кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) radosław miśkiewicz virtual economics, vol. 4, no. 3, 2021 29 2021 volume 4 number 3 (july) a review of the monograph by yu. bilan, o. chygryn, s. kolosok “environmental and economic impacts of energy transformation: concepts innovation and business models” radosław miśkiewicz abstract. in recent decades, there have been dramatic changes in the energy sector, which significantly influence other areas of activity. it is widely believed that traditional energy sources are the leading cause of air pollution, although they play the most prominent role in electricity generation. such dependence on fossil energy sources is a significant challenge on the path to sustainable development. the introduction of sustainable business models and innovative concepts in the energy sector is a tool for transitioning from traditional to "green" energy to reduce the negative impact on the environment. therefore, it is essential to estimate the effects of energy transformations and identify the environmental and economic effects of the deployment of such solutions. sustainable business models can solve environmental problems associated with harmful emissions from the energy sector. these models are more environmentally friendly and are part of "green" growth. they ensure the creation and maintenance of the organizations’ values and provide competitive advantages in the industry. although moving to sustainable business models is quite complex, they contain alternative solutions to avoid a global collapse due to energy shortages and climate change. in this regard, the priorities are to improve regulatory policy in the energy sector, the formation of environmentally friendly competitive advantages of energy companies, the description of opportunities to deploy smart energy networks, development of sustainable business models for energy sector transformation, optimization of energy financing. keywords: ecology, energy, model, sdg jel classification: o13, q43, q48 author: radosław miśkiewicz university of szczecin, 22a, papieża jana pawła ii szczecin, 70-453, poland e-mail: radoslaw.miskiewicz@usz.edu.pl https://orcid.org/0000-0003-2370-4783 citation: miśkiewicz, r. (2021). a review of the monograph by yu. bilan, o. chygryn, s. kolosok “environmental and economic impacts of energy transformation: concepts innovation and business models”. virtual economics, 4(3), 29-31. https://doi.org/10.34021/ve.2021.04.03(5) received: may 3, 2021. revised: may 12, 2021. accepted: june 6, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) radosław miśkiewicz virtual economics, vol. 4, no. 3, 2021 30 the modern trends in the development of the domestic energy sector in terms of reducing the final consumption of energy resources, the share of energy consumption from alternative sources, the rate of reduction of carbon emissions in energy are significantly inferior to those in the european union. relevant trends are due to the systemic transformation of european energy policy in the context of building smart energy networks and their integrated fusion with the european energy system. in this perspective, it is important to determine the mechanisms and tools for creating an environmentally friendly model of energy development, the introduction of smart transformations. in view of this, the monograph on the formation of innovative concepts and business models of environmental and economic transformation of the energy sector is, of course, relevant and timely. the authors pay considerable attention to the specific features of the sustainable and carbonneutral approach to economic development. they analyse certain features of forming transparent and innovative principles of state regulation of energy supply. today ukraine has already declared its european integration vector of development, which should include synchronization of national energy policy to follow the directions of the european action in this area. the study investigates the best practices in tackling environmental issues as a prerequisite for successful ukrainian policy. the authors investigate theoretical and methodological fundamentals of improving regulatory policy in the energy supply system. the monograph contains a sufficient number of data, analytical material and information from legislative documents, which in general allows the reader to navigate well in the scientific topics of the study. it is noteworthy that the monograph focuses on analysing organizational and economic principles of state regulation of the energy sector. the monograph offers a theoretical principle for identifying patterns in framing the smart grid concept development, which differ from existing ones using bibliometric (vosviewer v. 1.6.13) analysis, which allowed describing the dominant retrospective evolutionary-temporal trends in the smart grid theory in interrelation with the concepts of sustainable development, greening of the energy sector, green economy, etc. attention is paid to informing the general public and the scientific community about the importance of smart transformation of energy sector, reducing carbon emissions, achieving ecologically neutral economic stability, and shifting to renewable energy implementation. it should be noted that the authors are not limited to reviewing only ukrainian scientific sources, but also explore the development of sustainable energy measures and the introduction of tools in foreign publications. the proposed monograph "environmental and economic impacts of energy transformation: concepts innovation and business models" is a fundamental study that is relevant and has a scientific value. first, the publication gives a holistic view of the strategic vector of the modern development of the european energy policy. the paper suggests that the priority in implementing a smart transformation and carbon-neutral approach in the national economy development is to ensure high levels of public health and a sufficient standard of living and www.virtual-economics.eu issn 2657-4047 (online) radosław miśkiewicz virtual economics, vol. 4, no. 3, 2021 31 the development of economic entities. given the conceptual notions of a carbon-neutral approach and the environmental competitive development in the scientific literature, it is valuable in this peer-reviewed monograph that researchers thoroughly hypothesize that the european green deal is linked to the tenets of the european cohesion policy. the authors' empirical research on the development of sustainable business models for the transformation of the energy sector, proposed models of sustainable distributed energy generation and storage and analysed models of integration of renewable energy sources are of great practical significance. also, the authors conclude the positive dynamics of changes in ukraine's energy intensity since 2010, although it is not sufficient for a fuller implementation of the european approaches to implementing the state regulatory policy. the importance of introducing innovative energy technologies, which can be a crucial tool for overcoming the adverse effects of climate change, is emphasized. according to the authors, this will contribute to devising new scenarios for the sustainable energy development and support the energy security of the national economy. at the same time, introducing smart energy technologies can be a crucial tool for overcoming the adverse effects of climate change and anthropogenic pressure. in addition, it will help create new scenarios for the sustainable energy development of the country. in general, this work is a completed scientific study that contains valuable analytical material, calculation-based author's conclusions and can serve as a successful basis for further findings in this scientific and practical field of research. given many advantages, this monograph could be recommended to be published in the author's version. the peer-reviewed scientific work has a theoretical significance and can be recommended to scientists, graduates, energy workers and managers in the field of environmental policy implementation in ukraine. кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) tatjana tambovceva virtual economics, vol. 4, no. 3, 2021 20 2021 volume 4 number 3 (july) a review of the monograph by t. pimonenko, o. lyulyov, n. letunovska “circular and carbon-free economy: the roadmap for harmonizing national and european standards for energy market” tatjana tambovceva abstract. the monograph examines the essence of a circular and carbon-neutral economy and the mechanisms of their implementation to accelerate the development of the european society according to these approaches. the authors analysed the energy market of ukraine and calculated the degree of convergence of national energy policy and the european climate strategy. the experience of the european union member states in compliance with the standards of energy market regulation and the implementation of transformational changes in this area is studied. there have been examined the bottlenecks and attractors, which determine the dynamics of an increase or decrease of the country's energy efficiency in the forecast periods. the complex material will help to make rational management decisions in the field of energy production and energy saving. the works of the authors can be used in developing a roadmap for harmonization of ukrainian and european standards of energy market regulation. keywords: energy demand, energy efficiency, europe, reducing energy dependence jel classification: q40, q41, q43, q48 author: tatjana tambovceva riga technical university, 1, meza st., riga, lv-1048, latvia e-mail: tatjana.tambovceva@rtu.lv https://orcid.org/0000-0002-9516-1530 citation: tambovceva, t. (2021). a review of the monograph by t. pimonenko, o. lyulyov, n. letunovska “circular and carbon-free economy: the roadmap for harmonizing national and european standards for energy market”. virtual economics, 4(3), 20-22. https://doi.org/10.34021/ve.2021.04.03(2) received: may 7, 2021. revised: june 6, 2021. accepted: june 12, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) tatjana tambovceva virtual economics, vol. 4, no. 3, 2021 21 the transformational processes in the world today determine the importance of ensuring energy security, environmental security and tackling problems in the energy sector. it is the energy sector that has become a key factor influencing the sustainability of countries and regions. every sector of the economy depends on energy supply while the energy demand is constantly growing. implementation of changes and innovations in strategic energy planning is an essential aspect of tackling the problems of economic energy supply through the development of tactical and long-term actions in the field of energy-saving, energy efficiency, reducing energy dependence and the predominant use of renewable energy sources. in their work, the authors emphasize that the goals of energy strategies implemented by national economies in the world are a combination of plans to achieve energy independence and ensure a reliable energy supply. this makes it possible to avoid a wide range of problems: economic, environmental and social. mindless energy consumption can cause significant economic damage to each country, regardless of which category, which union of countries it belongs to, where it is geographically located, and so on. in the monograph, the authors repeatedly maintain that the energy efficiency of the economy and the focus of state policy in this direction are an essential driver of positive global change in improving the environment, human health, turning regions into centres for safe living and recreation. researchers analyse the factors that influence the intensification of changes in this direction. the list of these factors includes the scarcity of non-renewable energy resources. therefore, a significant part of the book's content is devoted to the analysis of the european and ukrainian market of renewable energy sources. the monograph is rich in statistics on using alternative energy sources in the european region. the authors provide numerous ratings from various analytical agencies on the countries' positions regarding energy efficiency, the introduction of "green" technologies, economic sustainability, etc. calculations and trends in energy consumption and energy production in the european region are also presented. the importance of collective action and cooperation in investing and implementing the european green deal policy is substantiated. the authors' forecasts of changes in ukraine's energy intensity, correlation-regression models based on three types of scenarios (optimistic, pessimistic and most realistic) and testing them for adequacy and reliability are of interest. the sections of the monograph are devoted to the issue of decarbonization of the economy and activities to implement this process in various sectors of the european countries. the authors do not ignore the issue of environmental pollution and its natural impact on public health. it is emphasized that polluted air is the cause of many deaths from coronary heart disease, pneumonia, strokes and others. it should be noted that the authors' developments on these issues are based on several surveys of respondents' opinions and are based on both calculated data and reported data of such analyses. much of the material is devoted to the analysis of the energy market of ukraine. the authors conclude that the country has significant potential for the active use of renewable energy. this direction could improve the state's position, enhance the trade balance, increase the number of new jobs for the population, and stimulate economic activity. in addition, according to the authors, this will achieve the goals of the policy to reduce dependence on imported natural gas and will significantly contribute tatjana tambovceva virtual economics, vol. 4, no. 3, 2021 to the diversification of energy supply. the authors convincingly argue that today many countries, including the european region, have changed their priorities for developing the energy sector. the direction of this development is correct, as it is based on the implementation of environmentally friendly reforms. the european green deal itself is aimed at the ecological transformation of the economy with the sustainable technological development of industry, simultaneous introduction of innovations to reduce harmful emissions, replacement of the traditional energy sources with the renewable ones, etc. the authors point out that the covid-19 pandemic and the economic recovery following the crisis require a sustainable ecological transformation. researchers note that given the heterogeneous economic development of the european union, one of today's challenges to successful implementation of the european green deal is the countries’ confidence in the feasibility of energy change with permanent sustainability of energy supply, which will not hinder economic recovery and further economic growth. the authors draw an important conclusion that the european countries in the comprehensive analysis have differences in the principles of implementing measures to improve energy efficiency, mainly due to their socioeconomic development. in general, the work performed testifies to the profound elaboration of theoretical and factual material. the subject chosen by the authors for their research is undoubtedly relevant. they are informed by a significant number of different relevant sources of data. in summary, we can conclude about the scrupulous work done by the researchers and the considerable theoretical and practical significance of the material presented in the monograph. this scientific development might contribute to the solution of many debatable issues arising in the convergence of national and european policies for the transition to carbon-neutral principles of economic growth. the monograph contains some innovative ideas and provisions that are important in environmental protection and energy transition and approximation to the european practice of energy market development. the manuscript of the monograph meets the requirements for such scientific works and deserves a recommendation for publication. www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 4, no. 3, 2021 26 2021 volume 4 number 3 (july) a review of the monograph by t. pimonenko, o. lyulyov, n. letunovska "stochastic modeling of the roadmap for harmonizing domestic and european standards of energy market regulation: transformational shifts to a circular and carbon-neutral economy” aleksy kwilinski abstract. the european green deal is a new european climate strategy presented by the european commission in 2019. the central postulate of this strategy is the growth of renewable energy sources share in the energy balance of the european countries. the proeuropean integration vector of ukraine envisages the country to synchronize the national energy policy with the eu strategic guidelines for transition to a circular and carbon-free economy. this monograph aims to explore the experience in implementing the principles of the european green deal and the best practices in improving energy policy among the eu countries. therefore, the findings would be instrumental in developing a balanced and structured roadmap for ukrainian energy policy synchronization with the eu requirements. the european commission poses significant challenges to european producers. in turn, transition to the principles of the european green deal is particularly relevant for ukrainian exporters competing with european producers within the european union and abroad. the comprehensible implementation mechanism of the new european green deal tools is a prerequisite for the successful adaptation of national energy policy and the modernization of approaches to managing local businesses and industries that depend on energy resources. keywords: sustainable development goals, energy market, energy balance jel classification: q28, q29, q50 author: aleksy kwilinski the london academy of science and business, 120 baker street, london, united kingdom, w1u 6tu e-mail: a.kwilinski@london-asb.co.uk https://orcid.org/0000-0001-6318-4001 citation: kwilinski, a. (2021). a review of the monograph by t. pimonenko, o. lyulyov, n. letunovska "stochastic modeling of the roadmap for harmonizing domestic and european standards of energy market regulation: transformational shifts to a circular and carbon-neutral economy”. virtual economics, 4(3), 26-28. https://doi.org/10.34021/ve.2021.04.03(4) received: may 28, 2021. revised: june 3, 2021. accepted: june 6, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 4, no. 3, 2021 27 in the monograph, the authors consider the importance for the contemporary society of the issue of systemic, strategic development of two concepts: the circular economy and the carbon-free type of economic development. in ukraine, such a systemic vision has not yet been formed, so it is interesting to frame the basic postulates of these theories, which, according to foreign experts, can enhance the resource efficiency and ensure energy conservation in the country. the paper emphasizes the importance of various stakeholders’ cooperation in promoting the development of approaches to circular and carbon-free economies. in particular, public authorities should be more balanced in developing tools and measures within the framework of sustainable development. in the first chapter, the authors analyze the principles of circular and carbon-neutral economies. there are many practical approaches to addressing the issue of excessive waste from a particular activity. specific initial differences of the circular economy implementation depending on the area's territorial needs and resources are identified. there are described the tools used in the european union to accelerate the transition to a circular economy. the authors believe that the transition to circular production can increase the number of new jobs, strengthen the security of raw materials in the country, gain business benefits for national companies, and other advantages. the monograph aptly emphasizes that approaches such as circulation and transition to carbon neutrality can be an effective tool for improving the health of countries and entire regions by solving environmental problems, overcoming difficulties with resource consumption, and shaping correct behavior. in the second chapter, the authors substantiate the opinion that ukraine has a significant potential for developing renewable energy sources. ukraine's implementation of the principles of transition to the green path of development will contribute to economic recovery, including after the covid-19 pandemic, increase the welfare of citizens, enhance the competitiveness of local businesses, improve environmental conditions and others. the structure of ukraine's economy is analyzed and conclusions are made about its energy efficiency. with the help of modern software, the authors conducted an empirical study on the convergence of ukraine's energy policy and the policy of european countries on the example of four countries. we emphasize that the authors use the most modern information processing methods and draw conclusions based on analytical processing of statistical information and balanced economic and mathematical calculations. the last chapter analyzes in-depth the experience of european countries in improving national energy efficiency, which is carried out through analysing positions in global rankings and the importance of energy intensity of gdp for different countries, including through evolutionary analysis of eu policies. certain aspects of introducing technological innovations in energy saving with the analysis of innovations implemented in the european union's member states (including germany, the netherlands, france, etc.) are studied. the main challenges to the current development of the european union's energy market have been identified, namely the security of energy supply, affordability of energy costs for all key consumer groups, energy management efficiency, environmental friendliness and sustainable development in most areas of the european region. given the international consequences of such challenges, it is www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 4, no. 3, 2021 28 very urgent and retains its relevance even in the covid-19 pandemic. the authors consider the phenomenon of energy diplomacy in relations between different countries of the european union. it has been argued that the concept of energy diplomacy in the european region has expanded significantly in recent years. eu policy is focused on achieving and maintaining energy security at all stages of development in the short, medium and long term. in general, the study shows deep processing of theoretical and factual material. the problem chosen by the authors for research is undoubtedly relevant. they disclosed it expertly, involving many different sources of information. a positive feature of the study, which resulted in the monograph by pimonenko t., lyulyov o., and letunovska n., is the use of methods and techniques of scientific knowledge. the use of modern tools testifies in favor of the thoroughness of the results presented in the monograph, the authors' mastering modern scientific research tools. it could be noted that the research materials presented in the monograph reflect the results of scientific research on an effective system of implementation and development of environmental approaches to the development of the national economy. finally, we can conclude about the conscientious work of researchers, the theoretical and practical significance of the material presented in the monograph. the authors' research will help address many controversial issues arising from the ukrainian government's focus on converging national and european policies on environmental transition and achieving the goals of the european green agreement. we believe that the monograph has innovative results and provisions important for energy, health and the environment. the practical significance of this work is that the findings can be used to devise strategies for developing countries on the principles of sustainable development. the monograph is of practical and scientific interest. it is a significant contribution to the development of the economic and environmental science of ukraine and deserves a positive evaluation. the monograph is made at a high professional level, sufficiently illustrated with graphic and tabular material, is easy to understand due to the language and style of writing, and logic in the structure of presentation. the structure of the material as a whole is logical and consistent. the manuscript of the monograph meets the requirements for such scientific works and deserves to be recommended for publication. кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) jelena titko virtual economics, vol. 4, no. 3, 2021 23 2021 volume 4 number 3 (july) a review of the monograph by t. pimonenko, o. lyulyov, n. letunovska "circular and carbon-free economy: the roadmap for harmonizing national and european standards for energy market" jelena titko abstract. circular and carbon-neutral economic development are the topical areas of implementing the climate strategy in many countries. according to these concepts, the main basis for economic development is the growth of the renewable energy share in the structure of energy consumption. the fact that ukraine has announced that in the future its evolution will be determined by the european integration vector of development means that a prerequisite for the transition to the next steps of development is the synchronization of the national energy policy in accordance with the strategic guidelines of the european region. to develop an effective roadmap for harmonising ukrainian and european standards of energy market regulation, it is advisable to analyse the experience of implementing energy efficiency practices in the policies of other countries in the european region. the authors forecast the structure of energy production from renewable sources, based on empirical calculations. the development and implementation of modernized mechanisms for regulating the energy market in european countries is a prerequisite for the successful adaptation of the ukrainian energy sector and the introduction of effective approaches to the management of local businesses and all industries that depend on energy resources. keywords: green economy, green energy, renewable energy, sustainable development goals jel classification: q28, q29, q50 author: jelena titko eka university of applied sciences, 1, lomonosova st., riga, lv1019, latvia e-mail: jelena.titko@eka.edu.lv https://orcid.org/0000-0003-1333-0941 citation: titko, j. (2021). a review of the monograph by t. pimonenko, o. lyulyov, n. letunovska "circular and carbon-free economy: the roadmap for harmonizing national and european standards for energy market". virtual economics, 4(3), 23-25. https://doi.org/10.34021/ve.2021.04.03(3) received: may 28, 2021. revised: june 12, 2021. accepted: june 19, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://www.scopus.com/redirect.uri?url=https://orcid.org/0000-0003-1333-0941&authorid=55390199100&origin=authorprofile&orcid=0000-0003-1333-0941&category=orcidlink https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) jelena titko virtual economics, vol. 4, no. 3, 2021 24 the deteriorating environmental situation in the world is one of the most dangerous problems for humanity. climate change worries all states and the population of many regions. during the long industrial development of the world, there has been a significant increase in anthropogenic impact on the whole planet's climate. many theorists and practitioners emphasize an urgent need to reduce greenhouse gas emissions in the coming years. it is essential for society to immediately move to a model of sustainable development, which includes economic growth while reducing carbon emissions. a necessary prerequisite for addressing this issue is the introduction of an effective system to promote sustainable lowcarbon development. the authors raise these critical issues in the monograph by analyzing a new document in the european practice regulating the transition to a sustainable economy, the european green deal. as ukraine has proclaimed its european integration vector of development, which provides, among other things, the synchronization of national energy policy with the strategic guidelines of eu member states, this document and its postulates are also relevant for consideration in the domestic practice. in their work, researchers thoroughly analyze the experience of implementing and exercising the principles of the european green deal, which precedes the future development of a phased roadmap for synchronization of the ukrainian energy policy with the european one. the authors emphasize the urgency of such synchronization in the field of export relations in ukraine, where ukrainian exporters compete quite closely with european businesses in the european territory of sales and abroad. the authors of each chapter of the monograph emphasize that understanding the mechanism of implementation of the european green deal instruments is a prerequisite for the successful adaptation of ukrainian energy policy to the european one. the introduction of new approaches to the management of industries and individual entities in energy production and consumption remains an important aspect. the monograph comprehensively examines the types of incentives by governments of national economies to switch to renewable energy sources. it thoroughly studies all the factors that cause climate change. the work presents valuable analytical reviews and statistics on consumption of energy and other resources in the countries of the european region. in several sections, the authors make a rather exhaustive, in our opinion, analysis of existing scientific works, mainly from the reputable scientometric databases scopus and web of science, the involvement of the scientific community in reducing carbon emissions, achieving economic sustainability, transition to more active use of renewable sources of energy. the authors made the review of works by scientists from different geographical areas and other scientific schools. it is valuable to present the material on the description of the critical areas in which the european green deal policy is implemented. essential principles of this course are the positioning of the eu as a global leader in the development of the circular economy and the creation of competitive advantages for the development of local producers. it is noted that a radical structural reform can change the european model of trade and investment. a largescale reduction in gas and oil purchases will restructure the european union's relations with www.virtual-economics.eu issn 2657-4047 (online) jelena titko virtual economics, vol. 4, no. 3, 2021 25 their leading suppliers. researchers do not overlook the fact that the european green deal is directly related to the postulates of the eu cohesion policy, another essential document for the territories of the european union. the european green deal contributes to the goals of this regulated document, as its purpose is to reduce disparities between the regions of europe through the fair transition mechanism. this mechanism provides attention to the development of areas that may face the most significant difficulties due to restructuring their economies on the path of carbon-free development. anthropogenic impact on the environment is estimated at 95% of all risks of climate change, primarily due to the rapid growth of carbon emissions, which are significantly ahead of population and economic growth. it is mainly due to the rapid development of carbon-intensive energy, accounting for up to 80% of carbon emissions. the monograph emphasizes that the european green deal aims to protect, preserve and strengthen the eu's natural capital, to protect the health and well-being of the region's population. at the heart of this policy are the individual and entire regions and industries. the authors consider the seven central pillars of the european green deal. different types of transformations are considered within the framework of this document. particular attention is paid to a fair transition to sustainable development that involves structural change. the policy set out in the european green deal includes ensuring a fair outcome and is the foundation of all types of transition. a comprehensive analysis of the already implemented measures within the european green deal since 2019 is provided. the research conducted by the authors is of significant theoretical and practical value for verifying the adequacy of models of energy intensity forecast in ukraine. important conclusions have been drawn on the positive dynamics of changes in the energy intensity of ukraine's economy during 2010-2019. at the same time, these rates are low due to the declaration and implementation of european approaches to pursuing the state regulatory policy in energy efficiency. the authors presented the results of an empirical analysis of the correlation between energy consumed by each country and the products produced in it. the monograph "circular and carbon-free economy: the roadmap for harmonizing national and european standards for energy market" is a thorough study by the team of authors, which has relevance, scientific value and is of interest to a wide range of readers. it gives a holistic view on the modern society's general vector of development in the transition to a carbonneutral economy. the work traces the idea of the european green deal and the maximum approximation of domestic policy to the principles of this document. the above facts give grounds to highly appreciate the work of the authors from sumy state university. кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 4, no. 4, 2021 61 2021 volume 4 number 4 (october) a review of the monograph by yu.m. kharazishvili “systemic security of sustainable development: evaluation tools, reserves and strategic implementation scenarios” aleksy kwilinski abstract. the monograph proposes a modern concept of sustainable development from the standpoint of security, which contains a general systematic idea of ways to move from the current position of the object of management to the desired. the necessity to adhere to the limits of safe existence of dynamic economic systems, which connects the problem of sustainable development with the problem of security, is substantiated. the presented concept is based on the methodology of identification and strategy of sustainable development from the standpoint of security and adaptive methods of regulation of management theory for the scientific justification of strategic planning in the medium and long term. it is proposed to take into account the shadow indicators in the components of sustainable development to reveal the adequacy of the real state of the economy using the developed method of its assessment and de-shadowing. the violation of the generality of macroeconomic identity of gdp by the end-use method at the regional level is proved and on this basis the method of determining the shadow net export due to violations at customs and in interregional movement of goods and services is proposed. possibilities of application of the stated approaches at different levels of economic activity are shown. the dual role of the shadow economy is revealed: as obstacles to sustainable development and as a significant reserve for modernization and growth of ukraine's economy. keywords: concept, economic systems, indicators, macroeconomic, management, sustainable development jel classification: b41, e60, o17 author: aleksy kwilinski the london academy of science and business, 120 baker street, london, united kingdom, w1u 6tu e-mail: a.kwilinski@london-asb.co.uk https://orcid.org/0000-0001-6318-4001 citation: kwilinski, a. (2021). a review of the monograph by yu.m. kharazishvili “systemic security of sustainable development: evaluation tools, reserves and strategic implementation scenarios”. virtual economics, 4(4), 61-64. https://doi.org/10.34021/ve.2021.04.04(5) received: august 15, 2021. september 9, 2021. accepted: september 24, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 4, no. 4, 2021 62 mankind is on the crest of an explosive demographic wave, but even accelerated economic growth is unable to meet the growing needs of the population. this impoverishes millions of people and depletes the planet's resources. the latter necessitated the development of a new paradigm of socio-economic development, taking into account environmental constraints, one of which was called "sustainable development". it was based on the analysis of the causes of the environment's catastrophic degradation on the biosphere scale and the search for ways to overcome threats to the environment and human health. the author of the monograph highlights the main principles of the concept of sustainable development, which indicate the need for the interrelationship of three components: economic, social and environmental on the way to overcoming global problems. in this context, technology can contribute to achieving goals in all three dimensions of sustainable development, the balance of which is one of the leading issues of sustainable development not only in individual countries or regions but also in the world as a whole. the study proved that the achievement of the sustainable development goals is based on the economic security (es) of the country as an integral characteristic of the economic system's state, the most important component of national security. its level determines to a certain extent the level of social and environmental components, as well as the level of the security and defence sector. revealing the need for an integrated evaluation and a systematic approach to regulating the level of economic security of the state, the author presents the dynamics of the es index and its components. and this indicates the development of an appropriate methodology and adequate diagnosis of the level of the country's es and its components with the further possibility of interpretation. the developed comprehensive methodology for identification and strategizing in the field of national security is universal and allows comparing the components and indicators of different areas of security and justifying strategic scenarios for security development. the methodology is based on the concept of sustainable development from the standpoint of security, which is grounded on: applied systems theory; management theory; economic cybernetics. it is expedient for the author to maintain that the development of the concept of sustainable development requires the interaction of multidirectional experts: economic cybernetics, macroeconomists, sociologists, environmentalists, ecologists, geographers, and politicians. the proposed concept of sustainable economic development (countries, regions) from the standpoint of security, which is a management structure, contains a general systematic view of the ways of transition from the current position of the object of management to the desired one. in this context, there are considered in detail the methodological tools for determining the status and strategic guidelines of sustainable development, and a number of shortcomings and inaccuracies that complicate or prevent their use, which allowed the improvement of the tools through the stages of identification and strategizing. www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 4, no. 4, 2021 63 the author's novelty development of the identification stage is sure to be a new modified method of rationing, a new method of "sliding matrix" to determine dynamic weights, the use of "t-test" for scientific justification and vector formalized determination of threshold values of characteristic types of distribution, justification of the criterion for achieving the sustainable development level as the average value of the "homeostatic plateau", the definition of sustainable development imbalances to justify the list of threats. the most important stage in achieving the level of sustainable development is the stage of strategizing future strategic changes to achieve a certain goal. due to the fact that classical methods of predicting integral indices using polynomials and regression equations are inappropriate here, the author's originality in solving this problem deserves attention: goalsetting and application of adaptive control methods in management theory to solve the problem of sequential decomposition of integral indices by solving the inverse problem. at the same time, the author points out the lack of scientists' attention to determining the dynamics of the integrated es index and comparing it with the integrated threshold values, first of all, regarding not fully taking into account the shadow indicators of the es. the latter has a significant impact on the final figure, because, according to experts, it is the shadow sector that accounts for about 50% of gdp. it is quite obvious that the lack of consideration of the shadow aspects of economic activity is inadequate for the real economy and can lead to the wrong measures and in the wrong place. the methods used in ukraine to evaluate the shadow economic activity are mainly borrowed from abroad and adapted to ukrainian realities; they roughly determine the relative changes in the shadow economy and, quite approximately, its absolute size. none of the current estimates of the shadow economy provides an answer to the question about the amount of gdp that is created in addition to those already taken into account in official statistics, and what part of the official gdp is created by shadow labour payment. the functionality of the known methods is limited only by the calculation of shadow gdp, ignoring other aspects of shadow activity, such as shadow wages, shadow employment, shadow capital loading, shadow intermediate consumption, shadow consolidated budget revenues (losses), shadow energy consumption, shadow energy consumption, shadow net export. it is these functions that distinguish the author's method of "social justice". given the obtained results, strategic scenarios of sustainable development of ukraine (living standards, industry, transport system in general, and railway transport in particular) are determined on the basis of selected indicators for each of these components. at the same time, based on the results of the calculations, the author concludes that the greatest effect of sustainable development can be achieved by applying the scenario of full-value balance the equidistance of integrated indices of development components from their average optimal values. based on the results of calculations, strategic scenarios for sustainable development of industrial regions of ukraine are proposed. the practical implementation of determined scenarios for the components of development is impossible without a significant reduction in corruption and the level of the economy shadowing. in this context, it is difficult to disagree www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 4, no. 4, 2021 64 with the author's opinion on the possibilities of applying and implementing the achievements of the new paradigm of industry 4.0. in general, the monographic work is a holistic and complete study of the extremely important problem of not only overcoming the shadowing of ukraine's economy on the path to sustainable development but also attracting the released resources to modernization processes. outlined by the author, based on in-depth analytical research, strategic scenarios of sustainable development of individual sectors of the economy and industrial regions as a whole will be perceived by the scientific community, heads of central and local governments, scientists, and experts in related fields. the peer-reviewed monograph, as well as other recent publications by the author, show that the developed methodological approaches are implemented at the global level, have scientific, theoretical and practical significance, are universal, suitable for any country to be put into practice and tested at the national level (ukraine, georgia, poland), for regions and types of economic activity and can be useful for heads of central and local authorities, scientists, specialists in the field of sustainable development, economic security and the shadow economy. кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 4, no. 4, 2021 52 2021 volume 4 number 4 (october) the prospects of retail payment developments in the metaverse oleksandr melnychenko abstract. in the age of technological development, rapid technological progress, and the metaverse development in which humans interact with each other and with the environment using virtual real-world metaphors, payment systems may also need to be re-considered. the study aims to find an answer to the question of what should be retail payments in the metaverse and to begin interdisciplinary discussions about their implementation in this environment. the author reviews the literature which shows that i) socio-economic relations are being implemented in the metaverse, but they still require the money to participate in the exchange relationships, as well as to support such a system; ii) it is impossible to abandon all forms of physical exchange, which is the basis of modern society; iii) the metaverse is an environment usually of anonymous users, who do not have the right to make significant purchases without their identification; iv) accounting of transactions remains the basis of payments in the metaverse as well. keywords: metaverses, payment, retailing jel classification: e42, j33, l81 author: oleksandr melnychenko gdansk university of technology, gdansk, poland e-mail: oleksandr.melnychenko@pg.edu.pl https://orcid.org/0000-0002-7707-7888 citation: melnychenko, o. (2021). the prospects of retail payment developments in the metaverse. virtual economics, 4(4), 52-60. https://doi.org/10.34021/ve.2021.04.04(4) received: september 12, 2021. revised: september 27, 2021. accepted: october 3, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 4, no. 4, 2021 53 1. introduction the latest technologies cover more and more areas of our daily lives and are getting closer to everyone. today, we see that most people almost never part with a smartphone which concentrates most of our digital private and professional information. this is not surprising given how much information and activities each of us stores in this device. today, a smartphone is a gadget that we can keep closest to us, touch them, and use them in a variety of everyday and professional circumstances from ordering a pizza to confirming financial or other transactions. at the same time, we should have a reliable protection of sensitive and vital data which are necessary for our lives or at least the illusion of such protection which is based on the belief that the corporations that created our smartphone really do not have access to our data or at least will not or cannot use it. technology is evolving much faster than ever and today our smartphone warns us about the weather change, in the nearest future it will be able to immediately offer us clothes that we should put on today, given what plans we have for today (it is written in the smartphone's calendar), what climatic conditions await us during the day and what things we have in the closet. technology will be much better at what we actually have in the closet, as we may forget what we bought last summer, while the history of financial transactions stored in the banks' and stores' apps will be securely stored and used at the right time by our virtual assistant. if it turns out that last summer we did not buy the right clothes or it is outdated, and in our bank account we have enough money to buy them after settling all the necessary payments, such an assistant will offer us to buy the necessary wardrobe item. or it can buy them immediately by transferring the required amount from our account to a seller. this scenario is becoming more realistic and partly automation is already firmly embedded in our daily lives. the issue that remains unresolved is the payment instruments and payment technologies that will be used in the era of continuous digitalisation. thus, recently, payment methods based on facial recognition technology have become one of the most popular payment methods in china (zhong, oh, moon, 2021). such a payment method does not involve any equipment or payment tools by the buyer. this reduces the transaction maintenance time and increases the cashiers' efficiency, security, and customer satisfaction. the customer just scans their face and then the captured image is linked to a specific digital payment system or bank account. thus, more and more advanced technologies are used from the different industries in the implementation of retail payments. however, the scientific literature does not pay enough attention to promising tools and methods of payment to answer the question of what awaits the payment industry in the future. this study tries to find an answer to it. the need for payment is one of the most fundamental in the world of modern economic relations, which are based on monetary settlement. payment using bank cards, payment terminals, smartphones, and other equipment for implementation, verification, and confirmation of payments in the real world is a necessary condition for transactions. instead, www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 4, no. 4, 2021 54 the virtual world or metaverse requires other ways to implement payment transactions. and if the system of monetary values in the metaverse economic relations remains a necessary component in trade, new forms of money transfer will be needed. 2. background the modern world of economic relations can be divided into a two-dimensional one, where there are two participants in the relationship like in the example of a traditional online store, and a three-dimensional virtual environment, or metaverse (gadalla, keeling, abosag, 2013), where avatars are active on behalf of users in the real world, and mutual communication is possible both in the real and in the virtual world, creating and participating in socio-economic life both in the virtual world and in the real world (suzuki et al., 2020). a three-dimensional environment is one in which vendors can work simultaneously in three different spaces: physical (offline), web-based or web-based internet environments using a computer or other technology (online), and virtual (metaverse), where economic and social life exists without its physical embodiment (bourlakis, papagiannidis, li, 2009). “metaverses are immersive three-dimensional virtual worlds (vws) where people interact with each other and their environment, using the metaphor of the real world but without its physical limitations” (owens, mitchell, khazanchi, zigurs, 2011). 3. literature review the dynamics of publishing (fig. 1) indicates a gradual increase in the interest of scientists in this topic. despite the fact that the first article on the metaverse was published in 1995 (in the scopus database), and its peak was in 2010 (22 papers), there has been a growing interest in it recently in the business community and among scientists. figure 1. dynamics of publications on financial security by years sources: developed by the author www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 4, no. 4, 2021 55 these trends are partly related to the gradual and dynamic spread of digitalisation in all socioeconomic life spheres, the technology development, and sometimes to the replacement of traditional relationships with virtual and digital ones. these studies have been conducted in 16 areas of research, and more than 95% of publications are related to computer science and engineering. the bibliometric analyses results conducted by vosviewer tools show the relationship of the metaverse with a number of economic categories (fig. 2), in particular, such as retail and micropayments, which are closely related. figure 2. the network visualization of the connection between financial security of a business and other economic categories sources: developed by the authors based on the scopus database thus, the issues of the virtual world and the circulation of values in it are covered by the innovative works of scientists who prove that there is an open virtual world in which virtual www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 4, no. 4, 2021 56 wealth can be measured (guo, gong, 2011). in such a world there is a virtual money market based on a common value system in which the total intrinsic value of the virtual currency is equal to its total exchange value (guo, chow, wigand 2011). since retail in the virtual world is considered “an evolution of the traditional web store” (hassouneh, brengman, 2015), the question of what the evolution of retail payments is in the virtual and metaverse needs to be answered. thus, the purpose of this study is to find an answer to the question of what retail payments in the metaverse should be. 4. methodology and research methods. in this research, the traditional literature review was used, which aims to report on the state of a particular field of knowledge. the scopus database to develop the review protocol was used. initially, a research plan was outlined that included the purpose of the study, questions, keywords, and a set of inclusion and exclusion criteria on the metaverse. the inclusion criteria were defined as academic peer-reviewed publications written in english that meet the objectives of the study. initially, the search returned a total of 182 publications, including journal articles and conference proceedings in english between 1995, when the first papers on the subject were published, and 2020. the final set of relevant articles included only 23 by subject areas of business, management, accounting, economics, and finance, which were reread, peerreviewed, classified, and analysed. the authors belong to 15 countries, the majority being from the united states, japan, turkey, and the united kingdom. in the next step, the author's work focused on writing and presenting conclusions related to the definition of the concept of retail payments in the metaverse. in particular, the process of synthesis, selection, and combination of different elements for the formulation of this concept was carried out. at this stage, other publications on the subject have also been integrated as additional supporting literature to better understand the problem and develop relevant results. the total number of peer-reviewed publications was 43. 5. research results suzuki et al. are explaining the proposed concept of the learning system in the metaverse (suzuki et al., 2020), in which its participants visit shops, museums, theatres, travel, etc. using modern technologies of augmented or virtual reality. therefore, there is no need to distinguish, say, participation in conferences, classes or other events using the application "remotely" or "online" – all feelings and consequences, in particular, economic and legal in the metaverse are the same for each form of involvement. at the same time, there is still that part of the real world that today is difficult to transfer to the virtual within the metaverse concept. according to swilley, the acquisition of items such www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 4, no. 4, 2021 57 as brick and cement creates an interaction of brand experience, excitement and opportunities for "more experiential shopping" (swilley, 2016). additionally, retail in the metaverse can help expand traditional online shopping and make it more attractive with better product verification capabilities (hassouneh, brengman, 2015). the problem of payments in the virtual world is primarily related to the ownership right, which is usually realised by its transfer from the seller to the buyer after payment and the execution of relevant documents in the real world. however, in the virtual world, "the rights ordinarily attached to such transactions are not clearly apparent" (zhou, leenders, cong, 2018). although, this problem is partially solved by blockchain technology, in which each transaction confirmation is recorded in a distributed database, and information about the ownership transfer is stored forever (melnychenko, hartinger, 2017), this technology has not yet found application in retail payments due to a number of shortcomings related to the cost of time and energy to make payments, for example, using cryptocurrencies (melnychenko, 2021; osadcha, melnychenko, spodin, 2021). payment transactions, which are realised today with the help of technical means while using cash operation, payment cards, biometric payer verification methods and the whole system of payment and banking operations require a very real physical implementation. instead, in the virtual world or in the metaverse, it is needed to use mechanisms that do not require physical form. in the first case it is not possible, and in the second, the very essence of the metaverse involves a combination of terrestrial and digital. therefore, it is necessary to find those retail payments methods that will allow society to continue the usual way of life in the new conditions. one of them may be emotions-based which are completely extra-physical or even supra-physical and which, however, have some expression in the real world such as increased blinking, heart rate, pressure, etc. (barry et al., 2015). this approach can be used to detect transactions' anomalies that are important in detecting fraudulent activities and other irregularities with payment instruments. another problem with payments in the metaverse is the anonymity of users, because in the metaverse avatars interact with each other, not people or users who tend to remain anonymous (kappe, steurer, 2010). this is not a problem for small purchases, when electronic money or other bearer values can be used, but their volume and number of transactions are limited by law (melnychenko, vlasova, 2018). instead, making more expensive purchases requires a different solution, which can be a cryptocurrency or a virtual currency. however, the combination of all three worlds in the technological singularity (corrêa, de oliveira, 2021) will require the regulation of both virtual and real money circulation. at the same time, according to johannessen and sætersdal (johannessen, sætersdal, 2020), "money and goods are prioritized over people and democracy". the payments development in the metaverse can be implemented in two scenarios: 1. rejection of the monetary payment form and the use of another payment method adequate to the environment. such values may include energy, computing power, information, data, virtual values and virtual benefits; www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 4, no. 4, 2021 58 2. non-cash transfers and digital cash payments exclusively to the virtual plane. in such circumstances, it is necessary to understand what the monetary policy will be and whether it will be needed at all. each of the scenarios differs from each other in a number of parameters. instead, for both of them, there remains unchanged the need for a reliable transaction accounting system that will ensure the reliable and equitable functioning of the metaverse in a socially and economically heterogeneous environment. such an accounting system can be implemented in the classic centralised scenario, when a bank is the centre role of accounting for financial transactions, central bank or payment system in the form of an institution or artificial intelligence (melnychenko, 2020). it can also be implemented on the example of distributed databases, such as blockchain. 4. conclusions this paper reviews the literature to find answers to the question of what retail payments should be in the metaverse. it was found that life in the metaverse continues as in the real world, although without physical limitations. it implements socio-economic relations that require the money participation which appeared as an evolution result of exchange operations and labour division, as well as to support such a system. the author noted the problems associated with the metaverse existence, which are, in particular, the impossibility of address all issues without a physical presence in the real world with all the consequences. in addition, the metaverse is an environment usually of anonymous users, who do not have the right to make significant purchases without their identification. this study emphasises the need to develop the retail payment system to the level when civilisation reaches the technological singularity level and all settlements, as well as all other interpersonal relationships will be implemented in a digital-real environment. further research should focus on the study of whether energy, computing power, information, data, virtual values and benefits or their combination could be used as a common equivalent in the modern real world and metaverse. references barry, d. m., ogawa, n., dharmawansa, a., kanematsu, h., fukumura, y., shirai, t., yajima, k., kobayashi, t. (2015). evaluation for students’ learning manner using eye blinking system in metaverse. procedia computer science, 60, 1195-1204. https://doi.org/10.1016/j.procs.2015.08.181 bourlakis, m., papagiannidis, s. & li, f. (2009). retail spatial evolution: paving the way from traditional to metaverse retailing. electronic commerce research, 9, 135–148. https://doi.org/10.1007/s10660-009-9030-8 corrêa, n.k., & de oliveira, n. (2021). singularity and coordination problems: pandemic lessons from 2020. journal of futures studies, 26(1), 61-74. https://doi.org/10.6531/jfs.202109_26(1).0005 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 4, no. 4, 2021 59 gadalla, e., keeling, k., & abosag, i. (2013). metaverse-retail service quality: a future framework for retail service quality in the 3d internet. journal of marketing management, 29(13-14), 1493-1517. https://doi.org/10.1080/0267257x.2013.835742 guo, j., chow, a., & wigand, r. t. (2011). virtual wealth protection through virtual money exchange. electronic commerce research and applications, 10(3), 313-330. https://doi.org/10.1016/j.elerap.2010.10.003 hassouneh, d., & brengman, m. (2015). retailing in social virtual worlds: developing a typology of virtual store atmospherics. journal of electronic commerce research, 16(3), 218-241 hassouneh, d., & brengman, m. (2015). metaverse retailing: are svw users ready to buy real products from virtual world stores? proceedings of the international conferences on e-health 2015, eh 2015, e-commerce and digital marketing 2015, ec 2015 and information systems post-implementation and change management 2015, ispcm 2015 part of the multi conference on computer science and information systems 2015, 104-110 guo, j., & gong, z. (2011). measuring virtual wealth in virtual worlds. inf technol manag, 12, 121–135. https://doi.org/10.1007/s10799-011-0082-9 johannessen, j.-a., & sætersdal, h. (2020). automation, innovation and work: the impact of technological, economic, and social singularity. automation, innovation and work: the impact of technological, economic, and social singularity, 196 p. kappe, f., & steurer, m. (2010). the open metaverse currency (omc) – a micropayment framework for open 3d virtual worlds. in: buccafurri, f., semeraro, g. (eds) e-commerce and web technologies. ec-web 2010. lecture notes in business information processing, vol 61. springer, berlin, heidelberg. https://doi.org/10.1007/978-3-642-15208-5_9 melnychenko o., & hartinger r. (2017). role of blockchain technology in accounting and auditing. european cooperation, 9(28), 27–34 melnychenko, o. (2020). is artificial intelligence ready to assess an enterprise’s financial security? journal of risk and financial management, 13, 191. https://doi.org/10.3390/jrfm13090191 melnychenko o. (2021). energy losses due to imperfect payment infrastructure and payment instruments, energies, 14, 8213. https://doi.org/10.3390/en14248213 melnychenko, o., & vlasova, g. (2018). electronic money and cryptocurrency: basic concepts, differences and commonalities. european cooperation, 1(32), 30-44 osadcha, t., melnychenko, o., & spodin, s. (2021). money circulation in conditions of energy fever. european cooperation, 3(51), 7-33. https://doi.org/10.32070/ec.v3i51.117 owens, d., mitchell, a., khazanchi, d., & zigurs, i. (2011). an empirical investigation of virtual world projects and metaverse technology capabilities. data base for advances in information systems, 42(1), 74-101. https://doi.org/10.1145/1952712.1952717 suzuki, s.-n., kanematsu, h., barry, d. m., ogawa, n., yajima, k., nakahira, k. t., shirai, t., kawaguchi, m., kobayashi, t., yoshitake, m. (2020). virtual experiments in metaverse and their applications to collaborative projects: the framework and its significance. procedia computer science, 176, 2125-2132. https://doi.org/10.1016/j.procs.2020.09.249 swilley, e. (2016). moving virtual retail into reality: examining metaverse and augmented reality in the online shopping experience. in: campbell, c., ma, j. (eds) looking forward, looking back: www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 4, no. 4, 2021 60 drawing on the past to shape the future of marketing. developments in marketing science: proceedings of the academy of marketing science. springer, cham, 675-677 https://doi.org/10.1007/978-3-319-24184-5_163 zhou, m., leenders, m. a. a. m., & cong, l. m. (2018). ownership in the virtual world and the implications for long-term user innovation success. technovation, 78, 56-65. https://doi.org/10.1016/j.technovation.2018.06.002 кwilinski alex 42 www.virtual-economics.eu issn 2657-4047 (online) hanna tarasova virtual economics, vol. 1, no. 1, 2018 2018 volume 1 number 1 (october) scientific and methodical approach to adaptive diversification of industrial enterprise development under crisis conditions hanna tarasova abstract. the article establishes that ukrainian enterprises operate in the conditions of permanent economic crises and changes in the economic environment as a result of further integration of ukraine into the world markets. this leads to the discrepancy between the state of domestic industrial enterprises and the requirements of the economic environment. to solve this problem, a scientific and methodical approach has been developed to adapt the diversification of the industrial enterprise development in a crisis that is based on the assessment of the existing and potential crises and the formalization of the assessment of the crisis impact, which enables an industrial enterprise to justify diversification measures in order to adapt to the crisis and to save the planned strategic development benchmarks. keywords: adaptation, diversification, development, industrial enterprise, assessment, strategic reference points, crisis jel classification: l230, c530, o210 author(s): hanna tarasova kyiv national university of technologies and design (knutd), nemirovich-danchenko street, 2, kyiv, ukraine, 01011 e-mail: tarasova.ganna@gmail.com https://orcid.org/0000-0002-5476-9881 citation: tarasova, h. (2018). scientific and methodical approach to adaptive diversification of industrial enterprise development under crisis conditions. virtual economics, 1(1), 42-52. https://doi.org/10.34021/ve.2018.01.01(3) received: june 12, 2018. revised: august 4, 2018. accepted: september 2, 2018. © author(s) 2018. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://creativecommons.org/licenses/by/4.0/ 43 www.virtual-economics.eu issn 2657-4047 (online) hanna tarasova virtual economics, vol. 1, no. 1, 2018 1. introduction for ukrainian industrial enterprises, which are still in the fourth technological stage, not only is the adaptation to crisis important, but also the diversification is, in order to increase competitiveness as a response to global technological and marketing changes. adaptation of the industrial enterprise in the general sense means the process of accumulation and use of information in the enterprise management system, the purpose of which is to achieve optimal state or behavior in an unstable external environment and under conditions of insufficient information. when adapting, the parameters and structure of the system, the algorithm of functioning, business processes, etc. can change (glushkov et al., 1974; prokopenko & shishatsky, 2014). diversification in the context of the development of an industrial enterprise is an increase in diversity in the implementation of enterprise development. this may be an expansion of the range of products manufactured by the company, the change or expansion of the markets, the development of new technologies, etc. (milovanov, 2006). accordingly, the adaptive diversification of the development of an industrial enterprise in a crisis means the process of accumulation and use of information on increasing the diversity of parameters and structure of an industrial enterprise, its technologies, product mix and business processes in response to existing or expected crisis. 2. literature review the issue of anti-crisis adaptation and diversification of industrial enterprises was dealt with by many domestic researchers, who considered some aspects of this problem. o. kuzmin and kh. drymalovska (2013) suggested diversification as an aspect of increasing competitiveness in order to better overcome crises. they believe that at the present stage of development, the diversification of ukrainian industrial enterprises is not given enough attention. the diversification development in ukrainian industrial enterprises is proposed to carry out simultaneously in many areas. the main directions should be strengthening of competitive positions in the national market and access to the world market, modernization of production technologies, expansion of markets, creation of new workplaces, optimization of utilization of production capacities, attraction of scientists and inventors (hroznyi et al., 2018). but practical recommendations for the implementation of the proposed directions of diversification are not provided, which limits the use of this approach. p. m. maidanevych (2014) offers to calculate a comprehensive comparative characteristic of the competitive status depending on the stage of the life cycle, which reflects the potential of the enterprise, its position on the market, as well as the ability to maintain its position under the influence of destabilizing factors of the environment (milovanov, 2006). he considers it necessary to build a development strategy depending on the life cycles of the enterprise, when http://www.virtual-economics.eu/ 44 www.virtual-economics.eu issn 2657-4047 (online) hanna tarasova virtual economics, vol. 1, no. 1, 2018 managing the development of an industrial enterprise under crisis conditions. the main disadvantage of this approach is to respond to a crisis that has already occurred without forecasting future probable crises. diversification as a component of strategic development of the enterprise is considered by i.o. gadzevych (2014), who proposed a model for evaluating the appropriateness of diversification, which is based on the comparison of income from diversification and the cost of its implementation. the main purpose of enterprise management is to select such diversification projects that would not significantly damage the financial and economic condition of the enterprise and its main activities during the implementation of these projects. also, diversification projects are evaluated in terms of risks calculated on the basis of the yield model of the fixed assets. the disadvantage of this approach is to consider diversification as an independent value that the enterprise does in any case, rather than respond to the challenges of the environment. insufficient attention is also paid to forecasting the state of the internal and external environment of the company, which will affect the effectiveness of diversification projects. methods of providing financial stability of the enterprise under crisis conditions are considered in the works (delas et al., 2015; lakhno et al., 2018; pająk et al., 2016), in which the directions of carrying out the enterprise sanation and innovative ideas search for realization of the anti-crisis strategy are investigated. particular attention in these studies is drawn to the need for timely prediction of the onset of the crisis, but specific tools for addressing this issue are not proposed. the solution of the problem of an industrial enterprise development through the formation of a mechanism for the adaptation of industrial enterprises to the external environment was proposed in the works of k. orlova (2013, 2015). the basis of the proposed mechanism is the determination of responsive behavioral reactions that reflect a set of the industrial enterprise processes and arise in response to external factors. it provides an opportunity to carry out a multidimensional survey of the enterprise, identify the problems of development and build a system of actions for adaptation to the conditions of the environment. the disadvantage of this approach, as of many others, is the ignoring of the need for forecasting crises and the lack of formalized adaptation models. consequently, most researchers who solved the problem of adapting the industrial enterprise to the crisis through diversification did not pay enough attention to forecasting crises, formalizing the process of assessing the current or future crisis, and to the diversification not only as a response to the crisis, but also as a preservation of the general vector of strategic development. to implement the adaptive diversification of the industrial enterprise development under crisis conditions, it is necessary to determine what crisis threatens the enterprise internal or external. problems of enterprise development under crisis conditions are considered in the works sabatino (2016), chung et al. (2013), laperche et al. (2011), cerrato et al. (2016), kapitsinis n. (2018). in the theory of systems, the crisis is considered as the state of the system, in which its parameters take threshold, critical values. after their achievement, the http://www.virtual-economics.eu/ 45 www.virtual-economics.eu issn 2657-4047 (online) hanna tarasova virtual economics, vol. 1, no. 1, 2018 probability of returning the system to a normal state is very small. after entering the crisis state, either the destruction of the system or its transformation usually occurs. in the aspect of the development of an industrial enterprise under crisis conditions, it should be borne in mind that the crisis of the environment is considered only in terms of its threat to the enterprise, and not to the environment itself. thus, with the adaptive diversification of the industrial enterprise, it is necessary to distinguish between the internal crisis of an industrial enterprise and the crisis conditions of the environment. 3. methodology crisis conditions of the environment are such parameters of the environmental system, which adversely affect the state of the industrial enterprise (naidoo, 2010; swan, 2009). the internal crisis of an industrial enterprise is its parameters, which have arisen not because of the influence of the external environment, but because of internal disorders. consequently, for the adaptive diversification of the industrial enterprise development, five types of information-analytical support should be used (figure 1): provision for forecasting of external crises; provision for assessing existing external crises; provision for forecasting of internal crises; provision for assessing existing internal crises; provision for developing adaptation diversification measures. provision for forecasting external crises includes tools for constructing the trends of key environmental indicators and the calculation of models of quality jumps in the external environment. key indicators of the environment include those indicators that directly affect the financial performance of the industrial enterprise (williamson & zeng, 2009). first of all, it is the capacity of the market of products that the enterprise produces. moreover, under the market size is meant not only the volume of total sales of such products, but the division of the market in quality, value, brand awareness and other basic characteristics of products. each such division is treated as a separate loss. dividing is necessary to analyze the possibility of a crisis for an industrial enterprise (wong, 2009) if demand for its products is reduced, as well as for further internal product diversification, that is, changes in some characteristics of products in order to reach the neighboring sectors of the market. also, depending on the peculiarities of the industrial enterprise activity, the availability of raw materials, labor supply, availability of credit resources, exchange rates (if the enterprise carries out foreign economic activities) may include key indicators. to predict the external crisis, it is proposed to calculate the coefficients of reaching the crisis, which take into account how the crisis will affect the key indicators of the production of the company and its products: http://www.virtual-economics.eu/ 46 www.virtual-economics.eu issn 2657-4047 (online) hanna tarasova virtual economics, vol. 1, no. 1, 2018 , 1,0max 1 1                       s s s s s f tr s base s p cr p k k k k k (1) where crk – assessment of the crisis for the sales market of the p-th type of industrial enterprise products; s k – the coefficient of proximity of the s-th type of loss of the market to the market of sales of the p-th type of products; base sp k , – the value of the market capacity for the s-th loss in the base period for the p-th type of products; f tr sp k , – the value of market capacity for the s-th loss in the forecast period for the p-th type of products; s – the number of market losses that are being analyzed. the closer the coefficient crk is to 0, the less the expected crisis is. the value of the coefficients of closeness of the s-th type of loss of the market to the market of sales of the p-th type of products is determined in the range from 0 to 1, where 1 corresponds to the full coincidence with all the characteristics of the products manufactured by the industrial enterprise. the second tool for forecasting external crises, the response to which needs diversification is the calculation of models of qualitative jumps in the external environment. qualitative jumps mean not a slow change in key indicators, which can be predicted through trend analysis, but fast or instantaneous changes. for example, they are changes in the technology of production, the substitution of goods by fundamentally different ones or in general, the disappearance of demand for it. such models need to take into account the scientific and technological progress and analysis of innovative developments in those industries which include the industrial enterprise. the second component of the adaptive diversification of the industrial enterprise development, which is providing for the evaluation of existing external crises, uses both information from the external environment and the results of the forecasting of external crises. the latter information is necessary to analyze the danger that the future crisis has. it is proposed to calculate the environmental impact on the balanced scorecard (bsc) and to analyze the impact of the crisis on competitors and consumers. the final stage of the adaptive diversification is the adjustment of the enterprise development strategy in accordance with the chosen scenario http://www.virtual-economics.eu/ 47 www.virtual-economics.eu issn 2657-4047 (online) hanna tarasova virtual economics, vol. 1, no. 1, 2018 provision for forecasting external crises building trends of key indicators of the environment provision for forecasting internal crises provision for assessing existing internal crises provision for assessing existing external crises calculation of models of qualitative jumps in the external environment building bsc trends of an industrial enterprise calculation of the bottlenecks of an industrial enterprise calculation of environmental impact on bsc indicators analysis of the impact of the crisis on competitors and consumers monitoring bsc calculation of the consequences of the crisis the inner environment environment provision for developing adaptation diversification measures formation of space for possible solutions calculation of diversification scenarios adjustment of enterprise development strategy figure 1. adaptive diversification of the industrial enterprise development under crisis conditions source: own research. http://www.virtual-economics.eu/ 48 www.virtual-economics.eu issn 2657-4047 (online) hanna tarasova virtual economics, vol. 1, no. 1, 2018 to do this, the measures identified as appropriate by the optimization model for the selection of diversification scenarios should be added to the strategic plan. thus, a scientific and methodological approach to adaptive diversification of the industrial enterprise development under crisis conditions that is based on assessing existing and potential crises and formalizing the impact assessment of the crisis enables the industrial enterprise to justify diversification measures in order to adapt to the crisis and to preserve the planned strategic guidelines of the development. results and discussion practical testing of the developed scientific and methodical approach to the adaptive diversification of the industrial enterprise development under crisis conditions was carried out at pjsc “kerammash”. an analysis of the external and internal environment of the enterprise made it possible to conclude that there is a risk of decreasing solvent demand due to the high cost of the enterprise production in comparison with competitors and the general decrease of economic activity (table 1). it is expected that the volume of sales will decrease by 13.6%, while the cost of sales will decrease only by 10.1%. this is due to an increase in labor costs, and, in particular, an increase in the cost of imported equipment for the production of thermal equipment. table 1. forecast of the crisis consequences for pjsc “kerammash” indicator 2016 2017 2018 (forecast) net income from sales of products (goods, works, services), ths. uah 69646 64939 56100 cost of sold products (goods, works, services), including 54267 52883 47563 material costs, ths. uah 43141 28971 27940 salary expenses, ths. uah 14935 17130 15630 deductions for social events, ths. uah 2902 3204 2768 amortization, ths. uah 1647 1705 1820 net financial result, ths. uah 6263 3021 2610 source: calculated by the author. the main products of pjsc "kerammash" are electric and gas industrial furnaces, most of the production capacities are occupied by their manufacture. but in crisis-time due to lack of orders for main products the company switches to the development of spare parts and secondary products (table 2). at the same time, the assortment of secondary products is negligible and cannot replace the main one. http://www.virtual-economics.eu/ 49 www.virtual-economics.eu issn 2657-4047 (online) hanna tarasova virtual economics, vol. 1, no. 1, 2018 table 2. sales dynamics of pjsc "kerammash" 2013 2014 2015 2016 2017 main products part, % 88,4 100 49,3 81,3 71,1 volume, ths. uah 92011 40203 10835 56669 46174 secondary products part, % 11,56 0 50,7 18,7 28,9 volume, ths. uah 12027 0 11143 13035 18768 source: calculated by author. the solution to this problem is possible due to the following diversification actions: diversification of the marketing network and access to new markets with traditional products; vertical diversification of the development of the production of spare parts and components of the products, horizontal diversification of the development of the production of new products, which can be produced on the existing equipment. specific measures to diversify the marketing network include participating in exhibitions in belarus and kazakhstan, and opening new sales offices in these countries. vertical diversification includes measures for the introduction of regenerative burners into production. burners are one of the main components of gas industrial furnaces, and the imported burners, which are currently used in the production of pjsc "kerammash," significantly increase the cost. horizontal diversification involves the development of production of new types of products for which there is an unsatisfied demand: cremator-insinerator and dyeing chamber. the result of the implementation of actions on adaptive diversification of pjsc "kerammash" is an increase in the net realizable sales and a decrease in the cost price (table 3). table 3. influence of adaptive diversification on indicators of pjsc "kerammash" indicator without adaptive diversification with adaptive diversification net income from sales of products (goods, works, services) 56100 61102 cost of sold products (goods, works, services) 47563 50880 source: calculated by the author. http://www.virtual-economics.eu/ 50 www.virtual-economics.eu issn 2657-4047 (online) hanna tarasova virtual economics, vol. 1, no. 1, 2018 due to the diversification of production and marketing network of pjsc "kerammash", an economic effect is expected at the expense of an increase in sales volumes and reduction of the cost price. at the same time, additional costs for research and development and participation in exhibitions are needed to carry out the planned diversification activities. the components of the economic effect are given in table 4. table 4. components of the economic effect of implementing adaptive diversification at pjsc "kerammash" revenue or savings costs indicator amount, ths. uah events amount, ths. uah increase in sales revenue 5002 development and introduction into production of creatorincinerator 320 participation in exhibitions in belarus and kazakhstan 150 reduction in the cost of sold products 3317 development and introduction of production of regenerative burners 180 revenue or savings 8319 costs 650 source: calculated by the author. due to diversification of production and marketing network of pjsc "kerammash", the estimated economic effect will be 7669 ths. uah. thus, a scientific and methodical approach to adaptive diversification of the industrial enterprise development under crisis conditions was developed. the approach is based on a hierarchical structure of the effects of the crisis and economic and mathematical models for assessing the enterprise's crisis coverage, assessing the relationship between changes in the environmental indicators and the company's system of indicators, determining the direction of change of indicators and calculating diversification scenarios. the practical testing of the developed scientific and methodical 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(2009). the crisis: a return to political economy? critical perspectives on international business, 5(1/2), 56‐77. https://doi.org/10.1108/17422040910938686 http://www.virtual-economics.eu/ кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) volodymyr nesterenko virtual economics, vol. 4, no. 4, 2021 21 2021 volume 4 number 4 (october) marketing communications: ongoing trends and options volodymyr nesterenko abstract. this article studies trends in the development of marketing communications as a result of business space transformation and the emergence of new values that are the main determinants of social development in the modern world. this article highlights the main preferences and expectations of users of different promotion channels, which provide the basis for predicting their further use and development. it studies the impact of advertising and promotion channels on the purchase by younger and older generation. various channels of marketing communications are considered, including the most effective digital marketing methods according to marketers around the world. there are analysed data users such as companies that intensively create, operate, collect and analyse digital data and use what they learn to improve their business. special attention is paid to the use of such a powerful and promising communications tool as ai, which can significantly affect the quality and speed of service. commercial content on social media has become the new normal, and users are actively exploring it. it is analysed how niche influencers will play a leading role in promoting commercial content on social media. there is described a way to achieve advanced digital technologies that allows marketers to reach the maximum share of the target audience and establish effective channels of communication with consumers, immersing deeper directly into the sales process. keywords: marketing communication, social development, promotion, advertising, brands, trends, digital marketing, transformation of social values jel classification: m30, m31 author: volodymyr nesterenko sumy state university, sumy, ukraine e-mail: vladimir.nesterenko5@gmail.com https://orcid.org/0000-0002-1792-9823 citation: nesterenko, v. (2021). marketing communications: ongoing trends and options. virtual economics, 4(4), 21-32. https://doi.org/10.34021/ve.2021.04.04(2) received: august 12, 2021. revised: september 3, 2021. accepted: september 24, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) nesterenko volodymyr virtual economics, vol. 4, no. 4, 2021 22 1. introduction the covid-19 pandemic has significantly changed marketing: communications with the audience have increasingly moved into the digital space; attracting the attention of potential customers has become much more challenging. figure 1. the number of internet users worldwide from 2005 to 2021, in millions (johnson, 2021) source: johnson (2021). in 2021, the number of internet users worldwide was estimated at 4.9 billion, up from 4.6 billion in the previous year. an easier access to computers, modernization of countries around the world and an increased distribution of smartphones has given people the opportunity to use the internet more frequently and with more convenience. however, the internet penetration often pertains to the current state of development regarding communications networks. as of q1 2021, there were approximately 854 million of total internet users in china and 313 million of total internet users in the united states. social networking is one of the most popular online activities and facebook is the most popular online network based on active usage. as of the second quarter of 2021, there were over 2.9 billion of active facebook users monthly, accounting for well over half of internet users worldwide. connecting with family and friends, expressing opinions, entertainment and online shopping are amongst the most popular reasons for using the internet (johnson, 2021). therefore, the objective of marketing today is to penetrate into the core of the buying process and interact with the inner beliefs, hopes and expectations of consumers at all stages of their decision-making. 1,023 1,147 1,367 1,545 1,727 1,981 2,174 2,387 2,562 2,75 2,954 3,217 3,444 3,729 4,119 4,585 4,901 0 1 2 3 4 5 6 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 number of internet users worldwide from 2005 to 2021(in millions) www.virtual-economics.eu issn 2657-4047 (online) nesterenko volodymyr virtual economics, vol. 4, no. 4, 2021 23 2. literature review marketing communications have been extensively studied by foreign researchers including o. grey, k. johnson, r. mayer, t.p. novak, k. odelli, j. pearson, d.l. hoffman, e. chadwick, and many others. many ukrainian experts, such as beliayev and haliuk (2019), bilan et al. (2020), horda et al. (2019), yashkina (2017), letunovska (2021a; 2021b), kwilinski (2018; 2019), kwilinski et al. (2019), explored these topics in their research, including the improvement of the methods of attracting customers and digitalisation of corporate marketing communications. within the framework of the general model of the 21st-century marketing , oklander m. and his co-authors conducted a large-scale study of the possibilities and prospects of digital marketing, which yielded a number of useful results and conclusions. (oklander et al., 2017). however, the rapid changes in information technology and the evergrowing amount of data and number of users in online domains are accelerating the transformation of the marketing environment. in 2021 alone, the number of internet users has increased by 14%, i.e., about half a billion of new people online. with the global transition online, people expect high-quality and personalised content that will meet their interests, which calls for a comprehensive study of the main trends in modern marketing communications. yang (2021) substantiated the causal links between the relevant characteristics of the marketing channels of communication and the level of the green competitiveness of enterprises. the purpose of the article is to identify the main current trends in the development of marketing communications, which will increase and maintain the consumers’ involvement and trust at all stages of the purchase. 3. results and discussion there were analysed publications on marketing communications and marketing tools used in practice to deeply analyse the known approaches and to describe trends. there were also shown new conclusions based on them. the research data were generated from the statista and analytics data of deloitte for 2010-2021. in the 21st century, marketing communications are developing rapidly and new channels and ways of promotion are constantly appearing. in their study titled a new marketing paradigm for electronic commerce, hoffman and novak suggest that digital media have changed the model of communication, becoming the basis for creating a new paradigm of marketing communications (gray, 2015, p.52). the main methods of promotion used in the past are no longer working today: advertisements in periodicals and classic tv commercials have long failed to produce the desired result. under the influence of modern trends, some types of communication are becoming more convenient and contemporary. outdoor advertising is still in demand, but instead of the usual billboards, more and more video boards are being installed, because video content is more attractive and sells better. since the advent of the www.virtual-economics.eu issn 2657-4047 (online) nesterenko volodymyr virtual economics, vol. 4, no. 4, 2021 24 automated teller machine, atm advertising has been in demand: messages on the screen such as announcements and offers; short surveys and feedback collection; notification of a new product (onboarding); reminders about existing products; promo codes, discounts, etc. under the influence of social development, marketing approaches, types and methods of marketing communications have changed along with the business space. today, the main determinants of social development are increasingly the values shared by most people, as well as the growing digital potential, which is widely used in digital marketing. it should be noted that according to the icc code 2011, digital communications mean exchanging information based on digital technologies and characterised by two-way interaction, which can be initiated by either a marketer or a client (gray, 2015). modern society tends to solve primarily social problems, so most buyers expect a clear position and clear statements on social issues from brands. moreover, the young audience is especially attentive to the social position of a brand. as a result of this trend, the mission of modern brands is to become a real driver of growth and will not be limited to the focus on profit growth in the near future. in order to form effective marketing communications, a business will have to deeply reconsider why it exists and rely on its updated values when choosing a business strategy. customers will expect brands to be fully immersed in social issues, and it will not be enough to simply broadcast their position in a commercial. the mission will permeate all areas, from marketing communications to corporate culture and product portfolio development. the system of priority values of society covers all spheres of life, and today the decisive values are eco-friendliness and smart consumption, social and environmental programmes, combating social inequality, privacy and protection of personal data. the gradual abandonment of using third-party cookies is becoming a constant trend. the use of cookies does not yield the same tangible result as it has previously done, and given the requirements of confidentiality, these data risk disappearing altogether, although the rejection of cookies will complicate remarketing and personalised advertising. after analysing the extent to which the corporate strategy depends on cookies and third-party services, marketers of many fast-growing companies concluded that information should be collected independently and approaches to analytics should undergo changes. this requires the process of systematic collection of information: developing a unified structure of information about customers, collecting information through consumer value, motivating customers to share personal data through loyalty programs, gamification, consulting and more. however, businesses should not limit themselves to their own database but establish relationships with partners. market giants are accumulating a lot of data valuable for analytics in marketing communications. www.virtual-economics.eu issn 2657-4047 (online) nesterenko volodymyr virtual economics, vol. 4, no. 4, 2021 25 geolocation and tracking the user activity are a useful tool for personalisation, but constant ‘tracking’ through gadgets scares customers and reminds them of the complete lack of anonymity. it is necessary to gradually abandon the practice of customer tracking, establishing a relationship of trust instead. to make it easier to process data, businesses can work with groups of people by interests and values, although this will somewhat weaken personalisation of messages. buyers found helpful messages about discounts and receipts, recommendations based on their interests, i.e., transparent transactions that simplify the user experience. this leads to the simple conclusion that marketing communications should be formed based on transparency and full trust in the brand. contrary to previous expectations, today society is opposed to the global transition to online services, because after 2 years of the pandemic, customers have gotten tired of distance shopping. therefore, in 2022, brands have to pay more attention to the offline space, implement hybrid experience, i.e., the practice of combining user experiences online and offline, the symbiosis of digital and physical interaction with the buyer. a hybrid experience requires a whole infrastructure that combines user experiences through different communication channels. this requires understanding the audience: for example, young people (millennials and gen z) prefer shopping through social media and use a voice assistant much more often, while the older generations (baby boomers and gen x) mostly prefer offline shopping and face-to-face communication with a consultant. so, digital space is considered more familiar to younger audiences. in addition, recent research shows that younger generations are more likely to notice advertising when considering a purchase, as well as to buy through new promotion channels. figure 1 clearly shows the impact of advertising on the purchase and use of modern promotion channels for younger (18-25 y.o.) and older (46+ y.o.) generations (deloitte, 2021). younger generations notice advertising much more actively. figure 2. the impact of advertising and promotion channels on the purchase for younger and older generations, % of the total age group 35% 32% 23% 28% 30% 30% 23% 31% 18% 17% 11% 10% 13% 14% 14% 17% 0% 5% 10% 15% 20% 25% 30% 35% 40% auto travel apparel and footwear beauty and personal care household equipment furniture electronics banking products and services 18-25 years 46+ years www.virtual-economics.eu issn 2657-4047 (online) nesterenko volodymyr virtual economics, vol. 4, no. 4, 2021 26 source: deloitte (2021). at the same time, companies are losing huge profits by focusing on gen z. numerous current studies have shown that the purchasing power of the boomers is usd 2.6 trillion, and gen x earns more than the rest of the age groups. therefore, marketing should focus on audiences of different ages, taking into account their values and interests. the statistics show that for the period of 2010-2021, the total amount of data on the internet, measured in zettabytes, increased by 3,950% and will continue to grow exponentially, as shown in the diagram (fig. 3). the trend function has an approximation coefficient with a value close to 1 (r²=0.9739), which indicates a high reliability of the forecast with an approximation error close to zero. figure 3. amounts of created, consumed and saved data in 2010-2021 with the forecast trend for the next 10 years, in zettabytes source: calculated by author. the total amount of data created, captured, copied and consumed worldwide since 2010 (2 zettabytes) has grown rapidly, reaching 79 zettabytes in 2021. (statista, 2022) in 2021, the amount of data created and reproduced reached a new high. growth was higher than previously expected due to the increased demand caused by the covid-19 pandemic, as more people worked and studied at home and used the internet resources more often. if these trends continue, it can be predicted that over the next decade (until 2031), the volume of global data will increase to more than 631 zettabytes. according to statistics published by the european commission, in 2020 the number of data users in 27 countries of the eu and the uk is estimated at 726,110. the number of data users 0 100 200 300 400 500 600 700 www.virtual-economics.eu issn 2657-4047 (online) nesterenko volodymyr virtual economics, vol. 4, no. 4, 2021 27 in these countries is projected to increase in the coming years, reaching 779,150 by 2025 according to the baseline scenario (statista, 2021). the source identifies data users as companies that intensively create, operate, collect and analyse digital data and use what they learn to improve their business. they represent the demand in the data market. in general, there are convenient and scalable technologies that allow companies to simplify the operational complexity of the work today. the diversity of software and services creates a confusing and overloaded architecture. more and more companies are taking into account the environmental trend and trying to reduce the load on devices as well as the consumption of energy and other resources. with the onset of the pandemic, loyalty formation through building trust has become important: buyers prefer trustworthy brands that treat them with respect. loyal customers have become the main ‘asset’ of brands in 2021. this trend has forced companies to redistribute their budgets: much more money is spent on retaining old customers than on attracting new ones. therefore, the costs of remarketing and retaining customer loyalty are expected to grow further in 2022. particular attention is to be paid to the use of such a powerful and promising communications tool as ai, which can significantly affect the quality and speed of service. businesses already use ai for certain activities such as timely notifications and mailings. however, its opportunities are much wider: ai helps to select recommendations, simplifies the product return process, allows better examination of the product and more. therefore, one of the priorities of 2022 will be to use ai to its maximum potential. at the same time, it is important to achieve a balance between technology and human resources. automating routine processes will improve marketing communications by spending more time communicating and building trust with customers. personalisation will cover all areas of business, from advertising and newsletters to retail customer service. the transition online brings an ‘omnichannel personalisation’, i.e., synchronisation between multiple communication channels to simplify the user experience (chaffey et al., 2006). augmented reality has been generating buzz for years, but in the post-pandemic period, brands are expected to attempt combining online experience with a return offline. indeed, nike and burberry have already opened augmented reality stores, etsy offers a virtual home tour, and macy’s offers a live-streaming shopping experience. the transformation of facebook into meta also speaks of the transition of businesses to ecosystems where reality and digital experiences merge into a single space. metaverse is a new way to unite users. metaverses unite the salient, supplemented and virtual world into a single universe. it is important to understand, however, that the idea is designed for the younger generations: the most popular virtual worlds are game universes. influence marketing and engaging opinion leaders (influencers) are becoming increasingly important and will become a mandatory part of the e-commerce sales funnel. collaboration with influencers increases brand awareness, promotes loyalty and influences the decisions of www.virtual-economics.eu issn 2657-4047 (online) nesterenko volodymyr virtual economics, vol. 4, no. 4, 2021 28 the target audience. from an auxiliary tool, influencers are becoming the cutting edge of promotion. today, most marketers use instagram to work with influencers. at the same time, the size of the audience has receded into the background, as micro-influencers with a loyal audience yield identical results. only in 2022, the market of influencers is expected to grow by 12.2% (deloitte, 2021). this will increase the influence of microand nano-influencers with an audience of up to 100,000 people formed in niche communities, and businesses are already interested in cooperation with them today. crowded social media create information noise, and users are increasingly looking for quiet communities with their like-minded people, ‘their people’. hence there is a growing interest in niche communities that exist on several social media and unite users with a common interest. instead of pursuing a wide audience, the businesses focus on narrow niches and penetrate the core of interests of their target audiences. thus, niche communities operate on the principle of ‘less does not mean worse’. there are two ways: 1) creating a community around your own brand for those niches that should form a loyal community; 2) a brand statement in the existing community, suitable for both paid advertising and various publications relevant to a specific target audience. short video content such as tiktok videos, memes and pictures are dominating views in 2021. due to a wide variety of information, people have more and more trouble focusing, so simple content that is easy to remember is the most popular. a study by app annie found that engagement with youtube videos fell by 30.7%. at the same time, the popularity of tiktok with its short videos is constantly growing. therefore, it is suggested to use micro-content and primitive formats to get the attention of the audience majority. timely support is another factor of trust and loyalty. society has become more irritable after the pandemic and is looking for instant support from brands. however, a chatbot and faq are no longer sufficient. customers want personal interactions and attention to their issues—and also actively express their dissatisfaction on social media. therefore, the number of interactions with online customer support services will only increase. to organise a fullfledged support service, it is advisable to use social listening tools and track opinions on social media; to synchronise requests from buyers from all platforms so that not to miss an urgent request; to create procedures and scripts to be followed by customer support staff; to record all communication processes. instagram's advertising audience is now growing by more than 1 million of new users per day and in early july 2020 amounted to 1.08 billion. linkedin has 700 million registered users worldwide. in the second quarter of 2020, the global user base of the platform grew by more than 25 million, which is 4% higher than in the previous quarter (nesterenko et al., 2021). particular attention is to be paid to the audio content, a trend that began when people missed live interactions and continued with clubhouse, spreading further to podcasts and tiktok’s music library. the number of podcast listeners has been growing over the last 6 years and has grown particularly rapidly since 2020. people expect sincerity and presence from the audio www.virtual-economics.eu issn 2657-4047 (online) nesterenko volodymyr virtual economics, vol. 4, no. 4, 2021 29 content. therefore, businesses should not try to sell through audio content; it is preferable to use this format to ensure visibility and loyalty, attracting influencers, talking pro-actively and igniting discussions around your brand, while showing maximum sincerity. figure 4. the most effective digital marketing methods according to marketers around the world in 2020, share of respondents source: calculated by author. based on the responses of global marketers, content marketing was considered the most effective digital technology in early 2020 (fig. 4). when asked to determine which activity they felt would have the greatest commercial impact on their own business or the business of their customers, 17% indicated content marketing. it was followed by marketing automation, big data, ai and machine learning (statista, 2021). classic tv commercials have long failed to produce the desired result. instead, advertisers turned to targeted tv advertising, a technology that delivers advertising content directly to the user. therefore, targeted tv advertising is expected to increase its popularity in the near future. 17.4% 17.4% 15.3% 12.9% 7.8% 4.8% 4.8% 3.9% 3.0% 3.0% 2.7% 2.7% 2.1% 2.1% 0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0% 14,0% 16,0% 18,0% 20,0% www.virtual-economics.eu issn 2657-4047 (online) nesterenko volodymyr virtual economics, vol. 4, no. 4, 2021 30 webinars, online events and media also remain the effective tools of marketing communications based on trust empathy. brands are actively using interactivity, which encourages users to engage in dialogue, and online events have replaced customer meetings offline. it should be noted that information on the internet spreads very quickly, although there is a huge risk of misinformation and distortion of facts at the same time. the problem of misinformation on the internet is increasingly highlighted. in many cases, the dissemination of false information is due to a lack of attention and engagement. distorted information and lies will no longer go unnoticed and will undermine the trust of users on all platforms at once. nowadays, to win more attention from users, brands will have to create better content and share relevant topics. in general, communication with users will be a key factor in the brand’s presence on social media. and just posting content is not enough: brands need an active and involved community. the attention of users themselves has also shifted: now they perceive the company not as a separate brand but as an association of people with common values. the need for constant communication will lead to the decentralisation of social media. instead of the main communication channel, brands will have to be present on several platforms or create their own community, including websites, applications, etc. facebook and instagram remain the leaders in sales among social media, with tiktok playing an increasing role in sales. commercial content on social media has become the new normal, and users are actively exploring it. niche influencers are expected to play a leading role in promoting commercial content on social media. more and more people are blocking or ignoring advertising on the internet, so instead of commercials, it is suggested to create exciting content that can attract users. 4. conclusions the marketing of the future will focus primarily on the consumer with their requirements, desires and expectations. to create relevant offers, brands will have to study in detail the needs and behaviours of their target audience. in addition, a marketing strategy of every modern company should be devised based on a mission that will clearly define its views on popular social issues, which have been updated and undergone significant changes. therefore, in the near future, companies will have to reconsider why they exist and what they need to talk about with their audience. the use of advanced digital technologies allows marketers to reach the maximum share of the target audience and establish effective channels of communication with consumers, immersing deeper directly into the sales process. all the variety of types and methods of digital communications are grouped under the umbrella term of digital marketing. one of the main trends in digital marketing is the phasing out of conventional advertising and database practices: many companies will have to look for new ways to work with data and promote brands to maintain the results they have achieved in the past, such as personalisation www.virtual-economics.eu issn 2657-4047 (online) nesterenko volodymyr virtual economics, vol. 4, no. 4, 2021 31 of advertising using the facebook database. more and more people are blocking or ignoring advertising on the internet, so instead of traditional advertising, it is suggested to create exciting content that can attract users. targeted advertising will also remain an effective tool for creating relevant advertising, which will be user-oriented rather than personalised. isolation during the pandemic has significantly changed consumer behaviour: consumers are spending more and more time choosing the product themselves, and the interest in shopping on social media has increased significantly. sales through social media will become more familiar and easier: for example, shopping tags on instagram allow the customer to make purchases without leaving the application. a deep understanding and engagement of the audience as well as building a particularly warm relationship between the brand and its consumer will be the key to the brand’s success on social media. the most promising social media, apparently, will be tiktok, the first non-facebook application, which has already reached 3 billion downloads worldwide. tiktok is growing at a tremendous rate, and the short video format and organic promotion set this resource apart from other platforms. in general, advertising on social media and the shopping process will merge into a single ecosystem that will simplify the path of the customer to the desired purchase. references bilan, y., pimonenko, t., & starchenko, l. (2020). sustainable business models for innovation and success: bibliometric analysis. e3s web of conferences. https://doi.org/10.1051/e3sconf/202015904037 chaffey, d., ellis-chadwick, f., mayer, r., & johnston, k. (2006). internet marketing strategy, implementation and practice. financial times prentice hall, 579. deloitte insights. (2021) global marketing trends. retrieved from https://cutt.ly/shslsge gray o., odelli c., & pearson j. (2015). digital marketing communications. easa the european advertising standards alliance. hoffman, d., novak, d. (1996) marketing in hypermedia computer-mediated environments. journal of marketing, 60, 50-68. haliuk, ya., horda, a., zaburmekha, ye (2019). methods of attracting consumer attention using smm. 36 bulletin of the khmelnytskyi national university. economic sciences, 5, 57-60. kryvenko, ya., & beliaev, l. (2019). digital marketing in the system of integrated marketing communications. collection of student research papers. odesa: odesa national economic university, 1, 135-144. кwilinski, a. (2018). mechanism of modernization of industrial sphere of industrial enterprise in accordance with requirements of the information economy. marketing and management of innovations, 4, 116-128. http://doi.org/10.21272/mmi.2018.4-11 кwilinski, a. (2019). implementation of blockchain technology in accounting sphere. academy of accounting and financial studies journal, 23(si2), 1-6. www.virtual-economics.eu issn 2657-4047 (online) nesterenko volodymyr virtual economics, vol. 4, no. 4, 2021 32 kwilinski, a., tkachenko, v., & kuzior, a. (2019). transparent cognitive technologies to ensure sustainable society development. journal of security and sustainability issues, 9(2), 561-570. letunovska n.e., khomenko l.m., lyulyov o.v. et al. (2021a). marketing in the digital environment: a manual. sumy: sumy state university, 259. letunovska, n., lyuolyov, o., pimonenko, t., & aleksandrov, v. (2021b). environmental management and social marketing: a bibliometric analysis. in e3s web of conferences, 234. https://doi.org/10.1051/e3sconf/202123400008 melnik, yu., saher, l., illiashenko, n., & ryazantseva, yu. (2016). classification of basic forms and types of marketing on-line communications. marketing and management of innovations, 4, 43-55. nesterenko, v., rosokhata, a., syhyda, l., moskalenko a. (2021). comparative analysis of marketing communications changes under the influence of covid-19. bulletin of the cherkasy bohdan khmelnytsky national university economic sciences, 4, 4-10. oklander, m., oklander t., & yashkina o. (2017). digital marketing: marketing model of the 21st century. odesa: astroprint, 292. rosokhata, a., & shapoval, v. (2020). theoretical bases of priority and perspective innovative development on the inclusiveness principles inclusive growth: basics, indicators and development priorities. publishing house: centre of sociological research, 2020, 141-150. rosokhata, a., khomenko, l., jasnikowski, a., & dmytruk, k. (2021). methodical tools research of place marketing via small and medium business development. modern economics, 29(2021), 156-162. statista. (2021). retrieved from https://www.statista.com yang, c., kwilinski, a., chygryn, o., lyulyov, o., & pimonenko, t. (2021). the green competitiveness of enterprises: justifying the quality criteria of digital marketing communication channels. sustainability, 13(24), 13679. кwilinski alex 76 www.virtual-economics.eu issn 2657-4047 (online) abbiha waqar and nida nabeel virtual economics, vol. 4, no. 2, 2021 2021 volume 4 number 2 (april) the impact of social networking on customer loyalty in an emerging e-market context abbiha waqar and nida nabeel abstract. the aim of this study was to understand the impact of social networking on customer loyalty from the customers’ perspective in an emerging e-market such as pakistan, where social media penetration is still at an early stage, but is growing rapidly. the planned sample size is 100 respondents. the primary data were collected by distributing questionnaires among general public in lahore, pakistan from december 2016 to january 2017. the data collected were analysed using cross tabs in spss. the secondary data collected by analysing literature in the libraries, online journals, and published papers. seventy four percent of the respondents agreed that website interface was of utmost importance, followed by sixty-seven percent saying that convenience of online shopping and the availability of product information are also of great importance. the findings suggest that social networking does influence the customer loyalty greatly. keywords: customer loyalty, e-commerce, social networking, online shopping jel classification: m5, m21 authors: abbiha waqar tokat gaziosmanpaşa university, gaziosmanpaşa üniversitesi, taşlıçiftlik yerleşkesi, merkez/tokat turkey, 60250 e-mail: abbiha.lse@gmail.com; abbiha.waqar9320@gop.edu.tr https://orcid.org/0000-0002-1179-3507 nida nabeel lahore school of economics, barki rd, sector p phase 7, lahore, punjab 54000, pakistan e-mail: nida.nabeel2@gmail.com https://orcid.org/ 0000-0002-2338-142x citation: waqar, a., & nabeel, n. (2021). the impact of social networking on customer loyalty in an emerging e-market context. virtual economics. 4(2), 76-87. https://doi.org/10.34021/ve.2021.04.02(4) received: january 3, 2021. revised: march 12, 2021. accepted: april 3, 2021. © authors 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2021.04.02(4) https://creativecommons.org/licenses/by/4.0/ 77 www.virtual-economics.eu issn 2657-4047 (online) abbiha waqar and nida nabeel virtual economics, vol. 4, no. 2, 2021 1. introduction gaining and maintaining customer’s loyalty have been marketers’ ambition for ages (bennett 2002). their ultimate goal is to maintain customer relationship; as brand gains special, affirmative and prominent share of mind, they become inimitable and help in winning customer loyalty. gaining loyalty in turn leads to sales, revenues, profitability and helps in the growth of a market share (keller 2008; kapfere 1997). various means are applied by companies to uphold customer loyalty including eight ps of marketing, brand elements, events and sponsorships, one-to-one marketing activities, internet marketing and social media marketing (keller 2008; kotler 2007). customer loyalty is defined as ‘an enduring desire to maintain a valued relationship’ (senders et al. 2013). maintaining a persistent and lasting relationship with customers leads to repeat purchases, thus creating customer loyalty (mithas et al. 2006). wide acceptance of social media platforms and ease of sharing content among friends is another important motivation for customers to engage with brands on social media (erdogmus & cicek 2012). using social media as a marketing tool to grab customers’ attention and win their loyalty is becoming popular because social media is the most price-effectual and easy-to-use display place to communicate and share information about brands, businesses, new products and services, events and anything else (julian, 2012). social media has changed and affected the consumer behaviour from end to end: from gaining information regarding the product you want to purchase to the post-purchase behaviour of gaining satisfaction or being dissatisfied. major advantage that the social media platforms provide is connecting people with similar mindset from all over the world to each other in real time and with minimal cost, which in turn effects customer’s purchase behaviour. it is due to this that social media has become a highly effective and relevant tool in most industries: that is why companies must participate and show their presence on facebook, twitter, instagram and other social networking sites in order to be visible to their customers and be successful (kaplan 2010). 1.1. an emerging e-market pakistan was chosen as the context of this research, as in terms of population density, it is the fourth-largest country on the asian continent. pakistan’s growth rate of internet users is the second highest in saarc countries. the internet users have showed double digit growth for the past five years, and now their number accounts for 16.8 percent (ameen 2017). the active social media users’ penetration rate is only 17.5 percent (internet world stat 2017) making it a largely untapped market to be exploited in the near future. according to the recent study, it has been noted that pakistan, although a late participant in the world of e-commerce, has been showing an increasing trend over the years. there is a massive rise in online shopping trends and other e-commerce businesses. among various factors that have changed the shopping trends over time and helped in pushing e-commerce http://www.virtual-economics.eu/ 78 www.virtual-economics.eu issn 2657-4047 (online) abbiha waqar and nida nabeel virtual economics, vol. 4, no. 2, 2021 to the next level in pakistan is the rate of internet penetration. internet users, whose number was limited to approximately 30 million back in 2015, are expected to soar up to 56 million users in 2019 (ahmad 2015). the 3g and 4g launch back in 2014 was another major event that brought the consumers and companies much closer to each other. many businesses were set up and had been successful due to this. pakistan’s telecom authority announced that after that launch the mobile subscriptions increased up to 10.3 million in 2015 (ahmad, 2015). the study further elaborates the next factor i.e., the increase in smart phone users, which in turn makes the online businesses much more accessible. it is due to the rise in demand of smart phones that many chinese smart phone manufactures have set up their companies in pakistan. with over 28 percent of the population to have access to internet by 2019 and the increase in using sites like facebook and twitter, the marketing strategies and companies’ relationship with the customers have experienced drastic transformations, because social media has started to have a major impact on customers’ opinions (ahmad 2015). this can be exemplified by a facebook group named “foodies r us”, which has members all over pakistan sharing their opinions in this group as to whether an eatery is worth trying or not. the results are made known to either, making the eatery a success or a failure. 1.2. problem definition/formulation many researchers suggest that social media can help in engaging customer and building customer loyalty. to understand the depth of this relationship, different variables concerning social media with reference to customer loyalty are studied. most studies are localised in the countries that have high penetration rate of social media usage such as the usa, turkey and the uk. as pakistani social media penetration is still at an early stage of development, making it potentially an untapped market to be exploited in the near future, this research is done in order to comprehend how social media can influence customer loyalty in an emerging market. 2. literature review safko and brake defined and explained social media as a “conversational media” where different people come together online in order to share their opinions, ideas and information (safko, 2009). “social media has altered the way people interact with each other” (olanrewaju et al., 2020). due to covid-19 pandemics, social media platforms did a roaring business. similarly, for the customers, the web has created a superior variety of choice in terms of value, price elasticity, products and services. this is due to the fact that the internet has provided admittance of new products and companies. “the fame of the internet and the initiation of the web 2.0 technologies have transmuted the contents of the web from publisher-to-usercreated contents” (ghani et al. 2019). in order to operate in highly aggressive environment, long-term relationships with customers are necessary (bruhn et al., 2014). a study states that http://www.virtual-economics.eu/ 79 www.virtual-economics.eu issn 2657-4047 (online) abbiha waqar and nida nabeel virtual economics, vol. 4, no. 2, 2021 customers are more likely to recommend or purchase a company’s product after they have affianced with company on social media (jackson, 2011). the customers who are using social media came across various sources of communal information from other customers about their recommendations and experiences. if the firm is engaged in social media, it helps in creating business for customers and helps in creating enhanced value (tajvidi & karami, 2021). 2.1. customer loyalty there are two main reasons of why customer loyalty is important in modern day businesses. “firstly, customers are a scarce resource; it is very easy to obtain a purchase from an old customer rather than from a new one. secondly, customer loyalty has a positive effect on revenues and profitability of the company” (castañeda, 2017). social networking plays an important role when it comes to gaining customer loyalty, therefore this study focuses on obtaining customer loyalty through social media presence. “customer loyalty construct was defined as recurrent purchasing, but literature has since evolved to considering several dimensions, including behavioural, attitudinal and composite” (närvänen et al., 2020). literature suggests that loyalty can be categorized in two diverse ways: first is attitudinal and second is behavioural. attitude focuses on a feeling that individual customers have in reference to the product they want to buy, service they want to avail themselves of and organization with which they want to associate; whereas the behavioural loyalty focuses on a behaviour that is repeated again and again until it becomes a habit rather than a cognitive decision (hallowell, 1996). customers using the same nearby store to shop even though there are other stores located nearby can be taken as an example. 2.2. salient features of social networks 2.2.1. a prerequisite for any business transaction trust in the context of social media – “e-trust” – can largely help in building “e-loyalty”. for any business transaction to take place, trust is a prerequisite. trust along with the customer satisfaction plays an invaluable role in bringing customers back for more buys, resulting in repeat purchases and a positive impact on customer loyalty (ribbink et al. 2004). consumers have more trust in online information shared by the opinion leader. consumer trust is very important in social media, as without it they are unable to purchase the product (pop et al., 2021). 2.2.2. customer satisfaction customer satisfaction is a multidimensional and extensive notion. in the whole consumer life cycle, which includes brand name, after-sales service and product or service quality etc., many various variables can affect customer satisfaction and customer loyalty (shokouhyar et al., 2020). anderson & srinivasan (2003) suggest that trust and perceived value go hand in hand http://www.virtual-economics.eu/ 80 www.virtual-economics.eu issn 2657-4047 (online) abbiha waqar and nida nabeel virtual economics, vol. 4, no. 2, 2021 in order to accelerate the impact of customer satisfaction on customer loyalty. customer satisfaction plays a key role in building customer loyalty. customer satisfaction has a positive impact on customer loyalty, as there is a significant relationship. “satisfaction is directly linked to customer experience, customers want more than just simple value”; they want businesses to give those superior services and products that are above their expectations in order to satisfy their needs and demands (hamzah & shamsudin, 2020). studies related to customer satisfaction define it as having two categories: transaction-specific that is the customer satisfaction comes in after a product or service has been used and customer determines whether it has been worthwhile or not, a postpurchase evaluation process (chang & chen 2009); whereas cumulative customer satisfaction focuses on the all-inclusive experience which is based on evaluating a particular organization during a specific period of time (chang & chen 2009). 2.2.3. readily available product information providing frequent and desirable information to customers on social media is inexpensive and can help companies reach out and persuade their customers to make repeat purchases (berger 1998). making relevant information about preferred products, status of order readily available to customers can help show the customers that companies “care” about them (srinivasan et al. 2002). “the most noticeable form of product communication in social media is digital advertisements, but social networking sites have permitted the emergence of new layouts and elusive messages in the form of e-word of mouth (e-wom)” (al-abdallah et al., 2021). 2.2.4. the ease of use and convenience a website interface and convenience both are interrelated; a simple and user-friendly website can minimize mistakes made by the customers and make shopping more satisfying, resulting in customer loyalty (srinivasan et al., 2002). there has been evidence that firms which invest in enhancing their websites by hiring talented staff, using multimedia and graphics, tend to attract more customers (chang & chen, 2009). convenient social media is described as the one which reduces customers effort, has a short response time and facilitates fast transactions (schaffer, 2000). many studies indicate that customers leave a website without making any purchases because they are not able to make their way through the website and, because of that, they leave the transaction incomplete. 30 percent of the customers leave a website that is not convenient (schaffer, 2000). moreover, another study defines a convenient website as the one that makes it easier for the customer to finish the transactions quickly, requires very little effort by the customer and is easy to go through (wolfinbarger & gilly 2003). consumer’s trust in online purchasing depends on the apparent comfort of use, website eminence, website reputation and apparent efficacy (pop et al., 2021). http://www.virtual-economics.eu/ 81 www.virtual-economics.eu issn 2657-4047 (online) abbiha waqar and nida nabeel virtual economics, vol. 4, no. 2, 2021 2.2.5. the internet experience h. chang and s. chen in their study provide evidence that the internet experience can have a role to play when it comes to gaining e-loyalty (chang & chen, 2009). the internet experience is referred to as customers’ ability to go online and use social media to facilitate themselves. previous research suggests that people who shop online usually tend to have had a positive experience, which makes them authoritative in comparison to inexperienced users. ecommerce players are increasing day by day, and the customers’ use of smart phones globally is increasing rapidly helping them to adopt e-commerce, which results in higher market growth (goutam et al., 2021). to access the world wide web, customers use different browsers such as netscape, internet explorer and google chrome etc. in order to get great experience. when it comes to online shopping, it has been noted that both experienced and inexperienced users have different concerns. thus, it has been concluded that customers who lack the internet experience are more likely not to shop online (chang & chen, 2009). 2.3. the hypotheses being in a continuous contact with customers using social media makes it easier to gain and maintain customer loyalty. thus: h1: customer loyalty is positively affected by trust. h2: customer loyalty is positively affected by customer satisfaction. h3: customer loyalty is positively affected by product information. h4: customer loyalty is positively affected by a website interface. h5: customer loyalty is positively affected by the perceived convenience of a website. h6: customer loyalty is negatively affected by the lack of the internet experience. 3. methods 3.1. data collection data were gathered through administering a structured questionnaire. the questionnaire designed for this study were taken from the literature. 3.2. a sample size there was drawn a sample of 100 people who were online shoppers and social media users. the sample consisted of 50 percent males and 50 percent females. the average age of the sample was 25. about 80 percent were students (graduate and postgraduate level) and 20 percent were professionals. 3.3. the questionnaire design http://www.virtual-economics.eu/ 82 www.virtual-economics.eu issn 2657-4047 (online) abbiha waqar and nida nabeel virtual economics, vol. 4, no. 2, 2021 the questionnaire for customer loyalty was adopted from (chang & chen, 2009). the independent variables were trust, customer satisfaction, convenience, product knowledge, the internet experience and a website interface. these constructs are also used in the literature by other researchers. all items on these scales were close-ended and measured on likert scale and multiple-choice questions. 3.4. the data analysis and interpretation crosstabs and pearson chi-square test were used to analyse data in order to test the relationship between variables and their correlation. 3.5. pretesting pretesting was also done by gathering data from 10 respondents in order to reduce the chances of error. so, bias can minimized. after pretesting, some of the questions were eliminated and the sequences of the questions were changed. pretesting sample was not included in the analysis and results. 4. results and discussion the hypothesized relations among all independent variables (trust, customer satisfaction, product knowledge, convenience, the internet experience and a website interface) and dependent variable (customer loyalty) were tested using spss. 0.05 and greater pearson chi-square value indicates a significant positive relationship resulting in accepting the hypotheses and vice versa. all the hypotheses of this study had a greater pearson chi-square value than 0.05 except for one variable (lack of the internet experience) (refer to table 1). table 1. pearson chi-square values hypotheses relationship pearson chi-square value results trust*customer loyalty positive 0.06 accept customer satisfaction * customer loyalty positive 0.18 accept product information * customer loyalty positive 0.43 accept lack of internet experience * customer loyalty negative 0.03 reject convenience * customer loyalty positive 0.09 accept http://www.virtual-economics.eu/ 83 www.virtual-economics.eu issn 2657-4047 (online) abbiha waqar and nida nabeel virtual economics, vol. 4, no. 2, 2021 website interface * customer loyalty positive 0.13 accept source: developed by the authors. 4.1. a trustworthy website as the internet usage increases, so do frauds and fraudulent websites resulting in the lack of trust. trustworthiness of a website is very important to customers. if a website seems authentic, it will help in taking purchase decision leading to repeat purchases and customer loyalty. respondents support this idea, as out of 100 respondents 55 percent state that a trustworthy website is very important to them. pearson chi-square value (0.06) also indicates a positive relationship between trust and customer loyalty. 4.2. customer satisfaction a bad experience will result in a negative word of mouth and the lack of customer loyalty. customer satisfaction is the one thing that guarantees repeat purchases. it plays a significant role in online shopping, and 61 percent of the customers agreed with this. pearson chi-square value (0.18) also indicates a positive relationship between customer satisfaction and customer loyalty. 4.3. a website interface similarly, an easy-to-use website would also result in bringing customers back. pearson chisquare value (0.13) also indicates a positive relationship between a user-friendly website interface and customer loyalty. a website interface also plays an important role, as 74 percent of the respondents agreed with this idea. 4.4. product information readily available information regarding products, promotions and a company itself would make it easy for customers to know the brand. moreover, having relevant product information readily available would mean making a quick purchase decision, and that is why readily available product information has a positive relation with customer loyalty, which it also indicated by the pearson chi-square value (0.43). sixty-seven percent of the customers agreed that product information helped in making an educated purchase decision. 4.5. convenience customers who shop online are looking for convenience and a way to save time. online shopping is convenience epitomized; and 67 percent of the respondents agree. pearson chisquare value (0.09) also indicates a positive relationship between convenience and customer loyalty. http://www.virtual-economics.eu/ 84 www.virtual-economics.eu issn 2657-4047 (online) abbiha waqar and nida nabeel virtual economics, vol. 4, no. 2, 2021 4.6. the internet usage and experience furthermore, 70 percent of customers use the internet twice a day and about 26 percent of the respondents said they use the internet throughout the day but frequency of internet experience does not guarantee a loyal customer base. this is also indicated by pearson chisquare test. as the pearson chi-square, value (0.03) also indicates a negative relationship between lack of the internet experience and customer loyalty. 5. conclusion and recommendations the purpose of this study was to understand the “impact of social networking on customer loyalty” from customer’s standpoint. it has been hoped that the outcome of this study contributes to practice and literature, since social media marketing has been defined as a fastgrowing platform for building long lasting relationships with customers and portraying a positive image of the brands in customer’s mind. social networking is eagerly explored by many companies all over the world in the countries that have the higher internet usage rate but not in emerging markets. therefore, research was needed to insure some tenor in this quest. 5.1. limitations and future research time constraint was the major limitation to this study, because of which large sample size could not be analysed. the other limitation was geographical boundaries, due to which only specific areas of lahore were targeted. moreover, validation by any quantitative statistical analysis in order to test relationship between dependent and independent variables was not done. due to the fact, that this research was based on convenient sampling and the number of respondents was limited as well, care should be taken to generalize the results as those true for any and all research. as the data was collected mostly from students who did not lack internet experience, the future research could be generalized, if survey filled by diverse group of people. future research could also focus on the specific features of a website and how is can influence a customer to return for more. 5.2. managerial implications it was interesting to see the managerial implications of this study by analysing the relationship that exist among some important variables (trust, customer satisfaction, product information, a website interface and convenience) with the customer loyalty. the results of the study show that website interface plays a vital role in building customer loyalty leading to the conclusion that any and all marketers who are willing to take advantage of this upcoming trend in pakistan need to invest in improving their website interface by investing time, money and human resources. http://www.virtual-economics.eu/ 85 www.virtual-economics.eu issn 2657-4047 (online) abbiha waqar and nida nabeel virtual economics, vol. 4, no. 2, 2021 other factors are also important in order to build customer loyalty and they have a positive relationship with customer loyalty except for one variable i.e., a lack of the 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(2003). etailq: dimensionalizing, measuring and predicting etail quality. journal of retailing, 79(3), 183–198. https://doi.org/10.1016/s0022-4359(03)00034-4 http://www.virtual-economics.eu/ https://doi.org/10.1016/s0022-4359(01)00065-3 кwilinski alex 7 www.virtual-economics.eu issn 2657-4047 (online) dmytro kozlov virtual economics, vol. 4, no. 3, 2021 2021 volume 4 number 3 (july) the strategies of internalizing the negative externalities in the company’s sustainable development dmytro kozlov abstract. the study focuses on externalities which play the important role in sustainable development. they indicate the impact of the company’s activity on the third persons. on the basis of findings, the externalities from the company’s financial reports are monetarized. the externalities exerting influence on the profit or loss as well as on the total balance of the company are analysed. positive and negative externalities are identified in order to internalize the negative externalities with the help of definite strategies of sustainable development. it is emphasized that the long-term action plans to ensure competitiveness, environmental protection and social legitimacy help to adapt to expected market, environmental and social developments. the study discusses current strategies: defensive (reactive), offensive that are viewed from the economic, environmental and social perspective. it is investigated that the defensive strategies are limited to the implementation of relevant laws or agreements in order to avoid negative consequences for the legislator. on the other hand, offensive, inwardlooking strategies are aimed at aligning the company’s structures (organizations) and systems (environmental management systems) with the requirements of sustainable development, motivation and qualification of employees for sustainable development. the environmental sustainable development strategies are focused on a variety of ecological aspects. the emergence of economic, environmental and social risks and opportunities in machinebuilding company with their potential solutions is underlined. as the matter of fact, using the right strategy, the company can easily go through the internalization of negative externality to exert more substantial impact on the society, environment and the economy. keywords: positive externality, negative externality, internalization of externalities, sustainable development, analysis of externality of the company, defensive strategies, offensive strategies jel classification: m21, q56 author: dmytro kozlov sumy state university, 2, rimski-korsakov st., sumy, 40007, ukraine e-mail: kozloff1976@gmail.com https://orcid.org/0000-0003-3381-4265 citation: kozlov, d. (2021). the strategies of internalizing the negative externalities in the company’s sustainable development. virtual economics, 4(3), 7-19. https://doi.org/10.34021/ve.2021.04.03(1) received: january 23, 2021. revised: march 12, 2021. accepted: june 9, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://creativecommons.org/licenses/by/4.0/ 8 www.virtual-economics.eu issn 2657-4047 (online) dmytro kozlov virtual economics, vol. 4, no. 3, 2021 1. introduction the global economic crises of recent decades have become increasingly closely linked to global environmental problems. scarcity of available natural resources, intensification of the climate change, an increase in the scale of natural disasters and the resulting losses determine the inevitability of society's transition to sustainable development, which ensures the harmonious coexistence of nature and humanity. the global sustainable development goals (united nations, 2012) and the paris agreement (paris, 2015) set new economic guidelines for states and companies in various economic activities. at the same time, given the slow pace of achieving the sustainable development goals by national economies and businesses, the tools for managing the transition to a new type of management are imperfect and require further scientific justification. particularly important in this context is the provision of "greening" of machine-building companies, which are mainly high-tech industries that provide diffusion of innovations, including environmental, to other areas of the economy. one of the main problems of sustainable development management is the presence of externalities – external effects of economic activities which are perceived by third parties who are not direct participants in the company. therefore, the internalization of externalities, especially negative ones, is of great importance for environmentally balanced regulation of machine-building companies. 2. literature review the modern scientific idea of externalities, their importance for the economy and the possibility of regulation have been formed in the research by the representatives of various fields of economics. an attempt to study externalities was made for the first time within the framework of the neoclassical theory of well-being, the origin of which dates back to the beginning of the xx century and is connected with surnames of pareto (pareto, 1927) and pigou (pigou, 1952). the further development of externality theory takes place in the studies by kaldor nicholas (kaldor, 1939), hicks john (hicks, 1939), r.a. musgrave (musgrave, 1959), paul a. samuelson (samuelson, 1948), john r. commons (commons, 1959), j. m. clark (clark, 1917), d. north (north, 1983), john kenneth galbraith (galbraith, 1973), ronald harry coase (coase, 1937). on the ground of their ideas, the direction of the externalities research has received a deeper scientific interpretation. in modern economic theory, a thorough research of externalities is represented in the works by w. baumol and w. oates (baumol & oates, 1993), a. a. papandreou (papandreou, 2003), h. r. varian (varian, 1992), k. bithas (bithas, 2011), m. common (common, 2011) and j.c.j.m. van den bergh (van den bergh, 2007), who examined the development of externalities in more practical modern field. http://www.virtual-economics.eu/ 9 www.virtual-economics.eu issn 2657-4047 (online) dmytro kozlov virtual economics, vol. 4, no. 3, 2021 however, given the passive attitude of the vast majority of business entities towards "green" activities, today their motivation to form and implement strategies for sustainable development at the microeconomic level, taking into account the developed theoretical and methodological framework, is extremely weak. isolated cases of companies’ environmentally conscious behaviour do not provide large-scale changes, requiring the formation of adequate economic levers to manage environmentally oriented transformations. thus, the need to improve the strategies of sustainable development of machine-building companies under modern economic conditions determined the relevance of the topic, its importance and practical significance, as well as the purpose and objectives of the research. 3. methods to analyse the impact of externalities, it is vital to identify at least one component that is not part of the interactions among economic entities, which either benefits in the case of positive externalities or, loses if the externalities are negative. although most externalities are nonmonetary in nature, the monetary equivalent of economic and social externalities can be found in the company's financial statements. this research takes the definite items of the consolidated balance sheet and statement of profit or loss of the company. the most important characteristic of the selected items is to have the externality principle inside. the following selected items (with the sequence number in the financial report) should be defined depending on the recipients of externalities:  long-term financial investments: accounted under equity method (1030): interaction of the company with other companies. recipients of externalities may be workers with additional jobs.  long-term accounts receivable (1040) and trade accounts receivable (1125): interaction of the company with other companies. recipients of externalities are employees of the company who do not receive a monetary reward from the products or services provided.  accounts receivable: due from budget (1135): interaction of the company with the state. the recipient of externalities is a society that could receive additional funds under expenditure budget items.  deferred pension liabilities (1505): interaction of the company with the workers. recipients of externalities are families of workers who have not received the appropriate cash receipts.  accounts payable: trade accounts payable (1615): interaction of the company with other companies. recipients of externalities are employees of other company who do not receive a monetary reward from the products or services provided.  accounts payable: due to budget (1620): interaction of the company with the state. the recipient of externalities is a society that has not received timely revenues under expenditure budget items. http://www.virtual-economics.eu/ 10 www.virtual-economics.eu issn 2657-4047 (online) dmytro kozlov virtual economics, vol. 4, no. 3, 2021  accounts payable: salary payable (1630): interaction of the company with the workers. recipients of externalities are families of workers who have not received enough money in the form of wages.  staff costs (2505): interaction of the company with the workers. the recipient of externalities is a society that has enough paid jobs, or vice versa.  social charges (2510): interaction of the company with the workers. recipients of externalities are the families of workers and society in general, who have been involved in the funds funded in this way.  ecology tax: paid by the company to the state. thus, there are three groups of indicators of economic externalities: through relations with the state; formed in interaction with employees; formed in interaction with other economic entities. data that are freely available to the following companies were used: sumy machinebuilding research and production association joint-stock company (hereinafter referred to as jsc smnvo) (jst smnvo, 2020), sumy pumping and power engineering plant joint-stock company nasosenergomash (hereinafter jsc nasosenergomash) (jsc nasosenergomash, 2020), private joint stock company scientific-production joint-stock company vndikompressormash (hereinafter pjsc spjsc vndikompressormash) (pjsc spjsc vndikompressormash, 2020), joint-stock company sumy plant energomash (hereinafter jsc energomash) (jsc energomash, 2020; jsc nasosenergomash, 2020). the data has been searched since 2016, i.e., the transition to international financial reporting standards. table 1. estimated share of externality no the item line code externality type by essence estimate d share qe total estimat ed share qe by essence by type of influence 1 line code 1030 economic positive 0.055 0.055 2 line code 1040 and line code 1125 economic negative 0.055 -0.055 3 line code 1135 economic positive 0.055 0.055 4 line code 1505 social negative 0.112 -0.112 5 line code 1615 economic negative 0.055 -0.055 6 line code 1620 economic negative 0.055 -0.055 7 line code 1630 economic negative 0.055 -0.055 8 line code 2505 social positive/ negative 0.112 ±0.112 9 line code 2510 social positive 0.112 0.112 10 ecology tax ecological positive 0.334 0.334 total 1.0 source: developed by the author. http://www.virtual-economics.eu/ 11 www.virtual-economics.eu issn 2657-4047 (online) dmytro kozlov virtual economics, vol. 4, no. 3, 2021 the profit (loss) of any company is the major indicator of company’s existence. in order to calculate the effect of a separate externality to net profit (loss) it is necessary to determine the estimated share of each externality (qe) depending on the nature of the impact to the economic activity of the company. the estimated share of each externality is illustrated in table 1. to indicate the impact of each externality, there should be determined the ratio (ke) of expenses separate item that indicates the exact externality, depending on the total amount of the current balance according to the following formula. to understand the impact of externalities on net profit (or loss) for each year separately, it is necessary to determine the sum of the coefficients of externalities depending on the total estimated share (σkeqe) for each year separately by the formula on figure 1 with the sum by each company and the graphic image of two exampled companies. the impact of externalities on net profit (or loss) for each year σkeqe = k1*q1 + k2*q2 + … + k10q10, (2) where q1 is an estimated share of each externality, k1 is a ratio (ke) of expenses for each year by the year: ke = bs / b, where (1) bs is the balance sheet item under the research; b is the value of the balance for the specified year. the sum of the coefficients of externalities, taking into account the share estimated company the sum of the coefficients of externalities (σkeqe) by years 2016 2017 2018 2019 2020 jsc smnvo -0.0085 -0.0130 -0.0130 -0.0360 -0.0541 jsc nasosenergomash 0.0199 0.0212 0.0155 0.0088 0.0105 pjsc spjsc vndikompressormash -0.0036 -0.0053 -0.0067 0.0107 0.0320 jsc energomash 0.1151 0.0718 0.1124 0.0660 0.1000 jsc smnvo jsc nasosenergomash figure 1. the impact of externalities on net profit (or loss) for each year of the company source: developed by the author. the impact of externalities on net profit (or loss) can be calculated by the following formula on figure 2 with the amount by each company and the graphic image of two 11exemplified companies. 0,0000 0,0050 0,0100 0,0150 0,0200 0,0250 -150000,00 -100000,00 -50000,00 0,00 50000,00 100000,00 150000,00 20162017201820192020 pr σkeqe -0,0600 -0,0500 -0,0400 -0,0300 -0,0200 -0,0100 0,0000 -4000000,00 -3500000,00 -3000000,00 -2500000,00 -2000000,00 -1500000,00 -1000000,00 -500000,00 0,00 500000,00 pr σkeqe http://www.virtual-economics.eu/ 12 www.virtual-economics.eu issn 2657-4047 (online) dmytro kozlov virtual economics, vol. 4, no. 3, 2021 the influence of externalities on net profit (or loss) by modular value of sum of externalities coefficients pre = pr* σkeqe, when pr>0 (3) pre = pr*|σkeqe|, when pr<0, where (4) pre is net financial profit (loss) including externalities; pr is net financial profit (loss). net financial profit (loss) taking into account externalities by modular value of the sum of coefficients of externalities depending on the nature of the impact. company net financial profit (loss) including externalities (pre) by years 2016 2016 2016 2016 2016 jsc smnvo -9797.21 -9797.21 -9797.21 -9797.21 -9797.21 jsc nasosenergomash 2571.22 2571.22 2571.22 2571.22 2571.22 pjsc spjsc vndikompressormash 10.44 10.44 10.44 10.44 10.44 jsc energomash 27.62 27.62 27.62 27.62 27.62 jsc smnvo jsc nasosenergomash figure 2. the influence of externalities on net profit (or loss) by modular value of sum of externalities’ coefficients source: developed by the author. according to these data, it is possible to determine the moments of transition from positive to negative externalities and vice versa in relation to profit or loss. the general picture emphasizes the emergence of negative externalities, especially with the company suffering damage. that is, if the machine-building company is unprofitable, there are also extremely dangerous negative externalities that need to be internalized. to obtain a clear picture of the externalities’ dynamics to the total balance of the company first, give the sum of the coefficients of externalities in percentage terms, then determine the average value of the sum of the modulus of externalities as a percentage of the balance for all years as in figure 3. -1500,00 -1000,00 -500,00 0,00 500,00 1000,00 1500,00 2000,00 2500,00 3000,00 -150000,00 -100000,00 -50000,00 0,00 50000,00 100000,00 150000,00 20162017201820192020 pr pre -250000,00 -200000,00 -150000,00 -100000,00 -50000,00 0,00 50000,00 -4000000,00 -3000000,00 -2000000,00 -1000000,00 0,00 1000000,00 pr pre http://www.virtual-economics.eu/ 13 www.virtual-economics.eu issn 2657-4047 (online) dmytro kozlov virtual economics, vol. 4, no. 3, 2021 the average value of the sum of the modulus of the externalities’ coefficients as a percentage of the balance sheet total (σkeqe)mid = (|σk1q1| + |σk2q2| + … + |σk5q5|):5, (5) where σkeqe = (k1*q1 + k2*q2 + … + k10*q10)*100. (6) the sum of the modulus of the externalities’ coefficients as a percentage of the amount of the balance company the sum of the externalities’ coefficients (σkeqe) by years in percent (σkeqe) mid 2016 2017 2018 2019 2020 jsc smnvo -0.85 -1.30 -1.30 -3.60 -5.41 -2.49 jsc nasosenergomash 1.99 2.12 1.55 0.88 1.05 1.52 pjsc spjsc vndikompressormash -0.36 -0.67 1.07 3.20 1.58 0.96 jsc energomash 11.51 7.18 11.24 6.60 10.00 9.31 figure 3. determining the sum of the modulus of the externalities’ coefficients as a percentage of the balance sheet total source: developed by the author. thus, the average value of the sum of the externalities’ coefficients depending on the total estimated share as a percentage of the amount of the balance sheet (σkeqe)mid reflects the result of the company’s economic activity in view of obtaining externalities. if this indicator is negative or less than 1.0, it emphasizes the urgent problems of the company in terms of impact on third parties, that is the increasing of the number of negative externalities over positive ones. a very important indicator is the dynamics of the positive externalities’ occurrence in relation to the occurrence of negative externalities. if there is a movement to reduce positive externalities, it also indicates a possible problem with the emergence of negative externalities that requires further internalization. 4. results and discussion the internalization of negative externalities is inextricably linked with implementing strategies for the company’ sustainable development. the need for action that arises as a result of a strategic analysis of sustainable development management in the company should be implemented by strategies that seem appropriate to achieve the goals of sustainable -10,00 -5,00 0,00 5,00 10,00 15,00 2016 2017 2018 2019 2020 jsc smnvo jsc nasosenergomash pjsc spjsc vndikompressormash jsc energomash http://www.virtual-economics.eu/ 14 www.virtual-economics.eu issn 2657-4047 (online) dmytro kozlov virtual economics, vol. 4, no. 3, 2021 development. sustainable development strategies are medium-term and long-term fundamental decisions on implementing the principles of sustainable development in the company (for example, corporate social responsibility). these are long-term action plans to ensure competitiveness, environmental protection and social legitimacy, which adapt to expected market, environmental and social developments. as a link between goals and activities, strategies define the course of action for appropriate measures to be able to achieve economic, environmental and social corporate goals. with the help of compatibility between economic goals, on the one hand, and social and environmental goals, on the other hand, sustainable development strategies can be differentiated (porter & kramer, 2006). they are primarily focused on social and environmental goals (sensitive corporate social responsibility), but also aimed at improving the competitive position of the company (strategic corporate social responsibility). strategies of sustainable development in the company are differentiated in terms of strategy orientation (defensive/reactive, offensive and selective) and strategic considerations (market, society, environment and the company itself). as for the degree of the company’s readiness to manage sustainable development, offensive and defensive strategies should be distinguished. although defensive strategies of sustainable development observe management as a risk or a necessary evil, rather than business and social opportunity, offensive strategies of sustainable development focus on the opportunities and include initiatives to implement and accelerate the sustainable development model in business. selective strategies for sustainable development are aimed at specific target groups, stakeholders and means of environmental protection, so, there is more an internalization of negative environmental externalities only. the offensive strategy aims to create competitive advantage and social perception through sustainable development management (costanza, 1991). sustainable development is viewed as an innovative concept, as a social commitment, and as an opportunity to achieve competitive advantage (business case). the orientation of the defensive strategy attempts to avoid, circumvent or combat the negative consequences of unstable corporate management. the company can apply the following defensive strategies of sustainable development: response: sustainable development is assessed as an entrepreneurial risk and is realized in the company only when there is a risk of neglect, if it is not observed (for example, environmental responsibility, damage to image, risk of boycott); retreat: this strategy is aimed at the exit of the company from contradictory spheres of activity, which are socially and ecologically unstable (for example, leaving or relocation of environmentally harmful companies); resistance: strategies aim to counter the requirements of public protection and the protection of corporate social responsibility (against lobbying, for example). there are strategies for sustainable development with an emphasis on markets, society, the environment and the company itself. market-oriented strategies of sustainable development http://www.virtual-economics.eu/ 15 www.virtual-economics.eu issn 2657-4047 (online) dmytro kozlov virtual economics, vol. 4, no. 3, 2021 include seizing opportunities or preventing risks through formulated sustainable development requirements in the markets. defensive market strategies of sustainable development are focused on achieving competitive advantage through opportunistic behaviour (for example, deceiving consumers through questionable advertising with environmental arguments). on the other hand, offensive strategies aim to achieve competitive advantage through sustainable development management. strategies aimed at society fix the promotion (offensive) or limitation (defensive) of social requirements for sustainable corporate management and corporate social responsibility. defensive strategies are aimed at protecting against social demands for sustainable development (defensive strategies, for example, through targeted lobbying) by "opposing companies" and should serve to support classical economic forms and the status quo (hedging strategies). offensive strategies of the company, such as aggressive product promotion, prpromotions, advertising, involve taking the initiative to promote sustainable development. they also create and intensify collaboration with relevant stakeholders in society and open dialogue, cooperation with environmental associations, strategies cooperation and so on. moreover, such companies provide a deep insight into corporate activities, creating transparency and participating in the fight against corruption (transparency and anticorruption strategies). in addition to improving relations with stakeholders in society, these strategies are aimed at improving the image and reputation of the company (win-win strategies). they may selectively address individual social stakeholders (for example, politicians, ngos). environmental sustainable development strategies can focus on variety of ecological aspects (for example, climate, water), protect resources and avoid or reduce environmental risks through production activities (van den bergh, 2007). defensive strategies are aimed at such cases as the development of potential to reduce costs by saving energy, materials, production and disposal of waste (increasing the level of resources). this is achieved through environmentally efficient production and processing processes (that is energy management systems, cycle processes, design to increase efficiency, reduce assembly and disassembly costs). offensive strategies pursue environmental measures that exceed the net potential for cost reduction and exceed the legal minimum, assuming corporate responsibility. this is applied to the establishment of energy and environmental management systems. coordination and cooperation of manufacturers with suppliers and dealers in the value chain are also a strategic approach (cooperation strategies). in vertical value chains, sustainable development implies an access at the level of cooperative approaches (for example, in the procurement of raw materials and supplies and at the stages of further marketing, as well as in the disposal and redistribution of waste). according to the principle "from cradle to grave", the company’s responsibility extends to the entire life cycle of the product (product management model). the companies must be aware of the environmental risks of their activities and be prepared for any obstacles (depending on the risk of production). http://www.virtual-economics.eu/ 16 www.virtual-economics.eu issn 2657-4047 (online) dmytro kozlov virtual economics, vol. 4, no. 3, 2021 strategies of the companies’ sustainable development, in fact, cover all areas with law compliance (corporate compliance), as well as with all other obligations undertaken by the corporate charter (corporate management). defensive strategies are limited to the implementation of relevant laws or agreements (labour and co-determination laws, environmental laws) to avoid negative consequences for the legislator (closure of the company). offensive, inward-looking strategies aimed at aligning the structures (organizations) and systems (environmental management systems) of the company with the requirements of sustainable development, motivation and qualification of employees for sustainable development (personnel management). furthermore, the company should establish its own code of ethics, which is aimed at sustainable development and is mandatory for management. these strategies can be selectively targeted at individual parts of the company (for example, production) and at individual internal stakeholders (for example, shareholders, management). machine-building companies are places where economic, environmental and social risks and opportunities arise (lukash et al., 2021). sustainable risk management is a key aspect of strategic sustainable development management. potential environmental, social and personal threats from the company's activities are often perceived as a risk that they want or do not want to take (depending on the risk itself). high attention to public health and the environment, as well as the great importance of the media in modern societies have led to the fact that the activities of machine-building companies are listed critically by social stakeholders and are often the cause of social and environmental dangers (staehle, 1992) as a sign of externalities. existing complaints in companies can quickly turn into noticeable scandals in the media due to accusations or excessive dramatization (kepplinger, 2012). if stakeholders do not accept the behaviour of the company, if these requirements and expectations are not met by this company, it can lead to a loss of reputation and image and even deprivation of social perception (license to operate) for the company. in recent years, the risk situation has changed significantly for humanity, as well as especially for the company. in its 2011 global risk report (global, 2011), the world economic forum identified five types of global risks: economic (including deteriorating assets, high volatility in energy prices), geopolitical (including corruption, terrorism), and technological (including online data security, threats from new technologies), environmental (including air pollution, climate change) and social risks (including demographic change, economic inequality). it could be interpreted into economic, environmental and social risks as risks of sustainable development of the company. social risks are associated, on the one hand, with the general danger to people and social communities that may arise from the mechanisms of the global economy (for example, economic and social inequality, poverty, exploitation and migration in parts of the world), and on the other hand, with such specific negative social dangers for people caused by noncompliance by companies with laws or international conventions (e.g., human rights). http://www.virtual-economics.eu/ 17 www.virtual-economics.eu issn 2657-4047 (online) dmytro kozlov virtual economics, vol. 4, no. 3, 2021 environmental risks (e.g., global warming) are often associated with social risks (e.g., poor harvests). the management of machine-building companies must identify operational risks in a timely manner and correctly assess their dangerous potential (mitroff, 1994). this requires basic individual qualities (risk awareness of the manager), corporate culture (sustainable development as a value of the company) and organizational skills (for example, the use of risk management system). for companies with a corporate culture focused on social responsibility and risk-oriented corporate governance, an important aspect is overall sustainable development management. sustainable risk management includes the identification, analysis and assessment of potential hazards to people, nature and companies, the planning of strategies and measures to avoid or reduce these risks, and strategies for communicating and reporting potential risks (transparency strategies). the goal is to avoid or minimize risks to people, society and nature. environmental and social risks are those risks that have a direct impact on business activities (for example, government regulations to reduce greenhouse effects) or if the engineering company can be identified as the cause (for example, claims for compensation for prohibited waste removal, etc.). the risk of harm to people and nature through the company’s operational activities is transferred to economic risk, which may result from the activities of damaged or affected stakeholder groups (e.g., compensation, closure of operations, unwillingness to buy or boycott purchases) (wagner, 1994). 5. conclusion the results of the current research suggest the importance of externality for the company’s sustainable development. when the externalities are difficult to calculate, it is possible to distinguish them from the selected items of balance sheet depending on the recipients of externalities. using the right strategy (defensive or offensive) the company can easily go through the internalization of negative externality to exert more substantial impact on the society, environment and the economics. forming the strategies of sustainable development is medium-term and long-term fundamental solutions for implementing the principles of sustainable development in the machine-building company. the implementation of such strategies in long-term action plans will ensure competitiveness, environmental protection and social legitimacy, which are adapted to expected market, environmental and social events. it is recommended to timely detect the operational risks and correct assessment of their dangerous potential, such as the manager’s awareness of risks, corporate culture (sustainable development as a value of the company), use of risk management system, etc. http://www.virtual-economics.eu/ 18 www.virtual-economics.eu issn 2657-4047 (online) dmytro kozlov virtual economics, vol. 4, no. 3, 2021 6. conflicts of interest the authors declare no conflict of interest. references baumol, w., & oates, w. 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(1994). umwelt-auditing als teil des betrieblichen umweltund risikomanagements. betriebswirtschaftliche forschung und praxis, 46, 573–604. http://www.virtual-economics.eu/ кwilinski alex 7 www.virtual-economics.eu issn 2657-4047 (online) xiang gao, weige huang, and hua wang virtual economics, vol. 4, no. 1, 2021 2021 volume 4 number 1 (january) financial twitter sentiment on bitcoin return and high-frequency volatility xiang gao, weige huang, and hua wang abstract. this paper studies how sentiment affect bitcoin pricing by examining, at an hourly frequency, the linkage between sentiment of finance-related twitter messages and return as well as the volatility of bitcoin as a financial asset. on the one hand, there was calculated the return from minute-level bitcoin exchange quotes and use of both rolling variance and highminus-low price to proxy for bitcoin volatility per each trading hour. on the other hand, the mood signals from tweets were extracted based on a list of positive, negative, and uncertain words according to the loughran-mcdonald finance-specific dictionary. these signals were translated by categorizing each tweet into one of three sentiments, namely, bullish, bearish, and null. then the total number of tweets were adopted in each category over one hour and their differences as potential bitcoin price predictors. the empirical results indicate that after controlling a list of lagged returns and volatilities, stronger bullish sentiment significantly foreshadows higher bitcoin return and volatility over the time range of 24 hours. while bearish and neutral financial twitter sentiments have no such consistent performance, the difference between bullish and bearish ratings can improve prediction consistency. overall, this research results add to the growing bitcoin literature by demonstrating that the bitcoin pricing mechanism can be partially revealed by the momentum on sentiment in social media networks, justifying a sentimental appetite for cryptocurrency investment. keywords: bitcoin, cryptocurrency, sentiment, twitter, social media, volatility jel classification: g12, g14, g15 http://www.virtual-economics.eu/ 8 www.virtual-economics.eu issn 2657-4047 (online) xiang gao, weige huang, and hua wang virtual economics, vol. 4, no. 1, 2021 authors: xiang gao shanghai business school, 2271 west zhong shan road, shanghai, china, 200235 e-mail: gaoxiang@sbs.edu.cn https://orcid.org/0000-0003-4914-557x weige huang (corresponding author) zhongnan university of economics and law, 182 nanhu avenue, wuhan, china, 430073 e-mail: weige_huang@zuel.edu.cn https://orcid.org/0000-0002-0615-3302 hua wang shenzhen technology university, 3002 lantian road, shenzhen, china, 518118 e-mail: wanghua@sztu.edu.cn https://orcid.org/ 0000-0001-5186-4165 citation: gao, x., huang, w., & wang, h. (2021). financial twitter sentiment on bitcoin return and high-frequency volatility. virtual economics. 4(1), 7-18. https://doi.org/10.34021/ve.2021.04.01(1) received: january 2, 2021. revised: january 7, 2021. accepted: january 10, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2021.04.01(1) https://creativecommons.org/licenses/by/4.0/ 9 www.virtual-economics.eu issn 2657-4047 (online) xiang gao, weige huang, and hua wang virtual economics, vol. 4, no. 1, 2021 1. introduction it has been a long time since social networks came into people’s life. social networks are everywhere in everyday life and they are now attracting a huge amount of attention, not only of the social network users but also of financial investors in various fields. a large number of researchers believe that the public mood or sentiment expressed in social media is related to financial markets. in the past, de long et al. (1990) investigated investor sentiment and suggested that different types of investors such as rational investors could make a profit from the market by exploiting the investor sentiments. audrino et al. (2020) analyse the impact of sentiment and attention variables on the stock market volatility by using dataset that combines social media, news articles, information consumption, and the study shows that attention and sentiment variables are able to improve volatility forecasts significantly. thus, professional investors could exploit the behavior of retail investors who use social media platforms as channels to obtain information about securities’ potential performance. twitter, which is a very popular micro-blogging forum, has been used to extract a proxy for investor sentiment. for instance, affuso et al. (2018) examine the impact of investor sentiment and geography on stock returns and conclude that twitter sentiment is among important factors that can have an impact on stock returns and negative tweets have a larger impact than positive tweets. bollen et al. (2011) derive different types of moods from twitter messages and indicate that predictions of the stock indices can be refined through the study of information. twitter sentiments and activity, the latter measured as the number of tweets in a certain time interval, are available to investors through commercial data providers. chen et al. (2014) found that social media represent one way for the investors to access information in equity markets. broadstock et al. (2019) used twitter messages to construct sentiment measures, and their results showed that stocks reacted to both firm specific and market wide sentiment which meant that sentiment from social media provided the pricing influence against the stock market. sprenger et al. (2014) studied how twitter sentiment related with the stock-related characteristics and investigated the trading characteristics of the listed stocks and their related tweets in the social media, finding the volume of tweets to be related to the trading volume of the corresponding stocks. besides, bukovina (2016) studied the investor sentiment obtained from social media and applied to the behavior finance area. all the studies mentioned above highlight the critical connection between the daily financial market and social media data. nevertheless, most of the studies conduct analyses only considering stock market domain. bitcoin as a new popular investment alternative has one of the highest market capitalizations and is the leading cryptocurrency in the digital asset space. bitcoin has quite outperformed some asset classes, and due to increasing speculation, it is now gradually becoming not only one of the highest traded digital assets across the world but also an important financial asset for alternative investments. there is a considerable amount of media attention to bitcoin investments. for instance, dyhrberg (2016) and dastgir et al. (2019) studied how media http://www.virtual-economics.eu/ 10 www.virtual-economics.eu issn 2657-4047 (online) xiang gao, weige huang, and hua wang virtual economics, vol. 4, no. 1, 2021 attention might affect the trading in bitcoins. philippas et al. (2019) took the investigation of how the increasing media attention in social networks may affect the trace jumps in bitcoin trading. nevertheless, there exists a growing literature on how to obtain the sentimental signals from twitter, and how to use the sentimental signals to predict bitcoin price and volatility. this paper adds to the literature on bitcoin by examining the link between sentiment on twitter and bitcoin returns and volatility. this research proposes a novel perspective of linking the sentimental signals from twitter with bitcoin price and volatility prediction in high-frequency. each tweet is categorized into bullish, bearish, and neutral sentiment according to wellaccepted financial market dictionaries and algorithms. this paper takes an intraday perspective and considers hourly bitcoin return and price changes as the subject of study. two main objectives emerge: (i) assessing the impact of twitter investor sentiment on bitcoin return and volatility and (ii) propose a novel channel for forecasting bitcoin performance at hourly intervals. 2. literature review this paper is related to two strands of literature. firstly, it adds to a large body of literature attempting to identify determinants of bitcoin as an alternative investment tool. being the most successful application of blockchain technology, numerous research such as carrick (2016), bouri et al. (2017), and gandal et al. (2018) has shown that bitcoin contains speculation, complementary-currency, and diversification characteristics resembling an investable asset class. previous research has studied the relationship among the price return of bitcoin with the performance of other markets or economic indicators. for instance, kristoufek (2015) studied the relation among the price return of bitcoin with the performance of s equity and fixed income markets. panagiotidis et al. (2018) studied the relationship among the price return of bitcoin with the major economic indicators such as unemployment rates. hakim da neves (2020) & nasir et al. (2019) studied the relation among the price return of bitcoin with social factors such as online search intensity. nevertheless, the effect of social media sentiment on the bitcoin market is largely overlooked due to their remoteness in the long run. the present paper argues the existence of a high-frequency intraday connection between the two. many forecasting models (sun et al., 2020) are also utilized in the attempt to capture the price trend of cryptocurrencies. however, these factors do not adequately explain the daily returns of bitcoin on a continuous intraday basis, and balcilar et al. (2017) argue that the high-frequency fluctuations are more likely to be affected by the noise and momentum in the markets rather than the fundamental characteristics. besides, catania et al. (2019) study the high-frequency data of the social media data and conclude that the high-frequency social media data have high importance for the market movement. in line with studies emphasizing the importance of high-frequency data, this article aims to investigate whether high-frequency twitter sentiment information is http://www.virtual-economics.eu/ 11 www.virtual-economics.eu issn 2657-4047 (online) xiang gao, weige huang, and hua wang virtual economics, vol. 4, no. 1, 2021 related to contemporaneous bitcoin returns and volatility. moreover, the question is posed whether such relationships can be used to predict the overnight or next day’s bitcoin return and price variations. secondly, the paper is also complementary to the literature about the predictability of twitter sentiment on the financial markets. bollen et al. (2011) conclude that the predictions of the stock indices can be refined through the study of information. groß-klußmann et al. (2019) examine the relation between signals derived from the unstructured social media text data and financial market developments in a long-term time range and conclude that there is relationship between the social media text data and financial market performance. gu & kurov (2020) find that the information content of twitter sentiment of an individual company can predict the future returns of the underlying stock. however, it is still little known about whether such twitter opinions can reveal pricing information and volatility expectation for asset class bitcoin. this paper shows that the sentiment signals on tweets at a high frequency are not able to predict returns on stock markets. 3. data and methodology the purpose of this research is to explore the sentiment information contained in tweets and exploit it to predict bitcoin price and volatility. to attain the goal, this section first introduces the data treatment and then presents the methodology employed to investigate bitcoin predictability. the textual data used consists of financeand economics-related twitter posts automatically downloaded by gulacsy, d. (2019) using java twitter streaming api from june 24th, 2019 to august 12th, 2019 in real-time. to construct dictionary-based sentiment measures, two documents are employed in categorizing each tweet into one of the three types of sentiments--bullish, bearish, and null (i.e., neither bullish nor bearish). the first document comes from the positive and negative word lists published by loughran & mcdonald (2011). the second document considers the stock market opinion lexicon created using diverse statistical measures and a large set of labeled messages from stocktwits (nuno et al., 2016). finally, the notation “bullish” (“bearish”) is used to represent the total number of bullish (bearish) tweets posted in an hour. similarly, “null” is used to denote the hourly count of twitter posts which are neither categorized as the bullish or bearish sentiment. there is also constructed a sentiment premium statistic “bmb” by letting bullish tweet number minus bearish tweet number. the logic is to capture the average range from optimistic to pessimistic moods on social media platforms. there are employed intraday high-frequency trading records from the bitstamp exchange in minute intervals. raw data fields contain timestamps expressed in unix time, minute-tominute updates of ohlc (open, high, low, and close) prices, and a weighted bitcoin price. to match with the tweet sample, there are aggregated minute-frequency bitcoin variables to the hourly level. in specific, hourly ohlc prices are their respective minute counterparts in an hour’s time range. regarding the weighted price quotes, the average across all minute values http://www.virtual-economics.eu/ 12 www.virtual-economics.eu issn 2657-4047 (online) xiang gao, weige huang, and hua wang virtual economics, vol. 4, no. 1, 2021 is taken. there are two prediction targets: return and volatility. the bitcoin return target is the simple return of holding bitcoin for every hour evaluated at weighted price quotes. another is the hourly volatility of bitcoin prices. bitcoin volatility target is measured by both a variance, which is computed on the basis of hourly prices over the previous 24 hours in a rolling way and an “hml” indicator, which is simply the hour’s low bitcoin price subtracted from the same hour’s high. all these bitcoin pricing statistics are scaled into a consistent order of magnitude (table 1). table 1. summary statistics hourly variable min mean median max std. dev. bitcoin return -0.08385 -0.00007 0.00031 0.09074 0.01176 bitcoin volatility 0.00323 0.01056 -0.00984 0.03082 0.00532 bitcoin high minus low price 28 175 138 1989 141 no. of bullish tweets 10 83 78 253 30 no. of bearish tweets 1 37 34 102 18 no. of null sentiment posts 19 382 333 1322 174 bullish minus bearish tweets -22 46 44 182 24 note: the web-crawled twitter posts are real-time from june 24th, 2019 to august 12th, 2019. the total number of tweets studied in this paper accounts for 550,661 with 91,158 bullish ones, 40,371 bearish ones, and 419,132 nulls. source: developed by the authors. table 1 lists the summary statistics of our main variables. the empirical methodology follows the next specification: 𝐵𝑖𝑡𝑐𝑜𝑖𝑛𝑡+𝜏 = 𝛼 + 𝛽𝑆𝑒𝑛𝑡𝑖𝑚𝑒𝑛𝑡𝑡 + 𝛾𝑁𝑢𝑙𝑙𝑡 + 𝜂1𝑅𝑡−1 + 𝜂2𝑅𝑡−2 + 𝜂3𝑅𝑡−3 + 𝜂12𝑅𝑡−12 + 𝜃1𝑉𝑡−1 + 𝜃2𝑉𝑡−2 + 𝜃3𝑉𝑡−3 + 𝜃12𝑉𝑡−12 + 𝜀𝑡 , (1) where 𝐵𝑖𝑡𝑐𝑜𝑖𝑛𝑡+𝜏 is the target variable of either a return or volatility proxy with 𝜏 setting at a range of time points up to 24 hours ahead of the current hour. let 𝑆𝑒𝑛𝑡𝑖𝑚𝑒𝑛𝑡𝑡 be a chosen measure of informative twitter sentiment measure. the number of tweets with null emotions are controlled so that strong emotions about investment can be captured without disturbances from irrelevant social media fever. by acknowledging the autocorrelation or momentum effect inherent in financial asset pricing, several lagged returns and volatilities are also included in the above regression. it is expected to estimate a statistically significant 𝛽 coefficient, and a positive estimate before the bullish sentiment would imply that an optimistic mood in social networks leads to higher levels of bitcoin hourly return and volatility. however, it is suspected that, for a longer sample period, this short-run overreaction will cause post drift back to the long-run pricing trend of bitcoin assets. http://www.virtual-economics.eu/ 13 www.virtual-economics.eu issn 2657-4047 (online) xiang gao, weige huang, and hua wang virtual economics, vol. 4, no. 1, 2021 4. results and discussion table 2 shows the results of regressing hourly bitcoin returns, 24-hour rolling variance, and high-minus-low price on the three types of sentiments. as can be seen, bullish sentiment is strongly associated with bitcoin returns and volatility in the high-frequency dimension. in specific, after controlling for a list of returns and volatilities lagged by 1, 2, 3, and 12 hours, a stronger bullish sentiment significantly foreshadows higher bitcoin return and volatility contemporaneously. though not statistically significant, the number of tweets with bearish sentiment tends to be negatively correlated with the contemporaneous return. and without controlling other variables, the number of tweets with bearish sentiment is able to predict negatively the volatility with the magnitude of similar size as the number of tweets with the bullish sentiment (-0.72 vs. 0.74). it is also noted that the number of tweets with bullish sentiment is consistently able to positively predict the difference between high and low prices (hml). it is interesting to note that, although not statistically significant, the number of tweets with bearish sentiment seems to negatively predict hml without controlling other variables, but positively forecast hml after controlling other variables. table 2. bullish/bearish sentiment and contemporaneous bitcoin return and volatility dep. var. is: return volatility variance hml (1) (2) (3) (4) (5) (6) bullish 0.36** (0.16) 0.38** (0.17) 0.04*** (0.01) 0.04*** (0.01) 1.03*** (0.17) 1.09*** (0.17) bearish -0.15 (0.26) -0.21 (0.27) 0.03 (0.02) 0.03 (0.02) 0.48* (0.28) 0.43 (0.28) null -0.02 (0.03) -0.01 (0.03) -0.01*** (0.002) -0.01*** (0.002) -0.11*** (0.03) -0.11*** (0.03) lagged returns yes yes no yes no yes lagged variances no yes yes yes yes yes constant -18.57* (10.60) -11.87 (12.99) 0.29 (1.03) 0.29 (1.03) -6.26 (13.28) -7.85 (13.17) no. of obs. 1,119 1,096 1,096 1,096 1,096 1,096 note: the coefficients are scaled up by 10,000, and heteroscedasticity robust standard errors are in parentheses. ∗ p<0.1; ∗∗ p<0.05; ∗∗∗ p<0.01. source: developed by the authors. given the results from table 2 (i.e., the number of tweets with bullish and bearish sentiment seems to oppositely predict return, volatility, and hml), it makes sense to construct a single variable which is the difference between the number of twitters with the bullish and bearish sentiment in order to capture a “real” bullish sentiment in the entire sentiment environment in an hour. in table 3, the step is taken to re-run the regression exercises in table 2 by replacing the bullish and bearish sentiment with their difference as a potential forecasting variable. it is http://www.virtual-economics.eu/ 14 www.virtual-economics.eu issn 2657-4047 (online) xiang gao, weige huang, and hua wang virtual economics, vol. 4, no. 1, 2021 found that, while bearish and vacant financial twitter sentiments have no comparable consistent performance with the bullish sentiment, the bmb ratings can improve concurrent prediction consistency at the cost of the degree of statistical significance. it should be noticed that the magnitudes of the bmb power on predicting return are similar between with and without controlling other variables (0.32 vs. 0.36). that said, the power is quite robust. on the contrary, the prediction power of bmb on volatility is much weakened after controlling the other variables (0.74 vs. 0.03) although both are statistically significant. it is found that without controlling variables, null is weakly and statistically correlated with volatility. a final observation is that bmb stays consistently positively correlated with hml, though the prediction size is halved after controlling for other variables. tables 2 and 3 examine the contemporaneous relationship between sentiment and bitcoin assets. table 4 explores whether the sentiment can predict future return and volatility. more specifically, bmb is used to predict future return, volatility, and hml in 2, 6, 12, and 24 hours. table 3 summarizes the predictive power of bmb for bitcoin return and volatility in the next 2 to 24 hours. except for the 24-hour return, all other prediction targets are statistically and positively associated with the sentiment premium predictor at least at the 5% significance level. specifically, bmb negatively predicts return half-day. it means that if the sentiment is bullish-dominant, the price is likely to decrease in the next 12 hours. however, bmb fails to statistically foreshadow bitcoin prices in the next 24 hours. also, it is noted that the bmb are positively correlated with future volatility in the next 12 hours and the sizes are similar with 24 hours. the bmb can also positively predict hml in the next 12 and 24 hours though the strength of predictive power seems to be weakened across time. based on results on volatility and hml, it can be concluded that the market uncertainty will increase when the sentiment in twitter is bullish. table 3. sentiment premium and contemporaneous bitcoin return and volatility dep. var. is: return volatility variance hml (1) (2) (3) (4) (5) (6) bmb 0.33** (0.15) 0.36** (0.17) 0.03** (0.01) 0.03** (0.01) 0.81** (0.17) 0.87*** (0.17) null -0.002 (0.02) 0.0004 (0.02) -0.002 (0.002) -0.002 (0.002) -0.02 (0.02) -0.01 (0.02) lagged returns yes yes no yes no yes lagged variances no yes yes yes yes yes constant -14.63 (9.50) -8.31 (11.89) 1.72* (0.95) 1.69* (0.95) 24.59** (12,34) 23.03* (12.25) no. of obs. 1,119 1,096 1,096 1,096 1,096 1,096 note: the coefficients are scaled up by 10,000, and heteroscedasticity robust standard errors are in parentheses. ∗ p<0.1; ∗∗ p<0.05; ∗∗∗ p<0.01. source: developed by the authors. http://www.virtual-economics.eu/ 15 www.virtual-economics.eu issn 2657-4047 (online) xiang gao, weige huang, and hua wang virtual economics, vol. 4, no. 1, 2021 this paper also checks if the sentiment on twitter used in this research can predict stock returns in the u.s. market. more specifically, treatment variables are used in this research to predict returns in stock market indices. the indices include the entire market and markets with large-, middle-, and micro-size stocks. generally, it is found that the sentiment shown on our dataset is not able to predict stock market returns. that is, by setting the stock market returns and volatility as a benchmark, at the hour-frequency level, there is not found supportive evidence that the twitter sentiment indices used in this paper can predict hourly aggregate stock returns and volatility. this implies that the high-frequency twitter sentiment might only have pricing power in volatile and digital asset markets. investors in the traditional stock market are relatively immune to very short-time sentiment movements. a further step is to explore why sentiment extracted from twitter displays bitcoin orientation. table 4. sentiment premium predicts next 2 to 24 hours bitcoin return and volatility panel a dep. var. is: return forward2 return forward6 variance forward2 variance forward6 hml forward2 hml forward6 (1) (2) (3) (4) (5) (6) bmb -0.16 (0.16) -0.25 (0.16) 0.09*** (0.02) 0.18*** (0.03) 0.99*** (0.17) 1.06*** (0.18) null 0.03 (0.02) 0.03 (0.02) -0.01*** (0.003) -0.01*** (0.004) -0.03 (0.02) -0.06*** (0.02) lagged returns & variances yes yes yes yes yes yes constant -7.18 (11.90) -4.62 (11.90) 5.80*** (1.61) 13.68*** (2.41) 32.57*** (12.44) 52.69*** (12.70) no. of obs. 1,094 1,090 1,084 1,072 1,084 1,072 panel b dep. var. is: return forward12 return forward24 variance forward12 variance forward24 hml forward12 hml forward24 bmb -0.50*** (0.16) -0.09 (0.16) 0.30*** (0.04) 0.37*** (0.06) 0.90*** (0.18) 0.79*** (0.16) null 0.04* (0.02) 0.03 (0.02) -0.02*** (0.01) -0.03*** (0.01) -0.11*** (0.02) -0.04*** (0.02) lagged returns & variances yes yes yes yes yes yes constant -0.30** (11.71) -8.52 (11.46) 26.83*** (3.20) 46.65*** (4.31) 90.99*** (12.90) 74.88*** (11.50) no. of obs. 1,084 1,072 1,084 1,072 1,084 1,072 note: the coefficients are scaled up by 10,000, and heteroscedasticity robust standard errors are in parentheses. ∗ p<0.1; ∗∗ p<0.05; ∗∗∗ p<0.01. source: developed by the authors. to sum up, it is found that the number of tweets with bullish sentiment leads both the contemporaneous and future bitcoin return as well as volatility. the more is the bullish sentiment shown in twitter, the higher are the present prices and the lower are the future http://www.virtual-economics.eu/ 16 www.virtual-economics.eu issn 2657-4047 (online) xiang gao, weige huang, and hua wang virtual economics, vol. 4, no. 1, 2021 prices in bitcoin. and the stronger is the bullish sentiment, the higher is the degree of uncertainty in current and future bitcoin prices. 5. conclusions in the financial world, the investors need to reduce volatility, and one way is to diversify the portfolio with alternative assets displaying superior hedge characteristics. this research proposes bitcoin as an alternative investment. bitcoin, as a new popular investment alternative, has one of the highest market capitalizations and is the leading cryptocurrency in the digital asset space. it is also imperative for investors to examine drivers of bitcoin price movements and volatility. this paper adds to the growing literature of bitcoin by examining the link between sentiment on twitter and bitcoin returns and volatility. a novel way is offered to obtain the sentimental signals from twitter to predict bitcoin price and volatility. each tweet is categorized into one of three sentiments which are bullish, bearish, and null. the empirical results indicate that sentiment from twitter (e.g., bullish sentiments) can predict bitcoin returns and volatility, namely, a 1% increase in the different of optimistic and pessimistic tweets lead to 0.3%-0.4% raise in bitcoin return at the same time and a similar size of increase in bitcoin variance in the next day. thus, it can be concluded that bitcoin prices are partially predicted by momentum on social media sentiment in social networks, justifying a sentimental appetite. this finding is important for investors who are interested in getting social media sentiment information as an alternative investment judgment. for future investigations, it will be interesting to investigate how to combine the sentiment prediction with the other pricing prediction methods such as technical analytical methods, fundamental analysis, and prediction based on time series and machine learning. it will be also intriguing to decipher the information contained in textual messages that specifically talk about investment in cryptocurrency rather than the broader financial markets. furthermore, it would be of great interest to weigh each tweet differently according to some measures such as the number of “likes”, of words in each tweet, of retweets and who writes the tweet when constructing the sentiment indices. 6. author contributions all authors contributed equally. 7. acknowledgements we are grateful to the two anonymous referees. 8. conflicts of interest the authors declare no conflict of interest. http://www.virtual-economics.eu/ 17 www.virtual-economics.eu issn 2657-4047 (online) xiang gao, weige huang, and hua wang virtual economics, vol. 4, no. 1, 2021 references affuso, e., & lahtinen, k. 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(2020). a novel cryptocurrency price trend forecasting model based on lightgbm. finance research letters, 32, 101084. https://doi.org/10.1016/j.frl.2018.12.032 http://www.virtual-economics.eu/ кwilinski alex 104 www.virtual-economics.eu issn 2657-4047 (online) maharaja alagpuria virtual economics, vol. 4, no. 2, 2021 2021 volume 4 number 2 (april) sustainable financing for the entrepreneurship continual growth: a gap analysis among small and medium enterprises in india maharaja alagpuria abstract. considering the existing funding conditionalities in india, the small and medium enterprises have to face stringent norms as sustainable financing requirements based on environment, society and governance (esg) disclosures are becoming mandatory for every organization worldwide. the onus still turns to be more intense than ever for the small and medium enterprises (smes). the main purpose of this paper is to warn smes of the upcoming sustainable financing conditionalities and develop a clear understanding among the smes on why they should adapt sustainable financing norms and be resilient towards sustainable financing and esg disclosures. this paper also tends to inspire smes for entrepreneurial growth by striking a balance between their financial requirements and mandatory obligations to benefit themselves, society and the indian economy. moreover, this paper focuses on the conceptual stipulation and early adaption of sustainable finance framework by the smes and strives to fathom the gap between the sustainable financing realities and the expected level of smes’ exposure to sustainable financing and mandatory esg disclosures. the research methodology identifies seven such areas interconnecting the sustainable financing and un sustainable development goals (sdgs); environment (climate action & carbon tax), society (sustainable consumption & externalities), business (sustainable production) and governance (green finance, & esg disclosures) and investigates to find the gap between the perception and expectation of smes about the mandatory requirements for sustainable financing and sustainability adaption in india. keywords: sustainable financing, small and medium enterprises, environment, society and governance (esg), sustainability development goals (sdgs) jel classification: g30, g32, m14 author: maharaja alagpuria (corresponding author) tips school of management, coimbatore, india e-mail: modelimits@gmail.com https://orcid.org/0000-0002-0866-4034 citation: alagpuria, m. (2021). sustainable financing for the entrepreneurship continual growth: a gap analysis on small and medium enterprises in india. virtual economics. 4(2), 105-119. https://doi.org/10.34021/ve.2021.04.02(6) received: december 19, 2020. revised: february 3, 2021. accepted: april 12, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://creativecommons.org/licenses/by/4.0/ 105 www.virtual-economics.eu issn 2657-4047 (online) maharaja alagpuria virtual economics, vol. 4, no. 2, 2021 1. introduction the role of small and medium enterprises (smes) is huge to the economic development of a nation next to agricultural sector, which constitutes a major source of employment and generates significant domestic and export earnings. india is no exception and a large part of business in the country is done through smes. today, it accounts for nearly 40% of the gross value of output in the manufacturing sector and over 45% of the total exports from the country. smes need adequate financing from investors, financial institutions and international funding organizations for long term development and expansion to meet funding requirements at each stage of their business development from initiation, operation, development, restructuring, recovery and beyond. to meet the requirements of the business system and further the business growth and opportunities of the companies and businesses, smes would have to deploy funds on projects continuously in coordination with the society and governments for implementing various projects to achieve economic development of india. at present, the world economy is influenced by greater financial transition involving the business firms, corporate, small and medium enterprises. the sustainability lens has started scanning all the business operations to check them for any adverse actions in providing clear directions to connect the investors and the smes to arrange credits as and when they need. in this context, not only the corporate companies but also smes would have to align their goals with sustainable financing and sustainability development goals (sdgs) of the united nations. as the role and contribution of smes are significant in the economic development of a nation and the future of generations, they must have clear understanding and policy setting on how they have to resort to sustainable production and consumption of the products and services in their operations. the finance providers are looking for sustainable financing policy decisions of the government for setting norms on their investments. obviously, sme sector emerges as a key instrument in poverty alleviation and unemployment eradication which appears in the first place in the agenda of the un sdgs. 2. literature review viewing the role of investors in sustainable financing, it could be transparently noticed that the concept of esg should not be overlooked. all esg operations must first be tracked and then reported. the reality is that esg reporting is optional which allows some companies not to report their operational impacts on the society and environment. zabri et al. (2021) suggest that enhancing knowledge of appropriate funding sources and access to external finance at an acceptable cost will facilitate greater productivity and growth. a comprehensive review of government and financial institutions’ policies to increase access to finance for the microenterprise sector is therefore imperative. it is very important to finance smes' activities. as a matter of social non-sustainability, growing inequality leads to political tensions hampering development (acemoglu & robinson, 2012). http://www.virtual-economics.eu/ 106 www.virtual-economics.eu issn 2657-4047 (online) maharaja alagpuria virtual economics, vol. 4, no. 2, 2021 smes face many obstacles when they try to access credit market. these obstacles are increased if the smes are innovative. in this case, financial data are insufficient or even not reliable. thus, building a judgemental rating model is mainly based on qualitative criteria (angilella & mazzù, 2013). it should also be noted that firm size distributions in developing economies are dominated by micro and small firms. small firms, especially informal micro firms, are the biggest creators of employment in many of these countries. however, examination of the financing patterns across firm sizes reveals that small firms are more constrained than large firms in their access to external finance. this is important since although informal finance is very prevalent in many economies, at the margin it seems to be bank finance that is associated with firm growth. overall, research shows that the firms in developing economies are not as productive as those in developed economies (ayyagari et al., 2012). debt financing, especially bank loans (advances), is the main source of funding for small firms; the corporate bond and organized security markets are mainly accessed by large firms in need of long-term financing. other authors also note that small firms face higher financing obstacles (access to finance and cost of credit) than large firms, thus they are more severely affected when they face financing constraints (beck et al., 2008). brandt et al. (2013) formulate a hypothesis and state that sustainability may imply a challenge to our underlying dominant cultural ideas about nature, science, technology, and society. in this mode, the project proposes that it may be important to engage sustainability through such issues as land use, energy efficiency, urban form, or consumptive behaviour. busch et al. (2016) suggest a reorientation toward a long-term paradigm for sustainable investments and esg data must become more trustworthy. from a theoretical point of view, the authors finally highlight the potential market consequences when esg investment criteria are used. chava (2014) studies the results of exclusionary socially responsible investing and environmentally sensitive lending and suggests that the consequent increase in the cost of equity and debt capital has the potential to prompt firms to internalize their environmental externalities. calice et al. (2012) state that the motivation for the interviewed banks to get involved in smes financing was to a large extent not driven by the moves of competitors. almost all banks (81 percent) reported that they did not become involved in smes financing because of the need to follow other banks. finally, 63 percent of the banks were of the opinion that it is important to be one of the first movers in the financing sector. financial institutions should develop products that are best suited for small business operators. this will not only benefit small business operators but the nation at large and also the banks themselves in terms of profitability and customer base (chimucheka, 2013). http://www.virtual-economics.eu/ 107 www.virtual-economics.eu issn 2657-4047 (online) maharaja alagpuria virtual economics, vol. 4, no. 2, 2021 the findings of the study indicate that good corporate esg performance enhances financial performance evaluated through accounting as well as market-based measures. the findings have practical implications for corporations, investors, regulators, as well as policymakers. the study highlights the need for adoption of sustainability reporting, including disclosure of esg scores. (dalal & nimit, 2019). vegholm (2009) in a study “understanding bank – sme relationships: the influence of adaptation and fairness on customer satisfaction” highlights that those banks are employing fairness in their strategy and encouraging employees to have relational interaction with smes for greater customer satisfaction. hamilton & fox (1998) viewed as of how the financing preferences of owners are established enables one to explain small firm financial structures without resorting to any shortcomings or gaps in the supply of finance. indeed, one may even argue that any apparent gap is in part a consequence rather than a cause of the financing preferences of small firm owners. sustainable development has the potential to address fundamental challenges for humanity, now and in the future. however, to do this, it needs more clarity of meaning, concentrating on sustainable livelihoods and well-being rather than well-having, and long-term environmental sustainability, which requires a strong basis in principles that link the social and environmental to human equity (hopwood et al., 2005). financial institutions and government role is to develop the small-scale industry by setting of right type of institution, providing infrastructure facility, providing institutional assistance, liberal and sympathetic attitude in formulating and implementing government policies towards small industry (jain, 1990). as sustainability science is a problem-driven and solution-oriented field that follows a transformational agenda, transdisciplinary research is, in many cases, a promising choice, as it aims at bridging the gap between problem solving and scientific innovation. but this does not undermine the relevance of disciplinary or interdisciplinary approaches (lang et al., 2012). mercieca et al. (2009) point out in their research paper “bank market structure, competition and sme financing relationships in european regions“ that the competition in the european banking sector has a positive effect on the number of lendings and borrowings and find no strong evidence that these tend to offset each other. the key messages of the cultural spheres are convergent, and the actors are becoming interconnected. we need to build on the connections created and the progress to ensure culture’s ability to support truly sustainable development is fully harnessed by all actors (pascual, 2021). http://www.virtual-economics.eu/ 108 www.virtual-economics.eu issn 2657-4047 (online) maharaja alagpuria virtual economics, vol. 4, no. 2, 2021 sandberg (2015) in his book proposes a new theory for a more sustainable role of finance in society. the theory represents an attempt to strike a balance between opposing camps in contemporary business ethics research. moreover, the chapter discusses implications of the new theory for both public policies and the governance of financial institutions. while financial institutions have started to avoid unsustainable companies from a risk perspective, the frontrunners are now increasingly investing in sustainable companies and projects to create a long-term value for the wider community. major obstacles to sustainable finance are short-termism and insufficient private efforts (schoenmaker, 2017). the role of finance would play a vital role in allocating investment to sustainable companies and thus accelerate the transition to a low-carbon and circular economy (schoenmaker & schramade, 2019). the transmission mechanisms between finance and sustainability find that there is no simple one-to-one relationship between financial development and sustainable development. sustainable finance sets standards to how finance (investing and lending) would interact with economic, social and environmental issues (esg) (scholtens, 2006). overview of bank financing to smes and constraints like asymmetric information, agency issues, risk to lending in small firms, costly monitoring, competition among banks, variability of entrepreneurs prove that entrepreneurs gain from increased project valuations and banks (storey, 1994). 3. methodology this paper adapts the descriptive research design, and multiple regression analysis has been used for data analysis to find the gap between the perception and expectation of smes on sustainable finance (esg) criteria interconnecting a few un sustainable development goals (sdgs); environment (climate action & carbon tax), society (sustainable consumption & externalities) and governance (sustainable production, green finance & esg disclosures). systematic sampling technique is used to ascertain a sample size of 325 smes from chennai region, tamil nadu in india that were contacted directly to get their responses for the analysis. the responses are analysed using spss-software to derive results and interpretation. in order to find the outcomes, the association between the smes’ profile and their level of perception and expectation on the 7 sustainable finance components were analysed. the main objective of this paper is to analyse the gap between the level of perception and expectation on sustainable financing and esg disclosures among indian smes. 4. results and discussion the gap analysis on the smes’ profiles and their perception and expectation on the 7 sustainable finance components and un sdgs has been done by using multiple regression analysis. the independent variables are 5 profile components, namely age, educational http://www.virtual-economics.eu/ 109 www.virtual-economics.eu issn 2657-4047 (online) maharaja alagpuria virtual economics, vol. 4, no. 2, 2021 qualification, working experience, number of employees working in the company and annual turnover of smes were analysed. table 1. the gap in perception and expectation on climate action no. variables coefficient se ‘t’ value ‘p’ value (constant) -0.503 1. age 0.213 0.022 9.682 0.000 2. educational qualification 0.085 0.019 4.474 0.000 3. working experience -0.030 0.018 -1.667 0.098ns 4. number of employees working in the company 0.090 0.027 3.333 0.000 5. annual turnover 0.112 0.026 4.308 0.000 r value 0.961 r2 value 0.924 f value 123.887 source: developed by the author. gap on climate action = -0.503 + 0.213 (age) + 0.085 (educational qualification) 0.030 (working experience) + 0.090 (number of employees working in the company) + 0.112 (annual turnover). it is found from the analysis that the age, educational qualification, number of employees working in the company and annual turnover have positive association. figure 1. climate action source: developed by the author on the basis of table 1. -1 1 3 5 7 9 11 coefficient se ‘t’ value ‘p’ value (constant) age educational qualification http://www.virtual-economics.eu/ 110 www.virtual-economics.eu issn 2657-4047 (online) maharaja alagpuria virtual economics, vol. 4, no. 2, 2021 table 2. the gap in perception and expectation on carbon tax no. variables coefficient se ‘t’ value ‘p’ value (constant) -0.454 1. age 0.226 0.024 9.417 0.000 2. educational qualification 0.107 0.021 5.095 0.000 3. working experience 0.201 0.019 10.579 0.000 4. number of employees working in the company -0.072 0.028 -2.571 0.011 5. annual turnover 0.131 0.028 4.679 0.000 r value 0.955 r2 value 0.912 f value 31.316 source: developed by the author. gap on carbon tax = 0.454 + 0.226 (age) + 0.107 (educational qualification) + 0.201 (working experience) 0.072 (number of employees working in the company) + 0.131 (annual turnover). it is found from the analysis that the age, educational qualification, working experience and annual turnover have positive association. figure 2. carbon tax source: developed by the author on the basis of table 2. -1 1 3 5 7 9 11 coefficient se ‘t’ value ‘p’ value (constant) age educational qualification http://www.virtual-economics.eu/ 111 www.virtual-economics.eu issn 2657-4047 (online) maharaja alagpuria virtual economics, vol. 4, no. 2, 2021 table 3. the gap in perception and expectation on sustainable consumption no. variables coefficient se ‘t’ value ‘p’ value (constant) -0.637 1. age 0.223 0.025 8.920 0.000 2. educational qualification 0.136 0.022 6.182 0.000 3. working experience 0.131 0.021 6.238 0.000 4. number of employees working in the company -0.061 0.031 -1.968 0.046 5. annual turnover 0.025 0.03 0.833 0.410ns r value 0.975 r2 value 0.951 f value 71.685 source: developed by the author. gap on sustainable consumption = -0.637 + 0.223 (age) + 0.136 (educational qualification) + 0.131 (working experience) 0.061 (number of employees working in the company) + 0.025 (annual turnover). it is found from the analysis that the age, educational qualification and working experience have positive association. figure 3. sustainable consumption source: developed by the author on the basis of table 3. -1 1 3 5 7 9 coefficient se ‘t’ value ‘p’ value (constant) age educational qualification http://www.virtual-economics.eu/ 112 www.virtual-economics.eu issn 2657-4047 (online) maharaja alagpuria virtual economics, vol. 4, no. 2, 2021 table 4. the gap in perception and expectation on externalities no. variables coefficient se ‘t’ value ‘p’ value (constant) -0.228 1. age -0.030 0.024 -1.250 0.214ns 2. educational qualification 0.103 0.021 4.905 0.000 3. working experience 0.073 0.02 3.650 0.000 4. number of employees working in the company -0.095 0.029 -3.276 0.000 5. annual turnover 0.124 0.029 4.276 0.000 r value 0.919 r2 value 0.845 f value 20.762 source: developed by the author. gap on externalities = 0.2280.030 (age) + 0.103 (educational qualification) + 0.073 (working experience) 0.095 (number of employees working in the company) + 0.124 (annual turnover). it is found from the analysis that the educational qualification, working experience and annual turnover have positive association. figure 4. externalities source: developed by the author on the basis of table 4. -2 -1 0 1 2 3 4 5 coefficient se ‘t’ value ‘p’ value (constant) age educational qualification http://www.virtual-economics.eu/ 113 www.virtual-economics.eu issn 2657-4047 (online) maharaja alagpuria virtual economics, vol. 4, no. 2, 2021 table 5. the gap in perception and expectation on sustainable production no. variables coefficient se ‘t’ value ‘p’ value (constant) -0.536 1. age -0.004 0.025 -0.160 0.880ns 2. educational qualification 0.113 0.021 5.381 0.000 3. working experience 0.095 0.02 4.750 0.000 4. number of employees working in the company 0.118 0.03 3.933 0.000 5. annual turnover -0.028 0.029 -0.966 0.336ns r value 0.981 r2 value 0.962 f value 71.799 source: developed by the author. gap on sustainable production = -0.5360.004 (age) + 0.113 (educational qualification) + 0.095 (working experience) + 0.118 (number of employees working in the company) 0.028 (annual turnover). it is found from the analysis that the educational qualification, working experience and number of employees working in the company have positive association. figure 5. sustainable production source: developed by the author on the basis of table 5. -1 0 1 2 3 4 5 6 coefficient se ‘t’ value ‘p’ value (constant) age educational qualification http://www.virtual-economics.eu/ 114 www.virtual-economics.eu issn 2657-4047 (online) maharaja alagpuria virtual economics, vol. 4, no. 2, 2021 table 6. the gap in perception and expectation on green finance no. variables coefficient se ‘t’ value ‘p’ value (constant) -0.854 1. age 0.113 0.026 4.346 0.000 2. educational qualification -0.027 0.023 -1.174 0.238 ns 3. working experience 0.201 0.022 9.136 0.000 4. number of employees working in the company -0.014 0.032 -0.438 0.665 ns 5. annual turnover 0.236 0.031 7.613 0.000 r value 0.929 r2 value 0.863 f value 21.904 source: developed by the author. gap on green finance = -0.854 + 0.113 (age) 0.027 (educational qualification) + 0.201 (working experience) 0.014 (number of employees working in the company) + 0.236 (annual turnover). it is found from the analysis that the age, working experience and annual turnover have positive association. figure 6. green finance source: developed by the author on the basis of table 6. -1,5 -0,5 0,5 1,5 2,5 3,5 4,5 coefficient se ‘t’ value ‘p’ value (constant) age educational qualification http://www.virtual-economics.eu/ 115 www.virtual-economics.eu issn 2657-4047 (online) maharaja alagpuria virtual economics, vol. 4, no. 2, 2021 table 7. the gap in perception and expectation on esg disclosures no. variables coefficient se ‘t’ value ‘p’ value (constant) -0.061 1. age -0.054 0.026 -2.122 0.034 2. educational qualification -0.024 0.022 -1.051 0.294 ns 3. working experience -0.056 0.021 -2.629 0.009 4. number of employees working in the company 0.006 0.031 0.191 0.849 ns 5. annual turnover 0.119 0.030 3.967 0.000 r value 0.926 r2 value 0.857 f value 32.863 source: developed by the author. gap on esg disclosures = -0.0610.054 (age) 0.024 (educational qualification) 0.056 (working experience) + 0.006 (number of employees working in the company) + 0.119 (annual turnover). it is found from the analysis that the annual turnover has positive association. figure 7. esg disclosures source: developed by the author on the basis of table 7. -2,5 -2 -1,5 -1 -0,5 0 0,5 coefficient se ‘t’ value ‘p’ value (constant) age educational qualification http://www.virtual-economics.eu/ 116 www.virtual-economics.eu issn 2657-4047 (online) maharaja alagpuria virtual economics, vol. 4, no. 2, 2021 from the above results, it is noted that even though the small size enterprises have above 10year experience in their business they are expecting more of climate action. the government may provide financial as well as technical help to smes in order to ensure proper implementation of mandatory rules and regulations conforming to international standards. ngos and their role and the consumer awareness can help in protecting the environment to a considerable extent that increases the chance of sustainable financing of smes. it is noticed from the gap analysis that the perception of the smes is lesser than their expectation and hence a negative gap exists. the gap between the perception and expectation related to the profile of the smes has positive association in all seven sustainable financing components. it is observed that regarding the sustainable financing for the installed capacity, production, and extent of demand, smes are unable to assess the present condition with the future prospects of their business and the mandatory requirements on esg disclosures. so, it is recommended to the smes that they should understand all the facts of sustainable financing criteria and esg disclosures sooner or later, which may qualify them and give more access to secure sustainable financing. moreover, the sustainable financing of the smes would have to be transparent so as to make the sustainable finance providers decide on sustainable financing investments in a simple and easier way. sustainable finance and its mandatory sustainability practices and disclosures are the most important concern for smes to get necessary funding, on which there is no much awareness among the smes. it is recommended that financial education should be given to the smes by designing necessary modules for successful adaption of sustainable financing requirements. it is also important to integrate mainstream smes for the growth of their business, but also to enrich their knowledge on sustainable financing through training and mentoring. these only can transform the smes and qualify them for sustainable financing application in future. 5. conclusion the flow of credit to smes in india has not kept pace with the growth of credit to non-sme sectors. by its sheer size, the sme market presents a huge opportunity for investors. but at present, the investors do not consider the whole of the smes credentials in the process of providing finance with the existing financial policy and regulations. in order to accommodate an improved version of sme financing incorporating sustainable financing criteria and esg disclosures to make them qualified for sustainable financing for smes, it is necessary to install a better governance mechanism, strategies, risk management practices and metrics & targets to plan and implement sustainable finance portfolio effectively in all parts of india. moreover, this study has identified seven sustainable finance components and the un sdgs to be considered for ascertaining the present level of understanding and awareness among the smes and to make them prepared for the future of sustainable financing to support their cause http://www.virtual-economics.eu/ 117 www.virtual-economics.eu issn 2657-4047 (online) maharaja alagpuria virtual economics, vol. 4, no. 2, 2021 and purpose of getting hassle-free investment from the investors and to enhance the chance of making financing sustainable to smes. in this regard, government of india should take sustainable financing initiatives in association with the reserve bank of india and the stakeholders globally by taking suitable policy decisions for implementing seamless sustainable financing for smes. government would have to act fast as there is a compelling situation to fulfil the state obligations on sustainable financing portfolio considering the time required for the smes to align themselves to the financial market requirements. it becomes necessary for smes to work closely with financial institutions and investors, governments, sme associations and international institutions. obviously, the organisation of this paper is forward looking and helps maximize the sustainability adaption for securing finance for the development of smes to further strengthen their present state. the role of the stakeholders is to be structured to provide more exposure on vital factors related to business 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(2021). the influence of managerial characteristics on external financing preferences in smaller enterprises: the case of malaysian micro-sized enterprises. cogent business & management, 8(1), 1912524. https://doi.org/10.1080/23311975.2021.1912524 http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) liudmyla saher, tatjana tambovceva, and radosław miśkiewicz virtual economics, vol. 4, no. 4, 2021 7 2021 volume 4 number 4 (october) research progress and knowledge structure of inclusive growth: a bibliometric analysis liudmyla saher, tatjana tambovceva, and radosław miśkiewicz abstract. environmental and socio-political challenges of today show that traditional models of economic growth and valuation methods, which are based primarily on financial profitability, are not always optimal, but the concept of inclusive growth is gaining popularity. in january 2018, the inclusive growth and development index was presented at the 48th world economic forum in davos. but the relatively new concept of inclusive growth and its economic meaning remains insufficiently studied and needs further research. accordingly, the paper aims at providing a bibliometric overview to determine the current state of scientific production in "inclusive growth". scopus database was selected as the primary data source. the scientific literature was searched based on the titles, abstracts, and author keywords with the following search strategy: "inclusive growth". a time span of 10 years was set, and thus, only literature published from 2012 to 2021 was included. to obtain a more comprehensive analysis vosviewer 1.6.16 software was used for mapping and visualizing bibliometric networks of scientific publications. a study of the geographical affiliation of researchers in this area showed that the most significant number of publications was published by scientists from the usa, india, great britain, china, south africa, australia, spain, italy, canada, and germany. the average growth rate of publications in this field is the highest among scientists in spain, italy, and china. the interest in the topic is constantly growing. as a result of a bibliometric analysis of 2000 publications indexed by the scopus database from 2012 to 2021, devoted to the issues of inclusive growth, 8 clusters were identified: environmental problems, role, and opportunities of stakeholders in increasing inclusive growth, population movement under the influence of micro-and macro-environmental factors to achieve sustainable development goals, inequality, analysis of economic and population development factors in the context of achieving sustainable development goals, inclusive growth essence, and parameters, poverty. the issues of regional aspects and mechanisms for attaining inclusive growth goals, as well as issues of regulating and ensuring stakeholders' interests, including issues of communication and promotion of inclusive growth paradigm, risk assessment of implementing inclusive economic principles, and formalization of impact factors remain unexplored. keywords: inclusive growth, economic growth, sustainable development, bibliometric analysis jel classification: o10, o40, d50 www.virtual-economics.eu issn 2657-4047 (online) liudmyla saher, tatjana tambovceva, and radosław miśkiewicz virtual economics, vol. 4, no. 4, 2021 8 authors: liudmyla saher sumy state university, sumy, ukraine e-mail: l.sager@kmm.sumdu.edu.ua https://orcid.org/0000-0002-5628-5477 tatjana tambovceva riga technical university, 1, meza st., riga, lv-1048, latvia e-mail: tatjana.tambovceva@rtu.lv https://orcid.org/0000-0002-9516-1530 radosław miśkiewicz university of szczecin, 22a, papieża jana pawła ii szczecin, 70-453, poland e-mail:radoslaw.miskiewicz@usz.edu.pl https://orcid.org/0000-0003-2370-4783 citation: saher, a., tambovceva, t., & miskiewicz, r. (2021). research progress and knowledge structure of inclusive growth: a bibliometric analysis. virtual economics, 4(4), 7-20. https://doi.org/10.34021/ve.2021.04.04(1) received: may 28, 2021. revised: september 3, 2021. accepted: september 21, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) liudmyla saher, tatjana tambovceva, and radosław miśkiewicz virtual economics, vol. 4, no. 4, 2021 9 1. introduction reality shows that economic growth has begun to accelerate with a simultaneous increase in unemployment and income inequality in most countries. economic growth is not enough to talk about the effective development of the state. the country's macroeconomic indicators may be typical. still, at the same time, a significant part of the population is not "involved" in economic growth because it does not participate in creating gdp and, consequently, in the distribution. the result is the stratification of population and the emergence of related problems. the issue of inclusive growth, which has been part of the global discourse for the last decade and continues to be one of the top priorities today, is becoming increasingly popular. inclusive growth improves the quality of human life and its ability to promote social progress actively. inclusive growth creates opportunities for all segments of the population and fairly distributes welfare growth dividends in monetary and non-monetary terms among all segments of society. this is a tripartite approach based on (oecd 2015): 1) multidimensionality (which includes indicators of economic well-being, such as gdp, in addition to other aspects relevant to well-being, employment, skills and education, health, environment, and participation of civil society, social ties); 2) emphasis on distribution (means that all people participate in the development process and benefit from its results); 3) relevance of the policy (the need to implement measures within the adopted action strategy). 2. literature review a critical review of the theoretical foundations underlying growth, development and prospects of the state's welfare concerning inclusive growth and socio-economic development was provided by hasmath (2015), dalevska et al. (2019), kharazishvili et al. (2020), and kwilinski et al. (2020). nicky & pouw (2016), heshmati et al. (2019), shipton et al. (2021) studied the literature on the essence and attributes of inclusive development, as well as areas of its analysis. boarini r., causa o., fleurbaey m., grimalda g., & woolard i. describe specific policy actions that include education, labour, fiscal instruments, public and private governance to achieve more inclusive growth in g20 countries. the authors claim that this will restore the feeling that the lives of all people are being improved (boarini et al., 2018). to diagnose growth factors, scientists (adham, 2016; drożdż et al., 2020; 2021a; 2021b; dźwigoł et al., 2019) have developed a cybernetic approach to analysing inclusive growth constraints. this approach allows examining the dynamic nature of growth, which supports identifying growth-limiting variables and mapping their relationships based on location of the data collected. many researchers are studying various inclusive growth indicators at the regional level. for example, lee & sissons (2016) analysed the links between economic growth and poverty and found no actual connection between output growth and poverty reduction in british cities. mitra & das (2018) ranked 16 asian countries according to the inclusive growth index; j. van niekerk (2020) carried out a similar study for africa. in their research, sun c., liu l., and tang y. (sun et al., 2018) built a system of indicators that measures the inclusive growth of chinese www.virtual-economics.eu issn 2657-4047 (online) liudmyla saher, tatjana tambovceva, and radosław miśkiewicz virtual economics, vol. 4, no. 4, 2021 10 provinces and cities in five aspects: survival, potential, development, freedom, and opportunity. cichowicz & rollnik-sadowska (2018), domonkos & ostrihoň (2015) determined the level of inclusive growth among central european countries in their studies. the evolution, development, and prospects of implementing an inclusive model of ukraine's economic growth were carried out by chaikin & usiuk (2019). they also determined that the inclusive development model is the most acceptable for ukraine in modern conditions and is the basis for sustainability and competitiveness in the domestic economy. at the same time, colin hay, tom hunt, and j. allister mcgregor (hay et al., 2020) argue the need to consider inclusive development not at the regional or state level but in its global interdependence. at the same time, they emphasize that inclusive growth should include a more multidimensional concept of inclusive development, which is based on a meaningful idea of human well-being. 3. methodology scopus database was selected as the primary data source. the scientific literature was searched based on the titles, abstracts, and keywords with the following search strategy: "inclusive growth" (table 1). table 1. stages of the literature search and selection process stage filters result stage 1 data collection choice of suitable information sources scopus database identification of search field in the database title, abstract, keywords identification of search keywords inclusive growth 5 949 publications stage 2 data screening identification of publication type journal articles only; conference papers, books, and chapters of books excluded 3 907 publications choice of the language english 3 707 publications choice of the field of publication business, management, and accounting; social sciences; economics, econometrics, and finance; decision sciences; environmental science; energy; multidisciplinary 2 561 publications identification of the publication's time limits 2012-2021 (since the beginning of the growth in the number of publications on the subject) 2 000 publications stage 3 bibliometric analysis tools vosviewer 1.6.16, microsoft excel visualization maps, charts source: developed by the authors a time span of 10 years was set, and thus, only literature published from 2012 to 2021 was included. only articles written in english were selected for this bibliometric analysis. in www.virtual-economics.eu issn 2657-4047 (online) liudmyla saher, tatjana tambovceva, and radosław miśkiewicz virtual economics, vol. 4, no. 4, 2021 11 addition, restrictions have been introduced on the scope of research (it focused on publications that contain the economic component and are of interest in the formation of sustainable economic development). thus, 2,000 publications were selected for further research considering all the limitations. to obtain a more comprehensive analysis vosviewer 1.6.16 software was used to map and visualize bibliometric networks of scientific publications. all data used in this work were downloaded from public databases and, therefore, ethics committee approval or informed consent was not required. 4. results and discussion according to the defined approach to screening of scientific publications (table 1), for the period of 2012–2021, 2000 original publications on the research topic were identified. figure 1 shows the growth dynamics of the number of publications on inclusive growth and their citations. the polynomial growth trend in the annual number of publications for the last 10 years is determined (y = 4.2576x2 14.348x + 115, r² = 0.9735). from 2001 to 2020, the average growth rate of scientific products was 18.62%. the highest citation rate and the highest number of citations per publication were achieved in 2021 (6396 and 12 citations per 1 publication, respectively). in 2012, 2016, and 2017, the top 10 most cited documents were published. figure 1. the dynamics of scientific publications on inclusive growth, indexed by the database scopus for 2012-2021 source: developed by the authors figure 2 compares subject areas in the study of inclusive growth. the results indicate the prevalence of social, managerial, and economic sciences. there is also a significant share of publications on energy and ecology, which confirms the interdisciplinary nature of the research topic and shows the coverage of the most inclusive growth indicators. 82 119 118 141 160 177 198 271 314 420 72 227 426 693 992 1493 2182 2979 4137 y = 4,2576x2 14,348x + 115 r² = 0,9735 0 50 100 150 200 250 300 350 400 450 0 500 1000 1500 2000 2500 3000 3500 4000 4500 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 n u m b e r o f ci ta ti o n s n u m b e r o f p u b li ca ti o n s number of publications number of citations polynomial www.virtual-economics.eu issn 2657-4047 (online) liudmyla saher, tatjana tambovceva, and radosław miśkiewicz virtual economics, vol. 4, no. 4, 2021 12 figure 2. publications on inclusive growth, selected by research areas (based on the scopus database) source: developed by the authors. the ten most-cited publications in inclusive growth research in the scopus database are listed in table 2. all articles are cited more than 200 times. it indicates that the world scientific community highly values these publications. there is a scientific discussion that emphasizes the relevance of the research topic. all articles are published in high-ranking journals with high ratings and included in mostly quartile q1. table 2. top 10 leading publications in inclusive growth research (based on the scopus database) article title total citations author country affiliation journal/year of publication 1 2 3 4 5 innovation for inclusive growth: towards a theoretical framework and a research agenda 404 george g., mcgahan a.m., prabhu j. united kingdom, canada journal of management studies, 2012 green, circular, bio economy: a comparative analysis of sustainability avenues 353 d'amato d., droste n., allen b., kettunen m., lähtinen k., korhonen j., leskinen p., matthies b.d., toppinen a. finland, germany, united kingdom journal of cleaner production, 2017 spatial planning for multifunctional green infrastructure: growing resilience in detroit 332 meerow s., newell j.p. united states landscape and urban planning, 2017 https://www.scopus.com/sourceid/20650?origin=resultslist https://www.scopus.com/sourceid/20650?origin=resultslist https://www.scopus.com/sourceid/20650?origin=resultslist https://www.scopus.com/sourceid/19167?origin=resultslist https://www.scopus.com/sourceid/19167?origin=resultslist https://www.scopus.com/sourceid/19167?origin=resultslist https://www.scopus.com/sourceid/19041?origin=resultslist https://www.scopus.com/sourceid/19041?origin=resultslist https://www.scopus.com/sourceid/19041?origin=resultslist www.virtual-economics.eu issn 2657-4047 (online) liudmyla saher, tatjana tambovceva, and radosław miśkiewicz virtual economics, vol. 4, no. 4, 2021 13 continued table 2 1 2 3 4 5 categorization of indicators for sustainable manufacturing 329 joung c.b., carrell j., sarkar p., feng s.c. united states ecological indicators, 2013 energy, land-use and greenhouse gas emissions trajectories under a green growth paradigm 307 van vuuren detlef p., gernaat david e.h.j., stehfest elkea, doelman jonathan c., van den berg maartena, harmsen mathijsa, de boer, harmen sytzea; bouwman lex f., daioglou vassilisa, edelenbosch oreane y., girod bastiend, kram toma netherlands, switzerland global environmental change, 2017 post-political spatial planning in england: a crisis of consensus? 293 allmendinger p., haughton g. united kingdom transactions of the institute of british geographers, 2012 sustainability practices and corporate financial performance: a study based on the top global corporations 255 ameer r., othman r. new zealand journal of business ethics, 2012 molecular conformations, interactions, and properties associated with drug efficiency and clinical performance among vegfr tk inhibitors 254 mctigue michele, murray brion william, deng ya-li, chen jeffrey h., solowiej james, kania robert s. united states proceedings of the national academy of sciences of the united states of america, 2012 sustainable development goals and inclusive development 241 gupta j., vegelin c. netherlands international environmental agreements: politics, law and economics, 2016 the worldwide trend to high participation higher education: dynamics of social stratification in inclusive systems 240 marginson s. united kingdom higher education, 2016 source: developed by the authors. the most cited article, "innovation for inclusive growth: towards a theoretical framework and a research agenda", was published by george g., mcgahan a.m., and prabhu j. the authors consider inclusive innovation as a factor of inequality that may arise in the development and commercialization of innovation or as a result of the creation and capture of value; they describe opportunities for the development of research around this concept in the fields of entrepreneurship, strategy, and marketing (george et al., 2012). the second place in the number of citations is occupied by the article of the author's team d'amato d., droste n., allen b., kettunen m., lähtinen k., korhonen j., leskinen p., matthies https://www.scopus.com/sourceid/20292?origin=resultslist https://www.scopus.com/sourceid/20292?origin=resultslist https://www.scopus.com/sourceid/36483?origin=resultslist https://www.scopus.com/sourceid/36483?origin=resultslist https://www.scopus.com/sourceid/36483?origin=resultslist https://www.scopus.com/sourceid/23859?origin=resultslist https://www.scopus.com/sourceid/23859?origin=resultslist https://www.scopus.com/sourceid/23859?origin=resultslist https://www.scopus.com/authid/detail.uri?origin=resultslist&authorid=6603838850&zone= https://www.scopus.com/record/display.uri?eid=2-s2.0-84860655172&origin=resultslist&sort=cp-f&src=s&sid=9b8324d1190a0d2363fa183680cd84b4&sot=a&sdt=a&cluster=scosubtype%2c%22ar%22%2ct%2bscosubjabbr%2c%22soci%22%2ct%2c%22econ%22%2ct%2c%22envi%22%2ct%2c%22busi%22%2ct%2c%22ener%22%2ct%2c%22mult%22%2ct%2c%22deci%22%2ct%2bscopubyr%2c%222021%22%2ct%2c%222020%22%2ct%2c%222019%22%2ct%2c%222018%22%2ct%2c%222017%22%2ct%2c%222016%22%2ct%2c%222015%22%2ct%2c%222014%22%2ct%2c%222013%22%2ct%2c%222012%22%2ct%2bscolang%2c%22english%22%2ct&sessionsearchid=9b8324d1190a0d2363fa183680cd84b4&relpos=0&citecnt=404 https://www.scopus.com/record/display.uri?eid=2-s2.0-84860655172&origin=resultslist&sort=cp-f&src=s&sid=9b8324d1190a0d2363fa183680cd84b4&sot=a&sdt=a&cluster=scosubtype%2c%22ar%22%2ct%2bscosubjabbr%2c%22soci%22%2ct%2c%22econ%22%2ct%2c%22envi%22%2ct%2c%22busi%22%2ct%2c%22ener%22%2ct%2c%22mult%22%2ct%2c%22deci%22%2ct%2bscopubyr%2c%222021%22%2ct%2c%222020%22%2ct%2c%222019%22%2ct%2c%222018%22%2ct%2c%222017%22%2ct%2c%222016%22%2ct%2c%222015%22%2ct%2c%222014%22%2ct%2c%222013%22%2ct%2c%222012%22%2ct%2bscolang%2c%22english%22%2ct&sessionsearchid=9b8324d1190a0d2363fa183680cd84b4&relpos=0&citecnt=404 www.virtual-economics.eu issn 2657-4047 (online) liudmyla saher, tatjana tambovceva, and radosław miśkiewicz virtual economics, vol. 4, no. 4, 2021 14 b.d., toppinen a. "green, circular, bio economy: a comparative analysis of sustainability avenues". they describe the circular economy, green economy, and bio-economy as united by a common ideal to reconcile economic, environmental, and social goals (d'amato et al., 2017). the authors of the third-ranked cited article "spatial planning for multifunctional green infrastructure: growing resilience in detroit" (meerow, 2017) offer the gisp model that provides an inclusive, replicable approach for planning future green infrastructure that maximizes social and ecological resilience for ensuring the inclusive region growth. the top researchers contributing to the field are listed in table 3 (based on their number of publications). thus, the most productive authors in the area were managi s., asongu s.a., and kurniawan r. in addition to a relatively significant level of citations per publication, these researchers have high h-index values. it confirms the high scientific level and relevance of their research. table 3. top authors by the number of publications in the field of inclusive growth during 2012-2021 (based on the scopus database) author total publications total citations average citation per publication hindex affiliation managi s. 10 129 12,90 44 kyushu university, fukuoka, japan asongu s.a. 6 98 16,33 44 school of economics, university of johannesburg, south africa; school of business, akfa university, tashkent, uzbekistan kurniawan r. 5 94 18,80 9 tohoku university, sendai, japan adedeji a.a. 4 45 11,25 4 university of ibadan, ibadan, nigeria jeyacheya j. 4 123 30,75 6 manchester metropolitan university, manchester, united kingdom osabuohien e.s. 4 51 12,75 19 covenant university, ota, nigeria oyinlola m.a. 4 42 10,50 5 university of ibadan, ibadan, nigeria rogerson c.m. 4 122 30,50 40 college of business and economics, johannesburg, south africa source: developed by the authors. a visualization map was formed for a more detailed analysis of the research direction using vosviewer 1.6.16 software. this map shows the frequency of terms used (the size of the circle), the tightness of the links between them, and the different combinations of words both within clusters and among them. each node in the figure represents a specific keyword. nodes and font size represent the number of keyword encounters. keywords with close correlation will be assigned to one cluster of the same colour. thus, 9657 keywords were included in the preliminary analysis. after checking their relevance and setting the "frequency of occurrence more than the five times" limit, 607 words were https://www.scopus.com/record/display.uri?eid=2-s2.0-85030721949&origin=resultslist&sort=cp-f&src=s&sid=9b8324d1190a0d2363fa183680cd84b4&sot=a&sdt=a&cluster=scosubtype%2c%22ar%22%2ct%2bscosubjabbr%2c%22soci%22%2ct%2c%22econ%22%2ct%2c%22envi%22%2ct%2c%22busi%22%2ct%2c%22ener%22%2ct%2c%22mult%22%2ct%2c%22deci%22%2ct%2bscopubyr%2c%222021%22%2ct%2c%222020%22%2ct%2c%222019%22%2ct%2c%222018%22%2ct%2c%222017%22%2ct%2c%222016%22%2ct%2c%222015%22%2ct%2c%222014%22%2ct%2c%222013%22%2ct%2c%222012%22%2ct%2bscolang%2c%22english%22%2ct&sessionsearchid=9b8324d1190a0d2363fa183680cd84b4&relpos=1&citecnt=353 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https://www.scopus.com/record/display.uri?eid=2-s2.0-85000843790&origin=resultslist&sort=cp-f&src=s&sid=9b8324d1190a0d2363fa183680cd84b4&sot=a&sdt=a&cluster=scosubtype%2c%22ar%22%2ct%2bscosubjabbr%2c%22soci%22%2ct%2c%22econ%22%2ct%2c%22envi%22%2ct%2c%22busi%22%2ct%2c%22ener%22%2ct%2c%22mult%22%2ct%2c%22deci%22%2ct%2bscopubyr%2c%222021%22%2ct%2c%222020%22%2ct%2c%222019%22%2ct%2c%222018%22%2ct%2c%222017%22%2ct%2c%222016%22%2ct%2c%222015%22%2ct%2c%222014%22%2ct%2c%222013%22%2ct%2c%222012%22%2ct%2bscolang%2c%22english%22%2ct&sessionsearchid=9b8324d1190a0d2363fa183680cd84b4&relpos=2&citecnt=332 https://www.scopus.com/record/display.uri?eid=2-s2.0-85000843790&origin=resultslist&sort=cp-f&src=s&sid=9b8324d1190a0d2363fa183680cd84b4&sot=a&sdt=a&cluster=scosubtype%2c%22ar%22%2ct%2bscosubjabbr%2c%22soci%22%2ct%2c%22econ%22%2ct%2c%22envi%22%2ct%2c%22busi%22%2ct%2c%22ener%22%2ct%2c%22mult%22%2ct%2c%22deci%22%2ct%2bscopubyr%2c%222021%22%2ct%2c%222020%22%2ct%2c%222019%22%2ct%2c%222018%22%2ct%2c%222017%22%2ct%2c%222016%22%2ct%2c%222015%22%2ct%2c%222014%22%2ct%2c%222013%22%2ct%2c%222012%22%2ct%2bscolang%2c%22english%22%2ct&sessionsearchid=9b8324d1190a0d2363fa183680cd84b4&relpos=2&citecnt=332 https://www.scopus.com/affil/profile.uri?afid=60008435 https://www.scopus.com/affil/profile.uri?afid=60006270 https://www.scopus.com/affil/profile.uri?afid=60006270 www.virtual-economics.eu issn 2657-4047 (online) liudmyla saher, tatjana tambovceva, and radosław miśkiewicz virtual economics, vol. 4, no. 4, 2021 15 selected. based on the selected data, vosviewer software divided all keywords into eight research clusters (fig. 3), which unite concepts on the principle of essential proximity. figure 3. a visualization map of the keyword network in the inclusive growth sphere source: developed by the author (based on the scopus database using vosviewer). the most powerful cluster – red – includes 81 items and is formed around the "climate change". the following are the largest concepts: "economics", "environmental economics", "environmental protection", "economic and social effect", etc. the general vector of research formed in the red cluster is environmental problems and ways to tackle them. the "green" cluster is the second-largest. it is based on the concept of "people". it includes 77 keywords, the essence of which is to study the stakeholders’ role and opportunities in increasing inclusive growth. the third ("navy") cluster, which is formed around the concept of "sustainability", characterizes the study of the importance of population movement under the influence of microand macro-environmental factors for achieving sustainable development goals (the implementation of which is focused on the inclusive economy development). the main essence of the research formed in the "yellow" cluster is the components and indicators of economic development, including ensuring inclusiveness, taking into account the policies of governments at the global and regional levels, and the interests of other stakeholders. it contains 68 items and is based on the concept of "economic growth". www.virtual-economics.eu issn 2657-4047 (online) liudmyla saher, tatjana tambovceva, and radosław miśkiewicz virtual economics, vol. 4, no. 4, 2021 16 the fifth-largest cluster ("purple") contains 32 items and is based on economic and population development factors in the context of achieving sustainable development goals. inequality and ways to overcome it have been the subject of publications grouped in a "blue" cluster of 28 items. "orange" and "brown" clusters are the smallest. they combine 25 and 24 items, respectively. within the orange cluster, authors who considered the essence and parameters of inclusive growth are united. the brown cluster is devoted to analysing the possibilities of overcoming poverty as a deterrent to inclusive growth. particular attention should be paid to analysing the geographical affiliation of scientists in this area. thus, figure 4 shows a. a visualization map of co-authored scientists according to the country specified in the affiliation; b. a visualization map of co-authored scientists according to the average publication time; c. top 20 most productive countries related to inclusive growth research; d. the annual number of publications in the top 10 prolific countries from 2011 to 2021. thus, according to the results, the leading positions in the scientists’ publishing activity in the field of inclusive growth are occupied by the following countries: the usa (366 publications), india (278 publications), great britain (239 publications), china (136 publications), south africa (109 publications), australia (107 publications), spain (72 publications), italy (70 publications), canada (56 publications), and germany (64 publications). almost all of these countries are in the top-15 countries in terms of gdp (world bank, 2021). accordingly, it can be assumed that the issue of inclusive growth is more interesting for countries with a high level of economic development. although the path of an inclusive economy can be one of the main goals at the stage of economic development, states and their governments (and other stakeholders) not only care about economic indicators and their growth, but also consider the interests of society as a whole. it should be noted that the number of publications in the scopus database published by the ukrainian authors is relatively insignificant – 19 publications. at the same time, they were published in the last three years, which indicates the lack of research and timeliness of the study in ukraine. the number of publications on inclusive growth in most countries is on the rise (except for germany and india in 2021). the highest growth rates and the number of publications are in the united states (73% in 2021 compared to 2020) and china (69%). the average growth rates for the analysed period (2012-2021) are the highest in spain (69%), italy (54%), and china (51%). www.virtual-economics.eu issn 2657-4047 (online) liudmyla saher, tatjana tambovceva, and radosław miśkiewicz virtual economics, vol. 4, no. 4, 2021 17 a b c d rank countries publications, n % of 2000 hindex average citations per a document 1 united states 366 18.30 37 15.37 2 india 278 13.90 18 6.10 3 united kingdom 239 11.95 33 20.58 4 china 136 6.80 19 9.96 5 south africa 109 5.45 15 7.91 6 australia 107 5,35 19 14.54 7 spain 72 3.60 15 12.74 8 italy 70 3.50 15 14.89 9 canada 65 3.25 17 22.75 10 germany 64 3.20 18 32.98 11 nigeria 62 3.10 11 6.24 12 france 57 2.85 13 15.88 13 netherlands 57 2.85 17 24.56 14 japan 45 2.25 13 14.27 15 malaysia 39 1.95 8 10.51 16 indonesia 36 1.80 7 5.06 17 pakistan 32 1.60 6 3.84 18 south korea 30 1.50 7 8.17 19 denmark 27 1.35 8 7.96 20 sweden 27 1.35 11 14.04 figure 4. a. a visualization map of co-authored scientists according to the country specified in the affiliation; b. a visualization map of co-authored scientists according to the average publication time; c. top 20 most productive countries related to inclusive growth research; d. the annual number of publications in the top 10 prolific countries from 2011 to 2021 source: developed by the author (based on the scopus database using vosviewer and microsoft excel) 5. conclusion as a result of a bibliometric analysis of 2000 publications indexed by the scopus database from 2012 to 2021, devoted to the issues of inclusive growth, 8 clusters were identified: research of environmental problems and ways to solve them; research on the stakeholders’ role and opportunities in increasing inclusive growth; analysis of population movement under the 0% 20% 40% 60% 80% 100% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 germany canada italy spain australia south africa china united kingdom india united states www.virtual-economics.eu issn 2657-4047 (online) liudmyla saher, tatjana tambovceva, and radosław miśkiewicz virtual economics, vol. 4, no. 4, 2021 18 influence of microand macro-environmental factors in achieving sustainable development goals; inequality and ways to overcome it; analysis of economic and population development factors in the context of achieving sustainable development goals; inclusive growth essence and parameters; opportunities to overcome poverty as a deterrent to inclusive growth. the issues of regional aspects and mechanisms for achieving inclusive growth goals, as well as issues of regulating and ensuring stakeholders' interests, including issues of communication and promotion of the inclusive growth paradigm, risk assessment of implementing inclusive economy principles, and formalization of impact factors remain unexplored. the interest in the topic is constantly growing as new problems and challenges appear, which change the consumer behaviour of the population, the principles of doing business, and form new developments in society. references adham, k. a., kasimin, h., jamaludin, n. a., ghanie, s. k. m., khatib, n. a. m., & said, m. f. 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(2017). energy, land-use and greenhouse gas emissions trajectories under a green growth paradigm. global environmental change, 42, 237-250. https://doi.org/10.1016/j.gloenvcha.2016.05.008 https://doi.org/10.1016/j.cosust.2016.11.013 кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) aleksandra kuzior virtual economics, vol. 5, no. 1, 2022 65 2022 volume 5 number 1 innovative development of renewable energy during the crisis period and its impact on the environment nataliia gavkalova, yuliia lola, svitlana prokopovych, oleksandr akimov, vainius smalskys, and liudmyla akimova abstract. the article examines the innovative trends in the renewable power generation, taking into account the impact of crises, as well as the impact of renewable energy on air pollution in the world (environmental change). hierarchical agglomerative and iterative methods of cluster analysis, as well as econometric models were used to test the hypotheses. carbon dioxide emissions and renewable power generation for 78 countries during 2000-2020 are taken into account as the database of the study. the results showed that there are groups of countries with sharp, high, moderate and low growth rates of renewable power generation. in addition, the results of econometric analysis indicate that the growth of renewable power generation does not always cause a decrease in carbon dioxide emissions. for a number of countries (australia, canada, mexico, poland) such connection is not essential at all. the results of the study can be useful in shaping and adapting environmental strategies around the world. keywords: carbon dioxide emissions, renewable power generation, innovative development, crises period jel classification: f64, o13, o44 www.virtual-economics.eu issn 2657-4047 (online) nataliia gavkalova, yuliia lola, svitlana prokopovych, oleksandr akimov, vainius smalskys, and liudmyla akimova virtual economics, vol. 5, no. 1, 2022 66 authors: nataliia gavkalova simon kuznets kharkiv national university of economics, prospekt nauky, 9a, kharkiv, 61166, ukraine e-mail: gavkalova@gmail.com http://orcid.org/0000-0003-1208-9607 yuliia lola simon kuznets kharkiv national university of economics, prospekt nauky, 9a, kharkiv, 61166, ukraine e-mail: yuliia.lola@hneu.net http://orcid.org/0000-0002-6631-3822 svitlana prokopovych simon kuznets kharkiv national university of economics, prospekt nauky, 9a, kharkiv, 61166, ukraine e-mail: prokopovichsv@gmail.com http://orcid.org/0000-0002-6333-2139 oleksandr akimov shupyk national healthcare university of ukraine, dorohozhytska str., 9, kyiv, 04112, ukraine e-mail: 1970aaa@ukr.net http://orcid.org/0000-0002-9557-2276 vainius smalskys mykolas romeris university, ateities str., 20, lt-08303 vilnius, lithuania e-mail: vainius.smalskys@gmail.com http://orcid.org/0000-0002-9557-2276 liudmyla akimova national university of water and environmental engineering, soborna st., 11, rivne, 33028, ukraine e-mail: l_akimova@ukr.net http://orcid.org/0000-0002-2747-2775 citation: gavkalova, n., lola, yu., prokopovych, s., akimov, a., smalskys, v., & akimova, l. (2022). innovative development of renewable energy during the crisis period and its impact on the environment. virtual economics, 5(1), 65-77. https://doi.org/10.34021/ve.2022.05.01(4) received: december 15, 2021. revised: january 3, 2022. accepted: january 24, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) nataliia gavkalova, yuliia lola, svitlana prokopovych, oleksandr akimov, vainius smalskys, and liudmyla akimova virtual economics, vol. 5, no. 1, 2022 67 1. introduction the growth of the earth's population aggravates the problem of limited non-renewable natural resources. experts are counting down the time when humanity will no longer have access to depleted resources. as on july 29, 2021, the world's oil reserves remained for 42 years, gas reserves  for 157 years, coal reserves  for 406.6 years (world health organization, 2021). in addition, 67% of greenhouse gas emissions are caused by energy and burning of fossil fuels, which leads to an increase in the global average temperature (ministry of environmental protection, 2021). therefore, the international community is joining forces to research, develop and commercialize "green" energy, decarbonise and determine energy efficiency areas and also to reach international agreements and develop common strategies to address global climate and environmental challenges. the kyoto protocol, signed in 1992, has been ratified by 191 countries. however, the tools provided to reduce co2 emissions have not been effective enough and the problem of global warming in the 21st century has become even more acute. therefore, the european union has made great efforts to formulate a climate policy based on the decarbonisation of economy. 195 countries of the world have joined the paris agreement, which has independently determined the percentage of reduction of co2 emissions in their countries. due to the covid-19 crisis, energy consumption has decreased in most countries. the exception is china, which has a significant impact on global energy consumption, as it consumes 24% of the world's energy. in 2020, this indicator increased by 2.2%, which is much less than in previous years (enerdata, 2021). global energy demand in 2020 fell by 4%. it has been the largest decline since world war ii and the largest ever absolute decline. at the peak of restrictions in april, global oil demand was more than 20% below pre-crisis levels. overall, oil demand was down by almost 9% across the year. the largest declines in coal use for electricity generation were in advanced economies, down 15%, which accounts for more than half of coal’s global decline (global energy review, 2021). those existing coal and other fossil fuel-fired power plants cause billions of tons of co2 discharge into the atmosphere each year and account for about 26 % of global greenhouse gas emissions. the economic downturn in 2020 led to a 5.2% reduction in co2 emissions, however, it is expected that this figure will not be contained and in 2021 it will increase again by 4.4% (enerdata, 2021). at a regional level, the different responses to the pandemic impacted emissions in different ways. on average, advanced economies saw the steepest declines in annual emissions in 2020, averaging drops of almost 10%, while emissions from emerging market and developing economies fell by 4% in comparison with 2019 (global energy review, 2020). in the power sector, co2 emissions declined by 3.3% in 2020. the share of renewables in global electricity generation rose from 27% in 2019 to 29% in 2020, the biggest annual increase on record. renewables accelerated their expansion in 2020, with a 50% increase in their https://www.iea.org/reports/global-energy-review-2021 https://www.iea.org/reports/global-energy-review-2021 www.virtual-economics.eu issn 2657-4047 (online) nataliia gavkalova, yuliia lola, svitlana prokopovych, oleksandr akimov, vainius smalskys, and liudmyla akimova virtual economics, vol. 5, no. 1, 2022 68 contribution to lowering power sector emissions relative to 2019 (global energy review, 2020). in 2021, 17.6% of electricity in the world was used from renewable resources (world health organization, 2021). increasing of renewable capacity of oil-exporting countries is also actively involved. thus, the goal of the uae energy strategy by 2050 is to achieve at least 44% of "clean" energy in the energy balance. economic growth achievement in china’s economy was primarily fuelled by fossil fuels  particularly coal, the main source for the emission of a variety of air pollutants and carbon dioxide (co2). in 2020, china was responsible for 31.8% of electricity generation and 32.4% of global co2 emission (our world in data, 2021). nowadays china is searching for the new industrial and environmental policy direction to reach social sustainability, economic development and environmental prevention (song et al., 2020). air quality is closely related to the economic levels of countries. it was used the bivariate local indicator of spatial association (lisa) statistic to reveal the spatial heterogeneous relationship between local gdp per capita and nearby air quality, especially fine particulate matter (pm2.5) among 256 cities in china in 2015. it was found that there is a group of cities with a significant number of coal-fired power plants, iron and steel plants. it has higher technology level and lower emission intensities (lu et al., 2020). as the pandemic leads to a decline around the world, greenhouse gas emission is expected to decline. but the annual increases in gdp per capita and in emissions were not wellcorrelated (sueyoshi & yuan, 2015). 2. literature review the results of the study (andrée et al., 2019) suggest that pollution level peak in middle income countries, and while pollution levels can generally be expected to decline in these countries as their income level grows, pollution level will still remain dangerously high in this group. the estimation results (kukla-gryz, 2009) suggest that the impact of economic growth on air pollution intensity varies between the developing and developed countries. in the developing countries, this impact occurs through the change of the structure of economic activity, while in the developed countries this impact is mainly direct and occurs through the sum of the scale and income effect. the positive sign of this impact suggests the dominance of the scale effect over the income one. renewable energy has a negative and statistically significant impact on co2 emissions in the short run. however, the depletion rate of non-renewable energy and gdp revealed a positive and statistically substantial effect on co2 emissions in both the short and the long run that is showed by the studies conducted in thailand and based on the time series data collected from 1980 to 2018 (abbasi et al., 2021). https://www.sciencedirect.com/science/article/abs/pii/s0921344920301993#! https://www.sciencedirect.com/science/article/abs/pii/s0921800908004321#! www.virtual-economics.eu issn 2657-4047 (online) nataliia gavkalova, yuliia lola, svitlana prokopovych, oleksandr akimov, vainius smalskys, and liudmyla akimova virtual economics, vol. 5, no. 1, 2022 69 the contribution of different sectors to carbon emissions is not equal. the environmental impact of technological progress might vary across sectors. our findings reveal that environmental technologies in transport sector have a statistically insignificant positive effect on co2 emissions from the transport sector. moreover, while economic growth and energy consumption lead to more pollution, the effect of urbanization on emissions is not statistically significant. research is focused on the eu15 countries over the period between 1977 and 2015. this is expected to the transport sector for becoming a carbon-neutral economy by 2050 (alataş, 2021). the results show that the technical progress is the main reason for the reduction of co2 emissions in the historical stage, pre-peak stage and post-peak stage (grythe & lopezaparicio, 2021). there is an inverse u-shaped relation between patent generation and co2 emissions for both, more and less energy-intensive sectors, suggesting that at low levels of innovation new technologies tend to be “dirty”, but at high levels of innovation they tend to be “green”. such dependence was found in the study of 30 provinces and 32 economic sectors in china (li et al., 2021). research of oecd countries over a period of almost 150 years suggests that 1% increase in transport infrastructure is associated with an increase in co2 emissions of about 0.4%, although dependent on the long-run estimator used (churchill et al., 2021). investment in nuclear energy reduces co2 emissions in canada, the netherlands, japan, switzerland, czech republic and uk, (ii) investment in renewable energy reduces co2 emissions in belgium, canada, france, germany, sweden, the uk, the us, japan, switzerland, finland, czech republic; however, it increases co2 emissions in the netherlands and south korea, and (iii) both nuclear and renewable energy consumption reduces carbon emissions for the panel estimations. the best option to reduce co2 emissions is to aim for a mix of nuclear and renewable energy (saidi & omri, 2020). the review of the research induces the authors to formulate new hypotheses and enlarge the research sphere. hypothesis 1. renewable energy is developing more intensively in the developed countries. its development does not respond to crises. hypothesis 2. the development of renewable power generation improves the state of the environment; however, such effects are heterogeneous in different countries. 3. methods for studying the renewable power generation impact on air pollution, the methods of multivariate statistical analysis, such as the pair correlation and the cluster analysis are used. these statistical methods were implemented with the statsoft's software package “statistica”. the number of countries studied is 78. the study period is from 2000 to 2020. the www.virtual-economics.eu issn 2657-4047 (online) nataliia gavkalova, yuliia lola, svitlana prokopovych, oleksandr akimov, vainius smalskys, and liudmyla akimova virtual economics, vol. 5, no. 1, 2022 70 countries without sufficient data were excluded from the database. this study does not include african countries because the statistical data were provided by the macro-regions of the continent. to carry out the research, the global indices of air pollution and development of renewable energy were selected: carbon dioxide emissions or co2 emissions (million tons of carbon dioxide) are those stemming from the burning of fossil fuels and the manufacture of cement (our world in data, 2021). renewable power generation (terawatt-hours) is derived from natural processes that are replenished constantly (electricity and heat generated from solar, wind, ocean, hydropower, biomass, geothermal resources, and biofuels and hydrogen derived from renewable resources) (renewable energy, 2021). the analysis of dynamics of renewable energy development is offered to be carried out by the following algorithm: stage 1. determination of groups of countries homogeneous in the dynamics of renewable power generation, based on the methods of cluster analysis; stage 2. study of the dynamics of rpg in each selected group of countries. 4. results and discussion during the implementation of the first step of the algorithm, 78 countries were divided into 3, 4 and 5 clusters based on an iterative method of clustering k-means. the hierarchical clustering method (ward's method) gave a good visualization of the partition shown in figure 1. during the division of countries into 3 clusters according to the dynamics of the indicator of renewable power generation, cluster 3 includes 69 countries. the division into 4 clusters allows obtaining such a division of countries: cluster 1 – china and the usa; cluster 2 – brazil, germany, india, italy, japan, spain, the united kingdom; cluster 3 includes 17 countries – australia, belgium, canada, chile, denmark, finland, france, indonesia, mexico, the netherlands, philippines, poland, portugal, south korea, sweden, thailand, turkey; cluster 4 includes 52 remaining countries. when divided into 5 clusters, germany is allocated to a separate cluster, and the composition of all other clusters remains unchanged. therefore, in our opinion, it is expedient to carry out the research of dynamics of an indicator of rpg for four groups. figure 2 shows the average values of renewable power generation for each of these four clusters. the quality of clustering by fisher's criterion is very high (p-level = 0.0000). https://ec.europa.eu/eurostat/statistics-explained/index.php?title=glossary:fossil_fuel www.virtual-economics.eu issn 2657-4047 (online) nataliia gavkalova, yuliia lola, svitlana prokopovych, oleksandr akimov, vainius smalskys, and liudmyla akimova virtual economics, vol. 5, no. 1, 2022 71 figure 1. a tree diagram. source: developed by the authors figure 2. a plot of means for each cluster source: developed by the authors t ree di agram for 78 cases ward`s method eucl idean di stances u s c h in a g e rm a n y s p a in it a ly in d ia j a p a n u n it e d k in g d o m b ra z il p o rt u g a l p o la n d m e x ic o n e th e rl a n d s d e n m a rk t h a ila n d c h ile b e lg iu m p h ili p p in e s f in la n d in d o n e s ia n e w z e a la n d a u s tr ia f ra n c e c a n a d a s w e d e n s o u th k o re a t u rk e y a u s tr a lia t a iw a n ic e la n d ir e la n d g re e c e r o m a n ia c z e c h r e p u b lic u n it e d a ra b e m ir a te s is ra e l k a z a k h s ta n r u s s ia n f e d e ra ti o n l it h u a n ia c ro a ti a m a la y s ia p e ru e s to n ia s lo v a k ia c o lo m b ia s w it z e rl a n d h u n g a ry p a k is ta n m o ro c c o b u lg a ri a v ie tn a m u k ra in e n o rw a y e g y p t a rg e n ti n a u z b e k is ta n v e n e z u e la t u rk m e n is ta n t ri n id a d & t o b a g o o m a n k u w a it c h in a h o n g k o n g s a r ir a q b e la ru s b a n g la d e s h q a ta r n o rt h m a c e d o n ia a z e rb a ija n s in g a p o re l a tv ia s a u d i a ra b ia s lo v e n ia e c u a d o r s ri l a n k a l u x e m b o u rg ir a n c y p ru s a lg e ri a 0 20 40 60 80 100 120 (d lin k /d m a x )* 1 0 0 plot of means for each cluster cluster 1 cluster 2 cluster 3 cluster 4 rpg_2001 rpg_2003 rpg_2005 rpg_2007 rpg_2009 rpg_2011 rpg_2013 rpg_2015 rpg_2017 rpg_2019 variables -400 -300 -200 -100 0 100 200 300 400 500 600 700 800 900 www.virtual-economics.eu issn 2657-4047 (online) nataliia gavkalova, yuliia lola, svitlana prokopovych, oleksandr akimov, vainius smalskys, and liudmyla akimova virtual economics, vol. 5, no. 1, 2022 72 so, the countries from the second cluster – china and the usa – are the countries with the highest growth rate of rpg. (figure 3) figure 3. dynamics of rpg for the countries of the first cluster source: developed by the authors as can be seen on figure 3, the crisis has slowed down the dynamics of rpg in china. however, the growth rate of the indicator remains high. moreover, in the usa, after the crisis, the development of rpg accelerated compared to the previous year 2020. thus, for china, the basic growth rate (based on 2000) in 2020 was 𝜏20 = 𝑅𝑃𝐺2020 𝑅𝑃𝐺2000 = 1216 (1) for the usa: 𝜏20 = 𝑅𝑃𝐺2020 𝑅𝑃𝐺2000 = 777.3 (2) these growth rates differ significantly from each other, however, their difference from the values for other countries is even more significant. in this case, the dynamics of change in the rpg for china can be described by a polynomial of the third degree (r2 = 0.9976), reflecting the change in growth acceleration, and for the united states – a polynomial of the second degree (r2=0.9984), which reflects the uniformly accelerated process. the reduction of air pollution can be achieved through the coordinated measures by the states. for example, comprehensive control actions with multi-party coordination on provincial and even national levels have been implemented in china to minimize the adverse ecological and social impacts of pollution. since 2013, combating pm2.5 pollution has marked a strategic transfer from emission control toward air quality management in china (kuklagryz, 2009). let us consider the dynamics of the rpg indicator in the first cluster (figure 4). 0,000 200,000 400,000 600,000 800,000 1000,000 1200,000 1400,000 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 china us www.virtual-economics.eu issn 2657-4047 (online) nataliia gavkalova, yuliia lola, svitlana prokopovych, oleksandr akimov, vainius smalskys, and liudmyla akimova virtual economics, vol. 5, no. 1, 2022 73 figure 4. dynamics of rpg for the third cluster source: developed by the authors the fastest growing renewables are in germany. that is why this country was singled out into a separate cluster when it was divided into 5 clusters. rpg dynamics for germany is best approximated by a third-degree polynomial (r2=0.9963). base growth rate for this country is: 𝜏20 = 𝑅𝑃𝐺2020 𝑅𝑃𝐺2000 = 327.4 (3) the base growth rates for the rest of the countries in this cluster are in the range of 99.1 (italy) to 213.0 (india). so, this cluster includes countries with high rpg growth rates. let us consider the dynamics of the rpg indicator in the third cluster. the fastest growing is in france. the dynamics of changes in the rpg indicator in this country is fairly well described by a polynomial of the second degree (r2 = 0.9966). the base growth rate is 90.6. basic growth rates for the rest of the countries in this cluster are in the range from 20.3 (philippines) to 70.2 (australia, turkey). thus, this cluster includes countries with an average rpg growth rate. cluster 4 includes countries with low rpg growth rates. the highest value of the basic growth rate is in greece (20.5), and the lowest (0.2 0.3) is in kuwait, oman, qatar, azerbaijan. thus, hypothesis 1 was not confirmed, since there are developing countries with high growth rates of renewable energy (china, brazil, india). developed and developing countries have reacted differently to the crisis triggered by covid-19. to test hypothesis 2 for each of 78 countries, regression equations of the form: 𝐶𝐷𝑒𝑡 = 𝑎1𝑅𝑃𝐺𝑡 + 𝑎0 (4) 0,000 50,000 100,000 150,000 200,000 250,000 300,000 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 germany india italy japan spain united kingdom www.virtual-economics.eu issn 2657-4047 (online) nataliia gavkalova, yuliia lola, svitlana prokopovych, oleksandr akimov, vainius smalskys, and liudmyla akimova virtual economics, vol. 5, no. 1, 2022 74 let us consider the obtained results of the regression analysis. for countries from cluster 1, the results are shown in table 1. table 1. regression results for countries from cluster 1 𝑎1 𝑎0 |𝑡𝑎1| |𝑡𝑎𝑒| r 2 r f china 5.807 6327.544 4.25 14.02 0.4876 0.698 18.08 us -2.314 5918.759 10.10 95.57 0.8431 0.918 102.09 source: developed by the authors comparing the calculated value of the student’s statistic ta1 and tae with a critical value tp (0.05;19) = 2.093 it can be concluded that the regression coefficients are statistically significant in both models. also, both models are statistically significant according to fisher's test. positive parameter value а1 for china indicates that the intense growth of renewable power generation does not lead to a reduction in carbon dioxide emissions. table 2. regression results for countries from cluster 2 𝑎1 𝑎0 |𝑡𝑎1| |𝑡𝑎𝑒| r 2 r f brazil 1.288 333.757 4.72 20.69 0.5397 0.735 22.27 germany -0.806 871.197 8.65 73.98 0.7977 0.893 74.90 india 10.565 1156.637 10.83 17.84 0.8605 0.928 117.19 italy -2.180 470.031 13.05 64.02 0.8997 0.949 170.34 japan -1.568 1292.800 5.06 73.29 0.5740 0.758 25.60 spain -1.180 367.690 4.84 28.45 0.5518 0.743 23.39 the united kingdom -1.954 582.647 21.19 108.74 0.9594 0.979 449.10 source: developed by the authors all models have statistically significant regression coefficients. positive parameter value a1 obtained for brazil and india, that is, in these countries, the increase in renewable power generation is accompanied by an increase in carbon dioxide emissions. table 3. results of regression analysis for countries from cluster 3 𝑎1 𝑎0 |𝑡𝑎1| |𝑡𝑎𝑒| r 2 r f australia 0.278 385.203 1.00 70.26 а1 а0 1.00 belgium -1.617 139.289 7.29 58.93 0.7369 0.8584 53.21 canada 0.144 550.080 0.63 85.72 0.0203 0.1424 0.39 chile 1.618 65.626 4.72 19.72 0.5402 0.7350 22.32 denmark -1.757 71.245 14.64 40.20 0.9186 0.9584 214.39 finland -2.266 84.049 5.89 17.06 0.6465 0.8041 34.75 france -1.923 388.302 14.88 101.90 0.9209 0.9597 221.32 indonesia 28.366 166.058 8.93 5.28 0.8075 0.8986 79.71 mexico 0.827 416.665 0.77 24.25 0.0303 0.1742 0.59 www.virtual-economics.eu issn 2657-4047 (online) nataliia gavkalova, yuliia lola, svitlana prokopovych, oleksandr akimov, vainius smalskys, and liudmyla akimova virtual economics, vol. 5, no. 1, 2022 75 continued table 3 the netherlands -1.857 236.313 7.63 72.65 0.7541 0.8684 58.27 philippines 14.034 -69.164 8.94 3.86 0.8080 0.8989 79.96 poland -0.258 309.502 0.88 77.69 0.0394 0.1986 0.78 portugal -0.768 63.365 7.01 48.29 0.7214 0.8494 49.21 south korea 4.624 502.290 5.24 37.78 0.5908 0.7686 27.43 sweden -0.573 63.417 9.40 51.41 0.8231 0.9072 88.40 thailand 4.818 214.694 5.93 27.76 0.6489 0.8056 35.12 turkey 3.675 246.871 7.00 24.43 0.7207 0.8490 49.03 source: developed by the authors out of 52 objects of the fourth cluster, the positive value of the parameter a1 there is in 30 countries. moreover, a statistically significant positive parameter a1 is for 21 countries only. statistically significant negative parameter a1 obtained for 18 countries from 4 clusters (table 4). table 4. results of regression analysis for some countries from cluster 4 𝑎1 𝑎0 |𝑡𝑎1| |𝑡𝑎𝑒| r 2 r f austria -0.939 72.588 4.33 41.06 0.4969 0.7049 18.76 bulgaria -1.547 47.880 4.36 57.46 0.5006 0.7075 19.04 croatia -1.620 19.400 4.75 49.81 0.5427 0.7367 22.55 cyprus -2.098 8.731 3.54 51.63 0.3979 0.6308 12.56 czech republic -3.398 126.427 11.84 86.67 0.8806 0.9384 140.08 greece -3.684 110.536 14.21 63.83 0.9140 0.9561 202.04 hungary -3.111 57.170 5.26 37.15 0.5924 0.7697 27.62 ireland -1.027 46.522 6.75 54.30 0.7058 0.8401 45.57 luxembourg -2.041 11.520 2.11 34.09 0.1905 0.4365 4.47 north macedonia -8.532 8.847 7.22 76.91 0.7329 0.8561 52.15 norway -0.506 36.820 5.38 124.58 0.6034 0.7768 28.91 romania -2.487 92.029 7.36 51.49 0.7404 0.8604 54.18 slovakia -3.642 38.219 9.93 74.18 0.8383 0.9156 98.52 slovenia -4.008 15.669 3.97 41.87 0.4536 0.6735 15.77 switzerland -2.402 46.230 8.81 71.61 0.8035 0.8964 77.70 trinidad & tobago -180.060 23.476 2.57 19.86 0.2584 0.5083 6.62 ukraine -18.855 300.747 4.94 30.11 0.5619 0.7496 24.37 venezuela -3079.51 164.328 2.72 23.14 0.2797 0.5288 7.38 source: developed by the authors ukraine is in cluster 4 (with a low rate of renewable power generation), however, the resulting model is statistically significant and parameter a1 is negative. according to the renewed (second) nationally determined contribution to the paris charter on climate change (hov2), ukraine must reduce greenhouse gas emissions by 65% from the 1990 level by 2030. www.virtual-economics.eu issn 2657-4047 (online) nataliia gavkalova, yuliia lola, svitlana prokopovych, oleksandr akimov, vainius smalskys, and liudmyla akimova virtual economics, vol. 5, no. 1, 2022 76 5. conclusions thus, although due to the crisis caused by covid-19, the pace of the development of renewable power generation in most countries has declined, but remains positive. according to the trend of renewable power generation, countries can be grouped into 4 clusters: with high, significant, moderate and low rates of renewable power generation development. the level of air pollution in 84.6% of countries decreases simultaneously with the increase in renewable power generation. however, there are rare countries in which with increasing renewable power generation co2 emissions also increase (china, india, brazil, philippines, south korea, thailand, turkey), which is due to the development of the economy and energy complex in the countries. in a group of countries with moderate rates of renewable power generation the rare countries are australia, canada, mexico, poland, where there is no connection between renewable power generation and carbon dioxide emissions. some limitations of this study are due to an insufficient database. prospects for further research are related to the assessment of the impact of covid-19 pandemic on the development of renewable power generation and 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(2015). china's regional sustainability and diversified resource allocation: dea environmental assessment on economic development and air pollution. energy economics, 49, 239-256. world health organization. retrieved from: https://www.who.int/news-room/detail/02-05-2018-9out-of-10-people-worldwide-breathe-polluted-air-but-more-countries-are-taking-action (accessed on 20 august 2021) https://www.iea.org/reports/global-energy-review-2021 кwilinski alex 49 www.virtual-economics.eu issn 2657-4047 (online) mykola rohoza, vasyl perebyynis, and kseniia verhal virtual economics, vol. 2, no. 1, 2019 2019 volume 2 number 1 (january) cooperation and integration processes and models in context of development of branches of economy and territories mykola rohoza, vasyl perebyynis, and kseniia verhal abstract. the conditions of enterprise functioning in the agrarian sector have been analyzed. it has been proved that cooperation and integration are a basis for the development of the agro-industrial complex. the necessity of developing the models of forming and managing integration processes of enterprises of the agrarian sphere has been substantiated. the use of a multiagent approach to the study of agricultural servicing cooperatives has been proposed. the developed models of social and economic systems can serve as a tool for their optimization. such indicators as stability of the system, competitive reliability have been used. approaches to determining the optimal potential of the system, strategies for its management have been substantiated. based on these approaches, a model of the optimal policy for updating equipment has been determined. keywords: cooperation, integration, agro-industrial complex, multi-agent structure, social and economic systems jel classification: f15, p13, q13 author(s): mykola rohoza poltava university of economics and trade, 3, kovalya street, poltava, ukraine, 36040 e-mail: rogoza.ne@gmail.com https://orcid.org/0000-0002-5654-7385 vasyl perebyynis poltava university of economics and trade, 3, kovalya street, poltava, ukraine, 36040 e-mail: perebyynis@gmail.com https://orcid.org/0000-0002-4779-515x kseniia verhal poltava university of economics and trade, 3, kovalya street, poltava, ukraine, 36040 e-mail: vergal.ks@gmail.com https://orcid.org/0000-0001-6611-0489 citation: rohoza, m., perebyynis, v., & verhal, k. (2019). cooperation and integration processes and models in context of development of branches of economy and territories. virtual economics, 2(1), 49-63. https://doi.org/10.34021/ve.2019.02.01(3) received: september 7, 2018. revised: october 21, 2018. accepted: december 25, 2018. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://orcid.org/0000-0002-5654-7385 https://orcid.org/0000-0002-4779-515x https://orcid.org/0000-0001-6611-0489 https://doi.org/10.34021/ve.2019.02.01(3) https://creativecommons.org/licenses/by/4.0/ 50 www.virtual-economics.eu issn 2657-4047 (online) mykola rohoza, vasyl perebyynis, and kseniia verhal virtual economics, vol. 2, no. 1, 2019 1. introduction appraising the situation at the stage of prospects of ukraine for joining the association with the european union, it has to be admitted that ukraine’s economy does not fully correspond to the eu’s existing economic and technological structure, regional, branch division and the level of personnel corps. after all, the use of the potential can stimulate not only complex technological export production, but also development of industries, in particular, formation of the agro-industrial complex. obviously, this sector, as a leader of the economy, can become one of the system-makers, stimulate development of economic and social processes in the respective territories (chygryn et al., 2018; czyzewski & majchrzak, 2017; czyzewski et al., 2018; ivanov et al., 2016a; 2016b; 2016c; ivanov et al., 2017; kharazishvili et al., 2016; lyeonov et al., 2018; pająk et al., 2016; yakubovskiy et al., 2017). identification of priority sectors affords an opportunity to implement development of other supporting industries, which in turn constitutes the basis for development of territories and reaching nationwide goals. the main argument for such a model is self-organization of the economic system, since in complex systems, such a phenomenon may be in open non-linear systems which also include social and economic systems (ses). however, in this case, it is necessary to regulate emergence of stable elements constituting the structure of complex control systems. in the ses, the phenomenon of self-organization is also associated with processes of the world globalization with simultaneous integration ensuring an increase in exchange of technological innovations. at the expense of this, there is formulation of a basis for rapid dissemination of uniform international standards of manufacturing methods, necessary institutional factors in the political, economic and social spheres allowing to reduce differences in development of states and their territories. in view of the stated above, it is important to study cooperation and integration as a basis for the development of the agro-industrial complex, consider servicing agricultural cooperatives as a multi-agent structure and model social and economic systems as an instrument for their optimization. 2. literature review it is evident that the policy of economic development should be built on the processes of self-organization of the domestic market which is possible as long as there are active processes of cooperation and integration of economic objects. at the same time, the state should not only be an observer, but actively participate in monitoring, regulation and management of these processes. it has been established that unstable business environment having a high level of dynamism affects conditions and generates risks for managing economic objects associated with the need for timely response to these changes when managing them. therefore, the key is an ability to predict and implement necessary 51 www.virtual-economics.eu issn 2657-4047 (online) mykola rohoza, vasyl perebyynis, and kseniia verhal virtual economics, vol. 2, no. 1, 2019 changes that will ensure effective activities in the strategic perspective of both an economic object and the national economy as a whole. such tools can include analysis of business environment of any economic object, monitoring conditions and parameters of such changes while developing social and economic systems of territories. in this case, it is necessary to regulate the process of occurrence of stable elements in the structure of complex management systems, which will be related to the needs of consumers and changes in their behavior. this, in turn, gives grounds to consider issues related to management of cooperation and integration processes of developing economic entities, branches of the economy and territories (dinar & wolf, 1997; dźwigoł & dźwigoł-barosz, 2018; kvilinskyi et al., 2017; kwilinski, 2018; lakhno et al., 2018; lyulyov & pajak et al., 2016; shvindina, 2017; sheldon, 2017; vasylieva et al., 2018; vernay et al., 2018; wink et al., 2017). to achieve this, the modern paradigm of the domestic economy functioning was based on designing regional programs aimed at regulating development of economic sectors, concentration of material, technical, financial and other resources, scientific, technical and industrial potential of the country. herewith, the coordinating of the activities of local selfgovernment bodies, central and local executive authorities, as well as enterprises, institutions, organizations and citizens is envisaged to solve the most important problems (grishova et al., 2013). although there are programs of legislative and regulatory state support of economic development, the process of self-organization of the domestic market of territories and the nation in general remains imperfect and is characterized by a number of shortcomings. in particular, they are related to distribution of funds allocated for financial support and insufficient funding of direct support measures for the agrarian sector (as a possible systemcreating sector of the national economy). the main disadvantage lies in the fact that the provided support is disproportionate and situational, thus excuses are found for ambiguity of formulating objectives and results of the programs as well as lack of responsibility for their implementation. this is also due to unresolved issues of the regulatory and legal framework and termination of a number of state target programs, as a result of which certain areas of the state support for agriculture have ceased their existence (grishova et al., 2013). in such conditions, when the problem of providing financial resources is unsolved, the search for new forms of support for agro-industrial development becomes especially urgent. they should be aimed at forming financial stability of agricultural production. this, in turn, will create prerequisites for expanding production volume of competitive agricultural products and food security in the country. emphasizing the role of the agro-industry for development of rural areas is necessary when there is a model of the economic development based on the priorities of development of certain industries and territories through development of the agro-industrial complex as the main industry. after all, this complex of industries provides development of other branches of the economy commissioned to manufacture products for 52 www.virtual-economics.eu issn 2657-4047 (online) mykola rohoza, vasyl perebyynis, and kseniia verhal virtual economics, vol. 2, no. 1, 2019 the agro-industrial complex (machinery, fertilizers, etc.). the said provides their development and, respectively, achievement of the main nationwide goals. the situation is challenging because till the present time, there has not been set up an appropriate system of organizational and economic measures and models which would be able to ensure effective functioning of the agricultural industry. discussions about methodology of cooperation and integration strategies have been in progress, which prevents to harmonize organizational and economic components of the agrarian reform. it results in incompleteness of the scientific and theoretical substantiation of completion of the agrarian reform in the country. the issues of establishing institutions at the industry level that would be capable of solving problems of social and economic development of rural territories have not been resolved. the study is based on the hypothesis of possibility to overcome the crisis phenomena in the social and economic development of territories due to processes of cooperation and integration in the agrarian sector of the economy. this is possible provided that models of development of not only the economy but also corresponding territories are constantly being improved. the achievement of this goal has determined the need for solving problems on the basis of disclosure of methodological approaches to activities of rural servicing cooperatives. it is important to harmonize the complex of organizational and economic measures for development of agro-industrial production on the basis of integration processes and cooperation. the above mentioned motivates to elaborate methodological principles for assessing agro-economic potential and individual components as one of the grounds for development of rural areas (czyzewski & majchrzak, 2017; czyzewski et al., 2018). in support of this, it is necessary to provide the following statistics: domestic peasant households produce 97-99% of potatoes, 80% of vegetables, fruits and berries, about 80% of milk and up to 50% of meat. it should be borne in mind that these products are practically made by hand by means of a shovel and have no civilized channels of sales. it should be noted that fairly tight trends in the marketing of food products are developing worldwide. obviously, ukraine will not be able to avoid them. this means that small agricultural producers who are out of associations, do not have their own capacities of processing agricultural raw materials, storage and pre-sale preparation of agricultural commodities will not be able to ensure independently their competitiveness and sales at attractive prices. therefore, there is no other way for domestic small-scale farmers than their association (ivanov et al., 2017). it should also be borne in mind that agricultural holdings constitute a serious problem for development of unintegrated and unassociated agricultural commodity producers. in fact, they have already monopolized food markets dictating conditions on the markets for agricultural raw materials. this is due to the fact that they have no counterweight there is no cooperation, no association of producers. at the same time, agricultural holdings are not 53 www.virtual-economics.eu issn 2657-4047 (online) mykola rohoza, vasyl perebyynis, and kseniia verhal virtual economics, vol. 2, no. 1, 2019 motivated to develop social and economic processes in the territories where they operate, therefore they do not invest money in this. it applies not only to agricultural servicing cooperatives, but also to consumer and credit cooperatives. it has resulted in one of the highest poverty rates on the continent, especially in rural areas, accompanied by unemployment, extinction of the ukrainian rural territories and decline of territorial communities (ivanov et al., 2017). cooperation in the rural territories has always contributed to the development of the infrastructure of the agrarian market and social sphere, and it is a complex social and economic problem for management. problems of creating effective conditions, models and methods for the development of agricultural servicing cooperatives as an integral part of the agro-industrial complex of the state are caused by the following: lack of trained personnel, information and educational resources to form organization of the cooperatives themselves, lack of a legal form of regular financial support for cooperation development, indefiniteness of nonprofit character of agricultural servicing cooperatives, misunderstanding and disinclination of agricultural entities and rural communities to cooperate, underestimating the essence and benefits of the cooperative model of agrarian entrepreneurship (vernay et al., 2018; wink, 2017). 3. methodology to develop the models for formation and management of integration processes, which can be attributed to innovative ones, goals of the subject (a cooperative) must be divided into several directions, which are both external and internal. the external type of tasks of the analyzed management object (a cooperative) should include the following: those connected with information security and decrease in uncertainty level, formation of working capital and renewal of fixed assets, support of the national regional producer, adoption of amendments to the tax code, identification of the world trends and, on this basis, improvement of management of the agrarian sector of ukraine's economy, in particular, improvement of the state support for development of rural territories and the agrarian sector in general, etc. in other words, creation of a system for effective study, analysis and use of information resources is one of the conditions for successful operation of an economic entity (a cooperative) under conditions of uncertainty in the competitive environment; it is a prerequisite for adoption and assessment of decisions on determination of a strategy for the development of servicing cooperation (ivanov et al., 2017). this provides with an opportunity to establish a general methodological framework for the program of development of the ukrainian rural territories on the principles of combining organizational and economic factors of development of the agro-industrial sphere. the reason for such optimism is the imf's assessment of the fact that one dollar invested in the agriculture in ukraine yields a return of ten times higher than in europe. 54 www.virtual-economics.eu issn 2657-4047 (online) mykola rohoza, vasyl perebyynis, and kseniia verhal virtual economics, vol. 2, no. 1, 2019 the internal problem of the cooperation development is recognizing the need for taking into account the potential and peculiarities of forming cooperation and integration processes, forming an effective integrated structure of horizontal or vertical orientation, its influence on the activities and the development of the enterprises belonging to rural servicing cooperatives. in the context of globalization influences, such processes have a positive impact not only on the state, but also on any territory and object. vertical integration is defined as extending activities and/or controlling an economic object (a cooperative) along the technological-distribution-sales chain: a) at the preliminary stage – till there is primary production; b) at the next stage before commodities are sold to the end user. its purpose is to replace market transactions with other forms of contacts (internal operations and processes, long-term contracts, etc.). a vertically integrated structure model in the simplest form is a two-tier hierarchical structure consisting of n functionally dependent subsystems and pm business processes where the results of the previous parts of the hierarchy are an input. in this case, all subsystems have the right to make decisions on organization of relevant business processes within the limits defined by the management system. under this condition, the hierarchical location of the subsystems (a multi-strand structure) is determined by the fact that some of the processes are under the influence or managed (partially/completely) by the management system. the following advantages of the vertical integration have been identified (ivanov et al., 2017): decreasing the final product price due to elimination of a traditional distribution network, increasing competitiveness of enterprises, reducing transaction costs, synergy effect of joint activities, reducing prime cost of the final product, forming vertically integrated structures. this presents an important stimulus when forming agricultural servicing cooperatives, improving relations between agricultural commodity producers, enhancing peasants’ well-being. the main features of management of agricultural cooperatives are defined by the laws of ukraine "on cooperation" and "on agricultural cooperation". their main content is as follows: a cooperative is managed on the basis of self-government, publicity, participation of its members in solving issues of the cooperative. governing bodies of a servicing cooperative are a general meeting and a board. when modeling, it is necessary to take into account a possibility of participation of each association member in management. in this case, a structure of an agricultural servicing cooperative as a multi-agent system can be shown as follows (fig. 1). in this case (fig. 1), an integrated structure is represented by a graph consisting of n+1 vertices. each of them defines a type of an agent involved in the cooperation. the vertices в01 and в02 are, respectively, managing bodies (functions of which are executed by a general meeting and a board of a cooperative). it should be noted that the members of an 55 www.virtual-economics.eu issn 2657-4047 (online) mykola rohoza, vasyl perebyynis, and kseniia verhal virtual economics, vol. 2, no. 1, 2019 agricultural servicing cooperative have the right to vote and participate in economic activities of the cooperative. therefore, between each agent bi and other agents constituting a cooperative, there is interaction created when the members of a cooperative are rendered services provided by its charter. since a general meeting of the cooperative members is the supreme governing body of the cooperative, the following can be written (1): : ⋃ . (1) b01 b02 bi bi+1 bn b1 bi-1 b2 figure 1. a servicing cooperative as a multi-agent system source: formed by the authors. in this case, each agent bi has the freedom to make managerial decisions within a defined joint strategy and has a controlling influence on the strategy formation. it should be taken into consideration that a board headed by a chairman is the executive body of a cooperative, and there are restrictions on the number of board members depending on the number of the cooperative members. then, you can specify the following (2): : ⋃ . (2) let us consider features of membership in a servicing cooperative. according to the legislation in force, cooperatives are non-profit organizations created to meet economic, social and other needs of cooperative members. we introduce the function f(x) as a function of satisfying an agent’s needs. according to studies, an agent’s need will be considered a 56 www.virtual-economics.eu issn 2657-4047 (online) mykola rohoza, vasyl perebyynis, and kseniia verhal virtual economics, vol. 2, no. 1, 2019 desire to move from one current state to another or a desire to maintain the current state expressed in an agent's application to meet his needs. so, (3): ⋃ * ( ) ( ) + (3) where ( ) is a function of satisfaction of an agent's needs at the expense of his own resources; ( ) is a function of satisfaction of an agent's needs due to membership in a cooperative; a is an external agent. 4. results since an integrated system is a social and economic system (ses) and simultaneously is a subject and object of economic relations, it is necessary to understand the nature of reproductive and transformational processes that lead to the formation of a new structure of relations in the market-led economy. in such case, destabilizing and favorable factors for functioning of entity mechanisms should be taken into account . a list of the factors is rather general and does not reflect fullness of the economic environment. therefore, a more detailed decomposition of various factors of such an environment of the ses as a subject of management (butyrkin, 2003) is required. to justify methodological foundations in the management mechanisms, it is necessary to consider the nature of interaction of a business entity with the external environment, components of which also have their own specifics. when modeling organizational structures, it is expedient to use a system quality indicator. it should be understood as totality of objectively existing characteristics (indicators) relating to the ability of the system to perform its function. in this case, quality indicators can include stability of the system, i.e. its ability to perform its functions within the specified parameters under the influence of external and internal stimuli (first of all, structural changes). the result of its functioning is directly related to the achievement of the system goals. this indicator is directly related to the functioning or movement of the system to change the final state of the business-system in a given strategic period (development) (4): bsbsv bsbs ztztzr  )()( 0 . (4) the result of functioning of the business system is an absolute indicator demonstrating how much the state of the system at the moment differs from the state of the system in the past. a volume of commodities manufactured for a certain period, gross expenditures, net profit, etc. may be the indicators of the result of system activities. 57 www.virtual-economics.eu issn 2657-4047 (online) mykola rohoza, vasyl perebyynis, and kseniia verhal virtual economics, vol. 2, no. 1, 2019 naturally, to analyze alternatives of influence on the system activities, it is necessary to develop an effective method for the analysis of production and economic activities. efficiency should be the main static characteristic of such a method. this allows us to assess the quality of the functioning of the system/entity and, on its basis, to make managerial decisions. the system analysis methods (hierarchy model) have been used for modeling the relations between the ses and external subjects (tax administration, government authorities, financial and banking system). herewith, their dependence on economic, political, social, legal conditions has been taken into account. the external subjects’ objectives were the criteria used in modeling. therefore, models for adaptation of national economic development in the context of a model of the global development are needed. given the peculiarities of ukraine's economic development, an analysis of impact of the environment on the results of activities of the ses can be provided by assessing the potential of the ses. herewith, it should be borne in mind that mathematical models may prove to be complicated and their solving may prove to be excessively lengthy. therefore, in order to obtain a result, it is necessary to use so-called heuristic methods based on intuitive and empirical rules that allow a researcher to improve already-existing solving. competitive reliability of any system depends on its ability to form, use and evaluate the available potential of all its elements in conditions where external and internal disturbances arise (which must be attributed to the nature of devastating effects). it is possible to establish comp etitive reliability of the ses by means of determining the difference of potential states before and after the effect of disturbing influences on the system or by determining the difference in assessment of the potential use efficiency (5):    m i i kn tn k j i m i k t k j xfxfz 1 0 11 0 00 1 )()( (5) where k is a set of potential states of the components of the ses; m is potential components of the ses; 0 00 k t f )( i x , )(0 i kn tn xf are, respectively, the optimal potential of a separate component of the ses at the beginning and at the end of the forecast period; xx  ( х is a set of admissible potential components of the ses). the need to determine the optimal potential is relevant to ensuring the model's efficiency in assessing the potential of each component of the ses. this is the potential of components of the ses, i.e. х, that (6): )(*)( 00 xfxf kk  for all xx  . (6) 58 www.virtual-economics.eu issn 2657-4047 (online) mykola rohoza, vasyl perebyynis, and kseniia verhal virtual economics, vol. 2, no. 1, 2019 consequently, since the assessment of the potential use efficiency is an estimate that matches each potential х with a real number, i.e. it is a function of the variable х. in this case, a criterion of efficiency is a basis for determining the assessment. if values of у 0 factors that are not controlled are known, we have the criterion of efficiency )(),( 0 xfyxfz  , which is a function of only х and can obviously serve as an efficiency assessment . the model provides efficiency assessment in several ways, depending on the availability and the type of the distribution law of a quantity of random or uncertain impact factors. it is known that if an indefinite ( or random) factor is a quantity with a known distribution law, mathematical expectation of a criterion of efficiency is used as an efficiency assessment (7):    k i ii yxfxfz 1 0 ),()(  (7) where iy is a random factor that takes k values with i probability. having determined the assessment of the ses potential, we have an opportunity to establish its stability. its stability is to be determined through reliability. functioning of all system elements depends on its reliability. in relation to the potential of the ses components, this means a loss/decrease in not only certain times in specific time periods, but also a loss/decrease in its overall potential. in the context of competitive reliability of the ses, in case of their quantitative and qualitative accumulation, such violations lead to a failure of using the potentials of its components. it also means a decrease in the overall potentials. let us use the definition of reliability suggested:    m i i p 1 1 (8) which depends on the total weight of violations of all elements (components) of the system (i = 1, 2, …m):  ijijip  (9) where i j is a number of violations of a j type in i element of the ses potential which leads to a decrease in the potential of these elements; ij  is a numerical value of a significant factor (assessment) of j violation in ith element of the ses. 59 www.virtual-economics.eu issn 2657-4047 (online) mykola rohoza, vasyl perebyynis, and kseniia verhal virtual economics, vol. 2, no. 1, 2019 this allows to determine reliability of the system. we measure its efficiency in this way:    k i ii yxfxfz 1 0 ),()(  (  ijij1 ). (10) when examining the ses, destructive internal influences should be taken into account. let us note that this estimate is applied to the process (potential use) which is repeated many times. in rare cases, it does not mean anything. if for a random у factor, only the area of its possible values (variations interval) is known, in this case, it is possible to use so-called guaranteed efficiency assessment (11): .),(minmax*)( * yxfxfz yyxx гг   (11) this is also evident in many of the tasks of modeling potential use risk. when a system is viewed as a “black box”, an internal structure of which is unknown, it is necessary to observe only inputs and outputs of the system (butyrkin, 2003). let us use the methodological approaches suggested in (ivanov et al., 2017) to determine the parameters and state of potential of such an integrated structure as the ses. we assume that the physical system s is in the state 00 ss  , where 0s is a set of initial states and is controlled by influence of the parameters of the potential. it should be noted that under the influence of some u potential management, the system grades from the initial state 0s (the state in which the potential of the enterprise is characterized by the existing indicators of personnel, production capacities, financial possibilities, etc.) into a state kk ss  where ks is a set of final states (these are the indicators of the potential which are necessary to solve the tasks). in this case, quality of each defined option to manage u potential is characterized by the corresponding value of the w(u) function. the task is to find such u* from a set of possible management options where the w(u) function takes the extreme (minimum or maximum) value of w(u*). in this case, s is called a dynamic system and tasks that are put in this model are called dynamic programming tasks. the state of the dynamic system s on a kth step (k= n,1 ) can be determined by a set of numbers (12): ),,...,,( )()( 2 )( 1 )( k n kkk xxxx  (12) 60 www.virtual-economics.eu issn 2657-4047 (online) mykola rohoza, vasyl perebyynis, and kseniia verhal virtual economics, vol. 2, no. 1, 2019 obtained as a result of implementation of uk potential management which ensures grading the system s from the state x (k-1) into the state of x (k) . herewith, we assume that the state x (k) , into which the system s graded, depends on the particular state x (k-1) and chosen uk management and does not depend in what way the system s graded into the state x (k-1) . this condition is called the condition of lack of aftereffect. therefore, if a certain gain wk(x (k-1) ,uk) which depends on the state x (k-1) and chosen, uk management is provided as a result of implementation of a kth step, the total state of the potential for n steps will be determined by the formula (13):      n k k k k uxwf 1 )1( , (13) this condition is called the condition of additivity of the objective function. whatever the state of the system before the next step is, you should choose a management option in this step so that the gain at this step plus the optimal gain at all subsequent steps is maximal. from this principle, it follows that the overall optimal potential management strategy u* that equals  **2 * 1 ,...,,* n uuuu  is determined if the optimal management strategy is at the nth step (wn * ). then, it is done on the last two steps (un-1 * ,un * ), next on the last three steps (un-2 * ,un-1 * ,un * ) and so on till the first step. let us suppose that it is necessary to determine the optimum replacement policy for some equipment for n years. at the beginning of each year, a decision is made either to keep the equipment for its further exploitation, or to replace it with the new one. we denote the operating surplus of t-year equipment during a year and expenses for its maintenance for the same period by  tr and  tu . let  ts be the residual value of the sold equipment that operated for t years. price of new equipment remains unchanged and is equal to p. we introduce the function )(tf n , which is an amount of total income for the last n years of the planning period, provided that at the beginning of this period there is equipment of t age. let us take into account that the optimal replacement policy is chosen. replacing an existing car of t age with a new one makes sense when the revenue from a new car is bigger than the old one. if )( 1 tf is the profit at the last stage, the ratios (14) and (15) express criteria for choosing a solution : 61 www.virtual-economics.eu issn 2657-4047 (online) mykola rohoza, vasyl perebyynis, and kseniia verhal virtual economics, vol. 2, no. 1, 2019       replaceurpts keeptutr tf ),0()0()( ),()( max)( 1 (14)        replacefurpts keeptftutr tf n n n ,)0()0()( ),1()()( max)( )1(1 (15) the formulas (14) and (15) establish a connection between the expressions nt and 1nt and are recurring relations that allow to solve the problem with the dynamic programming method. 5. conclusions the mentioned approaches to modeling and their further analysis in the process of organization of a cooperative and integrated structures on the basis of enterprises of rural servicing cooperation provide an opportunity to substantiate the strategies of their development and increase efficiency of their functioning taking into account trends, features, directions of improving management of economic subjects of the agrarian sector of the ukrainian economy, to suggest ways of improving and creating a database to make effective management decisions. herewith, the main goal of forming a modern level of an economic object is also provided. having methodological tools for effective activities in the domestic market, it will be able to provide the external market with competitive commodities. this, in turn, creates necessary opportunities for growth of the potential of the economy of territories. in this case, there is no narrowing of market relations but formation of 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(2017). economy modernization of industrial regions (based on the example of ukraine). in p. głowski, & o. kvilinskyi (eds.), economic transformation in ukraine: comparative analysis and european experience (pp. 12-29). warsaw: consilium sp. z o.o. https://doi.org/10.29202/nvngu/2018-1/4 http://dx.doi.org/10.21511/ppm.15(3).2017.04 https://doi.org/10.1017/aae.2016.29 http://www.mnje.com/sites/mnje.com/files/159-170_vasylieva_et_a.pdf https://doi.org/10.1080/08985626.2018.1501611 https://doi.org/10.1093/cjres/rsx008 кwilinski alex 77 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 2020 volume 3 number 2 (april) new policies, measures and responsibilities of polluting industries: a case study of the egyptian industries eid el-ragehy and doaa salman abstract. the paper provides a new approach to estimating the damage resulting from industrial wastewater. the measurement method proposed can be applied for all industries to determine the damage resulting from wastewater and to compare it with the environmental load of each pollutant. these measures help identify the environmental responsibility of a particular firm for a specific period and a level of pollution. furthermore, they are to determine clearly the main industries that are accountable for the highest environmental damage according to the water pollutant loads. during march 2019, the proposed approach was tested on abu qir industries that are located in egypt. results urge for applying the proposed measures to wastewater pollutions, as well as for updating the current legislation to stimulate a management system’s efficiency. results showed that phenol accounts for the highest percentage in paper production, followed by oily pollutant in fertilizer production, cod and bod in paper production and tss in fertilizer manufacturing. determining accurately the environmental responsibility for damages accelerates the spread of the clean industries. keywords: waste water, environment responsibility, environmental damages jel classification: q53, m14, d81 authors: eid el – ragehy egyptian ministry of environment, cairo, egypt e-mail: eid_eeaa@yahoo.com https://orcid.org/0000-0001-5050-6104 doaa salman october university for modern sciences and arts, cairo, egypt e-mail: dsalman@msa.eun.eg https://orcid.org/0000-0001-8276-0959 citation: el-ragehy, e. & salman, d. (2020). new policies, measures and responsibilities of polluting industries: a case study of the egyptian industries. virtual economics, 3(2), 77-94. https://doi.org/10.34021/ve.2020.03.02(5) received: february 16, 2020. revised: march 26, 2020. accepted: april 15, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://doi.org/10.34021/ve.2020.03.02(5) https://creativecommons.org/licenses/by/4.0/ 78 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 1. introduction industrial activities that pollute the environment vary, and it is important to recognize the location of these sources and estimate the amount and quality of pollutants resulting from them to determine whether they comply with legal limitations or not. by means of this data, there can be defined the enterprise’s responsibility for environmental pollution in general, knowing all enterprises within a specific geographical area or that of the industrial sector to which they belong (petroleum petrochemicals yarn and weaving dyeing food). environmental pollution includes the ecosystem pollution (water air soil) with various sources of pollution (agricultural industrial transport). environmental institutions are concerned with preventing or reducing pollution sources with many plans and investments not only to protect the environment from pollution but also to reach natural resources integrated and ideal management. determining responsibility for pollution is very important in environmental decision-making as it prioritizes inspection and monitoring activity, as well as environmental financing and investment, in addition to determining the extent of the impact on the environment and public health. inspection and review of the environment and monitoring, regardless of determining responsibility, seriousness, and importance, fail to achieve environmental objectives, which depend mainly on preventing and reducing pollution loads and managing natural resources. defining the pollution loads of a facility is an important indicator in determining the legal and technical path that must be followed, as well as in estimating the value of environmental compensation and the value of environmental degradation and estimating the cost of treatment in the long run, especially, since most environmental institutions depend only on the amount of water produced by the industrial facility only, not paying attention to the quality of that water and the extent of its pollution. determining environmental loads in a country contributes to defining the importance of expanding industrial activities in this sector or region so that it does not reach the unsafe level of pollution that is difficult to treat and which may turn into dangerous pollution; as well as the importance of that industry to the national income, the number of employees, and various economic, social, and, sometimes, political factors. this paper focuses on the wastewater that results from various industrial activities. as its quality varies according to the industry, as well as there are different amounts and methods of treatment, we will assume there is a certain amount in a certain watercourse range which must meet legal limits and standards. then, it is possible through the proposed model to define the environmental responsibility for each of these industries and, thus, contribute to the quality of an environmental decision. in the following section we will focus on the methodology adopted and the sample applied for testing and the measure proposed. finally, the recommendation is provided. numerous egyptian industries require new evaluation of the wastewater quality and a new shift to the use of more efficient and cleaner technologies, which make businesses consume the least amount of energy and resources and produce the 79 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 minimum amount of gases and pollutants, as well as use certain criteria that limit the flow of waste and make it recyclable. these technological transformations or developments are called shifting to environmental efficiency. in light of this growing necessity, institutions must adopt effective systems to improve the effectiveness and efficiency of their environmental management systems. then, environmental responsibility is an effective tool through which these measures can be undertaken. although the notion of sustainable development is related to the macroeconomics analysis, environmental responsibility has a direct relationship to the micro economy. there is an integrative relationship between the two concepts, and this will be the focus of our research that attempts to answer the following basic question: what is the actual state of affairs regarding environmental responsibility of the industrial companies in egypt? this question entail very important subquestions: in what way is environmental responsibility implemented by the organization and what is its role in supporting environmental management systems? to answer these questions, the research paper builds on the following three pillars: environmental responsibility; environmental problems and the nature of economic practices; the environmental strategy of the industrial company. 2. the literature review researchers have become interested in studying environmental responsibility of late. most western and arab studies of this topic focus on the relationship between environmental variables and industrial activities. among the most important of these studies are that by scovill (1995), who examines the problems of assessing environmental liabilities, in addition to the accounting disclosure of some companies’ environmental performance costs. linowes (1972) shows information about the impact of the unit's activities on the society, with the applied model related to one of the costing areas that affect workers, environment and production. besides, estes (1974) emphasises the costs aspect resulting from the negative externality. this researcher focuses on the concepts of trading as related to the society wellbeing and the harm that a unit causes to the society. the industrial enterprise’s environmental responsibility aims mainly at raising awareness and preventing external impacts (externalities) of production that harm the natural wealth, which is formed of institutional measures preventing or limiting certain activities, methods, or products that pose a threat to the balance of the natural environment. several theoretical approaches deal with the issue of the institution’s environmental responsibility. a prominent researcher, pigou (2013) believes that the institution’s environmental responsibility stands out in its economic form from fees, royalties and subsidies that governments impose on institutions since the collection (fees) are almost like levies (royalties) and subsidies (which are funds provided to an industrial enterprise to encourage it to adopt "clean practices"). he also considers that royalties are imposed in the field of waste collection and treatment, while fees are used to fight pollution, and they can be imposed directly on waste (the most stimulating procedure), or imposed on products derived from the use of polluting production methods, and the use of subsidies. pollution rights aim at distributing pollution resistance 80 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 efforts among different actors while allowing public authorities to maintain the maximum total of pollutant emissions, as it is divided into a fixed number of individual negotiable emissions rights, and the public authority works on these rights by selling them at a fixed price or selling them by auction or by distributing them to the concerned institutions according to their production. thus, they are allocated to every other company cleaner than those that have not yet implemented their rights to pollution, then, and in a certain area, the high degree of pollution by an institution can be compensated by a decrease in the degree of pollution by another institution by trading pollution licenses. qian et al. (2019), consider the importance of the type of the embodied emissions which is an appropriate approach to determining the environmental responsibility. it can be the production-based approach that places full responsibility on producers who benefit from the production of goods (e.g., the kyoto protocol). while the consumption-based approach lays full responsibility on the final consumers who benefit from the consumption of goods. the third approach can be based on the earners of income from the production of goods (liang et al., 2017; marques et al., 2012). the role of the public authority is to determine a comprehensive collective standard (maximum emission of pollutants) that must be met, but the burden is distributed among the various parties concerned through the market in which pollution rights are traded. the rules for the primary distribution of pollution rights are the prerogative of the public authority, and in this framework, the value provided for obtaining “pollution permits” aims to modify the environmental behaviour of an industrial enterprise not only by punishing the polluting enterprise, but also giving preference to those institutions that incorporate environmental considerations into their production and marketing policies, and, as a result, competition rules are changed in favour of enterprises that respect the environment and that get a preferential advantage over polluting enterprises. 3. the methods this paper is informed by the basic laboratory measurements that can be made for all industries, as well as by knowing the amount of water resulting from them accurately, and then an environmental load of each pollutant can be determined separately for all industries. but what applies to a single indicator can be generalized to all laboratory indicators, including the environmental responsibility of each facility in the same industrial sector. to define the environmental responsibility, it can be assumed that many scenarios may occur in the event of commitment of one or some of these facilities (at the same time or in succession) and, thus, a future scenario is produced for a specific period for the level of pollution in this region or this sector. by means of the proposed model, it is possible to determine the environmental efficiency of these facilities, which do not exceed the legal limits, and to learn how close they are to these limits. we assume that there are many industrial enterprises (both violating and conforming to the legal limits) and we assume that the legal limits for a laboratory index are 10 mg/litre 81 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 and the amount of exchange is different for each facility as well as different concentrations, and the environmental load for this indicator is defined by the following: first: determining an environmental load of this laboratory indicator through knowing the concentration as well as the amount of water that is spent annually, taking into account the number of working days, the number of shift hours and the maintenance periods. cvl  (1) where c is the concentration of the laboratory index; v is the amount of water annually; l is the actual environmental load for this indicator. second: knowing the maximum environmental load for this laboratory indicator by knowing the maximum law and the amount of water that is spent annually, taking into account the number of working days, the number of shift hours and the maintenance periods. lawlaw cvl  (2) where lawc is the legal maximum for the laboratory indicator; v is the amount of water annually; law l is the legal maximum environmental load for this indicator. an example of this is as follows: assuming the presence of two facilities and analysing water samples in one of the indicators (the legal maximum is 10 mg / m3), it was found that one of them did not exceed the limits (7 mg / m3) and the amount of the resulting water is 12000 m3 / year and the other facility exceeded the permissible limits (12 mg / m3) and the amount of the resulting water is 5000 m3 / year. in conventional models, the environmental load for each of them is calculated as follows: the actual environmental load of the first facility is: yearmmgcvl /384000712000  (3) the actual environmental load of the second facility is: yearmmgcvl /360000125000  (4) 82 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 by comparing the environmental load of the first facility (within the legal limits) with the environmental load of the second facility (violating the legal limits), we find out that the violating facility has an environmental load that is less than the corresponding facility due to ignoring the legal environmental load for each of them, which can be calculated as follows: legal environmental load of the first facility is: yearper m mg l law 3 120000101200  (5) legal environmental load for the second facility is: yearper m mg l law 3 40000105000  (6) therefore we have proposed a new model for determining the environmental responsibility of industrial enterprises by knowing the concentration of actual laboratory indicators and the amount of water discharged annually as well as their relationship to the permitted legal environmental load, and applying this model to the previous example shows the following: lls law  (7) where s is the actual environmental difference according to the legal limits; l is the actual environmental load for this indicator; law l is the legal maximum environmental load for this indicator. from the above, the environmental responsibility can be determined for each indicator separately, and the relative environmental responsibility of the establishment can be defined as follows. the indicators are evaluated according to a set of criteria such as cost of treatment. thus, laboratory indicators can be divided into five groups and set a numerical value for them as in the following table. table 1. groups of indicators, parameters and their value groups parameters value physical indicators ph, electrical conductivity, temp, -- 1 salt indicators tds, tss, ---2 heavy metal indicators cd, ni, cu, cr, ----5 vital indicators do, cod, bod --4 cations ca, mg, na, k, ---3 anoios so4, hco3, no3, nh4, --3 industrial indicators oily & gras, phenol, pesticides, -2 biological indicators probability count for alkaline 3 source: prepared by the authors. 83 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 we define the relative weight of each indicator separately, according to the previous evaluation table. the indicators that have been measured in practice already have a total relative weight of 1 = for example. when selecting the following indicators (cod, bod = 4), (tss, tds = 2), (cd, ni 5 =) and so on, the relative weight of these indicators can be calculated as follows: table 2. waste indicators shown, their value, and weight indicator cod bod tss tds cd ni total value 4 4 2 2 5 5 22 weight 0.1818 0.1818 0.0909 0.0909 0.2272 0.2272 1 source: prepared by the authors. in the case of the initial establishment (conforming to the legal limits): annually m mg s 3 3600084000120000  (8) that is, this facility is in compliance with the legal limitations and prevents itself from spending 36,000 mg/m3 annually even though the law allows it to do so, which means it is an environmentally efficient facility that can define this efficiency as follows: 100 law l s p (7) where p is the environmental efficiency of a facility in one laboratory index. %30100 12000 36000 p (8) in the same way, it is possible to learn the extent of environmental efficiency of the conforming facilities by knowing many of its environmental indicators, and therefore it can be defined how close it is to the legal limits on all indicators. table 3. the pollution indicator and wastewater 10,000 m3 annually indicator (mg / m3) cod bod tss phenol nh4 the legal limits * 10 8 30 5 4 actual concentrations 8 5 12 4 3 llaw -the maximum legal maximum for the llaw laboratory index 100,000 80,000 30,000 50,000 40,000 the actual load of the laboratory index l 80000 50000 12,000 40000 30000 environmental difference – s 20000 30000 18,000 10000 10000 environmental efficiency – p 20% 37.5% 60% 20% 25% source: prepared by the authors. 84 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 this facility discharges 80,000 mg/m 3 annually of cod and its environmental efficiency is 20%, meaning that it prevents itself from spending 20,000 mg/m3 annually, and also disburses 50,000 mg/m3 annually from bod and its environmental efficiency is 37.5 % that is, it prevents itself from spending 30,000 mg/m3 annually, and it also spends 120,000 mg/m3 annually from tss and its environmental efficiency makes 60%, meaning that it prevents itself from spending 180,000 mg/m3 annually; it also disburses 40,000 mg/m3 annually of phenol and its environmental efficiency is 20%, that is, it prevents itself from dispensing 10,000 mg/m3 annually; it also discharges 30,000 mg/m3 annually of nh4 and its environmental efficiency is 25%. it does not prevent itself from dispensing 10,000 mg/m3 annually. through this environmental profile, it is possible to assess the environmental status of this facility and determine the environmental decision thereon (the number of inspections, audits, and environmental monitoring), see table 4 and table 5. table 4. pollutant types, their value and weighted average according to the organization’s environmental efficiency indicator (mg / m3) cod bod tss phenol nh4 total value 4 4 2 2 3 15 weighted average 0.2666 0.2666 0.133 0.133 0.2 1 environmental efficiency 20% 37.5% 60% 20% 25% weighted average 0.266 0.266 0.133 0.133 0.2 organization environmental efficiency 5.32 9.975 7.98 2.66 5 30.95 source: prepared by the authors. the government sets environmental efficiency at p – equal 30.95 % for an organization. in the case of the second enterprise (breaching the legal limits): s = 40,000 – 60,000 = (-) 20,000 mg/m3 per year, the negative sign here indicates that the legal limit is exceeded, meaning that this facility does not conform to the legal limits and it discharges an additional load from this laboratory indicator with a quantity of 20,000 mg/m3 annually, even though the law does not allow it to do so. this means that it is a facility with negative environmental efficiency (it does not have environmental efficiency) and that this efficiency can be determined as follows: %law l s p  (9) where p is the environmental efficiency of a facility in one laboratory index. 85 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 %50)( %40000 20000 p (10) in the same way, it is possible to learn the extent of the negative environmental efficiency of non-conforming enterprises by knowing many of its environmental indicators, and therefore it can be determined how close it is to the legal limits on all indicators. table 5. assuming that a facility has an annual output of 10,000 m3/year indicator (mg / m3) cod bod tss phenol nh4 the legal limits* 10 8 30 5 4 actual concentrations 12 9 32 6 5 llaw -the maximum legal maximum for the llaw laboratory index 100,000 80,000 30,000 50,000 40,000 the actual load of the laboratory index l 120,000 90,000 320,000 60,000 50,000 environmental difference – s (-) 20000 (-) 01000 (-)20000 (-) 01000 (-) 1000 environmental efficiency – p (-) 20% (-)12.5 % (-) 6.66 % (-) 20% (-) 25% source: prepared by the authors. in this case, this facility discharges 120,000 mg/m3 annually of cod and its environmental efficiency accounts for (-) 20 %, meaning that it discharges 20,000 mg/m3 annually overload, and also outputs 90,000 mg/m3 annually from bod and its environmental efficiency makes ()12.5%, meaning that it spends 10,000 mg/m3 annually of overload, and it also spends 320,000 mg/m3 annually of tss and its environmental efficiency makes (-) 6.66%, meaning that it spends 20000 mg/m3 per year (overload); the facility discharges 60,000 mg/m3 per year of phenol and its environmental efficiency makes (-) 20%, that is, it discharges 10,000 mg/m3 per year (overload); it also outputs 50,000 mg/m3 per year of nh4 and its efficiency is (-)25% i.e. 10,000 mg/m3 per year of overload. through this environmental profile, it is possible to assess the environmental status of this facility and determine the environmental decision regarding it (the number of inspections, audits, and environmental monitoring), as well as the value of the environmental investment, compensation, and the value of environmental degradation. in the case of more than one facility, the amount of overload for each indicator can be estimated. for establishments in a specific geographical area: 86 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 we assume that there are 20 industrial facilities (10 violators + 10 conforming to law) and the legal limits for a laboratory index are 10 mg/litre and the amount of exchange is different as well as there are different concentrations, the environmental efficiency of the corresponding facilities can be neutralized as well as through the previous steps. the environmental responsibility of enterprises that breach the legal limits within the same geographical area can be determined by knowing the environmental position of an indicator and estimating the quantities of overload for each of them, then calculating the total overload and the responsibility of each facility. r is the relative environmental responsibility of this indicator for the rest of the enterprises can be calculated as follows: total overload =total overloads ss; rp relative environmental responsibility for this indicator = s / ss%. table 6. proposed scenarios for relative environmental responsibility of a sample of industries. q n m k g i f e d c b a legal limits m3 10 10 10 10 10 10 10 10 10 10 10 10 actual concentration m3 22 20 20 19 18 17 16 15 14 13 12 11 100 200 300 100 500 200 400 300 400 300 200 500 the total amount of nonconforming wastewater is m3 / annually 3500 % of the total amount of nonconforming waste water 2.857 5.71 8.57 2.85 14.2 5.71 11.4 8.57 11.4 8.57 5.71 14.28 legal maximum load for laboratory indicator, llaw 1000 2000 3000 1000 5000 2000 4000 3000 4000 3000 2000 5000 the actual load of the laboratory index l 2200 4000 6000 1900 9000 3400 6400 4500 5600 3900 2400 5500 environmental difference s 1100 2000 3000 900 4000 1400 2400 1500 1600 900 400 500 total overload (total environmental difference) ss 19700 relative environmental liability of indicator 5.583 10.15 15.22 4.568 20.3 7.1 12.18 7.61 8.12 4.568 2.03 2.538 source: prepared by the authors. 87 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 it is possible to change the legal limits if one of the enterprises is located on a waterway that has special and different treatment and by following the same method from the previous table to determine responsibility for this proposed laboratory indicator, we find that the total overload (environmental difference) for all the violating enterprises concerning this indicator is an estimate of the amount of 19,700 mg/m3 per year. the total amount of nonconforming industrial wastewater can be determined by adding the annual wastewater amount to all industries, which is 3500 m3/year. in the same way, the relative environmental responsibility of many indicators can be determined based on knowing the legal limits, the amount of annual wastewater, and the actual concentration. the final view of the table will be as follows table 7. proposed scenarios for a sample of industries (a, b, c...) to determine the state of compliance with or breaching the legal limits industries oily nh4 phenol tss bod cod amount of water a 7 12 6 16 11 10 7 b 14 15 12 11 9 15 16 c 27 7 18 15 19 17 18 d 6 13 24 13 25 20 9 e 12 24 15 9 20 8 22 f 18 15 12 5 6 13 15 h 16 14 13 31 10 17 12 total overload weight (total environmental difference) 7000 8000 10000 12000 16000 15000 total amount of wastewater not-conforming, m3 3500 source: prepared by the authors. by determining the relative environmental responsibility and as shown by the previous table, it is clear that the enterprise d, although the amount of water produced by it is small and represents only 9% of the total amount of non-conforming wastewater, bears responsibility for 20% of the cod, 25% of the bod and 13% of tss, nh4 and 24% of phenol and 12% of oily; thus, it is the most important establishment on the agenda of environmental decision priorities and needs more inspection, review and environmental monitoring as well as an environmental investment. through this schedule, a future scenario and more than one scenario can be established if one or some of these facilities are committed at the same time, as follows: the first scenario: firm b commitment during a specific period: this means eliminating 15% cod overload, 9% bod overload, 11% tss overload, 12% phenol overload from an overload of nh4 at 15%, getting rid of an overload of oily at 14% and turning 16% of the amount of mismatched water into a match. 88 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 the second scenario: firm commitment c during the same specified period: this means eliminating cod overload by 17%, eliminating bod overload by 19%, eliminating tss overload by 15% and eliminating overload from phenol by 18% and eliminating 7% of nh4 overload, 27% of oily overload, and 18% of non-conforming water converted into conformity. the results of the first and second scenarios are the commitment of establishments b and c during the same period, and this determines the extent of environmental improvement in this region by eliminating the cod overload by 32% and eliminating the overload from bod by 28% and eliminating the overload of tss by 26%, get rid of overload of phenol by 30%, get rid of overload of nh4 by 19%, get rid of overload of oily by 41% and convert 34% of the amount of non-matching water into matching. by applying the above, a specific percentage of the establishment can be inferred by testing the previous example. table 8. pollutant value and weight average indicator cod bod tss phenol nh4 oily total value 4 4 2 2 3 2 17 weighted average 0.23529 0.23529 0.11764 0.11764 0.1764 0. 11764 1 source: prepared by the authors. table 9. the relative environmental liability calculated with the percentage of overloads oily % nh4 % phenol % tss % bod % cod % total a 7 12 6 16 11 10 wiu 0.11764 0.1764 0.11764 0.11764 0.23529 0.23529 0.82348 2.1168 0.70584 1.88224 2.58819 2.3529 10.4695 b 14 15 12 11 9 15 0.11764 0.1764 0.11764 0.11764 0.23529 0.23529 1.64696 2.646 1.41168 1.29404 2.11761 3.52935 12.6456 c 27 7 18 15 19 17 0.11764 0.1764 0.11764 0.11764 0.23529 0.23529 3.17628 1.2348 2.11752 1.7646 4.47051 3.99993 16.7636 d 6 13 24 13 25 20 0.11764 0.1764 0.11764 0.11764 0.23529 0.23529 0.70584 2.2932 2.82336 1.52932 5.88225 4.7058 17.9398 e 12 24 15 9 20 8 0.11764 0.1764 0.11764 0.11764 0.23529 0.23529 1.41168 4.2336 1.7646 1.05876 4.7058 1.88232 15.0568 f 18 15 12 5 6 13 0.11764 0.1764 0.11764 0.11764 0.23529 0.23529 2.11752 2.646 1.41168 0.5882 1.41174 3.05877 11.2339 h 16 14 13 31 10 17 0.11764 0.1764 0.11764 0.11764 0.23529 0.23529 1.88224 2.4696 1.52932 3.64684 2.3529 3.99993 15.8808 99.99 source: prepared by the authors. 89 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 table 10. weight average of environmental responsibility industry a b c d e f h weight average of the environmental responsibility 10.4694 12.6456 16.7636 17.9397 15.0567 11.233 15.8808 99.99 source: prepared by the authors. 4. results and discussion the wastewater from industrial activities contains various pollutant loads (residues), which have a significant potential for the industrial pollution. such pollution may inflict serious damage to human health & ecosystems, cause direct costs for households and businesses, and hence it posses a serious environmental concern. however water consumption has found to be increased by 185% and wastewater m3/kg-production by 200%, the use of other materials were found to increase rather than decrease (abdel-fatah et al., 2019). thus we applied the previously mentioned methodology in abu quir city which includes many enterprises (both breaching and conforming to the law). according to the egyptian legislation (the law on protection from pollution no. 48 of 1982), the list of regulated pollutants has been stretched and there were allowed industrial waste discharges into the nile, its tributaries, lakes, and groundwater, provided that certain quality limits are observed. the following table 11 shows the listed pollutants with their limits and weighted average. table 11. pollutant value and weight from the total indicator cod bod tss phenol oily total value 4 4 2 2 2 14 weighted average 0.2857 0.2857 0.14825 0.14825 0.14825 1 legal limit mg/l 100 60 60 0.05 10 14 source: prepared by the authors according to the egyptian legislation (the law on protection from pollution no. 48 of 1982). table 12 shows that fertilizer and paper production tops the polluting industries. phenol represents the highest percentage in paper production, followed by oily pollutant scoring 55.22 % in the fertilizer production, cod with 44.3 % in paper production, bod recorded 30.3% in paper production and tss recorded 20.1% in fertilizer industry. determining the environmental responsibility according to the extra load for a sample of industries on a list of pollutants according to their weight and relative environment responsibility is shown in the following table 13. 90 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 table 12. the percentage of the increase in the industrial facilities’ relative loads in abu qir o rg a n iz a ti o n t 1 p a p e r p ro d u ct io n t 2 f e rt il iz e r p ro d u ct io n t 3 d y e in g t 4 t e xt ile t 5 c h e m ic a l p ro d u ct io n t 6 s e w a g e s ta ti o n t 7 f o o d p ro d u ct io n t o t a l cod 44.28 43.151 5.62 4.1 2.43 0.336 0.133 100 tss 74 20.1 3.4 1.5 0.71 100 oily 19.85 55.22 8.21 10.95 5.75 100 bod 30.286 26.82 18.65 15.2 4.9 3.3 0.81 100 phenol 70.5 29.5 100 source: the egyptian ministry of environment, an unpublished report, 2019. table 13. calculation of relative environmental responsibility according to the extra load organization cod tss oily bod phenol total mamora for paper 44.28 74 19.85 30.286 70.5 wiu 0.285 0.148 0.1483 0.2857 0.1483 rwiu 12.65 10.971 2.94276 8.653 10.452 44.96 ahleia for paper 43.151 20.1 55.22 26.82 29.5 wiu 0.2857 0.1483 0.1483 0.2857 0.1483 rwiu 12.328 2.979 8.186 7.6625 4.3733 34.98 racta for paper 5.62 3.4 8.21 18.65 wiu 0.2857 0.1483 0.1483 0.2857 rwiu 1.6056 0.5041 1.2171 5.3283 8.521 misr spinning & weaving textile unit 4.1 1.5 10.95 15.2 wiu 0.2857 0.1483 0.1483 0.2857 rwiu 1.1714 0.2224 1.6233 4.3426 7.246 misr spinning & weaving sabbaghi el-beida unit 2.43 0.71 5.75 4.9 wiu 0.2857 0.1483 0.1483 0.2857 rwiu 0.6943 0.1053 0.8524 1.3999 3.005 al-maamoura sewage station 0.336 3.3 wiu 0.2857 0.2857 rwiu 0.096 0.9428 1.023 qaha food 0.133 0.81 wiu 0.2857 0.2857 rwiu 0.038 0.2314 0.265 total 100.00 source: prepared by the authors. 91 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 in the same model, the relative environmental responsibility of several different enterprises in the industrial sector can be determined in a specific geographical area, as well as the relative environmental responsibility of several establishments in the same industrial sector and different geographical places. table 14 shows that mamaora's paper is the highest environmental responsibility for damages as it accounted for around 45% followed by the ahelia for paper with 34.9% during 2019, while qaha food, al mamora sewage, misr spinning unit bear the least environmental responsibility for damages. table 14. relative environmental responsibility organization environmental responsibility total mamora for paper 44.9609 45.6684 ahleia for paper 34.9798 35.5303 racta for paper 8.52104 8.65512 misr spinning & weaving textile unit 7.2457 7.35972 misr spinning and weaving sabbaghi el-beida unit 3.0046 3.05188 al-maamoura sewage station 1.02271 1.03881 qaha food 0.26524 0.26942 total 100 101.574 source: prepared by the authors. total global water withdrawals in 2025 are projected to increase by 22 percent above 1995 withdrawals, to 4.772 km 3 , and the projected withdrawals in developing countries will increase 27 percent over the 30-year period,while developed-country withdrawals will increase by 11 percent, (alcamo et al., 1997; seckler, 1998). regions that currently pump groundwater faster than aquifers can recharge, such as the western united states, northern china, northern and western india, egypt, and west asia and north africa, will continue to do so. the cost of supplying water to domestic and industrial users will rise dramatically. better delivery and more efficient home water use will lead to some increase in the proportion of households connected to piped water. many households, however, will remain unconnected.small price increases for industrial water, improvements in pollution control regulation and enforcement, and new industrial technologies will cut industrial water use intensity. yet industrial water prices will remain relatively low and pollution regulations will often be poorly enforced. thus, significant potential gains will be lost,( rosegrant et al., 2002; rosegrant et al., 2020) the egyptian government has become increasingly aware of the challenges posed by the rapidly growing demands for freshwater, together with egypt’s fixed annual water share of the nile river. within this limitation of water resources, and the government aims to bound 92 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 pollution (rather than it become unavoidable), to minimise the sources of industrial pollution emission (salman, 2011). determining the emission inventories are valuable to recognise the magnitude of emissions from various sources, such as traffic, industry, municipal waste burning, power plants, and residential fuel burning. yet, emission inventories will have difficulties in representing how much each of these sources contributes to ambient loads of a pollutant and do not capture the significance of secondary particulates (sulphates and nitrates) and area-wide sources such as re-suspended dust, windblown dust from the desert, and long distance agricultural burning, this would contribute toward identification of cost-effective interventions for minimization of cost to achieve ambient pm2.5 reduction targets (larsen, 2019). the previous measures provide precise assessment to penalize the main industries that participate damaging water which is directly and indirectly affecting population health. directly, poor wash causes diarrheal infections and other health effects which is the main reasons to mortality especially in young children (wolf et al., 2014; pruss-ustun et al., 2014; fewtrell et al., 2007). indirectly, deprived wash contributes to poor nutritional status in young (world bank, 2008; fewtrell et al., 2007; larsen, 2007). 5. conclusions this study aimed to identify the reality of the industrial enterprises’ environmental responsibility. the authors answered the research question in terms of tracking the strategy of industrial institutions in environmental management and reached several results concerning paper and fertilizer industries. these industries are on the top of environmental responsibility for damages. a situation that requires developing environmental legislation to meet the modern needs and requirements, as there are many cases of breaching the environmental regulations. fines should be imposed on those causing the environmental damage and breaching the laws. then, a cost benefit analysis should take into consideration future damages, rather than current damages. especially, during the modern era that witnesses acceleration of industrial and technological progress that causes enormous environmental damage. the paper proposes a strategy which starts by first determining the most damaging load of pollutants according to the new proposed measure; second, by determining the new fines linked with the environmental damage caused by the pollution, third, by providing an incentive for the industry to minimize the environmental damages, which, in turn, may be very profitable for the industry. to apply the new current pollution control targets in egypt it is required that the national government should evaluate the fairness of the current allocation scheme of pollutants, reduction targets under the shared responsibility principle by comparing the share in the allocation of environmental responsibility with the pollution reduction target. 93 www.virtual-economics.eu issn 2657-4047 (online) eid el-ragehy and doaa salman virtual economics, vol. 3, no. 2, 2020 results require new monitoring of mechanisms for environmental programs and continuous evaluation and development to ensure their compatibility and effectiveness in achieving their goals. moreover, the government needs to change the criteria for imposing fines on industries that are more responsible for the damages. it is worth mentioning the need for more environmental awareness to be raised for rationalizing the water consumption and building a strong civil society responsibility. 6. acknowledgements the authors are grateful to sara el sers & nihal nashet for reviewing the paper and providing a valuable comment on developing the paper. references abdel-fatah, m. a., hafez, a. i., gaber, a. h., & kamal, m. 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(2019). environmental responsibility for sulfur dioxide emissions and associated biodiversity loss across chinese provinces. environmental pollution, 245, 898-908. rosegrant, m. w., cai, x., & cline, s. a. (2002). global water outlook to 2025: averting an impending crisis. colombo, sri lanka: international water management institute. rosegrant, m. w., cai, x., & cline, s. a. (2002). water and food to 2025. colombo, sri lanka: international water management institute. salman, d. (2011). industrial development and the trade-off to environment: measurement techniques, meanings and outcomes in the context of water poverty in egypt. international journal of green economics, 5(1), 87-108. seckler, d. w. (1998). world water demand and supply, 1990 to 2025: scenarios and issues vol. 19. colombo, sri lanka: iwmi. scoville, j. n. 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(2008). environmental health and child survival: epidemiology, economics, experiences. washington, d.c.: world bank. кwilinski alex 7 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko, valerii matskul, and tetiana osadcha virtual economics, vol. 5, no.2, 2022 2022 volume 5 number 2 the dynamics of trade relations between ukraine and romania: modeling and forecasting oleksandr melnychenko, valerii matskul, and tetiana osadcha abstract. the article examines the monthly dynamics of exports, imports and balance of trade between ukraine and romania in the period from 2005 to 2021. time series from 2015 to 2021 were used for modelling and forecasting (since the date the european union–ukraine association agreement took effect). adequate models of the dynamics series of the boxjenkins methodology were built: additive models with seasonal component arima (autoregressive integrated moving average)*arimas (or sarima) and holt-winters exponential smoothing with a dampened trend. forecasting of exports, imports and trade balance for the fourth quarter of 2021 and first quarter of 2022 were completed. the forecast results showed a small relative error compared to the actual data. thus, when forecasting the trade balance between countries using the holt-winters model, the relative prediction errors were: for october 2021 – 1.3%; for november 2021 – 2.6%; for december 2021 – 0.4%. keywords: export, import, trade balance, arima*arimas, holt-winters models, forecasting jel classification: b27; c22; c45 authors: oleksandr melnychenko gdansk university of technology, gdansk, poland e-mail: oleksandr.melnychenko@pg.edu.pl https://orcid.org/0000-0002-7707-7888 valerii matskul odesa national economic university, odesa, ukraine e-mail: valerii.matskul@gmail.com https://orcid.org/0000-0003-3897-5500 tetiana osadcha odesa mechnikov national university, odesa, ukraine e-mail: tatiana@osadcha.com https://orcid.org/0000-0003-4258-0907 citation: melnychenko, o., matskul, v., & osadcha, t. (2022). the dynamics of trade relations between ukraine and romania: modelling and forecasting. virtual economics, 5(2), 7-23. https://doi.org/10.34021/ve.2022.05.02(1) received: january 16, 2022. revised: february 20, 2022. accepted: march 9, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://www.google.com.ua/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&cad=rja&uact=8&ved=0ahukewixt47tstbrahwmjjokhynjaowqfgg_maq&url=https%3a%2f%2fen.wikipedia.org%2fwiki%2fautoregressive_integrated_moving_average&usg=afqjcneyryjpb-kc2bb3qnvcxderic3nnq&sig2=elfw1welgonlrfj2s8d2za&bvm=bv.144224172,d.bgs http://oleksandr.melnychenko@pg.edu.pl https://orcid.org/0000-0002-7707-7888 http://valerii.matskul@gmail.com https://orcid.org/0000-0003-3897-5500 http://tatiana@osadcha.com https://orcid.org/0000-0003-4258-0907 https://creativecommons.org/licenses/by/4.0/ 8 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko, valerii matskul, and tetiana osadcha virtual economics, vol. 5, no.2, 2022 1. introduction in recent years, trade relations between ukraine and romania began to develop intensively. after signing the eu–ukraine association agreement, the trade turnover between ukraine and romania increased constantly and reached almost 2.3 billion us dollars in 2021 (see figure 1). figure 1. dynamics of trade turnover (in million us dollars) between ukraine and romania for the period from 2015 to 2021 source: sssu, 2022 the main export items from ukraine to romania comprise: products of agriculture, food and metallurgical industries, fertilizers, wood and various finished products from it, while imports from romania to ukraine are dominated by the means of land transport (except for railways), aircraft, various products of the chemical (especially pharmaceutical) industry. the relevance of this study is justified by the fact that romania has become one of the largest trading partners of ukraine: according to the results of 2021, romania ranked among the top ten of more than 100 trading partners of ukraine. 2. literature review thanks to the classic work by box (1976), time series models began to be intensively applied in various fields of science and technology. their discrete version is widely used in the practice of economic research. for example, papers by dzitsaki (2016) and dzitsaki (2018) used boxjenkins-type models to simulate and forecast unemployment in greece and the united states. in the studies (ahmed, 2017; dvorakova, 2017; dritsaki, 2021; eissa, 2020; ghazo, 2021), the dynamics of the gdp in various countries was studied and predicted. the time series methodology (with diverse variations) was used to simulate and forecast inflation dynamics by the following scholas: alderite (2020), ahmed (2021), dadyan (2020), shinkarenko (2021). the arima model was used by kayikci (2020) to forecast ice evolution in the polar seas. these models were further developed (in combination with other types of time series models) in the 0 500 1000 1500 2000 2500 2015 2016 2017 2018 2019 2020 2021 http://www.virtual-economics.eu/ 9 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko, valerii matskul, and tetiana osadcha virtual economics, vol. 5, no.2, 2022 works by khashei (2012), mohamed (2011), streimikiene (2020), and wang (2014). numerous examples of the practical application of box-jenkins (and other) models for simulating and forecasting various economic processes can be found in the papers by kozak (2017), melnychenko (2020, 2021a, 2021b), osadcha et al. (2021a, 2021b). it bears noting that when forecasting using an insufficiently large number of input data, box-jenkins models turn out to be more effective than neural networks that have been popular in recent years (matskul, 2020). the latter work (considering the growing interest in international trade) complements the above sources and fills in the gaps in the study of the dynamics of trade relations between ukraine and romania. a number of recent scientific research were devoted to the development of the economic systems of the countries of eastern europe (drożdż and mrózmalik, 2017; drożdż et al. 2020a, 2020b; dźwigoł 2021a, 2021b; kharazishvili et al. 2021; miśkiewicz 2019). in addition, it is extremely necessary to mention scientific works with alternative methods of calculation of interdependence and optimal interaction, where models of economic development are presented, which, in one way or another, can contribute to the bifurcation effect in trade relations between countries. this factor should also be taken into account among others in forecasting the development of trade relations between countries. the above-mentioned publications are related to: artificial intelligence components and fuzzy regulators in entrepreneurship development (bogachov et al. 2020); improving the development technology (borodin et al. 2021); determinants and evolution methods in the context of digitalization and sustainability (drożdż et al. 2021; dzwigol 2020; dźwigol et al. 2019, 2020; hezam et al. 2023; hussainet al. 2021; ingber 2017; kharazishvili et al. 2020, 2021b; kianpour et al. 2021; kotowicz et al. 2022; kuzior et al. 2021a, 2021b; kwilinski et al. 2019a, 2019b, 2019c; 2020a, 2020b, 2020c, 2020d, 2021, 2022a, 2022b, 2022c; lyulyov et al. 2021a, 2021b; miśkiewicz 2018, 2020, 2021; miskiewicz et al. 2021, 2022; moskalenko et al. 2022a, 2022b; polcyn et al. 2022; prokopenko and miśkiewicz 2020; saługa 2020, 2021; szczepańska-woszczyna gatnar 2022; tih et al. 2016; tkachenko et al. 2019a, 2019b; trzeciak et al. 2022; vaníčková and szczepańska-woszczyna 2020; yang et al. 2021). thus, the purpose of this article is to form a model for predicting the dynamics of trade relations between ukraine and romania on the basis of import-export data. the paper consists of 5 parts: introduction, literature review, materials and methods, results and discussion, and conclusions. 3. material and methods the data for analysis are available on the website of the state statistics service of ukraine (sssu, 2022). the time for which the data will be available is the monthly export, import and trade balance (as the difference between export and import between the ukraine and the romania) starting from january 2005 and ending in december 2021, covering about 204 input data. the unit is a million of us dollars. preliminary data processing was carried out in ms excel spreadsheets. dell statistica software, version 12, was used when modelling and computing. http://www.virtual-economics.eu/ 10 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko, valerii matskul, and tetiana osadcha virtual economics, vol. 5, no.2, 2022 3.1 box-jenkins models we use the following box-jenkins additive models of time series: 𝑦𝑡 = 𝑓(𝑡) + 𝑆𝑡 + 𝑒𝑡 , (1) where 𝑦𝑡 is a level of time series at time 𝑡 = 1, 2, . ..; 𝑓(𝑡) trend is traced the long-term and evolution is deterministic in time; 𝑆𝑡 stands for seasonal fluctuations; 𝑒𝑡 denotes random fluctuations. this design allows exploring the dynamic series by eliminating its components. arima*arimas model. it bears noting that a necessary condition for this model’s application is the stationarity of the dynamic series, which is achieved by taking differences of a certain order (depending on the trend). in addition, the random component must be the so-called "white noise", i.e., satisfy the condition 𝑒𝑡 𝜖 𝑁 (0; 𝜎). in our case, the trend is linear, so the stationarity of the series was achieved by taking the differences of the first order on lag 1. and the distribution of the residuals was visually compared with the normal distribution. after identification, the arima*arimas model for time series will look like: 𝑦𝑡 = 𝑝𝑡−𝑘 𝑦𝑡−𝑘 + 𝑓(𝑡) − 𝑞𝑡−𝑘 𝑒𝑡−𝑘 + 𝑆𝑡, (2) where 𝑝𝑡−𝑘 is the auto-regression coefficients of the k-th order; 𝑞𝑡−𝑘 is a coefficient of the moving average model; 𝑒𝑡−𝑘 is an irregular component (random deviations or so-called white noise). the smoothed moving average of first order 𝑆𝑡 = 𝑐 + 𝑄𝑡−1𝑆𝑡−1 was applied to find seasonal coefficients. parameters of the model should be estimated at 95% confidence level (or 5% risk) with the condition of minimizing the mse (mean square error): 𝑀𝑆𝐸 = ∑ (𝑦𝑖−�̃�𝑖) 2 𝑛 𝑛 𝑖=1 , (3) 3.2 holt-winters model the specificity of holt-winters model is that exponential smoothing (with its own parameter) is applied to each component of the box-jenkins model. so, for the main process, the alpha parameter is used, i.e., exponential smoothing is carried out according to the formula: 𝑦𝑡 = 𝛼𝑦𝑡 + (1 − 𝛼)𝑦𝑡+1, 𝑡 = 1,2 (4) the specific feature of this smoothing is that the last levels of the time series are more significant. so, for example, the value of the smoothing parameter alpha = 0.3 means that 30% of the last levels of a series of dynamics determine 70% of the forecast. the delta parameter is used to smoothen the seasonal component, and the trend is damped by the phi parameter. it bears noting that the successful application of exponential smoothing does not require the stationarity condition of the time series. 4. results and discussions figure 2, therefore, shows the dynamics of export, import and trade balance. http://www.virtual-economics.eu/ 11 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko, valerii matskul, and tetiana osadcha virtual economics, vol. 5, no.2, 2022 figure 2. the dynamics of the export, import and trade balance between january 2005 to december 2021 sources: developed by the authors. the descriptive statictics of the data are given in table 1. table 1. descriptive characteristics of the data variable average minimum maximum standard deviation export 58.49688 16.7 117.4 20.34272 import 55.08229 5.1 152.1 29.0717 trade balance 3.414583 -93.7 47.8 31.44937 source: estimated by the authors. a visual analysis, as well as descriptive characteristics of time series, lead to a conclusion that for the period of 2005-2014, the dynamics of trade relations between the countries was noticeably unstable. therefore, the period from 2015 to the present was selected for modelling and forecasting. a steady increase in the volume of export-import operations between two countries after signing the eu-ukraine free trade zone agreement (even despite the covid-19 pandemic), as well as a stable positive trade balance between ukraine and romania were of utmost importance. modelling and forecasting of export-import dynamics using one of the box-jenkins models (1) – the additive model arima*arimas – requires the model identification. first, the trends (the standard least squares method is used to find the trend component) are built. -150 -100 -50 0 50 100 150 200 1 7 1 3 1 9 2 5 3 1 3 7 4 3 4 9 5 5 6 1 6 7 7 3 7 9 8 5 9 1 9 7 1 0 3 1 0 9 1 1 5 1 2 1 1 2 7 1 3 3 1 3 9 1 4 5 1 5 1 1 5 7 1 6 3 1 6 9 1 7 5 1 8 1 1 8 7 1 9 3 1 9 9 export import trade balance http://www.virtual-economics.eu/ 12 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko, valerii matskul, and tetiana osadcha virtual economics, vol. 5, no.2, 2022 (a) (b) figure 3. the dynamics of export (a) and import (b) from january 2015 (1) to december 2021 sources: developed by the authors analysis of correlograms in figure 4 (graphs of autocorrelation coefficients) reveals the presence of the first-order autocorrelation at lag 1, as well as the presence of annual seasonality at lag 12. graphs in figure 5 show that there are no higher-order autocorrelations. so, the model identification process is complete. to find estimates of the parameters of the arima*arimas model and forecasts, the "time series and forecasting" module of the statistics program is used. elimination of the trend is carried out by transforming the time series by taking the firstorder differences at lag 1. when smoothing both the main process and seasonal components, a simple two-point smoothing at lag 1 is used. y = 0.5228x + 22.34 r² = 0.6057 0 10 20 30 40 50 60 70 80 90 100 1 3 5 7 9 11131517192123252729313335373941434547495153555759616365676971737577798183 http://www.virtual-economics.eu/ 13 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko, valerii matskul, and tetiana osadcha virtual economics, vol. 5, no.2, 2022 (a) (b) figure 4. autocorrelation functions dynamics of export (a) and import (b) sources: developed by the authors (a) (b) figure 5. partial autocorrelation functions dynamics of export (a) and import (b) sources: developed by the authors finally, the arima*arimas models for the exp (export) and imp (import) variables have the following form: 𝑦𝑡 = 𝑝𝑡−𝑘 𝑦𝑡−𝑘 + 𝑓(𝑡) − 𝑞𝑡−1𝑒𝑡−1 + 𝑆𝑡 , (5) where 𝑦𝑡 = 1.81̅̅ ̅̅ ̅̅ is the levels of time series; 𝑓(𝑡) = 0.6965𝑡 + 46.077 for variable exp and 𝑓(𝑡) = 0.5388𝑡 + 21.963 for variable imp are a trend components; 𝑝𝑡−1 is the autoregression coefficients of the first order; 𝑞𝑡−1 is a coefficient the moving average model; 𝑒𝑡−1 is an irregular component (random deviations or so-called white noise). the smoothed moving average of first order 𝑆𝑡 = 𝑐 + 𝑄𝑡−1𝑆𝑡−1 is applied to find seasonal coefficients. http://www.virtual-economics.eu/ 14 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko, valerii matskul, and tetiana osadcha virtual economics, vol. 5, no.2, 2022 parameters of the model should be estimated at 95% confidence level (or 5% risk) with the condition of minimizing the mse (formula (3)). as a result, the following parameter estimates are obtained (table 2). table 2. parameter estimates of the model arima*arimas variable exp imp parameter estimate standard deviation estimate standard deviation 𝑝𝑡−1 0.214581 0.165761 0.567133 0.133668 𝑞𝑡−1 0.780591 0.103687 0.912063 0.056426 𝑄𝑡−1 -0.381932 0.144834 -0.641404 0.125851 source: estimated by the authors. the adequacy of the arima*arimas models is confirmed by the closeness to the normal law of the distributions of residuals (differences between the actual and modelled levels of the time series), which are presented in figure 6. (a) (b) figure 6. normality graphs of the models’ residuals distribution: (a) export, (b) import sources: developed by the authors the constructed models are applied to predict the volumes of exports and imports for the first quarter of 2021 (t = 82, 83, 84). forecasting results, as well as relative forecasting errors, which are determined by the formulas (6) are shown in table 3. 𝛿𝑡 = |𝑦𝑡 𝑝𝑟𝑒𝑑𝑖𝑐𝑡 −𝑦𝑡 𝑎𝑐𝑡𝑢𝑎𝑙| |𝑦𝑡 𝑎𝑐𝑡𝑢𝑎𝑙| ; 𝑡 = 82, 83, 84, (6) table 3. forecasts for arima*arimas model and actual data export (exp) import (imp) forecasts actual residuals forecasts actual residuals 80.49 79.9 0.007 53.64 51.5 0.039 116.62 112.4 0.036 90.31 83.6 0.074 123.28 119.5 0.031 53.27 49.5 0.070 source: estimated by the authors. http://www.virtual-economics.eu/ 15 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko, valerii matskul, and tetiana osadcha virtual economics, vol. 5, no.2, 2022 from table 3, it can be concluded that the relative prediction errors for the exp variable do not exceed 3.6%, and for the imp variable they account for 7.4%. doing research, modelling and forecasting the trade balance (variable tb = exp-imp), similarly to the above, the arima*arimas model is applied first. figure 7 shows the dynamics of the trade balance for 2015-2021: figure 7. graphs of the trade balance between ukraine and romania from january 2015 to december 2021 (with a trend) sources: developed by the authors after identifying the model and applying the "time series and forecasting" module of the statistics program, the arima*arimas model is obtained (formula (5)) for the tb (trade balance) variable. the trend looks like 𝑓(𝑡) = 0.1177𝑡 + 24.113; autocorrelation and smoothing parameters are shown in table 4. table 4. parameter estimates of the model arima*arimas variable tb parameter estimate standard deviation 𝑝𝑡−1 0.179219 0.226005 𝑞𝑡−1 0.754857 0.169613 𝑄𝑡−1 -0.305027 0.117950 source: estimated by the authors. to simulate again, the "time series and prediction" module of the statistics program is used again. before building the holt-winters model, in order to find the optimal values of the smoothing parameters, the so-called "search on the grid" is conducted. as a result, the following values were found: the smoothing parameter of the main process alpha = 0.3; smoothing seasonal component parameter delta = 0.1; trend damping parameter phi = 0.1. table 5 shows the results of modelling and forecasting. y = 0.4265x + 16.963 r² = 0.3341 0 20 40 60 80 100 120 1 3 5 7 9 11131517192123252729313335373941434547495153555759616365676971737577798183 http://www.virtual-economics.eu/ 16 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko, valerii matskul, and tetiana osadcha virtual economics, vol. 5, no.2, 2022 table 5. results of the modelling and forecasting (fragment) using the holt-winters model of exponential smoothing observation tb smoothing tb residual season component 1 7.9 16.29 -8.39 -3.67 2 1.2 12.32 -11.12 -5.07 3 8.2 16.90 -8.70 3.22 4 21.0 16.85 4.14 0.61 5 26.6 15.17 11.43 4.58 6 29.0 21.04 7.96 7.26 7 29.1 22.57 6.53 5.01 8 26.3 16.64 9.66 -2.12 9 28.7 24.53 4.16 2.34 10 22.7 24.84 -2.13 0.73 11 22.7 12.84 9.85 -11.21 12 28.3 18.58 9.72 -9.32 81 70.58 82 70.58 83 71.45 84 76.49 85 84.66 86 86.40 87 97.77 source: estimated by the authors. the adequacy of the obtained the holt-winters model of exponential smoothing by analysing the histogram of residuals and normal curve is convincing (figure 8). figure 8. graphs histogram of the residuals and normal curve sources: developed by the authors the following figure 9, which shows the original and simulated time series, clearly demonstrates the quality of the constructed model. http://www.virtual-economics.eu/ 17 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko, valerii matskul, and tetiana osadcha virtual economics, vol. 5, no.2, 2022 figure 9. visualization of source data and results obtained using the holt-winters model of exponential smoothing sources: developed by the authors the constructed arima*arimas and holt-winters models are applied to predict the trade balance between ukraine and romania for the fourth quarter of 2021 (t = 82, 83, 84). the forecasting results, as well as the relative forecasting errors (which are determined by formulas (6)) are shown in table 6. table 6. forecasts for arima*arimas and holt-winters models and actual data forecasts (arima* arimas) actual residuals forecasts (holtwinters) actual residuals 29.35162 28.4 0.032421 28.79413 28.4 0.013688 31.93121 28.8 0.098061 28.05349 28.8 0.02661 69.91722 70 0.001184 70.28544 70 0.004061 source: estimated by the authors. analysing the results presented in table 6, it bears concluding that the relative forecast errors for the tb variable according to the arima*arimas model do not exceed 9.8%, and according to the holt-winters exponential smoothing model – 2.6%. 5. conclusions the conducted studies allowed for modelling and forecasting the dynamics of trade relations between ukraine and romania to build adequate models of box-jenkins time series: arima*arimas and holt-winters exponential smoothing. the results showed small relative forecast errors compared to actual data. in the paper, modelling and forecasting used the http://www.virtual-economics.eu/ 18 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko, valerii matskul, and tetiana osadcha virtual economics, vol. 5, no.2, 2022 latest available data. so, according to preliminary data for january 2022, the models showed good forecasting results. after the russian invasion of ukraine, statistical data are not available. however, romania remains ukraine's largest trading partner. the results of this study can be used in further research on models for predicting the dynamics of the trade relations development, in particular in the context of digitalization and sustainability. references ahmed, r. r., vveinhardt, j., ahmad, n., & štreimikienė, d. 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(2021). the green competitiveness of enterprises: justifying the quality criteria of digital marketing communication channels. sustainability, 13(24), 13679. https://doi.org/10.3390/su132413679 http://www.virtual-economics.eu/ кwilinski alex 31 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 2019 volume 2 number 1 (january) research methods and techniques in new management trends: research results henryk dźwigoł abstract. findings from domestic and foreign literature analyses on the research methods and techniques applied in the management sciences confirmed the necessity to elaborate a certain procedure of selecting proper research methods, with consideration given to new management trends. with reference to the foregoing, the article presented qualitative studies (interviews, experts’ opinions) and quantitative ones (surveys) in order to diagnose the problem in a proper way by providing answers to five research hypotheses. as a result of the research effort, the anticipated goal of the article was achieved, i.e. the readers were presented with an elaborated procedure (dźwigoł, 2018) of selecting the methods and techniques for the sake of the management-related research process, and with essential components of the research process used for designing the procedure in question. since the research hypotheses were positively assessed, the author was able to present recommendations as to putting the procedures into practice, which were supported by a dedicated online tool. what is more, the achieved goal allowed not only to determine the application rate of the particular methods and techniques, or their combined versions, but also to identify certain rules as to recognising the research process in the present context and in terms of other variables, since the latter may influence whether the selected methods and techniques, related to the research subject in the context of management sciences, are essential. all foregoing steps were aimed at enhancing the reliability, quality and level of the research studies being carried out. furthermore, it was recommended to perform further research studies aimed at verifying the adopted model and procedure of selecting research methods and techniques in the management sciences, especially in the practical context. keywords: method, research process, triangulation jel classification: b40, c10, c00 author(s): henryk dźwigoł silesian university of technology, 26 roosevelta street, zabrze, poland, 41-800 e-mail: henryk.dzwigol@polsl.pl https://orcid.org/0000-0002-2005-0078 citation: dźwigoł, h. (2019). research methods and techniques in new management trends: research results. virtual economics, 2(1), 31-48. https://doi.org/10.34021/ve.2019.02.01(2) received: august 7, 2018. revised: october 25, 2018. accepted: december 27, 2018. © author(s) 20xx. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://orcid.org/0000-0002-2005-0078 https://doi.org/10.34021/ve.2019.02.01(2) https://creativecommons.org/licenses/by/4.0/ 32 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 1. introduction in today’s science and economy (21 st century) we have been witnessing development of management sciences, aiming at making use of non-complicated and comprehensive methods in order to ponder on each aspect of the same problem (coghlan & shani, 2016; collins, 2010; harrington & voehl, 2016). managing of a contemporary company necessitates not only to enhance its effectiveness, but also improve the company’s value (gerring, 2017; mooi et al., 2018). due to the changes occurring in the environment of the company, it has been necessary to elaborate new rules, principles and ways for the company operation, as well as new management systems (o′leary & hunt, 2016; petrova, 2018). with reference to that, the 21 st century management sciences had to adopt a new paradigm; it was based on the ability to cope with continuous changes. it is said that a change is the only permanent phenomenon in the modern economic world (singleton & straits, 2017; sloan & quan-haase, 2017). in the literature, one may additionally identify some statements that have confirmed poor methodology-related character of management sciences, as well as have emphasised the necessity to effectively achieve knowledge, methods and techniques borrowed from other sciences’ research tools (labarca, 2017; o′leary, 2017; quinton & reynolds, 2018; robbins, 2009; thomas, 2017). it is always underlined that separating and developing the methods specific only for management sciences are not needed; on the other hand, it is necessary to transdisciplinarilly integrate overly specialised sciences. nonetheless, the conclusions on poor methodological state of management sciences turn out to be far-fetched. it needs to be emphasised that one is able to identify, among various methods employed in the management sciences, both methods typical of management as well as methods borrowed from other scientific disciplines. the borrowed methods relate, in most cases, to familiarising oneself with the organisation and its management, whereas the researchers’ own methods are aimed at developing the organisation itself and a system of its management. among basic methods of recognising the organisation and its management, one can distinguish: ‒ survey methods (derived from social sciences), ‒ observation methods (coming from natural sciences), ‒ ethnological methods (coming from anthropology), ‒ pseudo-experimental methods (coming from natural and social sciences), ‒ documentation-related methods (coming from social and historical sciences). it often happens that the application of management methods, as well as classifying the management as one of the branches of science are subject of critical analyses. it is, more often than not, caused by appearance of new management methods that happen to be quickly rendered obsolete and that are being used only because there is a trend of employing them. what is more, new methods are very often sold to companies in the form of marketing products, whereas some researchers express serious doubts as to their effective application. 33 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 it needs to be stated that, in spite of critical views, both management sciences and their methods and methodology result in the improved effectiveness and competitiveness of companies. however, it needs to be mentioned that management methods are not and cannot be of universal character. the methods must be adjusted as the time goes by, as the company changes over the years (gerring, 2017; mooi et al., 2018; quian, 2018). in modern management science, research and analyses focus mainly on the quality of the research process. the latter influences the accuracy and quality of the decisions taken. the difference between the modern and traditional approaches is significant. in the traditional approach to the management (in particular with reference to research processes) the main stress is put on finding answers to the following questions: ‒ which elements – of an organisation, process, etc. are not working properly? ‒ which elements should be regarded as inappropriate? ‒ what are the reasons for that? the traditional approach does not always allow to achieve satisfactory results; what is more, it does not always result in improving the existing situation. within the scope of the contemporary approach, various types of principles, procedures or tools are elaborated. they allow, contrary to the traditional approach, to enhance the knowledge of the existing problem situation (ares & varela, 2018a, 2018b; quian, 2018). to this end, one may adopt the following perspective – the positive organizational scholarship (sop). upon its implementation, one needs to pose a basic question, i.e.: why are some employees so ineffective? then, the following questions are asked: ‒ why is it so? ‒ what are the reasons for such a phenomenon? as a result of the applied sop perspective, one will find an answer to the following question – what needs to be done to achieve the desired state, i.e. what needs to be done to be good at something and how to achieve perfection. in modern management sciences, the methodological fundamentalism was rejected, which stringently defined the scientific character of a method, evoking neo-positivist models in natural sciences (hempolioski, 1992). in the literature on management sciences, the necessity of employing diverse research methods to study and develop organisations in research processes has been highlighted many times. in the literature on management sciences, the necessity to apply numerous self-verifying and self-correcting methods has been highlighted many a time (coghlan & shani, 2016; collins, 2010; denzin, 1970; harrington & voehl, 2016). furthermore, there occurred a phenomenon of methodological pluralism. it has advocated that in order to solve a research problem, one should be ready to apply research methods derived from various disciplines and theoretical approaches. it means that ‘the multitude of 34 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 ways in which the world is perceived shall be combined with multitude and diversity of ways, methods, evaluation techniques, and attempts to transform the world’ (dźwigoł, 2018). however, it very often causes anarchism and methodological eclecticism. with reference to the foregoing, in order to achieve reliable research results, it is necessary to analyse in details the research problem, and consequently select such research methods that would facilitate the avoidance of the above-mentioned phenomena (boland et al., 2017). 2. research scope and methodology diversity consists in both similarities and differences between people, associated with their age, culture, physical abilities, physical appearance, disability, race, nationality, religion, gender. conclusions derived from an ongoing analysis of national and foreign literature dealing with methodology of conducting a research process showed a deficit in empiric approaches to the quality of research processes. with reference to the foregoing, the following research hypotheses were posed in the article: h1. upon determining the research problem, it is necessary to analyse selected qualitative and quantitative methods in order to make a preliminary selection. h2. verification of elaborated methods, models or procedures is a prerequisite to combine management science and practice. h3. methodological triangulation supports research processes. h4. combining qualitative and quantitative methods in management-related research processes enhances the quality and reliability of research findings. h5. expert groups assessment should be regarded as a basic method of evaluating trends of the carried-out research. in order to find answers to the posed research questions, the research study involved an anonymous survey questionnaire and a structured interview 1 distributed in paper form at conferences from the area of management sciences, and electronically, on the basis of an email database, elaborated earlier. the research study was carried out from october 2016 to april 2018. the questionnaire consisted of three parts. the first part contained questions about the importance of approaches, processes, methods and techniques in a research process within the scope of management sciences (5 questions). the second part consisted of questions related to the problem of the improvement of a research process (33 questions). the third part contained demographics (3 questions). the structure of the questionnaire in the research part involved both open, rank questions, and questions based on the 5-point likert scale. within the scope of the latter, the respondents were obliged to classify a particular answer as: strongly agree (5), agree (4), neither agree nor disagree (3), disagree (2), strongly disagree (1), with reference to each of the proposed assumptions. 1 the research study was designed for academic staff members, within the scope of the management science discipline. 35 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 on the other hand, the interview survey involved an introduction – in the form of a letter of intent – two open questions and final information containing thank-you notes and postal addresses under which answers were to be sent. the respondents were asked the following questions: ‘does combining qualitative and quantitative methods in management-related research processes enhance the quality and reliability of research findings?’ and ‘which qualitative or quantitative methods enhance the new management paradigm in the context of science and business practice?’ quantitative research (survey questionnaires) covered theoreticians of management sciences, being a target group. the group consisted of: ‒ 272 foreign universities having faculties and/or units dealing with management sciences, ‒ 21,024 foreign academic staff connected to the management sciences, ‒ 93 national universities having faculties and/or units dealing with management sciences, ‒ 2,307 national academic staff connected to the management sciences, ‒ 52 foreign companies, ‒ 183 national companies. the size of a research sample, necessary to determine representative character of the research, was determined on the basis of the following assumptions: ‒ the p fraction ratio was set to 50% 2 , ‒ the amount of an error related to the fraction ratio was set to 5%, ‒ statistical significance α = 0.05. on the basis of the above-mentioned assumptions, the requested sample size formula is simplified, and looks as follows (kukuła, 2007): ( ) (1) where: np – requested sample size, uα – amount of cumulative normal distribution derived from statistical tables, p – fraction ratio, b – the size of the fraction ratio error. as a result of the research effort, 401 representatives of management science theorists were surveyed, thus the condition determining the representative character of the research sample was met. 2 should it be difficult to assess the volume of the population, such an approach shall be permissible. 36 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 in the surveyed group of scientists, polish universities amounted to 32%, whereas foreign universities accounted for 33%. as to the remaining part of the research group (35%), no academic unit was indicated. the most common areas of sciences in which the researchers were involved were, among others: strategic management, company management, knowledge and innovation management, as well as methodics of the research on organisations. 3. selected research results – verification of research hypotheses h1 – having developed a research question, it is necessary to analyse selected quantitative and qualitative methods in order to make a preliminary selection. ha1 – having developed a research question, it is not necessary to analyse selected quantitative and qualitative methods in order to make a preliminary selection. figure 1. necessity to analyse selected quantitative and qualitative methods in order to perform their preliminary selection upon the formulation of the research problem – research results source: the author’s own work. while analysing the achieved results, one may undoubtedly state that upon formulation of the research problem, it is necessary to analyse the chosen quantitative and qualitative methods in order to pursue their preliminary selection, which is underlined by 88.78% of the respondents. one may find arguments to support the above-mentioned thesis in the source literature, where it is claimed, more often than not, that in order to diagnose the research problem comprehensibly and thoroughly, it is necessary to apply diverse research methods, providing an exhaustive answer to the posed question. 0.419 0.4688 0.0998 0.01 0.0025 0,00% 5,00% 10,00% 15,00% 20,00% 25,00% 30,00% 35,00% 40,00% 45,00% 50,00% strongly agree agree neither agree nor disagree disagree strongly disagree 37 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 furthermore, the very development of heterogenous cognitive methods, modelling or organisation management has an impact on the necessity to adopt an open-minded approach, allowing or even encouraging to combine numerous approaches and methods. practical aspect of the devised methods, procedures or models were verified in order to make the research more reliable. moreover, before undertaking research studies, it is necessary to analyse the chosen methods against the character of the carried-out research (labarca, 2017; o′leary, 2017; quinton & reynolds, 2018; robbins, 2009; thomas, 2017). h2 – verification of elaborated methods, models or procedures is a prerequisite that allows to combine practical and theoretical aspects of management sciences. ha2 – verification of elaborated methods, models or procedures is not necessary to combine practical and theoretical aspects of management sciences. figure 2. verification of elaborated methods, models or procedures is a prerequisite that allows to combine practical and theoretical aspects of management sciences – research results source: the author’s own work. the statistical analysis of achieved data unequivocally states that most respondents, i.e. 80.05% hold the opinion that it is a prerequisite allowing to combine practical and theoretical aspects of management sciences. the view is shared by 86.73% of management practitioners, which allows to confirm the said hypothesis. h3 – methodological triangulation supports research processes in management sciences. ha3 – methodological triangulation does not support research processes in management sciences. 0.3017 0.4988 0.1247 0.0574 0.0175 0.3724 0.4949 0.1122 0.0153 0.0051 0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00% strongly agree agree neither agree nor disagree disagree strongly disagree 38 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 figure 3. methodological triangulation versus research process – research conclusions source: the author’s own work. in the sample in question, 82.29% of the respondents claim that methodological triangulation supports the research process. what is more, 69.08% of the surveyed researchers emphasise that the triangulation is a precondition in the management sciences. the achieved findings were also confirmed by an extensive literature study on the research methodology. it was stated in the said literature that the application of numerous differentiated methods in the research process allows to adopt a complex approach to the research problem, while providing it with a broader image. methodological triangulation is the answer to the problem of selecting just one adequate method, since the problem might undoubtedly distort the research findings. in the beginning, the researcher should assume that selecting a few good methods will result in more comprehensive information and will allow to find out more about the phenomenon, instead of focusing on selecting the best method. h4 – combining qualitative and quantitative methods in the management-related research processes enhances the quality and reliability of the research findings. ha4 – combining qualitative and quantitative methods in the management-related research processes does not enhance the quality and reliability of the research findings. according to the interviewed experts, combining quantitative and qualitative methods in the management-related research processes shall considerably affect the quality of the process itself and reliability of the research findings. what is more, the experts state that it is not always easy, in practical research studies, to make a clear distinction between quantitative and qualitative methods, where specific conditions should be met, e.g. an order of applying particular methods or objectivism as to the research findings. furthermore, k. pająk (pająk, 0.419 0.4688 0.0998 0.01 0.0025 0.207 0.4514 0.2344 0.0848 0.0224 0,00% 5,00% 10,00% 15,00% 20,00% 25,00% 30,00% 35,00% 40,00% 45,00% 50,00% strongly agree agree neither agree nor disagree disagree strongly disagree is it necessary, upon formulation of a research process, to analyse selected qualitative and quantitative methods in order to make a preliminary selection? is methodological triangulation a prerequisite in the research processes? 39 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 2010, pp. 185-215), professor, holds the opinion that qualitative research in the management sciences focuses on a comprehensive analysis of a given phenomenon. the main emphasis is put on understanding the analysed problem, in a better and more precise way, with the use of special research methods. the qualitative research, as opposed to the quantitative one, is not structured to a considerable extent, due to the lack of quantitative approach, as the statistical reasoning is not applied very often. in an ideal methodological situation, if a researcher is willing to study or discover something, verify a set hypothesis or research question, then the quantitative and qualitative research should complement each other. functions and usefulness of both kinds of methods and their combination are undoubtedly diverse, among other things due to the research subject and research goals, as well as the phase of the research process. nonetheless, should the researchers’ interest evolve around discovering and/or recognising (combined with interpreting) cause-and-effect relations, or mechanisms in which functions and processes are carried out, its underlying factors and further consequences, as well as subsequent formulation of research hypotheses, then the quantitative methods should be obligatorily supported by (additional) qualitative methods. h5 – expert groups assessment should be regarded as a basic method of evaluating trends of the carried-out research. ha5 – expert groups assessment should not be regarded as a basic method of evaluating trends of the carried-out research. figure 4. expert groups assessment should be regarded as a basic method of evaluating trends of the carried-out research – research results source: the author’s own work. 0.1571 0.5112 0.1471 0.1596 0.0249 0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00% strongly agree agree neither agree nor disagree disagree strongly disagree 40 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 a considerable number of the researchers (66.83%) believe that the expert group assessment should be regarded as a basic method of evaluating trends of the carried-out research, which confirms the hypothesis. 4. elaborating a procedure of selecting methods and techniques for management-related research process – online tool the principal aim of the article was to elaborate a model of selecting methods and procedures affecting the course of the research process for the sake of practical and theoretical aspects of management. in the beginning, the model and procedure were developed on the basis of methodological assumptions characterising models, processes or methods of carrying out research processes within the scope of management sciences. findings from domestic and foreign literature (dźwigoł, 2018; dźwigoł & dźwigoł-barosz, 2018) analyses have unequivocally confirmed that already at the phase of defining the research problems it is difficult to select one method allowing to diagnose the problem comprehensively and thoroughly. it is thus necessary to employ various research methods that would give a complex answer to the posed problem. the very development of heterogenous cognitive methods, modelling or organisation management has an impact on the necessity to adopt an open-minded approach, allowing or even encouraging to combine numerous approaches and methods (quian, 2018; quinton & reynolds, 2018). in order to develop a universal procedure, the experts defined, within the course of consultations, five elements to be taken into consideration upon selecting the methods and techniques suitable for the research process, including theses, hypotheses or research questions: ‒ selecting a research subject – defining what object lies in the interest of a given researcher; ‒ determining the character of the carried-out research – the researcher should precisely define a type, character and kind of the carried-out research; ‒ determining the research transparency – literature-based inference and practical experience show that the aim of the research may be presented in various ways depending on its defined character. in the given case, the researcher should state what method he/she is going to use to present a predefined aim of the carried-out research; ‒ selecting a way in which the research study is carried out – conclusions reached on the basis of methods and techniques described in the source literature prove a multidimensional commitment of the researcher in the ongoing considerations. what is more, it needs to be determined, in the first place, what rudimentary types of the researchers’ involvement in the process of carrying out the research process are. then, one should select the methods and techniques that fulfil the presented conditions; ‒ determining the size of the sample being researched – it is the last criterion, specified by the experts, which makes the availability of the given sample more precise. assigned methods and techniques of conducting research processes are often dependent on the sample size (some of them are destined to assess smaller populations, whereas others are to evaluate bigger ones). 41 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 further on, the author presented his own (dźwigoł, 2018) divisions of the components (modules) of the advocated research process, recommended by the experts (see the table below). table 1. division of the components in the modules of selecting methods and techniques related to the research process research subject character of the research studies transparency of the research goal ways of conducting the research studies size of the researched sample  business entity,  personal aspect,  case (case study),  phenomenon,  environment,  process.  identifying/ explorative,  secondary,  experimental,  diagnostical,  model-related,  analytical.  non-disguised,  disguised.  indirectly,  directly,  participating,  non-participating.  above 20 observations,  from 20 to 50 observations,  from 50 to 100 observations,  from 100 to 250 observations,  below 250 observations. source: own elaboration based on (goleman, 1996). then, by means of the group expert assessment carried out with the use of the form, one was able to classify the selected methods and techniques within the framework of the adopted division of the modules of the elaborated procedure. the classification process involved five experts, i.e.: ‒ two practitioners carrying out the research studies within the scope of their basic managerial activities, ‒ two representatives of the management sciences, ‒ one statistician analysing data resulting from the carried-out research studies. the survey form consisted of five parts corresponding to the subsequent modules of the research procedures (i.e. research subject, character of the carried-out research studies, transparency of the research goal, ways of conducting the research studies and size of the researched sample). each of five parts of the survey was designed in the form of a matrix, containing: in the columns – methods 3 (17) 4 or techniques respectively 5 (29) 6 , in the rows – 3 methods: documentation analysis, survey, biographical survey, self-monitoring checklists, in-lab experiment, field (natural) experiment, expert group assessment, scenario-based method, observation, pseudoexperiment, psychography, other people’s statements, projective tests, psychological tests, fitness tests, knowledge tests, interview. 4 only the methods used in the basic research studies were subject to assessment and classification. 5 techniques: analysis of non-formal clients’ opinions, analysis of evaluation reports, analysis of staff meeting reports, any reports, memos and regulations, analysis of presented speeches and published interviews, standardised open question survey, anonymous mail survey, the piorkowski apparatus (diagnosis of psychomotor skills), self-monitoring checklists as to professional qualifications and behaviours, graphology (personality assessment), introspective analysis of behaviours in critical situations, manipulation and inspection of environmental elements, undisguised observation of real events of critical importance, 42 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 constituents of the procedure of selecting methods and techniques as to the research processes in the management sciences, which constituents had been identified earlier. business entity personal aspect case phenomenon environment process choosing the research subject database of research methods and techniques other classification of research methods and techniques in relation to the selected research subject selection of methods and techniques put forward in relation to the selected research subject selection of methods and techniques put forward in relation to the selected research subject selection of methods and techniques classified in relation to the selected research subject identifying secondary experimental diagnostical model-related analytical identifying character of carried-out research studies other classification of research methods and techniques in relation to the character of the research studies 1 1 selection of methods and techniques put forward in relation to the character of the research studies selection of methods and techniques put forward in relation to the character of the research studies selection of methods and techniques classified in relation to the character of the research studies non-disguised research goal disguised research goal determining the transparency of research goals selection of methods and techniques put forward in relation to the transparency of the research subject selection of methods and techniques put forward in relation to the transparency of the research subject indirect direct participating non-participating selecting a way of conducting research studies selection of methods and techniques put forward in relation to selecting a way of conducting research studies selection of methods and techniques put forward in relation to selecting a way of conducting research studies less than 20 from 20 to 50 from 50 to 100 from 100 to 250 above 250 determining the size of the researched sample 2 2 selection of methods and techniques put forward to carry out research studies selection of methods and techniques put forward in relation to the size of the research sample figure 5. procedure for selecting the methods and techniques within the managementrelated research processes source: the author’s own work. disguised and participant observations, disguised observation of induced stressful situations, observation standardised on the basis of rating scales, probation period at a given post, samples of task-related behaviours, rating scales to measure lifestyles, condition simulating (controlling and manipulating variables that determine a researched phenomenon), thematic apperception test (diagnosis of achievement motivation), vocational skills test, intellectual aptitude tests, temper tests, tests related to given areas of knowledge, structured free-form interview, weighted application form, situational interview (evaluating behaviours in a given situation), structured interview (repeated questions, prepared beforehand), focused group interview. 6 only the techniques used in the main research studies were subject to assessment and classification. 43 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 as a result of the conducted research study, one achieved a division of the research methods and techniques with regard to their subject, number, character, aim or a way in which the study is to be carried out. the developed procedure of selecting the methods and techniques within the managementrelated research process consists of five phases that allow, in a considerable way, to answer any question which each researcher (both the academic and practitioner) should pose to himself/herself. what is more, the application of the developed procedure eliminates the need to diagnose research methods and techniques available in the literature through the use of the classification pattern, corresponding to five components of the procedure phases. furthermore, it needs to be underlined that the selection of the research methods and techniques, with the use of the above-mentioned procedure, shall be followed by an analysis of posed theses, hypotheses or research questions, repeated from time to time. it means that the researcher should separately apply, for each posed hypothesis or research question, recommendations resulting from the developed procedure. it is explained by the diversity of the research problems in the management sciences (dźwigoł, 2018). the graphic representation of the described procedure has been created by means of the business process model and notation (bpmn). it is a graphic notation destined to describe business processes; it provides businesses with the opportunities to define and comprehend internal and external procedures by means of business process diagrams (figure 5). thus, it is possible to communicate on the basis of the adopted standards (woodfield, 2018). phase i – selecting a research subject (dźwigoł, 2018) selecting a research subject – the process involves designating a real research subject, determining its quantity (cases), features, components, as well as ways and possibilities of addressing it. in this phase the researcher selects a subject to be submitted to the research studies, which subject was earlier identified by means of an adopted model of the research methodology. a starting point of the phase is a recommended classification of the research methods and techniques in terms of the research subject compliant with components of the phase: ‒ business entity – all organisational units carrying out business activities for profitmaking purposes (within the scope of organisational structure). within the said category, any business models, relations in organisational structures, etc. are taken into consideration. ‒ personal aspect – staff (of various levels), behaviour patterns and organisational culture in the company. within the scope of the category, staff’s competences, their knowledge, progress in meeting organisational goals, etc. are put under scrutiny. ‒ case study – a detailed case; within the scope of this category a real event is to be subject to analysis. ‒ phenomenon (economic, social, etc.) – any events related to the business activity, the society; the events that affect the said entities. 44 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 ‒ environment – nearer and farther environment, within the scope of this category broadly understood interested parties are taken into consideration – e.g. competitors, clients, suppliers and the society treated as an aggregate. ‒ process (external, internal) – each act/action undertaken to achieve a determined effect. within the category, internal and external processes, initiated by economic entities, are the subjects to analyses. the basic process of the „selecting a research subject” phase involves a decision made by a researcher about classifying the research subject, thoroughly characterised earlier, into one of the recommended categories (module elements – phase). should it be impossible to make such a classification, the researcher shall be obliged to assign, on his/her own, methods and techniques to categories which he/she had determined earlier. what is more, the researcher should, in the said case, make use of a questionnaire, containing selected earlier components of modules in the procedure of assigning methods and techniques to the research process within the scope of management sciences). the methods and techniques thus selected shall be treated as the author’s own contribution to the above-mentioned procedure, and as a source of enriching benefits. the starting point of the phase is a set of methods and techniques, gathered with regard to the selected research subject, as the latter shall be a point of departure in the next phase of the procedure execution. the cascade-like (step-by-step) execution of the procedure allows to eliminate the methods and techniques that fail to meet the coherence requirements as to all phases of the procedure. phase ii – determining the character of the carried-out research (dźwigoł, 2018) determining the character of the carried-out research – it specifies the reason why researchers undertake to deal with a given research problem as contained in the analysis, hypothesis or research question being analysed. in this phase, the researcher chooses the character of the research goal. ‒ character of the carried-out research – identifying – preliminary research studies, their aim is to identify a problem. ‒ character of the carried-out research – secondary – the research studies involve an analysis of existing and widely available data, gathered earlier. ‒ character of the carried-out research – experimental – the research studies involve searching for and verifying relations between two variables, with frequent variable manipulation. ‒ character of the carried-out research – diagnostic – the research studies whose goal is to determine (diagnose) the condition of the given subject, its properties and operational principles. ‒ character of the carried-out research – model – research studies whose goal is to reflect, in the best possible way, the researched subject by means of a selected model. ‒ character of the carried-out research – analytical – observation-based research studies whose goal is to detect operational structures and mechanisms of the researched subject. 45 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 the main process of the phase named determining the character of the carried-out research is to make a decision by the researcher as to verifying the defined research goal, through determining its character by means of assigning it to the indicated module elements – phases. should the classification be unfeasible, the researcher shall be obliged, just like in the case of the previous phase, to assign by himself/herself the methods and techniques to the category determined on his/her own. to this end, the researcher should make use of a form, as described earlier, containing identified components of the procedure (modules) of selecting the methods and techniques within the management-related research processes. phase iii – determining the transparency of the research goal (dźwigoł, 2018) the notion of transparency of the research goal undoubtedly plays an essential role as far as the selection of the research methods and techniques is concerned. the research methods and techniques, as described in the source literature, identify both the way in which the research process is performed and the research goal. in the present paper, the author adopted a widely used division of goal transparency, i.e. division between non-disguised and disguised goals. then, the author classified methodologically the starting point of the phase, achieved in the previous phase, as a set of the research methods and techniques and an additional set of methods and techniques, classified as to the transparency of research goals. ‒ research goal – non-disguised – the research subjects are aware of the goal of the research process in which they take part. ‒ research goal – disguised – the research goal is known but only to the researcher. the basic process of the phase named determining the character of the carried-out research is for the researcher to make a decision as to the transparency of the defined research goal. phase iv – choosing a way in which the research study is conducted (dźwigoł, 2018) although a question of choosing a way of conducting research studies has been tackled in the source literature for many years, it still remains valid. there are two popular divisions. the first division presents the researcher’s commitment in the research process as participating and non-participating one. the second division focuses directly on the way in which research studies are conducted, including direct and indirect ways. ‒ ways in which research studies are conducted – indirect ones – the researcher is carrying out the research studies remotely, not participating personally in the study. ‒ ways in which research studies are conducted – direct ones – the researcher is taking part in the study, participating actively in the whole research process. ‒ ways in which research studies are conducted – participating ones – the researcher is taking part in the study, being “inside” the researched subject. ‒ ways in which research studies are conducted – non-participating ones – the researcher is “outside” the researched subject, he/she does not interfere with the course of the research. 46 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 the researcher’s actions within the scope of the described phases involve selecting a way to carry out research studies with regard to the approach of the researcher himself/herself and his/her commitment. phase v – determining the size of the sample being researched (dźwigoł, 2018) the last phase of the suggested procedure of selecting the methods and techniques suitable for the management-related research process involves determining the size of the sample being researched. the said phase, due to a wide variety of methods and techniques available, indicates more precisely those samples that are the most essential for the correct course of the research process. as a result of the undertaken research actions, five divisions were defined, each phase describing the constituent of the phase (i.e. less than 20; from 20 to 50; from 50 to 100; from 100 to 250; above 250). ‒ size of the researched sample – less than 20. ‒ size of the researched sample – from 20 to 50. ‒ size of the researched sample – from 50 to 100 ‒ size of the researched sample – from 100 to 250. ‒ size of the researched sample – above 250. the effect of employing all constituents of the selection procedure covering methods and techniques is to achieve a suggested set of diagnosed and classified methods and techniques, as correlated to theses, hypotheses or research questions described by the author. 5. research conclusions the aim of the article was to present the elaborated procedure (dźwigoł, 2018) of selecting the methods and techniques for the sake of the management-related research process, as well as essential components of the research process used for designing the procedure in question. since the research hypotheses were positively assessed, the author was able to present recommendations as to the putting the procedures into practice, which was supported by a dedicated online tool. research conclusion, as well as the analysis of domestic and foreign literature as to research methods and techniques in new management trends unequivocally prove that: 1. having developed a research question, it is necessary to analyse selected quantitative and qualitative methods in order to make a preliminary selection. 2. verification of elaborated methods, models or procedures is a prerequisite that allows to combine practical and theoretical aspects of management sciences. 3. methodological triangulation supports research processes in management sciences. 4. combining qualitative and quantitative methods in management-related research processes enhances the quality and reliability of research findings. 5. expert groups assessment should be regarded as a basic method of evaluating trends of the carried-out research. 47 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 1, 2019 the above-mentioned statements are confirmed by the research studies carried out by bryman (bryman, 2006, pp. 3-37); mixed research studies are widely applied in barely a few disciplines, whereas significant works are found mainly in american publications. while reviewing other research studies on the subject (e.g. by niglas, 2004), one can draw a conclusion that mixed methods have been implemented relatively well in the management sciences, although the authors claim that their state is not satisfactory. furthermore, due to the research studies related to methods, procedures and approaches, it was found out which of these are the most essential for the research process and particular elements within the management sciences. it allows not only to determine the level of application of particular methods and techniques, or its amalgamation, but also identify certain rules of recognising the research process within the given context, as well as other variables that might affect the importance of assigning correct methods and techniques to a given research process, with the view of enhancing credibility, level and quality of the carried-out research studies. what is more, it is recommended to perform further research studies aimed at verifying the adopted model and procedure of selecting the research methods and techniques in the management sciences, and particularly in their practical aspect. references ares, g., & varela, p. 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(2018). the ethics of online research (advances in research ethics and integrity). bingley, uk: emerald publishing limited. кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) yana us, tetyana pimonenko, oleksii lyulyov, yang chen, tatjana tambovceva virtual economics, vol. 5, no. 1, 2022 24 2022 volume 5 number 1 promoting green brand of university in social media: text mining and sentiment analysis yana us, tetyana pimonenko, oleksii lyulyov, yang chen, and tatjana tambovceva abstract. combating climate change and mitigating its negative consequences requires enhancing awareness of sustainable development. it is believed the education sector is an excellent trigger for green transformations. in turn, since social media has become a fundamental part of people's everyday lives, they are considered to be an effective tool in engaging the broader audience to green problems. in this view, this paper aims to analyze the social media activity of world-leading green universities in gaining the university community's commitment to sustainable development principles. this study involved text mining, statistical, content, and sentiment analyses to achieve the study aim and answer the following research questions: 1) what is the social media performance of the green universities? 2) what is a difference in the social media parameters used by the green universities involving the academic community and stakeholders to account for environmental issues? the research objects are five top-ranked sustainable universities worldwide according to the ui greenmetric world university rankings in 2021 and sumy state university (as the first ukrainian university listed by the mentioned above ranking). the study period covers data as of may 10, 2022. the data was retrieved from the analyzed universities' social media sites (twitter, facebook, linkedin, youtube, instagram, etc.). the findings confirmed the research hypothesis that the social media activity of green universities could be a driving force in gaining sustainable development goals and promoting an eco-friendly lifestyle worldwide. based on the obtained results, the authors provided some recommendations regarding strengthening the universities’ social media activity towards increasing the green awareness of netizens. keywords: social media, sentiment, engagement, green university, green transformation jel classification: q01, q56, q57 www.virtual-economics.eu issn 2657-4047 (online) yana us, tetyana pimonenko, oleksii lyulyov, yang chen, tatjana tambovceva virtual economics, vol. 5, no. 1, 2022 25 authors: yana us sumy state university, 2, rymskogo-korsakova st., sumy, 40007, ukraine e-mail: y.us@biem.sumdu.edu.ua https://orcid.org/0000-0003-1451-0450 tetyana pimonenko sumy state university, 2, rymskogo-korsakova st., sumy, 40007, ukraine e-mail: tetyana_pimonenko@econ.sumdu.edu.ua https://orcid.org/0000-0001-6442-3684 oleksii lyulyov sumy state university, 2, rymskogo-korsakova st., sumy, 40007, ukraine e-mail: alex_lyulev@econ.sumdu.edu.ua https://orcid.org/0000-0002-4865-7306 yang chen school of economics, fujian normal university, fuzhou 350117, p. r. china email: cheny3598@gmail.com https://orcid.org/0000-0002-4801-4036 tatjana tambovceva riga technical university, 1, meza st., riga, lv-1048, latvia e-mail: tatjana.tambovceva@rtu.lv https://orcid.org/0000-0002-9516-1530 citation: us., ya., pimonenko, t., lyulyov, o., chen, ya., & tambovceva, t. (2022). promoting green brand of university in social media: text mining and sentiment analysis. virtual economics, 5(1), 2442. https://doi.org/10.34021/ve.2022.05.01(2) received: october 9, 2021. revised: december 3, 2021. accepted: january 3, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) mailto:y.us@biem.sumdu.edu.ua mailto:alex_lyulev@econ.sumdu.edu.ua https://orcid.org/0000-0002-4865-7306 https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) yana us, tetyana pimonenko, oleksii lyulyov, yang chen, tatjana tambovceva virtual economics, vol. 5, no. 1, 2022 26 1. introduction climate change, environmental degradation, resource depletion, and biodiversity loss issues are on the global agenda. in 2019, the european commission presented the european green deal (egd) to raise the world's attention to intensify the efforts in mitigating and combating climate change, developing resourceand energy-efficient economy, its decarbonization, etc. indeed, achieving sustainable development goals requires technological development, political regulation, and financial mechanisms. however, there is a critical need to formulate an eco-friendly mindset and attitude (arefieva et al., 2021; dalevska et al., 2019; bogachov et al., 2020; cyfert et al., 2021; dzwigol, 2020; kharazishvili et al., 2020; 2021; kuzior & kwilinski 2022; kwilinski & kuzior 2020; kuzior et al., 22021a; 2021b; kwilinski et al., 2019a; 2019b; 2019c; 2019d; 2021; 2022a; 2022b; lyulyov et al., 2021; miśkiewicz, 2021; miśkiewicz et al., 2022). according to the above, the commitment to sustainable development significantly impacts the education sector. correspondence to economic, environmental, and social changes requires the growth of green awareness, implementation the courses on sustainability into the study process; creation of a demand for the development of new green knowledge and skills, advanced training and retraining of employees; closer collaboration between business, research centers, higher education institutions, etc. (czyzewski and polcyn, 2016). even though the national governments express consent regarding the general sustainable development concept, there is not a unique education model for sustainable development (khalaim et al., 2021; tambovceva et al., 2018; dimante et al., 2016; tkachenko et al., 2019). each country has its own national approaches to education, depending on the local specificities and priorities. the international community believes that education could inculcate green values, ecofriendly attitudes, behavior, and lifestyle to ensure sustainability in the future (orangzab et al., 2021). in turn, sustainable education gives the knowledge on decision-making to gain the long-term development of the economy, ecology, and society. kakalejcik et al. (2021) noted that the country of origin has an important impact on the consumer choice of brand. in this line, the consumer perception of a national image could influence the choice of higher education. on the contrary, green universities are the driving force of green transformation in the country (czyzewski et al., 2016). therefore, the universities should pay more attention to building a strong green brand. www.virtual-economics.eu issn 2657-4047 (online) yana us, tetyana pimonenko, oleksii lyulyov, yang chen, tatjana tambovceva virtual economics, vol. 5, no. 1, 2022 27 figure 1. population and number of social network users worldwide, in billions (2017-2022) note: * is a forecast value. source: developed by the authors based on the data (statista, 2022; worldometer, 2022). figure 1 demonstrates the annual growth of the world population and the number of social network users. thus, in 2021, the number of social network users increased by 32.2% compared to 2017. besides, the social network users’ share of the total population increased by 9.7% in 2021 (47.8%) compared to 2017 (38.1%). therefore, considering the above statistical data and snowballing digitalization processes, the scientific community place greater focus on building the communication strategies and engaging the broader audience on the internet, especially using the social media networks. based on the above, designing the university's profile suitable for promotion through different digital channels increases the university's brand recognition (kuzior et al., 2019; titko et al., 2021; verina et al., 2021). as a result, it could grab the attention of green transformation. thus, this paper aims to analyze the social media activity of world-leading green universities in gaining the university community's commitment to sustainable development principles. to accomplish this aim, the remaining paper structure is as follows: section 2 provides the results of the literature review; section 3 presents the data and methods used in the study; section 4 is about the empirical results; section 5 provides the research conclusions. 2. literature review with growing concern on the adverse climate change, economic, environmental, and social pressure, the issues of green transformations penetrate all economic sectors. the international academic community rases the attention to building an effective strategy to combat and mitigate the consequences of destructive climate change (hussain et al., 2020; czyżewski et al., 2020). in this view, many scientists worldwide consider universities to play a critical role in mitigating ecological effects, achieving sustainable goals, and building green countries. thus, wang et al. (2013) emphasized that building a green society should start with green universities and promoting education for sustainable development. in turn, parra et al. (2018) concluded that higher education institutions require more study programs in sustainability since the ecological footprint of the university community is high. vaisi et al. (2021) visualized the ecological footprint map that allows controlling the level of sustainable performance of university campuses based on the developed ecological footprint index. 2,86 3,14 3,4 3,6 3,78 7,5 7,6 7,7 7,8 7,9 2017 2018 2019 2020 2021* www.virtual-economics.eu issn 2657-4047 (online) yana us, tetyana pimonenko, oleksii lyulyov, yang chen, tatjana tambovceva virtual economics, vol. 5, no. 1, 2022 28 alves-pinto and giannetti (2019) noted that students as future leaders should get the principal knowledge of sustainable development during their studies at the university to be environmentally solidary and prioritize eco-friendliness. in this line, ribeiro et al. (2019) analyzed the opinion of students of the business department at the south american university concerning the environmental, economic, and social impacts of green university infrastructure. based on their findings, the scholars gave some recommendations to promote green initiatives in higher education. to detect the main research directions and trends in the investigations regarding the green universities, this study retrieved the scientific papers indexed in the web of science database by the keywords "green university" and "sustainable university". the obtained results unveiled 236 relevant articles published from 2000 to 2021. further, the method of visualization of similarities was applied to calculate the similarities between keywords and visualize the network map of keyword co-occurrences. as a result, figure 2 demonstrates six clusters indicating the main research streams in the analyzed scope of scientific papers. thus, the biggest (red) cluster consists of 18 keywords. this cluster addresses mainly the administration issues in prioritizing sustainability in higher education institutions. figure 2. the network visualization of keywords’ co-occurrences. source: developed by the authors based on the web of science data using the vosviwer software toolkit. www.virtual-economics.eu issn 2657-4047 (online) yana us, tetyana pimonenko, oleksii lyulyov, yang chen, tatjana tambovceva virtual economics, vol. 5, no. 1, 2022 29 under this direction, the scholars investigated the campus sustainability, carbon footprint, implementation of energy-efficient technologies and environmental management, consuming renewable energy, increasing the sustainable performance and building the practical strategies, leadership, technological development, etc. the second (green) cluster unveils the studies devoted to environmental issues in the academic community. the studies addressed the academic community’s attitude and behavior, sustainable consumption, the impact of the higher education sector, etc. the third (blue) cluster shows the research streams in promoting environmental education, building green universities, increasing the scientific activity on environmental issues, providing efficient policy at the universities, etc. the fourth (yellow) cluster mainly addresses the challenges in green transformation, promoting environmental sustainability, decreasing the ecological footprint, estimating sustainable values, green perception, satisfaction in green universities, etc. therefore, the visualization of keywords’ co-occurences showed that the scholars investigated the green universities raise the issues of energy, management, consumption, carbon footprint, achieving campus sustainability, the role of education in sustainable development, etc. nagy and somosi (2020) emphasized that modern fourth-generation higher education universities should take responsibility for growing the green generation and meeting sustainable goals. therefore, it is essential to measure and promote sustainability performance in the higher education sector. having applied the importance-performance analysis and sustainable university scale, nagy and somosi (2020) estimated the sustainability progress at the university and the student attitude towards sustainable issues. li et al. (2012) summarized the international experience in building green universities. the scholars applied the concordance analysis to construct the evaluation index, estimating the universities’ green advantages and disadvantages based on their green scientific activity, green social services, green plan foundation, green campus, and education. carpenter et al. (2016) highlighted that social media is an effective instrument to promote sustainable behavior, disseminate relevant information, and engage the students and other stakeholders in green matters. yang et al. (2021) integrated social media mining into a valuebelief-norm model to measure the public concerns about the environmental issue, particularly air pollution, and suggest some insights into the general pro-environmental behavior. therefore, the green universities could greatly benefit from using social media. in this line, mehmood et al. (2022) mentioned that similar to commercial brands, the universities launch social media marketing campaigns to promote their brand, enroll more students, raise awareness of the particular issues, etc. www.virtual-economics.eu issn 2657-4047 (online) yana us, tetyana pimonenko, oleksii lyulyov, yang chen, tatjana tambovceva virtual economics, vol. 5, no. 1, 2022 30 several studies on social data analysis in the education sector have already been performed. besides, the impact of the covid-19 pandemic boosted the studies devoted to the examination of social media performance in the education sector. imran et al. (2021) applied a hybrid approach to analyze the effectiveness of the online education system during covid19 based on the learners’ reviews on twitter. using the machine learning approach, mujahid et al. (2022) analyzed the polarity and subjectivity score of 17,155 tweets’ text about elearning. having applied a content analysis, bularka et al. (2022) found that the european universities are more active on facebook, while their messages regarding sustainability mainly concern the environmental protection actions carried by the university. the main hypothesis of this research is as follows: h1: the social media activity of green universities could be a driving force in gaining sustainable development goals and promoting an eco-friendly lifestyle worldwide. 3. methods this study involved the text mining, statistical, content, and sentiment analyses (fig. 3) to answer the following research questions: 1) what is the social media performance of the green universities? 2) what is the difference in the social media parameters used by the green universities involving the academic community and stakeholders to account for environmental issues? figure 3. the empirical research structure. source: developed by the authors. the social media search engine “social searcher” was run to extract data. further, having applied the statistical analysis, this study summed up the number of mentions and users on social media sites, determined the type of posted content, and measured posting frequency by weekday and hours. the sentiment analysis was applied to detect the general online representation of the benchmark green universities based on the sentiments of users' comments regarding the university. following pang and lee (2008), the sentiment analysis is conducted in two stages: data extraction from social media (facebook, twitter, instagram, youtube, etc.) statistical analysis sentiment analysis text mining r e s u l t s content analysis www.virtual-economics.eu issn 2657-4047 (online) yana us, tetyana pimonenko, oleksii lyulyov, yang chen, tatjana tambovceva virtual economics, vol. 5, no. 1, 2022 31 opinion extraction and sentiment classification. thus, firstly, this study extracted the social media mentions expressing the subjective opinion words towards each university. then, the obtained opinions were divided into three sentiment groups: positive, negative, and neutral. as a result, the brand reputation of involved universities was estimated. the sentiment of posts was detected using the social media search engine “social searcher”. further, following mehmood et al. (2022), the text mining method was approached to unveil the main insights and patterns in textual data associated with each university. the text cloud maps visualizing the post thematic on social media were built using an online media monitoring tool “mediatoolkit”. this study analyzes the real cases of the social interactions of top-ranked sustainable universities worldwide according to the ui greenmetric world university rankings in 2021. the general sentiments for green universities were analyzed using the tweet sentiment visualization tool. the study period covers data as of may 10, 2022. the dataset used hereinafter was retrieved from the social media (twitter, facebook, linkedin, youtube, instagram, etc.) of the five top-ranked sustainable universities (wageningen university & research (wur), university of nottingham (un), university of groningen (ug), nottingham trent university (ntu), the university of california, davis (uc davis), and sumy state university (sumdu) (as the first ukrainian university listed by ui greenmetric world university rankings). it is worth mentioning this ranking collects the data on the sustainability of the environment and related economic and social issues under six categories (setting and infrastructure; energy and climate change; waste; water; transportation; and education) to increase the attention to combating climate change and green transformation. table 1. the universities involved in the study university short title country no. of students total score established wageningen university & research wur netherlands 12800 9300 1918 university of nottingham un united kingdom 47000 8850 1881 university of groningen ug netherlands 35000 8800 1614 nottingham trent university ntu united kingdom 35800 8750 1843 university of california, davis uc davis usa 38400 8750 1905 sumy state university sumdu ukraine 12000 6125 1948 source: developed by the authors based on (ui, 2022). www.virtual-economics.eu issn 2657-4047 (online) yana us, tetyana pimonenko, oleksii lyulyov, yang chen, tatjana tambovceva virtual economics, vol. 5, no. 1, 2022 32 according to table 1, wur in the netherlands had the best green performance in 2021. noteworthy here, this university has the best performance in the categories “energy & climate change” and “research & education”. in turn, ug has the highest score in "transportation" category, un in the united kingdom – “setting and infrastructure”. the categories “waste” and “water” are led by the top 3 universities (wur, un, and ug). 4. results and discussion social media have significantly penetrated ordinary life (metzker et al., 2021; machova et al., 2021). as mentioned above, approximately 48% of the world's population uses social media for communication, sharing content, business promotion, etc. noteworthy here, each social media has its own specific. however, the most interesting for businesses are relationship networks such as twitter, facebook, linkedin, etc. one of the twitter advantages is active brand monitoring by detecting the brand's negative attitude and getting feedback. therefore, this study applied the interactive tweet sentiment visualization tool to determine the social media attitude toward green universities worldwide. the extracted tweets were categorized by four quadrants of sentiments (pleasant, unpleasant, sedate, and active tweets). figure 4 concludes that green universities are of good standing worldwide since most tweets belong to pleasant and subdued sentiments. in turn, they have a calm and relaxed tone. therefore, these findings confirm the social media activity of green universities could drive gaining sustainable development goals and promoting an eco-friendly lifestyle worldwide. figure 4. tweet sentiment visualization. source: developed by the authors using tweet sentiment visualization tools. figure 5 provides information on the number of followers on the social media of the analyzed universities. as of may 10, 2022, the un has the biggest student population exceeding 47 thous. (table 1), and the summarized number of followers – 706.2 thous. the number of www.virtual-economics.eu issn 2657-4047 (online) yana us, tetyana pimonenko, oleksii lyulyov, yang chen, tatjana tambovceva virtual economics, vol. 5, no. 1, 2022 33 students at uc davis is 38.4 thous., while the summarized number of followers on social media – 659 thous. the universities ntu and ug have approximately the same number of students (35.8 and 35 thous.). however, the sum of followers on social media of ug is higher compared to ntu (505.9 and 415.9 thous., respectively). despite the student populations of wur and sumdu being almost equal (12.8 and 12 thous., respectively), the number of wur's followers exceeds the sumdu by 17.6 times. moreover, sumdu has a relatively small number of followers on twitter which means its low social activity on this social media. it stands to mention that linkedin is the most popular social media platform for all universities, followed by facebook, twitter, instagram, and youtube. noteworthy here, only ntu and uc davis take initial steps on tiktok. figure 5. the number of followers on social media, thous. (as of may 10, 2022). source: developed by the authors. according to statistical data (fig. 6), ntu is the most mentioned university (352 mentions). moreover, the number of users' social accounts of this university exceeds the rest of the analyzed universities (199 users). in the second place by the number of mentions is the un in netherland (261 mentions) with 153 users’ social accounts. the third place is occupied by uc davis (245 mentions and 137 users), followed by ug (194 mentions and 136 users), wur (126 mentions and 84 users), and sumdu (111 mentions and 90 users). www.virtual-economics.eu issn 2657-4047 (online) yana us, tetyana pimonenko, oleksii lyulyov, yang chen, tatjana tambovceva virtual economics, vol. 5, no. 1, 2022 34 figure 6. the number of mentions and users (as of may 10, 2022). source: developed by the authors based on (social searcher, 2022) and the universities’ data. for detecting the type of content posted by the universities as of may 10, 2022, this study employed the social media search engine “social searcher”. figure 7 demonstrates the segmentation of the posts published by each university and their summary proportion in the circular diagram. thus, all benchmark universities posted links, status, videos, and photos. it could be stated that the most popular content type (38%) is links (the posts with attached links). the share of photo posts is 35% (posts with an attached image or a link with the *.jpg, *.png, *.gif formats), videos (the posts with attached video or links to video web services like youtube, etc.) – 22%. figure 7. the type of posted content (as of may 10, 2022). source: developed by the authors based on data (social searcher, 2022). 126 261 194 352 245 111 84 153 136 199 137 90 wur un ug ntu uc davis sumdu mentions users www.virtual-economics.eu issn 2657-4047 (online) yana us, tetyana pimonenko, oleksii lyulyov, yang chen, tatjana tambovceva virtual economics, vol. 5, no. 1, 2022 35 on the contrary, status had the lowest popularity among all universities. however, figure 8 shows the slight difference between the five top-ranked green universities and sumdu in the share of posted content since sumdu posts more videos than photos. this study reveals some statistics on the frequency of posting by weekday. table 2 shows that wednesday is the most popular day for posting on social media. table 2. the frequency of posts by the weekday, no. of posts (as of may 10, 2022). university mon tue wed thu fri sat sun wur 6 19 51 4 3 10 7 un 6 21 48 4 3 9 9 ug 6 18 35 12 8 14 7 ntu 8 21 32 5 8 16 10 uc davis 11 23 33 8 7 10 8 sumdu 3 7 64 6 10 3 7 source: developed by the authors based on data (social searcher, 2022). the summarization of posts indicated that the top-5 green universities are most active on social media on wednesday, tuesday, saturday, and sunday (in decreasing order). noteworthy here, the ukrainian university is more active on wednesday and friday. figure 8. the frequency of posting by hours (as of may 10, 2022). source: developed by the authors based on data (social searcher, 2022). furthermore, figure 8 shows that the universities post mostly at the end of the working day (17% of posts) from 6 pm till 8 pm, during the lunchtime (11% of posts) from 12 pm till 2 pm, and in the morning (10%) from 8 am till 10 am. however, the posting schedule of the united 5.2 3.5 5.3 8.8 10.2 7.8 11.2 11.3 8.3 16.8 6.2 5.2 0 5 10 15 20 25 30 % wur un ug ntu uc davis sumdu average www.virtual-economics.eu issn 2657-4047 (online) yana us, tetyana pimonenko, oleksii lyulyov, yang chen, tatjana tambovceva virtual economics, vol. 5, no. 1, 2022 36 kingdom (un and ntu) is slightly different. the peak for posting is from 6 am till 8 am for the un, while from 12 pm till 2 pm – for the ntu. the sentiment analysis results allowed identifying the tonality and determining the general attitude towards the universities’ posts based on the positive and negative word collection. all feedback is divided into three categories (positive, neutral, and negative). figure 9 shows no significant variations in feedback among the categories for all benchmark universities. thus, neutral feedbacks dominate. the highest rate of positive user sentiment had the ug (29%) and un (28%). these universities are followed by the wur (26%), uc davos (25%), sumdu (24%), and ntu (22%). moreover, the ug has the lowest rate of negative user sentiment, while the rest universities have approximately the same share of negative feedback (11-12%). figure 9. the sentiment ratio of posts, % (as of may 10, 2022). source: developed by the authors based on data (social searcher, 2022). this study enrolled the text cloud technique to determine the topics on social media related to the analyzed universities. the findings allow detecting in what context the green universities are being mentioned online in april 2022. considering figure 10, the word size shows the frequency of its mentioning. thus, the bigger the size of the word is, the more popular it is and vice versa. 26 28 29 22 25 24 12 11 9 12 11 11 62 61 62 66 64 65 wur un ug ntu uc davis sumdu positive negative neutral www.virtual-economics.eu issn 2657-4047 (online) yana us, tetyana pimonenko, oleksii lyulyov, yang chen, tatjana tambovceva virtual economics, vol. 5, no. 1, 2022 37 figure 10. the text cloud map for a) wur; b) un; c) ntu; d) ug; e) uc davis; f) sumdu (as of may 10, 2022). source: developed by the authors based on data (mediatoolkit, 2022). figure 10 shows that the main topic of posts mentioning the five top-ranked green universities is research. the findings confirm the wur green orientation. thus, wru is mainly mentioned in the post addressing the environment, climate impact, greenhouse, internationalization, technology, innovations, etc. un was mentioned in the posts, especially concerning the internationalization, news, corona, etc. the post mentioning the ntu covers globalization, health, data, people, changes, etc. the ug's thematic posts relate to studies, scientific publications, internationalization, professors, etc. further, uc davis appeared in the posts about health, news, discrimination, and other university issues. at last, the ukrainian university sumdu is tagged in the posts covering invasion, support, international students, nationalization, etc. 5. conclusions this study examined the social media performance of top-ranked sustainable universities worldwide according to the ui greenmetric world university rankings in 2021 (wageningen university & research, university of nottingham, university of groningen, nottingham trent university, and the university of california, davis, and sumy state university (as the first ukrainian university listed by ui greenmetric world university rankings)). the findings of the sentiment analysis showed that netizens take well to the green universities’ activity on twitter. the above confirms the research hypothesis that green universities could significantly foster an eco-friendly lifestyle worldwide and contribute to achieving sustainable development goals. the obtained results showed that the total number of followers on social media of five topranked sustainable universities worldwide according to the ui greenmetric world university www.virtual-economics.eu issn 2657-4047 (online) yana us, tetyana pimonenko, oleksii lyulyov, yang chen, tatjana tambovceva virtual economics, vol. 5, no. 1, 2022 38 rankings in 2021 significantly exceeds the number of students. that indicates a good interest in the social media profiles of analyzed universities. besides, only two universities have created social profiles on tiktok, which is highly popular among youth. there is a low follower base in the ukrainian university. therefore, it requires sumdu to strengthen its social presence and activity to broader its social media audience and green impact on society. the most popular type of content posted by universities was links (38%), photos 35%, and videos (22%), while status had the lowest popularity among all universities. the analysis of posting frequency showed that the top-5 green universities are most active on social media on wednesday, tuesday, saturday, and sunday. on the contrary, the ukrainian university is more active on wednesdays and fridays. furthermore, the benchmark universities post mainly at the end of the working day (17% of posts) from 6 pm till 8 pm, during the lunchtime (11% of posts) from 12 pm till 2 pm, and in the morning (10%) from 8 am till 10 am. the findings of sentiment analysis showed that the general attitude towards the universities’ posts is neutral for all analyzed universities. the highest rate of positive user sentiment had the ug (29%) and un (28%). moreover, the ug has the lowest rate of negative user sentiment. therefore, the above results indicate the necessity to launch an effective marketing campaign to increase the social activity of followers, increase professional engagement and interaction, etc. the text mining technique showed that the main topic of posts mentioning the top-5 green universities is research. on the contrary, the most sustainable university wur confirmed its green orientation in social media posts addressing the environment, climate impact, greenhouse, internationalization, technology, innovations, etc. thus, it indicates the need to increase the number of posts devoted to green issues unveiling the universities activity in its intentions to increase the green awareness of society. however, it stands to mention these results are limited since they consider only cover only the data for the previous month. therefore, further studies should cover the broader date range and geography. 6. presenting the sources of funding the research was funded by a grant from ministry of education and science of ukraine, 0121u100468, "green investing: cointegration model of transmission esg effects in the chain "green brand of ukraine social responsibility of 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(2021). using social media mining and pls-sem to examine the causal relationship between public environmental concerns and adaptation strategies. international journal of environmental research and public health, 18(10), 5270. https://doi.org/10.3390/ijerph18105270 https://www.social-searcher.com/ https://www.csc2.ncsu.edu/faculty/healey/tweet_viz/tweet_app/ 64 www.virtual-economics.eu issn 2657-4047 (online) yuliya zaloznova and nataliia trushkina virtual economics, vol. 2, no. 1, 2019 2019 volume 2 number 1 (january) management of logistics activities as a mechanism for providing sustainable development of enterprises in the digital economy yuliya zaloznova and nataliia trushkina abstract. in today’s conditions of dynamic development of the digital economy, the problems of management of logistics activities of enterprises are actualized. there are such problems as the problems of effective use of material resources, improvement of management of warehouse economy, production and commodity stocks, transport streams and marketing activity and improvement of quality of logistic service. comparative analysis of the dynamics of indicators of logistic activity of business entities in ukraine and the eu countries is performed. features are investigated and modern trends in the development of logistic activities of ukrainian enterprises are determined. it is established that there are many risks in organization of logistics activities of enterprises that are conditionally classified into 2 groups: exogenous (political, institutional, market, financial, environmental) and endogenous (associated with the processes of logistics, inventory formation, economic, transport, marketing, information). international experience of strategic management of logistic activities of enterprises is analyzed and summarized. strategic lines of improvement of management of logistic activities of enterprises are defined, taking into account international best practices, which include logistics management, inventory management, process management, customer service, managing sales activity, pricing improvement, formation of transport-logistic system, information support of the process of the logistic activities through the use of modern digital technologies and logistic concepts. implementation of the above-mentioned measures will help to increase the level of competitiveness and sustainable development of business entities as a result of reducing the cost of organizing the logistic activities of enterprises, and to minimize the risks and losses from the acquisition of low-quality material resources, downtime of transport, late delivery of products to consumers and payment for shipped products. keywords: management of logistic activities, mechanism, sustainable development, enterprise, digital economy, strategic lines, efficiency jel classification: l10, l81, l91, m11, r40 65 www.virtual-economics.eu issn 2657-4047 (online) yuliya zaloznova and nataliia trushkina virtual economics, vol. 2, no. 1, 2019 author(s): yuliya zaloznova institute of industrial economics of the national academy of sciences of ukraine, 2 marii kapnist street, kyiv, ukraine, 03057 e-mail: zaloznova.iep@gmail.com https://orcid.org/0000-0003-3106-1490 nataliia trushkina institute of industrial economics of the national academy of sciences of ukraine, 2 marii kapnist street, kyiv, ukraine, 03057 e-mail: trushkina@nas.gov.ua https://orcid.org/0000-0002-6741-7738 citation: zaloznova, y., trushkina, n. (2019). management of logistics activities as a mechanism for providing sustainable development of enterprises in the digital economy. virtual economics, 2(1), 7087. https://doi.org/10.34021/ve.2019.02.01(4) received: september 29, 2018. revised: october 23, 2018. accepted: november 16, 2018. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://orcid.org/0000-0003-3106-1490 mailto:trushkina@nas.gov.ua https://orcid.org/0000-0002-6741-7738 https://doi.org/10.34021/ve.2019.02.01(4) https://creativecommons.org/licenses/by/4.0/ 66 www.virtual-economics.eu issn 2657-4047 (online) yuliya zaloznova and nataliia trushkina virtual economics, vol. 2, no. 1, 2019 1. introduction in order to improve the competitiveness, business entities should organize their logistics activities so that they could minimize the level of risks, losses and costs of logistics, production, inventory formation, customer service, transportation and marketing of finished products, as well as maximize profitability of its implementation. therefore, at present time the enterprises have to move on to qualitatively new technologies that can provide a level of service that meets the high demand and needs of consumers while at the same time maximizing possible costs. the key task of enterprises is to create an effective logistics information system capable of flexibly responding to changing market conditions. based on this, it is necessary to further develop the theoretical provisions and practical recommendations for improving the management of logistic activities of business entities in a global digital transformation of economic processes. 2. literature review a significant number of scientific works are devoted to the conceptual framework, scientific and methodological approaches, and practical recommendations to improve the efficiency of management of logistic activities of enterprises of various industries. as the analysis of international scientific sources on logistics shows, the scientists paid much attention to the justification and the development of: logistic model of distribution (boom, 2007); proposals for improvement of supply chain management (huemer, 2006; barratt & whitehead, 2008); methodological approaches to determine the optimum volume of the delivery batch (schreibfeder, 2006); measures to improve the level of service and customer service (gunasekaran, 2005; payne, 2005; kotler, 2006; lamben, 2007; souitaris & balabanis, 2007; wallenburg, 2008); methodical approach to calculation of indicators of efficiency and productivity of customer service (oke et al., 2007); concepts, optimization models and supply chain management strategies (beresford et al., 2005; harrison & hauck, 2007; sander & shechter, 2008; blaik, 2010; murphy & wood, 2017; bowersox & closs, 2017); scientific and methodological bases of risk management of enterprises, practical tools to determine the logistic risk under conditions of uncertainty and the use of risk management in the management of logistic systems of enterprises in order to optimize the process of rational decision-making (damodaran, 2008; fuchs & wohinz, 2009; andersen & schreder, 2010; crouhy et al., 2012); sustainable development (amosha et al., 2016; głowski & kvilinskyi, 2017; kharazishvili et al., 2016; kvilinskyi et al., 2017; laiko, o.; & kwilioski, 2017; lakhno et al., 2018; payonk et al., 2015; pajak et al., 2016; 2017; yakubovskiy et al., 2017; zaloznova et al., 2018); tools and methods of accounting of warehouse operations using automated, and information and communication technologies (frazelle, 2013; kwilinski, 2017; 2018a; 2018b; 2018c). 67 www.virtual-economics.eu issn 2657-4047 (online) yuliya zaloznova and nataliia trushkina virtual economics, vol. 2, no. 1, 2019 however, despite such close attention to the identified problems on the part of scientists, it remains relevant to conduct research in the line of improving the management of logistic activities of enterprises, which must meet modern requirements of management in the context of globalization and european integration. thus, the goal of this research is to determine the strategic lines of improving the management of logistic activities of enterprises in the conditions of the global digital economy. 3. methodology as the world bank studies show, in 2016 ukraine took the 80 th place among 160 countries in the ranking of logistics performance index (lpi). moreover, according to the criterion of "efficiency of customs clearance" ukraine took the 116 th place, "infrastructure quality" – the 84 th , "ease of arranging international shipments" and "quality and competence of logistics services" – the 95 th , "tracking the passage of goods" – the 61 st , "promptness of supply of goods" – the 54 th place among 160 countries in the world (connecting to compete 2016: trade logistics in the global economy. the logistics performance index and its indicators, 2016). in 2017 in the ranking of global competitiveness prepared by the world economic forum in terms of "infrastructure quality", ukraine took the 88 th place among 137 countries of the world, including in terms of "quality of roads" – the 130 th , "quality of port infrastructure" – the 93 rd , "quality of air transport infrastructure" – the 92 nd , "quality of railway infrastructure" – the 37 th place (the global competitiveness report, 2018). according to experts, the low efficiency of logistic activities in ukraine is connected with unreasonably high levels of port tariffs and fees (https://comments.ua/money/595535ukrainskaya-logistika-okazalas.html). as the experts state, ukrzaliznytsia meets the logistic needs of the industry only by 10-30% (vikhrov, 2017). on the basis of the analysis and generalization of statistical data, the tendencies and features of development of logistic activity of the enterprises in ukraine are determined. the ratio of sales and production of enterprises for 2012-2017 increased from 1.72 to 1.79 times. it is shown in table 1. table 1. dynamics of volumes of the sold and produced goods of enterprises years volume of the sold products, million uah volume of produced goods, million uah ratio, times 2012 4459818.8 2593346.7 1.72 2013 4334453.1 2468790.2 1.76 2014 4459702.2 2723971.2 1.64 2015 5716431.0 3215287.9 1.78 2016 6877077.3 3884617.6 1.77 2017 7797918.0 4367087.1 1.79 source: (information and statistical materials of the state statistics service of ukraine for 2012-2017). 68 www.virtual-economics.eu issn 2657-4047 (online) yuliya zaloznova and nataliia trushkina virtual economics, vol. 2, no. 1, 2019 excess of production costs over value added: in 2012 by 2.05 times, in 2017 by 1.52 times, is shown in table 2. table 2. dynamics of production costs and added value of enterprises years costs for production of goods, million uah value added, million uah ratio, times 2012 2077904.1 1015503.5 2.05 2013 1984065.5 977145.0 2.03 2014 1952582.8 1234090.1 1.58 2015 2434303.8 1329264.5 1.83 2016 2759943.0 1702670.5 1.62 2017 2986258.3 1969138.4 1.52 source: (information and statistical materials of the state statistics service of ukraine for 2012-2017). increase in the ratio of sales and operating costs of enterprises from 1.52 to 1.67 times and the volume of sales and production costs from 2.15 to 2.61 times are shown in table 3. table 3. dynamics of sales volumes and operating expenses of enterprises years volume of sold products, million uah costs of operating activity, million uah ratio, times 2012 4459818.8 2938536.6 1.52 2013 4334453.1 2790647.9 1.55 2014 4459702.2 3296514.5 1.35 2015 5716431.0 4149202.2 1.38 2016 6877077.3 4258442.3 1.61 2017 7797918.0 4664271.9 1.67 source: [information and statistical materials of the state statistics service of ukraine for 2012-2017]. growth of profitability of operations for the years 2010-2017 by 6.1% is shown in table 4. table 4. dynamics of profitability level of operating activities of enterprises years on average over ukraine, % including main lines of business, % agriculture industry wholesale and retail trade transport, warehousing, postal and courier activities 2010 4.0 22.9 3.5 9.8 5.6 2011 5.9 23.2 4.7 15.0 6.1 2012 5.0 21.7 3.4 12.2 5.4 2013 3.9 11.3 3.0 10.2 3.5 2014 -4.1 20.6 1.6 -12.8 -1.7 2015 1.0 41.7 0.9 -0.9 1.1 2016 7.4 32.4 4.2 15.8 5.1 2017 10.1 3.8 8.3 25.9 6.6 source: (information and statistical materials of the state statistics service of ukraine for 2010-2017). 69 www.virtual-economics.eu issn 2657-4047 (online) yuliya zaloznova and nataliia trushkina virtual economics, vol. 2, no. 1, 2019 decrease in the total volume of cargo transportation in 2010-2017 by 15.8% is the result of the 46.8% reduction in the volume of shipment by water transport – by 46.8%, by pipeline – by 25.2%, by railway transport – by 21.5%. increase in the volume of cargo transportation by road is 11%; volume of cargo transportation by air remained unchanged. the results are shown in table 5. table 5. dynamics of the volume of cargo transportation in ukraine by means of transport years total volume, million tonnes including by means of transport, million tonnes railways road pipeline water air 2010 755.3 432.5 158.2 153.4 11.1 0.1 2011 811.7 468.4 178.3 155.0 9.9 0.1 2012 772.8 457.5 179.0 128.4 7.8 0.1 2013 757.6 441.8 183.5 125.9 6.3 0.1 2014 671.2 387.0 178.4 99.7 6.0 0.1 2015 601.0 350.0 147.3 97.2 6.4 0.1 2016 624.5 344.1 166.9 106.7 6.7 0.1 2017 635.9 339.5 175.6 114.8 5.9 0.1 source: (information and statistical materials of the state statistics service of ukraine for 2010-2017). increase in the share of cargo transportation by road is 6.7% of the total ukrainian volume of shipments (from 20.9 to 27.6%); decrease in railway cargo transportation is 3.9% (from 57.3 to 53.4%), pipeline – 2.2% (from 20.3 to 18.1%), water – 0.6% (from 1.5 to 0.9%). percentage of cargo transportation by air is insignificant and has remained unchanged in recent years. decrease of total cargo turnover is 15.2% due to decrease of water transport cargo turnover by 52.8%, aviation – by 27.9%, pipeline – by 23.8%, railway – by 12%. increase in freight turnover of road transport is 6.4%. it is shown in table 6. table 6. dynamics of cargo turnover in ukraine by means of transport years cargo turnover, million tkm including by means of transport, million tkm railways road pipeline water air 2010 404572.9 218037.6 38697.2 138445.4 9014.5 378.2 2011 426427.7 243556.4 38438.9 136700.4 7365.2 366.8 2012 394648.1 237274.6 39194.1 112505.1 5324.8 349.5 2013 379045.0 224017.8 40487.2 109651.8 4615.2 273.0 2014 335151.7 209634.3 37764.2 82050.9 5462.3 240.0 2015 315341.8 194321.6 34431.1 80944.1 5434.1 210.9 2016 323473.9 187215.0 37654.9 94378.9 3998.6 225.9 2017 343057.1 191914.1 41178.8 105434.1 4257.1 272.7 source: (information and statistical materials of the state statistics service of ukraine for 2010-2017). 70 www.virtual-economics.eu issn 2657-4047 (online) yuliya zaloznova and nataliia trushkina virtual economics, vol. 2, no. 1, 2019 increase in the share of cargo turnover of road transport in the general ukrainian cargo turnover is 2.4% (from 9.6 to 12%); railway – 2% (from 53.9 to 55.9%); reduction in pipeline cargo turnover is 3.5% (from 34.2 to 30.7%); water – 1% (from 2.2 to 1.2%). the share of air transport cargo turnover is insignificant and amounted to almost 0.1% in 2017. growth of wholesale trade turnover of enterprises in comparable prices for 2012-2017 is 67.1%, of retail trade – 14.5%, volumes of retail turnover of enterprises – 53.3%. it is shown in table 7. table 7. dynamics of volume of wholesale and retail turnover of enterprises years wholesale turnover, million uah retail trade turnover, million uah retail trade turnover, million uah actual prices comparable prices actual prices comparable prices actual prices comparable prices 2012 1076572.9 1111014.3 767026.0 668723.6 405114.0 360742.7 2013 1057768.0 1086004.1 838230.1 771850.9 433081.0 408181.9 2014 987957.0 1203358.1 901923.7 990037.0 438343.0 487047.8 2015 1178887.1 1342696.0 1018778.2 1284714.0 487558.0 607927.7 2016 1555965.7 1486118.1 1175319.2 1126864.0 555975.0 532033.5 2017 1908670.6 1856683.5 815344.3 765581.5 586330.1 553141.6 source: (information and statistical materials of the state statistics service of ukraine for 2012-2017). reduction of export volumes of transport services for 2010-2017 is 23.5% as a result of reduction of railway transport export volumes by 60.8%, sea transport – by 45.4%, pipeline – by 10.7%, air transport – by 6.4%; increase in exports of services by road is 8.4%. the results are shown in table 8. table 8. dynamics of export volumes of transport services, million usd years total volume of export including by means of transport sea air railway road pipeline 2010 7662.9 1120.5 1166.3 1481.0 252.5 3357.7 2011 8848.1 1104.6 1481.8 1772.9 391.9 3755.0 2012 8287.1 1099.4 1485.1 1574.3 447.3 3247.3 2013 7981.8 1022.3 1299.1 1531.9 438.9 3329.0 2014 6101.9 850.9 1071.3 1098.8 459.6 2207.9 2015 5263.2 735.9 853.6 751.3 249.1 2258.0 2016 5300.5 661.6 882.8 561.1 237.9 2630.7 2017 5861.4 612.1 1091.8 580.9 273.8 2998.2 source: (information and statistical materials of the state statistics service of ukraine for 2010-2017). growth of the share of export of services by pipeline transport is 7.4% (from 43.8 to 51.2%) of the total ukrainian volume of exports of transport services; air – by 3.4% or from 15.2 to 18.6%; road – by 1.4% or from 3.3 to 4.7%; reduction in the share of railway service exports is 71 www.virtual-economics.eu issn 2657-4047 (online) yuliya zaloznova and nataliia trushkina virtual economics, vol. 2, no. 1, 2019 9.4% or from 19.3 to 9.9%; by sea – by 4.2% or from 14.6 to 10.4% of total exports of transport services. increase in the total volume of imports of transport services is 4.1% based on the growth of imports of services by pipeline by 132.8 times, by sea – by 71.9%, by road – by 22.6%, by air – by 1.1%; decrease in imports of services by railroad is 35.7%. the results are shown in table 9. table 9. dynamics of import volumes of transport services, million usd years total volume of import including by means of transport sea air railway road pipeline 2010 1164.9 129.6 447.6 463.3 108.3 0.6 2011 1581.5 137.4 685.9 599.7 141.2 0.5 2012 1713.5 196.4 635.9 641.9 193.6 0.9 2013 1689.8 187.8 628.3 626.3 194.9 3.5 2014 1376.6 243.7 431.0 431.3 189.8 52.6 2015 1153.4 191.7 466.9 287.0 91.8 98.1 2016 989.3 141.2 357.5 259.9 114.9 87.2 2017 1213.1 222.8 452.4 297.7 132.8 79.7 source: (information and statistical materials of the state statistics service of ukraine for 2010-2017). increase in the share of imports of sea transport services is 7.3% (from 11.1 to 18.4%) of total imports of transport services, pipeline – by 6.5% (from 0.1 to 6.6%), road – by 1.6% (from 9.3 to 10.9%) and by railroad; reduction is 15.3% (from 39.8 to 24.5%), air – by 1.1% (from 38.4 to 37.3%). reduction of the balance of export-import operations in the transport sector for 2010-2017 is 28.5% or from 6498 to 4648.3 million usd. reduction of the ratio of exports and imports of transport services: if in 2010 this figure was 6.58 times, in 2017 it was 4.83 times. increase in the total volume of exports of services for processing of material resources for 2010-2017 is 37.7% due to the growth of exports of services for processing of goods for sale in the international markets by 46.3%. it is shown in table 10. table 10. dynamics of export volumes of services for processing of material resources years export volume, thousand usd of which services for the processing of goods for sale in the ukrainian market abroad thousand usd % thousand usd % 2010 1030658.9 74167.4 7.2 956491.5 92.8 2011 1445719.8 120255.0 8.3 1325464.8 91.7 2012 1577828.2 89340.2 5.7 1488488.0 94.3 2013 1722083.1 15256.0 0.9 1706827.1 99.1 2014 1334394.1 18695.3 1.4 1315698.8 98.6 2015 1078345.1 18892.4 1.8 1059452.7 98.2 2016 1125705.2 8702.3 0.8 1117002.9 99.2 2017 1419720.3 20227.1 1.4 1399493.2 98.6 source: (information and statistical materials of the state statistics service of ukraine for 2010-2017). 72 www.virtual-economics.eu issn 2657-4047 (online) yuliya zaloznova and nataliia trushkina virtual economics, vol. 2, no. 1, 2019 reduction of the total volume of import of services for the processing of material resources is 96.7% due to a decrease in import of services for the processing of goods for sale in the ukrainian market by 99.9% and abroad – by 94.1%. it is shown in table 11. table 11. dynamics of import volumes of services for processing of material resources years import volume, thousand usd of which services for the processing of goods for sale in the ukrainian market abroad thousand usd % thousand usd % 2010 81069.4 35986.2 44.4 45083.2 55.6 2011 174562.2 74150.8 42.5 100411.4 57.5 2012 169262.5 90096.6 53.2 79165.9 46.8 2013 11627.5 571.9 4.9 11055.6 95.1 2014 51248.7 34.2 0.1 51214.5 99.9 2015 63415.8 0.1 0.0 63415.7 100.0 2016 5299.1 56.7 1.1 5242.4 98.9 2017 2703.9 31.8 1.2 2672.1 98.8 source: (information and statistical materials of the state statistics service of ukraine for 2010-2017). increase in the balance of export-import operations in rendering services for the processing of material resources is 49.2%. increase in export volumes in the structure of international trade of goods of ukraine with the eu countries is 34.3%, import is 8.9%; reduction in the ratio of import and export: if in 2010 this figure amounted to 1.46 times, in 2017 it was 1.19%. the results are shown in table 12. table 12. dynamics of the international trade of goods of ukraine with eu countries, million usd years export import balance 2010 13051.9 19101.2 -6049.3 2011 17969.9 25752.9 -7783.0 2012 17081.3 26156.4 -9075.1 2013 16758.6 27046.5 -10287.9 2014 17002.9 21069.1 -4066.2 2015 13015.2 15330.2 -2315.0 2016 13496.3 17140.8 -3644.5 2017 17533.4 20799.4 -3266.0 source: (information and statistical materials of the state statistics service of ukraine for 2010-2017). export volume growth in the structure of international trade of services of ukraine with eu countries is 10.8%, decrease in import volumes is 15.4%; increase in the ratio of export and import: if in 2010 this figure amounted to 1.04 times, in 2017 it was 1.36 times. the results are shown in table 13. 73 www.virtual-economics.eu issn 2657-4047 (online) yuliya zaloznova and nataliia trushkina virtual economics, vol. 2, no. 1, 2019 table 13. dynamics of volume of international trade of services of ukraine with eu countries, million usd years export import balance 2010 3117.0 2994.4 122.6 2011 3525.4 3363.3 162.1 2012 3744.9 3630.3 114.6 2013 4195.7 4212.0 -16.3 2014 3991.6 3148.8 842.8 2015 2927.9 2750.1 177.8 2016 3004.9 2421.6 583.3 2017 3452.7 2532.5 920.2 source: (information and statistical materials of the state statistics service of ukraine for 2010-2017). based on the international comparison of the volume of cargo transportation of ukraine with different eu countries, it was established that, as a rule, these countries have developed road and rail transport. it was established that the volume of cargo transportation increased in 2010-2016 in a number of european countries: lithuania – by 42.2%; latvia – by 35.4%; estonia – by 26.7%; uk – by 25.5%; czech republic – by 21.3%; austria – by 13.7%; germany – by 12.1%; slovakia – by 9.2%; poland – by 8%. in 2010-2016 the volume of cargo transportation by railroad increased in most eu countries: italy – by 117.8%; czech republic – by 18.3%; germany – by 15.7%; slovakia – by 14.4%; hungary – by 9.3%; france – by 4.8%. during this period there was a trend of significant growth in the volume of inland water transportation of goods only in poland. thus the value of this indicator increased by 38.8%. in other eu countries the inland water transport is not used efficiently enough as evidenced by the reduction in the volume of shipment that is shown in table 14. table 14. dynamics of the volume of cargo transportation in the eu countries by modes of transport, th. tonnes countries railway transport road transport inland water transportation 2010 2016 2010 2016 2010 2016 austria 107670 99784 330988 376326 11052 9071 united kingdom 104374 78549 1566016 1964743 3456 3394 estonia 46705 25363 27294 34585 – – italy 42348 92249 1527762 901518 1259 269 latvia 49164 47819 46809 63389 – – lithuania 48061 47651 44716 63571 99 52 germany 343774 397754 2734098 3066128 229607 221349 poland 234568 222523 1216083 1313657 2753 3821 slovakia 44327 50727 143071 156279 10103 6758 hungary 45794 50047 199848 197762 9952 8224 france 85045 89107 2015327 1777645 69244 64216 czech republic 82900 98034 355911 431889 833 832 source: (transport and communication of ukraine, 2017) 74 www.virtual-economics.eu issn 2657-4047 (online) yuliya zaloznova and nataliia trushkina virtual economics, vol. 2, no. 1, 2019 4. results table 15. risk classification of logistic activities of enterprises risk name risk content exo ge no us political unstable political situation institutional not effective enough action of legislative and regulatory documents, governing process of purchasing, sales, commercial and transport activity market unpredictability of the market; inflexibility of the existing logistic systems of enterprises in the constantly fluctuating consumer demand, market environment changes and risks financial constant changes in exchange rate fluctuations; increase in debt for products sold; difficulties in attracting credit resources due to financial and economic instability; limited financial resources of enterprises environmental negative impact on the environment as a result of violation of the conditions of transportation of products en do ge no us economic balance reduction of export-import operations in the transport sector; reduction of profitability from operating activities of enterprises; lack of sufficient organizational and economic support for the provision of quality logistic services associated with logistics limited number of consideration of many factors in the calculation of the optimum supply of material resources; unevenness of suppliers' work; inability of the enterprise to plan orders effectively; inability to fulfill the terms of the contract for the supply of material resources associated with inventory formation increase in production and inventory volumes; inefficient inventory management transport inopportune delivery of cargo due to breakage or unexpected downtime of vehicles; unavailability of goods at the required period; loss of cargo due to unfavorable transportation conditions sales insufficient consideration of service features of various categories of consumers in the context of the relationship marketing concept; imperfect system of contractual relations between enterprises and consumers; late payments by consumers informational insufficient use of modern information and communication technologies and electronic platforms as tools for information support of logistic activities and customer relationship management source: own research. the changeable development of the international market environment results in various types of risks of economic activity, including logistics. therefore, it is advisable to apply a systematic 75 www.virtual-economics.eu issn 2657-4047 (online) yuliya zaloznova and nataliia trushkina virtual economics, vol. 2, no. 1, 2019 approach to risk management of logistic activities in the risk management system of the enterprise in present-day conditions. as research shows, it is advisable to take into account many risks, which can be classified into 2 groups: exogenous and endogenous risks, on managing the logistic activities of enterprises. it is shown in table 15. therefore, in order to efficiently operate enterprises in an unstable institutional environment, it is advisable to create conditions that would enable enterprises to obtain maximum benefits from organizing logistics activities taking into account the specifics of the development of the global economy, maintaining an optimal level of costs, and increasing the service quality to customers. all this requires the introduction of a complex of various logistics information technologies, which can include: mrp (material requirements planning) – allows optimal regulation of components delivery to the production process, control of stocks in warehouse and production technology. the main task is to provide a guarantee of the availability of the required number of relevant materials and components at any time within the planning period along with possible reduction of permanent stocks; mrpi – material requirement planning; erp (enterprise resource planning system) – expands the range of supply chain management beyond the enterprise, allows you to control and regulate the communication among the supply chain members. it is oriented on processes and internal integration (logistic and financial); opt (optimized production technology) – the basic principle is to identify “bottlenecks” of production or critical resources (stocks of raw materials, materials, equipment); to solve the tasks of operational and short-term management of production, including the formation of a production schedule for one day, week, etc.; scm (supply chain management) – the integration of key business processes from the beginning to the end-user and the covering of all suppliers of goods, services and products that add value for consumers and other stakeholders. this is the technology that ensures the corporate strategy of an enterprise with optimal cost of resources. it allows you to solve the tasks of integrated management of functional areas and to coordinate the logistics process of an enterprise with business partners depending on the electronic platform (b2b or b2c); crm (customer relationship management) – an information technology that implements a client-oriented approach to management of an enterprise. the essence of this system consists of the personalization of relations with clients, the achievement of a favorable attitude of clients to the enterprise and products, the understanding of the process of sale as a permanent process with involvement of each employee of the enterprise; qr (concept “quickly reaction”) – quickly customer service that is used to manage the movement of goods with a short life cycle. this is the system of delivery service to the endcustomer based on the electronic data exchange between retailers and wholesalers and manufacturing areas; ecr (the system of organization of the economic relations between the producers and trade enterprises) – this system is based on the principle of jit and on the exact 76 www.virtual-economics.eu issn 2657-4047 (online) yuliya zaloznova and nataliia trushkina virtual economics, vol. 2, no. 1, 2019 synchronization of production and sales, which involves a specific approach to the control of the state of stocks and reorganization of the functions of distribution centers. the principle of continuous replenishment of stocks is used, according to which the powers of the suppliers are extended in order to provide the necessary amount of supply and the delivery terms; lp (concept “lean production”) – realizes the idea of combining low costs with large volumes of mass production, and product diversity with the flexibility of small-scale production. the main idea is to identify the operations that consume resources but do not create added value and to eliminate them completely; ddt (concept “demand reaction”) – allows to maximize the response time reaction of an enterprise to the demand changes through the rapid replenishment of stocks at those points of the market where the growth of such demand is predicted; it improves the coordination and relationship of producers, intermediaries and retailers as links of the integrated logistics chain; drp (planning system of products and resources in distribution) – drp i allows not only to take into account conjuncture, but also to actively influence on it. this system ensures stable ties between supply, production and sales. the ultimate function of drp i system is the planning of transport traffics. in the system, the requests for transport services are processed, the traffic schedules are drawn up and adjusted in real time. due to the drp ii technology, the tasks of medium to long-term forecasting of consumer demand, system indicators of work of warehouses and other parameters are solved; e-sklad (automated management system of warehouse) is an integrated suite that contains software, barcode printers, radio terminals or data collection terminals. the main purpose of the system is automation of operational management of all warehouse processes. it allows business partners to control individual transactions in their own warehouses via the internet. in this system the following set of warehouse functions is implemented: acceptance, placement, replenishment of stocks, selection and shipment of goods, inventory; cals-technologies – integrated system strategy for increasing the efficiency, productivity and profitability of the processes of production-economic activity of the enterprise, which directly influence the competitiveness of its products. the task of this technology is to increase the efficiency of all participants of the processes of creation, production and use of the product by expediting the process research and development of the product; to provide the product of new properties; to reduce costs; to increase the level of service in the processes of production the product, its operation and technical maintenance. the use of information and digital technologies will increase the efficiency of logistics management by obtaining the synergistic effect due to an increasing average profitability from organization of logistics activities by 15-20%; it will increase the indicator of the consumer retention by 5%; time reduction on performing current operations by 25-30%. there will be an increase in the accuracy of forecasting volumes of shipment products up to 99%; reduction of costs on sales, marketing and customer support by 10-15%; increase in the speed of customer orders processing and level information security; reduction of time losses on organization exchange of information between the enterprise and economic contractors; formation of client-oriented approach to management of relations with different groups of consumers of the enterprise. 77 www.virtual-economics.eu issn 2657-4047 (online) yuliya zaloznova and nataliia trushkina virtual economics, vol. 2, no. 1, 2019 5. conclusions to improve the efficiency of management of logistic activities of business entities in ukraine, it is advisable to develop a set of strategic measures on: the improvement of legal regulation of the development of transport and logistics system taking into account the best european experience (making the appropriate amendments to the national transport strategy of ukraine for the period up to 2030, formation of the concept of inland water transport development); the management of material and technical supply (calculation of the optimum volume of batch supply of material resources, optimization of procurement strategy of the enterprise, improving the management of the procurement process by multi-criteria evaluation of the choice of the optimum supplier of material resources); the inventory management (analysis of inventory volumes in the warehouse, forecasting of the inventory volumes, formation of optimum inventory management strategy, development of inventory management system at enterprise, optimization of volume of production, warehouse and commodity inventory); traffic management (implementation of cargo management information systems, application of automated processing of documents on completion of transportation of goods, development of proposals to optimize the load of transport, use of internet technology for automation of transport processes); management of customer service processes (analysis of the volume of shipment of products, forecasting of volumes of shipment of products to consumers, development of algorithms for servicing different categories of consumers, development of proposals to improve the level of logistic services); sales activity management (rationale for the use of a network approach to the organization of sales activities of enterprises, formation of a system of contractual relationships with consumers, improvement of customer-oriented approach to the service of different categories of consumers in the context of the concept of relationship marketing, mechanism of implementation of public-private partnership in the management of sales activities of enterprises on the basis of the legal form of syndicate, methodical approach to the selection of the optimum sales channel of finished product, identification of priority areas of ecommerce development as an effective tool for product promotion in the market); improvement of pricing (pricing of material resources and products ready for shipment); information support of the organization of processes of logistic activity on the basis of use of modern digital technologies. as a result of study it was established that there are many risks, which should be considered on the organization of logistic activities of enterprises. therefore, it is advisable to perform continuous monitoring, system risk analysis of logistic activities of enterprises and on this basis to manage risks using a set of methods, tools and activities, which allow to a certain extent to predict the occurrence of risk events and to take opportune measures to minimize them. implementation of the above measures will contribute to the competitiveness of enterprises as a result of improving the management of logistic activities by reducing the time of execution of 78 www.virtual-economics.eu issn 2657-4047 (online) yuliya zaloznova and nataliia trushkina virtual economics, vol. 2, no. 1, 2019 orders, reduction of inventory volumes, growth in the level of demand satisfaction and quality of logistic services, cost minimization, optimization of the material, transport, information and financial flows, increase in the level of profitability of operating activities. references activity of business entities for 2016: statistical abstract (2017). kyiv: the state statistics service of ukraine. retrieved from http://www.ukrstat.gov.ua/ (in ukrainian). amosha, o., kharazishvili, y., liashenko, v., & kvilinskyi, o. 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(2018). reverse logistics in a system of the circular economy: theoretical aspect. economic herald of the donbas, 4(54), 29-37. кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) aleksandra kuzior virtual economics, vol. 5, no. 1, 2022 7 2022 volume 5 number 1 technological unemployment in the perspective of industry 4.0 development aleksandra kuzior abstract. the article concerns the problem of technological unemployment in the perspective of industry 4.0 development. the purpose of the article is to indicate the positive and negative effects of industry 4.0 development and to define the ways of programming education as a way to counteract the negative effects of industry 4.0 development. the author emphasizes the need for an appropriate education curriculum, aimed at acquiring both professional and engineering competences as well as humanistic, ethical and social competences at the same time. technological unemployment is defined as a temporary, short-term phenomenon, lasting until human capital is shifted to other applications. the lack of adequate education, including lifelong learning, creates a risk of transition from technological unemployment to structural unemployment, which is much more dangerous for economic and social reasons. the article, therefore, contains an analysis of the labor market in terms of the demand for specific competences in the perspective of industry 4.0 development and forecasts of the demand for competences of the future. there is no doubt that the development of industry 4.0 requires specialized competences combining the skills of an it specialist and an automation / robotics specialist who has skills in the field of cyber-physical systems integration, operation of advanced production management systems and complex production data analysis systems as well as the application of artificial intelligence algorithms in the production space. at the same time, however, specialists with high communication, interpersonal and social competences will be sought, hence there is a need for appropriate education curriculum. keywords: industry 4.0, technological unemployment, structural unemployment, education, competences of the future jel classification: j23; j24; o33 author: aleksandra kuzior silesian university of technology in gliwice, 26-28 roosevelt str., 41-800 zabrze, poland e-mail: aleksandra.kuzior@polsl.pl http://orcid.org/0000-0001-9764-532 citation: kuzior, a. (2022). technological unemployment in the perspective of industry 4.0. virtual economics, 5(1), 7-23. https://doi.org/10.34021/ve.2022.05.01(1) received: september 12, 2021. revised: october 24, 2021. accepted: november 9, 2021. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) mailto:aleksandra.kuzior@polsl.pl https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) aleksandra kuzior virtual economics, vol. 5, no. 1, 2022 8 1. introduction the term "industry 4.0" is commonly associated with the beginning of the so-called fourth industrial revolution. the term was first used at the international fair hannover messe in 2011. therefore, germany is considered a cradle of industry 4.0 development in europe. in april 2013, a special working group presented the federal government of germany with a set of recommendations for implementing the industry 4.0 concept. the fourth industrial revolution is characterized by the development of intelligent factories based on cyber-physical production systems and openness to the environment. it is related to the internet of people, the internet of things, the internet of services, and the internet of data. industry 4.0 is also developing in poland. this concept was reflected in the government's strategy for responsible development until 2020 (with a perspective until 2030) (strategy for responsible development), which included the strategic project of creating a national integrator responsible for transforming the polish economy towards industry 4.0. as a result of the actions taken, the polish platform of the future was established to support the changes. the responsible development strategy draws attention to the consequences of transformation, indicating that the development of industry 4.0 will contribute to the displacement of human labor by modern technologies. however, at the same time, the demand for employees with other competences will increase in the labor market, e.g. pro-innovative, interdisciplinary, analytical and digital competences. the development of industry 4.0 in individual countries of our globe is different. the leading countries are the usa (in the usa, the terms "smart manufacturing leadership consortium" or "smart factory" are used for the term "industry 4.0"), germany, south korea. in poland, the mechatronization of the industry is not yet a showcase of modern times. for 10 thousand employees in poland there are only 22 robots. compared to germany (292 robots per 10,000 employees) and south korea (450 robots per 10,000 employees), poland is far behind (bujera, 2017). the development of industry 4.0 in poland is at a stage far from the global or european level. one of the main barriers are economic conditions, first of all the lack of sufficient funds for research and implementation of innovative technologies. the research "study of the degree of automation of companies in poland" indicates that only 6% of polish companies introduce industry 4.0 (astor, 2016). deloitte's report "industry 4.0 in poland  revolution or evolution?" (2020) indicates that the leaders of polish companies continue to use modern technologies with great caution, being afraid of destroying the proven ways of the organization’s functioning, although there is now better accessibility and wide possibilities of technologies offered by industry 4.0. in addition to limited financial resources, the leaders also point to the lack of appropriate specialists in the teams. innovative technologies are often evaluated by company leaders as too complex, expensive and unavailable. however, entering the domain of industry 4.0, as well as services 4.0, is a necessity for poland. the factors driving the technological transformation are primarily customer requirements, the need to increase efficiency and the pressure of competition (deloitte, 2020). one aspect that has somehow diminished confidence in modern industrial technology is the fear that robots will take human jobs. this problem is related to the issue of technological unemployment. www.virtual-economics.eu issn 2657-4047 (online) aleksandra kuzior virtual economics, vol. 5, no. 1, 2022 9 technological unemployment results from technological progress and the development of innovative technologies, which, when implemented in various industries and services, usually result in lower demand for human labor. activities previously performed by humans are performed by highly efficient machines. automation and robotization of industry and services undoubtedly reduce the demand for labor (kuzior, 2017), in some sectors of the economy and in selected industries where modern technologies are increasingly needed. however, technological unemployment is defined as a temporary, short-term phenomenon. it continues until human capital is shifted to other applications. therefore, one should not be afraid of this phenomenon, generated by the development of modern technologies. however, in order for technological unemployment not to turn into structural unemployment that is much more dangerous socially and economically, it is necessary to monitor economic and social processes, forecast the directions of labor market development and properly manage the processes of education and development, using the available tools and methods (kuzior, 2017; grebski & grebski, 2019 dzwigol et al., 2020a; 2020b; kwilinski and kuzior, 2019; kwilinski et al., 2020; 2022; miśkiewicz, r. (2019a; 2019b; miśkiewicz and wolniak, 2020; tkachenko et al., 2019). 2. literature review the interest in the development of industry 4.0 is very high, both in the business world and among scientists. the scopus database for the query "industry 4.0" shows 21,271 results (search by titles, abstracts and keywords as of 01/09/2021) and has been growing very significantly in recent years (see figure 1, presenting the last 10 full years). figure 1. publications on industry 4.0 according to scopus database (access: 1.09.2021) source: developed by the author. 89 99 115 218 341 750 1428 2485 4880 5578 0 1000 2000 3000 4000 5000 6000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 www.virtual-economics.eu issn 2657-4047 (online) aleksandra kuzior virtual economics, vol. 5, no. 1, 2022 10 the number of records generated by the system for the query "industry 4.0" on 01/09/2021 was 3920 (data for 8 months of 2021). the analysis was performed on the first 500 results generated by the system. the analysis showed that majority of the articles are directly related to industry 4.0, albeit to a different extent. some refer to the fourth industrial revolution (e.g., ariffin & ahmad, ali, 2021; 2021; gu et al., 2021; xiong, 2021; bigerna et al., 2021; balog & demidova, 2021), and, thus, indirectly to industry 4.0 as well. however, 76 of the 500 articles generated were not related to industry 4.0 at all. despite the inaccuracy of just over 15% of the search results, the analysis carried out in this way indicates a large scale of interest in this subject (kuzior, 2021a). the problem of unemployment in general is even more popular in scientific studies, but the problem of technological unemployment is rather rarely discussed. from the scopus database, the system generated only 1098 results. however, for the query "industry 4.0 and technological and unemployment" there are only 24 results, and two articles do not refer directly to the issue discussed. thus, there is relatively little indexed in the analyzed database of studies on technological unemployment in the context of the development of industry 4.0. thus, this article fills the research gap in this area. the analyzed papers on technological unemployment describe and evaluate this phenomenon from various perspectives. l. novakova (2020) analyzes how technological progress in production processes can affect the shape of the labor market in slovakia. a.r. ahmad, p.a.p. segaran and h.r.m. sapry (2020) draw attention to the need in adapting education to the requirements of the changing labor market to overcome the problem of unemployment in malaysia. popkova and zmiyak (2019) and v. filatov et al. (2020) analyze this problem in the russian federation. the high technological unemployment related to the development of robotization and various applications of artificial intelligence is pointed out by n. v. putilo et. al. (2020). g. szabó-szentgróti, b. végvári and j. varga (2021) analyze the problem of technological unemployment due to the development of industry 4.0 in relation to the theory of m. keynes. they indicate that changes in the labor market create problems with the stability of employment. and undoubtedly, the development of industry 4.0 will reduce the amount of labor needed. the authors suggest that this will bring us closer to the keynesian vision of limiting the demand for labor to 3 hours a day. they indicate that the scale of technological unemployment is determined by the digitization strategy of a given country as well as the readiness of the education system to retrain certain groups of employees, adjusting their qualifications to the needs of the labor market. on the basis of the available reports of consulting companies, k. koput (2020) analyzes the polish labor market, indicating that in the 10-year perspective, unemployment will increase to 40% as a result of the development of solutions based on artificial intelligence and robotization. in order to meet the future demand for specialists, it is necessary to properly prepare staff to supply the labor market. the problem of education in connection with changes in the labor market caused by the development of modern technologies was also analyzed earlier, not only from the perspective of technological unemployment, but also the development of society 4.0 (kuzior, 2017). 3. methods www.virtual-economics.eu issn 2657-4047 (online) aleksandra kuzior virtual economics, vol. 5, no. 1, 2022 11 in the preparation of the article, an analysis of the literature on the subject of technological unemployment in the context of the industry 4.0 development was used. the articles indexed in the scopus database were mainly analysed. given the topic discussed, it was also necessary to use the databases of official statistics. therefore, the desk research method was applied, which consists in recording and analysing the available data sources, including in particular their compilation, verification and processing. the data was analysed using the method of time series analysis, i.e., a sequence of observations of a certain phenomenon in the adopted time units. time series are the basis for the analysis of the dynamics of the phenomena observed, measured and analysed. additionally, a pilot diagnostic survey was conducted among students of management and sociology at one of the silesian universities (poland). quantitative research allowed determining the students’ attitude to the development of modern technologies and related risks, including technological unemployment. the research conducted in june 2020 on a pilot sample of 120 students allowed for the verification of the research hypothesis (h1 the young generation feels the risk of technological unemployment as a negative phenomenon generated by the development of modern technologies used in industry 4.0). additionally, in-depth interviews were conducted with four people suffering from technological unemployment, none of them was classified as long-term unemployed, meaning the one whose unemployment period exceeds 12 months. the interviews allowed for the verification of the hypothesis (h2 people affected by technological unemployment negatively evaluate the phenomenon of accelerated technological development, believing that robots take people's jobs, which leads to negative psychological effects). triangulation of methods and techniques was used in the research. 4. results and discussion in the 1990s, j. rifkin in his book "the end of work: the decline of the global labor force and the dawn of the postmarket era" (rifkin, 1995) presented the next stages of technology expansion into the spheres of human functioning and predicted a gradual elimination of mass employment for automation and robotization. he also indicated the need to prepare for these changes. the aforementioned j.m. keynes, in his considerations covered by the economic “possibilities for our grandchildren” (1930), indicated that in 100 years a person would only work three hours a day while maintaining an adequate standard of living and satisfaction, which was opposed to the generally prevailing opinion of pessimists at that time about progressive inevitable recession. he pointed out that the main reason for the pessimistic attitude is the too fast pace of changes, anomalies related to the progressive unemployment in a world full of needs and short-sightedness that does not allow looking into the future and forecasting this future. keynes avoided these mistakes by envisioning further technological improvements and capital accumulation. he argued that the speed of change that occurred in the eighteenth and nineteenth centuries, after a long period of relatively slow development, allowed for optimistic forecasts for the future with regard to capital accumulation and pace of development, improvement of the efficiency of industrial production and food production, all by means of merely a quarter of the human effort so far, human work. at that time, he was www.virtual-economics.eu issn 2657-4047 (online) aleksandra kuzior virtual economics, vol. 5, no. 1, 2022 12 already writing about technological unemployment as a temporary phenomenon in the perspective of solving economic problems as the basic ones with which humanity is struggling more or less cyclically. over the centuries, solving economic problems has been the primary goal of mankind. without this goal, the humanity may not be able to cultivate the art of living in and of itself. a person will have to work to be happy, but three hours a day (15 hours a week) is enough to keep a person happy. when capital accumulation is no longer essential, there will also be changes in humanity's moral code and many pseudo-moral principles that have placed negative qualities on a pedestal of virtues. people will have a chance to estimate the value of money in terms of its true value in an art of living based on economic justice (keynes, 1930). however, it is not the purpose of this article to thoroughly analyze keynes' vision of the future in a clash with the current economic, social and moral reality, but only to refer to the issue of technological acceleration and technological unemployment. the perspective of caring for human moral perfection is material for other considerations. in any case, according to keynes, technological unemployment is a transitional phase that should not cause concern, and technological development will help a person with less involvement in work to enjoy life (cultivate the art of living), resigning from the desire to accumulate one’s own capital in favor of engaging in other people's affairs. however, people who suffer from technological unemployment view it negatively. from a psychological point of view, the lack of acceptance of this phenomenon is justified. to confirm the hypothesis (h2), qualitative research was carried out  in-depth interviews with four people who, as a result of technological changes in workplaces, had been affected by technological unemployment and were not yet retrained to do another job. these people approach technological development with distrust and a lot of negative emotions. they blame employers who have not prepared them for the changes to come. they are not motivated to receive education and gain new qualifications, and they do not want to work on basic cleaning activities, although in this service industry, automation and robotization more and more often require having appropriate skills, and sometimes also specialist qualifications. quantitative research conducted on a pilot sample of 120 students allowed for the verification of the research hypothesis (h1), however, the results of the research did not confirm the hypothesis. on the contrary, the analysis of the results showed that the young generation (respondents aged 20-25) does not feel the risk of technological unemployment as a negative phenomenon generated by the development of modern technologies used in industry 4.0 (see figures 2, 3, 4). there were no significant statistical differences between the responses of men and women in this survey. although the young generation (respondents aged 20-25) does not feel the risks associated with the development of industry 4.0 in the context of technological unemployment, there is no doubt that it may be a phenomenon generated by the development of technology and modern technologies. however, it should be noted that not the technology itself is the cause of technological unemployment, but the whole complex of phenomena, situations, activities, objects and people (scientists, businessmen, politicians) guided by various interests (afeltowicz, 2007). hence the need for a proper humanistic, ethical www.virtual-economics.eu issn 2657-4047 (online) aleksandra kuzior virtual economics, vol. 5, no. 1, 2022 13 education of engineers (kuzior et al., 2019a), which seems to be the first link (subject) of creating technological innovations and ethical education of all political, economic and social actors who have a significant impact on the directions of development. figure 2. responses to the survey question: do you think that intelligent robots will "take" human jobs? source: developed by the author. figure 3. responses to the survey question: do you think that the development of industry 4.0 generates technological unemployment? source: developed by the author. rather yes 12% yes 6% no 23% rather no 47% no opinion 12% rather yes yes no rather no no opinion rather yes 8% yes 2% no 50% rather no 27% no opinion 13% rather yes yes no rather no no opinion www.virtual-economics.eu issn 2657-4047 (online) aleksandra kuzior virtual economics, vol. 5, no. 1, 2022 14 figure 4. responses to the survey question: are you concerned that you may face technological unemployment in the future? source: developed by the author. the development of science and technology should be programmed in such a way as to bring tangible benefits for man and society (kuzior, 2021a). in other words, innovations, as an instrumental value, should serve people in shaping better living, work and rest conditions, and serve to protect the natural environment. however, the development of innovation is not a clearly positive process, the end result may also have negative effects (kuzior, 2014; kuzior, 2021b). it is also not the same in every country (grebski, 2021a; grebski, 2021b, shvindina, 2017), which causes inequalities, both in the economic and social dimensions. the social effects of unemployment in general, including technological unemployment, can be very severe. the statistical data of the central statistical office in poland are, however, optimistic. at the end of december 2020, the unemployment rate in poland was 6.2%, and the average annual rate was 5.91%, i.e., only slightly above the acceptable frictional unemployment rate (3%-5%) regulating labor market relations. compared to 2019, the unemployment rate in 2020 increased by 0.48% (see table 1), which is not a worrying result considering the conditions related to the spread of the covid-19 pandemic. in january and february 2021, an unemployment rate of 6.5% was recorded, which, compared to the results from december 2020, shows an increase of only 0.3%, and the upward trend compared to january and february 2020 is 1%. this is an acceptable level and does not indicate a drastic change related to the covid-19 coronavirus pandemic. in the polish economy in the previous years, there were greater fluctuations and disturbing indicators, e.g. at the end of december 2002 the unemployment rate was as high as 20%, in the corresponding period of 2003 also 20%, and in 2004 19% (all data from the central statistical office refer to registered unemployment). rather yes 7% yes 6% no 18% rather no 65% no opinion 4% rather yes yes no rather no no opinion www.virtual-economics.eu issn 2657-4047 (online) aleksandra kuzior virtual economics, vol. 5, no. 1, 2022 15 table 1. unemployment rate (%) in poland according to central statistical office data year/ month i ii iii iv v vi vii viii ix x xi xii annual average 2021 6.5 6.5 6.4 6.3 6.1 6.0 5.9 5.8 2020 5.5 5.5 5.4 5.8 6.0 6.1 6.1 6.1 6.1 6.1 6.1 6.2 5.91 2019 6.1 6.1 5.9 5.6 5.4 5.3 5.2 5.2 5.1 5.0 5.1 5.2 5.43 2018 6.8 6.8 6.6 6.3 6.1 5.8 5.8 5.8 5.7 5.7 5.7 5.8 6.08 2017 8.5 8.4 8.0 7.6 7.3 7.0 7.0 7.0 6.8 6.6 6.5 6.6 7.28 source: developed by the author on the basis of the central statistical office data figure 5. unemployment rate in the years 2017-2020. source: developed by the author on the basis of the central statistical office data analyzing the dynamics of the increase or decrease of the unemployment rate in specific time series and extrapolating the presented results, it can be concluded that the forecasts of unemployment increase in 2030 to the level of 40% (koput, 2020) are rather excessive and strongly pessimistic. the covid-19 pandemic also did not significantly increase the unemployment rate (the analysis concerned only registered unemployment), although it significantly changed work processes (kuzior et al., 2022). statistics directly related to technological unemployment are not kept by the central statistical office, but in the astor whitepaper report (2016) entitled “the study of the degree of automation of companies in poland” indicated that 76% of companies are partially automated, 15% are fully automated, and only 6% introduce industry 4.0. the report "readiness of manufacturing companies to implement industry 4.0 solutions", prepared at the request of psi polska by the pmr company in 2019, clearly shows the increased interest of enterprises in the technological solutions of industry 4.0. of the 228 large and medium-sized companies surveyed, 52% know the assumptions related to the development of industry 4.0 and as many as 70% of this group are planning or have already implemented industry 4.0 solutions. large companies are leaders in implementing these solutions, which seems to be understandable due to the costs that must be incurred to implement these solutions. a report published by the analytical company 0 1 2 3 4 5 6 7 8 9 2020 2019 2018 2017 www.virtual-economics.eu issn 2657-4047 (online) aleksandra kuzior virtual economics, vol. 5, no. 1, 2022 16 markets and markets (mam) in 2020 informs that the global market for industry 4.0 solutions worth $ 71.7 billion in 2019 will grow to $ 156.6 billion in 2024, with an average annual growth in 2019-2024 of 16.9%. surveys conducted by the inżynieria i utrzymanie ruchu magazine (2020) show that 23% of companies in poland have adopted a strategy for the implementation of the industry 4.0 concept, and in 31% of companies, the strategy is being developed. in 2020, 46% of companies did not have such a strategy yet. thus, more than half of the companies in poland (54%) are seriously considering or have already introduced industry 4.0 solutions. (kuzior, 2021a). the previously mentioned deloitte report "industry 4.0 in poland  revolution or evolution?" (2020) indicates, however, that the leaders of polish companies still use modern technologies offered by industry 4.0 with great caution. as shown by the central statistical office research cited, the automation and robotization related to the development of industry 4.0 did not translate into an increase in the unemployment rate, although polish companies already use various technologies related to the industry 4.0 concept (data for 2020, see figure 6): devices intelligent (sensors) (65%), use of robots, including cooperating (58%), predictive maintenance (43%), mobile devices (notebooks, tablets, smartphones) (42%), use of internet of things technology iot and industrial internet of things iiot (29%), cloud computing (28%), augmented reality ar (15%), digital twins and production digitization (14%), big data (14%). figure 6. the use of industry 4.0 technology in polish companies source: devised on the basis of a survey by the magazine inżynieria i utrzymanie ruchu (2020). the cited research results show that in 2016 there was no threat in poland related to the increase in technological unemployment rates generated by the development of industry 4.0. however, the following years brought such a large increase of interest in implementing innovative industry 4.0 solutions that the threat of technological unemployment may become real. perhaps, however, the tendency will be the opposite (current data from the central statistical office of poland authorize such a statement), as in germany, the cradle of european industry 4.0. as the research shows, the increase in industrial automation under the german industry 4.0 program even translated into a reduction in unemployment (astor, 2016), 14% 14% 15% 28% 29% 42% 43% 58% 65% 0% 10% 20% 30% 40% 50% 60% 70% big data digital twins i digitalizacja produkcji augmented reality (ar) cloud computing iot and iiot mobile devices (notebooks, tablets, smartphones) predictive maintenance robots, including collaborative ones smart devices (sensors) www.virtual-economics.eu issn 2657-4047 (online) aleksandra kuzior virtual economics, vol. 5, no. 1, 2022 17 although in this case it is difficult to talk about direct cause and effect relationships, as a number of other factors influence this type of processes (kuzior, 2017). in the context of industry 4.0 development, ethical problems and dilemmas are also discussed (fobel & kuzior, 2019). pessimists bluntly claim that robots and artificial intelligence will take people's jobs. this trend will increase with the development of specialized tools. scientists from oxford predict that 50% of current jobs will disappear by 2050 as a result of the "invasion" of robots. on the other hand, there are estimates according to which robotics will create 3 million new jobs worldwide only in the next 5 years” (wierżyński, 2016). the report "will the robot take your job? sectoral analysis of computerization and robotization of european labor markets”, prepared in 2014 by the warsaw institute of economic studies (wise), indicated that poland is one of the countries most susceptible to automation. therefore, it can be expected that in the next 20 years, 36.1% of occupations in poland may be threatened with technological unemployment. it will primarily affect workers in the food processing industry, administrative workers, monetary workers, miners, cooks, drivers, office and house cleaners (mejssner, 2015). however, manpowergroup's report "skills revolution 4.0. do robots need people?" from 2019 indicates that 87% of employers in poland intend to increase or maintain employment as a result of automation. companies invest in innovative information technologies by delegating tasks to machines, but at the same time put emphasis on improving qualifications and acquiring new skills by their employees so that they can perform tasks complementary to those carried out by robots. generally, not only in poland, but also globally, the demand for engineers, managers and employees for direct customer service will increase. employers will require soft skills such as communication skills, negotiation skills, leadership, and adaptability. staff reductions can occur in the administration and office sectors. as the desk research shows, there are no clear answers to the bothering questions related to the development of industry 4.0, but undoubtedly these changes need to be properly prepared, because the demand for new engineering specialties will increase, such as: robot coordinator, simulation expert and optimization, service engineer using digital technologies, specialist in designing it systems and data processing, specialist in modeling and interpretation of production data with "soft skills", including the ability to work in a team (also virtual), interpersonal skills, in particular the ability to communicate effectively (astor whitepaper, 2017). in the report "professional competences of the future 2020", prepared by the institute for the future, competences of the future were mentioned, such as: discovering meaning and giving meaning, social intelligence, unconventional and adaptive thinking, intercultural competences, computational thinking, skills in using new media, transdisciplinarity, design thinking, cognitive load management, virtual collaboration. the complement should also include such competences as: broad contextuality, self-reflection, emotional intelligence, environmental friendliness, variability, equality competences, learning ability (sobotka, 2020). the team of researchers from the infuture hatalska foresight institute forecasts that the demand for contractors of such professions as: aba therapist, visual designer, machine learning engineer, food clerk, associate scientist, ruby on rails developer, scientist, rf engineer, regulatory affairs manager, data scientist will increase. the study also identifies potential professions of the future: meaning of life consultant (advising clients on setting personal goals, diagnosing competences, discovering passions), robot consultant (advice on purchasing a robot that best suits the needs of a given person), robot therapist www.virtual-economics.eu issn 2657-4047 (online) aleksandra kuzior virtual economics, vol. 5, no. 1, 2022 18 (teaching robots human emotions). key competences are still important, although in the face of the practically unlimited development of modern technologies, which can generate both positive and negative effects, the most important are ethical competences defined as honesty and responsibility in all aspects of human activity, following the principles of good, focus on subsidiarity, solidarity, respect for oneself and others, respect for basic human rights, tolerance and respect for people and the natural environment (kuzior, 2014). these competences determine the right interpersonal relations, and perhaps also in the future, relations with robots (robot ethics), as well as the appropriate  prudent  approach of engineers to creating technological innovations and knowledge management (grebski & grebski, 2018; kuzior & zozul’ak, 2019; kuzior & kuzior, 2020; kuzior & czajkowski, 2021). an engineer of the future, the so-called engineer 4.0, as defined by the astor whitepaper team, should be a professional in his field and a humanist at the same time, because he designs systems for individual people and human communities (astor whitepaper, 2017). industry 4.0 tools create a new type of organization, highly flexible, intelligent, capable of selfoptimization, constantly monitoring its own needs and the organizational environment, skillfully communicated with various entities. such an organization requires qualified staff with technical and humanistic competences, openness and flexibility. appropriate programming of training to prepare staff to support industry 4.0 may minimize the negative impact that may manifest itself in the future in the form of technological unemployment (kuzior, 2017; ulewicz & sethanan, 2019). 5. conclusions the presented issues of technological unemployment, the needs of the changing labor market in the perspective of the development of industry 4.0 and the demand for new competences needed to operate modern technologies allow for a rather optimistic look into the future. nevertheless, it is necessary to properly prepare for these changes by programming the education processes in such a way as to equip the next generations entering the labor market with the competences needed to operate innovative technologies. in terms of handling industry 4.0, lifelong learning will also be important, allowing for continuous improvement of competences and gaining new qualifications needed in the changing labor market. engineering education should include a combination of vocational (engineering) education with education focused on humanistic and ethical values. along with the implementation of technological innovations, social innovations should be implemented, which, on the one hand, could eliminate technological exclusion, preparing modern people to skillfully use available technical solutions, and, on the other hand, prepare them for the selective and critical use of internet resources and artificial intelligence solutions. in conclusion, however, it must be stated that the mechanization and mechatronization of the economy, although it gives rise to many discussions about the dangerous social effects, technological unemployment, technological exclusion and, consequently, also social exclusion, should not be viewed only from the perspective of negative consequences. it brings many positive solutions that, when www.virtual-economics.eu issn 2657-4047 (online) aleksandra kuzior virtual economics, vol. 5, no. 1, 2022 19 properly applied and targeted, can contribute to the improvement of the quality of life of a person and entire societies. the basic condition, however, is that artificial intelligence is equipped with ethical values and that humans have appropriate technological competences to operate and use solutions based on artificial intelligence algorithms. in this regard, the european union has already taken some steps with the creation of a "white paper on artificial intelligence" which sets out a european approach to ai excellence and trust. to be able to speak of a trustworthy artificial intelligence, the following principles must be followed: the guiding and supervisory role of a man; stability and security; privacy and data protection; clarity; diversity, non-discrimination and justice; social and environmental well-being; responsibility (white paper, 2020). only then the application of intelligent robots in various spheres of professional and personal life can be focused on. robots can help people out of their work in difficult conditions and optimize production processes. the principle of optimization and visions for the development of the factories of the future, however, still cause concern. optimization is one of 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(2019). the impact of industry 4.0 and ai on economic growth. zeszyty naukowe. organizacja i zarządzanie, 140, 391-400. кwilinski alex 77 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 2021 volume 4 number 1 (january) organization of aviation enterprises’ interaction based on the digital platform kateryna molchanova abstract. the article considers the approach to digital transformation of the aviation industry in terms of organizing the interaction of supply chain participants involving air transport based on the digital platform. digital transformation is considered not only as a tool of information interaction, but also as a business model that creates value by uniting consumers and producers of goods and services. there was performed a statistical analysis of indicators characterizing the state of the global aviation market and that of ukraine in particular, of the global crisis impact caused by the covid-19 pandemic on air transport and changes in the field of passenger and freight transport; there were analyzed the possible ways of overcoming the consequences of the crisis for airlines and airports and the use of digital technologies in developing anti-crisis strategies. the necessity of forming a united information space in the supply chain to ensure the rapid exchange of information between cooperating transport hubs and government agencies, including the exchange of information on the management of production and commercial activities of transport enterprises was highlighted. the role of air transport in servicing global supply chains was also emphasized, as it offers highly integrated and comprehensive fast delivery with safe, reliable, convenient and highly efficient services. there was proposed a scheme of information interaction among supply chain participants involving air transport based on the digital platform in the context of united information space. the use of the digital platform as a tool for organizing interaction was justified, as this technology provides massive opportunities to achieve increased efficiency not only of individual units, but also of the entire supply chain. keywords: digitalization, digital transformation, digital platform, interaction of aviation enterprises, organization of interaction jel classification: m31, l86 author: kateryna molchanova national aviation university, 1 liubomyra huzara ave., kyiv, ukraine, 03058 e-mail: molchanova@nau.edu.ua https://orcid.org/0000-0003-1846-2492 citation: molchanova, k. (2021). organization of aviation enterprises’ interaction based on the digital platform. virtual economics, 4(1), 77-97. https://doi.org/10.34021/ve.2021.04.01(4) received: october 27, 2020. revised: december 6, 2020. accepted: december 18, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://orcid.org/0000-0003-1846-2492 https://doi.org/10.34021/ve.2021.04.01(4) https://creativecommons.org/licenses/by/4.0/ 78 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 1. introduction the main advantage of digital technologies is the formation of personalized offers for the consumer. the latest digital technologies are actively used in the field of air transportation. technologies of virtual and augmented reality, big data and analytics, the internet of things, the use of beacons and sensors, robotics are actively introduced in the work of airlines and airports. it should be noted that most technologies are aimed at passengers. one example of digitalization of the air cargo industry is e-freight technology – an international standard for electronic registration and maintenance of air cargo, developed and recommended by the international air transport association (iata), which provides electronic document flow among air cargo participants and among participants and state control bodies at air checkpoints along the route of the cargo (molchanova, 2014, marintseva, 2013). however, the speed of this technology’s global implementation was not as high as predicted by iata experts. for example, in ukraine, discussions on introducing one of the e-freight components, namely the electronic air waybill (e-awb), began in 2014, but this has not been implemented yet. the global crisis in the aviation industry due to the covid-19 pandemic has highlighted the importance of air cargo transport and stimulated generation of development strategies in this area. information interaction with the help of digital technologies has become critical under the conditions of quarantine restrictions, isolation and remote work. the purpose of this study is to substantiate and develop a mechanism for information interaction of participants in supply chains, involving air transport, using digital platforms, which creates preconditions for the emergence of new business models and development of airlines and logistics operators. the results of the study continue the series of publications in foreign and domestic scientific literature the purpose of which was to consider the general issues of business digitalization, as well as the use of modern information and communication technologies in the production and commercial activities of enterprises. at the same time, despite the significant number of scientific papers on methods and tools of business digitization, as well as the use of digital technologies in enterprises, the problem of integrated interaction of enterprises in supply chains using digital platforms has been insufficiently studied. the issues of optimizing the information exchange among aviation enterprises in air cargo transport chains to cut operating costs and reduce regional disparities under conditions of global pandemic and a breakdown in air transport activity needs further development. 2. literature review the importance and relevance of solutions to the problem of organizing information interaction between the production processes of the airport is reflected in the work by dalinger (2017). the airport is considered as a system and there is proposed an integrated http://www.virtual-economics.eu/ 79 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 form of organization, the purpose of which is to combine different processes into a single production system. the formation of digital platforms for transport and logistics in order to generate digital services for consumers on the basis of technological integration of various resources and infrastructures is covered in the work by marusin & ablyazov (2019). the research by dmitriev & plastunyak (2019) is interesting from the viewpoint of considering the transport and logistics service development on the basis of integrated digital platforms and the use of digital technologies. the paper by m. de reuver et al. (2018) is devoted to the issue of industries’ transformation through introducing digital platforms. researchers deeply analyze the idea of "digital platform" in terms of different concepts and describe the ways in which digital platforms can change the activities of various sectors of the economy. existing approaches to the classification of digital platforms are analyzed and the author’s own classification is developed in the work by ryzhkova (2019). the paper also describes business schemes and features of creating the working classification of digital platforms. the main features of multisided digital platforms are studied in the work by hagiu (2014). the paper describes the network effect of digital platforms and shows that all participants in digital platforms are its full consumers, and they interact directly with each other. the localization of companies based on digital platforms is heterogeneous around the world, as illustrated by a study by evans & gawer (2016). researchers conducted a global survey of companies and identified those that are digital platforms with a market value of at least $ 1 billion. the study also demonstrates a wide range of industries in which business activity has grown significantly, built on a platform approach. researchers sutherland & jarrahi (2018) analyzed the concept of centralized and decentralized platform as an effective organizational principle of the sharing economy and evaluated the attitude of scientists to the technology itself. scholars have also described the relationship between digital platforms and the sharing economy. the formation of a digital platform model that provides interaction of autonomous management systems of economic entities – federal, regional, institutional, commercial and other organizational systems, is described in the work by zatsarinnyy & shabanov (2019). the purpose of their study was to solve economic problems in order to consolidate the production resources of economic agents. the description of a business model of the digital platform was made in the research by tauscher & laudien (2018), who studied a number of markets for developing taxonomies of business models of the market, as well as identified several clearly distinguishable types of business models, which showed the lack of a unified approach to creating value in markets and platforms in particular. the tendency to increase the number of decentralized platforms due to blockchain technology was analyzed in the research by chen et al. (2020), who assessed the trade-offs between http://www.virtual-economics.eu/ 80 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 centralization and decentralization and hypothesized semi-decentralization as a more effective governance structure. 3. methods the choice of research methods is determined by the nature of the actual data on the state and dynamics of global and national markets of air passengers and cargo transport. the used statistical and comparative analysis allowed revealing global and local market trends, determining the congestion of airports and estimating the potential intensity of cargo flows. 2020 was a year of significant global upheaval for the economy and society. due to the spread of the covid-19 virus, the pandemic has closed many borders and locked citizens in their homes. many sectors of the economy are in crisis and the air transport industry is almost the largest. the terrorist attacks of september 11, 2001, the global financial crisis of 2007-2008 contributed to the fact that the demand for air transportation fell significantly, but the pandemic almost closed the sky. in early 2020, china's domestic aviation market fell first, but by march it began to recover. simultaneously with the spread of the disease worldwide, its negative impact on air transport was felt everywhere from february to the end of april, when passenger traffic fell by 94% compared to the same period last year, and much of the industry was idle. beginning in may, air traffic began to recover slowly, but very slowly in almost all markets. due to restrictions on international travel, flights between cities around the world have almost stopped. domestic air transportation was performed in small volumes in china and the united states. however, most scheduled intercontinental airlines have been canceled. air transportation, which continued to be performed during this period, mainly concerned cargo. but it should be noted that about half of air cargo is carried in the holds of passenger airplanes and the almost complete cessation of passenger flights has created a serious problem for global supply chains, which are the basis of the modern economy. in figure 1 you can see a map of air routes, which compares april 2019 and 2020. although air traffic has been slowly recovering since may 2020, strict border crossing restrictions remained in place until the end of the year, as most countries adhere to strict quarantine restrictions. there is also a threat of mutated coronavirus waves, which could again lead the country which has slowly begun to ease restrictions to strict quarantine. iata predicts that most aviation jobs will be threatened by the crisis. the airlines that went bankrupt in 2020 include the following: atlasglobal (turkey), airitalia (italy), flybe (uk), braathens regional airlines (sweden), nokscoot (thailand, singapore), virgin australia (australia), virgin australia (south africa) and others, totaling about 40. http://www.virtual-economics.eu/ 81 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 figure 1. the map of air routes in april 2019 and 2020 and the impact of covid-19 on air communication source: iata (2020, november 25). air connectivity: measuring connections that drive economic growth. in total, the aviation industry received revenues of 365 billion usd, which is only 43.6% of those in 2019 (838 billion usd). the number of passengers carried in 2020 accounts for 1.8 billion people, according to iata (iata. (2020). deep losses continue into 2021), and this is 35% of the figure for 2019 (4.5 billion passengers). revenues from passenger transportation in 2020 amounted to 191 billion usd, compared to 612 billion usd received in 2019 (31.2%). the volume of air cargo has decreased slightly, as it remains important. the history of air transportation in 2020 is different from that before the pandemic. the volume of transported goods decreased, but not as much as the number of passengers. at the peak of air freight in april, the number of ton-kilometers (t-km) decreased by about a quarter (see figure 2). by september, the volume of air cargo increased by only 8% compared to the previous year. cargo, with rare exceptions, is not a covid-19 carrier. moreover, it remains important for supporting global supply chains and for transporting medical equipment and pharmaceuticals. figure 2. the tendency to change the air cargo transportation during the covid-19 pandemic, ton-kilometers source: iata (2020, november 25) http://www.virtual-economics.eu/ 82 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 the reliability of air freight in comparison with passenger traffic is different on the main trade routes. the most stable was the market of the north pacific, where usually 90% of air traffic is performed by specialized cargo planes. it can be argued that in 2020 this market has not suffered from the cessation of cargo transportation by passenger planes (see figure 3). the crisis hit the asian region harder, as most cargo was transported by passenger planes. figure 3. the trend to change air cargo transportation in the main trade areas during the covid-19 pandemic, ton-kilometers source: iata (2020, november 25) demand for air freight from global perishable supply chains, manufacturing and services is supported by a v-shaped recovery, which reflects growing business confidence amid a significant recovery in output as the economy reboots and returns to work. (see figure 4). fast delivery of materials and finished products by air is vital. as of october 2020, business confidence remained above pre-crisis levels, supporting demand for air cargo in countries such as china, the united states and germany. however, the recent resumption of quarantine in europe will be devastating, as it indicates a decline in business confidence in france. the total operating income of the air transport industry in 2020 decreased by more than 60% (see figure 5). as numerous costs in the aviation business, including fleet costs and skilled labor, are difficult to estimate, declining revenues have led to unprecedented losses for the industry. according to experts, the loss in 2020 will exceed 118 billion usd after taxes. the most difficult for the industry was the 2nd quarter of 2020, and in the second half of the year the recovery was very slow. http://www.virtual-economics.eu/ 83 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 figure 4. business confidence in production and services (procurement managers index) during the global covid-19 pandemic source: iata (2020, november 25) figure 5. estimated values of operating income (passenger and freight traffic) source: iata (2020, november 25) in the early days of the crisis, air travel played a crucial role in delivering personal protective equipment and medicines to destinations around the world. its positive impact continues as http://www.virtual-economics.eu/ 84 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 long as global isolation continues. 46 thousand special flights transported 1.5 million tons of cargo. but the number of cargo planes was insufficient to compensate for the reduction in cargo traffic in passenger aircraft by 40-45%. therefore, passenger planes were converted into cargo flights. for example, klm cargo and virgin atlantic aircraft carry cargo in the passenger seats in the cabin, and in the cabins of swiss worldcargo and finnair cargoes are installed in the place of dismantled passenger seats. to help with this, iata has published recommendations for removing regulatory barriers. for example, cargo can be transported on seats without the permission of the civil aviation authorities. if the airline decides to remove the passenger seats, it needs more permits. and, of course, it was necessary to consider and approve the transportation of dangerous goods in the passenger compartment and weight restrictions. however, the use of a passenger cabin for carrying goods is of great importance to the amount of cargo transported. there were and still are many problems facing air freight. iata is constantly working with icao to encourage governments around the world to take the necessary steps to support global logistics. for the most part, governments have responded positively, but operational difficulties persist. for example, airports, especially alternative airports used in emergencies, must be kept in working order. however, many of these secondary facilities ceased to operate due to the pandemic and were therefore effectively closed. meanwhile, the main centers remain open, but at existing intervals and curfews they need to be changed or abolished to allow freight flights. and since most cargo flights are charter, permits must be issued in an expedited manner. rules for the crew are another regulatory hurdle. it is clear that crews cannot comply with the 14-day quarantine. exceptions are therefore needed so that crew members can return home to their families, taking into account all possible security measures. the covid-19 crisis has led to atypical problems for the air cargo industry, especially in light of government restrictions on health and safety. problems include delays in obtaining charter permits, and no exceptions for covid-19 testing for air cargo crews. in response, iata calls on governments to: reduce the time of registering charter operations; exempt cargo crews from quarantine rules that apply to the general population; provide appropriate personnel and equipment for efficient cargo handling; recognize mutually agreed global standards, such as health certificates and licenses; make alternative airports available even in the absence of passenger traffic. cargo flights of passenger planes are cost-effective, apparently due to high transportation tariffs and low fuel prices, which can change at any time. removing passenger seats is a timeconsuming technical procedure, which increases the costs of airlines; and loading and unloading in the cabin is a grueling and difficult task, which increases the time spent on loading http://www.virtual-economics.eu/ 85 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 and unloading. in addition, cargo in such aircraft is moved through the passenger door, which makes their use impractical for the transportation of large equipment. the ukrainian air transportation market also showed a significant decline in activity. for three quarters of 2020, airlines carried 3,770.8 thousand passengers, i.e., compared to the same period in 2019, this figure decreased by 64.6%. performed passenger-kilometers for three quarters of 2020 amounted to 7.9 billion passenger-km, with a decrease compared to the same period in 2019 by 65.9% (see table 1). table 1. ukrainian airlines performance indicators for 2019-2020 indicators 3q 2019 3q 2020 total passengers transported, thousand people 10664,5 3770,8 including on regular lines, thousand people 6508,2 1509,3 executed passenger-kilometers, billion passenger-km 23,2 7,9 including on regular lines, billion passenger-km 13,8 2,7 cargo and mail transported, thousand tons 68,4 62,0 including on regular lines, thousand tons 15,0 4,2 executed ton-kilometers (cargo + mail), million tonkilometers 222,8 217,6 including on regular lines, million ton-kilometers 72,6 15,2 executed commercial flights, thousand 79,7 34,2 including on regular lines, thousand 52,0 15,6 including international passengers transported, thousand people 9781,0 3380,6 including on regular lines, thousand people 5632,6 1124,4 executed passenger-kilometers, billion passenger-km 22,8 7,7 including on regular lines, billion passenger-km 13,4 2,5 cargo and mail transported, thousand tons 68,1 61,8 including on regular lines, thousand tons 14,9 4,1 executed ton-kilometers (cargo + mail), million tonkilometers 222,6 217,5 including on regular lines, million ton-kilometers 72,5 15,1 executed commercial flights, thousand 67,0 27,2 including on regular lines, thousand 40,6 9,6 source: ministry of transport and communications of ukraine. (2020). the results of the aviation industry of ukraine for 9 months of 2020. during three quarters of 2020, 26 domestic airlines operated flights on the passenger and freight transportation market, and according to statistics, 34.2 thousand commercial flights were performed (for the same period in 2019 they accounted for 79.7 thousand). it should be noted that the volume of freight and mail for 9 months of 2020 decreased by only 9.4% compared to the previous year and amounted to 62 thousand tons (68.4 thousand tons in 2019). cargo and mail were transported by 19 ukrainian airlines, with the largest share of http://www.virtual-economics.eu/ 86 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 transportation (92%) performed by zetavia, atp antonov, ukraine international airlines, maximus airlines, constanta and skyup. it should also be noted that most air cargo is charter flights to other countries. comparing the statistics of cargo and postal traffic, it can be concluded that the airports of ukraine handle about 60% of cargo and mail transported by airlines of ukraine (see figure 6). figure 6. volumes of cargo and mail transported by ukrainian airlines and cargo and mail flows through ukrainian airports for 9 months of 2019 and 2020 source: developed by the author based on ministry of transport and communications of ukraine (2020) the system-structural analysis and the method of logical generalization allowed determining the structure and relations among transport systems in a united information space; system approach, decomposition method and functional analysis have defined the mechanism of information interaction of enterprises on the basis of digital platform, the use of digital technologies, namely digital platforms. the set of selected methods provides dialectical unity, the possibility of generalization, prediction and explanation of information exchange processes in supply chains involving air transport. the study is informed by legislation and other regulations on the functioning and development of the air transportation market, statistics of icao, iata and the state statistics service of ukraine, standards of information exchange in supply chains, the internet resources, domestic and foreign periodicals, as well as the author’s own research. 4. results and discussion against the background of a significant reduction in passenger air traffic, freight traffic can be an important factor in the resumption of scheduled air services, as for many airlines freight 68,4 62 42,3 37 9 months of 2019 9 months of 2020 t h o u sa n d t o n s transported cargo and mail by ukrainian airlines mail and cargo flows through the airports of ukraine http://www.virtual-economics.eu/ 87 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 traffic is insignificant and complementary. freight development strategies can give airlines a way out of the crisis, as forecasts of passenger traffic resumption are uncertain and freight traffic is likely to increase. strategies to increase air freight should be developed in the context of digital transformations. the global aviation crisis caused by the covid-19 virus has only exacerbated the need for digital technology, as many activities have moved online. the main trends can be observed at the moment, which further emphasizes the impact of digital optimization diggin travel (2019). 1. focusing on reducing costs and finding fast sources of income accentuates the importance of optimizing conversions (meaning online conversions directly before booking). during each crisis, airlines do two things: aggressively reduce costs and look for sources of rapid revenue growth. conversion optimization affects both cost and profit. more conversions mean more orders and more revenue. 2. the key is consumer understanding, the same approach to all will no longer work in the future. over time, consumers will start thinking about travel again and will make travel reservations, but they will have far more fears than ever. they will also need more information on hygiene measures, restrictions and recommendations. such fears will be different in origin (country of departure, airports) and especially in the destination (country, region) where they are sent. optimizing the activities of airlines will be the ability to understand such concerns of each of the passengers, at least key segments and to develop individual ways to book travel. a 2019 study by digital airlines retail found that 64% of airlines have the same booking path for all consumers. figure 7 presents the main factors that affect the passengers’ sense of safety during flights. 3. contactlessness is an opportunity for innovation and automation. one of the changes in passenger behavior is that people are looking for less physical contact. automation processes in the aviation industry have always taken place, but now companies are looking for opportunities for even greater digitalization: building direct booking channels, increasing the involvement of mobile applications, increasing the use of registration on the internet and more. 4. planning for future growth. today, airlines are actively looking for ways to reduce costs and this is also reflected in the reduction in the employees’ number, including experts in digital technology. therefore, airlines need to have a clear vision of organizing current operations, bearing in mind that resources will be needed again when the situation improves. 5. the emergence of new groups of internet users. currently, even those people who used the internet in pre-crisis times are at least increasing their online presence. not only will there be more people booking online, there will be more people getting used to the new digital experience (ordering food for delivery, other retail, etc.). this is an opportunity for airlines to innovate and test new concepts, such as pre-ordering and ordering food at airports or retail on board. http://www.virtual-economics.eu/ 88 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 figure 7. factors that make passengers feel safer in flight source: diggin travel (2020) undoubtedly, air transport plays an extremely important role in servicing global supply chains, as it offers highly integrated and comprehensive fast delivery with safe, reliable, convenient and highly efficient services. analysis of trends in the logistics services market and global supply chains shows an increase in competition among the modes of transport, the main feature of which is not the volume of traffic, but the services provided and the total added value for end users, an integral part of which is the speed of response to customer inquiries. against this background, the interaction among the modes of transport is critical. airports are important multimodal operators and central hubs of global supply networks (allroggen & malina, 2014, reis et al., 2013). generalization of different opinions of researchers, in particular, vega (2008), feng et al., (2015), kuljanin et al. (2015), allows identifying the following benefits of using air transport in global chains of trade: expanding access to major markets and ensuring the internationalization of producing spare parts, components and finished products; increasing productivity and efficiency of supply chains by reducing the delivery time and timeliness of delivery, which allows reducing inventories significantly; ability to move goods quickly and reliably across borders, reducing the risk of losing goods during air transportation, the probability of cargo damage is minimized. increased reliability is also provided by a system of continuous monitoring, which allows checking the location and condition of the cargo, regardless of its current location; stimulating innovation, as air transport promotes effective cooperation of companies from different countries and uses the latest information and communication technologies; better use of economies of scale through efficient airline networks and consolidation of global and regional freight flows; http://www.virtual-economics.eu/ 89 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 better mobility and efficiency of contacts among sellers, buyers and consumers, which contributes to the growth of the level of logistics service. however, in the field of freight transport, involving air transport, there are many significant problems that create barriers to its effective use: 1. the complexity and duration of customs procedures in registering export-import trade flows related to the specifics of goods and cargo. it takes into account various factors, such as weight, dimensions and specifications of the cargo, customs relations between the buyer country and the seller country, and so on. 2. the presence of various factors influencing the organization of logistics schemes for the movement of goods, the correct calculation of the delivery route, cost optimization and prevention of possible risks. 3. high cost of air transportation, due to the high costs of air carriers for the maintenance and operation of aircraft, as well as high airport fees for maintenance and support. the calculation of the cost of services in the carriage of goods has an interesting feature. on the one hand, the more cargo on board, the greater the profit; on the other hand, the aircraft has a capacity limit, so the cost of air cargo is calculated as the ratio of weight to a certain volume (li et al., 2012). it consists of several components: the cost of transportation (air freight); cost of allowances (fuel, airport, security); the cost of cargo handling at airports (loading, unloading, paperwork). it should also be noted that deregulation of air traffic has increased freight rates, but has given shippers more choice among carriers in terms of fares, consequential damages and overcharged charges (chao & hsu, 2014). 4. the structure of the airline network, as air transport is inextricably linked with the airport system. since air transportation services are provided by airlines, for optimal operation, these services need to be adjusted and fine-tuned in accordance with the logistics requirements, simply put to get into the popular "air flows". freight airlines continuously monitor the current situation in major consumer markets, because it directly affects the fluctuations of freight flows sources of income in the business of freight carriers. fall in regular cargo flows between major consumer markets one of the main prerequisites for stable operation of the airline (derigs et al., 2009). according to some experts, due to the globalization of trade and economic activity, the growth rate of air cargo will grow faster than passenger (kiso & deljanin, 2009). they also emphasize that the physical movement of goods has become an extremely complex operation involving the use of new technologies for the movement, storage and tracking of goods (derigs et al., 2009, becker & nadja, 2007). this process involves a variety of players, the general structure of which and the relations among them are presented in figure 8. http://www.virtual-economics.eu/ 90 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 figure 8. air cargo industry participants and their links source: developed by the author. cargo supply chain is a set of interconnected participants, settlements, information exchange procedures that ensure goods’ transportation from the point of departure to the destination. all participants in this process have a shared responsibility to ensure that air cargo moves safely and securely throughout the chain. the initiators of the process of moving air cargo are the seller (or "shipper") and the buyer (in the context of international trade called "importer"), who want to exchange goods by air. from a commercial point of view, the shipper is located at the opposite point from the buyer (or "importer" in international trade) in the supply chain. the person initiating the supply of goods may be their manufacturer or buyer for resale. the consignor (in the international context "importer") acts in accordance with established procedures and participates in the process of exchanging information received in connection with the purchase and sale of goods. often the shipper uses the services of a broker or agent who deals with organizational and regulatory aspects of its commercial activities, including preparing product declarations for customs, resolving issues related to numerous potential licenses, permits and certificates that may be required by other regulatory authorities. that is, the freight forwarder is an intermediary between the shipper and the airline. the airline receives, stores, transmits, tracks, loads and unloads cargo, as well as assigns and manages capacity. a detailed description of operations and responsibilities of key participants in the cargo aviation chain is summarized in the work by feng et al. (2015). it should be noted that the movement of goods in the air takes only 17% of the time. ground handling operations to the airport account for an average of about 26% of the total delivery time, and the remaining 57% of the transport time is required for delivery from the airport to the consignee (scholz, 2011). it is possible to reduce the total duration of cargo delivery with shipper pick-up service forwarder consolidator export customs airline (first carrier) other airlines terminal operator finance agencies rail/ocean transport import customsbreak-bulk agentforwarder delivery service consignee http://www.virtual-economics.eu/ 91 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 the participation of air transport by integrating and synchronizing processes in the chains of freight traffic. transportation of goods by air is often part of the supply chain, the digital transformation of which will optimize the activities of each of its links. the main goal of digital transformation should be to organize the interaction of all participants in the supply chain and not least the various transport systems. the complex interaction of different types of transport systems allows providing high quality of service and full satisfaction of the need for transportation by volume, directions and nomenclature of goods. in this case, as a result of the interaction among different types of transport systems, there are produced finished products in accordance with the specified criteria, the rational use of vehicles, energy resources and money with minimal costs for production, transportation and consumption of goods transported. (kryizhanovskiy & shashkin, 1998). the object of transportation acquires consumer value when delivery covers the entire path "door to door" from the sphere of production to the sphere of its consumption. this can be done through the integrated interaction among different types of transport systems, creating a single transport system that provides global supply chains. the effectiveness of production management in a single transport system depends on the state and development of vehicles, communications, transport management systems, technologies to ensure the readiness of the subsystems of the transportation process, productive use of material and financial resources, and production and management staff, conditions of transport systems’ interaction, marketing, management and logistics of transport enterprises, systems supporting the vital activity of transport enterprises, information and telecommunication system with information and logistics centers which provide analytical support at performing mixed transportations. the scheme of a single transport system that provides global supply chains is shown in figure 9. a united information space should ensure the compatibility of information systems of producers and consumers of transport products at all stages of the product life cycle "from raw material extraction to production and sale of specific products." a united information space is able to ensure the rapid exchange of information between the interacting transport hubs and the bodies that ensure the movement of vehicles, including the exchange of information on the management of production and commercial activities of transport enterprises. the united information space is substantiated and formed in accordance with the production and management structure of the unified transport system and ensures its effective functioning and development. to make a decision, each of the participants in the transportation process needs information about the state of the commodity and transport markets, producers and consumers of goods, the availability of transport companies, the composition and condition of their vehicles; data http://www.virtual-economics.eu/ 92 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 on goods and routes of their delivery, on transport hubs and conditions of cargo processing in them. the information must be complete, timely, reliable, and compatible for all modes of transport. special conditions must be provided for collecting, processing, storing, analyzing, and using information for decision-making. figure 9. a single transport system that provides global supply chains source: developed by the author. the scheme of information interaction between supply chain participants including air transport based on the digital platform in the context of a united information space is shown in figure 10. it is important to note that digital platforms are not just technologies, they are a business model that creates value by bringing consumers and producers together (moazed, 2018). traditional companies are often called linear, because their activities are well described by a typical linear supply chain. line companies create value in the form of goods or services and then sell them to the consumer (johnson, 2018). the platform is focused exclusively on building and promoting the network. platforms do not have means of production instead they create means of communication. http://www.virtual-economics.eu/ 93 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 figure 10. the scheme of information interaction among supply chain participants including air transport based on the digital platform source: developed by the author. digital platforms play a key role in developing e-commerce and one of their most important characteristics is the flow of data from users, which can be further analyzed, used and monetized. data has become a valuable resource that can be obtained in the digital economy (united nations conference on trade and development (2019). 5. conclusions based on a thorough analysis of the dynamics of global and national markets and air traffic in a global pandemic, the need to improve the processes of information exchange among enterprises to reduce operating costs and speed up cargo delivery time was justified. revenues of the aviation industry in 2020 amounted to only 43.6% of the corresponding figure for 2019 and there was the largest decrease in passenger traffic. the volume of air cargo decreased by a quarter, but the situation was not as critical as in the field of passenger air transport. in ukraine, the volume of transported passengers for 9 months of 2020 decreased by 64.6% compared to the same period in 2019, while the volume of freight traffic decreased by only 9.4% compared to last year. due to quarantine restrictions, the number of procedures and documents for transportation registration has increased, which very clearly emphasized the need for high-quality, efficient, clear and complete information exchange amongst enterprises, as well as between enterprises and government agencies. it is concluded that the current crisis shocks associated with the spread of coronavirus may be a catalyst for change that will allow aviation market players in the future to optimize their activities and reorganize business processes in supply chains. shipper airport warehouse receiver airport warehouse road, rail transportation road, rail transportation air transport communications airport area 1 airport area 2 flight along the route airport communications 1 airport communications 2 air route preparation and shipment transportation of goods by means of transport intersectoral transport hub transportation of goods by means of transport intersectoral transport hub unloading and delivery of cargo transportation of goods by air information node of shipper information node of transport company information node of transport hub information node of aviation transport system information node of transport hub information node of receiver information node of transport company digital platform http://www.virtual-economics.eu/ 94 www.virtual-economics.eu issn 2657-4047 (online) kateryna molchanova virtual economics, vol. 4, no. 1, 2021 as a result of the conducted research the theoretical and methodical provisions of the aviation enterprises interaction organization based on the digital platform were defined. the complex interaction of the supply chains participants including air transport allows providing high quality of service and full satisfaction of the need for transportation by volume, directions and nomenclature of cargoes. emphasis is placed on the fact that the active introduction of digital technologies in the activities of aviation enterprises creates the preconditions for forming a united information space that provides effective interaction of transport systems of different levels. a united information space is able to ensure the operational information exchange between the interacting transport hubs and the bodies that ensure the movement of vehicles, including the exchange of information on the management of production and commercial activities of transport enterprises. today, digital platforms are not just a technology that creates value by providing direct interaction between two or more groups of participants, but also a business model. accordingly, airlines need to review existing market strategies and develop new business models in the context of digitalization. the mechanism of information interaction of supply chain participants including air transport enterprises based on the digital platform is proposed, which will allow synchronizing demand for air transportation and supply online, coordinating business processes and operations related to cargo delivery on a door-to-door basis with the 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(2019). model of a prospective digital platform to consolidate the resources of economic activity in the digital economy. procedia computer science, 150, 552-557. https://doi.org/10.1016/j.procs.2019.02.092. http://www.virtual-economics.eu/ кwilinski alex 88 www.virtual-economics.eu issn 2657-4047 (online) joanna wyrwa, magdalena zaraś, and katarzyna wolak virtual economics, vol. 4, no. 2, 2021 2021 volume 4 number 2 (april) smart solutions in cities during the covid-19 pandemic joanna wyrwa, magdalena zaraś, and katarzyna wolak abstract. the covid-19 pandemic has suddenly swept across the world on an unprecedented scale, having a global and destructive impact on numerous areas of both social and economic life. for the most part, the effects of the current pandemic crisis have been evaluated negatively, although they may also bring about positive future trends, such as accelerated technological advancement or increased financial support for and development of areas such as smart cities. given the above, the focal point of our deliberations is the concept of smart cities and the exemplification of smart solutions implemented in cities in the context of new environmental challenges triggered by the covid-19 pandemic. the purpose of the article is, on one hand, to identify the key theoretical and research problems that define the framework for smart city development, and on the other, to present selected practical smart projects implemented in different city areas in poland and around the world during the covid-19 pandemic. as far as the methodology, systematic literature analysis and case study have been opted for. to explain the essence of the smart city concept, polish and foreign peer-reviewed scientific publications were analysed. to characterize smart solutions that are being implemented in different cities, findings from reports and materials retrieved from websites dedicated to smart initiatives were used. a search was carried out for scientific papers that contain the terms "smart city" and "covid-19" in the title, abstract or among the keywords. bibliometric analysis was the research method used to evaluate publications in terms of the smart city concept and the covid-19 pandemic. to that end, research techniques such as trend analysis, citation analysis and word coexistence analysis were applied. in the article, selected issues of the smart cities functioning during a pandemic crisis are analysed. the findings show that cities have been keen on developing and implementing smart solutions during the covid-19 pandemic, the latter obviously causing the accelerated development of smart-city systems. the pandemic-driven changes adopted so far by cities in the area of smart solutions are not only futureproof in terms of epidemic safety but also make other goals, such as limiting the use natural resources or increasing the quality of life for residents, more attainable. keywords: smart city, urban economy, city development, covid-19, innovative projects, case study jel classification: o1, o18, p25, q55 http://www.virtual-economics.eu/ 89 www.virtual-economics.eu issn 2657-4047 (online) joanna wyrwa, magdalena zaraś, and katarzyna wolak virtual economics, vol. 4, no. 2, 2021 authors: joanna wyrwa faculty of economics and management university of zielona góra, ul. podgórna 50, 65-246 zielona góra, poland e-mail: j.wyrwa@wez.uz.zgora.pl (corresponding author) https://orcid.org/0000-0003-0837-6590 magdalena zaraś faculty of economics and management university of zielona góra, ul. podgórna 50, 65-246 zielona góra, poland e-mail: 96368@g.elearn.uz.zgora.pl https://orcid.org/0000-0002-9070-1219 katarzyna wolak faculty of economics and management university of zielona góra, ul. podgórna 50, 65-246 zielona góra, poland e-mail: 96236@g.elearn.uz.zgora.pl https://orcid.org/0000-0002-6224-7995 citation: wyrwa, j., zaraś, m., & wolak, k. (2021). smart solutions in cities during the covid-19 pandemic. virtual economics, 4(2), 88-103. https://doi.org/10.34021/ve.2021.04.02(5) received: march 12, 2021. revised: march 26, 2021. accepted: april 15, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://orcid.org/0000-0002-9070-1219 https://doi.org/10.34021/ve.2021.04.02(5) https://creativecommons.org/licenses/by/4.0/ 90 www.virtual-economics.eu issn 2657-4047 (online) joanna wyrwa, magdalena zaraś, and katarzyna wolak virtual economics, vol. 4, no. 2, 2021 1. introduction the covid-19 pandemic suddenly swept across the world on an unprecedented scale, having a global and destructive impact on numerous areas of both social and economic life. the economic disruption caused by covid-19 is not only destructive, but it also comes with side effects in the form of supply and demand shocks spanning virtually every area of human activity (ozili & arun, 2020; solarz & waliszewski, 2020; kudełko et al., 2020). since then, the classic concept of uncertainty often referenced by economic analysts has often been preceded by the word radical, thus becoming ‘radical uncertainty’. with that, new terms have also emerged, such as: covid-economy, post-covid-economy, and coronomics (stiglitz, 2021; van den berg et al., 2021; bhattacharya et al., 2020). the pandemic challenged the idea of progressive globalization and became a catalyst for change at a local and regional level. in the paper ‘proposals for modification of selected economic concepts amid the covid-19 pandemic’, the authors highlight a number of features of the covid-19 pandemic which determine the specificity of its impact on the socioeconomic system as well as the features of the resulting crisis phenomena (banaszyk et al., 2021, p. 58). firstly, a pandemic carries the characteristics of the so-called “black swan”, constituting an unexpected and unlikely event of far-reaching consequences. secondly, the key indicators of crisis are: violence, deep recession, a sharp drop in gdp, employment rate, and others. thirdly, tackling the negative economic impact of the pandemic has led governments and international organizations to intervene on an unprecedented scale. last but not least, the difficulties associated with forecasting a postcrisis future and the reconstruction of the world economy must be noted as well. the phenomena and processes that took place over the last two years were yet another confirmation that we are living in a time of epidemiological turbulence. for the most part, the effects of the current pandemic crisis have been evaluated negatively, although they may also bring about positive future trends, such as accelerated technological advancement or increased financial support for and development of areas such as smart cities. the smart city concept is a response to the global change regarding how cities are being built and managed, with an emphasis on their smartness regardless of how developed or underdeveloped they are. such changes introduced over the course of the pandemic will not only increase epidemic safety in the future but will also help attain other goals such as limiting the use of natural resources or increasing the quality of life among residents. the pandemic has forced local governments into an entirely new position requiring efficient crisis management and handling of pressing issues. and so, maintenance of critical infrastructure, including public utilities, public health, administration, public transport and public order has become their top priority very much overnight. the challenge was to adapt the existing systems to the current national restrictions. provision of basic services required the adaptation of the work system to mind social distance, impossibility of face-to-face meetings and the need to protect vulnerable employees. this also meant a rapid digitization of offices as a prerequisite to keep the availability of public services unaffected. http://www.virtual-economics.eu/ 91 www.virtual-economics.eu issn 2657-4047 (online) joanna wyrwa, magdalena zaraś, and katarzyna wolak virtual economics, vol. 4, no. 2, 2021 with the pandemic and the associated restrictions, urban areas that were once important to residents and visitors for business and leisure purposes suddenly became either inaccessible or less desirable compared to virtual solutions. the pandemic has also affected public mood and people’s plans to live in cities, especially those who intend to keep working remotely even once the pandemic has been eradicated. currently, an increasing number of city dwellers are considering moving outside the urbanized area. a london assembly housing committee study reports that many londoners are planning to abandon the capital in the next few years in order to move closer to nature as a direct result of the pandemic (brodowicz, 2021, p. 55, 57). the same trend is observed in many cities around the world, and with each subsequent wave of the pandemic, it is bound to affect several areas of collective life. due to numerous restrictions introduced in cities, solutions based on modern technologies have become crucial for the functioning of many institutions and the provision of municipal services. in recent years, the issue of creating and developing smart cities has been systematically gaining ground, both in theoretical and practical terms. it should be noted here that more than half of the world population now live in cities (vitunskaite et al., 2019; kania, 2019, p. 72). for comparison, that number amounted to just 3% at the end of the nineteenth century. currently, according to the un data, the global urbanization rate exceeds 50% and is expected to reach 60% by 2030 and 70% by 2050 (in the eu alone, it exceeded 68% in 2018) (world urbanization prospects…). according to t. kulisiewicz (2019, p. 136), the high population density in cities compared to suburban or rural areas intensifies social interactions, inducing economic, cultural and social undertakings. large population combined with relatively high costs of living also create a sense of race among residents, as only the best and most innovative economic and social ideas and projects stand a chance. this gives rise to a positive feedback loop where the more innovative the urban community is and the better it fares, the more attractive it becomes, spawning increasingly innovative and creatively-minded community members who add to the competitiveness of that environment. it is therefore no surprise that current scientific debate on the development of urbanized areas increasingly often highlights the importance of smart cities (ismagilova et al., 2019). at the same time, the issues discussed within the context of smart cities have always been interdisciplinary in nature, given that cities tend to encompass very diverse and varied elements (szymańska & korolko, 2015). the vast majority of smart cities are spaces marked by an above-average technological, communication and it literacy. apart from technical and infrastructural matters, smart cities put a great emphasis on issues related to social, economic and environmental areas (lazaroiu & roscia, 2012). it is not enough to simply embrace modern technologies, as the smart city concept covers a much broader range of needs (jonekkowalska, & wolniak, 2019). some authors notice a vast source of urban intelligence springing from social capital, therefore making this prestigious group almost exclusive to big cities that are often either national or regional capitals (stryjakiewicz & męczyński, 2015). a smart city is much less likely to be a small territorial unit and/or be located in a less urbanized or less economically developed area (appio et al., 2019; engelbert et al., 2019). given the above, the focal point of our deliberations is the concept of smart cities and the exemplification of smart solutions implemented in cities in the context of new environmental http://www.virtual-economics.eu/ 92 www.virtual-economics.eu issn 2657-4047 (online) joanna wyrwa, magdalena zaraś, and katarzyna wolak virtual economics, vol. 4, no. 2, 2021 challenges triggered by the covid-19 pandemic. the solutions most commonly referred to as ‘smart’ include, among others: e-office, smart boards in public facilities, video-powered mobile service points, smart stops, virtual and physical tools encouraging residents to help municipal services maintain order, remote learning platforms, community-building tools to look after those in need, smart buildings, smart environmental-monitoring systems, modern energy production solutions. the concept of a "smart city", in addition to cross-disciplinary research, also has a specific practical dimension. increasingly frequently it is reflected and accounted for in municipal strategies. international rankings of smart cities are regularly published, promoting the smartest and most resident-friendly urban living spaces (iese cities in motion index, 2020). many researchers and main actors specializing in smart cities argue for a balanced approach to the creation and management of smart urban space. in this approach, infrastructural and economic issues are put on an equal footing with social and environmental ones. all parties are involved in the development of smart cities, in accordance with the quintuple helix model which encompasses: science, economics, community, environment, government at different levels, and the media. the purpose of the article is, on one hand, to identify the key theoretical and research problems that define the framework for smart city development, and on the other, to present selected practical smart projects implemented in different city areas in poland and around the world during the covid-19 pandemic. the analysis carried out for the purposes of this study is explanatory and descriptive. as far as research methods used in the article are concerned, these are a critical literature review and a case study, which point to the qualitative nature of the study. the article is descriptive and has been divided into two parts. in the first, theoretical part, the concept of a smart city was defined and its key properties were characterized. in the second, empirical part, the results of desk research aimed at presenting selected examples of smart solutions used during the covid-19 pandemic were discussed. the issues raised throughout the paper do not fully cover the problem area but constitute a premise for further research. the article can be used by both theoreticians and practitioners in the decision-making process in today’s volatile economic conditions. 2. literature review – smart cities in theoretical terms a ‘smart city’ is a complex concept covering the essence and importance of many aspects of urban development. the smart city concept attempts to approach urban development holistically, despite the fact that it refers to the multidimensional properties of cities (mierzejewska, 2015). researchers dealing with this subject matter emphasize different aspects of the smart city functioning. the concept has been studied and juxtaposed with technical, social, economic and environmental factors (hajduk, 2020, p. 124). however, this also entails difficulties with unambiguously and precisely defining the concept (bitkowska & http://www.virtual-economics.eu/ 93 www.virtual-economics.eu issn 2657-4047 (online) joanna wyrwa, magdalena zaraś, and katarzyna wolak virtual economics, vol. 4, no. 2, 2021 łabędzki, 2021, p. 4; de falco et al., 2019; albino et al., 2015). one of the reasons for this inconsistent approach is the constantly accelerating advancement of new technologies, which makes the concept an evolutionary one (mora & deakin, 2019). another important determinant is the whole range of possibilities to adjust explanations on a city-to-city basis, which cannot be avoided given that cities differ not only in terms of the problems they face but also in their technological capacity to solve them (łaźniewska, 2019, p. 105). initially, the smart city paradigm concerned information technologies that could be used for planning city development (stawasz & sikora-fernandez, 2016, p. 47). subsequently, the concept evolved towards a city management method, the ability to attract high-class professionals or the ability to generate and absorb innovations (florida, 2005). according to the traditional definition, a smart city means introducing solutions based on the latest it technologies to urban spaces with a view to improving the quality of life among their residents (pięta-kanurska, 2019, p. 60; pięta-kanurska, 2017, p. 185). it is a concept in which technological solutions make it possible to find a way out of the most pressing city-specific problems, such as improving the transport of persons and goods, counteracting climate change through the use of energy-efficient lighting, social inclusion (an accessible city). the european approach to the smart city concept was originally based on activities related to the reduction of carbon dioxide emissions and activities aimed at effective use of energy in every area of city fabric while improving the quality of life of its residents (stawasz & sikorafernandez, 2015, p. 18). currently, as per the definition put forward by the european commission, a smart city is the one which utilizes digital technologies to increase efficiency and improve living conditions, reduce costs and save resources, as well as boost civic engagement. the key sectors of a smart city include: transport, energy, health care, water and waste management. a smart city is also able to respond faster and better to any urban crises because of its high level of resilience (ferrara, 2015). the eu documents emphasize the role of advanced technologies as a factor enabling the most effective response to the changing preferences and needs of city dwellers. information and communication technologies (ict) are therefore becoming tools for solving public problems with the participation of civil society. in the united states, the ict sector is also seen as the key driver of the so-called power cities, while in australia the role of digital media, creative industries and cultural initiatives are highlighted (hollands, 2008). the smart city concept is rooted essentially in three paradigms: (i) digital city, which uses ict to support and network cooperation between citizens and organizations, exchange data and information, and implement online services such as e-government and e-democracy, (ii) green city, with an ecological vision of urban space based on sustainable development and reduced environmental footprint, (iii) knowledge-based city, relying on the enforcement and evaluation of data, information and knowledge available and produced within the city (after: hajduk, 2020, p. 130; benevolo et al., 2016). http://www.virtual-economics.eu/ 94 www.virtual-economics.eu issn 2657-4047 (online) joanna wyrwa, magdalena zaraś, and katarzyna wolak virtual economics, vol. 4, no. 2, 2021 when trying to define smart cities, some authors emphasize the differences between smart and digital cities, pointing to the role of social and human capital, education, partnership and environmental factors as the main drivers of city growth. regardless of the approach, both concepts are marked by a wealth of information processes, mechanisms that trigger creativity and boost absorptive capacity, and a sustainable approach to development. a city managed in line with the guidelines of the smart concept is a city of thoughtful and creative individuals who incorporate technical and technological innovations into their daily activities and who willingly use modern ict solutions (stawasz & sikora-fernandez, 2016, p. 16). caragliu et al. (2011) define a smart city as a city that invests in human and social capital, while the communication infrastructure leads to sustainable development and improved quality of life as a result of efficient natural resource management and participatory management. a smart city is primarily characterized by: a high level of governance (management) efficiency in conditions of uncertainty resulting from the use of innovative solutions, efficiency in creating knowledge, and high learning capacity. it is a city equipped with an extensive digital infrastructure, offering a broad range of e-services (including administrative), bringing together various creative-class individuals as well as being home to a number of r&d institutions and universities. n. komninos (after: hajduk, 2020, p. 125) defines smart city as a creative-minded urban space with a high capacity to learn and introduce innovations. w. mitchell (after: kuzior & sobotka, 2019, p. 42), meanwhile, recognizes a smart city as a new dimension of the city derived from the combination of increasingly effective digital telecommunications networks (that can be compared to neurons), ubiquitous intelligence (compared to human brain), sensors and tags (compared to sensory organs), and software (compared to knowledge and cognitive skills). an important feature of smart cities is the fact that this new dimension does not exist in isolation from other current city systems – instead, it adds the layer of smartness to the existing network of overlapping links to mechanical and electronic systems found in buildings, embedded in household appliances (the internet of things), transport, electrical networks, water supply and sewage disposal networks, and ensuring the safety of its residents. according to r.g. holland (2008, pp. 308-309), a smart city is an urban space focused on the use of transport and telecommunications infrastructure, ict, and creative industries, while albino et al. (2015) make a case for the following smart properties: network infrastructure reinforcing the effectiveness of political and cultural actions, development-promoting business and creative activities, social inclusion of city dwellers and engagement of social capital, natural environment. an important issue regarding the definition and understanding of the smart city concept is the evolving approach to this concept due to the role of its main beneficiaries. and so, it is no longer enough for cities to focus on the implementation and use of modern technology, but they must also meet the needs of their beneficiaries in an optimal way, that is, so that the elements constituting the foundation of the smart city interact with each other and in so doing create a positive synergy (albino et al., 2015). three generations of smart cities are distinguished (bitkowska & łabędzki, 2021, p. 5). in the first generation, advanced technologies play a fundamental role but the offered solutions are not adjusted to the specificity of the town. the authorities are most often unaware of the effects of the implemented technology and they neither raise these issues with the residents nor take the http://www.virtual-economics.eu/ 95 www.virtual-economics.eu issn 2657-4047 (online) joanna wyrwa, magdalena zaraś, and katarzyna wolak virtual economics, vol. 4, no. 2, 2021 latter’s expectations into account. having said that, the same authorities play an important role in the second generation of smart cities, where they are actively involved and seek solutions best adapted to the specific need of their town. the lack of appropriate governance arrangements for most cities appears to be the most prominent obstacle to effectively becoming a smart city, even though state-of-the-art technologies support the pursuit of strategic goals and help improve the quality of life among residents. in the third generation, city dwellers themselves take the initiative and propose new solutions. their ideas, expressed in the form of needs and expectations, are translated by providers of modern technologies into launchable projects. here, the authorities either act as an assistant-observer or support the communication process. this civic engagement, however, cannot be one-off, and the residents are expected to forge a community that will be the source of new ideas and solutions. recently, authors have seemed to focus on combining the smart city concept with the participation of residents in the city management process, in particular making choices and implementing smart projects. in this sense, the idea of smart city defines the way the city is managed, with the relationships between the local government, it suppliers, science and residents becoming particularly important (pięta-kanurska, 2019, p. 60). potential difficulties associated with determining the exact components of smart cities are the reason why there is no clear definition of this concept yet. having said that, researchers seem to agree as to some of the areas that make up this concept. it is generally assumed that cities can be defined as smart if they meet the following criteria (giffinger et al., 2007, pp. 10-11; krysiński, 2020, p. 17, 158; stawasz & sikora-fernandez, 2015, pp. 19-20): smart economy – measured by the city's entrepreneurship and productivity, adaptation to changes, labour market flexibility, and international cooperation; smart mobility – measured as the local and supra-local availability of information and communication infrastructure through the development of a sustainable, innovative and safe transportation system; smart environment – measured as the attractiveness of the natural environment, the level of pollution, measures taken in the field of environmental protection and through resource management methods; smart people – characterized by the level of skills, lifelong learning, social and ethnic diversity, creativity, openness, and participation in public life; smart living – measured as the existing cultural facilities, living conditions (health, safety, housing), educational establishments, tourism potential, and social cohesion; smart governance – expressed by the transparency of city management, social participation, the level of public services and the implementation of development strategies. the presence of at least one of the above characteristics is considered a prerequisite for including a city in the smart-city category. these correlate with traditional and neoliberal theories of urban and regional development, in particular in terms of competitiveness, quality of life, the significance of human and social capital, sustainable development and governance (stawasz & sikora-fernandez, 2016, p. 55). the systemization of fundamental smart areas in http://www.virtual-economics.eu/ 96 www.virtual-economics.eu issn 2657-4047 (online) joanna wyrwa, magdalena zaraś, and katarzyna wolak virtual economics, vol. 4, no. 2, 2021 cities is an element of the comparative analysis of cities, which is carried out periodically by the centre for regional research at tu wien (http://www.smart-cities.eu/). these parameters are the basis for assessing the city in terms of its smartness, creativity and innovation, although most often in the case of smart cities, particular attention is paid to technological innovations. this systemization allows distinguishing two ways of describing a smart city: (1) a city based on ict (hollands, 2008) and (2) a new paradigm in city development in which human and social capital, education and the environment play a key role (neirotti et al., 2014). the technological trend is reflected, among others, in the definition of t. bakici, e. almirall and j. wareham (bakıcı et al., 2013) who perceive a smart city as "an intensive and technologically advanced city that connects people, information and city elements using new technologies to create a sustainable greener city, competitive and innovative trade and improved quality of life”. currently, the scientific discourse and local-government practice are dominated by the second trend, going far beyond the technocratic perception in which technological solutions play a merely supportive function. new technologies are instrumental in creating cities capable of combining physical and social capital, offering better services and quality infrastructure. these two smart-city perspectives are, by no means, contradictory, but rather should be seen as complementary. the pandemic has shown how much ict can facilitate city life, especially in the context of keeping social distance and limiting physical contacts between the community and public administration employees. moreover, these technologies allow for the monitoring of densely populated areas in terms of disease spread. the existing untapped capabilities of ict systems allow for remote body temperature measurement and data exchange in a centralized health care system. the ability to track infected individuals and those who had contact with them is equally important, as it enables their faster isolation and therefore curbs the spread of the pandemic (wyrwich-płotka, 2020, p.75). 3. methods two research methods were used in the paper: a systematic literature review and a case study. opting for a systematic review has not only allowed for a formalized objective synthesis and assessment of research to date (columb & lalkhen, 2005), but more importantly, it has enabled the identification of both researched and as yet unexplored areas (levy & ellis, 2006). this, in turn, provided a framework for further research (gimenez & tachizawa, 2012) whose future findings could be generalized in the world literature (king, & he 2005). in order to explain the essence of the smart city concept, polish and foreign peer-reviewed scientific publications were analysed. a search was carried out for scientific publications that contain the terms "smart city" and "covid-19" in the title, abstract or among the keywords. the review covers the years 2018-2021 and falls within the scope of social sciences. a bibliometric analysis was the research method used to evaluate publications in the area of the smart city concept and the covid-19 pandemic. to that end, research techniques such as trend analysis, citation analysis and word coexistence analysis were applied. http://www.virtual-economics.eu/ 97 www.virtual-economics.eu issn 2657-4047 (online) joanna wyrwa, magdalena zaraś, and katarzyna wolak virtual economics, vol. 4, no. 2, 2021 choosing a case study as a research method was conditioned by several factors. mainly it was the possibility of using a specific theoretical framework in the research process, in this case the smart city concept. this was further justified by the fact the case study method may cover different epistemological orientations and permits mixing quantitative and qualitative research techniques (ćwiklicki & pilch, 2018). another reason concerned being able to develop practical solutions on its basis. in this research, the instrumental case study was used – this is where the case plays an auxiliary role and it is selected because it illustrates an important research problem. the stages of the study were fashioned after w. czakon (2016) and they were as follows: defining the purpose of the research, selecting cases, selecting data collection tools, collecting data, analysing data, forming generalizations, formulating conclusions. it should be noted that it was a pilot study that served as a trial preceding the actual research which is to cover a larger number of cases. the preparation of the theoretical part consisted in exploring secondary sources: previous studies, analyses and papers related to the smart city concept in connection with the covid-19 pandemic published in scientific journals, both domestic and foreign. the study included a literature review where the current and prospective state of knowledge in this area were analysed. lastly, to characterize smart solutions implemented in various areas across the cities, findings from reports and materials retrieved from websites dedicated to smart initiatives were used. 4. results and discussion – examples of implementing the smart city concept in selected cities during the covid-19 pandemic the smart city concept is becoming increasingly important. originally, a smart city meant a city where smart technology is implemented to streamline the provision of municipal services. over time however, the concept was expanded to include new elements: smart people, smart governance, smart environment, smart mobility, smart living, smart economy (according to the european smart city index). these new dimensions of the smart city concept mean that it is evolving rapidly, with many cities indeed putting it into practice. examples of smart cities show that these are areas marked by high mobility of its residents and green solutions that help reduce the emission of carbon dioxide and other pollutants into the environment. the implementation of smart products and services in these cities prompts new elements to emerge and be subsequently incorporated into the concept. the advancement in the implementation of the smart city paradigm varies for different cities. a smart city is fostered by people and it is precisely the concern for their safety during the covid-19 pandemic that has been prioritized. the smart city concept allows for an innovative approach to everyday matters which has now become more important than ever before. smart-city projects are being carried out all over the world. in this part of the article, the most prominent examples of using smart solutions during the covid-19 pandemic will be discussed, along with an outline of how this concept is being applied and which solutions have helped ensure public safety during the current pandemic. http://www.virtual-economics.eu/ 98 www.virtual-economics.eu issn 2657-4047 (online) joanna wyrwa, magdalena zaraś, and katarzyna wolak virtual economics, vol. 4, no. 2, 2021 4.1. the on-going smart-city projects in warsaw during the covid-19 pandemic smart solutions in warsaw are intended primarily to improve the quality and comfort of residents’ life. the smart city technology is being used in areas such as public transport, air quality, green areas, or city budget. there are a number of mobile applications in warsaw to help commuters purchase public-transit tickets, pay for city parking, check departure times, plan routes, or estimate expected times of buses or trams’ arrival based on the real-time vehicle location. in addition, there are several dozens of electric buses operating in warsaw and an order was placed for another 140. in the coming years, poland’s capital aims to replace its fleet with electric and gas-propelled vehicles and install public charging stations for individual drivers. warsaw, with its strong base of incubators and various forms of business support, is becoming a prominent hub for entrepreneurship, innovation and start-ups of all sorts. this is influenced by a number of initiatives taken by the public, private and science sectors (report developed by the city of warsaw, warsaw heading towards a smart city). one such example is the e-inspection of paid parking zones on 7 january 2020, two electric nissan cars for the first time travelled the streets of warsaw’s unguarded parking zones to scan license plates and report violations. these inspections are aimed at effectively reducing the number of foot patrols (e-kontrola działa. rusza trzecie auto, 2021). furthermore, through the installation of appropriate devices and the use of infrastructure management applications, the intelligent district heating network in warsaw enables an optimized use of resources and an annual carbon footprint has been reduced by at least 14,500 tons, which is equivalent to planting one million trees. during the pandemic, remote diagnostics of network status was launched to avoid direct contact with media recipients (report developed by the city of warsaw, warsaw heading towards a smart city). additionally, librus and the e-notebook for schoolteachers support remote learning in the times of the pandemic. protegosafe is an application that monitors the surroundings in search of other devices on which it is installed, logging every meeting that exceeds 15 minutes and is held at a distance of less than 2 meters. if any of the users falls sick, other users with whom they had contact in the last 14 days will be notified accordingly. due to this, they can better protect themselves and others (ewaluacja realizacji koncepcji smart city w państwach grupy wyszehradzkiej, 2021). 4.2. the on-going smart-city projects in valencia during the covid-19 pandemic a novel, creative approach adopted by generalitat valenciana (the valencia region government) currently champions the practical application of various fields of knowledge dealing with space, among them being: architecture, civil engineering, urban planning, spatial planning, as well as different branches of art and public communication and management. generalitat valenciana provides a global data exchange platform and implements a policy framework for the smart management of public health crises in cities. valencia has launched the frena la curva initiative, a citizens' platform to drive and manage social resilience to the covid-19 pandemic, providing a bottom-up response complementing government action and the work of public services. in a few months’ time, citizens across spain offered and provided over 9,000 free public services. social-action innovation, the collaborative approach and the active participation of citizens are the key factors behind the success of this initiative (smart http://www.virtual-economics.eu/ 99 www.virtual-economics.eu issn 2657-4047 (online) joanna wyrwa, magdalena zaraś, and katarzyna wolak virtual economics, vol. 4, no. 2, 2021 cities have responded to covid-19, 2020). the sharing cities program, consisting in the farreaching modernization of energy buildings, recognizes that the zero-carbon targets will be achieved not only through top-down policies but will also require bottom-up action by local beneficiaries, including citizens. solutions developed under sharing cities, such as the digital social market, are intended to encourage citizens to positively change their behaviour towards meeting the targets of sustainable development. 4.3. the on-going smart-city projects in new york during the covid-19 pandemic big data, which analyses vast and diverse data sets, is being utilized in increasingly surprising ways. it was big data that during the covid-19 pandemic allowed selecting nearly 160 kilometres of roads within new york city which could be excluded from traffic without causing additional traffic jams to offer residents additional space to walk, bike or rest while maintaining social distance (“big data” rewolucjonizuje zarządzanie, nowy jork przykładem, 2013). the city of new york allocated over $200 million to improve access to fibre optic networks for residents. in addition, the authorities also purchased several thousand tablets to be used, among others, by students in remote learning settings (new york smart cities innovation partnership). interestingly, new york did not restrict access to museums or public facilities over the course of the pandemic. safety protocols in those establishments are being monitored by special sensors attached to clothes which emit sounds whenever the distance between two people inside the building is too small. excelsior pass is a blockchain-based application designed by ibm as a virtual wallet for storing medical records. according to ibm, the blockchain technology that was used is interoperable, which means that similar passes could be used by other state or local agencies in the future. new york is additionally piloting a covid-19 digital vaccine passport that would allow its holders – via a digital card stored in their phones – to present proof that they have been vaccinated against covid-19 and/or have tested negative for the virus (smart cities walczą z pandemią, 2020). 5. conclusions this article aims to present the smart city concept in both theoretical and practical terms. d. brodowicz (2021) points out that people are the backbone of any smart city in which numerous smart solutions have been introduced in recent years – from cloud services, to solutions used in medicine or in everyday life. state-of-the-art technologies used in urban areas have significantly improved the life of the community as a whole especially during the covid-19 pandemic. all modern technologies previously used in cities seemed to be viewed mostly as gadgets, whereas now with the pandemic, they have gained enormous importance to the point of becoming very much indispensable. there is also no doubt as to the fact that the pandemic accelerated the development of smart-city systems in many urban areas. most experts agree that such solutions are here to stay and be improved, which will provide a further boost to smart cities. changes related to the smart city concept that were introduced during the pandemic will not only allow for greater epidemiological safety in the future, but will also http://www.virtual-economics.eu/ 100 www.virtual-economics.eu issn 2657-4047 (online) joanna wyrwa, magdalena zaraś, and katarzyna wolak virtual economics, vol. 4, no. 2, 2021 enable the implementation of the goals set for smart cities. one such example is the increased quality of life for city residents or limiting the use of natural resources. covid-19 caught the public off guard, but it quickly became apparent that effective remote living was indeed possible. of course, it would not have been so without using the solutions borrowed from smart cities. the conducted review of the literature and of selected examples of implementing smart solutions by different cities around the world shows that the meaning of the smart city concept is multifaceted and complex, and the measurement of its advancement is complicated at best. it therefore seems important to try and further systematize knowledge in the field of the smart city concept in order to facilitate its implementation and better monitor how it evolves. further research is needed to define the role of smart cities in the context of smart solutions implemented in urban areas during the pandemic. references albino, v., berardi, u., & dangelico, r.m. 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(2020). praca zdalna jako element koncepcji inteligentnego miasta [teleworking as an element of the smart city concept]. studia miejskie, 39, 71-81. http://www.virtual-economics.eu/ https://smart-cities-marketplace.ec.europa.eu/news-and-events/news/2020/smart-cities-have-responded-covid-19 https://smart-cities-marketplace.ec.europa.eu/news-and-events/news/2020/smart-cities-have-responded-covid-19 https://300gospodarka.pl/material-partnera/smart-cities-walcza-z-pandemia-material-partnera https://300gospodarka.pl/material-partnera/smart-cities-walcza-z-pandemia-material-partnera www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 33 2021 volume 4 number 4 (october) sustainable tourism for the green economy nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko abstract. the paper analyses the innovative direction of sustainable tourism in poland. it is investigated by means of a marketing survey of the respondents from this country and neighbouring regions. the authors’ findings deal with the results in the framework of the green economy. the research hypothesis is to check the target group’s awareness of postindustrial tourism in the field of region's rehabilitation, readiness to support sustainable development goals in their areas and to determine the most effective marketing tools to promote sustainable tourism. the authors found that local authorities play an essential role in developing territories through implementing healthy regional strategies. among the insights of the research is the concept of smart city as a promising tool for promoting healthy types of activity, to the respondents' opinion. regions are defined as local centres where sustainable tourism principles could be implemented to reduce consequences unwelcome for the environment and economy. keywords: sustainable development, healthy region, post-industrial tourism, marketing survey, local authorities jel classification: l83, z32, q01 www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 34 authors: nataliia letunovska sumy state university, 2, rymskogo-korsakova st., sumy, 40007, ukraine e-mail: n.letunovska@kmm.sumdu.edu.ua https://orcid.org/0000-0001-8207-9178 aleksy kwilinski the london academy of science and business, 120 baker street, london, united kingdom, w1u 6tu e-mail: a.kwilinski@london-asb.co.uk https://orcid.org/0000-0001-6318-4001 henryk dzwigol silesian university of technology, 26-28 roosevelt street, zabrze, 41-800, poland e-mail: henryk.dzwigol@poczta.fm https://orcid.org/0000-0002-2005-0078 oleksii lyulyov sumy state university, 2, rymskogo-korsakova st., sumy, 40007, ukraine e-mail: alex_lyulev@econ.sumdu.edu.ua https://orcid.org/0000-0002-4865-7306 tetyana pimonenko sumy state university, 2, rymskogo-korsakova st., sumy, 40007, ukraine e-mail: tetyana_pimonenko@econ.sumdu.edu.ua https://orcid.org/0000-0001-6442-3684 citation: letunovska, n., kwilinski, a., dzwigol, h., lyulyov, o., & pimonenko, t. (2021). sustainable tourism for the green economy. virtual economics, 4(4), 33-51. https://doi.org/10.34021/ve.2021.04.04(3) received: may 28, 2021. revised: july 9, 2021. accepted: november 12, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) mailto:alex_lyulev@econ.sumdu.edu.ua https://orcid.org/0000-0002-4865-7306 https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 35 1. introduction post-industrial tourism, also called industrial heritage tourism, is associated with postindustrial transformations of the society. it is a type of tourism that involves developing the tourism industry of a particular region based on the use of territories, buildings and other facilities previously used for industrial purposes. such facilities include material residues of production, industrial landscape, product residues, documentation, and social infrastructure of enterprises. many sources emphasize that this type of tourism is an effective way to restructure a particular region together with its directions such as health and green or ecotourism (karaoulanis & vasiliki, 2018; tovmasyan & tovmasyan, 2020; letunovska et al., 2020). significant changes in the structure of production that have taken place in various european countries in recent years create a prerequisite for the emergence and development of industrial tourism. here is an example of poland and ukraine. in ukraine, in recent years, with the general decline in labour market indicators, employment in the industry has been declining every year. since 2012 the total employment has fallen from 19,261 thousand people to 16,578 thousand people in 2019, which is slightly more than 86%. in the industrial sector, this decline is even more apparent. in 2019 the employment accounted for only slightly more than 55% of this indicator in 2012. figure 1 shows changes in the indicators of workers in industry and all sectors of ukraine. about 20% of ukrainians in the total employed population aged 15 to 70 work unofficially (it became known, 2020), while unofficial employment is scarce in the industry. there is also a very negative dynamics of changing the need for workers in the sector (figure 2). not only labour market indicators show negative dynamics in the industry of ukraine. in 2019, industrial production in ukraine decreased by 1.8%. figure 1. the number of people employed in the economy of ukraine with a forecast for 2022 sources: developed by the authors based on the (state statistics service of ukraine, 2020) 3236.7 3170 2898.2 2573.9 2494.8 2440.6 2426 1832.6 0 5000 10000 15000 20000 25000 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 all the branches of the economy industry www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 36 figure 2. the dynamics of the need for workers at the industrial enterprises of ukraine sources: developed by the authors based on the (collection of business statistics, 2018) as far as poland is concerned, the statistical analysis of this country's labour market shows not very positive trends in, for example, the elimination of jobs, among which industry is in the second place (fig. 3). figure 3. the share of eliminated jobs in poland in 2019 by industry, in % of the total number of eliminated jobs sources: developed by the authors based on the (the demand for labour, 2019) tourism in poland is developing. statistically the number of tourists in temporary accommodation facilities showed an increase in 2019 as compared to 2018. during the peak periods in 2019, this figure reached more than 4,000,000 people. the largest share of foreign 49.6 53.9 63.1 65.8 55.8 57.4 23.5 14.7 17.2 16.6 13.8 11.5 9 11.4 0 10 20 30 40 50 60 70 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 manufacturing; 16.7 construction; 12 trade, repair of motor vehicles; 26.9 transportation and storage; 7.8 accomodation and catering; 3.6 information and communication; 3.9 financial and insurance activities; 2.9 real estate activities; 2.3 professional, scientific and technical activities; 5.5 administrative and support service activities; 6.1 public administration and defence, compulsory social security; 1.6 education; 5.8 human health and social work activities; 1.9 arts, entertainment and recreation; 1 other service activities; 2 www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 37 tourists is from germany (more than 20%), great britain, and the united states (about 10% per each country), ukraine (about 8%). from these positions, it is essential to analyse the attitude to the tourism industry on the part of representatives of ukraine as a country whose population actively visits poland. since it is potentially possible to develop many types of tourism in poland, the authors’ research aims to single out one kind of tourism, post-industrial, and analyse the opinion of target respondents about this type of tourism activities in poland. since the end of the last century, industrial heritage tourism has developed in many countries. it began to be seen as a tool for regional restructuring and an essential condition for the survival and successful functioning of businesses. a permanent transformation of various areas of activity helped to achieve this. restructuring is a way to ensure the optimal functioning of regional economic entities following the adopted strategy of their development by implementing a system of measures of organizational, economic, technical, technological, and financial direction (letunovska et al., 2021). such actions require constant marketing analysis of the situation in the market to achieve high economic results of restructuring. post-industrial tourism can preserve the regional identity, stimulate the local service sector, and boost employment in the region. the development of post-industrial tourism is a tool for improving the region's image and counteracting the negative phenomena that may occur in a depressed or peripheral region. there are many kinds of research on the example of specific regions with their unique infrastructural objects. these regions have been improved due to the changing requirements of the market. recent research suggests that the covid-19 pandemic has altered the factors that influence the poles’ choice of destination inside the country (kuzmenko et al., 2020; george, 2020). in particular, the research presented on the statista website, along with pre-epidemic factors such as the total cost of travel, easy access to the destination and tourist attractions, has emphasised the importance of such components as, for example, the possibility of social distancing in the place visited or high hygiene standards (fig. 4). figure 4. the main factors determining the choice of tourist destination mentioned by the respondents-residents of poland in 2020 after the start of the covid-2019 pandemic sources: developed by the authors based on the (statista, 2020). 0% 50% 100% introduction of higher hygienic standards by the facility total cost of the trip accomodation tourist attractions climatic conditions easy access to the destination small number of coronavirus-related illnesses in the visited region possibility of social distancing in visited place local cuisine conditions for self-preparation of meals in the facility www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 38 in general, as well as in the rest of the world, the tourism industry in poland has suffered devastating losses since march 2020. even domestic tourist flows have decreased significantly. comparing the number of tourists in poland in march 2019 and march 2020 draws obvious parallels about the decrease in their number in march this year (fig. 5). figure 5. the comparison of tourist flows in poland by regions, in thousands of people sources: developed by the authors based on the (statista, 2020). figure 6 represents the main motives of travel for respondents from european countries. cultural tourism, which includes tourism of post-industrial heritage, occupies a prominent place among people's reasons for making a trip, gaining 26% of all responses. the survey results show that polish people are less interested in visiting cultural heritage sites than europeans in general. the leaders of this purpose are the respondents from the netherlands (39%), luxembourg (37%), estonia (36%), latvia (35%), belgium (34%), and denmark (33%). the analysis of sociodemographic characteristics shows that the respondents with a complete higher education are more attracted to cultural tourism (29% vs. 19% without higher education). self-employed people and employees mentioned cultural tourism among tourists’ motives more often than manual workers (26% vs. 19%). this was taken into account during the compilation of the target audience for the survey in the authors’ research – primarily self-employed people, employees and students who will have higher education in the future (undergraduates), postgraduate students. 274.1 92.5 73.6 42.2 117.7 381.5 426.1 32.6 81.9 39.1 174.4 200.8 50.9 68.3 156.4 189.9 0 50 100 150 200 250 300 350 400 450 march 2019 march 2020 www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 39 figure 6. the main motives to take a vacation mentioned by the european respondents, percentage of responses sources: developed by the authors based on the (preferences of europeans towards tourism, 2016; kmeco et al., 2019). significant quantitative declines are observed in almost all regions of poland, including the fourth-largest number of tourist flows in the silesian voivodeship, despite its considerable cultural and historical value, as a region containing a significant number of prominent tourist attractions (eagle's nest way, trail of monuments of technology, historic castles, museums, one of the largest parks in europe, deserts and more). in almost every region, the number of tourists in march 2020 did not reach half of their number last year, which is comparable. due to the negative trends in the tourism industry, poland needs to develop those tourist destinations that can provide sufficient social distance for visitors, encourage domestic tourist flows, and attract enough tourists to their region through active marketing activities. 2. literature review scientists from different countries studied various aspects of tourism and sustainable regional development goals in their works (chygryn et al., 2021; kljucnikov et al., 2020; rosokhata et al., 2021; vysochyna et al., 2020; bondarenko et al., 2020). their focus on analysing different types of tourism depends on tourist destinations recognised as strategically essential and promising within a particular region (bilan et al., 2018; bilan et al., 2019; vasilyeva et al., 2020). many scientists agree that tourism has a significant economic and social role in a country (kharazishvili et al., 2020; dzwigol et al., 2020, kwilinski et al., 2020). scientists from the czech republic (plzakova et al., 2018) emphasize that organized tourism brings a significant positive result in socio-economic development. they note that the contribution of tourism can be effectively estimated using the tourism satellite account (tsa). for example, in poland, out of 50 indicators of this complex parameter, 36 were used to evaluate tourism. in contrast, ukraine does not use this parameter. this paper considers other approaches to evaluating 0 5 10 15 20 25 30 35 40 45 50 sunshine and beach visit family and friends nature (mountains, lakes, landscape, etc.) city trips culture (religion, gastronomy, industrial heritage, etc.) wellness, spa, health care sports activities specific events (sports events, festivals, parties, etc.) 39 38 31 27 26 13 12 9 40 41 49 42 16 8 19 11 eu poland www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 40 tourism's economic and social contribution to the development of a particular country. from the standpoint of theoretical and practical justification of the tourism importance, the authors (xie et al., 2012) note that despite the economic feasibility of tourism, there are still some negative nuances, such as a growing cost of living in a country where tourism is actively developing, environmental pollution and a loss of the traditional culture of the tourist destination. in general, the authors of this paper study the perceived impact of the tourism industry on different groups of tourists: domestic and foreign. the authors (arva et al., 2011) note that new forms of tourism which appear in the xxi century significantly change the tourist demand and approaches to marketing activities in the tourism industry. a differentiated approach to building relationships with a client-tourist becomes essential. a product that may not attract one person's attention at all may be of great interest to another. there is an interesting study conducted by tovmasyan (2019), who constructed a model to identify several factors that determine the satisfaction of the tourists during their trip, namely the image of the destination, tourist infrastructure, quality marketing tools to promote the destination, available tourist resources, level of security and variety of types of entertainment in recreation areas. most scientists state that the visitors’ level of satisfaction with the destination determines the ease of attracting new tourists and the future number of repeat tourists. infrastructure is an essential factor in the satisfaction of tourists with travel, in particular, the entertainment infrastructure, an object of interest to tourists, and often serves as a starting point of curiosity that motivates them to travel long distances to see a tourist object. returning to the age grouping of tourists with the definition of their pattern of motivational behaviour in the tourism industry, the authors (sidali et al., 2017), on the example of specific individuals, thoroughly trace the relationship between socio-psychological characteristics of a particular person and his/her decision to choose a specific tourist trip. of course, remnants of post-industrial heritage can be such an object. concerning industrial heritage tourism (romanova, 2017), post-industrial tourism is the newest type of tourism that is gaining popularity. among the global trends that contribute to the development of this type of tourism, the author of this work mentions global trends in consumption and development of the services market, changing socio-demographic characteristics of tourists. after all, today, such a generation as millennials are beginning to dominate the market, for whom everything connected with impressions is essential. that is, tourism should surprise and open something new for them. a quiet rest is not for this category of people. although when it comes to such a type of cultural and cognitive tourism as post-industrial, the elderly may constitute the broad target group of travellers. (murphy et al., 2006) propose a conceptual model of tourism development in the post-industrial region, which combines the research of many scientists who identify exceptional features of tourists interested in post-industrial heritage sites, organizations facilitating development, and continual development. in several scientific papers (garača et al., 2014; jahić et al., 2014), industrial heritage tourism is considered a specific type of heritage tourism offered by a particular region. it is a product of past industrialization that includes a set of abandoned objects. based on the literature review and expert discussions on the specific features of post-industrial heritage tourism development, kua-hsin et al. (2017) summarized all aspects in six areas of growth and 25 criteria for www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 41 evaluating the effectiveness of strategic actions, which allows adjusting the tools used in practice. scientists use a hybrid madm model. considerable attention in scientific research is paid to the motivational component of tourist travel, which is essential to consider when building a marketing strategy for the development of a tourist destination as an object of post-industrial tourism. distinguishing diverse groups of backpackers and organized tourists, the authors draw parallels between them and highlight the fundamental differences in the characteristics of the motivational component of their decision-making on the choice of a tour (doran et al., 2015). in the paper (parrinello, 1993) motivational factors and premonitions are considered in the specifics of post-industrial tourism. the author analyses different countries with a rich post-industrial heritage, their features and how this impacts the tourism industry. the paper of (shu-yuan et al., 2018) shines a light on the issues of the sustainable tourism importance for society. they encourage researchers from different fields to further investigate inter-relations among community and tourism, environment, and green economy. (ruhanen, 2013) made an in-depth analysis of the scientific literature on the role of local authorities in achieving the goals of sustainable tourism development. the scholar concludes that many authors have undoubtedly discussed the role of local government in this area. however, very few have studied this aspect on the example of specific regions, analysing in detail the stimulating governance or, conversely, what inhibits sustainable tourism development. in (nunkoo, 2015), the interdependence between tourism development and public confidence in government is highlighted. local communities need to feel empowered to develop tourism and understand that government action aims at improving their quality of life in a particular area (kapera, 2018). based on a survey in poland, most local governments in poland agree that sustainable development should be considered to implement tourism-related programs. almost every local government answered that local people should also be involved in the planning and implementation of development programs. at the same time, more than 60% of respondents said that their local municipality does not support opportunities to share knowledge and experience of sustainable development. despite the significant attention paid to tourism questions in sustainable development, there is a constant lack in the quantity of the research dedicated to applying the implementation of principles of a green economy to the specific directions of tourism. this paper addresses this gap. the authors develop post-industrial tourism and sustainable development theory and reveal the particular context of this type of activity by conducting marketing research. 3. methodology this research is informed by the results of the anonymous survey with a pre-designed questionnaire. the results of this survey provide an opportunity to build the right marketing strategy for the development of post-industrial tourism in zabrze (poland). the study was conducted by an international team of scientists from the silesian university of technology, the university of silesia, the london academy of science and business, and sumy state www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 42 university. with the help of a specially designed questionnaire, 700 representatives of the most progressive part of the population (scientists, students, employees) were interviewed. the survey was conducted on february 24-28, 2020. respondents had to answer 25 questions of different types (open and closed). questionnaire completion time was 20-25 minutes. closed questions provided the opportunity to choose several answer options, which allowed the respondents to give a more balanced answer and take full account of their opinion on each of these questions. the questionnaire included general questions about whether the person is familiar with the term of post-industrial tourism and its features, and more specific questions to find out the views on the development and marketing opportunities of the tourist destination "guido" mine and the tunnel of queen louise, located in zabrze, poland. before conducting the survey, several relevant hypotheses were put forward to be tested, namely: h1: most respondents know about post-industrial tourism and fully understand its benefits and features. h2: about 40% of the target group of respondents would agree to visit a post-industrial tourism facility. н3: post-industrial tourism is the most interesting for the generation of 20-30-year-olds. н4: the most effective marketing tools to encourage potential tourists to post-industrial tourism are online advertising campaigns and celebrity endorsement. these hypotheses are subject to testing after analysing the answers received from respondents. 4. results the survey of respondents provided an opportunity to draw certain conclusions applicable in designing a marketing strategy for the development of post-industrial tourism. among all the respondents, it turned out that less than half of the respondents are familiar with the term of post-industrial tourism and its meaning. only questions that explain the purpose and role of post-industrial tourism in the development of the territory made it possible to frame the research conclusions to refute or confirm the hypotheses before the questionnaire is analysed. as it can be seen, the hypothesis h1 was not confirmed because only 44.4% of respondents knew what the concept of "post-industrial tourism" includes. further questions which explain what this type of tourism includes allow researchers to analyse respondents' opinion on, for example, the feasibility of using industrial heritage buildings as tourist attractions. here, most respondents agreed that such facilities might be attractive to tourists and even attract tourists to a particular region (65.7% of respondents). the hypothesis h2 of the study concerned the statement that about 40% of respondents would agree to visit a specific post-industrial tourism facility. here again, the hypothesis did not prove true, as more www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 43 than 70% of respondents expressed interest and willingness to see this post-industrial heritage site. since this is a specific object (museum-coal mine 320 meters underground), it can be assumed that those respondents who answered "no, because it is scary to go so deep underground" would also give an affirmative answer unless the object is associated with a particular risk according to visitors or their fears. the hypothesis h3 put forward by the authors of the study that the generation of 20-30-year-olds is the most interested in postindustrial tourism coincided with the opinion of respondents – 41% of respondents consider this generation to be the target audience for this type of tourism. this aspect should be considered when planning the content of a marketing advertising campaign for tourist sites of this type. the generation question provided an opportunity to choose several answer options to count all possible generations that the respondent would prefer, but the results showed that most respondents chose only one answer with confidence, bypassing the other options. thus, only about 2% of respondents included in their response three active groups of people ("adolescent generation", "generation of 20-30-year-olds", "generation of 30-50-year-olds"). for the sake of clarity, table 1 also presents responses such as "generation of 50-60 years old”, “generation of 60 years old and older", the share of which is very small among the answers. summarizing the opinions on the role of post-industrial heritage as an object of tourism for society, the vast majority of respondents (73.7%) agree that there is such a need. it can be concluded that the third hypothesis of the study that post-industrial tourism may be of the most interest to the generation of 20-30-year-olds has proven to be true. the opinion of researchers in this aspect coincided with that of the respondents. table 1. a fragment of the survey results option from the list of questions a number of respondents' answers, pcs. respondents' answers, % 1 2 3 awareness of the term "post-industrial tourism" the term is known 311 44.4 the term is unknown 389 55.6 the expediency of using post-industrial buildings as tourist attractions it is advisable 494 70.6 it is inappropriate 78 11.1 i have no idea 128 18.3 the ability of post-industrial tourism to attract tourists to a particular region able 460 65.7 unable 97 13.9 i have no idea 143 20.4 willingness to visit the museum-coal mine 320 meters underground yes 500 71.4 no, because it's not interesting 106 15.1 no, because it is scary to go so deep underground 94 13.5 the generation that is most interested in visiting post-industrial objects adolescent generation 134 19.1 20-30 years old 287 41 www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 44 countinued table 1 1 2 3 30-50 years old 147 21 50-60 years old 27 3.9 over 60 years 29 4.1 adolescent generation, 20-30 years old 28 4 50-60 years old, over 60 years 3 0.4 adolescent generation, 20-30 years old, 3050 years old 13 1.9 other answers 32 4.6 the need for a modern man to know about the industrial heritage there is a need 516 73.7 there is no need 96 13.7 i have no idea 88 12.6 sources: developed by the authors the opinion analysis serves as a starting point for devising a marketing program to promote typical post-industrial tourism facilities, such as the "guido" mine and the tunnel of queen louise, located in the polish city of zabrze. among the selected group of respondents, only 110 answered in the affirmative that they knew about this infrastructure facility in poland. it indicates that an effective advertising campaign is needed to inform the public about the postindustrial tourism offer. the respondents answered the question about the way of how to disseminate information about post-industrial heritage to foreigners. the analysis of internet sources showed that zabrze, with its interesting post-industrial heritage sites, is poorly known among tourists from other countries. the results of the authors’ research of online reviews confirmed it. "guides do not write about this city and there accidentally came across the mention that in zabrze there was opened for visitors a huge mine, the deepest of all available to tourists in europe" or "this museum was discovered while searching the internet. it is difficult to get information about this without being a polishlanguage speaker". among the ways of informing the respondents there were mentioned social networks, the internet advertising, participation in thematic conferences and exhibitions, placement of videos in streaming services, publications in foreign media, direct marketing, blogs, shooting, and thematic films and series. the latter can be exemplified by the tv series about the ukrainian post-industrial heritage object chernobyl npp. thanks to the phenomenal success of the american series "chernobyl", tourism in the chernobyl zone in 2019 broke all records. in just eight months, 75 thousand tourists visited this post-industrial heritage site. for comparison, during the whole 2018, there were 72 thousand tourists. the hbo's television network provided excellent marketing for the chornobyl exclusion zone. people became interested in this object, asked questions. then they had a desire to visit this place. below there are several respondents’ comments on the ways to encourage tourists to visit post-industrial objects. www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 45 table 2. respondents’ comments on the ways to encourage visits to post-industrial heritage sites (fragment) free vouchers make attractive advertising, get the celebrities’ support with the help of the internet and tv commercials, as well as virtual museums maintenance of facilities in good condition these objects should look like primary, i.e., without a restoration. there is a need for exciting tours with professional guides organize quests on objects construction of photo zones create a legend that will encourage to visit an object holding themed festivals near the post-industrial heritage object finding investors to improve the condition of the post-industrial heritage object placement of information about the object in thematic publications, guides, maps of the city and country attracting like-minded people to promotion conducting thematic virtual lectures creating thematic tours, both individual and group sources: developed by the authors even from a fragment of the respondents’ comments, it is evident that their proposals can divide into two groups. recommendations related to maintaining the facility in good condition to ensure its attractiveness to tourists and those that belong to the purely marketing tools to promote the object of post-industrial tourism. the survey and the answers summarized should initially result in framing the researchers’ idea of the feasibility of using specific marketing tools to attract tourists to places belonging to the field of post-industrial tourism (melnik et al, 2016). figure 7 presents the distribution of respondents’ opinions on the effectiveness of the marketing mix strategy in promoting post-industrial tourism. figure 7. the respondents’ answers to the question about the marketing mix effectiveness for promoting post-industrial tourism sources: developed by the authors from the analysis of the results in figure 7 it can be assumed that with a significant number of affirmative answers, a substantial proportion of respondents (28%) doubted their answer 433 71 196 0 100 200 300 400 500 yes no don't know www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 46 and did not consider themselves experts in the field of tourism marketing. they preferred the answer "don't know". specific questions of the questionnaire provided an opportunity to find out the respondents’ opinion on the marketing tools effectiveness to encourage potential tourists to post-industrial tourism. television advertising campaigns, the internet advertising campaigns, and celebrity endorsement received the most support among respondents, which confirmed the researchers’ hypothesis. virtual tours around the places that may be of most interest to the target audience are quite popular today to promote various tourist attractions. when asked whether a virtual museum of post-industrial objects and collections can attract people to visit a tourist destination, respondents answered differently, as shown in the diagram in figure 8. a significant gap is observed between the affirmative answers (almost 70% of respondents) and other options. figure 8. distribution of respondents' answers to the question about the ability of the virtual museum of post-industrial heritage objects to attract real visitors sources: developed by the authors local communities play an essential role in the development of tourism at the regional level. the role of the public sector is to prepare a local development strategy. tourism development should be part of it. the state’s task is to create such conditions that will be attractive to private market participants and potential tourists. regional associations can be a kind of a centre where tourist products are born bringing profits to the territories of their location after successful implementation. for example, in the industrialized silesian voivodeship of poland, a "technical attractions route" has been set up, consisting of many facilities, such as the "guido" coal mine in zabrze, where visitors are lowered to a depth of 320 m for a three-hour excursion. tourism is a tool that can be launch the comprehensive development of a city and community. first, unique facilities attract tourists. when demand outstrips supply, there is a need in infrastructure development, which boosts interest in local development, attracts investment, and improves the image of the territory. an example is the small ukrainian town of trostianets, the district centre of the sumy region, which has become a venue for national festivals. it attracts tourists from all over the country, despite the geographical location on the 479 135 86 0 100 200 300 400 500 600 yes no not sure www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 47 periphery and the difficulties with the development of tourism in the beginning. during the development of the city's strategy, it was noted that the kruglyi dvir fortress was in an abandoned state. after the building was transferred to the balance of the town in 2007, it underwent reconstruction. today, this object is a business card of the town with excellent acoustics, within the walls of which several large-scale festivals are held every year under the open sky. the following questions concern finding out the respondents' opinion on the role of local communities in the development of the region's industrial heritage. figure 9 shows the results of the analysis. figure 9. the role of local communities and cities in the development of tourism in the region's post-industrial heritage, according to respondents sources: developed by the authors although the majority of respondents supported the idea to necessarily involve local communities in the development of tourism, a significant percentage of respondents answered negatively and did not give any accurate answer to this question (almost 40%), which indicates that the population misunderstands this process, does not see such participation promising and doubts whether he/she can be helpful in this matter. considerable attention should be paid to informing locals about their possible role and participation in the process of forming a regional tourism cluster, which can be a set of post-industrial heritage sites. today's famous concept of a "smart city" is spreading in society. although this concept is interpreted differently, in general, the idea of the development of cities that have restructured their growth strategy according to the principles of a "smart city" is similar. in various forms, this concept is implemented and is being implemented in more than 2,500 cities around the world when smart cities create "from scratch" or gradually implement intelligent technologies in already established urban systems. it is a more common method that can be put into action for the cities that house post-industrial heritage objects and seek to include them in their 497 76 127 should post-industrial tourism cities work together to promote each other? yes no don't know 440 130 130 should local communities (residents) be involved in promoting the industrial heritage of their city? yes no don't know www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 48 tourism development programs. respondents supported the opinion on the usefulness of applying smart city tools in promoting post-industrial heritage tourism. they also agreed with the researchers' proposal on the expediency of using a smartphone application, available after registration on the website of a particular city, which may be one of the components of promoting industrial heritage objects (see figure10). figure 10. respondents' answers to the questions related to the concept of a smart city in the field of post-industrial tourism development sources: developed by the authors 5. conclusion the conducted research and systematization of data from statistical sources allowed the authors to reach several conclusions. first, sustainable tourism development is a promising area of activity in poland and, overall, in the regions with a similar background. in particular, a progressive form of such tourism is post-industrial. the marketing research results showed that a significant proportion of respondents in the target group are not informed about this direction of tourism in their or the neighbouring regions. to start an advertising campaign of sustainable tourism, it is advisable to actively use smm tools, exhibitions, opportunities for streaming services, direct marketing, distribution of thematic videos etc. researchers have concluded that local communities play an essential role in developing their territories by devising and implementing local strategies. regions are a kind of local centres, where the principles of innovative areas of sustainable tourism are implemented to improve environments and lay the foundations of a green economy. after successful implementation, it is possible to disseminate the results using the experience of implementing such projects in other regions and even countries. funding: this research was funded by the grants of national research foundation of ukraine and the ministry of education and science of ukraine (no g/r 0121u100468). 0 100 200 300 400 500 yes no don’t know can smart-city tools be useful in creating postindustrial tourism? 0 100 200 300 400 500 yes no don't know do you think that the smartphone app, available after registration on the city's website, can be one of the elements of promoting industrial heritage sites? www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, aleksy kwilinski, henryk dzwigol, oleksii lyulyov, and tetyana pimonenko virtual economics, vol. 4, no. 4, 2021 49 references andreas karaoulanis, a., vasiliki, k. 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(2022). research methodology in management science: triangulation. virtual economics, 5(1), 78-93. https://doi.org/10.34021/ve.2022.05.01(5) received: october 12, 2021. revised: november 26, 2021. accepted: january 12, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 1, 2022 79 1. introduction in management science, it is very easy to build "new theories" that lack sufficient verification. a swift introduction of new, recommended management-related concepts and methods, as well as their rapid rejection, resulted in negative organisational changes. it would be difficult to determine the reasons why the applied methods lack effectiveness. was the failure triggered by an inadequate method used for a management process or by its unskilful implementation? (sudoł, 2012). most disciplines of sciences have separate, proper and diverse cognitive methods, allowing to solve or diagnose a research problem, while the management methodology has no permanent, universal character. management uses methods inherent in other sciences, including psychology, sociology, statistics, econometrics, or economics, to name but a few. so, methodological aspects of different approaches were shown in the works of many researchers (arefieva et al., 2021; boiko et al., 2019; bogachov et al., 2020; dalevska et al., 2019; drożdż et al., 2021; dźwigoł & wolniak, 2018; dźwigol et al. 2019a; 2019b; 2020a; 2020b; dzwigol, 2020; hussain et al., 2021; kharazishvili et al. 2020; 2021; kostyrko et al., 2021; kotowicz et al. 2022; kuzior et al., 2021a; 2021b; 2022; kuzior & kwilinski, 2022; kwilinski et al., 2019a; 2019b; 2020a; 2020b; 2020c; 2020d; 2021; 2022a; 2022b; kwilinski & kuzior, 2020; lyulyov et al., 2021a; 2021b; 2021c; miśkiewicz, 2018; 2020; 2021; miśkiewicz et al., 2021; 2022; moskalenko et al., 2022a; 2022b; polcyn et al., 2021; prokopenko & miśkiewicz, 2020; saługa et al., 2020; 2021; szczepańskawoszczyna & gatnar, 2022; tkachenko et al. 2019; trzeciak & jonek-kowalska, 2021; trzeciak et al., 2022; yang et al., 2021). management methodology is a reflection on the transformations that have taken place over the years in management methods that provide an insight into the state in which a company finds itself. management methodology is constantly being enhanced by new methods characterised by varying cognitive and practical effectiveness. the constant growth of diagnostic instruments is conditioned primarily by changes in the environment (dzwigol, 2018). the problem lies in the overproduction of research findings and publications, being useless or not fully valuable (sułkowski, 2010). management science lacks an unambiguous criterion of truth and falsity (koźmiński, 2011) nowadays, in the management sciences, the most common division of research methods is their classification into qualitative and quantitative methods. certain methods exhibit characteristics of qualitative as well as quantitative methods. the discipline of management sciences relies on methodology from other sciences. already at the stage of defining the research problem, it is difficult to select one method enabling a full and thorough diagnosis of the problem. it is necessary to apply diverse research methods providing a comprehensive answer to the problem in question. the development of cognitive methods and business management makes it imperative to adopt an open-minded approach that requires combining several approaches and methods. in research processes, the author uses system methods and techniques, qualitative and quantitative methods (dzwigol, 2015). the author pays particular attention to the use of www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 1, 2022 80 triangulation of research methods. the simultaneous application of several research methods is very beneficial for the final result. then, one obtains a more comprehensive and reliable picture of the research problem and avoids the danger of bias or even obtaining a result that is not entirely consistent with economic or social reality (sudol, 2012). the author designed a concept of a modern formula of organisational changes of an enterprise in a model form and has verified the model on the example of selected enterprises. he makes an attempt to develop a research method to be used in the implementation of basic research processes in management sciences and the introduction of organisational changes. 2. research methods and techniques research methods and techniques in the management sciences are aimed at finding out about rules and principles that govern organisations, and at changing the said organisations for the better. a method can be defined as a conscious and resolute way in which a researcher acts or behaves in order to achieve a defined goal. a technique, on the other hand, can be defined as an instrument, a tool used to solve appearing problems. however, from a practical point of view, it is not easy to distinguish between a method and a technique. regardless of a researcher’s decision about applying a research method or a research technique, the researcher is always obliged to implement a determined research process. a research process consists of numerous elements; the said elements should be meticulously planned on the basis of continuous choices. the said choices are to be made in consideration of the reliability and credibility of research findings (babbie, 2005). the essence of the research process is formulating a research problem; the latter is needed to determine research goals, i.e. what is to be achieved as a result of the research. defining a research problem is the starting point for developing a research concept (bogdaniecko, 1983):  analysing the problem in the light of the subject literature,  identifying sources of necessary data and research methods,  adopting necessary assumptions, hypotheses and theses. it is necessary to apply a systemic methodology, which requires a common holistic design of activities (rokita, 2007), which will result in the construction of an appropriate research methodology. therefore, the research conducted in the management sciences in particular should be guided by:  clarity,  avoidance of vague statements and statements creating only an appearance of scientific thoroughness. in the discipline of management sciences, historically speaking, one can distinguish four fundamental types of methods. these include: pragmatic, empirical, formal and understanding ones (ostasz, 1999). www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 1, 2022 81 the first type of method was used the earliest. it may be most generally characterised as the practical solution to problems related to meta-physics. the advantage of this method was supposed to be common sense and reference to empirical reality. the value of this method is measured by the effectiveness of the changes occurring in the enterprise, which are to lead to an increase in its efficiency (niemczyk, 2011). empirical research methods are proper methods for management sciences. it needs to be underlined that one should employ proper methods allowing to verify research hypotheses and answer research questions. deductive methods and analogical reasoning, complemented with intuition should be a source of research hypotheses or a basis for formulating research questions. carrying out research in management sciences requires more research discipline than, for example, the above-mentioned intuition (niemczyk, 2011). empirical methods represent the opposite of pragmatic methods. they focus on solving the problem from the side of experience, trying to create the closest to reality conditions that will allow the researcher to explore the phenomenon, the problem from the side of science. the cognitive path, in this case, is mainly induction, which introduces certain generalisations and is therefore incomplete. in management, empirical methods are represented by observation, experiment and quantitative methods of social sciences for example, questionnaire (sułek, 1990). formal methods are related to the ability of hypothetical thinking. the ability to make inferences, mathematics and statistical and logical methods play an important role here. in management science, they are reflected in numerical and probabilistic methods. the result of the application of these methods can involve practical and cognitive conclusions (niemczyk, 2011). understanding methods, which refer to philosophy and humanities. their task is to thoroughly penetrate the essence of the problem, enabling to examine it from different sides. in empirical sciences they find their place in the qualitative methodology of social sciences including methods that allow comparing organisations (kostera, 2003), i.e. observation, interview, analysis of documentation, etc. during the analysis of literature concerning the phenomena and problems of interest to the researcher and their solutions, the researcher must also be guided by the principle of intersubjective verifiability. according to this principle, the results of other researcher’s studies should be verified and checked (sułkowski, 2005). methodics can be defined as a set of ways, rules and principles regarding how a given job needs to be done. nonetheless, one needs to ponder specific character of methodics related to management sciences. in the subject literature, one may find statements about the existence of methodological underdevelopment of management sciences, which is caused, among others, by the anti-methodological character of main trends (koźmiński et al., 1989). furthermore, it should be pointed out that among the methods that are used in the management sciences, it is possible to identify both methods specific to management only www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 1, 2022 82 and others, derived from workshops of other sciences. the borrowed methods refer primarily to learning about the organisation and management, while the management's own methods focus on shaping the organisation and management system. it should be stated that in spite of some criticism, management science and its methods lead to increased efficiency and competitiveness of enterprises. it is worth noting, however, that management methods are not and cannot be universal. these methods must change over time, just as the company does. the traditional approach does not always produce satisfactory results and, in addition, does not always contribute to improving the existing situation. in the modern approach, different types of rules, procedures and tools are developed, which make it possible to deepen, in comparison to the traditional approach, the understanding of the problem situation. in the literature on management sciences, the necessity of simultaneous use of many different methods of getting to know and shaping the organisation has been repeatedly emphasised. the literature also points out that there is a need for simultaneous use of many mutually verifying and correcting methods (denzin, 1970). 3. directions of development of research methods and techniques in management sciences scientific research is a complex process leading to the solving of a specific problem. its outcome may take a strictly cognitive form, but it may also be implemented for specific practical purposes. scientific work carried out in all fields consists of constant elements, which are: analysis and synthesis. the contribution of individual elements depends on the nature of the studied phenomena. popular scientific works are not connected with the implementation of research, nor do they contribute anything new to the world of science. the assumptions made in them do not necessarily have to be backed up by research and may therefore prove to be false. their main purpose is to disseminate what is already known. the language they use is also more accessible to the average reader. significantly greater conceptual and linguistic freedom prevails in them than in scientific works. scientific methods appropriate for management sciences are empirical research methods. it should be emphasised that appropriate methods must be used to verify research hypotheses and answer research questions. the source of research hypotheses or the basis for formulating research questions should be deductive methods, analogical thinking and, finally, intuition. conducting research in the field of management sciences requires more research discipline than, for example, the aforementioned intuition (niemczyk, 2011). however, regardless of whether a research method or technique is used, the researcher must always follow a specific research process. the research process consists of numerous elements that should be carefully planned based on continuous choices made in order to ensure the reliability and credibility of the research results (babbie, 2005). the essence of the research process is formulating a research problem; the latter is needed to determine research goals, i.e. what is to be achieved as a result of the research. the formulation of the research problem is the starting point for the development of the research concept (bogdaniecko, 1983): www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 1, 2022 83  analysis of the problem in the light of the subject literature,  determining sources of necessary data and research methods,  adoption of necessary assumptions, hypotheses and theses. according to the holistic approach, phenomena create comprehensible systems. regarding an organisation as a whole is an element of systems thinking. it is thus necessary to make use of the systems methodology, which requires designing actions collaboratively (in the holistic sense) (rokita, 2007). the ensuing results will be to establish proper research methodics. according to the author, core studies should be preceded by pilot studies. in pilot studies, the choice of objects should be well-thought-out by the researcher. one is aware that pilot research steers the fundamental research process. adopting wrong assumptions at this stage may result in making wrong assumptions about solving the research problem. in order to avoid confusion with an erroneously devised data collection tool, a pilot study should be carried out. the pilot studies, otherwise known as preliminary studies, are carried out prior to the basic (core) studies when a problem, process, phenomenon or mechanism specific to a given community, location, object or society is scarcely studied – that is, very little is known about it. such research is often conducted on a small scale and constitutes the first contact with the analysed reality. the pilot study allows gathering preliminary knowledge about the studied phenomenon. the main purpose of such study is to collect information (implicitly incomplete, because only core studies allow collecting all the necessary data to verify the theses adopted in the work) to verify the chosen direction, formulate assumptions for the work, or check the correctness of the developed questionnaire – in the case of surveys. pilot studies also serve to check the usefulness of the adopted research methods and tools to investigate a given problem (nowak, 2007). by conducting preliminary research, the researcher gains confirmation or negation of the previously accepted connections between the studied phenomena. furthermore, a pilot study also allows for the selection of the information collected. this results in the rejection of information that is irrelevant to the problem under investigation or that is not present in the environment or population. apart from checking the correctness of the developed questionnaire, it is also possible to obtain knowledge about the duration of basic research or a reliable random sample size. a pilot study appears to be necessary if (rószkiewicz, 2002):  the field of study is being explored for the first time,  completely new methods and tools are used in research,  it is likely that the assumptions made in the studies cannot be maintained. in contemporary management sciences, an important role is played by the calls for methodological eclecticism (sułkowski, 2005), within which research methods are divided into inductive and deductive methods (matejun, 2011). in management, moreover, there are no www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 1, 2022 84 unambiguous or definitive conclusions and firm findings that can be posed as immovable universal laws. each analysed phenomenon or problem is unique, and may have several solutions, additionally losing its validity quickly (koźmiński, 2004). therefore, in conducting scientific research, especially in the field of management sciences, one should be guided by clarity, and should avoid statements that are vague and create only an appearance of scientific thoroughness (koźmiński, 2004). the researcher must be guided by the principle of intersubjective verifiability. according to this principle, the results of other researchers' studies should be verified and checked (sułkowski, 2005). 4. research methodics in the process of designing organisational changes model, with the application of the „lider” method, developed by the author the essence of the exemplary research process is to investigate the determinants of changes in the organisational system. in the research process, an attempt should be made to comprehensively capture the problem from the point of view of the scope of research analysis and the possibility of supporting the implementation process by applying certain management methods. the research was conducted using quantitative and qualitative methods. in order to make the research more credible, in the author's opinion, triangulation of research methods should be applied, allowing to broaden the scope of the studied phenomenon. the use of combined research methods also allows to achieve a higher quality of research, as well as to limit measurement errors that may occur when just one method is employed. among the methods used in practice for research in management based on observation of facts and the classification used in the general methodology of inductive sciences, it is good when the author has the opportunity to use two extremely important methods, namely:  observation carried out under natural conditions, where the researcher cooperates with the enterprises being examined,  observations-interventions that take place within the framework of transformation activities in enterprises, and the author has a direct influence on the decisions taken in this respect. management theory should explain complex phenomena and be of help in improving management practice. the variety of research methods in management sciences is not detrimental, it is a resource that each discipline should value and develop. claims that each science should use only methods developed by itself and that only one method should be considered fundamental are unjustified and unrealistic (sudoł, 2012). from the point of view of the methodology of elaboration of the examined problem, it was important to use the results obtained on the basis of the "lider" research method developed by the author, referring to the assessment of the ability to conduct changes. the developed www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 1, 2022 85 "lider'' research method was used by the author to identify areas of activity and to assess the readiness of change leaders to carry out the said changes. most research problems are very complex and require a systematic approach and analysis of multiple threads, often inconsistent with the scope of research. the combining of various theories, concepts, notions and theses from different selected philosophical trends into one incoherent whole, is essential for the development of reliable principles and criteria as to the selection of components of the scientific offer to be applied in practice. in the case of the study of changes in the organisational system, enterprises of the same activity profile were accepted as research objects, which made it possible to compare their areas both in terms of identifying the actual research problem and the ability to solve it. experts and representative research groups were not used in this research; in the author's opinion, there is no need for it, as this is pilot research confirming the researcher's belief in the sense of investigating a given problem. the research paid special attention to the characteristics of individual areas of activity within the organisational system and their comparability. in order to identify a research object, it is necessary to carry out a preliminary measurement and assessment of the studied phenomenon, using, for example: the intuitive method of "comparisons", which involves comparing such quantities that have the so-called value of comparability. it means that as a result of these comparisons, one can draw conclusions that are important from the point of view of the evaluation of the studied phenomenon (dycz, 2000). in this process, depending on the nature of the research problem, one should also pay attention to the taxonomic methods of evaluation, especially useful when the features of the system subject to evaluation are not measurable. therefore, it is necessary to estimate them (steinhaus, 1950). in fundamental research, the author pays special attention to the determination of the sample size and the use of heuristic methods in the research process. the starting point, and at the same time the main reason for any marketing research is to determine the sample size. how to select the sample is one of the most important decisions that a researcher planning an empirical study must make. the accuracy of the obtained research results will depend on how representative the sample is (brzeziński, 1996). since each study satisfies a different decisionmaking need, no two studies are identical. each stage requires different methods of procedure specific to that stage. procedure for determining necessary sample size (greń, 1984). 𝑛𝑏 = 𝑁 1+ 4𝑑2(𝑁−1) 𝑍2𝑎 (1) where n – population size, d – admissible fraction ratio error; assumed fraction ratio– 1, hence z = 1.64, z – normal distribution, α – significance level, www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 1, 2022 86 heuristic methods may boast a strong scientific basis and a rich and long tradition. these methods use judgments and opinions of both experts (professionals) and non-professionals who are involved in the process of solving a specific research problem, consisting of searching for facts and connections between them, proposing solutions or expressing subjective opinions and judgments. the discussed methods draw on the achievements of the discipline, the subject of which is the processes of creative thinking – heuristics. it defines recommendations, the use of which enables more effective problem-solving. a heuristic approach to a problem should be understood as stimulating imagination, fantasy and intuition, and focusing on creative aspects of the solved problem (orzeł, 2005). at this point, it should be pointed out that the role of heuristic methods in enterprise management, with particular reference to decision-making, is extensive and well-established. the method of group expert assessment is most often used in decision-making. related to this is operational risk management, which is one of the elements of enterprise management. operational risk should be understood as “the risk of loss resulting from inadequate or failed processes, people and systems or from external events.” (mun, 2004). 5. the application of the "lider" research method to organisational change management an example of research methodology in the area of organisational changes in an enterprise. a concept of a modern formula for organisational changes in an enterprise was designed in the form of a model and the model was verified on the example of selected enterprises. the objective can be divided into two parts, i.e.:  designing a modern formula for organisational changes in an enterprise.  verifying the model on the example of selected enterprises. tasks to be completed during the construction of the model:  developing a methodology for designing a modern formula of organisational changes in an enterprise,  selecting tools to support the process of modelling organisational changes,  applying the systemic approach to enterprise diagnosis,  constructing a model of organisational changes in an enterprise,  verifying the model on the example of a selected enterprise. research methods and techniques.the simultaneous application of several research methods is highly beneficial as far as the final result is concerned. thus, a more comprehensive view of the research problem is obtained and the danger of bias or even of a result that is not fully in line with economic and social reality is avoided. www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 1, 2022 87 the researcher should contribute to the development of the research method, which may consist of his/her own research related to e.g.: critical analysis of literature in the field of management sciences. empirical research should be followed in this case by a diagnosis of the environment and the sector or industry represented by the research object, as well as verification of the functionality of the developed solutions for management purposes on the example of a selected organisation. the developed research methodology may consist of the following stages, i.e.:  determination of the research object and research goal selecting and defining the research object, as well as determination of the research expediency referring to the construction, e.g.: a model in the scope of research area,  internal diagnosis – recognition and identification of the internal conditions of the research object,  external diagnosis – identification of conditions for activities run by the research object in the environment,  identification of problems with regard to the subject and objectives on the basis of compiling the results of internal and external diagnosis aimed at recognising the specific nature of the activities of the research object,  search for partial solutions – analysis of contemporary approaches to the issues of the researched area through detailed recognition of theoretical achievements,  construction and description of e.g.: a model construed as a research method (dźwigoł, 2007). the company activity should be based on short-term enterprises, recreating themselves in other forms from accumulated capital, making use of external resources and activities performed by persons from the company’s environment and not from the inside of the company in question (dźwigoł, 2014). the development of a model of the enterprise of the future, possessing the ability to learn, to be creative, to manage with the use of lean organisational structures, is triggered by the new economic reality. coping with the changes of tomorrow is conditioned by the readiness to undertake the construction of new ways of perceiving the future of management (brzeziński, 2001). as a result of the conducted research and the synthesis of the said research, the key areas of companies’ activity were distinguished, taking into account the assumptions for the model. the selected areas of activity were examined using the „lider” research method developed by the author. furthermore, tools supporting the modelling phases were selected. from the point of view of the methodology of developing the model of organisational changes, it was important to use the results obtained on the basis of the "lider" research method developed by the author and relating to the assessment of the company's ability to carry out organisational changes. www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 1, 2022 88 the „lider” research method initiates the development of a new organisational model that allows to get to know the organization, determine methods of solving operational problems in a practical way, all that with the view of building an intelligent organisation. the conducted research was aimed at assessing the activity of employees participating in the restructuring processes of coal mining companies, particularly the middle management staff. the method enriched the traditional way of conducting interviews with three basic elements:  two types of survey questionnaires were developed with a differentiated approach to the survey of executive and managerial staff;  the author’s own system of scaling the issues which were subject to research analysis from the point of view of staff involvement in the restructuring process was developed;  an innovative way of interpreting the research was developed from the point of view of psychometric features of both employees fully engaged in restructuring processes and passive employees in the face of changes. the developed „lider” research method allows to:  assess the readiness to carry out organisational restructuring processes,  identify areas of key importance for organisational restructuring,  define the scope of restructuring, according to the change leaders. the use of the „lider” research method in the proposed model allows to take into account specific conditions in the process of organisational restructuring in individual companies. while constructing the overall concept of the company's organisational change model, the results of research relating to the general analysis of the change process according to the company's problem areas were taken into account, as well as the results obtained in the questionnaire survey relating to the perception of this process and the ability to carry it out. the "lider" research method is presented in fig. 1. the „lider” research method – assumptions. according to the author, the research methodology developed at the beginning did not provide a guarantee for effective practical implementation of the change process in the surveyed enterprises. therefore, it was necessary to develop the "lider" method to assess:  the enterprise's ability to conduct changes;  the credibility of the adopted direction of changes;  applicability of the developed model or concept, etc. the developed “lider” research method is a part of the proposed model, which allows to:  assess the readiness to carry out organisational changes; www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 1, 2022 89  identify areas of key importance for organisational changes;  define the scope of changes, according to the change leaders. the "lider" method comprehensively tackles the problem:  organisational changes in an enterprise;  determines the course of further development;  uses the intellectual potential of an enterprise to introduce changes;  provides an information database for many management concepts;  indicates the organisation's ability to learn. l i d e r figure 1. the „lider” research method (dźwigoł, 2007). the use of the “lider” research method in the proposed model allows taking into account specific conditions in the process of changes to particular research objects. if the research process results in a developed model, then the object of modelling should be characterised. the subject of modelling includes the following steps:  formulating general and key assumptions of the model, phase i survey of leaders of change survey i survey ii perceptions of change processes leaders' propensity for change assessment of readiness for organisational change phase ii group evaluation by experts score on as scale 1-5 importance of factors in individual areas identification of areas of particular importance to the organisational change process phase iii leaders of change – choosing a scenario scenario i scenario ii scenario iii scenario iv all business areas covered by the organisational change process areas of activity deemed by experts as less important for improving efficiency business areas with high relevance for improvement of efficiency individual selection of business areas scope of organisational change process according to change leaders www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 1, 2022 90  verifying the areas of activity identified at the stage of "internal diagnosis" as key elements of the model, by means of surveys and the scenario method,  listing key elements of the model together with defining relations between them and introducing supporting tools,  presenting activities in the field of modelling the process of change e.g.: in selected key elements of the model, including the use of force field analysis,  characterising in detail the possibilities to use tools supporting the modelling process of change. the "lider" method refers to the importance of soft organisational elements which are closely related to the concept of the management tetrahedron (strategy, structure, decision-making processes, organisational culture). 6. conclusions new problems arising in economic reality have turned companies into a completely new research subject, triggering the need for knowledge of processes and the conditions of transformation and development thereof, tools and methods of management in times of “new economy” (borowiecki et al., 2010). the nature of the research will determine the decision on the precise design of the research, the creation of a research model and the choice of specific research methods. it is worth mentioning that the research procedure presented in this paper is not an ideal answer on how to operationalize phenomena in management sciences, i.e. how to convert data to the level of variables ready for further statistical analysis. some limitations of the proposed methodology can be pointed out at this point. the basic limitation concerns the research sample. due to difficulties in reaching a large group of enterprises that could constitute a representative research sample, the research is usually conducted on a random sample. another limitation may concern the research tool and the obtained measures. the use of e.g.: a questionnaire survey results in obtaining numbers that reflect managerial approaches and views. in this respect, it is difficult to discuss the measurement of a given phenomenon what is studied is rather the level of a given phenomenon in a given group of organisations. however, the author would like to draw attention to a certain complexity of hypothesis verification in management and quality sciences. in management science, it is not possible to establish commonly valid and universal laws, because these laws are determined by people. if the order defined today does not suit people, they change it (bolesta-kukułka, 2003). berger and lukmann (2003) – note that “social order is not part of the nature of things and cannot be derived from the laws of nature. the changeability of the world is an important barrier to the formulation of laws in the management sciences.” in management, there are no unequivocal or definitive conclusions and firm conclusions that can be interpreted as indelible universal laws. there are no such laws in management and there must not be. this is because each phenomenon or problem analysed is unique, and may have several solutions, additionally rapidly becoming obsolete (koźmiński et al., 2004). knowledge in management sciences has a non-universal, approximate and uncertain character (sułkowski, 2005). w. ossowska, l kołakowski and t. kotarbiński claim “the way of interpreting social and historical phenomena depends, in fact, on the whole conceptual apparatus that we use, depends on the adopted system of classifying facts and other circumstances regarding which a general agreement never exists (kołakowski, 2004). www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 1, 2022 91 the objectivity of hypotheses in management science is highly challenging. therefore, there are significant limitations in applying the principle of intersubjective verifiability in the management sciences. the researcher should demonstrate the ability to combine quantitative and qualitative methods in the research process to increase the 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(2022). constructs of project programme management supporting open innovation at the strategic level of the organisation. journal of open innovation: technology, market, and complexity, 8(1), 58. https://doi.org/10.3390/joitmc8010058 yang, c., kwilinski, a., chygryn, o., lyulyov, o., & pimonenko, t. (2021). the green competitiveness of enterprises: justifying the quality criteria of digital marketing communication channels. sustainability, 13(24), 13679. https://doi.org/10.3390/su132413679 кwilinski alex 98 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 4, no. 1, 2021 2021 volume 4 number 1 (january) the uncertainty factor in the market economic system: the microeconomic aspect of sustainable development henryk dźwigoł abstract. opportunities for sustainable development of the business entity largely depend on the uncertainty factor, which, in particular, is expressed in the asymmetry of information. due to the influence of this factor, forecasting the efficiency of enterprises becomes a difficult task. every company must meet the requirements of modern reality and be open to new solutions. the purpose of this study is a microeconomic analysis of factors that affect the sustainable development of enterprises. the uncertainty condition is considered as an integral element of the modern concept of company management. based on the analysis of the literature, personal observation and interviews with managers, the guidelines for building a modern microeconomic model of a market economy were identified, which can further become the basis for creating new organizational management models. keywords: uncertainty factor, market economic system, sustainable development, network organization, knowledge economy jel classification: d01, o10, p10 author: henryk dzwigol silesian university of technology, 26–28 roosevelt st., zabrze, poland, 41-800 e-mail: henryk.dzwigol@poczta.fm https://orcid.org/0000-0002-2005-0078 citation: dzwigol, h. (2021). the uncertainty factor in the market economic system: the microeconomic aspect of sustainable development. virtual economics. 4(1), 98-117. https://doi.org/10.34021/ve.2021.04.01(5) received: october 3, 2020. revised: november 12, 2020. accepted: january 3, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://orcid.org/0000-0002-2005-0078 https://doi.org/10.34021/ve.2021.04.01(5) https://creativecommons.org/licenses/by/4.0/ 99 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 4, no. 1, 2021 1. introduction the ongoing process of globalisation and permanent changes in the market make it necessary for the companies to develop a different approach to the management process. modern enterprises have to open up to new solutions, learn to perceive problems from different perspectives, become more flexible and sensitive to market signals and be willing to implement changes to the management process. it is related with the fact that, now, in the situation of considerable uncertainty, businesses are, more than ever before, faced with increasingly complex company objectives, evolution of the organisation of work towards its autonomy and the creation of flexible forms of work, decreasing opportunities for achieving the company results through using hierarchical control and greater emphasis on improving the skills of employees and new models of so-called careers without borders. these processes are embraced by modern managers whose style of operation should take into account the interests of the company through the dynamic management of its resources, i.e., marketing and sales, production, human, financial, organizational, physical information sources-related resources. in addition, companies are operating in the time of the 4th industrial revolution, which is seen as the beginning of a new era in which the industry is becoming increasingly "intelligent" through intensive data exchange, predictive analytics and the use of internet technology, (porter & heppelmann 2015; lenka et al., 2017). this forces the companies from various industries to develop a new way of doing business that affects the entire industrial value chain (iansiti & lakhani 2014; cenamor et al., 2017) and is directly related with the capacity thereof (imran et al., 2018; rüßmann et al., 2015; waschneck et al., 2016). in this context, j. pieriegud points out that the digitisation of economy and society is one of the most dynamic changes that can be observed in the current environment, which, on one hand, opens up new opportunities for creating business models and, on the other hand, brings with it the uncertainty and various risks related to, inter alia, general security and social consequences of automation of manufacturing processes. the author presents the digitalisation as a continuous process of converging actual and virtual world, which is becoming a driving force for innovation and change in most sectors of the economy (pieriegud, 2016). taking this into consideration, it may be concluded that the changes occurring in our environment produce the necessity to construct the contemporary model of a market economy. however, in order to design such a model, it is necessary firstly to prepare the guidelines for its construction. therefore, the purpose of the article is to identify variables that may affect the modern market economy model. the article consists of two parts: the first part characterises the variables that may have a key impact on the modern market economy model, while the second part attempts to define the guidelines for constructing the modern market economy model. http://www.virtual-economics.eu/ 100 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 4, no. 1, 2021 2. variables of the modern market economy model when analysing variables of the modern market economy model, it is necessary to refer directly to the "valued" concepts of business management in the global economy, which include: the knowledge-based economy; sustainable development and sustainable organization; network structures; social participation; temporary management. the aforementioned concepts will be discussed below. 2.1. the knowledge-based economy one of the key variables of today's market economy model should be the knowledge-based approach. the essence of the knowledge-based economy may be summarised in the statement that the long-term growth is mainly determined by the investment in human capital and innovations (welfe, 2009). here knowledge becomes a driving force for the economy and a resource used in economic trade. it is the result of specific social, economic and political processes (krätke 2012; ernst & kim, 2002). as indicated by k. kucznik, the knowledge-based economy consists of four pillars, i.e.: 1) the institutional and legal environment – factors that can allow the elimination or mitigation of legal-administrative and economic barriers to the market as well as stimulation of entrepreneurship also known as an economic stimulus system; 2) innovation systems taking into account the number of people employed in the research and development sector, the number of scientific and technical publications and patents per a million of inhabitants; 3) education and training, which take into account the state and effectiveness of continuous education; 4) the information infrastructure per 10,000 inhabitants (kucznik, 2019). matusiak (2010) points out that transition from the industrial economy to the knowledgebased economy is evidenced by: 1) dematerialisation (knowledge as a source of competitive advantage); 2) an increase of dynamics (related to, e.g. technology race and growing demand for innovation), (3) decentralisation (management through networks and implementation of flexible business models); 4) an uncertainty (corresponding to the turbulence economy); 5) globalisation (increased market coverage simultaneously embracing the local and regional specifics). despite the numerous advantages of the knowledge-based economy it is also possible to indicate the risks related thereto, namely: http://www.virtual-economics.eu/ 101 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 4, no. 1, 2021 1) the possibility of widening of the gap between the backward and the technologically advanced countries as a result of dynamic technological progress; 2) additional marginalisation of developing countries as a result of their inability to adopt the global technological achievements made by the other countries; 3) deepening inequalities in the level of productivity and the pace of economic development of different countries due to the diversification of organisations’ quality; 4) monopolisation of the market through unification of products and services; 5) growing disparities in the level of the technology use; 6) widening of the gap between highly developed countries supporting each other in implementing modern technologies and the remaining countries; 7) division of countries into regions equipped with modern infrastructure and adequately qualified human capital and the regions devoid of such resources (makulska, 2012). 2.2. sustainable development sustainable development of enterprises is one of the key elements determining the competitiveness level of an organisation (koszel & weinert, 2013). adamczyk (2017) points out that managing a company in accordance with the principles of sustainable development requires balancing of economic, social and environmental objectives. it involves the process of efficient production of the desired products and services, while reducing the use of natural resources, respecting the environmental protection and ensuring that stakeholders’ expectations are met. pursuant to the principles of sustainable development, the company takes into account the interests of customers, employees, suppliers, local community and other groups of stakeholders. misztal (2018a) emphasises in turn that sustainable development in relations to a company is a process of quantitative and qualitative changes aimed at achieving economic, social and environmental objectives simultaneously. sustainable development should be the basis for a long-term approach to organisation management (misztal, 2018b). achievement of companies’ sustainable development is tied to the necessity to adapt to changing environmental conditions, continuous learning and reorienting of the company's objectives towards increasing value for its partners (grudzewski et al., 2010). as underlined by misztal (2018b), the company’s sustainable development is equivalent to the improvement of financial and capital standing of the entity combined with simultaneous improvement of the conditions and quality of its employees’ performance and with assurance of improving environment protection standards. however, harmonisation of actions aimed at attaining pre-defined strategic objectives must take into account not only the current operating conditions but also the need to ensure the future of the economic entity. 2.3. a network structure of a modern enterprise a network structure is a structure applied in modern organizations that break with traditional organizational solutions and introduce new ways of management. it can therefore be http://www.virtual-economics.eu/ 102 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 4, no. 1, 2021 concluded that this structure is used in businesses which base their activities on network operation and management. furthermore, as pointed out by glückler et al. (2012), the concept of the network’s creation and operation is linked to ensuring and strengthening of a competitive position which is established through various forms of cooperation among organisations in order to gain access to strategic resources. a network is a form of organisation that operates in order to build a competitive advantage. therefore, it consists of specific relation among separate entities, which is characterised to a greater extent by cooperation rather than competitiveness (zentes et al., 2005). contemporary network organisations are created on the basis of a new approach to competition, which is here equated not only with the individual capacities of enterprises, but also with the skills resulting from cooperation in a network of common values. their essence manifests itself in shared control over specialised and interconnected resources, which are usually intangible. network organisations are created when there is a strategic potential among the partners of the organisation that creates added value, which is at the same time a factor determining the competitiveness of network-creating entities (mikołajek-gocejna 2011). working in a network structure requires the managers to have a "high ability to synthesize distributed information material". modern managers should know how to share their expertise with others, how to update this knowledge so that it can reduce the implementation lead time of projects, enable the creation of informal connections and control the flow of information within the company, create and safeguard the boundaries between the activities of teams or individual employees. managers operating in a network structure should implement changes in the requirements regarding the members of the staff, a management method, organizational culture and an incentive system. the advantages of a network organisation include the possibility of achieving high efficiency by eliminating unnecessary operations, increasing operational flexibility, introducing new and faster methods of information exchange, supporting the competitiveness and learning. in addition, the "network of connections" among the entities promotes the exchange of resources, facilitates the control over work and the re-orientation of employee’s duties (mikołajek-gocejna 2011). furthermore, it allows the achievement of synergy, the creation of multilateral cooperation and the high independence of the partners in the system, which promotes innovation and learning (sułkowski & sikorski 2014). undoubtedly, like any concept, this one is not flawless either. the main disadvantages of this approach include: possibility of exploitation by the main organisation, requirements regarding the professionalism and training of employees, problems in managing mutual interconnections of the enterprises, increasing the number of participants and problems with information management and control (mikołajek-gocejna 2011). http://www.virtual-economics.eu/ 103 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 4, no. 1, 2021 2.4. social participation in the management process participation is understood as the inclusion of employees in the decision-making process regarding the functioning of the organisation and their participation in the management thereof. participation in the management process enables employees to become responsible for the company's future and results. their behaviour and commitment enhance their creativity and thus improves the development opportunities of the entire organization. in that context, e. poustma emphasises that at the level of employees participation is not limited to being a member of a team, since the essence of participation is to take an active role in the team, to have a say in decisions and to take responsibility for joint actions. as pointed out by kisielowska (1998), the sense of employees’ participation in management has a motivating nature and is summarised as the activities aimed at inducing grassroots initiatives and generating a willingness to take, at least, partial responsibility in the workplace. participation means the employee’s empowerment with all the positive effects to form desired attitudes on the part of the employee. within the participation activities, it is particularly important to involve as diverse employees as possible in the decision-making process because they bring their unique knowledge of different areas of the company (przywojska, 2019). at the same time, as underlined by b. wenerska & rącka (2018), it is necessary to implement the process of participation in a good way. it should allow strengthening the employees’ awareness regarding their position (denhardt & denhardt, 2007) and promote the increase of their confidence. it is also important to assure that social participation enables the actual participation in planning and decision-making as it is not enough for employees to be heard, it is necessary to take their views into account in the company's policy (przywojska, 2019). 2.5. temporary management as a new approach to the company development temporary management is a concept with many interpretations and definitions, e.g.: it is the temporary handover of management of an enterprise or a part thereof to the selected manager for special tasks in order to make changes to individual or all areas of this business. the factors determining this approach include (rytka, 2011): 1) growing competitive pressure resulting from globalisation of markets with a simultaneous removal of access barriers, for example, in the european union; 2) growing influence and role of consumers – access to information through the internet; 3) increasing uncertainty regarding the future resulting from the increase of operational, financial, political and other similar risks, the loss of the sense of economic security in business; 4) the growing role of innovation and flexibility in economic processes; 5) dynamic changes occurring in the economic and business environment of enterprises. the manager responsible for such temporary management should be characterised by a specific approach and achievements (wendt, 2011), i.e.: http://www.virtual-economics.eu/ 104 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 4, no. 1, 2021 1) experience enabling the use of proven methods in the customer’s organisation; 2) professional success; 3) stable life situation making him less susceptible to adopt various types of behaviour; 4) willingness to face challenges since the temporary manager is hired when competences of a usual manager are no longer sufficient; 5) openness to new tasks and goals enabling the increase in effectiveness of their implementation; 6) performance of the function not merely for the power related thereto but in order to achieve satisfaction with the effects. summarising, it can be stated that this concept focuses on key competences, increasing demand for effectiveness and efficiency of the actions taken, drive towards the mitigation of risk associated with the profit generated and towards the innovation. as can be inferred from the analysis, the construction of a new market economy model (nmem) should be carried out taking into account such aspects as sustainable development, the knowledge-based economy, the use of network structures, social participation in the management process and the use of temporary management (hiring managers for special tasks). survival of a company under changing conditions is determined by its ability to anticipate and effectively manage changes, adapt management methods to new implementation conditions, focus on building effective processes and creating employees’ effective attitudes and behaviours (nogalski & rutka, 2007). it is also necessary to leave the linear approach to process building (so called linearity) in favour of processes characterised by high independence in decision-making, speed, higher product quality and more efficient management (so-called networking). moreover, the study of the sustainable development parameters as priority strategic goals in the context of industry 4.0 is carried out in the works by abazov (2021), arefieva et al. (2021), boiko et al. (2019), bogachov et al. (2020), borychowski et al. (2020), chygryn et al. (2020), cyfert et al. (2021), czyżewski et al. (2019, 2020), dalevska (2013), dalevska et al. (2019), dementyev (2013, 2015, 2019), dementyev & scherbakov (2017), dementyev & kwilinski (2020), dementyev et al. (2021), dzwigol (2019a, 2019b, 2020a, 2020b, 2020c; 2021a; 2021b; 2021c), dzwigol & dźwigoł-barosz (2018a; 2020a; 2020b), dzwigol et al. (2019a, 2019b, 2019c, 2020a, 2020b), gorynia (2019), gorynia et al. (2019), kaźmierczyk & chinalska (2018), kharazishvili et al. (2020, 2021a, 2021b), khrapkina (2021), koibichuk et al. (2021), kondratenko et al. (2020), kwilinski (2018a, 2018b, 2019), kwilinski et al. (2019a, 2019b, 2019c, 2019d, 2019e, 2019f, 2019g, 2020a, 2020b, 2020c, 2020d, 2020e, 2021), kwilinski & kuzior (2020), kyrylov et al. (2020), lyulyov et al. (2020a, 2020b, 2021a; 2021b), melnychenko (2019, 2020), mlaabdal et al. (2020), miskiewicz (2020a, 2020b, 2021), pająk et al. (2016, 2017), polcyn (2018), prokopenko & miskiewicz (2020), saługa et al. (2020), savchenko et al. (2019), tkachenko et al. (2019a, 2019b, 2019c, 2019d, 2019e), todorov et al. (2021), trushkina (2019), trushkina et al. (2020), and others. http://www.virtual-economics.eu/ 105 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 4, no. 1, 2021 3. methodology of research the primary objective of this article is to analyse variables affecting the construction of modern market economy models of companies operating under conditions of uncertainty. as a theoretical background, the research uses the “valued” concepts related to business management in the global economy, i.e., the concepts of: the knowledge-based economy, a network organisation, sustainable development, temporary management and social participation. achievement of the objective required finding answers to two basic research questions: 1. what are the guidelines for designing a modern model of a market economy under conditions of uncertainty? 2. what measures should be taken in the area of business management to direct it towards a modern model of a market economy operating under conditions of uncertainty? the main research methods for achieving the purpose of the article include: participatory observation and interviews with 40 managers of both polish and global companies. the research was carried out in 2019-2020. participatory observation provided the author with a very good access to the study of variables of the market economy model under conditions of uncertainty due to the possibility of interaction and immersion in related circumstances (verschuren, 2003; czakon, 2009). the participatory observation was complemented by interviews. they were semi-structured in nature and contained open directional questions. managers came from various industries (i.e., manufacturing, commercial and educational) and business types: 8 of those surveyed belonged to so-called micro-entrepreneurs, 16 were managers of small enterprises, 6 respondents represented medium-sized enterprises, while 10 held positions in large enterprises. 4. the guidelines for creating a modern market economy model the guidelines for creating a modern model of a market economy under conditions of uncertainty were defined on the basis of research carried out and the literature analysis. they are summarised in figure 1. figure 1. the guidelines for creating a modern model of a market economy under conditions of uncertainty. source: developed by the author. http://www.virtual-economics.eu/ 106 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 4, no. 1, 2021 as it results from figure 1, the basic elements of a modern model of a market economy operating in times of uncertainty are, firstly, knowledge and competence, so that the organisation may continuously improve and operate even in difficult and uncertain conditions, as it is prepared to learn and meet new challenges. secondly, sustainable development of the organisation is a necessary element that will take into account the needs of all company’s stakeholders. only such a holistic approach will enable smooth operation in uncertain conditions and achievement of an advantage in the market. another element of the model, i.e., network organisation, is necessary if the company wants to grow and enter new sales markets. the network operation enables sharing resources, speeds up learning and information exchange process and increases flexibility in operation, which promotes competitiveness, innovation and globalisation of the activities carried out. in order to enable the company to produce high-quality solutions, it is also necessary to include employees in the processes occurring in the company and to enable the staff to co-decide on the direction of actions taken. only such an attitude allowing employees to participate in the activities of the organisation can take it to the next level and allow the synergies of the activities, especially in difficult and changing conditions. the last element of the model – temporary management – shall in turn enable the enterprise to increase the dynamics of development and innovative processes and to improve the efficiency of actions taken. moreover, the literature analysis, interviews with managers and own observations served as a basis for defining the actions that should be taken by the companies in order to steer their activities towards a modern model of a market economy operating under conditions of uncertainty. the following actions have been identified: 1. simplifying the organisational framework by taking greater account of the diversification of the scope of activities. 2. simplifying the management system and specialisation of management processes by creating strategic business units. 3. decentralising the responsibility for creating profit. 4. precisely separating basic and auxiliary activities. 5. transparent planning and analysing technical and economic indicators. 6. strengthening the responsibilities of selected services and functions. 7. implementing new shape of relations with the environment and focusing on the customer. 8. reducing administrative and maintenance activities. moreover, enterprises of the future need to base, to a greater extent, their functioning, production system and management on innovative solutions. their activities should be grounded on short-term projects repeating frequently from the capital accumulated in another form, using the external resources and works performed by the entities from the environment rather than from inside the company (dźwigoł, 2014). in addition, the work should be organised around mini enterprises within the institution. at the same time, the employees’ responsibility should be structured not so much by function (e.g., marketing, accounting, production) but by the divisional arrangement associated with a given product or service – the use of project management method. (dzwigol, 2021). http://www.virtual-economics.eu/ 107 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 4, no. 1, 2021 4. conclusion the ongoing globalisation process as well as continuous and turbulent changes in the market make it necessary to develop a different approach to the management process. learning is the basis for achieving benefits in a competitive market. in order to remain viable in variable and demanding business environment the companies must undergo a permanent process of continuous improvement. this is a prerequisite for further existence and development, a part of the company’s daily functioning (dźwigoł, 2019a). the organisation should be intelligent, flexible, critical, open, creative and innovative, capable of on-going transformation while maintaining a sense of purpose and direction (dźwigoł, 2019a). research has shown that, while designing a modern model of a market economy in times of uncertainty, it is necessary to take into account such aspects as sustainable development, building the company on the basis of knowledge and competences, enabling employees to cocreate the enterprise, using temporary management and network co-operation. the application of the above-mentioned concepts requires developing one of the most important resources of the organisation, which is knowledge, i.e., everything that employees know about the mechanisms of its operation. skilful knowledge management, choosing the knowledge that is the most important from the point of view of the organisation, will have a decisive impact on gaining a competitive advantage. in the process of a modern organisation’s development, there should be taken into account certain factors in the process of its functioning, i.e., internal and external conditions, predisposition of employees, that is, everything that constitutes entrepreneurial activities. references abazov, r. 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(2005). kooperationen, allianzen, netzwerke. wiesbaden: grundlagen-ansätze-perspektiven, auflage verlag. http://www.virtual-economics.eu/ кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 43 2022 volume 5 number 1 (january) impulse buying and hedonic behaviour: a mediation effect of positive emotions ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma abstract. this paper is devoted to building a miniature of an impulse buying behaviour in department stores, which is influenced by hedonic shopping value, store environment, and price discount factors, which involve the role of positive emotions as a mediator. a comparative causal-based quantitative approach examines empirical relationships. characteristics of the questionnaire invite respondents to be surveyed at matahari and transmart department stores in pontianak who are instructed to use purposive sampling. in the next procedure, interpreting the data is processed with smartpls, which emphasizes the structural model. the results of the investigation demonstrated that hedonic shopping value had a significant effect on positive emotions at matahari and transmart. however, the store environment actually has a significant effect on positive emotions at transmart, but has no effect at matahari. it was also detected that positive emotions have a significant effect on impulse buying at matahari. interestingly, it has no impact in the case study at transmart. later, hedonic shopping value appeared to have a significant effect on impulse buying at transmart, while at matahari it did not. further exploration also found that the store environment had a significant effect on impulse buying at matahari, while at transmart it had no effect. this work also confirms that the discount has no effect on impulse buying at matahari and transmart. the motives for impulse buying, hedonic behaviour, and positive emotions need to be adjusted to the broader analysis design in the future. there are striking differences with previous studies, thus providing a gap that is very suitable for the context of impulse buying. keywords: hedonic shopping value, store environment, discount, positive emotions, impulse buying, smartpls jel classification: d91, f64, h43, d90, m30 www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 44 authors: ramadania ramadania department of management, faculty of economics and business, tanjungpura university, pontianak 78124, indonesia e-mail: ramadhania@ekonomi.untan.ac.id https://orcid.org/0000-0002-7378-8068 ratnawati ratnawati department of management, faculty of economics and business, tanjungpura university, pontianak 78124, indonesia e-mail: ratna20diamond@gmail.com https://orcid.org/0000-0002-4501-8090 juniawati juniwati department of management, faculty of economics and business, tanjungpura university, pontianak 78124, indonesia e-mail: juniwati@ekonomi.untan.ac.id https://orcid.org/0000-0002-5450-6037 nur afifah department of management, faculty of economics and business, tanjungpura university, pontianak 78124, indonesia e-mail: nur.afifah@ekonomi.untan.ac.id https://orcid.org/0000-0002-1906-3576 heriyadi heriyadi department of management, faculty of economics and business, tanjungpura university, pontianak 78124, indonesia e-mail: heriyadi@ekonomi.untan.ac.id https://orcid.org/0000-0003-2785-157x dio caisar darma department of management, sekolah tinggi ilmu ekonomi samarinda, samarinda 75242, indonesia e-mail: diocaisar@stiesam.ac.id https://orcid.org/0000-0002-3287-7670 citation: ramadania, r., ratnawati, r., juniwati, j., afifah, n., heriyadi, h., & darma, d. c. (2022). impulse buying and hedonic behaviour: a mediation effect of positive emotions. virtual economics, 5(1), 43-64. https://doi.org/10.34021/ve.2022.05.01(3) received: november 9, 2021. revised: december 12, 2021. accepted: january 6, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) mailto:ramadhania@ekonomi.untan.ac.id https://orcid.org/0000-0002-7378-8068 mailto:ratna20diamond@gmail.com https://orcid.org/0000-0002-4501-8090 mailto:juniwati@ekonomi.untan.ac.id https://orcid.org/0000-0002-5450-6037 mailto:nur.afifah@ekonomi.untan.ac.id https://orcid.org/0000-0002-1906-3576 mailto:heriyadi@ekonomi.untan.ac.id https://orcid.org/0000-0003-2785-157x mailto:diocaisar@stiesam.ac.id https://orcid.org/0000-0002-3287-7670 https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 45 1. introduction today, the modern retail industry is offering various kinds of access to convenience, comfort, speed, and excellent service to its consumers. without ruling out the conventional methods, marketers need to change marketing methods, such as providing lower prices and longer operating hours (kartika et al., 2017). consumer buying behaviour and tastes also vary from one to another, so business people need to be creative to offer the right ideas and strategies in order to win the hearts of consumers (tkachenko et al., 2019). one type of retail is a department store. in urban areas, there can be found a variety of department stores that cater for different target markets. in indonesia, department stores such as sogo, seibu, metro department store, debenhams, harvey nichols, and marksspencer target the upper class. meanwhile, department store bases such as matahari department store, transmart carrefour, ramayana, and batik keris target the middle class. now, department stores are competing to make consumers who were initially not interested in buying products get motivated to buy. this is called impulse buying. the selected research object is a department store, exemplified by two, namely matahari department store and transmart carrefour pontianak. choosing these two objects is justified by the fact that matahari and transmart are the largest department stores in pontianak. this place is also frequently visited by consumers. they consider the assortment of products such as clothing, jewellery, make-up, and various other fashion products to be wide and varied. researchers are interested in exposing consumers’ impulse buying of fashion products. the research is focused on fashion products because they are the most widely sold goods. ma’ruf (2005) emphasises that fashion products, such as clothing, are those that are often purchased impulsively. this applies to the publication by chauhan et al. (2021) and jeffrey & hodge (2007) who maintain that people do impulse purchases of products such as clothing, jewellery, make-up, and other objects that can enhance their appearance. purmono & ramadania (2021) assume that the price tag on hedonic shopping has a positive effect on impulse buying for fashion products by generation z. in this paper, the researchers discuss the factors that influence impulse buying of fashion products at matahari and carrefour transmart in pontianak. impulse buying is a spontaneous buying factor related to individual emotions perceived when taking personal decisions in shopping. in addition, the purpose is to offer a new pattern of impulse buying on the market response. in short, impulse buying is defined as an act of buying that was not previously recognized consciously through considerations or formed buying intentions (mowen & minor, 2002). in a broad perspective, impulse buying is a sudden, strong, persistent, and unplanned urge to buy something outright with little regard for the risks. customers need to concentrate on pointof-sale interactions with buyers that are often overlooked. for convenience, impulse buying places the burden on the goods that consumers need and buy without spending a lot of time. www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 46 these items require no service, are inexpensive, and are chosen because of tradition or custom. there are several publications related to impulse buying. kim & sullivan (2019) explains that when individuals practice impulse buying, it is caused by hedonic shopping values, shopping lifestyles and positive emotions. alfarizi & hufron (2019) respond to factors that are oriented towards impulse buying, including sales promotions, store atmosphere, and positive emotions. on the one hand, indrawan & sudiksa (2019) examined aspects that positively affect impulse buying including the store environment, situational factors and positive emotions. xu & huang (2014) actually noticed that the price discount did not have a positive effect on impulse buying, but the bonus pack had a positive effect on impulse buying. prasetya & rahardjo (2016) agree that the availability of time and money will increase unplanned purchases. availability of time, money, store environment, value of hedonic shopping, and positive emotions simultaneously successfully influence unplanned purchases. rahmawati et al. (2018) have concluded that hedonic customers want to seek pleasure in relation to company activities. customers also prioritize happiness, and this is part of a positive emotional reflection. uniquely, this paper also highlights several dimensions that complement individuals that lead to impulse buying: hedonic shopping value, store environment, discount, and positive emotions are chosen, which differs from previous findings. the first dimension reviewed was hedonic shopping value. by implication, park et al. (2006) assume that hedonic shopping value plays a vital role in impulse buying. hedonic shopping value elaborates an instrument that is comprehensively mandated for a particular experience. its actuation draws attention to something new, the pleasure of shopping (rook & fisher, 1995). therefore, consumers are often hit by impulse buying when driven by hedonic desires. other causes are beyond economic reasons such as pleasure, fantasy, social, and emotional levels. on the other hand, zayusman & septrizola (2019) maintain that hedonic shopping value is not correlated with impulse buying. iyer et al. (2019) also examine the impact of price discount and positive emotions on stimulating impulse buying. only price discounts can increase impulse buying. in addition, zhou & gu (2015) accommodate studies that link price discounts with impulse buying. definitely, there is indeed a positive short-term effect, although it is not significant. in fact, there are striking differences with previous studies, thus providing a gap that fits perfectly with the context of impulse buying. this paper has the purpose to examine the display of impulse buying behaviour in department stores. researchers commit themselves to two main contributions analysing antecedent variables, including hedonic shopping value, store environment, and discounts on impulse buying. the function of positive emotions as a mediation to foster impulse buying behaviour is no less important. the motivation, significance, and contribution of the study are to locate and highlight the role of hedonic shopping value, store environment, and price discount in stimulating positive emotions and www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 47 impulse buying. to the authors’ knowledge, there are very few studies that discuss the relationship between these five aspects in the field of marketing and business 2. literature review and hypothesis framework 2.1. hedonic shopping value – positive emotions hedonic values are related to consumers’ emotions, therefore when shopping, customers really feel something that is expressed with pleasure, hatred, anger, or feeling that this is an adventure (lestari & oetomo, 2014; cachero-martínez & vázquez, 2018; yu et al., 2018). peter & olson (2013) believe that they can transfer positive emotions to feelings of pleasure, joy, love, liking, calm and satisfaction. according to dewi et al. (2015), positive emotions are feelings that are always coveted by everyone. it’s like being happy, joyful and satisfied. when individuals prioritize the value of hedonic shopping, positive emotions emerge. it also bridges the perceptual level, where learning is an emotionally rewarding condition for positive feelings. darma & japarianto (2014), byun & mann (2011), santini et al. (2019), choirul & artanti (2019) and chen & tsai (2020) noted a hedonic shopping value relationship with positive emotions. based on this description, the first hypothesis is framed as follows: h1. hedonic shopping value influences positive emotions. 2.2. store environment – positive emotions the store environment is one part of the retail mix, which has a very important meaning in running a retail business (hanaysha, 2018). with a good store environment or atmosphere, it will attract visitors and make purchases (hussain & ali, 2015). store atmosphere is a very important physical characteristic for any retail business. this acts as a creation of a comfortable atmosphere under consumer desires and makes consumers want to linger in the store and indirectly stimulates consumers to make purchases. gilbert (2003) evaluates store atmosphere as a combination of physically identified messages, where illustrate the store atmosphere as a change in the planning of the buying environment that starts a special emotional effect for consumers to make a purchase action. levi & weitz (2012) implicitly suggest the store atmosphere as a mechanism creation through visual, arrangement, light, music and aroma to convince, attract, perceive, and evoke emotions of consumers. in summary, store atmosphere is a combination of architectural characteristics that aim to design displays, customer perceptions, emotional responses, aroma, music, temperature, and colour to change customer trust (han et al., 2018; parsons, 2011). the store environment is a unit that involves affection as positive emotions that consumers are not fully aware of when shopping (peter & olson, 2005). by organizing an attractive store environment, it will encourage positive emotions. consumers like to feel happy to be in the store, passionate about shopping, and satisfied when shopping. positive emotions themselves are a mood that includes elements of the intensity of consumer decision making in shopping www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 48 (tirmizi, 2009). chang et al. (2014), putra & mudiantono (2014), nindyakirana & maftukhah (2016), and indrawan & sudiska (2019) emphasize that the store environment and positive emotions are in a positive relationship. it makes sense to plan the following second hypothesis: h2. store environment evokes positive emotions. 2.3. discount – positive emotions kotler & keller (2005) researched price discounts as a price reduction given by the seller and a strategy to increase sales of a product within a certain period. popularly, discounted prices are offered as a percentage reduction from the original price. this price discount is synonymous with an extra incentive to motivate consumers to take action. otherwise, consumers will not pay attention to the products offered. one dimension of impulsive shopping is the emotions of consumers when shopping (fahd, 2015). it maps feelings or emotions into constructs that are temporary because consumers are related to certain objects or situations. along with its development, they considered positive emotions as an affective response to a stimulus from the dimension that influences it. if the intensity of the price discount applied is higher, it will stimulate positive emotions in consumers (kim & sulivan, 2019). leba & suhermin (2015) assert that promotion is significantly related to positive emotions that rely on price discounts. gumilang et al. (2016), apriliani (2017), and nabilah (2017) note that price discounts have a stimulating effect on positive shopping emotions. the logical things that can be proposed in the third hypothesis are: h3. discount influences positive emotions. 2.4. positive emotions – impulse buying in a buying perspective, consumers interpret positive emotions as moods that have the potential to determine the intensity of consumer decision making (tirmizi et al., 2009). the reason is that impulse buying leads to purchasing actions that are not based on considerations before entering the store (mowen, 2008). wang et al. (2021) investigated that impulse buying occurs when consumers make a purchase by chance. then, park et al. (2006) explained that emotions are integrated with individual moods, including when making purchases, so this is a crucial factor. the consequences of a strong mood depend on controlling individual behaviour (hawkins & mothersbaugh, 2010). approaching the purchase decision, those who freely show feelings of joy will be more prone to impulse buying (widagdo & roz, 2021). thus, consumer emotional factors apply to impulse buying decisions (dewi et al., 2015). back to the strong buying urge, consumers no longer think rationally. for this case, a satisfied mood, like happiness and joy, bridges positive customer emotions towards impulse buying. this is in line with the study reviewed by puspita & budiarti (2016), where impulse buying is supported by positive emotions. one step further, darma & japarianto (2014), putra & mudiantono (2014), indrawan & sudiska (2019), santini et al. (2019), and alfarizi et al. (2019) www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 49 agreed that impulse buying arises from positive emotions. at this point, we propose the following fourth hypothesis: h4. positive emotions influence impulse buying. 2.5. hedonic shopping value – impulse buying park et al. (2005) describe whether the amount of hedonic shopping increases impulse buying. unfortunately, consumers often practice impulse buying when they collect hedonic desires or other reasons other than social and economic motives. when the level of demand for hedonic shopping is pleasure-oriented, this triggers impulse buying. prastia (2013) maintained that impulse buying was responded to by hedonic shopping significantly. this is in line with yiğit (2020), yu & bastin (2010), and kempa et al. (2020) who emphasize that hedonic shopping value and impulse buying are in a positive relationship. for the fifth hypothesis, we framed the following: h5. hedonic shopping value influences impulse buying. 2.6. store environment – impulse buying the sensation of the progress of the store environment, such as design, product layout, store colours, music, lighting, and scents that are imposed in the store, can simulate motivating customers to buy more commodities outside of what consumers have planned (wei & yazdanifard, 2014). from a theoretical lens, yuliartini & sulistyawati (2014) respond to a proper store environment, which ideally is required to provide comfort for its visitors. it is also expected to stimulate consumers to shop at the store. consumers may store services that have a major impact on the evaluation of their services and products (erdil, 2015; mofokeng, 2021). stores can also uphold accountability for the information and sights that catch their eye. passionate consumer enthusiasm, resulting in purchase motives that are attributes of the needs and desires themselves. these motives act as forces that carry out desires, behaviour, and satisfaction of needs. as the debate lasted for a long time, nuzula et al. (2013) stated that buying actions that are not carefully planned are created by the store environment. the combination study by mohan et al. (2013), nindyakirana & maftukhah (2016), altukar & kesari (2018), and indrawan & sudiska (2019) are very relevant to the store environment and impulse buying. referring to this detailed description, we try to design a proposal of the following sixth hypothesis: h6. store environment influences impulse buying. 2.7. discount – impulse buying tactically, discounts are a surefire strategy for sales promotion. in practice, discount pricing involves a long-term plan to systematically reduce costs, but consumer is presented the product at the highest price first (peter & olson, 2014). instruments at a discount can attract the attention of consumers to view and buy (santini et al., 2015). consumers interpret that with prices that were originally high and now when discounts are applied, they will save more. here, the discount policy facilitates impulse buying. www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 50 kotler & armstrong (2008) formulated the idea of a price discount, which is defined as savings offered to consumers from the normal price listed on the packaging or product label through a sales price reduction scheme. discounts increased sales that were initially declining and stagnant, now turning to the experimental stage (gupta & cooper, 1992). consumers are encouraged to purchase by trial and error. to attract them to the process, many manufacturers maximize profits in the short run with discount strategies. they also offer discounts in order to attract impulse buying desires. the duration and unit price discount period change impulse buying (aragoncillo & orus, 2018). a recent work on performing price discounts on milking impulse buying, presented by nabilah (2017), gumilang et al. (2016), and apriliani (2017), has significant implications. the role of discounting is so urgent that it gives rise to the seventh hypothesis: h7. discount influences impulse buying. 3. research methodology 3.1. variable measurement the conceptual framework of the research is summarised in fig. 1. the research systemacy is adjusted to the explanation to reveal the hypothesis empirically. research technique is set by looking for an explanation of the causal effect, so that we develop the flow between several variables and concepts for marketing management (ramadania et al., 2021). figure 1. the proposed model source: developed by the authors this workflow will describe a cause-and-effect relationship between several situations on the five variables, including hedonic shopping value, store environment, discount, positive emotions, and impulse buying. on this basis, some general conclusions can be drawn. there were formed seven hypotheses based on direct effects and mediating effects. www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 51 3.2. data and samples the population is set by inviting consumers at matahari department store and transmart carrefour in pontianak city (west kalimantan province, indonesia). an infinite population supports this type of population, because researchers do not know the exact number of informants. the sample size is 25 times the independent variable (e.g., dewi et al., 2021). the stipulation is that the number of independent variables is three variables, so that it reaches 3 x 25 units = 75 respondents. to avoid invalid samples, n = 100 were taken. without ignoring scientific requirements, tandoh et al. (2022) stated that purposive sampling can overcome determination of the sample through considerations applied. the sample criteria include respondents aged +17 who are worthy in deciding. the informants comprise those who have made impulse purchases of fashion products (at least 3 times during the last 6 months) in the two study objects. the social portrait of the respondents is reflected based on various demographic aspects. of all samples surveyed, 67% were female, and the rest were male (33%). this reflects the reality of buyers who are women, so that 54% of them are parents (housewives), 31% are unmarried, and 15% are divorced (widows and widowers). interestingly, the authors also got other profiles, such as the educational background and occupation of the respondents. here, there is no relationship between shopping interest and respondents’ insight, where most respondents’ educational backgrounds cover only high school 66%, while 24% are graduates with a bachelor degree and diploma, and 10% of them have master’s degrees. the survey method implies data collection through the distribution of questionnaires and primary interviews (sujarweni, 2017). the stages of the questionnaire instrument, collecting information by means of logical questions according to the direction of the study, refer to the value of hedonic shopping, the atmosphere of the store environment, discounts, positive emotions and impulse purchases. in the core investigation stage, the purposive sampling method is strongly supported. the authors divided the job desks into two teams because respondents were relevant to the two focuses of observation. at the first location, namely the matahari department store, the interview was handled by mrs. ramadania ramadania, mrs. juniwati juniwati, and mrs. nur afifah. then, mr. heriyadi heriyadi, mrs. ratnawati ratnawati, and mr. dio caisar darma held the interview session at the second location (transmart carrefour). fig. 2 shows the location of the study. 3.3. model specification there were collected the sample’s responses, which were then processed using smartpls software, an online questionnaire via google form. path analysis interpreted the results of this study. maçada et al. (2021) imply four analysis patterns, including an instrument test (reliability and validity), a normality test, a model test, and a hypothesis test (partial). www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 52 figure 2. outlet survey source: prepared by the authors. 4. findings 4.1. validity and reliability at the first step, testing instruments such as the validity and reliability of the questionnaire were conducted. through the instrument test, the accuracy of the research instrument was proven. table 1 shows that the ave roots for all variables at matahari department store and transmart carrefour are more prominent than the relevant variables. now, a discriminant validity has been met. table 1. square roots of ave and correlation among latent variables object matahari transmart x1 x2 x3 z y x1 x2 x3 z y x1 0.798 0.543 0.645 0.709 0.142 0.859 0.622 0.703 0.797 0.488 x2 0.543 0.815 0.660 0.583 0.134 0.622 0.801 0.776 0.775 0.143 x3 0.645 0.660 0.791 0.770 0.006 0.703 0.776 0.849 0.804 0.253 z 0.709 0.583 0.770 0.823 0.183 0.797 0.775 0.804 0.845 0.339 y 0.142 0.134 0.006 0.183 0.758 0.488 0.143 0.253 0.339 0.826 source: data output. work related to the level of the questionnaire reliability was tested on the level of reliability. the size of the questionnaire in the field must go through two stages (composite reliability and internal consistency reliability). composite reliability is met if the coefficient> 0.70. then, internal reliability is consistent with cronbach’s alpha> 0.70, thus, it fits the assumption. www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 53 table 2. a summary of composite reliability (cr) and cronbach’s alpha (ca) variables matahari transmart cr ca cr ca x1 0.840 0.714 0.918 0.881 x2 0.932 0.914 0.926 0.907 x3 0.908 0.877 0.939 0.923 z 0.926 0.904 0.937 0.920 y 0.889 0.855 0.928 0.907 source: data output. table 2 above shows the reliability gain. at matahari and transmart carrefour, cr and ca for x1, x2, x3, z and y are above 0.70. the reality that interprets the questionnaire has met the standards of both reliabilities. 4.2. structural evaluation there was carried out an evaluation of the structural model for using an inner model (inner relations, structural model, and substantive theory) which describes the relationship among latent variables based on substantive theory. the inner model on the r-square for endogenous latent was reviewed. after obtaining the results, stone-geisser also supported the analysis of the inner model through q-square predictive relevance, t-test, and probability coefficients of structural path parameters. changes in the r-square score reflect the effect among variables substantively (ghozali, 2012). the assessment of the r-squared in the matahari is showed in table 3. table 3. the rule of thumb inner model in matahari variables r2 criteria q2 criteria impulse buying 0.111 weak 0.055 weak positive emotions 0.662 moderate 0.433 strong source: data output. table 3 addresses the r2 score for impulse buying, reaching 11.1%. this means the ability of x1, x2, x3, and z, which actually weakens y. interestingly, the r2 score on positive emotions is 66.2%. the proof, x1, x2, and x3 have pushed z by 66.2% (moderate). it is worth waiting for the q2 score, where impulse buying is up to 5.5% or in weak criteria, so the observation model looks low. from fig. 3, the q2 score explained the evaluation of the structural model in matahari for positive emotions, which is 43.3%. the observation model that is classified as strong applies to positive emotions. www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 54 figure 3. case study at matahari source: data output. table 4 is a witness to the achievement of r2 on impulse buying. with the acquisition of 25.2%, the variables x1, x2, x3, and z contributed to y even though the classification was relatively weak. the r2 for positive emotions is quite strong, where x1, x2, and x3 can reflect z up to 78.1%. table 4. the rule of thumb inner model in transmart variables r2 criteria q2 criteria impulse buying 0.252 weak 0.173 moderate positive emotions 0.781 strong 0.549 strong source: data output. in a constructive context, the q2 score for impulse buying reached 17.3% (moderate). on the other hand, 54.9% of positive emotions were achieved, or this model is recorded as strong. fig. 4 displays the structural framework of transmart. 4.3. structural evaluation table 5 shows that there are four hypotheses that have a significant effect and the other three hypotheses have no significant effect. for events on the matahari, the first, third, fourth and sixth hypotheses yielded t-statistics> 1.96, and p values <0.05. from the other direction, as in the second, fifth, and seventh hypotheses, the t-statistic <1.96 and p>0.05 were got. www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 55 figure 4. case study at transmart source: data output. table 5. recapitulation of regression in matahari path coef. t-statistic p-value remarks h1: x1→ z 0.352 4.674 0.000 significant h2: x2 → z 0.059 0.566 0.572 insignificant h3: x3 → z 0.059 6.995 0.000 significant h4: z → y 0.504 2.084 0.038 significant h5: x1 → y 0.439 0.940 0.348 insignificant h6: x2 → y 0.155 1.961 0.050 significant h7: x3 → y -0.320 1.137 0.256 insignificant source: data output. table 6. recapitulation of regression in transmart path coef. t-statistic p-value remarks h1: x1→ z 0.413 5.190 0.000 significant h2: x2 → z 0.301 4.100 0.000 significant h3: x3 → z 0.280 3.504 0.000 significant h4: z → y 0.112 0.671 0.502 insignificant h5: x1 → y 0.652 6.248 0.000 significant h6: x2 → y -0.260 1.876 0.061 insignificant h7: x3 → y -0.003 0.020 0.984 insignificant source: data output. www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 56 investigations on hypothesis testing at transmart summarized that the first, second, third, and fifth hypotheses were significant (t-statistic> 1.96 and p <0.05). however, the fourth, sixth, and seventh hypotheses were insignificant because the t-statistic was <1.96 and p>0.05. 5. discussion even though it is time-consuming, darma & japrianto (2014) and beatty & ferrell (1998) are actually worried about an effective store environment. without realizing it, consumers’ positive emotions are not fully controlled. therefore, consumers need to expect consumer emotions by being given freedom of expression in the store. passion for shopping and feeling satisfied will attract them naturally. sellers who quickly respond to consumer moods are oriented to the intensity of decision making. although individual moods cannot appear instantly, an attractive environment can stimulate positive emotions. interest in sales promotions and certain products, of course, is closely related to purchasing decisions (suryani & syafarudin, 2021). indrawan & sudiksa (2019) interpret that the trick of overcoming negative emotions by consumers can be compensated with a positive environment, so that individual moods change. this view is relevant to the publication highlighted by sinaga et al. (2012), where positive emotions successfully mediate the store environment and impulse buying. however, this truth was refuted by baker et al. (2002). positive emotions do not always stimulate the store environment and impulse buying. park & lennon (2006) argue that emotion is an individual mood freedom that has been the essence of consumers’ determining purchasing decisions. if a bad individual mood does not block positive emotions, then the reaction and affective disposition to the environment become a stimulus for the seller’s offer. impulse buying is more stable because consumers do not confine the feelings to a certain point. they give up the desire and level of pleasure in controlling the minds of consumers (marianty, 2012). another aspect that stimulates consumers to carry out impulse buying is discounts. price discounts create a desire for individuals to continue shopping (lee & chen-yu, 2018). kotler & keller (2005) expressed that price cuts act as a barrier for producers who occasionally cannot implement marketing policies. in indonesia, price discounts also facilitate purchase intensity (sutisna, 2012). larasati & yasa (2021) have analysed impulse buying decisions at the indomaret mini market (denpasar). the findings show that impulsive buying decisions are increasing with the application of price discounts. in fact, at ramayana lawu plaza (madiun), the price discount also serves to increase impulse buying (saputra & purwanto, 2021). the latest finding was reported by hidayah & marlena (2021) who tried to analyse the performance between store atmosphere and hedonic shopping value in order to stimulate www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 57 impulse buying and positive emotions. however, several aspects should be studied and investigated regarding the latest developments in the store environment and discounts. aprilliani (2017) also examines the impact on price discount and positive emotions to stimulate impulse buying. only price discounts can increase impulse buying. in addition, wilujeng (2017) accommodates studies that link price discounts with impulse buying in indomaret (malang city). to be sure, there is indeed a positive effect for the short term, although not significant. another issue that develops regarding impulse buying is the store environment. the layout of the store, the music playing in the store, the situation inside the store, the lighting, the employees working and the products being sold are integral components of the store environment. firda & wusko (2013) introduces the physical and social characteristics of the external world of consumers, including the product, the attitude to the room (location), and the social behaviour of other people or what consumers do. mohan et al. (2013) understand that store specifications such as music and light have a negative effect on consumers, who will respond to impulse buying. in some theories, the physical environment of a store will colour the views of consumers through the mechanisms of touch, taste, hearing, smell, and sight (mowen & minor, 2002). primarily, the store environment plays a role in creating the urge or feeling to buy. enget et al. (2008) focuses on eight elements (temperature, aroma, music, lighting, colour, visual form, placement, hallway space, and store layout) significant for the existence of the store environment. 6. conclusion, limitation and implication this paper examines the effect of hedonic shopping value, store environment, and discount on impulse buying, mediated by positive emotions. empirical indications confirm the proposed hypothesis that hedonic shopping value increases positive emotions. however, the store environment has no effect on positive emotions in matahari. interestingly, in transmart, it was a positive emotion that failed to increase consumer impulse buying even though the hedonic shopping value had a significant effect on impulse buying and at matahari, this was not the case. for matahari, the store environment for impulse buying is significant and at transmart, in fact, it is not significant. finally, only the discount failed in influencing impulse buying in both objects. to prevent double interpretation, the study only concentrated the limitations of this observation in matahari and transmart. in order to grow more in the future, further studies should compare several locations about the dimensions that impact consumer impulse buying. theoretical and practical recommendations to maintain the store environment at matahari and transmart. even though it is maximal, it is necessary to put the interests of consumers first and revitalize the rules related to discounts. creativity, such as discount packages for families and loyal customers, certainly encourages them to make impulse buying. www.virtual-economics.eu issn 2657-4047 (online) ramadania ramadania, ratnawati ratnawati, juniwati juniwati, nur afifah, heriyadi heriyadi, and dio caisar darma virtual economics, vol. 5, no. 1, 2022 58 sellers will also be spared of customer complaints if they change the atmosphere of the store to a more attractive one. academic insights propose ideas regarding further clues and limitations of the research to provide direction, options, and develop limited findings to highlight the future. moreover, this research also puts hope in efforts to improve marketers’ decision-making in considering the empirical outputs broadly. so far, the purchasing system is still manual or traditional, with buyers coming directly to the shopping location, but now it must be applied to a more modern phase such as going online, partnering with product delivery service applications, and various unique strategies that are present to make it easier for buyers. 7. acknowledgements the authors have no conflicts of interest to declare. 8. funding this research received no external grant from other institutions. references aprilliani, r. 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(2015). the effect of different price presentations on consumer impulse buying behaviour: the role of anticipated regret. american journal of industrial and business management, 05(01), 27-36, 2015. https://doi.org/10.4236/ajibm.2015.51004 https://doi.org/10.3390/su10124603 https://ojs.unud.ac.id/index.php/manajemen/article/view/7569 https://doi.org/10.4236/ajibm.2015.51004 кwilinski alex 54 www.virtual-economics.eu issn 2657-4047 (online) vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski virtual economics, vol. 4, no. 1, 2021 2021 volume 4 number 1 (january) innovation and information aspects of the structural organization of the world political and economic space vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski abstract. the article analyzes the innovation and information aspects of the structural organization of the world political and economic space in terms of increasing the importance of knowledge-intensive production in meeting social needs. it develops theoretical aspects of establishing international economic relations in the conditions of deepening global confrontation between hierarchical and network structures of the global political and economic space. the institutional structure of the world political and economic space in terms of functional, normative, relational and stratification aspects is studied. it is determined that the global economy and world politics interact in accordance with the strategic direction of the global society development, the dominant position in which is occupied by information and communication technologies that provide opportunities to optimize the operation of actors in international relations and knowledge, the volume of which determines the integrated the position of the individual in the space of social inequalities, associated with a specific set of life opportunities. from the standpoint of the existential approach, it is argued that the globalization of the world economy generates a wide range of internal interests and human motivations, stimulates its purposeful influence on shaping the global information infrastructure, global productive forces and transformation of international economic relations on the natural basis of cognitive capital and social capital. the communicative and informational properties, the specifics of accumulation and the latest trends in the reproduction of social capital within the world political and economic space are considered. the paper reveals the criterion assessment of the effectiveness of rent-oriented social networks as a structural basis of the world political and economic space and the social legitimacy of international power structures for regulating the global social processes. the research results were scientifically substantiated on the basis of combining the concepts of existential approach and general scientific, special methods of scientific cognition (logicaldialectical method, method of systemic analysis, comparative method, economic-statistical method, method of theoretical generalization). keywords: the world political and economic space, rent-oriented social networks, world social capital, international relations actors, institutionalization jel classification: a10, e02, f00 http://www.virtual-economics.eu/ 55 www.virtual-economics.eu issn 2657-4047 (online) vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski virtual economics, vol. 4, no. 1, 2021 authors: vyacheslav dementyev financial university under the government of the russian federation, leningradsky prospekt 49, moscow, russia, 125993 e-mail: dementyevv@mail.ru https://orcid.org/0000-0001-6438-4320 nataliya dalevska institute for international cooperation development, kazimierza wielkiego 24-26/1, poznań, 61-863, poland e-mail: dalevskanm@gmail.com https://orcid.org/0000-0002-0074-497x aleksy kwilinski the london academy of science and business, 120 baker street, london, united kingdom, w1u 6tu e-mail: a.kwilinski@london-asb.co.uk https://orcid.org/0000-0001-6318-4001 citation: dementyev, v., dalevska, n., & kwilinski, a. (2021). innovation and information aspects of the structural organization of the world political and economic space. virtual economics, 4(1), 54-76. https://doi.org/10.34021/ve.2021.04.01(3) received: december 12, 2020. revised: january 3, 2021. accepted: january 9, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2021.04.01(3) https://creativecommons.org/licenses/by/4.0/ 56 www.virtual-economics.eu issn 2657-4047 (online) vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski virtual economics, vol. 4, no. 1, 2021 1. introduction the current period of world economic development is characterized by the technological competition increase and the dominance of innovative competitive advantages in the world political and economic space. the innovative type of economic development is increasingly becoming the foundation that determines the economic power of the country and its prospects on the world market. accordingly, the world economy globalization is accompanied by a growing trend of conflicts and contradictions due to the search for additional sources of investment support for structural changes and the intensification of innovation processes. however, the process of constructing hierarchical levels in the structure of international relations is continuous and dynamic, resulting in a change of innovation leaders with the subsequent formation of functional features of the mechanism structuring the world political and economic space. at the same time, radical changes in the world political and economic space are significantly related to the information sphere, which increasingly testifies to the dominant position of institutionalization of the world political and economic space and the perception of international relations actors about new social values, factors and conditions of developing the world social capital. this determines the emergence of a number of issues related to the values hierarchy in allocating global resources, to developing global institutions, forms of hierarchy and coordination of actors in international relations. 2. literature review the creation of conceptual foundations for the structural organization of the world political and economic space has a long history. the works by j. althusius (1995), m. weber (1978), t. parsons (1977), j. schumpeter (1995). the works by such authors as i. wallerstein (2008), g. arrighi (2007), m. j. habermas (1991) are devoted to studying the features of structuring the world political and economic space. research is primarily focused on transformation processes in the world economic system, structural heterogeneity of actors in international relations, shifted centres of gravity in the mechanisms of cyclical fluctuations from trade to the movement of liquid capital, and so on. the study of the parameters of the structural elements’ balanced cycle of the world economy as a multipolar system in the wave of "information society" is carried out in the works by a. aleksander et al. (2020), s. bogachov et al. (2020), o. burlaka et al. (2019), o. chygryn et al. (2020), v. dementyev (2013; 2015; 2019), v. dementyev & a. scherbakov (2017), v. dementyev & a. kwilinski (2020), w. drozdz (2019; 2020), h. dzwigol (2019a; 2019b; 2020a; 2020b; 2020c; 2020d; 2021), h. dzwigol et al. (2019a; 2020a; 2020b), m. gorynia (2019), m. gorynia et al. (2019), n. kashchena et al. (2019), j. kaźmierczyk & a. chinalska (2018), s. koev et al. (2019a; 2019b), v. koibichuk et al. (2021), o. kvilinskyi (2012), o. kvilinskyi & s. kravchenko (2016), a. kwilinski (2018a; 2018b; 2019), a. kwilinski et al. (2019a; 2019c; 2019e; 2019f; 2020a; 2021), a. kwilinski & a. kuzior (2020), v. lakhno et al. (2018), o. melnychenko (2019; 2020; 2021), r. miskiewicz (2017a; 2017b; 2018; 2019; 2020a), r. miśkiewicz & r. http://www.virtual-economics.eu/ 57 www.virtual-economics.eu issn 2657-4047 (online) vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski virtual economics, vol. 4, no. 1, 2021 wolniak (2020), v. tkachenko et al. (2019a; 2019b; 2019c; 2019d; 2019e), n. trushkina (2019), n. trushkina et al. (2020), and others. the theoretical search for modern features of structuring the world political and economic space is determined by such socio-integration and socio-institutional trends in the world economic system as preferring the concept of sustainable development in structuring the integration interests of actors in international relations within the world political and economic space (abazov, 2021; arefieva et al., 2021; boiko et al., 2019; borychowski et al., 2020; czyżewski et al., 2019; 2020; dalevska, 2013; dalevska et al., 2019; dzwigol, & dźwigołbarosz, 2018; 2020a; 2020b; dzwigol et al., 2019a; 2019c; kharazishvili et al., 2020; 2021; kondratenko et al., 2020; kuzior et al., 2019; kwilinski et al., 2019b; 2019d; 2019f; 2020b; 2020c; 2020d; 2020e; kyrylov et al., 2020; lyulyov & pimonenko, 2017a; lyulyov & shvindina, 2017b; lyulyov et al., 2018; 2020a; 2020b; 2021a; 2021b; mlaabdal et al., 2020; miskiewicz, 2020b; 2021; pająk et al., 2016; 2017; pimonenko & lyulyov, 2019; ponomarenko et al., 2018a; 2018b; prokopenko & miskiewicz, 2020; saługa et al., 2020; savchenko et al., 2019; shmygol et al., 2020; wyrwa & kaźmierczyk, 2020), strengthening social security system using the dominant characteristics of the world social capital, etc. for adherents of existentialism, the key concept in identifying the specificity of structural transformations of the world political and economic space with its inherent uncertainty, unpredictability and dynamism is the concept of "cognition". the content of cognitions belongs to the mental space of a man. according to j. dinsmore's definition, "mental spaces are areas that are used to combine information of one kind or another. within these spaces, different objects and the interaction between them can be interpreted as existing, despite the status of these objects and interaction in the real world" (1995). cognitive approach to the methodological problems of international political economy, focuses on the mind, consciousness, knowledge of actors in international relations as the motivating factors of their activity in world political and economic space. however, inter-subjective dialogue is realized in the communicative type of public consciousness, which implies the need to focus research on the problem of increasing the interdependence of subjects and objects of international economic integration, given the institutional structure of international relations. however, at the local level, the source element of shaping the institutions of the world political and economic space is the dominant values of social capital. current situation conditions the topicality of studying social capital as an aggregate creative potential of society, which determines the ability of people to produce and absorb knowledge, forms and methods of labour organization and new technologies. g. arrighi (2007), wallerstein (1983, 2008), r. putnam (2001) made a significant contribution to the development of trends in reproducing social capital. it should be noted that knowledge about social capital in the conditions of network competition allows determining the factors of power struggle; explaining the functioning of contradictions between actors of international relations, which are a consequence of stability and conflict; taking measures to prevent global conflicts, improving understanding of http://www.virtual-economics.eu/ 58 www.virtual-economics.eu issn 2657-4047 (online) vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski virtual economics, vol. 4, no. 1, 2021 legitimacy framework of the world order, etc. in this aspect, the german scientist k. schubert notes that the concept of networks in modern research tries to compensate for the obvious shortcomings of traditional approaches. these are, in particular, theories about the processes of interests’ coordination (schubert, 2004). this theoretical approach allows us to consider the subject as complex and changeable, in fact, decentralized, i.e. forced to constantly restore the balance between internal and external influences (information flows) through the approval and rethinking, improvement and clarification, recognition and denial of rules and forms of interaction, when external and internal are the poles of attention of a subject, who tries to find and to centre the desired balance within the world political and economic space in terms of qualitative diversity of elements of the world economic system and multi-variance of evolutionary trends in global development. 3. methodology the determining role of institutional structure of the world political and economic space in swaying the formation, functioning and development of the world economic system is substantiated by a combination of existentialism concepts (figure 1). figure 1. development of existentialism in the context of structuring the world political and economic space. source: own elaboration. the methodological basis of the study consists of general scientific methods (analysis and synthesis, induction and deduction, system approach), which corresponds to its theoretical http://www.virtual-economics.eu/ 59 www.virtual-economics.eu issn 2657-4047 (online) vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski virtual economics, vol. 4, no. 1, 2021 focus, and is grounded on a number of methods of scientific cognition (systemic, economicstatistical, comparative, theoretical generalization) due to the specifics of economic science. 4. results the world political and economic space is a relatively ordered set of an unlimited number of hierarchies of the world economic system, which, however, belong simultaneously to the hierarchies of macro-, meso-, and micro-levels. moreover, such hierarchies are in a state of constant transformation: disappearance, formation, change of configurations, crossing. in particular, the structuring of the world political and economic space in the context of the world economy globalization implies that countries become not only interdependent through forming a system of international integrated production, growth of world trade, intensification of international capital movements and technological innovations, etc., related to the processes of innovations diffusion and synchronization of technological, economic, political, social transformations in the world economic system. thus, the structuring of the world political and economic space occurs under the influence of economic, political, social, mental, cultural and general civilizational factors. this conditions an extraordinary variety of structural changes inherent in modern world economic development, even a certain disintegration of the world social system. on the one hand, the formation of the world political and economic space appears as an objective process the result of the development of productive forces and production relations; on the other hand, as a subjective process caused by the dominant vector of policy pursued by the most powerful countries "global players" on the world arena. it should be noted that the main feature of modern political and economic dominance in the world is a significant separation of the countries with innovation-oriented economies, which are actively forming new global markets, from less powerful countries, which are forced to some extent to be dependent on the position of "global players". in the countries that belong to the innovative leaders, there is a high concentration of the most profitable types of business, mainly high-tech structure of national production and concentration of the largest financial flows. this, in particular, is about the redistribution of resources in favour of developing countries on the basis of post-industrial principles, and the accumulation of backwardness on the other pole in the countries with traditional industrial technology and pre-industrial development (cattaneo et al., 2010). under these conditions, leadership becomes more personalized, but the path to power lies through the formation of rentoriented social networks: inter-individual, inter-group, inter-institutional interaction of actors in international relations within the world political and economic space. rent-oriented social networks as a structural basis of the world political and economic space are based on: 1) transforming knowledge into financial and managerial innovations and forming, on this basis, global control over money and its flows; 2) controlling innovation globally in order to concentrate knowledge in highly developed countries; http://www.virtual-economics.eu/ 60 www.virtual-economics.eu issn 2657-4047 (online) vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski virtual economics, vol. 4, no. 1, 2021 3) a special kind of global rents innovative, intellectual, resource, financial, political, informational, environmental, etc.; 4) economic networks, through which global rents are realized. according to wallerstein's world-system theory, the hierarchization of space in the structure of production processes has led to increasing polarization between the core (profit-making zone) and peripheral zones (loss-making zones) of the world economy not only along the distribution line, but, also along the line of localization of capital accumulation. the key to understanding this central mechanism is in the very structure of the capitalist world-economy, in the imaginary personification in the capitalist world-system of the economic sphere and the political sphere. however, in the real world, almost all commodity chains of any importance breach state borders, and this has been the case since the time historical capitalism started to exist. at the same time, the transfer of profits to the core concentrated capital there and created disproportionately large funds for further mechanization. this provided producers in the core areas with additional advantages in manufacturing existing products and allowed them to create more and more new rare products, by means of which they renewed the whole process (wallerstein, 2008). after all, non-equivalent exchange between the two zones is the main mechanism for the global rent transfer from the periphery of the core. the widening gap between developed and developing countries is a dominant destabilizing factor that stimulates asymmetric trends in the world economic system. some countries, pursuing their national interests, receive benefits and gains, while others become dependent on the supply of technology and external assistance. as a result, the structure of wealth in the countries with the lowest incomes is dominated by natural resource capital, while the structure of wealth in highly profitable countries is dominated by human capital. according to the world bank data, in the structure of national wealth of developed countries, human capital averages 70%. developed countries have concentrated more than 90% of the world's scientific potential, control 80% of the global high-tech market (the world bank, 2019). leading industries and activities through which the capital is accumulated comprise the core of the technological system (table 1). naturally, each technological system has its own characteristics of the social life of society, the role of the government in managing production, the dominant countries, their policies, promising research areas and the degree of their importance in production. according to the concept of k. freeman, the impetus for economic development is given by the emergence of basic innovations in certain industries. the aging of technological systems in some countries and the emergence of such systems in others lead to further uneven global economic development (freeman et al., 2001). each subsequent technological system originates in the depths of the current one, and takes effect when the latter exhausts its capacities and loses efficiency in increasing the rate of return. now in the structure of the economy of the countries world technological leaders, there is observed the development of the main industries of the sixth technological system, associated with the spread of genetic engineering, nanoelectronics, global information and http://www.virtual-economics.eu/ 61 www.virtual-economics.eu issn 2657-4047 (online) vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski virtual economics, vol. 4, no. 1, 2021 communication networks, fundamentally new sources of energy and materials. the growing actualization of these positions is determined by the logic of institutional transformations of the world political and economic space, which bear the signs of the fundamental laws of the evolutionary process. first of all, it is about gaining the dominance by creative work, which asserts itself through innovation, technology transfer, international patenting, and so on. it is about transformations of industrial and reproductive work into creative, which organically corresponds to the growth of intellectual potential of the individual, realized in the world political and economic space. table 1. characteristics of the leading technological systems period of dominance, years technological system first second third fourth fifth 1770-1830 1830-1880 1880-1930 1930-1990 1990 … the core of the system textile industry, textile machine building, pig iron smelting, iron processing, canal construction, water engine steam engine, railway construction, transport, machinebuilding, steamship construction, coal machine tool industry, ferrous metallurgy electrical, heavy machine building, production and steel rolling, power lines, inorganic chemistry car and tractor construction, nonferrous metallurgy, production of durable goods, synthetic materials, organic chemistry, oil production and refining electronic industry, fibre optic computers, software, telecommunicat ions, robotics, gas production and processing the core of the new device being formed steam engines, mechanical engineering steel, power engineering, heavy engineering, inorganic chemistry automobile construction, organic chemistry, oil production and refining, nonferrous metallurgy, road construction radars, pipeline construction, aviation industry, gas production and processing biotechnology, space technology, fine chemistry, nanotechnology source: own processing according to balabanova (2011). in 2019, the number of international patent applications for inventions filed under the patent cooperation treaty (pct) increased by 23% compared to 2005. the pct system creates significant benefits for patent offices (reduction of staff workload), applicants (cost reduction and awareness raising) and the national economy as a whole (creating favourable conditions for the acquisition of new technologies, attracting foreign investment, etc.). leaders in patenting inventions are china (their share in the total number of applications is 43.4%), the united states (19.3%), and japan (9.6%). these three countries account for more than half of all applications (72.3%) submitted in 2019 using the pct. (world intellectual property organization, 2019) countries that implement strategies for innovative development of national economies have effective national innovation systems, government mechanisms for regulating the innovation http://www.virtual-economics.eu/ 62 www.virtual-economics.eu issn 2657-4047 (online) vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski virtual economics, vol. 4, no. 1, 2021 activities of market participants, the highest indicators of the global competitiveness index (gci) (table 2). table 2. top 10 countries with innovation-oriented economies, 2019 country/economy global innovation index, rank/score global competitiveness index, rank/score switzerland 1/67.24 5/82.3 sweden 2/63.65 8/81.2 the usa 3/61.73 2/83.7 the netherlands 4/61.44 4/82.4 the united kingdom 5/61.30 9/81.2 finland 6/59.83 11/80.2 denmark 7/58.44 10/81.2 singapore 8/58.37 1/84.8 germany 9/58.19 7/81.8 israel 10/57.43 20/76.7 source: own processing according to data of the world intellectual property organization (2019) and world economic forum (2019). it should be borne in mind that the political capabilities of national institutions determine the competitive advantages in the global market of both individual firms and the economy as a whole, through such tools as political risk hedging, international fines and compensation, parity financial responsibility of coalition members for social economic consequences of joint actions, etc. the possibility of using these tools is provided, first of all, by the independent position of countries in the geopolitical space of international transactions, economic and military power of states. as defined by s.j. gould, the world appears as a set of quasi-stable systems that resist as much as they can to the limit of their strength, and then quickly move to a new balanced state (1986). endurance, stability, sustainability in self-organizing systems is based not on their resilience to external pressure, but due to changes aimed at improving intra-system ties within the world political and economic space. under these conditions, the fundamental problem is to find a way to absorb excess capital, i.e., new additional areas of profitable use of capital, which would keep the system from plunging into crisis. as a rule, the next recession or rise of the world economic system begins in the core states (i.e., global leaders), and then spreads to other regions, including the periphery and competing countries of the core states. at the same time, it is the leader (leaders) who has the deepest cyclical decline. competitors from the core countries, as well as certain semi-peripheral regions, have the opportunity to break through and possibly even take the place of the previous leader (frank et al., 1994). at the same time, progress in the division of labour, based on information and innovation development, leads in modern society to the infinite growth of objects of purchase and sale. this is especially true of financial and information markets, which shape their world, their http://www.virtual-economics.eu/ 63 www.virtual-economics.eu issn 2657-4047 (online) vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski virtual economics, vol. 4, no. 1, 2021 environment, sometimes weakly related to the processes in the real economy. as a result, along with the commodity and money fetishism usual for the market economy, a fetishism of a special kind financial and informational is becoming more widespread (porokhovskyi, 2012). importantly, the possession of world currency has a positive effect on the political and economic image of the country in the world, allows collecting and processing the widest amount of information on the economic activities of foreign countries, companies, political forces and individuals. first, the state that issues the world currency receives direct income from seigniorage; secondly, the possession of the world's reserve currency allows creating a strong sector for the provision of services related to this currency; third, in many cases, the issuing state benefits from the fact that foreign states hold gold and foreign exchange reserves in government securities denominated in this currency, and the yield on these securities is often lower than national inflation. finally, the most important thing is that owning the world currency allows financing public debt and the balance of payments deficit with own currency. the immediate political benefit lies in the fact that the issuer of the world currency is able to impose financial sanctions on certain countries and companies, as their settlements are made through the banking system of the issuing country. in case of any political necessity, such settlements can be stopped, and trade and financial transactions of countries (companies) objects of sanctions will be frozen. under these conditions, one of the compulsory stages of institutional dynamics and transformation of the world political and economic space is to establish social order relations, adapted to the hierarchical ties among the actors in international relations, which leads to the deep essence of social capital, given the principles of communicative legitimacy. after all, the category of social capital expresses the nature and content of relations among people and social groups as permanent bearer of qualitatively different types of social activities, differing in social status and social functions. no matter in which sphere of society the interaction among the subjects of the world economic system takes place, it is always social in its nature, as it expresses the connections between individuals and groups of people, i.e., the connections mediated by the goals that each of the interacting parties seek to adapt to their own needs. in essence, communicative legitimacy is a conscious and controlled process that is determined by the level of the ratio between needs, interests and goals of institutional actors. this characterizes communicative legitimacy as a multilevel system with a wide range of power relations among the subjects of social management within the world political and economic space. according to the definition by w. beck, power arises from the sum total of actions and decisions approved (2007). thus, the arrangement of power structures is formed by the position, motives, goals, interests, preferences, ideology, value system, as well as programs of activities and forms of organizational behaviour of actors within the world political and economic space. the main focus is on the institutional environment, as well as the impact of formal and informal institutions on the accumulation of social capital. however, the objective http://www.virtual-economics.eu/ 64 www.virtual-economics.eu issn 2657-4047 (online) vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski virtual economics, vol. 4, no. 1, 2021 complexity of social capital, i.e., complexity as a holistic structure, significantly affects the difficulties for understanding it. social capital comes in many forms, both as a resource and an institutional environment. at the same time, in the spatial dimension, it is characterized as a totality of knowledge, ideas, actions, results from revealing the mechanisms for deepening the international division of labour. thus, the spatial dimension of social capital involves a multidimensional kind of socioterritorial community of people who differ in the totality of natural and historical conditions of socio-economic diversity. a common feature of such entities is the availability of certain interests in the form of the purpose of activities, social norms and values that regulate it. networks, norms and trust constitute a "triad of social capital" (burkynskyi & horiachuk, 2013). all elements of the "triad" are connected with each other. networks build trust among participants and promote dissemination of prosocial norms of behaviour, while common values and mutual trust expand social networks and contacts. trust and norms of subjects' behaviour are elements of the institutional environment of the social system. social capital is one of the fundamental categories of international research on trends in world economic development. on the one hand, social capital is a complex system of interpersonal, intragroup and intergroup interactions, which necessitates the establishment of economic, social, political communication among actors in international relations. on the other hand, social capital is grounded on its objective inequality, heterogeneity, as a clear manifestation of inequality in access to resources, the conditions of their accumulation and use. from this point of view, the structuring of social capital takes place within the world political and economic space. since 2009, large-scale studies of social capital by the british think tank legatum institute have been conducted on the following indicators: level of trust; the scale of donations; degree of volunteering development; dissemination of the practice of assistance to third parties; social support of relatives; development of the marriage institution; religiosity in society; social cohesion and interaction in the family and community. statistics and survey results are summarized in a single index of social capital development, which is part of the legatum prosperity index. economic indicators (gdp, household income) as well as less precise criteria (for example, the results of life satisfaction surveys) are used for evaluation. the 89 criteria are divided into eight groups: economics, business and opportunity, governance, education, health, security, personal freedoms, and social capital. in 2020, the first place in the ranking of prosperous countries in the world, as well as last year, was taken by norway, followed by switzerland, canada, sweden and new zealand. the democratic republic of the congo, the central african republic and chad closed the ranking (legatum institute, 2019). in particular, in countries with a developed institutional environment, a high level of trust in government and a significant amount of gdp per capita, there dominate "putnam groups", whose goal is the public good. at the same time, it is not uncommon for actors to pursue their own goals and mobilize the bonding social capital of the "olson group". these groups can http://www.virtual-economics.eu/ 65 www.virtual-economics.eu issn 2657-4047 (online) vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski virtual economics, vol. 4, no. 1, 2021 compete with other interests in the economy and society for limited resources in this case, social capital does not create new value, and its public return is zero or even negative. thus, when analysing the latest trends in the social capital reproduction, it is methodologically important to take into account its ability to influence any aspect of world social development both positively (order, stability, conflict resolution, government efficiency, security) and negatively (crisis of power structures and power legitimacy, instability and functional disorder of the mechanisms of governing society, transformation of functional contradictions into structural social disturbances). social capital, methods and forms of its appropriation, optimal distribution are the basis for reducing (or increasing) transaction costs. thus, the basis for social capital reproduction is the formation of stabilization mechanisms that regulate the diversity of elements, connections and relations among the subjects of the world economic system, including the creation of a social information system. the significance of this information is determined by how effectively the world economic system functions and develops. however, the reproduction of world social capital on a cyclical basis contributes to the complexity and diversity of systemic features of the individual and society, affecting the systemic inequalities of social opportunities for human development within the global political and economic space. in this sense, social capital is an essential characteristic of human development. after all, the more money a country invests in science, education, culture, accelerates the pace of social information, the higher is the human development index (hdi). in particular, hdi has grown since 1970 by 41% in general and 61% in countries with low hdi, which reflects progress in health, education and income (united nations development programme, 2019). in essence, the change of values at the level of world social capital is due to the transformation of information resources and information infrastructure into one of the most important areas of interstate struggle for world leadership and achieving on this basis political, economic, social goals by the opposing parties. thus, it turns out that world social capital is an intersystem characteristic of an individual, in which integrity is understood as the relationship of the general, special and individual in a human being. for this reason, the reproduction of world social capital is based on the principles of procedurality, systemacy and complexity, proneness to conflict and creativity of the actors of international relations within the world political and economic space. thus, the reproduction of world social capital depends on the intensity of circulation between the structural subsystems of the world political and economic space and the presence of feedback with human capital. the actions of various institutional actors, primarily state institutions, can directly or indirectly affect the strength of the relationship between social and human capital within the global political and economic space. under these conditions, the development of criteria for the social legitimacy of international power structures for regulating world social processes http://www.virtual-economics.eu/ 66 www.virtual-economics.eu issn 2657-4047 (online) vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski virtual economics, vol. 4, no. 1, 2021 becomes especially relevant. the solution to this problem involves the implementation of such measures as: introducing standards of social services, which should establish framework requirements for the quality and conditions of service provision; developing requirements for monitoring, control and evaluation of social service providers; dividing powers among international, state and local authorities regarding responsibility for the organization of social services; ensuring, at the legislative level, transparency and accountability of the social services system (processes of planning, organization of social services, monitoring of their quality should take place with the participation of all responsible structures with the involvement of public control). it should be borne in mind that in complex systems of social management with a ramified hierarchical structure of world social capital, the communicative legitimacy of international power structures has a variety of organizational interactions: vertical (or subordinate) interaction that occurs between the object and the subject of management of different hierarchical levels of the management system; horizontal (or coordination) interaction carried out at each hierarchical level of organizational formation among the objects of management, i.e., among structural units of the organization; diagonal (or consultative) interaction, which is realized in the form of consultations among institutional actors within the world political and economic space. consequently, the conditions for the reproduction of world social capital at the beginning of the xxi century are characterized, on the one hand, by the development of the information sphere, strengthening the interdependence of the world economic system, introduction of mechanisms to legitimize international power structures, and on the other hand, by significant impact of the global migration processes, mosaic character of social structure and social norms in the world political and economic space. based on this, it is worthwhile highlighting such new trends in the reproduction of social capital within the world political and economic space as: forming a world information network, ensuring access of institutional actors to international educational and cultural programs; growing economic influence of social networks on the establishment of a legitimate international economic order, the introduction of communication technologies of power within the world political and economic space; institutionalizing the normative structure of world social capital, which is manifested in the generation of qualitatively new opportunities for human and social development; developing civic communication and initiative, expanding functions of civic structures and their cooperation with government institutions within the world political and economic space. the intellectual development of a human being, the spread of technological innovations based http://www.virtual-economics.eu/ 67 www.virtual-economics.eu issn 2657-4047 (online) vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski virtual economics, vol. 4, no. 1, 2021 on the economic feasibility of social justice, social solidarity, social trust become the priority value; changing values and transforming social institutions that perform integrative functions in society, based on the transcendental justification of the legitimation strategy of world economic development. accordingly, it is appropriate to determine that the world political and economic space embodies a set of options for business entities to choose the methods of making optimal decisions that would ensure the direction of their competitive advantages. on this basis, rentoriented social networks can be considered as: a systemic, dynamic formation based on the innovative culture of the individual, who has innovative needs, abilities, knowledge, social values, communication and desire for selfrealization; a multicomponent structure that consists of: information and communication technologies, scientific and technical, organizational, institutional innovations, social and financial institutions; an integrative subsystem in the world economic system, which is dialectically interconnected with social processes, characterizes the creative activity of actors in international relations and influences the process of forming world social capital. thus, it is rent-oriented social networks that ensure the reproduction and accumulation of world social capital in the context of the growing role of intellectual rent in the structuring of the world political and economic space. 5. conclusions the structuring of the world political and economic space makes the foundation for resolving the contradictions between the actors of international relations. the functional features of these contradictions depend on the goals of the actors' activity, as well as their place in the overall structure of the power field. the analysis of the dynamics and trends of structuring the world political and economic space is based on the information openness of the actors of international relations. after all, the specific features of the formation, functioning and development of the world economy are related to the institutional structure of the world political and economic space. global social changes, associated with the search for ways to harmonize one's own value system, provide a basis for choosing alternative courses of action, for selecting and evaluating these alternatives. in the course of human development there occurs a restoration of correspondence among various aspects of life: expanding the range of skills, abilities, knowledge, methods of action and activity in general, i.e., the operational side (or the opposite process the narrowing of opportunities); modification of motivation needs, goals, interests, motives in accordance with the desires and capabilities of people in a particular area of their life. analysis of social development shows that labour polarizes a person and the nature and at the same time affirms their inseparable unity, strengthens their http://www.virtual-economics.eu/ 68 www.virtual-economics.eu issn 2657-4047 (online) vyacheslav dementyev, nataliya dalevska, and aleksy kwilinski virtual economics, vol. 4, no. 1, 2021 connection, translates natural ties into social communication, develops a system of power relations, the legitimacy of which is manifested in achieving social balance during adaptation of the world economy to evolutionary change. in this sense, social capital is an essential characteristic of human development. world social capital is an intersystem characteristic of a human being, in which integrity is understood as the relationship of the general, special and individual in a person. for this reason, the reproduction of world social 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(2019). gender diversity as an important element of diversity management in modern enterprises: case of poland. virtual economics, 2(1), 7-30. https://doi.org/10.34021/ve.2019.02.01(1) received: september 22, 2018. revised: october 15, 2018. accepted: january 7, 2018. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) 1. introduction diversity management has become a part of strategic plans of the world of business, being a response to a growing diversity of societies, clients, market structures and the entire businessand employee-related environment where knowledge and innovations are particularly gaining in importance, in order to protect a competitive edge in globalised economies (stuber, 2012). although diversity and equal opportunities between men and women may be perceived as a social problem, it is, however, just one of many aspects. it is also becoming an issue connected with one’s professional life, both at national and business levels. nowadays companies have been facing many challenges related to parities. the problem of ageing societies and the battle for the most skilled workers are getting fiercer and fiercer. employing suitable and talented personnel is already a complex task, whereas keeping the best workers poses an enormous challenge. companies want to attract the most talented employees, whereas the generation y is eager to work in a diverse environment, as diversity is for them a completely natural phenomenon (jaoski, 2014). in the light of the current situation in the job market, a potential success for modern companies is inextricably connected with making use of the potential of women as managers, and investing money to develop their competencies. making use of the involvement of women is of particular importance not only to improve the effectiveness of companies, but also to develop entire national economies. out of two outstanding and well-managed teams, the greater potential has the one that is more diverse. female managers exert their influence in a slightly different way than their male counterparts – they more willingly share their ideas with the others and justify their own decisions in a rational way. the organisations that deliberately fail to benefit from the https://doi.org/10.34021/ve.2019.02.01(1) https://creativecommons.org/licenses/by/4.0/ 9 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 diversity are depriving themselves of opportunities to achieve a more effective action culture. having said that, what do the best companies do to maintain the gender equality? they have been learning how to use gender-related languages; through realising that the current situation is not completely impartial and through adjusting the language and behaviour styles to talent resources and the 21st-century market reality (wittenberg-cox & maitland, 2010, p. 135). the aim of the paper is to focus the readers’ attention on a low percentage of women holding managerial positions in companies, and to present arguments that speak in favour of eradication of the phenomenon by deliberately benefiting from various competencies of both genders. the presented reflections may constitute a methodological framework for elaborating in-company actions that perceive gender diversity as one of its business values. the article also presents the differences in the perception of men and women on managing positions as demonstrated by the research carried out by polish and foreign authors and presents the author’s own research on the perception of men and women in the light of emotional intelligence – significant for management of a modern corporation. the choice of the competences in the area of emotional intelligence has been motivated by the fact that it is generally thought that the success and the career are determined by the iq. however, in our way to success, iq is surely an important factor, but without the ability to create correct relationships with others, it is insufficient. a group of features in the area of emotional intelligence is, to a greater extent, responsible for success in human life, both in the private domain and in professional life. the emotional intelligence consists of several competences that allow a person to cope with the requirements imposed by the managers of modern corporations. functioning in the realm of uncertainty and growing expectations from managers forces them to have excellent ability to cope with stress and perseverance in reaching a certain objective despite of failure, an ability to stay calm and not get worried. 2. diversity management in theoretical perspective diversity consists in both similarities and differences between people, associated with their age, culture, physical abilities, physical appearance, disability, race, nationality, religion, gender, sexual orientation, having children and other characteristics. diversity is a complex of features, visible and invisible ones, that differentiate the society, including people employed in companies. diversity means opportunities, but also risks for the organization. diversity in a workplace is the subject of many studies carried out by various institutions and scientific centers. the question of diversity is a point of interest for the economists, sociologists, psychologists and ethics, which only confirms the complexity and multidimensionality of this concept. 10 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 the literature concerning management contains many definitions of diversity management (dm), which is why the authors of the article decided to mention those that best express the essence of this concept. the analysis of particular definitions will serve to identify the key features of diversity management. the concept of diversity management originated in the second half of the 20th c. in the usa and western europe. at the beginning dm was a tool for activating minority groups on the labor market. diversity management was limited to counteracting prejudice, although the main reason for introducing diversity management principles were increased profits of the company, not legal arguments, moral obligations or corporate social responsibility (kwiatek, 2014, p. 158). the concept of diversity management was introduced by roosevelt thomas (1990) stating diversity management embraces managing diversity effectively, by changing organizational culture and practices, valuing differences among employees and creating a work environment in which diversity can contribute to organizational goals (ashikali & groeneveld, 2015). diversity management is a personnel management strategy based on the belief that the diversification of the employees constitutes a business asset that, under specific circumstances, may generate business benefits and profits. the aim of dm is to create a working environment in which all the employees feel valued and appreciated and have the opportunity to make the most of their individual capabilities in order to implement the missions of the company. dm means eradication of instances of discrimination, harassment, mobbing based on whatever reason, and creating an inclusive, empowering workplace (rawłuszko, 2007, p. 28). diversity management is a collection of activities and practices aimed at the execution of enterprise's assumed goals using employees' heterogeneity. diversity management requires, in particular, respect, understanding, acceptance and appreciation of people's diversity. dm enables the creation of workplaces in which all employees, regardless of demographic and social differences between them, feel appreciated and respected. such activities allow the enterprise to fully utilise the employees' potential and favour their development, which may contribute to making human resources management more efficient (leooski, 2016). diversity management in the organization consists in balancing out the inequalities in terms of employment and promotion of women, as well as their remuneration. dm also covers creating a working environment for temporary workers and employing the disabled (rudnicka, 2012, p. 148). dm can be also defined as part of the gendered construction and operation of management, indeed increasingly mainstream management (konrad, et al., 2006, p. 312). according to ch. keinert-kisin (2016, p. 50) diversity management can be understood as an organizational practice derived from a mindset that embraces rather than fears difference. organizational members differing from an established majority, the “norm”, be it through visible or invisible difference, by birth or by choice, are accepted for who they are rather than negatively stereotyped. their potential contribution to the organization is welcomed. organizational diversity is perceived to enrich the organization through variety of different perspectives and skills. diversity management uses methods and tools from hr 11 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 management. selection of methods and instruments should be correlated with the structure of personnel and their use should be consistent with the assumptions of the personnel policy of the company (gajdzik, 2015, p. 93). dm initiatives generally are recruitment and selection programs which typically focus on the achievement of percentage or numeric placement goals for minority and female employment (besler & sezerel, 2012, p. 627). when organizations actively assess their handling of workplace diversity issues, develop and implement diversity plans, multiple benefits are reported such as (saxena, p. 83): ‒ diversity stimulates innovation and productivity and creates a world class culture that can outperform the competition, ‒ a diverse workforce that feels comfortable communicating varying points of view provides a larger pool of ideas and experiences, ‒ a diverse collection of skills and experiences allows a company to provide service to customers on a global basis, ‒ organizations employing a diverse workforce can supply a greater variety of solutions to problems in service, sourcing, and allocation of resources, ‒ employees from diverse backgrounds bring individual talents and experiences in suggesting ideas that are flexible in adapting to fluctuating markets and customer demands. definitions of diversity management presented in the chapter show various interpretations of this notion. analysis of diversity management confirms that it is perceived as, inter alia: a management strategy, a company’s policy, a business philosophy, a direction of changes in management. despite the lack of a homogenous definition of dm, it is possible to distinguish several features recurring in many definitions. the authors often point at creating appropriate conditions in a workplace, taking into account the heterogeneity of the personnel. diversity management consists in identification of particular dimensions of diversity significant in a given company and creating a working environment in which the employees are given the opportunity to make full use of their potential, competence, experience. these conditions must include openness to differences, tolerance and respect to other people as well as acceptance of various methods of operating. another common feature are the areas of diversity management: employees and working environment. people employed in the company are more often than not the greatest asset and value of the company. they have significant impact on the implementation of the strategy of the company and achieving the intended objectives. diversity management is manifested in the recruitment and selection process, motivating, promoting and remunerations, training, talent management and other elements of the hr management policy. definitions of diversity management often draw attention to its strategic and comprehensive nature, as well as treating diversity as a fundamental asset of the company. another element often mentioned in relation to diversity management is generating a positive impact on the organization. one of the results of diversity management is the improved performance of the organization and its increased competitiveness. diversity management leaders, i.e. companies that signed the diversity charter in poland, indicate a positive change in the working atmosphere (74%) and the company’s image (71%), attracting and keeping talented employees (58%), the employees’ loyalty (53%), competitive advantage (39%), and increased customer diversity (27%) (responsible business forum, 2017). 12 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 polish society is relatively uniform in terms of culture, race and religion. the most diversifying elements are usually age and gender. these two criteria constitute the most common reason for discrimination in polish enterprises. therefore, they are the main scope of diversity management in poland. the authors of the study decided to focus their discussion on the issue of gender diversity in enterprises. 3. gender diversity in enterprises – managing competences and gender gender diversity in enterprise may be interpreted as equal treatment and acceptance of both women and men. for many organizations gender diversity is a significant challenge. business entities are still learning how to manage employees of different sexes. the employers often forget that teams diversified in terms of gender may prove to be a source of many benefits to the organization. it is a common belief that a man is a better manager because his innate, gender-specific qualities predestine him for the role. 2000 research on polish female managers 1 showed that, firstly, women do not have worse predisposition to managing than men, and secondly, clearly showed that women have tendencies for democratic, i.e. participatory and partnership-based management. such management develops attitude of active co-operation and responsibility for the enterprise, identification with the enterprise and motivates report’s productivity (lisowska, et al., 2000; bliss, et al., 2003). male managers are more ruthless in pursuing goals, make decisions quicker than women, their leadership skills are better developed and they are more eager to take risks. according to most respondents, female managers are more meticulous in action and more opened to co-operation with other people. they also perceive emotions more often than men – says a. wilk (university of wrocław sociologist and talent club program expert) (wilk, 2011). j.b. rosener (2003) states that the management differences based on sex do exist. according to the author, women show interactive management in accordance with their life experience that is focused on co-operation and communication with others. according to her, men, on the other hand, prefer order and control system, which means they manage by passing down orders from top, performing authoritarian management. h. fisher (2003, pp. 21-23) has a similar view, she states that women have a tendency for contextual thinking. they often have a wider view on problems than male managers, they take more information into consideration in the decision making process and see more possible lines of action. according to the author, female thinking is network thinking, 1 this was a ground-breaking research on polish women in managerial positions funded by u.s. agency for international development (usaid). it included 20 thousand women in managerial positions, from independent accountants to a chief execution officer in enterprises with 5 or more employees. 1892 women answered the questionnaire. due to age of female managers, the sample was representative. the research represented private sector in a larger extent and feminized branches of industry in a lesser extent than gus research on general population of women in managerial positions show. 13 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 opposed by sequential thinking that is focused, labelled, linear and associated with men. whereas men see the enterprise as a diversified set of varied elements, women show tendency to perceive the enterprise as a whole, as a system of interconnected material and non-material assets that influence one another. p. cieślak, management practitioner, who observes business environment, notices that female presidents "are less inclined to waste time. they are more efficient. men have a tendency to wandering off into other areas or discussions on other subjects. women have better business discipline, better target focus and use facts to persuade. they are more ‘masculine’ than men."(deloitte, 2012, p. 19). as w.g. nickels shows the higher the management level the more prominent is the role of co-operation skills and conceptual skills, and the role of technical skills declines (nickels, 1999, p. 342). partnership and teamwork skills are more important than individualism and authoritarian personality. women have talent for co-operation, integrating people and creating good relationships between them, flexibility and dealing with failures (ben-yoseph & gundry, 1998, p. 59). more women than men managers have the sense of internal control in work environment, meaning they perceive themselves as agents of changes, believe they can shape reality and do so (porzuczek & danaj, 1998, p. 38). it must be noted that: "women possess emotional intelligence that is required today: sensitivity, emotionality, empathy [...] their intuition, holistic perception of situation, and as such, more accurate decision making ability are more developed" (majewska-opiełka, 2012, p. 242). thanks to those characteristics, women are better at motivating workers. informatization and globalization force managers to take into consideration a larger number of factors, and holistic thinking, according to h. fisher (2003, pp. 21-23) associated generally with women, becomes very useful. men have to master it, while women – reach to their resources and talents. according to t. peters (2005) – american business specialist – women make better leaders than men because they are more decisive and gain trust easier than men. he also claims that women are better salespersons (thanks to highly developed communication skills) and investors (thanks to reasonable decision making), they are educated and open to changes – they have traits much needed in modern business environment. new business environment prefers women as they pay less attention to hierarchy than men, are better at sustaining relations and they rather co-operate than compete. i. majewska-opiełka (2012, p. 67) also stresses the importance of intuition in leading others and intuition is strictly related to women and until recently no male manager would admit to using it in fear of being ridiculed. research presented by the co-author (dźwigoł-barosz, 2015) create an image of a woman as they are perceived as more emotional than men, who, according to the respondents, are characterized by the so-called "clear thinking". according to the respondents, women are not too nice or emotional, they also tend not to feel edgy when a woman is performing 14 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 better and they can value men in the working environment. respondents believe they are better at dealing with failures, pay more attention to challenges and work satisfaction rather than promotion. nowadays, a considerable problem is the lack of awareness among numerous top executives, both men and women, of what advantages may be achieved thanks to a greater representation of women in corporate boards. at present, in the largest polish companies, classified as the leaders in the central europe, only 30 % of corporate boards feature a female member, whereas women hold chairman positions just in 4% of companies. a similar situation is observed in the companies quoted at the warsaw stock exchange in which a female member works in every fourth board of directors, whereas women are at the helm of as few as 6 % of companies. the trend analyses over the last few years are far from optimistic – in poland, just like in many eu countries, the number of women in corporate boards is decreasing, instead of increasing (fraoczak & georgijew, 2012). in poland, the corporate boards consist of merely a dozen percent of women. the situation is not caused by their lower qualification or lesser professional skills; its roots lie in stereotypes that hinder women’s professional development and promotion. meanwhile, the studies show that companies run by gender-diverse managements are more successful and boast a better position on the market. according to the mckinsey & company study, the corporate management that have a representation of at least three women, are 41% ahead of the sector’s average in terms of return on equity and 56% ahead in terms of ebit. a 30%female representation in corporate boards is called a “critical mass”, which allows both women and men to participate more effectively in the decision making process (dąbrowska, 2014, p. 44). according to the studies conducted by the european commission, the representation of women in poland in the corporate boards of the largest companies accounts for 11.8 %. as many as every fourth large company is ruled by a male-only management board, while there is just one female member in more than a half of the companies (grzesiak, 2014). unfortunately approach to women in business still seems to be based on stereotypes despite women having better school results and diploma notes. for the first time more women than men study at universities and women frequently have very good education and interesting experiences (nitzsche, 2005, p. 8). in oecd countries the majority (54%) of university graduates are women (oecd, 2006a). countries and enterprises that allow women to realize their full potential will benefit from their educational achievements. among women in the age of 25-34 an average of one third has higher education compared to 28% of men (oecd, 2006b). currently 59% of all university diplomas and 61% phd titles in europe are given to women (european commission, 2006). a small representation of women in top management could be a proof of low entrepreneurial skills of female managers. 15 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 however, the studies show (kowalski, 2011) that women are owners of 37% of companies. psychologists underline their resistance to stress, ability to work under pressure, their multi-tasking abilities, better self-organisation and teamwork skills. it seems that women’s entrepreneurial qualities are not lesser than men’s, and yet they are not reflected in promotion opportunities. in most cases women own small companies (they run 2/3 of such companies) (glinka & kostera, 2012), which proves that women feel the most comfortable in flat structures and that there are obstacles for promoting women in large companies. the phenomenon in question is called a glass ceiling effect – being a kind of invisible (i.e. there are no official rules that prevent women from achieving more important positions), but yet a considerable barrier for promotion of women. the career of women resembles a pyramid or a glass mountain that nobody is able to climb, whereas the perspectives, shown by the trends from the past years, seem to be far from optimistic. although more women in poland become managers as compared to women from other eu countries (there are by 6 percentage points more female managers in poland than abroad), nonetheless the trend is slowly reaching the low average level in the eu – over last 5 years the number of female managers has decreased by 3% (kowalski, 2011). facing the choice between being professionally active and starting a family, the 21st-century women opt for jobs (with the current high rate of divorce, a different choice would not be financially reasonable) (wittenberg-cox & maitland, 2010, p. 44). moreover, the studies show (hewlett & luce, 2006, p. 13) that women find it uncomfortable to be financially dependent on their spouses. despite of the fact whether the relationship is good or not, most women do not like asking for money. nearly one half of the surveyed women (46%) admit that having their own source of income is an important advantage of professional careers. research presented by the co-author mariola dźwigoł-barosz (2015, pp. 117-130) creates an image of a woman unburdened with motherhood, family affairs and pregnancy itself, on the one hand. on the other hand, it proves general preference for male leadership and management style. although the respondents did not agree with the opinion that business is still a man-created world for men, in the end they still choose men 2 as their superiors. 4. research methodics as to perceiving women and men in modern enterprises from the perspective of emotional intelligence it is open secret that neither school grades nor intelligence quotient, sat results allow to predict who is going to be successful in life. best case scenario intelligence quotation determines 20% of the factors deciding on success, which means that 80% depends on other 2 this opinion is backed up by 50% of the respondents. only 7% of the respondents would choose a woman and 36% believe that gender is irrelevant at managerial position. 6% of the respondents find it hard to make a stand on the discussed matter. 16 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 variables (goleman, 1997, p. 35). factors independent of intelligence quotation, such as social class background, and sheer luck, play a major role in determining individual's position within society (gardner, 1989; 1995). emotional intelligence is the individual's personal competences understood as the ability to recognize emotional states of oneself and others, as well as the ability to use own emotions and deal with emotional states of others (mikołajewska & mikołajewski, 2013). emotional intelligence includes the ability to control and regulate one's mood, which allows dealing with various situations. the ability to understand emotions and skilful use of those play a crucial role in human life as well as in professional life. emotional intelligence competences complement rational intelligence. research and observation of business leaders seem to prove that 40-45% of professional success is a result of knowledge, expertise and general intelligence. in remaining cases constant self-improvement and diligence, as well as warm, calm personality, i.e. character, including traits called emotional intelligence, played the decisive role (bieniok, 2007, p. 69). therefore, one can say that emotional intelligence plays a crucial role in achieving professional success. emotional intelligence research show women have an advantage: they score higher than men in almost every aspect of emotional intelligence, i.e. (pinker, 2005, p. 489): ‒ they show higher degree of empathy (recognition and reading other's emotions); ‒ it is easier for them to recognize and name own emotions; ‒ they deal better with frustration and stress; ‒ they have better concentration skills; ‒ they are more efficient at solving interpersonal problems and conflicts. women are definitely weaker in one regard: they lack self-confidence and faith in success. this is proved by observations (wiecka, 2014, p. 74) showing that main barriers on women's path to promotion are: lack of self-confidence and belief in own strengths as well as giving in to opinion and bias of the environment. poll (hewlett & luce, 2006, p. 19) shows that almost half of men claim to be very or extremely ambitious, while only one third of women see themselves as such. although the percentile is higher among businesswomen, where 43% claims to be very ambitious. on the way to the top they lose against men although they are well-educated, they have knowledge and required skills to hold key positions in enterprises. therefore, it must be noted that emotional intelligence combined with the usage of partnership-building language and easiness of starting and maintaining relations can decide on success. it's worth stressing that those skills to a great extent determine efficient managing. 17 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 analysis of subject literature and research results of polish and foreign authors shows ambiguity and lack of consistency in relation to women in managerial positions. taking into consideration the traits attributed to both men and women, a question rises: how are men and women in managerial positions perceived from the perspective of emotional intelligence competences so important for modern enterprise management? gathering information for comparison of perception of men and women from the perspective of emotional intelligence is possible thanks to researching respondents. one type of such a research is a questionnaire. for this research it is assumed that questionnaire is the best source of reliable data for resolving the main research issue. usage of a questionnaire was also dictated by the ability to gather in a timely and systematised way matters relevant to the issue at hand and subject them to unified grading. used questionnaire research method was developed in accordance with questionnaire construction guidelines (babbie, 2009, pp. 275-293). due to ambiguity of matter at hand the questionnaire in written form consists of multiple choice questions, as it limits the possible number of answers. multiple choice questions are in a cafeteria-style (bieniok, 1999, p. 158), i.e. where the respondents are given a set of predefined answers and can only pick from among the given answers. it was proposed that given emotional intelligence competences would be graded in a fivepoint likert scale (likert, 1932). social research methodology uses the five-point scale in questionnaires. using the lickert scale allows to observe the level of acceptance of phenomena or opinions etc. as well as it is used for measuring attitude towards certain issues or opinions. this research aims at comparing the perception of men and women in managerial positions regarding 33 emotional intelligence competences divided into 11 groups. table 1 shows competences as were given to the respondents. respondents were asked to evaluate in a five-point scale (1 – the lowest, 5 – the highest) the importance of each of the 33 emotional intelligence competences from the 11 groups in relation to both men and women. company research time frame: 2015-2016. 228 respondents from 14 different enterprises and 7 industries were qualified for the research. sample had the highest percentage of female respondents (53%) at the age of 36-50 (39%) and 26-35 (36%). respondents with higher and secondary education constitute 43% and 42% respectively, technical education (33%), economic and others (32%) and legal (3%). white collar workers constitute 60% of the respondents, blue collar workers – 24%, and managers: 17%. about 23%, i.e. 53 respondents stated that their work experience is over 26 years, 20% – up to 5 years. respondents working for 6-10, 11-15 and 16-25 years constituted 19% for each group. 18 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 table 1. emotional intelligence competences. the higher the variable intensity, the higher the point rating self-awareness woman points 1 -5 man points 1 -5 1 ability to recognize own emotional states 2 knowledge of own feelings, values, preferences 3 self-esteem self-assesment woman points 1 -5 man points 1 -5 1 belief in own strength 2 awareness of one's capabilities, skills 3 awareness of one's limitations self-control woman points 1 -5 man points 1 -5 1 ability to self-control one's emotional states 2 ability to cope with stress 3 ability to form one's emotions in accordance with oneself, own norms, principles and values empathy woman points 1 -5 man points 1 -5 1 awareness of feelings, needs and values of others (understanding others) 2 sensitivity to the feelings of others 3 focus on helping and supporting others assertiveness woman points 1 -5 man points 1 -5 1 ability to express opinion, critique, needs and wishes 2 ability to say no in an unsubmissive way and without hurting others 3 ability to be criticized, evaluated persuasion woman points 1 -5 man points 1 -5 1 ability to reason 2 effective communication 3 ability to alleviate conflicts leadership woman points 1 -5 man points 1 -5 1 ability to create a vision and motivate others to achieve it 2 ability to win over allies 3 charisma co-operation woman points 1 -5 man points 1 -5 1 ability to form bonds and co-operate with others 2 ability to work as a team in order to achieve goals 3 ability to perform as a team and solve problems together motivation woman points 1 -5 man points 1 -5 1 own commitment 2 drive for achievements 3 optimism adaptive skills woman points 1 -5 man points 1 -5 1 ability to change 2 ability to act and make decisions 3 ability to act and make decisions under stress conscientiousness woman points 1 -5 man points 1 -5 1 ability to take responsibility for tasks and perform those tasks 2 ability to take pleasure in duties 3 consistency in actions source: own elaboration based on d. goleman (1996). emotional intelligence: why it can matter more than iq. new york: bantam books. 19 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 the highest number of respondents represented private sector enterprises (58%), stateowned enterprises constituted 42%. mining industry enterprises are vastly dominant (33%). enterprises from other branches constituted as follow: 15% – food industry, mechanical industries, construction and education – 11%, legal services and banking – 10%. respondents represent enterprises of various size. 34% of respondents work in enterprises with up to 50 employees, similar number (31%) works in enterprises of 201-500 employees. percentile of managers in enterprises with over 200 workers and 51-200 workers is 23% and 12% respectively. 5. results for precise result analysis of differences in perception of men and women in managerial positions it was checked if a statistically significant difference in evaluation of men and women in managerial positions exists. all tests had a statistical significance alpha = 0.05. responses were divided in accordance with the questionnaire into two groups: group 1 – responses evaluating women, group 2 – responses evaluating men, v1, v2, …., v33 – questions from the questionnaire. the following statistical hypotheses were assumed: h0: statistical distributions for both groups are equal (average for groups 1. and 2. are statistically equal). h0: statistical distributions for both groups are not equal (average for group 1. is not equal to average for group 2). if alpha (statistical significance) < asymptotic significance; so if asymptotic significance > 0,05, there is no ground for discarding the ho hypothesis, which means it can be assumed that the average for both groups are equal (i.e. there is no difference in evaluation of men and women in the answer). all the research were conducted with mann-whitney u test. table 2 contains competence level ratings. conducted calculations show that there are no statistically significant differences for all competences from motivation category, i.e. own commitment, drive for achievements, optimism, as well as: self-awareness, ability to form one's emotions in accordance with oneself, own norms, principles and values consistency in actions. 20 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 this justifies the claim that men and women are perceived as being on the same level with regard to those competences. table 2. competence level research results competence group g r o u p q u e st io n /c o m p e te n c e m in im u m m a x im u m a v e r a g e g r o u p m in im u m m a x im u m a v e r a g e d if fe r e n c e b e tw e e n a v e r a g e a sy m p to ti c s ig n if ic a n c e (2 -s id e d ) description self-awareness 1 v1 1 5 3.91 2 1 5 3.89 0.01 0.586 statistically insignificant difference v2 1 5 3.94 2 5 4.13 -0.19 0.027 men rated higher than women v3 1 5 3.80 1 5 3.52 0.28 0.001 women rated higher than men self-esteem v4 1 5 3.99 2 5 3.82 0.17 0.010 women rated higher than men v5 1 5 3.77 1 5 3.48 0.29 0.000 women rated higher than men v6 1 5 3.46 1 5 3.83 -0.36 0.000 men rated higher than women self-control v7 1 5 3.93 1 5 3.66 0.26 0.005 women rated higher than men v8 2 5 4.04 1 5 3.67 0.36 0.000 women rated higher than men v9 1 5 3.82 2 5 3.92 -0.10 0.345 statistically insignificant difference empathy v10 1 5 3.60 1 5 4.01 -0.42 0.000 men rated higher than women v11 1 5 3.37 1 5 3.89 -0.52 0.000 men rated higher than women v12 1 5 3.52 1 5 3.64 -0.11 0.089 men rated higher than women assertiveness v13 1 5 4.03 2 5 3.65 0.37 0.000 women rated higher than men v14 1 5 3.82 1 5 3.40 0.42 0.000 women rated higher than men v15 1 5 3.06 1 5 3.44 -0.38 0.000 men rated higher than women persuasion v16 1 5 3.61 2 5 3.90 -0.29 0.002 men rated higher than women v17 1 5 3.33 2 5 4.09 -0.76 0.000 men rated higher than women v18 1 5 3.58 1 5 3.92 -0.34 0.000 men rated higher than women leadership v19 2 5 4.11 2 5 3.78 0.33 0.000 women rated higher than men v20 1 5 4.14 2 5 4.00 0.14 0.041 women rated higher than men v21 1 5 4.13 1 5 3.57 0.56 0.000 women rated higher than men co-operation v22 2 5 3.89 2 5 4.13 -0.24 0.002 men rated higher than women v23 1 5 3.49 3 5 4.17 -0.68 0.000 men rated higher than women v24 1 5 3.17 2 5 3.99 -0.82 0.000 men rated higher than women motivation v25 1 5 4.36 3 5 4.48 -0.12 0.193 statistically insignificant difference v26 2 5 4.48 3 5 4.44 0.04 0.625 statistically insignificant difference v27 2 5 4.04 2 5 4.15 -0.11 0.224 statistically insignificant difference adaptive skills v28 2 5 3.92 1 5 3.60 0.32 0.000 women rated higher than men v29 2 5 4.24 1 5 3.86 0.38 0.000 women rated higher than men v30 1 5 3.87 1 5 3.38 0.49 0.000 women rated higher than men conscientiousness v31 1 5 3.89 2 5 4.02 -0.13 0.019 men rated higher than women v32 2 5 4.00 2 5 4.27 -0.26 0.000 men rated higher than women v33 2 5 4.14 2 5 4.14 0.00 0.743 statistically insignificant difference source: own elaboration. researched responders result compilation shows that in case of 14 emotional intelligence competences men are rated higher than women. 21 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 men are perceived higher in all competences related to empathy, persuasion and cooperation. the remaining competences where men were rated higher than women: knowledge of own feelings, values, preferences, awareness of one's limitations, ability to be criticized, evaluated, ability to take responsibility for tasks and perform those tasks, ability to take pleasure in duties. research results show that there are 13 emotional intelligence competences where women were rated higher than men. those include all competences related to leadership and adaptive skills as well as: self-esteem, belief in own strength, awareness of one's capabilities, skills, ability to self-control one's emotional states, ability to cope with stress, ability to express opinion, critique, needs and wishes, ability to say no without hurting others. 6. actions that support gender equality in the workplace many researches prove that discrete prejudice against women is still present in enterprises and society which distorts learning cycle that is crucial for becoming a leader. those research also point out the actions enterprises can undertake to alleviate the situation. it is not enough to determine required skills and competences and pass those on to people as if they were existing in social void. it is necessary to create climate for women motivation to power will be stimulated and encourage others to notice and support women efforts (ibarra, et al., 2014, p. 42). one of the pro-diversity policy elements is a financial, organisational or staff-related support for bottom-up initiatives undertaken by the staff willing to improve their involvement in the company (ministerstwo pracy i polityki społecznej, 2014a). one of the simplest activities supporting diversity in an enterprise consists in promoting among the employees knowledge regarding diversity and implementing a system of incentives aimed at actively promoting diversity. activities promoting diversity in a workplace are also undertaken by international organizations. at this point it is worth mentioning the diversity charter, which is a written commitment of an enterprise concerning implementation of prohibition of discrimination and mobbing in the workplace, developing and implementing policy of equal treatment and diversity management, promotion of diversity, introduction of institutional, internal solutions regarding development of the policy of equal treatment, engagement of all the 22 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 employees in the dm dialogue etc. this initiative operates in the european union as of 2011, and it reached poland in 2012 (responsible business forum, 2016). the main objective of this international initiative is to promote diversity and equal employment opportunities. being a signatory of the diversity charter can be perceived as prestigious. the companies that signed the charter constitute an elite group. they can act as a model for other entities willing to implement programs associated with diversity. the impact on the company’s image and reputation should also not be underestimated – such companies are perceived as socially responsible. h. ibarra, r. ely and d. kolb propose actions aimed at making managerial positions more accessible for women (ibarra et al., 2014, pp. 43-44): educating men and women on second generation gender bias, creating safe "identity development areas" where women will find support in the process of climbing the professional ladder, encouraging women to make the goals they want to achieve as leaders the cornerstone of their work and not follow rooted stereotypes. similar methods for supporting female manager chances in business were developed by "metlife". that is why klub kobiet w biznesie (club of women in business) was founded. it organizes meetings of both sexes in order to exchange experiences, build relations and get mutual support and advice (dąbrowska, 2014, p. 44). another type of support involves work-life balance projects. in poland, the idea of wlb is a relatively new notion, although the companies and employees tend to increasingly gravitate towards it, noticing its benefits. the significance of the wlb idea for employees in poland and around the world is disclosed by data contained in the workers preferences and workplace ability report of 2014 (kelly global workforce index, 2014, p. 7). at this point it should be noted that for 42% of employees in poland and 56% of employees around the world, the idea of wlb is more important that salaries or promotion. interest in wlb results mainly from the implementation of needs of the employees associated with performing different non-professional roles. for many companies, enabling the employees to use various wlb programs constitutes a challenge. at the same time, it should not be forgotten that wlb programs are quite expensive and preferred by large companies. by analyzing benefits of implementing the idea of wlb, it can be argued that it can be significant for gaining competitive advantage on the market. wlb practices can greatly improve the efficiency of the hr management. an example of wlb is capgemini’s project. the aim of the company’s project is to activate women and men on parental leave and to help them stay in touch with the company while on leave. a special website was designed for parents willing to return to work after the parental leave. on the website one can find a list of all vacancies available in the company, as well as e-learning training courses that may help the parents to expand their skills. the “business mama” website contains information on job opportunities during child care leave and available benefits, under relevant bookmarks: “i am on maternity leave”, “i want to get 23 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 back to work”. furthermore, the company elaborated a “guide for parents” and a “guide for superiors” being a database that contain information on parental entitlements, steps to be taken before starting the parental leave and before returning to work. the company also subsidises a child’s stay in a pre-school, children’s club or kindergarten. they also created a parent room in each of their office facilities (ministerstwo pracy i polityki społecznej, 2014a). 7. benefits of gender diversity in enterprises increased number of women at higher positions is beneficial for enterprise results. american catalyst analytic centre made a ground breaking discovery while researching correlation between women at high power posts and enterprises from the fortune 500 list. it turned out that a group of enterprises with highest percentage of female representatives at the highest managerial positions had way better results than those with lower percentage of female representatives. proprietary capital return rate was 35.1% higher and total shareholder return was 34% higher (catalyst, 2004). according to the data collected by the mckinsey & company (2010), companies with the highest representation of women in corporate boards have better return on equity (roe) ratios by 41% and ebit by 56% (mckinsey & company, 2010). another report conducted by credit suisse, entitled gender diversity and corporate performance (credit suisse, 2012), confirms that net income growth for companies with women in the board has averaged 14%, compared to 10% for those with no female board, 2.4 times higher price-to-book ratio (compared to 1.8 times), the return on investment higher by 4 percentage points (16% compared to 12%) and the debit-to-equity ratio of 48% (compared to 50%), i.e. lower by 2 percentage points. according to the data contained in the report, one may draw a conclusion that the companies with more women in corporate boards have better market valuation at the stock exchange. the reasons why companies with women in corporate boards achieve better results are the following (ministerstwo pracy i polityki społecznej, 2014b): various competencies, a better use of potential, talents and skills, a greater emphasis on needs of a client-consumer, a higher level of corporation governance, a reduced willingness to take a risk. the equality of men and women as to taking economic decisions brings about sheer advantages, whereas its lack results in losses (ministerstwo pracy i polityki społecznej, 2014b). if the employment rate of women in the us, japan and egypt were at the same level as the employment rate for men, then the gross domestic product of these countries would be higher by, accordingly 5.9 and 34% (empowering the third billion, 2012). countries and enterprises that allow women to realize their full potential will benefit from their educational achievements. secretary-general of organisation for economic co24 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 operation and development (oecd, 2006a), a. gurría, says that women are the least utilized economic commodity in world's economy. in 2010 "science" (woolley, et al., 2010) published research implying that efficiency of groups working on solving tasks or issues increases with diversity of competences of their members. more diversified groups have higher potential for finding adequate and profitable solutions. diversity is mostly gender-related – teams with female members are in general more effective. therefore, diversity increases efficiency. the inclusion of women into boards of directors and top management structures is not a fashionable must-do, but a logical business decision. the greater percentage of women at the helm of the companies, combined with diversity of top executive structures, may be a source of a company’s competitive edge (wróbel, 2010). promoting diversity results in attracting and acquiring talents, especially female talents. women (a half of each society) constitute a not-yet appreciated resource of talents, managerial skills included. the diversity-related culture is characterised by adherence to binding laws on equality in the workplace, relationships with the interested parties, and widespread promotion of values, standards and customs, aimed at developing an atmosphere for accepting and valuing differences instead of just tolerating them (wojciechowicz, 2015, p. 711). among the most significant actions undertaken by companies to promote diversity, the following are worth emphasizing: including the subject of diversity in strategic documents of the company, ethical systems, introduction of recruitment principles accounting for diversity and eliminating the impact of unaware stereotypes on decision processes. diversity in workplace creates the image of a socially responsible company, which is an entity that feels responsible for its actions, accounts for the needs of stakeholders and respects ethical principles in case of both its employees and clients. in the opinion of stakeholders, such company is perceived as a socially sensitive entity that uses transparent business practices and respecting diversity. wise diversity management is one of the most important criteria defining a good and reliable employer. implementing dm programs in an organization should make its employees satisfied by working for such company. it cannot be said with certainty that an increase of number of women in company boards will cure national economies, but it must be noted that diversity undoubtedly introduced by women in managerial positions can determine organization's success. 8. conclusions diversity and integration form one of the most significant trends on the global labor market. this was confirmed in a study conducted among 10 000 of heads of hr departments and ceos from 140 countries. 69% of the participants considered diversity a significant issue (deloitte global human capital trends, 2017). gender issues are perceived in different ways, 25 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 depending on the country, region and specific situation, including the degree of economic development of the given country of area (glinka & kostera, 2012, p. 318). business imposes specific code of conduct on managers – regardless of their sex. business environment is often ruthless environment where tasks must be completed quickly and efficiently. which approach to managing a modern enterprise will be better: male tactics focusing on efficiency, or tactics based on rational reasoning, that according to research (deloitte, 2012, p. 20) are more associated with women? i. majewska-opiełka (2012, p. 67) also stresses the importance of intuition in leading others, and intuition is strictly related to women and until recently no male manager would admit to using it in fear of being ridiculed. 2000 research on polish female managers 3 showed that, firstly, women do not have worse predisposition to managing than men, and secondly, clearly showed that women have tendencies for democratic, i.e. participatory and partnership-based management. such management develops attitude of active co-operation and responsibility for the enterprise, identification with the enterprise and motivates report’s productivity (lisowska, et al., 2000; bliss, et al., 2003). author's own research confirm other author's research results proving ambiguity in perception of men and women in managerial positions. research results regarding perception of men and women in managerial positions from the position of emotional intelligence presented in the paper creates the image of motivated, optimistic and committed individuals with achievement drive and persistence, regardless of sex. both men and women in managerial positions were seen as self-aware and able to form own emotions in accordance with themselves. research results where specific groups scored higher are surprising. they show that women are rated higher in leadership and adaptive skills, while men score higher in empathy, persuasion and co-operation. women are more aware of their skills and capabilities, while men are more aware of their limitations. male managers show a higher capacity for taking fulfilment from duties and ability to take responsibility for tasks and their execution, while women are better at dealing with stress. respondents also pointed that female managers are able to express opinions, critique, needs and wishes and can say no in an unsubmissive 3 this was a ground-breaking research on polish women in managerial positions funded by u.s. agency for international development (usaid). it included 20 thousand women in managerial positions, from independent accountants to a chief execution officer in enterprises with 5 or more employees. 1892 women answered the questionnaire. due to age of female managers, the sample was representative. the research represented private sector in a larger extent and feminized branches of industry in a lesser extent than gus research on general population of women in managerial positions show. 26 www.virtual-economics.eu issn 2657-4047 (online) mariola dźwigoł-barosz and wojciech leooski virtual economics, vol. 2, no. 1, 2019 way and without hurting others. men are better at accepting critique and being graded than women. women are seen being able to consciously control their own emotional states, but men, on the other hand, scored higher in regard to knowledge of their emotions, values and preferences. women scored higher in regard to belief in own strength and self-esteem. in the light of those results further research on subject matter is justified. it would be expedient to include other, not present in this research, aspects regarding perception of men and women in managerial positions such as: how respondents of both sexes rate one another, how age, education, type and length of work or enterprise size or legal status influence the differences in perception. future research could utilize tools such as mayer-salovey-caruso emotional intelligence test (msceit) or emotional intelligence test (eit) to measure emotional intelligence competence levels instead of researching the perception of men and women from the perspective of emotional intelligence (caruso & salovey, 2009). . nowadays a surprising number of managers despite high general intelligence (academic), knowledge and competences are not successful at managing. this is true not only for managers (bieniok, 2011, p. 18). emotional intelligence plays an important role in economy and enterprise operation, as this kind of intelligence is responsible for all interactions between workers. claim that emotional intelligence dictates relations between employees and is an important variable in enterprise management is fully justified (opolska, et al., 2009). research results obtained by the author do not show that any sex has an advantage in the field of emotional intelligence. emotional intelligence competences analysis associated with men and women in managerial positions creates area for similar activity of men and women. enterprises should utilize competences of both sexes and consciously use their diversity and create more efficient work culture. this notion is in line with claim that lines between management styles of men and women are getting blurred. this is already visible in western europe, but not yet in poland, where a typical personification of an efficient manager is a confident authoritarian man. the managerial competences of male and female sex discussed in the paper do not justify the conclusion that women are less suitable for managing then men, or that men are more suitable for managing than women. g.n. powell claims: "there are few reasons to believe that only men or only women can be perfect managers. 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(2010). różnorodnośd: droga do przewagi konkurencyjnej. magazyn thinthank: biznes – idee – paostwo – rozwój, 2, 72-79 [in polish]. http://ekonomiaspoleczna.info/media/biblioteka/wb/przewodnik-dobrych-praktyk-firma-rownych-szans.pdf http://ekonomiaspoleczna.info/media/biblioteka/wb/przewodnik-dobrych-praktyk-firma-rownych-szans.pdf http://odpowiedzialnybiznes.pl/artykuly/iluzoryczne-przeszkody-realne-korzysci/ http://odpowiedzialnybiznes.pl/artykuly/iluzoryczne-przeszkody-realne-korzysci/ http://odpowiedzialnybiznes.pl/artykuly/badania-csr-2016/ https://doi.org/10.1016/s2212-5671(14)00178-6 https://www.wko.at/site/charta-der-vielfalt/service/publikationen/checklist_divers%20itymanagement_en.pdf https://www.wko.at/site/charta-der-vielfalt/service/publikationen/checklist_divers%20itymanagement_en.pdf http://www.egospodarka.pl/72517,dobry-menedzer-nie-musi-byc-mezczyzna,1,39,1.html https://doi.org/10.18276/frfu.2015.74/2-61 https://doi.org/10.1126/science.1193147 кwilinski alex 24 www.virtual-economics.eu issn 2657-4047 (online) olena chygryn and radoslaw miskiewicz virtual economics, vol. 5, no. 2, 2022 2022 volume 5 number 2 new trends and patterns in green competitiveness: a bibliometric analysis of evolution olena chygryn and radoslaw miskiewicz abstract. global population growth, advancement of technological innovations, features of economic development, total digitization of production, and increase of consumption determine the necessity of forming companies' green competitive advantages. in order to create a terminological basis and research the main trends in the development of the concept of "green competitiveness of businesses" there was carried out a bibliometric analysis using the vosviewer software 1.6.13 and scopus tools analysis. a sample of 54,753 relevant scientific publications indexed by scopus scientometric databases was generated for the period of 1991–2021. the results of the bibliometric analysis made it possible to determine the basic prerequisites and the main stages of forming green competitive advantages: the first is related to the traditional understanding of competitiveness, its global measurement, the development of the processes of greening economic activity; the second is related to the greening of business activities and the development of the green economy; the third is related to the analysis of competitiveness in the context of green marketing strategies; the fourth is related to shaping the concept of green competitiveness directly. the conducted research formed a theoretical basis for clarifying the content of the concept of green competitiveness as an ability of an enterprise to form and effectively use green competitive advantages, their convergent and complementary effects, which ensure the sustainable development of enterprises, the expansion of the enterprise's competitive position on the market, the increase of investment attractiveness and capitalization, and the formation of an environmental brand. keywords: sustainable development, green economy, green marketing, green competitiveness jel classification: o1; q5; q56 http://www.virtual-economics.eu/ 25 www.virtual-economics.eu issn 2657-4047 (online) olena chygryn and radoslaw miskiewicz virtual economics, vol. 5, no. 2, 2022 authors: olena chygryn sumy state university, sumy, ukraine e-mail: o.chygryn@biem.sumdu.edu.ua https://orcid.org/0000-0002-4007-3728 radoslaw miskiewicz luma holding limited, malta; institute of management, university of szczecin, szczecin, poland e-mail: radoslaw.miskiewicz@lumaholding.eu https://orcid.org/0000-0003-2370-4783 citation: chygryn, o., & miśkiewicz, r. (2022). new trends and patterns in green competitiveness: a bibliometric analysis of evolution. virtual economics, 5(2), 24-42. https://doi.org/10.34021/ve.2022.05.02(2) received: january 6, 2022. revised: january 24, 2022. accepted: february 12, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ http://o.chygryn@biem.sumdu.edu.ua https://orcid.org/0000-0002-4007-3728 file:///c:/users/alex/downloads/radoslaw.miskiewicz@lumaholding.eu https://orcid.org/0000-0003-2370-4783 https://creativecommons.org/licenses/by/4.0/ 26 www.virtual-economics.eu issn 2657-4047 (online) olena chygryn and radoslaw miskiewicz virtual economics, vol. 5, no. 2, 2022 1. introduction modern trends in global population growth, advancement of technological innovations, features of economic development, total digitization of production and consumption are driving forces all over the world. predictive estimations of the national economies’ development indicate not only the preservation of existing consumption trends but their intensification as well. this especially applies to such countries as china, india, and the usa. according to world bank estimates, the global population will reach 9 billion by 2050, which is largely due to the growth of national economies in developing countries and the increase in the population of the countries with the lower income per capita. today, humanity already exceeds the earth's capacity to maintain an appropriate level of consumption. global gdp is projected to grow by 325% between 2007 and 2050 (policies, 2011). at the same time, according to analysts' forecast, 60% of it will fall on the share of consumer spending on goods and services. an evaluation of the development trends in the leading countries shows that the most populated countries, china and india, are developing extremely quickly and intensively. thus, by 2025, china's gdp should approach the level of the us gdp. india's gdp is expected to rival that of japan, and by 2050, approach that of the united states. meanwhile, by 2050, the gdp of mexico, brazil and indonesia is projected to exceed that of the uk. in addition, most economies of developing countries can catch up with great britain in terms of gdp by 2050 (oecd, 1998). at the same time, rapid economic development leads to degradation of the natural environment, depletion of natural resources, and increasing of the global climate change. today, both the reorientation of the business sector’s activities towards environmentally oriented technologies in production and management, and the use of behavioural tools based on the stimulation of changing consumption traditions, the motivation of the transition to ecologically balanced and harmonious consumption, are relevant (chygryn, o. et al, 2020). appropriate measures will ensure green competitive advantages of the business sector in foreign and domestic markets and will decrease anthropogenic pressure on the environment. the purpose of the paper is to study the evolution and patterns of shaping the theory of green competitiveness as a basis for creating the relevant competitive advantages of enterprises. 2. literature review the scientific community made a significant progress in determining the main determinants of sustainable development of the national economy and business sector. the main strategic directions that form the sustainable competitive development are the following: designing state strategies for sustainable development (artyukhov et al. 2021; bilan et al. 2019; didenko et al. 2020; lyulyov et al. 2019); ensuring the implementation of environmental protection programs (hens et al. 2019), promoting the development of innovations (tih et al. 2016; kwilinski 2018; pimonenko et al. 2021); improving organizational and economic mechanisms of ecologically oriented development at all levels of economic activity (dementyev et al. 2020; dzwigol et al., 2020; kozlov 2021); providing renewable energy sources (us et al. 2021); smart transformation of the energy sector (kharazishvili 2021; kuzior et al. 2021; vakulenko et al. 2021; lyulyov et al., 2021); promoting green investments, development of green http://www.virtual-economics.eu/ 27 www.virtual-economics.eu issn 2657-4047 (online) olena chygryn and radoslaw miskiewicz virtual economics, vol. 5, no. 2, 2022 infrastructure and green marketing (lyonov et al. 2021; tambovceva et al. 2020; panchenko et al. 2021; letunovska et al. 2021; yang et al. 2021); unlocking the economic potential (abazov 1997, 2010; dźwigoł & wolniak, 2018; miśkiewicz 2018, 2019, 2020, 2021a, 2021b, 2022); functioning and elaborating energy systems (coban et al. 2022; miskiewicz et al. 2021, 2022; moskalenko et al. 2022a, 2022b); energy and social security (kharazishvili et al. 2020, 2021; kotowicz et al. 2022; kuzior et al. 2021; hezam et al. 2023; hussainet al. 2021; miskiewicz et al. 2021, 2022; prokopenko and miśkiewicz 2020; saługa 2020, 2021); development of information systems (bogachov et al. 2020; borodin et al. 2021; drożdż et al. 2020a, 2020b, 2021; dzwigol 2020,2021, 2022; dźwigol et al. 2019, 2020; melnychenko 2020, 2021a, 2021b); determination of bifurcation points (ingber 2017; kianpour et al. 2021; kwilinski 2019; kwilinski et al. 2019a, 2019b, 2019c, 2020a, 2020b, 2020c, 2020d, 2021, 2022a, 2022b, 2022c); a systematic approach in determining the optimum (lyulyov et al. 2021a, 2021b; polcyn et al. 2022; szczepańska-woszczyna and gatnar 2022; tkachenko et al. 2019a, 2019b; trzeciak et al. 2022; vaníčková and szczepańska-woszczyna 2020; yang et al. 2021). however, there are no studies of the evolution of forming green competitive advantages of enterprises. 3. methods based on the past studies (bilan et al., 2020) this this investigation applied the bibliometric analysis. a thorough study of the interrelationships among the related concepts of competitiveness, the study of the thematic focus of research, and authorship of publications, called for using the appropriate software vosviewer 1.6.13, a software tool for constructing and visualising bibliometric networks, which may include journals, researchers, or individual publications, and are created based on citation, bibliographic linkage, co-citation, or coauthorship ratios. with the aim of forming a terminological basis and researching the dominant trends in the development of the concept "green competitiveness of enterprises", this paper carried out a bibliometric analysis of the evolution of the concept "competitiveness" in relation to the theories of sustainable development, the business sector greening, green economy and green marketing using the vosviewer software 1.6.13. for this purpose, a sample of 54,753 relevant scientific publications indexed by scopus scientometric databases was generated for the period of 1991–2021. 4. results and discussion the dynamics of publication activity, presented in figure 1, characterizes the rapid growth of publications since 2002. the relevant trend is explained, among other things, by the world summit on sustainable development, held from august 26 to september 4, 2002 in johannesburg, south african republic, with the purpose to analyse and evaluate achievements in the field of environmental protection, monitor the changes that have occurred, and identify new issues since the 1992 planet earth summit (undp, 2018). http://www.virtual-economics.eu/ 28 www.virtual-economics.eu issn 2657-4047 (online) olena chygryn and radoslaw miskiewicz virtual economics, vol. 5, no. 2, 2022 figure 1. dynamics of scientific publications devoted to competitiveness and green economy source: compiled by the authors based on the scopus database. the growing relevance of these studies is followed by the intensification of scientific articles that promote the principles of sustainable development, green economy and clean production. figure 2 describes the growth of publishing activity in specific global publications. figure 2. scientific publications devoted to the issues of sustainable development source: compiled by the authors based on the scopus database. thus, since 2012, the number of scientific articles on the topic of competitiveness and green economy in such scientific publications as "sustainability," "iop conference series earth and environmental science," and "e3s web of conference" has significantly increased. figure 3 presents the results of the analysis of the affiliation of scientific publications on the subject of competitiveness and green economy. the results of studying the affiliation of scientific publications, presented in figure 3, testify to the actualization of the relevant topic of scientific research at the state level, since affiliation is determined by such state scientific institutions as, for example: chinese academy of sciences (more than 350 publications); hong kong polytechnic university (more than 300 publications); economic academy in bucharest; national university of singapore; national centre for scientific research of france; ministry of education of china; university of cambridge; national centre for scientific research of france. 0 1000 2000 3000 4000 5000 6000 7000 1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 0 50 100 150 200 250 sustainability switzerland journal of cleaner production iop conference series earth and environmental… e3s web of conferences lecture notes in networks and systems advanced materials research advances in intelligent systems and computing quality access to success renewable and sustainable energy reviews http://www.virtual-economics.eu/ 29 www.virtual-economics.eu issn 2657-4047 (online) olena chygryn and radoslaw miskiewicz virtual economics, vol. 5, no. 2, 2022 figure 3. affiliation of scientific publications on competitiveness and green economy source: compiled by the authors based on the scopus database. in addition, a significant part of scientific research on the topic of competitiveness and green economy is presented by such powerful scientific institutions as cambridge university, oxford university, and manchester university. the results of a retrospective analysis in the evolutionary time dimension made it possible to identify the four most significant evolution stages of the theory of green competitiveness (figure 4). figure 4. the results of the evolutionary clustering of economic research areas depending on their relationship with the theory of competitiveness source: compiled by the authors using the vosviewer software. 0 50 100 150 200 250 300 350 400 chinese academy of sciences hong kong polytechnic university, china university of são paulo, brazil economic academy in bucharest, romania national university of singapore technical university of milan, italy tsinghua university, china university of cambridge, great britain national center for scientific research, france ministry of education of china university of manchester, uk university of oxford, great britain zhejiang university, china polytechnic university of valencia, spain http://www.virtual-economics.eu/ 30 www.virtual-economics.eu issn 2657-4047 (online) olena chygryn and radoslaw miskiewicz virtual economics, vol. 5, no. 2, 2022 the first stage is related to the transformation of the classical understanding of the category of "competitiveness". an evolutionary analysis of the cross-sector use of keyword combinations in scientific works made it possible to distinguish between the following dimensions: traditional (2004-2006), where competitiveness is studied in close relationship with the categories "resources," "technology," "staff," "management," "marketing;" global (2006-2010), where competitiveness is associated with the categories "economic growth," "globalization," "benchmarking," "international trade"; ecologically oriented (2010-2012), where competitiveness is related to the categories "environmental protection," "resource conservation," "renewable energy sources," "energy policy," "sustainable development." the second stage of the green competitiveness evolution made it possible to reveal the following patterns. relevant scientific research is characterized by the emergence and dominance of two new trends in cross-sector research that reflect the development of the green economy and determine the competitive advantages of enterprises through applying ecopolitics tools, and implementing resource-saving technologies, developing green production, and green innovations. figure 5 presents the results of the evolution of the relationship among the concepts of "competitiveness", "greening of the business sector" and "green economy". figure 5. a visualization map of the evolution of the relationship among the concepts of "competitiveness", "greening of the business sector" and "green economy" source: compiled by the authors using the vosviewer software http://www.virtual-economics.eu/ 31 www.virtual-economics.eu issn 2657-4047 (online) olena chygryn and radoslaw miskiewicz virtual economics, vol. 5, no. 2, 2022 from the point of view of the time dimension, the first cluster (2010-2014) is singled out, which characterizes the processes of the business sector greening, where such categories as renewable energy sources, bioenergy, waste management, biotechnologies, etc. are used. the second cluster (2014-2018) determines the density of relationships among the key category of "competitiveness" and categories of the green economy (environmental regulation, recycling, environmental planning, environmental taxes, etc.) at the macro and micro levels. the dynamics of relevant scientific publications, presented in figure 6, shows a significant increase in publishing activity about competitiveness and green marketing, starting from 2008. this trend indicates that the scientific community is beginning to study competitiveness from the viewpoint of the determinants that ensure it. at the same time, one of the effective tools that will ensure the promotion of green competitive advantages in the market is green marketing. figure 6. dynamics of scientific publications devoted to competitiveness and green marketing source: compiled by the authors based on the scopus database the growth of relevant activity was, among other things, the result of holding the 2012 un world conference on sustainable development under the name "rio-2012" or "rio +20". the main topics raised at the conference were (colenbrander et al., 2015): transition to a "green" economy, climate change, social aspects and the creation of green urban infrastructure, promoting the use of renewable energy sources in order to reduce greenhouse gas emissions and promote economic growth, improving forestry management, increasing the efficiency of using water resources. the main result of this stage was the formulation of the green economy concept and the establishment of the institutional framework for sustainable development. figure 7 presents the authors who have the largest number of publications on the relevant topic. 0 50 100 150 200 250 300 350 400 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 http://www.virtual-economics.eu/ 32 www.virtual-economics.eu issn 2657-4047 (online) olena chygryn and radoslaw miskiewicz virtual economics, vol. 5, no. 2, 2022 figure 7. contribution of individual scholars to the research on competitiveness and green marketing source: compiled by the authors based on the scopus database the diagram in figure 8 presents the results of the analysis of the international affiliation of scientific publications devoted to competitiveness and green marketing. figure 8. contribution of individual scientists to research on competitiveness and green marketing source: compiled by the authors based on the scopus database. thus, the usa (381 publications) and china (361 publications) are the undisputed leaders in promoting relevant scientific topics. the third position confidently belongs to indian scientists, who have 212 publications on the specified topic, and the fourth place is occupied by great britain (175 publications). the analysis of the third stage of the evolution of the green competitiveness concept (figure 9) indicate that it is related to the elaboration of the concept “green marketing” and the implementation of its tools as a determinant of ensuring competitiveness of enterprises. the dominant keywords in 2014 are environmental policy, and energy efficiency; in 2015 – green marketing strategies, green purchases; in 2016 greenwashing, green advertising, ecological labelling, and green logistics. 0 2 4 6 8 10 12 usa, 381 china, 361 india, 212 great britain, 175 taiwan, 111 italy, 108 germany, 99 malaysia, 97 australia, 92 spain, 80 canada, 73 http://www.virtual-economics.eu/ 33 www.virtual-economics.eu issn 2657-4047 (online) olena chygryn and radoslaw miskiewicz virtual economics, vol. 5, no. 2, 2022 figure 9. a visualization map of competitiveness studies depending on the relationship with green marketing theory source: compiled by the authors using the vosviewer software the dominant keywords in 2014 are environmental policy and energy efficiency; in 2015 – green marketing strategies, green purchases; in 2016 greenwashing, green advertising, ecological labelling, and green logistics. table 1 presents the most cited publications devoted to research on competitiveness in relation to green marketing. table 1. top 10 cited articles on the issue of enterprise competitiveness and green marketing author title year source citations bansal p., roth k. why companies go green: a model of ecological responsiveness 2000 academy of management journal 1793 rao p., holt d. do green supply chains lead to competitiveness and economic performance? 2005 international journal of operations and production management 1258 laroche m., bergeron j., barbaro-forleo g. targeting consumers who are willing to pay more for environmentally friendly products 2001 journal of consumer marketing 1258 hart s.l., ahuja g. does it pay to be green? an empirical examination of the relationship between emission reduction and firm performance 1996 business strategy and the environment 999 http://www.virtual-economics.eu/ https://www.scopus.com/sourceid/20191?origin=resultslist https://www.scopus.com/sourceid/20191?origin=resultslist https://www.scopus.com/sourceid/20039?origin=resultslist https://www.scopus.com/sourceid/20039?origin=resultslist https://www.scopus.com/sourceid/20039?origin=resultslist https://www.scopus.com/sourceid/20039?origin=resultslist https://www.scopus.com/sourceid/22897?origin=resultslist https://www.scopus.com/sourceid/22897?origin=resultslist https://www.scopus.com/sourceid/23406?origin=resultslist https://www.scopus.com/sourceid/23406?origin=resultslist 34 www.virtual-economics.eu issn 2657-4047 (online) olena chygryn and radoslaw miskiewicz virtual economics, vol. 5, no. 2, 2022 author title year source citations zhu k., sarkis j., gen yu. green supply chain management in china: pressures, practices and performance 2005 international journal of operations and production management 819 ambek s., lanois p. does it pay to be green? a systematic overview 2008 academy of management perspectives 738 ortiz o., castells f., zonnemann g. sustainability in the construction industry: a review of recent developments based on lca 2009 construction and building materials 714 strogan, r, roberts, j. environmental segmentation alternatives: a look at green consumer behaviour in the new millennium 1999 journal of consumer marketing 665 manaktola k., jaukhari v. exploring consumer attitude and behaviour towards green practices in the lodging industry in india 2007 international journal of contemporary hospitality management 471 pickett-baker j., ozaki r. pro-environmental products: marketing influence on consumer purchase decision 2008 journal of consumer marketing 457 source: compiled by the authors based on the scopus database. the analysis of the publications listed in table 1 shows that researchers analyse green goods and services and the features of their promotion on the market as an important determinant of ensuring green competitiveness. a corresponding query in the scopus and web of science databases proved the presence of growing scientific interest in the relevant topic in recent years (figure 10). in total, about 500 academic articles were examined for the period from 1990 to 2020. the results of the analysis prove that since 2005, the number of publications devoted to the issues of marketing greening and competitiveness began to grow. at the same time, in 2016, part of the research is moving to studying green competitiveness. this is explained by the actualization of environmental issues (signing the paris agreement "on climate change" in december 2015), the expansion of research in the field of environmental degradation, depletion of natural resources, increasing inequality, strengthening of climate change, etc. (pimonenko, t. et al., 2018). in addition, in 2020, compared to 2005, the number of scientists who researched the greening of competitiveness increased more than 20 times. further analysis of scientific publications on the topic of green competitiveness made it possible to identify the areas of scientific research in which there are relevant academic studies, which characterizes the appropriate cross-sectoral nature of the research on the processes of competitiveness greening. http://www.virtual-economics.eu/ https://www.scopus.com/sourceid/20039?origin=resultslist https://www.scopus.com/sourceid/20039?origin=resultslist https://www.scopus.com/sourceid/20039?origin=resultslist https://www.scopus.com/sourceid/20039?origin=resultslist https://www.scopus.com/sourceid/4700152287?origin=resultslist https://www.scopus.com/sourceid/4700152287?origin=resultslist https://www.scopus.com/sourceid/4700152287?origin=resultslist https://www.scopus.com/sourceid/22897?origin=resultslist https://www.scopus.com/sourceid/22897?origin=resultslist https://www.scopus.com/sourceid/144742?origin=resultslist https://www.scopus.com/sourceid/144742?origin=resultslist https://www.scopus.com/sourceid/144742?origin=resultslist https://www.scopus.com/sourceid/144742?origin=resultslist https://www.scopus.com/sourceid/22897?origin=resultslist https://www.scopus.com/sourceid/22897?origin=resultslist 35 www.virtual-economics.eu issn 2657-4047 (online) olena chygryn and radoslaw miskiewicz virtual economics, vol. 5, no. 2, 2022 figure 10. dynamics of scientific publications devoted to green competitiveness source: compiled by the authors based on the scopus database. the main areas of the research evolution are:  business and management – 29%;  environmental sciences – 15%;  social sciences – 14%, engineering sciences – 11%;  economy – 9%;  others (energy, computer, decision-making, biological, materials science) – 22%. figure 11 visualises a time dimension map of the research on green competitiveness and its determinants related to forming the concept of green competitiveness (2016 until now). figure 11. the visualization map of the time dimension of green competitiveness research and its determinants source: compiled by the author using the vosviewer software 0 50 100 150 200 250 300 350 400 450 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 http://www.virtual-economics.eu/ 36 www.virtual-economics.eu issn 2657-4047 (online) olena chygryn and radoslaw miskiewicz virtual economics, vol. 5, no. 2, 2022 the cluster directly related to green competitiveness includes the following categories: sustainable development, environmental management, and economic development. table 2 presents the top-10 most cited authors on the topic of the formation of green competitive advantages. table 2. top-10 most cited authors on the topic of green competitiveness author country documents by author citations h-index tsai sangbing china 238 2750 31 chen hong china 210 3158 34 long ruyin china 207 5113 39 hsu chihhung china 28 267 8 afum ebenezer china 28 372 10 agyabeng-mensah yaw china 27 380 10 kuo huiming taiwan 26 306 9 baah charles australia 23 214 8 lai chienjung china 21 182 7 cheng xiu china 11 155 6 source: compiled by the authors based on the scopus database. a significant number of publications belong to authors from china. the conducted research to understand the essence of green competitiveness formed a theoretical basis for clarifying the content of this concept as the ability of an enterprise to form and effectively use green competitive advantages (greening of business processes, green marketing and management tools, a regulatory framework that regulates the environmental activities of enterprises, the inclusion of stakeholders, green infrastructure), their convergent and complementary effects, which ensure the sustainable development of enterprises, the expansion of the competitive positions of the enterprise on the market, the increase of investment attractiveness and capitalization, and the formation of an ecological brand. 5. conclusion a retrospective analysis of the evolutionary time dimension and the identification of the close relationship of key patterns of scientific research made it possible to identify the four most significant stages of the evolution of the green competitiveness theory: – the first stage (2004–2012) is related to the transformation of approaches to the interpretation of the concept of “competitiveness”: 2004–2006 – a classical approach (main patterns: resources, technologies, personnel, management, marketing); 2006-2010 – a global approach (main patterns: economic growth, globalization, benchmarking, international trade"); 2010–2012 – an ecologically oriented approach (main patterns: environmental protection, resource conservation, renewable energy sources, energy policy, sustainable development); – the second stage (2012–2014) is related to the emergence and dominance in crosssectoral studies of two new patterns that reflect the development of the green economy and determine the competitive advantages of enterprises through using ecopolitics tools, http://www.virtual-economics.eu/ 37 www.virtual-economics.eu issn 2657-4047 (online) olena chygryn and radoslaw miskiewicz virtual economics, vol. 5, no. 2, 2022 implementing resource-saving technologies, developing green production and green innovations. it was established that from 2012 to 2014, scientific research concentrated on the processes of greening the business sector, where attention is focused on the following concepts: renewable energy sources, bioenergetics, waste management, biotechnologies, etc.; – the third stage (2014–2016) is related to the development of the green marketing concept and the implementation of its tools as a determinant of ensuring the competitiveness of enterprises. the dominant keywords in articles published in 2014 are environmental policy, energy efficiency; in 2015 – green marketing strategies, green purchases; in 2016 – the competitiveness of the enterprise is considered in relation to the tools of the green economy (environmental regulation, recycling, environmental planning, environmental taxes, greenwashing, green advertising, environmental labelling, green logistics, 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(2021). the green competitiveness of enterprises: justifying the quality criteria of digital marketing communication channels. sustainability, 13(24), https://doi.org/10.3390/su132413679 http://www.virtual-economics.eu/ 61 www.virtual-economics.eu issn 2657-4047 (online) wojciech drożdż virtual economics, vol. 2, no. 2, 2019 2019 volume 2 number 2 (april) the development of electromobility in poland wojciech drożdż abstract. the article discusses the development of electromobility in poland. the first part of the article highlights the significance of electromobility for the national transport and energy policy. the second part of the article describes issues related to the development of charging infrastructure. the article also presents plans for the expansion of charging stations and barriers related to it. the article discusses market segments in which electric cars are actually used. finally, the article describes stages of electromobility development in poland and indicates its benefits for poland. being a new rapidly developing industry, electromobility can be an opportunity for polish businesses and a stimulating factor for the entire national economy. the article is concluded with a summary. keywords: electromobility, electric vehicles, development policy jel classification: e69, f43, o30, p18 author(s): wojciech drożdż university of szczecin, 31, al. papieża jana pawła ii, szczecin, poland, 70-451 e-mail: wojciech.drozdz@enea.pl https://orcid.org/0000-0001-5915-546x citation: drożdż, w. (2019). the development of electromobility in poland. virtual economics, 2(2), 6169. https://doi.org/10.34021/ve.2019.02.02(4) received: december 12, 2019. revised: january 25, 2019. accepted: march 7, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) mailto:wojciech.drozdz@enea.pl https://orcid.org/0000-0001-5915-546x https://doi.org/10.34021/ve.2019.02.02(4) https://creativecommons.org/licenses/by/4.0/ 62 www.virtual-economics.eu issn 2657-4047 (online) wojciech drożdż virtual economics, vol. 2, no. 2, 2019 1. introduction the influence of the european energy market on the polish energy sector has been increasingly important, both in terms of regulations and environmental issues. while trying to meet new requirements, poland has been trying to deal with the new idea for the transport and energy market. in recent years, poland has noted a dynamic growth of the sectors which use advanced technologies. those solutions include electromobility which, as late as 2018, marked its presence on polish roads. on 22 nd february 2018, the electromobility and alternative fuel act of 11 th january 2018 became effective (electromobility and alternative fuel act of 11th january 2018, jol item 317, 2018). the new law defined a framework for modernisation and adjustment of infrastructure to handle electric cars. poland, as an eu member state, would like to catch up with other countries where such solutions have already been implemented. a major issue supporting the transport sector is a continuous development of technical and formal framework which, once combined with regulations and economic solutions, may create a modern system of new modes of transport. most importantly, such solutions have been implemented in line with the idea of ecological transport. poland should play an active role in the global process of promoting electromobility. one of the arguments for such an involvement is that poland enjoys a major potential of its automotive industry, energy as well as research and development, and laboratory and maintenance services. 2. the role of electromobility in the polish sectors of transport and energy the broadly understood market of electromobility products and services has been rapidly developing locally and globally (benveniste et al., 2018; de lara and marx, 2018; may, 2018). the promotion of electromobility may turn to be an excellent solution for the polish energy sector which one day may translate into economic improvements and specific social benefits. it can also have a positive influence on the life quality of people living in major cities where specific solutions will be applied. the electromobility development plan in poland (2017) puts much attention to the operation of the national grid. it is related to the potential increase in sales of electricity. poland has very scarce resources of oil needed to produce fuel for cars. however, the poland’s geographic location supports generation of energy from sources available, including renewable energy sources, which translates into the independence of the entire system. plans to have one million electric cars on polish roads by 2025 create prospects for integrating various modes of transport and the power supply system, and stimulating the development of the polish industry (electromobility development plan in poland. energy for the future, 2017). globally, the annual sales of electric vehicles is at the level of 500 thousand. “the fact that the polish government has adopted *…+ the electromobility development plan in poland (2017), which is expected to create condition for polish pioneers in electric transport fits into the trend” (drożdż, 2018). the plan highlights the need to designate funding for the development of charging infrastructure and the grid. the tasks specified in the plan define a general strategy 63 www.virtual-economics.eu issn 2657-4047 (online) wojciech drożdż virtual economics, vol. 2, no. 2, 2019 for the central government, local governments, as well as distribution system operators (dso). the objective adopted in the plan can be successfully achieved through the cooperation and mutual understanding of all parties involved. the plan defines the best possible distribution of infrastructure, i.e. critical locations where the functionality of an electric vehicle is the lowest in the case of infrastructure shortage (electromobility development plan in poland. energy for the future, 2017). in practical terms, it means that charging stations should be developed in all major cities and along trans-european transport corridors passing through poland. at the same time, tools for further development of electric vehicles should be precisely defined, since their number on polish roads will unavoidably grow. new regulations on electromobility is a challenge for dsos. in order to ensure uninterrupted and efficient power supply, it is necessary to increase spending on the development and modernisation of the grid. dsos can expect a pressure to increase spending on connecting electric vehicle charging stations (electromobility development plan in poland. energy for the future, 2017). the increased demand for electricity when electric vehicles are charged emphasises the need to develop energy storages to meet the demand and, in general, to stabilise the grid. in poland, several projects are already underway to test batteries and finally develop energy storages. an additional argument for developing electromobility is the care for sustainable development in line with the ecological transport principles, hence reduced emission of dust, gases, and noise, as well as improved comfort of public transport. several companies in poland have already started manufacturing electric buses. solaris urbino 12 electric received the title of the bus of the year during the industrial fair in hanover, germany, in recognition as the best urban bus of 2017 (onet, 2017). the use of electric engines reduces air pollution. wider use of zeroemission buses and electric cars in poland may be an important factor influencing the air quality (electromobility development plan in poland. energy for the future, 2017). although traffic pollution with pm10 is not a major problem in the scale of the entire country (5.4-7%), it is worth mentioning that in larger cities, e.g. warsaw or silesian conurbation pm10 accounts for 60% of the total emission (smoglab, 2018). an advantage of the electric engine for the user of public transport in poland is the reduced noise level. thus, the promotion of urban transport can focus on emphasising quiet engines. reduced street noise in large cities is important while creating areas of public friendly space or ‘green cities’. additionally, a larger use of public transport results in reduced demand for parking space in cities. 3. charging infrastructure and electric car market in poland according to estimates of the ministry of energy, in poland, over 300 ev charging stations are already in operation. the distribution of charging stations in poland is presented in fig. 1. the electromobility act has created a legal basis for the development of charging and cng/lng refuelling infrastructure and defined rules for creating and operating of the alternative fuel market in transport. by the end of 2020, we expect about 6 thousand regular speed charging stations and 400 fast-charging stations, as well as 70 cng refuelling stations in 32 cities and densely populated areas. the act assumes that the first stage of developing charging stations should take place in 2018 and 2019, and the infrastructure should develop in 64 www.virtual-economics.eu issn 2657-4047 (online) wojciech drożdż virtual economics, vol. 2, no. 2, 2019 the same period based on market principles with the support of public funding. if by 2020 the required number of charging stations is not developed in relevant municipalities as specified by the act, a municipality falling short of the infrastructure will be required to develop a plan to develop the missing charging infrastructure, and the local dso will be responsible for the building of missing charging stations (electromobility and alternative fuel act of 11th january 2018, jol item 317, 2018). figure 1. charging stations in poland, 31.08.2018 source: register of alternative fuel infrastructure (obserwatorium rynku paliw alternatywnych, 2018) the development of new charging stations is held back due to financial as well as legal reasons. according to estimates, the establishment of a new slow charging station may cost about pln 40 thousand, whereas in the case of a fast-charging station the cost increases to pln 100-190 thousand (wysokie napiecie, 2018). the access to public stations is free of charge and most often used to promote a specific company or the idea of electromobility itself. the ministry of energy declared that, according to their estimates, profitability of a charging station can be reached once the sale reaches 32.85 mwh for a regular station, whereas for a fast-charging one 452.6 mwh (polityka insight, 2018). a large margin, however, should be added to those figures, since they are calculated based on the energy price which is no longer used on the market. nevertheless, in poland, a growing number of companies are interested in building general access charging stations. by 2020, green way infrastructure poland intends to establish 200 charging stations, and lidl plans to develop a general access chargers at their premises in poland in cooperation with an external partner (www.abb.pl). in 2017, about 1,224,000 ev/phev were sold globally. due to a significant increase in china, the market grew by 58% comparing to a previous year. provided the growth rate is maintained, 65 www.virtual-economics.eu issn 2657-4047 (online) wojciech drożdż virtual economics, vol. 2, no. 2, 2019 in 2018 we can expect to reach 2,000,000. then, until the end of december, we will have 5,000,000 ev/phevs in the world (transport publiczny, 2018). leading electric vehicle markets include eu and the us as well as the recently rapidly growing asian market. the polish automotive market can be considered attractive, since poland is a major global manufacturer of combustion engines. the market comprises more than ten manufacturers with about 85% of their production sold abroad (transport publiczny, 2018). moreover, poland has been steadily developing production of components for electric vehicles, as well as electric and electronic equipment. poland has 700 manufacturers of components, of which over 400 are companies with polish interest (transport publiczny, 2018). they manufacture components to all makes of cars. an important piece of information for foreign investors interested in the automotive sector in poland is that nine out of ten leading global manufacturers have their plants in poland. even considering the above, it is not going to be easy to have one million electric vehicles present on polish roads by 2025. however, provided we use resources available and show relevant determination to meet the challenge, the goal can be realised to a large extent. additionally, this creates prospects for the integration of various modes of transport with the power grid. while cooperating with polish and foreign companies, businesses currently operating on the market can look for new solutions and develop their resource base. general changes in the urban transport create an opportunity for the development of electromobility. main activities implemented by polish cities are designed to increase the share of public transport at the cost of individual cars. still a large number of citizens living in major cities prefer to use their own cars instead of public transport, including buses and trams. this contributes to congestion in cities, which slows down the traffic during peak hours and sometimes brings the traffic to a halt causing a high concentration of exhaust gas emission. the trend to use individual cars results from suburbanisation, or moving to city outskirts. usually, such areas have poor transport accessibility and the use of individual cars remains the only alternative. park & ride facilities situated at the entrance to the city might be a solution, since drivers can leave their cars there and continue travelling using public transport. to provide an efficient public transport, the city needs a suitable network of tram and bus lines. trams do not cause emission, but buses do and we need to find an alternative for combustion engine buses to reduce pollution. there electric buses come into play. poland is one of the leaders in manufacturing and selling electric buses (portalsamorzadowy.pl). solaris, as mentioned above, is a well-recognised brand in europe and in the world. additionally, the ebus programme has been launched to support designing and manufacturing of the polish electric bus. by 2025, the polish electric bus should be ready with 100% polish content. the polish bus market is going to reach the value of pln 2.5 bn annually (mpit, 2018). it is also worth mentioning that in 2017 a letter of understanding was signed between the ministry of energy, ministry of development, national research and development centre, polish development fund, and 41 cities; the latter declared to increase the number of electric buses in their fleet. putting an increased pressure on public transport does not make people resign from using their cars. therefore, the electromobility act has introduced a number of incentives for drivers who decide to buy electric cars, e.g. lower excise duty for electric vehicles and favourable 66 www.virtual-economics.eu issn 2657-4047 (online) wojciech drożdż virtual economics, vol. 2, no. 2, 2019 depreciation rate, possibility of using restricted lanes by electric cars, as well as free parking in pay parking zones. despite growing popularity and incentives, the share of electric vehicles on the market remains limited. some of the major barriers include the shortage of charging infrastructure, higher purchase cost comparing to combustion engine cars, time needed to recharge batteries and their capacity expressed as the distance to be covered per single charging. thus, it is necessary to make travelling by car as friendly as possible for citizens and the environment. in this context, carsharing may be a solution. carsharing is a short-term rental of cars in cities with special car rental businesses. in the largest polish cities, private car rental systems are already in operation. the goal, however, should be to develop an urban carsharing system comprising a fleet of electric vehicles. the first attempt was made by kraków (2018) and wrocław (transport-publiczny, 2018) which plan to launch electric carsharing as a part of their sustainable urban transport. it seems that electric buses combined with electric cars, promoted inter alia through carsharing, can be a welcomed response to the needs of citizens. if so, it should improve the traffic flow in cities and air quality. at the same time, they may stimulate the growth of the electric car market in poland. 4. stages of electromobility development and opportunities for poland the development of advanced road and technical infrastructure will require poland to make significant spending on building and maintenance of roads and technical facilities. therefore, it is not possible to implement all feasible solutions overnight. three stages of the process can be distinguished (electromobility development plan in poland. energy for the future, 2017): stage i the first stage began in 2016 and should end by the end of 2018. it involves a number of pilot programmes designed to build public awareness. during the stage, the first prototypes of domestic electric cars and charging stations should be developed. additionally, regulations should be drafted to provide for the market oriented legal framework. stage ii it is a post-pilot stage aimed at determining technical issues, such as the location of charging stations all over the country, the actual development of the power supply infrastructure to support electric and natural gas cars and the small series ev production. during that stage, technological solutions should be ready for larger evs capable of transporting a larger number of passengers. this stage should end in 2020. stage iii it is the final stage which ends in 2025. its purpose is to support public awareness regarding electromobility as an indispensable component of the rapidly changing environment in large cities. at that stage, the grid infrastructure should be able to cater for the power demand created by about one million electric vehicles. moreover, local governments should have an ecological fleet and infrastructure accessible for citizens. this should additionally boost the interest in electromobility. we also expect an increased production of 67 www.virtual-economics.eu issn 2657-4047 (online) wojciech drożdż virtual economics, vol. 2, no. 2, 2019 components by polish companies and the first electric cars with full polish content will be produced. being a new sector of industry and economy, electromobility may prove to be one of the key energy transformation factors. over the years, electromobility can provide opportunity to stimulate the entire domestic industry. therefore, there is a need to promote cooperation between companies which previously have not had a chance to cooperate. this may produce only positive results. electromobility is closely linked with the application of modern technologies. thus, it is necessary to analyse knowledge and innovation based measures, which involves solutions to be developed by research institutions and universities. one of the additional arguments supporting electromobility is that it benefits electric car buyers, such as price subsidies, tax incentives and exemptions (e.g. free parking and registration). yet another advantage is that electric vehicles could use restricted lanes in cities and have special parking spots for evs only. the development of the power sector necessitates wider use of renewable energy sources, which in this particular case may be truly revolutionised. this is particularly true regarding micro and small installations designated for private use. apart from required infrastructure, wind farms, especially offshore farms should be developed and used. 5. conclusions electromobility is a new and increasingly important branch of the automotive industry. we have witnessed the development of new services and product related to that market segment. the growth of electromobility necessitates long-term major spending, especially in the initial period. after some time we will certainly notice a significant decrease in investment required and maintenance cost related to the infrastructure. such costs will virtually stabilise. a difficulty might be the development of the legal framework to regulate the operation of electromobility in poland. such regulations should be favourable for users and encourage them to use evs. the accessibility of charging stations will be needed and, at the same time, the service should be provided free of charge. we need to guarantee incentives, including subsidies, to encourage domestic and foreign investors to invest in manufacturing of electric vehicles and their components in poland. together with the development of the energy sector, we need to continue the development of renewable energy sources. moreover, attempts to reduce the number of vehicles in city centres and gradual retrofitting combustion engines with electric ones are supported by the care of the natural environment and human health. references abb. 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http://www.transport-publiczny.pl/wiadomosci/wroclaw-firma-enigma-zbuduje-carsharing-niedlugo-umowa-54162.html https://wysokienapiecie.pl/2457-stacje-ladowania-samochodow-na-prad-ile-to-kosztuje-samochod-baterie-elektromobilnosc/ https://wysokienapiecie.pl/2457-stacje-ladowania-samochodow-na-prad-ile-to-kosztuje-samochod-baterie-elektromobilnosc/ кwilinski alex 19 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 2021 volume 4 number 1 (january) a conceptual approach to forming a transport and logistics cluster as a component of the region’s innovative infrastructure (on the example of prydniprovsky economic region of ukraine) viacheslav liashenko, sergey ivanov, and nataliia trushkina abstract. the analysis of the dynamics of the regional transport and logistics system of the prydniprovsky economic region revealed many barriers to its effective functioning, which were divided into 10 groups: political, institutional, innovative, investment and financial, information, environmental, tariff, infrastructure, customs, and logistics. the forecast estimation of the indicators characterizing the development of the regional transport and logistic system in the prydniprovsky economic region by using economic and mathematical tools was carried out, and on this basis tendencies of its functioning were revealed. it should be noted that forecast estimates should be considered forecasts-warnings. that is, provided that the insignificant level of labor productivity is maintained, as well as its reduction, the low return on capital investments in the coming years can significantly reduce the volume of transport (rail and road) in the prydniprovsky economic region. based on the regional development strategies of dnipropetrovsk, zaporizhzhia and kirovohrad regions generalized, their shortcomings in creating a transport and logistics cluster were identified. in order to transform the regional innovation ecosystem, a conceptual approach to forming the transport and logistics cluster as an element of innovation infrastructure based on reasonable specialization was substantiated. it was proved that this structure should take the form of a partnership of business structures, research institutions, higher education institutions, institutions of logistics and innovation infrastructure, and government agencies. the structural scheme of interaction between the transport and logistics cluster and the innovation ecosystem was proposed to achieve the strategic goal of "innovative development of the region on the basis of smart specialization" while implementing the strategic documents for the period till 2027. it was established that the development and implementation of basic conceptual provisions for forming a transport and logistics cluster would create appropriate conditions for increasing the volume and quality of transport and logistics services, for intensifying innovative development and implementing a qualitatively new regional pattern of sustainable development of the prydniprovsky economic region, which must meet modern requirements for managing economic systems. keywords: regional economy, transport and logistics system, innovation ecosystem, transport and logistics cluster, indicators, barriers, structure, elements of innovation infrastructure, forecasting methods, economic and mathematical tools, conceptual approach, digital technologies, synergetic effect jel classification: l91, o18, r12, r41, r58 http://www.virtual-economics.eu/ 20 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 authors: viacheslav liashenko institute of industrial economics of nas of ukraine, marii kapnist str., 2, kyiv, 03057, ukraine e-mail: slaval.aenu@gmail.com https://orcid.org/0000-0001-6302-0605 sergey ivanov dnipropetrovsk state university of internal affairs, ave. gagarina, 26, dnipro, 49005, ukraine e-mail: ivanovsv@optima.com.ua https://orcid.org/0000-0002-1205-3797 nataliia trushkina institute of industrial economics of nas of ukraine, marii kapnist str., 2, kyiv, 03057, ukraine e-mail: nata_tru@ukr.net https://orcid.org/0000-0002-6741-7738 citation: liashenko, v., ivanov, s., & trushkina, n. (2021). a conceptual approach to forming a transport and logistics cluster as a component of the region’s innovative infrastructure (on the example of prydniprovsky economic region of ukraine). virtual economics. 4(1), 19-53. https://doi.org/10.34021/ve.2021.04.01(2) received: october 6, 2020. revised: december 12, 2020. accepted: january 3, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:slaval.aenu@gmail.com https://doi.org/10.34021/ve.2021.04.01(2) https://creativecommons.org/licenses/by/4.0/ 21 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 1. introduction the world is now undergoing global transformational changes in various spheres of economic activity. this requires the search for qualitatively new forms of management that would meet modern economic conditions. businesses, including those of transport and logistics, are trying to unite for further development and operation. therefore, the formation of a regional cluster structure of logistics management can create preferences for successful product promotion. according to the experience of the eu countries, clustering is one of the conditions for increasing the competitiveness of national and regional economies. that is, in most european countries, clusters are recognized as an effective institution of social and economic development at various levels. if we consider ukraine, it should be noted that one of the key priorities of the "national security strategy of ukraine", introduced by the decree of the president of ukraine dated 14.09.2020 no 392/2020, is the modernization of transport infrastructure (roads, railways, pipelines, airports, sea and river ports, etc.). this is in line with the eu-ukraine association agreement, which deals with developing a multimodal transport network linked to the transeuropean transport network (ten-t) and the improvement of infrastructure policy to better identify and evaluate infrastructure projects for different modes of transport. given this, the strategic direction of developing transport and logistics systems in the economic regions of ukraine is to improve the quality and availability of transport and logistics services, taking into account internal and interregional ties. to do this, it is necessary to create a transport and logistics cluster (tlc) as an element of innovation infrastructure in the context of balanced regional sustainable development at the level of the prydniprovsky economic region of ukraine, which meets the requirements of the european classification nuts 1. the purpose of the article is to scientifically and methodologically substantiate the conceptual approach to forming the transport and logistics cluster as a component of the regional innovation infrastructure on the example of the prydniprovsky economic region of ukraine. to achieve this purpose, there were applied the methods of analysis and synthesis, systematic approach, economic and statistical analysis, forecasting, comparisons and observations, grouping, structural and logical generalization. 2. literature review scientists study the issues related to the development of scientific approaches (system, integrated, logistics, etc.) in the theory of supply chain management and organization of logistics processes. among them are: beresford et al. (2005); gunasekaran (2005); huemer (2006); blaik (2010); kotler & keller (2014); murphy & wood (2017); bowersox & closs (2017); dźwigoł & dźwigoł-barosz (2018); dźwigoł (2019, 2020a, 2020b, 2020c); kwilinski (2018a, 2018b). http://www.virtual-economics.eu/ 22 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 the aspects of cluster development are actively researched by scientists and economists. porter (1998) paid considerable attention to studying clusters and theoretically substantiated the cluster development of the economy. according to the theory by porter (1998), a cluster is a geographical concentration of interconnected companies that compete and cooperate with each other, as well as specialized suppliers, firms in relevant industries and related institutions in certain areas (for example, universities, standardization agencies, trade associations, etc.). it is a group of geographically close interconnected companies and related institutions in a particular field on the basis of cooperation and complementarity. thus, it is a group of geographically neighboring interconnected companies (suppliers, manufacturers) and related organizations (educational institutions, government agencies, infrastructure companies) that operate in a particular area and complement each other. according to the european cluster collaboration platform (2016), clusters are considered as regional ecosystems of related industries and competencies that have a wide range of intersectoral interdependencies. they are defined as groups of firms associated with economic entities and institutions that are located next to each other and have reached a sufficient scale for the development of specialized knowledge, services and skills. a cluster is a sectoral, territorial and voluntary association of organizations that work closely with each other and with other actors in the value chain to increase the competitiveness of their products, their exports and promote economic development in the region (european cluster collaboration platform, 2016). ukrainian researchers also did not overlook the issue of clustering. thus, a significant contribution to the development of the clustering system was made by voinarenko (2011), who considers the cluster approach from the standpoint of institutionalism. sokolenko (2004) investigated in his works the influence of the cluster mechanism on innovative development. theoretical and methodological provisions and practical recommendations for forming transport and logistics clusters are reflected in the works by such scientists as: zrobek (2011); szuster (2012); kruczek & zebrucki (2014); frankowska (2015); dmukhovski (2019); hrytsenko (2019). ukrainian and foreign researchers (hryhorak, 2017; ivanov & kharazishvili, 2017; nykyforuk, 2014, 2017; ilchenko & karpenko, 2017; nykyforuk et al., 2019; dzwigol et al., 2019a, 2019b; kwilinski, 2019; dzwigol & dzwigol-barosz, 2020; dzwigol et al., 2020; kharazishvili et al., 2020) pay much attention to developing theoretical, methodological and applied principles of forming a management system for the balanced development of the market of logistics services as a component of the national logistics system; to identifying areas for improving the efficiency of transport and logistics activities and key tasks and priorities for the development of the transport sector in ukraine; to evaluating indicators of innovative development of the http://www.virtual-economics.eu/ 23 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 ukrainian transport system to substantiate strategic guidelines; to identifying the global trends in digitalization, which include the use of big data and cloud technologies, the spread of the internet of things, the development of robotics, the spread of 3d printing, blockchain technology and crowdsourcing; to developing a functional scheme of digital transformation of the transport sector in ukraine; to substantiating conceptual provisions of the strategy to develop the transport system of ukraine and measures of the state policy of its realization. in addition, it is necessary to note the research related to sustainable economic development and digital economy (abazov 2021; arefieva et al. 2021; boiko et al. 2021; bogachov et al. 2020; borychowski et al. 2020; burlaka et al. 2019; chygryn et al. 2020; czyżewski et al. 2019; 2020; dalevska 2013; dalevska et al. 2019; dementyev 2013; 2015; 2019; dementyev & scherbakov 2017; dementyev & kwilinski 2020; drozdz et al. 2019; 2020; dzwigol 2019a; 2020c; 2021; dzwigol & dzwigol-barosz 2020b; dzwigoł et al. 2019c; 2020a; 2020b; gorynia 2019; gorynia et al. 2019; kaźmierczyk & chinalska 2018; kharazishvili et al. 2021; koibichuk et al. 2021; kondratenko et al. 2020; kuzior et al. 2019; kvilinskyi 2012; kvilinskyi & kravchenko 2016; kwilinski et al. 2019a; 2019b; 2019c; 2019d; 2019e; 2019f; 2020a; 2020b; 2020c; 2020d; 2021; kwilinski & kuzior 2020; kyrylov et al. 2020; lakhno et al. 2018; lyulyov & pimonenko 2017; lyulyov & shvindina 2017; lyulyov et al. 2018; 2020a; 2020b; 2021a; 2021b; melnychenko 2019; 2020; 2021; mlaabdal et al. 2020; miskiewicz 2017a; 2017b; 2018; 2019; 2020a; 2020b; 2021; miśkiewicz & wolniak 2020; pająk et al. 2016; 2017; pimonenko & lyulyov 2019; prokopenko & miskiewicz 2020; saługa et al. 2020; savchenko et al. 2019; tkachenko et al. 2019a; 2019b; 2019c; 2019d; 2019e; wyrwa & kaźmierczyk 2020). 3. methods the prydniprovsky economic region (dnipropetrovsk, zaporizhzhia, kirovohrad regions) has a significant logistical and transit potential for developing the regional transport and logistics system. this area has a favorable economic and geographical position, extensive interregional transport infrastructure and transport communications, which include the prydniprovsky railway, berdiansk sea port, river ports, international airports, strategic highways in various directions and more. however, the statistical analysis shows that in the economic region there is a tendency of insufficiently efficient development of the transport and logistics system. thus, according to the state statistics service of ukraine, the total volume of transit freight flows in ukraine decreased in 2010-2014 by 33.1% due to a reduction of rail transport by 34%, water – by 78.2%, aviation – by 25%. since 2015, the value of this indicator has continued to decline. during 2010-2019, the total volume of transit freight reduced by 61.9% due to a decrease in the volume of rail transport by 54.3%, water – by 90.8%, air – by 68.8%. volumes of transit freight by road, on the contrary, increased by 95.7% in 2019 compared to 2010 (table 1). http://www.virtual-economics.eu/ 24 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 table 1. the dynamics of transit cargo flows in ukraine, thousand tons years total including by mode of transport automobile railway water aviation 2010 152353.8 4649.1 44511.8 3660.4 1.6 2011 151243.0 5011.2 48669.5 3912.1 2.8 2012 124893.9 4850.0 40940.1 1645.3 3.0 2013 120126.6 5585.0 32983.0 1521.5 0.8 2014 101993.4 5863.9 29398.3 797.3 1.2 2015 91100.5 6402.2 27305.1 671.2 1.0 2016 81371.0 6989.9 25361.0 564.9 0.9 2017 72680.6 7631.6 23555.3 475.6 0.7 2018 64918.3 8332.2 21878.2 400.4 0.6 2019 57985.0 9097.1 20320.4 337.0 0.5 note: the data provided for 2015-2019 are a forecast; they are calculated using an autoregressive model. source: state statistics service of ukraine (2015b). it should be noted that statistical data on transit cargo flows in the regions of ukraine are not available. the analytical materials provide only the information on cargo processing in the sea and river ports in the regions. thus, in 2010-2013 the volume of transit cargo in the river ports of dnipropetrovsk region decreased by 41.7%, or from 1.2 to 0.7 thousand tons. since 2014, the processing of transit cargo in the river ports of the region has been completely stopped. the volumes of transit cargo in the seaports of zaporizhzhia region decreased by 94.6%, or from 115.6 to 6.2 thousand tons in 2010-2019 (state statistics service of ukraine (2015a). table 2. the dynamics of cargo volumes by stevedoring companies in the berdiansk seaport, thousand tons years total volume including by types of cargo export import domestic traffic transit 2012 2538.2 2358.1 99.3 8.5 72.3 2013 2163.5 1997.6 120.5 22.3 23.1 2014 3197.1 2342.3 17.8 822.1 14.9 2015 4450.8 2755.4 3.3 1692.1 2016 3800.7 2806.6 994.1 2017 2397.8 2164.2 233.6 2018 1812.6 1782.9 17.3 12.4 2019 2074.2 2035.1 38.6 0.5 source: the ukrainian sea ports authority (2020). according to the ukrainian sea ports authority, the total volume of cargo processing by stevedoring companies in the berdiansk seaport decreased by 18.3% in 2012-2019. this is due to a reduction in the processing volume of export cargo – by 13.7%, import – by 61.1%, http://www.virtual-economics.eu/ 25 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 domestic traffic – by 94.1%. during 2012-2014, the volume of transit cargo processing decreased by 79.4%. and since 2015, the processing of these goods has not been carried out due to military events. the share of cargo processing volumes in the berdiansk seaport in 2019 was only 1.3% of the total ukrainian volume (in 2012 – 1.7%) (table 2). exports of goods in the prydniprovsky economic region increased by 1.1% in 2010-2019 due to an increase in volumes from the kirovohrad region by 109.9%. exports of goods from the dnipropetrovsk region decreased by 1.4%, from zaporizhzhia region – by 4% (table 3). table 3. the dynamics of goods exported from the prydniprovsky economic region, million dollars usa years prydniprovsky economic region including regions dnipropetrovsk zaporizhzhia kirovohrad 2010 11568.7 8021.9 3210.0 336.8 2011 14957.8 10363.2 4151.2 443.4 2012 14765.1 10129.7 4004.8 630.6 2013 14331.1 9795.3 3678.5 857.3 2014 13314.8 8763.9 3730.2 820.7 2015 9736.5 6398.9 2931.0 406.6 2016 8585.3 5864.8 2292.8 427.7 2017 10449.3 7052.8 2980.9 415.6 2018 11621.6 7722.6 3377.2 521.8 2019 11694.8 7907.2 3080.6 707.0 source: state statistics service of ukraine (2020d). during the period under research, the volume of goods imported to the prydniprovsky economic region increased by 5.2% as a result of an increase in the dnipropetrovsk region by 2.5%, zaporizhzhia – by 12.2%, kirovohrad – by 33.4% (table 4). table 4. the dynamics of goods’ imports into the dnieper economic region, million dollars usa years prydniprovsky economic region including regions dnipropetrovsk zaporizhzhia kirovohrad 2010 6938.2 5387.7 1363.0 187.5 2011 9215.1 6717.2 2271.0 226.9 2012 8836.6 6538.3 2013.4 284.9 2013 7349.0 5346.5 1759.9 242.6 2014 6418.3 4634.2 1582.4 201.7 http://www.virtual-economics.eu/ 26 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 2015 4416.2 3225.3 1085.5 105.4 2016 4626.0 3443.6 998.4 184.0 2017 6173.9 4609.6 1328.2 236.1 2018 7290.8 5264.9 1762.8 263.1 2019 7302.1 5522.2 1529.8 250.1 source: state statistics service of ukraine (2020d). at the same time, there is a positive balance of export-import operations: exports exceed imports of goods by 1.6 times. however, in 2010-2019, its value decreased by 5.1%, or from 4630.5 to 4392.7 million us dollars. according to the state statistics service of ukraine, in 2000-2019, the volume of freight traffic by the prydniprovsky railway increased by 3.8%, and its share in the all-ukrainian volume increased by 5.5 percentage points, or from 31.6 to 37.1%. freight turnover of the prydniprovsky railway decreased by 21.6%, and the share went down by 5.8 percentage points or from 23 to 17.2% of the national freight turnover of public railway transport (table 5). table 5. volumes of freight transportation and freight turnover of public railway transport years prydniprovsky railway freight transportation, million tons cargo turnover, billion tkm 2000 93.3 39.8 2005 112.0 48.1 2010 110.4 45.4 2012 115.5 46.9 2013 118.3 44.6 2014 107.9 36.7 2015 104.9 30.2 2016 99.4 31.2 2017 97.6 32.0 2018 96.7 32.8 2019 96.8 31.2 source: state statistics service of ukraine (2019); state statistics service of ukraine (2020c). in 2010-2019, freight transportation volumes by rail in the prydniprovsky economic region decreased by 7.8% as a result of a reduction in volumes in dnipropetrovsk region by 8.7%, zaporizhzhia – by 4.6%, kirovohrad – by 2.1% (table 6). http://www.virtual-economics.eu/ 27 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 table 6. volumes of rail freight transportation in the prydniprovsky economic region, thousand tons years prydniprovsky economic region including regions dnipropetrovsk zaporizhzhia kirovohrad 2010 110,775.1 90,836.0 13,548.2 6390.9 2011 117,462.8 94,215.0 15,375.4 7872.4 2012 116,734.0 93,723.0 15,190.1 7820.9 2013 119,209.3 96,774.0 14,729.3 7706.0 2014 114,234.9 93,261.0 14,605.1 6368.8 2015 111,419.6 90,533.0 14,340.4 6546.2 2016 107,540.4 85,848.0 13,995.4 7697.0 2017 105,424.1 83,951.0 13,650.4 7822.7 2018 103,876.2 83,481.0 13,258.3 7136.9 2019 102,124.9 82,941.0 12,930.3 6253.6 source: developed by the authors. during the period analyzed, the volumes of freight transportation by road in the prydniprovsky economic region decreased by 10.3% due to a reduction in volumes in the dnipropetrovsk region by 6.3% and zaporizhzhia – by 52.6%. in the kirovohrad region, on the contrary, there was a tendency to increase the volume of road freight by 37% (table 7). table 7. volumes of road freight transportation by in the prydniprovsky economic region, thousand tons years prydniprovsky economic region including regions dnipropetrovsk zaporizhzhia kirovohrad 2010 452196.2 359200.7 64914.5 28081.0 2011 451087.1 355940.2 61838.2 33308.7 2012 427221.4 345104.2 51403.4 30713.8 2013 445391.9 376121.6 35073.5 34196.8 2014 438834.3 361676.5 31427.4 45730.4 2015 372689.6 300356.8 28497.8 43835.0 2016 352062.8 284162.5 29050.4 38849.9 2017 404312.4 328113.2 30396.5 45802.7 2018 404321.0 324364.0 30715.2 49241.8 2019 405815.6 336593.8 30742.5 38479.3 source: developed by the authors. http://www.virtual-economics.eu/ 28 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 volumes of cargo transportation by the water transport (usually river) in the region surveyed decreased by 45.8% in 2019 compared to 2010. this is due to a reduction in freight traffic in the dnipropetrovsk region by 45.1% and zaporizhzhia – by 47% (table 8). table 8. volumes of water freight transportation in the region, thousand tons years total volume of freight including regions dnipropetrovsk zaporizhzhia 2010 1065.7 650.3 415.4 2011 1242.4 617.6 624.8 2012 1097.5 597.9 499.6 2013 936.5 517.2 419.3 2014 836.6 256.3 580.3 2015 819.6 419.7 399.9 2016 877.3 532.8 344.5 2017 763.1 466.4 296.7 2018 663.8 408.2 255.6 2019 577.5 357.3 220.2 source: developed by the authors. during the study period, the volume of air freight transportation in the prydniprovsky economic region decreased by 54.4%. this occurred as a result of a significant reduction in volumes in kirovohrad region by 75% and dnipropetrovsk – by 30% (table 9). table 9. volumes of air freight transportation in the economic region, thousand tons years prydniprovsky economic region including regions dnipropetrovsk zaporizhzhia kirovohrad 2010 10.3 3.0 0.5 6.8 2011 7.0 2.0 0.5 4.5 2012 4.4 0.8 0.6 3.0 2013 5.8 2.0 0.5 3.3 2014 5.1 0.4 0.4 4.3 2015 6.0 1.2 0.5 4.3 2016 7.8 2.7 0.6 4.5 2017 5.5 2.5 0.8 2.2 2018 5.2 2.3 0.8 2.1 2019 4.7 2.1 0.9 1.7 source: developed by the authors. according to the analysis, the total freight turnover in the prydniprovsky economic region (except for the kirovohrad region, as there are no data on freight turnover in the statistical http://www.virtual-economics.eu/ 29 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 bulletins) decreased by 23.5% due to a reduction in rail freight turnover by 27.6%, water freight turnover – by 39.8%, air freight turnover – by 73.1%. road freight transport turnover increased by 41% in 2019 compared to 2010 (table 10). table 10. freight turnover by the means of transport, million tkm years total including by the means of transport automobile railway water aviation 2010 44,088.5 2795.4 41,178.5 90.5 17.5 2011 48,708.9 2715.4 45,899.2 76.1 13.1 2012 44,775.1 2771.3 41,895.2 103.5 5.1 2013 42,871.6 2792.6 39,975.3 96.9 6.8 2014 38,294.9 2996.5 35,255.5 40.8 2.1 2015 33,405.8 3000.6 30,344.4 55.9 4.9 2016 35,785.4 3458.4 32,259.0 62.7 8.2 2017 35,915.4 3958.1 31,878.5 72.8 5.8 2018 34,544.8 3767.1 30,711.4 60.1 6.0 2019 33,716.9 3942.5 29,815.1 54.5 4.7 source: developed by the authors. during 2010-2019, the volume of direct investments in the field of transport and warehousing of the prydniprovsky economic region decreased by 32.9%. this is due to the reduction of direct investment in this type of economic activity of zaporizhzhia region by 88.7% and dnipropetrovsk region – by 21.4% (table 11). table 11. the dynamics of direct investments in the field of transport and warehousing of the prydniprovsky economic region, thousand dollars usa years total volume including regions: dnipropetrovsk zaporizhzhia kirovohrad 2010 91,216.1 71,249.6 16,171.2 3795.3 2011 115,402.9 94,447.2 17,199.6 3756.1 2012 97,211.3 85,608.8 3694.2 7908.3 2013 115,237.7 107,065.2 3920.8 4251.7 2014 90,566.3 83,911.9 2949.6 3704.8 2015 71,296.9 66,142.0 1672.8 3482.1 2016 69,917.5 63,822.6 2660.9 3434.0 2017 57,890.6 52,007.4 2591.8 3291.4 2018 61,441.5 55,035.3 1750.5 4655.7 2019 61,223.0 56,017.8 1829.2 3376.0 source: state statistics service of ukraine (2020b). http://www.virtual-economics.eu/ 30 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 the share of capital investments in the transport sector of the economic region increased by 3.5 percentage points in 2019 compared to 2010, or from 0.7% to 4.2% of the total volume of capital investments in the transport sector and warehousing (table 12). table 12. the dynamics of capital investments in the field of transport of the prydniprovsky economic region, thousand uah years total volume including regions: dnipropetrovsk zaporizhzhia kirovohrad 2010 161,689 95,278 25,553 40,858 2011 240,907 150,017 20,317 70,573 2012 183,268 136,052 15,703 31,513 2013 285,241 212,587 22,817 49,837 2014 182,323 122,202 13,998 46,123 2015 332,975 198,984 53,984 80,007 2016 589,165 372,273 61,477 155,415 2017 1,289,391 902,509 113,215 273,667 2018 2,098,340 1,524,231 357,685 216,424 2019 2,159,623 1,527,762 523,150 108,711 source: state statistics service of ukraine (2020a). the study (ivanov et al., 2019a, 2019b, 2019c; kwilinski & trushkina, 2019; trushkina, 2019a, 2019b; ivanov et al., 2020; liashenko et al., 2020) proved that effective development of the regional transport and logistics system is constrained by many barriers, which can be divided into 10 groups: political: an unstable political situation in the country; institutional: an imperfect legislative and regulatory framework; a lack of a regional program and strategy for developing the transport and logistics cluster; innovative: insufficiently effective implementation of innovative activities and application of innovative technologies in the transport sphere; investment and financial: insufficient funding for the transport sector; ineffective implementation of the public-private partnership mechanism; limited tools for private investment in logistics and innovation infrastructure; environmental: inefficient application of the "green" logistics concept in the transport sector; informational: insufficient use of information and communication technologies and digital logistics tools; tariff: high level of tariffs and costs for the organization of logistics activities; infrastructural: significant violations of existing logistics infrastructure facilities; limited infrastructure capacity; customs: significant time for document circulation and passing customs procedures; http://www.virtual-economics.eu/ 31 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 logistics: inefficient organization of logistics activities; uncoordinated work of ukrzaliznytsia and its regional branches; reducing the level of service and quality of transport and logistics services; reduction of freight traffic by different means of transport; complexity and unpredictability in tariffs and delivery times. thus, as can be seen from the analysis, in the prydniprovsky economic region, first of all, the ground type of transport (rail and road) is developing. the situation in the air and water transport is deteriorating every year and requires considerable attention from regional and local authorities, transport and logistics companies, private investors for joint efforts on anticrisis management of the transport system. based on the fact that the indicators that characterize the development of the transport and logistics system in the prydniprovsky economic region are represented by time series for 20102019, the main forecasting models are based on trend and integrated autoregressive models that adequately reflect trends and patterns of change in time series. the choice of the optimal approximation model is based on the essential characteristics of the calculation results and the optimal combination of formal approximation criteria, in particular, ,)ˆ(min 2   tt yy – the least squares method (lsm criterion), .min rel – the minimum value of the relative approximation error and criterionf max – the maximum value of the fishersnedekor criterion. algorithms for mathematical and statistical modeling are described in detail in the literature on mathematical statistics, econometrics, statistical modeling and forecasting (box & jenkins, 1974; shelobaev, 2000; yerina, 2001; shamileva, 2008). from all the calculated models for analysis and forecasting based on certain criteria, the optimal one is selected. for example, the dynamics of freight forwarding by the prydniprovsky railway has an autocorrelation component, so the optimal model is an integrated autoregressive model, in particular the model of moving average and autoregression (arma) or a model implemented by the olymp algorithm. the value of the relative error of the approximation ( .rel = 5.5%) indicates the statistical accuracy of the model and provided that pf > f ( =6.4; f =3.26), the corresponding model adequately reflects the regularity of changes in the levels of time series and can be used for modeling and prognostication. thus, the trend of changes in freight traffic by the prydniprovsky railway corresponds to the arma-model, and forecast estimates based on it show that in the next three years (20212023) the volume of shipments may reach 106.9 million tons. forecast estimates of cargo turnover were calculated similarly (table 13). pf http://www.virtual-economics.eu/ 32 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 table 13. forecast estimates of freight traffic by the prydniprovsky railway for 2021-2023 indicators optimal approximation model, .rel  , criterionf  actual level 2019 forecast estimates for the period of bias 2021 2022 2023 cargo transportation ( 1 y ), million tons integrated autoregressive model olymp; .rel  = 5.5%; =6.4 =3.26; pf > f 96.8 106.3 106.8 106.9 freight turnover ( 2 y ), billion tkm model olymp; .rel  = 9.8%; =16.0 31.2 35.3 35.8 36.2 source: calculated by the authors. these calculations show that in 2000-2018 there were conditions that provide a slight increase in freight traffic by the prydniprovsky railway. over the past five years, freight traffic has fallen by 7.7%. but according to forecasts, they may increase as of 2021 to 106.3 million tons, or 9.8% compared to 2019, and in five years (until 2023) this increase may be 10.4%. approximately the same picture has developed for freight turnover: they may increase to 36.2 billion tkm in 2023, which is 16% by 2019. forecast estimates of road freight traffic in the prydniprovsky economic region are based on these models (table 14). table 14. forecast estimates of the road freight transportation volume in the prydniprovsky economic region indicators optimal approximation model, .rel , criterionf  actual level 2019 forecast estimates for the period of bias 2021 2022 2023 prydniprovsky economic region freight transportation ( 4y ), million tons additive model: 7654 yyyy  405.8 458.6 462.1 467.8 cargo turnover ( 8y ), million tkm additive model: 111098 yyyy  7562.5 9337.8 9766.0 10219.8 pf              10v 1v 1,0 f 2 1   pf http://www.virtual-economics.eu/ 33 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 including: dnipropetrovsk region freight transportation ( 5y ), million tons integrated autoregressive model olymp; .rel =11.7% 336.6 363.7 362.7 363.7 cargo turnover ( 9y ), million tkm integrated autoregressive model of box-jenkins (arma); .rel = 6.5%; =27.7 4888.4 5754.9 5960.6 6166.3 zaporizhzhia region freight transportation ( 6y ), million tons integrated autoregressive model olymp; .rel = 5.1%; =20.7 30.7 35.6 36.3 37.0 cargo turnover ( 10y ), million tkm parabolic trend; .rel = 7.0%; =39.7 1532.0 1787.5 1936.3 2110.8 kirovohrad region freight transportation ( 7y ), million tons parabolic trend; .rel = 6.7%; =32.0 38.5 59.3 63.1 67.1 cargo turnover ( 11y ), million tkm integrated autoregressive model of box-jenkins (arma); .rel = 14.0%; =13.2 1142.1 1795.4 1869.1 1942.7 source: calculated by the authors. calculations show that in the district as a whole in the next five years the volume of traffic may increase by 15.3% and reach 467.8 million tons. it should be noted that according to forecast estimates, the largest growth rates of freight transportation are in the kirovohrad region – as of 2023, their growth may reach 74.3%, and freight turnover – 70.1%. this ratio indicates that a slight reduction in the distance of cargo transportation in the region is possible. the lowest growth rates of cargo volumes are in the dnipropetrovsk region; in five years they can grow by 8.1% with an increase in cargo turnover by 26.1%. in zaporizhzhia region, according to forecast estimates, it is possible to increase freight turnover by 37.8% by 2023, both due to direct volumes of transportation by 20.5% and to a significant increase in the distance of transportation by 16.8%. consider the factor model of changing the results of transport activities of the prydnieprovsky economic region. the results of transport, which are represented by the total volume of rail and road freight, depend on the number of employees and their productivity, as well as capital pf pf pf pf pf http://www.virtual-economics.eu/ 34 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 investment in transport and warehousing. to determine the influence of these factors, multifactor regression dependences of the following type are used. linear model:    ff v vf fd txxy p prely xi xi                  ;41.5 5 3 05.0 ;84.7%;2.2;825.0 ;117.6012.092.55.763ˆ 2 1 .ˆ 21 (1) power model: 67.7%;3.0;821.0 ;4.1749ˆ .ˆ 012.0053.0 2 423.0 1    prely t xi fd exxy xi  (2) where t y means volumes of cargo transportation by transport of the prydnieprovsky economic region for 2010-2018, million tons; 1 x is an average number of full-time employees in the field of transport, thousand people; 2 x is capital investments in the field of transport and warehousing (in actual prices), uah million;  9,8,7,6,5,4,3,2,1t is a time factor or serial number of the year. the inclusion of the time factor (t) in the regression equation as an additional independent variable is due to the fact that the objects of observation are taken as time series – to ensure the independence of the time series levels for the objects of observation. the statistical reliability and accuracy of the models (  ff prel  %;0.15. ) indicates that certain measures of correlation are objective and can be extended beyond the observation period. in 2010-2018, the impact of living labor costs, i.e., the number of full-time employees is reversed, the growth of the employees’ contingent is accompanied by a decrease in shipments. for example, according to equation (2), each percentage increase in the number of full-time employees is accompanied by a decrease in rail and road shipments of goods by 0.423%, provided that at the same time there are changes in capital investment. the defined measure of communication shows that the use of living labor costs in the transport of the prydnieprovsky economic region is not even extensive, but de-intensive, and is accompanied by a decrease in labor productivity. the impact of capital investment is direct, but the degree of communication is negligible. in particular, each percent of their growth is accompanied by an increase in shipments by 0.053%, provided that both affect the volume and cost of living labor. the time factor shows that over the past nine years there has been a negative trend, http://www.virtual-economics.eu/ 35 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 especially until 2016. despite the slight increase in traffic in 2017-2018, there is a downward trend. in general, all factors determine changes by 82.1% in total freight traffic. based on the above regression models, it is possible to determine the forecast values of cargo shipments, taking into account both trends in factors and the extent of their impact on cargo volumes. at the first stage, their forecast estimates are calculated by the method of extrapolation according to the optimal model of the corresponding series ( 21 x,x ). the second stage includes calculations of the already directly effective feature ( ty ) by a specific regression equation (table 15). table 15. forecast estimates of rail and road freight transportation by in the prydniprovsky economic region indicators optimal approximation model, .rel  , criterionf  actual level 2018 forecast estimates for the period of bias 2019 2020 2021 2022 2023 the average number of fulltime employees ( 1 x ), thousand people parabolic trend; .rel  = 4.1%; p f =3.1 41.7 44.5 45.7 46.9 48.2 49.5 capital investments ( 2 x ), million uah integrated autoregressive model olymp; .rel  =20.0%; p f =2.6 3325.7 3644.1 3966.0 4250.3 4497.0 4705.9 volumes of rail and road freight transportation ( ty ), million tons linear regressive model (1); .rel  = 2.2%; p f =7.84 501.0 482.6 473.3 464.0 452.7 441.4 power regressive model (2); .rel  =0.3%; p f =7.67 501.0 481.4 472.2 463.2 453.8 444.6 source: calculated by the authors. it should be noted that changes in the volume of capital investment have a fairly high level of variation throughout the period, for example, in 2014-2016, their volumes were almost 3-3.5 times less than in 2011 or in 2018. such regularity has determined a rather low level of adequacy and statistical accuracy of this series, .rel = 20%, so the forecast estimates of capital investment by the model have a probability of their implementation by 80%. http://www.virtual-economics.eu/ 36 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 provided that the trends of factors and strength change and the direction of their impact on the total volume of cargo transportation in the prydnieprovsky economic region, according to forecast estimates, will be reduced. thus, as of 2020, the volume of cargo transportation may be at the level of 482.6 million tons, which is 3.7% less than in 2018, and by 2023 this decrease may reach 12%. almost the same values of forecast estimates were obtained for both equation (1) and equation (2), which confirms the accuracy of the calculations. thus, these estimates can be considered forecasts – a warning. that is, provided that the insignificant level of labor productivity is maintained and it is reduced, the low return on capital investment in the coming years may significantly reduce the volume of transport (railway and road) of the economic region. 4. results to date, the regional development strategies for 2021-2027 have been developed and approved in dnipropetrovsk, zaporizhzhia and kirovohrad regions (table 16). these strategic documents meet the goals of sustainable development until 2030 and the main provisions of the state strategy for regional development until 2027 "development and unity oriented to people", which includes the formation of a cohesive country in social, economic, environmental and spatial dimensions. this goal should be achieved through the development of infrastructure (including transport) to support the provision of public services and increase the investment attractiveness of the territories. table 16. analysis of regional development strategies for the period up to 2027 in terms of forming transport and logistics clusters component dnipropetrovsk region zaporizhzhia region kirovohrad region strategic goal ensuring quality living conditions. innovative development of the region based on smartspecialization competitive economy of the region (which develops on the basis of smart specialization) in the national and global space competitive innovation-oriented economy, which develops on the basis of smart specialization operational goal development of the region's infrastructure, landscaping. creating a transport cluster modernization of transport and logistics infrastructure in the conditions of external challenges creating a favorable climate for investment source: compiled by the authors. the strategy of regional development of zaporizhzhia region for the period till 2027 deals with forming cluster initiatives in various spheres of economic activity, the creation of a large multimodal logistics center for transportation and storage of goods with the construction of a cargo terminal. modernization of transport and logistics infrastructure should be carried out by supporting the development of infrastructure of river and sea ports; reconstruction of http://www.virtual-economics.eu/ 37 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 airports; integration of the transport network and infrastructure into the trans-european transport network (ten-t). the development strategy of dnipropetrovsk region for the period till 2027 provides for the creation of a transport cluster that will facilitate the organization of a transport hub with the development of infrastructure for all means of transport – road, rail, water, aviation. as stated in the development strategy of kirovohrad region for 2021-2027, it is possible to create a favorable climate for attracting investment as a result of modernization and further development of road transport infrastructure and logistics potential. summarizing the above strategic programs, it was found that only in dnipropetrovsk region (with the involvement of specialists from the institute of industrial economics of the nas of ukraine and the academy of economic sciences of ukraine) there was indicated the creation of a transport cluster as a promising area of smart specialization in the region. the strategic documents of zaporizhzhia and kirovohrad regions do not currently indicate the need in forming transport and logistics clusters as a key component of regional innovation ecosystems, and do not prescribe the financial mechanism for their operation with nontraditional sources of investment and financial instruments, including international -privatepublic partnership. there are no measures in the implementation plans of the development strategies of zaporizhzhia and kirovohrad oblasts to promote the creation and intensive functioning of transport and logistics clusters. in order to modernize the innovation infrastructure of the prydniprovsky economic region, it is advisable to develop the concept of creating a transport and logistics cluster, the essence and main elements of which are given below. і. introduction ensuring the sustainable development of the prydniprovsky economic region in the context of intensifying the european integration processes requires the search for qualitatively new tools to increase their competitiveness and investment attractiveness, including a cluster pattern of logistics. at the same time, the main mechanisms for implementing the regional development strategies for 2021-2027, which are based on the laws of ukraine "on principles of state regional policy", "on stimulating regional development" and the project "support to regional development policy in ukraine", implemented within the eu, include a clustering mechanism, which involves the development of a concept for forming regional clusters and a system of measures for financial incentives for cluster initiatives. this is in line with the eu clustering manifesto (brussels, 2007) and the european cluster memorandum (stockholm, 2008), which currently define the development strategy of the european and global community and are based on the principles of regional cluster policy through functioning of economic entities, relevant regions, including the transport and logistics sector that serves them. http://www.virtual-economics.eu/ 38 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 іі. the problem definition the main problems in the functioning of the transport and logistics system of the prydniprovsky economic region include the following: an imperfect legislative and regulatory framework for regulating the transport system development; a lack of a regional program, concept and strategy for developing the transport and logistics cluster; insufficient funding of the transport sector due to inefficient implementation of the international-private-public partnership; limited tools for private investment in logistics infrastructure; a lack of "green" investment tools for transport and logistics infrastructure in the region; a limited use of the "green" logistics concept in the transport sector; an insufficient use of information and communication technologies and digital logistics tools; inefficient organization of logistics activities, reducing the level of service and quality of transport and logistics services. iii. the goal development and implementation of basic conceptual provisions for forming a transport and logistics cluster will create appropriate conditions for the growth and quality of transport and logistics services, as well as will implement a qualitatively new regional model of sustainable development in the prydniprovsky economic region, which will meet modern economic requirements. iv. ways to solve the problem to eliminate key barriers that hinder the effective functioning of the regional transport and logistics system, it is necessary to create a transport and logistics cluster as a form of partnership of business structures (transport and logistics companies, small businesses, consumers of transport and logistics services), institutions of higher education and science, logistics infrastructure institutions and authorities in order to transform the regional innovation ecosystem (figure 1). the organizational and legal form of this structure can be an association or a public organization. the key purpose of creating this institute of regional development is to: reduce logistics costs due to modernization of existing transport infrastructure; provide a comprehensive door-to-door service with all means of transport involved, with the construction of terminal complexes, regional logistics centers, creating a new type of structure (logistics operator) to service the transport and logistics system. the main principles of forming a transport and logistics cluster include: creating a network of logistics centers, including transport terminals, distribution and trade complexes; developing and implementing a single information and management system to optimize, monitor and manage traffic flows in cyberspace; http://www.virtual-economics.eu/ 39 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 delivering products "door to door", "in the right place and on time" based on the developing multimodal and combined transportation. figure 1. a conceptual approach to forming a transport and logistics cluster in the prydniprovsky economic region. source: developed by the authors. introduction problem definition aim ways to solve the problem financial security expected results regional branch "prydnieprovsky railway" jsc “ukrzaliznytsia” river ports, berdyansk seaport international airports “dnipropetrovsk”, "kryvyi rih", "zaporizhia", "berdyansk" logistics companies, warehousing and cargo consolidation centers motor transport and forwarding companies consulting and law companies industrial enterprises insurance, investment, financial companies, banking institutions mrp erp opt scm crm ecr qr lp ddt drp crp frp wms e-sklad cals-technologies venture financing crowdinvesting factoring international-private-public partnership attracting private investment funds of credit institutions foreign investment resources grants from international financial organizations c o m p o n e n ts o f th e c o n ce p t c lu st e r m e m b e rs in fo rm a ti o n t e ch n o lo g ie s f in a n ci a l se cu ri ty t o o ls http://www.virtual-economics.eu/ 40 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 the motivation of tlc participants is to increase the operation efficiency and the level of products and services competitiveness by maximizing profits and minimizing the cost of logistics activities as a result of optimizing traffic flows. when organizing the processes of logistics, it is advisable to use a set of modern information technologies, which are conditionally systematized by the process approach: design – cad (computer-aided product design); cam (computer-aided manufacturing); scheduling – cap (computer-aided planning); cae (computer support of calculations and simulations); crp (capacity planning); frp (financial resource planning); logistics – mrp (material needs planning); mrpii (resource planning); erp (integrated enterprise resource planning); production management – cim (computer integrated manufacturing); opt (optimization of production technology); ppc (production planning and management); pc (production control); lp ("savings production"); warehouse management – wms (warehouse management system); e-sklad (automated warehouse management system); customer service management – crm (customer relationship management); ecr (system of effective consumer response); distribution management – drp i (product distribution management and planning system); drp ii (resource planning in distribution); quality management – qa (quality analysis); caq (computer-aided quality control); sqc (statistical quality control); tqc (integrated quality control); tqm (integrated quality management); controlling – conwip (system of constant control in the course of work). it should be noted that the cooperation of the transport and logistics cluster with elements of innovation infrastructure (figure 2) should be to: participate in implementing development strategies of dnipropetrovsk, zaporizhzhia and kirovohrad regions until 2027 in terms of the task to create a transport cluster; working group meetings; develop the concept of creating a transport cluster and regulations on a transport cluster; conduct joint research with the prydniprovsky research center of the national academy of sciences of ukraine and the ministry of education and science of ukraine on modernization of the innovation ecosystem based on forming a tlc; http://www.virtual-economics.eu/ 41 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 organize scientific and methodological support of the concept; hold round tables and conferences to discuss problems, etc. figure 2. a structural scheme of the interaction among the elements of the regional innovation ecosystem to achieve the strategic goal "innovative development of the region based on smart-specialization" source: developed by the authors. v. financial security the concept should be implemented using financial instruments such as venture capital, crowdfunding, factoring, international public-private partnership based on attracting private investment, credit institutions, foreign investment resources, grants from international financial organizations and more. the public-private partnership in infrastructure survey conducted by the center for transport strategies and deloitte (2018) shows that 85% of respondents (experts from international financial institutions (ifis), shippers, existing port and railway operators control more than 90% of freight traffic in ukraine) consider attracting private capital as a key goal of publicprivate partnership (ppp) for developing large infrastructure projects. 77% of respondents consider ppp as an option when the state cannot implement the project on its own. other project objectives include improving the quality of infrastructure (35%); reducing corruption (35%); improving the level and quality of infrastructure services (31%); reducing project costs (19%); decreasing the level of state risks and simplifying implementation (12%). department of economic development of dnipropetrovsk regional state administration dnipropetrovsk department of ngo "aesu" business incubators industrial and science parks innovative and it clusters scientific institutions and analytical centers technoparks tlc in the form of an association or public organization institutions of higher education and training centers prydniprovsky research center of the nas of ukraine and the mes of ukraine objects of innovation infrastructure http://www.virtual-economics.eu/ 42 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 all participants in the transport services market recognize ppp as the best mechanism for financing projects. however, the respondents did not agree on the advantages of ppp compared to budget funding. shippers, port operators and ifis name the most significant factor in reducing the risks of inefficient and excessive spending of budget funds (58% of experts); railway operators mention rapid implementation of the plans to modernize transport infrastructure (46%). at the same time, 35% of respondents say that ppp will be an important factor in increasing the country's investment attractiveness. 46% of respondents consider the quality of the constructed objects and terms of realization to be unequivocal advantages. also, business (50% of respondents) prefers ppp as the most transparent investment mechanism compared to the budget, but ifis do not share this opinion. it should be noted that 85% of respondents say that sea and river ports have the highest potential for ppp development in ukraine. 65% of respondents see the development of ppp in the railway industry; 54% – in the field of road transport. and only 27% named airports and 8% – municipal transport. the majority of respondents (92%) call concession the main form of partnership between the state and business: port operators and ifis (100%), shippers (89%), railway operators (83%). despite the fact that the concession is recognized as a priority tool, for each infrastructure project the choice of cooperation mechanism should be individual: 50% of respondents consider joint activities to be the optimal form of ppp; 44% – property lease; 35% – privatization of state property. at the same time, 23% of respondents agree that the management of state property is not the best example of ppp. according to the results of the study "improving the management of the port industry of ukraine", conducted by the world bank (2020), for the management of the port industry in the regions it is advisable to implement the port-landlord pattern, which is used in some countries, such as the netherlands (antwerp, rotterdam), singapore. this management pattern provides for the existence of a port administration that controls port property, which allows it to develop the land use policy and consistent planning, transferring access to property to service providers and investors through contracts (concessions). the port-landlord pattern is based on the following principles: the port administration, which has the right of ownership or otherwise controls the use of port territories, is responsible for the planning and integrated development of ports; private operators carry out stevedoring activities under a concession or lease agreement for assets and land with the port administration. implementation of the mechanism of international-private-public partnership can lead to successful planning of transport infrastructure development and provision of integrated multimodal logistics services; effective provision of connections among different means of transport and their integration with cities and territorial communities; increasing the economic potential of transport and logistics infrastructure to attract private investment. http://www.virtual-economics.eu/ 43 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 vi. expected result the creation and development of a transport and logistics cluster in the prydniprovsky economic region as an element of the regional innovation infrastructure will contribute to: the annual growth of: volumes of rail freight transportation by 5% and freight turnover of the prydniprovsky railway by 2%; volumes of road freight transportation by 6% and road freight turnover by 16%; the density of public roads paved (km per 1 thousand km2 of the region) by 2%; the average daily productivity of the locomotive (thousand tkm gross) of the prydniprovsky railway by 2.4%; average daily productivity of a freight truck (tkm net) by 17.5%; the average precinct speed of the freight train (km per hour) by 1%; the level of logistics services for service consumers (%) by 3%; the share of direct investment in transport and logistics in the total direct investment in all types of economic activity in the region (%) by 2%; the share of capital investments in the field of transport and warehousing in the total amount of capital investments in all types of economic activity in the region (%) by 3%; the average number of employees in the field of transport and warehousing by 1.5%, including in the field of land and pipeline, water, air transport – by 1%; the reduction of: costs for organization of logistics activities by 12% due to reducing the transport component in the cost of services by 7%; average downtime of cars under one freight operation of the prydniprovsky railway (hours) by 25%. 5. conclusions as a result of the study, it was found that in the prydniprovsky economic region there is a significant logistical and transit potential for developing the regional transport and logistics system. however, this requires the creation of appropriate institutional conditions, namely: to improve the legal regulation of the transport sector development and the logistics activities organization, taking into account the regional component; to develop a strategy for the integrated development of the regional transport and logistics system based on modernizing the transport infrastructure and creating a transport and logistics cluster; to increase the efficiency of organizing logistics activities and functioning the port infrastructure in sea trade ports; to form optimal multimodal logistics chains and to substantiate the regional cluster pattern of organizing logistics activities in the economic region; to develop and implement an organizational and economic mechanism for managing the development of the transport and logistics system in the economic region using the "green" logistics tools and digital technologies; http://www.virtual-economics.eu/ 44 www.virtual-economics.eu issn 2657-4047 (online) viacheslav liashenko, sergey ivanov, and nataliia trushkina virtual economics, vol. 4, no. 1, 2021 to improve the mechanism of financial support for developing the transport and logistics system by using such financial instruments as venture capital, crowdfunding, factoring, international-private-public partnership based on attracting private investment, credit institutions, foreign investment resources, grants from international financial organizations. the implementation of the proposed conceptual approach to creating a transport and logistics cluster in the prydniprovsky economic region will help to obtain a synergistic effect, the components of which are: economic effect: increasing the level of the territories’ investment attractiveness; magnifying budgets revenues (regional, local) due to forming a qualitatively new pattern of regional economy, strengthening the area’s competitive advantages and increasing the economic capacity of territorial communities under conditions of decentralization; the growing level of transit potential; increasing the freight traffic and cargo turnover of various means of transport; decreasing the costs of organizing logistics activities by reducing the transport component in the cost of services, the time to perform customs procedures for goods’ clearance; ensuring favorable institutional conditions for functioning the logistics services market; improving transportation technology by using modern information and communication technologies and digital logistics; social: job creation and employment growth; improving the working conditions of workers employed in the field of transport and warehousing; environmental: reduction of greenhouse gas emissions from transport by optimizing traffic flows; increasing the level of environmental safety. prospects for further research are to summarize the international experience of creating transport and logistics clusters and justify and develop a cluster pattern of logistics activities in the economic regions of ukraine, taking into account their regional specificity. 6. conflicts of interest the authors declare no conflict of interest. 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(2011). marketing w klastrach logistycznych. acta universitatis lodziennsis. folia oeconomica, 251, 5-16. http://www.virtual-economics.eu/ кwilinski alex 7 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 2021 volume 4 number 2 (april) strategic european integration scenarios of ukrainian and polish research, education and innovation spaces yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko abstract. a comprehensive study was conducted in the direction of research and institutional support and comparison with the nearest neighbour poland, to determine the current state and justify strategic scenarios for ukraine's integration into the research, educational and innovation spaces of the eu as a source of proactive sustainable innovative development. analysis of the use of foresight technology to determine the possible future, create the desired image of the future and determine strategies to achieve it using methods developed in various research areas revealed that its application makes sense in determining long-term factors, trends and directions of national economies. that is, in foresighting, in contrast to forecasting, the emphasis is made on qualitative rather than quantitative results, which does not provide the expected targeted policy of the state, because it does not give clear, concrete results of actions quantitative strategic benchmarks, monitoring which would control the process of these areas' development. the disadvantages of foresighting methods that limit its application are identified. scientific substantiation of strategic scenarios of european integration of ukrainian and polish research, education and innovation spaces is based on the concept of sustainable development, which is grounded on applied systems theory, management theory and economic cybernetics and comprises the stages of identifying and strategizing. identification is carried out taking into account the definition of the safe existence boundaries and simultaneous norming and integrated convolution of indicators and thresholds of education and innovation. comparison on one scale of integrated indices of education and innovation makes it possible to carry out the goal-setting stage, identify possible strategic development scenarios and build the desired development trajectories, i.e., to implement the principle of strategizing "the future is determined by the trajectory into future." thus, knowledge of the desired values of integrated indices in each year makes it possible, through their decomposition by the method of adaptive regulation from the management theory, to justify the values of indicators that provide the desired growth trajectory and achieve certain goals of research, educational and innovative spaces of ukraine and poland. keywords: education, innovation, boundaries of safe existence, integrated index, development trajectories, strategic scenarios jel classification: c00, e00, o00 http://www.virtual-economics.eu/ 8 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 authors: yurii kharazishvili institute of industrial economics of the national academy of sciences of ukraine, zheliabov st., 2, kyiv, ukraine, 03057 e-mail: yuri_mh@ukr.net https://orcid.org/0000-0002-3787-1323 aleksy kwilinski the london academy of science and business, 120 baker street, london, united kingdom, w1u 6tu e-mail: a.kwilinski@london-asb.co.uk https://orcid.org/0000-0001-6318-4001 henryk dzwigol silesian university of technology, 26-28 roosevelt street, zabrze, poland, 41-800 e-mail: henryk.dzwigol@poczta.fm https://orcid.org/0000-0002-2005-0078 viacheslav liashenko institute of industrial economics of the national academy of sciences of ukraine, zheliabov st., 2, kyiv, ukraine, 03057 e-mail: slaval_aenu@gmail.com https://orcid.org/0000-0001-6302-0605 citation: kharazishvili, y., kwilinski, a., dzwigol, h., & liashenko, v. (2021). strategic european integration scenarios of ukrainian and polish research, education and innovation spaces. virtual economics, 4(2), 7-40. https://doi.org/10.34021/ve.2021.04.02(1) received: december 12, 2020. revised: january 26, 2021. accepted: february 3, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://orcid.org/0000-0002-3787-1323 https://orcid.org/0000-0001-6318-4001 https://orcid.org/0000-0002-2005-0078 https://orcid.org/0000-0001-6302-0605 https://doi.org/10.34021/ve.2021.04.02(1) https://creativecommons.org/licenses/by/4.0/ 9 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 1. introduction the fact of signing the association agreement between ukraine, on the one hand, and the european union, the european atomic energy community and their member states, on the other hand, amending the constitution of ukraine to determine the strategic course of ukraine to become a full member of the european union, prove that ukraine has demonstrated its intentions and readiness to access into the european space and the system of formal eu institutions, to adopt their rules, norms and practices, and to become an integral part of the european community. this choice provides ukraine with significant advantages, one of which is the opportunity to establish a real partnership with eu member states in building common research, education and innovation spaces as a basis for ensuring economic development on innovative grounds. discussions on the ways, directions and tools of ukraine’s integration into the european community are ongoing, and in recent years, due to objective reasons, have intensified significantly. traditionally, researchers of european integration issues focus on political and legal, socio-political, security, economic, financial and investment, foreign trade, social and labour, migration and social and communication aspects. much less attention is paid to the research, educational and innovative components of ukraine's european integration and their quantitative measurement. the potential for intensifying the processes of ukraine's integration of the eu's research, educational and innovation spaces is underestimated, and its implementation should be considered as one of the key areas of the strategy to ensure its european vector. therefore, conducting a comprehensive study in the direction of research and institutional support and comparison with the nearest neighbour poland, to determine the current state and justify strategic scenarios of ukraine's integration into research, educational and innovation spaces of the eu as a source of sustainable innovation is relevant and timely. thus, the purpose of the article is to identify, to carry out a comparative analysis and scientific substantiation of strategic scenarios of ukrainian and polish research, education and innovation spaces of european integration of ukraine and poland according to the modern methodology of identification and strategizing in the security dimension in the medium-term perspective. 2. literature review integration processes in research, education and innovation spheres are the subject of research by many scholars and experts. a significant number of analytical materials and research papers is devoted to the common eu policy on education, research and technology, cooperation under the program "horizon 2020", the development of interstate and crossborder cooperation (trippl, 2013; radosevic & stancova, 2017; makkonen & rohde, 2016; marek et al., 2017; chessa et al., 2013, kharazishvili et al., 2021a; 2021b). http://www.virtual-economics.eu/ 10 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 the attention of ukrainian scientists to the issues of ukraine's integration into the european research, educational, innovation spaces was uneven in time and volume. the first wave of research was devoted to the integration of higher education in ukraine into the european educational space in terms of joining the bologna process and solving problems of ensuring european standards of education quality and academic mobility. the following publications reveal the current state, problems and ways of modernizing higher education in the context of the bologna process, areas of improvement of legal support for ukraine's integration into the european educational space, development of university science, participation of ukrainian higher education institutions in european educational and research programs, and other issues of developing international academic cooperation (vashchuk, 2011; khan & slyusarenko, 2016; lugovyi & talanova, 2017; opanasyuk, 2017; kraevska, 2014). at the present stage, the scientific search for promising ways of innovative and research and technical development of ukraine and poland and the improvement of the research space in the context of european integration processes has intensified. relevant research is carried out by scholars of leading research institutions of the national academy of sciences of ukraine, as well as individual representatives of university science and experts: (geets et al., 2015; haustov, 2018; egorov, 2016; matyushenko et al., 2017; borshchevsky et al., 2017; babiy, 2015; lyashenko & pidorycheva, 2019). the abovementioned works consider the role and resources of international research and technical programs in stimulating the development of research, technical and innovative activities in ukraine, the need to develop a system of indicators of innovation for ukraine according to eu methods, priorities for research system, problems of forming a roadmap for ukraine to access the european research space and expected results, prospects for creating a new research and innovation infrastructure, relevant legal framework, the role of clusters as a tool for integration and providing the competitive advantage in the european innovation space, research, education and investment and innovation potential for cross-border cooperation with relevant recommendations and proposals. at the same time, it should be noted that ukraine lacks a systematic approach to scientific elaboration and formation of the strategy of ukraine's integration into the research, education and innovation spaces of the eu. meanwhile, no paper considers proposals for its own list of indicators and its own calculation of the current level of research, education and innovation spaces of european integration. despite the attractive title of the article (egorov, 2016) on the system of complex indicators for assessing research, technical and innovation activities in the context of european integration processes, the system of indicators itself is not provided, despite the sound reasoning behind the need to develop its own system of indicators for a particular country. in addition, it is necessary to note the research related to sustainability in economic development, as well as the development of artificial intelligence in the information economy (aleksander et al., 2020; arefieva et al., 2021; boiko et al., 2019; bogachov et al., 2020; borychowski et al., 2020; chygryn et al., 2020; cyfert et al., 2020; 2021; czakon et al., 2020; http://www.virtual-economics.eu/ 11 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 czyżewski et al., 2020a; 2020b; dalevska et al., 2019; dementyev & kwilinski, 2020; dementyev et al., 2021; dyduch, 2019a; 2019b; dzwigol, 2016; 2019a; 2019b; 2020a; 2020b; 2021a; 2021b; dzwigol & wolniak, 2018; dzwigol & dźwigoł-barosz, 2018; 2020; dzwigol et al., 2019a; 2019b; 2019c; 2020a; 2020b; furmaniak et al., 2018; 2019a; 2019b; gorynia et al., 2019; gorynia, 2019; kaźmierczyk & chinalska, 2018; kharazishvili et al., 2020; 2021a; 2021b; khrapkina et al., 2021; klimas et al., 2020; koibichuk et al., 2021; kondratenko et al., 2020; kuzior et al., 2019; 2021; kwilinski, 2018a; 2018b; 2019; kwilinski et al., 2019a; 2019b; 2019c; 2019d; 2019e; 2019f; 2020a; 2020b; 2020c; 2020d; 2020e; 2021; kwilinski & kuzior, 2020; kyrylov et al., 2020; lakhno et al., 2018; lyulyov & pimonenko, 2017a; lyulyov & shvindina, 2017b); lyulyov et al., 2018; 2020a; 2020b; 2021; mlaabdal et al., 2020; miskiewicz, 2018; 2019; 2020a; 2020b; melnychenko, 2020; 2021; 2019; miśkiewicz & wolniak, 2020; pająk et al., 2016; 2017; pimonenko & lyulyov, 2019; polcyn & czyżewski, 2016; prokopenko & miskiewicz, 2020; saługa et al., 2020; savchenko et al., 2019; shkodina et al., 2020; tkachenko et al., 2019a; 2019b; 2019c; 2019d; 2019e; trąpczyński et al., 2019; vatamanyuk-zelinska & melnychenko, 2020; zastempowski et al., 2020). the strengthening role of these aspects makes a certain trend when considering the issues of innovation space in the context of integration processes. the main tool for measuring the innovative development of the european union is the european innovation scoreboard (eis), for which the measurement system has been significantly revised since 2017. the new eis measurement system is represented by four groups of indicators, including 10 innovative measurements and 27 various indicators. (european innovation scoreboards, 2017): "framework conditions" cover the main factors of innovation activity that are external to the firm, and three innovative aspects: human resources, attractive research systems, as well as the innovation environment; “investment” includes public and private investment in research and innovation and covers two aspects: funding and support, as well as firms' investment; "innovation activity" covers innovation efforts at the firm level, grouped by three innovation dimensions: innovators, connections and intellectual assets. “impact” covers the sway of companies' innovation on two innovative aspects employment and trade effects. the use of a special methodology allows calculating summary innovation index (sii) (eis 2020 methodology report) for each country: after calculating each of the 27 indicators, the data undergo a ration setting process in order to translate the variation of normalized indicators in the range from 0 to 1. standardization is carried out by the method of "scope of variation", for which the minimum and maximum values of indicators are calculated. after normalization of the data, the arithmetic mean value of the indicators is found, which forms a summary innovation index sii, and then its relative value to the eu sii as a percentage. there are a number of remarks on this methodology. regarding normalization by the method of "scope of variation": if the minimum values are approaching or equal to "0", the normalized values very well reproduce the dynamics of the normalized indicators. however, with a http://www.virtual-economics.eu/ 12 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 significant deviation of the minimum value of the indicator from "0", the dynamics of the normalized indicator increasingly deviates from the display of the output indicator dynamics, simulating not its dynamics, but the dynamics of its range transformation, which is not the same. therefore, the change in the dynamics of the normalized indicators leads to a change in the factor load and, as a consequence, to a change in the weight coefficients and, thus, a distortion of the integrated index dynamics. it is difficult to imagine that all indicators have the same effect on the integral index (1/27); this is a very significant simplification that does not correspond to reality. therefore, a formalized definition of weight values is required. expert estimates are full of subjectivity and do not exclude fundamental errors. moreover, weight values cannot be constant they are dynamic. "...significant changes in the political and foreign economic situation lead after some time to radical changes in empirical estimates of econometric relationships, which, in turn, leads to changes in weight coefficients" (kharazishvili, 2019). otherwise, such an estimate of the sii index will reflect the average temperature in the hospital. in addition, the lack of a formalized definition of the limits of safe existence for each indicator a vector of threshold values, leads to an artificial distribution of gradations of the integrated index (innovative leaders, strong innovators, moderate innovators, modest innovators) instead of scientifically grounded division of the integrated index range on optimal, pre-crisis, crisis and critical areas for which there exist scientifically grounded approaches. the impossibility of comparing the results of calculations for each year indicates the imperfection of the evaluation methodology. regarding the composition of eis indicators, out of 27 indicators, 22 are resource components that characterize the capacities of individual resources for innovation in the country. that is, the external signs of innovation activity are considered, which, unfortunately, do not give an idea of how these external signs affected (if at all) the final result of economic growth or socioeconomic development. innovative potential, if it is not realized in the final product (in this case in the resulting indicators of socio-economic development) can remain only a potential for a long time. speaking in the language of mathematics, the availability of innovative potential or external signs of innovative activity to determine the level of innovative development is a necessary but insufficient condition. the resulting eis indicators, of which there are only 5, are divided into two groups: the impact on employment and the impact on sales. unfortunately, 2 employment indicators can also be classified as resource, because an increase in employment is a condition (not always necessary) to increase the result, not the result itself. thus, we can consider the following as resulting innovation indicators: medium and high-tech exports of production, exports of knowledge-intensive services, sales of products new for the market and innovative products new for companies. according to the authors of this article, this resulting list of indicators lacks the most important the indicator of scientific and technological progress (stp), recognized worldwide as the most important factor in qualitative changes in the economic system, which depends on many factors: technical and technological and organizational managerial innovation, efficiency of http://www.virtual-economics.eu/ 13 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 using resources, models to organize production of goods and services, existing tariffs for energy and resources, the level of labour force qualification, the share of wages in output, research and development costs, costs of innovation, education costs, legal environment and others. therefore, it is very important to determine how all resource indicators external signs of innovation, affected the rate of stp, i.e., what part of the country's gdp growth is due to the growth of the country's realised innovative potential, along with other factors. moreover, there is no considering the methodology of bringing the lagging countries closer to the optimal levels of educational and innovative spaces of the eu, that is, the methodology of strategizing, at all. 3. methodology research in determining the level of research, educational and innovative spaces of european integration consists of several stages of the "concept of sustainable development" (kharazishvili, 2019): determining the structure and system of indicators. this stage involves detailing the components and their indicators, forming the dynamics of indicators, identifying their affiliation to stimulants (s increase of which is desirable), or de-stimulators (d decrease of which is desirable). defining the boundaries of safe existence is the most important step in determining the level of security. a systematic study of the problem of sustainable development from the standpoint of security should include defining the boundaries of safe living conditions of the system, without the knowledge of which it is impossible to protect the vital interests of security subjects. that is why for each indicator it is necessary to determine the vector of threshold values: lower critical ( н кр x ); lower threshold ( н пор x ); lower optimal ( н опт x ); upper optimal ( в опт x ); upper threshold ( в пор x ); upper critical ( в кр x ) (figure 1). the most accessible among a number of methods for determining thresholds is the method of "t-criterion" (paniotto, 2004), which means constructing a probability density function for a given sample and calculating statistical characteristics: mathematical expectation, standard deviation and asymmetry coefficient. from all variety of types of probability density function for all indicators it is possible to allocate types with the characteristic law of distribution: a) normal, b) lognormal and c) exponential for which formulas to calculate a vector of threshold values are defined (table 1) (kharazishvili, 2019; 2021a; 2021b) with clarifications of the distribution: tail to the right, tail to the left (sukhodolya et al., 2020). http://www.virtual-economics.eu/ 14 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 figure 1. "homeostatic plateau" of the dynamic system source: kharazishvili (2019). table 1. formalised threshold vector values * type of indicator probability density function lower threshold lower optimal value upper optimal value upper threshold normal   t       t lognormal (tail to the right) as kt /  ask/      t lognormal (tail to the left)   t   as k/  askt /  exponential (tail to the right) as k/       t exponential (tail to the left)   t    as k/  note: * for critical values, instead of t we use _3_ or more for short samples. source: own elaboration. identification of the level of research, education and innovation spaces of european integration consists in a step-by-step integrated convolution of indicators and their threshold values according to the modern universal methodology of integrated assessment (kharazishvili, 2019; kharazishvili et al., 2020; kharazishvili et al., 2019): the form of the integral index is multiplicative (1):    ,0;1; 1 , ii n i a tit aazi i (1) http://www.virtual-economics.eu/ 15 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 where i is an integral index; z is a normalized indicator; a is a weighting factor. the method of normalization is combined (2): ,,:,: max,, , , , ttnorm tnorm itnorm i tnorm i i xk k xk zd k x zs    (2) where i x is an indicator value; s is a stimulator; d is a de-stimulator; tнорм k , is a norming coefficient: for stimulators it is equal to the maximum value from the sample of indicators and threshold values; for de-stimulators it exceeds the maximum values from the sample of indicators and threshold values by 5-10%. weighting factors are dynamic: based on the application of the method of "main components" (3) and the method of "sliding matrix": ,, ... ... .................................... ... ... 2 1 2211 2222211 1122111                                    i i i jjjjjj jj jj ii w w a w w w cdcdcd cdcdcd cdcdcd dc (3) where с is a matrix of absolute values of factor loads; d is a vector-matrix of dispersions; a are weighting coefficients. determining the list and significance of the threats impact is carried out according to two criteria: by the remoteness from the point of sustainable development the average value of the homeostatic plateau or the criterion of sustainable development (the list and importance of threats are determined); it is the simultaneous norming and integral convolution of indicators and their threshold values that makes it possible to compare on one scale the deviations of integrated indices from the relevant criteria of sustainable development. by the severity of the impact through calculating the coefficients of elasticity (4) (the degree of threats’ impact is determined). the elasticity coefficients of each component and indicators explain the degree of influence of individual components and indicators on the level of the integrated index (by how many percent the output value will change when changing 1% of the input value) and are the necessary information to develop priority influence measures: y x x y e     (4) http://www.virtual-economics.eu/ 16 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 the rate of stp is determined by the “solow residue” method for the cobb – douglas production function (5) (kharazishvili, 2018; 2021a; 2021b) by logarithmizing and obtaining logarithmic derivatives and determining the contribution of stp in the following formulas, to simplify them, the symbol of time t is omitted, but is implied (6). tttt a tt a sn t t ttt ta tz a t t t s t kk p w pneklepv   11 , )(])([)(   (5) where s t v is the actual issue of aggregate supply; t e  is the scientific and technological progress (stp);  is the stp rate; l is labour costs; tzagteft nn ,, / is the share of the effective number of taxpayers in total employment; tef n , is the effective number of taxpayers (employees plus another category of workers, reduced to the equivalent of employees for all taxes and wages); tzag n , is general employment; )( tt pn is the function of optimal demand for labour, determined from the condition of equality of the labour marginal product value to the nominal wage rate; t w is the average annual nominal wages of employees; tsn k , is the coefficient of social loads; t  is the capital utilization ratio; t k is capital expenditures; t  is the coefficient of elasticity at labour costs; t 1 is the coefficient of elasticity at cost of capital; t p is gdp deflator; t is the period of time. ,)1()ln(ln )lnln12ln001,0ln(ln_                   k k aka p p w w n n a kpwna v v ntptempo sn            (6) where v v ,   , n n , w w ,   , k k , p p are rates of the corresponding variables; a is a derivative of the coefficient of elasticity (n is set in million people, w in uah per month). the transition from output to gdp (grp) is carried out through the coefficient of manufacturability (), which in each period is determined by the ratio of gdp (grp) to output http://www.virtual-economics.eu/ 17 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 according to macroeconomic identity (7) "output is equal to the sum of intermediate consumption and gdp": )()( pvpgdp s  (7) scientific substantiation of strategic scenarios of the european integration of research, education and innovation spaces of ukraine and poland. most of the economically developed countries of the world, given the instability of economies' operation, have recognized the need not only to predict the future, but also its active formation by means of such a tool as foresight. the main purpose of foresighting is to determine the possible future, create the desired image of the future and determine strategies for achieving it. forecasting, technology prospects estimates, research of the future and other forms of foresight (swot analysis, expert estimates, trends' extrapolation, brainstorming) are an attempt to identify long-term trends and, based on them, to coordinate decision-making. unfortunately, expert estimates are full of subjectivity and do not exclude fundamental errors; forecasting trends using the principle of classical forecasting "the past determines the future" in the face of rapid change is inappropriate. for example, attempts to predict the integral indices' dynamics using polynomials or regression equations indicate incapability and generally discredit economic and mathematical modelling. with this in mind, a strategic planning approach is proposed, which uses the principle “the future is determined by the trajectory into the future” (kharazishvili, 2019), which consists of the following stages: identifying the current state through integrated assessment; goal setting for the desired perspective; constructing the desired trajectories according to development scenarios; sequential decomposing integral indices into components and indicators using adaptive control methods from the management theory (figure 2); de-norming indicators: the implementation of the inverse norming procedure, i.e., the transition from dimensionless values to macro indicators in natural units of measurement according to norming formulas. strategic planning is to result in obtaining, in the dynamics per each year, the necessary values of indicators and relevant macro indicators, compliance with which will provide the desired trajectory of sustainable development. http://www.virtual-economics.eu/ 18 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 figure 2. generalized scheme of adaptive control system with a reference model source: kharazishvili (2019). 4. results the stage involves the development of the structure (figure 3) and detailing of the components and their indicators, the formation of the indicators dynamics and their affiliation to stimulators (s) or de-stimulators (d) (table 2). table 2. components and indicators of subsystems of research, education and innovative spaces of european integration education (resource provision) science and innovation (resources and outcomes) 1. the level of higher education coverage, per 10 thousand population; (s) 2. the level of secondary education coverage, per 10 thousand population; (s) 3. the level of state funding of education, % of output; (s) 4. the level of state funding of higher education, % of output; (s) 5. average costs per 1 pupil (student), thousand dollars us for ppp; (s) 6. the level of capital investment in education, % of total expenditure on education; (s) 7. the level of labour remuneration in education of output; (s) 1. the pace of scientific and technological progress (s) 2. the level of scientific research funding, % of gdp (s) 3. the level of funding for innovation, % of gdp, (s) 4. the level of innovation activity of enterprises, % of the total number (s) 5. the level of sales of innovative products, % of total sales (s) 6. the level of scientific research costs per person, usd us for ppp (s) 7. the level of invention activity (patents and utility models), per 1 million population (s) source: own elaboration. http://www.virtual-economics.eu/ 19 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 figure 3. the structure of research, education and innovation spaces of european integration source: own elaboration. the dynamics of indicators of research, education and innovation spaces in ukraine and poland was determined according to the official data of the state statistics service of ukraine and poland. to calculate the vector of threshold values (table 3), a sample of values of similar indicators from eu countries was used for international comparison of statistical services of ukraine and poland, as well as eurostat data. the given list of indicators is not a dogma, it depends on the depth and objectives of the study, it should be consistent for all comparable countries and, finally, reflects the vision of the authors. the identification of the level of research, education and innovation spaces consists in applying the proposed methodology of integrated evaluation and simultaneous integrated convolution both for indicators ( i ) and for their threshold values ( p ), which is reflected in the multifactor hierarchical model (4).            7 1 ,, 7 1 ,, .,.,.,., 4 1 ,,_ ; ; ;;;;;;,2,1 i a tinovtinov i a teducteduc верхнє ijпор верхнє ijопт нижнє ijопт нижнє ijпор j ij b iji а inov а teductinoveduc i i ijtt zi zi pppppppiii (8 ) modelling the integrated indices dynamics of the components of the level of research, education and innovation spaces of ukraine and poland in comparison with the integrated threshold values, i.e., in the security dimension, gives the following picture of the current state (figure 4) and in general (figure 5). scientific-educational and innovation space education science and innovation http://www.virtual-economics.eu/ 20 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 table 3. vectors of threshold values of indicators of research, education and innovation spaces of european integration components and indicators lower threshold lower optimal value upper optimal value upper threshold ukraine 2019 poland 2019 education the level of higher education coverage, per 10 thousand population; the level of secondary education coverage, per 10 thousand population; the level of state funding of education, % of output; the level of public funding for higher education, % of output; average costs per 1 pupil (student), thousand dollars us for ppp; the level of capital investment in education, % of total expenditures on education; the level of labour remuneration in education of output; 220 1050 2.5 0.65 6.8 6.5 0.2 300 1345 2.8 0.71 9.7 8.9 0.26 450 1650 3.9 1.0 12.5 11 0.32 600 2300 6.0 1.55 18.0 15 0.382 344 910 2.24 0.462 2.65 2.387 0.1754 313,7 798 1.87 0.358 5.33 9.729 0.233 science and innovation the pace of scientific and technological progress the level of scientific research funding, % of gdp the level of funding for innovation, % of gdp, the level of innovation activity of enterprises, % of the total number the level of sales of innovative products, % of total sales the level of scientific research costs per person, usd for ppp) the level of invention activity (patents and utility models), per 1 million population 0.2 1.0 0.5 25 10 345 110 0.5 2.0 1.5 45 15 430 137 2.0 4.0 2.5 60 30 900 205 5.0 5.0 3.5 80 40 1100 245 -2.355 0.505 0.354 15 1.0 36.9 224.3 -0.356 1.324 0.941 21.7 9.3 207.7 92.49 source: calculated by the authors. a b figure 4. dynamics of integrated indices of research, education (a) and innovation spaces (b) of ukraine and poland. source: own elaboration. 0,25 0,35 0,45 0,55 0,65 0,75 0,85 0,95 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 ukraine poland lower threshold lower optimal value upper optimal value upper threshold integral index education 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 ukraine poland lower threshold lower optimal value upper optimal value upper threshold integral index innovations http://www.virtual-economics.eu/ 21 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 figure 5. dynamics of integrated indices of educational and innovation space of ukraine and poland with strategic goals and development scenarios until 2030 source: own elaboration. thus, according to the results of calculations, ukraine is in the crisis (orange) zone below the lower threshold, poland is on the border of the crisis-pre-crisis (orange-red) zone. it is the comparison of the dynamics of integrated indices with integrated thresholds on one scale that makes it possible to identify the current situation and carry out strategic planning for the medium-term perspective three strategic scenarios for poland (realistic, optimistic, sustainable development) and three for ukraine: (realistic, optimistic, entry to the sustainable development zone). the scientific substantiation of the vector of threshold values and their integral convolution makes it possible to determine the gradations of the countries' distribution by level of innovative development: critical (red) level (below the lower critical threshold), crisis (orange) level (between the lower critical and lower threshold) , pre-crisis (yellow) level (between lower optimal and lower threshold) optimal (green) level (between lower optimal and upper optimal), instead of subjective setting of artificial ranges distribution. determining the deviations of integrated indices from the average value of the "homeostatic plateau" the criterion of sustainable development demonstrates the imbalances of sustainable development and determines the list and importance of threats (figure 6). the most important task of the policy is to eliminate imbalances, i.e., to reduce to zero the deviation of each indicator, for example, by the end of 2030. out of 14 indicators of research, education and innovation space, 12 indicators pose a critical threat to ukraine and 9 indicators to poland. 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 ukraine poland lower threshold lower optimal value upper optimal value upper threshold ukr_r ukr_opt ukr_sr pol_r pol_opt pol_sr integral index_education + innovation http://www.virtual-economics.eu/ 22 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 therefore, changing dynamics of these indicators from negative to positive to ensure their location in the optimal zone is a priority of the government of each country, which will be an objective indicator of the reforms' effectiveness in any area of security. a b c d e f figure 6. dynamics of imbalances of research, education and innovative spaces of european integration source: own elaboration. 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 0,4 0,45 0,5 2000 2005 2010 2015 2020 2025 2030 education iinnovation deviation ukraine 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 0,4 0,45 0,5 2000 2005 2010 2015 2020 2025 2030 education iinnovation deviation poland -0,4 -0,2 0 0,2 0,4 0,6 2000 2005 2010 2015 2020 2025 2030 ind_1 ind_2 ind_3 ind_4 ind_5 ind_6 ind_7 imbalances "education" _ukraine -0,4 -0,3 -0,2 -0,1 0 0,1 0,2 0,3 0,4 0,5 0,6 2000 2005 2010 2015 2020 2025 2030 ind_1 ind_2 ind_3 ind_4 ind_5 ind_6 ind_7 imbalances "education" _poland -0,4 -0,2 0 0,2 0,4 0,6 0,8 2000 2005 2010 2015 2020 2025 2030 ind_1 ind_2 ind_3 ind_4 ind_5 ind_6 ind_7 imbalances of "innovation" _ukraine -0,4 -0,2 0 0,2 0,4 0,6 0,8 2000 2005 2010 2015 2020 2025 2030 ind_1 ind_2 ind_3 ind_4 ind_5 ind_6 ind_7 imbalances "innovation" _poland http://www.virtual-economics.eu/ 23 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 that is why the importance of the influence of individual components and indicators through calculating elasticity coefficients (4) (table 4-5) is important for implementing regulatory actions aimed at reducing development imbalances. table 4. critical threats and the importance of their impact on the level of research, education and innovation security of ukraine components and indicators of research, education and innovation security threats by remoteness from the criterion of sustainable development (importance of the threat) components and indicators of research, education and innovation security threats in terms of the significance of the impact coefficient of elasticity ukraine by components 1. innovation 1. education 0.5812 2. education 2. innovation 0.4164 according to education indicators 1. the level of capital investment in education, % of total expenditure on education; 1. the level of state funding of education, % of output; 0.1004 2. average costs per 1 pupil (student), thousand us dollars /ppp; 2. average costs per 1 pupil (student), thousand us dollars /ppp; 0.0998 3. the level of labour remuneration in education of output; 3. the level of higher education coverage, per 10 thousand population; 0.0982 4. the level of state funding of higher education, % of output; 4. the level of labour remuneration in education of output; 0.0981 5. the level of secondary education coverage, per 10 thousand population; 5. the level of capital investment in education, % of total expenditure on education; 0.0825 6. the level of state funding of education, % of output; 6. the level of state funding of higher education, % of output; 0.0617 7. the level of higher education coverage, per 10 thousand population; 7. the level of secondary education coverage, per 10 thousand population; 0.0391 according to indicators of innovation 1. the level of innovative products' sales, % of total sales 1. the level of innovative products' sales, % of total sales 0.0671 2. the level of scientific research funding, % of gdp 2. the level of scientific research expenditures per person, usd for ppp) ; 0.0662 3. the level of financing the innovation activity, % of gdp, 3. the level of inventive activity (patents and utility models), per 1 million of population ; 0.0659 4. the level of enterprises’ innovation activity, % of the total number; 4. the level of scientific research funding, % of gdp 0.0647 5. the level of scientific research expenditures per person, usd for ppp); 5. the rate of scientific and technological progress, %; 0.0592 6. the pace of scientific and technological progress, %; 6. the level of financing the innovation activity, % of gdp, 0.0545 7. the level of inventive activity (patents and utility models), per 1 million of population; 7. the level of innovation activity of enterprises, % of the total number; 0.0379 source: calculated by the authors. http://www.virtual-economics.eu/ 24 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 table 5. critical threats and the importance of their impact on the level of research, education and innovation security of poland components and indicators of research, education and innovation security threats by remoteness from the criterion of sustainable development (importance of the threat) components and indicators of research, education and innovation security threats in terms of the significance of the impact coefficient of elasticity poland by components 1. innovation 1. education 0.5448 2. education 2. innovation 0.4527 according to education indicators 1. the level of state funding of higher education, % of output; 1. the level of secondary education coverage, per 10 thousand population; 0.0961 2. average costs per 1 pupil (student), thousand us dollars /ppp; 2. the level of higher education coverage, per 10 thousand population; 0.0942 3. the level of secondary education coverage, per 10 thousand population; 3. the level of labour remuneration in education of output; 0.0934 4. the level of state funding of education, % of output; 4. average costs per 1 pupil (student), thousand us dollars /ppp; 0.0934 5. the level of labour remuneration in education of output; 5. the level of state funding of education, % of output; 0.0867 6. the level of higher education coverage, per 10 thousand population; 6. the level of capital investment in education, % of total expenditure on education; 0.0400 7. the level of capital investment in education, % of total expenditure on education 7. the level of state funding of higher education, % of output; 0.0396 according to indicators of innovation 1. the level of enterprises’ innovation activity, % of the total number; 1. the level of scientific research funding, % of gdp 0.0823 2. the level of scientific research funding, % of gdp 2. the level of scientific research expenditures per person, usd for ppp); 0.0807 3. the level of innovative products' sales, % of total sales; 3. the level of financing the innovation activity, % of gdp, 0.0766 4. the level of inventive activity (patents and utility models), per 1 million of population; 4. the level of innovation activity of enterprises, % of the total number; 0.0741 5. the level of financing the innovation activity, % of gdp, 5. the level of inventive activity (patents and utility models), per 1 million of population; 0.0668 6. the level of scientific research expenditures per person, usd for ppp); 6. the level of innovative products' sales, % of total sales 0.0481 7. the pace of scientific and technological progress, %; 7. the rate of scientific and technological progress, %; 0.0232 source: calculated by the authors. the results of the calculations show the fact that each country has its own "bottlenecks" in research, educational and innovative development. in terms of the components of “education” and “innovation”, the component “innovation” most lags behind the level of the developed eu countries in poland and in ukraine, while “education” prevails in terms of the http://www.virtual-economics.eu/ 25 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 importance of the impact. and this is quite logical, as the innovative capacity of scientists depends on the quality of education. if, according to the integrated education index, poland balances at the level of the lower threshold value (figure 4, a), ukraine has a negative dynamic in the critical zone below the lower threshold value. according to the integrated index of innovation after 2007, poland has a positive dynamics of approaching from the critical to the crisis zone, and ukraine has a negative one in the critical zone. as for education indicators, the three most important critical threats to educational security in ukraine are "the level of capital investment in education, % of total education expenditures," "the average cost per student, in thousand us dollars for ppp" and "the level of remuneration in education of output." the expected consequence of contempt for the financing of education in ukraine is the critical level of almost all indicators of innovation. another consequence of the current situation is the rejuvenation of the contingent of people with a doctorate degree with a simultaneous significant reduction in their scientific level. the situation in poland is somewhat better: the indicators “level of state funding of higher education,% of output”, "the average costs per 1 pupil (student), thousand us dollars per ppp" and “the level of secondary education coverage per 10 thousand population” need improving, which determines the critical level of the following three indicators of innovation: “the level of innovative activity of enterprises,% of total”, “the level of scientific research funding,% of gdp”, “the level of innovative products' sales, % of the total sales". comparing the dynamics of integrated indices with integrated thresholds on the same scale allows setting strategic goals and building a trajectory of their achievement in a given perspective, i.e., implementing the principle "the future is determined by the trajectory into the future" (figure 5). the most likely scenarios can be identified as follows: for poland: 1. realistic: reaching the average level between the lower threshold and the lower optimal values. 2. optimistic: reaching the level of the lower optimal value (entering the optimal zone of the eu). 3. scenario of balanced sustainable development: reaching the level of average optimal value (homeostatic plateau) the criterion of sustainable development. for ukraine: 1. realistic: reaching the level of the lower threshold. 2. optimistic: reaching the average level between the lower threshold and the lower optimal values; 3. sustainable development: reaching the level of the lower optimal value (entering the optimal zone of the eu countries). strategic planning to achieve the target level of research, education and innovation security is carried out taking into account the trajectory of transferring the system from the current level http://www.virtual-economics.eu/ 26 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 to the target one (figure 5). knowing strategic goals and desired values of the integrated index per each year determines the solution of the problem of decomposition of integrated indices, i.e., the synthesis of their necessary values using adaptive control methods from the management theory (leondes, 1965; aoki, 1965). to do this task, there is used the standard procedure of strategizing "strategy" in the c ++ programming language, developed by the author of the proposed method (kharazishvili, 2019), which implements an adaptive method of regulation with a short feedback cycle (without a macro model). the long feedback mode is used for more serious research. the reference to the standard procedure "strategy" is carried out as follows: ),,,,,,,,,( minmax21min funcepsppfxnnfpstrategyf zad  (8) where min f is the resulting error of the solution; p is the vector of normalized indicators of the integrated index, from which the strategizing begins the original vector of the desired values of the indicators corresponding to the specified value of the integrated index); f is the initial value of the integral index; 1 n is the initial number of the indicator; 2 n is the end number of the indicator; zad f is the set value of the integral index; max p is the vector of normalized maximum values of adjusted indicators; min p is the vector of normalized minimum values of adjusted indicators; eps is a set error of the solution; func is the function pointer that is called for computing the optimization criterion. the initial vector of normalized indicators, the initial vector of normalized required values of indicators, as well as the initial vector of required values of indicators in natural (physical) measurement units through the use of the inverse normalization procedure are used for further calculations of macro indicators per each year of the future trajectory. the calculations give the following dynamics of the strategic values of the components and their indicators according to certain development scenarios (table 6). it is obvious that the calculated strategic values of indicators (these are relative values), which are determined by the ratio of macro indicators, can be obtained by many of their values, so it is necessary to link to the strategic values of some important macro indicator against which all other macro indicators can be calculated. such a macro indicator can be "gdp per capita" at the current exchange rate "(kharazishvili y., lyashenko v., 2019, p. 296). http://www.virtual-economics.eu/ 27 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 table 6. evaluation of components' and indicators' strategic values of research, education and innovation spaces of the european integration at the end of 2030 indicators scenario 1 scenario 2 scenario 3 ukraine research, education and innovation spaces 0.3561 0.4316 0.5071 education 0.3616 0.4504 0.5464 the level of higher education coverage, per 10 thousand population; the level of secondary education coverage, per 10 thousand population; the level of state funding of education, % of output; the level of state funding of higher education, % of output; average costs per 1 pupil (student), thousand dollars us for ppp; the level of capital investment in education, % of total expenditures on education; the level of remuneration in education of output; 357.52 940.2 2.447 0.5035 4.0346 3.3046 0.1861 387.93 1008.1 2.891 0.5922 6.356 4.926 0.2095 428.38 1099.2 3.444 0.7031 8.793 6.673 0.2397 innovation 0.2116 0.3209 0.4268 the pace of scientific and technological progress, %; the level of scientific research funding, % of gdp the level of financing the innovation activity, % of gdp, the level of enterprises’ innovation activity, % of the total number; the level of innovative products' sales, % of total sales the level of scientific research expenditures per person, usd for ppp) the level of inventive activity (patents and utility models), per 1 million of population -2.214 0.7047 0.4688 16.19 4.522 117.63 225.63 -1.734 1.192 0.7621 19.93 9.654 248.24 230.2 -0.991 1.756 1.1081 25.16 14.7 378.8 237.7 poland research, education and innovation spaces 0.4316 0.5071 0.6257 education 0.4497 0.5446 0.6353 the level of higher education coverage, per 10 thousand population; the level of secondary education coverage, per 10 thousand population; the level of state funding of education, % of output; the level of state funding of higher education, % of output; average costs per 1 pupil (student), thousand dollars us for ppp; the level of capital investment in education, % of total expenditures on education; the level of remuneration in education of output; 336.37 927.54 2.21 0.4123 6.469 9.926 0.2453 383.17 1177.7 2.855 0.5179 8.597 10.355 0.2713 375.0 1497.5 3.35 0.86 11.1 9.95 0.29 innovation 0.3304 0.4371 0.6167 the pace of scientific and technological progress, %; the level of scientific research funding, % of gdp the level of financing the innovation activity, % of gdp, the level of enterprises’ innovation activity, % of the total number; the level of innovative products' sales, % of total sales the level of scientific research expenditures per person, usd for ppp) the level of inventive activity (patents and utility models), per 1 million of population -0.2435 1.64 1.145 26.19 11.01 29.2 10245 0.0044 2.223 1.527 34.63 14.27 451.16 122.54 1.25 3.0 2.0 52.5 22.5 665.0 171.0 source: calculated by the authors. http://www.virtual-economics.eu/ 28 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 construction of the probability density function of this indicator (exponential type of distribution) and calculation of statistical characteristics (figure 7, a) for 64 eu and world countries makes it possible to calculate a scientifically sound vector of threshold values and build strategic scenarios for the growth of 'gdp per capita.' for poland: 1) realistic achieving an average level between the lower threshold and lower optimal values, which corresponds to an average annual gdp growth of 2.2%; 2) optimistic reaching the level of the lower optimal value, which corresponds to the average annual gdp growth of 4.3%; 3) sustainable development achieving the average optimal value ("homeostatic plateau"), the criterion of sustainable development, which corresponds to an average annual gdp growth of 7.6%. for ukraine, similar scenarios are restricted to the most likely achievable growth rates: 1) inertial which corresponds to an average annual gdp growth of 3.0%; 2) realistic which corresponds to an average annual gdp growth of 5.0%; 3) optimistic which corresponds to an average annual gdp growth of 7.0% (figure 7, b). 0 0,1 0,2 0,3 0,4 0,5 0,6 0 20000 40000 60000 80000 100000 probability density mathematical expectation = 25,0; standard deviation = 20,4; asymmetry coefficient = 2,16; a 0 5 10 15 20 25 30 35 40 45 50 2000 2005 2010 2015 2020 2025 2030 ukraine lower threshold lower optimal upper optimal upper threshold ukr_3% ukr_5% ukr_7% польща pol_2,2 % pol_4,3 % pol_7,6 % gdp per 1 person, thousand dollars usa b figure 7. determining threshold values (a) and strategic scenarios for the growth of the indicator "gdp per capita" for ukraine and poland source: own elaboration. thus, performing forecast calculations of the population size and the coefficient of manufacturability (ratio of gdp to output), we can obtain an assessment of strategic benchmarks of key macroeconomic indicators of research, education and innovation spaces of european integration in each year, the values of which at the end of 2030 * are given in table 7. http://www.virtual-economics.eu/ 29 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 table 7. estimating strategic benchmarks of key macro indicators of research, education and innovation spaces of european integration at the end of 2030 indicator 2019 scenario 1 scenario 2 scenario 3 ukraine 1 output, uah billion 8969.9 21350.1 25051.5 29018.8 2. coefficient of manufacturability 0.4431 0.455 0.47 0.49 3. nominal gdp, uah billion 3974.56 9714.3 11774.2 14219.2 4. average annual gdp growth rate, % 3.2 3.0 5.0 7.0 5. gdp per 1 person, thousand dollars usa 3.67 8.58 10.39 12.55 6. average annual population size, million people 41.85 41.68 41.68 41.68 7. the volume of education financing, uah billion 200.76 522.47 724.3 999.57 8. volume of higher education financing, uah billion 41.428 107.49 148.35 204.03 9. capital investments in education, uah billion 4.792 17.26 35.68 66.71 10. nominal salary, uah 10378 34045 44978 59626 11. number of students, million people 1.4397 1.4291 1.5506 1.7123 12. number of pupils, million people 3.8094 3.7581 4.0294 4.3939 13. expenditures on scientific research, uah billion 19.9 68.457 140.396 249.71 14. expenditures on innovations, uah billion 14.22 45.547 89.727 157.57 15. number of inventions, units 9536 9019 9202 9501 poland 1. output, pln billion 4575.47 7690.4 9612.9 13458.1 2. coefficient of manufacturability 0.5 0.5 0.5 0.5 3. nominal gdp, pln billion 2287.7 3845.2 4806.5 6729.1 4. average annual gdp growth rate, % 4.5 2.2 4.3 7.6 5. gdp per 1 person, thousand dollars usa 15.69 20.0 25.0 35.0 6. average annual population size, million people 38.419 38.268 38.268 38.268 7. the volume of education financing, pln billion 86.34 170.0 274.4 450.85 8. volume of higher education financing, pln billion 16.5 31.71 49.79 115.74 9. capital investments in education, pln billion 8.4 16.87 28.42 44.86 10. nominal salary, pln 4944 8238 11387 17040 11. number of students, million people 1.2057 1.2934 1.4734 1.4419 12. number of pupils, million people 3.0658 3,5666 4.5286 5.7582 13. expenditures on scientific research, uah billion 30.28 63,06 106.87 201.87 14. expenditures on innovations, pln billion 21.52 44,03 73.38 134.78 15. number of inventions, units 3555 3939 4712 6575 source: calculated by the authors. the calculated strategic guidelines of indicators and key macro indicators of research, education and innovation spaces of european integration in each year are a strategic plan for this area development and are the best criterion for estimating how effectively the http://www.virtual-economics.eu/ 30 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 government and authorities of each country act by monitoring relevant indicators and macro indicators. 5. conclusions there were analysed the approaches to scientific elaboration and formation of the strategy of integration of ukraine and poland into the research, education and innovation spaces of the eu, and the absence of a systematic approach was determined. no paper considers proposals for its own list of indicators and its own calculation of the current level of research, education and innovation spaces of european integration of ukraine and poland. there were formulated the remarks to the main tool for measuring the innovative development of the eu countries the european innovation scoreboard (eis), which concern both the list of evaluation indicators and the methodology. there is proposed a systematic assessment of the level of research, education and innovation spaces of european integration of ukraine and poland, which consists of two subsystems: "education" and "innovation", for which a coordinated list of indicators for poland and ukraine has been developed. a total of 14 indicators are presented, 7 in each subsystem, including as the most important resulting indicator of qualitative changes in the economy, including innovation the pace of scientific and technological progress. for all indicators there were scientifically substantiated the limits of safe existence vectors of threshold values at different levels through the construction of probability density functions, calculation of statistical characteristics, determination of affiliation to the type of distribution (normal, lognormal, exponential) and formalized calculation by "t-criterion" method. such presentation makes it possible to identify the level of security of research, education and innovation spaces of european integration as a status of the system's security and its ability to adapt to new challenges. to quantify the level of security of research, education and innovation spaces of european integration, a modern universal identification methodology was used, which provided a multiplicative form of the integrated index, a combined method of rationing and dynamic weights. based on the proposed methodology, a multifactor hierarchical mathematical model for identifying the level of research, education and innovation spaces of european integration of ukraine and poland was developed and modeling was performed, which determined the current state of ukraine as critical and tat of poland as crisis. simultaneous hierarchical convolution of indicators and their thresholds makes it possible to compare integrated indices with integrated thresholds and scientifically substantiate the gradations of integrated indices as a critical, crisis and optimal states, as well as to identify strategic scenarios for medium-term development. the calculation of deviations of integrated indices and their indicators from the criterion of sustainable development – the average value of "homeostatic plateau" – allows, by means of http://www.virtual-economics.eu/ 31 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, henryk dzwigol, and viacheslav liashenko virtual economics, vol. 4, no. 2, 2021 defining imbalances, substantiating a list and importance of threats by the maximum deviation, and the calculation of elasticity coefficients – the importance of their impact on the level of education and innovation development in the security dimension. such information provides substantiated directions of structural transformation of research, education and innovation spaces of european integration of ukraine and poland. out of 14 indicators of research, education and innovation spaces, 12 indicators pose a critical threat to ukraine and 9 indicators – to poland. one-scale comparison of integrated indices of education and innovation makes it possible to carry out the goal-setting stage, identify possible strategic development scenarios and build the desired development trajectories, i.e., to implement the principle of strategizing "the future is determined by the future trajectory." thus, knowledge of the desired values of integrated indices in each year makes it possible, through their decomposition by the method of adaptive control from the theory of management, to justify the values of indicators that provide the desired growth trajectory and achieve definite goals of research, education and innovation spaces. constructing the probability density function for the indicator “gdp per 1 person / thousand usd” at the current exchange rate and determining its vector of threshold values made it possible to justify the strategic values of indicators and key macro indicators until 2030 according to development scenarios: for poland 20, 25 and 35 thousand us dollars with the corresponding average annual rate of real gdp growth 2.2; 4.3 and 7.6%; for ukraine 8.6; 10.4 and 12.5 thousand us dollars with the corresponding average annual growth rates of real gdp 3, 5 and 7%. thus, scientifically sound future values of indicators and macro indicators are the goal of strategic planning and the best criterion to estimate the effectiveness of authorities' and government's actions by monitoring current integrated indices and relevant indicators and macro indicators. 6. funding this study was commissioned by the department of economics of the national academy of sciences of ukraine as a program-targeted and competitive theme of the national academy of sciences of ukraine "strategic directions of ukraine's integration into research, education and innovation spaces of the eu: scientific and institutional support" (code: ii-06-19) within the project "supporting the priority scientific research and scientific and technical (experimental) developments of the department of economics of the national academy of sciences of ukraine ”. http://www.virtual-economics.eu/ 32 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(2020). technological innovation capabilities of small and medium-sized enterprises. european research studies, 23(3), 460-474. http://www.virtual-economics.eu/ 37 www.virtual-economics.eu issn 2657-4047 (online) radosław miśkiewicz virtual economics, vol. 2, no. 2, 2019 2019 volume 2 number 2 (april) challenges facing management practice in the light of industry 4.0: the example of poland radosław miśkiewicz abstract. the article outlines selected challenges brought by industry 4.0 as well as consequences for polish businesses in the modern process of their management. the concept is based on a close connection between physical objects and information network. sophisticated networks of businesses are being created, connected with smart resources communicating via the internet. this means cooperation within implemented cyber-physical systems affecting a company's environment, its production model, value-added chain of business processes and organisational structure. keywords: industry 4.0, cyber-physical systems (cps), robotisation jel classification: f6, l26, o32 author(s): radosław miśkiewicz silesian university of technology, 26, roosevelta street, zabrze, poland, 41-800 e-mail: radoslaw.miskiewicz@polsl.pl https://orcid.org/0000-0003-2370-4783 citation: miśkiewicz, r. (2019). challenges facing management practice in the light of industry 4.0: the example of poland. virtual economics, 2(2), 37-46. https://doi.org/10.34021/ve.2019.02.02(2) received: november 28, 2018. revised: december 29, 2018. accepted: march 7, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://orcid.org/0000-0003-2370-4783 https://creativecommons.org/licenses/by/4.0/ 38 www.virtual-economics.eu issn 2657-4047 (online) radosław miśkiewicz virtual economics, vol. 2, no. 2, 2019 1. introduction today, the fourth industrial revolution which enables devices to be interconnected within digital ecosystems is contributing to deeper integration within horizontal and vertical value chains. in the economy, the challenges will include new jobs with high added value concentrated around automation, increased competition with an innovative international economy, more efficient use of energy and materials. as k. schwab writes, attractiveness for investors will be perceived through building a positive feedback loop between competence development and capital inflow (schwab, 2018). under the influence of new technological solutions, the fourth industrial revolution has affected the shape of production functions. today's production cannot limit itself to a simplified version consisting of two or even three factors, such as those defined by classical economics, i.e. labour (n) and land (l), and capital (k) included in the capitalist economy. at present, the key factor is information and knowledge about values that are difficult to measure and characterised by high amplitude of changes; so the production function taking into account additional values will take the form of a complex equation, with a general formula y = f(n, k, l, sk, hk), where: n labour, k capital (financial), l land (land on which the factory stands, natural resources), hk human capital (knowledge, skills, know-how), sk social capital (good law, good institutions) (olender-skorek, 2017). in this context, industry 4.0 means new market models, new behaviour of businesses, a different perspective on competition and competitiveness. industry 4.0 encompasses a range of new technologies such as the internet of things, cloud computing, big data analysis, artificial intelligence, as well as additive printing, augmented reality and collaborative robots. this means significant changes in production management, business operations and value creation chain. a new architecture of production management systems is also being shaped, moving from linear processes and the traditional pyramid of production management systems to a network of connections and non-linear production. the combination of these innovations with new artificial intelligence capabilities should lead to a revolutionary change in manufacturing management systems which will operate in a highly autonomous way, dynamically changing their structure and functions within an organisation. industry 4.0 is part of a larger megatrend of digital transformation, encompassing a wide range of industries, the financial and logistics sectors in particular (miśkiewicz, 2019). 2. literature review scientific literature in economics and management sciences provides a number of arguments relating to the substance of industry 4.0. an attempt to identify them was made by hermann m., pentek t. and otto b. in their work design principles for industrie 4.0 scenarios: a literature review. they noted that in modern global activities the competition manifests itself in all spheres of business activity of enterprises. this necessitates the need to make more extensive use of knowledge and on its basis professionally manage the changes in a company (herman et al., 2015). mass customisation in the business area as well as additive manufacturing may, as k. liczmaoska and m. kuczyoska emphasise (liczmaoska & 39 www.virtual-economics.eu issn 2657-4047 (online) radosław miśkiewicz virtual economics, vol. 2, no. 2, 2019 kuczyoska, 2016), further contribute to the development of a business model. taking into account the theory proposed by j. bis, it is the factor which, unlike product and service, is much more difficult to copy. this fact seems to be confirmed by the experience of businesses that have achieved a competitive advantage by changing and continuously adapting their business model to new possibilities and operating conditions in the face of dynamic technological development (bis, 2013). common features of available models and emerging similarities in terms of their behaviour have been analysed by m. kardas, b. w. wirtz, a. pistoia, s. ullrich, w. gottel, a. osterwalder and y. pigneur, to name a few, and their research results have become the basis for distinguishing five general business model schemes (kardas, 2016; kwilinski, 2018a, 2018b, 2018c; osterwalder & pigneur, 2013; pająk et al., 2016; wirtz et al., 2015). these included (i) unbundling into separate but complementary modules relating to infrastructure management; (ii) product innovation and customer relationships management (e.g. mobile operators); (iii) long tail a new or additional value proposal addressed to a large number of niche customer segments that together generate a significant profit (e.g. if reached via an e-commerce platform), although it would not be profitable to operate only one of them; (iv) multilateral platforms providing customers with values 'ensuring the access'; (v) the free concept where customers who pay subsidise the segment that uses the free offer. of importance are open business models based, for instance, on research and development results obtained from external sources. the main aim of the article is to provide the reader with an insight into the current topic of the fourth generation industry still poorly explored and researched, and to identify the challenges facing the polish economy and manufacturing companies. consequently, it has been possible to present the state of advancement in the implementation of solutions resulting from the industry 4.0 concept. 3. methodology in writing this article, the author made use of a qualitative descriptive method referring to a critical analysis of national and foreign studies on the fourth industrial revolution and industry 4.0 and, on the basis of collected materials, made a short review of selected theoretical approaches constituting challenges that countries, economy and businesses are faced with as a consequence of the implementation of industry 4.0. acatech, a. whitmore, l. agarwal, x. da. point out significant changes taking place in it systems. these modern ones are supported by global networks consisting of machines, storage systems and production plants in the form of cyber-physical solutions (acatech; whitmore et al., 2015). their complex architecture is also emphasised by g. bartoszewicz, g. mazurek (bartoszewicz, 2017; mazurek, 2018) who refer it to the internet infrastructure, global intranets with their multimedia services, programmable logic controllers (plc) with embedded microprocessor systems, necessary to control manufacturing devices, wireless sensor network (wsn) consisting of sensors communicating with each other, used to monitor the condition of equipment and production lines. an important segment of cyber physical systems (cps) erp 2.0 is indicated by ch. bartodziej, j. badurek, ch. s. hu. these 40 www.virtual-economics.eu issn 2657-4047 (online) radosław miśkiewicz virtual economics, vol. 2, no. 2, 2019 systems support the implementation of industry 4.0 as they include: real time systems used in the processes of logistics 4.0 and concerning gps and rfid technologies, they control justin-time production and supply, carry out autonomic computing (ac) based on self-managing computer systems with the following characteristics: self-configuring, self-protecting, selfhealing, self-optimising, processing and analysing big data. as a result, they present information in the form of smart reports and management cockpits in business intelligence (bi) modules. (bartodziej, 2016; badurek, 2015; hu, 2013) these challenges shape a new model of modern business and production, defined by j. lee, e. lapira, b. bagheri, h. kao as a 5m system in the context of industry 4.0. on the one hand, it is integrated with infrastructure based on the 5c functional model, and on the other hand, on completely new paradigms created on the basis of innovative trends and megatrends understood as directions of social, economic, environmental, political, cultural and legal changes as presented in fig. 1. figure 1. components of industry 4.0 source: (magruk, 2017; lee et al., 2013; weyer et al., 2015). the digitisation of product and service offer, the integration of value-added chain are shaping a new model of modern businesses. this means the mass customisation of products resulting in the implementation of the following functions in industry 4.0 and relating to: horizontal integration through value networks; digital integration of engineering processes throughout the value chain, vertical integration and integration of networked production systems. the implementation of industry 4.0 in businesses also requires the implementation of next-generation tools for the design or modification of organisational structures. this new research thread is undertaken by the author (miśkiewicz, 2019) who points to the need to build a learning enterprise, improve the possibilities of an organisation as a whole and implement systemic thinking as a resource of knowledge and tools that allow to explain 5m model materials machines methods measurement modelling 3 paradigms smart product smart machines augmented reality 5c system connections cloud computing content community customisation smart factory 4.0 internet of things c-f system 41 www.virtual-economics.eu issn 2657-4047 (online) radosław miśkiewicz virtual economics, vol. 2, no. 2, 2019 complex phenomena and influence them. changes in business organisational structures caused by the dynamic development of digital technologies allow companies to globalise in a more "lean" way. digital tools, as emphasised by m. frankowska, m. malinowska, a. rzeczycki, enable remote cooperation and instant communication (frankowska et al., 2017). they create new opportunities for centralising some global functions related to accounting or r&d, creating virtual global teams or completely resigning from the existence of a single headquarters. taking into account automation and standardisation trends based on product models, they enable customers to access industrial production through digital platforms. an important challenge facing modern management practice is the development of human capital, analysed in various contexts by m. wosiek, a. butkiewicz-schodowska, m. kocór, j. pieregud or r. geissbauer, j. vedso, s. schrauf. these contexts refer to the ability to think in a systemic way, to operate in a multicultural environment and a globalised economy, as well as to the constant expansion of competences and readiness to accept new ideas, technologies and economic practices. they influence the working environment and its modern management (wosiek, 2015a, 2015b; butkiewicz-schodowska, 2015; kocór, 2015; pieregud, 2016; geissbauer et al., 2015). 4. results analysis of available literature and published reports indicates that industry 4.0 is already a global fact. its importance is evidenced by the fact that the search for its terminological reference in online databases has increased a hundredfold in the last five years. the leading slogans are production, business, politics, technology (asd consulting, 2018). the digitalisation of industry with the production brought to a completely new level is a great opportunity for economies. according to the capgemini report, it is estimated that by 2020, the 4.0 companies will bring an added value of 500 billion dollars to the global economy. this will happen mainly by adapting modern technological solutions streamlining production processes in the smart manufacturing market with the use of automation, internet of things or artificial intelligence. it is also an opportunity for poland, because thanks to the digital revolution in the industrial sector we can get richer by nearly 5 billion dollars. the report "digitalisation productivity bonus: sector insights" points to the need to implement specific investments in the areas of engineering, automotive, printing and plastics industries. in the former, the transition to digital technology could generate productivity gains of between $1.4 bn and $2.1 bn. the implementation of smart packaging with embedded rfid chips, print technology to monitor the flow of goods or cloud links between the customer and the manufacturer will result in digitisation bonuses in the printing, packaging and paper industries in the range of $0.5 bn. to $0.8 bn. in the plastics industry it will amount to around $0.7-1.1 bn. in the automotive industry, taking into account the electromobility megatrend and the use of new technologies such as agv, the productivity bonus could be in the range of $0.5-0.8 bn. (siemens, 2017) digital transformation of production requires appropriate it systems, e.g. manufacturing execution system (mes). unfortunately, the report "industry 4.0. the new industrial revolution how europe will succeed" published in 2014 by roland berger strategy consultants places poland among hesitating countries with a low index of readiness to implement industry 4.0 and an average industrial base. according to the 42 www.virtual-economics.eu issn 2657-4047 (online) radosław miśkiewicz virtual economics, vol. 2, no. 2, 2019 marketsand markets report "manufacturing execution system market by deployment type (on-premises, on-demand and hybrid), offering (software and services), process industry (food & beverages, oil & gas), discrete industry (automotive, medical devices) global forecast to 2022", and research conducted by astor, only 15% of polish companies are fully automated and 76% show partial automation of their company (astor, 2017b). in the global economy, automation of production is becoming more and more common. based on available data included in the report of the international federation of robotics (ifr), it appears that in 2017 the number of installed robots worldwide exceeded 2 million robots; there are almost 498,000 in europe and about 52,863 in central and eastern europe. poland is an emerging market with an accelerating pace of robot installations, especially since 2014. our market is particularly attractive for production in the automotive, chemical, metal and machinery industries. robot density is constantly increasing, but the number of robots per 10,000 employees is still lower than in the czech republic, slovakia and hungary 36 units (in the automotive industry 165 units per 10,000 employees, other industries: 24). in 2017, annual sales of robots in poland increased by 16% and reached a number of 1,891 units. ifr estimates the total number of robots installed in poland at about 11,400 units (data as at the end of 2017). according to ifr analysts, if the european economy continues to experience growth, it is very likely that between 2018 and 2021 robot installations in poland will grow by 15%-20% (ifr, 2017; gracel, 2016). smart machines are most commonly used in welding, palletising and handling operations, i.e. feeding, moving, preparatory operations or machine operation. polish entrepreneurs faced with the requirement to improve the quality of products are increasingly "employing" robots also for quality control (international federation of robotics, 2018). another challenge facing management practice is the implementation of the internet of things concept and global access to big data in polish companies. in the global economy, the costs of digitisation are currently being reduced and the concept of a smart factory is being implemented, which has a direct impact on data generation. for example, in 1992 it was 100 gb/per day, in 2013 it was 28,875 gb/per second, and in 2018 already 50,000 gb/per second. at the same time, the cost of data storage was reduced from 10,000 usd/year (1995) for 1 gb, and nowadays it is about 3 cents for 1 gb/year. meanwhile, according to astor research (astor, 2017), 59% of polish companies enter data manually into the system, 36% do so automatically and 16% manually on paper. it is essential to develop physical, digital and biological clusters in megatrends affecting the development of the economy and entrepreneurship globally and in poland, such as: industry 4.0, closed-loop economy, sustainable finance, eco-investment, flexible labour market and electromobility promotion (schwab, 2016). it is also worth noting that in the united states, the digitisation index is 18%, in western europe 12%, and in poland 8%. this means that the degree of digitisation of polish companies is on average 34% lower than in western europe (astor, 2017). 5. conclusions 43 www.virtual-economics.eu issn 2657-4047 (online) radosław miśkiewicz virtual economics, vol. 2, no. 2, 2019 the basis for conducting various industrial operations is an efficient, reliable and real-time data exchange between individual components of the system. the increasing amount of data to be transferred and/or processed has forced the development of new standards for industrial networks. of importance too is that modern production control and management systems have to communicate with the company's reporting modules, and this raises some problems. it is also a good thing if they work with design support software in construction offices. this means that industrial networks can no longer exist for themselves, but must also communicate with the entire company's infrastructure, either directly or via bridges. it networks are usually built on ethernet, which in comparison with other networks within a company occupies 52% (increase by 22% year on year), fieldbus 42% (annual growth 6%) and wireless 6% (annual growth 32%) (pieriegud, 2016). the most important challenges for business practice will be: expanding the activities of the polish digital platform with the task of integrating and coordinating the activities of many entities, including public administration, businesses, educational and scientific-research institutions carried out for the benefit of industry digital transformation; developing physical clusters, autonomous vehicles, advanced robotics, 3d printing and new materials such as graphene, self-cleaning clothes, ceramics turning pressure into energy and digital clusters built on the internet, availability of computing power, data collection and processing, mobile devices; implementing new technical competencies and specialisations of the managerial staff as the most important for the development of industry 4.0, but also broadening them with soft skills related to communication and leadership. the effects of the fourth industrial revolution will mean transformations of entire market structures, changes in business models, organization and management of the company, the creation of added value, the functioning of labor markets, and the conduct of a number of public policies. hence the need for more research dynamics in this area. unfortunately, existing studies draw attention to the technical and engineering perspective, while omitting international issues, for example, trade and investment relations. in polish scientific literature, this process has not been analyzed in an international context. its development in research can provide arguments for changes in the models of a modern enterprise, define new requirements in relation to planning and management in it. the scientific analysis should cover the economic policy of poland implementing the concept of industry 4.0, for example with an expanded research area regarding working conditions in an intelligent factory, in which organizational boundaries disappear, where flexible working time and distance work are preferred. references asd consulting. 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(2015b). niespójności w rozwoju kapitału ludzkiego w polsce – spojrzenie przez pryzmat koncepcji kapitału intelektualnego, part 2: kapitał ludzki a kapitał strukturalny rozwoju [the inconsistencies in the development of human capital in poland a view through the prism of the concept of intellectual capital. part 2 : human capital and renewal capital]. nierówności społeczne a wzrost gospodarczy [social inequality and economic growth], 42, 327-339 [in polish]. кwilinski alex 41 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 2021 volume 4 number 2 (april) the organizational and economic mechanism of implementing the concept of green logistics henryk dzwigol, nataliia trushkina, and aleksy kwilinski abstract. the article analyses the preconditions for shaping and developing the concept of a green economy. the stages of the evolutionary development of the circular economy are considered: work with waste; environmental performance strategies; maximum conservation in the era of resource depletion. having analysed the scientific opinions on the emergence of “circular economy”, the paper has found out that this concept is identified with the terms “round economy”, “cyclical economy”, “recovery economy”, “closed-cycle economy”, “green economy”. the approaches of different scientific schools to the category of “circular economy” are analysed and conventionally systematized into 12 groups: closed-cycle economy; renewable resource economy; alternative to traditional linear economy; global economic model; closed-loop economic system based on r-principles; the concept of economic development; sustainable development strategy; a "green" economy instrument; business philosophy; economic activity; use of production waste; recycling of secondary raw materials. there is proposed the authors' formulation of the circular economy as an innovative approach to organizing logistics processes based on the closed movement of resources with their minimum losses in the form of waste and the maximum involvement of secondary resources in production in order to achieve sustainable development of logistics systems. the article identifies the barriers preventing the implementation of the circular economy concept, among them being regulatory, institutional, economic, financial and investment, market, technological, informational, and cultural. the article considers the best practices of effective implementation of circular economy solutions on the example of finland. the indicators of the development of the green technologies market in the world and the national logistics system of ukraine under conditions of a circular economy are analysed. it has been established that many conceptual approaches to the definition of the terms “green logistics” and “environmental logistics” are generally accepted and have a broader meaning, without taking into account the functioning specificity of various spheres of economic activity, including transport and logistics. scientific views on interpreting the essence and content of the concept "green logistics" are generalized. it is proposed to consider the term "green logistics" from three angles: a circular economy instrument; a component of business corporate social responsibility; and a type of economic activity aimed at reducing the negative impact on the ecosystem and the environment. in order to effectively implement the concept of green logistics, an organizational and economic mechanism has been developed, the main elements of which are: diagnostics of the current state, features and trends in the logistics systems' development, taking into account the environmental component; exogenous and endogenous factors affecting the development of logistics systems; risks in organizing the processes of logistics activities; subjects and objects of management, goals, objectives, http://www.virtual-economics.eu/ 42 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 principles, functions, tools, methods, management tools, information technology, criteria. the priority principles of forming an organizational and economic mechanism include consistency, integration, reliability, dynamism, compliance with the goals of sustainable development, and efficiency. a structural diagram of forming an organizational and economic mechanism for implementing the concept of green logistics is proposed, including the following blocks: management of material resources’ supplies and purchases; products manufacturing; warehousing and stocks; logistic flows; the risks of logistics activities; logistics service processes; recycling of waste; innovation and transformations. introduction of the proposed organizational and economic mechanism will reduce the cost of managing the movement of logistics flows and increase the level of environmental safety. this is one of the most important requirements for implementing the concept of business corporate social responsibility in a circular economy. keywords: green economy, circular economy, green logistics, environmental logistics, greening of logistics activities, green technologies, logistics system, conceptual approach, organizational and economic mechanism, components of the mechanism, information technology, efficiency, sustainable development, cost minimization, environmental safety. jel classification: l86, q20, r40 http://www.virtual-economics.eu/ 43 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 author(s): henryk dzwigol silesian university of technology, 26-28 roosevelt street, zabrze, poland, 41-800 e-mail: henryk.dzwigol@poczta.fm https://orcid.org/0000-0002-2005-0078 nataliia trushkina institute of industrial economics of the national academy of sciences of ukraine, zheliabov st., 2, kyiv, ukraine, 03057 e-mail: nata_tru@ukr.net https://orcid.org/0000-0002-6741-7738 aleksy kwilinski the london academy of science and business, 120 baker street, london, united kingdom, w1u 6tu e-mail: a.kwilinski@london-asb.co.uk https://orcid.org/0000-0001-6318-4001 citation: dzwigol, h., trushkina, n., & kwilinski, a. (2021). the organizational and economic mechanism of implementing the concept of green logistics. virtual economics, 4(2), 41-75. https://doi.org/10.34021/ve.2021.04.02(2) received: january 12, 2021. revised: january 29, 2021. accepted: march 24, 2021. © author(s) 2021. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2021.04.02(3) https://creativecommons.org/licenses/by/4.0/ 44 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 1. introduction ensuring sustainable development of logistics systems requires introduction of organizational, managerial and environmental technologies adequate to transformational changes, as well as innovative models to reduce the negative impact of transport on the environment. this is in line with the green growth concept proposed by the organization for economic cooperation and development. as international experience shows, improving the efficiency of the transport sector and organizing logistics activities can be achieved through implementing conceptually new management tools based on the principles of logistics, namely, systematic, process approaches, concepts of "lean" production, "just in time," sustainable development (abazov 2021; dalevska et al. 2019; dyduch 2019; dzwigol 2019; 2020a; 2020b; dzwigol & dźwigoł-barosz 2018; 2020; dzwigol et al. 2019a; 2019b; 2020a; 2020b; kharazishvili et al. 2020; lyulyov et al. 2021). today, leading scientists are conducting scientific discussions on implementing the concept of green growth in order to preserve the environment and improve the economic activities of enterprises. the desire of companies to create an ecological image with consumers has contributed to developing a sustainable logistics concept (boichuk & kauf 2019) that includes green components and considers economic, social and environmental activities in the context of logistics management. it is the greening of logistics activities that is a key vector for business development, since most consumers consider priority those companies that carry out cargo transportation by "green" transport and use technologies that conserve natural resources. the use of "green" technologies in logistics has become as much a necessity as the implementation of a quality management system. as a consequence, according to “the green trends survey” in the study “towards sustainable logistics” (christof & ehrhart 2012), 59% of businesses found out that green transportation of their products was recognized as a decisive factor in attracting consumers. based on a survey by pe international (great britain) (mckinnon et al. 2010), there are identified the key advantages of implementing the green logistics concept which include the reduction of air emissions (33% of heads and top managers of companies); attracting new customers, or developing new products (26% of respondents). thus, modern business conditions dictate new requirements for business development. the priority is green logistics as one of the most important components of the overall strategy of business social responsibility in the context of the circular economy development. it should be noted that the role and importance of green logistics as a tool to support environmental safety is becoming more relevant every year, since it has become a socially useful and profitable symbiosis of ecology and economics as a part of corporate environmental governance policies. http://www.virtual-economics.eu/ 45 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 2. literature review the term "green economy" was first mentioned in 1989 in a report by a group of leading economists to the government of the united kingdom of great britain and northern ireland (pearce et al. 1989). this concept entered wide circulation during the global economic crisis of 2008–2009. in 2009, the un environment program published the report "global green new deal", which considered the goals, objectives, elements, incentives and directions of domestic policy aimed at developing a green economy. the green economy has mainly been defined as a practical approach to achieve sustainable development. currently, the concept of a green economy is being actively discussed by scientists, experts, business and public organizations. unep experts (2011) define a green economy as an economy that leads to improved human well-being and social justice and at the same time significantly reduces environmental risks and ecological scarcity. according to this concept, the priorities of a green economy are, on the one hand, the maintenance and restoration of a natural capital, the use of renewable energy and low-carbon technologies for fossil fuels, an increase in the efficiency of resource and energy use, the formation of responsible behaviour of urban residents, the transition to low-carbon mobility, and on the other, creating new jobs and increasing social justice. in the last decade, a new concept of economic development, called the "circular economy", has received special attention among leading scientists. proponents of this concept believe that circular growth will help to overcome the climate crisis and will contribute to the development of an inclusive green economy. the very definition of this kind of economy was formulated in their 2019 study by experts from the university of oxford (haney et al. 2019), based on a series of interviews conducted with participants in the platform for accelerating the circular economy (pace). most of the interviewed experts agreed that a circular economy is a regenerative type of economy in its design, aimed at preserving the greatest possible value of products, their components and materials, whose growth is not stimulated and does not depend on the exploitation of limited resources. at its core, this type of economy is viewed as a new trajectory for the development of society along the path of sustainability (fig. 1). the evolutionary development of the circular economy took place in three main stages (reike et al. 2018): stage i (1970-1990) – waste management – a number of environmental legislative measures were adopted in european countries and the united states. the concept of 3r (reduce, reuse and recycle) is becoming more and more interesting. a principle known as the polluter pays is emerging. the issue of waste management is central, but due to the underdeveloped environmental culture and thinking, there is gaining popularity an approach in which the territory of poorer countries was used for waste disposal and/or recycling; stage ii (1990-2010) – strategies for environmental efficiency – the idea of environmental payments (payment for pollution). environmental problems were perceived by society as a http://www.virtual-economics.eu/ 46 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 kind of economic opportunity. in the early 2000s, a number of environmental problems have been recognized as global (ozone depletion, global warming). the scientific community is actively developing possible ways of waste-free production, but applicable only in industry; stage iii (approximately 2010 – present) – maximum preservation in the era of resource depletion – the concept of a circular economy, having absorbed the ideas of theoretical research to the greatest extent, acquired its final form. the central problem is the posed threat to the mankind survival in connection with the reduction and gradual disappearance of necessary natural resources, the growth of the world's population and the amount of waste. companies are encouraged to develop taking into account three key principles: green innovation, alternative sources, and a change in the industrial paradigm. at the moment, about 500 companies in the world are using the circular economy strategy. figure 1. the ways of formation and development of directions of economic development source: (gureva 2019). the transition from industrial to post-industrial society in the 60s. xx century, based on technological progress and an innovative development model, led to the appearance in the scientific literature of the concept of a circular economy. the concept of a circular economy was put forward in 1966 by the american economist kenneth ewart boulding and had a pronounced ecological character: “... a person must find his place in a cyclical ecological system ...” subsequently, the concept began to acquire a more economic character. (boulding 1966; boulding 1966a). there are various scientific views on the origin of the “circular economy”. as a rule, scientists identify it with the concepts of “cyclical economy”, “recovery economy”, “circular economy”, “green economy”, etc. a number of scholars believe that the circular economy is a new stage in the development of the concept of sustainable development and a green economy in particular. on the other hand, much less often, it is viewed as an independent direction in economic theory, which originated in the 1970s. xx century (gureva 2019а; esipova et al. 2018). e. mishenin and i. koblyanskaya (2017) emphasize that the circular economy is not an analogue of the "green economy", but acts as a component of it, as a way to achieve sustainable development. sustainable development concept (1992) the concept of greening as a process to achieve sustainable development goals in different areas (2000-2010) “green economy” concept (2010-2018) “circular economy” concept (since 2017) http://www.virtual-economics.eu/ 47 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 the main interpretations of the concept of "circular economy" offered by different scientific schools are presented in table 1. table 1. definitions of the term “circular economy” interpretation representatives of the scientific school a policy strategy to reduce resource scarcity and reduce pollution z. yuan, j. bi, y. moriguichi (2006) a way to solve the problems of sustainable resource development c. wen, y. zhao, r. liang (2007) implementation of a closed cycle of material flows in the economic system y. geng, b. doberstein (2008) a path to sustainable development h. zhang et al. (2009) a way of continuous economic development without creating significant environmental and resource problems q. zhu et al. (2011) a sustainable development strategy aimed at improving the efficiency of materials and energy use b. su et al. (2013) a holistic concept encompassing the actions of "reduction, reuse and recycling" in the process of production, circulation and consumption w. jiao, f. boons (2014) an economic development model with a maximum resource use and environmental protection f. wei et al. (2014) a simple yet compelling strategy that aims at reduction of both the consumption of raw materials and the volume waste generation by closing economic and environmental cycles of resource flows w. haas et al. (2015) a mutually beneficial philosophy that prosperous economy and healthy environment can coexist a. tukker (2015) space to tackle growing resource challenges, a concept to separate the direct use of resources from economic growth p. ghisellini, c. cialani, s. ulgiati (2016) the model of production and consumption of goods through closed material flows that assimilate external effects associated with the extraction of primary resources and education waste (including pollution) s. sauve, s. bernard, p. sloan (2016) addressing a range of issues such as waste generation, resource scarcity and sustainable economic benefits m. lieder, a. rashid (2016) regenerating system, in which resource costs and losses, energy emissions and leaks are minimized by slowing down, closing and narrowing material and energy cycles m. geissdoerfer et al. (2017) an economic model in which both the results and the actual resource supply and production processes are planned and organized in such a way as to maximize human well-being and the efficiency of ecosystem functioning a. murray, k. skene, k. haynes (2017) an economic system based on business models which replace the concept of “the end of the product life” with reduction, alternative reuse, recycling and recovery of materials in production / distribution and consumption processes, thus functioning at the micro level (products, companies, consumers), meso level (eco-industrial parks) j. kirchherr et al. (2018) http://www.virtual-economics.eu/ 48 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 and macro level (city, region, nation and beyond) with the aim of achieving sustainable development which implies the creation of environmental quality, economic prosperity and social justice in the interests of generations a sustainable development initiative which aims at reduction of linear material and production flows in the production and consumption systems of the society by applying material cycles, renewable and cascading energy flows to a linear system j. korhonen et al. (2018) an economic model based on the principles of circular functioning of closed technological and biological cycles m. gureva (2019) a kind of green economy tool for targeted activities to achieve sustainable development and implementation of key sustainable development goals a complex multi-level system, whose principles of organization differ significantly from the traditional linear economy n. batova, e. shershunovich, i. tochickaja (2019) source: compiled by the authors. m. gureva (2019) proposes to group the approaches to interpreting the concept of "circular economy" over the period of its formation as follows: a global economic model (2004); an activity (2007); a new trend 4.0 (2013); an economic model (2015); a production system (2016); an economic activity, tool (2017); philosophy, economics (2018). based on the foregoing, the existing scientific approaches to defining the term "circular economy" can be conventionally systematized into groups (fig. 2). figure 2. systematization of the approaches to the category "circular economy" offred by different scientific schools source: developed by the authors. thus, a circular economy should be understood as an innovative approach to organizing logistics processes based on the closed movement of resources with their minimum losses in closed loop economy resource-based economy green economy instrument alternative to traditional linear economics recycling of secondary raw materials use of production waste closed-loop economic system based on r-principles c ir cu la r e co n o m y economic activity global economic model sustainable development strategy economic development concept business philosophy http://www.virtual-economics.eu/ 49 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 the form of waste and the maximum involvement of secondary resources in production in order to achieve sustainable development of logistics systems. the literature analysis has shown that the overwhelming number of researchers (su et al., 2013; reike & vermeulen, witjes 2018; kirchherr et al. 2018) uses the prefix "re-", which characterizes the basic essence of the circular economy. the circular economy was originally based on three key principles called "3r": reduce – reuse – recycle. but over time, they transformed into "9r": rethink – reduce – reuse – repair – refurbish – remanufacture – repurpose – recycle – recover. a significant number of studies has been devoted to identifying factors that impede the development of a circular economy (kirchherr et al. 2017; pheifer 2017; ritzén & sandströ 2017). according to scientists (kirchherr et al., 2018), implementation of the circular economy concept in practice can be hampered by the following barriers:  cultural (ecological culture of companies, lack of interest and consumer awareness, work according to the principles of a linear economy, interest in the final value chain);  regulatory (limited closed procurement, lack of global consensus, prohibition of laws and regulations);  market-based (low quality materials, standardization, high investment value, limited funding for circular business models);  technological (ability to supply high quality remanufactured products, lack of scale for design demonstrations, lack of required exposure data). n. batova et al. (2019) have identified and systematized 5 groups of barriers to the development of a circular economy: socio-cultural, legal, information, technological and economic. socio-cultural barriers hinder the development of a circular economy due to the existing differences in value attitudes and the level of environmental responsibility of the society. legal barriers are manifested in the form of restrictions imposed by current legislation. an insufficient consumers’ and producers’ awareness of the essence and principles and best practices in the circular economy implementation creates information barriers. economic barriers stem from a variety of factors, including the cost of circular innovation; lack of a clear methodology for assessing the economic efficiency of enterprises using secondary resources, effective mechanisms for financial support and preferences from the banking system, the public sector, and the state are also holding back the introduction of circular processes. it is also economy of scale that makes waste collection and recycling less costeffective for those who generate less waste. technological barriers to introducing a circular economy are characterized by the lack of a clear logistics infrastructure for collecting, extracting and processing secondary resources; the lack of demonstration projects for working with new technologies, and as a result, concerns about the quality of products made from recycled materials and waste (batova et al. 2019). http://www.virtual-economics.eu/ 50 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 as the analysis shows, from the macroeconomic point of view, a circular economic investment strategy could lead by 2030 to a 10% decrease in the cost of raw materials and a 7% increase in gdp in the european union compared to the usual business model (ellen mac arthur foundation 2017). however, such a leap in development undoubtedly requires a development strategy focused on the specific potential of the economy, as well as appropriate infrastructure and administrative capacities (müller & wilts 2019). in addition, it should be noted that the development of a circular economy contributes to obtaining a social effect through the creation of jobs. according to a study by the european commission (2018), depending on how waste is handled, a different number of jobs can be created: for 10 thousand tons of used products, one job can be created during incineration, six jobs – at disposal, 36 jobs – for recycling waste and up to 296 jobs for their recovery and reuse. reducing direct and indirect environmental costs is an important long-term opportunity for a circular economy. direct costs are associated with waste management. however, the indirect costs of using natural resources, which are passed on to the general public, are also relevant. globally, an international group of resource experts under the united nations environment program estimates that these costs amount to up to 2.4 trillion us dollars (müller & wilts 2019). studies by the european environment agency (2019) showed that the number of financial resources mobilized by the public sector in the period of 2013-2017 reached the total of 2 billion euros in various areas of the circular economy (table 2). in the coming years, this volume should increase significantly. for example, during the same period, investments in climate protection reached almost 20 billion euros. table 2. financial support for the circular economy in different sectors in the eu sector amount, million euros share, % industry and services 706 33 water resources management 554 26 agriculture and bioeconomy 366 17 waste management 331 16 mobility 95 5 urban development 50 2 energy 14 1 total 2116 100 source: based on research by the european environment agency (2019). for example, finland has the experience in the effective implementation of circular economy solutions. the essence of the transition is to rethink value chains and build on new business models. currently, there are several solutions developed by specialists from the finnish http://www.virtual-economics.eu/ 51 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 innovation fund sitra that help to accelerate the transition to a circular economy (herlevi 2020). these include:  product-service systems and sharing models;  ways of value attitudes towards nutrition;  sustainable delivery models (efficient delivery models and logistics operations are critical for implementing circular economy solutions. repack offers reusable packaging solutions that minimize the cost of air transport. koepala offers foldable lunch boxes that are flat for storage and transport and that can be assembled into packaging products of various shapes, which turned the potential of the circular economy into real market results);  roadmaps for carbon-neutral industries (important for the development of finland's industry in the future; for example, a 300-million-euro investment in a battery cluster, as well as the first multifunctional textile recycling centre in northern europe, will treat 10% of textile waste; due to resource efficiency and recycling betolar creates value by converting construction waste into concrete-like building materials with a carbon footprint of up to 90% less than conventional concrete);  circular economy education. within the framework of the project “building capacity for strategic planning and management of regional structural transformations in belarus in the context of a circular economy”, the beroc centre for economic research conducted a survey of 452 enterprises from the brest and mogilev regions. the purpose of the survey was to identify the readiness of business for circular transformation (batova 2020). as a result of the expert survey, it was found that the circular economy is important in terms of introducing innovations that will allow manufacturing new products and expanding sales markets. at the same time, for a significant number of respondents, the concept of a circular economy is limited only to processing secondary raw materials and using production waste. that is, belarusian enterprises do not understand that this concept is much broader. for example, they are not familiar with the green procurement tool, which involves taking environmental considerations into account when conducting tenders. about 30% of respondents fear that the introduction of the circular economy principles will lead to increased costs and higher prices of the final product. often a business does not understand that it is not necessary to immediately spend money on implementing a new model; it is enough to implement process innovations within small chains. among the main barriers to implementing a closed-loop business model, over 80% of respondents indicated insufficient financial resources. the second place is taken by the lack of technologies suitable for enterprises, as well as the lack of information and case studies on implementing circular economy approaches. at the same time, about 40% of respondents indicated that the lack of a unified electronic database on the availability of waste and secondary material resources impedes a large-scale transition to a circular economy. it is in http://www.virtual-economics.eu/ 52 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 the field of waste management where most of the respondents see the main potential for transferring the enterprise's economy to a closed cycle. in general, when developing long-term development strategies, 80% of enterprises focus primarily on increasing profits. they consider the introduction of the circular economy principles from the point of view of increasing economic efficiency. the survey identified the prospects for implementing the principles of a circular economy in belarus (batova 2020). the first direction is eco-design. this means that the product is initially designed to minimize environmental damage throughout its entire life cycle. the second is resource efficiency. it implies the organization of cleaner production and the maximum economy of materials, resources, and raw materials. one of the results of implementation is a reduction in financial costs and an increase in competitiveness. the third is the implementation of a circular business model, which consists of many elements, including green supply, the use of environmental innovation, and extension of the product life cycle. the sharing economy, which involves sharing assets and goods, is also a circular business model. this trend is the most developed in the world and gives the maximum growth rates. and another circular business model means product as a service. this approach assumes that, for example, it is not a car that is bought, but the number of kilometres that needs to be travelled, and the manufacturer deals with the service, technical support and disposal. the fourth priority is industrial symbiosis, which allows businesses to reduce costs through increased collaboration. for example, a by-product of one of them can be a raw material for another. this allows competing by reducing the cost of raw materials. according to h. wiltz (2020), head of the circular economy at the wuppertal institute for climate, environment and energy, households in belarus will save the most on transport (up to 80%), food (up to 40%) and construction due to introducing the circular economy principles (about 25%). the concept of green logistics began to take shape in the world since the mid-80s of the 20th century with the emergence of the concept "social responsibility of business". it was revealed that the process of shaping and developing the concept of green logistics was not easy. thus, foreign scientists j.-p. rodrigue, b. slack, and c. comtois (2001) define the content of the category "green logistics" broadly enough, without the subject and object of research. within the framework of this concept, a logistics activity is reduced only to a transport distribution system, which must be carried out on environmental principles. in addition, they argue that there are some inconsistencies between the concepts of “green” and “logistics”, as cost-saving strategies often conflict with environmental principles, which usually do not take into account environmental costs. researchers (baumgarten 2004; kümmetsteiner 2011; christof & ehrhart 2012) have shown that the origin, formation and further structuring of "green logistics" are closely intertwined with logistic principles. it has been established that a number of scientists have suggested http://www.virtual-economics.eu/ 53 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 calling the ecological direction of logistics "ecologically oriented logistics," "ecology" or "ecological logistics," which indicates the ecological orientation of logistics activities, as well as the creation of an integrated ecological system. the analysis of literary sources indicates that over the past decades of developing this scientific direction, scholars have not come to a common and unambiguous interpretation of the term "green logistics". currently, there are many conceptual approaches to considering the environmental component of logistics. this is due to a significant number of the established scientific schools, which have their own characteristics and approaches to the theoretical and applied aspects of developing the concept of green logistics. however, all the proposed formulations of the terms "green logistics" and "environmental logistics" are usually generally accepted and have a broader meaning, without taking into account the specifics of the functioning of various spheres of economic activity, including transport and logistics. thus, this problem determined the purpose of the article, which is to substantiate and develop an organizational and economic mechanism for implementing the concept of green logistics in the context of sustainable development of logistics systems and a circular economy. 3. methods the methodology of this research is based on the scientific works by foreign and ukrainian scholars studying green economy, circular economy, logistics, management, marketing, information technology. the study was carried out using general scientific methods: analysis and synthesis – to generalize the existing theoretical approaches and provisions, scientific developments on the development of a circular economy, green logistics and the greening of logistics systems, clarification of the terminological apparatus; classification – to systematize scientific approaches to defining the concept "circular economy": analysis and generalization of theoretical approaches to the definition of the concept "green logistics" proposed by different scientific schools; a statistical analysis and comparison – to analyse the results of expert surveys of the need for a "green" transformation of logistics systems in the world; statistical analysis of the development of logistics systems, taking into account the environmental component in foreign countries and ukraine; structural and logical generalization – to identify barriers hindering the development of logistics systems in terms of greening; clarification of wording the term "green logistics"; a systematic approach – to build a structural diagram of forming an organizational and economic mechanism for implementing the concept of green logistics. statistics for ukraine include: gdp at constant 2010 prices; total expenditures (capital investments and operating expenses) for environmental protection, including in the field of transport and storage; budget expenditures for environmental protection; general expenses for the protection of atmospheric air and climate, including in the field of transport and storage; investments in equipment and installations related to integrated environmentally http://www.virtual-economics.eu/ 54 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 friendly technologies; the volume of pollutants’ emissions into the air from mobile sources of pollution; the volume of emissions of carbon dioxide into the air from road transport. these data are taken in the sections "environment," "transport," "activities of enterprises" on the website of the state statistics service of ukraine, as well as in the statistical collections “the environment of ukraine 2019,” “activity of business entities 2019”. the amounts of financial support for developing a circular economy in different sectors in the eu are obtained from the website of the european environment agency (2019); indicators of the development of the green technology market in the world – on the website of the bundesministerium für umwelt, naturschutz und nukleare sicherheit (bmu). it was established that in 2009 the countries of the organization for economic cooperation and development (oecd) adopted the strategy for environmentally oriented ("green") growth as a tool for overcoming the financial and economic crisis for the medium (until 2030) and long-term (until 2050) prospects. south korea has emerged as the green economy leader, announcing green growth as its national strategy. following south korea, china has taken a green economy course. and then, the countries of the european union began the transition to green development. according to experts, the expected growth of the global market for green technologies is 6.9% (this is almost 2 times more than the growth rate of the world economy). according to forecasts, the total volume of this market by 2025 may increase to 5.9 trillion euros (table 3). if we analyse the data on the structure of the green technologies market, it can be noted that its two main segments are environmentally friendly production, accumulation and distribution of energy (21% and 20% in 2016 and 2020) and the energy efficiency submarket (26% and 25% in 2016 and 2020). sustainable mobility and efficient use are projected to grow by 2025 raw materials and materials (table 4). table 3. prospects for the development of the green technologies market in the world in 2016–2025 segments annual value, billion euros 2025 to 2016, times average annual growth rate in 2016–2025, % 2016 2025 environmentally friendly production, accumulation and distribution of energy (renewable energy sources (res), storage, smart grid 667 1164 1.75 6.4 energy efficiency submarket 837 1491 1.8 6.6 efficient use of raw materials and supplies (including the production of biological substitutes for fossil raw materials) 521 1048 2.0 8.1 http://www.virtual-economics.eu/ 55 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 environmentally sustainable mobility (development of new transport technologies and biofuel production) 412 988 2.4 10.2 circular economy 110 210 1.9 7.4 environmentally sustainable water management (including various aspects of wastewater management) 667 1001 1.5 4.6 total 3214 5902 1.8 6.9 source: bmu (2018). table 4. the market structure of green technologies in the world segments share, % 2016 2025 energy efficiency submarket 26 25 environmentally friendly production, accumulation and distribution of energy 21 20 efficient use of raw materials and supplies 16 18 environmentally sustainable mobility 13 17 environmentally sustainable water management 21 17 circular economy 3 3 source: bmu (2018). if we consider the national logistics system of ukraine in a circular economy, it should be noted that its transformation is not being carried out efficiently enough. according to the ministry of finance of ukraine, the share of budget expenditures on environmental protection (epp) is insignificant and in 2019 amounted to only 0.7% of the total volume of state budget expenditures. this, in turn, is not in line with the sustainable development goals 2016-2030. the share of total expenditures on environmental protection in the total gdp is insignificant and amounted to 4.2% in 2019 (table 5). table 5. financial and economic indicators of the development of the sphere of environmental protection in ukraine years gdp at constant 2010 prices, uah million total expenditures on ep budget expenditures on ep uah million share in gdp, % uah million share in the total volume of budget expenditures, % 2010 1079346.0 13128.1 1.2 2872.4 0.8 2011 1138338.0 18490.4 1.6 3890.7 0.9 2012 1141055.0 20514.0 1.8 5297.9 1.1 2013 1140750.0 20377.9 1.8 5594.2 1.1 2014 1066001.0 21925.6 2.1 3481.7 0.7 2015 961821.0 24591.1 2.6 5529.7 0.8 2016 985299.0 32488.7 3.3 6255.4 0.7 2017 1010173.0 31492.0 3.1 7349.3 0.7 2018 1043272.0 34392.3 3.3 8242.1 0.7 2019 1037299.1 43735.9 4.2 9731.1 0.7 source: (state statistics service of ukraine 2020, pp. 195, 198). http://www.virtual-economics.eu/ 56 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 in 2012-2019, the share of total expenditures on environmental protection (ep) in the field of transport and warehousing decreased by 4.3 percentage points, or from 6.2 to 1.9% of the total siterlet expenditures on ep. during this period, there was a trend towards a reduction in the share of capital investments in the development of the transport and storage sector by 51 percentage points, or from 58.8 to 7.8% of the total siterlet expenditures on environmental protection in this area. the share of current expenditures on ep in the field of transport and warehousing, respectively, increased by 51 percentage points, or from 41.2 to 92.2% of the total siterlet expenditures on environmental protection in this type of economic activity (table 6). table 6. total environmental expenditure in the field of transport and warehousing years total volume, uah million including in the field of transport and warehousing including capital investment operating costs uah million share, % uah million share, % uah million share, % 2012 20514.0 1262.6 6.2 742.1 58.8 520.5 41.2 2013 20377.9 691.6 3.4 197.6 28.6 494.0 71.4 2014 21925.6 330.0 1.5 78.0 23.6 252.0 76.4 2015 24591.1 303.8 1.2 59.0 19.4 244.8 80.6 2016 32488.7 824.9 2.5 96.7 11.7 728.2 88.3 2017 31492.0 575.4 1.8 65.3 11.3 510.1 88.7 2018 34392.3 742.3 2.2 168.2 22.7 574.1 77.3 2019 43735.9 819.0 1.9 64.0 7.8 755.0 92.2 source: (state statistics service of ukraine 2020, pp. 191, 194, 198). in 2012-2019, the share of current costs for oops in the field of transport and warehousing decreased by 1.2 percentage points, or from 3.7 to 2.7% of the total current expenditure on environmental protection. the share of expenses for the protection of atmospheric air and climate in the field of transport and storage facilities decreased by 1.6 percentage points, or from 2.4 to 0.8% of the total volume of these expenses for all types of economic activity. at the same time, the share of expenses for the protection of atmospheric air and climate in the field of transport and warehousing decreased by 3.1% in the total current expenditures for environmental protection in this area, or from 6.1 to 3% (table 7). table 7. current expenditures for environmental protection years total volume, uah million including in the field of transport and warehousing of these the costs of protecting the atmospheric air and climate, uah million including in the field of transport and warehousing uah million share, % uah million share, % 2012 13924.7 520.5 3.7 1330.8 31.9 2.4 2013 14339.1 494.0 3.4 1411.1 29.0 2.1 2014 13965.7 252.0 1.8 1234.6 22.6 1.8 2015 16915.5 244.8 1.4 1512.6 60.3 4.0 http://www.virtual-economics.eu/ 57 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 2016 1 9095.2 728.2 3.8 1755.4 32.4 1.8 2017 20466.4 510.1 2.5 2086.9 31.8 1.5 2018 24318.0 574.1 2.4 2897.7 26.7 0.9 2019 27480.2 755.0 2.7 2963.9 22.4 0.8 source: (state statistics service of ukraine 2020, pp. 172, 192, 198). for the period of 2012-2019, the share of capital investments in environmental protection in the field of transport and warehousing decreased by 10.9 percentage points, or from 11.3 to 0.4% of the total volume of capital investments in environmental protection for all types of economic activity (table 8). table 8. capital investment for environmental protection years total volume, uah million including in the field of transport and warehousing, uah million share in the total volume of capital investments, % 2012 6589.3 742.1 11.3 2013 6038.8 197.6 3.3 2014 7959.9 78.0 1.0 2015 7675.6 59.0 0.8 2016 13390.5 96.7 0.7 2017 11025.6 65.3 0.6 2018 10074.3 168.2 1.7 2019 16255.7 64.0 0.4 source: (state statistics service of ukraine 2020, pp. 189, 191). during the study period, the share of investments in equipment and installations related to environmentally friendly technologies in the field of transport and warehousing decreased by 18.2 percentage points, or 21.7 to 3.5% of the total volume of these investments. the share of investments in integrated technologies for the protection of atmospheric air and climate in the field of transport and storage facilities decreased by 22.8 percentage points, or 44.2 to 21.4% of the total volume of relevant investments. at the same time, the share of investments in integrated technologies for the protection of atmospheric air and climate in the field of transport and warehousing increased by 29.5 percentage points, or 60.9 to 90.4% of the total investment in equipment related to environmentally friendly technologies in this industry (table 9). table 9. investments in equipment and installations related to integrated environmentally friendly technologies years total volume, uah million including in the field of transport and warehousing of these investments for the protection of atmospheric air and climate, uah million including in the field of transport and warehousing uah million share, % uah million share, % 2012 3714.8 806.6 21.7 1112.2 491.5 44.2 2013 3233.9 191.7 5.9 1094.2 142.7 13.0 2014 4638.2 70.8 1.5 428.5 11.0 2.6 http://www.virtual-economics.eu/ 58 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 2015 4952.2 49.2 1.0 436.0 10.0 2.3 2016 7783.7 82.0 1.1 528.9 25.4 4.8 2017 4183.4 47.5 1.1 300.1 12.0 4.0 2018 3519.4 125.7 3.6 514.1 114.0 22.2 2019 3519.4 121.9 3.5 514.1 110.2 21.4 source: (state statistics service of ukraine 2020, p. 134). for the period of 2010-2019, the volume of pollutants emissions into the air from mobile sources of pollution decreased by 35.2%. and their share in the total volume of pollutants emissions increased by 1.9 percentage points (table 10). table 10. volumes of pollutants emissions into the air from mobile sources of pollution years total volume, thousand tons including mobile sources of pollution, thousand tons share in the total volume of pollutant emissions, % 2010 6678.0 2546.4 38.1 2012 6821.1 2485.8 36.4 2013 6719.8 2424.7 36.1 2014 5346.2 1996.2 37.3 2015 4521.3 1663.9 36.8 2016 4236.0 1608.5 38.0 2017 3968.7 1645.7 41.5 2018 4043.9 1612.9 39.9 2019 4119.0 1648.8 40.0 source: (state statistics service of ukraine 2020, pp. 26, 28). as the analysis shows, the total volume of air emissions from road transport decreased in 2010-2019 by 28.3%, or from 2313.8 to 1659.5 thousand tons. the volume of carbon dioxide emissions into the air from road transport increased by 13.4%, or from 1782.7 to 2021.1 thousand tons (state statistics service of ukraine 2020; environment of ukraine 2019, pp. 26, 28). thus, the statistical analysis indicates the need to implement the principles and tools of green logistics as a concept for the sustainable development of the national logistics system. 4. results based on the analysis of literary sources (janbo & songxian 2008; brdulak & michniewska 2009; sbihi & eglese 2009; mesjasz-lech 2011; ubeda et al. 2011; lai & wong 2012; dekker et al. 2012; ćirović et al. 2014; harris et al. 2014; jedliński 2014; seroka-stolka 2014; zhang et al. 2015), scientific views on interpreting the essence and content of the concept "green logistics" are generalized. as a rule, scientists understand this term as:  a scientific direction and one of the factors of environmental preservation, based on resource-saving and environmentally friendly technologies; http://www.virtual-economics.eu/ 59 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021  a new direction, providing for the use of advanced logistics technologies and modern equipment in order to minimize pollution and increase the efficiency of using logistics resources;  from a theoretical and scientific-methodological point of view, the subordinate functionality of the "green" economy;  logistics based on resource-saving and environmentally friendly technologies;  a type of logistics in which scientific and practical activities take into account environmental aspects at all stages of movement of material and other flows corresponding to it in order to reduce destructive effects on the environment and optimize resource consumption;  an innovative method in logistics;  within the framework of the concept of sustainable economic development, an effective approach to the management of resource and energy flows to reduce the environmental and economic damage to the environment and ensure effective innovative development of production;  a system of measures providing for the use of energy and resource-saving logistics technologies and modern equipment in all links of the supply chain in order to minimize the negative impact on the environment and increase the total consumer value of products;  an environmentally friendly and efficient transport distribution system;  scientific and practical activities aimed at optimizing and effective management of direct and reverse material and accompanying flows (information, financial, waste flows, harmful emissions, various natural resources and energy) in order to minimize the negative impact on the environment;  a scientific and practical activity, which provides for the formation of an effective mechanism for integrating environmental and socio-economic aspects at all stages of planning, design and management of the supply chain of goods in order to minimize environmental and economic damage and increase the consumer value of products through the use of energy and resource-saving logistics technologies;  activities related to the eco-efficient management of the movement of logistics flows of products that move from the enterprise to the consumer, as well as return flows of goods in the "supplier-consumer" system;  a set of actions related to the assessment and minimization of the environmental consequences of logistics activities;  a coordination of logistic activities of market entities with a focus on achieving economic and socio-ecological effect through the use of energy and resource saving technologies;  an increasing environmental responsibility in the transport and logistics sector. based on the generalization of the terminological apparatus on the selected topic in accordance with various scientific concepts and as a result of the research (zaloznova et al. 2018; trushkina 2018; koev et al. 2019; koev et al. 2019a; sandiuk et al. 2019; kashchena et al. 2019; trushkina 2019; trushkina 2019a; trushkina et al. 2020; kwilinski et al. 2020; http://www.virtual-economics.eu/ 60 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 trushkina 2020; aleksander et al. 2020; arefieva et al. 2021;boiko 2019; bogachov et al. 2020; borychowski et al. 2020; chygryn et al. 2020; cyfert et al. 2020; 2021; czakon et al. 2020; czyżewski et al. 2019; 2020; dementyev & kwilinski 2020; dementyev et al. 2021; drozdz et al. 2020; 2021; dyduch 2019a; 2019b; dzwigol 2019a; 2019b; 2020a; 2020b; 2020c; 2020d; 2021a; 2021b; 2021c; dzwigol & wolniak 2018; dzwigol & dźwigoł-barosz 2018; 2020a; 2020b; dzwigol et al. 2019a; 2019b; 2020a; 2020b; 2021b; gorynia 2019; gorynia et al. 2019; hrytsenko et al. 2021; kaźmierczyk & chinalska 2018; kharazishvili et al. 2021a; 2021b; khrapkina et al. 2021; koibichuk et al. 2021; kondratenko et al. 2020; kuzior et al. 2019; 2021a; 2021b; kwilinski 2018a; 2018b; 2019; 2021; kwilinski et al. 2019a; 2019b; 2019c; 2019d; 2019e; 2019f; 2020a; 2020b; 2020c; 2020d; 2020e; 2021; kwilinski & kuzior 2020; kyrylov et al. 2020; lakhno et al. 2018; lyulyov et al. 2020a; 2020b; 2021a; 2021b; 2021c; mlaabdal et al. 2020; miskiewicz 2017a; 2017b; 2018; 2019; 2020a; 2020b; 2021a; 2021b; miśkiewicz & wolniak 2020; pająk et al. 2016; 2017; polcyn 2018; 2021; prokopenko & miskiewicz 2020; saługa et al. 2020; savchenko et al. 2019; tkachenko et al. 2019a; 2019b; 2019c; 2019d; 2019e; trąpczyński et al. 2019; zastempowski et al. 2020), the authors’ approach to defining the term "green logistics" is offered. it is understood as a circular economy instrument; a component of corporate social responsibility of business in the transport sector and logistics activities; a type of economic activity, including the processes of material and technical supply, warehousing, environmentally friendly storage, production, customer service, transportation, sale of finished products, recycling (recycling and waste disposal), which allows reducing the negative impact on the ecosystem and the environment in a circular economy. for the effective implementation of the green logistics concept, it is advisable to develop an organizational and economic mechanism, which is considered as a set of principles, tools, functions, methods and means aimed at reducing the level of greenhouse gas emissions and the costs of organizing logistics activities and various logistics services (transport, warehousing, marketing, etc.) (fig. 3, 4). the components of the organizational and economic mechanism include resources; factors of influence; goals, principles, functions, methods, control levers; tools; information technology; and performance criteria. the key principles of forming the organizational and economic mechanism comprise consistency, integration, reliability, dynamism, compliance with the goals of sustainable development, and efficiency. http://www.virtual-economics.eu/ 61 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 figure 3. the main elements of the organizational and economic mechanism for implementing the concept of green logistics source: developed by the authors. diagnostics of the current state, features and trends in the development of logistics systems, taking into account the environmental component factors affecting the development of logistics systems, and risks in organizing logistics activities (exogenous and endogenous) management subjects market participants of transport and logistics services and distribution, sales networks tasks functions forecasting → planning → organization → accounting → control → analysis → regulation management methods economic ways, techniques, technologies tools and means stakeholders goals principles criteria organizational controls information support levers management objects complex of sequential processes of logistics activities provision of logistics services and their outsourcing http://www.virtual-economics.eu/ 62 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 figure 4. a flowchart of forming an organizational and economic mechanism for implementing the concept of green logistics source: developed by the authors. managing the development of the logistics system management of procurement and supply of material resources production management warehouse and inventory management customer relationship management industrial waste recycling management management of innovation and organizational change the management subject (control system) – various groups of stakeholders management object (controlled system) – a complex of sequential processes of logistics activities r is k m a n a g e m e n t o f lo g is ti cs a ct iv it ie s m a n a g e m e n t o f lo g istics flo w s (m a te ria l, fin a n cia l, in fo rm a tio n , tra n sp o rt, h u m a n ) goals, tasks, plans strategies and programs input input information flows output output information flows environmental factors http://www.virtual-economics.eu/ 63 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 5. conclusions in modern conditions of intensive development of the circular economy, the issues of environmental protection in the transport sector and in the organization of logistics activities are actualized. this should be done in the context of green growth and in line with the european ten-t transport policy aimed at using resources efficiently and reducing greenhouse gas emissions. it has been proven that green logistics is an effective tool for transforming logistics systems. based on the analysis and generalization of existing scientific approaches to defining the term "green logistics", it was established that the term is understood differently, namely as a factor of preserving the environment with the help of environmentally friendly technologies; a component of the green economy; a type of logistics; an economic activity; scientific and practical activities; a type of activity related to the eco-efficient management of the movement of logistics product flows; a tool for ensuring the ecological safety of the ecosystem; a set of logistic approaches to optimizing waste and resource flows; an environmentally friendly transport distribution system; a coordination of logistics activities to achieve sustainable development. at the same time, most scientists identify the concepts of "green" and "ecological logistics", which is understood as a scientific direction that involves using modern innovative logistics technologies; a set of actions aimed at minimizing the environmental consequences of logistics activities; integrated management of logistic processes (production, storage, waste transportation); a subsystem for managing product flows from supplier to consumer with minimal impact on the environment. as a result of the study, it was proposed to consider the term "green logistics" from four scientific viewpoints: as a concept of sustainable development of logistics systems of different levels; a circular economy tool; a component of business corporate social responsibility; a type of walking activity. the main principles of green logistics should be the application of an integrated approach to managing logistics flows; the rational use of resources (production, financial, energy, information); the minimal use of raw materials and packaging that are not recyclable; economically sound and environmentally friendly transportation and storage of material resources; the maximum use of production waste, containers and packaging as secondary raw materials or their environmentally friendly disposal; optimization of costs for organizing logistics activities; minimization of risks in the operation of transport and logistics systems; increasing the level of environmental education and personnel responsibility; introduction of innovative technologies to reduce the environmental burden on the environment; an application of information systems and digital technologies in the field of environmental protection. http://www.virtual-economics.eu/ 64 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol, nataliia trushkina, and aleksy kwilinski virtual economics, vol. 4, no. 2, 2021 the implementation of the green logistics mechanism helps to minimize the costs of managing the movement of logistics flows while maintaining the required level of environmental safety, which is one of the important requirements for the implementation of the concept of corporate social responsibility of business in a circular economy. in further scientific research, it is planned to develop the authors’ approach to defining the 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(2015). swarm intelligence applied in green logistics: a literature review. engineering applications of artificial intelligence, 37, 154-169. https://doi.org10.1016/j.engappai.2014.09.007 zhu, q., geng, y., sarkis, j., lai, k. (2011). evaluating green supply chain management among chinese manufacturers from the ecological modernization perspective. transp. res. part e-logistics transp., 47, 808-821. https://doi.org/10.1016/j.tre.2010.09.01 http://www.virtual-economics.eu/ 82 www.virtual-economics.eu issn 2657-4047 (online) nataliia vodolazskaya virtual economics, vol. 2, no. 1, 2019 2019 volume 2 number 1 (january) types and ways of modernization in a context of the international experience nataliia vodolazskaya abstract. results of the researches of productive and economic systems of a number of the countries are stated in this paper. types and ways of modernization of these systems taking into account the choice of the development model of a society are presented. process regularity of international modernization, including russia is specified. the immediacy of the problem of modernization as sets of technological, economic, cultural, political changes is proved. the listed changes are directed towards the improvement of social system, culturaleducational level of the population, and towards the increase in prestige of the country in general. qualitative differences between the eastern ("asian") and western ("european") ways of modernization are given. the objective reasons for differences in character, rates, efficiency of implementation of political modernization in post-socialist societies are the level of political stability in society, presence of the reformatory elite interested in political and innovative development strategies of society and cultural traditions. stages and prerequisites of production modernization are considered. the problems describing participants of the process, their competences and professional standards are shown. the quality of education of the leading representatives was and remains the major indicator defining long-term development of a society. examples of implementation of the international educational projects are given. keywords: modernization, productive and economic systems, society, international process jel classification: d83, e27, f59, l52, o21, p41 author(s): nataliia vodolazskaya federal state budgetary educational institution of higher education “belgorod state agricultural university named after v. gorin”, 1, vavilova street, mayskiy, belgorodskaya region, russia, 308503 e-mail: vnv26@bk.ru https://orcid.org/0000-0002-1168-5741 citation: vodolazskaya, n. (2019). types and ways of modernization in a context of the international experience. virtual economics, 2(1), 82-98. https://doi.org/10.34021/ve.2019.02.01(5) received: september 3, 2018. revised: october 16, 2018. accepted: december 6, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://orcid.org/0000-0002-1168-5741 https://doi.org/10.34021/ve.2019.02.01(5) https://creativecommons.org/licenses/by/4.0/ 83 www.virtual-economics.eu issn 2657-4047 (online) nataliia vodolazskaya virtual economics, vol. 2, no. 1, 2019 1. introduction the international process of formation of the economic relations in the conditions of globalization of the world market faces a number of problems, considering branch and regional functioning features of production systems of the various states. therefore, researches of such systems are of the special urgency. they allow to implement ecological production modernization taking into account a choice of the development model of the society. modernization represents a set of technological, economic, cultural, political changes which are directed towards the improvement of social system, cultural and educational level of the population and the increase of prestige of the country as a whole. thus it should be noted that practically all societies have an ability to the updating and they aspire to achieve steady competitiveness with other organized societies. as a rule, in the international practice of historical development this process occurs within internal structure of the most developed social system. natural character of gradually developing modernization is caused by the processes of self-control of the society which assumes the improvement of requirements and development of new skills of their satisfaction. modernization as a fundamental problem consists of narrower problems. for less developed countries, economic modernization means overcoming their backwardness. actually it can be presented as an attempt to catch up with the developed countries on the level of economic development. therefore, the term catching-up development has appeared. for the developed countries, modernization means, first of all, the solution of the problems which are characteristic of a post-industrial stage of development they are the problems of the human capital, innovations, financial stability, international competitiveness. 2. literature review the research (kryuchkov et al., 2014) carried out by a number of russian scientists has shown that a process of modernization exists in all spheres of the person’s activity in spite of the fact that in scientific community there is no uniform position about an effective vector of its development (burenko & shumilov, 2012). on the basis of the analysis of socio-political and economic development of the country, russian political scientists v.i. burenko, z.v. ivanovskiy, v. g. ledyaev, l.g. titova, o.f. shabrov, etc. prove the thesis about formation of rather stable political system which at last was transformed from a negative situation of the end of the last century when there were no standard and legal bases for implementation of reforms (kryuchkov et al., 2013). german scientist x.steiner (steiner, 2003) allocated three groups of the countries differing in historical specifics and modern development. the first group are the countries of the central europe and the baltic states (poland, hungary, the czech republic, slovenia, slovakia, estonia, latvia) which by the time of entry into the modern world system reached rather high level of social, economic and political development. after receiving the independent status, having considerably democratized the political power and having rehabilitated private property, these countries took the most thorough steps to the development of civil society and stayed on the road of successful political modernization. the 84 www.virtual-economics.eu issn 2657-4047 (online) nataliia vodolazskaya virtual economics, vol. 2, no. 1, 2019 second group are the countries of central, eastern and southeastern europe (albania, bulgaria, romania, and also the majority of the countries resulted from the disintegration of yugoslavia) which had rather low level of socio-economic and political development before the establishment of socialism. having gained the state independence, these countries have carried out political modernization slowly and ineffectively. the third group are the post-soviet countries which passed a way of the state socialism within the ussr (georgia, russia, ukraine, uzbekistan, etc.) which were middle-advanced in socio-economic and socio-political aspects. having found sovereignty, these states took the way of the political modernization, urged to replace the system of the soviet type democratic political system. however, the directions of the valid changes in the post-soviet states often do not correspond to the vectors of reforms wished or declared by the political elite. their created institutes of the political power are far from a liberal and democratic ideal to which they aspired (burenko, 2012). at the end of the xx century r. rose, k.herpfer and v. mishler by the results of the research program of society of paul lazarsfeld «new democratic barometer» also came to a conclusion about a divergence of the ways of post-socialist development. from the point of view of democracy and action manifestation of a post-totalitarian system factor, the authors allocated three groups of the countries "leading", "late" and "post-soviet" which according to their structure practically coincide with the typology offered by x. steiner taking into account a wider set of factors (kutsenko, 2004). the objective reasons for differences in character, rates, efficiency of implementation of political modernization in post-socialist societies are the first level of political stability in society, secondly, existence of the reformatory elite interested in political and innovative strategy of the development of society, thirdly, the accounting of cultural traditions. at the same time, there are also opinions that the soviet period cannot be considered through the prism of the theory of modernization (maksimova & lyamtseva, 2011). the socialism is characterized as antimodernization structure or as false modernization (the russian modernization, 1993). stagnation in political system at the rapid development of industrialization is interpreted as the indicator of false modernization. in particular, the polish sociologist p. sztompka on the example of the ussr and communist countries of eastern europe showed that the elements of the above-mentioned imposed to society by the authoritative power are fancifully combined with the heritage of premodern eras covered with symbolical substitutes of institutional modernization. in this sense, according to the author, socialist modernization is imaginary since there was only an imitation of changes in political systems of the socialist camp states (sztompka, 1994). in scientific literature the modernization possibilities of the power are often estimated through its influence on the political stability of society. in effect, political stability is defined as absence of structural changes in political system of society or control possibility over these changes; as result of legitimacy of the power; as behavior model when people regulate the behavior by a certain code of morals and political actions, understanding that the deviation from these codes leads to instability in society (kryuchkov et al., 2014). therefore, to begin cardinal sociopolitical transformations, it is important to stabilize the political situation. 85 www.virtual-economics.eu issn 2657-4047 (online) nataliia vodolazskaya virtual economics, vol. 2, no. 1, 2019 the specified tendencies explaining regularities of modernization processes in international and (including russian) national contexts differ concerning the concrete countries and the people by the degree of the intensity and the advance. professor g.n. lanskoy suggests to designate the arising distinctions, proceeding from the contents, as the ways of modernization (lanskoy, 2018). the first way of modernization was realized by the countries relating to the western type of civilizations and it had consecutive linear character. the west european way of modernization assumed in the beginning the transformation of political system of society and respectively an ideological platform of its development. as a rule, such transformation was rather radical as it concerned redistribution of imperious functions as well as the status of privileges and available public benefits. those countries and societies were the first on the way of structural political changes in which social and economic progress appeared to be the most successful and consecutive. such practice and sequence of changes were traced in great britain and france. later it happened in germany and in the usa, which were formed in essence as the countries accumulating optimum traditions of modernization and personnel reserves from other countries. the second way of modernization was peculiar to the countries relating to the eastern type of civilizations. japan, india and china (china, 2009) are the most advanced of them. in these countries complex changes of social system appeared the most considerable. obvious actual distinctions exist between historical practices of development of these countries (for example, china passed through a stage of existence of a totalitarian and communist mode; india was in the colony status for centuries). but they have the general properties of internal transformation. there are political and economic changes for achievement of sufficient competitiveness and at the same time preservation of own historically developed traditions of spiritual culture and mentality. any penetrations of new traditions (for example, during "opium" wars in southeast china) were dissolved sooner or later in the affirmed cultural shape and disappeared practically without a trace. qualitative differences between eastern ("asian") and western ("european") ways of modernization were repeatedly emphasized in historical and sociological researches (lanskoy, 2018). these representations began to change only in the last decade taking into account considerable achievements of china, japan, india and to a lesser extent other countries (for example, koreas). consequently, successes in the area of modernization of economic system can be provided also in the alternative directions in relation to the european tradition. therefore, the choice of one of two considered above ways of modernization has conceptual character according to the contents and strategies. it defines the role and the status choosing for itself the program of transformations of the country in the system of the international relations. to a considerable degree, this choice depends on the resource, and mental and psychological (including manifestation of historical memory) potential which public institutes and groups operating in the territory of the country possess. 86 www.virtual-economics.eu issn 2657-4047 (online) nataliia vodolazskaya virtual economics, vol. 2, no. 1, 2019 the purpose of this work is to give the characteristic of some existing models of modernization and to offer methodological models which can be applied in the context of national and international modernization. besides, it will elucidate more fully the evolution of a modernization paradigm and will plan the possible prospects of its further development. 3. methodology the designated subjective circumstances are characteristic for the present stage of modernization of russia along with naturally remaining objective factors. it is important to emphasize the existence of high level of government legitimacy in the country, legitimacy of the leaders heading these departments and the public organizations, giving ideological support to the administrative structures of personnel. sources of legitimacy are the norms of a constitutional law defining the system of authority’s interaction; the status of the state head as the guarantor of execution of the main legislative decisions; wide volume of functions of the federal ministries and the departments, strengthening of the territorial organization of the state; existence of the ruling party having universal support of the social majority. existence of the strong administrative base of modernization faces only one risky functional form of the development when the state loses communication with society at the level of identification and the lists of its updated requirements. lack and disappearance of such communication have already repeatedly caused crises including revolutionary processes for the russian statehood. thus, patriotism and adherence of certain idealistic (christian or communistic) concepts are red lines of development including modernizations of russia throughout a long time. these political and ideological changes have found their continuation in the economic sphere. some authors focus attention on the economic aspect of modernization. so walt rostow in his work «a stage of economic growth» aspires to define the conditions necessary for start and further continuous accumulation of the capital and investments i.e. for continuous generating of the national profit. modern russian researchers (v.a. krasilshchikov, g. drach, s.yu. malkov, v. g. fedotova) after foreign authors at the end of the xx the beginning of the xxi century came to a conclusion about the need of refusal of «catching-up modernization» in favor of national modernization on the basis of already reached results during the process of catchingup modernization (krasilshchikov, 2009; pain, 2008; fedotova, 2009). as a result of modernization, a society gets the following characteristics in the economic sphere: prevalence of industrial technologies of mass production, labor market, the goods, finance, existence of conditions for economic growth and wellbeing of people. in other words, today the modernization of production structure of high-technological branches, science and education spheres as key factors of growth is one of the main conditions of a sustainable development of each state (vodolazskaya, 2016; vodolazskaya, 2018). questions of economic and production modernization are undoubtedly actual and important for russian federation. however, now the given problem is not solved yet and it demands the fastest measures for current situation change. the crisis phenomena in the world and national economies bared one of the main shortcomings of the russian economic development. it is the specifics of the structural 87 www.virtual-economics.eu issn 2657-4047 (online) nataliia vodolazskaya virtual economics, vol. 2, no. 1, 2019 reproduction model characterized by the low competitiveness of the processing branches that leads to «a raw distortion» economy and to the relevant position in the world market. existence of raw material resources is one of the key factors of the development for the state. but in a long-term prospect, the growth indicators of the countries possessing considerable resources appear worse than of the countries with similar level of the income per capita, but having smaller resources (meshkov et al., 2017; vodolazskaya, 2017; matokhina et al., 2017). the theoretical basis which has united statistical data and researches of scientists on a perspective of effective use of resources was the concept of “a resource damnation.” according to this concept «in the long term, the period of resources abundance cannot stimulate economic development, but only slow it down» (shmyrova, 2010; guriyev et al., 2010). today russia is also in a similar situation. during the pre-crisis period the level of its social and economic development was characterized by quite high key indicators. so russian gross domestic product in 1999-2008 grew by 93 %. however, statistical data did not reflect the valid situation, namely, the missed possibilities of modernization of national economy and its direction to a way of innovative development. favorable conjunctural changes in the world markets of traditional russian export became the main source of growth of gross domestic product in the xxi century for russia. the income of export of raw materials and energy carriers only to insignificant degree was directed to the development of scientific and technical potential, updating of the fixed business assets, support of health care and social development. it was more concentrated on the stabilization fund placed abroad. reduction of prices of oil in 2008 by more than 2 times caused falling of the russian gross domestic product (from 9,3 % in the first quarter of the year 2008 to 0 % in the fourth quarter) (shmyrova, 2010; indexes of physical volume, 2018). the power raw scenario of the development of the russian economy is a deadlock and further development of the country is not obviously possible without modernization of the national economy, in particular, industrial modernization taking into account the development of the human capital in full. (vodolazskaya, 2018). modernization of production can be complex (replacement of out-of-date units), partial (sector replacement) or a regeneration of systems or equipment at the enterprise (vodolazskaya, 2016). this process involves careful information accumulation and analysis. it concerns both conditions of the production and studying of offers from suppliers of the equipment and services. as a whole, depending on the sizes of the enterprise, its financial possibilities and modernization plans, the introduction of these actions can take from several months to one year and a half. as any process, modernization of production has some stages. the first three stages are directly connected with the analysis of all available information and statistical data. the choice of the equipment and suppliers also demands studying. further efficiency and payback of the enterprise depends on quality and characteristics of the equipment. reliability of suppliers influences speed of modernization and its cost. it is important to notice that the stage of search of the equipment and suppliers should begin at the same time with consideration of a problem of modernization need. it will allow to compare the current situation with prospects which the new equipment will give. formation of the business plan will help to order the entire process and to calculate expenses and time of payback of the undertaken measures. mechanism of modernization presented on fig. 1. https://www.sciencedirect.com/science/article/pii/s1877050917323207#! 88 www.virtual-economics.eu issn 2657-4047 (online) nataliia vodolazskaya virtual economics, vol. 2, no. 1, 2019 figure 1. mechanism of modernization source: own research. all preconditions presented in fig. 2 are necessary for making decision on modernization. figure 2. the scheme of preconditions for necessary modernization source: own research. mechanism of modernization analysis of information and statistical data research of material resources studying of tools and processes check of prerequisites about need of modernization attraction of necessary resources determination of necessary speed of modernization formation of the business plan of realization of stages preconditions the big percent of the emergency and beyond repair equipment insufficient efficiency the big percent of the outof-date equipment necessity to increase productivity planned expansion of manufacture 89 www.virtual-economics.eu issn 2657-4047 (online) nataliia vodolazskaya virtual economics, vol. 2, no. 1, 2019 modernization of production will demand attraction of credit resources. seldom some enterprise presumes similar actions at own expense. nevertheless, the contract can be concluded with suppliers without waiting loan opening. it is enough to receive confirmation of approval of inquiry from the creditor. the longest stage is the supply of equipment. it can take some months. as a rule, different producers deliver equipment. they can be in the distance from the enterprise customer and sometimes in other country and even the continent. assembly occurs quickly (speaking about large enterprises about one month). when equipment arrives, the enterprise already increases qualification of the personnel (vodolazskaya, 2011; vodolazskaya, 2012; jasiak, 2015) or employs experts. production modernization is usually finished by a stage of carrying out trial operation. it is necessary for identification of malfunctions and the subsequent final assembly (vodolazskaya, 2009; vodolazskaya & strebkov, 2017). for example, some “melitek” devices are the progressive equipment shown in fig. 3. they are widely applied at production modernization, in particular, for quality control of the products made of different materials, for the control of raw materials, workpiecеs, details and also in the laboratories where new designs and materials (melitek catalog, 2018) are developed. industrial modernization of this type of the equipment provides high precision of measurements; wide range of possible loadings; simplicity and convenience of use; work possibility with samples of the various sizes; high reliability. а) b) c) d) figure 3. examples of modern types of the equipment for quality control of products: а) microhardness tester durascan-20; b) rockwell hardness tester durajet; c) universal hardness gage duravision-30; d) upright microscope bx53m source: own research. 90 www.virtual-economics.eu issn 2657-4047 (online) nataliia vodolazskaya virtual economics, vol. 2, no. 1, 2019 4. results the analysis of the main types of modernization shows that modernization is not a complete logical structure, but rather a set of concepts of modern social development. and it allows to find the axial strategic directions of this development that coincide with the requirements of the sociological, economic, and political science spheres. the results of modernization for a certain period of time are reflected in the coefficient of renewal of fixed fund by the sectors of the economy, including those related to high, medium, and low degree of manufacturability, which allows to assess the level of development and renewal of the material and technical base of the industry. it is shown in fig. 4. figure 4. the coefficient of renewal of fixed fund according to the level of technology source: own research on the basis of russtat data. maximum values of coefficient for high-tech activities reached 17.6% in 2015, for medium-tech high levels of activity – 13.3% in 2015, for medium-tech low activities – 17.6% in 2008, for low technology activities – 16.1% in 2013. decline in all sectors of the economy is in 2017, respectively 14.9%; 7.5%; 10.1% and 9.7%, which indicates the need for modernization. on the other hand, the analysis of the depreciation degree of the fixed fund by industries shows a tendency to increase in almost all areas of economic activity. it is shown in fig. 5. the depreciation curve of all fixed assets continuously rises from 2008 43.4% to 2017 49.5%. especially large readings are related to the branch of wholesale and retail trade; repair, motorcycles, and household appliances, reaching a value of 64.9% in 2017. this indicator 0,0 5,0 10,0 15,0 20,0 high-tech activities high-level medium-technology activities low-level medium-technology activities low-tech activities all fixed fund 91 www.virtual-economics.eu issn 2657-4047 (online) nataliia vodolazskaya virtual economics, vol. 2, no. 1, 2019 allows to assess the state of the material and technical base of industries. the depreciation rates for most sectors of the economy are approaching or exceeding 50%, which is critical for the development of economic sectors and requires the adoption of appropriate measures to control the situation. however, besides solving the problems of technical and economic aspects of the issue of modernization, it is necessary to pay attention to the direct participants of this process, their competencies and the level of professional qualifications. a quality of education of the leading society representatives is the major indicator defining long-term development of the society (vodolazskaya & bondareva, 2016; vodolazskaya, 2012). it is necessary to realize the system concept of a sustainable development for the solution of a problem of education modernization because traditional education does not always react to arising problems in due time (meshkov et al., 2018; lavrov et al., 2015; sharaya & vodolazskaya, 2018). formation of a sustainable development provides transition to focused economic and social model of training. it is based on the interdisciplinary knowledge and on a comprehensive approach to the development of the society (faber, 2008; victor, 2008; zencey, 2005; soderbaum, 2008). unfortunately, investments into education, health care, science have long-term character as a rule. figure 5. the coefficient of renewal of fixed fund according to the level of technology source: own research on the basis of russtat data. 0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 all fixed fund agriculture, hunting and forestry mineral extraction the processing productions production and power distribution, gas and water сonstruction wholesale and retail trade; repair of vehicles, motorcycles, household products and objects of private use hotels and restaurants transport and communication financial activities public administration and ensuring military safety; obligatory social security education health care and providing social services 92 www.virtual-economics.eu issn 2657-4047 (online) nataliia vodolazskaya virtual economics, vol. 2, no. 1, 2019 however, now russian companies are more focused on receiving profit in the short-term period. and in these conditions, investment into the person becomes unprofitable for the vast majority of businessmen. these and other factors (low, in comparison with the leading countries of economic development, salary level, lack of worthy working conditions and labor reproduction) promote the phenomenon called brain drain. therefore, the problem of education modernization is the task of prime importance for educational institutions. it is directed not only towards the training of experts with a high skill level and professional mobility, but also towards high social responsibility. the need of employment according to the level of education of the population is presented in fig. 6. figure 6. the need of employment according to the level of education of the population source: own research on the basis of education indicators, 2018. the histogram shows that every year the need for highly qualified personnel increases: with higher education from 21.5% in 2000 to 33.5% in 2016, for secondary vocational education total (secondary vocational education in training programs for mid-level specialists and secondary vocational education training programs for skilled workers, employees) from 42.6% in 2000 to 45.1 % in 2016. training of such professional staff that are capable to adequately react to the changing conditions of the global market results in the need of modernization of an education system. in this regard, the priority directions of state policy are the following: individualization of educational process and the educational programs considering interests and abilities of the personality; ensuring competitive education level; 0 5 10 15 20 25 30 35 40 2000 2005 2010 201 2 2013 2014 201 5 2016 higher education secondary vocational education in training programs for mid-level specialists basic general education no basic general education secondary vocational education training programs skilled workers, employees secondary general education 93 www.virtual-economics.eu issn 2657-4047 (online) nataliia vodolazskaya virtual economics, vol. 2, no. 1, 2019 training in the basic principles of creation of professional career and skills of behavior in a labor market; the organization of educational process taking into account modern achievements of science; creation of the programs realizing information technologies in education and development of open education; academic mobility of students; training of the highly qualified personnel capable of the professional growth and professional mobility in the conditions of informatization of society and development of new high technologies. for a long time, a pedagogical internship exists in the developed countries (gracheva, 2011; faskhutdinov, 2015). the analysis of its organization allows to define the following general positive tendencies: improvement of quality of teaching; prevention of outflow of perspective beginning teachers; assistance to personal and professional growth of the beginning teacher; satisfaction of need of the concrete school district in teachers; successful advance of the teacher from a survival phase to a phase of complete adaptation; providing conditions of gradual occurrence into a profession. within the project modernization, special educational programs are used in some higher educational institutions of russia (simonova & minyurova, 2015; margolis & rubtsov, 2011). they are directed to the training of specialists who possess the professional competences necessary for implementation of the effective management of groups (including virtual) consisting of representatives of various cultures. the need for such experts is defined by entry of russia into the world community and expansion of international relations in various spheres (vodolazskaya, 2017). the graduate of an educational program can carry out professional activity in the polycultural environment, considering features of a sociocultural situation of development (simonova & minyurova, 2015; bolotov, 2014). training is realized in virtual space specially created by means of modern information technologies. there are groups of students of partner universities together in that space. a working language of an educational program is english. practice of using of the international virtual educational projects allows to reach qualitatively new level of the organization of educational process. there is a creation of the enriched educational space. it provides the university with the experience of real intercultural interaction and forms students’ important competences (minyurova, 2015). however, it is worth to remember about the need of preservation of the best domestic educational traditions (simonova & minyurova, 2015). throughout centuries they were distinctive and strong side of the russian system of higher education. thus, the appeal to the international experience of using modernization projects can have comprehensive advantage for the definition of a further course of development of modern russia. 94 www.virtual-economics.eu issn 2657-4047 (online) nataliia vodolazskaya virtual economics, vol. 2, no. 1, 2019 5. conclusions and directions of further researches unreasonable mixture of different groups, types, subspecies of modernizations is allowed sometimes in scientific literature. classical and modern versions of the modernization analysis differ significantly . at the same time, it should be noted that there is a certain progress in the development of activity approach. it is perspective for the improvement of a modernization paradigm. modern russia takes some intermediate place. it exists in an inertial state between authoritarianism and free competition, between the leading and catching up modernization, between the west and the east. russia should make use of the accumulated experience of the countries using positive models (types and ways) in the sphere of modernization of economy and technologies for further development. as the directions of future researches it is supposed to consider the following problems: development and creation of such system of professional education at which university graduates would be capable to carry out functions without retraining and professional development; 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(2005). mr. soddy’s ecological economy. green economy, 54, 457-501. retrieved from http://www.nytimes.com/2009/04/12/opinion/12zencey.html?_r=3&pagewanted. кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) bogdan moskalenko, oleksii lyulyov, tetyana pimonenko, and ihor kobushko virtual economics, vol. 5, no. 4, 2022 50 2022 volume 5 number 4 institutions’ effect on a country’s investment attractiveness within sustainable development bogdan moskalenko, oleksii lyulyov, tetyana pimonenko, and ihor kobushko abstract. sustainable development requires implementation of relevant green transformation of countries by providing green policies and extending green technologies and renewable energies. withal, it requires attracting additional knowledge, human, financial, and natural resources. in this case, countries with higher investment attractiveness have a higher capability to attract additional knowledge and resources to implement mechanisms and policies to achieve sustainable development goals. the effectiveness of public governance is a basic condition for the successful modernization of the economy to develop a positive business climate and attract investment. the paper aims at analysing the impact of institutions’ quality on a country’s investment attractiveness. the objects of research are ukraine and the eu countries. the study applies correlation and regression analysis to achieve the purpose of the research. the findings show that institutions’ quality has a positive and statistically significant effect on a country’s investment attractiveness in the eu countries. however, in political stability, freedom and quality of governance positively influence a country’s investment attractiveness. improving political stability by one point promotes the integrated index of a country’s investment attractiveness for the eu country by 0.086 and for ukraine by 0.016. the impact of the rule of law on a country’s investment attractiveness is not statistically significant. this means that ukraine has not formed an appropriate and affordable legislation base for attracting investors to the country. thus, the ukrainian government should pay attention to legislation for the regulation of social and economic development and energy and resource use. keywords: sustainable growth, climate finance, foreign development investment, r&d investment jel classification: d25, e22, g23 www.virtual-economics.eu issn 2657-4047 (online) bogdan moskalenko, oleksii lyulyov, tetyana pimonenko, and ihor kobushko virtual economics, vol. 5, no. 4, 2022 51 authors: bogdan moskalenko agro business client advisor, procredit bank, ukraine e-mail: b.mos.sumdu@gmail.com https://orcid.org/0000-0003-3972-1705 oleksii lyulyov wsb university in dabrowa gornicza, poland; sumy state university, ukraine e-mail: alex_lyulev@econ.sumdu.edu.ua https://orcid.org/0000-0002-4865-7306 tetyana pimonenko wsb university in dabrowa gornicza, poland; sumy state university, ukraine e-mail: tetyana_pimonenko@econ.sumdu.edu.ua https://orcid.org/0000-0001-6442-3684 ihor kobushko director, se "sumystandartmetrology", ukraine e-mail: i.m.kobushko@biem.sumdu.edu.ua https://orcid.org/0000-0003-0821-4233 citation: moskalenko, b., lyulyov, o., pimonenko, t., & kobushko, i. (2022). institutions’ effect on a country’s investment attractiveness within sustainable development. virtual economics, 5(4), 50-64. https://doi.org/10.34021/ve.2022.05.04(3) received: july 20, 2022. revised: october 15, 2022. accepted: december 10, 2022. © author(s) 2022. licenced under the creative commons license attribution 4.0 international (cc by 4.0) mailto:b.mos.sumdu@gmail.com https://orcid.org/0000-0003-3972-1705 mailto:alex_lyulev@econ.sumdu.edu.ua https://orcid.org/0000-0002-4865-7306 mailto:tetyana_pimonenko@econ.sumdu.edu.ua mailto:i.m.kobushko@biem.sumdu.edu.ua https://orcid.org/0000-0003-0821-4233 https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) bogdan moskalenko, oleksii lyulyov, tetyana pimonenko, and ihor kobushko virtual economics, vol. 5, no. 4, 2022 52 1. introduction the eu countries and ukraine declared ambitious goals of achieving sustainable development and reducing the energy intensity of economic development (kotowicz et al., 2019; kwilinski et al., 2019a; kharazishvili et al., 2020). in addition, it requires implementation of countries’ relevant green transformation by providing green policies, extending green technologies (kharazishvili et al., 2021; kotowicz et al., 2022) and renewable energies, and enhancing green education (dzwigol, 2020a; 2021; 2022), consciousness and awareness (kwilinski et al., 2019b; dźwigol et al., 2019; chygryn et al., 2020; dzwigol et al., 2020). withal, the above-mentioned needs attracting additional knowledge (szczepańska-woszczyna & gatnar, 2022; miśkiewicz 2018; 2019; 2021b), human, financial, and natural resources. in this case, countries with higher investment attractiveness have a higher capability to attract additional knowledge and resources to implement mechanisms and policies to achieve sustainable development goals. thus, assessment of a country’s investment attractiveness is a key point when making an investment decision for stakeholders (investors, highly qualified labour resources, international institutions, etc.). in addition, the results of the evaluation of a country’s investment attractiveness could be a benchmark for creating policies for a country's socioeconomic development. according to the analytical reports of international agencies, ukraine has been losing its competitive position from year to year: according to the global attractiveness index (2022), ukraine ranked 62nd out of 144 countries in 2018, 71st in 2019, and 75th in 2020. in addition, according to the global entrepreneurship index of 137 countries, ukraine ranked 73rd in 2018, 77th in 2019, and 79th in 2020. considering the global innovation index, among 131 countries in 2018, ukraine occupied 43rd place, 47th place in 2019, and 45th place in 2020. these negative tendencies lead to a reduction in the country’s investment attractiveness. consequently, it provokes the outflow of capital and resources from the country (kwilinski et al., 2022). in 2020, in ukraine, the value of foreign direct investments decreased by 6.2 billion usd compared to 2019 (state statistic service of ukraine, 2022), and the private remittances received from emigrants almost tripled the investment of non-resident companies in the economy (kwilinski et al., 2020a; 2020b). these trends confirm the inefficiency of the state policy to develop and use the investment capabilities of the country. effectiveness of the public governance is a basic condition for the successful modernization of the economy to develop a positive business climate (hussain et al., 2021), attract foreign investment, increase labour productivity due to the transfer of innovative technologies (kuzior et al., 2021), effectively use agricultural resources, reduce the energy intensity of economic development and transition to alternative energy sources (melnychenko, 2021; kwilinski et al., 2022; lyulyov et al., 2021a; 2021b). in this case, it is necessary to justify the relevant dimensions of institutional efficiency that influence a country’s investment attractiveness. 2. literature review the analysis of the theoretical landscape of evaluating a country’s investment attractiveness allows making a conclusion that different combinations of the dimensions of a country’s www.virtual-economics.eu issn 2657-4047 (online) bogdan moskalenko, oleksii lyulyov, tetyana pimonenko, and ihor kobushko virtual economics, vol. 5, no. 4, 2022 53 development could increase or reduce investment attractiveness (abazov, 1997; 2010; kuzior et al., 2021; kwilinski et al., 2020a; nawawi et al., 2022). farooq (2022) empirically justifies a hypothesis that the quality of institutions influences attractiveness for fdi and, consequently, countries’ investment attractiveness. khan et al. (2022) confirms similar conclusions on the role of institutions’ quality in providing investment attractiveness to a country. elmawazini (2010) maintains that government investment plays a core role in enhancing a country’s investment climate, which allows attracting foreign direct investment. hall and jones (1999) demonstrate that institutional quality directly affects a country’s capability to attract investment and new stakeholders into a country. oduola et al. (2022) apply the pls model with fixed effects and gmm to check the hypothesis on the role of government efficiency in providing a positive country investment climate. considering the findings, these scholars confirm that political stability could serve as a catalyst for investment attractiveness of sub-sahara african countries. rigobon and rodrik (2005) highlight the statistical significance of political and social climate in promoting countries’ investment attractiveness. they empirically justify that political and social dimensions stimulate the growth of a country’s competitiveness and, consequently, investment attractiveness. withal, kardos (2014) proves the bi-directional relationship between social dimensions and a country’s investment attractiveness. they use the level of people’s well-being to evaluate a country’s social development. sekkat and veganzones‐ varoudakis conclude that the political climate, infrastructure and social dimensions have statistically significant impacts on the investment attractiveness of the developing countries (south asia, africa, and the middle east). in addition, they confirm that economic openness could boost foreign direct investment in a country. the vast range of scholars confirm an interrelationship between ecological dimension of a country’s development and its investment attractiveness (yang et all., 2021; miskiewicz, 2022). the researchers (miskiewicz et al., 2021; 2022) underline that countries with an attractive investment climate receive more options for investing into the green projects and technologies (melnychenko, 2021; kwilinski et al., 2020b; coban, 2022; dźwigoł & wolniak, 2018). withal, other scientists conclude that countries with well-developed green infrastructure and a higher share of renewable energy are more attractive for foreign stakeholders and investments (saługa et al., 2021; miskiewicz, 2020; 2021a). alfaro et al. (2004) analyse the role of corruption in attracting investment into a country. the empirical results confirm the hypothesis that countries without corruption are more attractive for investment in new technologies, which could boost a country’s development. a similar conclusion is proven by medina and schneider (2020), who confirm that high corruption hinders investment in a country and leads to growing incredulity towards a country. nay et al. (2022) demonstrate that the rule of law is conducive to polish investment attractiveness. scholars emphasise the role of the legislation base in strengthening investment attractiveness for green projects on overcoming climate emergencies. othman (2022) applies the gmm model to confirm the effect of economic freedom on countries’ investment attractiveness. furthermore, he maintains that economic and financial freedom has a positive www.virtual-economics.eu issn 2657-4047 (online) bogdan moskalenko, oleksii lyulyov, tetyana pimonenko, and ihor kobushko virtual economics, vol. 5, no. 4, 2022 54 statistically significant impact on investment attractiveness in the arab countries. considering the abovementioned results, this study aims at analysing the impact of institutions’ quality on a country’s investment attractiveness. 3. methods the object of research is ukraine and the eu countries, which have common historical postsoviet roots (bulgaria, croatia, lithuania, latvia, poland, and romania). the panel data are compiled from the world data bank for the period of 2000–2019. applying the methods of our previous studies (moskalenko et al., 2022a; 2022b), a country’s investment attractiveness is evaluated in the following stages: 1) evaluation of the internal (a country’s capabilities to attract new resources) and external (a country’s capabilities to effectively use available resources) dimensions of a country’s investment attractiveness. thus, based on the papers (moskalenko et al., 2022a; 2022b), the following indicators of internal dimensions are analysed: se – social and economic; in – infrastructure; rd – research and development, ar – agriculture, e – energy and resources; 2) normalization of selected variables; 3) evaluation of indicator values by using the entropy method; 4) integrated evaluation of a country’s investment attractiveness by using the taxonometric method. thus, based on the abovementioned stages, the findings of a country’s investment attractiveness are shown in figure 1. figure 1. the empirical results of evaluating a country’s investment attractiveness source: developed by the authors based on (moskalenko et al., 2022a; 2022b). www.virtual-economics.eu issn 2657-4047 (online) bogdan moskalenko, oleksii lyulyov, tetyana pimonenko, and ihor kobushko virtual economics, vol. 5, no. 4, 2022 55 the study applies worldwide governance indicators (wgi) to estimate the quality of institutions. this indicator was developed by the world bank experts (kaufmann et al., 2011; wgi, 2022). it explains integrated and partial indicators of the quality of institutions for 200 countries since 1996. the core dimensions of wgi are voice and accountability; political stability and absence of violence; government effectiveness; regulatory quality; rule of law; and control of corruption (table 1). table 1. the core dimensions of institutions’ quality dimensions symbols explanations voice and accountability va evaluation of a country's society participation in the election process, the ability of the elected authorities to respond to the society demands in a constitutional manner, freedom of expression and voice. political stability and absence of violence ps the political system stability, the probability of an unconstitutional or violent overthrow of a government, including politically motivated violence and terrorism government effectiveness ge the ease of using government services in licensing, permits and patents, protecting the producers’ rights, an access to natural resources under the government monopoly, etc. regulatory quality rq the laws and regulations governing economic activity creates a business environment. the unequivocal interpretation of regulatory acts, the equality of all economic subjects before the law, and a transparent system of legislation reform rule of law rl evaluation of the compliance with laws, execution of contracts, security in property relations, ensuring the establishment of justice in judicial and law enforcement agencies control of corruption сс tolerance of authorities to the possibility of using administrative levers for personal gain, including both small and large-scale forms of corruption source: developed by the authors based on (kaufmann et al., 2011; wgi, 2022). the wgi summarizes the data from more than 30 separate sources, with the participation of public opinion research institutes, think tanks, non-governmental organisations, international organisations and business. each of the six wgi indicators is constructed by summarizing data from primary sources that are consistent with the concept of public administration evaluation. the descriptive statistics of the selected variables of wgi for each country and for all panel data are shown in table 2. the findings of the correlation analysis are shown in table 3. the empirical results lead to a conclusion that the dynamics of the indicators is homogeneous. among the six indexes, political stability has a negative correlation value relative to all others. this means that political stability is achieved with the simultaneous decline of freedom and government effectiveness, the rule of law, voice and accountability and control of corruption. www.virtual-economics.eu issn 2657-4047 (online) bogdan moskalenko, oleksii lyulyov, tetyana pimonenko, and ihor kobushko virtual economics, vol. 5, no. 4, 2022 56 table 2. descriptive statistics of the selected variables variables mean sd cv min max mean sd cv min max bulgaria croatia сс -0.154 0.104 -0.678 -0.267 0.108 0.124 0.106 0.856 -0.073 0.291 ge 0.144 0.114 0.796 -0.057 0.339 0.521 0.115 0.221 0.332 0.707 ps 0.283 0.161 0.570 0.004 0.540 0.608 0.112 0.185 0.278 0.810 rq 0.586 0.107 0.182 0.197 0.697 0.449 0.140 0.311 -0.030 0.591 rl -0.073 0.043 -0.580 -0.140 0.036 0.175 0.149 0.850 -0.146 0.409 va 0.480 0.104 0.216 0.325 0.691 0.524 0.050 0.096 0.453 0.658 lithuania latvia сс 0.395 0.176 0.447 0.130 0.714 0.302 0.151 0.501 -0.072 0.536 ge 0.796 0.234 0.294 0.145 1.185 0.752 0.224 0.297 0.329 1.105 ps 0.779 0.130 0.167 0.425 1.050 0.546 0.213 0.390 0.205 1.002 rq 1.070 0.117 0.110 0.764 1.277 1.018 0.107 0.105 0.748 1.193 rl 0.769 0.204 0.265 0.292 1.029 0.737 0.205 0.279 0.197 1.014 va 0.920 0.051 0.055 0.850 1.025 0.802 0.048 0.060 0.701 0.885 poland romania сс 0.513 0.177 0.344 0.139 0.739 -0.206 0.132 -0.638 -0.491 -0.018 ge 0.593 0.127 0.215 0.374 0.827 -0.237 0.102 -0.429 -0.373 -0.026 ps 0.679 0.281 0.414 0.153 1.072 0.174 0.193 1.108 -0.382 0.526 rq 0.890 0.107 0.121 0.728 1.055 0.424 0.243 0.572 -0.109 0.658 rl 0.609 0.154 0.252 0.405 0.841 0.046 0.208 4.555 -0.260 0.388 va 0.954 0.127 0.133 0.698 1.105 0.436 0.075 0.172 0.299 0.541 ukraine total сс -0.929 0.141 -0.151 -1.150 -0.710 0.006 0.479 75.477 -1.150 0.739 ge -0.598 0.144 -0.240 -0.834 -0.297 0.282 0.519 1.843 -0.834 1.185 ps -0.735 0.810 -1.102 -2.021 0.173 0.333 0.592 1.776 -2.021 1.072 rq -0.501 0.113 -0.225 -0.629 -0.259 0.562 0.519 0.922 -0.629 1.277 rl -0.785 0.089 -0.113 -1.109 -0.681 0.211 0.539 2.554 -1.109 1.029 va -0.179 0.255 -1.426 -0.671 0.091 0.562 0.382 0.678 -0.671 1.105 source: developed by the authors. table 3. correlation matrix for wgi va ps ge rq rl cc va 1.0000 ps –0.1997 1.0000 ge 0.0551 –0.6937 1.0000 rq 0.1882 –0.3299 0.4855 1.0000 rl 0.4738 –0.1864 0.3840 0.4565 1.0000 cc 0.4212 –0.2155 0.5178 0.5688 0.6570 1.0000 source: developed by the authors. the results confirm the multiculturality among the selected variables. considering the previous study (bilan et al., 2019), the integrated indicator or elemental assessment allows eliminating multiculturality issues. scholars (bilan et al., 2019) apply the integrated index of institutions’ quality based on fishburn methodology and consider the direction of influence of various subindices on government quality: www.virtual-economics.eu issn 2657-4047 (online) bogdan moskalenko, oleksii lyulyov, tetyana pimonenko, and ihor kobushko virtual economics, vol. 5, no. 4, 2022 57 𝑊𝐺𝐼 = ∑ 𝑤𝑖 × 𝑊𝐺𝐼𝑖 = ∑ 2(𝑛−𝑗+1) 𝑛(𝑛+1) × 𝑊𝐺𝐼𝑖,𝑡 , 𝑛 𝑖=1 𝑛 𝑖=1 (3.2) where 𝑤𝑖 is a weight of i-subindexes of wgi; n is numbers of subindexes; j is a sub-index rank; 𝑊𝐺𝐼𝑖,𝑡 is calculated values of the i-th sub-index. the study applies the following stages to check the elemental assessment of wgi impact on quality of institutions: 1) evaluating each indicator of wgi impact on dimensions of a country’s investment attractiveness; 2) evaluating each indicator of wgi impact on the integrated value of a country’s investment attractiveness; 3) evaluating wgi impact on the integrated value of a country’s investment attractiveness. 4. results and discussion considering the findings (table 4) on the six indicators, only political stability has a statistically significant impact on the external dimensions of a country’s investment attractiveness. thus, the growth of ps by one point led to an increase in a country’s investment attractiveness by 0.008. table 4. the wgi impact on external dimensions of a country’s investment attractiveness variables coef. p–value const. p–value va 0.013 0.148 0.048 0.000 ps 0.008 0.003 0.051 0.000 ge -0.011 0.352 0.021 0.038 rq 0.024 0.282 0.033 0.010 rl 0.031 0.166 0.069 0.001 cc 0.006 0.711 0.051 0.006 source: developed by the authors. it should be noted that voice and accountability and freedom of voice are the core catalysts of the society’s democratic development. consequently, it could boost the inflow of foreign investments and contribute to improving a country’s investment attractiveness. in the next stage, the study applies correlation regression analysis to check the impact of wgi on the internal indicators of a country’s investment attractiveness: social and economic, infrastructure, research and development, agriculture, energy and resources. the results of the wgi impact on internal indicators of a country’s investment attractiveness are shown in table 5. www.virtual-economics.eu issn 2657-4047 (online) bogdan moskalenko, oleksii lyulyov, tetyana pimonenko, and ihor kobushko virtual economics, vol. 5, no. 4, 2022 58 table 5. the findings of va, cc, rq, rl, ps and ge impact on internal dimensions and integrated index of the country’s investment attractiveness for ukraine and the eu countries variables regression equations p–value variables regression equations p–value const wgii const wgii va cc se y= 0.054+0.006va 0.000 0.329 se y = 0.071+0.02cc*** 0.000 0.078 in y= 0.079+0.088va* 0.000 0.000 in y = 0.128+0.07cc 0.000 0.127 rd y= 0.052+0.057va** 0.000 0.001 rd y = 0.012–0.055cc 0.719 0.121 ar y= 0.089+0.024va** 0.000 0.014 ar y = 0.07–0.024cc 0.001 0.181 e y= 0.057+0.007va 0.000 0.405 e y = 0.045–0.012cc 0.009 0.479 ciaua y= 0.379–0.034va 0.000 0.136 ciaua y = 0.377+0.005cc 0.000 0.907 ciaeu y= 0.261+0.137va* 0.000 0.000 ciaeu y = 0.331+0.153cc* 0.000 0.000 rq rl se y = 0.053+0.001rq 0.000 0.940 se y =0.071–0.025rl 0.000 0.102 in y = 0.099+0.075rq 0.004 0.221 in y =0.19+0.159rl** 0.000 0.003 rd y = 0.022+0.082rq*** 0.339 0.075 rd y =–0.038+0.127rl** 0.208 0.002 ar y = 0.098+0.009rq 0.000 0.701 ar y =0.046+0.059rl** 0.010 0.008 e y = 0.034+0.044rq** 0.003 0.034 e y =0.059–0.004rl 0.003 0.840 ciaua y = 0.34–0.065rq 0.000 0.248 ciaua y =0.39+0.032rl 0.000 0.562 ciaeu y = 0.251+0.014rq* 0.000 0.000 ciaeu y =0.311+0.119rl* 0.000 0.000 ps ge se y =0.056+0.006ps** 0.000 0.002 se y =0.045–0.011ge 0.000 0.352 in y =0.048+0.019ps** 0.000 0.017 in y =0.11+0.078ge*** 0.001 0.098 rd y =0.078+0.019ps** 0.000 0.001 rd y =0.014+0.082ge** 0.481 0.019 ar y =0.088+0.008ps** 0.000 0.014 ar y =0.108–0.023ge 0.000 0.223 e y =0.063+0.009ps* 0.000 0.000 e y =0.024+0.053ge* 0.003 0.000 ciaua y =0.385+0.016ps** 0.000 0.028 ciaua y =0.321+0.085ge** 0.000 0.043 ciaeu y =0.312+0.086ps* 0.000 0.000 ciaeu y =0.309+0.108ge* 0.000 0.000 note: se stands for social and economic; in means infrastructure; rd is research and development, ar is agriculture, e is energy and resources; ciaeu,ua is a country’s investment attractiveness of the eu and ukraine, respectively; *, **, and *** are statistical significance at 1%, 5% and 10%. source: developed by the authors. the results (table 5) confirm the statistically significant impact of va on three internal dimensions of a country’s investment attractiveness: infrastructure, research and development, and agriculture. increasing va results in the growth of infrastructure by 0.088, research and development by 0.057 and agriculture by 0.024. in addition, the integrated index of a country’s investment attractiveness for ukraine is not elastic for changes in va. however, for the eu countries, the integrated index of a country’s investment attractiveness is elastic for changes in va. improving va is conducive to ciaeu by 0.137 points. improving control over corruption promotes social and economic dimensions (by 0.02). furthermore, control of corruption positively influences the integrated index of a country’s investment attractiveness for the eu countries. it should be noted that ukraine has not developed effective institutions to tackle corruption. thus, corruption is not only an economic but also a social issue for the country. the impact of the rule of law has a positive and statistically significant (p value is higher than 0.05) effect on research and development, www.virtual-economics.eu issn 2657-4047 (online) bogdan moskalenko, oleksii lyulyov, tetyana pimonenko, and ihor kobushko virtual economics, vol. 5, no. 4, 2022 59 energy and resources, and the integrated index of a country’s investment attractiveness for the eu countries (table 5). considering the empirical results (table 5), the rq increase leads to the growth of rd by 0.082, e by 0.044 and ciaeu by 0.014. withal, the findings in table 8 show that the rule of law is conducive to infrastructure by 0.159 (statistical significance 5%), research and development by 0.127 (statistical significance 5%), agriculture by 0.059 (statistical significance 5%) and ciaeu by 0.119 (statistical significance 1%). the legislation base is the core element of government efficacy in providing relevant social and economic policies. the impact of rl on ciaua is not statistically significant. this means that ukraine has not formed an appropriate and accessible legislation base for attracting investors to the country. thus, the ukrainian government should pay attention to legislation for regulating social and economic development and energy and resource use. contrary to the above findings, political stability has a positive and statistically significant impact on all internal dimensions of a country’s investment attractiveness. thus, improving ps by one point promotes the integrated index of a country’s investment attractiveness for the eu country by 0.086 and for ukraine by 0.016. government effectiveness positively affects all dimensions of a country’s investment attractiveness, excluding social, economic, and agricultural dimensions. thus, increasing the efficiency of governance promotes the infrastructure, research and development, energy and resources dimensions. in addition, ge positively affects the integrated index of a country’s investment attractiveness for the eu countries and ukraine. 5. conclusions it is necessary to emphasize that one requirement to achieve sustainable development goals is the transference, accountability, and efficiency of governance institutions. providing them allows improving a country’s investment climate and inflows of new resources into a country (labour, natural, financial). thus, the government should focus on providing effective and transparent policies. the empirical results of the wgi effect on the integrated index of a country’s investment attractiveness showed that, unlike eu countries, where all wgi sub-indices have an equally positive and statistically significant impact on a country’s investment attractiveness, in ukraine, there are only indices of political stability, freedom and quality of state authorities that positively affect the country’s investment attractiveness. it should be noted that ukraine has already run the restructuring of government policies, which is accompanied not only by changes in the foreign policy orientation but also by approaches to regulating domestic policy. reforms in the public administration have different effects on the country's socioeconomic development. thus, political stability, freedom and voice, and public opinion are very sensitive to the government’s attempts to implement www.virtual-economics.eu issn 2657-4047 (online) bogdan moskalenko, oleksii lyulyov, tetyana pimonenko, and ihor kobushko virtual economics, vol. 5, no. 4, 2022 60 reforms. the changes in external dimensions (growth in the gross domestic product, decrease in the unemployment rate, inflow of foreign direct investments) and other macroeconomic indicators respond to the reforms with a time lag. thus, the positive changes are reflected in the statistics when the government in ukraine has already changed and policies have been implemented (kwilinski et al., 2019c). moreover, the results showed that in the long term, the policy on improving a country’s investment attractiveness should consider the targeted value for each indicator. furthermore, the ukrainian government should provide the convergent policy with the eu countries (szczepańska-woszczyna et al., 2022). despite the valuable findings, this study has the potential to benefit. the number of countries should be extended to provide a comparison between all eu countries and ukraine. in addition, in further research, the nonlinear and casual relationship should be checked among the selected variables. besides, it is necessary to underline those digital technologies is conducive to business and investment climate (кwilinski, 2019; tkachenko et al., 2019; trzeciak et al., 2022; vaníčková & szczepańska-woszczyna, 2022). in this case, further studies should consider digitalization and new technologies’ 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(2021). the green competitiveness of enterprises: justifying the quality criteria of digital marketing communication channels. sustainability, 13(24), 13679. https://doi.org/10.3390/su132413679 https://doi.org/10.3390/en14206840 https://www.ukrstat.gov.ua/ https://doi.org/10.23762/fso_vol10_no3_6 https://doi.org/10.3846/tede.2022.17518 https://doi.org/10.1515/mspe-2019-0020 https://doi.org/10.1515/mspe-2019-0020 https://doi.org/10.3390/joitmc8010058 file:///c:/users/okvil/downloads/.%20https:/doi.org/10.17512/pjms.2020.21.2.30 https://info.worldbank.org/governance/wgi https://doi.org/10.3390/su132413679 70 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, maryna klymchuk, and iryna ivakhnenko virtual economics, vol. 2, no. 2, 2019 2019 volume 2 number 2 (april) scientific prediction of the balanced energy saving development strategy of the construction projects volodymyr tkachenko, maryna klymchuk, and iryna ivakhnenko abstract. the article explores the process of syncretisation of the concepts of "green lease", "surveying" and "balanced scorecard" in the formation of strategy of energy saving development of construction projects. as a result of the conducted analysis of the systems, it was proposed to incorporate the category “energy saving development” to scientific terminology from the perspective of increasing energy efficiency and energy saving of the construction projects, defined as scientific categorical status of this concept. within the framework of four interconnected main projects of the balanced scorecard, a basic model of the energy saving development system of construction projects is formed, taking into account the purpose, the stages, and schemes of implementation. conceptual and integrative approaches have been implemented in the energy saving development system of construction projects based on the symbiosis of modern concepts of “green leasing” and “surveying”, which will provide the opportunity to use the latest effective practices in the construction of energy efficient buildings. the strategic map for implementation of energy saving development for llc “kan development” was developed, where the proposals of the implementation of an effective strategy on the energy saving platform with the regard to innovative management and energy efficient technologies were presented within four projections of “balanced scorecard” (finance, customers, business processes, personnel). keywords: balanced scorecard, green lease, surveying, energy saving, strategy, management, enterprise, development jel classification: d2, m12, o13, p18 71 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, maryna klymchuk, and iryna ivakhnenko virtual economics, vol. 2, no. 2, 2019 author(s): volodymyr tkachenko kyiv national university of construction and architecture, 31 povitroflotsky avenue, kyiv, ukraine, 03680 e-mail: vladymyr8888@gmail.com https://orcid.org/0000-0003-2114-7194 maryna klymchuk kyiv national university of construction and architecture, 31 povitroflotsky avenue, kyiv, ukraine, 03680 e-mail: klimarinchuk@gmail.com https://orcid.org/0000-0002-1024-4784 iryna ivakhnenko kyiv national university of construction and architecture, 31 povitroflotsky avenue, kyiv, ukraine, 03680 e-mail: ivakhnenkoirina@ukr.net https://orcid.org/0000-0001-7166-1023 citation: tkachenko, v., klymchuk, m., & ivakhnenko, i. (2019). scientific prediction of the balanced energy saving development strategy of the construction projects. virtual economics, 2(2), 70-84. https://doi.org/10.34021/ve.2019.02.02(5) received: december 18, 2018. revised: january 16, 2019. accepted: march 29, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) mailto:vladymyr8888@gmail.com https://orcid.org/0000-0003-2114-7194 mailto:klimarinchuk@gmail.com https://orcid.org/0000-0002-1024-4784 https://orcid.org/0000-0001-7166-1023 https://doi.org/10.34021/ve.2019.02.02(5) https://creativecommons.org/licenses/by/4.0/ 72 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, maryna klymchuk, and iryna ivakhnenko virtual economics, vol. 2, no. 2, 2019 1. introduction one of the strategic imperatives of country's development is to improve the energy efficiency of the real economy, which is caused by high levels of energy intensity, the needs of society in a significant amount of energy and modernization of the national economy, with the need to improve the competitiveness of the enterprises of the construction complex. the concentration of interest in energy efficiency, both from the position of scarcity of fuel and energy resources, and of competitiveness of national industries, has led to the fact that this vector is considered as an indicator that mediates economic and social development and energy independence in developed countries. the priority is to solve the problem of realization of the potential of energy saving construction resource, where, according to experts estimate, it is 55 %. there is a need in the application of new energy saving efficiency in terms of the dynamism of the external business environment, growth of the market risks of dissonance in the construction industry (kulikov & klymchuk, 2017). the current state of the economic development of the country determines the search for constructive solutions in the field of energy saving based on advanced concepts, such as “environmental economics”, “passive house”, “triple zero”, “nzeb”, “surveying”, “green lease”, which can be solved on the basis of development of the energy saving development system (chernyshev et al., 2018). there is a need in the interaction of the basic structural components (economic, social, environmental) of modern environmental development of society in the context of the implementation of energy efficiency measures, which can be solved through the development of energy saving development system (chernyshev et al., 2018). researchers investigate the development implementation problem in modern forms of industrial-economic relations in their writings (barbier, 1989; baronin, 2013; fesun, 2014; mulhearn & vanе, 2016; peiser & frej, 2003). some researchers interpret the essence of development as a construction process, realtor activity, management of commercial real estate (fesun, 2014). however, in our opinion, such an approach only fragmentarily highlights the specifics of development. m. ashouria, f. haghighat, b.c.m. fung, a. lazrak, and h. yoshino (2018) proposed a new methodology for monitoring energy consumption of the building. this study proposes a new methodology for monitoring the energy consumption in building end-use loads to build an advisory system. the built system alerts occupants to take certain measures (prioritized recommendations) to reduce energy consumption of end-use loads. the quantification of potential savings is also provided upon following measures. the proposed methodology is also capable of evaluating the energy savings performed by the 73 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, maryna klymchuk, and iryna ivakhnenko virtual economics, vol. 2, no. 2, 2019 occupants. the system works based on the analysis of historical data generated by occupants using data mining techniques to output highly feasible recommendations. for demonstration purposes, the methodology was tested on the real dataset of a building in japan. the dataset includes detailed energy consumption of end-use loads, categorized as hot water supply, lighting, kitchen, refrigerator, entertainment and information, housework and sanitary, and others. the results suggest that the developed models are accurate, and that it is possible to save up to 21% of total energy consumption by only changing occupants’ energy use habits (ashouria et al., 2018). energy consumption for a full cycle of operation of buildings in ukraine is in average more than 300 kwh/m² per year of the heated area. in this case, emission of about 35 % of all greenhouse gases is created (kulikov & klymchuk, 2017). the above needs to address the issue of environmental protection, healthy lifestyle and an updated study of the problem of implementation of energy saving development for the sustainable development of the national economy. the construction of passive houses is one of the solution vectors of the problem of optimizing the structure of energy consumption, that will lead to the feasibility of using renewable energy sources and modern technical and economic solutions in the context of energy saving in construction. it is expedient to implement the main directions of energy efficient construction taking into account the provisions of energy saving development. statistics of foreign and domestic developers testify to the reality of obtaining the following economic effects from the implementation of the development system (in comparison with the traditional forms of organization of the investment process): reduction of the duration of the stages of development and implementation of the project by 7-15 %, including the stage of the construction work — by 10-25 %; reduction of the complexity of the stage of project implementation by 5-15 %; reduction of the construction by 10-20 %; reduction of the operating costs by 15-25 %; reduction of the expenses for the entire project by 5-15% (fesun, 2014; peiser & frej, 2003). therefore, the presented data substantiate the feasibility of the development of the concept of balanced energy saving development as a basis for the formation of the system management of construction projects on the energy saving platform. 2. literature review a modern approach to the formation of the system of the development of construction projects based on the implementation of the neoclassical paradigm focuses on maximizing profits and liquidity. in terms of innovative development of the economy on the energy saving platform, there is a need to develop a comprehensive methodology for energy saving development and appropriate tools for its implementation. this methodology will provide the opportunity to transform the information-analytical and organizational and economic https://www.sciencedirect.com/science/article/pii/s0378778818300057#! 74 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, maryna klymchuk, and iryna ivakhnenko virtual economics, vol. 2, no. 2, 2019 structure of the construction project to find solutions to the basic problems of its development that promote sustainable economic growth in the present and future periods; as a toolkit, it is proposed to use the concept of “balanced scorecard”. the concept of “development” has two interrelated values. the first, development is the modernization of the real estate, which provides its conversion into another new object, which has a higher market value than the value of the original object. thus, development is a process of the development of the estate. the second, development is a professional activity of the organization (management) processes in construction. this is a special type of entrepreneurial activity in market conditions and manifestation of business activity on the market. the role of the developer has some specifics on all stages of the investment — construction project, and differs from the role of other participants (peiser & frej, 2003; fesun, 2014). we agree with the above mentioned authors' proposals which represent the essence of development through the lens of two interrelated values, but we propose to supplement this characterization based on the conceptual integration approach that provides the symbiosis of the two previous characteristics, taking into account modern concepts of “green leasing” and “surveying” which will provide the opportunity to use the latest effective development practices in construction. one of the trends of the development of the world economy in the field of commercial management is active dissemination of the conception of “surveying” in science and practice. requirement of the effective adjusting of the real estate market development as a key sector of the national economy of any country has determined the origin of independent professional activities in the form of surveying. the study of international experience shows that the use of a professional approach to the property management provides the opportunity to significantly increase the level of its effectiveness in the interests of all stakeholders (owners, tenants, government and society in general). such a conceptual approach regarding management of property is called “surveying” (baronin, 2013). the conception of “surveying” can be interpreted today as totality of legal, technical, economic and managerial expertise of the real estate, which provides a maximum effect of its use. “green lease” is one of the tools that formalizes duties among leaseholders and tenants with energy efficiency measures in the building (brooks, 2008). that is why, the solution is proposed to synchronize the concepts of “surveying” and “green lease” to solve the problems of elaborating the methodology of balanced energy saving development, which will enable the fruitful cooperation between the owners of commercial real estate and tenants in the context of implementing energy efficient measures in the building. the economic aspect of the development is implemented to increase the value of the property as a result of modernization. increase as a result of the modernization of the value of the object provides the appearance of real estate with new consumer qualities, which make it more attractive on the market. legal aspects of the development are 75 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, maryna klymchuk, and iryna ivakhnenko virtual economics, vol. 2, no. 2, 2019 associated with the legal registration of the performed changes, the emergence of a qualitatively new property, which has a higher value (peiser & frej, 2003). development means the property development-construction, engineering and other operations on real estate, it leads to a qualitative transformation, because development is the process of project implementation (chernyshev et al., 2018). from the perspective of attracting additional financial resources into the activity of the production-economic system, feson a.s. defined the development as a form of organization of an investment project in the field of real estate, and directly the development project is the investment project, which is a set of interrelated activities with available resources to create new long-term assets for further return on investment and income (fesun, 2014). 3. methods the theoretical and empirical basis of the research were the methods of scientific cognition, general scientific principles, achievements in the sphere of energy saving of enterprises. the conceptual-integration approach provides symbiosis of modern concepts of “green leasing”, “surveying” and “balanced scorecard” (baronin, 2013; brooks, 2008; kaplan & norton 1996). the suggestion is to implement into the research the definition of “energy saving development” due to the significant energy intensity of the national economy, the growing demand for energy in the enterprises, the need for modernization of housing and communal services, and the availability of foreign concepts that offer a number of energy efficiency measures that are appropriate to be implemented at the development stage of construction in order to increase the level of energy saving of enterprises, social infrastructure. the concept of energy saving development has not yet been defined in science. obviously, before making managerial decisions, it is necessary to have clear representation of the essential characteristics of this term, because the correct definition helps to understand the choice of strategy to increase energy efficiency at the enterprise level and the country on the whole (dzwigol & dzwigol-barosz, 2018; dzwigol et al., 2019; karpenko et al., 2018; meneses-viveros et al., 2018; national action plan for energy efficiency, 2008; pajak et al., 2017; thøgersen, 2018; zhang et al., 2018). energy saving development should not be equated to the economic efficiency of energy consumption. the energy saving does not always turn out to be the most economically effective, since the achievement of high energy efficiency sometimes requires significant investments, the payback of which cannot always be ensured by the energy savings achieved in reasonable time. the significant achievement of energy saving, as a rule, requires investment costs, and saved energy receiving must be commensurate with the relevant investment costs. further, according to the results of the definitive analysis, the determinants of incorporation of energy saving development into the theoretical and practical areas of construction management were proposed (table 1). 76 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, maryna klymchuk, and iryna ivakhnenko virtual economics, vol. 2, no. 2, 2019 table 1. determinants of incorporation of energy saving development into the theoretical and practical sphere of management of a construction project determinant characteristic comfortable housing awareness of the possibilities of a significant increase of consumer qualities of housing through the introduction of modern technologies conceptualism of energy saving construction one of the trends of the development of the world economy in the field of commercial real estate management; there is an active dissemination of the concepts of "surveying" and "green lease" in the science and practice legal the legal basis of passive housing, energy audits and energy certification of buildings construction ecological investing in the development projects in the construction of energy efficient housing, which has no negative environmental impact; using modern energy efficient technology that increases the cost and the prestige of such housing financial and economic introduction of energy efficient development will reduce energy consumption of buildings throughout the life cycle, and will provide an opportunity to attract significant investments through enhancing energy efficiency of the state politics source: own research. therefore, we propose that "energy saving development" is a system of implementation of a complex of measures of economic, technical, technological, legal, environmental and social nature aimed at reducing the cost of energy efficiency in the building on the basis of the implementation of energy efficient technologies and management practices, as well as improving organizational and managerial areas, optimization of interaction links within the production chain, optimization of business processes, increase of management efficiency. considering the proposals of the implementation of energy saving development in theory and practice of implementation of energy efficiency measures in the construction, we propose forming an effective strategy and its estimation based on balanced scorecard. balanced system of energy saving development of construction projects provides achievement of goals and long-term sustainable advantages over competitors. system of energy saving development of construction projects from the perspective of principles of equity is very important for the developer because of its promotional efficient use in existing advantages, and creates new potential activities. the successful implementation of a balanced system of energy saving development of construction projects requires the assessment of: the external and internal environments; the competition; the key success factors; the strategic plans and economic indicators of activity; the factors that affect the reduction of energy consumption. if we present the proposed system of balanced energy saving development of construction projects as a method of organization, through which you can monitor the activities of the 77 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, maryna klymchuk, and iryna ivakhnenko virtual economics, vol. 2, no. 2, 2019 enterprise in the context of management and implementation of energy efficient measures, then there is a need to define indicators, absolute and relative quantities, which will allow the quantitative form of reflection of some kinds of the developer's economic activity on the energy saving platform. since the information content of some indicators are limited, and when they are used without taking into account all the relevant economic and analytical information they may be misinterpreted, it is advisable to offer an informative system in order to maintain the principle of complexity of energy saving development of construction projects. within the framework of the balanced system of indicators of energy saving development of construction projects, the emphasis should be on using the data on the assessment of changes in current and potential performance. the performance indicator reflects quantitative characteristics, that is, the ratio of the costing result. balanced system of energy saving development of the construction projects of external and internal environment examines key indicators of effectiveness, since this assessment system helps the organization identify ways of achieving strategic goals. their use allows developer to assess the status of implementation of the strategy. figure 1. conceptually balanced saving development source: own research on the basis of balanced scorecard (kaplan & norton, 1996). the main elements of the balanced scorecard indicator target value of indicators strategic priorities strategic map scorecard the tasks of energy saving development constructing passive houses rationing of energy consumption the introduction of renewable energy into construction introduction of leed, bream, dgnb standards conducting energy audit and certification of buildings 78 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, maryna klymchuk, and iryna ivakhnenko virtual economics, vol. 2, no. 2, 2019 the concept of balanced energy saving construction projects should be based on balanced scorecard and include basic concepts regarding the implementation of measures of energy saving in construction fig. 1. a balanced system of energy saving development of the construction projects is an integrated technology of coordination of energy saving management project, created to maintain a system of indicators needed to increase energy efficiency, profitability and quality of customer service, taking into account the relationship between various aspects of the development strategy of the developer. the aim of the balanced energy saving development of construction project system is the coordination on basis of relevant information of causal relationship between the cost system and the drivers of effective results. we propose to consider energy saving development of construction projects on the basis of balanced scorecard in the form of a structuredanalytical scheme consisting of five stages fig. 2. figure 2. stages of implementation of balanced energy saving development of construction projects source: own research. according to the authors, the key business processes of the system of balanced energy saving development of construction projects should be implemented according to the scheme fig. 3. balanced system of indicators (balanced scorecard, bsc), offered by scientists r. kaplan and d. norton provides an opportunity to develop an effective strategy for formation energy saving development projects within four interconnected main projections (kaplan & norton, 1996). the four indicators of balanced scorecard, with the determinants of energy saving, are presented in fig.4. stage 1. initiation of energy saving development of construction project stage 2. target-setting: formalization of indicators; definition of key business process leaders stage 3. financial and legal support construction project realization: establishment of terms implementation; preparation of technical-economic feasibility stage 4. formation of system contractual obligations of participants of construction project step 5. project implementation: assess of financial-economic results, monitoring and optimization measures 79 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, maryna klymchuk, and iryna ivakhnenko virtual economics, vol. 2, no. 2, 2019 figure 3. the realization scheme of the system of balanced energy saving development of the construction project source: own research. figure 4. the basic model of the system of balanced energy saving development of the construction project source: own research. assessment of energysaving potential system of values of sustainable development formation of the control system for the fulfillment of strategic goals responsibility centers controlling indicators checking strategic plans plan meets the established criteria estimation of external environment estimation of internal environment assessment of the market of energyefficient technologies in construction alternative strategies formation evaluation and selection strategies yes no strategy of balanced energy saving development projection "finance / economics" definition of the potentials of development and attraction of investments into the process projection "personnel" formation of effective motivation of personnel in energy saving projection "business processes" definition of business processes that need optimization, or outsourcing transfer projection "customers" working with existing and searching new customers 80 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, maryna klymchuk, and iryna ivakhnenko virtual economics, vol. 2, no. 2, 2019 the four components of balanced system of indicators are interconnected and should promote the implementation to a unique strategy of balanced energy saving development of construction projects. though, the balanced scorecard does not reach all aspects of the developer's activity, but concerns only those aspects that will be used to achieve strategic energy saving goals. the orientation of the system for balanced system of energy saving development of construction projects for long term, require taking into account the factors of time and risks, analysis of the industrial and general development potential of the developer, the integration of all management functions. accordingly, the tools of the proposed system are: analysis of the strengths and weaknesses of the developer, regarding opportunities and threats; benchmarking, market analysis; cost assessment at all stages of the life cycle of a construction project; functional cost analysis; analysis of impact of the formation of energy saving development on the ecological state of the region; portfolio analysis; potential and competition analysis; balanced system of indicators. 4. results on the foundation of conceptual integration approach that implies the symbiosis of the modern concepts of “green leasing” and “surveying”, we will consider the application of the tools of a balanced system of energy saving development of construction projects of kan development llc management. for the exploring developer, it is advisable to choose a strategy of reducing energy consumption, with reducing that in the main production. at the same time, the amount of production will continue to be sufficient on effective management level. the development of the strategy requires a definition of the main goal. in “kan development” ltd, the main targets are defined as optimization of expenses in building constructions, realization of energy saving projects and energy efficiency in construction. after determination of primary strategic purpose of the developer, aims and tasks are formed, in relation to their implementation within the framework of four projections of a balanced system of indicators. in general, the process is presented as a strategic map of the explored developer, the instrument that will enable the symbiosis of goals and tasks at different stages of balanced energy saving development. strategic map of the implementation of the energy saving development project of kan development ltd presented in fig. 5. 81 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, maryna klymchuk, and iryna ivakhnenko virtual economics, vol. 2, no. 2, 2019 the degree of execution of each strategic task must be measured by a certain set of indicators expressed in absolute or relative numerical values. within the framework of a balanced system, they have key performance indicators. figure 5. strategic card for implementing energy saving development of llc kan development source: own research. the achievement of the financial objectives of the developer is verified by comparing the planned and actual performance indicators in the chosen direction. based on the study, conclusions are drawn about the need to reduce (increase) a specific indicator in the dynamics. 5. conclusions in today's conditions of development of the real estate sector of the economy, in particular construction, there is a problem of ensuring their energy efficiency, energy independence and energy security that can be realized through the introduction of energy saving development of construction projects. based on the results of the systematic analysis carried finances costs optimization of efficiency increase in realization of construction project on the basis of energy saving development estimate construction formation of the project the use of high-quality energyefficient materials construction profit margin customers a significant expansion of the customer base, asretention of loyal customers ensuring the timely commissioning of the construction project quality improvement of construction objects business processes optimization technology of the construction process introduction of the newest approaches of business processes management use of energy-saving technologies buying of new building materials personnel ensuring the optimal level of labor resources, motivation of personnel to energy saving formation payment salary fund innovative equipmenttraining work of personnel optimizing the amount of company workers 82 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, maryna klymchuk, and iryna ivakhnenko virtual economics, vol. 2, no. 2, 2019 out, the proposal on incorporation the category of “energy saving development” into the scientific terminology in the context of increasing the level of energy efficiency and energy saving of construction projects was substantiated, and the scientific and categorical status of this concept was determined. in order to form an effective strategy for energy saving development of construction projects, proposals for the syncretisation of the concepts of “green lease”, “surveying”, “balanced scorecard” in the process of its implementation are provided. within the framework of four interconnected key projections of the balanced scorecard, a basic model of the balanced system of energy saving development of a construction project has been formed taking into account the purpose, stages, implementation schemes. the conceptually-integration approaches are incorporated into the system of energy saving development that implies the symbiosis of the modern concepts of “green leasing” and “surveying”, which will provide the opportunity to use the newest effective practices in the construction of energy efficient buildings. a strategic map of the implementation of sustainable energy saving development for kan development llc was developed, where within the framework of four balanced scorecard projections (finance, clients, business processes, personnel), proposals for implementation of effective strategy of energy saving platform are presented, taking into account innovative management and energy efficient technologies. prospects for further research are the development of an economic-mathematical model based on a strategic map of energy saving development, which will allow to determine the structure of the system of balanced indicators by the categories of production costs 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(2018). impact factors of household energy-saving behavior: an empirical study of shandong province in china. journal of cleaner production, 1851, 285-298. https://doi.org/10.1016/j.jclepro.2018.02.303 48 www.virtual-economics.eu issn 2657-4047 (online) viacheslav lyashenko and iryna pidorycheva virtual economics, vol. 2, no. 2, 2019 2019 volume 2 number 2 (april) the formation of interstate and cross-border scientificeducational and innovative spaces between ukraine and the european union member states in the digital economy viacheslav lyashenko and iryna pidorycheva abstract. by signing the association agreement between the eu and ukraine, ukraine has demonstrated its intention and willingness to integrate into the system of formal institutions of the eu, to adopt the eu rules, norms, and practices, which will enable ukraine to achieve significant economic benefits. one of those benefits is the opportunity to build a true scientific-educational and innovative partnership with the eu member states within the european research area. this study considers opportunities and perspectives of creating an interstate and cross-border scientificeducational and innovative spaces between ukraine as an associated country and the european union member states taking into account key priorities of the era and rapidly growing impact of digital technologies. particular attention has been given to the establishment of a common polishukrainian scientific-educational space which could be complemented by the entrepreneurial component. the article has identified opportunities, existing prerequisites, directions, and priorities for building polish-ukrainian spaces. it has also defined the challenges of formation the european interstate and cross-border scientific-educational and innovative spaces as a whole. it has been suggested to develop hereinafter an interstate and cross-border high-tech clusters based on the interstate and cross-border scientific-educational and innovative spaces. the scheme and the main steps of formation a cross-border cluster of nanoand biotechnologies are proposed. keywords: scientific-educational and innovative spaces, digital economy, the fourth industrial revolution, the european research area, digital technologies, high-technology cluster jel classification: f2, f5, o31, o33 author(s): viacheslav lyashenko the institute of industrial economics of the national academy of sciences of ukraine, 2, zhelyabova street, kyiv, ukraine, 03057 e-mail: slaval.aenu@gmail.com, https://orcid.org/0000-0001-6302-0605 iryna pidorycheva the institute of industrial economics of the national academy of sciences of ukraine, 2, zhelyabova street, kyiv, ukraine, 03057 e-mail: pidoricheva@nas.gov.ua, https://orcid.org/0000-0002-4622-8997, citation: lyashenko, v., & pidorycheva, i. (2019). the formation of interstate and cross-border scientificeducational and innovative spaces between ukraine and the european union member states in the digital economy. virtual economics, 2(2), 48-58. https://doi.org/10.34021/ve.2019.02.02(3) received: january 7, 2019,. revised: february 21, 2019. accepted: march 10, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) mailto:slaval.aenu@gmail.com https://orcid.org/0000-0001-6302-0605 mailto:pidoricheva@nas.gov.ua https://orcid.org/0000-0002-4622-8997 https://doi.org/10.34021/ve.2019.02.02(3) https://creativecommons.org/licenses/by/4.0/ 49 www.virtual-economics.eu issn 2657-4047 (online) viacheslav lyashenko and iryna pidorycheva virtual economics, vol. 2, no. 2, 2019 1. introduction the main source of economic growth and industrial development for developing countries is their absorptive capacity, or ability to tap into the world knowledge and technology. this is evidenced by the report of the world bank as part of a series undertaken by the europe and central asia region (goldberg et al., 2011). тhe authors of this research report highlight that the process of knowledge and technology absorption is neither automatic nor costless. rather, this process requires extensive, active efforts, particularly – “dense links to the global knowledge economy, human capital, and a learning-by-doing process, among other factors”. the main “channels of absorption" are foreign direct investment (fdi), trade, human capital and mobility, research and development, and flows of codified knowledge (patents, standards, and publications) fig. 1 (goldberg et al., 2011). economic growth, industrial development and productivity labour and capital absorpital absorptive capacity knowledge flows capital flows education and training trade and foreign direct investment information and communication technology r&d codifies knowledge: patents, standards and publication tacit knowledge: migration and r&d collaboration investment climate figure 1. “channels of absorption” of knowledge and technology that spur economic growth, industrial development and productivity source: (goldberg et al, 2011). 50 www.virtual-economics.eu issn 2657-4047 (online) viacheslav lyashenko and iryna pidorycheva virtual economics, vol. 2, no. 2, 2019 the availability of effective institutions and dynamic local firms are main conditions for taking advantage of these “channels of absorption,” hence the importance of regional level in world economic processes. the oecd study found that the most intensive interactions between economic agents take place within a radius of approximately 200 km (the organization for economic co-operation and development, 2013). by signing the association agreement between the european union (eu) and the european atomic energy community and their member states, as one party, and ukraine, as the other party, (hereinafter referred to as association agreement between the eu and ukraine), ukraine has demonstrated its intention and willingness to integrate into the system of formal institutions of the eu, to adopt the eu rules, norms, and practices, which will enable ukraine to achieve significant economic benefits. one of those benefits is the opportunity to build a true scientific-educational and innovative partnership with the eu member states within the european research area (era) using the above-mentioned “channels of absorption.” in our opinion, such a process, on the one hand, needs to be considered according to regional specificity as each region is unique and has its competitive advantages and weaknesses that determine its path of development, directions, and priorities of integration into european spaces. on the other hand, the conditions of the digital economy that will fundamentally transform human lives, activities of companies and governments in the near future should be taken into account. 2. literature review contemporary science is looking for the answers to the unprecedented depth and severity of socio-economic transformations that engulfed the modern world, to the challenges of increasing competition on world markets, to the objective processes of globalization and the growing importance of regional factors in the production of knowledge and turning them into innovation (dźwigoł et al., 2019; dźwigoł and dźwigoł-barosz, 2018). according to philip cooke, globalization of markets has significantly changed the competitive conditions for most companies that compete on time, price and quality. as a result, they should change their business organization, consumer and supplier relationships to be competitive. but in so doing, companies will be more successful in the global economy if they join their efforts in local (regional) environment (cooke, 2001). klaus schwab considers regions and cities as centers of innovation networks, which will be important for the competitiveness of countries at a time of digital revolution (schwab, 2015). in view of the rapidly growing fourth industrial revolution, many countries and regions are in а difficult situation of transition from a purely industrial specialization, that prevailed in xx century, to the economy in which key technologies play the leading role. the world economic forum (2018a) report provides a list and a description of twelve key emerging technologies of the fourth industrial revolution table 1. 51 www.virtual-economics.eu issn 2657-4047 (online) viacheslav lyashenko and iryna pidorycheva virtual economics, vol. 2, no. 2, 2019 table 1. twelve key emerging technologies of the fourth industrial revolution technology description artificial intelligence and robotics development of machines that can substitute for humans, increasingly in tasks associated with thinking, multitasking and fine motor skills ubiquitous linked sensors also known as the “internet of things.” the use of networked sensors to remotely connect, track and manage products, systems and grids virtual and augmented realities next-step interfaces between humans and computers involving immersive environments, holographic readouts and digitally produced overlays for mixed-reality experiences additive manufacturing advances in additive manufacturing, using a widening range of materials and methods. innovations include 3d bioprinting of organic issues blockchain and distributed ledger technology distributed ledger technology based on cryptographic systems that manage, verify and publicly record transaction data; the basis of “cryptocurrencies” such as bitcoin advanced materials and nanomaterials creation of new materials and nanostructures for the development of beneficial material properties, such as thermoelectric efficiency, shape retention and new functionality energy capture, storage and transmission breakthroughs in battery and fuel cell efficiency; renewable energy through solar, wind, and tidal technologies; energy distribution through smart grid systems; wireless energy transfer; and more new computing technologies new architectures for computing hardware, such as quantum computing, biological computing or neural network processing, as well as innovative expansion of current computing technologies biotechnologies innovations in genetic engineering, sequencing and therapeutics, as well as biological computational interfaces and synthetic biology geoengineering technological intervention in planetary systems, typically to mitigate effects of climate change by removing carbon dioxide or managing solar radiation neurotechnology innovations such as smart drugs, neuroimaging and bioelectronic interfaces that allow for reading, communicating and influencing human brain activity space technologies developments allowing for greater access to and exploration of space, including microsatellites, advanced telescopes, reusable rockets and integrated rocket-jet engines source: (world economic forum, 2018a). rapid growth and diffusion of smart digital technologies will have a fundamental impact on the world economy that will have multifaceted nature and will affect all major macroeconomic variables – gdp, employment, investment, consumption, trade, inflation et al (schwab, 2015). the next five years will be transformational for enterprises, consumers, and governments. the internet of things (iot) will boost the economy through the data and the bridging of the physical and digital worlds. indeed, it is estimated that by the year 2023 (allhoff and 52 www.virtual-economics.eu issn 2657-4047 (online) viacheslav lyashenko and iryna pidorycheva virtual economics, vol. 2, no. 2, 2019 henschke, 2018; bittencourt et al., 2018; lim, kwon, and lee, 2018; lu, papagiannidis, and alamanos, 2018 shelagh, 2018): only in the united states, the number of smart home devices will exceed $ 1 billion (about $ 725 for one family); about 6 million industrial robotic systems will be launched in the world and annual spending on manufacturing iot solutions will reach about $ 450 billion; governments throughout the world will invest heavily in iot devices to stimulate the development of smart cities that will be equipped with smart cameras and street lamps, traffic control systems in real time, utilities usage, crime control, and environmental factors; annual investment in this sphere is expected to reach nearly $900 billion. alec ross notes that rapid development of the internet of things is being achieved through four main engines (ross, 2017, р. 15): 1. the number of cars connected up to the internet on the roads. it is expected that within the period from 2015 to 2020, it will grow from 23 to 152 million; 2. the dissemination of smart devices that are worn as a piece of clothing or jewelry – for only one year between 2013 and 2014 their number was doubled; 3. the implementation of “smart home” systems. according to the juniper research report (2014), the revenues generated from “smart home” services had been set to reach a global market value of $71 billion by 2018; 4. production. mckinsey global institute predicts that by 2025 only in the area of production the economic influence of the internet of things will have grown from $900 billion to $2.3 trillion per year. raymond kurzweil predicts that there will be a merger between human intelligence and artificial intelligence in 2029 and singularity will come in the year 2045. he defines the term “singularity” as “a future period during which the pace of technological change will be so rapid, its impact so deep, that human life will be irreversibly transformed” (kurzweil, 2005). singularity is “an era in which our intelligence will become increasingly non biological and trillions of times more powerful than it is today” … it “will enable us to transcend our biological limitations and amplify our creativity. in this new world, there will be no clear distinction between human and machine, real reality and virtual reality” (kurzweil, 2005). raymond kurzweil defined a number of principles in the concept of singularity and explored them in the book (kurzweil, 2005). the main reason for impending singularity, in his view, is the law of accelerating returns, the basic gist of which is in accelerating the pace of technological evolution. the development of almost all modern technologies goes at an explosive pace, exponentially. exponential growth can start almost imperceptibly, and then quickly accelerate (kurzweil, 2005). new development models based on intangible component, smart technologies and data are seen as effective means of addressing the urgent challenges of sustainable development of countries, regions, and cities – economic, social and environmental problems. working http://context.reverso.net/translation/english-russian/reach 53 www.virtual-economics.eu issn 2657-4047 (online) viacheslav lyashenko and iryna pidorycheva virtual economics, vol. 2, no. 2, 2019 together in a better way to address the great challenges faced by humanity is one of the main priorities of the european research area. in fact, the era includes six priorities: building more effective national research systems; optimal transnational cooperation and competition (coopetition), including the creation of a high-quality, accessible research infrastructure; an open labour market for researchers; gender equality and gender mainstreaming in research; optimal circulation, access to and transfer of scientific knowledge, including through digital era, open access to scientific publications and data; international cooperation. as noted in the era progress report 2016 (european commission, 2017), cooperation between the eu member states and associated countries with the aim of finding the best ways to solve modern challenges “is central to europe’s ability to respond to a dynamic and changing world.” consequently, it is important to examine the perspectives of formation of scientificeducational and innovative spaces between the eu and associated countries considering also the features of the digital economy. priority attention of many scientists is given to the problem of cooperation in r&d, education and innovation both at the country and firm levels, and among the countries. indeed, the study (gunther et al., 2017) focuses on the analysis of cross-border scientific cooperation between germany and poland. the role of transnational organizations in european innovation policy and of the policy networks established between these organizations and supranational institutions is investigated in the work (grande and peschke, 1999). the authors of the article (tumelero, sbragia and evans, 2019) consider scientific cooperation between companies in the sphere of ecological innovations. nevertheless, despite the significant contribution of scientific papers, existing approaches to european scientific-educational and innovative cooperation are limited to the eu member states and do not consider prospects for engagement with associated countries such as ukraine. therefore, the aim of the study is to identify opportunities and priorities of creating an interstate and cross-border scientific-educational and innovative spaces as a means of cooperation between ukraine as associated country and the eu member states taking into account the key priorities of the era and the major challenges of the digital economy in the conditions of association agreement between the eu and ukraine. 3. methodology this study was conducted using the following methods: analysis and synthesis, abstracting and generalization, and systemic approach being considered as a strategic one to determine 54 www.virtual-economics.eu issn 2657-4047 (online) viacheslav lyashenko and iryna pidorycheva virtual economics, vol. 2, no. 2, 2019 opportunities, and priorities in creating an interstate and cross-border european scientificeducational and innovative spaces. systemic approach implies accounting for the interactions among a number of items forming an integral whole (igi global. disseminator of knowledge, 2019). in terms of systemic approach, a research subject is a system, which has input (resources are transferred to the system and affect it), output (an end product of the system), its relationship to external environment and feedback (which is relevant for open systems). the system has also its internal structure – a set of interrelated elements that transform input resources into outputs and allow to achieve system goals. 4. results and discussion in the new geopolitical reality, under the multiple challenges related to digital economy, the role of the driver in building „europe of different speeds,” could be played by poland and ukraine (in the post-war “old europe” this function was performed by france and germany) in order to use the “window of opportunity” that provides the transition from the 5th to the 6th “long wave” of kondratyev. the example of using this “window of opportunity” was demonstrated by the new industrial countries of south-east asia which have become the socalled “asian tigers” when moving from the 4th to the 5th “long wave” of kondratyev. to achieve this, poland and ukraine have significant opportunities and competitive advantages: highly qualified and educated human capital (of 130 countries, poland and ukraine rank, respectively, 31st and 24th on the global human capital report 2017 (world economic forum, 2018b); advantageous geographical location – in the heart of europe, at the intersection of major transport and trade routes; large consumer market unsaturated with individual commodities – the population of poland and ukraine is respectively 38,2 and 44,4 million people (world economic forum, 2018b); a well-developed network of academic institutions and universities that need to be connected to each other and to industry; the industrial capacity requiring large-scale innovation-based modernization to ensure high levels and quality of production. both countries are particularly interested in developing defense, energy, scientificeducational and innovative spaces. with a view to their formation, we have proposed to consider ukrainian universities as a platform for undergraduate education from post-soviet (azerbaijan, turkmenistan), asian (china, pakistan) and african (nigeria) countries for bachelor’s degree and further education in poland and other member states of the eu for master’s degree (liashenko & pidorycheva, 2017). actually, the necessary prerequisites for this scenario implementation are already in place – many universities, scientific institutions, and social organizations of ukraine have concluded relevant agreements with universities and innovative structures of european countries. for 55 www.virtual-economics.eu issn 2657-4047 (online) viacheslav lyashenko and iryna pidorycheva virtual economics, vol. 2, no. 2, 2019 example, a memorandum of cooperation between national science-technological association of ukraine, uzhgorod national university and the technical university of košice was signed in march 2017 in košice (slovakia). in september 2016, similar memorandums of agreement were signed between academy of economic sciences of ukraine, institute of industrial economics of the nas of ukraine, poltava university of economics and trade and from the polish side – poznao university of economics and business, higher vocational school in suwałki and technology park in suwałki. establishment of a common polish-ukrainian scientific-educational space can be complemented with the entrepreneurial component. namely, students who have entrepreneurial abilities and who are studying in ukraine (on bachelor's curriculum) start their own business in the business-incubator of the corresponding ukrainian university and then, transfer it to the corresponding domestic scientific or industrial park. while continuing their education in poland (for master's degree), they adapt their small business to the relevant technology park in poland, that makes them already residents of the eu. this allows them to enter the large polish market as well as the pan-european market, without losing ties with ukraine. in the process of the formation of interstate and cross-border scientific-educational and innovative spaces, the following challenges, that correspond to the priorities of era, can be solved: development of bilateral and multilateral relations in scientific-educational and innovative spheres in order to achieve maximum results from the convergence of national and regional economic interests, the creation of the necessary conditions for the market of innovative goods development and providing scientific-educational services; identification of mutual interest zones, allocating priority technology areas in them (including key emerging technologies of the fourth industrial revolution) for joint scientificeducational and innovative projects; creating favorable conditions for their implementation for the benefit of states and regions; development of human capital and staffing system of scientific-educational and innovative cooperation, professional training of managers and agents of innovative and scientific-educational programs and projects, among other things, in the sphere of the digital economy; effective use of all available scientific-educational and innovative infrastructure, its development; implementation of new mechanisms ensuring closer and more effective interaction between the states, scientific organizations, universities, and entrepreneurs; removing of possible legal and administrative barriers, creating of conditions for gradual harmonization of national systems of institutional and legal regulation of scientificeducational and innovative activity, standardization and product/services certification in the field of development and production of high-technology products/services, technical regulation and self-regulation. 56 www.virtual-economics.eu issn 2657-4047 (online) viacheslav lyashenko and iryna pidorycheva virtual economics, vol. 2, no. 2, 2019 in building of ukrainian-polish scientific-educational and innovative spaces, the following inter-state priorities can be defined: institutional ensuring of the realization of interstate and cross-regional scientificeducational and innovative activities; increase of the innovative activity of enterprises in the production sector (kwilinski, 2017; 2018a; 2018b; 2018c; 2018d; yakubovskiy et al., 2017); introduction of economic and financial instruments and promotion of the regimes of innovative and entrepreneurial activities (lakhno et al, 2018; pająk et al., 2016); effective use of intellectual property, development of its common market; institutional transformation of the innovative sphere, namely, creating conditions to implement the concept of “innovative lift: from school to europe” (liashenko & pidorycheva, 2017); personnel training and skills development in innovative and entrepreneurial spheres; creation of joint digital and physical platforms, complementary value chains, joint ventures and other forms of economic cooperation (głowski and kvilinski, 2017); introduction of measures in the field of export and customs. figure 2. scheme of cross-border high-technology cluster formation source: own research. based on the interstate and cross-border scientific-educational and innovative spaces, interstate and cross-border innovative systems and high-tech clusters can be created in the future. research suggests that as the first approximation can be proposed the main steps of cross-border nanoand biotechnologies clusters formation shown in fig. 2: 57 www.virtual-economics.eu issn 2657-4047 (online) viacheslav lyashenko and iryna pidorycheva virtual economics, vol. 2, no. 2, 2019 i. choosing profiled institution of the national academy of sciences of ukraine and establishing its branch in the relevant ukrainian partner university. ii. signing a cooperation agreement with a foreign partner university. iii. providing equipment to structural units engaged in research in the field of high technology. iv. staffing, internships, academic exchanges. v. providing financing by attracting funds from the european, national and regional programmes, and structural funds, local business structures, through loans, grants and other sources not prohibited by law. vi. preparing proposals to devise national and regional “smart-specialization” strategies and to diversify traditional industries of regions and cities of partner countries. vii. introduction of new special courses “economics and entrepreneurship,” “nanotechnologies and economics,” “biotechnologies and economics” for physical and biological specialties at partner universities. viii. providing services of business-incubators for small enterprises and replication of developments (nanoand biotechnologies) based on local incubators, science, technology and industrial parks. one of the operating scientific center – dnieper scientific center of the national academy of sciences of ukraine and ministry of education and science of ukraine – can conduct an experiment on formation of polish-ukrainian scientific-educational and innovative space in the form of a pilot project of a cross-border high-tech cluster. scientific and methodological support can be undertaken by the institute of industrial economics of the nas of ukraine and its dnipro department. 5. conclusions many countries face serious problems emanating from the fast-growing impact of smart digital technologies to all areas of society. in addition, nowadays an active process of formation of bilateral and multilateral linkages in various fields of cooperation between countries is undertaken. this study seeks to consider the prospects of creating interstate and cross-border scientific-educational and innovative spaces between the eu member states and ukraine as associated country considering the major challenges of the digital economy and key priorities of the era within the context of association agreement between the eu and ukraine. we rely on a systemic approach in order to propose the promising directions of cooperation between european countries towards the formation of the effective scientificeducational and innovative spaces. particular attention in this regard has been given to the creation of a common polishukrainian scientific-educational and entrepreneurial space; existing prerequisites and priorities of economic cooperation between countries are identified. it has been proposed to form an interstate and cross-border nanoand biotechnology cluster as a cooperation tool between ukraine and the eu member states. nanotechnology and 58 www.virtual-economics.eu issn 2657-4047 (online) viacheslav lyashenko and iryna pidorycheva virtual economics, vol. 2, no. 2, 2019 biotechnology are smart digital technologies which in the ensuing years will lead to a radical transformation of global value chains, will be at the heart of research and development, the activities of business structures and government policies, which makes our proposals both relevant and perspective. these issues require further more in-depth interdisciplinary research. in particular, exploring how the formation of cross-border high-technology clusters will allow european countries to take advantage of digital technologies. references allhoff, f., & henschke, a. 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(2017). economy modernization of industrial regions (based on the example of ukraine). in p. głowski and o. kvilinskyi (eds.), economic transformation in ukraine: comparative analysis and european experience (pp. 12-29). warsaw, poland: consilium sp. z o.o. retrieved from https://institute-icd.org/wpcontent/uploads/2016/07/monografia_kvilinskyi.pdf https://luminariaz.files.wordpress.com/2017/11/the-fourth-industrial-revolution-2016-21.pdf https://luminariaz.files.wordpress.com/2017/11/the-fourth-industrial-revolution-2016-21.pdf https://www.businessinsider.com/iot-forecast-book-2018-7 https://doi.org/10.1787/19976585 https://doi.org/10.1016/j.jclepro.2018.09.146 http://www3.weforum.org/docs/fop_readiness_%20report_2018.pdf https://weforum.ent.box.com/s/dari4dktg4jt2g9xo2o5pksj%20patvawdb https://weforum.ent.box.com/s/dari4dktg4jt2g9xo2o5pksj%20patvawdb https://institute-icd.org/wp-content/uploads/2016/07/monografia_kvilinskyi.pdf https://institute-icd.org/wp-content/uploads/2016/07/monografia_kvilinskyi.pdf кwilinski alex 31 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and mariola dzwigol-barosz virtual economics, vol. 5, no. 3, 2022 2022 volume 5 number 3 a country's green brand and the social responsibility of business yevheniia ziabina and mariola dzwigol-barosz abstract. recently, the topic of carbon neutrality has been gaining momentum. such trends are mainly related to the adoption of important global agreements, such as the european green deal, as well as the implementation of the sustainable development goals. such trends have a positive effect on countries, but in such situations, states must quickly respond to the challenges and needs of the world and have an understanding of how to respond to these trends. to date, there are many ratings that can be used to form a portrait of a country (investment, social, environmental, etc.), but currently the rating of the green brand of a country is becoming more relevant. there are problems regarding its improvement and filling, yet this is a new evaluation of a country for this period of time. it is relevant today to study the nature and architecture of the concept of a green brand, as well as the search for the main determinants of its impact. the purpose of the article is to analyse publications in order to identify patterns in the development of the green brand and the social responsibility of business. the article provides a bibliometric analysis of research in the field of green branding and corporate social and environmental responsibility. the authors selected more than 10,000 works published in 2000–2021 indexed by the scientometric databases scopus, web of science and google scholar. using vosviewer, the results of the bibliometric analysis were visualized on the definition map. this made it possible to identify seven clusters that combine 58 terms. as a result of the research, using the constructed bibliographic map, the connection between the terms ‘green brand’ and ‘corporate social responsibility’ was revealed. keywords: green brand, corporate social responsibility, country brand, greenwashing jel classification: м14, м31, м38 http://www.virtual-economics.eu/ 32 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and mariola dzwigol-barosz virtual economics, vol. 5, no. 3, 2022 authors: yevheniia ziabina sumy state university, sumy, ukraine e-mail: e.ziabina@biem.sumdu.edu.ua https://orcid.org/ 0000-0003-0832-7932 mariola dzwigol-barosz silesian university of technology, zabrze, poland e-mail: mariola.dzwigol-barosz@polsl.pl https://orcid.org/0000-0002-5306-3836 citation: ziabina, y., & dzwigol-barosz, m. (2022). a country's green brand and the social responsibility of business. virtual economics, 5(3), 31-49. https://doi.org/10.34021/ve.2022.05.03(2) received: december 15, 2021. revised: march 12, 2022. accepted: july 6, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ http://:%20e.ziabina@biem.sumdu.edu.ua https://orcid.org/%200000-0003-0832-7932 file:///c:/users/alex/downloads/mariola.dzwigol-barosz@polsl.pl https://orcid.org/0000-0002-5306-3836 https://creativecommons.org/licenses/by/4.0/ 33 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and mariola dzwigol-barosz virtual economics, vol. 5, no. 3, 2022 1. introduction the state of the social and economic (lyulyov et al., 2021a; hussain et al., 2021; kwilinski et al., 2022a; moskalenko et al., 2022), ecological (dźwigol et al., 2019; kharazishvili et al., 2021; kostyrko et al., 2021) and energy problems (banasik et al., 2022; miśkiewicz, 2018; 2022; miśkiewicz et al., 2022; 2021), which the whole world has encountered today, require further research and the search for new alternatives to influence the ecological consciousness of the population (chen et al., 2021; chygryn et al., 2020; drożdż et al., 2021). to date, one of the relevant areas of research is the development of a green brand of a country (company) through the improvement of corporate social and environmental responsibility of the population (employees) (kharazishvili et al., 2020; 2021b). according to statistical agencies, by the end of 2021, the top-10 countries in shaping their sustainable green image include the following states (table 1). table 1. top-10 leading countries in the context of a sustainable green image, 2021 rating country characteristics 1 sweden a country that comprehensively implements the sustainable development goals in management and improvement. 2 switzerland the country has a high level of social and environmental responsibility of the population, which allows effective implementation of innovative environmental ideas for the development of the country's green brand. 3 norway the country is actively investing in the ocean clean-up and research. at the same time, it is a leader in providing itself with alternative energy, primarily hydroelectric power. 4 japan the country is a leader in processing secondary raw materials. plans to increase the use of zero-emission cars and the greening of public transport are ambitious. 5 finland in the country, all forest areas and water bodies are actively protected and cleaned if necessary. the country is forming its own green brand focused on following the key conditions of social and environmental responsibility. 6 denmark the country is actively working on the development of a green brand. copenhagen has become a leader among the green cities of the country, while the plans of the city management include the capital becoming a city fully equipped with an alternative energy. 7 new zealand the country has a high level of social and environmental responsibility among the population and businesses. the country is a leader in sustainable agriculture. 8 germany a country that has one of the most powerful recycling programs. at the same time, germany is a leader in sustainability in the industrial sector, but at the same time it is quite dependent on russian energy resources. the priority goals are to reduce greenhouse gas emissions by 55% by 2030. 9 canada the country's government is working on increasing the level of sustainability and aims to reduce the level of greenhouse gas emissions by 30% by 2030. 10 netherlands today, the country is working on promoting a green image of the country. it develops the use of alternative sources at enterprises and the search for new types of energy source: devised by the authors. considering the data presented in table 1, it is possible to conclude that the issue of a country’s green brand in the context of enhancing corporate social responsibility of business is topical in the ongoing economic development. http://www.virtual-economics.eu/ 34 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and mariola dzwigol-barosz virtual economics, vol. 5, no. 3, 2022 2. literature review in the process of analysing joint research in the field of green branding and corporate social responsibility, a sample was formed based on the search words "green brand" and "corporate social responsibility" in the scientometric databases scopus and web of science. the results of the search confirmed the availability of 14 publications displayed in table 2. table 2. field-weighted citation impact of top-10 cited articles in scopus № title authors year source citations fwci* 1 csr and organizational citizenship behaviour for the environment in hotel industry: the moderating roles of corporate entrepreneurship and employee attachment style luu t.t. 2017 international journal of contemporary hospitality management 73 3.28 2 sustainable fashion supply chain management: from sourcing to retailing choi t.-m., cheng t.c.e. 2015 sustainable fashion supply chain management: from sourcing to retailing 17 1.38 3 a model of green bank marketing lymperopoulos c., chaniotakis i.e., soureli m. 2012 journal of financial services marketing 16 – 4 does one bad apple ruin a firm’s green brand image? examining frontline service employees’ environmentally irresponsible behaviours zhang l., wu j., chen h., nguyen b. 2020 european journal of marketing 7 0.6 5 effect of green attributes transparency on wta for green cosmetics: mediating effects of csr and green brand concepts lee y.-h., chen s.-l. 2019 sustainability (switzerland) 6 0.53 6 perceptions on the strategic value of corporate social responsibility – some insights from global rankings claudia o. 2014 journal of international studies 6 0.57 7 green banking initiatives: a qualitative study on indian banking sector sharma m., choubey a. 2021 environment, development and sustainability 4 5.62 8 green paradox in emerging tourism supply chains: achieving green consumption behaviour through strategic green marketing orientation, brand social responsibility, and green image khan m.i., khalid s., zaman u., josé a.e., ferreira p. 2021 international journal of environmental research and public health 4 1.23 9 is it all for show? environmental brand identification on skin care and cosmetic websites seelig m.i., sun r., deng h., pal s. 2021 journal of marketing communications 4 1.09 10 corporate social responsibility in modern central and eastern europe kopp h. 2015 csr, sustainability, ethics and governance 2 – *fwci – field weighted citation impact source: developed by the authors based on scopus (2022). http://www.virtual-economics.eu/ 35 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and mariola dzwigol-barosz virtual economics, vol. 5, no. 3, 2022 the article with the highest number of citations (luu, 2017) aims at determining the influence of corporate social responsibility and corporate green branding on the environment using the example of the vietnamese hotel business. the results of the study indicate the necessity to influence not only the formation of eco-oriented products and services, but also to form the environmental behaviour of employees. choi et al. (2015) consider the topic in the context of the sustainable fashion development. thus, the authors raise the issue of green brand evolution against the background of the fashion industry due to the implementation of the sustainable development goals (goals 9, 12 and 13) and the formation of corporate social and environmental responsibility of employees (abazov, 2021; arefieva et al., 2021). the third place in terms of citations is occupied by the study of the impact of corporate social responsibility and green marketing on shaping and improving the green image brand of banking institutions (lymperopoulos et al., 2012). it should be noted that the paper was published in 2012, while today it has a significant relevance and prospects for further research. the fourth work by the number of citations is based on an experiment that is aimed at evaluating the impact of a client on a company's brand (zhang et al., 2020). the authors proved that a company's green brand image can have a negative impact on a client if the latter notices a low level of corporate social and environmental responsibility and non-compliance with the relevant environmental branding standards. at the same time, a client's negative reaction is possible even if the level of corporate social responsibility matches their expectations, but it also negatively affects their perception of the company's environmental irresponsibility. accordingly, based on the results of two experiments, the scientists drew the main conclusions that emphasize the need for comprehensive development of a green brand image and corporate social and environmental responsibility of employees. publications in google scholar were analysed using the search terms “green brand” and “corporate social responsibility”. accordingly, more than 300,000 publications were selected based on the given parameters. having systematized the papers closer to the topic of this research, the key aspects were summarised. thus, active attention is paid to considering corporate social responsibility in managing labour resources (tenytska et al., 2020; voegtlin et al., 2016) as well as national scientists (syhyda et al., 2020; ziabina et al., 2021). the authors consider the main aspects of corporate social responsibility evolution in the context of implementing environmental management at industrial enterprises (chigrin et al., 2011). scholars are also actively investigating the impact of corporate social responsibility on the financial performance of businesses (al-khonain et al., 2020; fadyeyeva, 2019; khadidja et al., 2021; tommaso, et al., 2019; cyfert et al., 2021). the bibliometric analysis revealed thirteen clusters, while the "innovation" cluster and the "corporate social responsibility and environmental management" cluster (bilan, 2020; kuzior & kwilinski, 2022; kuzior et al., 2022; kwilinski, 2018;2019; kwilinski et al., 2020c; 2021a; 2021b; miśkiewicz, 2021a; rajiani et al., 2018; shafait et al., 2021; szczepańska-woszczyna & gatnar, 2022) have a strong close relationship, which proves the impossibility of effective implementation of corporate social and environmental responsibility without an established http://www.virtual-economics.eu/ 36 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and mariola dzwigol-barosz virtual economics, vol. 5, no. 3, 2022 innovation system at an enterprise (szostek, 2021; bogachov et al., 2020; borodin et al., 2021). the authors (celma et al., 2012; husnain et al., 2020; chygryn et al., 2018; coban et al., 2022a; 2022b) found that corporate social irresponsibility is a powerful factor that negatively affects consumer loyalty and brand value in general (oláh et al., 2021; stuss et al., 2019; vaníčková & szczepańska-woszczyna, 2020; wróblewski et al., 2018), while the scientific community considers the possibility of a positive impact of corporate social responsibility in the management of labour resources for the image (dacko-pikiewicz, 2019; dzwigol, 2020b; 2021b; dzwigol-barosz & dzwigol, 2021; dzwigol et al., 2020b), corporate sustainability and reputation of a company (advantage, 2020; balaraman, 2017; yang et al., 2021). research on the corporate social responsibility evolution in managing labour resources under the conditions of the covid-19 pandemic and its possible transformations in all spheres of activity are relevant today (alkubaisy, 2020; buhaisi et al., 2021; lyulyov et al., 2022). scientists also consider the theory of the effective influence of corporate social and environmental responsibility measures on shaping a company's competitive potential under conditions of globalization processes (celma et al., 2014; hakobyan et al., 2019; pimonenko, 2011; dzwigol et al., 2020a; miśkiewicz, 2019;2021b; nawawi et al., 2022). the vast range of researchers consider corporate social responsibility as an integral tool in ensuring sustainable development both at the level of companies and at the level of countries (biewendt et al., 2020; kurian, 2021; miller, 2020; soudi, 2020; czyżewski et al., 2019; dementyev & kwilinski, 2020; dementyev et al., 2021; drożdż et al., 2020a; 2020b; dzwigol & dzwigol-barosz, 2020). 3. methods the study of a green brand evolution in the context of corporate social responsibility took place in several stages. the methodology of the research took into account the experience that proved relevant in the existing publications in the domain (kwilinski et al., 2022a; kwilinski et al., 2022b; polcyn et al., 2022; soliman et al., 2021; us et al., 2021a; us et al., 2021b; zhang et al., 2022; dzwigol, 2021a). at the first stage of searching for relevant information, more than 22,000 publications were processed using the keywords "green brand", "corporate social responsibility" in the scopus and web of science databases. at the second stage, the data set was ranked according to the criterion of scientific fields: "economics, econometrics and finance", "multidisciplinarity", "business, management and accounting", and "social sciences". according to the second stage results, about 10,000 documents were received, in which the development of a green brand, ecological image in the context of corporate social responsibility of business were investigated. all data were saved and processed using the excel program. at the third stage, a bibliographic map was created based on the relevant scopus and web of science data using vosviewer, a research visualization and clustering analysis tool. vosviewer is a software designed to build and visualize bibliometric references. bibliometric analysis using vosviewer identified 58 out of 983 keywords which meet the threshold and the minimum number of repetitions in the title, keywords and abstract accounted for 6. http://www.virtual-economics.eu/ 37 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and mariola dzwigol-barosz virtual economics, vol. 5, no. 3, 2022 4. results before starting the bibliographic analysis, it was decided to find out the level of interest in this topic not only on the platforms of scientometric databases scopus, web of science and google scholar, but also to trace the dynamics of queries in google on the topic under research (figure 1). figure 1. the results of a trend synchronization analysis for the search queries “green brand” and “corporate social responsibility” in the google search engine, 2004-2021 source: compiled by the authors based on google trends data the obtained data indicate that interest in the search query "green brand" has been increasing since 2014, while it bears noting a negative correlation between the search queries in the period 2004-2013, while in the last ten years this trend has changed radically. in our opinion, this indicates the expansion of views on the green brand evolution and possible determinants of influence on this phenomenon. moreover, the study took a closer look at the geographic structure of google queries (figure 2). green brand corporate social responsibility figure 2. a geographical structure of requests “green brand” and “corporate social responsibility” in the google search engine source: devised by the authors based on google trends data. 0 50 100 150 200 250 300 350 400 450 500 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021t h e n u m b e r o f se a rc h q u e ri e s in g o o g le years green brand corporate social responsibility http://www.virtual-economics.eu/ 38 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and mariola dzwigol-barosz virtual economics, vol. 5, no. 3, 2022 a geographic structure of searches for "green brand" is concentrated more in the countries of north america, australia, and the european union, while the search for "corporate social responsibility" is the most popular in african countries. the main purpose of this research was to conduct a bibliometric analysis of a green brand evolution in the context of corporate social responsibility. there was formed an array of publications on the researched topic. the results revealed that the first publications indexed by the scientometric databases scopus and web of science in the field of green brand research date back to 2000. figure 3. the dynamics of publishing documents in the period of 2000-2022 source: developed by the authors based on the scopus database (2022). this, in turn, indicates the relevance of the studied phenomenon and the determinants of its impact. it bears mentioning that the number of studies is increasing every year. examining the subject area of the formed array of publications, it can be concluded that the greater share falls precisely on “business, management and accounting” (16,145), “social sciences” (10,557), “economics, econometrics and finance” (7,125), “environmental science” (4,062), “arts and humanities” (2,237), “energy” (1,837), “engineering” (1,154), and “decision sciences” (1,101). a visualization map (figure 4) was constructed using vosviewer, a research visualization and clustering analysis tool. a bibliometric map was constructed based on the results of the formed selection of articles by key words. 58 keywords were used as a basis, which were clustered according to the relevant topics. here is a closer look at each cluster: 1. cluster no 1 (red). in total, the cluster includes 15 keywords, from which it is necessary to single out the marker words: marketing (links: 39; total link strength: 82; occurrences: 24); consumer behaviour (links: 32; total link strength: 52; occurrences: 11); purchase intention (links: 24; total link strength: 35; occurrences: 12); greenwashing (links: 14; total link strength: 23; occurrences: 10); green consumption (links: 11; total link strength: 13; occurrences: 10); http://www.virtual-economics.eu/ 39 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and mariola dzwigol-barosz virtual economics, vol. 5, no. 3, 2022 figure 3. a bibliometric map of the keywords in the investigated articles, 2000-2022. source: developed by the authors based on vosviewer (2022). 2. cluster no 2 (green). in total, the cluster includes 10 keywords, from which it is necessary to single out the marker words: green marketing (links: 31; total link strength: 72; occurrences: 44); green brand equity (links: 26; total link strength: 57; occurrences: 24); green economy (links: 17; total link strength: 22; occurrences: 6); corporate social responsibility (links: 13; total link strength: 16; occurrences: 10); environmental economics (links: 23; total link strength: 33; occurrences: 7); 3. cluster no 3 (blue). in total, the cluster has 8 keywords, from which it is necessary to single out the marker words: sustainability (links: 38; total link strength: 74; occurrences: 31); sustainable development (links: 38; total link strength: 88; occurrences: 25); supply chain management (links: 16; total link strength: 24; occurrences: 8); environmental protection (links: 24; total link strength: 31; occurrences: 8); brand (links: 10; total link strength: 16; occurrences: 5); 4. cluster no 4 (yellow). in total, the cluster has 7 keywords, from which it is necessary to single out the marker words: green brand (links: 18; total link strength: 31; occurrences: 20); brand loyalty (links: 17; total link strength: 23; occurrences: 9); green brand loyalty (links: 18; total link strength: 31; occurrences: 20); perception (links: 24; total link strength: 31; occurrences: 8); brand equity (links: 8; total link strength: 10; occurrences: 8); 5. cluster no 5 (purple). in total, the cluster has 7 keywords, from which it is necessary to single out the marker words: green brand image (links: 33; total link strength: 72; http://www.virtual-economics.eu/ 40 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and mariola dzwigol-barosz virtual economics, vol. 5, no. 3, 2022 occurrences: 28); green trust (links: 21; total link strength: 41; occurrences: 16); human (links: 30; total link strength: 52; occurrences: 9); 6. cluster no 6 (turquoise). in total, the cluster has 6 keywords, from which it is necessary to single out the marker words: consumption behaviour (links: 28; total link strength: 54; occurrences: 15); advertising (links: 16; total link strength: 22; occurrences: 6); sustainable consumption (links: 21; total link strength: 27; occurrences: 5); 7. cluster no 7 (orange). in total, the cluster has 5 keywords, from which it is necessary to single out the marker words: green brand positioning (links: 10; total link strength: 16; occurrences: 13); green purchase intention (links: 23; total link strength: 32; occurrences: 10); green advertising (links: 5; total link strength: 6; occurrences: 7). figure 4. a bibliometric map of the keywords evolution in the researched articles (2000-2021) source: developed by the authors based on vosviewer (2022). based on the results of the formed bibliometric map of the keywords evolution, it can be concluded that the research topic is quite new and relevant. this proves the average year of use of the keywords "green brand" and "corporate social responsibility" in the scientometric databases scopus and web of science. having considered the keywords evolution in more detail, it is necessary to highlight the following key points and their average year of publication: branding and environmental management (avg. pub. year 2013); green marketing and sustainable (avg. pub. year 2015); green brand, greenwashing, and consumer behaviour (avg. pub. year 2017); sustainability, green brand equity, corporate social responsibility (avg. pub. year 2018); green trust, green brand loyalty, environmental protection, green manufacturing (avg. pub. year 2019); green purchase intention, green economy (avg. pub. year 2020). http://www.virtual-economics.eu/ 41 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and mariola dzwigol-barosz virtual economics, vol. 5, no. 3, 2022 the results of the bibliometric map of the keywords evolution indicate the active development of ecological production and a green brand in the mix with ecological management. in our opinion, such phenomena are caused by the implementation and research of the sustainable development goals and the european green deal adopted in 2019, which has been supported by many countries around the world. 5. conclusions having conducted research on the green brand evolution in the context of corporate social responsibility, the following conclusions could be made. in particular, taking into account the results of the trend analysis, it could be concluded that interest in both studied concepts is growing. it bears mentioning that not only developed countries are interested in these concepts, which emphasizes the relevance of this issue. the results of publication activity indicate a positive dynamics of research in the field of green branding and corporate social responsibility, and the number of citations of these studies also emphasizes this. according to the results of the research of the terminological map, it can be concluded that the main studied terms are green marketing, sustainability, sustainable development, green brand and corporate social responsibility, as evidenced by the lengths of the connecting lines, although the keywords belong to different clusters. it is necessary to attract attention to the fact that all clusters are tightly connected with each other, and the circles of keywords are quite large, which is evidence of the positive dynamics of the used keywords and their symbiosis in the studied topics. the finding allowed concluding that there exists a necessity to study a green brand and corporate social responsibility both in a complex and separately. there is a scientific need for research on the impact of corporate social and environmental responsibility of business on a country's green brand and, in general, on the country's sustainable development strategy. it should be noted that green brand depends on social, economic and political climate in the country (kuzior et al., 2021b; kwilinski et al., 2022c; 2020b). considering the studies (drożdż & mróz-malik, 2017; kotowicz et al., 2022; kuzior et al., 2021a; kwilinski et al., 2020a; miskiewicz, 2020) the green energy and technologies, green knowledge (saługa et al., 2020; 2021; tkachenko et al., 2019; trzeciak et al., 2022; lyulyov et al., 2021b) and energy security of the country could decline or reduce the counrty’s green brand. in this case, the further investigations should incorporate the energy dimensions within analysis of country’s green brand. at the same time, it is advisable to formulate one of the key problems of further research – the lack of established and proven sustainable indicators of the effectiveness of a green brand and fixed values and determinants of the corporate social responsibility impact. these shortcomings can be resolved only under the conditions of constant testing and the search for new mathematical models for further research. 6. presenting the sources of funding this research was funded by the grant from the ministry of education and science of ukraine (0121u100468). http://www.virtual-economics.eu/ 42 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and mariola dzwigol-barosz virtual economics, vol. 5, no. 3, 2022 references abazov, r. 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(2021). hr management in private medical institutions. health economics and management review, 2(1), 30-36. https://doi.org/10.21272/hem.2021.1-03 http://www.virtual-economics.eu/ http://doi.org/10.21272/fmir.3(4).49-61.2019 https://doi.org/10.3390/joitmc8010058 http://doi.org/10.33223/epj/127397 http://doi.org/10.33223/epj/142462 https://doi.org/10.17512/pjms.2020.21.2.30 http://doi.org/10.1016/j.hrmr.2015.12.003 https://www.vosviewer.com/ https://doi.org/10.3390/su10113856 https://doi.org/10.3390/su132413679 https://doi.org/10.3390/su14074361 https://doi.org/10.1108/ejm-11-2019-0844 https://doi.org/10.21272/hem.2021.1-03 кwilinski alex 71 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 2022 volume 5 number 2 digital transformation of a country’s image: the case of the astana international finance centre in kazakhstan azel zhanibek, rafis abazov, and andrey khazbulatov abstract. a strong positive image is an important asset for all countries around the world. simple recognition of a name or geographic location is not enough to make a successful brand. people should want to visit, live, and preferably work and invest in the country. the research methodology for this article used simon anholt’s approach. anholt is the author of the widely recognized system nation brands index which measures the power and quality of each country’s “brand image” by combining the following six dimensions: exports, governance, culture and heritage, people, tourism, and investment and immigration. in this article, the authors selected one important dimension, “investment and immigration,” using the case of the astana international finance centre (aifc), which was created to enhance and promote kazakhstan’s investment image. the expected outcomes of the study include assessing the perception of how the aifc used digital technologies to build its brand as a part of the country’s image, and discussing the digital context of developing investment attractiveness. it also covers a short literature review on the theoretical and empirical aspects of digital transformation and presents a case study and a questionnaire-based survey to illustrate the impact of digital transformation, and especially the use of digital technologies for the aifc’s image promotion. the conclusion summarizes the findings of this research and discusses some implications for investment and immigration attractiveness and the image of the aifc. keywords: digital transformation, country branding, place branding, investment attractiveness, immigration, image policy jel classification: m15; m30; o31 http://www.virtual-economics.eu/ 72 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 authors: azel zhanibek al-farabi kazakh national university, faculty, almaty, kazakhstan e-mail: azel.zhanibek@gmail.com https://orcid.org/0000-0003-1306-5738 rafis abazov kazakh national agrarian research university, almaty, kazakhstan e-mail: r.abazov@kaznaru.edu.kz https://orcid.org/0000-0001-6042-9560 andrey khazbulatov kazakh research institute of culture, almaty, kazakhstan e-mail: ar.khazbulatov@gmail.com https://orcid.org/0000-0002-1499-7396 citation: zhanibek, a., abazov, r., & khazbulatov, a. (2022). digital transformation of a country’s image: the case of the astana international finance centre in kazakhstan. virtual economics, 5(2), 7194. https://doi.org/10.34021/ve.2022.05.02(4) received: october 6, 2021. revised: december 18, 2021. accepted: february 15, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ http://azel.zhanibek@gmail.com https://orcid.org/0000-0003-1306-5738 http://r.abazov@kaznaru.edu.kz https://orcid.org/0000-0001-6042-9560 http://ar.khazbulatov@gmail.com https://orcid.org/0000-0002-1499-7396 https://creativecommons.org/licenses/by/4.0/ 73 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 1. introduction the economic and political processes taking place in the world today increase the importance of building and promoting a positive image of countries. to be competitive on the “global olympus” today means keeping abreast of global trends and “creat[ing] favorable conditions for living and working at home and abroad” (tpbo, 2020). it is as if the world has turned into one big information field where choices are made on the basis of technologies, highlighting quality processes and products (drozdz et al., 2020b). each country defines its own key effective tools to promote its image suitable to the realities of the region and considering global trends. in this context, the global digital transformation is one of the trends that significantly help to promote a country’s image (petroye et al., 2020). over the past two decades, digital technology has fundamentally changed the approach to promoting the image of countries (kwilinski, 2018c; miśkiewicz, 2019). it is not just channels of information flow that have changed. there are more opportunities not only to highlight but also to create the necessary processes and products. today it is not enough just to create pretty photos or interesting videos to attract tourists and investors. what is even more important is to tell real success stories and generate narratives (moskalenko et al., 2022; yang et al., 2021). according to kotler and colleagues, the modern approach uses marketing tools and mechanisms in promoting the image of territories (kotler et al., 2002). thus, when studying the image of countries, it is logical to focus on the promotion of a country’s brand. to date, there are many approaches to assessing the brand of countries, and perhaps the most recognized in the world science is the famous hexagon by the british scientist simon anholt, who identified six key elements of the modern brand of territories, categorized as tourism, export, politics, investment, culture and human capital (anholt& hildreth, 2004). in this context, developing countries, on the one hand, face more difficulties because the “branding” processes have become much more complex and require mobilization of significant resources – both human and financial. however, at the same time, it has also become easier, because information and communication technologies (icts) and digital transformation have facilitated an access to the global marketplace (kwilinski et al., 2022a; miśkiewicz, 2021b). the past studieis outline (abaas et al., 2018; bilan et al., 2020; polcyn et al., 2022; prokopenko & miśkiewicz, 2020; saługa et al., 2020; pimonenko et al., 2021) that new paradigm of sustainable development requie to consider the energy (melnychenko, 2021; ingber, 2017; drożdż et al., 2020; miskiewicz, 2020; 2021b) and ecological (lyulyov et al., 2020; 2021; miśkiewicz et al., 2022) dimensions within assessment of country’s brand. this can be seen in all aspects of a country's life and operations. this article examines the digital transformation of kazakhstan’s image in terms of its investment appeal. “kazakhstan – like many neighboring countries in central asia – is undergoing an early stage of the digital revolution and making significant efforts towards building a post-industrial information society” (abazov, 2018). a relatively young state, kazakhstan has only recently begun active work on shaping and promoting its image in general, and in terms of investment attractiveness in particular. the image of “kazakhstan abroad is still based on stereotypes formed from a standard set inherent in all countries whose http://www.virtual-economics.eu/ 74 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 name has the ending ‘stan’ (kyrgyzstan, tajikistan, etc.)” (tlepbergenova, 2011). however, this outdated image is changing. “big changes in the formation of kazakhstan’s international image took place in february 2007, when the department of international information was established within the ministry of foreign affairs of the republic of kazakhstan, whose main function was the formation of the country’s image abroad” (zhanibek,2011). among the major projects aimed at promoting the country’s image has been the creation and development of the astana international financial center (aifc). the authors have chosen the aifc as a case study for a more detailed evaluation of the significance of the organization’s activities, which, in addition to its core business, is designed to make a major contribution to the promotion of the country’s brand. the choice of the aifc for this case study is also due to the fact that the main objective of the organization is to “promote investment in the economy of the republic of kazakhstan by creating an attractive environment for investment in the financial services sector” (constitutional law of the republic of kazakhstan, 2015), as investment attractiveness corresponds to one of the key elements of the modern branding of territories. building a country’s brand and promoting its image today are closely linked to the process of global digital transformation. this study analyzes the process of formation and promotion of kazakhstan’s country image using the example of the aifc and its digital transformation. the authors employ a questionnaire-based survey among representatives of the business community, academic community, government officials and culture to identify and assess the tools used by the aifc to create and develop its image; and also, to identify and its contribution to the development of the country’s image: in this case, the investment image of the country. the purpose of this article is to evaluate the perception of the effectiveness of using digital technologies to promote the country’s image and investment appeal, focusing on the aifc as an industry organization dedicated to shaping and developing kazakhstan’s investment image. “the degree of investment attractiveness of the country is directly related to the image of the state” (myakishev & zhdanova, 2018). as a rule, investment attractiveness and the country’s image develop at the same pace and strengthen or weaken each other. accordingly, the tools and channels chosen to promote a country’s image should be organically combined with the tools and channels to enhance investment attractiveness. implementing a country’s imagemaking process through institutions and their various tools are shown in fig. 1. it is important to note that the study considers the aifc as an institution designed for enhancing the country’s investment appeal. digital transformation has made an impact on many aspects of life, knowledge, and activity (szczepańska-woszczyna & gatnar, 2022; trzeciak et al., 2022; vaníčková & szczepańska-woszczyna, 2020). however, in order to understand the extent to which the digital transformation process is already in place and how successful it is in promoting the country’s image and investment appeal, the authors conducted a survey designed to evaluate the perception of the level of these processes by internal stakeholders, namely the citizens of kazakhstan. the survey was conducted during the year of 2022. a total of 17 questions were included in the questionnaire. five of these http://www.virtual-economics.eu/ 75 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 questions asked about the geography and demographics of the respondents. only three of the 17 questions were selected for this article. figure 1. implementing a country’s image-making process through institutions and their various tools source: developed by the authors. the expert survey to evaluate perceptions of the effectiveness of using digital technologies to promote the country’s image, investment appeal and activities of the aifc was based on three sets of questions: 1. the first set of questions aims to identify the perception of the most effective investment image communication channels. 2. the second set of questions aims to evaluate the perception of the impact of digitalization and digital transformation on the country’s investment image. 3. the third set of questions aims to identify the most effective channels of communication for the aifc as a sectoral organization designed to enhance the investment attractiveness of the republic of kazakhstan. the survey was designed to estimate the impact of digital transformation on the country's image, the strengths and weaknesses of brand-building activities, and tools used for developing the investment attractiveness. in this regard, the authors set the following objectives: to study the basis for building the country's brand and promoting it through sectoral organizations; to consider the digital context of the development of the country's investment and immigration attractiveness; http://www.virtual-economics.eu/ 76 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 to review briefly the literature on the theoretical and empirical aspects of digital transformation; to consider examples of the digital transformation impact through using digital technologies to promote the image of the aifc. the object of this study is the role of digital technology in shaping and promoting the investment image of kazakhstan. a comprehensive view of a representative group of participants on the holistic image of the country is important. the subject of the study is the activity of the aifc as a special body for shaping and promoting the investment image of kazakhstan. in this case the activity of the aifc is considered as an institution for increasing investment attractiveness, so at the meeting of the government of kazakhstan on attracting investment held on april 22, 2019 “a single center for coordination of work on investment attraction and promotion of the investment image of kazakhstan was determined: the international financial center ‘astana’ (aifc)” (aifc.kz.,2019). since the investment image of the country is one of the components of the country’s image as a whole, it is logical to consider the activities of the aifc as a component of the construction and promotion of the country’s image. globalization, growing international trade and rising economic productivity in many countries around the world contribute to increasing the competition among countries for foreign direct investments (fdis) and for technology transfers (kovchuha, 2020; chygryn et al., 2018). this, in turn, requires strengthening measures to improve investment attractiveness and the country’s image, as these are the links in the chain of the country’s economic (lyulyov et al., 2021; melnyk et al., 2018; kharazishvili et al., 2021; hussain et al., 2021; ), social (kharazishvili et al., 2020; lyeonov et al., 2018; smiianov et al., 2020), energy (coban et al., 2022; drożdż & mróz-malik, 2017; drożdż et al., 2021; dźwigol et al., 2019; miskiewicz, 2022; miśkiewicz et al., 2021) and political (lyulyov et al., 2021a; bilan et al., 2019) prosperity. this issue is relevant for all countries of the world, but especially for developing ones. the use of new digital technologies brings changes to the organization of communication, organizational, educational, cultural and many other processes. it has a particularly great impact on the organization of business processes. cooperation with major investors today implies the readiness of the digital environment of the region. kazakhstan today is experiencing a digital transformation in many sectors. according to the state program “digital kazakhstan,” the implementation of which was planned for 2018–2022, one of the five key areas is “digitalization of economic sectors” (gosudarstvennaya programma “tsifrovoi kazakhstan”, 2017). as part of the implementation of this direction, the authorized bodies studied in detail the processes of digitalization. however, the impact of digital transformation on the promotion of investment attractiveness and the image of the country remains only superficially studied. the relevance of this research rests on several factors. first, the need to understand how the investment image of a country is formed, using the case of the republic of kazakhstan. for example, there is a need to understand and explain how, kazakhstan achieved the ranking http://www.virtual-economics.eu/ 77 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 position no 52 in the global direct investment country attractiveness index for foreign investment in 2020 (ahead of neighboring kyrgyzstan, tajikistan, and uzbekistan, a global direct investment country attractiveness index, 2020). the authors suggest that the analysis of experts’ perceptions of the methods used information and promotion of the investment image will allow better understanding of the reason for the country’s placement at this level. for comparison, azerbaijan, another post-soviet country, is positioned 62 in this rating. second, the study is relevant given the need to understand how digital technology affects the promotion of the country’s investment image and its communication channels. third, analysis of the aifc effectiveness as an organization designed to influence the investment image of kazakhstan in the global market allows evaluation of the digital transformation effectiveness and the use of digital technology. the issue of forming and promoting the investment image of a country is of concern for almost all countries in the world, especially due to the growing global competition for fdis. as a country’s positive investment image is a reflection of a favorable business environment within the region, the growth of the economy as a whole depends on it, among other things (moskalenko et al., 2022; chygryn et al.; dzwigol et al., 2020a; kwilinski, 2018a; kwilinski et al., 2020b; 2020c). a wide range of tools in this area are used by different countries at various stages. kazakhstan has taken a comprehensive approach to the issue of shaping and promoting its investment image. in 2015, a specialized institution, the aifc, was created, whose activities should directly affect the investment image of kazakhstan. this organization is unique in its structure. the aifc became the first organization in the region to offer businesses a legal regime of attraction, implementation and protection of investments, based on the principles, norms and precedents of the law of a foreign entity – in this case of england and wales. it is critical to gain and secure organizational legitimacy for representatives of business, and it is good for the international image of the host country (marschlich & ingenhoff, 2022). this article is designed to address the challenges in evaluating the brand formation of an institution such as the aifc and the tools used in forming it. 2. literature review this section presents a brief review of the literature on the digital transformation of a country’s image promotion process and its investment appeal. the purpose of the literature review is three-fold. first, it evaluates conceptual research on promoting such an image, including such concepts as image, brand and reputation of the country. leading experts, expert organizations and the media compile various ratings using the concepts of brand, image and reputation. the purpose of this study is to determine the correct terminology for describing the public perception of the country, both domestically and abroad. this is in addition to a more detailed study of the theoretical foundations of the perception of the country’s investment attractiveness. second, it overviews case studies on the correlation between the internal and external country image. it seeks to determine the degree of interconnectedness among the perceptions of business environment representatives, http://www.virtual-economics.eu/ 78 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 residents of the country and foreigners concerning the favorable conditions for business on the given territory. third, it evaluates the latest research in the field of digital transformation of international public relations, marketing and branding. the concept “image” is multifaceted. american scientists deborah j. macinnis and linda l. price considered “image” from the standpoint of psychology as a unique way whereby certain characteristics of the object are processed and stored in memory, and came to the conclusion that these characteristics affect the purchasing power of a person (macinnis& price, 1987). according to some researchers, the image has been studied most often in fragments in accordance with the discipline in which it is considered. for instance, it can be considered in the plane of sociology, psychology, philosophy and of course in the plane of marketing, management and public relations (popova, 2003). john pantzalis and carl a. rodrigues looked at factors that contributed to the 1997 financial crisis and concluded that international capital is influenced by investors’ perceptions of the country’s brand, and that the positioning and management of this brand play a crucial role in attracting global capital. even more, such perceptions influence how and when this global capital, in similar situations, will leave the country (pantzalis & rodrigues, 2011). the british scholar simon anholt examined the importance of building a nation’s image and concluded that a powerful and positive brand of a nation directly benefits its exporters, importers, government, cultural sector and tourism; it facilitates immigration processes for the state and virtually every other aspect of international relations (anholt& hildreth 2004, p.20). ulyanovsky (2008) considers the corporate image of organizations in the context of the eastern europe and central asia (eeca) region and concludes that there is a stable image of the subject in the public consciousness. ilyin & leonova (2008) consider the importance of the image in conditions of globalization and prove that the image of the country today has acquired such a significant role that it can be attributed to the social value, on which there depends the success of political and economic activities of the state in the foreign policy, as well as the social stability of its internal political processes. the findings of simon anholt, who is the author of a number of concepts and notions in the field of building and promoting a country's image, introduced the concept of the nation branding. in his early works, he argued that countries and nations can be equated with brands and trademarks (anholt, 2003). next, anholt introduced the concept of competitive identity into the academic world, presenting it as a hexagon, including six elements of the modern country’s brand: tourism, exports, foreign and domestic policy, investment and immigration, culture and heritage, and human capital. the elements of a hexagon are shown in figure 2. in later works, he refers to these elements as natural channels through which most countries communicate with the rest of the world, either deliberately or accidentally building their reputation (anholt, 2007). in 2004, anholt co-authored with the young british scholar d. hildreth a book titled brand america: the mother of all brands, in which the scholars suggest the existence of links between certain product brands and the country’s image. http://www.virtual-economics.eu/ 79 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 figure 2. competitive identity hexagon elements source: anholt (2007). they highlight such american brands as coca-cola, pepsi, apple, microsoft, time, nbs, nike, johnson&johnson and many others linked to “brand america” (anholt & hildreth 2004). anholt argues for the creation of specialized agencies for competitive identity within national and regional governments. he emphasizes the marketing necessity for a brand of the country of a product origin: “made in...” (anholt, 2007). in 2007, anholt introduced the concept “place branding”, which should be based on a synthesis of brand management with public diplomacy. in 2010, in a new study, anholt notes that nations and countries can have brands – in the sense that they have a reputation, which is certainly important for prosperity in today’s world, just like brand images for corporations and their products. however, according to anholt, the idea that one can “brand” a country identically to the way companies would “brand” their products is futile (anholt, 2010). prue robson suggests that place branding shares many commonalities with public relations: it involves relationships with a wide range of stakeholders and communication campaigns that involve no direct sale of product (robson, 2021). in this context, similar to the studies (bogachov et al., 2020; borodin et al., 2021; kwilinski, 2018b; kwilinski et al., 2021), the author confirms that digital transformation might play an important role in improving the image of a country. according to jafari-sadeghi theory, digital transformation should be divided into “three categories, namely technological readiness (e.g., ict investment), digital research (e.g., research and development) and digital exploration (e.g., patents and trademarks)” (jafarisadenhi et al., 2021, p.100; abazov, 2021). http://www.virtual-economics.eu/ 80 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 3. methods based on the previous studies (abazov, 1997; 2010; 2021) the authors prepared the questionnaire-based survey using the competitive identity theory of the british scholar simon anholt (anholt, 2007), according to which “investment and immigration” are important components of a country’s image. based on the studies (arefieva, 2021; dzwigol, 2020; 2021; dzwigol et al., 2020b; kuzior et al., 2021b; kwilinski et al., 2020a; 2022; miśkiewicz, 2018; lyulyov et al., 2015) the authors, therefore, compiled questions on the respondents' perceptions of the country’s image in the areas of: tourism, exports, foreign and domestic policy, investment and immigration, culture and heritage, human capital. in addition, the questionnaire included a group of questions concerning the activities of the aifc, as the authors considered it as a case study. as a result, the questionnaire consisted of 17 questions, of which five were the passport data of the respondents. for this article, three questions belonging to different groups were selected, which, according to the authors, show information relevant to achieving the purpose of the research. as a first step, the authors organized a focus group to evaluate how a representative sample and relevant information could be collected. during the focus group interviews, it was determined that the questionnaire should be compact and mobile, in both paper and electronic form. the participants had a choice of answering in russian, kazakh or english. as a second step, the research team worked on achieving the proportional geographical diversity of respondents to cover not only the residents of nur-sultan and almaty, but also other large regional centers. as a third step, the questionnaire was created on the google forms platform and the link to it was distributed via various platforms. it was critical to select respondents from industries related to the key elements of the country’s contemporary brand. preference was given to experts with a university degree and/or academic degree and/or mba. 4. results and discussion a total of 105 people took part in the survey. however, five questionnaires were dismissed due to incomplete data. the survey was conducted among experts. in addition to age, other demographic and geographic indicators were recorded in the passport data. the demographic indicators included age, gender, education and occupation of the respondents, while the geographical indicators included the city of residence. this study does not report a detailed correlation of respondents’ responses according to passport data, but this can be made available upon request. the research questions were presented in three groups. the first group was designed to identify the most effective communication channels for the investment image. when asked how the investment image of kazakhstan was constructed, the respondents’ answers were distributed as follows: 17% of respondents chose traditional media, 2% of respondents http://www.virtual-economics.eu/ 81 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 marked social networks, 38% of respondents said through conferences and other events, and 38% of respondents chose a combination of social networks and traditional media as it shown in figure 3. figure 3. communication channels for the image of kazakhstan source: devised by the authors. in addition, respondents had an open-ended option and 5% provided their own answer. below are the examples of interesting answers. respondent x: in my opinion, the investment image of the republic of kazakhstan is developing quite dynamically and uses the whole range of promotion technologies. big contribution to the development of the investment image in my opinion is made by the aifc. mostly they implement it through an integrated approach, working with international partners of various levels and using modern communication channels. one respondent suggested that kazakhstan’s investment image was built through behind-thescenes arrangements that were not advertised to the general public. the authors focused on this example, as they suggest that it also demonstrates the view of the 38% of respondents who chose the option “through conferences and other events.” respondents were not given an explanation as to which other events fell into this category. these may be of very different formats and of course of varying levels of confidentiality. it is therefore possible that some respondents may have meant other events that are confidential and not publicly visible. it is also very interesting that only 2% of respondents mentioned social media as an independent tool to promote the country’s investment image. it is especially interesting that this is 8.5 times less than those who chose traditional media as an independent channel for promoting the country’s investment image. 2% 17% 38% 38% 5% how do you see the investment image of kazakhstan being built through traditional media through social media through a combination of traditional media and social media through conferences and other events other http://www.virtual-economics.eu/ 82 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 this data may indicate either low coverage of the topic in social media or low trust in social media information. kazakhstan's statistics also lead to such a conclusion: in january 2021 the number of users of social networks amounted to 12 million people, which is 26% more (2.5 million people) compared to the beginning of 2020. the total population of kazakhstan as of january 2021 stood at 19,126,000. according to some recent studies, the country has increasingly the “internet and social media active population” as the share of social media users reached 62.7% in 2021 (zhusupova, 2021). for example, if we look at the top five popular social networks in the country, the most popular social network in the world in january 2021, according to statcounter global stats, is facebook, with a share of 69.8%. next comes pinterest (11.9%), twitter (9.5%), youtube (4.9%) and instagram (2.56%). all of the abovementioned networks are, for the most part, entertaining and informative, which explains the respondents’ perception of social networks as an independent communication channel for the country’s investment appeal (statcounter global stats, 2021). thus, it can be seen that the greatest preference, and perhaps even trust, among the target audience of our study is firstly for conferences and other events, and secondly for traditional media. it is particularly interesting to observe these responses in the light of the fact that as many as 74% of respondents believe that the digitalization of image policy will have an impact on the formation and promotion of a positive investment image of the country. only 5% believe that there will be no impact and 20% did not answer as it shown in fig. 4. figure 4. the impact of digitalization of the image policy on promoting a positive country image source: devised by the authors. the distribution of responses clearly demonstrates the positive perception of digitalization by the target audience, and their acceptance of it as an effective tool to promote the country’s image in the area of investment attractiveness. to some extent, such a positive assessment 74% 5% 20% 1% do you think the digitalization of image policy will affect the formation and promotion of a positive investment image of the country? yes no i can't answer other http://www.virtual-economics.eu/ 83 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 by respondents is also due to the level of internet penetration, which stood at 81.9% at the beginning of 2021. the second set of questions aims at evaluating how the impact of digitalization and digital transformation on the country’s investment image is perceived. digitalization is a strategic priority for kazakhstan, because the introduction of digitalization technologies allows the state to develop effectively in a variety of ways, including promoting its investment image and increasing the investment attractiveness of the country. in 2017, kazakhstan launched a state program “digital kazakhstan,” which aims at creating conditions for the transition to a digital economy. in the un e-government survey 2020, kazakhstan ranked 29th out of 193 un member states, with a score of 0.92 out of 1 for e-services (un, 2020, p.270). a favorable business environment, and the resulting increase in attractiveness to foreign investors, largely depends on the region’s technological development. digital support for doing business in the country is one of the key factors of comfortable business conduct. kazakhstan has created quite comfortable conditions in this respect. another critical key factor is the legal and judicial system. taking the opportunity to give an open response, 1% of respondents pointed out that digitalization alone without a transparent judicial system cannot be effective in improving the investment image. respondent y: indeed, i would say that in the modern world it is impossible to do without it. for example, compared to neighboring countries fintech is developing well in kazakhstan, which is very important for foreign investors. the fintech lab has been opened at the aifc, which brings together developers of innovative financial products. leadership in such breakthrough areas becomes the basis for the digital component of promoting the country's image. the digitalization of the image policy has a positive effect on the country's investment image, especially in the business environment, and the aifc plays a big role in this. earlier they very correctly determined what should be emphasized. in 2014 tursunbek omurzakov, a member of the majilis of the kazakh parliament, spoke about the need to develop a positive investment climate in the country and noted that “59% of investors already operating in kazakhstan consider the regulatory environment to be insufficiently transparent and stable. foreign companies operating in kazakhstan regularly encounter instances of ambiguous interpretation and selective application of the law. in addition, the judicial and arbitration systems have proven ineffective in handling cases involving investors. respondents expressed their concerns about respecting property rights and guaranteeing investment security” (kuatova, 2014). this means that at the highest level of the country’s leadership, there was a clear understanding of the weaknesses of promoting investment attractiveness in the traditional “old” ways and the need to come up with the new innovative ideas including integration of digital tools and digital transformation for both improving effective management of investors’ needs and creating an attractive investment image of the country. http://www.virtual-economics.eu/ 84 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 the aifc establishment in 2015 was a part of the country’s effort in introducing new modern and effective ways of working with investors and international businesses and it began working with the mandate to ensure investor protection and maintain investor confidence. all of these benefits need to be communicated. how effective these channels of communication are after almost seven years is addressed in this study under the third set of questions, which seeks to identify the most effective channels of communication for the aifc as a sectoral organization designed to enhance the investment attractiveness of the republic of kazakhstan. regarding the most effective communication tool used by the aifc, 8% of respondents chose social media, 14% chose traditional media, 35% chose a combination of social media and traditional media, while 37% chose conferences and other events and 6% preferred an open response as it is shown in figure 5. figure 5. perception of the most effective channel of communication used by the astana international financial center (aifc) source: devised by the authors. the overall picture of respondents’ perception of the effectiveness of the aifc’s communication channels is similar to how the same group of respondents evaluated the effectiveness of communication channels of the country's investment image as it is shown in figure 6. the main reason for this similarity, according to the authors, lies in the fact that respondents identify the activities of the aifc as the main mouthpiece for information about the country’s investment attractiveness. on the one hand, this is evidenced by the fact that in the respondents’ perception in the general information field there is no gradation of messages into those initiated by the aifc or by other participants in the process of formation and promotion of the investment image of kazakhstan. 8% 14% 35% 37% 6% what is the most effective communication tool used by the astana international financial center (aifc)? social media traditional media a combination of social media and traditional media conferences and other events other http://www.virtual-economics.eu/ 85 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 figure 6. a comparison of the perception of communication channels of the investment image of kazakhstan and the communication channels of the astana international financial center (aifc) source: devised by the authors. the volume of information flow also plays a significant role in this, and the diversity and uniqueness of the aifc’s products today allow the center to be on the agenda and generate a variety of information occasions. on the other hand, despite the strategic importance of digitalization as designated at the state level, and a sufficient level of internet penetration, there can be seen a scarce use of social networks as a separate channel of communication for aifc activities and promotion of the investment image of the country as a whole. 5. conclusions a rapid development of information communication technologies affects all aspects of economy at both the macro and micro levels, including the formation and promotion of the country’s investment image. changing practices in using digital technologies contribute to the development of new approaches, tools and institutions to reshape the investment image in many countries. by their very nature, digital technologies become a driver of the globalization process for developing countries through creating favorable conditions for integrating their economies into the global economic system (trushkina, 2020). however, icts and digital transformation can either help some countries integrate into the global community, or become an insurmountable barrier undermining international competitiveness of other national economies. 0 10 20 30 40 a combination of traditional media and social media social media other conferences and other events communication channels of kazakhstan's investment image aifc's communication channels http://www.virtual-economics.eu/ 86 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 this study reconfirms the anholt’s assumption that there are links between certain product brands and a country’s image (anholt & hildreth 2004, p.23-26) and shows the positive impact of digital transformation of some product brands (in our case – the aifc in kazakhstan) on the country’s investment image and investment attractiveness. in fact, the majority of responses in the survey confirmed the link between the work of aifc and an investment image of kazakhstan. in the case of kazakhstan, digital technologies were actively introduced not only in the core business, but also in the development of new communication channels. yet, the picture is more nuanced as the respondents pointed out that it was the combination of traditional media and new social networks that played an important role in promoting the investment image of the country. the existence of this trend is confirmed by research conducted in other countries. for example, albishri osama in his recent studies suggests that some governments began using strategically mediated and digitalized public diplomacy tools, including satellite news, radio, newspapers and, more recently, social media platforms for building a country’s image (osama, 2019). the information and image policy of the state has become increasingly complex in its nature. therefore, this requires the creation of specialized institutions or support of certain national private companies dedicated to the implementation of various activities in different areas by using the full range of digital technology capabilities (dementyev & kwilinski, 2020; dźwigoł & wolniak, 2018; kotowicz et al., 2022; kuzior et al., 2021a; saługa et al., 2021). for instance, the aifc activities exemplifies the emergence of such national institutions specifically designed to work both on improving investment climate for the international investors inside the country and on developing the investment image of the country in the international business arena, especially among large international investment entities. the authors conducted a comparative analysis of how the communication channels of the country’s investment image in general and of the aifc in particular are perceived. the analysis suggested that the respondents perceived the existence of the links between the aifc efforts in developing investment image and changing image of the country in the international economic space. the authors determined that most respondents have recognized the aifc’s activities as one of the important tools for creating and disseminating information about the country’s investment appeal utilizing various tools. this, in turn, leads to the suggestion that the nation’s image in the developing countries and in emerging economies can be effectively shaped and promoted not only by traditional “old” communication tools, but also through the work of “new” institutions which utilize “new” digital tools for promoting an image of their respective countries. there is some additional evidence which confirms this trend. for example, kazakhstan was ranked 63rd in 2014 in the global direct investment country attractiveness index. it was before the active work of the aifc started in 2015 (a global direct investment country attractiveness index, 2020). over the next few years kazakhstan gradually improved its positions in the index, and it was ranked 52nd in 2020. this data combined with the results of our research may lead to an assumption that the work of specialized private and/or public institution (in this case of the aifc) contributed to the improvement of country’s position in the global ranking (table 1). http://www.virtual-economics.eu/ 87 www.virtual-economics.eu issn 2657-4047 (online) azel zhanibek, rafis abazov, and andrey khazbulatov virtual economics, vol. 5, no. 2, 2022 table 1. global direct investment country attractiveness index global direct investment country attractiveness index kazakhstan 2014 2015 2016 2017 2018 2019 2020 63 56 54 55 55 53 52 source: global direct investment country attractiveness index (2020) indeed, the aifc operates as a unique and innovative new institution which works on improving investment climate for foreign investors inside the country and on improving the country’s image in a very competitive global investment environment. it utilizes both traditional tools for communicating with international partners (such as business-to-business (b2b) events: investment seminars, forums and consultations) and innovative digital communication and social media tools (such as social media presence on such platforms as instagram, facebook, twitter, etc.). in fact, in march 2022, aifc’s managing director kairat kelibmetov announced that the aifc became one of the most successful institutions in attracting the fdis to kazakhstan and he quoted several macroeconomic statistical data as the evidence of success. according to him, the total amount of investments attracted through the aifc platform accounts for $6.2 billion (nurgaliyeva, 2022). our study suggests that a careful and effective use of icts and digital transformation may contribute to the development of a positive investment environment and ultimately to the positive investment image of a country. in addition, the results of the study suggest that traditional ‘old’ channels of communication should not be discharged. another lesson is that the activities of a combination of communication channels – both traditional and new digital ones – should be anchored in an especially dedicated institution(s) that would coordinate the work of public and private organizations and partners in developing the investment attractiveness of the country. in the development of the country’s investment image and investment attractiveness, this institution should also combine and coordinate media tools in order to achieve synergies. indeed, the lessons from the aifc suggest that it is possible that in such a short time – less than a decade of functioning of the aifc – it became a model institution contributing to the development of the investment image of the country through digital transformation of communication channels. future studies should pay more attention to the diversity and effectiveness of digital tools for shaping the country’s investment image and investment attractiveness, both in terms of core business and in terms of communications. 6. acknowledgements the authors would like to express their gratitude to the editorial board of the journal and to the anonymous reviewers of the article. http://www.virtual-economics.eu/ 88 www.virtual-economics.eu issn 2657-4047 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[media consumption in kazakhstan in 2020: the internet and social networks win]. http://www.virtual-economics.eu/ кwilinski alex 87 www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, rafis abazov, and yang chen virtual economics, vol. 5, no. 4, 2022 2022 volume 5 number 4 framing a regional spatial development perspective: the relation between health and regional performance nataliia letunovska, rafis abazov, and yang chen abstract. the article describes the step-by-step process of testing the hypothesis about the importance of the health factor in the regions’ economic growth, which determines their competitive positions. calculations of the health development level in 22 regions of ukraine were carried out, according to which those regions were divided into four clusters. the regions’ integrated index of competitiveness was evaluated. the obtained taxonomic indicator allowed dividing the analysed regions into four groups according to their integral values of competitiveness. at the next stage, there were used several criteria for checking the data by groups for normality of distribution using the shapiro-wilk test and the levin method, which made it possible to confirm the presence of the heteroscedasticity phenomenon of the variances of the compared groups of regions. to confirm a connection between the level of regions’ health development and their competitiveness, a one-factor parametric anova analysis, supported by tukey's post hoc test, was carried out, which revealed a dependence between almost all groups of the regions compared. the granger test made it possible to confirm the hypothesis of a unidirectional causal relationship between the health factor and the competitive positions of a region based on the integrated level of competitiveness. the obtained results prove the need for an active work in the direction of strengthening the regional health care system and the maximum involvement of stakeholders of various levels in the strategy issues of improving the territories and supporting the system of medical and social care of the population at the level of cities and regions. the authors emphasize that for implementing an effective regional health policy, it is important to take into account the influence of factors that can restrain health development, as well as those groups of determinants capable of stimulating this development: financial and budgetary mechanisms, involvement of marketing and information tools, taking into account behavioural and institutional factors. keywords: a level of health development, regional competitiveness, public health risk, quality of life, regional growth, causality jel classification: c12, i15, r11 http://www.virtual-economics.eu/ 88 www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, rafis abazov, and yang chen virtual economics, vol. 5, no. 4, 2022 authors: nataliia letunovska sumy state university, ukraine e-mail: n.letunovska@kmm.sumdu.edu.ua https://orcid.org/0000-0001-8207-9178 rafis abazov unai sdg hubs, new york, usa e-mail: r.abazov@kaznaru.edu.kz https://orcid.org/0000-0001-6042-9560 yang chen school of economics, fujian normal university, fuzhou, p.r. china e-mail: cheny3598@gmail.com http://orcid.org/0000-0002-4801-4036 citation: letunovska, n., abazov, r., & chen, y. (2022). framing a regional spatial development perspective: the relation between health and regional performance. virtual economics, 5(4), 87-99. https://doi.org/10.34021/ve.2022.05.04(5) received: june 20, 2022. revised: november 19, 2022. accepted: december 10, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:n.letunovska@kmm.sumdu.edu.ua https://orcid.org/0000-0001-8207-9178 mailto:r.abazov@kaznaru.edu.kz https://orcid.org/0000-0001-6042-9560 mailto:cheny3598@gmail.com http://orcid.org/0000-0002-4801-4036 https://creativecommons.org/licenses/by/4.0/ 89 www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, rafis abazov, and yang chen virtual economics, vol. 5, no. 4, 2022 1. introduction given the spread of the covid-19 pandemic around the world in 2020, over the years the issue of a health factor has not lost its relevance. the determinants of health are complex and linked to factors that operate both at the individual level and at the level of countries and regions (smiianov et al., 2020). it is clear that individual health characteristics are determined by genetics, but the community lifestyle determines the inclination to care for a person’s health. the main functions at the regional government level are health promotion, including the influence on social determinants and information and outreach work in the interests of health (pimonenko et al., 2021). these components are the main ones when calculating regions’ health development levels. it is appropriate to note that the relevance of the issue of health promotion in the regions of ukraine today is due not only to the importance of preventing infectious diseases but also to the fact that ukrainians continue to suffer from preventable diseases and premature death. thus, according to statistical information, the leading cause of death from 2007 to 2017 were cardiovascular diseases, cancer, chronic respiratory diseases and type 2 diabetes. in 2019, 84% of deaths were related to a progressive state of non-communicable diseases which could be prevented if concomitant risks, such as the frequency of infectious diseases, prevention, following the principles of the concept of holistic health, were prevented in time (on the way, 2020). the population’s health is undoubtedly one of the leading indicators of national, regional and local well-being. this parameter is a fundamental component of human capital – an important indicator of a country's global competitiveness. this is a property without preserving and reproducing which each individual cannot realize his potential in various spheres of socioeconomic life. naturally, a high level of health ensures a corresponding quality of life. along with the concepts of "public health" and "community health", the term "population health" is directly related to the condition and characteristics of individual persons or small groups of people. this term is a starting point for further generalization and comprehensive analysis of a regional level of health. effective population health interventions require comprehensive attention to social, environmental, and medical determinants of health. undoubtedly, an important role is played by promoting a healthy lifestyle, social cohesion and interaction to solve common problems. health can be called the factor that stimulates growth of the quality of life: only physically and mentally healthy people can make a positive contribution to their region with their professional contribution. it is a healthy personality that forms human capital and guarantees high productivity in regional development. a higher indicator of working capacity increases economic indicators at the level of regions and the entire country. for example, a one-unit increase in the multifactor health index in a country increases output by 2% (bhargava et al., 2001). dash et al. (2020) estimated that about a third of economic growth in developed countries over the past century was due to improvements in public health. in 2020, health problems prevented people from being economically active and fully realizing their production potential. this led to losses of up to 580 million person-years per year due to diseases of the working-age population. health problems cost the world more than 12 trillion http://www.virtual-economics.eu/ 90 www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, rafis abazov, and yang chen virtual economics, vol. 5, no. 4, 2022 us dollars. health shocks such as global epidemics lead to additional economic losses (prioritizing health, 2020). this article aims to confirm the authors’ hypothesis that the high position of a region in terms of health parameters leads to a high probability that this region will receive a high rank in terms of spatial development prospects, which can be expressed through the competitiveness index. 2. literature review different approaches to regional growth and issues of ensuring competitiveness took place in the studies of many scientists in the 21st century (kuzior et al., 2022; arefieva et al., 2021; trzeciak et al., 2022). various factors stimulating regional growth are singled out in publications on this topic. in (vyrostova et al., 2021; pimonenko et al., 2021), this growth factor is called tourism and focuses on researching the relationship between tourism and economic growth. with this study, the authors confirm the hypothesis that tourism positively affects the growth of the territory's gdp. the subject of research by (bondarenko et al., 2020) is the marketing and economic attractiveness of a territory and taking into account the parameters that determine it. it is noteworthy that the authors propose to determine the economic attractiveness of a territory according to five sub-indices: the development level of business structures, production indicators, the sphere of trade and investment, as well as issues of the environment and logistical support. tielietov & letunovska (2014) emphasize the importance of the social factor in ensuring a region’s competitiveness, which can be realized by supporting social infrastructure objects subordinated to municipalities and local business entities. in (zdražil & kraftová, 2021), an attempt is made to evaluate the development of the multifactor productivity structure in a region and determinants affecting it. theoretically, this study is based on the principles of accounting for the growing phenomenon. in the article (roses & wolf, 2021), the authors examine regional income growth and inequality based on the analysis of long-term panel data covering more than 170 european regions in almost 20 countries over a century. these data made it possible to compare the regions with each other and with the development level of other parts of the world. the analysis was carried out based on a comparison of such indicators as fluctuations in population density and economic activity, structural changes in the economy with a shift in the leading role of industries in the national economy, the rise and fall of industry, and the rise of the service sector. de lucio, j. (2021) uses artificial intelligence techniques to analyse a regional situation. it combines the most common regional analysis tools (time series analysis, synthetic and dynamic parameters) with neural network tools that help reduce errors in evaluating a regional situation. batzilis, d. (2020) studies cost sharing and the impact of political determinants on regional country growth using panel data. it is the issues of politics and the current government that have a significant impact on regional development that are the focus of scientific research. sleuwaegen & ramboer (2020) think that economic efficiency of regions depends on a small number of companies that are the most productive, and their performance influences regional growth rates and indicators of competitiveness at the local level. such companies, for example, account for most jobs in the region. data studied by the authors indicate the stimulating role in the regional growth of such http://www.virtual-economics.eu/ 91 www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, rafis abazov, and yang chen virtual economics, vol. 5, no. 4, 2022 parameters as the quality of market support institutions, agglomeration and infrastructure. basboga (2020) analyses the impact of the factor of opening the country's borders and the intensity of cross-border cooperation on the regional growth, focusing his research, to a greater extent, on the border regions of europe. in his opinion, opening national borders with free movement of people results in an increase in regional gross value added per capita of almost 3%. kuzmenko et al. (2020), as well as smiianov et al. (2020), concentrate their scientific research on determining the differentiated position of regions in terms of their ability to counter the impact of epidemic threats. they consider the health factor in the region as fundamental to determining the territories’ sustainability and long-term competitiveness, since the lower impact of risk factors for public health determines the relative future stability of their economic indicators. even in work (zukin, 1971), it is emphasized that non-economic factors are decisive and significantly influence the outcomes of economic development programs. he makes a case for cases where healthcare factors significantly undermined the target values of economic development indicators under successful economic planning. based on research results he concludes that economic development is directly and indirectly related to health and depends on this factor. a carefully planned and implemented regional healthcare program can help optimize economic development in a country. rivera & currais (2004) examine the impact of public health spending and its variations on economic growth. the authors proposed a modified solow model that includes a health factor to explain the impact of several determinants on regional productivity. an empirical study based on panel data is carried out on the example of the regions of spain. the results show that current government spending on health care has a stable positive effect while public investment in health care does not affect productivity measures. bousquat & de paula (2017) analyse the coordination relationships between the primary health care unit and the established network of a regional medical sphere in a country. they chose stroke as a factor for tracking therapeutic routes and, thus, assessed the quality of medical care in a region. an analysis of the scientific literature on health care shows that many studies are devoted to comparing health indicators between different regions, in which attention is also paid to analysing the determinants of existing differences among them. thus, health differences are reflected through indicators such as infant and maternal mortality, life expectancy, mortality rates from various causes, and indicators of mental well-being. considerable attention in scientific research is paid to the social determinants of health. in addition, the differences among regions, according to the author, are due to the complex diet and other factors: economic conditions, lack of food security, environmental influences, psychological injuries and stress, and availability of medical services. fronlich et al. (2006) explore patterns of health disparities and propose theoretical mechanisms that generate these patterns. they pay attention to the analysis of such indicators as life expectancy and mortality in the population. the article focuses on three social determinants of health: social status, income, and place of residence. the authors argue that health inequalities can be reduced by redressing inequity in the distribution of these determinants. franzini & giannoni (2010) found that residents of lower-income regions of italy with higher unemployment and greater inequality were more likely to report poor health and adverse living conditions which they believed to be the main determinants level of health. gusmano et al. (2014) examine http://www.virtual-economics.eu/ 92 www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, rafis abazov, and yang chen virtual economics, vol. 5, no. 4, 2022 differences between access to health care in central and peripheral regions of france. they conclude that residents of low-income areas and those treated in public health facilities have poorer access to primary care. that is, income inequality and an access to a medical institution (public or private) are called by the authors the main determinants of the health services availability. henriksen et al. (2015) revealed the homogeneity of the five regions of denmark regarding socio-demographic characteristics and the level of health development. conclusions are drawn based on descriptive characteristics for all five regions. such parameters as the use of medical services and the use of medicines for 2008-2013 were also taken into account. in connection with the covid-19 pandemic, in recent years, more and more studies have been devoted to analysing health issues through the prism of achieving resilience of the medical system and a region as a whole through the impact of epidemic threats. this issue is addressed in a paper (perone, 2021), which examines the effectiveness of the italian regions’ response to the emergency related to covid-19. the article aims at investigating the causes of differences in mortality rates in 20 italian regions and 107 provinces using ols multivariate regression and to construct a "taxonomy" of provinces at risk of mortality from covid-19 using ward's hierarchical agglomerative clustering method. as determining indicators, the author chose indicators of the development level of the health care system, the level of environmental pollution, climatic conditions, demographic characteristics, and indicators of the medical system saturation. 3. methods the object of the study is the regions of ukraine. data for calculations are taken from open sources of the state statistics service of ukraine. the authors proposed that the high value of health parameters in a region is determined by its leading position in terms of overall competitiveness. to check it, several stages were performed:  at the first stage, 22 regions were evaluated according to the level of health development using kohonen's self-organized map toolkit, which made it possible to form clusters with the appropriate weighting coefficients based on the distance criterion of the values of each region from the winning neuron. the calculation results made it possible to identify four clusters of regions according to the level of health development. the leading regions are kharkiv, odesa, vinnytsia; regions with a high level of health development – zaporizhia, kyiv, khmelnytskyi, mykolaiv, volyn, lviv, dnipropetrovsk, zakarpattia, zhytomyr; regions with an average level of health development – ivano-frankivsk, cherkasy, poltava, sumy; outsider regions – kirovohrad, chernihiv, chernivtsi, kherson, rivne, ternopil;  at the second stage, integral indicators of the competitiveness of the regions of ukraine were calculated. an analysis of the most common methods of determining competitiveness (european regional competitiveness index, regional innovation scoreboard, porter diamond model, regional competitiveness hat, pyramid model of regional competitiveness, index of european competitiveness (robert huggins associates), regional competitiveness atlas (eurochambers), oecd regional well-being) made it possible to form the basis for specifying the parameters and single out the most informative of them, which are structurally grouped into four subgroups: economic (gross regional product per person, export of goods, export of services, number of enterprises, number of employees per person), http://www.virtual-economics.eu/ 93 www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, rafis abazov, and yang chen virtual economics, vol. 5, no. 4, 2022 social (number of births per person, total marriage rate, enrolment of children in preschool education institutions, provision of strawberries by institutions, crime rate), environmental (volumes of emissions into atmospheric air per person, waste generation per person, volumes of wastewater pollution, volumes of forest loss, installed capacity of renewable energy sources) and innovative (number of employees involved in the implementation of scientific research works, number of applications for useful models, costs of scientific research and development, propensity for innovation of the administrative apparatus of the regional government , uniformity of innovative activity in the region). statistical data are taken quarterly from 2010 to 2019 when the covid-19 pandemic had not yet time to transform these indicators. the selection of parameters for calculating the regional competitiveness index was carried out according to the criterion of an absence of multicollinearity: 𝑟𝑖𝑗 = ∑ 𝑥𝑖−�̅�𝑖)· 𝑛 1 ∑ 𝑥𝑗−𝑥𝑗̅̅ ̅) 𝑛 1 √∑ (𝑥𝑖−�̅�𝑖) 2118 1 ∙∑ (𝑥𝑗−�̅�𝑗) 2118 1 (1) where 𝑟𝑖𝑗 is a spearman's linear correlation coefficient (critical value 0.8); 𝑥𝑗 , 𝑥𝑖 are input data indicators; �̅�𝑗 , �̅�𝑖 are average values of time series. a distinctive feature of the approach is the use of quantitative and qualitative parameters to calculate these components. at the same time, cronbach's alpha criterion was used to check the consistency of expert assessments. according to this criterion the analysis results make it possible to assess the acceptability of the selected indicators for describing the phenomenon under study. standardization of indicators is proposed to be carried out by the z-scores method, and the calculation of the integral value of competitiveness is done by the taxonomy method when the extremes of indicators are first found for each of the sets of parameters (economic, social, ecological and innovative), and then the distances to the predominant indicator are calculated according to the formula: 𝑑𝑖𝑜 = √∑ (𝑦𝑖𝑘 − 𝑦0𝑘 ) 2𝑛 𝑘=1 , 𝑖 = 1, . . . , 𝑚 (2) where 𝑦𝑖𝑘 is the values of indicators of the components of the index of regional competitiveness; k is the feature number; n is the number of features of each statistical unit; m is the number of regions. it is advisable to calculate the integral index of regions’ competitiveness according to the formula: 𝑇𝑃 = 1 − 𝑑𝑖0 1 𝑚 ∑ 𝑑𝑖0 𝑚 𝑖=1 + 4√ 1 𝑚 ∑ (𝑑𝑖0−𝑑0сер) 2𝑚 𝑖=1 ; (3) where docер is mathematical expectation. according to calculations, kharkiv, lviv, and odesa regions are the leading regions in terms of competitiveness. zaporizhzhia, kyiv, vinnytsia and mykolaiv are regions with high http://www.virtual-economics.eu/ 94 www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, rafis abazov, and yang chen virtual economics, vol. 5, no. 4, 2022 competitiveness. khmelnytskyi, zakarpattia, zhytomyr, cherkasy, ternopil, ivano-frankivsk, poltava, volyn, kherson, rivne, sumy are regions with an average level of competitiveness. other regions belong to outsider regions;  at the third stage, there was checked the normality of the distribution of regions’ clusters by competitiveness using the shapiro-wilk test (razali & wah, 2011): 𝑆𝑊 = (∑ 𝑎𝑖 𝑛 𝑖=1 𝑥(𝑖)) 2 ∑ (𝑥𝑖−�̅�) 2𝑛 𝑖=1 (2) where aі is constant; 𝑥(𝑖) is the smallest indicator value in the sample.  at the fourth stage, there was checked the grouping of regions for the presence of heteroscedasticity of disparities in individual clusters using the levine method (shymon et al., 2020): 𝐿𝑡 = (𝑁−𝑘) 𝑘−1 ∙ ∑ 𝑁𝑖(𝑍𝑖−𝑍𝑖𝑗) 2𝑘 𝑖=1 ∑ ∑ (𝑍𝑖𝑗−𝑍𝑖) 2𝑁𝑖 𝑗=1 𝑘 𝑖=1 (3) where z is a sample mean; k is the number of groups; 𝑁𝑖 is the number of values in the i-th group.  at the fifth stage, analysis tools were selected to analyse the regions’ groups and confirm the research hypothesis. 4. results and discussion at the initial stage, using the available values of regional competitiveness indices by a group, there was checked their normality of distribution according to the shapiro-wilk test (table 1). table 1. shapiro-wilk test results variable w v z p-value index of the region’s competitiveness 0.881 3.023 2.234 0.012 source: calculated by the authors using the stata software. according to the calculations, the value of the shapiro-wilk index is below one, and the asymptotic value is less than 0.05, which indicates that the distribution does not meet the criterion of normality and there are differences between the variables. in the next step, there is checked the homogeneity of the variances of the isolated groups of regions according to levin's method (table 2). the asymptotic significance value is less than 0.05 for w0 (mean), w50 (median), and w10 (for the top 5% and bottom 5% of values), indicating that the distribution does not meet the normality criterion and there are differences among the variables. http://www.virtual-economics.eu/ 95 www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, rafis abazov, and yang chen virtual economics, vol. 5, no. 4, 2022 table 2. the results of calculations using levin's method level of health development mean student’s deviation leaders 0.443 0.063 a high level of health development 0.356 0.072 the average level of health development 0.276 0.019 outsiders 0.251 0.02 total 0.324 0.083 w0 = 5.213 pr > f = 0.009 w50 = 4.145 pr > f = 0.021 w10 = 5.214 pr > f = 0.009 source: calculated by the authors. one-factor parametric anova analysis was chosen to check the relationship between the competitiveness of regions and their level of health development. the results of the calculations are presented in table 3. table 3. the results of the anova analysis note: ss is a sum of squared deviations; ms is the ratio of the sum of squared deviations to the number of their degrees of freedom; f is quantile of the fisher distribution. source: calculated by the authors. the analysis showed the presence of a statistically significant difference between at least two groups (f(3, 18) = 10.7, p-value < 0.05; since bartlett's test > 9.488, p-value < 0.05, the conclusion was made about the presence of a statistically significant result. a further empirical analysis with the help of tukey's post hoc test confirmed the proposed hypothesis regarding the presence of a statistically significant difference between the region’s competitiveness and its level of health development, which was most significantly manifested in the intergroup comparison of the leader regions and outsider regions with other groups (22, 5±0.041, p-value = 0.000), and the leader regions and regions with an average level of health development (19.9±0.044, p-value = 0.001). there is no statistically significant difference in only one pair of groups: regions with an average level of health development and outsiders (2.5±0.033, p-value = 0.863) (table 4). comparison ss ms f p-value between groups 0.093 0.031 10.7 0,0003 within groups 0.052 0.003 bartlett's criteria for equality of variances: chi2 = 9.745, p-value = 0.021 in general 0.145 0.007 http://www.virtual-economics.eu/ 96 www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, rafis abazov, and yang chen virtual economics, vol. 5, no. 4, 2022 table 4. tukey's post hoc test results comparison groups divergence standard error t p-value leaders and a high level of health development -0.117 0.039 -3.00 0.035 leaders and the average level of health development -0.199 0.044 -4.56 0.001 leaders and outsiders -0.225 0.041 -5.45 0.000 high and medium levels of health development -0.081 0.029 -2.12 0.049 high level of health development and outsiders -0.107 0.026 -4.11 0.003 the average level of health development and outsiders -0.025 0.033 -0.78 0.863 source: calculated by the authors. the granger test will help assess the cause-and-effect relationships between the analysed indicators of the regions. the results of the causality assessment are given in table 5. table 5. cause-and-effect relationships between the regions’ competitiveness and their level of health development using the granger causality test hypothesis w-statistics probability connection type the level of health development of the region → competitiveness of the region 0.422 0.025 one-way competitiveness of the region → the level of health development of the region 5.977 0.524 source: calculated by the authors. the analysis showed a unidirectional relationship between the level of health development of the region and its competitiveness. 5. conclusions according to the obtained results, the hypothesis that there is a connection between the region’s competitiveness level and its level of health development is confirmed. this makes it possible to conclude that the growth of the level of health in the region forms the prerequisite for improving its competitive position among other regions. this indicates that the health factor is an attractor of the region’s attractiveness in terms of competitiveness indicators. the obtained results confirm the need to intensify work in the direction of strengthening the regional health care system, increasing the level of involvement of the territory's stakeholders in the development of health development strategies and in the sphere of managing the public system of medical and social care, which will ensure a full modernization of the health system in the regions, an approach to preventing common diseases, obtaining additional positive effects for the country. to implement an effective policy in the field of improving the region, it is advisable to analyse the factors that restrain this process, namely, mostly the economic http://www.virtual-economics.eu/ 97 www.virtual-economics.eu issn 2657-4047 (online) nataliia letunovska, rafis abazov, and yang chen virtual economics, vol. 5, no. 4, 2022 orientation of regional development, socio-economic inequality among the population, incomplete consideration of risk factors, the unpopularity of the culture of preventing a disease, etc. improving the level of health care can be realized by considering such groups of determinants as financial-budgetary, marketing-informational, social-behavioural and institutional. markers of effectiveness will be an increase in medical and demographic indicators of the population, an increase in the number of people covered by immunization, an increase in the number of entrepreneurs working in the field of health product manufacturing, etc. then the ranking positions of a region according to the level of health development will also increase, which will make it possible to follow the trend of 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(2022). using blockchain and artificial intelligence in energy management as a tool to achieve energy efficiency. virtual economics, 5(3), 69-90. https://doi.org/10.34021/ve.2022.05.03(4) received: june 9, 2022. revised: august 21, 2022. accepted: september 6, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://creativecommons.org/licenses/by/4.0/ 71 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 1. introduction energy management is a range of activities to ensure the efficient use of energy in an organization. energy management has turned out to be essential for organizations aiming to reduce energy costs, improve their public image, pursue a sustainable way of doing business and comply with legal requirements. although some energy management standards and guidelines have been introduced, organisations continue to face significant challenges in implementing energy management. companies can expand by forming working groups and committees to develop rules and a related framework for energy technology transfer would be an added benefit in delivering results in energy management. these practices include energy monitoring and measurement, establishment of the unit use standards, assignment of responsibilities, taking people on board through effective communication within the realm of society and, above all, recognising the efforts of personnel who strive and achieve energy goals (el-shimy, 2018). consistent energy management helps to increase the efficient use of power in an organisation. to improve energy efficiency over the long term, an organisation needs an energy policy that extends across the organisation. besides managerial aspects of energy management, an energy manager must have a good understanding of the technical factors as well to define a successful energy program; an energy manager must have a good understanding of both technical and managerial aspects of energy management (awan et. al., 2014; miśkiewicz et al., 2021). companies constrained by external forces, such as higher energy prices and irregular energy supplies, were motivated to adopt energy-efficient technologies (parekh et. al., 2022; karpenko et al., 2018). some of the key drivers to the adoption of energy-efficient methods are the long-term benefits of energy-efficient technologies. the studies on the energy efficiency gap have, to a great extent, revolved around the distribution of energy-efficient technologies. however, there is a considerable emphasis on the fact that the total efficiency potential can be achieved through investments in technology only jointly with maintenance and ongoing monitoring (backlund et.al., 2012; lyulyov et al., 2021; kuzior & staszek, 2021; makieła et. al., 2022, kuzior et al., 2022, vasylieva et al., 2021; samusevych et. al. 2021; kuzior et. al., 2021). particularly in the industrial sector, the compound of proven energy efficiency technology investments with continuous energy management practices in industrial installations is a cost-effective way to improve energy efficiency (gonçalves & mil-homens, 2019). consequently, a contribution to the study has been identified. the paper focuses on blockchain and artificial intelligence as innovations adopted in energy management. therefore, the article fulfils the objectives as follows. firstly, there is provided an overview of the literature on the research area, and there are analysed a number of documents in which an explored keyword occurs and its place in the network. secondly, the paper aims at examining the feasible use cases of technologies application. furthermore, the paper addresses the existing use cases semisexy to point out their energy efficiency. 72 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 2. methods this section presents the methodological approach which sustains the theoretical framework. a critical analysis of the literature on the research problem related to how disruptive technologies such as blockchain and artificial intelligence in energy management affect energy efficiency. vosviewer provides an easy formation and visualization of bibliometric maps. this method allows the efficient collection of the literature and establishing the interrelationships between selected publications within the options. a co-occurrence map creation with all keywords as a unit is applied to achieve a network visualization. publications data related to the research has been collected using such terms as ‘energy efficiency’, ‘blockchain’ and ‘artificial intelligence’ and combinations of ‘energy efficiency’ and ‘blockchain’ as well as ‘blockchain’ and ‘artificial intelligence’ as search parameters limited to the keyword ‘energy management’. the results that meet the criteria mentioned have been exported from scopus in a csv format and from the web of science (wos) in a txt format to be processed using vosviewer to visualize maps. it bears noting that only publications of the type articles with final publication status in english and in open access have been selected. thesaurus files have been used to perform data cleaning when creating a map. the files have been used to merge terms, for instance, to merge synonyms, abbreviated terms with full terms and singular and plural forms of a keyword. the minimum number of occurrences has been selected in such a way that the threshold within the range has been up to 100. the option of fractionalization has been applied to the analysis tab. this means that the fractionalization method is used for normalizing the strength of the links among items (eck & waltman, 2022). 3. literature review energy efficiency continues to be an area of interest for researchers, particularly due to the following two reasons but is not limited to them. firstly, sustainable development goal 7.3 target expects global progress on energy efficiency by doubling the rate of improvement in energy efficiency globally by 2030 (united nations, n.d.). secondly, there is the net zero emissions by 2050 scenario (nze), released by the international energy agency (iea, n.d.-b). this is a normative iea scenario that shows a narrow but achievable pathway for the global energy sector to achieve net zero co2 emissions by 2050 (sadamori & motherway, 2021). therefore, energy efficiency continues to attract attention as a key resource for economic and social development in all economies. the multipurpose approach of energy efficiency policy aims at broadening the perspective of energy efficiency beyond traditional measures to reduce energy demand and greenhouse gas emissions. what is more, the energy sector is changing rapidly as technologies emerge. such questions as how artificial intelligence and blockchain can contribute to the energy industry and improve energy efficiency are still being investigated. there are analysed a number of documents in which an explored keyword occurs and its place in the network. for the purpose of this analysis, there were exported scopus and wos files received through the search of such combinations as ’energy efficiency’, ‘artificial 73 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 intelligence’, ‘blockchain’, ‘artificial intelligence’ and ‘blockchain’, ’energy efficiency’ and ‘blockchain’ according to queries mentioned in the section “methods”. the result of a network visualization for ’energy efficiency’ obtained from vosviewer on the base of scopus files is shown in figure 1. figure 1. a network visualization of data for ‘energy efficiency’ query from the scopus database the minimum number of occurrences of a keyword is 7. therefore, of the 13,592 keywords, 82 meet the threshold. the program selects keywords with the greatest total link strength of 82 chosen keywords. it is obvious that the ‘energy efficiency’ label is the biggest one. it means that its occurrence rate is the highest. it is 1,067. this phrase also has links with at least one keyword in each cluster. its greatest total link strength is 831, being the highest one among others. this combination is followed by ‘energy management system’ with an occurrence rate of 380 and total link strength of 363. figure 2 represents a network visualization obtained from vosviewer on the base of wos files. the parameter for creating this map is the minimum number of occurrences of a keyword of 2. accordingly, of the 1044 keywords 58 meet the threshold. of 58 keywords those with the greatest total link strength are selected. a combination ‘energy efficiency’ occurs in 139 documents and has 296 links with other items as well as a total link strength of 554. this combination has the highest rate of occurrence and total link strength among other items from all 8 represented clusters. for instance, the second biggest item is ‘optimization’ with an occurrence of 55 and a total link strength of 117. 74 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 figure 2. a network visualization of the data for ‘energy efficiency’ query from the wos database figure 3 stands for a network visualization of the data for the ‘artificial intelligence’ query from the scopus database. the criteria for creating a map on the base of exported files is the minimum number of occurrences of a keyword of 5. accordingly, of 5,924 keywords, 30 meet the threshold. figure 3. a network visualization of the data for ‘artificial intelligence’ query from the scopus database 75 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 the result of figure 3 leads to the following conclusions. ‘artificial intelligence is the fifth item on the list of items with the biggest occurrence. it belongs to the first red cluster as the four keywords above on the list. it has 65 occurrences and 136 links with other items. the combinations have at least one link with another keyword in each of the 4 other clusters. figure 4 presents a network visualization of the data for ‘artificial intelligence’ obtained from vosviewer on the base of scopus files. the minimum number of occurrences of a keyword is 2. therefore, of the 66 keywords 82 meet the threshold. ‘artificial intelligence’ represents the biggest frame in figure 4 with occurrences of 34 and total link strength of 97. figure 4. a network visualization of the data for ‘artificial intelligence’ query from the wos database. the result of a network visualization for ’blockchain’ obtained from vosviewer on the base of scopus files is shown in figure 5. the indicator of the minimum number of occurrences of a keyword is 3. therefore, of the 1258 keywords, 68 meet the threshold. ‘blockchain’ stands for the fourth yellow cluster. clusters are ranked based on the number of items included in a cluster. there are 6 items in the yellow cluster in which ‘blockchain’ represents the biggest frame. the explored item occurs in 17 documents and its total link strength with other items is 64. 76 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 figure 5. a network visualization of the data for a ‘blockchain’ query from the scopus database. figure 6 represents a network visualization of the data for the ‘blockchain’ query from the wos database. figure 6. a network visualization of the data for a ‘blockchain’ query from the wos database. 77 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 the indicator for creating a map on the base of exported files is the minimum number of occurrences of a keyword. it is 5 documents. therefore, of the 181 keywords 29 meet the threshold. ‘blockchain’ is included in a third yellow cluster being the biggest item of 8 items in this cluster as it occurs in 16 documents with a total link strength of 68. figure 7 represents a network visualization of the data for the ‘energy efficiency’ and ‘blockchain’ query from the scopus database. in figure 7 ‘energy efficiency’ responds to the biggest frame. it has 21 occurrences and total link strength of 69. the third blue cluster includes the item. ‘energy efficiency’ is the first item on the list from the ones with the highest occurrences while ‘blockchain’ is the fifth. ‘blockchain’ is involved in the fifth violet cluster. it occurs in 6 documents and its total link strength is 17. a relative location near each other demonstrates the relatedness of the keywords in terms of occurrence. figure 7. a network visualization of the data for ‘energy efficiency’ and ‘blockchain’ query from the scopus database. figure 8 depicts a network visualization of the data for ‘energy efficiency’ and ‘blockchain’ obtained from vosviewer on the base of wos files. the minimum number of occurrences of a keyword is 1. the obtained results indicate that all the items have the same indicators of occurrence and the total link strength, 1 and 13 accordingly. it is important to mention that according to the vosviewer the explored items have not been shown in figure 8. this means that they have not occurred in the investigated documents. 78 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 figure 8. a network visualization of the data for ‘energy efficiency’ and ‘blockchain’ query from the wos database. figure 9 represents a network visualization of the data for the ‘artificial intelligence and ‘blockchain’ query from the scopus database. the indicator of the minimum number of occurrences of a keyword is 3. therefore, of the 1,258 keywords 68 meet the threshold. ‘artificial intelligence’ occurs in 201 documents while ‘blockchain’ occurs in 220 documents. the total link strength of ‘artificial intelligence’ is 484 whereas the total link strength of ‘blockchain’ is 521. as both items closely located to each other, their relatedness is strong. figure 9. a network visualization of the data for ‘artificial intelligence’ and ‘blockchain’ query from the scopus database. 79 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 figure 10 represents a network visualization of the data for the ‘artificial intelligence and ‘blockchain’ query from the wos database. the minimum number of occurrences of a keyword is 1. ‘artificial intelligence’ occurs in 2 documents while ‘blockchain’ is found in no documents. the total link strength of ‘artificial intelligence’ is 21. figure 10. a network visualization of the data for ‘artificial intelligence’ and ‘blockchain’ query from the wos database. the summary of the achieved result is presented in table 1. the comparison of results on base of two databases is demonstrated. table 1. generalization of the conducted analysis. explored combination if the searched phrase occurs the most among all the keywords occurrence total link strength scopus wos scopus wos scopus wos energy efficiency yes yes 1067 139 831 296 artificial intelligence no yes 65 34 136 97 blockchain no no 17 16 64 68 energy efficiency and blockchain energy efficiency yes 21 69 blockchain no 6 17 artificial intelligence and blockchain artificial intelligence no no 201 2 484 21 blockchain yes 220 521 table 1 reflects the results if the searched phrase has high occurrences among other keywords, frequency how often it has occurred and its total link strength that shows its connection with other keywords due to each search query. the high occurrence of ‘energy efficiency’ reflects researchers’ considerable attention devoted to this topic. if ‘artificial intelligence’ and ‘blockchain’ are analysed separately, indicators of ‘artificial intelligence’ prevail. though when they are both included in the query, occurrences of these keywords are almost equally weighted on the database from the scopus. when analysing combinations ‘energy efficiency’ and ‘blockchain’ with vosviewer on the base of files from the wos we witness no occurrences of these keywords. whereas their occurrences are relatively low when analysing data from the scopus. therefore, it could be stated that there is a gap in the research on this subject. 80 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 4. results the energy industry is facing a global transformation. digital technologies stimulate profitability, provide new revenue opportunities, and change business models. energy management has been persistently facilitated by innovations. blockchain technology is attracting a lot of interest among scientists (kuzior and sira, 2022). blockchain technology is a form of distributed ledger technology, arranged on a peer-to-peer network where all data are reproduced, shared, and simultaneously circulated across multiple peers (butijn et al., 2020). this characteristic enables the secure accomplishment of smart contracts over peer-to-peer networks individually from a central authority such as banks, trading platforms or energy companies/utilities (t’serclaes, 2017; kwilinski, 2019). in the network, other participants observe transactions accomplished between a provider and a customer. these transactions are stored persistently on a digital ledger. thus, blockchain is reproduced by every computer on the network. blockchain promises to meet the challenge and difficulty to manage a power energy system due to its increasingly distributed structure, allowing for trusted collaboration in the absence of a trusted central authority. therefore, promising applications of blockchain in energy systems include energy commerce, energy management and data synchronization (chen, 2022). this means that with blockchain, participants can jointly execute and monitor these applications, ensuring that the rules are strictly applied and that data records cannot be handled. the blockchain use cases in energy management impact different areas: 1) wholesale electricity distribution; 2) peer-to-peer energy trading; 3) electricity data management; 4) utility providers. blockchain technologies in combination with iot devices allow consumers to trade and purchase power directly from the grid rather than from retailers. in this way connecting end-users with the grid becomes a key reason why companies proceed to implement blockchain technology in wholesale electricity distribution. retailers are identified as a driving source of inefficiency in the consumer electricity market as they own very little of the grid infrastructure. instead, they only deal with the kinds of services that blockchain technology can replace, such as billing and metering usage. supplementing retailers with a blockchain-based platform has the potential to reduce consumer bills by around 40% (consensys, n.d.). by connecting users directly to the network, ethereum allows users to buy power from the network at a price they wish. as a result, there is a fairer and more stable energy market with lower electricity costs where micro-transactions of energy can link wholesale and retail markets at a low cost through smart contracts. however, there are still important technical and economic issues as well as central, regulatory aspects to be evaluated for the final decision-making of blockchain application (dick and praktiknjo, 2019). peer-to-peer energy trading is another well-known use case for deploying blockchain technology. a peer-to-peer energy market is a shared network of individuals who trade and purchase excess energy from other participants. these energy markets are beneficial to the masses because they diminish the control of central authorities, such as wholesale entities. an example of a blockchain application in the electricity market and trading is enerchain/ponton (merz, n.d.-a; merz, n.d.-b; merz, 2020). it is a peer-to-peer local 81 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 community with distribution flexibility and wholesale trading. in 2019, enerchain has been released for live trading, after a successful proof-of concept with 44 european trading companies. peer-to-peer energy exchange is one of the latest projects provided in the case studies section in the report “blockchain applications in the energy sector” prepared by the european union blockchain observatory & forum (vlachos, 2022). the government of uttar pradesh (up) introduced blockchain technology to its rooftop solar energy segment (powerledger, n.d.). the implemented blockchain platform fosters the use and growth of renewable energy on a large scale, without increasing congestion on the network. blockchain is a digitised, decentralised, distributed ledger recording all energy transactions taking place on a peer-to-peer network. these features assisted the government of india with its ambitious goal of installing 40gw of solar energy on rooftops (saur news bureau, 2022). to study major factors related to peer-to-peer energy exchange on the base of the case study, pestle analysis has been applied. it is an analytical tool to assess the impact of existing and future external factors that have the greatest influence on development projects at the macro level (cipd, 2021). in this work, pestle has been used to understand the current trends affecting the environment by focusing on the main drivers for the development of the peerto-peer energy exchange considering political, economic, social, technological, legal, and environmental aspects. table 2 presents an overview of the perceived drivers for the case study of peer-to-peer energy exchange from the perspective of pestle aspects. table 2. drivers for peer-to-peer energy trading under the pestle framework political economic social technological legal environmental national plan providing prosumers more flexibility with price improving energy security and sustainability 3 blockchain technology 4, 5 change of regulatory framework 6 reduction of distribution losses electricity tariff 1 promoting energy efficiency creation of a tariff order 7 improving the economic welfare of the citizens of up energy cost reduction 2 note: 1 the p2p energy market buying price was 43% lower than the retail tariff (vlachos et al., 2022); 2 reduced transportation costs and generation capacity costs result in reduced overall electricity supply costs; 3 better access to affordable energy in non-electrified rural areas; 4 head end system integrated with the blockchain platform and smart meters (vlachos et al., 2022); 5 cc&b system developed for this project and nitration of billing system within the blockchain platform (vlachos et al., 2022); 6 up is the only state to have amended its regulatory framework to allow controlled trade in energy among peers (p2p) in india (powerledger energy projects, n.d.); 7 creation of a tariff order that provides a directive to all the utilities in the state of up to implement p2p energy trading by a regulatory body (vlachos et al., 2022). 82 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 regarding a political driver, the government can advance peer-to-peer energy trading and influence an industry through national policies. concerning economic drivers, they refer to the economy and its consequences. as regards social drivers, they relate to the needs of consumers and communities. in relation to a technological driver, they consider technological innovations and their influence on the industry. legal drivers reflect certain law aspects that affect performance while an environmental driver shows the influence on the environment. the different kinds of energy data include market prices, marginal costs, energy law compliance and fuel prices. blockchain can provide consumers with greater efficiency and control over their energy sources. furthermore, an immutable register provides secure, realtime updates of energy consumption data. an additional area of a potential disruption using blockchain technology is the energy trade industry. blockchain technology application transcends existing proprietary systems as its adoption would be cheaper and more efficient and highly adaptable due to the possibility to program immutability, security, and immediacy. there are three ways in which utility providers can benefit from distributed ledger technology. enterprise ethereum can process and validate data from many devices at the grid edge before securing the data onto the blockchain. secondly, energy providers can utilize blockchain to create a system for transactions of data which is critical to distribution. lastly, distributed ledger technology can be used to develop a system for transacting energy among a diverse set of actors. andoni et al. (2019) specifically categorized blockchain use cases into eight larger groups according to their purpose and field of activity: 1) metering/billing and security; 2) cryptocurrencies, tokens and investment; 3) decentralised energy trading; 4) green certificates and carbon trading; 5) grid management; 6) iot, smart devices, automation and asset management; 7) electric e-mobility; 8) and general-purpose initiatives and consortia. they set up that almost one-third of the cases are about decentralised energy trading, which includes wholesale, retail, and p2p energy trading initiatives. the second most prevalent category is cryptocurrencies, tokens and investments occupying one-fifth of the use cases. this is followed by iot, smart devices, automation and asset management, and metering, billing, and security, estimating approximately one-tenth of total use cases, respectively. ogawa et al. (2021) explored the effectiveness and limitation of blockchain-based distributed optimization through the design of energy management systems (emss). the study suggested that blockchain-based distributed optimization can be utilizable for emss though blockchainbased distributed optimization cannot be applied to faster dynamical systems such as mechanical systems. the study of ogawa et al. stated that it is important to consider utilizing distributed ledgers such as iota for faster dynamical systems (merz, n.d.-b). yang et al. (2021) developed a blockchain system for the transactive energy management of distributed energy resources in a smart grid on which they implemented the proposed algorithm with the smart contract to guarantee the transparency and correctness of the energy management. the researchers proved the feasibility and effectiveness of their design with experimental results. 83 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 the energy management framework proposed by wang et al. can be used in distributed energy systems, particularly if it applies to decentralised renewable energy micro-networks (wang et al, 2021). they state that other studies will concentrate on the allowed blockchain technology and its application in the integrated energy system, in a scenario of multiple energy interactions, to show its wider applicability. mediwaththe et al. (2016) considered a one-day decentralized energy management framework for the district grid by using a ces device to distribute the overall electricity load on the main grid throughout the day. the simulation results show that their proposed system can reduce total electricity demand on the grid throughout the day while reducing costs for energy consumers. dzobo et al. (2021). proposed a distributed blockchain architecture model for balancing and managing microgrids in an intelligent network. the authors resulted that with architecture based on distributed blockchain, it is possible to have peer-to-peer energy trading between distributed energy prosumers' peers in a microgrid and the microgrid can be balanced in real time. artificial intelligence is a collection of computer systems that perform tasks that revolve primarily around human beings. ai is the simulation of human intelligence processes through machines, particularly computer systems including learning, reasoning, planning, selfcorrection, problem-solving, knowledge representation, perception, motion, manipulation, and creativity (harkut & kasat, 2019). by using artificial intelligence, energy management can be performed more automatically and intelligently without human intervention, while most energy systems are still operated manually or at a basic level of automation. the automation of energy systems is useful for fault diagnosis, restoration, grid safety and energy-efficient operation. moreover, ai can cover issues connected with mitigating the uncertainties associated with energy management problems. ahmad et al. (2022) have conducted a substantial amount of research to realize the full advantages of ai technology in terms of cost reduction through improved efficiency in electrical systems, distributed monitoring and control, electricity and investment markets, and renewable energy systems. ai can reduce machinery breakdowns, improve quality control, reduce costs, and increase productivity. the role of ai in foresight and learning is essential in energy management. ai has proven capable of predicting and learning consumer habits, values, motivations and personalities, thus contributing to a more balanced and efficient energy system and enabling more effective policies to be created (jin et al., 2020). the role of ai in collecting and analysing data to train forecasters to manage energy better is fundamental. artificial intelligence technologies are closely linked to the ability to deliver clean, low-cost energy that is essential for development (makala & bakovic, 2020). the authors state that ai has the potential to reduce energy waste, reduce energy costs, and facilitate and accelerate the use of clean renewable energy sources in electric grids around the world as well as ai can also improve how electrical systems are planned, operated, and controlled. lee et al. (2020) developed ai control tools to construct an ai implementation framework for energy saving for buildings. these energy savings have demonstrated feasibility of the execution framework. investigating the promising application of ai in managing electrical systems, the researchers determined that ai facilitates the implementation of demand management (msm). 84 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 “flex2x”, developed by the uk-based company grid edge, is a system that due to machinebased artificial intelligence algorithms can optimise commercial building energy use (iea, n.d.a). the example of this technology is important as it promises to unlock predictable new sources of flexible demand, which will help balance supply and demand, which is particularly useful when the share of intermittent renewables increases. the measured advantages of the system application include cost savings and revenue generation equivalent to >10% of annual on-site energy costs; carbon reduction through load shifting and efficiency measures (up to 40% has been evidenced) (ahmad et al., 2022). another example of a forecasting technique that relied on individual weather models is ibm’s program for the us department of energy’s sunshot initiative with the result of a 30% improvement in accuracy in solar forecasting, leading to gains on multiple fronts (mortier, 2020). furthermore, in his research on the example of organizations borowski (2021) confirmed the hypothesis that blockchain and artificial intelligence increase energy efficiency. another example is an experiment of the world's first high-frequency decentralized energy trading platform which utilizes blockchain technology and artificial intelligence. it has demonstrated a solution to the challenges of microgrid renewable electricity (s&p global commodity insights, n.d.). the result that has proved its efficiency is that users have witnessed an 11% reduction in energy costs during the trial, while energy producers saw a 14% revenue improvement (ingham, 2020). 5. discussion using blockchain as a secure database is a standard practice in controlling and managing distributed energy. what is more, autonomous energy management can be obtained through the application of control rules in intelligent contracts (wang et al., 2022). distributed ledger networks provide important advantages over traditional banking transactions in the form of greater flexibility, security, transparency, and speed. however, in the case of customer-tocustomer transactions at the distribution level, there is still no clear demonstration of the advantages of blockchain technology compared with a customer-customer bank payment system, or how this emerging technology contributes to financing a network infrastructure in the distributed power market (serpell, 2018). blockchain technology can achieve confidence and transparency in transactions between multiple roles, promote healthy competition and improve transport efficiency (bao et al., 2021). chen et al. (2022) advised answering three questions to persuade utilities to deploy the blockchain. it is important to briefly highlight points as follows. firstly, if strengthening confidence is important for a utility in a use case, blockchain is preferred. secondly, in some usage cases that are not utility-focused, blockchain gives a utility a chance to get involved and not be excluded. thirdly, in each test, a node is set to offline or tries to manipulate data records or rules. if these attempts fail, there is a proof of blockchain use. concerns regarding the use of blockchain can be divided into two categories: 1) adherence to the law, and 2) specific technical implementations, mainly related to operation time, system scalability and data privacy (fovino et al., 2021). further decentralization may lead to more complex 85 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 management of the energy system as a whole (baashar et al., 2021). to maintain consistency with the law and the rights of customers, smart contracts should be incorporated into the legal code. andoni et al. (2019) indicated another important factor that could slow down blockchain uptake is a lack of standardization and flexibility. schletz et al. (2020) demonstrated in their research that blockchain technology can address the constraints of existing systems that currently limit intensified energy efficiency interventions, such as a lack of transparency, asymmetry of information, high transaction costs and limited access to financial support. the artificial intelligence potential to change the game, particularly, for the renewable energy sector is undeniable, but its wider application throughout the sector still faces challenges. while ai has a great potential for improving energy production, transmission, distribution and consumption, the energy sector continues to face multiple challenges related to the efficiency, transparency, affordability, and integration of renewable energy sources into electric systems. makala et al. (2020) defined possible constraints: a feasible lack of the knowledge needed to understand the specifics of power systems; dependence on cellular technologies limits the potential of artificial intelligence in rural and other underserved areas of many emerging markets, particularly in low-income countries; the digital transformation of the electricity network has turned it into a target for hackers; integrating different data sources or experiencing a low volume of data for machine learning models to learn from; absence of understanding of artificial intelligence-based models inner workings nor how they were developed, which can constitute security risk (wang et al., 2022). marinakis et al. (2021) allocated access to artificial intelligence enablers, access to human capital, and an ai-skilled talented workforce as major challenges that may reduce the speed with which ai is adopted and thus limit the economic potential of energy stakeholders. therefore, there is a need to democratize the data and analytics in the energy sector to allow people to be aware of the data to be able to make the right decisions. as a result, an integrated and more efficient energy value chain and more efficient business processes are facilitated. in addition, it is necessary to provide the proper framework for a reliable and legally binding data-sharing culture in the energy sector, where the value of the data is shared and exchanged among the ecosystem participants because of an equitable distribution of resources. 6. conclusions rapid development of innovation and technology, and intensification of the environmental issues have led to transformations of the management paradigm in companies of the energy sector. embedding blockchain and artificial intelligence technologies accelerate adaptation to new market trends. higher energy costs and growing demand for businesses to reduce their carbon footprint through energy sustainability, enhancing analytics and efficiency, make the energy management sector one of the most ideal industries for applying blockchain technology. the presented research results showed that the technologies are widely applied in energy management. the need for further research has been proved based on vosviewer analysis showing a lack of documents that contain the terms ‘energy efficiency and ‘blockchain’. artificial intelligence has been rapidly integrating with energy management, 86 aleksandra kuzior, mariya sira, and paulina brozek virtual economics, vol. 5, no. 3, 2022 helping to develop more efficient and secure energy generation techniques. the research results indicate use cases that prove their efficiency. there was also discussed what constraints can currently limit energy efficiency interventions scaling up. references ahmad, t., zhu, h., zhang, d., tariq, r., bassam, a., ullah, f., alghamdi, a. s., & alshamrani s. s. 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(2021). blockchain for transactive energy management of distributed energy resources in smart grid. proceedings of the twelfth acm international conference on future energy systems. association for computing machinery (acm): usa, 211-215. https://doi.org/10.1145/3447555.3464848. https://www.eublockchainforum.eu/sites/default/files/reports/eubof-thematic_report_energy_sector.pdf https://www.eublockchainforum.eu/sites/default/files/reports/eubof-thematic_report_energy_sector.pdf https://doi.org/10.3390/su13031317 https://doi.org/10.1016/j.ijepes.2021.107499 https://www.spglobal.com/commodityinsights/en/about-commodityinsights/media-center/press-releases/2020/051020-world-s-first-high-frequency-decentralized-energy-market-drive-port-of-rotterdam-energy-transition https://www.spglobal.com/commodityinsights/en/about-commodityinsights/media-center/press-releases/2020/051020-world-s-first-high-frequency-decentralized-energy-market-drive-port-of-rotterdam-energy-transition https://www.spglobal.com/commodityinsights/en/about-commodityinsights/media-center/press-releases/2020/051020-world-s-first-high-frequency-decentralized-energy-market-drive-port-of-rotterdam-energy-transition https://doi.org/10.1145/3447555.3464848 кwilinski alex 95 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 2022 volume 5 number 2 investment in virtual digital assets vis-a-vis equity stock and commodity: a post-covid volatility analysis nishi sharma, shailika rawat, and arshdeep kaur abstract. virtual digital assets including cryptocurrencies, non-fungible tokens and decentralized financial asset have been initially used as an alternative currency but are currently being purchased as an asset and hedging instruments. exponentially growing trading volume witnesses the growing inclination of investors towards these assets, and this calls for volatility analysis of these assets. in this reference, the present study assessed and compared the volatility of returns from investment in virtual digital assets, equity and commodity market. daily closing prices of selected cryptocurrencies, non-fungible tokens and decentralized financial assets, stock indices and commodities have been analysed for the postcovid period. since returns were observed to be heteroscedastic, autoregressive conditional heteroscedastic models have been used to assess the volatility. the results indicate a low correlation of commodity investment with all other investment opportunities. also, tether and dai have been observed to be negatively correlated with stock market. this indicates the possibility of minimizing risk through portfolio diversification. in terms of average returns, virtual digital assets are discerned to be better options than equity stock or commodity yet the variance scenario of these investment avenues is not very rosy. the volatility parameters reveal that unlike commodity market, virtual digital assets have got a significant impact of external shocks in the short-run. further, the long run persistency of shocks is observed to be higher for the uk stock market, followed by ethereum, tether and dai. the present analysis is crucial as the decision about its acceptance as legal tender money is still sub-judice in some countries. the results are expected to provide insight to regulatory bodies about these assets. keywords: autoregressive conditional heteroscedastic model, cryptocurrencies, decentralized financial assets, non-fungible tokens, risk-return analysis jel classification: g110 http://www.virtual-economics.eu/ 96 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 authors: nishi sharma university institute of applied management sciences, panjab university, chandigarh, india e-mail: nishi.uiams@pu.ac.in; jmdnishi@yahoo.com https://orcid.org/0000-0002-5561-331x shailika rawat university institute of applied management sciences, panjab university, chandigarh, india e-mail: shailikarawat765@gmail.com https://orcid.org/0000-0002-4772-2049 arshdeep kaur department of commerce, mehr chand mahajan dav college for women, chandigarh, india e-mail: dr.arshdeepkaur@gmail.com https://orcid.org/0000-0002-0809-1491 citation: sharma, n., rawat, s., & kaur, a. (2022). investment in virtual digital assets vis-a-vis equity stock and commodity: a post-covid volatility analysis. virtual economics, 5(2), 95-113. https://doi.org/10.34021/ve.2022.05.02(5) received: august 23, 2022. revised: august 31, 2022. accepted: september 27, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://creativecommons.org/licenses/by/4.0/ 97 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 1. introduction a digital asset is an intangible asset that is created, traded and stored in a digital format. it can also be used as a currency to make transactions. david chaum, an american cryptographer and computer scientist founded digicash in 1989 as ‘electronic money’ (hayes 2019). digicash was an early electronic payment system that needed user’s software to withdraw bank notes and identify certain encryption keys. unlike other currencies, digicash transactions are governed by the series of cryptographic protocols (batten and yi 2019). the use of cryptographic protocols ensures that all information and communications are available to intended users only. later, these protocols are being applied to some other currencies as well. therefore, digicash can be assumed to be a predecessor of modern digital currencies. here it is pertinent to mention that digicash remain in operation for less than a decade due to the company’s failure to persuade banks to use this technology. as a result, the company declared a bankruptcy in 1998. despite the fact that digicash never really took off, it proved to be a milestone to build the groundwork for today's thriving cryptocurrency industry. apart from digicash, there are other significant digital currency projects such as hashcash (1997), bmoney (1998), and bit gold (1998). however, these projects had their own limitations and challenges. to overcome these challenges, blockchain technology was applied during 2000s. the blockchain technology was devised by haber and stornetta in 1991 as a decentralized database (i.e., electronic ledger) that is used to record the ownership of digital assets in a secured form. it ensures transparency, integrity and security of information (kitsantas et al. 2019). the digital assets that transact using blockchain technology are known as ‘virtual digital asset’ (vda). virtual digital assets are subsets of all digital assets transacted on a blockchain technology. in simple words, vda is a digital representation of a value that can be digitally traded or transferred or can be used for payment / investment purposes. satoshi nakamoto firstly utilized blockchain technology for virtual digital assets bitcoin in 2008 (bamakan et al. 2022). in present days, blockchain technology is frequently used in virtual digital assets including cryptocurrency, decentralized finance and non-fungible tokens (chevet, 2018). these vdas can be overviewed as follows: cryptocurrency: crypto-currency, also known as alternative currency and virtual currency, is a form of digital currency. the enticing characteristic of a cryptocurrency is that it allows anonymity to its users while providing safe, secure and valid transactions. due to a distinct characteristic of not being issued by any central authority, it offers a unique advantage of the least government interference. the first cryptocurrency invented by an american cryptographer and electronic currency pioneer david chaum (narayanan and clark 2017) was ‘digicash’. the digicash was based on cryptography to verify and secure the transactions. during early 1990s, cryptographic protocols and software have been developed to make decentralized digital currency practicable. satoshi nakamotomay (2008) was given a credit for popularising the cryptocurrency at the international level through highlighting the advantages of peer-to-peer electronic cash system of bitcoin. with the advent of bitcoin during 2008, the market for cryptocurrencies registered a remarkable growth. cryptocurrency is gaining popularity because it is easier to use cryptocurrency (baur et al. 2015). during august 2022, http://www.virtual-economics.eu/ 98 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 the top five cryptocurrencies with highest market capitalization were bitcoin, ethereum, tether, united states dollar (usd) coin, binance coin. non-fungible token (nft): another popular vda based upon blockchain technology is nonfungible token (nft). it has a unique feature of non-interchangeability, which distinguishes it from physical money as well as cryptocurrencies. the term ‘non-fungible’ implies that it is unique and cannot be traded or exchanged. each nft has a digital signature which makes them unique. the first-known nft ‘quantum’ was introduced by a digital artist kevin mccoy in 2014, using namecoin blockchain. during 2017, ethereum block chain, which was initially used for cryptocurrencies (cryptopunks and cryptokitties), was applied for nfts as well. during august 2022, the top five nfts with highest market capitalization were decentraland, sandbox, tezos, theta, chiliz. decentralized financial assets (defi): defi, the first peer-to-peer digital currency based on blockchain technology, was launched in 2009 with bitcoin. however, the introduction of dai by maker (decentralized autonomous organization) in december 2017 was a watershed moment for financial applications ranging from simple transfers and payments to lending, borrowing, trading, portfolio management and insurance. with defi lending, the users can lend their cryptocurrency, similar to practices of a traditional bank with fiat currency and could earn interests as a lender. as compared to traditional banks, the interest rates are more alluring in defi lending and also there are fewer barriers to borrow loan. defi uses ethereumbased protocol which is much faster and more robust than bitcoin block-chain. each block of information on the ethereum blockchain is verified and created in every 10-20 seconds. during august 2022, the top five defis with the highest market capitalization were avalanche, dai, uniswap, wrapped bitcoin, chainlink. the vda gained attention with the launch of initial coin offerings (ico) by brock pierce and scott walker in july 2013 whereby investors could buy mastercoins (richter 2018). ico provided a unique way for entrepreneurs to finance startups. hsieh and oppermann, (2021) observed that by 2017, ico got huge popularity because it offered a unique advantage of a stake in the project’s success. but at the same time, it brings a new set of risks (like cybertheft, trading halts, market manipulation) as well. the inherent risk attracted the attention of regulatory authorities towards the usage of vda. since these assets are characterized by a decentralized mechanism and absence of government intervention, these are under the bracket of high risk of fraud. the feature of these currencies’ anonymity enables it to be misused for funding illegal activities like terrorism. that is the reason why, different countries are comparing the pros and cons of these currencies so that a decision regarding a permission or a ban may be taken. across the globe, different countries have different views in this context. some countries banned the use of these vda options, some have allowed it and other countries are still in the process of decision making. the united states, canada, japan, singapore, iran, russia, italy, venezuela, mexico, south africa, and australia are friendly towards its use, while brazil and china are hostile, while south korea, thailand and france are neutral towards it. in india, the government has not yet legalized the status of cryptocurrencies. but it is interesting to note that income earned from these assets is subject to tax liability. cryptocurrencies have now been included in the definition of vda for tax purposes. recently in the union budget for 2022–23, the finance minister declared that virtual http://www.virtual-economics.eu/ 99 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 digital assets such as nfts and cryptocurrencies will be subject to a 30% tax (economic times, february 1, 2022). as a result of the national budget's acknowledgment of digital assets and the application of clear tax laws, investors became more confident about their investments. but the primary concern area for investors with respect to investment in vda is the ‘price volatility’. the prices of these assets are highly sensitive to shocks infused into the economy. amongst the recent significant shocks, the outbreak of coronavirus during late 2019 was devastating. the coronavirus has shaken the entire world including markets for equity, commodity and vda (estrada et al. 2020; mnif, et al. 2020; senol and zeren 2020; zhang, et al. 2020 and salisu, et al. 2021). after the outbreak of coronavirus, the investors experienced an unprecedented volatility in returns from all investment avenue including vda, equity and commodities. since, volatility is the primary concern for investor, there is a huge need to analyse the volatility involved in vdas and compare the same with other investment options. in this context, the present study aims at comparing the volatility of returns from investment in vda, stock market and commodity market during the post-covid period. to attain this purpose this paper is structured as follows: section 2 summarises the literature review; section 3 provides details about the data and methods used in the study; section 4 discusses the empirical results, and, lastly, section 5 provides the conclusions of the study. 2. literature review since the concept of vda is comparatively new, not much work has been done in this domain. the primary focal point of researchers has been exploring the factors affecting the price of cryptocurrency. like, baek and elbeck (2015) studied the determinants of bitcoin’s market returns. the results indicate that the return is primarily driven by internal factors instead of external ones. brière et al. (2015) researched the relationship between macroeconomic indicators and the bitcoin’s value and made conclusion about the absence of cause-and-effect relationship between macroeconomic indicators and the bitcoin’s value. ciaian et al (2017) empirically examined the shortand long-run interdependencies between bitcoin and altcoin markets by using time-series analysis for the period of 2013–2016. the finding highlighted the interdependencies between bitcoin and altcoin markets. the study reported that the longterm macro-financial indicators influence altcoin pricing to a slightly larger extent than they do for bitcoin. aste (2019) studied collective movements of prices and social sentiment with regard to two thousand cryptocurrencies traded during the first six months of 2018. the results indicate that there is a significant correlation between prices and sentiments. guizani and nafti (2019) analysed the main factors affecting the bitcoin prices. the daily observations from december 2011 to february 2018 were analysed through autoregressive distributed lag model. the findings revealed that demand for bitcoins has a significant impact on the prices in the short term as well as the long term. but no significant impact of supply was observed on the prices of currency. nasir et al. (2019) analysed the impact of google search values to predict the volume and returns of bitcoin. the study applied a vector autoregression model on a weekly dataset from 2013 to 2017. the results reveal that shocks to search values have a favourable impact. caporale and plastun (2020) looked at the aftermath momentum effect of one day abnormal returns. the study reported existence of a momentum effect as the http://www.virtual-economics.eu/ 100 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 prices tend to move in the direction of the abnormal returns. the momentum effect was also observed on the following day. in recent years, a volatility parameters of digital assets have started to attract researchers. such studies on digital currency are equally important as these currencies gained their position beside conventional assets and made this market very risky through severe price fluctuations (corbet et.al 2019). in this context, few studies analysed risk volatility involved in digital assets. like osterrieder et al. (2017) compared the volatility of cryptocurrencies with usd through 90-day rolling annualized volatility estimates. their results illustrated the substantially larger volatility of cryptocurrency in comparison to any other standard financial assets. dyhrberg et al. (2018) analysed the performance of cryptocurrency-bitcoin to examine the worthiness of investment in it. their study noticed that, like gold and usd, bitcoin has hedging capabilities and that trading induces additional volatility in bitcoin. chowdhury (2020) analysed the volatility of 15 cryptocurrencies and volatility index (vix) of cboe-traded from january, 2019 to june, 2020 through garch model. his results indicate significant elevations in volatility for six currencies viz. nem, neo, monero, tether, cordano and iota. the coefficients of generalized auto-regressive conditional heteroscedastic (garch) model demonstrate that volatility of the previous day is repeated in the returns and volatility on the following day. cabarcos et al. (2021) compared the volatility of s&p500 index, vix index and bitcoin over a period of january 2016 to september 2019. the study applied garch and exponential garch models, whose results conclude that cryptocurrency bitcoin acts as a safe haven. further, cryptocurrency becomes more attractive to speculators during the condition of stability in stock markets. woebbeking (2021) analysed the volatility of cryptocurrency along with the two popular stock indices of united states (viz., standard and poor's 500and russell 2000), gold and eur/usd. the study concluded that covid shock affected bitcoin as well, however the reaction to shock was delayed in comparison to equity and gold. the findings indicate that global shocks affect cryptocurrencies and traditional assets alike, which is a serious limit to the benefits from diversification during times when it is needed the most. maitra et.al, (2022) examined the risk spillover and hedging effectiveness by using the fiveminute interval price data of two cryptocurrencies and eight stock market indexes. the results witnessed the risk spillover from bitcoin and ethereum to stock market returns. the results depicted that during the covid-19 epidemic, optimal investments in bitcoin and ethereum have decreased while hedging costs went up. karim et al. (2022) analysed the risk transmission among nfts, defis, and cryptos. the study observed significant volatility connectivity among blockchain markets. further, the study noted that from the diversification point of view, nfts demonstrated a higher potential in comparison to defis and cryptos. to assess the potential of cryptocurrencies in the portfolio diversification, khaki et al. (2022) conducted an analysis of the major cryptocurrencies based on their market capitalization and the major markets from mena regions. the study discerned that cryptocurrencies offer the mena markets a significant amount of potential for diversification. however, the study also observed that the use of cryptocurrencies should be made cautiously due to their extremely volatile price movements. http://www.virtual-economics.eu/ 101 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 it is worthwhile mentioning here that many studies at the international level are making attempts to disclose various facets of cryptocurrency. here, it is pertinent to highlight the two major limitations. the first limitation is that, in spite of growing popularity of nft and defi, the primary focus of most researchers has been on cryptocurrency and studies analysing the rest two vdas i.e., nft and defi, are in dearth. further researchers (like chowdhury 2020; cabarcos et al., 2021; woebbeking 2021; khaki et al, 2022; maitra et.al, 2022) primarily made a comparison of investment in cryptocurrency with investment in stock market but studies comparing the volatility of investment in vda vis-à-vis commodity investment are scarce. in this reference, dyhrberg et al., (2018) made an attempt to compare the performance of bitcoin with gold and usd but that study too has taken only bitcoin as a proxy of cryptocurrencies and vdas. to bridge these research gaps, the present paper aims at comparing the volatility of returns from investments in vda (including cryptocurrencies, nft, defi) with equity investment in stock market and investment in the commodity market. 3. methods the present study aims at comparing the volatility of returns from investment in vda versus returns generated from equity investment in stock market and investment in the commodity market. thus, at the outset, logarithmic daily returns were calculated by the following formula: return t = log ( pt pt−1 ), (1) where pt represents the closing price of investment on t day and pt−1represents the closing price of one day prior to t i.e., the day ‘t-1’. the returns from investment in vda, stock investment, commodity investment were compared in terms of average, minimum, maximum, standard deviation, skewness and kurtosis. to know about the statistical properties of the return, jarque bera test, augmented dickey fuller test (adf) and arch test were conducted. jarque bera aims at accepting (or rejecting) the null hypothesis of normal distribution of investment returns. adf unit root tests the null hypothesis of presence of unit root i.e., non-stationarity of the returns. arch test verifies the null hypothesis of homoscedasticity of the data through regressing the squared residuals on lagged squared residuals. the null hypothesis can be accepted only if the probability of calculated test statistics is more than 5%. in the present study, all three null hypotheses have been rejected i.e., returns from selected investment do not exhibit normal distribution. the returns are observed to have absence of unit root i.e., returns are stationary and have heteroscedasticity. in the light of these observations, the commonly applied analytical models like regression analysis cannot be applied because these models give unbiased estimates only under the assumption of homoscedasticity of residuals. to capture the volatility of such data (data with non-normal distribution and heteroscedasticity of residuals), engle (1982) proposed an autoregressive conditional heteroscedastic (arch) model. the model conditions the volatility to some specific http://www.virtual-economics.eu/ 102 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 information like previous errors. this type of volatility is termed as a conditional volatility. the model may be represented as follows (equation 2): σt 2 = ω + ∑ α𝑖 ϵt−i 2𝑝 𝑖=1 , (2) where a dependent variable is: σt 2 is the current volatility (variance)and independent variable isϵ𝑡−𝑖 which shows the past error (residual). the parameters ω and α represent the intercept and arch coefficient (measuring the impact of past shocks over current volatility) respectively. though an arch model is simple, it often calls for the estimation of many parameters for describing the volatility of returns. to overcome this limitation, bollerslev (1986) proposed generalized auto-regressive conditional heteroscedasticity (garch) that accounts for autoregressive as well as moving average to the variance (σt 2 ) through the usage of past variance (σt−j 2 ) and error term (ϵt−i 2 ). the model may be represented as follows (equation 3): σt 2 = ω + ∑ α𝑖 ϵt−i 2𝑝 𝑖=1 + ∑ βjσt−j 2𝑞 𝑗=1 , (3) where β is a garch coefficient quantifying market reaction towards shock; independent variable σt−j 2 represents the past variance. since financial markets usually witness an asymmetric impact of shocks (a high volatility during a crisis period and relatively less volatility during the period of growth or calmness) over volatility, nelson proposed an exponential garch (egarch) model in 1991. the model considers a log of variance and may be represented by the following mathematical equation (4). ln σt 2 = ω + α (| ϵt−1 √σt−1 2 | − √ 2 π ) + γ ϵt−1 √σt−1 2 + β ln(σt−1 2 ) (4) where, along-with the parameters explained in garch model, γ represents the leverage effect and the term ln represents the natural logarithm. if, γ = 0, the impact is assumed to be symmetric. but if, γ < 0, the asymmetric impact is considered. to capture the possible leverage and asymmetric effect, zakoian (1990) & glosten, jagannathan, and runkle (1993) developed threshold garch (tgarch) which uses zero as a threshold to separate the impacts of the past shocks. the model may be represented by the following mathematical equation (5). σt 2 = ω + α1ϵt−1 2 + γϵt−1 2 dt−1 + β1σt−1 2 , (5) where, along-with the parameters explained in previous models, the term d𝑡−1is an indicator of negative ϵ𝑡−𝑖 . if ϵ𝑡−𝑖 <0, the value of d𝑡−1will be one else it will be zero. http://www.virtual-economics.eu/ 103 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 ding, granger and engle (1993) proposed the asymmetric power arch (aparch) model. but the asymmetry term (γ) of the model allows positive and negative shocks of equal magnitude to elicit an unequal response from the market. the value of asymmetry term (γ) lies between -1 to 1. however, the other parameters like ω α, β and δ should be non-negative. the model may be represented by the following mathematical equation (6). σt δ = ω + ∑ (αi|ϵt−i p i=1 |−γiϵt−i) δ + ∑ βj q j=1 σt−j δ , (6) where, along-with the parameters explained in the previous models, the term δ is a power term parameter which is used to identify the nature of the news. in case of the bad news, the value of δt−1 will be one else it will be zero. during 1996, baillie, bollerslev and mikkelsen developed a fractionally integrated garch model (figarch), which can accommodate time dependence of the conditional variance. replacing the first difference operator with fractional differencing operator figarch can capture long run dependence properties of the variance. the model is capable of considering leptokurtic distribution of returns and long memory behaviour of conditional variances. the model may be represented by the following mathematical equation (7). σt 2 = ω + (1 − β(l) − ϕ(l)π(l))ϵt−1 2 + β(l)σt−1 2 , (7) where π(l) is the infinite lag operator;ϕ(l) = 1 − ∑ 𝛼𝑖 𝐿 𝑖 𝑖=1 ; β(l) = ∑ β𝑗 𝐿 𝑗 ; π(l) = 𝑞 𝑗=1 (1 − 𝐿)𝑑 π∗ (𝐿) = ∑ π𝑘 𝐿 𝑖∞ 𝑖=1 though all the above five models are frequently used to capture the volatility, it is imperative to use only that model which can provide the best possible information from the given dataset. to decide on the suitable model there are two popular criterions viz., akaike information criterion (aic) and schwarz information criterion (sic). according to recent studies (gayawan and ipinyomi 2009; koehler and murphree 2016), sic is a better information criterion since aic often overfits the data and leads to over parameterization. the present paper also applied the sic criterion for selecting an appropriate model. this criterion was developed by schwarz (1978) using the maximum likelihood method with a condition of a large sample. the criterion provides a measure of information that strikes a balance between the measure of goodness of fit and parsimonious specification of the model. javed and mantalos (2013) suggested that model with the least value of the information criterion needs to be selected. accordingly, the values from all models have been noted and compared to identify the best suited model for further analysis. data: since the present study aims at comparing the volatility of three investment options viz., vda, stock (equity) market and commodity, the top investments of all three categories have been screened on the basis of market capitalization / popularity as on the last day of the study period. amongst cryptocurrencies, bitcoin, ethereum and tether discerned to be leaders. the preliminary data screening revealed that in contrast to all other options, bitcoin was homoscedastic. therefore, it was dropped and the next two cryptocurrencies i.e., ethereum and tether, have been selected. amongst nft, decentraland, sandbox and tezos registered http://www.virtual-economics.eu/ 104 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 the maximum market capitalization. since the data for sandbox is available only from 14-082020, the same has been dropped and remaining two nfts (decentraland and tezos) have been taken to proxy nft investment. in case of defi, the five best performers (in terms of market capitalization) include avalanche, chainlink, dai, uniswap and wrapped bitcoin. on the basis of data availability, out of these five defis, the two defi (dai and chainlink) have been used to proxy the investment in defi. to represent the equity market, the market capitalization suggests the stock markets of the usa, china, the uk, and japan. since the chinese market experienced multiple lockdowns and massive oscillations during the study period, it was skipped. thus, the usa and the uk stock markets were finally considered in the study. the leading two indices of these markets viz., standard and poor's 500 (s &p 500) and financial times stock exchange 100(ftse-100) were taken to represent the equity investment. the investment in commodity may be in the energy sector (like oil and natural gas), metal (like gold and silver) or agricultural product (like corn and soyabean) investment. since the daily returns from gold and corn found to be homoscedastic, oil and silver have been taken to represent commodity investment. finally selected ten investment avenues can be noted as follows: cryptocurrency: ethereum and tether non-fungible token (nft): decentraland (mana) and tezos decentralized financial assets (defi): dai and chainlink equity: s&p 500 (usa) and ftse-100 (uk) commodity: oil and silver the study period: the study analyses the volatility of investment returns during the post-covid period starting from january 1, 2020 (as the first case of covid-19 was observed at the end of december 2019). the study considers daily observations of all selected ten investment avenues till the maximum possible date allowed by the study, i.e., august 18, 2022. all data were taken from finance.yahoo.com only for post-covid period owing to three reasons. firstly, since the concept of vda (particularly nft and defi) is comparatively new, it is deprived of the privilege of numerous observations. secondly, the outbreak of coronavirus was a distinctive experience for the entire world resulting into an unprecedented influence over investor’s sentiments and the financial system. to understand the changed scenario, it is essential to analyse the situation standalone. lastly, many studies (like liu et al., 2020; estrada and lee 2020; shankar and dubey, 2021; maitra et.al, 2022) have already done the comparative analysis of the pre-covid and post-covid period with the respect to financial markets. therefore, the present study analyses the daily observations for the post-covid period i.e., from january 2020 to august 2022. http://www.virtual-economics.eu/ 105 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 4. results and discussion table 1 shows the descriptive statistics of returns from investment. the analysis reveals that decentraland (mana) provided the maximum return to investors during the post-covid period. mana is a virtual reality platform that allows users to produce and sell content. during the quarter ending in december 2021, mana offered a return of 41.80%. the token rose steadily by 4,000 percent last year. as the concept of the metaverse grows in popularity in 2022, mana is expected to gain much more traction, resulting in the possibly enormous price increases (economic times, march 12, 2022). but at the same point of time, another noticeable fact is that the return offered by another nft i.e., tezos is not satisfactory enough. tezos also posted strong results last year but in comparison to other vdas, it did not grow much. one of the reasons hindering its impressive performance is the internal dispute between its creators (arthus and kathleen breitman) and the tezos foundation. the assets experienced a bad weather during 2019-20. however, the combative nature of tezos brought positivity around its prices in 2021. at the beginning of december 2021, tezos extended a return of 30.59% daily. the mana was followed by ethereum in terms of proposing good returns to investors. amongst defi, investment in dai offered better daily returns (0.025%) in comparison to commodity investment. during the study period, the average daily return from equity investment was observed to 0.022% (usa) and -0.014% (uk). the stock markets became more fragile, sensitive, and volatile due to the coronavirus outbreak. the experience of stock market investors was pretty bitter during the first half of 2022 however, recently by mid of the year, the market experienced a rebound. table 1. descriptive statistics particulars daily logarithmic return (in percentage) ske kur test statistics * ave max min sd jb adf ethereum 0.133 22.56 -55.07 5.70 -1.4 17.9 9.1 -33.1 tether 0.005 5.34 -5.26 0.40 0.4 120.8 555.0 -197.3 decentraland 0.195 41.80 -62.98 8.24 1.4 25.0 19.6 -30.0 tezos -0.018 30.59 -60.73 7.39 -1.0 13.1 4.3 -34.2 dai 0.025 6.54 -5.67 0.77 -0.9 35.6 42.6 -229.9 chainlink -0.028 27.58 -61.46 7.35 -1.1 12.7 3.9 -33.7 s&p 500 0.022 8.97 -12.77 1.60 -0.9 15.1 4.1 -32.2 ftse-100 -0.014 8.67 -11.51 1.38 -1.1 15.2 4.0 -26.1 crude oil 0.007 31.96 -33.55 4.44 -0.9 22.2 10.4 -24.2 silver 0.003 8.88 -12.39 2.37 -0.67 7.67 654.66 -26.97 note: ave – average; max – maximum; min – minimum; sd – standard deviation; ske – skewness; kur kurtosis; jb – jarque bera (in thousand); adf – augmented dickey fuller; * – significant at 5% level. source: calculated by the authors. though, in terms of daily returns, mana, ethereum and dai are discerned to be better options than investment in equity stock or commodity market, the variance scenario of these investment avenues is not very rosy. the market for vda flourished during the year 2021 with a boom in some promising assets like bitcoin, ethereum and mana. but since the industry is in its infancy, big highs are easily followed by big drops. the first half of 2022 has not been so http://www.virtual-economics.eu/ 106 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 good for vda investors. the market capitalization of all cryptocurrencies has decreased by more than $2 trillion in june 2022 particularly owing to the announcement to pause all account withdrawals by the firm celcius, a cryptocurrency lending firm that invested in terra. since terra experienced an abrupt failure with a massive crash of 99.9% drop in prices, the firm banned accounts withdrawals which spooked the investors about liquidity crunch and its possible contagious effects. the investor’s reaction made the market highly volatile. in terms of standard deviation, the returns of mana followed by tezos, chainlink and ethereum were found to be the most volatile. contrary to the majority of cryptocurrencies, which are known for their volatility values, tether found to be the least fluctuating. it was designed to be pegged and linked to tangible assets (american dollars) in order to maintain a stable value. while the value of other cryptocurrencies fluctuates frequently, tether's price is typically equal to $1 (cnbc, 2021). stock market investments experienced lesser variance in comparison to commodity market investments. the return of tether and mana were found to be positively skewed, while the remaining returns were found to be negatively skewed. in terms of financial time-series, the skewness measures the degree of return asymmetry in terms of the probability distribution around the mean. the negative skewness represents a longer or fatter tail on the left side of the distribution, while positive skewness demonstrates the same on the right side. in general, positively skewed distribution of returns is more preferred by investors as it allows probability of gaining huge profits that can cover all the frequent small losses (cfi 2022). the returns from all investment avenues have a high level of kurtosis. the results of the jarque-bera test reveal that the probability is less than 5%. thus, a null hypothesis of normal distribution cannot be accepted and it may be concluded that none of the return series is normally distributed. similarly, the probability of adf statistics is also less than 5%, which amounts to rejection of a null hypothesis. therefore, it may be concluded that all return series are stationary in nature i.e., there is no unit root in any of the return series. table 2 depicts the correlation between the returns. table 2. a correlation matrix investment ethe reum tether mana tezos dai chainlink s&p 500 ftse100 oil silver ethereum 1 tether -0.23 1 mana 0.67 -0.19 1 tezos 0.77 -0.22 0.66 1 dai 0.15 0.06 0.07 0.10 1 chainlink 0.82 -0.18 0.66 0.80 0.08 1 s&p 500 0.40 -0.22 0.37 0.39 -0.03 0.36 1 ftse-100 0.29 -0.17 0.27 0.30 -0.13 0.28 0.60 1 oil 0.12 0.03 0.10 0.12 -0.01 0.08 0.28 0.28 1 silver 0.17 0.08 0.10 0.15 -0.03 0.13 0.17 0.18 0.19 1 note: figures in bold are statistically significant. source: calculated by the authors. http://www.virtual-economics.eu/ 107 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 as it is evident from table 2, ethereum has a significant high degree correlation with chainlink, tezos and mana. ethereum shows higher significantly positive correlations with the us stock market, this result being in line with the findings by maitra et al. (2022). the commodity investment has a low to moderate degree of correlation with all other investment opportunities. the returns from tether are found to be negatively correlated with nfts as well as stock indices. dai also has a low degree of negative correlation with equity stock and commodity investments. such negative correlation indicates the possibility to reap the benefits from the portfolio diversification. umar et al. (2020) pointed out that a correlation matrix enables investors to create an effective and risk-hedging investment portfolio. accordingly, tether and dai can can be used to reduce the potential risk from portfolio investment. the probability of test statistics as demonstrated by the arch test is found to be 0.00 for all investment avenues, which is less than 5% for all investment avenues. therefore, the null hypothesis of homoscedasticity of data series cannot be accepted and it can be concluded that all return series are heteroscedastic in nature. considering the heteroscedastic nature of return series, arch based models have been applied to capture volatility. as discussed in the research methodology, the study applied five prominent models (viz., garch, egarch, tarch, aparch and figarch) and to select the best one, sic criteria were adopted. table 4 represents the results of the model recommended by information criteria. the arch (α) term represents the impact of the past shocks over the current volatility. the beta(β) coefficient depicts the presence of volatility clustering i.e., the reaction of market towards any shock. the asymmetric effect of shocks i.e., the leverage effect, is represented by gamma variable (γ). the parameters not applicable to the specific models were represented as na. the significance of the variable was tested by comparing the p-value of all coefficients with 1% level as well as 5% level of significance and was highlighted by ** and * mark respectively. table 3. volatility parameters from the selected models investment model arch term (α) garch term (β) leverage (γ) power term (δ) fraction (d) ethereum garch 0.050* 0.839** na na na tether aparch 0.215** 0.805** 0.572** 0.076 na mana aparch 0.224** 0.606 ** 0.193* 0.334** na tezos figarch 0.938** 0.485** na na -0.378** dai figarch 0.326** 0.801** na na 0.973** link tarch 0.102 0.441** 0.376** na na s&p 500 garch 0.217** 0.741** na na na ftse-100 aparch 0.102** 0.896** 0.999** 0.749** na oil tarch 0.096** 0.762** 0.219** na na silver figarch 0.317 0.270 na na 0.162** note: * statistically significant at 5% and ** statistically significant at 1%. source: calculated by the authors. http://www.virtual-economics.eu/ 108 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 whenever there is an infusion of any shock into the financial market, it affects the stocks’ demand and supply dynamics. however, due to a short memory, the memory of such a shock quickly disappears. the α coefficient attempts to capture the impact of the past shocks over the present volatility of the returns. it represents a short-term impact of shocks infused into the market. as evident from table 3, during the short period, the commodity market was not much affected by shocks. the volatility parameters for silver were found to be insignificant to influence the variance. the alpha coefficient for oil was also observed to be less than 10%, which shows the efficacy of the market under a short period of turmoil. tezos has the highest influence by the previous shocks. it was quite evident in the return analysis also whereby; tezos registered a negative daily return of 0.018% on the average basis during 2020-22. further, the standard deviation of returns was also high in the case of tezos, which homologates the results of figarch model. the variances of returns from other vdas were also discerned to get significant impact from the external shocks in the short period. in the case of equity investment, the impact was higher in the usa stock market (21.7%) as compared to the uk market (10.2%). the persistence of the market reaction as captured by β coefficient reveals that there is a larger impact of the long-run shocks on the uk stock market volatility. ethereum was observed to be the least influenced from shocks in the short-run but the shocks were found to be persistent in the long run. the long-run persistency of shocks was observed to be higher for ftse, followed by ethereum, tether and dai. the volatility parameters of aparch and tarch model expose that γ estimates for tether, mana, chainlink, ftse-100 and oil are significant at 1% level of significance. thus, it may be concluded that there is a leverage effect and the null hypothesis of symmetric impact for these currencies can be rejected. in other words, positive and negative shocks do not influence the market with same magnitude. in case of figarch model, the fraction term d assists in testing the null hypothesis of no long memory. if the fraction term is positive, the underlying series has long memory else it has a short memory. the estimated parameters depict the short memory for tezos and long memory for dai and silver. therefore, investors and portfolio managers, in particular, should pay close attention to the conditions in the stock and cryptocurrency markets. 5. conclusions vdas are gaining huge popularity around the world due to their distinct features. the feature of anonymity of these currencies put them under the bracket of high risk of fraud and also to be misused for funding illegal activities. that is the reason why different countries are comparing the pros and cons of these currencies. at present, it has been legally acceptable while in some countries it remains not to be recognized as a legal tender. however, it is worthwhile noting that cryptocurrencies, nfts and defis have been initially used as an alternative currency but are currently being purchased as an asset and hedging instruments, leading to a huge surge in the demand of these assets across the globe. the growing popularity of these assets is evident from the exponential growth in its trading volume. these assets offer lucrative returns to investors but at the same time are observed to be highly volatile. many researchers perceived the same but unfortunately most of the studies limited their scope to cryptocurrencies only (like chowdhury 2020; cabarcos et al., 2021; woebbeking 2021; khaki http://www.virtual-economics.eu/ 109 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 et al, 2022; maitra et.al, 2022). since volatility is an important tool to measure the risk, the present paper analysed the volatility of returns accrued from investing in vda (including cryptocurrencies, nft and defi). this volatility is used to compare the investment in vda visa-vis equity stock investment and investment in commodity market. daily closing prices over a period of around 2.5 years from january 2020 to august 2022 were used to compute logarithmic returns from investments. the analysis of returns shows that all returns are stationary, heteroscedastic and not normally distributed. in terms of average returns, the virtual digital assets (mana followed by ethereum and dai) are discerned to be better options than investment in equity stock or commodity market yet the variance scenario of these investment avenues is not very rosy. particularly, the abrupt failure of terra spooked the investors and turned the market highly volatile (nahar 2022). the outbreak of coronavirus compelled the stock markets to be very fragile and sensitive (estrada and lee 2020; awan, et al. 2021). even the market could not meet investor’s expectations during the first half of 2022. however, recently by the mid of the year, the market has experienced a rebound. the commodity investment has low to moderate degree of correlation with all other investment opportunities. the results witness that tether (cryptocurrency) and dai (defi) have a negative correlation with investments in the stock market. the negative correlation indicates the possibility to reap the benefits from portfolio diversification to reduce the potential risk. jareño et al. (2021) also considered tether to be a more stable currency with a unit value of one us dollar and found it to be a good option for diversification. karim et.al, (2022) found that nfts manifested a higher diversification potential against defis and cryptocurrencies. the best-fit arch-based model was applied, as recommended by the information criterion, to capture the volatility. the results witnessed volatility clustering i.e., large changes are followed by large changes and small changes tend to be followed by small changes. during a short period, the commodity market was not much affected by shocks. tezos has the highest influence of previous shocks. the variances of returns from other vdas were also discerned to get a significant impact of external shocks in the short period. in case of equity investment, the impact was higher in the us stock market (21.7%) as compared to the uk market (10.2%). the persistence of a market reaction as captured by β coefficient reveals that there is a more significant impact of the long-run shocks on the uk stock market volatility. the long-run persistency of the shocks was observed to be higher for ftse-100, followed by ethereum, tether, and dimitra et al. (2022) also witnessed an increased persistency for ftse-100 during the covid period. a leverage effect has been observed for tether, mana, chainlink and ftse, which implies that positive and negative shocks will not influence the market with same magnitude. therefore, investors and portfolio managers, in particular, should pay close attention to the conditions in the stock and cryptocurrency markets because the best methods for capital allocation, diversification, and risk hedging may drastically vary based on the particular events in each market (ji. et al. 2020). undoubtedly, vda offers good returns but at the same time have significant impact of external shocks in the short run. in its comparison, the commodity market is not much affected by http://www.virtual-economics.eu/ 110 www.virtual-economics.eu issn 2657-4047(online) nishi sharma, shailika rawat, and arshdeep kaur virtual economics, vol. 5, no. 2, 2022 shocks. since vda may have negative correlation with the stock market (tether and dai), it may be included in the portfolio for diversification. the results of the present study are expected to be fruitful for investors intending to make investment in vdas to diversify their portfolio. further, since the decision about the vdas is still sub judice in india as well as in some other countries, the results are expected to provide an insight to regulatory bodies and government through providing empirical evidences about the volatility of these assets. however, the study has three limitations that may be overcome in the further research. the first limitation is that it did not consider macroeconomic variables (such as political uncertainties, weather and climatic conditions, inflation, unemployment, etc.), which have a major impact on the returns. secondly, the volatility was analysed through arch-based models, yet it will be interesting to analyse the results of applying the models based on machine learning. thirdly, nowadays, there is a strong inclination towards vda. it will be interesting to conduct an empirical study regarding behavioural aspects motivating (restraining) the adoption of vda. 6. acknowledgements the authors are thankful to anonymous reviewers for their valuable comments and suggestions to improve the quality of the manuscript. 7. presenting the sources of funding this research received no specific grant from any funding agency. references akaike, h. 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(2020). financial markets under the global pandemic of covid-19. finance research letters, 101528. http://www.virtual-economics.eu/ кwilinski alex 91 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 2022 volume 5 number 3 predicting pilgrim and visitor satisfaction through using smartphone applications at holy sites during covid-19 abobakr aljuwaiber and ahmed k. elnagar abstract. this study aims to investigate the promotion of digital transformation in umrah and visitation through the management of smartphone applications (such as tawakkalna and nusuk) in light of covid-19. the research measures the impact of digital transformation on visits during covid-19, in light of the kingdom's vision 2030 statement, in terms of pilgrims’ and visitors’ satisfaction with the services provided in madinah. the study relied on the descriptive analytical approach to collect and analyse primary and secondary data as the basis for research findings. an electronic questionnaire was designed and distributed to pilgrims and visitors in madinah. the study found a positive significant impact of digital transformation on visits during covid-19 in light of the kingdom’s vision 2030 statement and pilgrims’ and visitors’ satisfaction with the services provided to them. the study recommends that decisionmakers and employers emphasize the need to use smartphone applications in hajj and umrah visits even after the end of the corona crisis. applications were found to be critically important in limiting the spread of the virus. there is a need for continuous improvements in digital transformation in hajj, umrah and visits. keywords: digital transformation, smartphone applications, tawakkalna, umrah, pilgrims and visitors, madinah, covid-19 jel classification: m15, m38, i18 authors: abobakr aljuwaiber applied college, taibah university, madinah, kingdom of saudi arabia e-mail: abobakrju@gmail.com https://orcid.org/0000-0001-8939-5317 ahmed k. elnagar applied college, taibah university, madinah, kingdom of saudi arabia e-mail: aelnagar@taibahu.edu.sa https://orcid.org/0000-0003-1787-8189 citation: aljuwaiber, a., & elnagar, a. k. (2022). predicting pilgrim and visitor satisfaction through using smartphone applications at holy sites during covid-19. virtual economics, 5(3), 91-108. https://doi.org/10.34021/ve.2022.05.03(5) received: july 9, 2022. revised: september 12, 2022. accepted: october 9, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://creativecommons.org/licenses/by/4.0/ 92 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 1. introduction there has been a boom in electronic and technical fields since the late twentieth century, making the use of modern technologies an inevitability in organizations. the strategic plan for digital transformation is a beacon to lead the economic transformation expressed in the kingdom’s vision 2030 statement (saudi vision 2030, 2022). digital technology has become the language of the times. it is an essential commodity and no longer a luxury. it presages not only a technical mechanization of current operations, but also a change in work practices that will improve creativity and provide technical empowerment. to achieve these goals, digital transformation will require the deployment of all material and human resources of an organization within a modern and advanced technological and informational framework. thus, such transformations have become a core responsibility of all senior organizational management and not just of the director of information technology. new technology devices such as smartphones essentially allow individuals to communicate easily. communication theory argues that people obtain information through different technology devices and applications (keib et al., 2021). the use of these technologies and associated electronic transactions to serve the guests of allah are seen in various practices related to the rituals of the hajj, umrah, and visiting. the importance of technology and availability of the digital infrastructure emerged during the corona pandemic. in december 2019, the corona virus (hereafter referred to as covid-19) first appeared in the seafood market in wuhan, china. it then spread throughout china and worldwide. the world health organization announced the outbreak of the epidemic in march 2020 (wang et al., 2020) and many countries took precautions to suspend activities in workplaces, schools, restaurants, and shops, and implemented curfews. under these circumstances, covid-19 has become a global pandemic due to its worldwide spread. hence, the kingdom of saudi arabia, like most countries at the beginning of the epidemic, took limited preventive measures, such as thermal examination at all points of entry into the country, the promulgation of travel instructions, and emphasizing basic health prevention measures, such as hand washing and using alcohol-based hand sanitizers and face masks (who, 2020). the saudi ministry of health announced the first case of covid-19 in march 2020. the case was a saudi citizen recently returned from iran. the ministry revealed through its official account on social media that the patient was immediately quarantined in qatif hospital. since then, covid-19 cases have begun to spread in the kingdom. the government has made every effort to prevent the spread of the virus and prepared twenty-five private hospitals with integrated facilities to support the quarantine process to deal with those infected. at the end of march, the ministry of health announced the first death. in view of the rapid spread of the virus and the exponential increase in cases of infection, the country has enacted measures to deal with the global health crisis. for example, schools and universities were closed and distance education activated. public facilities, such as restaurants, commercial shopping centres and business districts were closed, public curfews announced and movement between cities and regions restricted (jokhdar et al., 2021). http://www.virtual-economics.eu/ 93 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 because of the virus and associated measures to limit contact, the crisis has contributed to promoting digital transformation through its implementation in businesses and services. it has prompted many organizations to launch smart device applications to enhance digital transformation and support business solutions and customer services. within the scope of the ministry of hajj and umrah, the use of smart device applications has been instrumental in implementing precautionary and preventive measures to reduce the covid-19 pandemic effect in the two holy mosques. the ministry has created its own applications in addition to those developed by the ministry of health (spa, 2020; basahel et al., 2021). based on the above unfolding events, this study aims to explore the importance of smartphone applications in promoting digital transformation and to assess the satisfaction of pilgrims and visitors with their use during the pandemic. taking madinah as a case study, the research has the following objectives: to ascertain the importance of promoting digital transformation in hajj, umrah and visits in light of the kingdom’s 2030 vision statement. to explore the impact of the covid-19 pandemic on the hajj, umrah and visitation systems. to understand participants' attitudes to the use of digital technology, and to measure the impact of smartphone applications management in promoting digital transformation and satisfaction of pilgrims and visitors in madinah. in line with these objectives, the contribution of this study lies in the empirical research of how using smartphone applications enhanced digital transformation during the corona pandemic and shed light on what part it plays in satisfying pilgrims and visitors. 2. literature review 2.1. digital transformation in the religious context the global community is witnessing a development in the digital and technical field, known as the fourth industrial revolution. it has affected many activities of life, which explains the desire of nations to transform into digital societies and develop their information infrastructure, which accelerates day by day. it has become necessary for individuals and organizations to adapt to this development and transformation in parallel; hence the desire to protect individuals’ data and prevent cybercrime (ahmed & fattah, 2020). several studies have addressed the concept of digital transformation. janssens (2019) sees it as a process in which an organization is transformed into new ways of working and thinking using digital and social technologies. gurbaxani & dunkle (2019) defined digital transformation as “the reinvention of the company— its vision and strategy, organizational structure, processes, capabilities, and culture”. based on the foregoing, the current study can procedurally define digital transformation in hajj, umrah and visitation as a comprehensive process of changing the vision and strategy of the ministry of hajj and umrah. specifically, it will devise http://www.virtual-economics.eu/ 94 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 mechanisms for implementing its work and activities in the ministry to achieve the desired goals through automating traditional businesses by replacing them with digital technology. in considering the objectives of the kingdom’s vision 2030, which includes improving the capacity of pilgrims, umrah performers and visitors to use information technology, the ministry of hajj and umrah, as one of the vital pillars in the kingdom, is taking on the vision’s goals. from this standpoint, digital transformation has become a necessity and responsibility placed on the shoulders of the ministry (aljohani et al., 2022). for this reason, recent research has focused on studying the impact of using technology to enhance the hajj, umrah and visitation systems. yasein & alharthi (2016) point out the importance of using tracking technologies to develop new applications that facilitate services provided to pilgrims and visitors, such as the global positioning system and barcode systems based on satellites, wi-fi, and bluetooth. reviewing the benefits of using digital technology, an examination of images suggests that accuracy of localization, scope of coverage, and advantages and disadvantages relate to the suitability for connecting services and applications related to hajj, umrah and visits. gutub & ahmed (2018) presented the possibilities of a smart computer system to solve the problem of pilgrims straying from the two holy mosques in makkah and madinah during the performance of hajj, umrah and ziyarah. the scholars indicated that the system could be developed in the future to assist the authorities searching for people wanted. khan & shambour (2018) conducted an analytical study of smartphone applications related to hajj and umrah via google play. their research largely agreed with that of gutub & ahmed (2018) about the importance of these applications in improving services provided to pilgrims, umrah performers and visitors. they called on researchers to shed more light on targeted features and those requested by the beneficiaries. alshalani et al. (2020) explain, the effective management of crowd density in hajj is a serious challenge, suggesting the development of the hajj crowd management application for use by travel agencies to assist pilgrims in managing their camps sites. in terms of digital transformation in hajj, umrah and visitation, altahtooh & al-fahal’s (2020) study proposed a management information system (mis) to adopt hajj and umrah projects within its current and future management infrastructure, linking all activities within a coherent and integrated information template. as a result, the kingdom’s vision 2030 emphasized the objective of developing communications and information technology sector infrastructure through partnership with service operators. consequently, the ministry of hajj and umrah launched strategic initiatives to build integrated systems, including the: 1) establishment of an electronic control and monitoring centre, 2) electronic bangle project, 3) electronic track initiative for pilgrims. aljohani et al. (2022) suggest that, while the ministry of hajj and umrah is technically and environmentally prepared for the digital transformation process, it still needs to intensify efforts to increase organizational interest in adopting the digital transformation approach. the ministry has accordingly oriented its strategic plan towards digital transformation in line with the kingdom’s vision 2030. nevertheless, even though the ministry has developed a considerable number of smartphone applications to be used in hajj, it still faces challenges, http://www.virtual-economics.eu/ 95 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 especially those related to the lack of qualified personnel to carry out the work. these two researchers identified the smartphone applications that the ministry uses in hajj, including: fazaa, makkah cleanliness, al-mutawaf, hadaj, mint, treatment, we are all security, torgoman, al-haramain, messenger, karim, navigational hajj and umrah determiner, destination, our rituals, tarwiyah, health, asafni, smart washer, “barber” scissors, watani, arafat’s sermon. based on the foregoing, the efforts are being made to promote the concept of digital transformation in the hajj, umrah and visitation systems is clear. it is also evident that digital technology can contribute to the conduct of organizational business and rapid adaptation to modern technical developments. further, smart automation can improve the quality of services provided to pilgrims and expand the scope of service through channels and new technical tools. 2.2. an impact of the pandemic on religious sites the pandemic had a significant impact globally, especially in health care, economic and social areas. the speed of the infection’s spread is what distinguishes the virus, especially through direct contact with the respiratory droplets of an infected person and their transfer to others. health laboratories and medical and clinical researchers are striving to find an effective treatment or vaccine to enhance people's immunity, as well as ways to treat the symptoms and to reduce the risk of infection. the directives of international and national health organizations indicate that social distancing and restricting gatherings reduces its spread (who, 2020). since large gatherings contribute to the rapid spread of infections of this type due to social proximity, the large crowds during the performance of the hajj and umrah rites are of concern. here, the number of pilgrims and visitors in normal circumstances throughout the year reaches seven million, while in the hajj season alone the number reaches more than 2.5 million muslims. due to the pandemic, this number decreased to ten thousand in 2020, by applying health restrictions and precautionary measures, including social distancing, not touching the kaaba (square building) or kissing the black stone, throwing sterilized pebbles, conducting strict health checks and requiring certificates. thus, the saudi government instituted a number of precautionary measures to control the spread of the virus on a larger scale (nur alam et al., 2021; bbc news, 2020). more specifically, the measures included: 1. temporary suspension of umrah: official umrah activities have been temporarily suspended to prevent the spread of the virus. this ban applies to all local residents since the announcement of the second death in saudi arabia. the saudi government has stopped issuing visitor visas to foreigners and those seeking to perform umrah to prevent the spread of the virus from other countries. 2. closing mosques: the performance of friday prayers and congregational prayers was suspended in the kingdom’s mosques to limit the spread of the virus, except for the grand mosque and the prophet’s mosque. here, all prayers continued to be held, but were limited to workers in the two holy mosques. http://www.virtual-economics.eu/ 96 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 3. temporary suspension of circumambulation of the kaaba: the courtyard and the kaaba are among the sites usually crowded with pilgrims in close proximity. due to the pandemic and within the framework of measures to tackle the virus, the courtyard around the kaaba was closed, and barriers were placed around the kaaba where the cleaning team disinfects the circumambulation. even though these are health measures, they have had a remarkable psychosocial effect within the kingdom and among muslims worldwide. the saudi government took early steps and applied proactive and precautionary measures to impede the rapid transmission of the virus. further, the fear of exacerbating the health crisis and its dire effects on pilgrims, worshipers, and visitors resulted in the difficult decision to stop issuing umrah and visit visas. this led to a reduction of the pandemic effects within the kingdom and was important in supporting international efforts to address the pandemic. not surprisingly, however, these measures have had a social and economic impact, and also a psychological effect on individuals and private and public stakeholder entities in hajj and umrah (muneeza & mustapha, 2021). 2.3. smartphone applications during the pandemic digital technology has played a critical role during the pandemic in keeping communities working at scale to keep people safe, productive, and connected despite their physical distance. its importance has emerged in harnessing the potential of communications technology to save lives from the threat of this virus. the international telecommunication union has benefited from the diversity of its members to make humanity more connected and safer since the emergence of the virus, and the world has witnessed the acceleration of digitization in many companies and services, including systems for remote work, access to health care, education, basic goods and services, and the creation of health solutions evidence-based digital (itu news, 2020). since the beginning of the virus, the kingdom has paid attention to the safety of more than 600,000 pilgrims present in the kingdom at the time in makkah al-mukarramah. such decisions required the innovation and use of modern technologies to manage the general interests of the people and preserve the health and safety of individuals. the saudi data and artificial intelligence authority (sdaia) developed ‘tawakkalna and nusuk’ apps, which are applications assist to facilitate the issuance of movement permits electronically during the curfew period to help reducing the spread of the pandemic in the kingdom, to support government efforts to confront the virus. as of september 5th, 2021, the number of subscribers to the tawakkalna reached twenty-three million. the nusuk application also made it easy for pilgrims to plan the umrah trip or visit and to choose the available date and time. these smart applications were effective in organizing umrah and visiting. they assisted with permits issuing procedures for umrah pilgrims and visiting at the prophet’s mosque according to the approved capacity of the two holy mosques and the strategic plan to be followed during the pandemic. in addition, the ‘sehhaty’ application assisted in organizing the dates of vaccinations, tests for the virus and other health checks, and review health records (hoang et al., 2020). http://www.virtual-economics.eu/ 97 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 on the visit side, smart applications contributed to organizing the appropriate number of health requirements to enter the prophet’s mosque, and to visit and pray in the honourable kindergarten during the pandemic. further, the ministry cooperated with the saudi data and artificial intelligence authority to require vaccination as a condition for reservation and issuance of umrah and visit permits. the application shows the health status of the user, whether they were vaccinated, their immunity, or to be completed 14 days after taking the first dose, or that the infected person has recovered (ministry of hajj & umrah, 2020; al sharif, 2021). with the continuation of the pandemic, the saudi government decided to allow the gradual performance of umrah and visit. this was possible for those who had a permit to visit the holy sites with the aim of implementing the health standards and controls approved by the ministry of health and the competent authorities in the kingdom. based on the literature review and the context of digital transformation outlined above, the hypotheses of the research were formulated as follows: h1: there is a statistically significant correlation between the study variables. h2: there is a statistically significant effect of digital transformation on visits during the pandemic in line with the kingdom’s vision 2030 regarding the satisfaction of pilgrims and visitors with the services provided during the visit using smartphone applications. 3. methodology 3.1. sample and data collection a questionnaire-based survey was used to collect data. the questionnaire was developed from a focused literature review, written in arabic and translated into english. a revised and recompiled version of the questionnaire was sent to two academics, and one citizen working in the field of umrah and to a resident in the kingdom to obtain their feedback. the link was subsequently distributed to respondents electronically, and included a group of pilgrims and visitors, citizens, and residents, domestic umrah companies, residents of hotels and accommodation venues, and university students in madinah. the total number of responses received and validated for analysis was 440. krejcie and morgan (1970) explained that if the study population exceeded 100,000, the study sample must be represented by a minimum of 385 individual responses. table 1 indicates the distribution of the study sample according to their personal data, including gender, place of residence, destination, identity of the pilgrim or visitor, and age group. the demographic profile as illustrated in table 1 shows that most of the study sample was female (64.8%), with fewer males attending (35.2 %). as for the place of residence, most of the study sample (80.7%) resided in medina, with fewer residing outside medina (19.3%). as for destination, majority (94.3%) came from within the kingdom, with few coming from outside the kingdom (5.7%). as for the identity of the study sample, saudi citizens ranked first (79.5%), followed by residents in the kingdom (19.3%), and visitors to the kingdom (1.2%). as for the average age of the sample, it was dominated by those whose ages ranged between 29http://www.virtual-economics.eu/ 98 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 39 years (27.3%), followed by those aged 50 years and over (26.1%), followed by those aged between 40-49 years (23.1%), and those aged between 18-28 came last (22.7%). table 1. demographic characteristics of respondents source: developed by the authors 3.2. measurement the questionnaire employed consisted of thirty-three items divided into four parts. all items were rated on a five-point likert scale (1 = strongly disagree, 5 = strongly agree). the first part included the demographic sample characterization, as presented in table 2. the second part included items related to the digital transformation of the visit during the pandemic. the third part focused on the items related to the procedures followed in the visit during the exacerbation of the pandemic crisis. the fourth part related to items measuring the pilgrims’ and visitors’ satisfaction with services provided during the visit regarding the use of smartphone applications during the pandemic. researchers analysed the collected data by using spss v25. the descriptive analysis using mean and standard deviations for the study’s variables are illustrated in table 1, together with the reliability analysis using cronbach's alpha correlation coefficient to verify the stability of the scale used in managing smartphone applications in promoting digital transformation and its role in satisfying pilgrims and visitors during the corona pandemic. multiple linear regression and correlation analysis using correlation matrix and f test were applied to study the impact of digital transformation in the visit during the corona pandemic. to verify the stability of the constructs used in the questionnaire, cronbach's alpha correlation coefficient test was conducted, as shown in table 2. the results in table 3 show that the reliability coefficient values ranged between 0.605 and 0.896, indicating that the measure of smartphone application management in boosting digital transformation and the satisfaction of pilgrims and tourists during the corona epidemic were characterized by a high degree of stability. demographic characteristic frequency percentage % gender male 155 35.2 female 285 64.8 place of residence in madinah 355 80.7 out of madinah 85 19.3 destination from inside the kingdom 415 94.3 from outside the kingdom 25 5.7 identity of pilgrim or visitor citizen 350 79.5 resident 85 19.3 visitor (umrah visa) 5 1.2 age group 81-81 100 22.7 82-92 120 27.3 04-02 105 23.9 04 over 115 26.1 http://www.virtual-economics.eu/ 99 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 table 2. results of the reliability and validity test for the research scale source: developed by the authors the dependability coefficient values ranged from 0.778 to 0.947, the value of the total score being 0.828 and the validity value being 0.909. these values indicate that coefficients of stability and homogeneity of the study tool are sufficient for use in its final application, where the cronbach alpha coefficient exceeded 0.6, the minimum stability threshold (sekaran and bougie, 2013). accordingly, the coefficients of the study data are considered to be reliable. 4. results and discussion this section aims at ascertaining the opinions of the study sample about the digital transformation of the visit during the corona pandemic, the procedures followed in the visit during the exacerbation of the pandemic crisis, the satisfaction of pilgrims and visitors with the services provided to them during the visit in light of the use of smartphone applications during the pandemic. to verify this, a descriptive analysis test was conducted, as shown in the following tables 3, 4, and 5. table 3 shows that the level of digital technologies use in the visit during the corona pandemic was high, as the total mean of these practices reached 4.13, with a standard deviation of 1.11. the highest scoring statement, one of the most important technologies used in the digital transformation of the visit is smartphone applications (tawakkalna and nusuk), had a mean of 4.44 and a standard deviation of 1.14. the lowest scoring statement, the digital transformation of the visit has helped to gradually increase the number of pilgrims and visitors during the corona pandemic, had a mean of 3.98 and a standard deviation of 1.09. this statement was preceded by the phrase stating that the digital transformation helped the visit follow all the precautionary measures put in place by the relevant ministries, with a mean of 4.20 and a standard deviation of 1.16. the next statement read, (t)he kingdom’s vision 2030 included a digital transformation strategy in the hajj and umrah sector, which contributed to the appropriate preparation to deal with any crisis and mitigated the severity of the corona pandemic during the visit, with a mean of 4.13 and a standard deviation 1.17. credibility cronbach’s α items variable 0.874 0.764 2 the digital transformation of the visit during the corona pandemic in light of the kingdom’s vision 2030. 0.947 0.896 6 procedures followed during the visit during the exacerbation of the corona pandemic crisis. 0.778 0.605 89 satisfaction of pilgrims and visitors with the services provided to them during the visit in light of using smartphone applications during the corona pandemic. 0.909 0.828 overall total scale http://www.virtual-economics.eu/ 100 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 table 3. pilgrims’ and visitors’ opinions about the digital transformation of the visit during the covid-19 source: developed by the authors the following statement: the digital transformation of the visit helped to achieve distancing between pilgrims and visitors, and thus reduced infection from the corona virus, and preserved their health, had a mean of 4.10 and a standard deviation 1.04. next came the statement, the objectives of the kingdom’s vision 2030 were reflected in the development of the internet, and the kingdom became one of the first countries in the world to own a 5g internet, which positively contributed to the development of the service environment for the hajj, umrah and visitor organization, with a mean of 4.08 and a standard deviation of 1.05. the item referring to the digital transformation of the visit contributed to increasing the technological awareness of pilgrims and visitors and reduced the number of violations of the regulations followed during the corona pandemic, had a mean of 4.08 and a standard deviation of 1.13. finally, the statement, the digital transformation of the visit was reflected in the preservation and sustainability of the places visited had a mean of 4.05 and a standard deviation 1.03. item mean std. dev. rank the objectives of the kingdom’s vision 2030 were reflected in the development of the internet, and the kingdom became one of the first countries in the world to own a 5g internet, which positively contributed to the development of the service environment for the hajj, umrah and visitor organization. 4.08 1.05 high the kingdom’s vision 2030 included a digital transformation strategy in the hajj and umrah sector, which contributed to the appropriate preparation to deal with any crisis and mitigated the severity of the corona pandemic during the visit. 4.13 1.17 high one of the most important technologies used in the digital transformation of the visit are the smartphone applications (tawakkalna and nusuk). 4.44 1.14 very high the digital transformation helped the visit follow all the precautionary measures put in place by the relevant ministries. 4.20 1.16 high the digital transformation of the visit helped to achieve distancing between pilgrims and visitors, and thus reduced infection from the corona virus, and preserved their health. 4.10 1.04 high the digital transformation of the visit contributed to increasing the technological awareness of pilgrims and visitors and reduced the number of violations of the regulations during the corona pandemic. 4.08 1.13 high the digital transformation of the visit helped to increase the number of pilgrims and visitors during the corona pandemic. 3.98 1.09 high the digital transformation of the visit was reflected in the preservation and sustainability of the places visited. 4.05 1.03 high total 4.13 1.11 high http://www.virtual-economics.eu/ 101 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 these findings showed that the applications of tawakkalna and nusuk were the most important technologies used in the digital transformation for pilgrims and visitors. this result is consistent with previous research (khan et al., 2021) that found that the use of the tawakkalna application is a successful method in fighting the covid-19 pandemic in saudi arabia. in madinah, the number of active daily cases decreased by 61% after the implementation of technologies, such as tawakkalna. the positive perception evident in the results of this study indicate the level of collaboration between the users of smart applications and the competent authorities, with the community ready to cooperate in the public interest. using technologies during this pandemic has offered remarkable protection and support for public health (khan et al., 2021). thus, there is a positive moral impact of digital transformation in the visit during the corona pandemic in light of the kingdom’s vision 2030 on satisfying pilgrims and visitors with the services provided in light of using smartphone applications during the corona pandemic. table 4 shows that the level of the procedures implantation followed in the visit to the prophet’s mosque during the exacerbation of the corona pandemic was seen as high by participants, with the total mean of 4.12 and a standard deviation of 0.83. the statement measuring the highest for the procedures followed in the visit stated that: banning pilgrims and visitors from entering the prophet’s mosque, visiting the prophet, peace be upon him and his two companions, may god be pleased with them, or praying in the honourable kindergarten during the exacerbation of the corona pandemic, had a mean of 4.32 and a standard deviation of 1.08. table 4. the pilgrims’ and visitors’ opinions about the procedures followed at the visit source: developed by the authors items mean std. dev. rank restricting the obligatory prayers, friday prayers, the month of ramadan and the eid prayers to workers only in the prophet’s mosque during the exacerbation of the corona pandemic. 4.11 1.22 high banning pilgrims and visitors from entering the prophet’s mosque, visiting the prophet, peace be upon him and his two companions, may god be pleased with them, or praying in the honourable kindergarten during the exacerbation of the corona pandemic. 4.32 1.08 very high lifting the qur’an, carpets and zamzam water from the prophet’s mosque during the exacerbation of the corona pandemic. 3.91 0.87 high cancelling the visit of al-baqi for pilgrims and visitors during the exacerbation of the corona pandemic. 4.21 1.23 very high banning serving meals and extending travel during the pandemic inside the prophet’s mosque during the exacerbation of the corona pandemic. 4.16 0.76 high lessons and quran memorization sessions stopped in presence inside the prophet’s mosque during the exacerbation of the corona pandemic. 3.98 1.17 high total 4.12 0.83 high http://www.virtual-economics.eu/ 102 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 whilst the lowest scoring statement measuring the procedures followed in the visit stated that lifting the qur’an, carpets and zamzam water from the prophet’s mosque during the exacerbation of the corona pandemic had a mean of 3.91 and a standard deviation of 0.87. the next statement referred to cancelling the visit of al-baqi for pilgrims and visitors during the exacerbation of the corona pandemic, with a mean of 4.21 and a standard deviation of 1.23. next, the statement, banning serving meals and extending travel during the pandemic inside the prophet’s mosque during the exacerbation of the corona pandemic had a mean of 4.16 and a standard deviation of 0.76. the statement that preceded this said, restricting the obligatory prayers, friday prayers, the month of ramadan and the eid prayers to workers only in the prophet’s mosque during the exacerbation of the corona pandemic reported a mean of 4.11 and a standard deviation of 1.22. the last was the statement clarifying that lessons and quran memorization sessions stopped in presence inside the prophet’s mosque during the exacerbation of the corona pandemic obtained a mean of 3.98 and a standard deviation of 1.17. these empirical results show that respondents were positive about the procedures applied for banning pilgrims and visitors from entering the prophet’s mosque, visiting the prophet, peace be upon him and his two companions, or praying in the honourable kindergarten during the exacerbation of the corona pandemic. this finding supports a similar conclusion drawn by ahmed and memish (2020) who indicated that the bans during covid-19 impeded millions of muslims fulfilling hajj rites. however, the procedures followed by saudi government in this regard have been widely supported by the organization of islamic cooperation, the world health organization and other muslim governments. these findings indicate that the right to human life was seen above all else as a right that muslims must preserve for all humanity, irrespective of creed or belief. table 5 shows that the level of pilgrims’ and visitors’ satisfaction with the services provided to them during the visit in light of using smartphone applications during the corona pandemic was high, with the total mean of 3.85 and a standard deviation of 0.93. the highest scoring statement of the evidence in this set of questions indicating that the wise leadership in the kingdom seeks the health and safety of the pilgrim and the visitor and provides them with the best services during the corona pandemic, which made the visit a pioneering and unique experience had a mean of 4.12 and a standard deviation of 1.02. the lowest scoring statement indicating smartphone applications helped the return of breakfast in the month of ramadan, and fasting people on monday and thursday had a mean of 3.66 and a standard deviation of 0.59. the findings confirm that the statistically-significant correlation in the study variables in this regard. respondents perceived that the wise leadership in the kingdom sought the health and safety of the pilgrim and the visitor and provided them with the best services during the corona pandemic, which reflected positively on the pioneering and unique experience during their visit to madinah. http://www.virtual-economics.eu/ 103 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 table 5. the opinions of the pilgrims and visitors about their satisfaction source: developed by the authors indeed, several previous studies emphasized the importance of providing a healthy and safe environment for pilgrims and visitors, particularly by ministry of hajj and umrah, to ensure that well-being of all attendees is taken seriously (raj & bozonelos, 2020). it can be concluded that the respondents in this present study have seen smartphone applications, particularly the two applications of tawakkalna and nusuk, as being helpful tools to mitigate the risk of corona infection, which reflected positively on their experience during their visit to madinah. to test the hypothesis 1, the pearson correlation coefficient was used to determine the nature of the relationship among the study variables, as shown in table 6. item mean std. dev. rank it is easy for pilgrims and visitors to download smartphone apps, register in them and use all the services included. 4.08 0.72 high smartphone apps (tawakkalna and nusuk) facilitated the return of worshipers to the prophet’s mosque. 4.06 0. 85 high smartphone apps facilitated the organization of the entry and exit of pilgrims and visitors to the prophet’s mosque, the visit of the prophet, peace be upon him, and his two companions, may god be pleased with them, and prayer in the honourable rawda. 4.07 0.75 high smartphone apps have helped to feel reassured and safe while visiting the prophet’s mosque in light of the corona pandemic. 4.02 0.64 high smartphone apps helped trust in returning the carpets, the qur’an and zamzam water to the prophet’s mosque. 3.92 0.70 high smartphone apps helped the return of breakfast in the month of ramadan, and fasting people on monday and thursday. 3.66 0.59 high smartphone apps helped allow pilgrims and visitors to visit al-baqi (the cemetery). 3.78 0.61 high smartphone apps helped bring back the lessons and memorization sessions in presence at the prophet’s mosque. 3.72 0.87 high i feel the return of life in the prophet's mosque to its previous state occurred as a result of using smartphone apps during the visit. 3.84 0.41 high it is easy to solve any problem i encounter using smartphone apps during the visit. 3.85 0.68 high i expect that the use of smartphone apps will continue in the visit even after the end of the corona pandemic. 3.99 0.33 high i am fully satisfied with the services provided in the smartphone apps (tawakkalna and nusuk) for the visit. 4.05 0.57 high the wise leadership in the kingdom seeks the health and safety of the pilgrim and the visitor and provides them with the best services during the corona pandemic, which made the visit a pioneering and unique experience. 4.12 1.02 high total 3.85 0.93 high http://www.virtual-economics.eu/ 104 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 table 6. correlation coefficients among study variables source: developed by the authors table 6 illustrates a medium to strong significant correlation between all study variables, namely: digital transformation in the visit during the corona pandemic in light of the kingdom’s vision 2030, the procedures followed in the visit during the exacerbation of the corona pandemic crisis, and the satisfaction of pilgrims and visitors with the services provided to them during the visit in light of the use of smartphone applications during the corona pandemic indicated that the correlation coefficient ranged between 0.620 minimum and 0.813 maximum, with a level of significance of 0.01. based on the foregoing, the first hypothesis is accepted, which states that “there is a statistically significant correlation between the study variables”. h2: there is a statistically significant effect of digital transformation in the visit during the corona pandemic in light of the kingdom’s vision 2030 on the satisfaction of pilgrims and visitors. this study applies multiple linear regression and correlation analysis test to check hypothesis 2 on the potential impact of digital transformation in the visit during the corona pandemic in light of the kingdom’s vision 2030 on the satisfaction of pilgrims and visitors (table 7). table 7. the impact of digital transformation on the visit during the corona pandemic on the satisfaction of pilgrims and visitors. source: developed by the authors the results in table 7 demonstrate that there is a positive significant impact of digital transformation in the visit during the corona pandemic in light of the kingdom’s vision 2030 variable (1) (2) (3) (1) the digital transformation of the visit during the corona pandemic in light of the kingdom’s vision 2030 8 (2) procedures to be followed during the visit during the exacerbation of the corona pandemic crisis 0.638 8 (3) satisfaction of pilgrims and visitors with the services provided to them during the visit in light of the use of smartphone applications during the corona pandemic 0.813 0.620 8 variables dependent variable satisfaction of pilgrims and visitors with the services provided to them during the visit in light of the use of smartphone applications during the corona pandemic independent variable β t sig. the digital transformation of the visit during the corona pandemic in light of the kingdom’s vision 2030 0.857 12.94 0.0004 f= 167.36 r2 =0.66 sig = 0.000 http://www.virtual-economics.eu/ 105 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 in the satisfaction of pilgrims and visitors with the services provided in the visit in light of using smartphone applications during the corona pandemic, where the value of the regression coefficient (β = 0.857), and the value of t (t = 12.94) is significant if its value is ≤ 2 at the level of significance p<0.001. the value of the coefficient of determination of the r2 model was 66.1%. this means that the digital transformation of the visit during the corona pandemic in light of the kingdom’s vision 2030 as a whole explains 33.9% of the change in the variable of pilgrims’ and visitors’ satisfaction about the services provided in the visit in light of using smartphone applications during the corona pandemic. this is consistent with al-sharif’s (2021) study, which identified the importance of ‘my trust’ and ‘nusuk’ applications in facilitating and organizing umrah and visitation in the two holy mosques. the study also recommended the necessity of enabling the elderly to obtain smart devices and use applications. based on the foregoing, the hypothesis that states that there is a significant impact of digital transformation in the visit during the corona pandemic is accepted in light of the kingdom’s vision 2030 in the satisfaction of pilgrims and visitors with the services provided in the visit with regard to using smartphone applications during the corona pandemic. 5. conclusion this study aimed at identifying the importance of promoting digital transformation in umrah and visitation through the management of smartphone applications (such as tawakkalna and nusuk) in light of the corona pandemic. it measured the impact of managing smartphone applications as one of the tools for promoting digital transformation and its impact on achieving pilgrims’ and visitors’ satisfaction during the corona pandemic, taking madinah as a case for study. based on the field work, the empirical results showed that the use of smartphone applications is a successful way to combat the covid-19 pandemic in the kingdom. this study makes theoretical and practical contributions to using digital technologies in times of health crises. firstly, in terms of theoretical contributions, current research on the importance of promoting digital transformation in umrah and visitation remains limited. thus, this pilot study can enhance the theoretical understanding of promoting digital transformation in umrah and visitation under the kingdom's vision 2030 and in the ministry of hajj and umrah, that is, within public organizations. secondly, this study is one of the few that examined views about the impact of smartphone application management in promoting digital transformation and its role in satisfying pilgrims and visitors in medina. experimentally, participants demonstrated their awareness of the importance of using smartphone applications during the corona pandemic, and as an aid to promoting digital transformation, business development, and services provided to pilgrims and visitors. however, this area needs more attention. http://www.virtual-economics.eu/ 106 www.virtual-economics.eu issn 2657-4047 (online) abobakr aljuwaiber and ahmed k. elnagar virtual economics, vol. 5, no. 3, 2022 regarding practical recommendations, the results of this study indicated that continuous improvement and adding various services to smartphone applications will positively affect the development of the work of the hajj, umrah and visitation systems. among the recommendations of this study there are the following: (1) giving attention to solving problems which pilgrims and visitors are facing while using smartphone applications during the visit, (2) paying attention to training employees of the ministry of hajj and umrah, especially those working in the information systems department, on how to solve problems in using smartphone applications, and developing them continuously, (3) emphasizing the necessity of using smartphone applications in hajj, umrah and visitation even after the end of the corona crisis, because of its proven importance and effective role in limiting the spread of the virus and its positive role in organization, (4) constant interest in innovating modern technologies that enhance digital transformation in hajj, umrah and visitation in light of the kingdom’s 2030 vision, and (5) supporting scientific research concerned with digital transformation and innovation to uphold it. some limitations can be noted in this study. one limitation involves the sample size, which may not have been large enough to confidently obtain general views on the effectiveness of smartphone applications in satisfying pilgrims and visitors during the corona pandemic, particularly views from outside the kingdom. thus, findings of this research encourage undertaking similar studies to obtain significant and more inclusive feedback on the objectives of the study. another limitation is that the study only investigated the views of pilgrims and visitors in madinah, where makkah, another holy city for muslims that also used these smartphones applications (tawakkalna and nusuk) during the corona pandemic, has its own characteristics. conducting a comparative study in the application 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(2016). a review of tracking technologies in hajj and umrah. research17th scientific forum for the research of hajj, umrah and madinah visit, scientific portal for 1438ah. http://www.virtual-economics.eu/ кwilinski alex 50 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 2022 volume 5 number 3 measuring the quality of educational services on the example of secondary schools in poland marta ciarko abstract. research results, as well as the author’s own observations show that the quality of educational services is one of the most important factors affecting the level of civilization of modern states, by affecting all aspects of their socio-economic life, including health, natural environment and economic growth, in the long run. the quality of education directly influences the formation of the human capital of the society, and this impacts the pace of economic development. the starting point for actions aimed at improving the quality of educational services is undoubtedly both the proper recognition of the main factors determining the quality of educational services and the measurement of this quality determinants. thus, measuring the quality of educational services, identification and gradation of key determinants were considered the main purpose of this study. the research method used to achieve the set goal was a two-part, anonymous questionnaire sent to secondary schools’ principals in the zachodniopomorskie province in poland. the conducted evaluation of the factors shaping the quality of educational services in the surveyed institutions indicated numerous needs in terms of improving their activity. it should be emphasized that none of the estimated factors obtained a fully satisfactory outcome in the survey of respondents' opinions. the general conclusion from the conducted research is to confirm the importance of recognizing properly the determinants of the educational services quality as the basis for developing a proposal for shaping the desired level of these services’ quality. keywords: quality measurement, human capital, quality determinants jel classification: i28, i29 author: marta ciarko stanisław staszic state university of applied sciences in pila, poland e-mail: mciarko@ans.pila.pl https://orcid.org/0000-0001-6690-3833 citation: ciarko, m. (2022). measuring the quality of educational services on the example of secondary schools in poland. virtual economics, 5(3), 50-68. https://doi.org/10.34021/ve.2022.05.03(3) received: january 21, 2022. revised: march 3, 2022. accepted: june 24, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://creativecommons.org/licenses/by/4.0/ 51 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 1. introduction education is considered to be the most important national investment that guarantees a safe and prosperous future for poland among both european and world nations. the education is a specific service, and the issue of quality assurance in education is closely related to both its development and financing. the starting point for actions aiming to improve the quality of educational services is, therefore, recognition of determinants (stępień et al., 2022) for shaping this quality. the article is of theoretical, as well as of empirical, nature. some considerations were dedicated to literature studies on the methodology of quality measurement, also presenting selected measurement methods in an ideological way. the focus was also on human capital issues. the above is a conceptualization of the discussed problems, taking into account the multidimensionality and interdisciplinarity of the indicated concepts. the following part presents the methodology and results of the author’s own research, on the basis of which the gradation of the most important determinants of the educational services quality at secondary schools in the zachodniopomorskie province was carried out. the conclusions from the conducted research allowed for a positive verification of the objective set in the article. the disquisition of this issue was concluded with a summary of considerations regarding the significance of the undertaken research, presentation of its main conclusions and practical recommendations. 2. measuring the quality of educational services – a literature review in learning economics, measurement is an important tool of cognitive processes, constituting in its essence a specific type of observation enabling inference of the nature, complexity and significance of the studied phenomena. according to borowiecki and jaki (2008), the measurement methodology is a research system presenting both a procedure related to posing problems and a description of the ways of solving these problems. measurement is closely related to a scientific definition and consists in determining the metric order between various manifestations of individual properties and giving scientific events usefulness for the mathematical description. both the problem of identifying the measurable mechanisms to increase the efficiency (bilan et al., 2019) and the quality measurement in the literature on the subject is widely discussed, but it is commonly accepted that the necessary condition for the evolution of quality science is the ability to measure the dynamics of phenomena occurring in it. it is also assumed that quality assessment leads consequently to various types of positive economic effects, and, thus, to an improvement in the socio-economic well-being of the whole society. measurement can be made in analytical and synthetic terms. the result of measurement at the analytical level is the vector of inherent properties value, and measurement in a synthetic approach is a numerical description of a distance between the numerical values assigned to the inherent properties of a specific object and the numerical values assigned to the requirements set for individual properties of an object, considering the relationship between these requirements (szydłowski, 2000). according to kindlarski (1988) measurement of the quality status should allow for making decisions similar to the optimal ones. skrzypek (2000) http://www.virtual-economics.eu/ 52 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 indicates that in order to have information about quality, the latter needs to be measured and constantly controlled. lesiński (1996) reduces the essence of measuring the quality of services to comparing the values observed with the values required for a given service. a quality measure is a numerical measure of one or more quality-of-service properties. these measures may be determined in si units or in relative numbers. kolman (2009) believes that quality cannot be measured because the concept of quality is considered abstract. the author justifies his position by indicating that measurement is understood as comparing two appointed values (expressed in units of measurement), one of which is the measurement standard. moreover, there is no single, universally recognised physical quantity that universally determines quality, thus, preventing it from being measured. the author believes that quality measurement can only be properly spoken of if all the criteria describing the quality status are measurable values. the author also points out that analytical methods for calculating the quantitative quality level should be used primarily to examine the quality of equipment, e.g., tools, instruments, machinery and equipment, materials and raw materials, and to analyse components that are very important for the economy, such as the quality of work. tkaczyk (2000) analyses measurability of quality depending on the adopted quality definition, as shown in figure 1. this author claims that only the case of a transcendental approach indicates the inability to measure quality, in other approaches, such as: product orientation, user orientation, production orientation or value orientation he indicates the measurability of quality. figure 1. measurability of quality depending on a specific definition source: the author’s own study based on (tkaczyk, 2000). http://www.virtual-economics.eu/ 53 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 since in most research cases, when measuring and evaluating the quality of services, the application of many tools used to measure the quality of products becomes impossible, the selection of appropriate sources of information and a model for assessing the level of quality of services should always be made earlier, in terms of the purpose of the conducted research. it should be noted that the universality and topicality of the issue of quality measurement require constant verification. in order to achieve optimal precision in the study, according to n. denzin et al. (denzin & marshall, 2004), it is justified to use methodological triangulation, giving the possibility of using quantitative methods (observation, questionnaire interview, survey, test, sociometry, quantitative analysis of documents) and qualitative methods (participant observation, personal interview, qualitative content analysis, biographical method, case study) in one study (denzin, 1970; nadolna, 2017). assuming that quality is defined as the satisfiability of the customer's expectations, according to this definition, the service (intangible product) provider should primarily ensure that the manufactured product satisfies the customer (pacana & stadnicka, 2010). the results of the research prove that the degree of meeting customer's expectations examined post factum, i.e., after delivery of the product, does not guarantee success. it is only ensured by shaping the optimal quality by early recognition of customers' expectations (gazda, 2007). determination of a product pattern to be pursued makes this possible, which is particularly important in the case of the quality of services which are characterized by the much higher number of non-measurable features, compared to tangible products, and the assessment of their quality depends to a significant extent on a customer's opinion. there is a common belief that it is difficult to measure the quality of a service, but people usually know when they get a bad service. according to czyżewski et al. (2016), various methods are used to measure quality. for example, borkowski (2004) presents the abcd method, which method can be interchangeably used with the pareto-lorenz analysis and, after identifying the causes of a given problem, used to create a ranking of their importance. figure 2. stages of the abcd method source: (borkowski, 2004). http://www.virtual-economics.eu/ 54 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 analysing the literature on the subject, it can be noted that in numerous publications on quality-related issues, the authors propose various approaches to the problem of its measurement, namely:  wawak (2000) presents a numerical measure of quality as a quotient of the actual status and expectations. if the result of such a quotient is less than 1, this status is referred to as a "sub-quality"; if the result is exactly equal to 1, then there is a "full quality", i.e., complete fulfilment of expectations by a product; if the result is greater than 1, then it should be referred to as an "excess quality", i.e., the actual status of a product that exceeds all expectations of a customer.  crosby (1995) proposes to measure quality at the expense of non-compliance, attracting attention to the financial aspect of non-quality and suggests the expression of quality in monetary units. the maximum quality, according to this measure, is a lack of any costs of noncompliance to requirements.  dahlgaard et al. (2000) recognize that there are two aspects to practical quality measurements. the first aspect concerns the features that are explicit or hidden, since explicit features are directly measurable, while hidden features are not directly measurable. the second aspect concerns user issues, in particular, whether they have a uniform approach to quality or its assessment, or whether they have different perceptions of quality. the combination of these two aspects of measurement allows creating a typology of the concept of quality, which can be the basis for measuring quality in practice. in this approach, quality can be measured in two ways. the first one is direct measurement of consumer preferences through statistical methods of scaling and designing experiences, while the second one is indirect measurement of preferences based on observations of market reactions.  smoluk (2000) demonstrates a mathematical argument of the possibility to measure quality understood as a relation of preferences. in his opinion, the family of all preferences in the set m, ordered by the relationship, is a matrix, which means that the multiplicity product of two preferences is their lower bound. the upper bound, however, is the extension of the union of these preferences to the minimum preference containing this sum. what is more, quality is a property that depends on individual preferences, but quality is also a measure of compliance with the pattern. the author believes that quality changes when a pattern changes. in his view, therefore, there is no objective quality. quality is a relative concept and depends primarily on experience and needs. quality is a preference, and a quality feature is a linear preference, called tolerance (pre-order). it is reciprocal and transitional. according to sage & rouse (2009), any action aimed at improving the quality of service involves the elimination of losses, which means everything that does not create added value for a customer. therefore, each activity should be treated as a process that can be improved. kujawiński (2001) claims that in practical terms, one can point to a number of methodological approaches used to measure and assess the quality of products, as shown in figure 3. in conclusion, it may be stated there are many quantitative and qualitative methods, documented theoretically and verified in practice that allow for effective measurement of quality. the results of the conducted assessments are used both in planning quality improvement, as well as in checking and analysing the results after pro-quality changes are implemented. withal, it should be pointed out that there is a difficulty in selecting the http://www.virtual-economics.eu/ 55 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 appropriate measurement method, adequate for the category of the examined problem, as well as the purpose of the conducted research. figure 3. quality measurement and assessment source: the author’s own study based on (kujawiński, 1998). 3. the importance of the education quality in shaping human capital the quality of educational service is defined as a degree of meeting the requirements for the educational process and its effects, formulated by stakeholders, considering internal and external conditions (unesco roadmap for artistic education, 2006). withal, the key importance of the education effectiveness, measured by a degree of competences adaptation to social and economic life, and thus to the needs of the labour market, is emphasized. in the scientific literature, the quality of educational service is considered primarily as (piotrowski & kirejczyk, 2001):  the quality of a school, i.e., the educational institution which is defined by: its organizational structure, management style used, interpersonal relations between the participants of the educational process, teaching methods and means used, educational impacts, forms and methods of cooperation with parents, system of intra-school evaluation. http://www.virtual-economics.eu/ 56 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 the quality of a school may be perceived differently by various groups of stakeholders, e.g., pupils, the governing authority;  the quality of education or a teaching process, which includes: the objectives of education, its content, principles of education, its methods, organizational forms, means of education, plans, syllabi and methods of selecting the content, textbooks, auxiliary materials, procedures for testing and evaluating the study results and the results achieved by students in external examinations, especially the secondary school leaving examination and examinations confirming professional qualifications in individual professions, as well as the number of winners of out-of-school competitions. assuming that education should be understood as both developing students’ intellect and building their attitudes regarding their comprehensive development and functioning in the society, the quality of educational service is essentially the quality of education, as school has no other socially important goals than education understood this way;  the quality of teacher training and professional experience;  the quality of the outcome, i.e., preparation for the next educational or work stage in accordance with the current expectations and requirements of employers. the assessment of the outcome should be combined with evaluating the educational service effectiveness, which is measured by the volume of knowledge transferred at a given time, with a specific effort and financial costs. both theoreticians and practitioners of education and upbringing agree that among the various factors determining the quality and effectiveness of school work, one of the most important is the teachers’ professional development, understood as their qualifications and competences (nowacki, 1999). as a consequence, the above means that it is a team of teachers who are responsible for creating new and enriching the already functioning human society capital (polcyn, 2012). the conducted literature studies, therefore, encourage to combine closely the competences and qualifications of teachers with the category of human capital. some authors clearly emphasize the direct relationship between the employees’ qualifications and the quality of their work when defining human capital (stankiewicz, 1987), which in a broader sense means the relationship between the employees’ qualifications and the economic development of a country. table 1 presents examples of definitions and descriptions of human capital justifying such a position. considerations formulated by petty (1958) and smith (1954) in this regard are also worth noting. in his works, petty (1958) emphasized that the quality of work depends on the qualifications of employees. this author drew attention to the similarity of human capital to fixed capital and proposed estimating the economic value of employees. in his opinion, an employee's value consists of his/her performed profession, age, health and skills (petty, 1958). smith analysed the importance and cost-effectiveness of skills he described as useful, acquired by members of the society in the process of education and vocational training. the author argued that the wealth of a country increases with the increase in employment and human labour productivity. both of these factors depend on employees’ qualifications, as highly qualified employees prove to be more productive (smith, 1954). http://www.virtual-economics.eu/ 57 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 table 1. selected definitions and descriptions of human capital author definition /description j. nicholson points to the "living" capital that is inherent in people and draws attention to the importance of employee competences as a very significant factor affecting the quality of their work. j.h. thuenen the formation of human capital is greatly influenced by upbringing, care for physical fitness and education including literacy and numeracy skills. the following are important: appropriate remuneration of well-educated employees, the amount of remuneration appropriate to the education. it is necessary to increase investment in education as a form of investment in economic development. t.w. schultz human capital is all abilities (innate or acquired) that have value and can be enriched by appropriate investment. human capital is a resource that is a source of future employee satisfaction, earnings, as well as work of a certain value for the economy. the feature that distinguishes human capital is that it is a part of man because it is embodied in people. g.s. becker, b. lev and a. schwartz. human capital is embodied in an employee, in his or her innate and acquired skills, which are at the same time a source of income. an individual decides to invest in his or her human capital if the expected return on this investment is higher than the incurred expenditures, whereby the return on investment can be analysed from the perspective of both an individual and society. j. b. say the source of shaping human capital are various forms of education, while the accumulated knowledge is the capital contained in a man without the possibility of its disposal. s. r. domański human capital is a resource of: knowledge, skills and vital energy contained in society. this resource is determined by the genetic characteristics of a given population once and for all, but it can be increased through investments, called by various authors investments in: human; in people; in human capital; in human life. j. wilkin education is the main component of human capital, which is the most important factor in economic and civilizational development. j. laitner human capital is considered a synonym of education. h. uzawa the leading role of the educational sector in shaping the value of human capital is emphasized. j. mincer human capital is understood as the sum of knowledge acquired at school, expressed by the learning time, and acquired during performing work. source: the author’s own study based on: nicholson (1891); schultz (1981); fitz-enz (2001); schultz (1976); bochniarz &gugała (2005); schwartz (1971); say (2000); domański (2000); wilkin (1998); laitner (1993); uzawa (1965). smith (1954) believed that only productive work, which included, among others, the work of teachers and scientists, contributed to enhancing the wealth of a nation, which he justified with expenditure on education, productive in his opinion from the point of view of a country's economy. he proposed calculating qualification values as the sum of expenditures on education and maintenance in the period of learning and practice (jarecki, 2002; szałkowski, 2002). smith (1954) also emphasized teachers’ considerable responsibility for the level of conducted classes, claiming that reliable performance of their duties, supported by high requirements and their enforcement, translates into commitment to the work of schoolleavers. employers should be interested in hiring workers with the highest qualifications in http://www.virtual-economics.eu/ 58 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 order to improve the quality of the manufactured products. the above allows concluding that improving the quality of schoolwork is inextricably linked to the need to invest in human capital represented by teachers' skills. 4. research methodology in order to verify the purpose, set out in this research, a two-part survey was designed and conducted. in terms of location, the research covered the zachodniopomorskie province. the terms of time, it covered a school year 2015/2016. such a criterion of distinguishing the research area was supported by the practicality of conducting the research, related primarily to:  a sufficiently large number of surveyed units: in the zachodniopomorskie province in the school year 2015/2016, educational services were provided by 284 secondary schools (information with contact details was obtained from the local education authority in szczecin), whose work was managed by 98 headmasters. at this point, it should be clarified that some secondary schools form school complexes, and each complex has one principal. in order to avoid a situation in which a principal of a complex of schools completes more than one questionnaire, the author identified the number of units of the surveyed population with the number of principals;  functioning of the surveyed units within the subordination to one local education authority that positively recommended the research, which had a positive impact on the level of survey return – the return from the research was obtained at the level of 53%;  a lack of identified contraindications for generalising the conclusions of the research on a nationwide scale, which is justified primarily by the high homogeneity of the functioning conditions of education at the level of secondary schools at the national level. in the first part of the survey, respondents – principals of secondary schools – were asked to evaluate and rank the sixteen factors shaping the quality of educational services in their subordinate institutions. in the questionnaire of the first part of the survey, a four-point rating scale was used, supplemented with the possibility of evading the point score by selecting the "difficult to say" box (kaczmarek & tarka, 2013). when designing a questionnaire, selected elements of the servqual service quality assessment method were used. a typical questionnaire applying this method for research purposes consists of statements grouped into 5 dimensions: material appearance of the service, reliability, responsiveness, certainty and empathy. thus, the presented research approach allows for an orderly, logical presentation of the quality determinants of the educational services. in the second part of the survey, respondents evaluated significance of the factors in question from the viewpoint of their determination of the educational services quality. respondents were asked to select the five most important determinants of the educational services quality, assigning them a rank, with 1 being of the lowest significance, and 5 being of the highest. thus, each of the surveyed principals had a total of 15 points at their disposal, which could be awarded to the five most important, in their opinion, determinants of the educational services quality. a given determinant could get a maximum of 260 points in case that each respondent http://www.virtual-economics.eu/ 59 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 assigns it 5 points. in order to calculate an aggregated value of partial assessments assigned by the respondents to individual examined factors, an arithmetic average was used. 5. results and discussion the numerical values for the analysis are included in tables 2 and 3. the data from table 2 are the results of the evaluation assigned by the principals of secondary schools in the zachodniopomorskie province to individual factors, indicated by the author, affecting the quality of educational services in the institutions managed by them. table 2. the results of the evaluation assigned by the principals of secondary schools in the zachodniopomorskie province item factor number of responses within each category ar v g s is d 1. an amount of financial resources allocated to the school development and maintenance 7 5 12 28 0 2.83 2. conditions for conducting classes related to the number of students in classes and at school 5 22 25 1 0 3.58 3. a level of technical facilities of the school in teaching aids and teaching equipment 5 10 33 4 0 3.31 4. quality of work of the teaching staff related to their competences and professional qualifications 20 21 11 0 0 4.17 5. environmental conditions of the students’ life and development 14 14 22 2 0 3.77 6. teachers' cooperation with the school principal (e.g., in pedagogical councils, etc.) 21 9 22 0 0 3.98 7. the principal’s and/or managerial staff’s school management skills 26 15 11 0 0 4.29 8. transparency and allocation of responsibilities and associated rules for awarding salaries, bonuses and allowances 15 9 17 11 0 3.54 9. a level of teachers’ and management’s motivation resulting from their sense of educational mission 10 5 23 14 0 3.21 10. an impact of material motivation tools addressed to teachers 5 10 11 26 0 2.88 11. an impact of non-material motivation tools addressed to teachers 15 2 7 25 3 3.14 12. attractiveness of the school's offer of extracurricular activities (e.g., trips, cultural events, projects, interest groups) 10 10 29 3 0 3.52 13. cooperation and competition with external entities 10 31 4 2 5 4.04 14. relevance of selecting educational profiles and curriculum content in relation to the needs of the labour market 6 15 25 6 0 3.40 15. standardisation of teaching and external evaluation of the quality of education (e.g., conducting and interpreting the results of secondary school leaving examinations) 5 19 20 8 0 3.40 16. internal evaluation of the quality of education (e.g., the number of observed classes) 5 17 19 9 2 3.36 note: v – very good; g – good, s – sufficient, is – insufficient, d – difficulty to say, ar – average rating source: the author’s own study based on an it-conducted survey in 2016. analysing the respondents' responses from the first part of the survey, evaluation of the amount of financial resources allocated to the school development and maintenance on the average presented in the first point of table 2 is sufficient, however, it should be emphasized http://www.virtual-economics.eu/ 60 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 that the dominant response, i.e., in the case of 54% of the surveyed principals, was insufficient. this means that in more than a half of the secondary schools of the zachodniopomorskie province, in the opinion of the principals of these schools, a minute number of financial resources allocated to the development and maintenance of their schools creates significantly worse conditions for the subject education of students and, according to the author, also limits professional development opportunities of teachers. regarding the results of the second point of the first part of the survey, the author indicates that the conditions for conducting classes are primarily the number of students in classes and school. these conditions were assessed by 2% of principals as insufficient, 47% of respondents said that they were at a sufficient level, for 42% of principals it is a good level, and for 10% it is very good. the obtained results confirm the author's own opinion about the relatively poor premises condition of secondary schools located in the area covered by the research. in many schools, due to the lack of classrooms, classes take place in shifts. when analysing evaluation of the schools’ technical facilities, namely with teaching aids and equipment, it should be stated that for most principals (63%) the condition of this equipment is sufficient, for 19% it is at a good level, while 10% and 8% of respondents gave extreme grades: very good or insufficient respectively. the presented results indicate that vast majority of schools have the necessary technical equipment for the proper organisation of the teaching process. the fourth point of the survey referred to the quality of work, professional competences, and qualifications of the teaching staff. nearly 38% of the surveyed principals rated their level as very good in the institution they manage. a similar number of respondents, i.e., 40%, gave a good rating, and 21% said that this level was only sufficient. none of the surveyed principals assessed the quality of work, professional competences, and qualifications of the teaching staff as insufficient, nor did they choose a "difficult to say" option. the obtained result should be considered positive, considering that the economic condition of the professional group of teachers and the resulting consequences for young people to opt for the teaching profession have been one of the key unresolved problems of the government policy for years. the fifth point of the first part of the survey concerned the impact of environmental conditions of the student's life and development on the quality of the educational service. in the answers obtained in the survey, more than a half of the surveyed principals assessed the impact of this factor on the quality of services in their schools as good and very good. 42% of the respondents considered this factor to have a weak impact, granting a sufficient assessment, and 4% indicated its negative impact. the author's observation shows that an impact of the environmental factor on the quality of educational services is strongly and positively identified primarily in the best, recognized as elite, general secondary schools, located in large agglomerations. the sixth point of the first part of the survey referred to teachers’ cooperation with the school administration. the quality of this cooperation was evaluated very well and well by almost 60% of the respondents, while the others described it as satisfactory. according to the author, the interpretation of the respondents' answers indicates, first of all, at least a good opinion of http://www.virtual-economics.eu/ 61 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 the majority of principals regarding their interpersonal skills. however, the percentage of other responses suggests that the relationship between 40% of principals and the teachers they manage needs improving. the management skills of the administrative staff, as discussed in the next, seventh point of the first part of the survey, were best assessed by the respondents from among all the surveyed factors determining the quality of educational services. the author interprets this as a manifestation of generally good self-assessment of the surveyed principals, which is a positive phenomenon. however, due to the particularly strong characterization of the responses by the respondents' subjectivism, the obtained results should be treated with great caution. the eighth point of the first part of the survey referred to the transparency and allocation of responsibilities and associated rules for awarding salaries, bonuses, and allowances. half of the surveyed principals gave a good and very good evaluation in this regard, 33%  sufficient and 21%  insufficient. it should be noted that despite the limited possibilities for a school principal to act in terms of using salary, in particular its size, as a motivation tool, transparency, and division of responsibilities of teachers, together with the related principles of awarding remuneration components, are mainly dependent on his or her decision. the author acknowledges that the level of motivation of school employees is also largely determined by the quality of their relationship with the administration. the ninth point of the survey raises the issue of evaluating the level of teachers and management staff motivation, resulting from their sense of an educational mission. nearly a half of the respondents described the level of this factor only as satisfactory. in the author's opinion, this is primarily the result of a lack of a transparent system of evaluating the effects and quality of work in education and the phenomenon of so-called professional burnout. the tenth point of the first part of the survey referred to the impact of material motivation tools, in particular salary elements applied to teachers, affecting the level of quality of services offered by the school. the percentage distribution of respondents' responses in this area was as follows: 10% assessed the state of this impact in the managed facility as very good, 19% of the respondents awarded a good rating, 21% a satisfactory rating, and the others, constituting almost half of all respondents, indicated an insufficient rating. in the polish education, there is a noticeable lack of systemic correlation between the requirements formulated for the teacher's work and the motivational influences applied to them. for example, a teacher who has achieved the degree of a certified teacher has a closed path of further promotion, both vertical (positional) and horizontal (salary). the eleventh point of the first part of the survey was dedicated to evaluating the impact that the influence of non-material motivation tools for teachers has on the quality of educational services. 29% of the surveyed principals rated the impact of these instruments as very good, 4% rated it as good, 13% rated it as satisfactory, and nearly half of the respondents rated it as insufficient. these results indicate that most respondents underestimate or even negate the motivational effectiveness (kwilinski et al., 2019) of the non-material impacts at their disposal. the author's observations show that intangible stimuli are of greatest importance for teachers http://www.virtual-economics.eu/ 62 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 who are at the end of their professional career. these people often feel a decreasing psychomotor efficiency, which is why this form of motivation (low-cost for the employer) is valued by them as a form of confirmation of their own value and professional utility. it should be noted that 6% of the respondents were unable to comment on the issue in question, which, according to the author, negatively confirms the management qualifications of this group of principals. the twelfth point of the first part of the survey was dedicated to evaluating the attractiveness of the school offer of extracurricular activities. in this case, less than a half of the respondents gave a very good and good rating, 56% rated this aspect as sufficient, and 6% as insufficient. it bears mentioning that extracurricular activities are a permanent element of the entire process of education and upbringing. they should be adapted to the interests of young people, and their proper organization and realisation have an impact on the results of teaching and increasing students’ satisfaction from participation in the school's, broadly understood, educational process. the next, thirteenth point of the first part of the survey referred to cooperation and competition between the school and other entities. 19% of respondents rated this factor as very good in the subordinate institution, 59% rated it as good, 8% gave a satisfactory rating, and nearly 4% described it as not essential to the quality of educational services provided at school. one in ten respondents was unable to address this issue and indicated a "difficult to say" option. the scale of responses in the last two options is puzzling and, according to the author, proves, among others, that these principals did not pay due attention to the impact of inter-school comparison of students' achievements on improving the quality of work at their subordinate institutions. a negative signal, in relation to vocational schools, is the underestimation by a given group of principals of the importance of cooperation with companies and institutions offering apprenticeships for students. point fourteen of the first part of the survey concerned the relevance of the selection of educational profiles and curriculum content in relation to the labour market needs. in relation to this factor, 11% of principals gave their schools a very good rating, 29% gave a good rating, 48% a sufficient rating and 11%  an insufficient rating. when choosing a given school, students are guided by the expectations to obtain a specific education, needed to continue their education at the next educational stages and to obtain work in accordance with the education. it is, therefore, crucial that the school meets these requirements. the adequacy of the education offer to the conditions of the labour market and the good, professional preparation of students not only creates the opportunity for them to obtain a satisfactory job or to continue education at a renowned university, but it also shapes the good image and prestige of the educational institution. principals actively monitoring the needs of the labour market are able to develop the educational offer of the taught professions or educational profiles more accurately. an effective action in this area requires appropriate regulation of the educational law, reducing formalisation and bureaucracy in terms of adapting the number of schools to the needs of the labour market. http://www.virtual-economics.eu/ 63 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 the fifteenth point of the first part of the survey was dedicated to the standardization of teaching and external evaluation considered on the example of the nationwide secondary school leaving examinations. nearly 10% of the surveyed principals rated the impact of these factors on the quality of educational services in their subordinate school as very good, 37% as good, 38% considered that the level of their impact should be attributed to a sufficient evaluation, and the remaining 15% of principals awarded insufficient evaluation. according to the author, the weak or negative evaluation made by almost a half of the principals is primarily influenced by the bureaucratic nuisance strongly emphasized in the school environment and organisational errors accompanying the standardisation and evaluation processes. the sixteenth and last detailed issue from the questionnaire of the first part of the research survey is the perception of the internal evaluation carried out in the school. the schools’ principals commented on this issue as follows: 43% rated the condition in this respect as very good or good, 36% of the respondents gave a satisfactory rating, 38% awarded the insufficient evaluation, and 4% chose a "difficult to say" option. according to the author, the obtained results indicate a lack of understanding by at least 42% of respondents of the importance of internal evaluation of schoolwork for the quality of educational services offered. due to the function performed, a school principal should maximize his or her activity precisely and especially in this area. the best possible education of students is the only socially justified sense of the school existence. the system of external examinations should perform both diagnostic and evaluation functions of educational processes in a given school. the examination results should not only be used to improve the quality of work of both principals and teachers themselves, but also, just as importantly, provide reliable information to public administration bodies responsible for shaping the state education policy. moving on to the results of the second part of the study (table 3) including the responses of the secondary school principals regarding the importance of individual factors determining the quality of educational services in the institutions managed by them, it should be pointed out that the most important determinant of the educational services quality in secondary schools of the zachodniopomorskie province, clearly indicated by the respondents, are the teachers’ qualifications and professional competences. table 3. summary of responses by secondary school principals regarding the importance of individual factors determining the quality of educational services in institutions managed by them item factor points ranking 1. an amount of financial resources allocated to the school development and maintenance 194 3 2. conditions for conducting classes related to the number of students in classes and at school 0 12 3. a level of technical facilities at schools in teaching aids and teaching equipment 105 4 4. quality of work of the teaching staff related to their competences and professional qualifications 210 1 5. environmental conditions of the students’ life and development 27 8 6. teachers' cooperation with the school management staff 6 10 http://www.virtual-economics.eu/ 64 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 item factor points ranking 7. the principal’s and/or managerial staff’s school management skills 92 5 8. transparency and allocation of responsibilities and associated rules for awarding salaries, bonuses and allowances 0 12 9. a level of teachers’ and management’s motivation resulting from their sense of an educational mission 41 7 10. an impact of material motivation tools addressed to teachers 201 2 11. an impact of non-material motivation tools addressed to teachers 0 12 12. attractiveness of the school's offer of extracurricular activities (e.g., trips, cultural events, projects, interest groups) 17 9 13. cooperation and competition with external entities 4 11 14. relevance of educational profiles and curriculum content selected in relation to the needs of the labour market 27 8 15. standardisation of teaching and external evaluation of the quality of education (e.g., administering secondary school-leaving examinations and interpreting their results) 57 6 16. internal evaluation of the quality of education (e.g., number of observed classes) 0 12 note: ranking – position in the ranking of significance, points – points in total source: the author’s own study based on an it-conducted survey in 2016. this statement was chosen by more than 94% of the surveyed principals. most of them, more than 53%, considered this statement to be the most important, giving it a rating of 5; over 34% of the respondents gave this statement a rating of 4, and almost 12% – 2. thus, this statement received 210 points out of 260 possible. this result confirms the author’s own observations that a teacher educates, brings up and develops students under his or her care. only thanks to the direct work of a teacher and a student, didactic ideas and content are implemented. professional preparation of a teacher plays, therefore, a decisive role in the teaching process. according to the principals surveyed, the second most important determinant of the quality of educational services in the institutions managed by them is the motivational impact of monetary instruments of teachers' remuneration, to which the surveyed principals assigned 201 points. most principals, i.e., 87%, gave this statement a rating of 4, and 13% graded it 3. there is no doubt that a financially motivated teacher works with greater commitment. incentives also stimulate more activity of teaching staff to supplement and upgrade their professional qualifications. the third most important determinant of the quality of educational services, selected by the respondents, is the financial resources allocated to the development and maintenance of a school. over 96% of the respondents made such a choice, of which 22% gave this statement a rating of 5, nearly 38% gave 4, 34% graded it 3, and 6% marked 2. only 4% of all the surveyed principals did not indicate the importance of this determinant. in total, the determinant in question gained 194 points. such a strong exposure by the principals of this factor is associated with the perception of its significance through the prism of the scope of their professional responsibility. the fourth and fifth, in terms of importance, factors determining the quality of educational services were indicated by the respondents as the "level of technical facilities at school with http://www.virtual-economics.eu/ 65 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 teaching aids and equipment" and " the principal’s and/or managerial staff’s school management skills". these determinants were evaluated by the surveyed principals in a way that allows them to be assigned 109 and 92 points, respectively, which is half of the point value of the determinants ranked highest in the list in question. in subsequent places, i.e., in the 6th and 7th place, with the results of 57 points and 41 points, there were "standardization of teaching and external evaluation of the quality of education" and "a level of teachers’ and management staff’s motivation resulting from their sense of educational mission". the last result, which is only 20% of the score obtained by the highest rated determinant, is noteworthy, as it is an important recognition of how teachers are perceived by the surveyed principals to spontaneously motivate themselves to fulfil their educational mission. other determinants of the educational services quality included in the questionnaire were given a negligible or zero number of points. however, this result should not be interpreted as an irrelevance of these determinants, but as a primacy of the determinants evaluated higher by the respondents. the results obtained from the author's own study allowed ranking the significance of the identified determinants of the educational services quality of secondary schools in the zachodniopomorskie province. 5. conclusions the general conclusion from the conducted research confirms the importance of recognizing the economic determinants of the educational services quality properly as a basis for developing a proposal for shaping the desired level of these services’ quality. the conducted research also allowed for a clear gradation of importance of the factors determining the quality of educational services in secondary schools. the determinant recognised as the most important by the respondents in this area was the professional qualifications and competences of teachers. the indication of the motivational impact of monetary instruments for remunerating teachers and the amount of financial resources allocated to school as the second and third most important determinants of the educational services quality confirms the author's own observations. the development of education, including universality of education at all levels, requires constant control of the quality of education and the creation of systemic solutions supporting the improvement of this quality. each educational institution is a team of cooperating teachers, whose coherent, pro-quality action determines the perception of a school in the environment, which translates into students’ interest in studying at a given school, and consequently translates into the students’ educational success. in addition, the author of this research identifies numerous examples that higher quality of human skills in the field of professional qualifications and competences translates into the desired economic growth and social development. people are typically aware that good education and a willingness to constantly deepen the acquired skills translate into their well-being  by acting rationally, through educating themselves, they will build the foundations for faster economic http://www.virtual-economics.eu/ 66 www.virtual-economics.eu issn 2657-4047 (online) marta ciarko virtual economics, vol. 5, no. 3, 2022 development of a country. considering the above considerations, the following general conclusions were formulated: the current way of financing education in poland is not conducive to the provision of educational services at a high level, generating a negative selection phenomenon among candidates for teachers whose proper work is the basic determinant of the quality of the services in question; financial efforts aimed at education should make it possible to introduce a system of remuneration which attracts suitable candidates for a teaching profession, motivates teachers to upgrade their qualifications and induces them to remain in the profession; differentiation in teachers’ remuneration should be based on an individualised system of grades for qualitative achievements in the field of teaching work provided; improving the quality of education services should be geared to the needs of all school stakeholders; the basic task of modern education is to equip students with digital competences, which requires schools to be equipped with modern computer equipment, access to the high-speed internet and high-quality digital educational resources. it should be pointed out that activities aimed at developing optimal solutions in the field of improving the quality of educational services require conducting a number of analyses and research among all school stakeholders (employees, students and candidates, parents, employers, superiors, graduates). references aske, d., corman, r.r., & 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[in polish] http://www.virtual-economics.eu/ https://doi.org/10.1080/1331677x.2022.2037445 кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) taufik hidayat, rahutomo mahardiko, and ali miftakhu rosyad virtual economics, vol. 6, no. 2, 2023 23 research article the analysis of data preparation to validate model values of information technology taufik hidayat, rahutomo mahardiko, and ali miftakhu rosyad abstract. currently, there are some methods of preparing data for validating an it value model correctly. one challenge in applying data mining to validate model values is to convert data into an appropriate form for this activity. data mining algorithms can then be applied using the prepared data. the adequacy of data preparation often determines whether this data mining is successful or not. this study aims at creating a method for preparing the data during validation. the basic method used for data preparation is the returns to scale (rts) method because it is easy to use and can be combined with further validation results. this method was applied by employing two models: two-factor and three-factor models. both models are then compared to see the difference between them. the developed model is then tested on branchless banking (bb) and downstream petroleum (dp) industries. the results show that the method is applicable to prepare the data for validation. in addition, the results also demonstrate that both industries, dp and bb, have different result on data preparation, meaning that dp and bb have different its. this research contributes not only to a technique of preparing data for validating an it value model by the rts method but also can be a basis to work for data validation because it can give a result with the behaviour of the industry. keywords: it value; it value model; returns to scale method; data preparation; validation. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) taufik hidayat, rahutomo mahardiko, and ali miftakhu rosyad virtual economics, vol. 6, no. 2, 2023 24 authors: taufik hidayat department of electrical engineering, universitas indonesia, depok, indonesia e-mail: taufik.hidayat23@ui.ac.id https://orcid.org/0000-0003-0230-9872 rahutomo mahardiko department of data management, pt.bfi finance indonesia tbk, indonesia e-mail: rahutomo.mahardiko@bfi.co.id https://orcid.org/0000-0001-7324-0556 ali miftakhu rosyad department of islamic education, universitas wiralodra, indramayu, indonesia e-mail: miftakhurosyad@gmail.com https://orcid.org/0000-0002-8845-2364 corresponding author: taufik hidayat, taufik.hidayat23@ui.ac.id citation: hidayat, t., mahardiko, r., & rosyad, a. m. (2023). the analysis of data preparation to validate model values of information technology. virtual economics, 6(2), 2334. https://doi.org/10.34021/ve.2023.06.02(2) received: march 27, 2023. revised: june 18, 2023. accepted: june 25, 2023. © author(s) 2023. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:taufik.hidayat23@ui.ac.id https://orcid.org/0000-0003-0230-9872 mailto:rahutomo.mahardiko@bfi.co.id https://orcid.org/0000-0001-7324-0556 mailto:miftakhurosyad@gmail.com https://orcid.org/0000-0002-8845-2364 mailto:taufik.hidayat23@ui.ac.id https://doi.org/10.34021/ve.2023.06.02(2) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) taufik hidayat, rahutomo mahardiko, and ali miftakhu rosyad virtual economics, vol. 6, no. 2, 2023 25 1. introduction in fact, information technology (it) value pattern progress has been extensively conducted in many ways. an it value model validation verifies the it value model for the firm used as a research subject. the it value model validation for the private firm, national, and even governmental institution levels are being developed in the last two decades. the validation compares a two-factor model with a three-factor model. the validation results help the it value analysis and engineering processes and the validation also improves the degree of accuracy in the it value analysis and engineering [1–3]. this study will focus on analysing the data preparation before validating model values of it in the several aspects, especially in the engineering context. based on the several studies the validation results were discussed by the previous research. validation on the model can be performed with many methods, such as: partial adjustment valuation (pav) [4], traditional regression analysis (tra) [5], stochastic production frontier (spf) [6], and data envelopment analysis (dea) [7,8]. pav for the validation using constant speed of adjustment was proposed for the first time in 2010, and the validation was also implemented at the country-level. since then, the validation was studied and implemented in other ways, such as: a firm, a governmental institution and even a country level. all of previous research on pav was conducted because (1) partial adjustment valuation was more valuable than data envelopment analysis and traditional regression analysis and (2) it used fewer sample measurement than stochastic production frontier. partial adjustment valuation exploits two approaches, such as: static and dynamic partial adjustment valuation at the early time. the recent research on pav was centred on powerfully partial adjustment because of a variable which could be adjusted dynamically based on the obvious situation (macro or micro economic). the research of partial adjustment valuation was also renewed to take innovation by current research on the it value model in general, and dynamic pav in particular [9,10]. the research on dynamic pav could split the data into 2 types. the data that was used for a two-factor model are two independent variables (total capital without it capital and total labour without it labour) and a dependent variable (gdp). the data that was used for a three-factor model are three independent variables (total capital without it capital, total labour without it labour, and it capital + it labour) and a dependent variable (gdp). this result compared a 2aspect model and a 3-aspect model. the dynamic speed of adjustment due to macroeconomic and microeconomic factors and the validation was implemented at a country-level [11]. the study [12] that used pav for the validation using the dynamic speed of adjustment was held in branchless banking industry. the newest research [13] also applied pav. based on the factual condition, the bank indonesia’s interest rate was used as a macroeconomic factor for the dynamic speed of adjustment and the validation also was implemented at a firm level. the needed data were still the same data as the needed data from the last research, except the dependent variable (organizational revenue). this result compared a two-factor model with a three-factor model. on the other hand, the studies [14,15] that used pav for the validation using adjustment were held in the petroleum industry. sales growth was used as a microeconomic factor for the dynamic speed of adjustment and the validation was implemented at a company level. the needed data were still the same data as the needed data from the last research, except the dependent variable (organizational revenue). this result compared a twofactor model with a three-factor model [14]. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) taufik hidayat, rahutomo mahardiko, and ali miftakhu rosyad virtual economics, vol. 6, no. 2, 2023 26 there is a problem while the validation process according to the data because the validation is of a direct effect. the last research on the data preparation was done in 2017 to separate data for a two-factor model. the result showed a positive result of the correction of a 2-factor model with pearson correlation technique on a hybrid it value model. however, no research on the data preparation was found on the indirect effect so far. as of today, a country/firm uses it in their business process. gdp/revenue data in the validation are still uncorrected for a two-factor model. this problem occurs because the gdp/revenue data resulted from the business process that always contains an it factor. then, the gdp/revenue data in a two-factor model needs to be corrected. the question is how this research corrects the gdp/revenue data in a two-factor model? this question should be investigated. from this issue, the researchers originally thought that data preparation modelling for validation of an it value model should be conducted to prevent multiple works during the validation. this study will focus on the exploration of four aspects of data validity. the first aim is to get a data correction method for a two-factor model. the second aim is the method that can be used to improve the degree of accuracy by correcting the gdp/revenue data for a two-factor model. the third aim is this method can be used to differentiate the gdp/revenue data in 2-factor models and 3-factor models. the final purpose is to differentiate between holistically independent and dependent variables data between 2-factor models and 3-factor models. besides all primary purposes that have been already explained, this research has the added value to the validation research. data preparation is useful for the validation. this research contains the systematized analysis that will describe the following. the second stage points out the literature review concerning the data preparation. the third stage highlights the research design and collection of data. the fourth stage summarizes results and discussion. the fifth part outlines the research conclusion. the last stage determines the research limitations. 2. literature review 2.1 production function quantitative data is a primary requirement in doing it value model validation by pav. pav will explicitly use the production function. many industries already use the production function briefly, such as material, service, modal, labour, etc. the production theory is a foundation theory for the pav method. the theory has already been discussed for a long time and recently has been actively developed on the it value model validation. the theory explains that an organization will use production factors/inputs (material, service, modal, labour and so on) and changes it into outputs. in the production process, the output that has been made is not always the same as the desired output [16]. technical efficiency may be applied in this condition. the maximum output that can be made may depict organizational performance. the production process may be formulated as follows: 𝑌𝑡 = 𝑓(𝑋𝑡 ; 𝛽) – 𝑢𝑡 (1) where 𝑓(𝑋𝑡 ; 𝛽) is the desired output, 𝑋𝑡 is production inputs (capital, labour, it and so on), ut is technical inefficiency, 𝑓(𝑋𝑡 ; 𝛽) is a function that may be changed by cobb-douglas function. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) taufik hidayat, rahutomo mahardiko, and ali miftakhu rosyad virtual economics, vol. 6, no. 2, 2023 27 2.2 it value model validation the it value model has been well developed for more than a decade. the model can be found easily in some trusted libraries, such as: ieee, mis quarterly, tandfonline, springer, sciencedirect, etc. the models consist of a direct impact and indirect impact. the direct-impact model highlighted that a digital system could contribute to operational capability, customer service and financial performance in several apparel industries. meanwhile, the production function was employed to measure it investment influencing 370 manufacture and services firms over the period of 1988-1992. the it value was measured by gdp [17]. in some cases, the direct effect cannot explain well the it effect. however, the it value model can be explained well through an indirect effect. the use of intermediary (capability) was explained. since then, the indirect-effect model was developed significantly in some industries and at a countries’ level. however, the validation of the it value model needs to be addressed better [18]. lately, the it value model was validated using pav. pav was used based on the production function. it was said to use input and change the input into output. partial adjustment valuation with static speed of adjustment: 𝑌𝑡 – 𝑌𝑡−1 = 𝛿 × (𝑓(𝑋𝑡 ; 𝛽) – 𝑌𝑡−1) + 𝑊𝑡 (2) where yt is the real result in current t; yt-1 was the real result in current t-1, 𝑓(𝑋𝑡 ; 𝛽) is a desired output in time t, δ is a speed of adjustment ranging 0 – 1, wt is an error factor that might happen. the production function of a two-factor model by employing cobb-douglas function is: 𝑓(𝑋𝑡 ; 𝛽) = 𝛼 𝐾𝑡 𝛽0 𝐿𝑡 𝛽1 𝑒 −𝑢 (3) where α is a vector of unknown coefficients, kt is a conventional capital without it-capital, lt is a conventional labour without it-capital, e is an error factor that might happen. the production function of a three-factor model employing cobb-douglas function is: 𝑓(𝑋𝑡 ; 𝛽) = 𝛼 𝐾𝑡 𝛽0 𝐿𝑡 𝛽1 𝐼𝑡 𝛽2 𝑒 −𝑢 (4) where α is a vector of unknown coefficients, kt is a traditional capital without it-capital, lt is a traditional labour without it-capital, it is the sum of it capital and it labour, e is an error factor that might happen. during the validation, there is no method found on preparing the data except the use of pearson correlation technique. then, the data preparation is essential during the validation. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) taufik hidayat, rahutomo mahardiko, and ali miftakhu rosyad virtual economics, vol. 6, no. 2, 2023 28 3. the research method 3.1 methodology this methodology is built to correct the needed data for a two-factor model and a three-factor model. all methodology activities are presented below. first, to look for the sample and necessity data collection must be performed. after finding a sample, the data may be retrieved from the secondary resources. the secondary data should be identified to determine the needed data. the validation result on the downstream petroleum and branchless banking industries gave the holistic view on the broad methodology for this research [15,12]. second, the data preparation process should be executed. then, rts is carried out. the primary reason is to correct the data for two-factor. the second reason, data preparation for measuring performance has been successfully completed. third, the result of rts must be interpreted so that data preparation is meaningful [19]. 3.2 data the data used in this research was borrowed from the validation result on downstream petroleum and branchless banking industries. to continue this research, data preparation activity is performed based on the previous research on the validation of the it value model. the data for data preparation research are collected and processed, so that the meaning of data collection is useful for the industries [20,21]. there are four variables. three variables were the investments (total capital without it capital, total labour without it labour, and it capital + it labour). the last variable is performance (gdp or revenue). it investment (i) is a mount of it spending and number of it labour. the parts of it spending are the hardware and software purchased by the institution a year. the parts of the it labour share are all investments in the permanent staff of an it office, investments in personnel during an it project and investment in temporary staff of an it office [22,23]. capital expenditure (capex) without digital or it investment (k) could be recovered by decreasing capex with it expenditure to obtain good percentage. the official investment is a global investment action by the institution regardless the it expenditure. the good percentage of capex could be obtained simply in the reporting annually. the number of labour regardless it labour (l) would be received by decreasing the number of labour regardless the it labour. the variable was globally constant and tentative workers to spend, and others do not include it labour. the amount of labour itself could be determined in the yearly report and financial reports. gdp or income is obtained easily based on the yearly report. this variable will illustrate the potential of a country or a company to grow every year [24]. the authors will display table 1 and table 2 which are the collections of data examples to be used for overcoming the defined problem. some columns are omitted in table 2. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) taufik hidayat, rahutomo mahardiko, and ali miftakhu rosyad virtual economics, vol. 6, no. 2, 2023 29 table 1. sample time-series data period 2008-2013 in branchles banking industry year k l i performance 2008 3.107 3.284 0.225 95.5 2009 3.745 4.186 0.321 135.3 2010 4.465 4.545 0.33 187.4 2011 5.132 5.205 0.336 224.1 2012 6.079 6.155 0.371 314.3 2013 6.854 6.866 0.532 389.9 source: devised by the authors. this study was conducted in the two ways. the first stage analyses the period of 2008-2013 to obtain the research data in branchles banking industry concerning the data preparation and it model. so, the second stage covered 2009-2014 to obtain data in downstream petroleum industry concerning pav. that research was already published in 2015 and 2020. table 2. sample time-series data period 2009 – 2014 in downstream petroleum industry year k l 2009 3,881.12 437.40 2010 3,365.95 709.24 2011 4,174.48 695.90 2012 5,730.44 1,759.16 2013 14,202.96 1,869.01 2014 18,480.61 3,237.35 source: devised by the authors. 3.3 returns to scale (rts) method estimation result of two models can be compared using rts method for data preparation purpose. the rts method was applied because it is easy and can be combined with validation result of cobb-douglas from the previous research. this method is the only available on cobbdouglas production function. rts points out the technical property of production which evaluated in result subsequent to a proportional change in all inputs (where all inputs increase by a constant factor). the combination of rts for two-factor model employs total capital without it capital, total labour without it labour, and gdp or revenue. on the other hand, the combination of rts for a three-factor model employs total capital without it capital, total labour without it labour, it capital + it labour, and gdp or revenue [25]. there were 2 reasons why rts was chosen. first, the result of dynamic pav from eq. (1) to (4) could be used for data preparation. second, it is an easy calculation as described in table 1 after the result of dynamic pav was summarised in table 4 and table 5. so, it can be said that the rts method could be continued without any complicated formula. the combination of rts is as follows and table 3: • decreasing rts. it means that new production inputs exceed production result. • constant rts. it means that new production inputs are proportionate to the production result. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) taufik hidayat, rahutomo mahardiko, and ali miftakhu rosyad virtual economics, vol. 6, no. 2, 2023 30 • increasing rts. it means that new production inputs produce bigger production result than production inputs. table 3. rts formulation for two factors and three factor models combination of rts two-factor model three-factor model decreasing rts β1 + β2 < 1 β1 + β2 + β3 < 1 constant rts β1 + β2 = 1 β1 + β2 + β3 = 1 increasing rts β1 + β2 > 1 β1 + β2 + β3 > 1 source: devised by the authors. 4 results and discussions 4.1 result estimations as was argued above, this study contains an analysis of 2 models, and this stage will illustrate the two-factor and three factor models in results validating. table 4 is estimation results that have been published for branchless banking. table 4. unobserved coefficient to use prediction method (non-linier least square) in branchless banking coefficient two-factor model three-factor model α0 1.20245 2.76655 α1 -0.94051 -3.09189 β0 -160.523 -445.04 β1 -31.3483 -1574.69 β2 115.594 1632.3 β3 792.023 source: developed by the authors. in addition, table 5 is estimation results in downstream petroleum. table 5. unobserved coefficient to use prediction model (non-linier least square) in downstream petroleum coefficient two-factor model three-factor model α0 -0.341907 1.37597 α1 240.261 -244.409 β0 8.31331 19.9813 β1 0.0306634 0.40625 β2 0.576009 0.385247 β3 -2.8775 source: developed by the authors. these unobserved coefficients are meaningless until it can be interpreted. α0 and α1 are useful for the validation of the it value model but it can be ignored for the data preparation research in the it value model. next, rts is useful for data preparation. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) taufik hidayat, rahutomo mahardiko, and ali miftakhu rosyad virtual economics, vol. 6, no. 2, 2023 31 4.2 rts results after whole estimation results (α0, α1, β0, β1, β2, β3) have been received from gretl statistical software package with the use of eq (1) to eq. (4), rts is going to be performed. from table 4, a two-factor model (β1 + β2) will get 84.246, and a three-factor model (β1 + β2 + β3) will have 849.633. both models have the same category. two-factor and three-factor models are increasing rts. from table 5, a two-factor model (β1 + β2) will get 0.607. meanwhile, a three-factor model (β1 + β2 + β3) will have -2.086. both models have the same category. two-factor and threefactor models are decreasing rts. table 4 shows increasing rts which means new production inputs produce bigger production result than production inputs. in other words, increasing rts will bring more productive value for the industry. besides that, table 5 is decreasing rts which means new production inputs produce fewer production result than production inputs. it can be concluded that decreasing rts will bring less production value for the industry. 5. discussions the result of the rts method gives a better explanation in preparing data to validate it. the 2 (two) factor and 3 (three) factor models may be compared to bring the desired result based on table 1. from this research result in table 4, both models are increasing rts. it means new production inputs produce bigger production result than production inputs. for comparison purpose, three-factor model value has bigger value than 2 (two) factor model value. threefactor model value is 849.633. two-factor model value is 84.246. the rts measurement provides firms with strategic guidance on how to enhance their efficiency measures and international competitiveness by controlling their operational sizes and/or introducing technology innovation [7]. there is a reason why a three-factor model value is bigger than a two-factor model value though both models are increasing rts. it for branchless banking is more meaningful to deliver banking system through retail and postal office than without it. from this perspective, a customer may feel more convenient with services. besides that, a customer may be not familiar with branch bank requirement or perceive unsuitable to deal with a teller and branch staff. it values is a key driver to success in branchless banking industry. branchless banking providers the use of it for lowering channel cost and increasing customer convenience and trust [13]. in contrast, the bank may get good performance without it, but bank’s performance may be lower than today’s performance with it. the result of this research also confirms that the validation result in it values model for branchless banking was positive. based on the validity results showed that it enhanced the performance. otherwise, the research result in table 5, both models are decreasing rts. it means new production inputs produce little production result than production inputs. for comparison, a three-factor model value has a smaller value than a two-factor model value. a three-factor model value is -2.086, while a two-factor model value is 0.6066724. there is a reason why a three-factor model value is smaller than two-factor model value. it for downstream petroleum is just an enabler. the study concludes with a model for the downstream petroleum industry's total deregulation to eliminate impediment against the nation's economic growth and development [26]. the main production is still from oil and gas sales. without it, the http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) taufik hidayat, rahutomo mahardiko, and ali miftakhu rosyad virtual economics, vol. 6, no. 2, 2023 32 production is still running by the time [7]. the result of this research shows otherwise than the previous study for the validation of it value model for downstream petroleum. this study shows that it is just an enabler. however, the validation of it value model showed that it (three-factor model) had positive effect to the performance. it is different from branchless banking. branchless banking is heavily dependent on it. without it, branchless banking is just a concept. 6. conclusion the result of data preparation for the validation has found positive results. these results were achieved by the four targets. the first aim was achieved by applying the rts method for data correction on a two-factor model (without it). the second aim was achieved by comparing the previous research and this result on the degree of accuracy. though, the previous research showed that it had impact on gdp/revenue, this research explained otherwise. the third aim was achieved by using eq (1) to eq. (4) to generate table 4 and table 5. these formulas are common for many models. the final purpose was achieved by the developed methodology in section 3 (research methodology and data collection). this methodology can differentiate many data collections for many models. besides these four aims, another result is that the developed methodology for data preparation on validation of it value model can also be applied on both industries. this result brings greater meaning in resolving data preparation problem during validation. as is known about data preparation for validation, it is hard to separate inputs and outputs for two-factor and threefactor models, but rts may solve this problem. this research also shows that other industry may apply the methodology to correct the performance of a two-factor model. the implication for further study is to explore the it value model for branchless banking must be validated to verify whether it can be applied in the industry or is needed for further research. the validation checks the accuracy of the model’s representation to the branchless banking industry. moreover, the validation result can ensure whether the it value model for branchless banking can describe real-world phenomena. many computers can simultaneously operate in a network for applying the proposed approach to various ram/rts measurements. that is another research task. in addition to the computational issue, the proposed approach needs to be applied to many real applications on ram/rts. such real applications will document the practicality of this approach. finally, it is hoped that this study makes a certain contribution to the ram/rts measurement. 7. limitation of the study first, there are lots of methods for data preparation for validation, apart from rts for validation, such as: sas enterprise miner, enterprise miner and pattern-oriented modelling. in the research to follow, a comparison of sas enterprise miner, enterprise miner and rts will be performed. second, this research has already compared two models. the further research in data preparation may employ more models to see the better result of rts. third, the longer datasets should be studied to comprehend better results on preparation before data validation. fourth, the forecast analysis of the longer datasets can be done in order to know that it is capable to http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) taufik hidayat, rahutomo mahardiko, and ali miftakhu rosyad virtual economics, vol. 6, no. 2, 2023 33 enhance the industry performance. author contributions: conceptualization, t.h. and r.m..; methodology, t.h., r.m; software, t.h, r.m; validation, t.h., r.m. and a.m.r.; formal analysis, t.h, r.h, a.m.r.; investigation, t.h, r.m.; resources, t.h, r.m.; data curation, t.h, r.m.; writing-original draft preparation, t.h.; writing-review and editing, t.h.; visualization, t.h, r.m.; supervision, t.h.; project administration, t.h.; funding acquisition, t.h, r.m, a.m.r. all authors have read and agreed to the published version of the manuscript. funding: not applicable. data availability statement: not applicable. acknowledgements not applicable. conflicts of interest: the authors declare no conflict of interest. references 1. darmizal, t., & ranti, b. 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(2021). a mathematical model to forecast future banking income. international journal of mathematics in operational research, 19(4), 515-529. http://www.virtual-economics.eu/ https://doi.org/10.1016/j.ejor.2018.07.016 https://doi.org/10.1016/j.arth.2019.04.055 https://doi.org/10.1016/j.aap.2018.12.007 кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) lubica gajanova and jakub michulek virtual economics, vol. 6, no. 1, 2023 7 research article digital marketing in the context of consumer behaviour in the ict industry: the case study of the slovak republic lubica gajanova and jakub michulek abstract. in slovakia, a significant increase in spending on digital advertising was recorded in 2021. according to estimates, when compared to spending on other media types, online became the strongest advertising medium for the first time. as part of the analysis of consumer behaviour in the context of digital marketing, the research primarily focused on slovak companies operating in the retail sector with it and communication equipment – ict specialized stores, because electronics is among the most frequently purchased online products by slovak consumers. in the study, an analysis of consumer behaviour in the context of digital marketing was carried out to detect how respondents perceive selected digital marketing tools, to determine their preferences, attitudes, and reactions within ict industry. for the purposes of this study, the method of collecting data through a questionnaire was chosen. the questions in the questionnaire were concerned consumer behaviour before purchase and were focused on selected digital marketing tools. the survey was conducted in december 2022 by the cawi method, on a representative sample of the slovak population of 391 respondents. the statistical method single proportion by one tailed test as well was used to verify the research assumptions. based on the results of the consumer behaviour analysis, recommendations were established with the intention to be applied in the practice of slovak companies in the context of digital marketing in the ict industry. the fact that almost half of the respondents use the internet for more than two hours daily presents many opportunities for businesses to appropriately address and engage potential customers through various digital marketing tools. the implementation of proposals should have a positive impact on companies in the ict sector and their marketing activities. their pursuance should bring benefits to businesses in the form of increased website traffic, acquisition of new customers, increased demand, profit, and satisfaction of customers. keywords: digital marketing; consumer behaviour; ict industry; slovakia. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) lubica gajanova and jakub michulek virtual economics, vol. 6, no. 1, 2023 8 authors: lubica gajanova university of zilina, zilina, slovakia e-mail: lubica.gajanova@uniza.sk https://orcid.org/0000-0001-9242-5898 jakub michulek university of zilina, zilina, slovakia e-mail: michulek4@stud.uniza.sk https://orcid.org/0000-0003-2944-808x corresponding author: lubica gajanova, lubica.gajanova@uniza.sk citation: gajanova, l., & michulek, m. (2023). digital marketing in the context of consumer behaviour in the ict industry: the case study of the slovak republic. virtual economics, 6(1), 7-18. https://doi.org/10.34021/ve.2023.06.01(1) received: december 13, 2022. revised: february 2, 2023. accepted: march 5, 2023. © author(s) 2023. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:lubica.gajanova@uniza.sk https://orcid.org/0000-0001-9242-5898 mailto:michulek4@stud.uniza.sk https://orcid.org/0000-0003-2944-808x mailto:lubica.gajanova@uniza.sk https://doi.org/10.34021/ve.2023.06.01(1) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) lubica gajanova and jakub michulek virtual economics, vol. 6, no. 1, 2023 9 1. introduction a new era of digital marketing has entered modern society's practice []1. in slovakia, a significant increase in spending on digital advertising was recorded in 2021 in the amount of 32%, when it reached a value of 184 million euros. of the total amount of expenses, 54% is related to mobile advertising, i.e., 99 million euros and 46% to desktop advertising, i.e., 85 million euros. according to estimates, when compared to spending on other media types, online has become the strongest advertising medium for the first time. behind its growth in 2021 is a significant increase in advertising in the slovak media, as well as from multinational players, especially in the second half of the year [2]. the year 2021 was highly non-standard not only in terms of slovak media traffic, but also in terms of advertising expenditure, which was mainly caused by the significant transition to online communication of many brands during covid. investments in slovak online advertising reached the level of 189 million euros in 2022, which means an increase of 3% year-on-year. the main reason for the low increase was the economic and political situation, which had an impact on consumer behaviour as well as the budgets of contractors. high inflation and the fear of a significant increase in energy prices in slovakia in 2022 had an impact on lower consumption by the population as well as lower investment by brands in advertising. as a positive thing, there can be considered the fact that approximately 5% growth in digital marketing is predicted for the year 2023, despite the development of the economic situation with signs of recession [3]. as part of the consumer behaviour analysis in the context of digital marketing, this study primarily focused on slovak companies operating in the retail sector with it and communication equipment (ict retail). the ict retail sector is among the five types of assortments most often purchased online by slovak consumers. based on a survey by forbes magazine, it follows that 25% of slovaks buy ict online [4]. globally, the ict segment ranked third in terms of e-commerce revenue, with revenues of nearly $502 billion in 2020 [5]. during 2020, sales in slovakia in the ict retail sector developed very unevenly. a more significant impact of the pandemic was only noticed at the beginning of 2021. after high sales declines in the months of march (decrease by 18.6%), april (by 23.1%) and may (by 14.5%), sales fell even more significantly in november (by 12.8%) and slightly in october (by 2.8%). however, the declines were partially compensated by year-on-year sales growth in other months, especially in july (by 18%) and september (increase by 19.6%). in january 2021, a more significant drop in sales due to the corona crisis was recorded (by 20.2%). sales fell even more significantly in february 2021, when the value of the index was at the level of 68.1, which represents a year-on-year drop of 31.9% [6]. during 2021, the demand for ict increased, which was mainly caused by the pandemic, when people worked and studied from home. however, production was suppressed in certain cases, when it was not only a matter of slowing down the production of end devices, but also of the extraction of raw materials and the processing of input materials. this caused a lack of supply and subsequently ict prices increased [7]. from the above, it is possible to deduce the assumption of constant growth of digital marketing in slovakia as well. however, slovakia differs from the rest of the world precisely because of the unpredictability of the demand for products in the ict retail sector. the global market is http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) lubica gajanova and jakub michulek virtual economics, vol. 6, no. 1, 2023 10 characterized by a definite increase in the sale of ict products despite the increasingly saturated market because there is still a potential for growth in the segment of smart devices with more advanced premium functions [8]. this fact also represents the purpose of our study, which is to perform an analysis of slovak consumer behaviour in the context of digital marketing used in the ict retail sector. the aim was to detect whether the difference of slovak customers is also reflected in the perception of selected digital marketing tools through the determination of their preferences, attitudes, and reactions within ict industry. this paper has the following structure: a) section 2 is the literature review, which is centred on literary research and presents the main conceptual approach to the topicality of digital marketing and the variability of using its possible tools; (b) section 3 describes the data, methods, and instruments for checking the research hypotheses; c) section 4 expound the empirical findings obtained by applying the selected methodology; (d) section 5 focuses on primary findings which are described and compared with those of other relevant studies. in addition to the most crucial findings, limitations, and scope for future directions of research on this topic are described at the end of this paper. 2. literature review digital technologies have spread rapidly in most parts of the world. with globalization, most people are immersed in the digital age. digital marketing has grown enormously during the last decade, benefiting from the latest results and achievements in the field of digital technologies. in the future, there is room for enhancing digital marketing with iot technology [9]. thus, technologies have been exerting great pressure on companies to adapt their practice to the various existing modern mechanisms. with this, digital marketing has become an essential tool to compete in the market, being an efficient means of reaching potential consumers [10]. digital marketing is an integral part of the transformation process of digital business. it is made up of new marketing techniques that are relevant to the current market situation and based on information and communication technologies [11]. digital marketing takes place in a specific environment of digital media. it is currently already a standard element of complex marketing communication. it is based on all the practices of classical marketing and includes practically all marketing communication operating based on digital technologies, i.e., new media, such as tools from the internet, mobile communications, and digital tools of communication [12]. digital marketing is specifically defined as the process of using digital technologies to acquire customers and build customers preferences, promote brands, retain customers, and increase sales [13]. by digital marketing, one can imagine marketing of mass individualization, which allows creating a personalized approach to satisfying demand within the framework of the "seller-buyer" system [12,14]. malesev & cherry [15] and nair & nair [6] talk about digital marketing as marketing that uses digital media to communicate with customers, which will increase the demand for company products. thanks to digital marketing, companies have access to more effective tools in customer relationship management, which allows increasing customer satisfaction. these tools are characterized by interactivity, mobility and are very well understood by users, thanks to which they could satisfy their needs related to information search and perception [17]. they help companies implement marketing strategies more effectively and at the same time they are the http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) lubica gajanova and jakub michulek virtual economics, vol. 6, no. 1, 2023 11 bearers of traditional marketing principles, the goal of which is to achieve higher customer satisfaction and increase sales or profit [11]. currently, digital marketing provides a huge space for businesses that can effectively and especially cheaply get closer to customers. digital marketing offers tools through which a business can reach new customers and justify why they should use its services and products [18]. in professional and scientific literature, there is no complete consent of authors regarding the definition of specific digital marketing tools [19-25]. however, the greatest penetration can be seen in the following tools: websites, internet advertising, ppc, seo, sem, social media, email marketing, content marketing, affiliate marketing and mobile marketing. 3. methods the inquiry method was used as part of a survey. the questionnaire was anonymous and contained several questions on the issue of consumer behaviour in the context of digital marketing. questions in the questionnaire related to consumer behaviour before a purchase and were focused on selected digital marketing tools. the primary questionnaire survey took place in march 2022. the survey involved 391 respondents. the goal of the questionnaire survey was to find out how the respondents perceive selected digital marketing tools and what their preferences, attitudes, and reactions are within the ict retail sector. for this reason, the following research objectives and assumptions were defined: objective 1: to find out how many respondents most often use a mobile phone to search for websites. the goal was based on research assumption 1 that 64% of respondents most often use a mobile phone to search for websites. the assumption was based on the survey by beus [26]. objective 2: find out how many respondents click on the seo results area in the google search engine. the goal was based on research assumption 2 that 65% of respondents click on seo results in google. the assumption was based on the survey by krnáčová  benköová [27]. objective 3: to find out how many respondents who use social networks have an active account on the social network facebook. the goal was based on research assumption 3 that 71% of respondents who use social networks have an active account on the social network facebook. the assumption was based on the survey by the agency go4insight [28]. objective 4: find out how many respondents skip/close the ad. the goal was based on research assumption 4 that 81% of respondents will skip/close the ad. the assumption was based on the survey by krnáčová  benköová [27]. to verify the statistical hypotheses 1–4, there was used the method testing a single proportion. significance level α was determined at 0.05. the test criteria were calculated according to: 𝑇 = 𝑝−𝜋0 √ 𝜋0∗(1−𝜋0) 𝑛 (1) where t is test statistic; p means an observed proportion; π0 is a null hypothesized value; n is a sample size. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) lubica gajanova and jakub michulek virtual economics, vol. 6, no. 1, 2023 12 by using the tables of the normalized normal distribution, there is found the critical value for the right-tailed test (2) for hypotheses 1–4 according to: 𝑇 > 𝑧2𝛼 (2) where t is a test statistic; z2α is a critical value of the normalized normal distribution. 4. results based on the evaluated questionnaire, most respondents (45.3%) spend more than 2 hours a day on the internet. 73.9% of respondents most often use a mobile phone to search for websites. most respondents (60.9%) will leave a website unless the content is adapted to the device they are using. the most common reason that discourages respondents from a store website is lack of clarity and disorganization. the majority of respondents (70.3%) click on the seo results area of the google search engine. 87.2% of respondents use social networks. most respondents (91.8%) have an active account on the facebook social network. the respondents most often stated that they consider the activity of adding photos and posts to be the most interesting from the side of online stores. most respondents are bothered by ads on the youtube social network, and most respondents are not bothered by ads on other social networks. up to 98% of respondents will skip/close an ad if they have the option. the most common reason for skipping/closing an ad was that the respondents were not interested in the given product. the majority of respondents would accept if companies selling ict would add relevant content for free beyond the scope of their business activities. most would prefer visual content. 111 respondents answered an open and optional question regarding what the respondents would recommend to companies to improve their marketing activities on the internet, which would make it easier for them to make purchasing decisions. the most common suggestion was reviews. to verify the statistical hypotheses 1–3, the study used the method testing a single proportion. results of verifying these statistical hypotheses are shown in table 1. table 1. verification of statistical hypotheses calculation of the sample proportion: 𝒑 = 𝒎 𝒏 satisfaction of the condition 𝒏 ∗ 𝝅𝟎 ∗ (𝟏 − 𝝅𝟎) > 𝟓 test criteria critical field inequality acceptance or rejection of the hypothesis hypothesis 1: h0: the share of respondents who most often use a mobile phone to search for websites is 64%. h1: the share of respondents who most often use a mobile phone to search for websites is more than 64%. p = 0.73913 90.09>5 4.08 1.96 4.08>1.96 h0 rejected hypothesis 2: h0: the share of respondents who click on seo results in the google search engine is 65%. h1: the share of respondents who click on seo results in the google search engine is more than 65%. p = 0.70332 88.95>5 2.21 1.96 2.21>1.96 h0 rejected hypothesis 3: h0: the share of respondents who use social networks and have an active account on the facebook is 71%. h1: the share of respondents who use social networks and have an active account on the facebook is more than 71%. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) lubica gajanova and jakub michulek virtual economics, vol. 6, no. 1, 2023 13 calculation of the sample proportion: 𝒑 = 𝒎 𝒏 satisfaction of the condition 𝒏 ∗ 𝝅𝟎 ∗ (𝟏 − 𝝅𝟎) > 𝟓 test criteria critical field inequality acceptance or rejection of the hypothesis p = 0.91789 70.21>5 8.46 1.96 8.46>1.96 h0 rejected hypothesis 4: h0: the share of respondents who skip/close the ad is 81%. h1: the share of respondents who skip/close the ad is more than 81%. p = 0.97954 60.17>5 8.55 1.96 8.55>1.96 h0 rejected source: devised by the authors. table 1 shows that in all hypotheses the inequality applies, so the hypothesis h0 was rejected, i.e., the alternative hypothesis h1 was accepted. based on the comparison of the value of the test statistics and critical value of the normalized normal distribution, the following conclusions were made: more than 64% of consumers in the ict retail sector most often use a mobile phone to search for websites. more than 65% of consumers in the ict retail sector click on seo results in the google search engine. more than 71% of consumers in the ict retail sector use social networks and have an active account on the facebook. more than 81% of consumers in the ict retail sector skip/close an ad. the results prove that the consumers of the examined sample (consumers in the ict retail sector) did not show great differences in the perception of selected digital marketing tools through determining their preferences, attitudes, and reactions compared to global customers in general. besides, the given results showed more positive attitudes towards digital marketing in the ict sector than from a global point of view (apart from the knowledge that an enormous number of respondents would skip or close an advertisement). 5. discussion the survey showed that more than 45% of respondents use the internet for more than 2 hours a day, this represents many opportunities for businesses to appropriately address and engage potential customers through various digital marketing tools. the study found that the majority of respondents use mobile phones to search for websites. 60.9% of respondents said they would leave a website when its content did not adapt to the device they were using. a similar share of consumers (60%) completes a comparison with our result of 60.9% who do not recommend a business with a poorly designed mobile website [29]. according to survey question focusing on what most discourages respondents from the website of ict retail sector, it was found that the three most common responses from respondents were a lack of clarity and disorganization, insufficient, out-of-date information and slow loading. the results are somewhat different from the list of ux factors considered most important by the users [30]. the survey also showed that the majority of the respondents (70.3%) click on seo results in the google search engine. this is useful information for companies in the ict retail sector, because in general almost half of all enterprises state that organic search brings the best return http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) lubica gajanova and jakub michulek virtual economics, vol. 6, no. 1, 2023 14 on investment, more than a half of website traffic is generated by search. search traffic has a 15% conversion rate and 28% of searches convert within 24 hours [29]. companies in the ict retail sector should therefore focus largely on seo optimization, but high-quality and elaborate content is also important. the development of technologies and the web 2.0 environment have influenced the behaviour of content producers and consumers as well and made it necessary to change marketing concepts. content marketing is a current trend that brings benefits to companies and their clients, moving in a digital world flooded with redundant information. it does not force products or praise the seller but focuses on the needs and interests of (potential) customers [31]. for businesses selling ict devices, it is recommended putting online product reviews on the website, which are forms of content marketing. the survey showed that 43.3% of respondents find online reviews the most helpful when making a purchase decision. this was also confirmed based on an open question, where a large part of respondents stated that they would accept reviews and their clear publication, the possibility of adding reviews even after a longer period of using the product, publishing negative reviews, motivating reviews, etc. ratings and recommendations are the most effective marketing tool ever. up to 93% of consumers read online reviews when making a purchase decision [29] and 88% of people trust online reviews almost as much as those by friends and well-known persons [32]. in fact, consumers spend 50% more per order if a business regularly responds to reviews [29]. the second most common answer was video, chosen by 29% of respondents. it is recommended that companies should add videos to individual products (ict devices). in the open question, the respondents also stated that they would accept video reviews, or also video instructions for use, or instructions for replacing certain parts, etc. thanks to the video, it is easier for consumers to remember the brand and recognise it even after a long time. the study concludes that videos strengthen brand positioning and allow repeatability and continuity (e.g., in the form of podcasts). they also increase web traffic and work well on all personal devices [33]. the importance of video as a content marketing tool is growing. according to a hubspot study [34], a video will account for 80% of all web traffic in two years. adding a video to a newsletter or blog article will increase your click-through rate by up to 300%. the 90% of consumers say that demo videos of products have helped them with their purchasing decisions. according to the ascend2 study, up to 51% of marketers rated testimony and tutorials as the most effective for building a brand. the demo videos mentioned are also considered highly effective (49%) [35]. based on the results of the survey, it was found that 87.2% of respondents use social networks. of the respondents who use social networks, up to 91.8% have an active account on facebook, 54.5% on instagram and 50.7% on youtube. to increase awareness of the company, or brand with potential customers, social media is another important digital marketing tool. as the largest network in the world, facebook offers companies many opportunities for raising awareness of the company, its activities, offered products or services. this social network is also suitable for obtaining feedback from customers. the conducted survey found that 62% of respondents do not follow any company selling ict devices on social networks. the rest of the respondents consider adding photos and posts and organizing contests for consumers to be the most interesting activities on social networks by companies in the ict retail sector. for this reason, up to 93% of brands are active on facebook building their brand awareness [29]. social networks can be considered a distribution channel for content marketing. the second view emphasizes the possibility of understanding specially adapted content on social networks as one http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) lubica gajanova and jakub michulek virtual economics, vol. 6, no. 1, 2023 15 of the possible tactics of content marketing. the conclusions of the content marketing institute study [36], according to which social networks are one of the most used content marketing tools to build brand awareness, also correspond to this concept. the content effectiveness on social networks in building a brand was examined by gunelius [37], who found that it is a more economical way of marketing than traditional marketing. it enables direct communication, audience involvement and effectively builds brand awareness. according to this author, most marketers use the golden 80/20 rule when creating content on social networks, where about 80% of the content has a non-sales character, while offering additional value for the customer. moreover, another study shows that user-generated content on social networks causes 6.9 times more involvement than corporate content [38]. it is clear from the survey that up to 98% of respondents skip or will shut down an internet advertisement if they have the option. the most frequent reasons indicated by the respondents are that they are not interested in the given product, they are not interested in any advertisement and an advertisement did not get them interested. a few respondents expressed their own opinion, where they mostly stated that advertisements annoy them. a negative aspect for digital marketing is that consumers have developed banner blindness over time, or use ad blocking tools [39]. therefore, as a possible solution, it is recommended that companies in ict retail sector should use native advertising. the development of advertising spending in the us so far has confirmed the growing importance of native advertising as a new advertising phenomenon [40]. native ads will account for a whopping 74% of the total us display ad revenue by 2021, up from 56% in 2016, according to an estimate by business insider based on data provided by pwc and the interactive advertising bureau. this mind-blowing statistics shows the power and impact of native ads [41]. google also sees native advertising as a phenomenon of the future. ekin ozenci, a mobile product specialist at google, said in an interview with hansen [42] that this is because every component of native advertising can benefit from it – users, publishers and advertisers as well. it allows the media to optimize their advertising space effectively. it offers advertisers an easy way to gain user time and attention [43]. the attention is becoming an increasingly valuable resource at a time when some studies and companies as microsoft claim that humans are able to hold attention shorter than a goldfish [44]. the average attention by reading of a quality native article takes a few minutes. long native articles can have a readability to the end of an incredible 73% [45]. valuable content is so important for visitors that they discuss it and recommend it to their loved ones and acquaintances. in short, people like native articles or videos so much that they often forward them [46]. 6. conclusion although the purchasing behaviour of consumers in the ict retail sector in slovakia is different from the global one, as far as the perception of selected digital marketing tools is concerned, slovak consumers share global preferences, attitudes, and reactions. there can even be perceived more positive results of attitudes towards digital marketing in the ict retail sector than from a global perspective. therefore, it is appropriate for companies in the slovak ict retail sector in slovakia to implement digital marketing in accordance with global trends. nowadays, when the communication space is dense, the creation of the right digital content and its effective distribution is very important. digital marketing is literally experiencing its golden era, its importance is also increasing in slovak companies, because for most of them digital marketing is a high to top priority due to sustainable competitiveness. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) lubica gajanova and jakub michulek virtual economics, vol. 6, no. 1, 2023 16 the first crucial limitation in this research is its territorial validity. secondly, the applicability of the suggested recommendations based on research outcomes is justified only according to the customer's preferences of the analysed sector and chosen tools. it means that it is not fully possible to apply these claims and recommendations to generally effective practice. the research outcomes provide an overview of digital marketing and its tools in business practice, which could be considered as the article’s main theoretical benefit. it also provides space for further discussions on specific digital marketing activities as a source of competitive advantage. based on this, the main managerial recommendation is the effective application of digital marketing in business practice focused on the new trends and strategies that are gradually evolving in the conditions of high-tech industry. it includes customizing communication according to the specific preferences of targeted customer segments. it follows from the above that digital marketing as a source of competitive advantage has a great potential for further research. it would be appropriate to examine and compare the impact of digital marketing and its perception by consumers in particular fields. author contributions: conceptualization, l.g. and j.m.; methodology, j.m.; software, j.m.; validation, l.g.; formal analysis, l.g.; investigation, l.g. and j.m.; resources, l.g. and j.m.; data curation, l.g.; writing-original draft preparation, l.g.; writing-review and editing, j.m.; project administration, l.g.; funding acquisition, l.g. all authors have read and agreed to the published version of the manuscript. funding: this paper is an outcome of the scientific project vega no. 1/0032/21: marketing engineering as a progressive platform for optimizing managerial decision-making processes in the context of the current challenges of marketing management and an output of the project nfp313010bwn6 “the implementation framework and business model of the internet of things, industry 4.0 and smart transport”. data availability statement: the data that support the findings of this study are available on request from the corresponding author [l.g.]. conflicts of interest: the authors declare no conflict of interest. the funders had no role in the study design, in collecting, analysing, or interpreting data, in writing the manuscript, or deciding to publish the results. references 1. gaol, j. l.,  ichsan, r. n. 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(n.d.). ad effectiveness study: native ads vs banner ads. https://www.sharethrough.com/resources/in-feed-ads-vs-banner-ads http://www.virtual-economics.eu/ https://www.go4insight.com/post/maket%c3%a9ri-vs-be%c5%ben%c3%ad-%c4%beudia-ako-vyu%c5%be%c3%advame-soci%c3%a1lne-siete https://www.go4insight.com/post/maket%c3%a9ri-vs-be%c5%ben%c3%ad-%c4%beudia-ako-vyu%c5%be%c3%advame-soci%c3%a1lne-siete https://www.ranktracker.com/sk/blog/the-77-statistics-for-digital-marketing-in-2022-you-need-to-know/ https://www.awwwards.com/brainfood-mobile-performance-vol3.pdf https://ibima.org/accepted-paper/content-marketing-in-the-context-of-brand-building/ https://doi.org/10.1016/j.jhtm.2021.03.007 http://www.forbes.com/sites/forbesagencycouncil/2017/02/03/video-marketing-the-future-of-content-marketing/ http://www.forbes.com/sites/forbesagencycouncil/2017/02/03/video-marketing-the-future-of-content-marketing/ https://www.hubspot.com/marketing-statistics https://www.brafton.com/blog/video-marketing/the-most-effective-videos-for-marketing-study/ https://contentmarketinginstitute.com/wp-content/uploads/2019/12/2020_b2c_research_final.pdf http://www.mavrck.co/8-user-generated-content-trends-we-learned-from-25-million-facebook-posts-report/ http://www.mavrck.co/8-user-generated-content-trends-we-learned-from-25-million-facebook-posts-report/ https://www.nngroup.com/articles/banner-blindness-original-eyetracking/ https://visibility.sk/blog/nativna-reklama-buzz-alebo-buducnost-reklamy-1-cast/ https://www.businessinsider.com/the-native-ad-report-forecasts-2016-5 http://nativeadvertisinginstitute.com/blog/native-advertising-paid-distribution/ https://doi.org/10.1155/2020/8836195 https://time.com/3858309/attention-spans-goldfish/ https://prirucka.iabslovakia.sk/wp-content/uploads/2018/06/prirucka_nativnej_reklamy.pdf https://prirucka.iabslovakia.sk/wp-content/uploads/2018/06/prirucka_nativnej_reklamy.pdf https://www.sharethrough.com/resources/in-feed-ads-vs-banner-ads кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) regina veckalne, martins kapustins, and tatjana tambovceva virtual economics, vol. 6, no. 2, 2023 7 review article smart cities, green diets: how the lucy veg app supports valencia's vegan community and contributes to sdgs regina veckalne, martins kapustins, and tatjana tambovceva abstract. in the context of growing environmental concerns and the need to promote sustainable living, this study explores the potential of the lucy veg app, a digital solution under development, in contributing to the achievement of the sustainable development goals (sdgs) in valencia. the app is designed to empower the local vegan community by providing resources such as plant-based recipes, eco-friendly product recommendations, and a platform for connecting like-minded individuals. this research utilizes a review of relevant literature and examines the theoretical implications of the app on the achievement of sdgs in valencia. methodologically, this study draws on existing research related to digital technologies, sustainable living, and sdgs, focusing on the potential of the lucy veg app to promote plantbased diets and sustainable lifestyles. by analyzing the app's features and exploring its potential contributions to multiple sdgs, the research studies the app's alignment with various sustainability dimensions. the findings suggest that the lucy veg app has the potential to contribute to several sdgs by fostering community engagement, driving positive behavior change, and addressing key sustainability challenges related to food production, consumption, and their associated environmental and health impacts. the study also identifies promising avenues for future research and practical implementation of the app, including evaluating its effectiveness, expanding its features, analyzing user data, and assessing its broader contribution to sdgs in valencia. in conclusion, the lucy veg app presents a promising opportunity to support valencia's efforts to achieve the sdgs by promoting plant-based diets, sustainable lifestyles, and leveraging digital technologies. further research and ongoing evaluation of the app's impact on users' behavior and the achievement of sdgs are necessary to maximize its potential in fostering a more sustainable future. keywords: digital technology; food sustainability; sustainable development goals; smart cities; veganism. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) regina veckalne, martins kapustins, and tatjana tambovceva virtual economics, vol. 6, no. 2, 2023 8 authors: regina veckalne riga technical university, kipsalas iela 6a, riga, lv-1048, latvia e-mail: regina.veckalne@rtu.lv https://orcid.org/0000-0003-2517-1749 martins kapustins lucyveg, valencia, spain e-mail: martins.kapustins@gmail.com https://orcid.org/0009-0008-4612-9906 tatjana tambovceva riga technical university, kipsalas iela 6a, riga, lv-1048, latvia e-mail: tatjana.tambovceva@rtu.lv https://orcid.org/0000-0002-9516-1530 corresponding author: regina veckalne, regina.veckalne@rtu.lv citation: veckalne, r., kapustins, m., & tambovceva, t. (2023). smart cities, green diets: how the lucy veg app supports valencia's vegan community and contributes to sdgs. virtual economics, 6(2), 7-22. https://doi.org/10.34021/ve.2023.06.02(1) received: december 18, 2022. revised: april 25, 2023. accepted: june 10, 2023. © author(s) 2023. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:regina.veckalne@rtu.lv mailto:martins.kapustins@gmail.com https://orcid.org/0009-0008-4612-9906 mailto:tatjana.tambovceva@rtu.lv https://orcid.org/0000-0002-9516-1530 mailto:regina.veckalne@rtu.lv https://doi.org/10.34021/ve.2023.06.02(1) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) regina veckalne, martins kapustins, and tatjana tambovceva virtual economics, vol. 6, no. 2, 2023 9 1. introduction sustainable development, as defined by the united nations, refers to development that meets the needs of the present without compromising the ability of future generations to meet their own needs [1]. in recent years, there has been a growing awareness of the role that individual dietary choices play in achieving the sustainable development goals (sdgs). research has indicated that the adoption of plant-based diets can substantially reduce environmental impacts and promote public health [2–4]. valencia, like many other cities in the mediterranean region, has a rich culinary heritage rooted in the mediterranean diet. this diet is praised for its health benefits and lower environmental impact compared to other dietary patterns [5]. however, contemporary dietary trends in spain have drifted from the traditional mediterranean diet towards more resource-intensive and less healthy alternatives [6]. this dietary shift poses challenges to both human health and the environment, and is particularly concerning in the context of climate change and its impacts on agricultural systems [7]. the lucy veg app is an innovative digital tool currently under development, designed to facilitate the transition to a more sustainable, plant-based diet for the citizens of valencia. the app incorporates cutting-edge technologies to provide information on vegan, organic, and gluten-free ingredients, as well as geolocation services to guide users to nearby establishments offering desired items. by offering plant-based recipes, eco-friendly product suggestions, and fostering connections among like-minded individuals, the app aims to empower the local vegan community and contribute to the achievement of sdgs in valencia. this article examines the potential of the lucy veg app to promote sustainable development in valencia through the adoption of plant-based diets. the authors draw upon recent literature to explore the environmental and health impacts of dietary choices, with a specific focus on valencia. the article will also discuss the role of digital technologies in promoting sustainable diets, and how the lucy veg app can contribute to this effort. ultimately, this research aims to shed light on the potential of innovative digital solutions in achieving sustainable development goals. 2. literature review 2.1. environmental and health impacts of dietary choices dietary choices play a significant role in determining the environmental impacts of food systems, with the production, distribution, and consumption of food being major contributors to greenhouse gas emissions (ghg), land use change, and other environmental challenges [2,8,9]. research has shown that shifting to more plant-based diets can lead to significant reductions in these environmental impacts [3,10]. the environmental benefits of plant-based diets can be attributed to the lower resource intensity of plant-based food production as compared to animal-based food production [11]. animal agriculture, particularly ruminant livestock, contributes to substantial ghg emissions due to enteric fermentation, manure management, and land-use change associated with feed production [12,13]. plant-based diets, on the other hand, generally have lower ghg emissions, http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) regina veckalne, martins kapustins, and tatjana tambovceva virtual economics, vol. 6, no. 2, 2023 10 as they require fewer resources such as land, water, and energy, and result in reduced deforestation and habitat destruction [14,15]. in the mediterranean region, traditional dietary patterns based on fruits, vegetables, legumes, nuts, whole grains, and olive oil are known for their lower environmental footprint when compared to more resource-intensive western diets, which are high in animal products and processed foods [16]. however, in recent years, dietary patterns in spain and other mediterranean countries have been shifting towards more animal-based and processed food consumption, leading to increased environmental pressures and adverse health outcomes. as a result, there is a growing need to promote sustainable diets that are not only healthy but also environmentally sound. in addition to the environmental implications of dietary choices, there is a growing body of evidence demonstrating the health benefits associated with plant-based diets [17,18]. these benefits include reduced risk of chronic diseases such as cardiovascular disease, type 2 diabetes, certain types of cancer, and obesity, as well as overall improvements in life expectancy and quality of life [3,19]. when developing a social-change application companies, including lucyveg are interested in making green changes and building their sustainable brands in order to stand out in the market and appeal to customers' interests. the research of web searches conducted using the google trends tool (fig.1) revealed a rise in the popularity of veganism among internet users. it is seen that since 2004 the interest in veganism increased by 5 times. figure 1. web search dynamics on google, 2004-2023 source: developed by the authors. additionally, sentiment examination has been conducted to analyze netizens’ emotions towards plant-based lifestyle. the majority of plant-based-related tweets, according to the tweet text analysis, fall within the right-bottom quadrant, meaning that the term “plant-based” evokes calm serene and pleasant emotions (fig. 2). 0 20 40 60 80 100 120 2 0 0 4 -0 1 2 0 0 4 -0 8 2 0 0 5 -0 3 2 0 0 5 -1 0 2 0 0 6 -0 5 2 0 0 6 -1 2 2 0 0 7 -0 7 2 0 0 8 -0 2 2 0 0 8 -0 9 2 0 0 9 -0 4 2 0 0 9 -1 1 2 0 1 0 -0 6 2 0 1 1 -0 1 2 0 1 1 -0 8 2 0 1 2 -0 3 2 0 1 2 -1 0 2 0 1 3 -0 5 2 0 1 3 -1 2 2 0 1 4 -0 7 2 0 1 5 -0 2 2 0 1 5 -0 9 2 0 1 6 -0 4 2 0 1 6 -1 1 2 0 1 7 -0 6 2 0 1 8 -0 1 2 0 1 8 -0 8 2 0 1 9 -0 3 2 0 1 9 -1 0 2 0 2 0 -0 5 2 0 2 0 -1 2 2 0 2 1 -0 7 2 0 2 2 -0 2 2 0 2 2 -0 9 2 0 2 3 -0 4 http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) regina veckalne, martins kapustins, and tatjana tambovceva virtual economics, vol. 6, no. 2, 2023 11 figure 2. sentiment analysis on tweets source: developed by the authors. 570 documents appear when searching for “vegan diet” and “plant-based diet” in scopus. as shown in figure 3, the first mentions of these diets appeared 25 years ago, however it was not until 2013 when this topic garnered significant scholarly attention. since then, the number of topics related to veganism and plant-based diet increased continuously. figure 3. the number of documents on “vegan diet” and “plant-based diet” published in scopus between 1999-2022. source: developed by the authors. when it comes to research in the field of vegan and plant-based diets, spain is among top 5 contributors (table 1). although its contribution is almost 5 times smaller compared to the usa (195) documents, spain still makes it to the 4th place with 41 publications. germany and the united kingdom are ahead of spain with 72 and 52 published articles respectively. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) regina veckalne, martins kapustins, and tatjana tambovceva virtual economics, vol. 6, no. 2, 2023 12 table 1. top contributors in the field of vegan and plant-based diets on scopus country number of documents the usa 195 germany 72 the united kingdom 52 spain 41 italy 39 canada 34 australia 31 the netherlands 22 poland 19 switzerland 18 source: developed by the authors. figure 4 demonstrates the key-words co-occurrence visualization, which identifies the main scientific areas in the selected articles. the network map shows the keywords’ links, link strength and occurrence. the study was limited to at least 5 keywords co-occurrence, which resulted in 323 keywords. these keywords are grouped in 8 clusters. among the top keywords occurred are: vegan, vegan diet, vegetarian diet, meat, nutrition, body mass, body weight, obesity, protein intake, lifestyle, physical activity, nutritional status, pregnancy, etc. figure 4. a keywords co-occurrence map source: developed by the authors. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) regina veckalne, martins kapustins, and tatjana tambovceva virtual economics, vol. 6, no. 2, 2023 13 the mediterranean diet, traditionally consumed in spain and other mediterranean countries, is widely recognized for its health-promoting properties, largely due to its emphasis on plantbased foods, healthy fats, and moderate consumption of fish and poultry [16]. numerous studies have shown that adhering to a mediterranean-style diet can help prevent and manage chronic diseases, as well as improve overall health outcomes [20,21]. however, since recent trends indicate that dietary patterns in spain and other mediterranean countries are shifting towards more westernized diets that are higher in animal products, processed foods, and unhealthy fats [16] not only does it have negative implications for the environment but also poses significant risks to public health. by promoting plant-based diets and eco-friendly products, the lucy veg app aims to support individuals in valencia in making healthier dietary choices that align with the principles of the plant-based diet while reducing their environmental impact. the app's features, such as plantbased recipes and product recommendations, are designed to facilitate the adoption of healthier and more sustainable eating patterns, which can contribute to improved public health outcomes and reduced pressure on healthcare systems [22,23]. furthermore, the lucy veg app's platform for connecting like-minded individuals can foster a supportive community that encourages healthy and sustainable lifestyle choices, which is a key factor in promoting a long-term behavior change [24,25]. by leveraging digital technologies to empower users in making informed dietary decisions, the app can play a critical role in promoting public health and achieving the sustainable development goals in valencia. 2.1. the role of digital technologies promoting sustainable diets the rapid advancement of digital technologies has created unprecedented opportunities to support individuals in adopting more sustainable and healthy dietary choices. digital tools, such as mobile applications, websites, and online platforms, have the potential to provide users with access to a wealth of information, resources, and social support networks that can facilitate a positive behavior change [24,25]. digital technologies can enhance the accessibility and effectiveness of interventions aimed at promoting sustainable diets in several ways. first, they can deliver tailored information and feedback to users, enabling them to make informed decisions about their food consumption patterns and preferences [26]. second, digital tools can help users track their dietary habits, set goals, and monitor their progress over time, which can be instrumental in fostering motivation and commitment to behavior change [24,27]. finally, digital platforms can facilitate social support and interaction among users by connecting like-minded individuals who share similar values, interests, and lifestyle goals, thereby reinforcing a sense of community and collective action towards sustainable development [24]. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) regina veckalne, martins kapustins, and tatjana tambovceva virtual economics, vol. 6, no. 2, 2023 14 figure 5. lucyveg product-scan mockup source: developed by the authors. the lucy veg app is an example of an innovative digital solution designed to empower the local vegan community in valencia and promote the adoption of plant-based diets, which are aligned with the principles of sustainable development. by providing users with information on vegan, organic, and gluten-free ingredients, as well as geolocation services to locate nearby establishments offering these items, the app aims at making sustainable and healthy dietary choices more accessible and convenient for users [23]. furthermore, the app's features, such as plant-based recipes and eco-friendly product recommendations, can help users navigate the complexities of adopting a more sustainable lifestyle, while its platform for connecting like-minded individuals can foster a supportive community that encourages collective action towards sustainable development [24,28]. by leveraging the power of digital technologies, the lucy veg app can play a vital role in promoting sustainable diets and contributing to the achievement of the sustainable development goals in valencia. 3. veganism potential contribution to sdgs veganism, as a lifestyle choice that abstains from the consumption of animal-derived products, has the potential to contribute significantly to the achievement of the sustainable development goals. by embracing plant-based diets, individuals can promote environmental sustainability, public health, and social equity, thereby supporting progress towards several sdgs [2,4]. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) regina veckalne, martins kapustins, and tatjana tambovceva virtual economics, vol. 6, no. 2, 2023 15 sdg 2: zero hunger by adopting plant-based diets, resources such as land, water, and energy can be used more efficiently, allowing for increased food production and greater food security [11,15]. livestock production requires large amounts of feed, much of which is derived from edible crops that could otherwise be used to feed humans directly [29]. by shifting towards plant-based diets, the global availability of food calories could increase, contributing to the eradication of hunger and malnutrition [9]. sdg 3: good health and well-being as previously discussed, plant-based diets are associated with numerous health benefits, including reduced risks of chronic diseases, such as cardiovascular disease, type 2 diabetes, and certain types of cancer [3,18,19]. by embracing veganism, individuals can promote their own health and well-being, thereby contributing to the achievement of sdg 3 and reducing pressure on healthcare systems [4]. sdg 6: clean water and sanitation animal agriculture is a significant contributor to water pollution due to the excessive use of fertilizers, pesticides, and other agrochemicals, as well as the release of nutrients, pathogens, and pharmaceuticals from livestock waste [31,32]. additionally, livestock production requires substantial amounts of water, primarily for feed production and animal husbandry practices [33]. by adopting plant-based diets, individuals can help reduce water pollution and conserve water resources, thus contributing to sdg 6. sdg 8: decent work and economic growth the shift towards plant-based diets has the potential to create new economic opportunities within the agri-food sector, as the demand for plant-based alternatives to animal-derived products continues to grow [33,34]. this transition can lead to job creation and economic growth in industries related to the production, distribution, and marketing of plant-based products, thus supporting sdg 8. veganism inherently supports responsible consumption and production by promoting the consumption of plant-based foods, which have lower environmental footprints compared to animal-derived products [3,14]. the adoption of vegan diets can lead to reduced greenhouse gas emissions, land use, and other environmental impacts associated with food production, thereby supporting more sustainable production practices and responsible consumption patterns [2,8]. sdg 13: climate action the adoption of plant-based diets can contribute significantly to climate change mitigation, as animal agriculture is a major contributor to greenhouse gas emissions [12,13]. by reducing demand for animal products, veganism can help reduce the emissions associated with livestock production, thereby contributing to global efforts to combat climate change [3,9]. sdg 14: life below water by reducing the demand for animal-derived products, particularly fish and other seafood, veganism can help alleviate pressure on marine ecosystems and promote the sustainable management of fisheries [35,36]. overfishing, bycatch, and other unsustainable fishing http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) regina veckalne, martins kapustins, and tatjana tambovceva virtual economics, vol. 6, no. 2, 2023 16 practices contribute to the decline of marine biodiversity and the degradation of marine habitats [37]. adopting plant-based diets can help conserve marine resources and support the achievement of sdg 14. sdg 15: life on land by supporting the adoption of plant-based diets, veganism can contribute to the protection and restoration of terrestrial ecosystems [2,8]. animal agriculture is a significant driver of deforestation, habitat destruction, and biodiversity loss, as vast areas of land are required for livestock grazing and feed production [29,30]. by reducing demand for animal products, veganism can help alleviate these pressures on land and promote the conservation of terrestrial ecosystems. figure 6. veganism influence on sgds source: developed by the authors. in summary, veganism offers a wide range of potential contributions to the sdgs by addressing key sustainability challenges related to food production, consumption, and their associated environmental and health impacts. the lucy veg app, through its promotion of plant-based diets and eco-friendly products, can serve as a catalyst for individuals to embrace more sustainable and healthy lifestyles, thereby supporting the achievement of the sustainable development goals in valencia and beyond. 4. digital nudges and behavioral change digital nudges are interventions that leverage technology to subtly influence people's behavior and decision-making processes, often by providing personalized information, feedback, and prompts [38,39]. these nudges have been shown to be effective in promoting healthier and more sustainable behaviors, as they capitalize on cognitive biases and heuristics to facilitate a behavior change without restricting individuals' freedom of choice [39,40]. veganism sdg 2: zero hunger sdg 3: good health and well-being sdg 6: clean water and sanitation sdg 8: decent work and economic growth sdg 13: climate action sdg 14: life below water sdg 15: life on land http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) regina veckalne, martins kapustins, and tatjana tambovceva virtual economics, vol. 6, no. 2, 2023 17 digital nudges have the potential to support the adoption of plant-based diets and sustainable lifestyles by providing users with tailored information and feedback, helping them set and monitor personal goals, and fostering motivation and commitment to change [25,41]. for example, digital nudges can remind users of the environmental and health benefits of consuming plant-based meals, suggest healthy and sustainable meal options, or provide social comparison feedback to reinforce positive behaviors [42,43]. the lucy veg app can incorporate digital nudges to encourage users to make more sustainable and healthy dietary choices, by providing them with relevant and timely information, personalized recommendations, and interactive features that promote engagement and selfreflection [24,25]. for instance, the app could display visual representations of the environmental impact of users' food choices, offer recipe suggestions based on users' dietary preferences and nutritional needs, or facilitate goal-setting and progress tracking for individual sustainability targets. furthermore, the lucy veg app can leverage social influence and peer support to reinforce behavior change, by providing users with a platform for connecting with like-minded individuals and sharing their experiences, tips, and achievements related to veganism and sustainable living. by integrating digital nudges and social support features, the app can foster a sense of community and collective action towards the achievement of the sustainable development goals in valencia. in summary, digital nudges have the potential to be a powerful tool for promoting the adoption of plant-based diets and sustainable lifestyles. by incorporating these nudges into the lucy veg app, developers can harness the power of technology to support users in making more informed, healthy, and environmentally friendly dietary choices, thereby contributing to the achievement of the sustainable development goals in valencia and beyond. 5. lucy veg app for valencia’s sustainability the lucy veg app is a revolutionary digital tool designed to cater to the needs of the vegan, vegetarian, and flexitarian community in valencia. the app is equipped with advanced features and services that help users identify vegan-friendly products, explore new vegan products, and find vegan-friendly businesses in the city. the lucy veg app is a user-friendly mobile application that allows users to scan product barcodes and receive real-time information on whether the product is vegan-friendly or not. in case the product is not yet in the database, users can upload the product by taking a photo of it, including the ingredients, typing in the brand name, and selecting the shop where it was bought. the app also provides information on product certificates, such as vegan and eco certification. additionally, lucy veg app offers an explore section, which allows users to discover new vegan products from smaller local brands. this feature helps support local vegan businesses and promotes sustainable consumption habits. thus, it is a comprehensive digital tool that provides a range of features and services designed to help users make informed decisions about the products they purchase and the businesses they support. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) regina veckalne, martins kapustins, and tatjana tambovceva virtual economics, vol. 6, no. 2, 2023 18 moreover, the app is about to introduce a new feature that provides information on food allergies, helping users make safer and healthier choices when selecting products. additionally, the app's search feature allows users to find product alternatives, making it easier to find veganfriendly substitutes for products they may have previously enjoyed. in future versions of the app, there are also plans to expand the product and shop list to include cosmetic products, as well as provide a map of valencia highlighting vegan-friendly businesses such as shops, cafes, restaurants, hairdressers, gyms, and more. by partnering with other vegan-friendly businesses, the lucy veg app aims at creating a supportive network that makes it easier for people to transition to a vegan lifestyle. 6. theoretical implications of the lucy veg app on sdgs in valencia the lucy veg app has several theoretical implications for the achievement of sustainable development goals in valencia. by promoting plant-based diets and sustainable lifestyles through digital means, the app has the potential to contribute to multiple sdgs, foster community engagement, and drive a positive behavior change. the lucy veg app aligns with various sdgs by addressing key sustainability challenges related to food production, consumption, and their associated environmental and health impacts. as discussed in section 3, the app can contribute to the achievement of sdgs, such as sdg 2 (zero hunger), sdg 3 (good health and well-being), sdg 12 (responsible consumption and production), sdg 13 (climate action), sdg 15 (life on land), sdg 6 (clean water and sanitation), sdg 8 (decent work and economic growth), and sdg 14 (life below water). by encouraging plant-based diets, the app can help reduce greenhouse gas emissions, land and water use, and promote more sustainable resource management. the lucy veg app can foster community engagement by providing a platform for like-minded individuals to connect, share knowledge, and support each other in adopting plant-based diets and sustainable lifestyles. this sense of community can facilitate collective action towards the achievement of the sustainable development goals in valencia. moreover, the data generated by the app can provide valuable insights into local dietary trends and preferences, informing urban planning and policy-making processes related to food systems, public health, and environmental management. the app has the potential to drive a positive behavior change by incorporating digital nudges and personalized feedback, helping users make more informed, healthy, and environmentally friendly dietary choices. the lucy veg app can encourage users to make more sustainable choices by displaying visual representations of the environmental impact of their food choices, offering recipe suggestions based on users' dietary preferences and nutritional needs, or facilitating goal-setting and progress tracking for individual sustainability targets. in conclusion, the lucy veg app has various theoretical implications for the achievement of the sustainable development goals in valencia. by leveraging digital technologies, the app can promote plant-based diets and sustainable lifestyles, contribute to multiple sdgs, foster community engagement, and drive positive behavior change. although the app is still in the development stage, its potential to support the city of valencia in achieving sdgs presents promising opportunities for future research and practical applications. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) regina veckalne, martins kapustins, and tatjana tambovceva virtual economics, vol. 6, no. 2, 2023 19 7. conclusions it is important to consider the practical implications of the lucy veg app in furthering the achievement of the sustainable development goals (sdgs) in valencia. the app can play a significant role in raising awareness about the environmental and health benefits of plant-based diets, encouraging individuals to adopt more sustainable food consumption patterns. one practical implementation strategy for the app could involve collaboration with local restaurants, grocery stores, and food delivery services to promote plant-based options and provide incentives for users to choose sustainable food alternatives. by partnering with these establishments, the app can help expand the availability and accessibility of plant-based food choices, making it easier for individuals to make sustainable dietary decisions. furthermore, the app can leverage digital technologies such as gamification and social networking features to foster community engagement and create a sense of shared purpose among its users. through challenges, rewards, and interactive features, the app can encourage users to actively participate in sustainable practices, share their experiences, and inspire others to follow suit. this sense of community and collective action can contribute to the achievement of sdg 17, which emphasizes the importance of partnerships and collaboration for sustainable development. to maximize the impact of the lucy veg app, ongoing evaluation and improvement are crucial. continuous user feedback and data analysis can help identify areas for enhancement and tailor the app's features to better meet users' needs and preferences. by incorporating machine learning algorithms and personalized recommendations, the app can provide users with tailored suggestions, recipes, and resources based on their individual preferences and goals. this personalized approach can facilitate behavior change and increase users' motivation to adopt sustainable dietary habits. additionally, the app can serve as a platform for educational content, providing information on the environmental, health, and ethical aspects of plant-based diets. by disseminating evidencebased knowledge, the app can help dispel misconceptions and provide individuals with the information needed to make informed choices. this educational component aligns with sdg 4, which aims to ensure inclusive and equitable quality education and promote lifelong learning opportunities for all. in conclusion, the lucy veg app represents a promising digital solution for promoting plantbased diets and sustainable lifestyles in valencia. by leveraging digital technologies, fostering community engagement, and incorporating ongoing evaluation and improvement, the app has the potential to contribute significantly to the achievement of the sdgs. with collaboration, strategic partnerships, and a focus on user-centered design, the app can become a valuable tool in creating a more sustainable future, not only in valencia but also in other regions striving for sustainable development. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) regina veckalne, martins kapustins, and tatjana tambovceva virtual economics, vol. 6, no. 2, 2023 20 author contributions: conceptualization, r.v. and m.k.; methodology, r.v.; software, m.k.; validation, t.t.; formal analysis, r.v.; investigation, m.k.; resources, t.t.; data curation, t.t.; writing-original draft preparation, r.v. and m.k.; writing-review and editing, t.t.; supervision, t.t.; project administration, m.k.; funding acquisition, t.t. all authors have read and agreed to the published version of the manuscript.” funding: not applicable. data availability statement: not applicable. acknowledgements: not applicable. conflicts of interest: the authors declare no conflict of interest. references 1. brundtland commission. 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(2019). the ethics of behavioural public policy. in the routledge handbook of ethics and public policy (pp. 513–525). routledge. http://www.virtual-economics.eu/ https://doi.org/10.1088/1748-9326/10/8/084008 https://doi.org/10.1007/s10021-011-9517-8 https://doi.org/10.3390/ijerph16071220 https://doi.org/10.1016/j.advwatres.2017.03.025 https://doi.org/10.1002/fee.1822 https://doi.org/10.1038/nature01017 https://doi.org/10.1016/j.socec.2019.03.005 https://doi.org/10.1016/s0924-2244(01)00002-4 https://doi.org/10.1016/s0924-2244(01)00002-4 https://doi.org/10.1016/j.jrurstud.2020.06.02 https://doi.org/10.1016/j.chbr.2020.100052 кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) volodymyr nesterenko, radoslaw miskiewicz, and rafis abazov virtual economics, vol. 6, no. 1, 2023 57 research article marketing communications in the era of digital transformation volodymyr nesterenko, radoslaw miskiewicz, and rafis abazov abstract. the advent of digital transformation has revolutionized the marketing landscape, presenting both challenges and opportunities for businesses. this scientific paper delves into the realm of marketing communications in the context of this transformative era. the primary objective is to examine the profound impact of various marketing communication tools on consumer perception and response to advertising messages, direct marketing, electronic communication, and other innovative marketing techniques. utilizing the anova (analysis of variance) statistical evaluation method, comprehensive empirical research data are analysed to uncover key trends and insights. the findings shed light on the dynamic market developments characterized by a notable decline in the effectiveness of traditional mass marketing approaches. instead, there is a discernible shift towards more specialized marketing strategies, bolstered by the rapid advancement of computer and information technologies. moreover, this study confirms a hypothesis pertaining to the efficacy of internet advertising in relation to different age groups of customers. this confirmation underscores the importance of leveraging digital platforms and channels to engage specific target audiences effectively. the practical significance of this research lies in its potential to guide marketers in optimizing their marketing budgets, identifying the most impactful communication channels, and discerning statistically significant variations in consumer responses to diverse marketing communication tools. by understanding these nuances, marketers can design more targeted and persuasive marketing campaigns, leading to enhanced customer engagement and improved business outcomes. keywords: marketing communication; artificial intelligence; advertisements; values; trends; common value transformation. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) volodymyr nesterenko, radoslaw miskiewicz, and rafis abazov virtual economics, vol. 6, no. 1, 2023 58 authors: volodymyr nesterenko sumy state university, sumy, ukraine v.nesterenko@biem.sumdu.edu.ua https://orcid.org/0000-0002-1792-9823 radoslaw miskiewicz institute of management, university of szczecin, szczecin, poland; luma holding limited, malta radoslaw.miskiewicz@usz.edu.pl https://orcid.org/0000-0003-2370-4783 rafis abazov development program on sustainability, columbia university, nyc, usa; kazakh national agrarian research university, almaty, kazakhstan r.abazov@yahoo.com https://orcid.org/0000-0001-6042-9560 corresponding author: volodymyr nesterenko, v.nesterenko@biem.sumdu.edu.ua citation: nesterenko., v., miskiewicz, r., & abazov, r. (2023). marketing communications in the era of digital transformation. virtual economics, 6(1), 57-70. https://doi.org/10.34021/ve.2023.06.01(4) received: october 9, 2022. revised: january 21, 2023. accepted: february 10, 2023. © author(s) 2023. licenced under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:v.nesterenko@biem.sumdu.edu.ua mailto:radoslaw.miskiewicz@usz.edu.pl https://orcid.org/0000-0003-2370-4783 mailto:r.abazov@yahoo.com https://orcid.org/0000-0001-6042-9560 mailto:v.nesterenko@biem.sumdu.edu.ua https://doi.org/10.34021/ve.2023.06.01(4) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) volodymyr nesterenko, radoslaw miskiewicz, and rafis abazov virtual economics, vol. 6, no. 1, 2023 59 1. introduction in today's rapidly evolving business landscape, the relentless pace of digital transformation has completely revolutionized the way organizations function, particularly in the realm of marketing communications [1-3]. with consumers increasingly reliant on digital platforms for obtaining information, seeking entertainment, and engaging in social interactions, businesses face the imperative of adapting their communication strategies to effectively connect with and captivate their target audiences [4]. recognizing and leveraging the intricacies and possibilities brought about by digital transformation is paramount for marketers to not only stay competitive but also to achieve resounding success in the current marketplace. understanding the dynamics of digital transformation is crucial for developing effective marketing strategies as traditional methods become less effective [5]. embracing the potential of digital platforms and communication channels empowers businesses to forge strong connections with consumers, enhance brand visibility, and foster meaningful customer engagement [6]. furthermore, marketing communications can play a vital role in raising awareness about the sustainable development goals (sdgs) among the general public, businesses, and policymakers [6-9]. through diverse channels like advertising, social media, and public relations, marketing communications can educate people about the significance of the goals and the necessary actions to accomplish them [10-16]. furthermore, the integration of emerging technologies into marketing communications has undergone a remarkable transformation in developing countries. this integration has not only created novel opportunities for market access, improved targeting capabilities, and increased operational efficiency but has also empowered entrepreneurs [17-20]. by embracing technologies like artificial intelligence (ai) [21], blockchain [20], and cognitive technologies [23-28], developing nations can effectively tap into the potential of marketing communications to drive economic growth, foster social development, and promote sustainability [29-32]. numerous researchers have delved into the realm of digital marketing communication (dmc), offering valuable insights into its key challenges and proposing effective methods for managerial decision-making [33-35]. v. shankar et al. have analysed digital marketing communication (dmc), highlighting key challenges and proposing methods for effective managerial decision-making [36]. s. u. reman et al. [37] have emphasized the increasing significance of social media integration in marketing communications and its impact on overall brand image and market success. y. bashirzadeh et al. [38] explored the use of innovative visual design elements in digital communication and investigated the negative impact of advertising clutter on communication effectiveness. e. polat [39] has examined the influence of technology on digital marketing and provided insights into digital marketing practices in asian countries. p. j kitchen and m. e. turki [40] have emphasized the importance of integrated marketing communication (imc) and the need for strategic collaboration among stakeholders. m.a. rahmawati and s.i. afifi [41] has discussed the impact of digital technologies on radio as a form of mass media and the significance of integrated marketing communication in the digital environment. despite significant scientific achievements, some theoretical and applied problems, including significant differences in the perception of marketing tools by different age groups, remain unresolved. the lack of a comprehensive understanding of consumer attitudes towards different types of marketing communications predetermined the research relevance, aim, objectives, and http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) volodymyr nesterenko, radoslaw miskiewicz, and rafis abazov virtual economics, vol. 6, no. 1, 2023 60 content. one of the important tasks of this study is to establish cause-and-effect relationships and identify patterns in assessing the effectiveness of advertising through marketing communications. the research aims at studying the effectiveness of various communication channels and determining the most effective channel of communication with consumers. to achieve these goals, anova is used, which helps to reveal the effectiveness of marketing communication tools and to study the impact of qualitative factors on the dependent quantitative variables. the research hypotheses are tested. the paper is structured into four main sections: the literature review analyses articles and studies by various authors on the effectiveness of marketing communications (mc) and their types; the materials and methods section describes the main input data for the study and the methodology used for the analysis; the results section presents the calculation results, analysis outcomes, and confirmation of hypotheses; and the discussion and conclusion section provides a logical summary of the study, interprets the findings, compares them with literature, addresses limitations, and suggests future research directions in the field of marketing. 2. literature review marketing communication channels play a significant role in influencing consumers as they serve as a tool for enabling two-way communication between a company and its audience, providing essential information about new products or services. different communication channels are employed to achieve diverse marketing goals, including boosting sales, attracting new customers, retaining existing ones, and increasing brand awareness. consumers are exposed to a wide range of communication forms, such as online advertising (including search, banner, ai chatbots, smm, social media advertising, and bloggers), personal selling, direct marketing, public relations (pr), and promotions, among others [42]. a study marketing communication [43], suggests the important of conducting surveys among the target audience to determine the level of brand awareness and the brand’s image. promotions are aimed at stimulating the sales of specific products or services, and they encompass various types, such as discounts, coupons, gifts, and drawings. the digitalization of marketing communication has brought about changes in these practices. in the article [9], the author highlights that the effectiveness of promotions is measured using diverse metrics, including increased sales, website traffic, registrations or subscriptions, and average purchase value, among others. e. cagnago and n. ariani [45] investigated the significance and effectiveness of integrated marketing communications for small and medium-sized businesses. the main hypothesis of the study posits that the proper implementation of integrated marketing communications can enhance communication between sellers and buyers, increase sales, and minimize the need for repeated product promotion. the study utilized a qualitative descriptive approach and a case study method to analyse the marketing communication strategies already implemented in pure milk msmes. asrul a. et al. [46] examined the use of instagram as a marketing communication tool in the online environment to engage potential consumers. the authors employed qualitative research methods. the outputs demonstrated that utilizing instagram as a social network contributes to enhancing the functions of marketing communication and expanding its reach. marketers need to develop a strategy for leveraging instagram as a marketing communication tool to achieve their goals and target audiences. thus, the study aimed at ascertaining the advantages of instagram as a marketing communication tool http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) volodymyr nesterenko, radoslaw miskiewicz, and rafis abazov virtual economics, vol. 6, no. 1, 2023 61 in approaching consumers and reaching the desired target audience. r. pehlevi [47] crafted bibliometric analyses of scientific articles on integrated marketing communications and identified four primary trends: the integration of marketing communications with customer relationship management, the concept of added value in communication plans, the utilization of questionnaires as a data collection method, and an equal number of studies on integrated marketing communications in both developed and developing countries. d. mulder [42] examined the history of marketing communication and emphasized the importance of studying this history to understand a new approach called integrated communication. it is noteworthy that with the emergence of technology and scientific research, marketing communication has become increasingly complex and has evolved into integrated communication. the author explored the different phases of marketing communication development from the early 1960s to the present day and concluded that integrated communication is vital for the overall success of an organization. the issues of production management at different levels of management and management decision-making are also the subject of the scientific research. in this context, it is important to adhere to an integrated approach, which covers all areas of the enterprise’s functioning, touching its strategies using marketing tools. planning a set of marketing communications is one of the important stages of managing product promotion in the market. however, it is important to note that the implementation of strategies for the promotion of goods and services and the management of marketing communications cannot be considered separately since the result of the information exchange of the company under study depends on the interaction of the communication environment and management decisions. therefore, it is important to ensure that these aspects of the company's activities are mutually consistent. in general, the issues of planning and evaluating marketing communications are crucial for the process of making effective management decisions at the enterprise in the struggle for customer loyalty to the network and brand. in addition, the research of prominent scientists also focuses on methods of measuring the effectiveness of marketing communications. in particular, the problem of measuring the effectiveness of marketing activities is a key issue in addressing the effectiveness of marketing communications. many scholars discuss how to determine the indicators of marketing communications success and how to measure them correctly. for example, e. chaniago [43] and a. hidayat [44] consider models of marketing communications effectiveness and point out that the success of marketing communications depends on increasing consumer awareness and understanding of the product. in addition, other studies focus on indicators for measuring the effectiveness of marketing communications, such as market share, sales growth, and increased customer loyalty. overall, research in the field of marketing communications has become an important source of knowledge for companies and organizations in developing effective marketing and communications strategies. studying the effectiveness of marketing communications allows businesses to understand how their efforts attract consumer attention and build brand awareness to help increase sales and gain market leadership. effective marketing promotion relies on the integration of communication and management subsystems, which work together to achieve goals and influence the response of the target audience. this ensures the efficiency of activities and impacts the overall performance of the enterprise. the success of product promotion is contingent on a well-thought-out, justified, and implemented promotion strategy that fosters the harmonious development of an enterprise. by http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) volodymyr nesterenko, radoslaw miskiewicz, and rafis abazov virtual economics, vol. 6, no. 1, 2023 62 evaluating indicators based on different types of marketing communications, businesses can accurately assess their effectiveness and identify the most promising areas for growth. streamlining these indicators enables companies to prioritize specific aspects of their marketing communications strategy, leading to more efficient resource allocation and cost-effective goal achievement. moreover, it is appropriate to employ the latest technologies and interactive formats to engage younger audiences while using more traditional formats for older demographics. this approach enables enterprises to effectively capture the attention of different consumer groups and enhance the effectiveness of their marketing communication strategy [47]. in the retail industry, careful planning of marketing communications is vital to establish effective consumer communication and ensure sustained demand for products. to achieve this, communication activities should be phased, and the communication policy should be flexible, allowing adjustments as necessary. successful communication requires periodic review and adjustment of the communication policy, elimination of ineffective promotional methods, and the organization of planned and consistent communication activities. additionally, reallocating the promotion budget can optimize efficiency in communication activities [48]. furthermore, conducting marketing channel research and analysing data through anova enables businesses to understand customer needs and preferences, which serves as the foundation for developing products and services that meet those needs. these tools also help determine optimal pricing strategies and distribution channels, resulting in increased sales and profits [49, 50]. based on the analysis conducted, the present study proposes the following hypotheses: h1: consumer reactions to different marketing communication tools, such as online advertising, outdoor advertising, direct marketing, social media, etc., have statistically significant differences in consumer perception. h2: the effectiveness of online advertising has statistically significant differences in the perception of certain age groups. 3. methods the study utilized data collected through a survey conducted among gh customers, leveraging the database of this women’s wear chain. the research was conducted from january 1, 2022, to december 31, 2022. the basic marketing channels selected for analysis included social media advertising, printed advertising materials, celebrity collaborations, and more. the collected data included the internet aspect of marketing communication, including texts generated with the assistance of chat gpt artificial intelligence. the total number of respondents after analysing the answers was 200 individuals. the largest group of consumers, accounting for 36% (72 individuals), fell within the age range of 18-24 years (table 1). this was followed by the age group of 25-34 years, comprising 29% (58 individuals). consumers under 18 years old made up 18% (36 individuals), while the 35-45 age group represented 11% (22 individuals). the over 45 age group constituted 6% (12 individuals). the majority of the store's customers had high incomes, accounting for 71% of the respondents, while the remaining 29% were classified as http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) volodymyr nesterenko, radoslaw miskiewicz, and rafis abazov virtual economics, vol. 6, no. 1, 2023 63 middle-income customers. out of the 200 customers, 96% returned for subsequent purchases, while 4% did not. in terms of gender distribution among luxury clothing consumers, women dominated, accounting for 78.5% of the total number of buyers, while men accounted for 21.5%. table 1. marketing communications by consumer age categories age internet billboards advertising at points of sale personal sales direct marketing pr promotions up to 18 years 12 2 6 4 8 1 3 18-24 years 31 2 12 6 9 8 4 25-34 years 34 3 4 5 4 3 5 35-45 years 6 1 1 6 3 3 2 more than 45 years 2 1 2 1 2 1 3 all respondents were divided into two customer groups within a store. the first group, which comprises 96% of the sample, consists of loyal customers referred to as "special." these customers highly value the quality of service, actively engage with the store’s promotions and events and are likely to become repeat customers. the second group, which makes up 4% of the sample, is labelled “casual.” these customers make a single purchase at the store and do not return. they exhibit limited interest in promotions and perceive prices as being too high. this group cannot be converted into regular customers and requires additional efforts to reengage them. cronbach's alpha was calculated to assess the internal consistency and reliability of the survey instrument: 𝛼 = 𝐾 𝐾−1 (1 − ∑ 𝜎𝑌 2𝐾 𝐼=1 𝜎𝑋 2 ) (1) where 𝛼 –cronbach's alpha; k – the number of measured components (in this case, 3);𝜎𝑋 2 – the variance of the overall test result;𝜎𝑌 2 – the variance of the component for the current sample. it provided a measure of the extent to which the items in the questionnaire consistently measured consumer perceptions. a cronbach's alpha value of 0.68 was obtained, indicating satisfactory internal consistency. cronbach's alpha was used to assess the internal consistency and reliability of the scaled assessment based on respondents' answers. to test the selected hypotheses, anova (analysis of variance) was employed as a robust statistical technique [51]. anova allows for the examination of significant differences in consumer perception across a range of marketing communication tools (h1), as well as within specific age groups (h2). in conducting the anova, the dependent variable was consumer perception, measured through survey responses. the independent variables were the different http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) volodymyr nesterenko, radoslaw miskiewicz, and rafis abazov virtual economics, vol. 6, no. 1, 2023 64 marketing communication tools and age groups. the analysis involved calculating the sum of squares for each variable, determining the degrees of freedom, and estimating the f-statistic and associated p value. a significance level of α = 0.05 was used to determine statistical significance [52, 53]. to assess the normality of the data distribution, the shapiro‒wilk test was employed: 𝑊 = (∑ 𝑎𝑡𝑦𝑡) 𝑛 𝑡=2 2 ∑ (𝑥𝑡−𝑦𝑎𝑣𝑔) 𝑛 𝑡=1 , (2) where: w is the value of the shapiro-wilk coefficient; 𝑎𝑡 is the table coefficients; 𝑦𝑡 is a sample value; n is the number of observations. this test was used to determine whether the data collected from the study followed a normal distribution. additionally, to examine the equality of variances between two or more groups of data, levene’s test, which is based on the f test of sample variance, was applied. this test allowed for the assessment of whether there were statistically significant differences in the variances across the different groups. by examining the homogeneity of variances, levene’s test provided valuable information to ensure the validity of subsequent statistical analyses [54]. to investigate specific pairwise comparisons between marketing communication tools or age groups, additional post hoc tests were conducted when anova revealed significant overall differences. in this study, tukey’s test was employed as a post hoc test [55, 56]. the purpose of these post hoc tests was to gain further insights into which specific groups or tools differed significantly from each other in terms of consumer perception. to analyse the significance of differences in the levels of the factors in this table, eviews, data analysis, and one-factor analysis of variance (anova) were used. 4. results and discussion the shapiro-wilk test revealed a negligible probability of the samples following a normal distribution, with a p-value of 0.00535. therefore, it can be concluded that the data does not exhibit a normal distribution. table 2. the outputs of shapiro‒wilk test the shapiro–wilk test calculated w-value of the shapiro-wilk test 0.578 calculated p-value of the shapiro-wilk test 0.00 critical value of w for a significance level of 5% 0.938 in addition, the levene test was performed between the samples. it showed that the variance between the samples is homogeneous with sufficient probability, which indicates a uniform distribution of respondents' estimates in the samples. the findings related to the impact of marketing tools are presented in table 3. the first marketing tool examined is "internet," which attracted a significant number of customers, with a total of 85 individuals participating in this channel. the total amount associated with this tool http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) volodymyr nesterenko, radoslaw miskiewicz, and rafis abazov virtual economics, vol. 6, no. 1, 2023 65 sums up to 85, with an average amount of 17. the dispersion value of 214 suggests a wide range of amounts reported by customers within each age group, indicating potential variations in their spending behaviour. moving on to “printed advertisements,” this marketing tool attracted a relatively lower number of customers, with only 9 individuals participating. similar to the previous tool, these customers were also categorized into five different age groups. the total amount associated with printed advertisements is 9, resulting in an average amount of 1.8. the low dispersion value of 0.7 suggests a relatively consistent spending pattern among customers within each age group. the analysis also considered the impact of "billboards" on customer behaviour. this marketing tool attracted 25 customers, divided into five age groups. the total amount associated with billboards is 25, yielding an average amount of 5. however, the relatively high dispersion value of 19 indicates significant variability in the reported amounts within each age group, suggesting diverse spending patterns among customers. another marketing tool examined is “advertising at points of sale.” this tool attracted 22 customers, categorized into five age groups. the total amount associated with advertising at points of sale is 22, resulting in an average amount of 4.4. the dispersion value of 4.3 indicates moderate variability in the reported amounts within each age group, implying some differences in spending behaviours among customers. the analysis also includes the impact of "personal sales," which attracted 26 customers distributed across five age groups. the total amount associated with personal sales is 26, yielding an average amount of 5.2. the dispersion value of 9.7 suggests a significant range of reported amounts within each age group, indicating diverse spending behaviours among customers. furthermore, the impact of “public relations” on customer behaviour was examined. this marketing tool attracted 16 customers, divided into five age groups. the total amount associated with public relations is 16, resulting in an average amount of 3.2. the dispersion value of 8.2 indicates a considerable range of reported amounts within each age group, suggesting potential variations in spending patterns among customers. finally, the impact of “promotions” on customer behaviour was analysed. this marketing tool attracted 17 customers, categorized into five age groups. the total amount associated with promotions is 17, resulting in an average amount of 3.4. the low dispersion value of 1.3 suggests a relatively consistent spending pattern among customers within each age group. table 3. the impact of marketing tools on the age factor marketing tools number of involved customers amount of age groups sum average dispersion internet 85 5 85 17 214 printed advertisements 9 5 9 1.8 0.7 billboards 25 5 25 5 19 advertising at points of sale 22 5 22 4.4 4.3 personal sales 26 5 26 5.2 9.7 public relations 16 5 16 3.2 8.2 promotions 17 5 17 3.4 1.3 the analysis of table 3 reveals that the internet has the greatest impact on young people, specifically consumers under the age of 34, compared to older audiences. this suggests that the internet as a marketing tool is more effective in reaching and influencing younger demographics. on the other hand, the other marketing tools have shown relatively weaker http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) volodymyr nesterenko, radoslaw miskiewicz, and rafis abazov virtual economics, vol. 6, no. 1, 2023 66 effectiveness, indicating that newer technologies, such as the internet, outperform traditional channels. moreover, the analysis highlights that different age groups have varying levels of response to different communication channels. this implies that the age of customers plays a significant role in determining their susceptibility to specific marketing communication channels. consequently, it is crucial for advertising campaigns to be targeted towards specific age groups that have demonstrated a higher level of response to the advertising information delivered through the respective marketing communication channel. this targeted approach ensures maximum effectiveness and resonance with the intended audience. table 4 presents the conclusions derived from the analysis of the statistically significant influence of factor levels, specifically the different age groups, on the average amounts. the table provides information on the variation source, sum of squares (ss), degrees of freedom (df), mean squares (ms), f-statistic, p value, and critical f value. table 4. the outputs of anovas variation source ss df ms f p value f critical between groups 784.343 6 130.724 3.558 0.0096 2.445 within groups 1028.8 28 36.743 total 1813.143 34 based on the outputs presented in table 4, the analysis reveals statistically significant differences in the average amounts across different age groups. this confirms that age group membership has a significant influence on consumer spending patterns. furthermore, the “between groups” variation source indicates that the variability in average amounts attributed to the different age groups is significant, as evidenced by the calculated f-statistic (3.558) and the associated p-value (0.0096). these results provide strong evidence to suggest that the average amounts differ significantly between the age groups. the variation source "within groups" in table 4 represents the variability observed within each age group. the sum of squares for this variation source is 1028.8, indicating the total variability within the age groups. the degrees of freedom for this source are 28, representing the total number of observations minus the number of age groups. dividing the sum of squares by the degrees of freedom gives a mean square value of 36.743, which represents the average variability within each age group. the total sum of squares in the analysis is 1813.143, which is the combined variability between and within the age groups. the total degrees of freedom are 34, representing the total number of observations minus one. however, it is important to note that the specific effectiveness of internet marketing communication compared to other tools is not explicitly addressed in the outputs provided in table 4. the table primarily focuses on the statistical analysis of differences in average amounts between age groups. therefore, further research and analysis would be required to draw conclusions about the relative effectiveness of different marketing tools in influencing consumer behaviour across age groups. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) volodymyr nesterenko, radoslaw miskiewicz, and rafis abazov virtual economics, vol. 6, no. 1, 2023 67 5. conclusions the analysis reveals insights into consumer behaviour and preferences regarding marketing communication channels. it established that consumers aged 18 to 34 are the most active users of online advertising and direct marketing, while older consumers show a preference for promotions and point-of-sale advertising. this suggests that different age groups have distinct preferences in regard to engaging with marketing messages. furthermore, the study indicates that younger consumers (under 34 years old) are more likely to accept online marketing communications, while older consumers are more likely to respond to billboards and promotions. this highlights the importance of tailoring marketing strategies to target specific age groups through the appropriate channels. among the various channels, online advertising exhibits the highest diversity of consumer engagement, with a variance of 17. this suggests that online platforms provide a wider and more diverse audience that can be effectively reached through this channel, making it a valuable avenue for marketing efforts. in the context of the gh store chain, the research identified the main channels that influence consumers to visit the store. on the one hand, this study indicates that billboard advertising is not an attractive means of communication with consumers as it was in the past. on the other hand, social media marketing campaigns have proven to be highly effective and popular, given the wide audience and diverse social groups that can be targeted using different criteria. in addition, social media platforms enable interaction with consumers, allowing companies to receive feedback and respond to their needs and preferences. the findings of this research have practical implications for marketing and advertising strategies. they can serve as a foundation for further research in the field, leading to the development of more effective communication and marketing strategies that can enhance business performance. the data obtained from the analysis can be used to conduct detailed studies on the effectiveness of various marketing communication channels and develop strategies to attract new customers. these insights can inform management decisions, improve product quality, and increase competitiveness in the market. additionally, the analysis indicates that different age groups respond to marketing communications in a similar manner, suggesting that no single group can be singled out as being more receptive to advertising. this implies the need for a comprehensive approach when targeting different age groups in marketing campaigns. furthermore, the study highlights the importance of investigating the influence of various factors on consumers' purchasing decisions and establishing relationships between qualitative and quantitative variables. overall, the research outcomes provide valuable insights into consumer behaviour and offer opportunities for further exploration and the development of effective marketing and advertising strategies. author contributions: conceptualization, v.n., r.m., and r.a.; methodology, v.n., r.m., and r.a.; software, v.n., r.m., and r.a.; validation, v.n., r.m., and r.a.; formal analysis, v.n., r.m., and r.a.; investigation, v.n., r.m., and r.a.; writing-original draft preparation, v.n., r.m., and r.a.; writing-review and editing, v.n., r.m., and r.a.; visualization, v.n., r.m., and r.a.; supervision, v.n., r.m., and r.a. all authors have read and agreed to the published version of the manuscript. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) volodymyr nesterenko, radoslaw miskiewicz, and rafis abazov virtual economics, vol. 6, no. 1, 2023 68 funding: this research received no external funding. data availability statement: not applicable. acknowledgements: the authors are very grateful to the anonymous referees for their helpful comments and constructive suggestions. conflicts of interest: the authors declare no conflict of interest. references 1. chen, y., kwilinski, a., chygryn, o., lyulyov, o., & pimonenko, t. 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(2023). anova as fitness function for genetic algorithm in group composition. tem journal, 12, 396-405. http://www.virtual-economics.eu/ кwilinski alex 65 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 2022 volume 5 number 4 the role of digital transformation in education in promoting sustainable development regina veckalne and tatjana tambovceva abstract. the crucial role education plays in fostering sustainable development, moving society toward a more environmentally and socially conscious future, and influencing the attitudes and behaviours of both the present and the future generations are explored in this article. the authors analyse the concept of education for sustainable development (esd), a transformative learning technique designed to provide individuals and communities with the knowledge, skills, and values necessary to encourage moral behaviour. esd must be integrated into a number of learning contexts in order to have a full and all-encompassing impact, underscoring the need for interdisciplinary and holistic methods that are considerate of different learning styles, backgrounds, and circumstances. moreover, the article examines the role of key stakeholders, such as educators, policymakers, and local communities, in designing and implementing transformative learning experiences that foster behavioural change, critical thinking, and social engagement. it discusses the significance of teacher training, curriculum development, and innovative educational resources in nurturing a culture of sustainability and encouraging collective action. additionally, the article investigates the potential barriers to adopting esd, including resistance to change, insufficient funding, and a lack of awareness, and proposes strategies for overcoming these challenges. the authors conduct a survey among university students to detect the key challenges of esd and how to address them from their perspectives. keywords: education for sustainable development, sustainability awareness, sustainable development jel classification: q01, q56 66 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 authors: regina veckalne riga technical university, riga, latvia e-mail: regina.veckalne@rtu.lv https://orcid.org/0000-0003-2517-1749 tatjana tambovceva riga technical university, riga, latvia e-mail: tatjana.tambovceva@rtu.lv https://orcid.org/0000-0002-9516-1530 citation: veckalne, r., & tambovceva, t. (2022). the role of digital transformation in education in promoting sustainable development. virtual economics, 5(4), 65-86. https://doi.org/10.34021/ve.2022.05.04(4) received: june 20, 2022. revised: november 25, 2022. accepted: december 10, 2022. © author(s) 2022. licenced under the creative commons license attribution 4.0 international (cc by 4.0) mailto:regina.veckalne@rtu.lv https://orcid.org/0000-0003-2517-1749 mailto:tatjana.tambovceva@rtu.lv https://orcid.org/0000-0002-9516-1530 https://creativecommons.org/licenses/by/4.0/ 67 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 1. introduction sustainable development is defined as the process of evolution that addresses the needs of humans without sacrificing the capacity of future generations to meet their demands (brundtland, 1987). education is one of the key tools in achieving sustainable development goals (sdgs). the 2030 agenda for sustainable development emphasizes the importance of quality education, lifelong learning, and global citizenship education (united nations, 2015). since education is seen as a powerful tool for reforming communities and cultivating responsible and sustainable behaviours, it has been receiving more and more attention from academics and policymakers in recent years (mckeown, 2002). education for sustainable development (esd) is expected to equip people and communities with the values, knowledge, and skills they need when dealing with difficult socio-ecological problems (unesco, 2014). esd aims to actively engage students in contributing to sustainable development through the promotion of sustainability awareness. various scholars (mochizuki & fadeeva, 2008; barth & michelsen, 2013) suggest that interdisciplinary and integrative approaches to esd are to be utilized when addressing the interconnection of social, environmental, and economic concerns. a lot of efforts have been made to integrate esd into different learning environments in recognition of the necessity to modify educational institutions to accommodate a variety of learning styles, backgrounds, and circumstances (rieckmann, 2012). nevertheless, a number of challenges, such as a lack of awareness, a lack of money, and resistance to change, still prevail. in order to better understand how education contributes to sustainable development, this study will look at the notion of esd, its development, and how it affects students' attitudes, behaviours, and beliefs. additionally, it will go over the value of interdisciplinary and holistic approaches, how to incorporate esd into different learning settings, and the function of important stakeholders including educators, policymakers, and civil society organizations. 2. literature review in recent years, education for sustainable development (esd) has undergone a major evolution. the united nations' 2030 agenda for sustainable development, which emphasizes the value of education in achieving sustainable development goals (sdgs) and places a focus on quality education, lifelong learning, and global citizenship education, gave rise to the notion of esd (united nations, 2015). value-belief-norm theorists argue that the intention to perform pro-environmental behaviours is strongly linked to the awareness of adverse environmental consequences (hansla et al., 2008). from the same point of view, sustainability awareness is key to reaching sustainable development. environmental kuznets curve claims that economic development inevitably leads to environmental degradation; nevertheless, some researchers state that the 68 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 extent to which this happens depends on moral values and laws within the investigated communities (stern, 2018). since the theory of needs is mostly used to predict behaviours, it is only natural to question whether sustainability awareness may be described at the country or town level; for instance, wealthier countries and cities tend to demonstrate higher awareness levels when it comes to sustainability and sustainable development. a hierarchy of needs proposed by maslow suggests that humans need to fulfil their basic needs first before proceeding to higher levels on the pyramid; thus, sustainable development requires meeting all the basic needs, including food, shelter, clothing, and jobs, prior to extending their aspiration for a sustainable life (clarivate analytics, 2018). following this theoretical framework, we can presume that compared to developing states, wealthy countries have fewer people with unfulfilled lower-level needs, and therefore they move up the pyramid reaching a higher level of sustainability awareness and consequently sustainable development. this, however, does not mean that sustainable development should become a prerogative of developed nations only; on the contrary, this means that we should invest more time and money into raising awareness of sustainability and the importance of sustainable development among those that would otherwise take decades to reach a higher level of maslow's hierarchy. to ensure the implementation of sustainable development goals, societies have to make complex fundamental transformations (the bertelsmann stiftung and sustainable development solutions network, 2018). to achieve such transformations, people need to change their daily behaviour in order to lead more sustainable lifestyles. this, however, takes a significant amount of time and is impacted by market, political and individual factors (foster et al., 2022). pavalache-ilie and cazan (2018) argue that the enhancement of responsible environmental behaviour can be achieved by raising awareness. this idea is backed up by guan et al. (2019), who claim that raising public awareness of sustainability goals is one of the key factors of their successful implementation. in addition to that, businesses should be expected to become more active in the implementation of sustainable practices, which can also be achieved through the spread of awareness on both corporate and individual levels. companies can contribute to sustainable development in various ways, for instance, through corporate social responsibility practices. sustainable development goals may be appealing for private companies due to the possible return on investment; however, businesses can also create value through corporate social responsibility projects because individual stakeholders reward companies engaged in csr activities. another way to raise citizens' awareness of sustainable development is through education. in the past few decades, more and more people have been enrolling at educational institutions at all levels (un, 2021). education is expected to improve social and economic indicators (un, 2021) and eliminate poverty (unesco, 2019), which consequently leads to a reduction in 69 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 inequality levels. moreover, education allows people to live healthier and more sustainable lives. last but not least, education is pivotal to promoting tolerance and making societies more peaceful (un, 2021). to achieve all the aforementioned benefits of education, many institutions today include education for sustainable development in their programs. the focus on esd has increased in the daily practices of many schools across the globe (pauw et al., 2015). such education is transformative and learning-oriented. esd can be very efficient in raising students' awareness. the framework of esd implementation is presented in figure 1.16. it is clear today that raising awareness is an extremely important thing to do when aiming for sustainable development. thus, we should do that on each level of personal development – from schools to continuous training at the workplace. when more and more people become aware of their contribution to environmental and societal degradation, they will alter their daily behaviour to lead more sustainable lifestyles. the development of skills like systems thinking, critical reflection, and anticipatory and collaborative decision-making has been a growing focus of esd (wiek et al., 2011; rieckmann, 2012). the global action programme (gap) on esd, which replaced the united nations decade of education for sustainable development (2005-2014), places a priority on five key areas for advancing esd: advancing policy, changing learning and training environments, building educators' capacities, empowering and mobilizing youth, and accelerating sustainable solutions at the local level (unesco, 2014). the global trend toward competency-based education, which emphasizes the development of specialized knowledge, skills, and attitudes necessary for addressing complex sustainability concerns, has had an impact on the idea of esd (cebrián & junyent, 2015). esd combines ideas from environmental education, development education, and global citizenship education to reflect how social, environmental, and economic sustainability issues are interconnected (leicht et al., 2018). the sustainable development goals (sdgs) themselves (united nations, 2015), the earth charter (earth charter initiative, 2016), the unesco roadmap for implementing the global action programme on esd (unesco, 2014), and the european union's strategy for esd are just a few of the frameworks and principles that have been created to support the implementation of esd (european commission, 2018). these frameworks emphasize the necessity of esd integration across disciplines and educational settings as well as transformative learning processes (mochizuki & bryan, 2015; boeve-de pauw et al., 2018). the focus of research on esd has expanded to include a variety of issues related to teaching and learning, such as the function of instructors, the creation of curricula and learning resources, assessment procedures, and the impact of institutional and regulatory contexts (chawla & cushing, 2019). developing topics in esd research include the use of indigenous and local knowledge systems in esd, as well as the use of digital technologies for promoting sustainability education. 70 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 thus, esd has recently developed greatly, reflecting the growing understanding of the importance of education in resolving issues related to global sustainability. to guarantee that educational systems around the world are successfully nurturing the knowledge, skills, and values required for a sustainable future, it will be crucial to draw on the most recent research, frameworks, and recommendations as esd develops. interdisciplinary and holistic approaches to esd. addressing the complex and interwoven nature of sustainability concerns requires an interdisciplinary and holistic approach to education for sustainable development (leicht et al., 2018; mochizuki & bryan, 2015). this method encourages a thorough comprehension of the interrelationships between the social, economic, and environmental aspects of sustainable development (broman & robèrt, 2017). integrating systems thinking, which entails comprehending the relationships between various components of a system and their impact on the system's behaviour through time, is one strategy to encourage interdisciplinary learning in esd (sterman, 2018; rieckmann, 2012). learners that utilize systems thinking are better able to understand the underlying causes of sustainability issues, investigate change-making opportunities, and anticipate unintended repercussions of solutions (wiek et al., 2011). integration of various disciplines and viewpoints, including those from the scientific and social sciences, humanities, and the arts, is a crucial component of an interdisciplinary approach to esd (brundiers et al., 2009). as a result, learners are better equipped to interact across disciplinary boundaries and co-create knowledge with a variety of stakeholders, such as practitioners and communities (lang et al., 2012; mochizuki & fadeeva, 2018). also, holistic approaches to esd place a strong emphasis on the significance of values-based learning, which involves fostering the growth of moral and ethical principles that inform behaviour and decision-making in favour of sustainability (chawla & cushing, 2019; leighton et al., 2017). empathy, responsibility, respect for variety, and a sense of justice are a few examples of such principles. esd should encourage transformational learning, which entails challenging learners' presumptions, beliefs, and values and empowering them to take transformative actions in the direction of sustainability, in addition to fostering multidisciplinary and holistic learning (mezirow, 2018). to do this, critical thinking, reflexivity, and agency must be developed. to support transdisciplinary and comprehensive approaches to esd, a number of pedagogical techniques have been suggested, including problem-based learning, project-based learning, service-learning, and place-based education, these strategies place an emphasis on authentic, collaborative, and experiential learning events that involve students in real-world sustainability concerns. in conclusion, interdisciplinary and holistic esd approaches are crucial for building a thorough grasp of sustainability concerns and equipping students to take revolutionary steps toward sustainable development. effective esd must incorporate systems thinking, values-based 71 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 learning, transformative learning processes, and pedagogical practices that stress experiential and collaborative learning. undoubtedly, digitalization plays a crucial role in making esd more holistic. in the education sector, digital transformation has become more and more important for encouraging sustainable development. according to abad-segura et al. (2020), technological improvements have increased an access to educational materials, resulting in more inclusive and equitable learning opportunities for a variety of populations, including those with impairments and those living in remote locations. by using fewer resources, like paper and electricity, and requiring less travel, online and mixed learning environments have the potential to lessen the environmental impact of traditional education. (yin, 2022). the incorporation of education for sustainable development (esd) into the curriculum has also been made easier by digital transformation, promoting the critical thinking and problemsolving abilities required to solve the issues of global sustainability (tilbury, 2016). collaboration amongst a variety of stakeholders, such as policymakers, educators, and students, is essential to fully harness the potential of digital transformation for sustainable development in education (abad-segura, 2020). therefore, the research hypothesis is as follows h1: digital transformation of education is positively associated with esd. integrating esd into various learning environments. esd must be integrated into a variety of learning environments in order to be effectively implemented. this section highlights current research on esd incorporation into various educational contexts, including opportunities and problems. the curricula design is a crucial component of incorporating esd in the formal education. a more thorough understanding of sustainability concerns is promoted through the integration of sustainability concepts, topics, and approaches across disciplines (holdsworth et al., 2008; leicht et al., 2018). studies have emphasized the significance of including esd in disciplines like science, social studies, and language arts (chawla & cushing, 2019). also, it is becoming increasingly clear that multidisciplinary methods to teaching and learning are necessary for tackling the complexity and interconnection of sustainability concerns (mochizuki & bryan, 2015). for the efficient incorporation of esd in formal educational contexts, educator competences are also essential. according to the research (cebrián & junyent, 2015), professional development programs are needed to give teachers the information, abilities, and attitudes necessary to cultivate esd capabilities in their pupils. also, emphasis has been placed on the part that school leadership plays in advancing and bolstering esd (boeve-de pauw et al., 2018). via community-based projects, youth programs, and environmental organizations, esd has been incorporated into non-formal education (kollmuss & agyeman, 2002). non-formal education can enhance esd competencies and contribute to transformative learning experiences, according to the research (redman & larson, 2011). participatory methods and project-based learning, for instance, have been found to be efficient tools for motivating students to take sustainability-related actions in non-formal contexts. 72 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 moreover, informal learning settings like botanical gardens and museums provide potential for esd integration. these environments can offer contextualized, experiential learning opportunities that can deepen one's understanding of sustainability challenges and supplement formal schooling (sterling, 2001). for instance, it has been demonstrated that the use of digital tools in informal learning settings improves student involvement and learning results (wals et al., 2014). thus, it can be concluded that nurturing the knowledge, skills, and values necessary for sustainable development depends on incorporating esd into a variety of learning situations. notwithstanding recent success, more study and cooperation among researchers, educators, and policymakers are required to address the potential and problems related to esd integration across a variety of educational contexts. challenges and barriers to implementing esd. there are obstacles and hurdles in properly implementing education for sustainable development (esd) in educational institutions. the integration of the curriculum, teacher preparation, resources, and institutional support are only a few of the major problems that are discussed in this section as obstacles to the successful implementation of esd. the incorporation of sustainability concepts and practices into current curricula is one of the major obstacles to implementing esd. rethinking traditional topic boundaries and promoting a more all-encompassing approach to teaching and learning are necessary due to the interdisciplinary nature of esd (mochizuki & bryan, 2015). due to time restrictions, competing curricular demands, and a lack of clear instructions on how to apply esd in different disciplines, this can be challenging to do. the successful implementation of esd depends on teacher preparation since teachers are crucial in influencing students' sustainability-related knowledge, values, and actions. yet, according to studies, many teachers do not possess the abilities, expertise, and self-assurance required to successfully teach esd (cebrián & junyent, 2015; holdsworth et al., 2008). furthermore, many teacher preparation programs do not stress esd or offer enough chances for professional growth in this area (leicht et al., 2018; wals et al., 2014). the application of esd in educational institutions may be significantly hampered by a lack of resources, including money, time, and instructional materials. effective esd requires access to high-quality, current, and contextually appropriate resources, but these may not always be easily accessible or affordable for schools and teachers. moreover, it can be difficult to arrange the collaboration between educators, researchers, and politicians required for the creation and distribution of esd resources (rieckmann, 2012). a crucial element in enabling the successful implementation of esd is institutional support. this entails the formulation of precise policies and plans, as well as the supply of the required tools and facilities (chawla & cushing, 2019). however, not all educational institutions may 73 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 place a high value on esd, and it can be challenging to devote enough time and money to sustainability programs due to competing interests. it is clear that there are a number of obstacles and problems that must be overcome for esd to be successfully implemented in educational settings. it will need a coordinated effort by educators, policymakers, and other stakeholders to emphasize sustainability, fund teacher preparation and resources, and create supportive institutional frameworks in order to overcome these challenges. continuous innovation and research in esd are crucial to identify and address these challenges and foster the development of more sustainable societies. thus, there is hypothesised that h2: challenges and barriers to implementing esd is associated with quality of esd. stakeholders' roles in esd. implementation of education for sustainable development depends on the participation and cooperation of a wide range of stakeholders, including educators, students, decision-makers, communities, and business partners. the function of various stakeholders in developing esd is examined in this section. esd is being implemented in classrooms and courses at the forefront by educators. they are in charge of creating and executing stimulating and successful educational experiences that advance students' comprehension of sustainability principles, sharpen their critical-thinking abilities, and encourage responsible environmental actions. also, teachers ought to act as role models and proponents of sustainable practices both inside and beyond the classroom (holdsworth et al., 2008). students are essential to esd because they are engaged learners and potential change agents. individuals are accountable for participating in the learning process, putting their knowledge and skills to be used in solving real-world sustainability problems and acting to advance sustainable development both within and outside of their communities (chawla & cushing, 2019; mochizuki & bryan, 2015). in addition, students can participate in extracurricular sustainability activities, offer comments, and share their perspectives to help design and implement esd projects (boeve-de pauw et al., 2018). the development of the structures, rules, and incentives required to promote the integration of esd into educational systems falls squarely on the shoulders of policymakers. setting curricular standards, creating national and regional esd plans, and giving funds for teacher preparation, research, and innovation are all part of this (leicht et al., 2018). to ensure the success and relevance of esd policies and programs, policymakers should also work with other stakeholders, such as educators, researchers, and business partners (wals et al., 2014). local communities have a crucial role as partners in esd because they offer important resources, expertise, and chances for learning and action. community organizations can work with educational institutions to create and deliver contextually relevant esd programs and activities, including environmental organizations, cultural institutions, and companies. 74 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 communities may also help esd by promoting a culture of sustainability and working together to address regional and global environmental problems. industrial partners can support esd by supplying knowledge, materials, and chances for hands-on learning and cooperation. this involves providing opportunities for students to apply their sustainability knowledge and abilities in professional settings through internships, workshops, and research projects (wiek et al., 2011). investing in sustainable technologies, practices, and innovations that promote the objectives of sustainable development is another way that industrial partners can assist esd (cebrián & junyent, 2015; holdsworth et al., 2008). in conclusion, active participation and collaboration from a range of stakeholders are necessary for the successful implementation of esd. together, educators, students, governments, communities, and business partners can advance esd and promote the creation of more sustainable societies by utilizing their individual talents and views. thus, there is hypothesised that h3: stakeholders’ roles have a positive association with quality of esd. 3. bibliometric analysis before proceeding to the empirical research the findings of bibliometric analysis for this topic are presented. for this analysis there were searched “education” and “sustainable” and “development” and “digitalization” on scopus. then the search results were limited to papers in english. this resulted in only 234 documents, which shows that this topic lacks sufficient research. if looking at the dynamics of publications (fig. 1), it can be observed that the first article with these keywords was published 15 years ago in 2007. after that there was no evident interest in this topic up until 2015, since when there was a steady uprising movement, reaching its peak in 2022. figure 1. documents published in scopus with keywords “education” and “sustainable” and “development” and “digitalization” source: devised by the authors. 75 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 when it comes to the most relevant sources in the field of esd and digitalization, the winner is journal “sustainability” with 26 publications. it is followed by e35 web of conferences with 5 publications less. lecture notes in networking and systems comes third with 12 publications. the remaining sources can be seen in figure 2. figure 2. most relevant sources in digitalization and esd research source: devised by the authors. then there were analysed the most common words used in the selected articles and their frequency over time. the most often used keywords were digital transformation, digitalization, e-learning, education, engineering education, higher education, planning, students, sustainability and sustainable development. three keywords: sustainability, students and sustainable development appeared the earliest and remained the only ones up until 2014, where the emergence of other key terms can be observed. “sustainable development” was by far the most used one. education, engineering education and e-learning followed, with the occurrence over twice as little. although “digitalization” was not as popular among scholars, it started receiving more attention in 2021 which resulted in a rapid growth of its frequency of use. figure 3. the word frequency over time source: devised by the authors. 76 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 finally, using vosviewer software there was created a key-words co-occurrence map. out of 47 offered keywords from the scopus articles there were selected 32, which were the most relevant. these keywords were then grouped into 4 clusters: 1st containing 10 items, 2nd and 3d 8 items each; and 4th cluster with 6 items. the results of this analysis are presented in figure 4. the size of the bubble represents the frequency of using the keyword, in which the bigger the bubble, the higher the frequency is and vice-versa, whereas the length of the link demonstrates the connection of keywords, where the shorter the link, the more they are connected. figure 4. a key-words co-occurrence map source: devised by the authors. as it can be noticed sustainable development, e-learning, sustainability, and education are among the most often used keywords. they are closely connected with planning, decision making, information management, digital transformation, economic and social effects, industry 4.0 and innovation. other digitalization related keywords, such as technological development, computer aided instruction, the internet of things, digital economy, and educational systems were also present in the findings. thus, it can be concluded that there is a noticeable link between digitalization related activities and education for sustainable development. 77 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 4. methods an extensive literature review was conducted to explore the existing research on esd, its challenges and barriers, and stakeholders' roles in promoting sustainable development. a systematic search was performed using several academic databases, including web of science, scopus, and eric. the search focused on peer-reviewed articles, books, and reports published within the last seven years. the keywords used included "education for sustainable development," "esd," "sustainability education," "challenges," "barriers," and "stakeholders." the literature review allowed the researchers to identify trends, gaps, and opportunities in the field of esd, which informed the design and analysis of the subsequent survey and interviews. a quantitative questionnaire was distributed to students from riga technical university. the purpose of the survey was to determine how respondents saw and experienced esd, what obstacles and challenges they encountered, and what they thought about the roles and responsibilities of various stakeholders in advancing sustainable development. the survey was composed of multiple-choice and closed-ended questions utilizing likert scales. one question was open-ended. the answers to this question underwent content analysis. to find patterns, correlations, and disparities in the respondents' perspectives, the survey results were examined using descriptive and inferential statistics. the study complied with ethical standards for studies involving human subjects. all survey and interview participants provided informed consent, confirming that they were aware of the study's goals, methods, and rights to anonymity and withdrawal. to maintain the participants' privacy and anonymity, the data were securely stored once all identifying information was obliterated. 5. results and discussion 118 students took part in the survey. most of the respondents (60%) were aged between 18 and 24; 37.1% were between 25 and 34; and the remaining respondents were underage (fig. 5). 78 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 figure 5. age distribution among survey participants source: devised by the authors. 65.7 % of respondents were identified as men, while 34.7 as women. the vast majority of survey participants studied at the undergraduate level (82.9 %), and the remaining were pursuing master’s degrees. when asked about their familiarity with the concept of education for sustainable development 37.1 % chose the option “somewhat familiar”, and 22.9 % – neutral and very familiar (fig. 6). figure 6. familiarity with the concept of esd source: devised by the authors. when it comes to evaluating the quality of esd, the majority ranked it as fair (34.3%) or good (31.4). only 20% of students think that it is excellent, while 11.4% and 2.9% consider it poor and very poor respectively. when asked to what extent esd aided in critical thinking skills related to sustainable development, 45.7 % of respondents answered “moderately”, while 25.7 % selected “greatly”; 20 % of those participating in the survey students believed that esd has a slight effect on their critical thinking development, whereas 8.6 % noticed no effect at all (fig.7). figure 7. quality of esd in the institution under research. 79 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 source: devised by the authors. then participants were asked to rank several challenges and barriers to esd on a likert scale from 1 to 5. figure 8. esd effect on critical thinking development source: devised by the authors. when it comes to resources, 20% stated that it was extremely challenging, 17.1% marked it as moderately challenging and the majority (48.6 %) found it somewhat challenging. 40% of the participants believe that they receive insufficient training in the field of sustainable development, and therefore lack awareness on the issue. additionally, 37.1% of students thought that they had very limited time for esd in their curriculum. 45.7% of the respondents voted that there were not enough elements of esd incorporated in their courses. when asked about the importance of stakeholders in promoting esd, surprisingly, option “other students” received the most votes 34.3%. educators followed with 18.7%. industry partners received only 4.8% and the rest was spread out among communities and industry partners. the last question was open-ended and asked what actions could be taken by various stakeholders to promote esd successfully. the answers were analysed after 3 themes were formulated. theme 1: mandatory esd courses. students believe that there should be a mandatory course allocated specifically for raising awareness on sustainability issues and how to address them. theme 2: raising awareness events. here, students suggested that to engage more students in the topic of sustainable development stakeholders should organise events: such as planting trees, collecting garbage, recycling seminars, etc. while some such events would encourage students to lead more sustainable lives, others would provide the knowledge that they might lack. theme 3: cooperation with sustainability leaders. respondents stated that more attention should be paid to cooperation with successful sustainability-related companies in the form of 80 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 lectures from the company representatives, visits to such companies and internship opportunities. then using smartpls software there was created a structural equation model (sem) based on the survey results. sem, which links measurement items to their corresponding latent variables, requires the measurement model as a precursor. this section provides the theoretical context and statistical analysis to support the accuracy and dependability of the measurement model. the conceptual model is made up of four latent variables, which are complex and cannot be assessed by a single observed variable (fig. 9). therefore, each of the latent variables of the conceptual model is evaluated using numerous observed objects. figure 9. estimated structural equation model source: devised by the authors. this study uses a variety of assessment scales on how digital transformation in education contributes to fostering sustainable development to assess crucial variables. according to earlier research on esd awareness, familiarity with education for sustainable development (esd) is operationalized as a single-item latent variable (cortese, 2003). a multi-item latent 81 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 variable is used to assess the educational institution's quality of esd, including questions taken from the research by sterling (2011) and mochizuki and fadeeva (2010). in order to address topics like online learning, technology integration, and blended learning strategies, the concept of digital transformation in education was built by modifying elements from several research, including bonk (2009), means et al. (2010), and zawacki-richter and naidu (2016). using items derived from lozano et al. (2015), the stakeholder roles and responsibilities construct is measured with an emphasis on the contributions that educators, students, policymakers, and local communities make to the promotion of esd. the items used to measure access to educational resources were developed from jaggars (2014) and shea and bidjerano (2014) and take into account factors like the accessibility of online resources and their availability. items drawn from latchem (2018) are used to evaluate the environmental impact of education and the expenditures associated with it. the barriers to implementing esd, including a lack of resources, insufficient training in esd, limited time for esd in the curriculum, a lack of support from school administration, and no integration of esd in existing subjects, are measured using items adapted from barth et al. (2007) and wiek et al. (2011). these items are designed to assess the challenges and barriers educational institutions face when incorporating esd and digital transformation into their curricula and practices. table 1 presents the measurement items with their respective latent variables and table 2 demonstrates a validity check. table 1. measurement items barriers to implementing esd digital transformation quality of esd stakeholders' roles b1 0.814 b2 0.782 b3 0.885 c1 0.867 c2 0.856 c3 0.826 d1 0.857 d2 0.799 d3 0.871 d4 0.903 d5 0.856 d6 0.78 d7 0.83 d8a 0.799 d8b 0.797 d8c 0.907 d8d 0.883 source: calculated by the authors. there are used both multivariate and univariate normality tests to determine whether the measurement items are normal before moving on to the confirmatory factor analysis (cfa) 82 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 model. the estimating method used in cfa (and sem) depends on the normality of the data, hence it is crucial that the data be normal. the shapiro-wilk test (all p-values 0.05 of all measurement items) rejects the null hypothesis of univariate normality, much as the mardia test (p-value 0.05) does the same for the null hypothesis of multivariate normality. therefore, rather than using the maximum likelihood (ml) estimator to evaluate the measurement model, there is instead utilized the maximum likelihood robust (mlr) estimator, commonly known as the satorra-bentler rescaling approach (rosseel, 2012). this research used self-reported surveys to get the measurement item data. the items reflect their underlying latent concept, as shown by the statistically significant (p-value 0.001) standardized factor loadings of the cfa model shown in table 1. this attests to the measurement model's convergence validity (anderson and gerbing, 1988). table 2 lists each factor's composite reliability (cr) and cronbach's alpha (cronbach, 1951). according to hair et al. (2011), all factors' cronbach's alpha and cr values are higher than the specified cut-off point of 0.70. as a result, the measurement model's reliability is confirmed. table 2. the analysis validity cronbach's alpha composite reliability (rho_a) composite reliability (rho_c) average variance extracted (ave) barriers to implementing esd 0.808 0.812 0.886 0.722 digital transformation 0.846 0.847 0.886 0.565 quality of esd 0.771 0.794 0.867 0.685 stakeholders' roles 0.873 0.91 0.911 0.719 source: calculated by the authors. the structural model is used to look at relationships among the latent variables after establishing the measurement model in the previous section. once more, sem is evaluated using the mlr method as rosseel (2012) advised for non-normal data. figure 9 shows the calculated sem. based on the sem model there can be tested the hypotheses proposed earlier. the first hypothesis is related to the association of digital transformation of education and esd. thus, hypothesis is supported with standard coefficient value of 0.16. h2, which refers to challenges and barriers to implementing esd being associated with quality of esd is also supported with standard coefficient value of 0.23. and finally, h3 about the stakeholders’ roles have a positive association with quality of esd is also confirmed with standard value of 0.35. this study employing the sem model allowed testing the proposed hypotheses related to the role of digital transformation in education toward promoting sustainable development. the results provide support for all three hypotheses. these findings contribute to our understanding of the factors influencing esd and highlight the potential of digital transformation to enhance sustainable development in education. 6. conclusions 83 www.virtual-economics.eu issn 2657-4047 (online) regina veckalne and tatjana tambovceva virtual economics, vol. 5, no. 4, 2022 in conclusion, education for sustainable development (esd) is essential for promoting sustainable development and influencing the attitudes and actions of current and future generations. for a significant impact, transformative learning methodologies must be adopted, which includes esd in various learning contexts, highlighting the need for multidisciplinary and integrative approaches that take into account various learning styles, backgrounds, and circumstances. for the purpose of creating and putting into practice transformative learning experiences that promote behavioural change, critical thinking, and social engagement, important stakeholders including educators, policymakers, and civil society organizations must be engaged. although there may be obstacles to implementing esd it is necessary to raise awareness of the topic. a brighter future for all depends on the appeal for a renewed commitment to esd as a critical tool in addressing the global sustainable development agenda. 7. acknowledgements the authors express their deep gratitude to the anonymous referees for their helpful comments and constructive suggestions. 8. presenting the sources of funding this research received no external funding references abad-segura, e., gonzález-zamar, m.-d., infante-moro, j. c., & ruipérez garcía, g. 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(2016). mapping research trends from 35 years of publications in distance education. distance education, 37(3), 245-269. кwilinski alex 7 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 2022 volume 5 number 4 methodology for determining the limit values of national security indicators using artificial intelligence methods yurii kharazishvili and aleksy kwilinski abstract. applying artificial intelligence methods, the paper frames the algorithm structure and software for the formalized determination of the type of distribution (automatic classification) of the probability density function and the vector of limit values by justifying theoretically security gradations and determining quantitatively security indicators. the methodological basis of the research is the applied systems theory, statistical analysis, and methods of artificial intelligence (cluster analysis). the study of the approaches applied showed the absence of a theoretical basis for determining security gradations and the absence of their theoretical quantitative justification. the theoretical basis for determining security gradations is the concept of an extended "homeostatic plateau", which connects three levels of security in both directions: optimal, crisis, and critical with spheres of positive, neutral and negative feedback. to determine the bifurcation points (vector of limit values), the “tcriterion” method is used, which consists in constructing the probability density function of a “benchmark” sample, determining whether it belongs to the type of distribution with the calculation of statistical characteristics (mathematical expectation, mean square deviation, and asymmetry coefficient) and formalized calculation of the vector of limit values for characteristic types of distribution (normal, lognormal, exponential). to solve the problem of recognising (automatic classifying) the type of distribution of probability density functions of security indicators, artificial intelligence methods are used, namely, a discriminant method from the class of cluster analysis methods using quantitative and qualitative metrics: euclidean distance, manhattan metric and recognition by characteristic features. to digitize the determination of the vector of safety indicators limit values, an algorithm structure and software in the c++ programming language (version 6) have been developed, which ensures full automation of all stages of the algorithm and the adequacy of recognising graphic digital data with a predetermined number of clusters (types of distribution). a distinctive feature of the proposed method of formalized determination of the security indicators limit values is a complete absence of subjectivity and complete mathematical formalization, which significantly increases the speed, quality and reliability of the results obtained when evaluating the level of sustainable development, economic security, national security or national stability, regardless of the level of a researcher's qualification. keywords: national security, homeostatic plateau, safety indicators, limit values, distribution types, automatic classification, artificial intelligence jel classification: c00, c02, c18, c50, c61, f50, f52, h56, q01 http://www.virtual-economics.eu/ 8 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 authors: yurii kharazishvili institute of industrial economics, national academy of sciences of ukraine, kyiv, ukraine; the national institute of strategic studies, kyiv, ukraine e-mail: yuri_mh@ukr.net https://orcid.org/0000-0002-3787-1323 aleksy kwilinski department of management, faculty of applied sciences, wsb university, dabrowa gornicza, poland e-mail: a.kwilinski@london-asb.co.uk https://orcid.org/0000-0001-6318-4001 corresponding author citation: kharazishvili, y., & kwilinski, a. (2022). methodology for determining the limit values of national security indicators using artificial intelligence methods. virtual economics, 5(4), 7-26. https://doi.org/10.34021/ve.2022.05.04(1) received: april 6, 2022. revised: september 9, 2022. accepted: november 3, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ http://yuri_mh@ukr.net https://orcid.org/0000-0002-3787-1323 mailto:a.kwilinski@london-asb.co.uk https://orcid.org/0000-0001-6318-4001 https://creativecommons.org/licenses/by/4.0/ 9 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 1. introduction limit values of indicators of the state of various components of national security and sustainable development are the most important tool for analysis, forecasting and strategic planning of security development. in a more general case, the theory of security assumes knowledge and interrelationship of safe conditions for the functioning of various security objects: space, technical, economic, social and ecosystems, without knowledge of which it is impossible to protect the vital interests of security objects. "the understanding of these dependencies led to the advancement of the anthropic principle in science and philosophy one of the principles of modern cosmology, which claims that the world's physical constants are optimally appropriate for the emergence of the biosphere and the beginning of sociogenesis” (kachinskyi, 2013). an interesting paradoxical explanation of the anthropic principle is given by kazyutinsky and balashchev (1989) "the presence of life, of which we are a representative, imposes a number of very strong restrictions on the properties of the universe." or "the universe cannot be other than it is, since we exist", which should be understood not as the possibility of human intelligence to influence the universe, but as the impossibility of the emergence and existence in the universe of intelligence, whose properties would be different. the emergence of a new paradigm of social development – sustainable development – prompted an active search for national approaches to its management, which resulted in conceiving a number of projects on conceptions of sustainable development (butlin, 1987; daly & townsend, 1993; johannesburg declaration on sustainable development, 2002; undp, 2012). on the one hand, thanks to the latest technologies and innovations, the production process becomes more efficient, thus enhancing the countries' competitiveness and reducing their vulnerability due to market fluctuations. on the other hand, economic growth entails an increase in the number of resources, materials and fossil fuels used, which leads to environmental pollution and degradation, especially in low-income countries. therefore, if countries do not take steps in all three directions to support economic growth, promote social development and strive for environmental sustainability – and to reach compromise solutions among them, then it is unlikely that such countries will advance far on the path to sustainable industrial development, regardless its current level. such a conception is directly consistent with the interpretation of security development. in addition, knowledge of the safe conditions for the existence of the ecosystem provides a number of more important functions – monitoring the state of the studied system in comparison with the limit values allows evaluating adequately the current state, setting goals, strategizing and determining objectively the effectiveness of the actions of governments and authorities. determining the boundaries of safe existence is the most important stage of determining the level of security. a systematic study of the problem of sustainable development in the security dimension is impossible without determining the limits of the safe conditions for the system's vital functions, without knowing which it is impossible to protect the vital interests of security objects. therefore, determining the limit values of safety indicators is very closely related to http://www.virtual-economics.eu/ 10 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 the concept of dynamic stability of the economic system and its individual components or to the mechanism of homeostasis. many studies are limited to calculating the integral index of the security object without comparison with the vector of limit values, which does not make any sense and only determines their increase/decrease in separate periods and can lead to a false conclusion regarding the maximization of the integral index. the interpretation of homeostasis as the system's ability to dynamic equilibrium for technical systems is somewhat different from economic systems. if the purpose is to ensure that the integral index of development is within threshold or optimal values, then this is accompanied by a violation of the equilibrium and the emergence of new production relations that permanently change the previous state of equilibrium. at the same time, the economic system moves into a new state endowed with better qualitative characteristics. that is, in the process of development, not only the structure of the system (composition of elements and connections) changes but also the relationships between the elements of the system and the mechanism of its functioning. therefore, homeostasis in the economic system determines not only the ability to dynamic stability for the existing mode of operation but also the ability to manage – the transition to a new state of economic equilibrium, that is, the controllability of the economic system. therefrom goes the importance of scientifically based determination of limit values of safety indicators for safety management. the most common practice of their determination is an analogue approach and various expert and point estimates, target and legally established normative values, as well as recommendations and resolutions of authoritative international and european organizations (van kampen, et al., 2014; reiman & pietikäinen, 2010; araujo et al., 2009). so, it can be stated that there are no formalized approaches to scientifically based determination of limit values of safety indicators yet. the determination of limit values during integral evaluation varied from their complete disregard (state statistics service of ukraine, 2003) to scalar (no more or no less) and vector (ministry of economic development and trade of ukraine, 2013) with five ranges below the optimal values, i.e., exceeding the optimal values up to the upper threshold and critical values is not taken into account at all. moreover, all limit values are determined by experts, and the ranges are equal (0.2 each), which is unlikely in reality. in general, the following approaches to determining the limit values of safety indicators can be defined (kachinskyi, 2013): 1. heuristic methods: snowball method, analogy method, calibration method. 2. stochastic methods: diagnostic method (cluster analysis, fuzzy set theory method, t-test method, logistic regression method). 3. analytical methods: the ahiezer-holtz method, methods of information theory, and the method of the "golden section" rule. 4. methods of nonlinear dynamics (wavelet analysis). heuristic methods are mainly based on expert, subjective estimates, which undoubtedly reduces the practical and scientific value. therefore, they can be used in the case when statistical information is unreliable, absent or available in limited quantities; part of the http://www.virtual-economics.eu/ 11 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 information is of a qualitative nature; the complexity of the task and resource limitations do not allow experts to independently collect and summarize all the necessary information; other methods cannot be used for some reason. analytical methods and methods of nonlinear dynamics are too general and need to be improved in each practical case, besides, it is not about determining the vector of limit values. the main disadvantages of the used approaches are: a lack of a theoretical basis for determining security gradations; a lack of their theoretical quantitative justification. in the authors’ opinion, stochastic methods (diagnosis) have a good theoretical basis and practical significance in processing statistical data, the prospect of further development and are most suitable for formalization and universal application. in view of this, the purpose of the article is to develop a methodology and software for scientific substantiation of the vector of limit values of national security indicators using artificial intelligence methods. 2. materials and methods the concept of gradations of security should be connected with the concept of “homeostatic plateau”, which was first proposed by gigch (1978) in the applied theory of systems and included the plateau itself and the destruction of the system from both sides. the concept of “extended homeostatic plateau”, which was proposed in (kharazishvili et al., 2020), additionally contains ranges of threshold and critical values with a region of neutral and positive feedback, staying in which is dangerous for the system. moreover, the change in the type of feedback does not occur immediately upon crossing the sphere, but at first the existing type of communication decreases exponentially, and then another type of communication grows, also exponentially (figure 1). figure 1. extended homeostatic plateau of the dynamical system source: (kharazishvili, 2019) http://www.virtual-economics.eu/ 12 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 thus, the number of safety gradations (critical, threshold, optimal) on both sides of the homeostatic plateau is associated with the concept of an extended "homeostatic plateau" and spheres of positive, neutral, and negative feedback. that is why it is necessary to define a vector of limit values for each indicator: lower critical (𝑥𝑐𝑟 𝑙 ); lower threshold (𝑥𝑡ℎ𝑟𝑒𝑠 𝑙 ); lower optimal; (𝑥𝑜𝑝𝑡 𝑙 ); upper optimal;(𝑥𝑜𝑝𝑡 𝑢 ); upper threshold; (𝑥𝑡ℎ𝑟𝑒𝑠 𝑢 ); upper critical (𝑥𝑐𝑟 𝑢 ). a pair of optimal values defines a homeostatic plateau, within which the best conditions for system functioning and negative feedback exist. that is why, the average value between two optimal values (lower and upper optimal) – the middle of the "homeostatic plateau" can be considered a criterion for achieving the level of sustainable development for both indicators and integral indices. quantitative values of security gradations (bifurcation points) are associated with the extension of the "t-criterion" method through the construction of the probability density function, determination of belonging to the type of distribution with the calculation of the statistical characteristics of the "benchmark" sample (mathematical expectation 𝜇, mean square deviation 𝜎, and coefficient of asymmetry 𝑘𝑎𝑠) and formalized determination of bifurcation points for characteristic types of distribution. from all the variety of types of probability density functions for all studied indicators of sustainable development (> 300), it is possible to distinguish functions with a characteristic type of distribution: normal, lognormal and exponential (figure 2). a b c figure 2. typical types of probability density function indicators source: (kharazishvili, 2019). 0 0,05 0,1 0,15 0,2 0,25 0,3 73 74 75 76 77 78 79 80 81 probability density function mo=77,15; sigma=1,394; k_as=1,642; t=2,6. mo sigma mo + sigma mo + t * sigmamo t *sigma 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 0,4 0 5 10 15 20 25 30 35 40 mo=20,54 sigma=3,88 k_as=1,844 t=2,5882. probability density function 0 0,1 0,2 0,3 0,4 0,5 0,6 1 1,5 2 2,5 3 3,5 4 4,5 mo=1,472; sigma=0,5279; k_as=2,3196; t=2,5882. probability density function http://www.virtual-economics.eu/ 13 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 formulas for calculating the vector of limiting values are derived for characteristic types of distribution (table 1) (kharazishvili et al., 2021). moreover, a "benchmark" sample is formed for each indicator from the list of countries that have the best values of the relevant indicators and can be a promising model for the country under study. table 1. formalized threshold vector values type of indicator probability density function lower threshold lower optimal value upper optimal value upper threshold normal 𝜇 − 𝑡 × 𝜎 𝜇 − 𝜎 𝜇 + 𝜎 𝜇 + 𝑡 × 𝜎 lognormal (tail right) 𝜇 − 𝑡 × 𝜎/𝑘𝑎𝑠 𝜇 − 𝜎/𝑘𝑎𝑠 𝜇 + 𝜎 𝜇 + 𝑡 × 𝜎 lognormal (tail left) 𝜇 − 𝑡 × 𝜎 𝜇 − 𝜎 𝜇 + 𝜎/𝑘𝑎𝑠 𝜇 + 𝑡 × 𝜎/𝑘𝑎𝑠 exponential (tail right) 𝜇 − 𝜎/𝑘𝑎𝑠 𝜇 𝜇 + 𝜎 𝜇 + 𝑡 × 𝜎 exponential (tail left) 𝜇 − 𝑡 × 𝜎 𝜇 − 𝜎 𝜇 𝜇 + 𝜎/𝑘𝑎𝑠 source: (kharazishvili et al., 2021). the calculated values 𝜎 of the "benchmark" sample are multiplied by the value of the confidence coefficient t (takes into account the dependence between the confidence level and the width of the evaluation interval), which is taken from the student's t-distribution tables (turner, 1970). the calculated values 𝜎 of the "benchmark" sample are multiplied by the value of the confidence coefficient t (takes into account the dependence between the confidence level and the width of the evaluation interval), which is taken from the student's t-distribution tables (turner, 1970). the t value for a given confidence level is determined not by the sample size, but by a number known as the degree of freedom. when calculating the reduced vector of limit values (table 1), a confidence level of probability 0.98 or 0.99 can be used. then, for calculating safety indicators' critical values (lower critical, upper critical) there is a confidence level of probability 0.998-0.999 for threshold value formulas. for the exponential type of distribution, in the absence of the t parameter, the minimum value of the indicator (tail right) or the maximum (tail left) is chosen as critical. 3. theory as said earlier, stochastic methods of diagnosis (cluster analysis and the “t-criterion” method) are the most promising in formalizing the definition of the limits of dynamic systems' safe existence. therefore, the unsolved problem of the complete digitalization of the definition of the safe existence limits is the automatic classification (pattern recognition) of the type of distribution of the probability density function of a given sample, for the solution of which the most suitable are methods of artificial intelligence (nilsson, 2009; kornieiev, 2016; bonabeau et al., 1999; russell & norvig, 2009; bogachov et al., 2020; canny, 1986; coban et al., 2022; drozdz et al., 2020a; 2020b; dzwigol et al., 2020; huang et al., 2022; kuzior et al., 2021; kuzior & kwilinski, 2022; kwilinski & kuzior, 2020; kwilinski, 2018; 2019; kwilinski et al., 2019; 2020; 2021a; 2021b; lecun et al., 2015; lyulyov, 2021a; melnychenko, 2020; miśkiewicz, 2018; http://www.virtual-economics.eu/ 14 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 2021a; 2021b; 2022; miśkiewicz et al., 2021; 2022; saługa, 2020; schmidhuber, 2015; shafait et al., 2021; szczepańska-woszczyna & gatnar, 2022; tkachenko et al., 2019), in particular cluster analysis (blashfield & aldenderfer, 1988; hu & winsch, 2005; hartigan, 1975; standford university, 2016; tryon, 1939). it should be noted that scholars (petroye et al., 2020; pimonenko et al., 2021; melnyk et al., 2018; lyulyov et al., 2021b; 2015) outline that artificial intelengence and digital technologies allow achieve synergy economic, ecological and social effects at all levels and sectors. a meaningful definition of artificial intelligence for this study was provided by nils j. nilsson (2009), “artificial intelligence is that activity devoted to making machines intelligent, and intelligence is that quality that enables an entity to function appropriately and with foresight in its environment.” cluster analysis (or automatic classification, pattern recognition) is one of the effective methods of deciding whether an object belongs to one of the previously selected classes of objects (image) and refers to statistical processing, as well as a wide class of learning tasks without a teacher, in this case, a "benchmark" sample of some indicator values to one of the reference types of distribution: normal, lognormal, exponential. the recognition process is based on comparing the features and characteristics of the object (sample) under investigation with the features and characteristics of other known objects, as a result of which a conclusion is made about the most likely correspondence between them. to determine the correspondence (highest likelihood) of the constructed "benchmark" probability density function to the "reference" as a metric formulas for evaluating the degree of closeness, the characteristics of plausibility and characteristic features are selected, namely: 1. euclidean distance (quantitative feature): 𝑑𝑘 = [∑ (𝑥𝑖 − 𝑥𝑖𝑘) 2𝑁 𝑖=1 ] 1 2 (1) where n is the number of benchmark sample points; k is the number of clusters (types of distribution). 2. manhattan metric (quantitative feature): 𝑑𝑘 = ∑ |𝑥𝑖 − 𝑥𝑖𝑘| 𝑁 𝑖=1 (2) 3. rodgers-tanimoto similarity measure recognition by characteristic features (qualitative feature): a normal type of distribution: a) clearly expressed maximum (not at the edges of the sample); b) the same number of points ( ) with smaller ordinates to the left and right of the maximum point; c) the distance from the maximum point to the left and right is approximately the same to the extreme points ( ). a lognormal type of distribution: a) clearly expressed maximum (not at the edges of the sample); 1 %2010  http://www.virtual-economics.eu/ 15 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 b) to the left (right) of the maximum point there should be at least 1-2 points with smaller ordinates; c) most of the points to the right (left) have a decreasing ordinate from the maximum; d) the distance from the maximum point to the extreme points is significantly different (> 2). an exponential type of distribution: clearly expressed maximum at the extreme left (right) point; most points to the right (left) have a decreasing ordinate. therefore, one of the well-known clustering methods, namely discriminant analysis, is used to perform automatic classification of the distribution type of the “benchmark” sample, which is used to divide or assign the “benchmark” sample (i.e., “discrimination”) to one of the a priori specified clusters (types of distribution). 4. calculation since part of the indicators of the air transport sustainable development depends on the gdp of ukraine, there should be made a forecast of the real gdp, assuming the maximum of all expert estimates (-20; -45%) of a drop of 45% and possible scenarios of its recovery (figure 3). figure 3. the structure of the digitization program to determine the vector of the limit values of safety indicators source: own elaboration. reading the current sample from the source file statist.tab calculating the dimensionality for the sturges probability density function:𝑛 = 1 + 3.322 𝑙𝑔 𝑁 and pitch ℎ = 𝑥𝑚𝑎𝑥−𝑥𝑚𝑖𝑛 𝑛 alignment of the dimensionality of the "benchmark" table of the probability density function with the "reference" calculating statistical characteristics of the sample: 𝑚𝑜,  𝜎, 𝑘𝑎𝑠 forming the probability density function table for a given sample: 𝑊(𝑥) determining the type of distribution by the discriminant method according to the criteria of plausibility analogous to the euclidean distance criterion analogous to the manhattan metric criterion by the criterion of characteristic features criteria analysis and automatic classification of distribution type by principle: 2 of 3 calculating the vector of limit values (upper and lower) according to the defined type of distribution: critical, threshold, optimal x.tab completion of the program http://www.virtual-economics.eu/ 16 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 from this graph, it follows that under the scenario of 2.3% annual growth, reaching the level of real gdp of the pre-war period (2021) is possible only in 2048, so this scenario will not be considered. having set the forecast values of the gdp deflator, there will be obtained the values of the nominal gdp of ukraine, which, in combination with official statistical data (2010-2021) and model calculations, make it possible to obtain the forecast values of the indicators of the sustainable development of air transport at the end of 2022. below there is given a structure of the digitization algorithm for determining the vector of limit values of safety indicators (figure 3). reading of the "benchmark" sample from the source file: for each indicator, a "benchmark" sample is formed, which has values that correspond to the best values of developed countries and is considered a benchmark. the values of the "benchmark" sample are recorded in the file "statist. tab" 8 numbers in a line, separated by a space. calculating the dimension for the probability density function according to (sturges, 1926): for a given sample, there is applied the empirical rule for determining the optimal number of intervals into which the observed range of a random variable change is divided when constructing a histogram of its distribution density (3): 𝑛 = 1 + 3,322 𝑙𝑔 𝑁 (3) where n is the number of intervals; n is the size of the sample. this leads to the step of constructing the probability density function (4). if the dimensions of the constructed and reference tables do not match, their dimensions are automatically aligned for further classification. ℎ = 𝑥𝑚𝑎𝑥−𝑥𝑚𝑖𝑛 𝑛 (4) where 𝑥𝑚𝑎𝑥, 𝑥𝑚𝑖𝑛 are the maximum and minimum value of the "benchmark" sample. making the table of the probability density function: for a given sample, the number of hits of a random variable in a given range is calculated with a step and the probability of this hit as the ratio of the number of hits in a specific range to the total number of observations (sample size n). calculating statistical characteristics: statistical characteristics of the "benchmark" sample are calculated: mathematical expectation, mean square deviation and coefficient of asymmetry for further calculation of the limits of dynamic systems' safe existence (vector of limit values). determining the type of distribution by the discriminant method according to the criteria of plausibility: there is carried out the automatic classification of the probability density function according to one of the types of distribution: normal, lognormal, exponential, using artificial intelligence methods, namely: by the discriminant method of cluster analysis according to three criteria: 1) an analogue of the euclidean distance (quantitative feature) (1); h h http://www.virtual-economics.eu/ 17 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 2) an analogue of the manhattan metric (quantitative feature) (2); 3) an analogue of the rogers-tanimoto similarity measure – recognition by characteristic features (qualitative feature). analysis of criteria and automatic classification of the distribution type according to principle 2 out of 3: the conclusion of the automatic classification software is based on the resulting criterion – the match of distribution types according to at least two of the three criteria. the smallest value of the plausibility criteria for the three types of distribution determines its affiliation. the value of the variable distribution determines the type of distribution, and the variable subtype determines the subtype of the distribution: 𝐷𝑖𝑠𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑙𝑎𝑤 𝑡𝑦𝑝𝑒 (𝑠𝑢𝑏𝑡𝑦𝑝𝑒) = [ 0; −𝑁𝑜𝑟𝑚𝑎𝑙; 1; −𝐿𝑜𝑔𝑛𝑜𝑟𝑚𝑎𝑙; 2; −𝐸𝑥𝑝𝑜𝑛𝑒𝑛𝑡𝑖𝑎𝑙 ] ( 0 − 1; 0; −𝑡𝑎𝑖𝑙𝑟𝑖𝑔ℎ𝑡; 1; −𝑡𝑎𝑖𝑙 𝑙𝑒𝑓𝑡; ) (5) for example, the value in the source file of the variable distribution law type is 1 (0) means that the type of distribution is "lognormal", tail to the right. calculating the vector of limit values (upper and lower) according to the defined type of distribution: defining the type of distribution in automatic mode makes it possible to calculate the vector of limit values according to table 1 formula. to check the adequacy of the calculations of the digitization model, there were selected some indicators of sustainable development which provide a full functional check of the developed model: the level of provision with own resources, % of total consumption; energy intensity of gdp, t.o.e./1000 us dollars; gdp per person, thousands of us dollars; energy consumption per 1 person, t.o.e. per year; final carbon content of energy, g co2 / mj; the level of co2 emissions per 1 gdp, kg/us dollars; investment level, % before release; life expectancy, years. the calculated probability density functions based on "benchmark" samples of the above indicators are presented in figure 4. presented in figure 4 the structure of the digitization software is implemented in the c++ programming language (version 6.0). http://www.virtual-economics.eu/ 18 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 a b с d e f g h fig. 4. probability density functions of sustainable development indicators source: own elaboration. -0,05 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 0,4 0,45 70 75 80 85 90 95 100 level of provision of own resources,% 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 0,4 0,45 0,05 0,1 0,15 0,2 0,25 0,3 energy intensity of gdp, tne/1000 dollars. 0 0,1 0,2 0,3 0,4 0,5 0,6 0 20 40 60 80 100 120 gdp per capita, thousand usd 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 0,4 0,45 0,5 2 3 4 5 6 7 8 9 energy consumption per 1 person, toe/year -0,1 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 40 50 60 70 80 90 final carbon intensity of energy, gco2e/mj 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 level of co2 emissions per 1 gdp, kg/usd 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 12 14 16 18 20 investment level, % of issue 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 70 72 74 76 78 80 82 life expectancy, years http://www.virtual-economics.eu/ 19 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 the results of calculations regarding the automatic classification of the distribution types of probability density functions of sustainable development indicators (economic, environmental and social security) prove the effectiveness of recognition according to the specified criteria (table 2). table 2. results of automatic classification of the distribution type of probability density functions indicators actual distribution type by criterion 1 by criterion 2 by criterion 3 resultant evaluation 1. the level of provision with own resources exponential, tail to the left confirmed confirmed confirmed three out of three 2. energy intensity of gdp exponential, tail to the right confirmed confirmed confirmed three out of three 3. gdp per person exponential, tail to the right confirmed confirmed confirmed three out of three 4. energy consumption per 1 person lognormal, tail to the right confirmed confirmed confirmed three out of three 5. final carbon content of energy lognormal, tail to the left confirmed confirmed confirmed three out of three 6. the level of co2 emissions per 1 gdp lognormal, tail to the right confirmed confirmed confirmed three out of three 7. investment level exponential, tail to the right confirmed confirmed confirmed three out of three 8. life expectancy normal confirmed confirmed lognormal, tail to the left two out of three source: own elaboration. the result of the digitalization software for determining the limits of the dynamic systems' safe existence is the calculation of the vector of the limit values of the safety indicators (table 3). table 3. the results of digitalization of determining the limits of the safe existence of dynamic systems indicators lower critical lower threshold lower optimal upper optimal upper threshold upper critical 1. the level of provision with own resources 72.27 80.7 87.6 96.1 108.0 115.3 2. energy intensity of gdp 0.08 0.0962 0.1336 0.1866 0.26 0.3024 3. gdp per person 10.36 15.72 26.5 47.2 75.74 92.95 4. energy consumption per 1 person 1.67 2.315 3.428 5.6 7.492 8.58 5. final carbon content of energy 45.38 52.2 63.8 85.48 103.8 114.6 6. the level of co2 emissions per 1 gdp 0.1 0.1788 0.3034 0.4973 0.7644 0.919 7. investment level 13 13.7 14.5 16.0 18.2 19.5 8. life expectancy 70.2 71.7 74.4 78.3 80.9 82.4 source: own elaboration. http://www.virtual-economics.eu/ 20 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 such a definition of the vector of limit values is typical for stimulator indicators, but for destimulator indicators, the order of values of the components of the vector is reversed. given that indicators 2, 5 and 6 (table 3) are de-stimulators, that is, their reduction is desirable, the final table for further calculations of integral indicators looks as follows (table 4). table 4. the results of digitalization of determining the limits of the safe existence of dynamic systems, taking into account the type of indicator (stimulator/de-stimulator) indicators lower critical lower threshold lower optimal upper optimal upper threshold upper critical 1. the level of provision with own resources 72.27 80.7 87.6 96.1 108.0 115.3 2. energy intensity of gdp 0.3024 0.26 0.1866 0.1336 0.0962 0.08 3. gdp per person 10.36 15.72 26.5 47.2 75.74 92.95 4. energy consumption per 1 person 1.67 2.315 3.428 5.6 7.492 8.58 5. final carbon content of energy 114.6 103.8 85.48 63.8 52.2 45.38 6. the level of co2 emissions per 1 gdp 0.919 0.7644 0.4973 0.3034 0.1788 0.1 7. investment level 13 13.7 14.5 16.0 18.2 19.5 8. life expectancy 70.2 71.7 74.4 78.3 80.9 82.4 source: own elaboration. scientifically based determination of the limits of the safe existence of dynamic systems during their integral evaluation makes it possible to adequately identify the safety level by comparing integral indices with integral limit values. 5. conclusions and discussion knowledge of the safe conditions for the existence of the ecosystems provides a number of more important functions: monitoring the state of the studied system in comparison with the limit values allows evaluating adequately the current state, the level of safety/danger, setting goals, strategizing and objectively determining the effectiveness of the actions by the government and authorities. determining the limits of safe existence is the most important stage of determining the level of security. a systematic study of the problem of sustainable development from the point of view of security should include the definition of the limits of safe conditions for the life of the system, without knowing which it is impossible to protect the vital interests of security objects. therefore, the definition of limit values should be connected with the concept of dynamic stability of the economic system and its individual components or with the mechanism of homeostasis. without such a comparison, there will be the dynamics of integral indices of sustainable development, which will determine their increase/decrease in separate periods, which may lead to a false conclusion regarding the maximization of the integral index. http://www.virtual-economics.eu/ 21 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 in the vast majority of publications, expert evaluations are used to determine safety gradations and limit values when assessing the safety level, which introduces a certain amount of subjectivity, does not exclude fundamental errors, and undoubtedly reduces the scientific and practical value of the obtained results. application of the method of expert evaluations in the general case means a "dead end" situation, or the inability to offer something adequate. an analysis of the approaches used to determine the limits of the safe existence of dynamic systems was carried out, including the following methods: heuristic, stochastic, analytical, and nonlinear dynamics. among the main shortcomings of the used approaches is the lack of a theoretical basis for determining security gradations and the lack of their theoretical quantitative justification. the most promising are stochastic methods, which have a good theoretical basis and practical significance in processing statistical data, the prospect of further development and are most suitable for formalization and universal application. therefore, it is proposed to solve the identified problems by formalized mathematical methods: to determine security gradations there is used the concept of an extended "homeostatic plateau", which provides for three levels of security in both directions: optimal ("green" zone), crisis ("orange" zone), critical ("red" zone), which define areas of positive, neutral and negative feedback; to determine the bifurcation points (vector of limiting values), there is used the "tcriterion" method, which consists in constructing the probability density function of the "benchmark" sample, determining whether it belongs to the type of distribution with the calculation of statistical characteristics (mathematical expectation, root mean square deviation, and asymmetry coefficient) and formalized calculation of the vector of limiting values for characteristic types of distribution (normal, lognormal, exponential); to solve the problem of recognition (automatic classification) of the type of distribution of probability density functions of security indicators, there are used artificial intelligence methods, namely the discriminant method from the class of cluster analysis methods using quantitative and qualitative metrics: euclidean distance, manhattan metric and recognition by characteristic features; for the digitalization of determining the vector of limit values of safety indicators, there have been developed an algorithm structure and a program in the c++ programming language (version 6), which ensures full automation of all stages of the algorithm and the adequacy of recognising graphic digital data with a predetermined number of clusters (types of distribution). for each indicator, the "benchmark" sample is formed from the dynamics of similar indicators of economically developed countries, which can be considered a model for the country under study. that is, the process of determining the benchmark sample is similar to the construction of a hypothetical country with the best values of the relevant security indicators. a distinctive feature of the proposed method of formalized determination of the limit values of security indicators is the complete absence of subjectivity and complete mathematical formalization, which significantly increases the speed, quality and reliability of the results http://www.virtual-economics.eu/ 22 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili and aleksy kwilinski virtual economics, vol. 5, no. 4, 2022 obtained when assessing the level of sustainable development, economic security, national security or national stability, regardless of the level of the researcher's qualification. 6. acknowledgements the authors are very grateful to the anonymous referees for their helpful comments and constructive suggestions. 7. presenting the sources of funding this research received no 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(2014). the value of safety indicators. spe economics and management, 6(03), 131–140. https://doi.org/10.2118/164954-pa http://www.virtual-economics.eu/ https://zakon.rada.gov.ua/rada/show/v0114202-03#text https://doi.org/10.1080/01621459.1926.10502161 https://doi.org/10.23762/fso_vol10_no3_6 https://doi.org/10.1515/mspe-2019-0020 https://doi.org/10.1515/mspe-2019-0020 https://www.undp.org/turkiye/publications/future-we-want-united-nations-conference-sustainable-development-rio20-rio-de-janeiro-brazil-20-22-june-2012-outcome-conference https://www.undp.org/turkiye/publications/future-we-want-united-nations-conference-sustainable-development-rio20-rio-de-janeiro-brazil-20-22-june-2012-outcome-conference https://doi.org/10.2118/164954-pa кwilinski alex 7 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 2022 volume 5 number 3 strategic scenarios of the post-war recovery of the aviation transport sustainable development: the сase of ukraine yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna abstract. the state and strategic scenarios to recover the sustainable development of air transport in ukraine in the post-war period are studied. research is fulfilled with the scientific justification of quantitative indicators and macro-indicators of maintaining the trajectory of sustainable development in the medium-term perspective. the starting point of strategizing is the concept of sustainable development in the safety dimension as a management construct that contains a general systemic view of the ways to transfer from the current state of the management object to the desired one and includes the stages of identification and strategizing. identification involves an integral convolution with dynamic weighting coefficients and a formalized justification of the limits of safe existence. a new methodology is used for strategizing, which, unlike classical forecasting methods (the past determines the future), uses the principle "the future is determined by the trajectory into the future" and is based on the method of adaptive regulation from the management theory. according to the defined methodology, three strategic recovery scenarios were developed with the annual rates of growth of real aviation transport: realistic – 4.5%; optimistic – 7.2% and the scenario of entering the optimal zone of the eu countries – 10.4%. the resulting dynamics of components, indicators and macro indicators is, in fact, a strategic plan for the post-war recovery of the economy and entering the path of sustainable development. threats are identified and institutional measures are proposed for airlines and national systems of airports and airfields, air navigation services, aviation industry, aviation education and science of ukraine. the strategic orientations of the environmentalization of air transport of ukraine in the post-war period and the strategic priorities of the recovery of the air transport infrastructure were formulated, and the necessity to pursue a course towards carbon neutrality was proved. keywords: aviation transport, sustainable development, security dimension, strategic management, environmental strategy jel classification: c18, c61, q01 http://www.virtual-economics.eu/ 8 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 authors: yurii kharazishvili institute of industrial economics, national academy of sciences of ukraine, kyiv, ukraine; the national institute of strategic studies, kyiv, ukraine e-mail: yuri_mh@ukr.net https://orcid.org/0000-0002-3787-1323 aleksy kwilinski department of management, faculty of applied sciences, wsb university, dabrowa gornicza, poland e-mail: a.kwilinski@london-asb.co.uk https://orcid.org/0000-0001-6318-4001 dmytro bugayko national aviation university, kyiv, ukraine e-mail: bugaiko@nau.edu.ua https://orcid.org/0000-0002-3240-2501 mariia hryhorak v. m. glushkov institute of cybernetics, national academy of sciences of ukraine, kyiv, ukraine e-mail: m_grigorak@ukr.net https://orcid.org/0000-0002-5023-8602 veronika butorina kamianets-podilskyi ivan ohiienko national university, kamianets-podilskyi, ukraine e-mail: butorina@kpnu.edu.ua https://orcid.org/0000-0002-6657-5718 iryna yashchyshyna kamianets-podilskyi ivan ohiienko national university, kamianets-podilskyi, ukraine e-mail: yarinaeco@gmail.com https://orcid.org/0000-0002-9107-7980 citation: kharazishvili, y., kwilinski, a., bugayko, d., hryhorak, m., butorina, v., & yashchyshyna, i. (2022). strategic scenarios of the post-war recovery of the aviation transport sustainable development: the case of ukraine. virtual economics, 5(3), 7-30. https://doi.org/10.34021/ve.2022.05.03(1) received: january 21, 2022. revised: march 9, 2022. accepted: june 12, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:yuri_mh@ukr.net https://orcid.org/0000-0002-3787-1323 mailto:a.kwilinski@london-asb.co.uk https://orcid.org/0000-0001-6318-4001 mailto:bugaiko@nau.edu.ua https://orcid.org/0000-0002-3240-2501 mailto:m_grigorak@ukr.net https://orcid.org/0000-0002-5023-8602 mailto:butorina@kpnu.edu.ua https://orcid.org/0000-0002-6657-5718 mailto:yarinaeco@gmail.com https://orcid.org/0000-0002-9107-7980 https://creativecommons.org/licenses/by/4.0/ 9 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 1. introduction aviation transport is an open system influenced by many factors: social (arefieva et al., 2021; kharazishvili et al., 2020), economic (coban et al., 2022a), ecological (chygryn et al., 2020), financial (moskalenko et al., 2022; miśkiewicz et al., 2022), government (nawawi et al, 2022; miskiewicz, 2022), and technological (vaníčková & szczepańska-woszczyna, 2020), both related and unrelated. in many countries, aviation plays a crucial role in facilitating economic development, inclusive growth, and international trade. however, the aviation industry is also one of the largest emitters of greenhouse gases, contributing to global warming and climate change (polcyn, 2022). this has led to growing concerns about the sustainability of aviation and its long-term impact on the environment. to address these challenges, aviation stakeholders are increasingly focusing on innovative solutions that can help reduce the industry's environmental footprint while supporting economic growth and social development (borodin et al., 2021). in addition to investing in new technologies, aviation stakeholders are also exploring ways to improve air traffic management systems, reduce waste and carbon emissions, and promote more sustainable practices throughout the industry (miśkiewicz 2021a; coban et al., 2022b; miskiewicz, 2022). collaboration between all stakeholders is key to ensuring that aviation transport supports sustainable development in a balanced and inclusive direction (oláh et al., 2021). the full-scale military aggression of the russian federation against ukraine from the first minute dealt a devastating blow to the activity of the aviation transport of ukraine as a whole and the activity of all its components: airlines, airport and airfield systems, air traffic control systems, aviation industry systems of ukraine, aviation systems education and science. the industry faced unforeseen force majeure challenges and threats to its existence. under such conditions, the development and substantiation of strategic scenarios for the sustainable development of air transport in ukraine in the conditions of the post-war economic recovery acquire undeniable relevance and is of practical importance for the further development of both air transport and the national economy, as a whole. 2. the study area developing strategic scenarios for a country's sustainable development is crucial to achieving long-term sustainability goals (yang et al., 2021; banasik et al., 2022). the outputs of the studies (wróblewski et al., 2018; kuzior et al., 2021a; kwilinski et al., 2022b) show that strategic scenarios help to identify potential challenges and opportunities for sustainable development and provide a framework for decision-making that considers multiple factors, including environmental, social, and economic considerations. dzwigol et al. (2020a) and drożdż et al. (2021) note that strategic scenarios help policymakers and other stakeholders to identify critical areas of focus for sustainable development, such as improving access to clean energy, reducing greenhouse gas emissions, and promoting sustainable land-use practices. according to dementyev and kwilinski (2020) and dementyev et al. (2021), by analyzing various scenarios, decision-makers can evaluate the potential impact of different policy http://www.virtual-economics.eu/ 10 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 interventions and determine the best course of action to achieve sustainable development goals. in the studies (kwilinski, 2019; bogachov et al., 2020; cyfert et al., 2021; chen et al., 2021), the authors analysed post-war recovery efforts in several conflict-affected countries and identified the need for a strategic approach to sustainable development that considers the long-term impacts of reconstruction and development programs. they found that a lack of coordination between different actors and limited resources often led to ineffective recovery efforts that did not address underlying structural issues or promote sustainable development. similarly, in the studies (miśkiewicz 2019; lyulyov et al. 2021a; miśkiewicz, 2021a; saługa et al., 2021), the authors examined the impact of post-war recovery efforts on environmental sustainability. they found that while reconstruction and development programs had led to economic growth and improved social conditions, they had also contributed to environmental degradation and the displacement of indigenous communities. the studies (dzwigol et al, 2019; dzwigol, 2020; dzwigol & dzwigol-barosz, 2020; dzwigol et al, 2020b; dzwigol, 2021) have emphasized the need for a strategic approach to sustainable development that considers the long-term impacts of recovery efforts on social, economic, and environmental factors. for example, in a study by dzwigol et al. (2020b), the authors developed a strategic scenario analysis framework to identify key areas of focus for sustainable development in post-conflict regions. they found that this approach could help to ensure that recovery efforts were inclusive, equitable, and sustainable over the long term. moreover, studies (kwilinski, 2018; miśkiewicz, 2018; shafait et al., 2021; abazov, 2021; kuzior et al., 2022) have highlighted the importance of incorporating environmental, educational, and social considerations into postwar recovery. considering the continuation of the military actions of the russian federation (rf) against ukraine, forecasts of the economic decline are crucial for understanding the current state and developing strategic scenarios for its recovery. even after five months of the rf's war against ukraine, forecast estimates of foreign and domestic experts regarding the world's economies, the rf, and ukraine appeared, ranging from -20% to -45%. all forecasts of ukraine's development today are highly speculative, even taken from the ceiling (ash, 2022). still, they are needed to understand the approximate depth of the fall and to substantiate the indicators and macro-indicators of the future economic policy of restoring the post-war economy of ukraine. the main proposals declare the principles of economic recovery. still, they are needed to understand the approximate depth of the fall and to substantiate the indicators and macro-indicators of the future economic policy of restoring the post-war economy of ukraine. the main proposals declare the principles of economic recovery. in the studies (international civil aviation organization, 2017; frenkel, 2017; tkachenko et al., 2019; kim et al., 2019; ellis, 2020), the authors elaborate on the main strategic planning tool, swot analysis, based on the current state of the aviation industry, studying its ecosystem, expert, and passenger surveys to identify strengths and weaknesses, opportunities and threats. pereira et al. (2022), regarding the comprehensive evaluation of the impact of military operations, run on the territory of ukraine on the ecological state, is also known. http://www.virtual-economics.eu/ 11 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 an unresolved part of research is the development of a strategy for the sustainable development of aviation transport of ukraine in the post-war conditions, as a country that has a full cycle of development, production and operation of aviation equipment, as well as an extensive system of training and retraining of aviation personnel. therefore, the purpose of the article is to develop strategic scenarios for the post-war recovery of air transport in ukraine with scientific justification of quantitative indicators and macro-indicators of maintaining the trajectory of sustainable development in the medium-term perspective. 3. materials and methods the starting point for devising strategic scenarios for the post-war restoration of aviation transport is the concept of sustainable development in the safety dimension as a management structure containing a general systemic view of the ways to transfer from the current state of the management object to the desired one (kharazishvili et al., 2021) and includes the stages of identification and strategizing. identification of the current state of sustainable development in the safety dimension is a necessary stage and includes determining the structure of the research object, forming a system of indicators, choosing the form of an integral index (multiplicative) (dementyev et al., 2021; kharazishvili et al., 2021a; kharazishvili et al., 2021b): 𝐼𝑡 = ∏ 𝑧𝑖, 𝑡 𝑎𝑖𝑛 𝑖=1 ; ∑𝑎𝑖 = 1;𝑎𝑖 ≥ 0, (1) where 𝑧𝑖,𝑡 stands for normalized values of indicators; 𝑎𝑖 means dynamic weighting coefficients; 𝐼 is a serial number of the indicator; t is a time period; selection of the rationing method (hussain et al., 2021; kuzior et al., 2021b): for stimulants: 𝑧𝑖,𝑡 = 𝑥𝑖 𝑘𝑛,𝑡 , (2) for inhibitors: 𝑧𝑖,𝑡 = (𝑘𝑛,𝑡−𝑥𝑖) 𝑘𝑛,𝑡 ; , max,n t tk x , (3) where tnk , a normalization factor; scientific substantiation of dynamic weighting factors: based on a combination of the "principal components" and "sliding matrix" methods (kwilinski et al., 2020b; kwilinski et al., 2022a; kuzior et al., 2021b), which consists in successively shifting the matrix of the minimum required size over a period of time and calculating the weighting factors; scientific substantiation of the limits of safe existence – the vector of limit values is closely related to the concept of "extended homeostatic plateau," which has optimal (negative feedback), threshold (neutral feedback) and critical (positive feedback) spheres, which determines safety gradations on both sides of the "homeostatic plateau:" lower and upper critical, threshold and optimal, for which formulas for calculating the vector of limit values are proposed (table 1): http://www.virtual-economics.eu/ 12 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 table 1. formalized threshold vector values tipdf lt lov uov ut normal 𝜇 − 𝑡 × 𝜎 𝜇 − 𝜎 𝜇 + 𝜎 𝜇 + 𝑡 × 𝜎 lognormal (tail right) 𝜇 − 𝑡 × 𝜎/𝑘𝑎𝑠 𝜇 − 𝜎/𝑘𝑎𝑠 𝜇 + 𝜎 𝜇 + 𝑡 × 𝜎 lognormal (tail left) 𝜇 − 𝑡 × 𝜎 𝜇 − 𝜎 𝜇 + 𝜎/𝑘𝑎𝑠 𝜇 + 𝑡 × 𝜎/𝑘𝑎𝑠 exponential (tail right) 𝜇 − 𝜎/𝑘𝑎𝑠 𝜇 𝜇 + 𝜎 𝜇 + 𝑡 × 𝜎 exponential (tail left) 𝜇 − 𝑡 × 𝜎 𝜇 − 𝜎 𝜇 𝜇 + 𝜎/𝑘𝑎𝑠 note: tipdf – type of indicator probability density function; lt – lower threshold; lov – lower optimal value; uov – upper optimal value; ut – upper threshold source: (kharazishvili et al., 2021). the simultaneous integral convolution of indicators and their limit values makes it possible to change the level of sustainable development in the security dimension. the structure of sustainable development of air transport is presented in figure 1 and is described by 29 indicators, 7 of which are shadow indicators for model calculations (kharazishvili, 2017). moreover, each indicator is assigned to stimulators (s, the increase of which is desirable) or to de-stimulators (d), the decrease of which is desirable. figure 1. a hierarchical structure of components of the air transport sustainable development source: designed by the authors. to develop strategic scenarios for the post-war recovery of air transport, a new principle of strategizing "the future is determined by the trajectory into the future" is used, which consists in identifying the level of sustainable development in the security dimension, defining strategic goals, building the future trajectory of the desired development, solving the inverse problem of synthesizing the necessary values of components and indicators through the sequential decomposition of integral indices using adaptive control methods from the management theory (drozdz et al., 2020b; dzwigol, 2021; dzwigol-barosz & dzwigol, 2021; kharazishvili et al., 2021; trzeciak et al., 2022) (figure 2). economic component aviation safety production activity economic and technological development of ат social component performing regular commercial, non-scheduled, commercial, and noncommercial flights performing aerial works and training flights ecological component sustainable development of air transport in the safety dimension technological development economic development http://www.virtual-economics.eu/ 13 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 in the "identification" block, integral convolution equations of type (1) for the components of sustainable development of air transport are set sequentially, and in the "reference model" the desired values of the future integral index are set. therefore, the control device evaluating the error changes the value of the indicators in such a way as to reduce it to zero taking into account the limitations. figure 2. a generalized scheme of an adaptive control system with a reference model source: designed by the authors. for practical use, the presented scheme is implemented in the programming language c++ (version 6.0) with a short cycle. the long-cycle mode is used for more in-depth research. 4. results 4.1. strategizing sustainable development since part of the indicators of the air transport sustainable development depends on the gdp of ukraine, there should be made a forecast of the real gdp, assuming the maximum of all expert estimates (-20; -45%) of a drop of 45% and possible scenarios of its recovery (figure 3). from this graph, it follows that under the scenario of 2.3% annual growth, reaching the level of real gdp of the pre-war period (2021) is possible only in 2048, so this scenario will not be considered. having set the forecast values of the gdp deflator, there will be obtained the values of the nominal gdp of ukraine, which, in combination with official statistical data (2010-2021) and model calculations, make it possible to obtain the forecast values of the indicators of the sustainable development of air transport at the end of 2022. +𝐼𝑡 criterion calculator identification of the development level vector of anticipated values of safety components (indicators) macromodel reference model (anticipated characteristics) 𝐹𝑡 = 0? setting mechanism calculator indicators statistical indicators −𝐼𝑡 𝑡𝑎𝑟𝑔 no yes 𝐹𝑡 = (𝐼𝑡 − 𝐼𝑡 𝑡𝑎𝑟𝑔2 making allowance for limitations http://www.virtual-economics.eu/ 14 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 figure 3. real gdp of ukraine with strategic growth scenarios source: own elaboration. the integral convolution of indicators and their limit values according to the modern methodology for determining the level of sustainable development gives the following picture of the current state of air transport at the end of 2022 by components and as a whole (figure 4). as it follows from the calculations, all components of the sustainable development of air transport of ukraine and the integral indicator as a whole are below the lower threshold value, that is, in the critical zone, which is the result of the military actions of the rf against ukraine. to develop strategic post-war reconstruction scenarios, there will be defined strategic goals and there will be built trajectories of the desired increase at the level of sustainable development (figure 5). so, there are three possible recovery scenarios in accordance with the given goals: 1. realistic – reaching the lower threshold value. 2. optimistic – reaching the average value between the lower optimal and lower threshold values of the integral index. 3. the scenario of entering the zone of optimal sustainable development reaching the lower optimal value of the integral index. 0,6 0,8 1 1,2 1,4 1,6 1,8 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 real gdp is cumulative growth 2,3 % growth 6,3 % growth7,76% growth 9,5 % http://www.virtual-economics.eu/ 15 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 2010 2012 2014 2016 2018 2020 2022 integral index lower threshold lower optimal upper optimal upperr threshold economic component a 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 2010 2012 2014 2016 2018 2020 2022 integral index lower threshold lower optimal upper optimal upper threhold social component b 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 2010 2012 2014 2016 2018 2020 2022 integral index lower threshold lower optimal upper optimal upper threshold ecological component c 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 2010 2012 2014 2016 2018 2020 2022 integral index lower threshold lower optimal upper optimal upper threshold sustainable development of aviation transport d figure 4. dynamics of integrated indices of air transport of ukraine source: own elaboration. the construction of the growth trajectory to the defined goals requires the knowledge of the integral index each year, which, together with it, is laid down in the reference model of adaptive regulation for the synthesis of the latest values of the components (table 2), and then their indicators (table 3). table 2. evaluating strategic guidelines of integral indices of the aviation transport sustainable development under scenarios of the post-war recovery components of sustainable development 2022 2023 2024 2025 2026 2027 2028 2029 2030 realistic scenario economic component social component ecological component 0.3440 0.2492 0.2432 0.7458 0.3630 0.2680 0.2629 0.7536 0.3831 0.2882 0.2839 0.7621 0.4044 0.3099 0.3063 0.7713 0.4268 0.3330 0.3302 0.7813 0.4505 0.3577 0.3557 0.7919 0.4755 0.3841 0.3828 0.8034 0.5018 0.4122 0.4117 0.8156 0.5298 0.4421 0.4425 0.8287 optimistic scenario economic component social component ecological component 0.3440 0.2492 0.2432 0.6856 0.3695 0.2745 0.2696 0.6948 0.3971 0.3025 0.2986 0.7057 0.4269 0.3331 0.3303 0.7183 0.4589 0.3666 0.3648 0.7329 0.4933 0.4030 0.4023 0.7497 0.5303 0.4427 0.4430 0.7690 0.5700 0.4856 0.4870 0.7911 0.6127 0.5319 0.5344 0.8162 entering the zone of sustainable development economic component social component ecological component 0.3440 0.2492 0.2432 0.6856 0.3755 0.2806 0.2759 0.6971 0.4101 0.3157 0.3124 0.7110 0.4478 0.3550 0.3529 0.7277 0.4891 0.3985 0.3977 0.7476 0.5341 0.4467 0.4472 0.7711 0.5832 0.4999 0.5016 0.7987 0.6369 0.5583 0.5613 0.8311 0.6957 0.6224 0.6268 0.8687 http://www.virtual-economics.eu/ 16 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 the resulting dynamics of the components of the air transport sustainable development, in fact, compose a strategic plan for the post-war recovery of air transport if the calculations are followed. moreover, the realistic scenario provides an almost pre-war level, the optimistic scenario exceeds the level of the air transport sustainable development over all the years of its existence, and the scenario of entering the optimal zone of sustainable development of the eu countries is the most desired state. 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 integral index sustainability figure 5. dynamics and strategic scenarios of the aviation transport sustainable development source: own elaboration. therefore, the main task of the policy is to comply with the developed strategic plan through the development of appropriate regulatory measures to achieve the desired goal. thus, the formation of justified response measures to military actions and adaptation of the trajectory of sustainable development to achieve strategically defined goals is ensured. and the transition from indicators to macro indicators makes it possible to imagine the necessary resources for implementing a strategic plan to maintain the trajectory of sustainable development. for example, given the forecast values of the gross value added (gva) deflator of air transport until 2030, we will get the strategic dynamics of real air traffic, which makes it possible to build its trajectory relative to 2010 for the analysis of the identified scenarios (figure 6). table 3. evaluating strategic guidelines of air transport indicators at the end of 2030 according to the post-war recovery scenarios components and indicators / development scenarios rs os sd economic component 0.4421 0.5319 0.6224 economic development 0.4081 0.5202 0.6348 http://www.virtual-economics.eu/ 17 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 a share of air transport gva in total gva of transport and communication), % (s); a level of investment in air transport, % of air transport output (s); a level of export services of air transport, % of total exports of transport services (s); a level of import air transport services, % of total import of transport services (d); a level of shadowing of air transport, % of official gva (d); 5.996 6.05 15.72 13.67 39.64 6.61 8.75 21.2 10.86 32.59 7.37 11.53 27.18 6.86 25.55 technological development 0.3491 0.4204 0.4958 a coefficient of manufacturability of air transport, the share of vda in output (s); capital utilization ratio (s); a level of shadow capital load, % of official load (d); a level of using passenger capacity of aircraft (s), %; a level of fixed assets renewal, (s)%; 0.4698 0.7886 30.69 29.44 3.6 0.4812 0.9128 29.38 36.78 5.06 0.4963 1.0615 27.71 45.11 6.55 production activity 0.7048 0.7339 0.7685 cargo gdp transport intensity on air transport (ratio of cargo turnover to gdp) (d); passenger gdp transport intensity on air transport (ratio of cargo turnover to gdp) (d); an average distance of cargo transportation (ratio of cargo turnover to volume of cargo transportation) (s); an average distance of passenger transportation (ratio of passenger turnover to passenger traffic volume) (s); a ratio of domestic and international air transportations (s); 0.001 0.053 3367.1 2266.5 0.12 0.00092 0.0465 3414.7 2313.5 0.1313 0.0008 0.0387 3473.7 2371.4 0.1447 aviation security: 0.3872 0.4881 0.5914 execution of regular commercial, non-regular commercial and noncommercial flights1: accident rates (catastrophe) (d); accident rates (accident) (d); accident rates (serious incidents) (d); 0.3434 0.0 2.5725 4.3425 0.4642 0.0 2.067 3.5225 0.5852 0.0 1.538 2.666 performing aviation works and training flights2 accident rates (catastrophe) (d); accident rates (accident) (d); accident rates (serious incidents) (d); 0.4462 6.3696 7.3343 6.7059 0.5179 5.1333 6.7159 5.5572 0.5988 3.676 5.9421 4.1465 social component 0.4424 0.5344 0.6268 a level of wages in the output of air transport, ukraine (s); a level of employment in air transport, % (s); a population mobility ratio (s); a level of official gva created by shadow wages, % of official gva of at (d); a level of shadow employment, % of official employment (d); 0.1747 61.04 0.8107 31.93 37.3 0.2065 66.5 1.1635 26.87 31.23 0.2407 72.75 1.4915 21.25 24.94 ecological component 0.7686 0.8162 0.8687 a co2 emission level of ukrainian air transport to gdp (d); a level of pollutants emissions into the atmosphere (d); a level of environmental costs of ат (s). 0.0343 0.0015 0.1505 0.0335 0.0014 0.169 0.27 0.001 0.185 note: rs – realistic scenario; os – optimistic scenario; sd – entering the zone of sustainable development; 1 the current values of the indicators and their threshold values for integral convolution to exclude zeros have been increased by 0.35; 0.35 and 0.41, respectively, to preserve the proportions, followed by a return to natural values in the reverse calculation. 2 the current values of the indicators and their threshold values for integral convolution to exclude zeros have been increased by 0.41; 0.41 and 0.41, respectively, to preserve the proportions, followed by a return to the natural values when recalculating. source: model calculations. http://www.virtual-economics.eu/ 18 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 from the above calculations (figure 6), it can be seen that according to the realistic scenario, the real gva of air transport remains at the level of 2021; according to the optimistic scenario – at the level 2018 year; according to the scenario of entering the optimal zone of sustainable development (achieving the lower optimal value by the integral index) – at the level of 2019. 1 1.5 2 2.5 3 3.5 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 real gr oss added v alue scenario 1 (4,5 %) scenario 2 (7,2 %) scenario 3 (10,4 %) real gross gva of air transport 2010=1 figure 6. strategic dynamics of the gva of air transport source: own elaboration. it should be noted that the implementation of the proposed scenarios is possible only under the condition of the total destruction of corruption and a significant reduction of the level of shadowing of the ukrainian economy and aviation transport in particular to the level of the eu countries. all proposed post-war recovery scenarios are characterized by disproportionality in the development of components and indicators. therefore, the next stage after entering the optimal zone of limit values (see figure 5) will be the achievement of the sustainable development criterion by the integral index of the air transport sustainable development – the average optimal value for all components and all indicators. but this means structural restructuring of ukraine's economy and aviation transport in particular. 4.2. strategic guidelines for air transport environmentalization in ukraine in the post-war period in order to determine the main measures of the air transport environmental strategy of ukraine in accordance with the presented strategic scenarios for developing the national economy and air transport until 2030, there will be calculated the volumes of co2 emissions, based on the proposed scenarios and the vector of limit values of the indicator "the level of co2 emissions of air transport of ukraine to gdp", kg/dollar gdp, which is a disincentive: the http://www.virtual-economics.eu/ 19 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 lower critical level is 0.96; lower threshold – 0.82; the lower optimal – 0.51; upper optimal – 0.32; the upper threshold is 0.2; upper critical – 0.1. (figure 7). from the figure presented, it can be seen that in accordance with the growth of cargo and passenger transportation volumes, the total volume of co2 emissions has a clear upward trend and can reach 372.7 thousand tons under a realistic scenario, or the highest value of 572.4 thousand tons under a sustainable development scenario. these maximum values are much smaller than previous estimates that were made before the war (ovdiienko et al., 2021). 0 200 400 600 800 1000 1200 2010 2012 2014 2016 2018 2020 2022 2024 2026 thousand tons co2 figure 7. strategic scenarios of the scope of co2 emissions of air transport of ukraine source: own elaboration. in addition, the values of this indicator under the development scenarios are significantly better than its optimal values [0.51-0.32], but are limited to the upper threshold value of 0.2 for all scenarios, which corresponds to the best values of this indicator in germany and significantly better than in poland, the usa and the world as a whole, second only to france (0.11). the recovery of aviation in the post-war period, according to our deep conviction, should involve a radical transformation of the existing state of the industry in accordance with the principles of sustainable development. if a simplified approach to the analysis of this trend is taken, it is possible to come to a conclusion that the closure of the airspace of ukraine led to a sharp decrease in co2 emissions. however, unfortunately, this is accompanied by a sharp decrease in the revenues of air transport enterprises, which in turn leads to a decrease in the replenishment of the state budget from their activities in general and, accordingly, to a decrease in costs for ecology, in particular. http://www.virtual-economics.eu/ 20 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 it bears noting that in recent years, domestic airlines and airports have not actively developed programs for introducing "green" technological solutions into their operations. there is not a single airport in ukraine that could be considered "green". currently, the situation has worsened even more, as the russian army has caused damage to airports amounting to uah 200 billion. of the 19 operational civilian airports, 12 have been destroyed or damaged. unfortunately, the war continues. but everything can change after the end of hostilities. joining the european green course aims to reduce transport emissions by 90% by 2050. the ukrainian "marshall plan", presented in lugano, provides for the reconstruction of 5-7 airports, which will be determined taking into account the goals of sustainable development and will provide for the reduction of harmful effects on the environment. the state aviation service of ukraine and the ministry of digital transformation of ukraine have already created a portal "fly green: the way to the "greening" of aviation", which popularizes practical tools for implementing "green technologies" in airports and contains advice on managing financial and natural resources. in particular, this implies the use of special materials (low-carbon concrete, wood, photocatalytic membranes, biofuel, etc.), solar panels, ground electric transport, replacement of lighting with led, installation of various energy conservation systems, etc. it is common knowledge that in most countries of the world, the incentives to reduce harmful emissions are an effective system of taxation and fines for exceeding the established emission volumes (boston consulting group, 2020). a carbon tax can be a powerful tool to reduce harmful emissions at a high rate because "the polluter pays" (lilliestam et al., 2020). environmental tax rates have been increased in ukraine since january 1, 2022, in particular, the tax rate for emissions of carbon dioxide into the atmosphere is 30 hryvnias per ton (about 0.82 euros at the current nbu exchange rate) (low carbon ukraine project, 2021), which is much less than the tax in the eu (4.3 euros in the current year). according to the recommendations of the carbon pricing leadership coalition, achieving the goals of the paris agreement is possible if the carbon price is set in the range of $40-80 per ton of co2 emissions by 2030, and at the level of $130-150 per ton by 2050 (the world bank, 2021). besides, on january 1, 2021, the system of monitoring, reporting and verification of greenhouse gas emissions, which is part of directive 2003/87/ec38, began to operate in ukraine. with the law of ukraine "on principles of monitoring, reporting and verification of greenhouse gas emissions" entering into force, large and medium-sized industrial enterprises designated by the government are required to prepare plans for monitoring greenhouse gas emissions and report on emissions annually. the next stage should be the creation of market mechanisms, which provide for the introduction of emission quotas in 2025 and the possibility of their sale. the emissions trading system provides for the establishment of a quantitative goal for reducing emissions at the state level, which can cover various sectors of the economy. next, the government transforms this goal into obligations of enterprises and distributes free emission allowances among them. the number of free quotas is always less than the total emissions of enterprises. that is why those enterprises that have reduced greenhouse gas emissions can save money and http://www.virtual-economics.eu/ 21 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 modernize at the expense of "green" loans or state subsidies. this directly concerns aviation transport enterprises, which will have to compete for free quotas for the volume of annual emissions or buy quotas from those enterprises that will have excess quotas. 4.3. threats and institutional measures 4.3.1. threats of components and indicators of sustainable development to determine the list of threats, a criterion is used based on the distance from the point of sustainable development (the method of imbalances), which is considered the average value of the "homeostatic plateau". thus, the social and economic components are the most lagging behind the optimal, and according to the indicators, the five most important threats are: the level of shadow intermediate consumption; the level of official gva created by shadow wages; the level of shadow capital loading; the level of shading of air transport; a share of wages in the output. therefore, as institutional measures to reduce the level of shadowing, the following is proposed: a legal limitation of the increase in the price of the product supplier for "firms-pads" to no more than 5-10% and redistribution of income between the employee and the employer through an increase in wages, which consists in a simultaneous reduction of the single social contribution (ssc), reducing the contribution to the pension fund of ukraine and increasing personal income tax (pit) and wages. 4.3.2. general threats not described by indicators of sustainable development threats to ukrainian airlines: a delay in the evacuation of unique aviation equipment abroad, problems with the leasing fleet of aircraft, a closure of ukrainian airspace for civil aviation flights. threats to the system of airports and airfields of ukraine: air and ground strikes on buildings, infrastructure and equipment; a closure of airspace for civil aviation flights. threats to the air traffic control system of ukraine: air and ground strikes on buildings, infrastructure and equipment of the air traffic control system; a closure of airspace for civil aviation flights. threats to the aviation industry system of ukraine: air and ground strikes on the design bureau, enterprises and infrastructure facilities of the aviation industry system; threats to serial production of aviation equipment during hostilities. threats to the aviation education and science system of ukraine: air and ground strikes on buildings, infrastructure and equipment of the aviation education and science system; a delay or failure of the educational process and scientific activity of the aviation education and science system. http://www.virtual-economics.eu/ 22 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 institutional measures: updating the provisions of the safety and security state programmes, the concept of the state target scientific and technical program for the development of the aviation industry for 2021-2030; state target program for the development of airports for the period until 2023; development of mechanisms for partial support of ukrainian airlines, airports, air traffic control system, aviation industry and aviation education & science system in the post-war period by the state, non-state investors and foreign investors; financial support for the recovery of aviation equipment; step-by-step optimization of the aircraft leasing fleet; implementation of the crisis management system elements under the force majeure conditions. 5. discussion aviation constantly faces rapidly and constantly changing market conditions, intense competition, evolving business models and advances in technology (kwilinski et al., 2020c; kwilinski et al., 2021). this reality determines the need for a quick response to these challenges and requires a scientifically based strategic vision to preserve the trajectory of sustainable development (czyżewski et al., 2019; kostyrko et al., 2021; szczepańskawoszczyna & gatnar, 2022). moreover, such a formulation a priori assumes three components of development: social, ecological and economic, the balanced development of which occupies one of the first places among the main problems of developing territories and communities of all levels. the basis of sustainable development both at the state level and at the regional and local levels is the harmonization of economic, social and environmental components (rajiani et al., 2018; stuss et al., 2019; kotowicz et al., 2022). the systematic coordination and balance of these three components and the development of a development strategy on this basis is a task of enormous complexity. to promote sustainable development, aviation stakeholders need to adopt innovative technologies and practices that reduce the industry's negative impacts while supporting economic growth and social development (chygryn et al., 2018; saługa et al., 2020; kuzior & kwilinski, 2022). this can include investments in renewable energy, eco-friendly aircraft designs, and improved air traffic management systems, among others (drożdż & mróz-malik, 2017; miskiewicz, 2020; drożdż et al., 2020a; lyulyov et al., 2021b; miskiewicz et al, 2021). additionally, collaboration between aviation stakeholders, policymakers, and local communities is essential to ensure that aviation transport supports sustainable development in a balanced and inclusive direction. one of the main tools for accomplishing tasks is foresight, which is based on the following methods: the delphi method, identification of critical technologies; development of scenarios; expert panels; swot analysis; economic and mathematical modelling; brainstorming; regression analysis; extrapolation; simulation modelling; multi-criteria analysis and other classic forecasting methods. unfortunately, expert evaluations are full of subjectivity and do not exclude fundamental errors. known approaches to the classical forecasting of the integral indices' dynamics with the help of polynomials discredit economicmathematical modelling in general and emasculate the essence of such a multidimensional concept as sustainable development or economic security. the use of the swot analysis method (dacko-pikiewicz, 2019; kwilinski et al., 2020c; stuss et al., 2019) can be considered a stage necessary for determining strategic directions of development, but completely http://www.virtual-economics.eu/ 23 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 insufficient for substantiating quantitative strategic assessments of the future state. it is quite obvious that classical forecasting methods based on correlation-regression analysis are inappropriate here. first, forecasting provides a continuation of existing trends for the future, which is not always fulfilled; secondly, it always contains an error due to the innate pathology of errors due to the principle of forecasting "the past determines the future"; thirdly, it is necessary to know how the components and indicators of sustainable development should change to achieve the desired state, so completely different approaches are needed. that is why most of the developed strategies in ukraine have a declarative nature without scientific substantiation of strategic guidelines through the declaration of necessary measures such as: provision, improvement, creation, formation, renewal, implementation, improvement, involvement, development, according to which it is impossible to monitor their implementation. in this regard, new approaches to identifying and strategizing the level of sustainable development and its components – economic, social and environmental – are gaining relevance. 6. conclusions most approaches to strategizing the post-war recovery are based on the declaration of necessary measures and principles such as: provide, enhance, create, update, improve, attract, develop, etc. unfortunately, the stated principles of restoring ukraine's economy are only slogans, and some are more like ultimatums to the eu. therefore, declaring the priority areas of such strategies does not ensure implementation of the expected targeted state policy. modern identification methodology is used to determine the current level of sustainable development in the safety dimension. the identification result proves that the integral index of the sustainable development of air transport of ukraine for the period of 2010-2022 is at the level of the lower threshold value, and in 2022 – in the critical zone, the strategic goals until 2030 follow – the achievement of the level of the lower threshold value (realistic scenario), reaching the average value between the lower threshold and lower optimal values (optimistic scenario), reaching the lower level of the optimal value (scenario of entering the optimal eu sustainable development zone). for strategizing, it is proposed to use a new methodology, which, in contrast to classical forecasting methods (the past determines the future), uses the principle "the future is determined by the trajectory into the future" and provides a scientific basis for the strategic development plan with the following scenarios with the annual growth of real air transport air transport: realistic – 4.5%; optimistic – 7.2%; the scenario of entering the optimal zone of the eu countries) – 10.4% by 2030. the obtained strategic guidelines of indicators and key macroindicators are, in fact, a strategic recovery plan, and their monitoring allows determining the effectiveness of the government's economic policy. formulated strategic guidelines for the air transport environmentalization in ukraine in the post-war period and strategic priorities for restoring the air transport infrastructure proved the need to pursue a course towards carbon neutrality. all considered strategic scenarios of sustainable development of aviation transport adhere to the level of co2 emissions, kg/dollar gdp is no more than 0.2, which corresponds to the best value of this indicator in germany and is significantly better than in poland, the http://www.virtual-economics.eu/ 24 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, aleksy kwilinski, dmytro bugayko, mariia hryhorak, veronika butorina, and iryna yashchyshyna virtual economics, vol. 5, no. 3, 2022 usa and the world as a whole, second only to france (0.11). in order to maintain such a level of co2 emissions, it is considered effective to stimulate the reduction of harmful emissions through an effective system of taxation and fines of those exceeding the established emission volumes. the main threats to the aviation transport sustainable development in ukraine are identified: those which are described by indicators of sustainable development using the method of imbalances – mainly indicators that reflect a shadow component of the aviation transport economy; those which are not described by indicators of sustainable development and reflect the general problems of air transport operation and management in ukraine. in response to the threats and challenges of wartime, a complex of institutional measures was developed to ensure the specified scenarios of the post-war recovery of air transport in ukraine. the proposed approaches to identifying and strategizing sustainable development, even in the post-war period, are universal, scientifically based and can be applied to any country or region. 6. acknowledgements the authors are very grateful to the anonymous referees for their helpful comments and constructive suggestions. 7. presenting the sources of funding this research received no external funding. references abazov, r. 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(2021). the green competitiveness of enterprises: justifying the quality criteria of digital marketing communication channels. sustainability, 13(24), https://doi.org/10.3390/su132413679 http://www.virtual-economics.eu/ https://doi.org/10.3390/en13184833 https://doi.org/10.3390/en14206840 https://doi.org/10.1371/journal.pone.0255428 https://doi.org/10.3390/su11184988 https://doi.org/10.23762/fso_vol10_no3_6 https://openknowledge.worldbank.org/%20handle/10986/35620 https://doi.org/10.1515/mspe-2019-0020 https://doi.org/10.1515/mspe-2019-0020 https://doi.org/10.3390/joitmc8010058 https://doi.org/10.3390/su10113856 https://doi.org/10.17512/pjms.2020.21.2.30 https://doi.org/10.3390/su132413679 кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 19 research article sustainable marketing performance of banks in the digital economy: the role of customer relationship management stephen acheampong, tetyana pimonenko, and oleksii lyulyov abstract. customer relationship management (crm) has become the lifeblood of banking and the principal driver of sustainable marketing performance in the digital economy. the discovery of computers and the internet has transformed the industrial economy into digital through the integration of crm and related elements, resulting in several benefits, including growth in research documents and increased collaborations. marketers have developed a crm system that integrates the digital infrastructure and digital capabilities of people to promote the sustainable marketing performance of banks through innovations such as customer acquisition, segmentation, customization, loyalty, and profitability. the paper aims to analyse the scientific landscape of crm and sustainable marketing performance in the digital economy. the authors resorted to the scopus database to extract 1485 documents and filtered 248 for scopus analysis and to determine the roles of crm. the filtered documents were then exported to vosviewer for visualization mapping, including co-authorship and co-occurrence analysis. the visualization mapping depicts relationships among the keywords. the results of the research indicate an upwards growth in research publications since 2003, growing interest in funding and collaborations by countries and institutions, and the relationship among the keywords. the emerging financial crisis is a motivation for research in the area of study. the results also indicate that the integration of crm into digital technology promotes collaborations and innovations resulting in the development of banking software applications to promote customer acquisition, retention, loyalty, profitability and sustainability. the study developed an integrated framework for sustainable banking performance. global crises, including financial crises and covid-19, have increased research output and become an integral part of crm. green banking is to be researched and integrated. the study will be used as a basis for further studies and for bankers for policy formulation. keywords: customer relationship management, sustainability, marketing performance, banking, digitalization. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 20 authors: stephen acheampong sumy state university, sumy, ukraine ghana baptist university college, kumasi, ghana e-mail: stephen.acheampong@aspd.sumdu.edu.ua https://orcid.org/0000-0002-9900-3564 tetyana pimonenko wsb university in dabrowa gornicza, poland; sumy state university, ukraine e-mail: tetyana.pimonenko@wsb.edu.pl https://orcid.org/0000-0001-6442-3684 oleksii lyulyov wsb university in dabrowa gornicza, poland; sumy state university, ukraine e-mail: oleksii.lyulyov@wsb.edu.pl https://orcid.org/0000-0002-4865-7306 corresponding author: oleksii lyulyov, oleksii.lyulyov@wsb.edu.pl citation: acheampong, s., pimonenko, t., & lyulyov, o. (2023). sustainable marketing performance of banks in the digital economy: the role of customer relationship management. virtual economics, 6(1), 19-37. https://doi.org/10.34021/ve.2023.06.01(2) received: november 10, 2022. revised: january 17, 2023. accepted: february 27, 2023. © author(s) 2023. licenced under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:stephen.acheampong@aspd.sumdu.edu.ua https://orcid.org/0000-0002-9900-3564 mailto:tetyana.pimonenko@wsb.edu.pl https://orcid.org/0000-0001-6442-3684 mailto:oleksii.lyulyov@wsb.edu.pl https://orcid.org/0000-0002-4865-7306 mailto:oleksii.lyulyov@wsb.sumdu.pl https://doi.org/10.34021/ve.2023.06.01(2) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 21 1. introduction effective crm implementation enables businesses to improve customer relationships and loyalty as well as maximize revenue and minimize costs. according to blery & michalakopoulos [1], crm is one of the best approaches to sustaining the long-term performance of banks. thus, crm has become the lifeblood of banking and the principal driver of sustainable performance in marketing efficiency in the digital economy due to the important roles it plays. any system that determines customer activity can measure business value. the new technology resulting in mass production and economies of scale has the potential to minimize costs and maximize profits [2]. during the industrial revolution, companies focused on making huge profits through economies of scale at the expense of customer satisfaction. however, crm has become a significant determinant of organizational performance and sustainability in the digital economy. society has not been static but dynamic, changing from simpler to complex and traditional to modern and global, so businesses need to be innovative to perform. companies integrate relational customer indicators into profitability measurement to determine performance. businesses, including banks, adopt the customer-centric approach to reaching their goals and objectives through holistic marketing. the holistic marketing concept encompasses relational marketing, integrated marketing, internal marketing, as well as corporate social responsibility marketing which enhances banking trust and image [3]. this suggests that in this study, integrating profitability and customer relational indicators is a holistic approach to sustainable performance in the banking industry. customer patronage is the outcome of a great manufacturing capability [4]. crm is a technology that synchronizes organizational activities (e.g. segmentation, targeting, product development, sales, marketing research, business environment, analytics and green banking) and makes customer relations automatic by focusing on acquisition, retention and profitability [5]. in the contemporary digital economy, information technology capability is the fundamental sustainability factor for firms [6–12]. in the virtual market, companies need to put it infrastructure tools and systems in place and have employees capable of using it tools for accessing, integrating, evaluating and creating information and connecting stakeholders to promote sustainable marketing performance [13–16]. the availability of information tools alone does not guarantee development and the ability to solve problems [17]. apart from investing in digital infrastructure, the organization needs to build capacity through training and integrate it into business operations to realize the full effect. besides, it is necessary to enhance relevant digital knowledge and skills [18–22]. earlier researchers have not studied crm, digitalization, and performance together to establish the relationships among them. studies about crm and technology indicate that technology is a crm enabler; it promotes customer relationships by centralizing data and information as well as providing accurate and timely information [23]. most crm and technology studies to determine the role technology plays in crm indicate the statistical relationship between technology and crm [24]. additionally, several studies on crm and aspects of technology aimed at evaluating the contribution of technology to effective crm have shown that crm implementation largely http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 22 depends on the state of technology and that technology and crm are statistically related [23]. technology and crm contribute to the sustainable marketing performance of organizations. despite a wider adoption of the camels model, namely, capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk [24] for assessing banking performance, many organizations have gone out of business, while others find it challenging to sustain their performance, particularly in the digital age. the 2007-2008 financial crisis in the united states resulted in a high rate of bank failures [25]. as a result, the federal deposit insurance corporation closed 465 banks from 2008-2012. bank of ghana's (bog) stability report for 2017 stated that the banking industry’s cost-income ratio increased to 85.7% in february 2017 from 84.4% in february 2016, indicating a general decline in the banking industry’s efficiency. the ghana banking crisis between august 2017 and january 2020 affected many banks, and the bog allowed some indigenous banks to take over private companies. dwamena et al. [26] noted that the recent banking crisis in ghana has led to the revocation of the licences of more than 400 financial institutions that were licenced under the act, 2016 (act 930). comparatively, the ukrainian banking crisis was between 2014 and 2017, and out of the 181 banks as of january 2014, only 77 survived in may 2019 [27]. often, crises demand transformational solutions, and in this regard, companies integrate industrial and digital era models to ensure their survival; hence, this research focuses on marketing innovations. adam et al. [28] asserted that if firms are to continue in business, they must be innovative and adapt to new situations continually. developing an integrated model with customer relational components promotes the banking industry's sustainable performance. the camels model is a partial method of assessing banking performance in the digital age since it focuses on financials and pays little attention to sustainable non-financial marketing elements, which is the gap the research addressed. bibliometric co-occurrence mapping was used to identify sustainable marketing performance indicators, including customer relationship management, market share, customer loyalty, customer profitability, research and product development, service quality, green banking, and brand image integrated into financial measurements. this research, therefore, assessed the role of crm and banks’ marketing performance in the digital economy and offered sustainable marketing performance indicators as integral components, the proper and fit method that focuses on the customer. practically, the study serves as a guide to regulators, including central banks and businesses, to formulate the right policies and performance measurements to promote sustainable performance. the research contributes to the growing theoretical development by developing an integrated and holistic model for measuring sustainable marketing performance in the banking sector. academically, the study keeps researchers abreast with contemporary research trends for further studies. the financial model includes camels indicators, and using camels to assess banking performance in the digital economy is a partial approach. integrating financial, customer-based, internal processes, learning and growth with crm is a holistic approach to achieving sustainability. the vosviewer co-word visualization mapping depicts the relationship among the keywords in crm and balanced scorecard components. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 23 the paper has the following structure: section 1 highlights the introduction aspect of the role crm plays in sustainable marketing performance in the digital economy; section 2 analyses the theoretical landscape of keywords namely, crm, sustainable marketing performance and digitalization and developed an integrated performance assessment model for contemporary banking; section 3 describes the methodology, sources and process for data as well as the tools used for analysis; section 4 illustrate the research findings obtained through the application of the selected methodology; section 5 highlights on the main results, recommendations for future studies, and limitations. 2. literature review crm evolved around the late 1950s with the introduction of rolodex. in the 1960s, the main frame computers became available to businesses, the 1980s was an evolution of database marketing, in the 1990s software service was developed, the 2000s was the growth of cloudbased crm and open-source software, in 2010 were the explosion of technology and rise of crm providers and today further sophistication of crm, building customer strategy [29]. chen & popovich [30] asserted that crm integrates people, processes and technology to analyse customers, manage relationships, and ensure customer retention. the authors added that crm gas revolutionises from information technology, changes in organization, and customeroriented processes; hence, the successful implementation of crm results in long-term customer profitability and loyalty. in this regard, crm is becoming the lifeblood of contemporary and future businesses as cloud-based software solutions are gaining ground. sales, marketing, service and provision of mobility are the main focus of crm today. banks need to adopt a holistic approach, financial and non-financial, to ensure the sustainability of the digital age. raut et al. [31] studied the sustainability of banking from four angles, including crm, business process, financial stability, and friendly environment management system. the emergence of crm has promoted targeted and segmented marketing to enhance policy optimization and profit maximization. crm is a complete strategy to acquire, retain and connect specific clients and create customer delight value. it includes sales, customer service, marketing and the supply chain that promote effectiveness and efficiency [32]. the purpose of crm is defined to enhance productivity through marketing efficiency and effectiveness [33]. scholars [32] have stated that cooperation and collaboration accruing from marketing efficiency minimize the transaction and cost of development. in banking, the digitalization process promotes efficient and quality service to customers. from a marketing perspective, digital banking promotes long-term quality service in banking and customer satisfaction [34]. crm, which is the impact factor in the digital economy, integrates digitalization, banking, marketing, customers and other contemporary elements as a model to develop loyal customers for long-term sustainability. the theoretical framework-integrated approach for sustainable marketing performance of banks is shown in figure 1. the research theories in the later part of the 1970s focused on industrial marketing and channels to develop buyer‒seller relationships [35]. the emergence of a marketing philosophy for customer-organization relationships resulted in crm [36]. crm is an integrative strategic process to develop, enhance and sustain customer relationships as well as add value to http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 24 businesses [37]. in strategic management, the balanced scorecard encompassing financial, customer-oriented, internal business processes, and learning and growth is a holistic approach. figure 1. theoretical framework depicting the integration of the sustainable marketing performance of bank elements, including financial and nonfinancial factors. source: developed by the authors based on crm, balanced scorecard concepts, scopus and vosviewer visualization mapping. crm is a collaboration of all the departments in the bank [38]. hoseini et al. [39] researched crm and business performance and developed a conceptual framework based on a balance score card, and the results indicated a relationship between crm processes and banking performance. banking is a customer-based service because the customer is the highest priority [36]. zulkifli & tahir [36] conducted research, and the results indicated six crm measurements, namely, customer acquisition, customer value evaluation and customer information process. this study integrated crm into financial determinants as a holistic approach to the sustainable marketing performance of banks. crm balance scorecard customer-oriented + finance + internal business processes + learning and growth crm and sustainable marketing performance elements sustainable marketing performance of banks http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 25 3. methods researchers [34,40] have resorted to a bibliometric analysis to research contemporary issues, including customer loyalty in banks, bank efficiency, promoting green university branding through social media, new trends [41–43] and patterns in green competitiveness, green policy on renewable energy [44–46], and trends and patterns in sustainable entrepreneurship research [47–51]. the study adopts the scopus online database for the analysis because it has the most extensive database and the most prominent research papers and vosviewer for visualization analysis. the analysis covers quantity, quality and structural indicators, which measure a researcher’s productivity, output performance, and institutional collaborations. performance analysis investigates the contributions of academic research elements to a particular discipline [52]. this is a descriptive approach and the foundation for bibliometric analysis [53]. input terms for the search were "customer relationship management" or "sustainable marketing performance of banks". the researchers inputted “customer relationship management” and “role” or “sustainable marketing performance” or “digital economy” and yielded 1485 documents, refined to 248. refine; document type: article, book chapter, conference paper, review, book, note, editorial, erratum. subject categories: arts and humanities, business management/accounting, economics, econometrics, decision sciences and social sciences. others include finance, computer science, environmental science, agricultural and biological science, and mathematics. language: english; the reason is that most metadata are in english. refine results for keywords: a total of 248 documents were exported to vosviewer for visualization analysis. vosviewer identified 1301 author keywords, of which 187 met the threshold, and the researchers eliminated repetition and irrelevant words for visualization mapping. to achieve the objective regarding the role crm plays in sustainable marketing performance in the digital economy, a specific bibliometric analysis was performed: 1. co-authorship analysis to examine the collaboration patterns between authors and countries and to identify the most influential countries; 2. keyword concurrence analysis to examine the frequency of different keywords or the most influential elements in the sustainable marketing performance of banks in the digital economy; 3. literature reviews on performance measurement and developed a sustainable banking performance framework. 4. results and discussion the crm role in sustainable marketing performance in the contemporary digital economy was assessed holistically, including the impact on productivity trends, collaboration, funding, and integration. first, crm contributes to publication output from 2003 to 2023, and this is analysed in comparative terms for the pre-and post-digitalization periods (figure 2). before 2003 represents pre-digitalization when banks had not integrated digital technology into banking and research output was zero. after digitalization in 2003, banks could use digital network infrastructure to connect stakeholders, including customers, shareholders, and http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 26 regulators; therefore, crm is an enabler of the digital economy and a promoter of the sustainable marketing performance of banks. figure 2. the role of crm in the output trend and sustainable marketing performance of banks in digital economy from 2003 to 2023. source: generated by the authors from the scopus database. the study results show increased research publications in the area of study between 2003 and 2023 globally, although the growth rate fluctuates. the fluctuations are indicated in figure 1 by the upwards and downward growth trends of research documents produced from 2003 to 2023. the statistics indicate documents as follows: 2003 =3, 2004 = 1, 2007 =0, 2008 = 9, 2013 = 12, 2014 = 7, 2015 =11, 2016 = 13, 2017 = 46, 2018 =13, 2019 =22, 2020 =20, and 2022 =32 research documents. publication activity on customer loyalty to banking systems increased in the financial crisis era (2008-2009 and 2014-2015) [54]. the study results reveal that the outflow of customers and capital emerged from the economic crisis. an increasing growth but fluctuation results from the research is due to the world crisis, including the financial crisis, and covid-19. a crisis is a motivation to research and diagnose the causes and find solutions. technological innovations such as computers and the internet are also a motivation for research fluctuations within the period of 2003 to 2023. the year 2010 was the explosion of technology and the rise of crm providers and today further sophistication of crm, building customer strategy [29]. it should be noted that 2010 was the explosion of technology and the rise of crm providers and today further sophistication of crm, building customer strategy [29]. a total of 248 documents were produced during the digital age in the global economy, with an average of 11.8 documents per year, as indicated above. the average results are used to project future research output. as of march 2023, when conducting the research, 8 research documents were produced, and all things being equal, 32 documents are expected to be produced by the end of 2023. a search of the scopus database indicates no publication in the area of study before 2003 (predigital era), as figure 2 shows. banks took advantage of the available digital infrastructure in the 2000s to build the capacity of employees through training and integrated digital technology into daily business operations as well as developing a database of customers and customizing their services. 0 5 10 15 20 25 30 35 40 45 50 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 27 the growing research has also resulted in banking innovations, including the internet banking, atms, branchless banking, and the development of new banking application software to manage customers, products and transactions. at the same time, crm innovations and digital integration resulted in the network, high operational cost, software/hardware and cybersecurity challenges, including internet fraud and hacking. the results show no research in 2007 that marks the beginning of the banking crisis and which might have interested researchers to take keen interest to intensify research in 2008, with 9 research documents being the highest since the predigital and digital era. this implies that crisis is an important motivation for research. the graph in figure 3 indicates the country contribution of the top countries in the research area of crm on sustainable marketing performance in the digital economy. the results revealed a total of 189 research documents produced with an average of 18.9 per country. figure 3. the publication structure on crm role in sustainable marketing performance of banks, from 2003 to 2023. source: generated by the authors from the scopus database. the united kingdom produced the highest number of research documents, 40, and the united states came second, with 35 research documents. the rest of the contributions were india = 26, canada = 14, germany = 14, indonesia 14, jordan = 13, china = 11, and italy = 10 documents. increased research of crm, sustainable marketing performance and digitalization might have contributed to the growing innovations and development of banking software solutions and applications in the united kingdom, the united states, india, etc. there is an increase in business and private funding to support art organizations in the united kingdom to enable them to stay in business with integrity [55]. the united kingdom and the united states promote research funding in business, including crm. the results further revealed that no african country was among the top countries that contributed to the research in the study area. this suggests that countries in africa have not shown much interest in crm and sustainable marketing performance in the digital economy or have limited access to research funding, thereby resulting in low innovations in the banking sector and creating a digital divide challenge. the findings in figure 4 for network visualization indicate that the researchers in the united kingdom contributed more than in any other country. the country co-authorship visualization 0 5 10 15 20 25 30 35 40 45 united kingdom united states india canada germany indonasia jordan iran china italy http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 28 map indicates the following: items-23, clusters-7, links-59, total link strength-88, out of which the united kingdom cluster had 15 links with 27 total link strengths in cluster 2 (green). figure 4. the co-authorship network of countries’ research documents. source: visualization mapping generated by the authors from scopus and vosviewer 1.6.17. opoku et al. [57] studied the influence of project sponsorship, realizing the impact in the united kingdom, and noted that customer value creation is the foundation for business survival, hence, for the need for government departments and local authorities to focus on sponsorship. figure 5 shows that in terms of collaboration, the uk authors collaborate more with other countries to promote research on crm and sustainable marketing performance in the digital economy, as indicated by 27 links being the highest. figure 5. the map of co-authorship research network for the united kingdom cluster. source: visualization mapping generated by the authors from scopus and vosviewer 1.6.17. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 29 figure 6 depicts mapping for the us cluster (6), which was the second with 13 links, 35 documents, and 26 link strengths, showing more collaborations apart from the united kingdom. the third largest with collaborations is india, then canada, etc., with no african country among the top 10 researchers. figure 6. the map of co-authorship research network of the united states cluster, 20032023. source: visualization mapping generated by authors from scopus and vosviewer 1.6.17. the graph in figure 7 depicts 16 sponsored documents, out of which the national science foundation sponsored 3 and four others. the us air force, national natural science, european regional development fund, economic and social, sponsored 2 documents each and the rest of the sponsors 1 document each. this result indicates growing funding to promote research in the study area throughout 2003 and 2023, mostly from europe and north america. figure 7. the most influential sponsors of papers on the role of crm, and sustainable marketing performance of banks in the digital economy (from 2003 to 2023). source: generated by authors from the scopus database. 0 0.5 1 1.5 2 2.5 3 3.5 national science foundation economic and social …. european regional development fund. national natural science… us air force academy of finland bt group chosum university council on grants of.. deanship of scientific.. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 30 the results in figure 8 represent items, clusters, links and total link strengths of the keywords in crm and the sustainable marketing performance of banks in the digital economy. figure 8. visualization mapping for keyword co-occurrence, 2003-2023. source: visualization mapping generated by the authors from scopus and vosviewer 1.6.17. in all, there were 13 clusters, 118 items, 716 links and 1178 total link strengths. customer relationship management with the pink colour in cluster 9 has the largest node or circle being the highest frequency, most influential, and impactful keyword – 127, links-103, total link strength-306. the mapping indicates vosviewer visualization links that crm has with other keywords (figure 9). the visualization analysis from the study of the researchers based on scientific methodology in developing questionnaires to collect primary data and formulating and testing hypotheses enables relationships to be established among keywords. the visualization links in the map demonstrate the direct and indirect roles crm plays in sustainable marketing performance in the digital economy. the crm cluster includes keywords such as customer experiences, customer data, brand management, marketing through social media, and digitalization of marketing. the crm concept has increased the demand for customer data and promoted social media marketing, digital marketing, etc., which results in customer satisfaction. crm directly or indirectly connects almost all 13 clusters; hence, its influence is significant. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 31 figure 9. vosviewer keyword visualization link for customer relationship cluster. source: vosviewer visualization mapping generated by authors from scopus and vosviewer 1.6.17. considering figure 10, crm has a direct link with technology cluster (4) with yellow colour, 6 links, 6 occurrences and 3 total link strengths. the elements of cluster 4 include technology, the internet, human, and organizational culture. the crm linkage suggests the role it plays in digital technology and possibly sustainable marketing performance. figure 10. vosviewer keyword visualization link for technology. source: vosviewer visualization mapping generated by the authors from scopus and vosviewer 1.6.17. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 32 the outcome of the vosviewer visualization itemized mapping depicts significant information, as each of the clusters is linked to the crm cluster (figure 11). this confirms that crm plays an important role as the lifeblood or an engine that enables machines or systems to work. figure 11. item-by-item keyword co-occurrence in violet, green, and red categories, namely, information technology, electronic commerce, and marketing clusters source: vosviewer visualization mapping generated by the authors from scopus and vosviewer 1.6.17 each of the clusters, namely, information technology, electronic commerce, marketing, etc., is associated with other important keywords, all of which work together as a team or collaborate to work for a holistic result, similar to parts of a vehicle or human body work. the violet cluster includes keywords such as information technology, dynamic capabilities, sustainability, innovation process, balanced scorecard, and marketing orientation. a balanced scorecard includes finance, marketing, process, and human resources and is a holistic strategic approach to achieving sustainable results or goals. additionally, information technology or digital infrastructure alone cannot work to achieve results unless humans are trained and crm systems and elements are synchronized to develop dynamic capabilities for the innovation process. in research on customer loyalty in bank services by dubina et al. [55]. the researchers analysed the correlation between consumer loyalty and gender age. shetch et al. [32] revealed that crm and marketing efficiency are the outcomes of transaction and development cost minimization through collaborative processes. therefore, in this study, the red cluster includes keywords such as customer satisfaction, customer loyalty, banking industry, marketing, data mining, relationship management, advertising and customer experience, which all relate to crm and achieve results. dubina et al. [55], in research on customer loyalty to bank services, noted that the covid-19 crisis was a wake-up call to stabilize financial institutions. among the red cluster is covidhttp://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 33 19, which has affected the way business is done and has therefore become an integral part of crm and contemporary business systems. shetch et al. [32] noted that crm marketing efficiency is achieved through cooperative and collaborative processes that help to reduce transaction and development costs. in this study, the elements in the green cluster, including enterprise systems, machine learning, electronic commerce, risk assessment, customer trust, etc., also constitute integral parts of crm and collaboratively play a holistic role in sustainable marketing performance in the digital economy. the results suggest that the integrated elements of crm have been a transformation factor from an industrial to a digital economy, eliminating brick-and-mortar boundaries and unnecessary bureaucracy and promoting 24/7 business around the globe. nigamananda [58] researched sustainable green banking and noted that profit maximization and business prospects are the results of innovative and environmentally sustainable business practices. although vosviewer mapping did not highlight green banking, it is an important sustainable performance factor. the benefits of green banking include cost savings, risk minimization, banks' reputational enhancement, and environmental sustainability promotion. therefore, it plays both commercial and social responsibility roles. in this regard, the green banking element needs to be researched and integrated into crm and sustainable banking in the digital economy. 5. conclusions the authors resorted to the scopus database to extract 1485 documents and filtered 248 for scopus analysis and to determine the roles of crm. the results of the study indicate a growing interest in sponsorship and funding with the national science foundation leading to promoting the growth and sustainability of marketing performance in the digital economy. there is an upwards growth in research documents between 2003 and 2023 that leads to innovations and increased collaborations among countries, and the united kingdom collaborates the most. the emerging financial crisis is a motivation for research in the area of study. the results also indicate that crm promotes digitalization while digitalization enhances crm, hence a reciprocal relationship and together promotes sustainable marketing performance in the digital economy. the researchers developed an integrated theoretical framework to include nonfinancial sustainability factors of crm, namely, customer acquisition, retention, loyalty, and satisfaction, as an integral part of financial performance indicators to ensure a holistic assessment approach to banking performance. the transformation from an industrial to a digital economy requires a proper and fit approach to assess banking performance and possibly to ensure sustainability. the integrated theoretical model is recommended for future studies by researchers. covid-19, which has affected the way business is done and has therefore become an integral part of crm and contemporary business systems, is an outcome of the study, as indicated in the figure, among the red cluster. the increasing growth but fluctuation results from the research are due to the world crisis, including the financial crisis and covid-19. a crisis is a motivation for research to diagnose the causes and find solutions. technological innovations such as computers and the internet are also a motivation for research fluctuations within the period of 2003 to 2023. the year 2010 was the explosion of technology and the rise of crm providers and today further sophistication of crm, building customer strategy [29]. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 34 although bibliometric methods facilitate a review of volumes of research documents, they have some limitations, including language selection and the influence of citations on research outcomes. green banking is a researchable factor integrated into the crm system and is recommended for future research, although it is not highlighted in the vosviewer bibliometric mapping. the study will be used as a basis for further research and for the government and bankers to shape the policy. the growth rate of annual research publications has been increasing over the past fifty years; hence, some countries and institutions are adopting the bibliometric method to perform reviews [59]. however, there are some limitations to bibliometric research. the fact that a paper has more citations may not necessarily mean it is more influential because citations are based on different reasons, including methodology assessment and checking for flaws. whether citations are influential depends on the purpose of their use. belter [59] stated that most cited papers tend to be very influential to authors for further research, and the usefulness of the papers requires some probing. an open-access paper may have more citations than restricted documents since most researchers with funding challenges, especially in developing countries, cannot access them, thereby affecting research outcomes. the database selection was limited to scopus and other relevant data from other sources were excluded. this can be improved by analysing data from other reliable sources. vosviewer did not select the most relevant keywords that might influence the outcome of the research. this could be resolved by manually selecting the most relevant keywords for vosviewer mapping analysis. the research was limited to english documents because metadata are in the english language. there may be some useful other languages but excluded and affecting the accuracy of the research outcome. this could be addressed by integrating automatic translators into various software, including scopus and web of science systems. author contributions: conceptualization, s.a., t.p., and o.l.; methodology, s.a., t.p., and o.l.; software, s.a., t.p., and o.l.; validation, s.a., t.p., and o.l.; formal analysis, s.a., t.p., and o.l.; investigation, s.a., t.p., and o.l.; writing-original draft preparation, s.a., t.p., and o.l.; writing-review and editing, s.a., t.p., and o.l.; visualization, s.a., t.p., and o.l.; supervision, s.a., t.p., and o.l. all authors have read and agreed to the published version of the manuscript. funding: this research was funded by the ministry of education and science of ukraine under the grant number 0121u100468. data availability statement: not applicable. acknowledgements: the authors express their gratitude to the european education, audiovisual & culture executive agency, which supports the project “the eu policy for smes: perspectives and challenges for ukraine (eu4smes)” 619999-epp-1-2020-1-uaeppjmo-module within the erasmus+ programme of the european union. this paper contains the results that are received in the framework of this project. conflicts of interest: the authors declare no conflict of interest. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) stephen acheampong, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 6, no. 1, 2023 35 references 1. blery, e., & michalakopoulos, m. 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(2015). bibliometric indicators: opportunities and limits. journal of the medical library association: jmla, 103(4), 219. http://www.virtual-economics.eu/ кwilinski alex 43 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 2022 volume 5 number 2 managing the logistic activities of agricultural enterprises under conditions of digital economy aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina abstract. at the current stage of transformations, it is of urgent importance to solve the problems of logistics management in the system of agricultural enterprise management. the issues are particularly relevant under conditions of the rapid development of digital economy. therefore, the purpose of this research is to develop further theoretical and methodological fundamentals, scientific and methodological approaches and practical recommendations to enhance the efficiency of managing the logistic activities of business entities in the agroindustrial complex allowing for the specific features of business processes digitalization. the article specifies the essence of the concept “management of the logistic activities of an agricultural enterprise” in digital economy. problems, specific features and directions of transforming the logistics management in the agrarian sphere are identified. the work carries out a comparative analysis of the indicators reflecting trends in the global development of agriculture by applying digital instruments and technologies. the authors analyze the range of using information and communication technologies while organizing the logistic activities at ukrainian processing enterprises. the authors reveal the key barriers hindering the digital transformation of the logistic activities of agricultural enterprises, which can be conventionally classified into 7 groups, namely institutional, market, transport, marketing, informational, organizational, financial and economic. it is confirmed that to eliminate those barriers, it is necessary to transform radically the existing system of managing the logistic activities of agricultural enterprises, which should be based on fundamentally new principles of operation under conditions of digitalization. keywords: agricultural enterprise, logistics management, customer-oriented approach, information and communication technologies, digital economy, transformation jel classification: l86; m31; o13; q12; q13 http://www.virtual-economics.eu/ 44 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 authors: aleksy kwilinski department of management, faculty of applied sciences, wsb university, dabrowa gornicza, poland; the london academy of science and business, london, united kingdom e-mail: a.kwilinski@london-asb.co.uk https://orcid.org/0000-0001-6318-4001 liudmyla hnatyshyn lviv national environmental university, lviv, ukraine e-mail: gnatluda@ukr.net https://orcid.org/0000-0003-4425-0514 oksana prokopyshyn lviv national environmental university, lviv, ukraine e-mail: os378@ukr.net https://orcid.org/0000-0002-7027-3499 nataliia trushkina institute of industrial economics of the national academy of sciences of ukraine, kyiv, ukraine e-mail: nata_tru@ukr.net https://orcid.org/0000-0002-6741-7738 citation: kwilinski, a., hnatyshyn, l., prokopyshyn, o., & trushkina, n. (2022). managing the logistic activities of agricultural enterprises under conditions of digital economy. virtual economics, 5(2), 4370. https://doi.org/10.34021/ve.2022.05.02(3) received: december 12, 2021. revised: january 21, 2022. accepted: february 24, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ file:///c:/users/alex/downloads/a.kwilinski@london-asb.co.uk https://orcid.org/0000-0001-6318-4001 http://gnatluda@ukr.net https://orcid.org/0000-0003-4425-0514 http://os378@ukr.net https://orcid.org/0000-0002-7027-3499 http://nata_tru@ukr.net https://orcid.org/0000-0002-6741-7738 https://creativecommons.org/licenses/by/4.0/ 45 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 1. introduction nowadays, it is necessary to improve logistics management at the enterprises in the agrarian sphere. a logistic component has become a strategically important factor, which is revealed in financial results of business entities’ performance (abazov, 1997; abazov, 2010). logistic activities are the center of costs optimization and, consequently, can be a lever to increase profitability, because supply chains consume a significant share of agricultural enterprises’ costs. according to the data supplied by armstrong & associates, inc. (2021), in 2020 the share of costs for organizing the logistic activities accounted for 15.9% in the gdp of ukraine (the world average index – 10.8%, in the usa – 8%, canada – 9%, japan – 8.5%, great britain – 8.5%, poland – 10.1%, and generally in europe – 8.6%). in that period, the share of income of the 3pl sector in ukraine accounted for 8.2% of the volume of logistics costs (the world average index being 10.6%, in the usa – 13.8%, canada – 10.6%, japan – 10.9%, great britain – 9.8%, poland – 10.2%, and generally in europe – 10.5%). in 2020, the share of gdp of ukraine accounted for 0.18% of the global gdp, costs for logistic activities amounted to 0.27% of its total amount in the world, income of the 3pl sector made 0.21% of the total amount in the world (to compare: the values of those indices in great britain were 3.2; 2.5; 2.3 respectively). therefore, to improve their competitiveness, business entities of different industries, including agriculture, should organize their logistic activities with the purpose to minimize risks, losses and costs of production, to make reserves, to service customers, transportation and sales of products, as well as to maximize profitability from operational activities and sales. hence, agricultural enterprises should switch to innovative technologies and to introduce information systems, which will secure a high level of customer service and improve logistic service. a survey of 528 managers and specialists in strategic management of digital transformation, which was conducted by an advisory company altimeter-prophet, demonstrates that the main efforts are focused on improving the system of contacts with customers (54% experts) (solis & szymanski, 2019). price water house coopers, the second-largest professional services network (2012) proves that investing in the digital transformation first contributes to a better quality of customer servicing. studies of campaign monitor (2021) show that 64.1% of small enterprises use digital marketing to attract customers. according to gartner’s estimates, in 2019, 25% of interactions with customers were automated with involvement of artificial intelligence and machine learning. moreover, 91% of companies have planned to develop artificial intelligence by 2023 for managing customer relationship. according to forecasts, until 2030, chat bots will automatically collect above 1 billion of requests on customer service (costello, 2019). a survey conducted by ey-parthenon confirms that companies continue to make a lot of investments into digital transformation. most managers and top-managers consider it is the main business imperative that is crucially important for survival in the competitive business environment (wang et al., 2022). therefore, for business to develop, they should introduce new technologies and digital channels, being incorporated into the customer experience (bogachov et al., 2020; borodin et al., 2021). experts of digital marketing http://www.virtual-economics.eu/ https://www.campaignmonitor.com/resources/guides/the-state-of-small-business-marketing/#one https://www.ey.com/en_cn/people/joongshik-wang 46 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 institute (2022) make forecast that by 2025, costs for strategic digital transformation in the world will have reached usd 2.8 trillion, which almost twice exceeds the amount of 2020. those investments will assist international companies to implement the integral digital strategy for organizing logistic processes, technologies, data and management, as well as to interact with customers, to raise work efficiency, to reduce time for bringing new products and services to the global and national markets, and to stimulate innovative development (moskalenko et al., 2022; chygryn et al., 2020; drozdz et al., 2020b; kwilinski et al., 2020a). according to the statista data (2022a, 2022b, 2022c), in 2021 the share of digital advertising revenue made 65.2% of the total amount of worldwide revenue of advertising. it was expected that the share will increase to 67% in 2022, and will exceed 70% in 2025. according to estimates, in 2020 the worldwide spending for digital advertising accounted for usd 378 billion, usd 521 billion in 2021, and will reach usd 646 billion in 2024, and usd 876 billion in 2026. expert estimations prove that spending for advertising in mobile internet will increase in 2020-2024 by 79.3% or from usd 276 billion to usd 495 billion. the global revenue of the internet advertising accounted for usd 365.9 billion in 2021, whilst by 2025, the amount will have reached usd 488 billion, which is by 33.4% more as compared to 2021. the global market of solutions for end users of the internet of things (iot) will grow every year and reach usd 1.6 trillion in 2025. specialists of rocket marketing group (2020) declare that a raise of customers’ loyalty contributes to increasing income. however, attracting new customers is five times more expensive than retaining available ones (morgan, 2019). investments into customers’ loyalty are ones of the most profitable for developing business environment. some researchers consider that a raise of customers’ loyalty is more important than a reduction of operating costs. increased customer loyalty by 2% influences profitability the same way as reduction of operating costs by 10% (ozuysal, 2021). the research by reicheld and teal (2005) confirm that 5% growth of the number of loyal customers fuels an increase of the profit from 25% to 85% depending on the type of economic activities. however, according to gamble et al. (2002), a raise of the level of loyalty reduces the customers’ willingness to appreciate competitors’ actions. the priority task of enterprises is to create an effective logistic information system, being flexible in response to the crisis phenomena in the global world, changes of institutional environment, instable economic situation, and the conjuncture fluctuations on the agricultural product market (kwilinski et al., 2020b; lyulyov et al., 2021a; vaníčková & szczepańska-woszczyna, 2020; yang et al., 2021; hussain et al., 2021). therefore, the issues of improving the logistic activities of agricultural enterprises with consideration of their operation and global digital transformation processes are still topical to study. 2. literature review analysis of the past studies (dementyev & kwilinski, 2020; dzwigol, 2021; dźwigoł & wolniak, 2018; kwilinski et al., 2021; miśkiewicz, 2019; 2021b) confirms a diversity of scientific approaches to defining the notion “management of the enterprise’s logistic activities”. scholars apply various notions, particularly “logistic management”, “strategic logistics http://www.virtual-economics.eu/ https://userguiding.com/blog/author/can/ 47 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 management”, “logistics management of the enterprise”, “logistics management in the company”, “logistics management”, “supply chain management”, “marketing and logistics management”, etc. there are numerous interpretations of those concepts, which are based on different scientific approaches and principles. in general, logistics management is considered as an instrument, which can help to reduce costs for material and technical supply, management of reserves, transportation of products to customers; synthesis of the management functions (planning, organization, regulation, coordination and control) of flow processes; management of material and informational flows; management of integrated business processes (from material and technical supply to sales of final products to consumers); integration of the theory of management and logistics. some authors use the notion “logistics management”, which includes management of consumers’ requests, proposals of market participants and establishment of relations among them; information flows; processes of purchase and delivery; production activities; reserves and storage; financial and sales activities; service maintenance; pricing; other components of production activities and relations with end consumers. thus, having consolidated the existing conceptual fundamentals and obtained results of personal research (kwilinski, 2018a; 2018b; 2018c; kwilinski et al., 2020; dzwigol & dźwigołbarosz, 2018; dzwigol, 2019; 2020; dzwigol et al., 2020a; dzwigol et al., 2020b; zaloznova & trushkina, 2018; 2019; trushkina, 2019a; 2019b; 2020; 2022; koev et al., 2019), the authors of this study propose to consider management of the logistic activities of agricultural enterprises under conditions of digital economy as a continuous integrated process, fulfilled through exercising the functions of management (forecast, planning, organization, accounting, control, analysis and regulation); a complex approach to the processes of logistic activities (supply and purchase of material resources, contractual work with suppliers, production of agricultural products, their storage in the logistic centers, recycling of wastes with application of the tools of circular economy and reverse logistics, logistic servicing of customers, transportation and sales of agricultural products); application of digital technologies and information systems. a great number of scientific works are devoted to the conceptual fundamentals, scientific and methodological approaches to increasing the efficiency of logistics management at various industrial enterprises. the analysis of scientific sources on logistics shows that the known foreign scientists pay much attention to justification and development of: a logistic model of distribution (boom, 2007); concepts, models of optimization and strategies of supply chain management (beresford et al. 2005; huemer, 2006; harrison and hauck, 2007; sander and shechter, 2008; barratt and whitehead, 2008; blaik, 2010; murphy and wood, 2017; bowersox and closs, 2017); methodological approaches to setting an optimal consignment (schreibfeder, 2006); measures on increasing the level of consumer service and logistic service (gunasekaran, 2005; payne, 2005; kotler, 2006; lamben, 2007; souitaris and balabanis, 2007; oke et al., 2007; wallenburg, 2008); scientific and methodic fundamentals of enterprises’ risk management and practical tools of logistic risk assessment in uncertainty conditions (damodaran, 2008; fuchs and wohinz, 2009; andersen and schreder, 2010; crouhy et al., http://www.virtual-economics.eu/ 48 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 2012; saługa et al., 2021); methods of the warehouse operation accounting with application of automatic, information and communication technologies (frazelle, 2013). the vast range of the scholars (kuzior et al., 2021a; 2021b; lyulyov et al., 2021b; miskiewicz, 2020) outline the necessity of incorporation the green dimension within improving logistic management. it is justified by the reorientation of word development considering sustainable development principals (abazov, 2021; dźwigol et al., 2019; kharazishvili et al., 2020). it requires the affordable investment (miskiewicz, 2022; melnychenko, 2021), knowledge, and innovation (coban et al., 2022; drożdż et al., 2020a; ingber, 2017). at the same time, the logistic management should allow declining using of all recourses’ types (kharazishvili et al., 2021; drożdż & mróz-malik, 2017) and reducing carbon dioxide emissions (drożdż et al., 2021; kotowicz et al., 2022). in spite of the numerous scientific research on the chosen topic, the multi-aspect and debatable nature of some issues needs further development. solution of the mentioned problem is getting more relevant at the current stage of transformational changes in the agrarian sector under conditions of digital economy. therefore, the mentioned problem has shaped the purpose of this article, particularly to make scientific and methodological substantiation and to develop practical recommendations on improving the logistics management at agricultural enterprises in the context of digital transformation of business processes. 3. methods the theoretical and methodological basis of the research is made by the fundamentals of institutional theory, digital economy, concepts of strategic, logistic and marketing management, management of business development, and customer relationship management. conducting the research, the authors used the following general scientific methods, namely analysis and synthesis to consolidate the existing theoretical approaches and principles, scientific works on the problem of logistics management, and to specify terminology; comparison and classification to systemize conceptual approaches to interpretation of the notion “management of the logistic activities of an agricultural enterprise”; a complex of barriers, hindering effective digital transformation of the logistic activities of agricultural enterprises; an expert opinion survey to define problems, specificity, tendencies and ways of the logistics management transformation in the agrarian sphere and management of customer experience; a statistical analysis to evaluate the current conditions of the information and communication technologies application at processing enterprises in ukraine; structural and logical generalization to develop a structural and functional scheme of a principally new system of logistics management at agricultural enterprises; structural and logical scheme of transforming the system of logistics management; scientific and methodological substantiation of the expediency of the complex approach application to implement the digital strategy of logistics management at agricultural enterprises. information on the current problems of the formation and development prospects of the system of logistics management and customer relationship management is obtained by http://www.virtual-economics.eu/ 49 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 making a comparative analysis and consolidating the methodologies of evaluating digital maturity and transformation of business processes, which are developed by the international consulting companies, analytical centers and scientific institutions, including the national academy of sciences and engineering of germany, pwc, deloitte, kpmg, cisco, gartner, arthur d. little agency, mit center for digital business, global center for digital business transformation, capgemini consulting, and ionology. the indices demonstrating the global development of agriculture with the use of digital technologies and instruments are taken from the official site of statista. statistical data concerning ukraine include the number of enterprises which have got access to the internet; the number of enterprises grouped by the directions of using the internet; the number of enterprises for determining the website opportunities while using the internet; the number of enterprises using social media while organizing their logistic activities; the number of enterprises using big data analytics; the number of enterprises which have purchased cloud computing services; the number of enterprises employing it specialists; the number of employees with the internet access; e-commerce via the internet; the number of enterprises running e-commerce; the amount of products (goods, services) sold online. the data are taken from the chapters of “information society” at the official website of the state statistics service of ukraine and in the statistical bulletin called “the use of information and communication technologies at enterprises” in 2017-2019; “the use of information and communication technologies at enterprises: e-commerce, big data analytics, ict specialists and ict-related skills, the use of 3d printing in 2018-2020”; “the use of information and communication technologies at enterprises: the use of the internet, cloud computing, robotics in 2018-2021”. according to the statista data (2022d, 2022e, 2022f, 2022g), the amount of income at the global food market accounted for usd 8.3 trillion in 2021. worldwide food production revenues continue to grow every year and can reach usd 11.1 trillion by 2027. in 2021, the value of the global market of agricultural technologies (agtech) accounted for usd 10.5 billion. it is expected that the agtech market will significantly grow by 2025. the agtech market consists of such segments as platforms of agriculture management, solutions of chain supply management and stock management, gps services, mapping of fields, agricultural monitoring and managerial decisions for micro-farms. according to the expected figures, the volume of the global market of “smart” agriculture will increase 2.8 times or from usd 12.4 billion to usd 34.1 billion in 2026 as compared to 2020. the global market of agricultural robots will grow and it expected to reach usd 20.6 billion in 2025. according to statista (2022h) data, the market price of a block chain at the global market of food and agricultural products was usd 32.2 million in 2017. it is expected that the value of the indicator will increase 16.7 times (usd 195.3 million) in 2023, and 44.8 times (usd 1442.9 million) by 2028. considering ukraine, it is worth noting that statistical bulletins of “the use of information and communication technologies at enterprises” do not include data on the operation of enterprises of agro-industrial complex. therefore, it is necessary to analyze http://www.virtual-economics.eu/ 50 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 current conditions of the information supply for organizing the logistic activities of processing enterprises. it can be explained by the fact that, according to the ctea-2010, that category includes enterprises of food production which are related with the economic activity of agricultural enterprises. moreover, the authors of the research compared the use of information and communication technologies on the example of other types of business activities. referring to the data of the state statistics service of ukraine, the number of processing enterprises having access to the internet increased by 14.2% during 2017-2021, whilst their share in the total number of enterprises of the corresponding type of economic activity increased by 8.1 per cent or from 82% to 90.1%. the share of processing enterprises stayed almost the same and accounted for 25.4% of the total number of enterprises in 2021 by all types of economic activities. the number of enterprises producing food products increased by 9.4%, in 2021 as compared to 2017, and their share in the total number of enterprises of the corresponding type of economic activity increased by 7.1 p.p. or from 82.2 to 89.3%. however, in that period, the share of enterprises engaged in food production reduced in the total number of processing enterprises by 0.8 % or from 19 to 18.2 % (table 1). table 1. the number of enterprises having the internet access indicators years 2017 2018 2019 2021 the number of enterprises by all types of economic activities 39582 43303 43785 44508 including processing ones 9917 10878 11089 11323 in % to the total number of enterprises of the corresponding type of economic activity 82.0 90.0 89.5 90.1 a share in the total number of enterprises by all types of economic activities, % 25.1 25.1 25.3 25.4 including enterprises of food production 1888 2071 2046 2065 in % to the total number of enterprises of the corresponding type of economic activity 82.2 90.2 90.3 89.3 a share in the total number of enterprises of processing industry, %. 19.0 19.0 18.5 18.2 source: the state statistics service of ukraine (2019). the use of information and communication technologies at enterprises by the type in 2017; state statistics service of ukraine (2020). the use of information and communication technologies at enterprises by the type in 2018-2019; the state statistics service of ukraine (2022). the use of information and communication technologies at enterprises: the use of the internet network, cloud computing, robotics. in 2018-2021, the number of people employed at processing enterprises and having the internet access increased by 2.2%. their share in the total number of employees at the enterprises of the corresponding type of economic activity increased by 1.4 % or from 19.2% to 20.6%. in the studied period, there can be observed a 1.7% increase in the number of people employed at the enterprises of food production which had the internet access, and their share in the total number of employees at the enterprises of the corresponding type of economic activity increased by 0.5% or from 19.2% to 19.7% (table 2). http://www.virtual-economics.eu/ https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls 51 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 table 2. the number of employees having access to the internet indicators years 2018 2019 2021 the number of people employed at enterprises by all types of economic activities, thousand people 1064.7 1090.0 1133.1 including people employed at processing enterprises, thousand people 255.7 257.6 261.2 in % to the total number of employees at enterprises of the corresponding type of economic activity 19.2 19.9 20.6 a share of employees in the total number of them at enterprises of all types of economic activities, % 24.0 23.6 23.1 including the number of those employed at enterprises of food industry, thousand people 58.8 58.8 59.8 in % to the total number of people employed at enterprises of the corresponding type of economic activity 19.2 19.4 19.7 a share of employees in the total number of them at processing enterprises, % 23.0 22.8 22.9 source: the state statistics service of ukraine (2022). the use of information and communication technologies at enterprises: the use of the internet network, cloud computing, robotics. the statistical analysis shows that the number of processing enterprises which employed specialists in information and communication technologies increased by 2.7% in 2019 as compared to 2017. their share in the total number of enterprises by all types of economic activities stayed almost the same in 2019 and accounted for 24.6%. however, the number of processing enterprises which organized training courses for ict specialists reduced by 1.8% in that period, and those which employed such specialists – by 33.7% (table 3). table 3. the number of processing enterprises which employed specialists of information and communication technologies indicators years 2017 2018 2019 the number of enterprises by all types of economic activities, which employed ict specialists 10660 10973 10953 including in processing industry 2627 2732 2699 a share in the total number of enterprises by all types of economic activities, % 24.6 24.9 24.6 the number of processing enterprises which organized training courses for ict specialists 491 478 482 the number of processing enterprises which employed ict specialists 1028 713 682 source: the state statistics service of ukraine (2019). the use of information and communication technologies at enterprises by the type in 2017; the state statistics service of ukraine (2020). the use of information and communication technologies at enterprises by the type in 2018-2019. in 2017-2019, the number of processing enterprises which used the internet to get information about goods and services increased by 12.9%; to send and receive e-mails – by http://www.virtual-economics.eu/ https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls 52 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 12.2%; for instant messaging and online advertising – by 14.6%; to make banking transactions – by 12.8%; to get access to other financial services – by 15.9% (table 4). table 4. the ways of the internet use by processing enterprises indicators years 2017 2018 2019 the number of processing enterprises having the internet access 9917 10878 11089 including: sending or receiving e-mails 9792 10769 10985 getting information about goods and services 9012 10004 10178 instant messaging and online advertising 4927 5510 5647 banking transactions 9604 10591 10832 access to other financial services 3952 4481 4580 source: the state statistics service of ukraine (2019). the use of information and communication technologies at enterprises by the type in 2017; the state statistics service of ukraine (2020). the use of information and communication technologies at enterprises by the type in 2018-2019. during the analyzed period, the number of processing enterprises which used websites while organizing their logistic activities increased by 9.1%. it happened due to a growth of the number of enterprises which used their website to train staff – by 22.3%; to create personified information content of the website for regular customers – by 16%; to make online orders of goods – by 14.1%; to provide customer service – by 11.5%; to monitor and check the status of orders – by 10.1%; to supply products online – by 7.9% (table 5). table 5. website options while using the internet by processing enterprises indicators years 2017 2018 2019 the number of processing enterprises having websites 4910 5288 5358 including: customer service 2078 2275 2316 online product supply 636 688 686 making online orders of goods and services 1230 1372 1403 website personified information for regular customers 995 1176 1154 monitoring and check of the status of orders 1104 1221 1215 staff training 345 426 422 source: the state statistics service of ukraine (2019). the use of information and communication technologies at enterprises by the type in 2017; the state statistics service of ukraine (2020). the use of information and communication technologies at enterprises by the type in 2018-2019. during 2017-2019, the number of processing enterprises which used social media for headhunting increased by 30.9%; for the company presentation or promoting its goods/services – by 28.7%; for getting feedback from customers and replying to orders – by 28.5%; for involving customers into innovative activities – by 24.8%; for cooperation with different groups of stakeholders – by 21% (table 6). http://www.virtual-economics.eu/ https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls 53 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 table 6. purposes of using social media by processing enterprises purposes years 2017 2018 2019 presentation of the enterprise or promotion of its goods/services 2306 2795 2967 feedback from customers and reply to orders 1571 1880 2018 involvement of customers into development or innovation of goods and services 1005 1187 1254 cooperation with business partners and other groups of stakeholders 1773 2028 2146 hiring employees 1208 1452 1581 source: the state statistics service of ukraine (2019). the use of information and communication technologies at enterprises by the type in 2017; the state statistics service of ukraine (2020). the use of information and communication technologies at enterprises by the type in 2018-2019. a statistical data analysis confirms that in that period, the number of enterprises in processing industry which used cloud computing increased by 33%, and their share in the total number of enterprises by all types of economic activities increased by 1.2% or from 22.5% to 23.7%. it was due to the growing number of processing enterprises which purchased services for the file storage – by 42.6%; office software – by 41.3%; programs for customer relationship management – by 37.7%; database hosting, financial or accounting applied programs – by 34.5% (table 7). table 7. the use of cloud computing at processing enterprises indicators years 2017 2018 2019 the number of enterprises of all types of economic activities which purchased cloud computing services 4135 4831 5207 including the number of processing enterprises 929 1124 1236 among them, such kinds of cloud computing services were bought: office software 392 482 554 hosting the enterprise’s database 330 375 444 file storage 338 420 482 financial or accounting applied programs 537 627 722 programs of customer relationship management 236 293 325 source: the state statistics service of ukraine (2019). the use of information and communication technologies at enterprises by the type in 2017; the state statistics service of ukraine (2020). the use of information and communication technologies at enterprises by the type in 2018-2019. the number of processing enterprises which made big data analytics of the information obtained from geolocation data by portable devices increased by 16.5% in 2019 as compared to 2017. however, the number of processing enterprises which made big data analytics of the data obtained by smart-devices and sensors reduced by 6.7%; from social media – by 2%; other information sources and means – by 25.4% (table 8). http://www.virtual-economics.eu/ https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls 54 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 table 8. big data analytics at processing enterprises indicators years 2017 2018 2019 the number of processing enterprises which made analytics of big data, obtained from: data of their enterprises by smart-devices or sensors 750 676 700 geolocation data from portable devices 345 353 402 data of social media 354 340 347 other information sources 921 695 687 source: the state statistics service of ukraine (2019). the use of information and communication technologies at enterprises by the type in 2017; the state statistics service of ukraine (2020). the use of information and communication technologies at enterprises by the type in 2018-2019. during 2017-2019, the number of processing enterprises which made procurement online increased by 32.6%, whilst their share in the total number of enterprises by all types of economic activities increased by 1.5% or from 24.2% to 25.7%. however, the number of processing enterprises which got orders online reduced by 10.3%, whereas their share in the total number of enterprises by all types of economic activities – by 1.3% or from 28.4% to 27.1% (table 9). table 9. e-commerce run by processing enterprises indicators years 2017 2018 2019 the number of enterprises by all types of economic activities which purchased good and services online 8168 9583 10169 including in processing industry 1973 2440 2616 a share in the total number of enterprises by all kinds of economic activities, % 24.2 25.5 25.7 the number of enterprises by all types of economic activities which received orders for their products or services via the internet 2596 2476 2440 including in processing industry 737 673 661 a share in the total number of enterprises by all types of economic activities, % 28.4 27.2 27.1 source: the state statistics service of ukraine (2019). the use of information and communication technologies at enterprises by the type in 2017; the state statistics service of ukraine (2020). the use of information and communication technologies at enterprises by the type in 2018-2019. it is worth noting that the number of food processing enterprises running e-commerce reduced by 2.6% in 2020 comparing to 2018. their share in the total number of enterprises by all types of economic activities reduced by 0.2% or from 6.8% to 6.6%, whilst in the total number of processing enterprises running e-commerce it reduced by 1% or from 23.2% to 22.2% (table 10). http://www.virtual-economics.eu/ https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2017_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls 55 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 table 10. the number of enterprises running e-commerce indicators years 2018 2019 2020 the number of enterprises by all types of economic activities 2476 2440 2494 including in processing industry 673 661 684 a share in the total number of enterprises by all types of economic activities, % 27.2 27.1 27.4 in % to the total number of ukrainian enterprises 5.6 5.3 5.4 the number of enterprises of food industry 156 146 152 a share in the total number of processing enterprises, % 23.2 22.1 22.2 in % to the total number of ukrainian enterprises 6.8 6.4 6.6 source: the state statistics service of ukraine (2021). the use of information and communication technologies at enterprises: e-commerce, big data analytics, ict specialist and ict-related skills, the use of 3d printing. despite the positive trends in organizing the logistic activities of processing enterprises due to applied information and communication technologies there are some negative aspects. according to the data of the state statistics service of ukraine, in 2018-2020 the share of processing industry products via the instruments of e-commerce reduced by 6.4% or from 23.1% to 16.7% of the total volume of sold products by all types of economic activities. the share of food products sold online fell by 4.2% or from 14.8 to 10.6% of the total volume of sold products by all types of economic activities (table 11). table 11. the amount of products sold via e-commerce websites or applied programs indicators years 2018 2019 2020 by all types of economic activities, billion uah 228.0 292.7 364.6 including in processing industry, billion uah 52.6 56.3 61.0 a share in the total amount of sold products by all types of economic activities, % 23.1 19.2 16.7 in % to the total amount of products sold by enterprises of the corresponding type of economic activity 2.7 3.1 3.1 including food production, billion uah 33.8 36.4 38.5 a share in the total amount of products sold by all types of economic activities, % 14.8 12.4 10.6 in % to the total amount of products sold by enterprises of the corresponding type of economic activity 5.2 5.7 5.2 source: the state statistics service of ukraine (2021). the use of information and communication technologies at enterprises: e-commerce, big data analytics, ict specialist and ict-related skills, the use of 3d printing. thus, the statistical data analysis confirms that enterprises of processing industry in ukraine actively use modern digital technologies and information systems. in its turn, this contributes to effective organization of the processes of logistic activities in digital economy. http://www.virtual-economics.eu/ https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls https://ukrstat.gov.ua/operativ/operativ2018/zv/ikt/viktp2018-2019_e.xls 56 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 4. results the conducted research found out that effective digital transformation of the logistic activities of processing enterprises is hindered by some barriers, which are conventionally systemized into 7 groups: institutional (a negligible effect of the legislative and normative documents regulating the processes of procurement, commercial, sales, and transportation activities) (kwilinski et al., 2022a; abaas et al., 2018; bilan et al., 2019); financial and economic (permanent fluctuations at currency markets; instable economic situation because of crisis phenomena; late payment for delivered products; poor investments and financial resources) (miśkiewicz et al., 2022; prokopenko & miśkiewicz, 2020; chygryn et al., 2018; melnyk et al., 2018); market (regular fluctuations of the sales markets conjuncture; insufficient consumer’s demand for agricultural products (kalashnikova et al., 2019; lypchuk et al., 2019; prokopyshyn, 2019; danko et al., 2020); marketing (under-consideration of the specific features of servicing different categories of consumers; weak contract activities of enterprises; an inefficient use of digital marketing tools; an inadequate use of the customer-oriented approach to logistic services (sandiuk et al., 2019; trushkina, 2019c; 2020; hnatyshyn & trushkina, 2021; prokopyshyn & trushkina, 2021; petroye et al., 2020); transport (a delayed delivery of freight because of breakage or unexpected idle of transport means; freight not prepared in the proper time; a loss of freight because of transportation problems) (lyulyov et al., 2015); information (insufficient knowledge and skills of digital economy and marketing; a limited use of digital technologies and electronic platforms for customer relationship management) (miśkiewicz, 2018; miśkiewicz ey al., 2021; szczepańska-woszczyna & gatnar, 2022; trzeciak et al., 2022); organizational (a lack of a clear strategy of digital transformation, comprehension of the company’s digital future and drawbacks of management; unskillful management of organizational changes; no digital strategy of customer relationship management; a low level of employees’ involvement; the insufficient number of qualified and competent employees who meet modern requirements of digital economy) (miśkiewicz, 2021a). to overcome the above-mentioned barriers, it is reasonable to transform the current system of logistic activity management (slam) at agricultural enterprises which should be considered as an interrelated complex of objects and subjects of management through implementing the whole list of functions of the logistics process management in a single complex on the basis of using the mechanisms of information and organization supply (figure 1). the transformation of the system of logistic activity management at agricultural enterprises should be based on fundamentally new principles of operation (figure 2). among them, there can be distinguished: an application of the system approach to organizing logistic activities as a single complex, which means implementation of the integrity of related, sequential processes (supply and purchase of material, contract work with suppliers, production of agricultural http://www.virtual-economics.eu/ 57 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 products, their storage in logistic centers, recycling of wastes, customer servicing, transportation and sales of agricultural products) and different logistic services; figure 1. the structural and functional scheme of the fundamentally new system of logistics management of agricultural enterprises source: designed by the authors s u b sy st e m s slam planning organization and implementation of slam processes analysis of the slam performance regulation of the slam processes and their information supply f u n ct io n s a n d t a sk s o f m a n a g e m e n t forecasting and planning forming the portfolio of orders and potential customers’ base; a forecast of the amount of products delivered to different categories of customers; a forecast of the volume of productive, warehousing and commodity reserves; developing the plans of purchases and supply, production, transportation, sales of agricultural products and strategic programs of marketing activity; planning the costs for logistic activities organization organization filling in applications of product supply and setting the payment conditions; making contracts of products supply to customers; improving the methodological approach to choosing an optimal channel of agricultural product sales; organizing customs procedures while exporting agricultural products; organizing and supplying information on the processes of logistic activities accounting, control, analysis analyzing the conjuncture of agricultural products markets; swot-analysis and pestel-analysis of competitors and customers; accounting and analysis of costs of logistic activities; controlling implementation of plans and payment for agricultural products delivered to consumers regulation agreeing on the contract conditions on supply of material resources, transport servicing, supply of agricultural products to customers; regulating implementation of the plans of material and technical supply, production, transportation, sales, marketing http://www.virtual-economics.eu/ 58 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 figure 2. the structural and logical scheme of transforming the system of management of the logistic activities of agricultural enterprises in digitalization conditions source: designed by the authors exercising the whole list of managerial functions (forecast, planning, organization, accounting, control, analysis and regulation) through a complex of sequential processes of logistic activities; differentiation of the product consumers into the large-scale, medium-scale, and small-scale and wholesale ones referring to the amount of their annual demand; partnership relationship among the members of sales networks should be implemented voluntarily on the principles of interaction and synergy due to integration of subsystems of management procurement and supply commodity production warehousing subject of management (managing system) – topmanagers, middle-rank managers and logistics department specialists object of management (managed system) – a complex of sequential processes of the logistic activities of agricultural enterprises logistics risks logistics flows (material, financial, transport, informational) customer service processes transportation sales innovations and organizational changes organizational and economic mechanism exogenous factors of impact endogenous factors of impact formation of goals, tasks, plans, strategies and programs incoming information flow incoming information flow system of logistics management of agricultural enterprises information technologies and systems mrp → erp → opt → scm → crm → qr → ecr → lp → drp → e-sklad →cals-technologies information supply for the logistic activity management http://www.virtual-economics.eu/ 59 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 efforts, goals and resources of stakeholders (polcyn et al., 2022; saługa et al., 2020) on the basis of interdependence of their responsibility, distribution of authorities and logistics risks; the processes of logistic activities should be organized basing on modern information and communication, as well as digital technologies with the use of specific software, automated systems of management, logistic concepts, economic and mathematical methods. the conducted research provides for the conclusion that to transform the system of managing the logistic activities of agricultural enterprises in digital economy, it is reasonable to apply a complex approach (fig. 3). figure 3. a complex approach to managing the logistic activities of agricultural enterprises in digital economy source: designed by the authors thus, effective operation of agricultural enterprises in the instable institutional environment needs creating adequate conditions, which would provide for the business entities to get the use of information tools and digital-channels digital platforms software different digital channels forming a principally new culture of marketing communication integration of crm-systems into itarchitecture of agricultural companies integration of digital channels of marketing communication into a single system directions to improve quality of logistic services based on customer orientation forming a customer-oriented way of thinking; reorienting on a customer while developing goods and services; digitalization, machine learning and robotics complex modernization of businessprocesses, optimization of the organizational structure of logistics management; transformation of the models of customers’ behavior components of the effect 1) an increase of the average profitability by 15-20% due to well-organized logistic activities; 2) a raise of the index of retaining customers by 5%; 3) a reduction of time for current operations by 25-30%; 4) a higher accuracy of forecasts of the volume of delivered products up to 99%; 5) a reduction of costs for sales, marketing and customer maintenance by 10-15%; 6) an increase of the speed of order processing and level of informational safety; 7) a reduction of time for organization of information exchange between enterprises and different groups of stakeholders http://www.virtual-economics.eu/ 60 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 maximum benefits from organization of the logistic activities with consideration of the specificity of the global and digital economy development. 5. conclusions considering everything mentioned above, it is possible to make some conclusions. transformation of logistics management of an enterprise in the agro-industrial complex is closely related with the development of digital economy. a total focus on consumers is achieved by accumulating, structuring and exchanging information, whereas high competitiveness of enterprises in the digital economy is impossible without the customeroriented approach to logistic services. the mentioned approach means planning all business processes around customers’ needs and is considered as a tool to create values for consumers and to use digital technologies in order to improve the customer experience. therefore, the consumer relationship management is a priority direction in the system of logistics management under conditions of business digitalization. in the current conditions, to increase efficiency of the logistics management of business entities in the agrarian sector of ukraine, it is expedient to develop a complex of strategic measures on: managing material and technical supply (calculation of an optimal consignment of materials and sources; optimization of the purchasing strategy of enterprises; improvement of the purchasing process management by means of multi-criteria assessment of the choice of the best-possible supplier of materials); managing transportation process (introduction of information systems of freight management; application of automatic processing of documents while delivering freight; shaping proposals on optimization of transport loading; the use of internet technologies for transportation process automation); managing the processes of customer servicing (analysis and forecast of the volume of delivered products with consideration of the seasonal factor; development of algorithms of servicing different categories of consumers and proposals on improvement of the level of logistic services); managing sales activities (the substantiated use of the network approach to organization of enterprises’ sales activities; the development of a system of contract relations with consumers; improvement of the customer-oriented approach to servicing different categories of consumers in the context of the concept of marketing relations, mechanism of implementing public-private partnership in managing the enterprises’ trading activities on the basis of agro-clusters, the methodological approach to choosing an optimal channel of agricultural products sales; identification of the priority directions of ecommerce development as an effective instrument to promote goods at the markets of agricultural products); information supply for organizing logistic activities by using modern digital technologies. the research confirms numerous risks which should be considered while organizing logistic activities of agricultural enterprises. therefore, it is reasonable to make permanent http://www.virtual-economics.eu/ 61 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski, liudmyla hnatyshyn, oksana prokopyshyn, and nataliia trushkina virtual economics, vol. 5, no. 2, 2022 monitoring, a system analysis of risks of the logistic activities of enterprises and thus, to manage them by applying a complex of methods, tools and information systems which can provide for a forecast of probable market risks and to take measures to minimize them. implementation of the proposed complex of strategic measures will provide a synergetic effect, comprising: 1) an economic effect because of an increase of the average profitability by 15-20% due to well-organized logistic activities; a raise of the index of retaining customers by 5%; reduction of time for current operations by 25-30%; a higher accuracy of forecasts of the volume of delivered products up to 99%; a reduction of costs for sales, marketing and customer maintenance by 10-15%; 2) a social effect due to optimization of the work of the logistics department staff at agricultural enterprises; faster processing of customers’ orders and level of information safety; reduction of time for information exchange between the enterprise and economic counteragents; 3) an ecological effect: a reduction of the negative impact on the environment due to improved conditions of products transportation and storage, application of the concept of industrial waste management in the context of circular economy, implementation of “green” technologies in production and organization of logistics processes. prospects of the further scientific research suggest the development of an organization and economic mechanism to improve the system of consumer relationship management in the context of the marketing strategy of agricultural enterprises in digital economy, as well as scientific and methodological substantiation of the digital strategy of developing the logistics companies in ukraine with consideration of the specificity of their performance and advanced international experience. references abaas, m. s. m., chygryn, o., kubatko, o., & pimonenko, t. 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(2021). the green competitiveness of enterprises: justifying the quality criteria of digital marketing communication channels. sustainability, 13(24), https://doi.org/10.3390/su132413679 zaloznova, yu., & trushkina, n. (2018). scientific and methodological support of improvement of the management system of logistic activities of the enterprise. economic innovations, 20(3(68)), 5767. https://doi.org/10.31520/ ei.2018.20.3(68).57-67. zaloznova, yu., & trushkina, n. (2019). management of logistic activities as a mechanism for providing sustainable development of enterprises in the digital economy. virtual economics, 2(1), 63-80. https://doi.org/10.34021/ve.2019.02.01(4) http://www.virtual-economics.eu/ https://www.ey.com/en_cn/people/joongshik-wang https://www.ey.com/en_cn/people/laura-mcgarrity https://www.ey.com/en_cn/people/peter-ulrich https://www.ey.com/en_cn/people/sri-prabhakaran кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 38 research article application of the internet of things and 6g cellular communication to optimize accounting and international marketing zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko abstract. digitalization of marketing forms preconditions for personalization and individualization of advertising promotion of goods (works, services). databases about consumer preferences and market situation are at the disposal of major international corporations, which makes it difficult for advertisers and admen. it is envisaged that the development of technologies of the internet of things (iot) and 6g cellular communication should change the situation in the field of processing and using information for accounting, management and marketing purposes. the purpose of the scientific research lies in optimization of accounting and international marketing in terms of determining income, expenses and, accordingly, profits from the lease of commercial and advertising space in all international participants of lease relations on the basis of information generated by innovative technologies of the internet of things and cellular communication of the sixth communication generation. in particular, the method of using technologies of the internet of things and 6g cellular networks was developed for obtaining information about the movement of visitors of commercial establishments and their consumer preferences. the procedure for recognition and accounting of all market participants’ income, expenses and, accordingly, financial results from the lease of commercial and advertising space has been developed, including operators of commercial establishments, advertisers, admen, and leasers. the organization of accounting the lease of commercial and advertising areas as part of international economic activity of enterprises has been optimized by providing international access to information and software and technical resources of the internet of things and cellular communication. management decisions have been made as a reaction to information from a database about visiting commercial establishments. based on the authors’ proposals, the order of circulation of accounting and management information and funds from buyers to operators of trade networks, trade establishments, advertising agencies and, finally, producers of goods (works, services) are proposed through the systems of international information relations that form a closed cycle of economic activity at the global level and require further scientific research. keywords: accounting; international marketing; lease profit; commercial and advertising areas; the internet of things; 6g cellular communication; international economic activity. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 39 authors: zenovii-mykhaylo zadorozhnyi west ukrainian national university, ukraine e-mail: zadoroznuy.zenoviy@gmail.com https://orcid.org/0000-0002-2857-8504 volodymyr muravskyi west ukrainian national university, ukraine e-mail: vavanm2@gmail.com https://orcid.org/0000-0002-6423-9059 nataliya pochynok west ukrainian national university, ukraine e-mail: natapochynok@gmail.com https://orcid.org/0000-0003-4416-3680 uliana ivasechko west ukrainian national university, ukraine e-mail: u.ivasechko@wunu.edu.ua https://orcid.org/0000-0002-3317-2306 correspondence author: volodymyr muravskyi, vavanm2@gmail.com citation: zadorozhnyi, z.-m., muravskyi, v., pochynok, n., & ivasechko, u. (2023). application of the internet of things and 6g cellular communication to optimize accounting and international marketing. virtual economics, 6(1), 38-56. https://doi.org/10.34021/ve.2023.06.01(3) received: november 11, 2022. revised: january 15, 2023. accepted: february 23, 2023. © author(s) 2023. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:zadoroznuy.zenoviy@gmail.com mailto:vavanm2@gmail.com https://orcid.org/0000-0002-6423-9059 mailto:natapochynok@gmail.com https://orcid.org/0000-0003-4416-3680 mailto:u.ivasechko@wunu.edu.ua https://orcid.org/0000-0002-3317-2306 mailto:vavanm2@gmail.com https://doi.org/10.34021/ve.2023.06.01(3) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 40 1. introduction further development of marketing is connected with personalization of the means of advertising promotion of goods (works, services). if the current practice of contextual advertising is focused on taking into account the information behavior of the internet users, then the future of marketing is connected with monitoring the daily management of users in various life situations. behavioral marketing is focused on the study of consumer decision-making in searching, selecting and purchasing goods (works, services). information and communication technologies play an active role in the personalization of marketing research. monitoring of the internet search by users of cellular services in combination with tracking the movement of persons forms a significant information resource for marketing promotion of goods (works, services). this accumulated database about consumers’ behavioral actions and habits is available mainly to large international corporations. advertisers are forced to seek the services of global players on the market of marketing services. particularly the problem of a limited choice of marketing platforms and intermediaries in advertising is being sharpened by conducting international economic activity by an enterprise. international marketing services are offered by large transnational marketing corporations. therefore, in the orientation of manufacturers and sellers of goods (works, services) to international markets one has to agree to a price supply without proper competitive methods of limiting monopolistic influence on marketing services. the issues of personalized and behavioral marketing at micro-level are becoming considerably urgent, but these problems are devoted very little attention to in the scientific domain and practical r&d activity. therefore, the article is focused on solving the problems of overall accessibility of innovative digital marketing for small companies through implementing technologies of the internet of things and cellular communication of the sixth generation into information processes of operators of commercial space and advertisers. the purpose of the research is to identify the facts of visitors’ movement in commercial establishments using iot and 6g technology to digitize the accounting of financial results from the rental of commercial and advertising spaces as part of the international marketing activity of businesses. on the basis of the use of innovative information and communication technologies capable of carrying out identification of persons and their behavior in public space (premises), it is possible to form local information bases that are useful for marketing purposes. such technologies as the internet of things and cellular networks of the sixth generation provide decentralization of information processing. local databases collected by the latest technologies directly in their places of occurrence may be owned by small local companies. an access to such information resources can be given to arbitrary stakeholders on the principles of distance and payment, which creates favorable conditions for marketing promotion of goods (works, services) within the framework of international activity of businesses. enterprises that trade products (works, services) in international commercial sites have the opportunity to control commodity flows and marketing activities. business management receives a multifaceted information resource for management decisions related to sales and advertising. the ability to use personalized and behavioral information of consumers of goods (works, services) for accounting and marketing purposes at the international economic level determines the relevance and demand of the research topic. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 41 this paper, together with the previous article by the authors muravskyi et al [1], for the first time in the scientific space, determines the prospects of the combined use of iot and 6g technologies for the digitization of accounting. it forms a scientific field for other researchers who are interested in the prospects of economic use of iot and the future (not yet fully formed) 6g technologies. to disclose the topic of the research, the article has the following structural elements: the literature review of scientific research on the prospects of using the internet of things technologies and 6g cellular communication in economic processes; forming the purpose of the article, defining objects and hypotheses of research; selecting methods and methodological approaches in the process of scientific research; achieving the results of the research (justifying expediency and efficiency of using iot and 6g technologies to determine the number and preferences of commercial establishments’ consumers; improving the methodology of automated accounting of income, expenses and, accordingly, profits of all market participants of the lease of commercial and advertising space (operators of commercial premises, advertisers, admen, leasers of commercial and advertising space); organization of accounting of lease profits as part of international activity of enterprises); conclusions and prospects of further scientific research. 2. literature review among the few scientists in this field, it is advisable to distinguish lu [2], who explored the historical stages of the cellular network development from 1g to 5g, which made it possible to identify future trends of economic use of prospective 6g technology. popovski et al [3] conducted systematic research in the field of developing 6g cellular networking and connected concepts of “simultaneity”, “presence” and “causality”, which are basic categories in using new generation cellular communication in economic processes. zhang et al [4] developed a methodology of decentralized processing and exchange of information using 6g cellular communication for implementing crowdsourcing (transmission of production and information functions of an indefinite circle of people). the problematic aspects of using the promising 6g technology of cellular networks were distinguished by bourbah et al [5], who drew attention to the complexity of cyber defense of information, high cost of technology implementation, significant organizational restrictions and the need for infrastructure transformations in the transition to a new level of cellular development. scientists are actively discussing the branches of economic activities in which 6g technologies are the promising ones. due to the integration of blockchain and cellular networks of the sixth generation, according to khan et al [6], prerequisites for solid use of cellular communication in transport, construction, logistics are formed, and also as it has been proven by de alwis et al [7], in the production industry. supplementing the research on the branch use of the technology was carried out by samanta et al [8], who identified the prospects for the provision of administrative services and the development of urban entities based on the principles of a smart city with sixth generation cellular communication. the place of the technology in the development of renewable energy systems was explained by yap kah et al [9]. significant transformations, as it is proved by singh et al [10], also undergoes the health care system with using cellular networks of new generations in telemedicine and access to medical databases. there is also research conducted on the combined integration of various information and communication technologies with using 6g cellular communication. for example, borah et http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 42 al [11] substantiated the expediency of building multi-stage artificial intelligence systems with direct communications through 6g cellular networks. as an example of machine learning based on 6g technology in industrial engineering, there can be cited the research on autonomous manufacturing of industrial equipment by sumaiya & alsekait [12]. the interconnection of digital doubles and 6g in ensuring autonomy and generative intelligence in economic systems was explained by shu et al [13]. the 6g cellular connection, according to wu [14], is the main construction of the 5.0 industry, which is based on the maximum level of autonomy of economic activity in combination with the increase in the enterprise personnel’s professionalism. almohammed et al [15] continued the research and substantiated the prospects for the implementation of the internet of things technology on the basis of the internet communication of cellular communication of the sixth generation in various spheres of economic activity. it is also expedient to consider the study by honar et al [16], in which the concept of uniting all the latest information and communication technologies around new generation cellular communication in integration with the internet of things devices was developed, which brings the digitalization of financial and economic processes to a new level. most scientists support a joint conclusion about the prospect of developing of technology of the internet of things on the basis of communication exchange of information through 6g cellular communication. however, the ability to collect and process information on the use of 6g cellular networks, which constitutes an invaluable informational resource for marketing remains beyond the attention of scientists who are specialists in the practical use of cellular communication technologies. there are almost no scientific works in the field of methodology and organization of accounting for management and international marketing purposes using 5g and 6g technologies, which made it possible to formulate the purpose of the article. the purpose of the scientific research lies in optimization of accounting and international marketing in terms of determining income, expenses and, accordingly, profits from the lease of commercial and advertising space in all international participants of lease relations on the basis of information generated by innovative technologies of the internet of things and cellular communication of the sixth communication generation. to implement the research, the tasks were formulated, which consist in: substantiation of expediency and efficiency of use of iot and 6g technologies to determine the number of visitors of commercial premises and their consumer preferences; improvement of the methodology of automated accounting of income, expenses and, accordingly, the financial results of all international participants of the market of lease of commercial and advertising space; organization of information exchange in accounting of lease profits as a part of international activity of enterprises. the object of the research in the article is the economic processes and financial results from the lease of commercial and advertising space from the standpoint of accounting and international marketing. 3. methods the specific methods of scientific and empirical research were used in article. in particular, the systematic approach to scientific research has provided substantiation of systematic subordination of accounting to international marketing and management systems. the accounting system is an information generator of data on commercial and marketing processes for the purposes of managing international economic processes at an enterprise. based on a systematic approach to scientific research, the article uses a list of scientific methods (table 1). http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 43 table 1. research methods section research method result introduction deductive method the subject importance of the research topic has been substantiated. the topicality and perspective of the research in the field of renting commercial and international marketing spaces has been determined. literature review economic and mathematical modeling with the use of polynomial trending based on approximated and smoothed data using excel, a forecast of the development of 6g cellular networks until 2030 has been provided. graphical method the use of excel based on statistical and forecast data made it possible to build graphs on the development of 6g cellular communication. bibliographic and comparative analysis empirical research was conducted with the use of a bibliographic approach known as “common word analysis” using the keywords “accounting” and “6g” on the “researchgate” information resource. the comparative analysis revealed promising directions for using 6g cellular network technology, which made it possible to determine the purpose and objects of the research. results functional method the functional possibilities of iot and 6g technologies in optimizing the accounting of the lease of commercial and international marketing spaces have been identified. information and entropy method the method of accounting of income, expenses and, accordingly, financial results from the lease of commercial and advertising spaces among all market participants has been improved, with the use of information about consumer preferences and the movement of visitors through commercial premises. innovative method innovations in the organization of accounting and international marketing in the part of external communications between participants of the rental market of commercial and advertising space have been proposed conclusions generalization of data and research synthesis summarizing proposals and developments for explanation of their importance and feasibility. the contribution of the authors to the optimization of the accounting of financial results from the international lease of commercial and advertising space using iot and 6g technologies and the directions of further research in this area have been determined. the use of the above research methods made it possible to obtain the results of the scientific research. 4. results and discussion the number of devices connected to cellular communication is increasing every year (from 3,863 million in 2016 to 5,826 million in 2020) [17]. despite the permanent increase in cellular networks, the pace of introduction of new generations of cellular communication is decreasing (fig. 1). http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 44 figure 1. the pace of cellular devices distribution by generation (2g-6g) source: determined on the basis of ([17]; [18]; [19]); the 2030 indicator is calculated on the basis of data forecasting using excel. in particular, on the background of 4g cellular communication growth by 32 % in the previous 5 years, the estimated use of 5g technology in 2020-2025 will comprise only 15 percent (from 5,826 billion units to 8,513 billion units). similar unsatisfactory indicators are expected for 6g technology, despite popularization of the internet of things, which is based on using the fast cellular internet. global spending on the development and implementation of iot technology will grow from usd 646 billion in 2018 to usd 1,100 billion in 2023 [20]. however, the rate of spread of cellular communication devices is much lower than the development of technologies that function with the use of the internet communication through cellular networks. an obstacle to the rapid implementation of new generations of cellular communication technologies is the significant payback period of investment projects of cellular operators. in particular, based on the universal concept of the 5g technology development (table 2), it is possible to estimate potential costs and revenues, as well as the payback period of investments in the implementation of new generations of cellular communication for any cellular operators in the countries of northern europe and eurasia [1]. under the basic scenario of global socio-economic development, the payback period for projects implementing 5g technology is pessimistically estimated to be 11.3 years. this indicator under a conservative version of socio-economic development is 12.6 years, if the global military-pandemic threats to the functioning of the enterprise continue. even according to the most optimistic estimates, the investment can pay off in only 4.5 years. such a trend is 2016 2017 2018 2019 2020 2025 2030 6g 0 0 0 0 0 0 5 5g 0 0 0 0 5 20 30 4g 23 29 43 52 55 56 57 3g 32 31 28 25 20 18 8 2g 45 40 29 23 20 5 0 year-over-year growth 0.581 0.861 0.563 0.415 0.124 0.537 1.290 mobile broadband subscriptions 3.863 4.724 5.287 5.702 5.826 8.513 14.965 0 2 4 6 8 10 12 14 16 18 0 20 40 60 80 100 120 m il li o n s % http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 45 most likely relevant for 6g technology as well, given the same development period as 6th generation cellular communication (fig. 2). table 2. the payback period of 5g implementation projects per cellular operator (million usd) indicator pessimistic scenario optimistic scenario basic version of socio-economic development the operator's capital costs for implementing the technology 493 341 the increase in operating costs after the introduction of the technology 923 650 net discounted income of the operator 597 976 internal rate of return, % 21 23 payback period, years 11.3 4.4 conservative version of socio-economic development the operator's capital costs for implementing the technology 505 354 the increase in operating costs after the introduction of the technology 935 658 net discounted income of the operator 571 960 internal rate of return, % 20 25 payback period, years 12.6 4.5 source: muravskyi et al [1] the term of development of cellular communication of the fifth and sixth generations is 8 years, which is positively different from 3g (15 years) and 4g (12 years) technologies. given the shorter term for research and development of new technologies in cellular communication, the pace of their practical implementation is unsatisfactory despite significant advantages over previous technologies. figure 2. development periods of 3g, 4g, 5g, and 6g mobile broadband technologies source: [21] for example, the determining functional characteristic of 6g technology is the reliable and accurate identification of the location of the cellular subscriber. the sixth-generation networks are similar to the technology of global positioning (gps-navigation) are able to determine the 15 12 8 8 0 2 4 6 8 10 12 14 16 3g 4g 5g 6g y e a rs http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 46 spatial placement of a radio transmitter and a person respectively who is its owner. unlike the two-dimensional determination (longitude and latitude) of the location of the gps device, the cellular networks also monitor the height in the process of moving of the controlled object. 6g technology is capable of forming information about the three-wave positioning of the cellular device in the open and closed space. for the management system, an important information resource is the identification data on the movement of persons inside buildings by different floors, functional zones and individual premises. to achieve this goal, compared to cellular communication of previous generations, 6g technology is able to provide a significant bandwidth of the internet communication (1000 gigabits per second) and at the same time provide information service to a large number of connected cellular devices (10 million devices per kilometer²) (fig. 3). figure 3. connection density and peak data rates of 4g, 5g, and 6g mobile broadband technologies source: [22]; [23] another important possibility of cellular networks of the sixth generation is direct information synchronization with other technical devices at the micro-level. cellular devices can exchange data without the involvement of operators’ base stations. through the internet technology, information from 6g telecommunications devices can be accumulated in local databases. information processes occur in the information environment of an enterprise even before data get to operators of cellular networks. there is already an increase in the number of local databases based on the use of iot devices connected to the internet via cellular communication (fig. 4). in particular, in 2023, the number of access bases for iot devices through cellular networks will reach 19,087 million units in transport, 15,762 million units in cctv cameras, and 5,863 million units in home appliances and gadgets. the internet of things technology with data transmission through local cellular communication provides collection of multilateral data and their operative transmission to the management and accounting personnel of an enterprise. as a result, enterprise management receives complete and reliable data on the movement of persons in buildings and adjoining territories. in addition, the use of iot, implemented in household appliances and clothing items with a connection to 0.1 1 10 1 20 1000 0 20 40 60 80 100 120 4g 5g 6g connection density of 4g, 5g, and 6g mobile broadband technologies(in millions of devices per kilometre²) peak data rates of 4g, 5g, and 6g mobile broadband technologies(in gigabits per second) http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 47 cellular communication, is gaining popularity (630.4 million devices in 2023). in particular, the internet of things technology is embodied in household devices, clothing elements, smart gadgets, technological sensors, which permanently transmit information through the cellular network, and is able to monitor household habits, individual characteristics of the body, a schedule of working and weekend days, communication links and, the main thing for international marketing, consumer preferences of individuals [26]. the functionality of iot and 6g technologies in improving accounting and management are shown in fig. 5. figure 4. global distribution of iot technologies with connection to cellular communications of new generations by 2023. source: [24]; [25] on the basis of information on the number of visitors of the commercial space and its leased area, it is possible to calculate the amount of rent. determination of the number of visitors ensures the identification of the popularity of a particular commercial space. in most cases, popularity is the result of more profitable from the standpoint of the spatial organization of the location of the entrance and showcases of the commercial space. it is expedient to take into account optimal location of commercial spaces when determining the rent and, accordingly, the income of operators of commercial establishments. rental payments can be variable over different periods of time due to seasonal attendance of certain commercial establishments. since during the new year holidays traditionally turnover in commercial establishments increases as a result of increase of the number of buyers, the amount of rent may be larger. and vice versa, in the summer holiday season, the number of buyers is significantly reduced, which is the basis for adjusting the rent. it is advisable to form the amount of rent taking into account two factors: the area leased; the number of visitors of commercial premises. the optimal option is an equal ratio of the above factors. the best option is the equivalent ratio of the above factors. establishing compliance between the rent and the leased area with taking into account the number of visitors, provides fair pricing in the commercial lease market. in addition, the costs of servicing public use areas and areas of general purpose (heating, air conditioning, cleaning, ongoing repairs, etc.) are mainly related to 393 2482 135 50 61 400 19087 15762 5146 1552 1181 5863 81.9 172.2 346.4 445.7 533.6 557.3 630.4 5 g i n te rn e t o f t h in g s e n d p o in t in st a ll e d b a se w o rl d w id e , b y s e g m e n t (i n 1 ,0 0 0 u n it s) wearables internet of things unit shipments worldwide (in millions) 2023 2020 household it and gadget emergency services in-vehicle toll devices telematics devices cctv cameras connected cars 202320222021202020192018201720162015 http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 48 direct operating (production) costs, which violates fundamental accounting principles. premises that are not related to the main activity of commercial establishments include corridors, terraces, public toilets, stairs, escalators, adjoining and lounge zones and more. figure 5. using the internet of things and 6g cell networks for accounting purposes source: devised by the authors. instead, the identification of such costs, taking into account the number of visitors and their place of stay, provides reliable accounting and distribution. on the basis of accounting information on the total operational costs for the maintenance of all buildings and adjoining areas at the disposal of operators of lease areas, it is possible to organize effective analytical accounting. it is advisable to distribute the total volume of operating costs for the maintenance of the interior space in terms of leasers in proportion to the number of visitors of each room. such costs are, in their economic essence, general production distributed and at the end of the reporting period are included in the cost of rental services. it is advisable to recognize the costs of maintaining the adjoining territories and at the end of the reporting period, to write off at the end of the reporting period. it is also advisable to take into account the administrative costs of commercial establishments for the purposes of full and reliable calculation of the cost of lease services in management accounting. it is recommended to distribute administrative expenses in proportion to general production costs at the end of the reporting period. in order to reduce labor intensity of simultaneous financial accounting and management accounting of administrative expenses with their corresponding parallel attribution to financial results and the cost of lease services, the internet of things latitude longitude height commercial institutions information about: visiting commercial premises staying in common areas movement in space stops the number of visitors length of stay cellular networks of individual use advertisers information about: behavior in commercial establishments household habits individual characteristics of the body schedule of working days and weekends communication links consumer preferences and other information admen: cost accounting, income and finance. results 6g public cellular networks advertisers: cost accounting, income and finance. results spatial location http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 49 automation of accounting functions is important. automated comparison of the given income and expenses also ensures prompt determination of financial results of operators of commercial areas. the methodology of digitalized accounting of income, expenses and, accordingly, financial results in the field of lease of commercial and advertising space is presented in table 3. table 3. the methods for accounting of income, expenses and financial results from the lease of commercial and advertising space using iot and 6g technologies no. primary data object of accounting methodology of accounting operator of commercial establishments 1 the number of visitors, the area of commercial premises rent → operating income → financial results the amount of rent depends on the number of visitors and the area of the commercial premises leased 2. the number of visitors, the area of commercial premises and common use areas costs for the operation of the internal space of commercial establishments → distributed general production costs → financial results recognition of operational costs related to the internal space of commercial establishments, general production allocated to the maintenance of each premises in proportion to the number of visitors and the area leased 3 number of visitors costs for maintenance of house territories → general production undistributed costs → financial results recognition of operating expenses connected with the internal space of commercial establishments, general production allocated to the maintenance of each premise in proportion to the number of visitors and the area leased advertisers – adman 4 place and length of stay of persons, number of visitors advertising payment → operating income → financial results display in accounting of the receipt of advertising payment after confirmation of the fact of demonstration of advertising 5 location and length of stay of unique visitors advertising payment → operating income → financial results display in accounting of the receipt of advertising payment after confirmation of the individual user's reaction to advertising 6 number of advertising displays and reactions to it marketing expenses → costs of main operating activities → financial results write-off the share of the costs of the main operating activity on the cost of the provided international marketing services in proportion to the number of advertising displays and the reaction to it lessee of commercial and advertising space 7 the number of visitors, the area of the commercial premises rent → operating expenses → financial results determining the costs of renting of commercial premises depending on their popularity among visitors and the area leased 8 the number of advertising views, the reaction to the advertising advertising expenses → sales expenses → financial results advertising payment in favor of the advertiser is determined in proportion to the number of views of the advertisement and the reaction to it at fixed (one-time) or dynamic rates (at the end of the period). 9 number of people attracted by advertising, turnover income from the sale of goods (works, services), stimulated by advertising → operating income → financial results accounting of the growth of income from the sale of goods (works, services), attracted by advertising and an increase in the number of visitors to commercial establishments source: developed by the authors. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 50 with the purpose of avoiding manipulations with the number of visitors for overestimating or reducing economic indicators, it is necessary to ensure the personalization of calculations. for this purpose, it is advisable to identify the unique persons who first visited the commercial establishment. of the total number of visitors, it is recommended to exclude persons who have visited the commercial establishment. the return of visitors to the same premises cannot be recognized as the fact of their involvement through the use of marketing measures. therefore, by determining the unique identification number of the cellular device, it is possible to calculate the number of people who first physically arrived into certain places of commercial space. by comparing the indicators of the visitors’ presence in the commercial establishment and reaction and the marketing measure, it is possible to calculate the effectiveness of international marketing. therefore, unique visits to certain spatial areas of the premises automatically increase not only rent income but also marketing income. operators of the commercial space have an active and effective zoning mechanism of all premises from the standpoint of the popularity among visitors, which determines the marketing value and the location of outdoor advertising objects. 6g technology provides a function of identifying the exact spatial location of people by attitude towards outdoor advertising objects. additionally, surveillance cameras which are capable of operating on the principles of the internet technology are able to track eye focus on spatial objects. as a consequence, it is recommended to identify the facts of visual perception of advertising signs, placards, banners, posters and other advertising objects. the number and duration of visitors’ stops near an advertising sign or commercial window is a criterion for determining the popularity and effectiveness of marketing measures in a commercial space. with increasing popularity of certain places for placing outdoor advertisement or products (goods), it is possible to calculate an integrated lease of advertising and commercial space. the cost of the lease is determined by taking into account the international marketing and spatial components with the attachment to the potential number of people who can be consumers of goods (services) of the leaser. in other words, the amount of rent should take into account visitors’ access to the commercial space and the popularity of outdoor advertising objects. on the basis of accumulated information collected by the internet of things and 6g technologies, ways of people’s movement can adaptively adjust the content of advertising. in particular, depending on the type of attending commercial establishments or a part of commercial premises with a certain type of goods, it is advisable to change the context of advertising and the method of marketing promotion. the content of advertisements is recommended to adapt to consumer needs and interests, which appear depending on the people’s physical presence in certain commercial premises or zones. it is advisable to broadcast appropriate advertisements on smartphones and tablets, as well as on devices operating on the principles of the internet technology. such devices include smart tvs, smart watches, home appliances with the internet access etc. each of the gadgets is able to display advertisements that are most adapted to users’ needs. for advertisers and marketing companies, the ability of monitoring reaction to advertising facilities creates preconditions for automation of accounting and control of marketing profits. similarly for the method of calculating advertising payments on the internet, it is advisable to ensure accounting of costs and income from placing objects of outdoor advertising. automatic identification of short-term facts of stay and contemplation on advertising objects initiates calculation and charging extra of advertising payments. after confirming the facts of http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 51 advertising contemplation, it is advisable to write off certain advertising payments that are its costs from the advertiser. payment from the advertiser in favor of the advertising company is advisable to be recognized as the main operating income. receipt of payment from the advertiser in favor of the advertising company should be recognized as its main operating income. the amount of advertising payment in proportion to the number of views can be fixed or dynamic over time. at a fixed rate, the advertising payment is accrued and recognized in the accounting of the advertiser's expenses and the advertiser's income immediately after the automatic confirmation of viewing the ad. at a dynamic rate, these costs and income are recognized in accordance with the approved advertising budget and the expected number of views. that is, the advertiser, based on retrospective information, predicts the number of advertising views for certain periods of time and forms a planned budget for international marketing. accordingly, the advertising payment is accrued at the end of the reporting period at a predetermined rate. if the number of views is significantly different from the planned figure, progressive and regressive coefficients of adjusting the advertisement budget may be applied. the advertiser will have to increase or reduce marketing costs from predetermined value. instead, the advertising company also adjusts the appropriate income from marketing services. the formation of a complex advertising budget foresees accumulation of information on advertising views from different objects of international marketing promotion of goods. the amount of the advertiser’s expenses and operating income of the advertising distributor is determined by summarizing the corresponding indicators by all advertising platforms at which appropriate advertising is shown. in commercial establishments, it is advisable to monitor the popularity of a particular type or kind of goods according to a similar method. visiting of local commercial zones and shelves in commercial establishments with goods by persons should be positioned as an interest in buying. the more visitors are in local areas, the more interest have the goods which are placed in them. information generated by the internet of things and 6g technologies is of interest to merchandisers for marketing promotion of goods. in particular, identification requires increased attention to low-sales products. that is, visitors are interested in goods, but for some reason they do not buy them. such goods require the use of more active methods of stimulating demand, including: cost adjustment, active advertising, introduction of shares or sales, etc. also, an important way to increase the sale of certain goods is to move them to other commercial areas. additional actions lead to new marketing costs among advertising distributor. after intensifying marketing activities, it is necessary to re-monitor the effectiveness of advertising due to the ratio of marketing costs to advertisers’ income. the customer of advertising has an effective mechanism for quantitative evaluation of advertising efficiency. it is advisable to compare the increase in the number of visitors for each type of commercial space and goods with the number of people who have been shown advertising. if there is a significant increase in the flow of visitors in a commercial establishment, then personalized advertising was effective. also, the growth of operating income of commercial establishments from the sale of each type of goods (works, services) can be directly related to the cost of its international marketing promotion, which is an element of economic assessment of the results of advertising activities. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 52 on a similar principle, it is recommended to account the expenses of the advertiser for conducting advertising events. all costs for the organization and conducting of advertising measures are accumulated during the reporting period in the cost account of the main operating activity during the reporting period. at the time of receipt of an advertising payment, which is the income of the advertiser, it is advisable to automatically write off the corresponding share of the main operating (production) costs associated with obtaining this income to the cost of providing advertising services. in order to ensure the efficiency of accounting with an advertiser, one can use the planned values of expenses with subsequent adjustment to the actual indicators at the end of the reporting period. since under conditions of using the internet of things and 6g technologies, income can be determined by each targeted advertising show, it is advisable to automatically reflect the share of adequate costs incurred for the implementation of the advertising event in accounting. by comparing operating income and expenses from marketing services, it is possible to automatically determine the financial result of an advertising company. accordingly, the overall financial result of an advertiser for the reporting period will equal to the amount of single financial results from personal advertising, which is demonstrated by each individual potential consumer of goods (works, services). information from the system of automated accounting and management of shopping establishments using the internet of things and 6g technologies can be removed remotely to all stakeholders. large commercial networks rent commercial and advertising areas at the same time in many countries. international aspect of business is focused on the global distribution of goods and services, which causes activation of the international exchange of accounting information. in most cases, customers and advertising services are in different countries. the organization of accounting for the lease of commercial and marketing space for the purposes of effective international management and marketing is shown in fig. 6. in order to digitize the accounting of income and expenses (respectively, financial results), it is advisable to ensure automation of the primary processing of accounting information in the places where it occurs. that is, in international commercial establishments, automated collection with the use of the internet of things and 6g data on visitors to commercial premises is necessary. in the future, primary data must be transferred to advertisers and admen in turn. information collected by the internet of things and 6g technologies is accumulated in international databases. ownership of various software, technical and informational resources can be distributed among all participants of the market for renting commercial and advertising space. technical devices for collecting data about visitors to commercial establishments may belong to the operators of commercial networks. databases about the popularity of shopping and advertising spaces among visitors are the property of advertising companies, which may provide limited access to advertisers based on the principles of international availability and payment. part of advertising payments received is redistributed by advertisers in favor of commercial establishments, cellular network operators and other participants of the rental market, which provide maintenance of technical devices of the internet of things and 6g technologies. admen use this data to manage advertising placement and accounting of financial results of advertising companies. accounting and management employees of advertising companies carry http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 53 out remote selection of advertising media, advertising content in accordance with the audience and interests of visitors to commercial establishments, search for optimal places for placing advertising, determine its popularity and effectiveness, quickly adapt marketing measures to the needs of consumers of goods (works, services). representatives of advertisers, on the basis of remotely collected information, make decisions about international popularity of: leased commercial premises, advertising means for supermarket visitors, individual groups or types of goods for end consumers. in the future requests for the following there may arise: a lease of space in other premises of commercial establishments, a change of vendors and operators of commercial networks, a review of contracts with advertising companies, replacement of advertisers, diversification of advertising activities, revision of product and price policies, etc. figure 6. organization of cash flows accounting in international marketing source: developed by the authors. through the system of international economic relations, the circulation of accounting and marketing information is ensured between the participants of the market for renting commercial and advertising space, as well as funds from end buyers to operators of commercial networks, commercial establishments, advertising companies and, in the end, producers of goods (works, international marketing data base advertisers operators of commercial areas manufacturers of goods (works, services) leasers of commercial and advertising spaces consumers of goods (works, services) accounting country 1 country 3 c o u n tr y 2 c o u n tr y х the acquisition process rental payments rental process data on the popularity of goods (works, services) consumer preference information data on the movement of visitors in space іот 6g http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 54 services). information and money circulation forms a closed cycle of international economic activity at the global level, which requires further scientific research and development in the management of accounting and production and international marketing processes. 5. conclusions the implementation of information and communication technologies in business activities has led to the digitalization of economic (primarily international marketing and accounting and management) processes. large international corporations form global electronic databases on consumers of goods (works, services) and provide paid marketing services to advertisers on their basis. local operators of commercial and advertising spaces are capable of breaking the monopoly of international e-business corporations, who are able to form local databases thanks to the use of sixth generation cellular communication technologies and the internet of things. the database collected by innovative the internet of things and 6g technologies accumulates information about visits to commercial premises, stays in general areas of stores, movement in space, people stopping, number of visitors, duration of their stay, etc., and consumer preferences of visitors of commercial establishments. on the basis of this database, it is possible to digitize accounting: for operators of commercial networks – the rent depending on the number of visitors (operating income), costs for maintaining separate commercial premises and areas of general use (operating costs); for advertisers – advertising payments after confirming the facts of advertising display and response to it (operating income), costs for rendering marketing services (operating costs); for leasers – fees for renting premises (operating expenses), advertising expenses (sales expenses), income from the sale of goods (works, services) stimulated by advertising (operating income). digitization of accounting of the given income and expenses provides automated determination of financial results of all participants in the rental market of commercial and advertising space. stakeholder access to the database of accounting and management and marketing data can be provided based on distance and payment. remoteness foresees the implementation of international economic activities of enterprises in the field of renting commercial and advertising spaces. producers and consumers of goods (works, services), advertisers and admen, operators and leasers of commercial premises in most cases can be located in different countries. the accounting system is entrusted with the function of international electronic communications between all participants of the market for renting commercial and advertising spaces for the exchange of accounting, management and marketing information. the principle of payment is implemented through the provision of paid services for the global distribution of this information. part of the received payments are redistributed to the benefit of commercial establishments, cellular network operators and other participants of the rental market, who carry out servicing of technical devices of the internet of things and 6g technologies. through systems of international economic relations, the circulation of accounting and management, marketing information and funds is ensured from end buyers to operators of commercial networks, commercial establishments, advertising companies and, in the end, producers of goods (works, services), which forms a closed cycle of international economic activity at the global level. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) zenovii-mykhaylo zadorozhnyi, volodymyr muravskyi, nataliya pochynok, and uliana ivasechko virtual economics, vol. 6, no. 1, 2023 55 the need for optimization of accounting and international management as well as production and marketing processes in the global circulation of information and money flows with the use of innovative information and communication technologies is the subject of further scientific research. however, a significant limitation of further research in this area is the lack of final technological parameters and organizational conditions for the use of 6g technology, the implementation of which is planned after 2030. author contributions. conceptualization, z.-m. z., v. m., n. p. and u. i.; methodology, z.m. z. and v. m.; software, v. m.; validation, v. m.; formal analysis, z.-m. z., v. m., n. p. and u. i.; investigation, z.-m. z., v. m., n. p. and u. i.; resources, z.-m. z. and v. m.; data curation, z.-m. z., v. m., n. p. and u. i.; writing-original draft preparation, z.-m. z., v. m., n. p. and u. i.; writing-review and editing, z.-m. z., v. m., n. p. and u. i.; visualization, v. m.; supervision, z.-m. z. and v. m.; project administration, z.-m. z. and v. m.; funding acquisition, z.-m. z., v. m., n. p. and u. i. data availability statement: not applicable. conflicts of 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(2022). comparing idiographic and nomothetic approaches in management sciences research. virtual economics, 5(3), 27-49. https://doi.org/10.34021/ve.2022.05.04(2) received: april 15, 2022. revised: september 12, 2022. accepted: november 5, 2022. © author(s) 2022. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:henryk.dzwigol@polsl.pl https://orcid.org/0000-0002-3787-1323 https://creativecommons.org/licenses/by/4.0/ 28 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 4, 2022 1. introduction the field of management sciences is concerned with understanding and explaining the decision-making and behavior of organizations (wróblewski & dacko-pikiewicz, 2018), managers (trzeciak et al., 2022), and employees in different situations (hinojosa et al., 2017; schad et al. 2016). to achieve this, researchers must adopt an appropriate research approach that is tailored to their research goals and questions (dźwigoł, 2020; dzwigol et al., 2020a). the two main approaches in management sciences research are the idiographic and nomothetic approaches (defreese & nissley, 2020; zhang et al., 2022). the idiographic approach is focused on the distinctiveness and uniqueness of each case or phenomenon studied (de luca picione, 2015; miśkiewicz, 2018). rather than seeking to draw general conclusions that can be applied to a larger population, this approach aims at gaining a deep understanding of the specific context and conditions of each case. on the contrary, the nomothetic approach aims at identifying general principles, laws, and theories that can explain behavior across a larger population or set of cases (ashworth et al. 2019; szczepańskawoszczyna & gatnar, 2022). it seeks to uncover patterns and relationships that are consistent across multiple cases or situations (patel, 2017; dźwigoł & dźwigoł-barosz, 2018). in the field of management sciences, the idiographic approach involves in-depth study of individual cases or organizations, often using qualitative research methods such as case studies (kharazishvili et al., 2020; abazov, 2021; miśkiewicz, 2021a; kharazishvili et al., 2021), interviews (kwilinski et al., 2020a; kuzior et al., 2021a; kuzior et al., 2021b), or observations (shareia, 2016; tkachenko et al. 2019; kwilinski et al., 2022a). this approach enables researchers to delve into complex issues, to uncover the unique factors that influence each organization's behavior and decision-making (lehnert et al., 2016; saługa et al., 2020), and to identify patterns and themes that might be missed by more generalized research methods. the idiographic approach is particularly useful in management sciences research when the goal is to obtain a comprehensive understanding of a specific issue (ackermann & alexander, 2016; dzwigol, 2021), to generate rich and detailed data that can inform theory-building, or to examine complex and dynamic phenomena that are not easily quantifiable (welch et al., 2020; dzwigol, 2021). however, the idiographic approach can be time-consuming and may lack generalizability, so it is important to carefully consider the research question and objectives before choosing this approach (rajiani et al., 2018; alsharari & al-shboul, 2019; miśkiewicz, 2019). oppositely, the nomothetic approach typically involves quantitative research methods, such as surveys or experiments, that aim at establishing cause-and-effect relationships and testing hypotheses (drożdż & mróz-malik, 2017; günbayi & sorm, 2018; miśkiewicz et al., 2021). the purpose is to identify and test general theories or models that can explain behavior in a particular context. the nomothetic approach is particularly useful in management sciences research when the purpose is to test hypotheses (dźwigoł & dźwigołbarosz, 2018; dźwigoł-barosz & dźwigoł, 2021), to establish causal relationships, or to generate findings that can be generalized to a larger population or set of cases (parker & northcott, 2016; drożdż et al., 2021; lyulyov et al., 2021a; lyulyov et al., 2021b). it provides a rigorous and systematic approach to research that can lead to more robust and generalizable http://www.virtual-economics.eu/ 29 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 4, 2022 findings. however, the nomothetic approach may overlook important contextual factors that can influence behavior and decision-making, and may not provide a complete understanding of complex or dynamic phenomena (klimstra & denissen, 2017; vaníčková et al., 2020). the present article focuses on the importance of selecting the appropriate research approach, either idiographic or nomothetic, and the methods and techniques employed in the research process in management sciences. specifically, the article seeks to answer the research questions on which methods and techniques are essential in management sciences research and which research method should be used. the article aims at providing guidance on choosing the appropriate research approach for different research contexts by comparing the importance of using appropriate methods and techniques in both idiographic and nomothetic approaches based on the results of international research. furthermore, the contribution made to the literature emphasizes the importance of research triangulation, especially in management sciences. this study contributes to the ongoing discussion on research approaches in management sciences and serves as a valuable resource for researchers and practitioners interested in conducting high-quality research in this field. 2. literature review functionalism utilizing quantitative research or classical grounded theory techniques was a manifestation of the so-called nomothetic approach, which focused on seeking regularities, patterns (kostyrko et al., 2021; polcyn et al., 2022; miśkiewicz et al., 2022), and relationships (hussain et al., 2021), and striving to formulate laws, including by verifying hypotheses using statistical techniques (murphy et al., 2017; chen et al., 2021; cyfert et al., 2021). researchers aimed at further expanding their knowledge by verifying, confirming, or questioning additional social regularities. typical research procedures within idiographic approach include experimentation, surveying, and correlation, while appropriate methods include interviews, surveys, observations, experiments, and tests. an alternative to nomothetics is the so-called idiographic approach, in which a researcher is interested in individual cases, events, or facts, aiming at better understanding social mechanisms (klimstra & denissen, 2017; coban et al., 2022a; coban et al., 2022b). this conceptualization allows for a comprehension of human actions in their natural context, supports a researcher's reflection and identification of relationships that nomothetic proponents verifying hypotheses on large samples do not take into account (patel, 2017; dźwigoł & dźwigoł-barosz, 2018). idiography is useful for exploring new, previously unknown issues and problems (so-called exploration) (van langenhove, et al., 2016; drozdz et al., 2020b). in the case of this approach, an appropriate research procedure is a case study, while methods used in this area may include documentation analysis, interviews, observations, or projective tests (turner et al., 2020; kwilinski et al., 2021a; kuzior & kwilinski, 2022). http://www.virtual-economics.eu/ 30 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 4, 2022 nomothetic research focuses on a limited number of pre-selected variables consciously giving up a consideration of many additional factors in the study, while the idiographic approach allows for the analysis of a very large number of such factors, but only for a single case or a small number of studied organizations (lyon et al., 2017; kwilinski, 2018; kwilinski, 2019). according to windelband & rickert (1999), the distinction of the idiographic approach resulted from a focus on seeking characteristic features that distinguish given phenomena from others. according to the general classification of sciences, it is accepted that economic sciences serve a utilitarian or theoretical-normative function (truc, 2018). as management sciences are a part of economic sciences they are also subject to this role (schad et al., 2016). nomothetics occurs when a general law is determined based on the analysis of a single case. idiographic methodology is used to study and understand the essence and characteristics of a specific event (dźwigoł, 2020; hayes et al., 2019). the problem of choosing tools to understand and explain a phenomenon, especially in social sciences, depends on the science paradigm (khaldi, 2017; dementyev et al., 2021; kwilinski et al., 2022b), even though quantitative research is generally considered "better" and provides more reliable knowledge than qualitative research (yardley & bishop, 2017). however, in many cases, the nature of the research problem necessitates qualitative research. quantitative research involves empirical research that measures specific variables in a quantitative way using measurement instruments (antwi & hamza, 2015; kwilinski et al., 2020b; banasik et al., 2022; miskiewicz, 2022). they are used when a research problem and conclusions can be described using quantitative measures. quantitative research also includes survey research, which verifies hypotheses by analyzing the frequency of responses (runfola et al., 2017). quantitative laws are developed using mathematical formulas (successor) (dźwigoł, &dźwigoł-barosz, 2018). the preceding operation (predecessor) in this law is to determine the conditions under which a particular relationship occurs. qualitative laws are defined in the language of a particular science and aim at identifying the properties possessed by a particular class of objects (brinkmann, 2017; chygryn, 2018). they have a less precise description of the predecessor compared to quantitative laws. it should be noted that the context of quantitative and qualitative laws does not necessarily have to be related to quantitative and qualitative research (hammersley, 2017; borgstede & scholz, 2021; nawawi et al., 2022). the field of management sciences consists of various disciplines, sub-disciplines, and scientific specialties that draw upon other fields of science, and therefore do not have their own methodology and cognitive tools (schad et al., 2016; bogachov et al., 2020). as a result, researchers studying management problems are required to put in a great deal of effort to determine the appropriate research method for an analyzed phenomenon (apuke, 2017; basias & pollalis, 2018). additionally, they should establish a research program that encompasses not only the defined area of study but also a specified research problem and its http://www.virtual-economics.eu/ 31 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 4, 2022 objectives. often, a choice of research tools may depend on research purposes (dźwigoł, 2019; dźwigol et al., 2019). currently, to increase the credibility of research and the probability of finding a solution, the principles of triangulation are often utilized (abdalla et al., 2018; dzwigol, 2020). this involves using multiple different procedures to seek answers to research questions. however, this approach carries the risk of researchers employing methods that they do not fully understand or are unfamiliar with. building scientific knowledge requires discipline and a scientific approach. therefore, in order to properly select a research method for the context of their study, researchers must be familiar with the differences between specific scientific methods or approaches in social science methodology (patten, 2017; shafait et al., 2021; arefieva et al., 2021). economists as scientists tend to overuse tools employed in the exact sciences and marginalize tools of other social sciences, apply complex theories to simple issues, favor concepts such as "optimization", isolate themselves from other social sciences, and deal with important social problems with a sense of prestigious mission. the essence of the research process is to find a solution, not just the tool that enables the solution to be found. 3. methodology the article aims at providing guidance on selecting the appropriate research approach for different research contexts by comparing the importance of using suitable methods and techniques in both idiographic and nomothetic approaches. the analysis of literature conducted in this study identified a gap in knowledge regarding the selection of appropriate research approaches, idiographic or nomothetic, as well as the methods and techniques used in the research process in management sciences. the identified knowledge gap and the formulated research purpose led to the development of detailed research questions: rq1. which of the listed procedures are the most important in the research process in management sciences? rq2. which of the listed methods are the most important in the research process in management sciences? rq3. which of the listed techniques are the most important in the research process in management sciences? rq4. which of the listed research methods should be used in the research processes in management sciences? 3.1. research method to achieve the desired objective and answer the research questions the author conducted international quantitative research on an expert group of academic researchers engaged in management sciences research. the questionnaire was designed after conducting a literature review of research methodology and engaging in discussions with other researchers. the http://www.virtual-economics.eu/ 32 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 4, 2022 survey comprised three sections. the first section included five questions that enquired about the significance of approaches, processes, methods, and techniques used in the research process in management sciences. the second section had 33 questions on the problem of enhancing the research process. the third section was metric-based and included three questions. the questionnaire was primarily composed of closed-ended questions arranged in a matrix format with a five-point likert scale, which made it possible to optimize the filling time. only a part of the survey results was used for this article, which pertained to the issues discussed and emerged from the research questions (first section). selected questions covered the issue of research approach (single-choice question) and successively the importance of procedures, methods, and techniques in the research process in management sciences (multiple-choice questions). the surveys were distributed in a print form at conferences dedicated to management sciences and through a pre-prepared email database. 3.2. a research sample the survey applied a theoretical sampling method, which involved selecting experts who had the best knowledge of the subject matter being studied (bryman, et al., 2020; oláh et al., 2021). the research was conducted on an international scale, with a survey questionnaire being directed at a group of 23,331 academic researchers associated with the field of management sciences. to ensure representativeness, a sample size was determined based on assumptions such as a fraction indicator p of 50%, an error size of 5% regarding the fraction indicator, and a significance level α of 0.05. after calculations, the minimum sample size required was 385 accurately completed questionnaires. the research resulted in surveying 401 representatives of management science theorists from 45 countries, which satisfied the criteria of sample representativeness. to meet the research objective, the obtained sample was split into two groups based on appropriate idiographic and nomothetic approaches (as shown in table 1). table 1. a list of experts distribution according to the declared research approach research approach n % idiographic 239 59.60 nomothetic 162 40.40 4. results according to the methodological assumptions of this research, the validation of experts' responses to the research questions was carried out by the analysts, taking into account the grouping that included the declared approach to the research process. to verify the structural differences in the responses of both groups, the two-sample z-test for proportions (wooditch, et al., 2021; girdler-brown and dzikiti, 2018) was used assuming a statistical significance level of alpha equal to 0.05. considering the above, the following hypotheses were adopted for each analyzed variable: http://www.virtual-economics.eu/ 33 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 4, 2022 hypothesis 1 (h1). p1 = p2 where alpha ≤ p-value (two-tailed) – there are no significant differences between the groups. hypothesis 2 (h2). p1 ≠ p2 where alpha > p-value (two-tailed) – there are significant differences between the groups. 4.1. applied procedures in the research process in management sciences based on the collected overall data (fig. 1), it can be concluded that among the surveyed experts, the case study procedure dominates (71.57%), while the experiment and correlation, indicated by 52.37%, ranked second. the smallest percentage of experts indicated the procedure related to vetting (19.95%). figure 1. procedures used by experts in research (n=401) interpreting the results, one can observe the current research trend in management sciences, which involves conducting in-depth studies in specific contexts or testing hypotheses and developed models in natural conditions. this is also confirmed by the majority of experts declaring an idiographic approach (59.60%), according to which the researcher is interested in individual cases, events, or facts, aiming to better understand social mechanisms. analyzing the results of the conducted test (table 2), it can be observed that the case study, which is often used in management sciences and is a typical manifestation of idiography, is also widely used in a non-methodical approach, according to the experts' opinions (64.81%). furthermore, both analyzed groups agree only in the case of the low utilization of the vetting procedure. in other procedures, the experts' statements differ. table 2. two-sample z-test for proportions on the procedures used by experts procedures experiment correlation vetting case study % idiographic (p1) 59.83% 46.03% 18.83% 76.15% % nomothetic (p2) 41.36% 61.73% 21.60% 64.81% z-value 3.6348 -3.0895 -0.6827 2.4694 p-value (left-tailed) 0.9999 0.0010 0.2474 0.9932 p-value (right-tailed) 0.0001 0.9990 0.7526 0.0068 p-value (two-tailed) 0.0003 0.0020 0.4948 0.0135 52,37% 52,37% 19,95% 71,57% experiment correlation vetting case study http://www.virtual-economics.eu/ 34 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 4, 2022 therefore, it can be concluded that despite receiving similar percentage values of data, the views on the use of specific procedures vary depending on the adopted research approach. 4.2. methods used in the research process in management sciences based on the follow chart (fig. 2) provides valuable insights into the most popular research methods in management sciences, as well as the ones that are not commonly utilized. the data shows that observation (71.57%) and interview (65.09%) are the two most frequently used methods, which is not surprising given that they allow researchers to gather firsthand information about organizational behavior and work processes. analysis of documentation (64.59%) and poll (63.09%) are also widely used, as they provide a wealth of information about policies, procedures, and attitudes related to management. on the other hand, the method of scenarios (32.92%) and field experiments (30.42%) are less common, possibly due to their high cost or complexity. the other methods are rarely used. figure 2. methods used by experts in research (n=401) upon analyzing the obtained test results (table 3), it is noticeable that there is a significant agreement among experts from both groups regarding the methods used. the only difference in the response structure is observed in the message tests (0.0025) and poll (0.01). interestingly, both idiographic and nomothetic approaches involve the use of surveys, which are commonly associated with the nomothetic approach, as well as analysis of documentation, interviews, and observation, which are more aligned with the idiographic approach. this suggests that there is a degree of overlap between the two approaches, and that researchers may draw on a variety of methods to achieve their research objectives. 64,59% 63,09% 7,98% 8,48% 8,98% 30,42% 48,63% 32,92% 71,57% 4,99% 1,50% 5,74% 5,49% 5,49% 2,00% 12,47% 65,09% 0,00% 20,00% 40,00% 60,00% 80,00% analysis of documentation poll biographical survey self-observation sheets laboratory experiment field experiment (natural) group expert assessment method of scenarios observation paraexperiment psychographics other people’s opinion projection tests psychological tests fitness tests message tests interview http://www.virtual-economics.eu/ 35 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 4, 2022 table 3. two-sample z-test for proportions on the methods used by experts methods idiographic nomothetic z-value p-value (left-tailed) p-value (right-tailed) p-value (two-tailed) documentation analysis 64.44% 64.81% -0.0780 0.4689 0.5311 0.9378 poll 68.20% 55.56% 2.5749 0.9950 0.0050 0.0100 biographical survey 8.79% 6.79% 0.7239 0.7655 0.2345 0.4691 self-observation sheets 7.95% 9.26% -0.4619 0.3221 0.6779 0.6442 laboratory experiment 7.53% 11.11% -1.2305 0.1093 0.8907 0.2185 field experiment (natural) 28.45% 33.33% -1.0425 0.1486 0.8514 0.2972 group expert assessment 50.63% 45.68% 0.9729 0.8347 0.1653 0.3306 method of scenarios 34.31% 30.86% 0.7205 0.7644 0.2356 0.4712 observation 71.55% 71.60% -0.0124 0.4951 0.5049 0.9901 paraexperiment 5.86% 3.70% 0.9723 0.8346 0.1654 0.3309 psychographics 1.26% 1.85% -0.4829 0.3146 0.6854 0.6292 other people’s opinion 4.60% 7.41% -1.1853 0.1179 0.8821 0.2359 projection tests 6.28% 4.32% 0.8437 0.8006 0.1994 0.3988 psychological tests 5.02% 6.17% -0.4971 0.3096 0.6904 0.6191 fitness tests 2.09% 1.85% 0.1688 0.5670 0.4330 0.8660 message tests 8.37% 18.52% -3.0190 0.0013 0.9987 0.0025 interview 65.69% 64.20% 0.3077 0.6209 0.3791 0.7583 4.3. techniques used in the research process in management sciences based on the follow chart (fig. 3), it can be concluded that the most frequently used techniques include: analysis of business opinions, observation of real critical events, hidden and participating observation, analysis of informal customer reviews, a survey of standardized open questions, situational interviews, structured interviews, and analysis of reports of employee meetings these techniques are commonly used in management research and provide valuable insights into various aspects of organizational behavior, customer preferences, and employee engagement. analysis of business opinions helps researchers to understand the views of key stakeholders and decision-makers within an organization (moskalenko et al., 2022; song et al., 2022). observational techniques, including hidden and participating observation, allow researchers to observe behavior in real-world settings and gain insights into unspoken dynamics within an organization (ciesielska et al., 2018; borodin et al., 2021; yang et al., 2021). surveys and interviews provide researchers with structured data that can be analyzed quantitatively or qualitatively (trzeciak, 2020; prokopenko & miśkiewicz, 2020; kharazishvili et al., 2021b), while analysis of reports from employee meetings can provide insights into the concerns and suggestions of employees. by analyzing the obtained results (table 4), it can be concluded that experts do not exhibit any specific dominant research techniques. only in the case of the idiographic approach, there is a frequent use of the analysis of business opinion and observations of real critical events. furthermore, except for six instances, the opinions of experts from both groups are in agreement. http://www.virtual-economics.eu/ 36 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 4, 2022 figure 3. techniques used by experts in research (n=401) table 4. two-sample z-test for proportions on the techniques used by experts techniques idiographic nomothetic z-value p-value (left-tailed) p-value (right-tailed) p-value (two-tailed) analysis of informal customer reviews 43.10% 33.33% 1.965 0.975 0.025 0.049 analysis of business opinions 56.07% 46.30% 1.922 0.973 0.027 0.055 analysis of reports of employee meetings, memos and ordinances 35.98% 33.33% 0.546 0.708 0.292 0.585 analysis of delivered speeches and published interviews 19.25% 11.73% 2.005 0.977 0.023 0.045 a survey of standardized open questions 38.08% 39.51% -0.289 0.386 0.614 0.773 anonymous mailing questionnaire 21.76% 22.22% -0.110 0.456 0.544 0.912 depth camera 5.02% 4.94% 0.037 0.515 0.485 0.970 self-assessment of qualifications and professional behavior 15.06% 14.81% 0.068 0.527 0.473 0.946 graphology 8.37% 3.70% 1.861 0.969 0.031 0.063 introspective analysis of behaviors in difficult situations 13.39% 11.11% 0.678 0.751 0.249 0.498 observations of real critical events 51.05% 41.36% 1.907 0.972 0.028 0.057 hidden and participating observation 48.54% 44.44% 0.806 0.790 0.210 0.420 hidden observation of simulated stressful situations 22.59% 12.96% 2.427 0.992 0.008 0.015 observation standardized on estimated scales 25.10% 21.60% 0.809 0.791 0.209 0.419 trial period of work in the post 32.64% 37.65% -1.036 0.150 0.850 0.300 samples of task behaviors 24.27% 32.72% -1.855 0.032 0.968 0.064 manipulation and control of environmental elements 10.04% 14.81% -1.445 0.074 0.926 0.149 39,15% 52,12% 34,91% 16,21% 38,65% 21,95% 4,99% 14,96% 6,48% 12,47% 47,13% 46,88% 18,70% 23,69% 34,66% 27,68% 11,97% 10,22% 17,46% 6,23% 26,68% 12,97% 8,98% 23,44% 27,18% 8,23% 37,16% 36,41% 26,68% 0,00% 20,00% 40,00% 60,00% analysis of informal customer reviews analysis of business opinions analysis of reports of employee meetings, memos and… analysis of delivered speeches and published interviews a survey of standardized open questions anonymous mailing questionnaire depth camera self-assessment of qualifications and professional behavior graphology introspective analysis of behaviors in difficult situations observations of real critical events hidden and participating observation hidden observation of simulated stressful situations observation standardized on estimated scales trial period of work in the post samples of task behaviors manipulation and control of environmental elements estimated scales for lifestyle measurement simulating conditions thematic apperception test (tat) by henry murray test of professional skills intellectual performance tests temperament tests tests of knowledge in a specific field structured free-form interview application form situational interview structured interview focus group interview http://www.virtual-economics.eu/ 37 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 4, 2022 techniques idiographic nomothetic z-value p-value (left-tailed) p-value (right-tailed) p-value (two-tailed) estimated scales for lifestyle measurement 10.46% 9.88% 0.189 0.575 0.425 0.850 simulating conditions 15.06% 20.99% -1.534 0.063 0.937 0.125 thematic apperception test (tat) by henry murray 6.69% 5.56% 0.463 0.678 0.322 0.643 test of professional skills 24.69% 29.63% -1.098 0.136 0.864 0.272 intellectual performance tests 15.48% 9.26% 1.820 0.966 0.034 0.069 temperament tests 11.72% 4.94% 2.330 0.990 0.010 0.020 tests of knowledge in a specific field 21.76% 25.93% -0.967 0.167 0.833 0.334 structured free-form interview 26.78% 27.78% -0.221 0.413 0.587 0.825 application form 8.79% 7.41% 0.493 0.689 0.311 0.622 situational interview 38.91% 34.57% 0.883 0.811 0.189 0.377 structured interview 35.15% 38.27% -0.638 0.262 0.738 0.523 focus group interview 22.18% 33.33% -2.479 0.007 0.993 0.013 4.4. recommended methods in the research process in management sciences the conclusions drawn from the analysis (table 5) recommend the five most commonly used research methods in management sciences: 1. documentation analysis. 2. poll. 3. group expert assessment. 4. observation. 5. interview. table 5. two-sample z-test for proportions on the methods recommended by experts methods idiographic nomothetic z-value p-value (left-tailed) p-value (right-tailed) p-value (two-tailed) analysis of documentation 73.22% 71.60% 0.356 0.639 0.361 0.722 poll 74.06% 58.64% 3.243 0.999 0.001 0.001 biographical survey 7.53% 6.79% 0.281 0.611 0.389 0.779 self-observation sheets 8.79% 12.35% -1.154 0.124 0.876 0.248 laboratory experiment 7.53% 13.58% -1.983 0.024 0.976 0.047 field experiment (natural) 26.78% 32.10% -1.153 0.124 0.876 0.249 group expert assessment 51.46% 48.15% 0.652 0.743 0.257 0.515 method of scenarios 31.80% 30.25% 0.329 0.629 0.371 0.742 observation 74.48% 62.35% 2.591 0.995 0.005 0.010 paraexperiment 5.02% 3.09% 0.943 0.827 0.173 0.345 psychographics 0.84% 1.85% -0.899 0.184 0.816 0.369 other people’s opinion 3.35% 5.56% -1.077 0.141 0.859 0.282 projection tests 5.44% 4.94% 0.221 0.587 0.413 0.825 psychological tests 5.44% 5.56% -0.050 0.480 0.520 0.960 fitness tests 0.84% 1.23% -0.393 0.347 0.653 0.694 message tests 10.88% 22.22% -3.083 0.001 0.999 0.002 interview 65.69% 59.88% 1.186 0.882 0.118 0.236 furthermore, these methods are recommended by the majority of experts in both groups studied. these conclusions also emphasize the role of methodological triangulation, in which multiple methods are used to study a single phenomenon. http://www.virtual-economics.eu/ 38 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 4, 2022 the use of multiple methods in research can increase the validity and reliability of findings by cross-validating results and addressing potential biases or limitations of individual methods. for example, combining observation and interviews can provide a more comprehensive understanding of a phenomenon, as observation may reveal certain behaviors while interviews can provide insights into underlying motivations or attitudes (natow, 2020; dzwigol et al., 2020b; trzeciak et al., 2022a). the use of triangulation is particularly relevant in management sciences, where complex social and organizational phenomena often require a multifaceted approach (ngulube, 2015; dzwigol, 2020; dzwigol & dzwigol-barosz, 2020). therefore, researchers are encouraged to consider using multiple methods in their research design, taking into account the strengths and weaknesses of each method and how they can complement each other to provide a more nuanced understanding of the research question at hand. 5. discussion in the following discussion, the author provides answers to the research questions posed and indicated the interpretation of the results obtained with respect to the current literature on the subject. which of the listed procedures are the most important in the research process in management sciences? according to the obtained research results and statistical tests conducted, each of the procedures subjected to the study is important. however, the dominant procedure among the group of surveyed experts is the case study. this suggests that there is a certain degree of subjectivity involved in the choice of research procedures and that the researchers need to carefully consider the pros and cons of each approach to align it with their research objectives. moreover, the results imply that there is a need for a more comprehensive and systematic approach to method selection that would account for both the idiographic and nomothetic perspectives. it is also worth noting that the study highlights the importance of using multiple methods to triangulate the research findings and minimize the potential biases associated with single-method research. in sum, the analysis of the test results underscores the need for a critical and reflective approach to method selection in management research and highlights the complexity of the research process, which involves a range of methodological, theoretical, and ethical considerations. which of the listed methods are the most important in the research process in management sciences? based on the interpretation of the obtained results, the experts demonstrate agreement in both groups regarding the importance of the following methods in the research process in management sciences: interview; observation; analysis of documentation; poll; group expert assessment. http://www.virtual-economics.eu/ 39 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 4, 2022 in addition, it is worth noting that despite the slight variation in responses, the experts from both groups prioritize similar methods of research. this reinforces the idea that certain methods are widely accepted and have become standard practices in the field of management sciences. it is also interesting to see that message tests, which are a relatively newer research method, are not as commonly utilized as the more traditional methods. this may indicate that researchers are cautious when it comes to adopting new techniques, and prefer to stick with methods that have been tried and tested. overall, the results of the test highlight the importance of carefully selecting the appropriate research methods based on the research question and objectives, as well as taking into consideration the underlying theoretical frameworks and assumptions of the chosen approach. which of the listed techniques are the most important in the research process in management sciences? according to the obtained research results, there are no dominant research techniques among experts in management sciences. the lack of a dominant research technique suggests that researchers in management sciences may be flexible in their approach and are willing to draw on various methods depending on their research objectives. the agreement between experts from both groups also implies a certain degree of consensus in the field regarding the utility and effectiveness of these techniques. the six instances where there is disagreement may be an area for further exploration to determine the reasons for the difference in opinion and to identify potential areas for improvement in the research process. overall, the analysis of the results provides insight into the research practices in management sciences and highlights the importance of considering multiple methods to achieve the desired research outcomes. which of the listed research methods should be used in the research processes in management sciences? according to research results, experts unanimously point to five methods that should be used in research processes in management sciences, namely: analysis of documentation, poll, group expert assessment, observation, and interview. documentation analysis: this method involves the systematic examination of existing documents, such as company records (chygryn et al., 2020; saługa et al., 2021), financial statements (dacko-pikiewicz, 2019; kwilinski et al., 2020c), or policy documents (miśkiewicz, 2021b; kotowicz et al., 2022), to gather information relevant to the research question (rapley, 2018). it is useful in management sciences as it provides a reliable and objective source of data that can be analyzed for trends, patterns, or themes. poll: a poll is a method of collecting data from a large number of people through a set of questions (stuss et al., 2019; kwiliński et al., 2021b; trzeciak & banasik, 2022). it is useful in http://www.virtual-economics.eu/ 40 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 4, 2022 management sciences for gathering quantitative data on attitudes, opinions, or behaviors of a group of people. group expert assessment: this method involves bringing together a group of experts in the field to evaluate a research question (fu et al., 2015; czyżewski et al., 2019; drożdż et al., 2020a). it is useful in management sciences as it enables the aggregation of diverse opinions and perspectives, leading to a more comprehensive understanding of a phenomenon. observation: observation involves the systematic and objective recording of behaviors, events, or phenomena in their natural setting (ciesielska et al., 2018; dementyev & kwilinski, 2020; tkachenko et al., 2019). it is useful in management sciences as it allows researchers to study behaviors or practices that cannot be easily reported by individuals. interview: interviews involve the collection of data through a face-to-face or phone conversation with an individual (trzeciak & jonek-kowalska, 2021; kuzior et al., 2022). they are useful in management sciences for gathering detailed and in-depth information on attitudes, opinions, or experiences that cannot be captured by other methods. in summary, the recommended research methods in management sciences are chosen based on their capacity to bear reliable and objective data, provide diverse perspectives, and enable in-depth analysis of complex social and organizational phenomena. researchers are encouraged to select appropriate methods based on the research question and to study using multiple methods for triangulation to enhance the validity and reliability of their findings. 6. conclusions the purpose of the article was to provide guidance on choosing an appropriate research approach for different research contexts by comparing the significance of using appropriate methods and techniques in both idiographic and nomothetic approaches. the results of the survey among experts indicate the importance of various methods and techniques in the research process in management sciences. both nomothetic and idiographic approaches are important in management research, and their application depends on the research purpose and the type of data being collected. furthermore, the results suggest the need for further research to compare the effectiveness of different methods in data analysis and to develop new techniques that enable more comprehensive data analysis in management sciences. it is also important for researchers to be aware of different research methods and to be able to adapt their approach to the specific research. moreover, the choice of research procedures is subjective, and researchers must carefully consider the advantages and deficiencies of each approach. therefore, a comprehensive and systematic approach to selecting a method is necessary taking into account both idiographic and nomothetic perspectives. in addition, the use of multiple methods for triangulating research results can help minimize potential errors associated with studies based on a single method. http://www.virtual-economics.eu/ 41 www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 5, no. 4, 2022 given the complexity of the research process, which involves a range of methodological, theoretical, and ethical considerations, a critical and reflective approach to selecting a method is essential in management research. survey results should be interpreted with caution due to the limitations of the study. firstly, the study was conducted on a purposive group of experts, which may influence the subjective interpretation of results. moreover, the study was based only on one type of data – surveys, which may affect the limitations of the results. future research should include a more diverse range of respondents and different sources of data, such as interviews and observations. the practical implications of the research results can include many actions. firstly, researchers should consider the appropriate selection of research methods and techniques depending on the purpose of the study and the type of data being collected. it is also important to pay attention to the quality and usefulness of the data for further analysis. secondly, researchers should be aware of different research methods and techniques to be able to use them in the process of making business decisions. this knowledge can help use available resources effectively, increase the efficiency of actions, and minimize the risk 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(2022). the analgesic effect of nostalgia elicited by idiographic and nomothetic approaches on thermal stimulus. annals of the new york academy of sciences, 1517(1), 167-175. http://www.virtual-economics.eu/ https://doi.org/10.3390/joitmc8010058 https://doi.org/10.3390/joitmc8040174 https://doi.org/10.17512/pjms.2020.21.2.30 https://doi.org/10.3390/su10113856 https://doi.org/10.3390/su132413679 кwilinski alex 22 www.virtual-economics.eu issn 2657-4047 (online) julia miśkiewicz virtual economics, vol. 2, no. 3, 2019 2019 volume 2 number 3 (july) the merger of natural intelligence with artificial intelligence, with a focus on neuralink company julia miśkiewicz abstract. human development is connected with permanent action to be better, to overcome nature, to build something that has so far been able to occur without its participation. the emergence of concepts such as artificial infertification, artificial blood, artificial organs, artificial eye retina, artificial brain or artificial intelligence suggests the desire to take control of man, the control which has so far been attributed to nature, to god the creator, fate or chance. the dynamic development of science, modern tools and research methods make the thought of artificial intelligence becoming more and more real. in recent years, artificial intelligence (ai) is increasingly being used by business people. its development involves numerous groups of high-class specialists, using the most modern it tools. before the creation of the first "intelligent" machines, its idea lasted in the imagination of many people. the films and books of science fiction presented the future in which man was replaced by a machine, and the phenomenon of this reality were robots. today, for the modern man, it is not a surprise robot, or a "smart" computer program. thanks to the rapid development of electronics and computer science, we are able to create what was once only a topic of science fiction. ai is currently being used in various fields of science, such as medicine, economics and management. but it is also worth remembering that these processes are accompanied by numerous questions and doubts related to the ethics of its use. the aim of the articles is to inspire the discourse on the example of neuralink – the search for answers to emerging doubts. keywords: artificial intelligence (ai), neuralink chip, business ethics jel classification: i15, o33 author(s): julia miśkiewicz john cabot university, 233, via della lungara, roma rm, italy, 00165 e-mail: jmiskiewicz@johncabot.edu https://orcid.org/0000-0001-7022-3216 citation: miśkiewicz, j. (2019). the merger of natural intelligence with artificial intelligence, with a focus on neuralink company. virtual economics, 2(3), 22-29. https://doi.org/10.34021/ve.2019.02.03(2) received: march 12, 2019. revised: june 20, 2019. accepted: june 25, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://orcid.org/0000-0001-7022-3216 https://doi.org/10.34021/ve.2019.02.03(x) https://doi.org/10.34021/ve.2019.02.03(x) https://doi.org/10.34021/ve.2019.02.03(x) https://creativecommons.org/licenses/by/4.0/ 23 www.virtual-economics.eu issn 2657-4047 (online) julia miśkiewicz virtual economics, vol. 2, no. 3, 2019 1. introduction the use of artificial intelligence (ai) and the ethical issues it raises are at the heart of much impassioned debate. to be sure, technology has greatly improved the economy in the countries which have applied it by increasing work efficiency across many sectors. this has led to an increase in the unemployment rate, especially among low-skilled workers (kwilinski, 2018). despite fears that technology will lead to accelerating job losses, several scientists have decided to go even further with ai and use it to increase the efficiency not of machines but of humans by merging natural with artificial intelligence. experts are worried not only about the increasing unemployment caused by introducing more ai, but also about that people will become economically of no value (space insider, 2017). in fact, stephen hawking (2005) and other specialists have forecasted that ai will eventually acquire its own form of mental autonomy and therefore surpass humans in its ability to think (vaughan, 2018). ai has arrived at a point at which it is assumed that it will become the most intelligent ‘species’ in the world. historically, the most intelligent creatures on the planet have always taken power from others – in this case, ai seems destined to take over from humans and make them the “second-class citizens” (mckissen, 2017). 2. literature review scientific literature provides several arguments relating to the essence of intelligence (sternberg & kaufman, 2002). for the first time, the notion of intelligence (latin intelligentia) was used by m.t. cyceron, who described the intellectual abilities (wood, 1991). intelligence is one of the determinants of man's accomplishments and constitutes one of the most precious features of j. strelau (1987), while spearman's intelligence is a general and nondifferentiated factor, which consists of reasoning processes. in addition to the general intelligence, it distinguishes special abilities, which allow to solve the tasks of a particular kind (spearman, 1904). in turn, d. hebb, talks about intelligence as the combined effect of biological equipment (potential) and environmental, learning and self-activity (klein, 1999) effects. m. tegmark wonders how artificial intelligence will affect the world-wars, law, employment, crime, social relations and our own sense of humanity? should we be afraid of arms race in the field of autonomous weapons, and perhaps the fact that the machines will completely replace us in the labour market? (tegmark, 2017). the influence of artificial intelligence on the lives of people wonders e. musk. in his opinion, humanity should be exceptionally careful, because ai is "potentially more dangerous than nuclear weapons." he also believes that humanity should make sure that the results of the work on artificial intelligence will be good, not bad and most importantly, we should prepare ourselves for possible hazards (e.g. machines-terminators) and control the development of ai. in a similar tone, he also spoke of s. hawking, who warns that artificial intelligence can be the "worst thing that can happen to humanity." science can, of course, develop in this direction, but it is necessary to control that our work does not ever turn against us. otherwise, the superintelligence that man will create can lead to the collapse of our species (hawking, 2005). by contrast, r. forsyth (1984), e.b. hunt (1975), n.j. nilsson (1980) analyzing the development of artificial intelligence assign its tasks to realize, among other things: search 24 www.virtual-economics.eu issn 2657-4047 (online) julia miśkiewicz virtual economics, vol. 2, no. 3, 2019 and analysis of information in large collections; the building and use of expert systems; automatic command of mathematical assertions; automatic computer programming; solving combinatorial tasks and scheduling; solving visual and audible signal reception tasks (forsyth, 1984; hunt, 1975; nilsson, 1980). the aim of the article is to analyse the literature of an object relating to artificial intelligence, and in the example of neuralink, to inspire discourse – the search for answers to emerging ethical concerns and related to the development of modern society. 3. methods by writing this article, author has used a qualitative descriptive method that refers to a critical analysis of national and foreign artificial intelligence studies based on the gathered material of a brief review of the selected theoretical shots, which are challenges facing humanity, economic challenges and human-machine relationships. 4. results and discussion the increasing use of ai, which may resemble things that until recently could have only happened in science fiction movies, worries many people. the predictions encouraged elon musk, an entrepreneur, “known for founding tesla motors and spacex,” to invest in, and eventually acquire, a company named neuralink (elon musk biography, 2014). according to mit technology review, in the beginning, professors pedram mohseni and randolph nudo set the treatment of health problems as their primary goal, and finally invented a device to cure brain injuries. yet, once elon musk stepped in, the company expanded its horizons. musk wants to focus not only on sick but also on able-bodied and healthy people, according to mohseni’s statement, to work on extending their minds by connecting their brain to a computer, by surgically implanting a chip into human’s brain (marsh, 2018). surprisingly, elon musk himself strongly recommends introducing laws to limit ai, which, he claims, is why he started working on his project, ostensibly to help the human species. he has already arranged several meetings, including with barack obama and 50 governors, to explain the dangers of ai, as he revealed in an interview with joe rogan (powerfuljre, 2019). to date, no one has actively responded to. ai needs to be restricted by law because it poses a danger and raises several ethical concerns which demand our attention, such as the question of access and fair distribution of neuralink technology, and its potential threat to “humanness.” communicating through thoughts, having access to all of existing information just by thinking about something, writing an email without using a keyboard, and using a computer or a smartphone without even touching them are just some of the things neuralink “product” will make possible. the company wants to make the product as accessible as possible. people are free to choose whether or not to take advantage of neurotechnology, but should be given the chance to use it if necessary for survival. the brain-computer interface is expected to help cure life-altering diseases. indeed, neurotechnology might be the only solution to help paralyzed people, or people suffering from memory loss illnesses, 25 www.virtual-economics.eu issn 2657-4047 (online) julia miśkiewicz virtual economics, vol. 2, no. 3, 2019 such as alzheimer’s. for example, in 2017, bill kochevar, eight years after an accident that had paralyzed him, finally gained enough autonomy to drink and eat without any assistance. neurotechnology enables him to move by the power of thought: “i think about what i want to do and the system does it for me.” (boseley, 2017). the implanted electrodes recognize his thoughts and send impulses to specific parts of his body to trigger the movement (boseley, 2017). yet people are not willing to invest in companies that do not give them sufficient profits, even if the companies work in the medical sector. as professor nudo observes, “paralysis is a terrible condition,” but “it’s not that many people,” so it will not give satisfactory profits to financially allow the specialists to work on it (regalado, 2017). general lack of willingness to financially support medical research stunts medical progress. thanks to brain-computer interface people would be able to remember everything perfectly, exactly as their smartphones keep all of the photos and videos in their memory, which would cure memory loss-related illnesses. additionally, according to e. strickland (2017), part of neurotechnology which is already in use, helps to alleviate the symptoms of diseases like epilepsy or parkinson. even though it remains unknown who will legally obtain the rights to use neuralink brain-computer interface; perhaps sick people will be a priority in order to have access. however, what if everyone obtains access to the neuralink product? of course, it would need a regulatory agreement, but general accessibility is the company’s ultimate goal. as stated by dustin mckissen (2017), supposing that “neural lace” technology (a merger of natural and artificial intelligence) becomes legally allowed and widely available, people from deprived backgrounds will not be able to equalize their chances with their wealthier peers any longer. they will not be able to get into certain universities, or afford them without getting a scholarship, and then to get a well-paid job with high-level positions. depending on which families people were born into, they have either more or less difficult path to achieve their longed-for successes. yet whether people achieve their goal or not is determined after all by their self-motivation and hard work. once the neuralink “product” is introduced to the market, as every new product in the market, will be extremely expensive and perhaps not refundable. thus, only the wealthiest will may be able to afford it, and it will remarkably decrease chances of the less wealthy people to compete with their technologically upgraded peers, which would contribute to the increase of income inequality. nevertheless, in the interview with joe rogan (powerfuljre, 2019), musk said that the chip will be available for everyone. because even if it is very expensive, once it is implanted, it will benefit people sufficiently to get a well-paid job and recompensate the cost of the procedure. it is still uncertain though if that many people will be ready to invest in it, expecting to earn enough money afterwards to pay off their liabilities. there is already noticeable income inequality and making this technology widely accessible may make it worse, but also it might contribute to the ultimate intellectual progress of our species which can be necessary for the future. 26 www.virtual-economics.eu issn 2657-4047 (online) julia miśkiewicz virtual economics, vol. 2, no. 3, 2019 despite the financial obstacles which can be overcome, applying the neuralink chip requires going to a hospital and having brain surgery. this might be one of the reasons which would make people hesitate to commit themselves to enhance their brain. another one would be losing their humanness. elon musk aims to enhance humans to decrease negative ai impact which can quickly transition to a real danger to humans in the future. nevertheless, many think that this chip will infringe the nature of human, not only in ethical but also in the religious aspect. it is inconsistent with the three most common world religions: judaism, christianity, and islam. all three of them have the common origin of human and come down to one thing freedom to choose, even if it means to choose wrong, in this case not to prevent the possible “annihilation” caused by ai (greenblatt, 2018). yet, it raises concerns not only about the conflict with these religions, but also about general ethics regarding losing humanness and intrinsically associated with it privacy. according to sierra simmerman (2018), “individuals,” who got bci electrodes implanted, “have experienced personality changes or identity shifts.” when a human’s brain is connected to these electrodes, people start thinking differently (faster and more directly) so that it influences their behavior and feelings. regardless of direct influence on people’s mentality, the implementation of the chip would also result in a lack of privacy, which eventually may also influence people’s lifestyle and behavior. musk claims that the majority of people is already cyborgs, because of the digital extension of themselves, for example, phones, computers, applications (fourtané, 2018). so he suggests to take a step further. all of current “digital extensions” expose private information; however, there is a significant difference between exposing private information through the phone and exposing private information through the chip implanted to the human’s brain. phone and computer only record the users’ data when they are in use. however, the implanted chip would have access to and would record the raw data all the time (simmerman, 2018). people would stop exposing only “filtered” information about themselves and start exposing every single thought. therefore, the chip procedure would demand specific regulations or privacy policy, because otherwise people might be completely deprived of intimacy. registering raw data means exposing all of the experiences including, for example, “engaging in sexual relationship.” what would happen, “if your bci registered neural data that demonstrated your silent homophobic or racist ideals? what if your data registered homicidal thoughts?” (simmerman, 2018). would the government have a right to punish people for their thoughts? maybe implementation of the chip would be useful in preventing from some dangerous situations, for instance, from terrorist attacks, but it would be serious invasion of privacy, which demands specific regulations enforced by law. 5. conclusions there are still many questions to be asked, for which answers might vary from one person to another. artificial technology evolves at an incredibly fast pace, but its outcome cannot be clearly defined as “evil or good” (miśkiewicz, 2018). there will be increasing unemployment due to replacing workers with ai, because there are not many tasks which people can do better or even equally well as ai does. it not only worries people in terms of economy, but in 27 www.virtual-economics.eu issn 2657-4047 (online) julia miśkiewicz virtual economics, vol. 2, no. 3, 2019 terms of ethics too. merging natural and artificial intelligence may worsen the already existing global problems, for instance, inequality. however, it gives much hope to incurably ill people. people should not object the medical research if there exists a chance that scientists can find a cure for certain diseases and improve people’s conditions who currently suffer from severe physical and mental disorders. if implanting a chip into people’s brain means losing their humanness, why being in such a terrible physical condition as, for instance, paralysis is not considered an infringement of the humanness? it is difficult to decide if access to this technology should be allowed or not. for sure certain governmental institutions should be tasked with keeping privacy policy under control, and maybe it should not be widely accessible, but people should give it a chance in the medical sector. the idea of implanting a chip into people’s brain sounds terrifying, perhaps simply because it is new, but ethics keep changing with human progress. in the past, slavery was acceptable whereas it is now strongly prohibited by law. the ethical disagreements are even noticeable between the nineteenth and twentieth centuries, when people changed their opinions about women’s and blacks’ right to vote. each generation blames the previous one for being unethical, and even the current generation might be blamed so for issues people not recognize as a problem yet: “perhaps someday the act of subjecting children to involuntarily schooling will be seen as child abuse—or maybe allowing children to leave school at age 18 will be seen as child abuse.” (bostrom & yudkowsky, 2014). that is why ethics not only of this concept but of each big issue is extremely hard to define, because along with the development of societies ethics change. so, it may turn out that today’s generation will be thought of as unethical in its perception of ai by future generations (dźwigoł & dźwigołbarosz, 2018). references boseley, s. 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(1991). cicero’s social and political thought. berkeley, los angeles, oksford: university of california press. кwilinski alex 7 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 2019 volume 2 number 2 (april) standards of living in ukraine, georgia, and poland: identification and strategic planning yurii kharazishvili, olena grishnova, and bożena kamioska abstract. the article determines the list of indicators of the standard of living of the population as a component of social security, including shadow indicators, without which the assessment of living standards is inadequate in reality. the authors substantiate the limits of safe existence through the definition of the vector of the indicators’ threshold values. the paper identified the current state of the standards of living in ukraine, georgia and poland through the integrated assessment from the standpoint of security, as well as outlined the most important threats. the researchers also scientifically substantiated the strategic benchmarks for the indicators of the standards of living considering three development scenarios that provide the fulfilment of the established sustainable development goals by means of adaptive regulation methods available in the control theory. keywords: standard of living, social safety, indicators, thresholds, integral index, economic security, sustainable development jel classification: i310, c460, c610, h510, h520, h550, o210 author(s): yurii kharazishvili institute of industrial economics of the national academy of sciences of ukraine, 2 marii kapnist street, kyiv, ukraine, 03057 e-mail: yuri_mh@ukr.net https://orcid.org/0000-0002-3787-1323 olena grishnova taras shevchenko national university of kyiv, 90a vasylkivska street, kyiv, ukraine, 03022 e-mail: grishnova@ukr.net https://orcid.org/0000-0002-4178-1662 bożena kamioska deputy of the sejm of the republic of poland, 4/6/8 wiejska street, warsaw, poland, 00-902 e-mail: biuro@bozenakaminska.pl https://orcid.org/00000002-0654-870x citation: kharazishvili, y., grishnova, o., & kamioska, b. (2019). standards of living in ukraine, georgia, and poland: identification and strategic planning. virtual economics, 2(2), 7-36. https://doi.org/10.34021/ve.2019.02.02(1) received: october 22, 2018. revised: january 25, 2019. accepted: march 7, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://orcid.org/0000-0002-3787-1323 https://orcid.org/0000-0002-4178-1662 https://orcid.org/0000-%200002-0654-870x https://creativecommons.org/licenses/by/4.0/ 8 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 1. introduction standard of living is one of the most important socio-economic categories that are often referred to in discussions about the position of a person in society, the opportunities for meeting the needs of the residents, and the possibilities of human development. the "standard of living" category is a complex and structurally systematic object of scientific economic and social research which in essence combines a wide range of socio-economic relations that characterise the peculiarities of the grade or level of subsistence and living conditions available to a person, family, social class, community and population in general. the peculiarity of this category lies in the fact that it cannot be described by a single indicator and may be objectively determined by a wide spectrum of characteristics relating to specific elements or certain manifestations of relations that arise in the process of society functioning. therefore, it is important to clearly define the meaning of the "standard of living" concept. it is quite common when the standard of living is identified with the notion of "well-being" which is defined in terms of access to consumption. from the standpoint of human development concept, the following is the most complete definition of the "standard of living" concept: the standard of living is a complex socio-economic category that reflects the level of development of the physical, spiritual and social needs of the population, the degree of their satisfaction, and conditions for the development and satisfaction of these needs. (grishnova & kharazishvili, 2018) the "standard of living" concept is often interpreted as the degree of satisfaction for material, spiritual and social needs available to the population. this definition reflects the statics of living standards. meanwhile, the standard of living is a dynamic process, which is affected by numerous factors. on the one hand, the standard of living is determined by the composition and level of needs that are constantly changing. on the other hand, the standard of living is limited basing on the situation in the goods and services market, income of the population, and wages of employees. at the same time, both wages and living standards are determined by the scale and efficiency of production, scientific and technological progress, cultural and educational level of the population, the level of corruption, political situation, and the variety of other factors. the international labour organization states that: “everyone has the right to a standard of living adequate for the health and well-being of himself and his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.” every country implements these rights differently. raising the standard of living is simultaneously a goal and a priority of social development and is associated with social progress of society. the dynamics of the indicators of the standard of living indicate the results of economic development of the country, as well as the degree of socialisation of the economy. 9 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 the indicators of income as the main source of satisfaction of personal material needs and increase of welfare take centre stage in the system of measuring the standard of living. we view the growth of income through the concept of human development as one of the major means that promote the increase of human capabilities and the level of well-being. however, income is not a measure of human happiness. it is definitely not enough to meet many urgent needs that go beyond material well-being. thus, history demonstrates multiple examples, when the increase in national wealth was not accompanied by an adequate expansion of human freedom, strengthening of human health or improving the comfort of their lives. a similar situation was typical for the former countries of the socialist camp. both the 1980s and these days witness the low (compared with neighbouring countries) standard of living becoming the cause of many negative processes – emigration, discomfort, social protests, etc., which, in general, pose a threat to national security. therefore, the objective of this paper is 1) to identify the existing standard of living in ukraine, georgia and poland through integrated assessment from the standpoint of social security; 2) to detect the most important threats; and 3) to provide scientific substantiation of strategic indicators of living standards for three development scenarios that ensure the achievement of sustainable development goals through adaptive regulatory methods available in the management theory. 2. literature review a number of researchers investigated the standards of living as a component of social development, human capital and social security, particularly (amosha & novikova, 2011; amosha et al., 2016; antoniuk et al., 2012; arts, 2017; bilan et al., 2019; biermann, 2017; cherenko, 2006; dźwigoł & dźwigoł-barosz, 2018; głowski & kvilinskyi, 2017; ivanov et al., 2017; kaźmierczyk & akulich, 2018a,2018b; koval, 2012, 2016; kolot, 2010; kvilinskyi et al., 2017; kwilinski, 2018; libanova et al., 2013; laiko & kwilioski, 2017;lakhno et al., 2018; mazurkiewicz & lis, 2018; mishchuk et al., 2018; ngo, 2018; novikova et al., 2018; pająk et al., 2016a, 2016b; peker et al., 2014; raudeliūnienė et al., 2014; trzeciakowski, 2018; tkachenko et al., 2019; tvaronavičienė et al., 2014;vosylius et al., 2013; winiarczyk-razniak & razniak, 2011;yang et al., 2018; yakubovskiy et al., 2017; yevdokimov et al., 2018) and others. according to (amosha and novikova, 2011), the human potential development in ukraine is increasingly becoming a strategic direction of state and regional governance. however, the competence of the cabinet of ministers of ukraine regarding the quality of life and living standards of the population has not yet been specified; and therefore human and social development indicators are not included in the indicators of its effectiveness. (libanova et al., 2013) emphasizes that the strategic path of ukrainian society modernisation is to improve the quality of life. furthermore, the scholar analyses foreign experience and suggests a system of indicators and methodology for calculating the integral index. 10 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 (kolot, 2010) substantiates in his work the falsity of existing paradigms and myths that economic growth automatically creates preconditions and possibilities for solving problems in the field of social development. the researcher demonstrates that economic growth is not a guarantee of social security without an active social policy, which includes, in particular, redistributive measures of the state. on the other hand, (antoniuk et al., 2012) has further developed theoretical and methodological approaches to the definition of "decent living standards" and "quality of life" concepts, factors of their formation and role in the system of ensuring sustainable development of ukraine. the scholar has provided the theoretical basis for the social potential of sustainable development, analysed the level and quality of life of the population at the regional level, evaluated regional differences in the welfare of the ukrainian population. whereas (novikova, 2018) explores the current state and burning issues of social security according to experts' estimations and substantiates the theoretical approaches and empirical dimensions of social security in ukrainian society. at the same time, (yashchyshchyna, 2012) has grappled with the problems of social orientation of the innovative economy and has revealed the attributes of its socio-economic nature. as an example, she has described the social orientation of the eu and ukraine's strategic documents and has analysed the trends of the interrelation between innovation and social development within their national economies. (koval, 2012) has examined the main approaches to the definition of the essence of social security: in the traditional (lack of threats to society) and alternative (no threat to society) understanding. moreover, he has also justified the sets of indicators for quantitative measurement of the level of social security in the traditional and alternative sense. while (cherenko, 2006) delved into the problems of studying the standard of living of the population of ukraine taking into account the specifics of the development of socio-economic processes. the scholar even developed the necessary methodical tools for assessing the living standards of the population. (mishchuk et al., 2018) have argued in their papers that significant differences in the standard of living of the population, which, in particular, are evident through the excessive income inequality, may have dangerous consequences for the sense of social injustice and the formation of negative migratory sentiment on this basis. despite the enormous importance of the conducted research, the issue of identifying the status of living standards from the standpoint of economic security was left out of attention – the definition of the dynamics of integral indices, their comparison with integral threshold values, the consideration of shadow social security indicators, and the scientific substantiation of strategic guidelines for sustainable development strategies. 11 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 3. methods the manifestations of human livelihoods and their needs are very diverse; therefore, it is impossible to allocate income as one universal indicator for the complete assessment of living standards of the population. this requires a cumulative system of features, indicators and parameters that, in their unity, are able to reflect the state of satisfaction of social needs according to their individual types, assess the level of life guarantees, conditions for the formation and distribution of material goods, spiritual benefits, and services in the country. 3.1 indicators of the standard of living a holistic system of indicators of the standard of living of the population should consist of both quantitative and qualitative indicators, grouped according to certain features. however, the practitioners use only the indices of material consumption, indices of physical volumes of consumed services, needs satisfaction coefficients, etc. we suggest a system of indicators and a methodology for evaluating them which allows assessing the conditions in a society for meeting human needs most accurately, basing on key macroeconomic indicators, taking into account shadow employment and shadow wages without which the assessment of living standards is inadequate. the standard of living as a component of social security is characterised by the following indicators (grishnova & kharazishvili, 2018): 1. labour use level (the ratio of the optimal demand for labour to its supply) (s); 2. compensation of employees in output (s); 3. gdp created by shadow employment and wages, % of gdp (d); 4. shadow employment to total employment (d); 5. expenditure on education to output , % (s); 6. healthcare expenditure to output,% (s); 7. the ratio of average wages to a living wage (s); 8. wage share in the structure of income, % (s); 9. pension expenditure to output, % (d); 10. pension fund deficit to output, % (d). in order to calculate a great number of the indicators of the standard of living, we use the original author's model of the aggregate supply function using the modified celebrated cobbdouglas production function (kharazishvili, 2019): tt a ttttttt a sn t t ttef ts t paikkik p w pnev    1 1111, )],,,()([])([   (1) where: v – is output; t e  – is the scientific and technological progress, stp; γ – is stp rate; 12 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 l – is labour costs ( snef kpwnl )/( ); tttef nn  , is the effective number of taxpayers (hired workers plus another category of employed, normalised to the equivalent of employees); t  – is the share of the number of taxpayers in total employment; t n – is total employment; w is average nominal wages of employees; sn k – is social load index;  – is capital to net sales ratio; i – is investment; а – is consumption of fixed capital; k – is cost of capital; а – is coefficient of elasticity, coe; t p – is gdp (gva) deflator; t – is the period of time. generally, part of the indicators of living standards (wage share, educational expenditures, healthcare expenditures, pension expenditures and pension fund deficit) is calculated relative to the gdp of each country. sometimes it leads to a ridiculous or absurd result in countries with a high level of corruption and shadow economy, as in ukraine, for instance: such definition of outlined indicators results in their best value among economically developed countries. nevertheless, their real absolute values are extremely low; they are insufficient even when compared to less developed countries. this can be explained by the artificial increase of intermediate consumption and corresponding reduction in gdp relatively to which these indicators are calculated. therefore, it is more appropriate to measure these indicators relative to the output rather than the gdp, which is artificially understated because of the massive shadow economy development. the calculation of our chosen indicators of the standard of living is carried out according to the following method: 1. labour use level (the ratio of the optimal demand for labour to its supply) tlk , . microeconomics substantiates that the maximum profit can be obtained when the marginal product of labour p is equal to the nominal wage rate w: w l v p    (2) after applying the transformation to the output function v, we can get the function of optimal demand for labour )(pn dt (kharazishvili & liubich, 2006; kharazishvili et al., 2016):   ta t t sntt tttd t ae kw pk n  1 1    (3) 13 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 on the other hand, if we use household utility function yfu  , which reflects the households' possibility to receive income y considering that they have free time f according to the method of lagrange multipliers, we can obtain an equation for labour supply function )(wn s for the case of money illusion (tarasevich et al., 1999):          t tp tn npnns w i t w tit w rkt n , , * 15.0 2222 (4) where: nt – is average annual population; r – is marginal productivity of capital; * k – is property (capital) owned by households; p i – is income per capita received from property owned by households. then, the labour use coefficient can be defined as the ratio of the function of optimal demand for labour )( t d t pn to the labour supply function )( t s t wn : )( )( , t s t t d t tl wn pn k  (5) 2. compensation of employees in output ta . it's a common fact that social and labour sphere is an integral part of the economy. individual immediate needs, interests, standard of living is its major focus. at the same time, the very individual is the main element of the productive forces of society; moreover, the success of economic and social reforms largely depends on the work motivation of individuals. therefore, the share of the compensation of employees in output is one of the main indicators that gives an idea of the real level of socioeconomic development in the country. according to the system of national accounts (sna), compensation of employees includes wages and salaries payable in cash or in kind, social insurance contributions payable by employers, which include contributions to social security schemes, actual social contributions to other employment-related social insurance schemes and imputed social contributions to other employment-related social insurance schemes. the application of the aggregate supply function model allows calculating the elasticity coefficients of the production function at labour and capital costs basing on the official statistics for the country, regions and major economic activity types that determine the distribution of income between labour and capital: t sn t t t d tt t v k p w pn a )(  (6) 14 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 3. gdp created by shadow employment and wages tlpshadow k ,_ . low wages is the result of the current imperfect ukrainian tax system. paradoxically, the main component of tax revenue is labour, more precisely, payroll. due to all charges and deductions, about 75% of tax revenues are directly or indirectly linked to payroll. however, at the same time, wage in ukraine is one of the lowest in the world. here we can see an incredible paradox: the most oppressed production factor – labour – has become the largest source of revenue of the country's budget. this reality is the outcome of the disproportions between the primary production factors (labour and capital) which results in unjustifiably high tax burden on income of both the population and business. the application of the method of calculating shadow gdp that we have developed and tested (kharazishvili, 2019) makes it possible to calculate the internal part of gdp which is created by the shadow economy taking into account the consumption multiplier ( tshadow lp , ). consequently, the share of gdp created by shadow employment and wages will determine the level of the shadow economy in gdp: %100 , , ,_  tof tshadow tlpshadow gdp lp k (7) 4. shadow employment to total employment tnshadowk ,_ . shadow employment is an indisputable fact in a transformational economy, and its illegality is due to the weakness of socio-economic institutions. the increase in shadow employment leads to the production reduction in the main types of economic activity, low wages in production, high level of poverty of the working population, high level of taxation of legal business, contributions to state social funds, low compliance with established laws and, subsequently, loss of confidence to the law enforcement and judicial system of the state. at the same time, employment in the shadow economy facilitates the development of new entrepreneurial abilities of an individual, the full implementation of his/her ability to work, adaptation of the workforce to modern market conditions. the ability of an employee to apply his/her ability to work and his/her personal motivation to obtain decent work remuneration (in most cases) determine the relatively high efficiency of the employment formation mechanism in case of shadow economy. nevertheless, they require increased labour intensity from the employees with no state security guarantees in case of illness, accident, old age, etc. therefore, individuals significantly reduce their future pension. hence, in a certain way employment in the shadow sector can protect labour potential, it contributes to increasing current incomes, and often even assures the primary survival of a particular share of the population. on the other hand, employment in the shadow economy distracts a lot of resources and efforts to conceal the activity itself, as well as its results, generates additional expenses of business entities, leads to the loss of mandatory tax revenues 15 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 due to shadow wages that are vital for the state to perform its functions, and contributes to corruption development. therefore, the quantitative determination and consideration of shadow employment, shadow wages and the search for mechanisms for its reduction is very relevant. if we use the model of the aggregate supply function (kharazishvili & liubich, 2006), it is possible to measure the capital to net sales ratio for both official and shadow economy for the country in general, regions and major economic activity types. measuring the capital to net sales ratio gives grounds to the hypothesis of the relationship between the capital to net sales ratio in the shadow economy and the level of shadow employment (kharazishvili, 2019). with the use of the official and forecast statistics on the average annual number of employed and hired employees, it is possible to determine the size of shadow employment proportionally to the capital to net sales ratio. at the same time, the ratio of shadow employment tshadow n , to total employment t n will determine the level of shadow employment: t tshadow tnshadow n n k , ,_  (8) 5. public expenditure (consolidated budget expenditure) on education to output teduk , . it is well-known that education is an institution that influences all spheres of society and it is a significant factor in achieving high rates of economic growth and social well-being. it is the constant growth of educational expenditures that help developed countries to maintain leading positions in the world economy, and, in most of them, the state share predominates in the structure of educational expenditure. at the same time, it is not just a single citizen who benefits from the high level of education; it is society as a whole, since raising the level of general and professional training and qualifications of each employee is an important factor in the labour productivity and economic development growth of the country. in the light of the aforementioned, the fifth indicator will be measured as follows: public expenditure on education t,edug to output tv ratio: %100 t t, , v g k edu tedu  (9) 6. public healthcare expenditure to output thealthk , . the right to healthcare, medical care and health insurance is one of the fundamental civil rights and is usually set out in the basic law (for example, in ukraine it is article 49, in georgia – article 37 of the constitution). healthcare is provided by public funding of the relevant socio-economic, health and sanitation, health improvement and prevention programmes. the state promotes the development of medical institutions of all forms of ownership. the indicator shows what proportion of public resources the state allocates to preserving the health of its citizens and it is calculated as the ratio of expenditures on healthcare t,healthg to output tv in per cent: 16 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 %100 t t, , v g k health thealth  (10) 7. the ratio of average wages to a living wage tlww k ,/ . this indicator is one of the most important social security indicators. a living wage is a state standard used for general assessment of living standards in the country. living wage is the pivotal basis of the social policy of the state, since the other standards and results of the social sphere reform and the minimum rates are most consistent with this indicator. it is also one of the important socio-economic indicators the application of which on a massive scale makes it possible to identify objective patterns and measure the general trends in the standard of living both quantitatively and qualitatively. such measuring is an adequate basis for making informed managerial decisions. therefore, the closer the standard of living is to the critical level is , the more important social role the state plays, moreover, it bears the higher responsibility it bears for the social consequences of economic policy implemented in the country. the definition of the living wage should be related to socio-economic conditions in the country and should take into account the need to shift to international standards in a context of growing globalisation. the poverty of the working population who receive wages that are not sufficiently higher than the living wage or even subsistence is a significant issue and it is reflected in the ratio of average wages t w to the living wage tlw . %100 t t ,/ lw w k tlww  (11) taking into account the eu and ilo standards (zavora, 2013) for a decent standard of living wage should be at least 3 times higher than the living wage (lower threshold). according to the relevant european standards, the average wage should be 5-6 living wages. 8. wage share in the structure of income tdwk ,/ . income of the population is the sum of monetary and in-kind compensations, particularly: wages and salaries (including income received from abroad), profits and mixed income, property income, social benefits and other current transfers. a high share of wages, along with a low percentage of social income support, indicates the employment efficiency, and the social self-sufficiency of employees. the indicator is calculated as the ratio of the aggregate nominal wages and salaries of the population tpopw , to the total income of the population tpopd , : 17 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 %100 , , ,/ tpop tpop tdw d w k  (12) 9. pension expenditure to output tpens k , . pension expenditures perform one of the social security functions. this function is implemented through the accumulation of financial resources in special funds and their distribution for different purposes. these are the actions of state bodies, local self-government, organisations regarding the contributions to social security funds, the allocation of these funds for the payment of pensions, assistance, servicing of pensioners, etc. as a general matter, the pension fund balance under consolidated scheme which provides the functioning of the 1 st tier is defined as follows (koval, 2012): avepensaveeff pknwn  (13) where: effn – is effective number of payers of insurance contributions; ave w – is average wage (average value of the sum relevant for payable insurance contributions); n – is the size (%) of insurance contribution; pens k – is the number of pensioners; ave p – is the average pension. if the left side of the equation (own revenues of the pension fund) is less than the right side (pension fund expenditures), there is a deficit of the pension fund budget covered only from the state budget. the number of retirees is the only objective variable in the equation (subject to the legislative unchanged retirement age). the other variables are subjective; therefore, they can be potentially regulated by administrative or economic levers. the ninth indicator is calculated as the ratio of annual aggregate expenditures ( tpensg , ) of the pension fund (pf) to output tv : %100 , , t tpens tpens v g k  (14) 10. pension fund (pf) deficit to output tpfudefk ,_ . the indicator reflects the output share that should cover the deficit of the pf budget and is calculated as the ratio of the pf budget deficit tpfudef , to output tv : 18 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 %100 , ,_ t tpfu tpfudef v def k  (15) one of the reasons for the disparity in the pension fund budget is the imbalance of its revenues and expenditures due to the great extent of shadow economy and low wages. 3.2 integral assessment of the standard of living the methodology of integral assessment of the standard of living includes the following tasks: defining the structure of the assessment of the standard of living; forming a list of indicators and components of the evaluation object; selecting the form of the integral index; selecting the method of valuation; scientific substantiation of the dynamic weight coefficients; scientific substantiation of the threshold values' vector. similarly to the methodology for assessing the level of economic security (kharazishvili, 2014; amosha et al., 2016) (of the country, region, types of economic activities) that we recommended and successfully tested in practice we suggest using a methodology for integrating 10 indicators of the standard of living described above which includes the following elements: the form of the integral index is multiplicative:    0;1; 1 , ii n i a tit aazi i (16) where: i – is an integral index; z – is a normalised indicator; a – is a weight coefficient. the method of valuation is combined: max ,:,: xk k xk zd k x zs norm norm inorm i norm i i    (17) where: x – is an indicator value; norm k – is a valuation factor. weight coefficients are dynamic: based on the application of the main components and the moving matrix methods: 19 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019                                    i i i jjjjjj jj jj ii w w a w w w cdcdcd cdcdcd cdcdcd dc , ... ... .................................... ... ... 2 1 2211 2222211 1122111 (18) where: с – is the matrix of absolute values of factor loadings; d – is the vector-matrix of dispersions. over time, substantial changes in the political and external economic situation lead to substantial changes in empirical estimates of econometric relationships, which, in their turn, lead to changes in weight coefficients. the moving matrix method is based on the application of the main components method; it lies in the sequential shift of the matrix of the minimum required size along the time period and the determination of the weight coefficients for the last time period each and every time. minimum required matrix size (number of rows ( n ) – periods of time) is determined basing on the principle that the number of indicators (the number of columns ( m ) – main components) is equal to the number of positive eigenvalues of this matrix. typically, the minimum required matrix size is equal to nn  )1( . threshold values are the results of calculations using a set of methods (mainly analytic ones): functional dependencies; macroeconomic models; stochastic; nonlinear dynamics; legislative approach; heuristic; analogue approaches; expert assessments; taking into account evaluations of international organisations. the vector of threshold values is given for each indicator, namely: lower critical value, lower threshold, lower optimal value, upper optimal value, upper threshold, and upper critical value. a pair of optimal values forms a homeostatic plateau within which there is a negative feedback and the best conditions for the system existence are created; moreover, the violations of critical values can even lead to the destruction of the system. an integral convolution is made both for indicators of the standard of living and for their threshold values which allows the researchers to particularly identify the standard of living. consequently, measuring the threshold values is quite closely related to the concept of the dynamic stability of economic system and its individual components, or to homeostasis mechanism. without this comparison, we will have the dynamics of integral indices which will determine their increase / decrease in certain periods that may lead to an erroneous conclusion regarding the integral index maximisation, nevertheless it is worth finding it within the thresholds, preferably optimal values (within the homeostatic plateau boundaries). given the definition of the threshold vector, we suggest to extend the "homeostatic plateau" proposed by van gigch (van gigch, 1981), which differs by adding a range of threshold and critical values to the area of neutral inverse communication fig.1. each dynamical system has 20 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 marginal stability, so the crossing of critical points does not determine immediately the change of the type of inverse communication: first, the inverse relationship decreases by the exponential, and then another type of connection grows along the exponential. if there is no chance to apply functional dependencies or macroeconomic models (in case of their absence), a situation often arises when, on the basis of different sources of information, it is possible to formulate a sample (in this case, a sample of the indicators' limit values), which number of elements is more than 20 (the method can be used for both large and small samples). in this case, the vector of threshold values can be derived from the t-criterion (paniotto et al., 2004). using the sample mentioned above, we construct the probability density function with the calculation of statistical parameters: mathematical expectation, mean squared deviation, and skewness. considering all the diversity of types of probability density functions for all types of indicators we can distinguish the types with a characteristic distribution law: normal, lognormal and exponential, for which there are suggested equations for determining the vector of threshold values (kharazishvili, 2019). figure 1. 'homeostatic plateau' of the dynamic system source: own research. on each side of the homeostatic plateau there are areas with neutral and positive feedback, staying in which is dangerous or threatens the existence of the system in general. in this sense, monitoring of the standard of living in general, as well as according to individual components and indicators gains crucial importance for establishing the real state in comparison with the thresholds, for identifying the threats and justifying the strategic guidelines for medium and long-term development scenarios. homeostatic plateau neutral feedback area positive feedback area system destruction system destruction managerial influence on the system m a n a g e m e n t sy st e m r e si st a n ce negative feedback area 21 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 4. comparative analysis of the living standards in ukraine, georgia, and poland using these methods of measuring threshold values, we calculate the vector of the threshold values of the suggested indicators and the valuation coefficients taking into account the experience of the economically developed countries. the advantage is given to the methods of functional dependencies, macroeconomic models, and stochastic process table 1. table 1. vector of threshold values of the indicators of standard of living indicators lower threshold lower opt. upper opt. upper threshold norm. coefficient labour use level; 0.8 0.9 0.98 1.0 1.0 compensation of employees in output; 0.2 0.26 0.32 0.382 0.382 gdp created by shadow employment and wages; 15.0 8.0 5.0 3.0 50.0 shadow employment to total employment; 20.0 15.0 10.0 7.0 37.0 expenditure on education to output, %; 2.5 2.8 3.9 6.0 6.0 healthcare expenditure to output, %; 4.0 4.9 6.3 7.4 7.4 the ratio of average wages to a living wage; 3.0 4.0 6.0 7.0 8.5 wage share in the structure of income, %; 40.0 50.0 60.0 70.0 70.0 pension expenditure to output, %; 5.0 8.0 10.0 11.0 11.0 pension fund deficit to output, %. 1.5 1.0 0.5 0.25 4.3 integral threshold values 0.54289 0.68602 0.83742 0.94755 source: own research. fig. 2 reflects the dynamics of the determined indicators of the standard of living for ukraine, georgia and poland for 2000-2017 compared with the corresponding threshold values. this comparison makes it possible to identify the status of individual indicators that threaten the safety of the standard of living and determine the required regulatory actions. we also would like to emphasize that it is essential to periodically revise thresholds that vary over time depending on the development level of countries. a b figure 2a. dynamics of the indicators of the standard of living in ukraine, georgia, and poland (part 1) source: own research. 0,65 0,75 0,85 0,95 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 georgia ukraine lower thres. lower opt. upper opt. upper thres. poland labour use level 0,10 0,15 0,20 0,25 0,30 0,35 0,40 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 compensation of employees in output 22 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 c d e f g h i j figure 2b. dynamics of the indicators of the standard of living in ukraine, georgia, and poland (part 2) source: own research. 0 5 10 15 20 25 30 35 40 45 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 shadow compensation of employees, % 0 5 10 15 20 25 30 35 40 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 shadow employment, % 1 2 2 3 3 4 4 5 5 6 6 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 expenditure on education,% 1 2 3 4 5 6 7 8 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 health expenditure, % 0 1 2 3 4 5 6 7 8 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 aw/lw ratio, times 10 20 30 40 50 60 70 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 aw in population income, % 1 2 3 4 5 6 7 8 9 10 11 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 pension expenditure, % -1,0 -0,5 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 pf deficit, % 23 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 georgia has always surpassed ukraine by the level of labour use and even had the best performance in 2000-2006 with a gradual decrease to the lower threshold. in ukraine since 2012, this figure has fallen below the lower threshold and is particularly strong after 2014, reflecting a real threat. in case of poland, in 2000-2015 this indicator was below the lower threshold, and since 2016 poland has been outpacing both ukraine and georgia, possibly due to migration processes. ukraine has outstripped georgia by the wage and salary share in the output which determines the average nominal wage and the level of shadow economy, till 2015, but then the situation has changed, and both countries are currently in the critical area below the lower threshold. in a radical departure from them, poland is approaching the lower optimal value among eu countries. by the end of 2017, the overall level of shadow economy was as follows: in ukraine – 47.4%; in georgia – 32.9%; in poland – 27.1%. after the employers paid shadow wages the indicator changed, particularly: in ukraine it was 33.0%; in georgia – 24.5%; in poland – 23.8%. despite the anti-corruption reforms in georgia held in 2004-2013, shadow wages and shadow employment have still been substantial, even larger than in ukraine until 2015, and then the situation has changed. both countries are in the critical area – below the lower threshold – according to this indicator. unlike poland, where shadow employment and shadow wages are constantly on the verge of the optimal range of economically developed eu member states. according to the model estimates in 2017, the level of official gdp created by the shadow wages (taking into account the consumption multiplier) is 21.9% in georgia, 37.8% in ukraine, 8.5% in poland, and shadow employment is 23.9%, 26.5% and 14.6% respectively. georgia has always been in the critical area – below the lower threshold – by the expenditure on education which indicates a very insufficient financing of education in the country. poland demonstrates the same trend; however the level is slightly better. ukraine has got considerably better indicators in terms of the indicator: in 2006-2014, the country was in the optimal zone which corresponds to the level of the economically developed countries of the world, and only in the last two years (2016-2017) it had negative dynamics and appeared to be in the critical area. the situation with the health expenditure is quite the opposite: georgia has undoubtedly the best indicators. it has been in the optimal area in 2000-2014, but the situation has somewhat deteriorated in recent years. ukraine and poland have had a low level of health spending throughout the analysed period: it was constantly in the critical area at the level of underdeveloped african countries which is an important cause of population decline and emigration. taking into account the ratio of average wages to a living wage, poland is way over the top – the indicator is 8 times higher than the standards, georgia has already reached the eu standards by 2008 (4 times higher) and has continued the indicator increase up to 6.5 times in 24 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 2017. on the contrary, by the end of 2015, ukraine has come closer to the lower threshold of the eu countries and only in 2017 reached the value of 4.4 times. however, both in georgia and in ukraine, wages / salaries and living wage have significantly lowered in terms of output, unlike poland, where the share of wages in output is approaching the lower optimal value of the developed eu member states. the share of wages in the income of the population of poland is at the level of lower optimal value; in ukraine it is roughly constant: it is closer to the lower threshold, indicating both low absolute compensation of employees and high shadow employment. in georgia, this indicator is in the critical area – below the lower threshold, but with a positive dynamics of approaching the lower threshold, indicating a gradual increase in wages and a reduction of shadow employment. in poland, the pension expenditure to output has a negative dynamics: from the lower optimal to the average value between the lower optimal and lower threshold. in ukraine, this indicator in certain years (2008-2013) was almost in the optimal area, and starting in 2014, there is a clear negative dynamics, moreover the indicator has fallen below the lower threshold. until 2008, the pension expenditure to output in georgia has been too low that indicates substantial reserves of its increase, if the country targets economically developed countries. the replacement rate by the end of 2017 is a conspicuous fact of low retirement expenditures, namely: in ukraine – 0.28; in georgia – 0.2; in poland – 0.5, considering the ilo requirements of not less than 0.4. if until 2014 the pf deficit in ukraine was within acceptable limits, in the last 3 years it has reached critical values due to the low revenues of the pf due to low wages, decline in production and labour migration. in poland, the level of pf deficit has a tendency to decrease and in the last 16 years it has declined more than twice: from 4.0 to 1.72% in 2017. the relatively high level of pf deficit is due to higher pensions and, consequently, high replacement rates. georgia does not have a pension fund, and pensions are paid from the state budget. before 2008, there was an additional 20% social tax, but according to the changes that came into force on 1 january 2008 regarding abolishing social tax, georgia increased the personal income tax rate from 12% to 25%. therefore, for proper comparison with ukraine and poland, we have modelled the virtual pension fund of georgia, where the social tax (which does not exist in georgia since 2008) was defined as follows: %625.1525625.025 1220 20   ssc (19) while the revenues and expenditures of the virtual pension fund were calculated according [eq. (13)]. as a result of calculations, the deficit of the virtual pf of georgia can still be increased (to the level of economically developed countries). 25 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 each indicator in a particular period may increase or decrease, so it is not enough to analyse individual indices or development indicators. this does not give a complete picture of the standard of living in general. for an unambiguous measuring of the living standard of the population, we will analytically determine the integral index which will ensure the methodological unity of all indicators. simultaneous valuation of the indicators and their threshold values with a single normalisation coefficient allows us to compare the dynamics of the integral index with integral threshold values on one scale, that is, to identify the state of living standards of the population of georgia, ukraine, and poland fig. 3. figure 3. dynamics of the standard of living in georgia, ukraine, and poland (dotted lines reflect strategic development scenarios) source: own research. 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 poland lower threshold lower optimal value upper optimal value upper threshold ukraine georgia integral standard of living indices 26 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 as the calculations reveal, the standard of living in poland is the best since 2000 and since 2006 it has crossed the lower threshold and is gradually approaching the lower optimal value of economically developed eu member states. out of the ten indicators of living standards in poland, only two are below the lower threshold and require immediate attention: these are expenditure on education and health expenditure. until 2014 georgia had the worst indicators of living standards, but since 2014 it has been ahead of ukraine with a constant positive trend and almost approaching the lower threshold. it is notable that the analysed period can be clearly divided into two stages: 1) 2003-2009 with the development angle of about 34° and 2) 2011-2017 with the development angle of about 14°, which is almost 2.5 times slower. this can be explained by the effectiveness of the liberal reforms in the social and economic spheres in the first period, as a result of which the georgian economy has experienced a rapid rise, reflected in international indices, reports and ratings, as well as in the dynamics of the standard of living and our calculations confirm it. out of ten indicators of the standard of living in georgia, six are below the lower threshold, thus, they are alarming and need attention: compensation of employees in output; official gdp created by the shadow wages; shadow employment to total employment; expenditure on education to output; wage share in the structure of income of the population, pension expenditure to output. until 2014, ukraine has been second by the level of living standard, however afterwards there was a rapid fall, which continues to this moment. unfortunately, unlike georgia and poland, the standard of living in ukraine since 2000 has never risen above the lower threshold, indicating a systemic crisis in the social sphere. this situation is due to the critical level of the overwhelming majority of key indicators. out of ten indicators, nine are in the critical area (below the lower threshold), one – the ratio of average wages to a living wage – in the optimal area. thus, the main threats to a decent standard of living in ukraine are reflected in the indicators: labour use level, compensation of employees in output, official gdp created by shadow economy; shadow employment to total employment; expenditure on education to output; health expenditure to output; pf deficit to output. the most critical ones include the following: compensation of employees in output (indicates very low nominal wages), shadow wages (shows a high share of 'envelope' wages), health expenditure (reveals catastrophically low funding for healthcare). thus, the indicators of the standard of living in ukraine (all but one) do not correspond (even in relative terms) to european standards in the first place; furthermore, they have had virtually no positive dynamics for a long time. therefore, it is not surprising that in such conditions more and more active, motivated, highly skilled citizens have lost hope for the improvement and choose to emigrate from ukraine to other countries. 27 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 if this trend remains unchanged, it will lead to a sharp decline in working-age population, and, accordingly, to relevant drastic decline in social contributions, increase in the pension fund deficit, further decline in the standard of living and a complete loss of the economic growth potential of ukraine. 4.1 scientific substantiation of the strategic targets for the standard of living the main objective of social policy, as well as its components, is the achievement of sustainable development. strategic vision of sustainable development, first of all, involves defining at what distance from the desired level development are the current indicators of the standard of living. namely, it is desirable to determine the starting point for each component of the standard of living, and then – to justify strategic benchmarks for achieving the desired level of indicators. the average value between the lower and upper optimal values – a homeostatic plateau (kharazishvili, 2019) – within which there is a negative feedback and the best conditions for the system, is the criterion for achieving sustainable development. hence, let's define development scenarios fig. 3: for georgia: realistic (inertial) assumptions – reaching the lower optimal value; optimistic assumptions – reaching 0.5 of the average optimal value; sustainable development assumptions – reaching the average optimal value. for ukraine: realistic (inertial) assumptions – reaching the lower threshold value; optimistic assumptions – reaching the lower optimal value; sustainable development assumptions – reaching the average optimal value. for poland: realistic (inertial) assumptions – reaching the lower optimal value; optimistic assumptions – reaching 0.5 of the average optimal value; sustainable development assumptions – reaching the average optimal value. the rationale for strategic guidelines implies solving the issue of sequential decomposition of integral indices, i.e., synthesising the necessary values of the components and their indicators for finding the integral index in the specified limits by solving the inverse problem. solving this issue for each component of the standard of living, when known (or given) its desired value, allows determining the required values of the components and their indicators that meet the defined objectives for each year tables 2-4, throughout the forecast period, while taking into account the sensitivity of components or indicators, weight coefficients and adaptive regulation methods of the control theory (kharazishvili, 2019). 28 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 table 2. strategic values of the indicators of standard of living in georgia for 2025 according to sustainable development scenarios indicator realistic scenario optimistic scenario sustainable development 1. labour use level 0.88893 0.9172 0.94 2. compensation of employees in output 0.2381 0.2547 0.29 3. official gdp share created by shadow wages, % 15.83 13.95 6.5 4. shadow employment, % 17.1 15.16 12.5 5. expenditure on education, % 2.55 2.75 3.35 6. healthcare expenditure, % 5.21 5.42 5.6 7. ratio of average wages to a living wage, % 7.02 7.21 5.0 8. wage share in the structure of income, % 47.1 49.9 55 9. pension expenditure in output, % 4.92 5.39 9.0 10. pf deficit (-)/ surplus (+) in output, % -1.73 -2.09 -4.33 source: own research. using the appropriate equations for calculating the indicators of each component of the standard of living and the normalisation equations in the reverse order, one can obtain strategic benchmarks for key macro-indicators. table 3. strategic values of the indicators of standard of living in ukraine for 2025 according to sustainable development scenarios indicator realistic scenario optimistic scenario sustainable development 1. labour use level 0.8176 0.88884 0.94 2. compensation of employees in output 0.2163 0.2693 0.29 3. official gdp share created by shadow wages, % 29.02 19.42 6.5 4. shadow employment, % 20.57 13.94 12.5 5. expenditure on education, % 2.73 3.78 3.35 6. healthcare expenditure, % 2.97 4.60 5.6 7. ratio of average wages to a living wage, % 5.59 6.28 5 8. wage share in the structure of income, % 42.25 48.06 55 9. pension expenditure in output, % 5.53 6.83 9.0 10. pf deficit (-)/ surplus (+) in output, % -1.63 -1.97 -3.76 source: own research. 29 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 table 4. strategic values of the indicators of standard of living in poland for 2025 according to sustainable development scenarios indicator realistic scenario optimistic scenario sustainable development 1. labour use level 0.8773 0.9066 0.94 2. compensation of employees in output 0.2656 0.2814 0.29 3. official gdp share created by shadow wages, % 6.59 4.99 6.5 4. shadow employment, % 12.69 11.07 12.5 5. expenditure on education, % 2.27 2.49 3.35 6. healthcare expenditure, % 2.32 2.63 5.6 7. ratio of average wages to a living wage, % 8.1 8.33 5.0 8. wage share in the structure of income, % 52.47 55.0 55.0 9. pension expenditure in output, % 6.29 6.58 9.0 10. pf deficit (-)/ surplus (+) in output, % -1.05 -1.21 -2.56 source: own research. these macro-indicators, along with the strategic values of the indicators, are the ultimate goal of regulation required in order to achieve the anticipated standard of living for the population of georgia, ukraine, and poland tables 5-7. table 5. change the most important macro-level indicators in georgia for 2025 according to sustainable development scenarios indicator realistic scenario optimistic scenario sustainable development gross domestic product (nom.), billion gel 94.53 137.07 179.6 average gdp growth rate, % 6.1 11.2 15.0 optimal demand for labour, million people 1.867 1.926 1.974 nominal wage, gel/ month 2,414.8 3,631.7 5,286.5 shadow wage, gel/ month 2,569.6 3,704.6 2,742.4 shadow employment, million people 0.1881 0.1667 0.1375 official gdp share created by shadow wages, % 15.83 13.95 6.5 expenditure on education, billion gel 3.67 5.77 9.95 health expenditure, billion gel 8.14 12.29 16.62 living wage, gel/ month 343.8 503.7 1057.3 minimum wage, gel/ month 1,207.4 1,815.9 2,643.2 pension expenditure, billion gel 7.69 12.23 23.7 average monthly pension, gel 660.4 1,050.8 2,040.3 replacement rate 0.2735 0.2893 0.3859 deficit (-)/ surplus (+), % of output -1.732 -2.092 -4.327 source: own research. 30 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 table 6. change of the most important macro-level indicators in ukraine for 2025 according to sustainable development scenarios indicator realistic scenario optimistic scenario sustainable development gross domestic product (nom.), billion uah 6,081.4 11,554.3 22,702.0 average gdp growth rate, % -3.5 4.5 14.3 optimal demand for labour, million people 16.35 17.77 18.8 nominal wage, uah/ month 16,123.0 35,093.0 70,179.0 shadow wage, uah/ month 16,942.8 31,790.5 20,853.0 shadow employment, million people 3.364 2.279 2.044 official gdp share created by shadow wages, % 29.0 19.42 6.5 expenditure on education, billion uah 316.1 831.6 1,448.6 health expenditure, billion uah 344.3 1,012.6 2,421.6 living wage, uah/ month 2,884.6 5,585.3 14,035.8 minimum wage, uah/ month 8,061.5 17,546,6 35,089.5 pension expenditure, billion uah 640.9 1,504.3 3,891.9 average monthly pension, uah 4,450.5 10,446.7 27,027.3 replacement rate 0.276 0.2977 0.3881 deficit (-)/ surplus (+), % of output -1.627 -1.974 -3.764 source: own research. table 7. change of the most important macro-level indicators in poland for 2025 according to sustainable development scenarios indicator realistic scenario optimistic scenario sustainable development gross domestic product (nom.), billion pln 2,902.6 3,631.3 5,083.2 average gdp growth rate, % 3.8 6.7 11.5 optimal demand for labour, million people 16.36 16.91 17.53 nominal wage, pln/ month 7,234.0 9,278.0 15,573.6 shadow wage, pln/ month 2,864.3 3,109.4 5,022.8 shadow employment, million people 2.157 1.883 2.125 official gdp share created by shadow wages, % 6.59 4.99 6.5 expenditure on education, billion pln 131.7 180.7 340.6 health expenditure, billion pln 134.5 191.3 569.4 living wage, pln/ month 892.8 1,113.4 3,114.7 minimum wage, pln/ month 3,617.0 4,639.0 7,786.8 pension expenditure, billion pln 365.2 478.1 915.1 average monthly pension, pln 3,307.6 4,330.6 8,288.8 replacement rate 0.4572 0.4667 0.5322 deficit (-)/ surplus (+), % of output -1.05 -1.212 -2.56 source: own research. 31 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 strategic benchmarks for the standard of living defined for each year basing on the sensitivity of the impact of each individual indicator on the integral index, are, in essence, strategic plans for the medium to long-term perspective. the identified strategic benchmarks of the standard of living at the level of indicators and macro-indicators are necessary for comparing with the actual values during monitoring, for determining the proximity to the preferred sustainable development indicators and the effectiveness of macroeconomic policy activities. 5. conclusions 1. we define the standard of living as a complex socio-economic category that reflects the level of development of the physical, spiritual and social needs of the population, the degree of their satisfaction available to a person, and conditions for the development and satisfaction of these needs existing in a society. a high standard of living is the objective and criterion of the effectiveness of socio-economic policy, a prerequisite for human development, an element of social security. the article suggests a list of the indicators of the standard of, taking into account shadow employment and shadow wages, without which the assessment of standard of living is inadequate. 2. without knowing the boundaries of safe conditions for the economic system functioning, it is impossible to protect its vital interests. therefore, we substantiated the vectors of the threshold values for each indicator (lower threshold, lower optimal value, upper optimal value, and upper threshold), taking into account the experience of economically developed eu countries, which, in fact, gives an opportunity to identify the standard of living of georgia, ukraine and poland. 3. the research assessed and identified the standard of living of the population of georgia, ukraine and poland according to the author's modern methodology of integral assessment, which also revealed the main threats. this allows us to determine how far the components of the standards of living in georgia, ukraine, and poland are from the sustainable development indicators: the integral index of the standard of living in georgia has positive dynamics and approaches the lower optimal value of the eu member states. however, out of ten indicators of the standard of living in georgia, six are below the lower threshold, thus, they pose a threat to a decent standard of living; for the last 17 years the integral index of the standard of living in ukraine has been below the critical value (lower threshold). this demonstrates a consistently low level of living, which got even worse over the last three years. this poses a threat to national security from the side of society. the given situation is due to the unsatisfactory level of the vast majority of the indicators of standard of living. out of ten indicators, nine pose a threat to a decent standard of living; the integral index of the standard of living in poland is the best among the three countries, since 2006 it has crossed the lower threshold and is gradually approaching the lower optimal value of economically developed eu member states. out of the ten indicators of living 32 www.virtual-economics.eu issn 2657-4047 (online) yurii kharazishvili, olena grishnova, and bożena kamioska virtual economics, vol. 2, no. 2, 2019 standards in poland, only two are below the lower threshold and require immediate attention: these are expenditure on education and health expenditure. 4. the article advocates three strategic development scenarios aiming to raise the standard of living of the population of georgia, ukraine and poland by 2025: realistic, optimistic and sustainable development scenarios. they scientifically substantiate strategic benchmarks with the use of adaptive regulation methods of the control theory through the definition of target benchmarks and decomposition of integral indexes. the values of the standard of living indicators and relevant macro-indicators that provide the desired development are the ultimate result of strategic planning. 5. the identified strategic benchmarks for sustainable development at the level of indicators are, in their essence, a strategy for raising the standard of living of the population of georgia, ukraine and poland. they are necessary for comparing with the actual values during monitoring, for determining the proximity to the preferred sustainable development indicators and the effectiveness of macroeconomic policy activities. it is evidenced that the use of realistic and optimistic strategic development scenarios preserves the disproportionality to varying degrees, and only full implementation of the agenda for sustainable development eliminates this disproportionality. the sustainable development scenario foresees reaching the average optimal values of the indicators (sustainable development criteria): an increase in the share of wages in output and, consequently, a significant increase in wages and a decrease in the shadow economy that solves the problem of the standard of living and the budget deficit of georgia, ukraine and poland. 6. practical implementation of the noted scenarios of the standard of living in ukraine is impossible without a significant reduction 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(2013). pidvyshchennia sotsialnykh standartiv u konteksti zabezpechennia natsionalnoi bezpeky derzhavy u sotsialnii sferi [improving social standards in the context of ensuring national security of the state in social sphere]. retrived from http://www.rusnauka.com/30_oinxxi_2013/economics/13_146887.doc.htm [in ukrainian]. http://www.rusnauka.com/30_oinxxi_2013/economics/13_146887.doc.htm кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) edward owusu, jones lewis arthur, and kwaku amofah virtual economics, vol. 6, no. 2, 2023 55 research article cross-cultural communication strategies in the digital era: a bibliometric analysis edward owusu, jones lewis arthur, and kwaku amofah abstract. the growth of global industrialisation, migration, international trade, industryacademia collaboration, government-industry-academia collaboration, and internationalisation of institutions and business entities has led to an expansion of crosscultural communication strategies and digitalisation across the world. because of this, a lot of scientific research publications have been done on cross-cultural communication and digitalisation. therefore, the purpose of this study was to assess authors’ citations, affiliations, and bibliometric coupling on cross-cultural communication and digitalisation within ten years, between 2014 and may 2023. the purpose of this paper was to identify the countries and disciplines with the most and least scientific publications on cross-cultural communication and digitalisation from 2014 to may 2023. since the design of the paper was qualitative, the descriptive approach was used. the data (scientific publications) were electronically sampled from scopus using three key phrases (“cross-cultural” or “communication” or “digitalisation”). in the first instance, a total of 122,461 data were collected from 2014 to may 2023. however, a sample size of 5,493 scientific publications was collected after filtering the initial data with the open-access option. the data collected from scopus were then analysed with the 1.6.13 version of the vosviewer software. the results of the study indicate that between 2014 and may 2023, chang l. is the author with the highest number of scientific scopus-indexed publications (13 papers) on cross-cultural communication and digitalisation. also, the united kingdom is the country with the highest number of scientific publications on cross-cultural communication and digitalisation from 2014 to may 2023. still, on the results, the united kingdom with total documents of 674 is the country with the highest number of bibliometric couplings on cross-cultural communication and digitalisation from 2014 to may 2023. in terms of authors with the highest citation within the period studied, hofstede recorded 546 during ten years. the study recommends that more collaborative research should be done on cross-cultural communication and digitalisation among authors from various disciplines. keywords: cross-cultural, communication strategies, digitalisation, bibliometric analysis http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) edward owusu, jones lewis arthur, and kwaku amofah virtual economics, vol. 6, no. 2, 2023 56 authors: edward owusu sunyani technical university, sunyani, ghana sumy state university, sumy, ukraine e-mail: edward.owusu@aspd.sumdu.edu.ua https://orcid.org/0000-0002-6373-9211 jones lewis arthur sunyani technical university, sunyani, ghana e-mail: jonesarthur2002@yahoo.co.uk https://orcid.org/0000-0002-2496-3819 kwaku amofah sunyani technical university, sunyani, ghana e-mail: kwakuamofah@gmail.com https://orcid.org/0000-0002-3944-5504 corresponding author: edward owusu edward.owusu@aspd.sumdu.edu.ua citation: owusu, e., arthur, j.l., & amofah, k. (2023). cross-cultural communication strategies in the digital era: a bibliometric analysis. virtual economics, 6(2), 55-71. https://doi.org/10.34021/ve.2023.06.02(4) received: january 10, 2023. revised: may 10, 2023. accepted: june 12, 2023. © author(s) 2023. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:edward.owusu@aspd.sumdu.edu.ua https://orcid.org/0000-0002-6373-9211 mailto:jonesarthur2002@yahoo.co.uk https://orcid.org/0000-0002-4865-7306 mailto:kwakuamofah@gmail.com https://orcid.org/0000-0002-3944-5504 mailto:edward.owusu@aspd.sumdu.edu.ua https://doi.org/10.34021/ve.2023.06.02(4) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) edward owusu, jones lewis arthur, and kwaku amofah virtual economics, vol. 6, no. 2, 2023 57 1. introduction communication is the lifeblood of every organisation. without communication, it is practically impossible for organisations, and institutions to promote their mission, vision, core values, goods, and services. communication is the practice of conveying information, ideas, attitudes, views, and opinions from one individual to another [1]. usually, the culture of a community determines the type, nature, and communication strategies used. in a cosmopolitan society with multiple cultural practices, different communication strategies exist. such communities have high cases of different strategies for cross-cultural communication. crosscultural communication is one of the emerging subject matters in most disciplines. in the united states, after the first world war, cross-cultural communication research started emerging [2]. from that time up to this period, this subject matter has gained popularity in academia and the world of business. communicating clearly about the numerous issues and results is important to excel in cross-cultural communication strategies. so, the leaders’ competence in communication, in general, is a vital approach to efficaciously implementing cross-cultural communication strategies [3–11]. in this digital era, several cross-cultural communication strategies abound. hofstede et al [12,13] offer a profound examination of perspectives of cultures in other countries, which represent sovereign policy for a country over another country, and this helps to differentiate one country from another country. hofstede’s model has six dimensions. these dimensions are low and high-power distance, individual / collectivism, masculinity / femininity, uncertainty, and avoidance, long-term / short-term orientation, and indulgence / restraint [12,13]. another cross-cultural communication strategy in this era is digitalisation. digitalisation is the use or upsurge in the adoption of computer or technological know-how by an association, a business, or a nation [14–20]. the scholars [21–24] have highlighted the function that digitization plays in a lot of setups. therefore, the purpose of the study is to examine the various cross-cultural communication strategies used by institutions, organisations, and countries in this digital era as indicated by some scopus-indexed empirical research papers. the objectives of the study are to: • assess the affiliation(s) of authors with the highest number of publications on crosscultural communication and digitalisation, • identify the countries with the highest scientific publications on cross-cultural communication and digitalisation for the past decade (2014 – 2023), • identify countries with the highest collaborative research (bibliometric coupling) on crosscultural communication and digitalisation between 2014 and may 2023, • find authors whose scopus-indexed papers on cross-cultural communication have been cited the most in the past decade, and • find out the disciplines (subject areas) with the highest and lowest scientific papers on cross-cultural communication and digitalisation. the paper is structured into five main parts. part one provides the introduction to the paper. here, the background to the study of cross-cultural communication and digitalisation has been outlined. part two highlights the theoretical and empirical literature review of the study. part three showcases the various methods that were used in collecting, and analysing the data. this http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) edward owusu, jones lewis arthur, and kwaku amofah virtual economics, vol. 6, no. 2, 2023 58 part also provides readers with information about the focus of this bibliometric study. part four summarises the results and discusses the objectives of the study. part five, the conclusions, highlights the main revelations of the paper with specific reference to the objectives. this section also deliberates on the limitation of the study and provides direction for future studies. 2. literature review 2.1. theoretical literature review classical literature defines culture as the way of life of a group of people [25]. thus, the culture of every community represents its lifestyle. this includes their dress code, food, dance, language, music, norms, systems, orientation, values, and rules. therefore, culture is a group's system of beliefs, norms, and values, that is learned [26]. usually, societal systems of communication and culture and intertwined. thus, there is a symbiotic relationship between culture and communication. usually, in an environment where different participants with diverse orientations exist, there are bound to be exhibitions of activities that border on culture. one such activity is communication. people may communicate based on their cultural orientation. therefore, cross-cultural communication is the interaction of entities from diverse cultures that borders on information dissemination; interpersonal, mass, group, and person-togroup communication, as well as the flow, sharing, infiltration, and transfer of various cultural elements in the world [27]. thus, cross-cultural communication takes place when people who speak different languages come into contact with one another. when this happens, they display a lot of cultural practices both in their communication and general conduct. considering to the studies [28–42] cross-cultural communication plays a significant role in the green development of a country [28,38–40,42] and the success of businesses in terms of stakeholderoriented value [29], institutional components [30–32], globalization [33–35], economic growth [36–37], and sustainable development [40–42]. cross-cultural communication skills are the skills that enable someone to successfully intermingle with people from different cultural groupings [43]. cross-cultural communication deals with how people from dissimilar cultures communicate when they deal with each other either on a remote or face-to-face basis [2]. thus, this communication can comprise verbal, printed, and non-verbal language. on a remote basis, various electronic communication media (both print and electronic) are used for cross-cultural communication. these may include websites, social media handles and pages, telecommunication systems, books, journals, magazines, and others. 2.2. empirical literature review moton [44] used semi-structured interviews and document analysis to solicit data from four (4) managers of different fast-food restaurants about cross-cultural communication strategies that engage employees and increase productivity. these restaurants were situated in the southern region of the united states of america. grounded in hofstede's cross-cultural dimensions theory, this qualitative multiple-case study research sought to explore strategies that managers of small fast-food restaurants deploy to improve employee engagement. the study revealed that low employee engagement can negatively impact productivity for small http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) edward owusu, jones lewis arthur, and kwaku amofah virtual economics, vol. 6, no. 2, 2023 59 fast-food restaurants in the usa. again, small fast-food managers who do not engage employees’ experience, usually decrease employee productivity. four thematic areas emerged from the study: (1) developing relationships, (2) empathy, (3) mindfulness and respect for others, and (4) training and communicating. the study recommended that managers should train employees on cross-cultural communication issues. there is another study that looked at the effect of culture on marketing communication through the websites of four multinational fast-food companies operating in the usa and malaysia [45]. this qualitative study used a content analysis design to assess the websites of four (4) fast-food international restaurants namely: burger king, kfc, mcdonald's, and domino's pizza operating in both the usa and malaysia. the objective of the study was to find out how cultural differences and various dimensions of culture affect the design of the websites of these multinational companies. the study revealed that the sampled websites reflected the local cultural values of the location of the various companies. the design of the websites portrayed the national culture of both countries. also, the use of animations and sounds attracted local customers. the study recommended culture-preferred websites for companies, especially those in pakistan. this may go a long way to attract customers. however, cross-cultural communication has some barriers. for example, sylaj [46] investigated cross-cultural communication barriers in international organizations. the objective of the study was to assess whether a preference for a supportive management style and a directive management style was a result of highly individualistic, highly masculine, and low uncertainty avoidance societies. the participants for the study were fifty-two employees who were surveyed. out of this number, six (6) were interviewed. the findings of the study showed that preference for a supportive management style was not significantly related to highly individualistic and low uncertainty avoidance societies. the study revealed that preference for a directive management style was not significantly related to highly masculine societies. the results of the interview showed that preference for a supportive management style was related to individualistic culture societies but do not show a trend that preference for a supportive management style was related to low uncertainty avoidance societies. riyanto et al. [47] investigated the intercultural communication challenges among indonesian seafarers with foreign crews at international shipping companies. with a mixed-questionnaire method, this descriptive analysis study collected data (consisting of 10 items) from 171 respondents (seafarers) through google forms from june 30, 2022, to july 19, 2022. the study aimed to examine the experiences of these seafarers in onboard intercultural communication related to personal job duties and daily social interactions. the findings of the study revealed that the language barrier was a significant issue among indonesian seafarers. thus, they had challenges communicating and socialising with onboard multinational crews, and this challenge was overcome by body language. chudnovskaya & millette [48] studied the intercultural experiences of 16 chinese graduate students at u.s. universities. the methodology used was a focus group (n=8) and personal interviews (n=8) conducted at a southeastern university. the results of the study revealed how international chinese students dealt with variances in expectations for the classroom environment, excellence in schoolwork, and non-verbal norms during their time studying in the u.s. the findings aligned with the three cross-cultural dimensions of hofstede's theory: http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) edward owusu, jones lewis arthur, and kwaku amofah virtual economics, vol. 6, no. 2, 2023 60 power distance, individualism versus collectivism, and indulgence versus restraint. again, the work brought to light that despite some cultural shifts shown by newly introduced dimensions collectivism-individualism and duty-joy, cultural differences still posed some problems for the participants studied. 3. methods various methods were used in this study. based on its efficacy by several authors [49–57], the bibliometric analysis design was applied by using the key phrases in the objectives of this study. the main keywords used in scopus in soliciting the data are “cross-cultural” or “communication” or “digitalisation”. since the design of the paper was descriptive, the 1.6.13 version of the vosviewer software was used in analysing the data collected from scopus. vosviewer is a 21st-century software tool for constructing and visualising bibliometric networks. this software uses data from scopus in analysing journals, researchers, and countries of authors. vosviewer software uses one of three data types – network, bibliographic, or text – to create maps and graphics for analysis. in creating maps, five types of analysis options are available for users. these are co-authorship, co-occurrence, citation, bibliographic coupling, and co-citation. using the three main keywords (“cross-cultural” or “communication” or “digitalisation”) in scopus, a total of 122,461 data were initially exhumed. however, a sample size of 5,493 document results was used based on the open-access filtering option. they were the relevant scientific publications on “cross-cultural”, “communication”, and “digitalisation” published within the past decade of 2014 and may 2023. 4. results and discussion in figure 1, the dynamics of the scientific publication activity show rapid growth in publication since 2014. thus, in 2014, about 200 scientific publications were done on crosscultural communication and digitalisation. this number gradually increased to over 1000 publications in 2022. in the first quarter of 2023, about 400 scientific publications were done. figure 1. the dynamics of scientific publication on cross-cultural communication and digitalisation published from 2014-2023 source: compiled by the authors based on the scopus database. 0 2 4 6 8 10 12 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) edward owusu, jones lewis arthur, and kwaku amofah virtual economics, vol. 6, no. 2, 2023 61 therefore, it is anticipated that by the end of 2023, over 1200 scientific papers on crosscultural communication and digitalisation would have been published in scopus. this trend corroborates the assertion that in the united states, after the first world war, cross-cultural communication research started emerging [2]. table 1 compares the document counts for up to 10 authors who have published scientific papers on cross-cultural communication and digitalisation. while chang has the highest count of 13 publications, oburu, skinner, and tapanya have 12 publications each. as bacchini, lansford, pastorelli, and sorbring have 11 publications on the keywords used, al-hassan and deater-deckard have 10 publications each. table 1. authors’ scientific publications on cross-cultural communication & digitalisation author number of publications author number of publications chang l 13 lansford j.e. 11 oburu p 12 pastorelli c. 11 skinner a.t. 12 sorbring e. 11 tapanya s. 12 al-hassan s.m. 10 bacchini d. 11 deater-deckard k. 10 source: compiled by the authors from the scopus database in figure 2, ten (10) affiliations of authors on cross-cultural communication (ccc) and digitalisation have been displayed. from figure 2, the university college london has the highest number of authors who published scientific papers (about 80) on ccc and digitalisation in scopus between 2014 and 2023. on the other hand, about 48 scientific papers on ccc and digitalisation emerged from tilburg university. figure 2. affiliations of authors of scientific publications on cross-cultural communication and digitalisation. source: compiled by the authors based on the scopus database. figure 3 shows the top ten countries with scientific publications on ccc and digitalisation from 2014 to may 2023. figure 3 indicates that the united kingdom has about 1,420 publications on ccc and digitalisation. this is followed by the united states of america (with 0 10 20 30 40 50 60 70 80 90 tilburg university university of oxford universiteit utrecht the university of manchester kazan federal university universiteit van amsterdam rijksuniversiteit groningen hse university university of cambridge university of oxford http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) edward owusu, jones lewis arthur, and kwaku amofah virtual economics, vol. 6, no. 2, 2023 62 about 1410 publications), while canada is the 10th country in the world with the highest number of publications on ccc and digitalisation (with about 300) from 2014 to 2023. figure 3. top 10 countries with the highest scientific publications on cross-cultural communication and digitalisation source: compiled by the authors based on the scopus database. the data from scopus (figure 3) corroborates the bibliometric coupling analysis (figure 4) generated from the vosviewer software about how countries have collaborated with other countries in research on ccc and digitalisation. figure 4. countries with the highest collaborative research (bibliometric coupling) on cross-cultural communication and digitalisation source: generated by the authors from vosviewer. 0 200 400 600 800 1000 1200 1400 1600 canada italy netherlands australia china spain russian federation germany united states united kingdom http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) edward owusu, jones lewis arthur, and kwaku amofah virtual economics, vol. 6, no. 2, 2023 63 from table 2, the united kingdom (uk) has the highest number of collaborative research on ccc and digitalisation (674 documents). the uk has 24,573 citations and 216,327 total link strength. while the united states of america is 2nd on the table with 610 documents, 21,572 citations, and 188,895 total link strength, france is 10th with 79 collaborative research on ccc and digitalisation, 4,164 citations, and 54,741 total link strength. thus, the first three countries in the world with the most collaborative research on ccc and digitalisation are the united kingdom, the united states, and germany. table 2. countries with the highest number of bibliometric coupling data on ccc and digitalisation from 2014 to 2023 country documents citations total link strength united kingdom 674 24573 216327 united states 610 21572 188895 germany 325 13213 114135 italy 202 7375 89902 netherlands 217 8311 87006 china 169 4739 80170 australia 217 8602 79205 canada 123 5177 70002 spain 211 6348 67163 france 79 4164 54741 finland 66 2996 45833 switzerland 67 3190 45710 sweden 78 3220 40987 belgium 54 2082 40963 norway 64 2709 39753 japan 50 1360 37337 turkey 38 1737 35188 source: generated by the authors from the vosviewer software figure 5 shows that between 2014 and may 2023, social sciences have dominated (35.0%) with scientific publications on ccc and digitalisation. as business and management has 12.1%, arts and humanities has 10.3%. figure 5. scientific papers on ccc and digitalisation by subject area from 2014 to 2023 source: generated from scopus by the authors. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) edward owusu, jones lewis arthur, and kwaku amofah virtual economics, vol. 6, no. 2, 2023 64 the disciplines with the lowest scientific publications on ccc and digitalisation are energy (3.6%), medicine (3.7%), and economics (4.3%). these data suggest that more scientific research on ccc and digitalisation are needed in energy, medicine, economics, engineering, environmental science, and other related fields [58–67]. figure 6 portrays the data of authors who have collaborated with other authors in scientific research on ccc and digitalisation from 2014 to may 2023. figure 6. co-authorship collaborations source: generated from vosviewer by the authors. table 3, which supports figure 6 shows that hofstede is the author number one, who has collaborated the most with other authors in publishing scientific papers on ccc and digitalisation from 2014 to 2023. table 3. co-authorship collaborations with citations author citation total link strength hofstede g. 546 22475 kitayama s. 215 12711 schwartz s. h. 273 11369 triandis h. c. 208 10812 parida v. 138 10752 markus h. r. 165 10111 diener e. 158 8738 henrich j. 179 7646 gelfand m. j. 118 7485 hair j. f. 141 7292 kohtamaki m. 79 7195 ringle c. m. 115 7134 sedikides c. 78 6959 kraus s. 122 6923 norenzayan a. 152 6852 source: generated from vosviewer by the authors. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) edward owusu, jones lewis arthur, and kwaku amofah virtual economics, vol. 6, no. 2, 2023 65 table 3 shows that he has 546 citations and 22,475 total link strength. this confirms that hofstede is an authority in this area who has collaborated with several authors on scholarly works on ccc. for example, hofstede et al. [12] propose a thoughtful investigation of viewpoints of cultures of other countries which epitomize autonomous policy for a country over another country, and this facilitates distinguishing one country from another. figure 7 reveals the co-occurrence of related keywords on ccc and digitalisation. thus, this visualisation map shows a cross-tabulation relationship among the keywords in the topic of our paper used between 2014 and may 2023. figure 7. a visualisation map of the relationship among the key concepts – cross-cultural, communication, and digitalisation. source: generated from vosviewer by the authors. from figure 7, it is obvious that keywords such as digitalization, covid-19, cross-cultural, culture, cultural differences, gender, and china are the major concepts used within the period. other minor concepts used are communication strategy, cross-cultural studies, international students, communication strategy, e-learning, cross-cultural adjustment, and emotional intelligence among others [68–73]. what this means is that ccc and digitalisation have a symbiotic relationship with these key concepts. figure 7 is augmented by table 4, which showcases the occurrence and total link strength of the keywords on ccc and digitalisation from 2014 to may 2023. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) edward owusu, jones lewis arthur, and kwaku amofah virtual economics, vol. 6, no. 2, 2023 66 table 4. keywords about ccc and digitalisation, and their occurrence in scopus from 2014 to may 2023. keyword occurrences total link strength digitalization 195 322 covid-19 72 125 cross-cultural 121 107 culture 90 104 industry 4.0 48 102 sustainability 50 95 digital transformation 51 90 digitalisation 59 77 social media 52 76 circular economy 21 54 china 31 47 gender 29 42 digital technologies 23 41 twitter 17 41 innovation 23 38 source: generated from vosviewer by the authors. from table 4, it is obvious that digitalization and digitalisation are the same concepts that belong to the american and british english codes. therefore, if we should merge their total occurrences and total link strength, we will have 254 occurrences and 399 total link strengths. this situation shows how vital digitalisation is in this 21 century. with a total occurrence of 121 and 107 total link strength, cross-cultural was also visible in most of the publications we exhumed from scopus between 2014 and may 2023. 5. conclusions this bibliometric analysis paper sought to assess cross-cultural communication (ccc) strategies and digitalisation over the last decade (from 2014 to may 2023). thus, crosscultural, communication, and digitalisation were the main keywords used in scopus in searching for scientific publications over the past decade. the paper brought out some revelations, which have been grouped under the specific objectives of the paper: 1. concerning affiliation(s) of authors with the highest number of publications on crosscultural communication and digitalisation, the study revealed that between 2014 and may 2023, chang l. had the highest number of scientific publications (13 papers). while oburu p., skinner a.t., and tapanya s. had 12 publications each, bacchini d., lansford j. e., pastorelli c., and sorbring e. had 11 publications on the keywords used, and al-hassan s.m., and deater-deckard k. had 10 publications each. 2. when it comes to countries with the highest number of scientific publications on crosscultural communication and digitalisation for the past decade (2014–2023), the study revealed that the united kingdom has over 1,400 publications, while the united states has about 1400 publications. as germany has about 850 publications, russia has almost 600 http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) edward owusu, jones lewis arthur, and kwaku amofah virtual economics, vol. 6, no. 2, 2023 67 publications. however, no country in sub-sahara africa ranked among the first 10 countries with the highest number of publications on ccc and digitalisation. this does not suggest that papers on ccc and digitalisation have not been done on the continent. the analysis was only based on the first 10 countries. 3. in terms of the countries with the highest collaborative research (bibliometric coupling) on cross-cultural communication and digitalisation between 2014 and may 2023, the study showed that the united kingdom has a total of 674 documents with 24573 citations, followed by the united states with 610 documents and 21572 citations, and germany with 325 documents and 13213 citations. this data suggest that the united kingdom and the united states have done more collaborative research on ccc and digitalisation than any other countries in the world. 4. about authors whose scopus-indexed papers on cross-cultural communication have been cited the most in the past decade (2014 and may 2023), the findings revealed that as of may 2023, hofstede had 546 citations, kitayama had 215, schwartz had 273, triandis had 298, and parida had 138. table 3 has a complete list of authors and their citations and total link strength. 5. concerning the disciplines (subject areas) with the highest and lowest scientific papers on cross-cultural communication and digitalisation between 2014 and may 2023, the paper revealed that publications in the social sciences lead with about 35.0% of the entire publication within the period. also, business and management has 12.1%, arts and humanities has 10.3%. on the other hand, the disciplines with the lowest scientific publications on ccc and digitalisation are energy (3.6%), medicine (3.7%), economics (4.3%). in conclusion, it is imperative to indicate that more collaborative research should be done among authors from social sciences, arts and humanities, business and management on one hand; and authors from medicine, economics, energy, geography, etc. again, local and international institutional collaborative research could enhance authors’ citations and visibility. however, there are limitations to this study. the database selection was limited to only scopus-indexed journals. probably, if papers were sampled from other recognised academic research databases, the results would have been different. for example, there may be equally good scientific papers on ccc and digitalisation published in journals indexed by eric, ebsco, web of science, doaj, pubmed, sciencedirect, and jstor. another limitation of the study is the selection of only open-access scientific publications. this filtering method selected in scopus may have excluded some exciting scientific papers on ccc and digitalisation published in closed-access journals. what this means is that these findings should not be perceived as absolute in assessing scientific publications on ccc and digitalisation. also, the filtering process deployed in scopus selected only scientific papers on ccc and digitalisation published in the english language. maybe, if there was an option in scopus for translating non-english language papers, our scope would have been expanded to capture other papers published in other languages. this would have changed the results of the http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) edward owusu, jones lewis arthur, and kwaku amofah virtual economics, vol. 6, no. 2, 2023 68 study. future research could explore papers from other recognized academic research databases. the only challenge here is that the vosviewer software uses only scientific papers from scopus. future research studies could also focus on ccc and other disciplines or areas such as entrepreneurship, sustainable development, and national development. author contributions: conceptualization, e.o., j.l.a., and k.a.; methodology, e.o., j.l.a., and k.a.; software, s.a., t.p., and o.l.; validation, s.a., t.p., and o.l.; formal analysis, e.o., j.l.a., and k.a.; investigation, e.o., j.l.a., and k.a.; writing-original draft preparation, e.o., j.l.a., and k.a.; writing-review and editing, e.o., j.l.a., and k.a.; visualization, e.o., j.l.a., and k.a.; supervision, e.o., j.l.a., and k.a. all authors have read and agreed to the published version of the manuscript. funding: not applicable. data availability statement: not applicable. acknowledgements: not applicable. conflicts of interest: not applicable. references 1. owusu, e. & mardani, m. 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(2022). digital transformation of a country’s image: the case of the astana international finance centre in kazakhstan. virtual economics, 5(2), 71–94. https://doi.org/10.34021/ve.2022.05.02(4) http://www.virtual-economics.eu/ https://doi.org/10.1051/e3sconf/202015904037 https://doi.org/10.13165/vpa-19-18-2-05 https://doi.org/10.5430/rwe.v10n4p97 https://doi.org/10.3390/en16010178 https://doi.org/10.3390/en14092640 https://doi.org/10.3390/en16031117 https://doi.org/10.1016/j.apenergy.2022.118933 https://doi.org/10.33223/epj/127397 https://doi.org/10.3390/en16062511 https://doi.org/10.3390/en15010108 https://doi.org/10.3390/en13184833 https://doi.org/10.9770/jesi.2020.7.4(5) https://doi.org/10.3390/su15097249 https://doi.org/10.3390/en15103805 https://doi.org/10.23762/fso_vol10_no3_6 https://doi.org/10.3390/joitmc8010058 https://doi.org/10.34021/ve.2022.05.02(4) кwilinski alex 30 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 2, no. 3, 2019 2019 volume 2 number 3 (july) application of artificial intelligence in control systems of economic activity oleksandr melnychenko abstract. the implementation of the tasks of evaluating historical financial information, the control or audit of business activities are based primarily on professional judgments about the object of study of a professional accountant or auditor. their findings are drawn on the review of documents, the use of audit evidence, risk assessment, etc. there is always a probability (and rather high) that professional judgment will be based on incomplete information (since the dynamics of information changes is extremely high today), on the misstatements (since it is impossible to trace all the changes in knowledge related to the object of study), regardless of the quality of the performance of these individuals. in addition, the auditor often takes subjective decisions (for example, when choosing individual elements for the assessment from the general population), which also affects the degree of objectivity of his assessments. artificial intelligence is the tool that could handle the entire set of knowledge, track all changes in the significant and important information, as well as in the insignificant and unimportant (which, however, also has an effect on the object of analysis). it does not have a work schedule or other restrictions on the time of work, so the comparison and analysis of information can be carried out around the clock, and the speed of data processing is determined by the processing power of the information systems, on which it operates, and is stably high. in this case, the artificial intelligence is ready to perform the tasks non-stop in real time till receiving the command of the termination of the process. this article proposes a methodology for the artificial intelligence use in the control systems of economic activity, reflects the artificial intelligence concept in the control systems of economic activity, indicates the goals, principles, tasks and its functions when checking an object. keywords: artificial intelligence, audit, control, economic activity, methodology, concept jel classification: o00, m15, m40, f38 author(s): oleksandr melnychenko the london academy of science and business, 3rd floor, 120 baker street, london, england, w1u 6tu e-mail: o.melnychenko@london-asb.co.uk https://orcid.org/0000-0002-7707-7888 citation: melnychenko, o. (2019). application of artificial intelligence in control systems of economic activity.virtual economics, 2(3), 30-40. https://doi.org/10.34021/ve.2019.02.03(3) received: january 11, 2019. revised: march 22, 2019. accepted: june 21, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) mailto:o.melnychenko@london-asb.co.uk https://orcid.org/0000-0002-7707-7888 https://doi.org/10.34021/ve.2019.02.03(3) https://creativecommons.org/licenses/by/4.0/ 31 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 2, no. 3, 2019 1. introduction as a rule, science moves forward in proportion to the array of knowledge acquired earlier. at the same time, the current speed of transferring information and replacing data sometimes leads to the opposite effect, when the body of knowledge does not contribute to the growth of science, but prevents it. so, today, the body of information received by a person per day can be compared with a big data array, to which the information comes from everywhere, structured and unstructured, necessary, secondary and really useless knowledge. to concentrate on the necessary data or unambiguously and objectively classify information, when its sources are so numerous, and the speed of its updating is so high, is very difficult and requires considerable efforts from everyone, especially from the decision maker. for example, the implementation of the tasks of evaluating historical financial information, the control or audit of business activities are based primarily on professional judgments about the object of study of a professional accountant or auditor. their findings are drawn on the basis of the study of documents, the use of audit evidence, risk assessment, etc. there is always a probability (and rather high) that professional judgment will be based on incomplete information (since the dynamics of information changes is extremely high today), on the misstatements (since it is impossible to trace all the changes in knowledge related to the object of study), regardless of the quality of the performance of these individuals. in addition, the auditor often takes subjective decisions (for example, when choosing individual elements for the assessment from the general population), which also affects the degree of objectivity of his assessments. artificial intelligence is the tool that could handle the entire set of knowledge, track all the changes in the significant and important information, as well as in the insignificant and unimportant (which, however, also has an effect on the object of analysis). it does not have a work schedule or other restrictions on the time of work, so the comparison and analysis of information can be carried out around the clock, and the speed of data processing is determined by the processing power of the information systems, on which it operates, and is stably high. in this case, artificial intelligence is ready to perform the tasks non-stop in real time till receiving the command of the termination of the process. according to some forecasts, personal computers will achieve the processing power of the human brain in 2020; laws that regulate the relations between people and robots will be enacted in 2022; it will be possible to extend the life of a person by more than what has passed per unit of time in 2026; in 2040, search engines will work not only based on queries from the voice of a person, but also from thoughts; in 2043, the human body will be able to take any form thanks to nanorobots and cybernetic devices, which will replace human organs with significantly higher quality; in 2045, a technological singularity – the transformation of the planet into a solid computer, when technological progress is beyond its understanding – will come (space, 2016). 32 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 2, no. 3, 2019 such transformations are also linked to the development of artificial intelligence (ai), which is currently not a concern, but the pace of its refinement leads to the reflection and consideration of trends for the development of all branches of science, including economics. therefore, the question of the use of artificial intelligence in the control systems of economic activity is becoming increasingly relevant, which has led to the choice of the topic for the research. in this work, the concept of “auditor” is used in the narrow sense in accordance with the international standards on quality control, auditing, review, other assurance and related services pronouncements and, in a broad sense – the person, who verifies, controls financial and other statements, gives confidence that the information is correct and is the subject of the control. in any case, now by “auditor” we mean the person, who is responsible for making final decisions about the misstatements in the information on the economic activity of the control object. 2. literature review the issue of the application of artificial intelligence in the daily life of every person, as well as enterprises and states, is receiving attention today at different levels. such reports are prepared at the state and international levels by the leading organizations in the field of business consulting and information technology. an analytical document prepared by the house of lords of the united kingdom talks about the positive opportunities that artificial intelligence can provide to the british economy, in particular, by optimizing business processes and the associated risks (select committee on artificial intelligence (house of lords), 2018). the authors of the report support the ai and offer to inform the public, when ai is used, to make important or sensitive decisions. the introduction of such a rule, perhaps, would be the first regulatory measure to streamline the relationship between humans and artificial intelligence since 1955, when it was first discussed in the world. at the same time, researchers note (select committee on artificial intelligence (house of lords), 2018), that it is necessary to constantly pay attention to the raising of public awareness of the digital environment, information technology and, in fact, artificial intelligence. this is what the development and the positive trends in the implementation of ai will be based on. however, it was rightly noted that, for example, in school curricula it is advisable to increase attention on computer science at the expense of objects of art or the humanities that form creative, contextual and analytical skills. in science fiction films, there are often like-minded anti-globalists with the slogan “robots take jobs”, which is not meaningless in the development of our topic and questions about the future of ai. the issue of the impact of ai on employers and workers was assessed by specialists of pricewaterhousecoopers (pricewaterhousecoopers, 2018). they rightly point out that changes in employment will be more likely to concern retraining of workers: indeed, some professions will disappear, but new and more highly qualified ones will replace them. in addition, such changes are actually a constant companion of technical evolution and these 33 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 2, no. 3, 2019 changes are noticeable at every stage of the society development. the same as ever, these changes will be evolutionary, rather than simultaneous. so, the profession of chimney sweeps before the invention of steam heating (especially based on natural gas) was also popular and also did not disappear immediately, since only gradually the steam heating came to most houses. and today, workers, who install gas boilers, are popular and uniquely more skilled than the chimney sweeps. today, perhaps, the most successful and illustrative example of the application of artificial intelligence is targeted sales and advertising. an analytical report by experts on deloitte (deloitte, 2018) is dedicated to these issues. processing a significant amount of data and the decision to offer a particular product to a specific buyer at the right time ai systems are coping with this task today. researchers note an interesting solution that uses rapidmathematix in the pricing system: prices in the online store are updated almost every second depending on the time of day, market, shelf life of the product, season, customer sentiment, etc. indeed, the product value for each of us depends on many factors and can change at any time. why not change its value to buyers to maximize turnover and profits? insurance companies that calculate their risks based on global and individual conditions of the surrounding world should always be aware of the latest developments. so, one of the largest insurance companies in the world, allianz points to seventh in the ranking of the main risks to business, the impact of artificial intelligence and other forms of the latest technology. this type of risk, according to insurance company specialists, is more significant than, for example, political risk and climate change risk (allianz global corporate & specialty, 2018). in particular, we are talking about improving road safety thanks to the ai. and the number of traffic accidents will decrease by 90%. indeed, using 5g data transfer technology, it is possible to integrate car systems with road traffic control systems, and ai will help to determine the probability of an accident depending on the speed and trajectory of each car in the stream and, for example, suggest the driver to change the movement parameters to avoid an accident. the main fears associated with the implementation of ai are usually rooted in ethical aspects. the unesco publication refers to three categories of such risks (unesco, 2018): labour shortage – machines, not people can do the job; consequences for the autonomy of the individual: on freedom and human security; advancement in the development of mankind by more “intelligent” machines that are able to process significant amount of information faster, make decisions, and have access to a significant number of information sources. p.h. winston (1992) identifies two components of the goal of introducing artificial intelligence: engineering, which consists in solving real problems using ai as a tool of ideas that would represent and use knowledge, build systems; and scientific, which is based on the fact that ai should determine what ideas will represent knowledge, use them and build systems, taking into account various types of intelligence. 34 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 2, no. 3, 2019 at the same time, the author identifies some areas of ai application and explains their capabilities, in particular: on farms – to control the number of pests in the fields, pruning trees, sorting crops using computers; at home – to provide advice on purchases and ration, home cleaning; in schools – to identify the reasons why pupils or students make mistakes, and not just respond to them, etc. (winston, 1992). indeed, each person, buying food at the supermarket, stops in front of a shelf with a significant assortment of similar goods from time to time to look through the components of the product, date of manufacture and expiration date. it is especially difficult to decide, when there are more than 20 components of the product, 5 or more analogues, and a number of unknown factors that should influence the decision, and lack of information to make it at the optimal level. so, for example, baby food has 26 components, the choice in the supermarket is represented by 5 or more brands. comparison of the tables with the elements on each package and understanding that, for instance, hipp milk has 51 kilocalories of energy value per 100 grams of product, and nestle 67 does not guarantee that nestle will be more beneficial for the child, since hipp has more vitamin d and potassium in its list of components. at the same time, the buyer does not know the latest research on how many such elements a child needs at each stage of his/her development, and whether such an amount is suitable for the child of this particular buyer. products or services also vary in price. so, it is possible to choose products that are absolutely identical in terms of quantity and make a decision based on price (according to the preferences), and ultimately not take into account qualitative factors, for example, on the practical use of the product, which cannot be taken into account without analysing the opinion of customers who have already bought it or not having completed the research itself, again spending their time and money on it. almost every person makes a lot of such decisions throughout life. evaluation of the time taken to analyse factors for making the optimal decision is not the subject of our study, nevertheless, it is obvious that this process takes a lot of time. in addition, the decision after analysis of the factors is rarely quite far from ideal or optimal – rather, it is random. artificial intelligence is intended to meet such or similar challenges, when there are many factors, and sometimes the price of a mistake is health or life, when it concerns, for example, medicine, diet, etc. it is able to help in the analysis of the necessary information with higher efficiency. it saves time a person can spend on other areas, where it is more needed. p.h. winston suggests answering the following questions in order to determine, whether artificial intelligence can successfully solve the problem (winston, 1992): are the tasks formulated clearly? is the procedure that performs a specific task implemented? 35 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 2, no. 3, 2019 is there a set of identified patterns or limitations, from which the implemented procedure gains its strength? does the program solve a real problem? does the program open up new possibilities? after the positive answers to these questions, it is possible to build a control system of economic activity. international standards on quality control, auditing, review, other assurance and related services pronouncements (international auditing and assurance standards board, 2018a; 2018b) are recognized in the world and are used to build a control system of economic activity. in particular, it was determined that the purpose of the audit is to increase the degree of confidence of certain users in the financial statements. this is achieved by the auditor's opinion on whether the financial statements are prepared in all aspects in accordance with the applicable financial reporting framework or not (international auditing and assurance standards board, 2018a; 2018b). the auditor should receive reasonable assurance that the financial statements as a whole do not contain misstatements because of fraud or error. at the same time, reasonable confidence means a high level of confidence. it is achieved, if the auditor has received sufficient audit evidence required to reduce the audit risk (the risk that the auditor will express an inappropriate opinion if the financial information contains misstatements) to an acceptably low level. however, reasonable assurance is not an absolute level of assurance, since there are inherent audit restrictions that make the majority of the audit evidence, on which the auditor draws conclusions and bases his/her opinion, more convincing than final (isa 200, §3). hence, there is no absolute confidence either in the objectivity of the data presented in the financial statements, or in accuracy of the auditor's conclusions. such a risk of “convincing” conclusions would be acceptable if decisions based on the results of the audit were made conditionally. however, specific figures depend on the reports on the results of inspections, for example, tax deductions, penalties, people's fates, business reputation, etc. a study of these and other sources revealed that research on the use of artificial intelligence does not pay enough attention to the possibilities of its use in control systems and audit of economic activity. modern findings in the field of artificial intelligence research are definitely significant and valuable (bochulia & melnychenko, 2019; bochulia & yancheva, 2017; dalevska et al., 2019; european political strategy centre (european commission), 2018; girchenko & kossmann, 2016; kwilinski et al., 2019a; 2019b; lakhno et al. 2018; omoteso 2012; russell & norvig, 2016). however, real results are not used in practice due to the lack of methodological support for the regulation of the work of artificial intelligence in this area. the actual development of a separate unit, for example, responsible for working with documents and information in the framework of the audit, requires significant investments that can bring tangible results, or may not work at all. for example, it is not known whether the entrepreneurs will be interested in an absolutely objective, unbiased audit with zero probability of not detecting violations. is a 36 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 2, no. 3, 2019 global, interstate, large national or small business ready to conduct a completely transparent activity, based on blockchain technology, which implies, in fact, an objective and impartial audit (kwilinski, 2019; melnychenko & hartinger, 2017)? 3. methodology the role of artificial intelligence in the realization of assurance tasks lies in increasing the effectiveness of the control system. this goal is achieved through the implementation by artificial intelligence in the process of auditing the following functions: improving the quality of data processing: considering, apart from important noticeable and significant data, also important imperceptible, secondary noticeable and imperceptible, as well as even insignificant, omissible and imperceptible data for analysing information and identifying the truth; increasing the productivity of the audit system by the analysis of the information, associated with the object of audit, round-the-clock, without fatigue, distraction, with a stable high speed of data processing; acceleration of reaction to changes in the information space and considering all possible factors that influence or have influenced the decision-making associated with the object of audit, reduce the risk of errors caused by obsolete knowledge. performing these functions depends on specific tasks according to the type of control object. thus, before setting the task to artificial intelligence, it is necessary to classify the object according to different features: volume, size, scale, level, etc. for example, the control over the correctness of the calculation and payment of value added tax is appropriate to assign to artificial intelligence, in particular, in part of the comparison of information in the regulations, primary documents, agreements with counterparties, budget movement report for funds in bank accounts, tax returns, etc., when it comes to a separate enterprise. otherwise, it is advisable to describe the level of information support when it comes to state-level control. in addition, the information from the tax authorities, data from registers of different levels, etc. should be used as well. therefore, the tasks of artificial intelligence in cooperation with the auditor in the control systems of economic activity are: analysis of complete information about the object of control and its individual elements, including indirect, in particular, big data research; comparison of the information about the object of control with the analysed information; identify inconsistencies that lead to misstatements in the financial or other business reporting of the entity. as a result, the risk of the auditor's failure to detect serious or minor misstatements because of fraud or error will tend to zero. 37 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 2, no. 3, 2019 4. results artificial intelligence in business control systems refers to the modelling of human intelligence in machines that are programmed to think like humans and that mimic their actions to detect irregularities and distortions in the accounting system caused by fraud or human error. its characteristic features are training and solving problems in identifying anomalies in primary documents, reporting registers, etc. the ideal characteristic of artificial intelligence is its ability to rationalize and take actions that have the best chance of achieving a specific goal, which is to analyse all the information and prove existing inaccuracies. artificial intelligence is based on the principle that human intelligence can be defined in such a way that the machine can easily simulate it and perform tasks. the objective of artificial intelligence in business control systems is to find out how the patterns established in the set of information can be understood as individual cases of more general patterns. artificial intelligence goals include learning, reasoning, and perception. in the process of learning, the system must, first of all, find out the basic principles (full coverage, autonomy, consistency, continuity, accrual, entity over form, etc.), elements (documentation, inventory, estimation, calculation, billing, double entry, balance sheet, reporting) and methods (primary observation, cost measurement, grouping and systematization, summary generalization) of accounting. therefore, when comparing information and data from the accounting system of the studied object with those from other, external sources of information, artificial intelligence should reveal those inconsistencies that violate one or more principles. such detection should also be based on the appropriate application of all elements and methods in the accounting system. reasoning is based on causation, which will allow the information in the financial statements to be objective or vice versa to detect distortions or anomalies. for example, by evaluating the costs recorded in the accounts, the system will compare them with counterparty bills, contracts, as well as data from the registers on the activities of such counterparties, on displaying in their data the information on the corresponding revenues, will check the types of activity of such company for the possibility of the provision of relevant services or sales of goods, and will control the possibility of attributing such costs to the costs of the audited entity, etc. after such a thorough verification, artificial intelligence will "express" the assumption of the accuracy of the displayed data and the compliance of the operations with the current legislation. 38 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 2, no. 3, 2019 perception of artificial intelligence is the process of forming images on the basis of information received in different forms and in different ways. it is based on the experience and knowledge gained during the training and on the conclusions drawn from the reasoning. perception is already the highest manifestation of the psychological activity of artificial intelligence, when reality is perceived as a whole or in individual elements. for example, the balance sheet as a form of financial reporting is perceived by artificial intelligence (as by an experienced enterprise accountant) not as, for example, a table with a set of assets and liabilities or as a set of indicators with a corresponding taxonomy, but as a complex category, which reflects the essence of the business activity as a complex system with a certain set of personnel, tangible and intangible assets, sources of their formation, each of which has its own history, origin, processes, etc. a modern example of the effective work of artificial intelligence, elements of which can be used in business control systems, is its work in google maps application for smartphones when used as a navigator. thus, when traveling along a route, for example, by car, the user firstly receives recommendations from the system regarding directions, turns, etc., secondly, analyses the current road situation and determines the time of getting to the necessary destination point, considering traffic light congestion, road traffic. thirdly, it identifies and evaluates, in real time, alternate routes and offers the user another, more optimal or faster route, if there is any during the journey, etc. in this way artificial intelligence constantly analyses the extraordinary number of factors coming from a large number of sources of information: from the same users, who also have the google maps app activated, from road services, from its own technical tools that monitor the situation on the roads, and at the same time, from the numerous analysed roads in all the continents, in all the countries, cities, villages and between them. in general, if do not fall into the theory of global conspiracy, google's system has a number of tools and, most importantly, information on society that can control different areas of human life or the activities of different businesses and institutions. this is true for every person and every entrepreneur, from the health by the search queries and taste preferences, to competitive intelligence and plans to bring new products to the market. 5. conclusions therefore, unlike most other information systems, artificial intelligence uses probabilistic processes, rather than clear rules and algorithms to obtain results. unlike auditors, which verify information depending on the expected result, artificial intelligence “does not expect” any result, but only the probabilities of each of the results. actually, unpredictability of the results creates a risk, creating potential problems for auditors, who use traditional methods. in addition, the algorithms of artificial intelligence systems in the control systems of economic activity may change with changes in the processed data. in contrast to the approaches of the work of auditors, who act in accordance with the compiled program. at the same time, the results of the automated audit support systems are determined by the programmed algorithm, 39 www.virtual-economics.eu issn 2657-4047 (online) oleksandr melnychenko virtual economics, vol. 2, no. 3, 2019 and not by the data that does not change the algorithm. in control systems, based on the use of artificial intelligence, data is an integral part of the algorithm. this article describes the concept of the application of artificial intelligence in business control systems, and shows the goals, principles, objectives and functions of the object. references allianz 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the london academy of science and business, london, uk e-mail: a.kwilinski@london-asb.co.uk https://orcid.org/0000-0001-6318-4001 nataliya dalevska institute for international cooperation development, poznan, poland donetsk national technical university, pokrovsk, ukraine e-mail: dalevskanm@gmail.com https://orcid.org/0000-0002-0074-497x valentyna khobta donetsk national technical university, pokrovsk, ukraine e-mail: valentyna.khobta@donntu.edu.ua https://orcid.org/0000-0002-2964-3697 сorresponding author: mariia pankova, mariia.pankova@donntu.edu.ua citation: pankova, m., kwilinski, a., dalevska, n., & khobta, v. (2023). modelling the level of the enterprise’ resource security using artificial neural networks. virtual economics, 6(1), 71-91. https://doi.org/10.34021/ve.2023.06.01(5) received: march 9, 2022. revised: august 18, 2022. accepted: january 12, 2023. © author(s) 2023. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:mariia.pankova@donntu.edu.ua https://orcid.org/0000-0001-7467-9819 mailto:a.kwilinski@london-asb.co.uk https://orcid.org/0000-0001-6318-4001 mailto:dalevskanm@gmail.com https://orcid.org/0000-0002-0074-497x mailto:valentyna.khobta@donntu.edu.ua https://orcid.org/0000-0002-2964-3697 mailto:mariia.pankova@donntu.edu.ua https://doi.org/10.34021/ve.2023.06.01(5) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 73 1. introduction in accordance with the goals of sustainable development, approved by the resolution of the un general assembly "transforming our world: the 2030 agenda for sustainable development" [1], countries should reorient to rational models of consumption and production (goal 12), which will ensure increased efficiency in the use of resources [2–5]. the implementation of this goal is primarily aimed at overcoming the dependence between economic growth and the deterioration of the environment [6–11], because production and consumption, on the one hand, are the driving force of the economy, and on the other hand, they lead to the rapid depletion and scarcity of resources [12–17], causing a destructive impact on the environment [18–23]. this statement can be confirmed empirically on the basis of statistical information regarding the number of consumed resources and the level of the country’s economic development. one of the indicators that serves as an indicator of achieving the stated goal of sustainable development is the material footprint (mf). total mf represents the sum of the material footprint for biomass, fossil fuels, metallic ores, and non-metallic ores, and is, accordingly, calculated as the raw material equivalent of imports plus domestic production minus the raw material equivalent of exports. in turn, mf per capita describes the average material use for final demand [1]. the country's economic development can be characterized on the basis of the global innovation index 2022 (hereinafter gii-2022), as well as the division of the world bank into groups (by income level) [24–26]: high-income countries (gross national income (gni) per capita exceeds $13,205); countries with a higher-than-average income level (gni per capita is in the range of $4,256–$13,205); countries with a lower-than-average income level (gni per capita ranges from $1,086 to $4,255); low-income countries (gni per capita is less than $1,085). a graphical presentation of the relationship between the material footprint and the level of development and innovation for a sample of 121 countries is shown in fig.1. based on the visual analysis of the correlation field, it becomes possible to make an assumption about the existence of a direct, close connection between the innovativeness level of the country's economy and the number of natural resources consumed, which can be described by a linear function. according to fig. 1, it can be concluded that moving from the origin of the coordinates along the trend line, there is a gradual transition from the least developed countries to the developed ones; moreover, a high level of resource utilization and gii are characteristic of developed countries. thus, statistical data confirm the statement that the most developed innovative countries consume the largest number of resources. accordingly, the development of countries with a high level of innovation should be aimed at intensifying production and increasing the efficiency of resource consumption (when the return on the production factors use increases, and the number of resources consumed either remains unchanged or decreases). http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 74 figure 1. correlation field of the material footprint dependence on the level of the country's innovative development. note. the green colour denotes countries with a high level of income, yellow marks those above average; purple denotes those below average; red colour marks countries with a low level of income. source: compiled by the author based on the data [27–29]. recognition of the growing dependence of countries on the availability and accessibility of resources, as well as the emergence of shortages of certain raw materials, results in increased attention to ensuring resource security, both at the level of the state and at the level of a specific business entity. therefore, modern global challenges and the spread of uncertainty in the conditions of enterprises' economic activity make it necessary to ensure their security in the context of achieving sustainable development. the levelling of internal and external risks, which are not only tactical, but also systemic in nature, presupposes a balanced development of an enterprise and, above all, its resource potential. resource security of an enterprise acts as an important subsystem of the economic security system, which is a structural component of the mechanism of the enterprise's adaptation to internal and external conditions of operation. at the same time, the object to be protected by resource security is the components of the economic, ecological and social balance of an enterprise as an open system, which determines a decisive role of the regulating level of the enterprise's resource security in ensuring its sustainable development. in this context, the issue of modelling the level of resource security of a modern company is gaining relevance. the article has the following structure: (a) section 2 analyses the theoretical landscape of the meaningful content of the enterprise's resource security, its main indicators and approaches to determining and substantiating the research purposes; (b) section 3 describes the input and output data used in resource security level modelling, their sources, and research methods and tools; (c) section 4 outlines the empirical conclusions regarding the proposed methodology for building and using artificial neural networks for modelling the level of the enterprise's resource australia benin botswana china ecuador estonia finland germany hungary india kazakhstan kenya netherlands norway paraguay poland portugal slovak republic switzerland ukraine united states yemen 10 20 30 40 50 60 70 0 5 10 15 20 25 30 35 40 45 g lo b a l in n o v a ti o n i n d e x , sc o re material footprint, thousand kg per capita http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 75 security; (d) chapter 5 summarizes the results of the performed research, its limitations and outlines the prospects for further research. 2. literature review to forecast the level of the enterprise's resource security, it is necessary to use adequate models formed on the basis of an accurate and objective evaluation of the current security state of economic entities. the analysis of literary sources [6-9] proved that the most common approach to substantiating the level of security in economic activity is a functional approach, in which the state of the system is examined in terms of functional subsystems, thereby identifying problem areas, in particular, in the enterprise's activities. however, kharazishvili et al. [34] point out that when using the functional approach in practice, in most cases there are certain shortcomings and limitations. for example, when performing an integral assessment, it is unreasonable to determine the threshold values of economic security indicators, which are subjectively set by experts in the range from 0 to 1 (with a span of 0.2), which is unlikely in practice. in addition, in the case of a significant pairwise correlation, it is proposed to reduce the weight of the "most important" indicators, which contains subjectivism and, undoubtedly, reduces the scientific and practical value of the obtained results. in turn, the main disadvantages of the functional approach at the micro level, according to kozachenko & pogorelov [30], are as follows: the normalization of the values of single indicators and the following two integral convolutions (single and complex indicators) lead to a significant gap between the obtained estimates of economic security and its real state; retrospective values of the indicators are used in the evaluation, as a result of which the obtained economic security estimates are of interest for analytical activities, but are practically unsuitable for making current and strategic management decisions; there are no substantiated recommendations regarding the indicators that will most accurately characterize each of the components of the enterprise's economic security; difficulties arise with individual indicators that do not have a generally accepted meaning, since not only the selected indicators, but also their marginal values, play an important role in determining the level of economic security; a significant drawback is the practical impossibility to determine the impact of qualitative characteristics on the level of economic security, for example, the reputation of the enterprise, the level of trust in it by counterparties, the dedication of personnel, etc. therefore, the shortcomings of the functional approach indicated by scientists are mostly due to the use of imperfect methodological tools. the second most widely used is the indicator approach to justifying the safety level. it is based on a comparison of the actual values of the enterprise's performance indicators with their limit values – indicators. for example, vasyltsiv & mykytiuk [31] claim that a methodological approach to assessing the level of economic security of an enterprise should involve determining the state of enterprise security, and, accordingly, assigning a business entity to one or another level, based on exceeding the actual values of individual indicators of the enterprise's critical limitations indicators, but which are not the same for all levels, but are selected exclusively taking into account the level of security that they characterize. thus, the authors mentioned propose to compare a significant number of indicators with their average industry values, the so-called indicators. for the case described in [31], it is difficult to objectively justify the threshold values of the indicators that are characteristic of each individual security level. kozachenko & pogorelov [30] singled out features regarding the use of the indicator approach http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 76 that make it difficult to solve the task of establishing normative threshold values of indicators that are not always taken into account by researchers in the field of economic security, namely: due to the presence of cause-and-effect relationships and interdependencies between various indicators, the list of indicators of the economic security of the system cannot be established unambiguously; threshold values should be established taking into account the interrelationship of economic security indicators due to the possible dependence of the threshold values of security indicators on the values of other indicators; in fact, there is no clearly known, predetermined threshold, the crossing of which will indicate that the system will instantly enter an irreversible crisis state. for economic systems, the presence of a threshold band, a critical zone, within which the probability of a crisis situation becomes noticeably high, is more characteristic. the system is able to stay in this dangerous zone without a complete loss of stability for a certain period, which depends on the availability of reserves and the degree of survivability of the system; at the same time, it is expedient to reduce the studied set of safety indicators by selecting individual types (parts) from it, and by determining the appropriate groups of indicators for the selected types. thus, the above-mentioned specificity of the indicator approach makes it impossible to take into account the individualized features of the enterprises' development and leads to an artificial overestimation or underestimation of the existing level of security. some issues in determining the level of resource security of organizations are outlined by gushchenskaya & anfalova [35], who propose to use a system of indicators of the availability, security and efficiency of resource use. to bring such a system to a single basis, each indicator undergoes a normalization procedure and is adjusted to the level of significance. as the authors rightly note, such procedures allow ranking the indicators by the strength of influence and multiplying their influence when calculating the integral indicator of resource security. however, the normalization method chosen in the mentioned publication (according to the reference value) does not allow repeating accurately the dynamics of the input indicators in the case of their multi-directionality (when a company seeks to maximize some indicators and minimize others), and the determination of the significance of indicators based on expert evaluation introduces a high level of subjectivism in forming an integral indicator of resource security, which leads to obtaining estimates that are insufficiently accurate and reliable. taking into account the advantages, disadvantages and the revealed specificity of the researched approaches to evaluating security in economics, it appears to be expedient to synthesize functional and indicator approaches with their further improvement through the use of modern economic-mathematical methods and digitalization tools when justifying the level of resource security. it is worth noting that digitization tools are special automated technologies for collecting, processing, and analysing large volumes of structured or unstructured data that allow decision-making, forecasting, recognition of patterns of cluster formations, etc., based on the identification of meaningful factors [36–42]. one of the most common and effective digitalization tools is artificial neural networks, which are dynamic systems capable of generating output signals in response to input neurons. churchland & sejnowski [43] claim that the neural network is a special case of the method of http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 77 pattern recognition, clustering and discriminant analysis, and from the point of view of the multi-parameter problem of nonlinear optimization, the process of training a neural network is carried out for its future use. simon haykin in his work [44] refers to specific properties of neural networks, such as nonlinearity; transformation of input information into output based on a number of algorithms; adaptability; obviousness of the response; contextual specificity of information; fault tolerance; scalability; uniformity of analysis and design. these properties are implemented in the topology of the network, which is a logical structure with many neurons (nodes, cells) connected by synapses. the architecture of a neural network is represented by a number of neurons' layers: input (a set of computing elements that receive signals from the external environment), hidden (a set of computing elements that receive signals from other elements), output (a number of neurons that correspond to the final result of neural network calculations). thus, neural networks are able to accumulate experimental knowledge and provide it for further processing [14]. existing structures (architectures) of neural networks are divided [43,44] into 3 fundamental classes: single-layer direct propagation networks – there is an input layer of source nodes, information from which is transmitted to the output layer of neurons (computing nodes), but not vice versa. at the same time, a single layer means a layer of computing elements (neurons); multilayer networks of direct propagation are characterized by the presence of one or more hidden layers, the nodes of which are called hidden neurons, or hidden elements. the function of the latter is to mediate between the external input signal and the output of the neural network. such a network makes it possible to highlight the global properties of data using local connections due to the presence of additional synaptic connections and an increase in the level of interaction among neurons; recurrent networks differ from direct propagation networks by the presence of at least one feedback, in addition, this class of networks can use its internal memory to process arbitrary sequences of inputs. in economic activity, multi-layer networks of direct propagation, which are also called multilayer perceptron, have become the most widely used in practice. the spread of this class of neural network architecture is due to its high quality in solving forecasting, clustering and recognition tasks. in a perceptron, neurons are organized into layers, and the elements of each layer are connected only to the neurons of the previous layer, and information is propagated from previous layers to subsequent layers. the choice of the number of layers of the network and the number of neurons in each layer affects the ability of the network to solve the respective tasks. after determining the number of layers and elements in each of them, there are values for the weights and thresholds of the network that would minimize the prediction error produced by the network. simon haykin [44] notes that knowledge enters the neural network from the surrounding environment and is used during the learning process. connections between neurons, called synaptic weights, are used to accumulate knowledge. the procedure used for the process of training a neural network is called a learning algorithm, the main paradigms of which are reduced to the following: http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 78 assignment of confidence coefficients – methods are used that assign confidence or distrust coefficients to all results obtained by some learning machine; supervised learning (with a teacher) – under this learning paradigm, the weights of the neural network are changed using sets of training samples that include input values and known output values [45–48]; unsupervised learning (without a teacher) methods are used in which the weights of the neural network are changed using sets of inputs (output values are not required). that is, when using this approach, there are no labelled examples, according to which the neural network is trained. the constructed and trained neural network model must be tested. for this purpose, a test sample is formed, which was not used during the training of a neural network. if, according to the test results, the appropriate values of the initial parameters of the test sample are obtained, then the built network is adequate and can be used in the future for object recognition and forecasting. summing up, it is worth noting that digitalization tools, in general, and neural network modelling, in particular, have not yet become widely used in forecasting the level of resource security of an economic entity due to their complexity, the need for special software, appropriate training and preparation, etc. however, the advantages of these tools (which include: the speed of information processing and the ease of its updating; the possibility of filtering out "noises" that lead to making incorrect decisions; reducing the costs of various types of resources, and others) make it possible to obtain more accurate modelling results, due to which business processes' optimization is carried out and competitive advantages of the business entity over other market players are formed. taking into account the above, the purpose of the article is to develop a modelling methodology for determining the level of resource security of an economic entity based on the use of artificial intelligence methods, including neural networks. 3. materials and methods 3.1. input data for neural network modelling this study uses a combination of functional and indicator approaches as a theoretical foundation for substantiating the level of resource security of business entities. in particular, on the basis of the functional approach, an analysis of the enterprise's resource security is carried out according to the main functional subsystems (financial, personnel, production), which allows characterizing the results of the enterprise's activities in relation to its handling the main types of resources to the fullest extent. in turn, the indicator approach was used to establish the threshold values of the indicators with the further development of methods that allow setting the boundaries of the zone of the system's safe existence (vectors of the threshold values of the indicators) taking into account the specifics of the enterprise's activity; as well as the formation of an integral convolution both for indicators and for their limit values, on the basis of which quantitative determination of the general level of the enterprise's resource security is performed. in order to form a representative set of initial indicators characterizing the specified functional subsystems of an enterprise, the works [50–53] were analysed and those indicators that have http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 79 the highest frequency of occurrence and there is the possibility of their calculation for a large number of business entities based on the database of stock market infrastructure development agency of ukraine (smida). the advantages of the specified source of information comprise availability and variety of information for a long-term period of time; wide geography, belonging to different sectors of the economy and different sizes of research objects; as well as an annual update of information. among the shortcomings, there should be noted the presence of a time lag in the posting of reports and, as a result, the ageing of information over a period of 1 to 3 years. this study selected 32 indicators that characterize the state and efficiency of using various types of enterprise resources, in particular: the personnel subsystem is described by 7 quantitative indicators (labour productivity, average monthly salary, labour resources, the share of wages in the cost of production, profitability of labour costs, the share of arrears from wages in the amount of loan sources of enterprise financing, salary return); the financial subsystem is determined by 18 quantitative indicators (coefficient of autonomy, financing ratio, financial leverage ratio, coverage ratio, quick liquidity ratio, absolute liquidity ratio, asset turnover ratio, inventory turnover ratio, accounts receivable turnover ratio, accounts payable turnover ratio, the ratio of payables and of receivables, the ratio of securing current assets with own funds, the ratio of working capital manoeuvrability, the ratio of equity capital manoeuvrability, profitability of operations, profitability of products, profitability of equity capital, profitability of assets); the production subsystem is characterized by 7 quantitative indicators (the coefficient of fixed assets' wear and tear, return on capital, material intensity of products, the share of fixed assets in assets, the share of circulating production assets in working capital, the index of permanent assets). it should be noted that changes and clarifications may be made to the specified list of functional subsystems and indicators depending on the specifics of the industry, the available information and the goals of the resource security research of the economic entity. each of the indicators from the created list is assigned to stimulators (have a direct relationship with the final results of activity – the growth of the indicator increases the results of entrepreneurial activity) or destimulators (have a feedback relationship – the decrease of the indicator characterizes the improvement of the enterprise's work). to bring the indicators to the same orientation and dimension (range from 0 to 1), they are normalized according to a single normalizing function using the combined method [34]: for stimulator indicators: 𝑧𝑖 = 𝑥𝑖 𝑘𝑛𝑜𝑟𝑚 (1) for de-stimulatory indicators: 𝑧𝑖 = 𝑘𝑛𝑜𝑟𝑚 − 𝑥𝑖 𝑘𝑛𝑜𝑟𝑚 (2) where хі is the value of the indicator in the i-th period; knorm is the normalization coefficient (taken to be 5-10% greater than the maximum value of х). http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 80 to form the initial sample of input data used for training, testing and verification of artificial neural networks, the activities of 85 ukrainian enterprises were analysed according to smida data. the selected companies belong to different sectors of the economy, are characterized by different sizes and efficiency of functioning, and are also geographically located in different regions. taking these factors into account during the random selection of enterprises made it possible to generate sample data that reflect the structural properties of the general population, and therefore can be used to reproduce and model its characteristics. for each of the studied objects, the above-mentioned 32 indicators were calculated for a five-year period (from 2015 to 2019 inclusive), which was between the crisis years for the ukrainian economy, and their normalization was performed. 3.2. output data for artificial neural networks in order to obtain reliable results regarding the level of resource security of the enterprise, which are used as initial data for training neural networks, research must be conducted in homogeneous groups. for this purpose, 85 selected enterprises were clustered by ward's method into four types according to the nature of their behaviour with resources [19]. the developed typology of enterprises makes it possible to individualize the limits of safe fluctuation of indicators for a separate economic entity, taking into account its potential capabilities. to substantiate resource security zones for basic types of enterprises, procedures are carried out in the following sequence: step 1 – determining the type of distribution of each indicator (normal, lognormal, exponential) by constructing distribution histograms and quantile graphs. step 2 – calculating the vector of limit values of the indicators, based on the method of the student’s t-criterion, taking into account the type of the indicators' distribution, their statistical characteristics and the enterprise’s belonging to a certain type – that is, the limits of safe fluctuation of each of the indicators are established for each of the types of enterprises (table 1). table 1. formulas for calculating vectors of indicators' limit values distribution type lower threshold value lower optimal value upper optimal value upper threshold value normal 𝜇 − 𝑡 ∗ 𝜎 𝜇 − 𝜎 𝜇 + 𝜎 𝜇 + 𝑡 ∗ 𝜎 exponential 𝜇 − 𝜎/𝑘𝑎𝑠 𝜇 𝜇 + 𝜎 𝜇 + 𝑡 ∗ 𝜎 lognormal 𝜇 − 𝑡 ∗ 𝜎/𝑘𝑎𝑠 𝜇 − 𝜎/𝑘𝑎𝑠 𝜇 + 𝜎 𝜇 + 𝑡 ∗ 𝜎 note: 𝜇 is the average value of a certain indicator; σ is its mean square deviation; 𝑘𝑎𝑠 is the asymmetry coefficient; t is the confidence coefficient selected from statistical tables of the student’s t-distribution. source: [34]. for indicators that have established normative values (for example, the coefficient of absolute liquidity, the coefficient of autonomy, and others), the definition of the vector of threshold values is performed on the basis of their well-known norms. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 81 step 3 – convolution of indicators' normalized values and their thresholds for each subsystem (first-level convolution), as well as the final convolution of integral indices and thresholds (second-level convolution) according to a multiplicative form that takes into account the nonlinearity of economic processes (formula 3): { 𝐼𝑅𝑆,𝑡 = 𝐼𝑝𝑟𝑜𝑑 𝑎1,𝑡 ∗ 𝐼 𝐻𝑅 𝑎2,𝑡 ∗ 𝐼 𝑓𝑖𝑛 𝑎3,𝑡 ; 𝑃і = ∏ 𝑝𝑖𝑗 𝑎𝑖𝑗 ; �̅�𝑖𝑗 = [𝑝𝑖𝑗 𝐿𝑇; 𝑝 𝑖𝑗 𝐿𝑂𝑉; 𝑝 𝑖𝑗 𝑈𝑂𝑉;𝑝𝑖𝑗 𝑈𝑇];𝑛𝑗=1 𝐼𝑝𝑟𝑜𝑑,𝑡 = ∏ 𝑧𝑝𝑟𝑜𝑑,𝑡 𝑎𝑖7 𝑖=1 ; 𝐼𝐻𝑅,𝑡 = ∏ 𝑧𝐻𝑅,𝑡 𝑎𝑖7 𝑖=1 ; 𝐼𝑓𝑖𝑛,𝑡 = ∏ 𝑧𝑓𝑖𝑛,𝑡 𝑎𝑖18 𝑖=1 . (3) where 𝐼𝑅𝑆,𝑡 is the integral index of the enterprise's handling of resources; 𝐼𝑝𝑟𝑜𝑑,𝑡 is the integral index of the production subsystem; 𝐼𝐻𝑅,𝑡 is the integral index of the personnel (hr) subsystem; 𝐼𝑓𝑖𝑛,𝑡 is the integral index of the financial subsystem; 𝑎1,𝑡,𝑎2,𝑡,𝑎3,𝑡,𝑎𝑖𝑗 are weighting factors; 𝑧𝑝𝑟𝑜𝑑,𝑡,𝑧𝐻𝑅,𝑡,𝑧𝑓𝑖𝑛,𝑡 are normalized values of indicators characterizing, respectively, the production, personnel and financial subsystems of the enterprise; 𝑝𝑖𝑗 𝐿𝑇, 𝑝 𝑖𝑗 𝐿𝑂𝑉,𝑝 𝑖𝑗 𝑈𝑂𝑉,𝑝𝑖𝑗 𝑈𝑇 are the threshold values of the indicators of the corresponding subsystem (lt – lower threshold; lov – lower optimal value; uov – upper optimal value; ut – upper threshold). in turn, the weight coefficients (𝑎𝑖𝑗) used in the model are calculated based on the weight of the dispersion (entropy method), which allows taking into account the uncertain nature of socioeconomic systems and the load of each component in the integral index. therefore, the weighting factors are determined by the following formula: 𝑎𝑖𝑗 = 𝐷𝑖𝑗 ∑ 𝐷𝑖𝑗 𝑛 𝑖=1 𝑖 (4) where 𝐷𝑖𝑗 is the dispersion of the i-th indicator of the j-th subsystem; n is the number of indicators characterizing the j-th subsystem of the enterprise. therefore, in accordance with the specified procedure, a safety zone is determined for each year of operation of each enterprise: zone 1 – upper critical, zone 2 – upper threshold, zone 3 – optimal, zone 4 – lower threshold, zone 5 – lower critical. in this way, the initial data, on the basis of which the training of neural networks is carried out, is formed. 3.3. research method neural network modelling of the resource security level of the enterprise was performed sequentially according to the following stages: forming input data as a sample of 85 enterprises and 32 indicators, each of which was calculated for five years (that is, the initial matrix of input data had a size of 425*32); forming initial data on the basis of which the neural network is trained (zone 1 – upper critical, zone 2 – upper threshold, zone 3 – optimal, zone 4 – lower threshold, zone 5 – lower critical); http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 82 selecting architecture and defining a network structure (multilayer perceptron with a hidden layer); neural network training (70% of the data was used for training); neural network testing and validation (data breakdown: 15% for testing and 15% for validation). in the general case, the input conditions of neural networks are data on n objects, each of which is represented as a set of j observations, that is, it is characterized as a point x in the jdimensional space of observations. the classification task is reduced to the division of objects into a number of similar groups, which is carried out on the basis of information extracted from training data. since in this study, the values of the output layer are given, the problem is solved using a multilayer perceptron (mlp). graphically, the nonlinear neuron model is shown in fig. 2. figure 2. nonlinear model of a neuron, labeled t. source: [44]. the bias (bt) has the effect of increasing or lowering the net input of the activation function, depending on whether it is positive or negative, respectively [44]. mathematically, the functioning of neuron t is described by the following formulas [44]: 𝑢𝑡 = ∑𝑥𝑗 ∗ 𝑤𝑡𝑗 𝑗 𝑖=1 (5) 𝑦𝑡 = 𝜑(𝑢𝑡 + 𝑏𝑡), (6) where j is the number of input neurons; xj is the value of the j-th neuron input; wj is the weight of the j-th synapse (including the threshold element); bt is the bias; ut is the linear combiner output due to the input signals; φ() is the activation function; yt is the output signal of the neuron. v t synaptic weights summing junction х1 x2 … xj bias bt input signals activation function output yt wt1 w t2 w tj σ φ () … http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 83 when building mlp networks, different activation functions are used both for the neurons of the hidden layer (logistic, hyperbolic tangent, linear, exponential) and for neurons in the output layer (sinusoidal, hyperbolic tangent, exponential softmax function). the most widely used activation function is the sigmoidal function, exemplified by the logistic function given by the expression [44]: 𝜑(𝑣) = 1 1 + 𝑒𝑥𝑝(−𝑎𝑣) (7) where а is is the slope parameter of the sigmoidal function. also, the sigmoidal function can have the form of a hyperbolic tangent, in which case it is defined by the formula: 𝜑(𝑣) = 𝑡𝑎𝑛ℎ(𝑣) (8) for the task of neuro-modelling, it is advisable to use the structure of a neural network containing an input layer (for individual subsystems, the number of input neurons corresponds to the number of indicators that characterize this subsystem, while for determining the general level of enterprise resource security, the number of input neurons is 32), and an output layer, which contains 5 neurons (the answer about the assessment of the level of resource security of an enterprise or subsystem). the general architecture of neural networks used in modelling the level of enterprise resource security is shown in fig. 3. figure 3. the structure of neural network models for determining the level of resource security of an enterprise and individual subsystems source: developed and designed by the authors. neural network training is performed using the statistica automated neural networks (sann) software product for enterprises whose resource security level is known (precalculated), while the program constructs a neural network using the sorting method, determines the optimal neural network topology, and trains it. the multilayer perceptron is trained on the basis of the bfgs algorithm (broyden–fletcher–goldfarb–shanno), which is based on the error minimization rule. the neural network, in response to received input data, y 5 y 4 y 3 y 2 y 1 х j х 3 х 2 х1 … input layer hidden layer output layer upper critical zone upper threshold zone optimal zone lower threshold zone lower critical zone resource security indicators http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 84 generates output data, which it then compares with the target (set) parameters and calculates the error value. afterwards, the weights and biases are adjusted to minimize the error; the training process continues until the network reaches a predefined minimum allowable error [55]. one of the two functions is chosen as the criterion for stopping the calculations [55,56]: cross-entropy function (ece): 𝐸𝐶𝐸 = −∑𝑡𝑖 ln( 𝑦𝑖 𝑡𝑖 ) 𝑁 𝑖=1 (9) where n is number of records in the used data file; yi is calculated values of outputs in the network model; ti is actual values of outputs recorded in the data file. mean square error (mse): 𝑀𝑆𝐸 = 1 𝑛 ∑(𝑡𝑎𝑟𝑔𝑒𝑡𝑖 − 𝑜𝑢𝑡𝑝𝑢𝑡𝑖) 2 𝑁 𝑖=1 (10) where target and output denote experimental and predicted values, respectively, n is the number of data points. 4. calculation results the results of constructing, training and testing neural networks (with multilayer perceptron architecture) for the production subsystem of the enterprise are shown in table 2 and fig. 4. the presented results were obtained on the basis of 7 input indicators, which characterize the level of economic security by production activity for 85 companies over 5 years. in this way, five mlp networks were formed. table 2. mlp networks are built for modelling the level of security according to the production subsystem of an enterprise no. network structure teach – quality, % test quality, % validquality, % averagequality, % bfgs error function activation function for hidden layer activation function for output layer 1 mlp 7-5-5 91.25 85.94 79.69 85.62 86 mse hyperbolic softmax 2 mlp 7-12-5 98.32 93.75 89.06 93.71 139 mse logictic hyperbolic 3 mlp 7-4-5 83.84 70.31 59.38 71.18 48 mse logictic sine 4 mlp 7-8-5 56.52 50.79 34.92 47.41 105 crossentropy hyperbolic softmax 5 mlp 7-4-5 84.51 67.19 59.38 70.36 48 mse logictic exponenta source: developed and designed by the authors. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 85 figure 4. results of the quality of mlp networks' modelling the level of security by the production subsystem of an enterprise (in graphic form) source: developed and designed by the authors. the calculation results presented in table 2 and fig. 4 show that the mlp 7-12-5 network (7 source nodes, 12 hidden neurons, and 5 output neurons) turned out to be the best among the generated networks, as the average value of its quality was 93.71%. in addition, the mlp 7-125 network also turned out to be the best among the constructed ones in terms of the quality of training, testing and verification. thus, the empirical results confirmed that the quality of the network, or rather the accuracy of object classification by the network, depends on the selected activation functions between the layers, the number of neurons in the hidden layer, the learning algorithm and its stopping rule. in general, the accuracy of mlp networks increases as the number of neurons in the hidden layer increases. but exceeding a certain limit on the number of hidden neurons can worsen the simulation results. in turn, the best combination of activation functions chosen for the hidden layer and the output layer was the combination of the logistic function and hyperbolic tangent, and high-quality results were obtained for the combination of hyperbolic tangent and softmax. other combinations of activation functions in this case were characterized by lower efficiency. in the calculations of the best classifier, the criterion for stopping the calculations (error function) was the mean squared error. the next step of the research was the training, testing and verification of mlp networks' modelling the level of security for the financial and hr subsystems, as well as the enterprise as a whole. this procedure was performed similarly to the one by which the construction and selection of the mlp network for the production subsystem were carried out. the obtained results of the selection of the best neural networks for each individual subsystem and an enterprise as a whole are presented in table 3. therefore, the constructed networks are characterized by rather high quality, since the correctness of determining the values of the training sample ranges from 91.58% to 98.32%; values of the test sample are from 84.38% to 93.75%; values of the verification sample are from 81.25% to 89.06%. the best combinations of activation functions in these cases turned out to be: a combination of hyperbolic tangent and softmax (for the personnel subsystem and the enterprise as a whole), a combination of logistic and exponential functions (for the financial 0 20 40 60 80 100 120 m l p 7 5 5 m l p 7 1 2 5 m l p 7 4 5 m l p 7 8 5 m l p 7 4 5 % teaching testing validation http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 86 subsystem). in the calculations of the best classifiers, the criterion for stopping the calculations (error function) was equal parts mean squared error and cross-entropy. table 3. a summary of the highest quality mlp networks constructed for each enterprise subsystem enterprise subsystem network structure teach – quality, % test quality, % validquality, % bfgs error function activation function for hidden layer activation function for output layer production subsystem mlp 7-12-5 98.32 93.75 89.06 139 mse logictic hyperbolic hr subsystem mlp 7-4-5 96.30 84.38 81.25 76 crossentropy hyperbolic softmax financial subsystem mlp 18-9-5 91.58 92.19 82.81 90 mse logictic exponenta total mlp 32-13-5 92.59 89.06 85.94 90 crossentropy hyperbolic softmax source: developed and designed by the authors. the results of classifying enterprises and their functional subsystems by security zones, obtained by the highest quality of the constructed mlp networks for the training sample, are shown in table 4. table 4. results of object classification in the training sample network name results zone 1 zone 2 zone 3 zone 4 zone 5 all zones production subsystem mlp 7-12-5 total 63.00 46.00 65.00 41.00 82.00 297.00 correct 62.00 46.00 63.00 40.00 81.00 292.00 incorrect 1.00 0.00 2.00 1.00 1.00 5.00 correct (%) 98.41 100.00 96.92 97.56 98.78 98.32 incorrect (%) 1.59 0.00 3.08 2.44 1.22 1.68 human resources subsystem mlp 7-4-5 total 56.00 47.00 67.00 42.00 85.00 297.00 correct 54.00 46.00 63.00 41.00 82.00 286.00 incorrect 2.00 1.00 4.00 1.00 3.00 11.00 correct (%) 96.43 97.87 94.03 97.62 96.47 96.30 incorrect (%) 3.57 2.13 5.97 2.38 3.53 3.70 financial subsystem mlp 18-9-5 total 54.00 48.00 69.00 41.00 85.00 297.00 correct 50.00 44.00 62.00 37.00 79.00 272.00 incorrect 4.00 4.00 7.00 4.00 6.00 25.00 correct (%) 92.59 91.67 89.86 90.24 92.94 91.58 incorrect (%) 7.41 8.33 10.14 9.76 7.06 8.42 in total for enterprise mlp 32-13-5 total 57.00 47.00 68.00 41.00 84.00 297.00 correct 52.00 43.00 63.00 38.00 79.00 275.00 incorrect 5.00 4.00 5.00 3.00 5.00 22.00 correct (%) 91.23 91.49 92.65 92.68 94.05 92.59 incorrect (%) 8.77 8.51 7.35 7.32 5.95 7.41 source: developed and designed by the authors. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 87 the mlp-network algorithm accurately checks the conformity of the simulation result with the given initial parameter values. even a slight deviation of the simulated result from the original value means an incorrect decision, which is not taken into account in estimating the percentage of the classifier quality. the average percentage of incorrect classifications was: zone 1 – 5.33%; zone 2 – 4.74%; zone 3 – 6.64%; zone 4 – 5.47%; zone 5 – 4.44%. 5. discussion and conclusions the performed calculations proved that artificial neural networks can be a useful and convenient tool for determining the security level of an enterprise in various areas of its economic activity (types of resources consumed or involved). the speed of processing input data by neural networks and the formulation of modelling results allows timely detection of threats in the enterprise's activities and taking appropriate measures to eliminate them. despite the actual conclusions regarding the quality of constructed neural networks, this study has certain limitations and debatable points. first, the list of indicators and functional subsystems, by which the level of enterprise's security is assessed, depends on the specific goals of the research and available information, and therefore it can be specified in further research. secondly, taking into account the rapid and significant improvement and spread of using neural networks in practical activities, additional scientific, methodological and practical interest is the justification of the possibility of using other architectures of neural networks, followed by a comparison of the quality of such models with those obtained in this work. in addition, the existing experience of using neural networks in other spheres of activity and a series of experiments conducted by various scientists [56–59] allows stating that a possible way to improve the quality of constructed mlp networks is to increase the number of objects on which their training is carried out, as well as changing the number of neurons in the output layer, which will allow the neural network to more accurately recognize the differences of one classification group from another. so, modelling the level of resource security of an enterprise is a complex process aimed at solving various tasks that differ in the set of studied parameters, time periods, the composition of objects for comparison, etc. the use of neural network modelling within the scope of this study to justify the level of resource security of the enterprise, which is carried out by building neural networks for each subsystem and the enterprise as a whole, contributes to the solution of such problems as, for example: determining the security zone for a certain subsystem or enterprise, which was not included in the sample of studied business entities; substantiating the effect of a change in input indicators on a change in the safety zone for a single subsystem or object as a whole of one or another type; forming predictive scenarios for future periods regarding options for achieving the desired level of resource security by adjusting the values of input indicators. in general, the proposed approach to modelling the level of resource security of an economic entity contributes to increasing the degree of validity of relevant management decisions and expanding opportunities for forecasting the consequences of their implementation. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) mariia pankova, aleksy kwilinski, nataliya dalevska, and valentyna khobta virtual economics, vol. 6, no. 1, 2023 88 author contributions: conceptualization, m.p. and a.k..; methodology, m.p., a.k., and n.d.; software, m.p.; validation, m.p., a.k. and n.d.; formal analysis, m.p.; investigation, m.p. and n.d.; resources, m.p. and a.k.; data curation, a.k.; writing-original draft preparation, m.p. and a.k.; writing-review and editing, n.d. and v.k.; visualization, m.p.; supervision, v.k. all authors have read and agreed to the published version of the manuscript. data availability statement: not applicable. conflicts of interest: the authors declare no conflict of interest. references 1. united nations. 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(2021). deep neural networks for global wildfire susceptibility modelling. ecological indicators, 127, article 107735. https://doi.org/10.1016/j.ecolind.2021.107735. http://www.virtual-economics.eu/ кwilinski alex 7 www.virtual-economics.eu issn 2657-4047 (online) oleksandr vyshnevskyi virtual economics, vol. 2, no. 3, 2019 2019 volume 2 number 3 (july) unity of digital and virtual economies within concept of dataism oleksandr vyshnevskyi abstract. the article outlines the development of the digital and virtual economies and related concepts. in the introduction, the emphasis is put on the increasing role of the digital and virtual (intangible) economies. the literature review shows the diversity and similarity of the category apparatus of the digital and virtual economies. the methodological foundations of the study are based on descriptive, historical and logical approaches. the main results of the study are connected with the analysis of the concepts of digital economy, virtual economy and their relationship. the final part of the work shows how the concept of dataism allows to unite the concepts of virtual, digital and real economy. the article is concluded with a summary. keywords: virtual economy, digital economy, dataism jel classification: a10, b00, d8 author(s): oleksandr vyshnevskyi institute of industrial economics, 2, maria kapnist street, kyiv, ukraine, 03057 e-mail: allexxandr@gmail.com https://orcid.org/0000-0002-2375-6033 citation: vyshnevskyi, о. (2019). unity of digital and virtual economies within concept of dataism. virtual economics, 2(3), 7-21. https://doi.org/10.34021/ve.2019.02.03(1) received: january 12, 2019. revised: march 18, 2019. accepted: april 21, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) 1. introduction the beginning of the 21st century was marked by a further amplification of the processes of digitalization and virtualization of the economy. the share of the industrial capital in economically developed countries is declining, while digital and intangible shares are growing. as of early may 2019, the three most capitalized companies in the world (apple $ 971.5 billion, amazon $ 965.5 billion, google $ 822.3 billion) represent the technology sector. their shares in the aggregate are estimated at more than $ 2.5 trillion. at the same time, the question remains: which part of their shares' value is determined by using digital technologies, and which part is determined by speculative interests. in any case, ten years ago they could not get into the top-30 of the most expensive companies in the world, where dominated financial conglomerates (hsbc holdings, bank of america, jpmorgan chase, ing group, mailto:allexxandr@gmail.com https://orcid.org/0000-0002-2375-6033 https://doi.org/10.34021/ve.2019.02.03(1) https://creativecommons.org/licenses/by/4.0/ 8 www.virtual-economics.eu issn 2657-4047 (online) oleksandr vyshnevskyi virtual economics, vol. 2, no. 3, 2019 berkshire hathaway) and widespread industrial corporations (general electric, exxonmobil, royal dutch shell, bp, toyota motor, etc.) dominated. new market leaders do not simply digitize traditional business processes, but use digital platforms and digital technologies as the basis of their business model. their main assets are information (databases), algorithms of working with them, and employees' skills of working with data. moreover, the products and services produced are digital and are often provided online, 24 hours a day, 7 days a week. although information has always played an important role for society and business, the extent of its use and its role for the successful development of companies are increasing. considering the intangible nature of information, it becomes possible to regard this process as the main factor in expanding the volume of the entire economy. at the same time, the explosive interest in digital technology creates high expectations of shareholders and investors. as a result, the shares of technology companies, and afterwards the entire stock market are growing steadily. the s&p 500 index has grown more than 4 times over the 10 years from spring 2009 to spring 2019, during the same time, the growth of the us economy and the global economy was 10 times less. alongside these processes, there is a transition from the dominance of intangible assets over tangible assets. it is shown in fig. 1. figure 1. tangible and intangible assets in components of s&p 500 market value source: (ocean tomo, 2015). from 1975 till 2015 the structure of companies' assets included in the s&p 500 turned upside down. in 2015 intangible (virtual) assets began to completely dominate, accounting for 87% of assets for companies that are included in this stock index. 83% 68% 32% 20% 13% 17% 32% 68% 80% 87% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1975 1985 1995 2005 2015 components of s&p 500 market value tangible assets intangible assets 9 www.virtual-economics.eu issn 2657-4047 (online) oleksandr vyshnevskyi virtual economics, vol. 2, no. 3, 2019 the border between the digital (virtual) and the real economy is blurred, and the conversion ratio has appeared in the economy in the form of transformation of virtual processes (for example, visiting sites and social networks) into real actions (purchases or orders). thus, the study of the essence of digitalization and virtualization processes of the economy is a relevant scientific and practical issue, although the concepts of digital and virtual economy have not yet become generally accepted and have not been uniquely defined. 2. literature review as a rule, the concepts of virtual and digital economy are used either separately from each other or in the context of each other, but are never opposed to each other. topics related to the “digital economy” have become more and more popular in recent years compared to the “virtual economy”. the query “virtual economy” in the google search engine gives 215 million results, the query “digital economy” in the google search engine gives 863 million (as of september 4, 2019). issues related to the digital economy are studied not only by individual scientists, but also by many international organizations (world bank, world economic forum, the boston consulting group and others), consulting firms (mckinsey, pwc, etc.), and companies (at&t, cisco, citi, sap, etc.). the direct impact of digitalization is experienced by both business and society. it is not by chance that experts at the boston consulting group say that “digitization creates value for individuals, corporations, and society as a whole” (alm et al., 2016). and the digitalization process itself influences different aspects. various researchers study digital goods (atasoy & morewedge, 2017), digital services (williams et al., 2008), digital consumption (world economic forum, 2016), digital currency (chuen, 2015), digital labor (fuchs & sevignani, 2013), digital divide (corrocher, 2002; lupac, 2018), digital dividends (world development report, 2016), digital platforms (parker et al., 2016). simultaneously, similar categories are explored in the context of virtuality: “virtual economy” (lehdonvirta & ernkvist, 2011), “virtual inequality” (mossberger et al., 2003), “virtual currency” (european central bank, 2012), “virtual labor” (webster et al., 2016), “virtual consumption” (lehdonvirta, 2009), “virtual property” (fairfield, 2005). consequently, there is an interweaving in the use of concepts related to digital and virtual economies, which requires further research for their more specific definition and differentiation or identification between them. whereas, the field of concepts related to the digital economy is larger than the field of concepts related to the virtual economy. in addition, it is also noteworthy that the following scholars research the problem of information economy in the various aspects of its functioning: biswas, 2004; dalevska et al., 2019; innocenti, 2017; кwilinski, 2018; кwilinski, 2019; kwilinski et al., 2019a; 2019b; lakhno et al., 2018; lamberton, 1998; lippman & mccall 2015; mol, 2019; pająk et al., 2016; sun et al., 2017; tkachenko et al., 2019; and others. 10 www.virtual-economics.eu issn 2657-4047 (online) oleksandr vyshnevskyi virtual economics, vol. 2, no. 3, 2019 3. methods the following methods were used as the main research methods: 1) a descriptive method for describing the concepts of digital and virtual economies; 2) a historical and logical approach for considering the genesis of a real, virtual and digital economy; 3) a systematic approach when considering the virtual, digital and real economy as a single system; 4) the dialectical method for the analysis of the interaction of digital, virtual and real economies. 4. results and discussion 4.1. digital economy if we consider digitalization process from the perspective of three sectors' economy (primary agriculture and mining, secondary – industrial production, tertiary services), then the fundamental difference is found not in increasing the tertiary sector share or the emergence and expansion of a new (digital) economy, but in an outstanding transformation of all the three existing sectors. taking into account current technological capabilities and tendencies of their further development, the classic distinction between these sectors may disappear. for example, it is now technologically possible to remotely manage (in an intelligent mode/online) agricultural land, harvesting, growing crops, providing various services and even conducting medical operations. consequently, digitalization does not occur in separate sectors of the economy, but in the entire economic system. the processes of production, distribution, exchange and consumption, formulated by the classics of political economy more than 150 years ago in order to describe the economic system, completely in accord with the digital economy are shown in table 1. an analysis of the approaches to the definition of the concept “digital economy” shows that the majority of scientists agree on the connection of this phenomenon, on the one hand, with the internet, smart and computing machines, information and communication technologies, e-commerce, and digital technologies that are associated with the production stages, and, on the other hand, with production, distribution, exchange and consumption. this allows to review such concepts as digital production, digital distribution, digital exchange and digital consumption. the possibilities for digital production are expanding significantly based on the internet of things logic and industry 4.0 development. at the same time, a special sector is already emerging in the form of production of digital products and services. the key difference between digital and material products is the potentially endless possibility of replicating the former, and the fundamental limitation of the latter from the standpoint of supply. 11 www.virtual-economics.eu issn 2657-4047 (online) oleksandr vyshnevskyi virtual economics, vol. 2, no. 3, 2019 table 1a. retrospective definition of digital economy (part 1) year / author definition produc tion distribution/ ex-change consum ption 1996, tapscott no direct definition but called it the “age of networked intelligence” where it is “not only about the networking of technology… smart machines… but about the networking of humans through technology” that “combine intelligence, knowledge, and creativity for breakthroughs in the creation of wealth and social development” + + 1999, lane “…the convergence of computing and communication technologies in the internet and the resulting flow of information and technology that is stimulating all of electronic commerce and vast organizational changes” + 1999, margherio no explicit definition but identified four drivers: “building out the internet ... electronic commerce among businesses ... digital delivery of goods and services ... retail sale of tangible goods”. + 2000, kling and lamb “...includes goods or services whose development, production, sale, or provision is critically dependent upon digital technologies”. + + 2001, mesenbourg defined the digital economy as “having three primary components”: “e-business infrastructure is the share of total economic infrastructure used to support electronic business processes and conduct electronic commerce” “electronic business (e-business) is any process that a business organization conducts over computer-mediated networks” “electronic commerce (e-commerce) is the value of goods and services sold over computer-mediated networks”. + + 2002, corrocher factors of the digital economy: “1) the communication infrastructures, which identify the availability of the physical resources that allow access to the digital economy and stimulate its development. this factor includes aspects related to the expansion of the internet and of www access devices as well as indicators concerning the penetration and degree of technological advancement of other infrastructures that account for the levels of connectivity in the system, such as broadband cables and satellites. 2) the human resources, which account for the absorptive capacity of the system towards technological innovations on the basis of available knowledge and education. in this context, policies and programmes of formal education and training play a central role, as well as the employment conditions in the communications sector. 3) the competitiveness of the information and communication providers and the degree of competition among different operators, which have a welldefined role in fostering the provision of new services and in determining the pace of adoption of new platforms and applications.” + + + source: (bukht & heeks, 2017; keshelava et al., 2017; corrocher, 2002; mesenbourg, 2001) and own research. 12 www.virtual-economics.eu issn 2657-4047 (online) oleksandr vyshnevskyi virtual economics, vol. 2, no. 3, 2019 table 1b. retrospective definition of digital economy (part 2) year / author definition produc tion distribution/ ex-change consum ption 2013, oecd “the digital economy enables and executes the trade of goods and services through electronic commerce on the internet”. + + 2013, european commission “...an economy based on digital technologies (sometimes called the internet economy)”. + + 2014, british computer society “the digital economy refers to an economy based on digital technologies, although we increasingly perceive this as conducting business through markets based on the internet and the world wide web” + 2015, european parliament “a complex structure of several levels/layers connected with each other by an almost endless and always growing number of nodes. platforms are stacked on each other allowing for multiple routes to reach end-users and making it difficult to exclude certain players, i.e. competitors”. + + 2016, house of commons “the digital economy refers to both the digital access of goods and services, and the use of digital technology to help businesses” + + + 2016, g20 detf “...a broad range of economic activities that include using digitized information and knowledge as the key factor of production, modern information networks as an important activity space, and the effective use of information and communication technology (ict) as an important driver of productivity growth and economic structural optimization” + 2016, knickrehm et al. “the digital economy is the share of total economic output derived from a number of broad “digital” inputs. these digital inputs include digital skills, digital equipment (hardware, software and communications equipment) and the intermediate digital goods and services used in production. such broad measures reflect the foundations of the digital economy” + 2016, rouse “the digital economy is the worldwide network of economic activities enabled by information and communication technologies (ict). it can also be defined more simply as an economy based on digital technologies” + + + 2016, dahlman et al. “the digital economy is the amalgamation of several general purpose technologies (gpts) and the range of economic and social activities carried out by people over the internet and related technologies. it encompasses the physical infrastructure that digital technologies are based on (broadband lines, routers), the devices that are used for access (computers, smartphones), the applications they power (google, salesforce) and the functionality they provide (iot, data analytics, cloud computing)”. + + source: (bukht & heeks, 2017; keshelava et al., 2017; corrocher, 2002; mesenbourg, 2001) and own research. 13 www.virtual-economics.eu issn 2657-4047 (online) oleksandr vyshnevskyi virtual economics, vol. 2, no. 3, 2019 table 1c. retrospective definition of digital economy (part 3) year / author definition produc tion distribution/ ex-change consum ption 2017, oup “an economy which functions primarily by means of digital technology, especially electronic transactions made using the internet”. + 2017, keshelava et al. “a “digital” (electronic) economy is an economy that exists in a hybrid world. the hybrid world is the result of the merger of the real and virtual worlds, characterized by the ability to perform all the "vital" actions in the real world through the virtual.” + + + source: (bukht & heeks, 2017; keshelava et al., 2017; corrocher, 2002; mesenbourg, 2001) and own research. for example, the number of cars will always be limited in advance by a given number (for example, based on the limited natural resources on earth and the available production capacities). the number of copies of the electronic book, as well as monetary symbols characterizing its value is not limited. digital production is driven by a combination of digital capital and digital labor. digital capital is based on the use of big data, in addition, digital labor is alienated from the person “playfully”. “the wealth of facebook’s owners and the profits of the company are grounded in the exploitation of users’ labour that is unpaid and part of a collective global ict worker. digital labour is alienated from itself, the instruments and objects of labour and the products of labour. it is exploited, although exploitation does not tend to feel like exploitation because digital labour is play labour that hides the reality of exploitation behind the fun of connecting with and meeting other users” … “the social media economy’s financialization may result in the next big bubble. the only alternative to exit the internet crisis and exploitation economy is to exit from digital labour, to overcome alienation, to substitute the logic of capital by the logic of the commons and to transform digital labour into playful digital work” (fuchs & sevignani, 2013). digital consumption is constantly increasing through the use of mobile applications for smartphones running the android or ios operating system. e-commerce, coordinating the interests of the seller and the buyer, leads to the digitization of exchange and distribution. at the same time, the product can be exclusively digital and consumed in virtual space. however, more often with the use of digital technologies, the creation of a physical “non-digital” product takes place, as well as its order or delivery. digital distribution and exchange of goods and services take place in the internet, and particularly on the special digital platforms. digitalization of production, distribution, exchange and consumption manifests itself in the transition from a linear model of creating value to a network model of creating value based on digital platforms. this process has been studied carefully by various researchers. some of them 14 www.virtual-economics.eu issn 2657-4047 (online) oleksandr vyshnevskyi virtual economics, vol. 2, no. 3, 2019 talk about the “platform revolution” (parker et al., 2016), which creates digital ecosystems around digital platforms. the platform model affects all elements of the economic process. for example, on the facebook platform, content is created (by the users themselves), content is exchanged between users and further it is consumed during reading or viewing. meanwhile the platform software is digital and virtual (intangible), the users of the platform are quite real. the above real economic phenomena are directly related to the digital economy. at the same time, the digital context provides a new understanding of the “virtual” economy, not just as an interaction of signs that reflects the measure of value and proprietary rights, but as a creation of real value for society based on digital technologies. 4.2. virtual economy traditionally, the study of the virtual economy is developed, on the one hand, through its opposition to the real economy and, on the other hand, taking into consideration the development of digital technologies. so, there are three approaches to the definition of the virtual economy (one from the side of unreal economy and two from the side of digital economy). the first approach considers the virtual economy as a speculative activity based on the use of money capital. the second approach considers the virtual economy as a higher level of digital economy. the third approach considers the virtual economy as part of the digital economy in the form of virtual online worlds. the discussion on the division of the economy into real (that creates user value) and "virtual" (non-material, intangible, that uses symbols, signs or exchange values) has a long history. aristotle separately singled out economics and chrematistics. economics involves real household management, i.e. the creation of an immediate good (use value), while chrematistics is focused on “money-making”, the process of which is described as “the birth of money from money”. regarding the real household, the philosopher wrote “of the art of acquisition then there is one kind which is natural and is a part of the management of household. either we must suppose the necessaries of life to exist previously, or the art of household management must provide a store of them for the common use of the family or state. they are the elements of true wealth; for the amount of property which is needed for a good life is not unlimited…”. and regarding the financial (virtual) sector, he said as follows “there is another variety of the art of acquisition which is commonly and rightly called the art of making money, and has in fact suggested the notion that wealth and property have no limit” (aristotle, 1985). similarly, k. marx spoke out regarding money capital as non-existent, artificial, which operates only with virtual titles of value. “titles of ownership … come to nominally represent nonexistent capital. for the real capital exists side by side with them and does not change hands as a result of the transfer of these duplicates from one person to another. they assume the form of interest-bearing capital, not only because they guarantee a certain income, but also because, through their sale, their repayment as capital-values can be obtained. … . but as duplicates which are themselves objects of transactions as commodities, and thus able to 15 www.virtual-economics.eu issn 2657-4047 (online) oleksandr vyshnevskyi virtual economics, vol. 2, no. 3, 2019 circulate as capital-values, they are illusory, and their value may fall or rise quite independently of the movement of value of the real capital for which they are titles. (marx, 2010). modern neo-marxists show that “the transformation of a quantitative separation of the fictitious capital price from the real assets evaluation (that presented it), into qualitative (separation)” and designate this transition “as the transformation of fictitious capital into virtual” (buzgalin & kolganov, 2018). as a result, the digitalization of fictitious capital determines its further virtualization. at the same time, the digital revolution has created many specific intangible assets (for example, websites, software), the use of which in economic activity makes it necessary to study the corpus of phenomena associated with the concept of “virtual property” (fairfield, 2005). monetarists (the chicago school), being opponents of neo-marxists, also actively use extremely generalized abstract concepts. monetarism involves shifting of the emphasis from analyzing physical production, demand and supply volumes, to analyzing and regulating the money supply and interest rates, which have intangible characteristics. in many aspects, this logic has been adhered for many years by the united states, where the federal reserve system is the main regulator of the economy, which balances economic development by changing the key rate and money supply. thus, the management of real economic processes occurs through the influence on the virtual (intangible) financial system. thus, within the framework of this approach, the definition of a virtual economy is closely related to the monetary form of capital. according to the second approach, the virtual economy is one of three interconnected levels: ict infrastructure, virtual economy and digital economy. it is shown in fig. 2. in this hierarchy, the virtual economy is a higher level, which is based on the digital economy and ict infrastructure. figure 2. connection of 3 levels: ict infrastructure, digital and virtual economy source: (lehdonvirta & ernkvist, 2011). virtual economy (exchanges of virtual goods, currencies, links, digital labor) digital economy (online services, communities, games; online shopping, ecommerce, egov) ict infrastructure (broadband connectivity; wirless networks) 16 www.virtual-economics.eu issn 2657-4047 (online) oleksandr vyshnevskyi virtual economics, vol. 2, no. 3, 2019 within this approach “the proliferation of digital services from e-commerce to social networking services in developed as well as developing countries has given rise to new digital needs and problems. this demand, the supply that has arisen to meet it, and the markets where this demand and supply meet, together comprise the virtual economy” (lehdonvirta & ernkvist, 2011). typical characteristics of the virtual economy are the following: 1) centers around commodities that are digital yet scarce; 2) demand arises from the increasing use of digital services in business and leisure; 3) supply is created through the expenditure of human effort, and doing so requires relatively few specialized skills or resources (lehdonvirta & ernkvist, 2011). a fundamentally different approach to the consideration of the virtual economy appeared with the development of virtual online worlds (second life, world of warcraft, entropia universe). according to this approach «the term ‘virtual economy’ (ve) refers to the process of exchanging virtual items and services with virtual currency within a virtual world. a virtual world (vw) is an avatar-based 3d platform, in which avatars represent real-world users. an “avatar” – in the context of virtual world – is a graphical representation of the user, in a three dimensional (3d) form, through which the user can interact with his/her surrounding virtual environment, participate in virtual events and activities, and communicate with other avatars» (nazir & lui, 2016). meanwhile, the real people, who spend their real time, are behind activities in virtual worlds. and if to consider such real time socially efficient, then this is quite real labor that is realized through virtual space and the following sequence takes place: real labor virtual world (virtual space) real consumption (use) of labor of other people. thus, the virtual economy is a more ambiguous and multifaceted concept than the digital economy. it has a longer history of development and is closely intertwined with digital technology. 4.3. dataism as a synthesis of real, digital and virtual economies the above approaches to the definition of digital and virtual economies can be combined in the framework of the concept of dataism discussed in the last few years in the scientific community (brooks, 2013; harari, 2016). “dataism says that the universe consists of data flows, and the value of any phenomenon or entity is determined by its contribution to data processing. this may strike you as some eccentric fringe notion, but in fact it has already conquered most of the scientific establishment. dataism was born from the explosive confluence of two scientific tidal waves. in the 150 years after charles darwin published on the origin of species, the life sciences have come to see organisms as biochemical algorithms. simultaneously, in the eight decades after alan turing formulated the idea of a turing machine, computer scientists have learned to engineer increasingly sophisticated electronic algorithms. dataism puts the two together, pointing out that exactly the same mathematical 17 www.virtual-economics.eu issn 2657-4047 (online) oleksandr vyshnevskyi virtual economics, vol. 2, no. 3, 2019 laws apply to both biochemical and electronic algorithms. dataism thereby collapses the barrier between animals and machines, and expects electronic algorithms to eventually decipher and outperform biochemical algorithms. according to dataism, king lear and the flu virus are just two patterns of data flow that can be analyzed using the same basic concepts and tools. this idea is extremely attractive. it gives all scientists a common language, builds bridges over academic rifts and easily exports insights across disciplinary borders. musicologists, political scientists and cell biologists can finally understand each other” (harari, 2016). if to build a general contrasting scheme of virtual (intangible, financial) and material economies starting from antiquity, we can see that these two directions, after more than two thousand years of transformation and development, merge together in the framework of a data-based economy concept (fig. 3). figure 3. genesis of development and integration of tangible and intangible economies in dataism concept source: own research. antique economy data based economy (economy in the concept of dataism) household science, classical antiquity industrial economy, xvii – xix centuries industry 3.0, xx century industry 4.0, xxi century chrematistics, classical antiquity financial economy (development of exchanges), xviii – xix centuries era of derivatives, xx century era of fintech, xxi century 18 www.virtual-economics.eu issn 2657-4047 (online) oleksandr vyshnevskyi virtual economics, vol. 2, no. 3, 2019 one way is from antique chrematistics (the science of money and wealth accumulation according to aristotle), through the formation of the securities and derivatives market to the massive use of financial technology and electronic money. the second way is from the ancient science of household, through the industrial revolution and industry 3.0. to industry 4.0. as a result, both ways are comprehended and defined as flows of big data that equally fully describe the real, virtual and digital economies. 5. conclusions 1. there is a transition from the real (material) economy to the virtual (digital) economy. digital capital is becoming the main source of economic growth. without virtual and digital components, it is already impossible to think of the economy in general. at the same time, the boundaries of these concepts are blurred and a hybrid world will develop further, where the virtual, digital and real economies will deeply determine each other. there is a two-side movement: (1) virtualization and digitalization of the material economy and (2) materialization of the virtual economy. moreover, the reality of the virtual and digital economy manifests itself when the final consumers of economic goods (digital and material goods and services) are either people or organizations. 2. as a result of the objective processes, the scientific community has not developed an unambiguous definition of a digital and virtual economy. there are only separate groups of approaches to the definition of these concepts, which are not clearly distinguished from each other, but concern all elements of the economic system. 3. information and communications technology is recognized to be the basis of the digital economy. the basis of a virtual economy is either (1) speculative (artificial) capital (in the classical sense), or (2) digital economy (including as an online space where virtual worlds exist, where virtual economic relations between avatars take place). 4. as a result, the classical formula for the movement of financial capital "money –> commodity -> production -> commodity + -> money + " turns into another: "digital capital -> digital commodity -> digital production ->digital commodity + -> digital capital +". the spread of this model to all economic activity allows us to move on to the concept of dataism, in the framework of which the conceptual apparatus of the virtual, digital and real economies merges, because even the latter is easily described as big data streams. 19 www.virtual-economics.eu issn 2657-4047 (online) oleksandr vyshnevskyi virtual economics, vol. 2, no. 3, 2019 references alm, e., colliander, n., deforche, f. et al. 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(2016). digital transformation of industries: digital consumption. retrieved from https://www.accenture.com/t20160503t050949__w__/hu-en/_acnmedia/pdf-16/accenturedigital-consumption.pdf http://doi.org/10.1057/ejis.2008.38 http://www.worldbank.org/en/publication/wdr2016 https://www.accenture.com/t20160503t050949__w__/hu-en/_acnmedia/pdf-16/accenture-digital-consumption.pdf https://www.accenture.com/t20160503t050949__w__/hu-en/_acnmedia/pdf-16/accenture-digital-consumption.pdf кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 35 research article the quality determinants of the research process in management sciences henryk dzwigol abstract. the purpose of the article is to identify the quality determinants of the research process in management sciences. additionally, the author aims to indicate the relationships and differences in the identified determinants of quality depending on the adopted idiographic and nomothetic approach in management sciences. to achieve the intended purpose, the author used the survey data based on an expert group consisting of 401 scientific employees. in addition, a cluster analysis was used to identify the determinants of research process quality, conducted both for the entire sample studied, as well as in individual groups representing the idiographic and nomothetic approaches in management sciences. based on the conducted research, 7 general determinants of research process quality in management sciences have been identified. in addition, the analysis of the results showed that the determinants of the research process quality are consistent between the idiographic and nomothetic approaches. the main contribution of this article focuses on the developed recommendations regarding the identified determinants. applying the guidelines presented in the article may result in an increase in the quality of the research process in management sciences, regardless of the adopted research approaches. keywords: quality determinants; research process; management sciences; research methodology; research approach. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 36 author: heryk dzwigol, department of management, faculty of organization and management, silesian university of technology, zabrze, poland; faculty of applied sciences, wsb university, dabrowa gornicza, poland e-mail: henryk.dzwigol@polsl.pl https://orcid.org/0000-0002-2005-0078 citation: dzwigol, h. (2023). the quality determinants of the research process in management sciences. virtual economics, 6(2), 35-54. https://doi.org/10.34021/ve.2023.06.02(3) received: january 17, 2023. revised: may 20, 2023. accepted: may 30, 2023. http://www.virtual-economics.eu/ mailto:henryk.dzwigol@polsl.pl https://orcid.org/0000-0002-2005-0078 https://doi.org/10.34021/ve.2023.06.02(3) www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 37 © author(s) 2023. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 38 1. introduction in recent years, the field of management sciences has undergone significant changes and advancements [1,2], with new theories, methods, and approaches being developed to address the complex challenges facing modern organizations [3–11]. besides, the concept of sustainable development [12–16] has also modified the management research. management researchers need to conduct high-quality research to keep up with these advancements and to contribute to the field's progress [17]. however, achieving high-quality research is not always straightforward, and researchers need to be aware of the factors that influence the quality of their research. one of the key quality determinants of the research in management sciences is the skills and knowledge of a researcher [18,19]. researchers need to have a solid understanding of the relevant theories and methods, as well as the ability to apply them effectively in their research [20]. additionally, the availability of resources, such as funding, data, and access to participants, can also affect the quality of research. without adequate resources, researchers may struggle to conduct rigorous and comprehensive studies [21–25]. moreover, the quality of research design and the rigor of data analysis are crucial factors that impact the quality of research in management sciences. researchers need to design studies that are robust, valid, and reliable, and they must employ rigorous data analysis techniques to ensure the validity and reliability of their findings. the above factor directly results from the adopted research process, which is emphasized by many scholars. in addition, comprehending how scientific research can aid in broadening both theoretical and practical knowledge is a significant obstacle for advocates of management sciences [30–34]. the objective of disquisition methods and techniques in management sciences is to comprehend the principles and guidelines that oversee organizations and enhance them [34]. despite the chosen research method or technique, the scholar must always adhere to a particular research process [35], which comprises various components that must be meticulously planned based on consistent decisions made to ensure the reliability and credibility of research outcomes. therefore, the purpose of the article is to identify the quality determinants of the research process in management sciences. additionally, it aims at indicating the connections and differences in recognized determinants of quality depending on the adopted idiographic and nomothetic approach in management sciences. to achieve the intended goal, the author used survey data based on an expert group of 401 academic staff. furthermore, to identify the quality determinants of the research process, a cluster analysis was used, which was conducted for the entire sample as well as for individual groups comprising the idiographic and nomothetic approach. by understanding the quality determinants of the research process in management sciences, researchers, practitioners, and policymakers can work together to improve the quality and relevance of management research, thereby contributing to the advancement of the field and the improvement of organizational practices. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 39 2. literature review the objective of research methods and techniques in management sciences is to comprehend the principles and guidelines that regulate organizations and to enhance their effectiveness [36]. a method refers to a deliberate and consistent approach to research that facilitates the accomplishment of the desired outcome [37–47]. on the other hand, a technique refers to a tool or instrument employed to address problems [48]. however, the distinction between method and technique is often blurred in practice, and these terms are used interchangeably in literature, making it challenging to categorize them with precision [37–49]. irrespective of whether a research method or technique is adopted, a scholar must always adhere to a specific research process that involves careful planning and continual decision-making to ensure the accuracy and validity of research outcomes [50,51]. the research problem is the starting point for developing a research concept, which encompasses several elements. firstly, it involves analysing the problem in the light of literature on the subject [52]. this includes an exploration of existing research and literature related to the research problem to identify knowledge gaps and ascertain the current state of knowledge. secondly, it requires the identification of necessary data sources and research methods [53]. this entails determining the most appropriate methods and tools to collect relevant data to address the research problem [54]. the choice of research methods and data sources depends on several factors, including the nature of the research problem, the research design, and the availability of resources. thirdly, it involves adopting necessary assumptions, hypotheses, and theses. this entails the formulation of preliminary assumptions, hypotheses, and theses, which serve as the basis for the research concept [36,37]. these assumptions, hypotheses, and these are tentative and subject to revision and refinement during the research process. the research process involves several stages [55], including data collection, data analysis, and the interpretation of results. the process requires continuous evaluation and decision-making to ensure that the research objectives are achieved effectively [56]. effective research in management sciences is critical to developing practical solutions to organizational challenges and enhancing organizational performance [57]. research methods and techniques provide a systematic approach to investigating organizational issues and developing evidence-based solutions to improve organizational effectiveness [20]. moreover, the research process enhances the research skills of researchers and contributes to the development of knowledge in management sciences. in the contemporary world of management, there is a growing recognition of the importance of methodological eclecticism in scientific research [59,60]. this approach advocates for the use of both inductive [61] and deductive methods [62], with the aim of gaining a more comprehensive understanding of complex phenomena [11]. it recognizes that in management, there are no clear or final conclusions that can be presented as immutable universal laws. rather, each analysed phenomenon or problem is unique, and may have several potential solutions that quickly become outdated in the rapidly changing world of business. consequently, in the conduct of scientific research, particularly in the field of management sciences, clarity and precision are of utmost importance [63]. vague and imprecise statements should be avoided, as they can create only the illusion of scientific rigor. researchers must http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 40 carefully analyse the literature related to phenomena and problems of interest to them, and carefully consider the potential solutions proposed by other researchers. to ensure the veracity of their findings, researchers must be guided by the principle of intersubjective verifiability [20,64], which requires that the results of other researchers’ studies be rigorously tested and verified [65]. o’leary [48] and labarca [49] highlight the significant challenge faced by management science proponents in comprehending how scientific research can contribute to expanding theoretical and practical knowledge. the limited applicability of research results to management science and practice often relates to the issue of knowledge transfer [66]. it can be assumed that practical knowledge in organizational management stems from scientific knowledge, and thus, the translation and diffusion of research results are crucial for practice [53,67]. however, this is only possible when the research process is appropriately conducted using suitable research methods [68], including a narrative approach that emphasizes organizational discourse [69]. the process of creating theoretical knowledge, whether in a narrative approach or not, should enable the explanation of key research issues, thus facilitating the understanding of complex organizational phenomena [70]. this understanding could be achieved through effective communication and the dissemination of research findings, which requires the adoption of a clear and concise language that avoids technical jargon and vague statements that may create the illusion of scientific rigor. the cycle of the research process is a phased and staged framework for cognitive procedures that is appropriate for analytical and project-implemented research. it is a complex action that involves posing and solving theoretical and practical problems, resulting in specific statements, rules, assessments, and projects. each research process must begin with identifying a research problem and end with finding the most optimal solution for it. all conducted research involves the need to accomplish many tasks, consisting of various activities. the way in which individual activities, and thus tasks, are carried out depends on the thematic area in which the research is conducted, among other factors such as the methodology adopted, and the research methods used [71]. research is a multi-element process that requires careful consideration and planning in such a way that the diligence and accuracy of the obtained results cannot be questioned. 3. methods the purpose of the article is to identify the quality determinants of the research process in management sciences. additionally, it aims at identifying the links and differences in recognized determinants of quality depending on the adopted idiographic and nomothetic approach in management sciences. for the purposes of achieving the intended goal, additional specific goals related to the adopted research process were adopted: • e1: identification of quality determinants of the research process in management sciences. • e2: recognition and comparative analysis of quality determinants of the research process in idiographic and nomothetic approaches. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 41 • e3: operationalization of identified determinants according to current literature on the subject. • e4: development of recommendations for increasing the quality of the research process in management sciences. in order to reach the intended goal, the author carried out a global quantitative study on a group of expert academic researchers who were involved in conducting research in the field of management sciences. the questionnaire was developed after reviewing relevant literature on research methodology and having discussions with other scholars. the survey was divided into three parts. the first section consisted of five questions that asked about the importance of various approaches, processes, methods, and techniques used in the research process in management sciences. the second section contained 33 questions related to improving the research process. the third section was based on metrics and contained three questions. the questionnaire was primarily made up of closed-ended questions arranged in a matrix format with a five-point likert scale, which helped to streamline the process of completing it. for the purpose of this article, the statistical analyses performed focused only on the 33 questions included in the second section of the survey. the survey employed a theoretical sampling method that involved selecting experts who had the best understanding of the subject matter under study [72]. the study was carried out on a global scale, and a survey questionnaire was distributed to over 23 thousand academic researchers associated with management sciences. to ensure that the sample was representative, the sample size was calculated based on assumptions such as: a fraction indicator: p=50%, an error size related to the fraction indicator: 5%, and a significance level α: 0.05. after the calculations, the minimum number of questionnaires required was 385. the research ultimately surveyed 401 management science experts, satisfying the criteria for sample representativeness. in order to achieve the research objective, the obtained sample was divided into two groups based on appropriate idiographic and nomothetic approaches. the number of experts who declared using the idiographic approach was 239, which accounted for 59.60% of the total respondents. on the other hand, 162 researchers, representing 40.40% of the respondents, declared using the nomothetic approach. 4. results to identify the determinants of research process quality in management sciences, data segmentation or grouping was employed using a cluster analysis, a widely used method for data exploration [53]. this approach aims to create clusters of similar objects within the same group while maintaining dissimilarity with those in other groups [73]. the analysis was conducted based on specific methodological assumptions, only including questions directly impacting the research process. a total of 33 questions were selected, which were measured on a five-point scale. the primary statistical characteristics of the chosen factors are displayed in table 1. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 42 table 1. the primary statistical characteristic of the variables. variable symbol m sd supporting the practice of economic life is the goal of the management sciences discipline. p1 4,364 0.817 the researcher should provide models of effective solutions in the area of organization and management. p2 4,352 0.783 the researcher should provide methods to implement patterns of effective solutions. p3 4,227 0.797 the research work conducted within the discipline of management science should be embedded both in theoretical and practical terms. p4 4,317 0.850 the main downside associated with the management sciences is not the instability of the statements made. p5 3,723 1.049 the variables dependent on e.g.: atmospheric, legal, social, environmental conditions, etc. are often the objects of research. p6 3,776 0.997 the complexity of research facilities (e.g., enterprises) can negatively affect the credibility of research results. p7 3,653 1.126 the inclusion of factors of a qualitative nature, difficult to measure, can affect the quality of the research process. p8 3,828 1.074 the proposed and applied methods are assessed differently by theoreticians and management practitioners. p9 4,057 0.851 there are problems with verifiability of the results of scientific research conducted in the discipline of management science. p10 3,953 0.895 cooperation between science and business practice should be strategic in the management process of a contemporary enterprise. p11 4,222 0.859 the time spent between managing the problem, its analysis and finding a solution, and implementation can negatively affect the effectiveness of the solution in the management sciences. p12 3,838 0.991 there is no universalism of developed concepts or solutions to problems in management sciences. p13 3,486 1.116 methodological triangulation is a necessary condition in research processes. p14 3,736 0.957 quality methods in research processes should be supported by case studies. p15 4,035 0.812 it is necessary to verify the developed methods, procedures or models in practice in order to make testing credible. p16 4,150 0.832 pilot studies are heading towards the research process. p17 4,185 0.739 it is necessary to develop a model, procedure, tool, or approach to the research process. p18 4,202 0.835 the researcher has the possibility to choose methods in terms of the nature of the conducted research. p19 4,267 0.668 the researcher influences the combination of quantitative and qualitative methods in the research process. p20 4,229 0.719 pilot studies have an impact on the course of the research process. p21 4,190 0.688 the development of a model, procedure, tool or approach in the research process is not necessarily a guarantee of the reliability of results. p22 3,526 1.102 it is necessary to develop assumptions to create a research methodology. p23 4,155 0.837 http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 43 variable symbol m sd the development of recommendations for learning and management practice based on research results raises the quality of science and practice. p24 4,219 0.807 the developed model, procedure, tool, or approach to selecting methods in the research process has a significant impact on the quality and applicability of research results. p25 4,195 0.712 selected quantitative and qualitative methods should be analysed for the initial selection after the research problem is identified. p26 4,292 0.705 pilot studies form an integral part of any research process. p27 3,721 1.045 the verification of the developed methods, models or procedures is an indispensable condition to combine learning and management practice. p28 4,010 0.903 methodological triangulation supports research processes. p29 4,110 0.727 the case study gives the possibility of a deep analysis of the research problem. p30 4,077 0.844 group expert assessment should be the basic method for verifying the direction of the conducted research. p31 3,616 1.011 observing the conducted research in natural conditions, where the researcher cooperates with the surveyed entities, is important. p32 4,077 0.766 observational interventions that take place as part of managerial actions in the studied entities and where the researcher has a direct influence on the decisions made are important. p33 3,833 0.900 source: developed by the author. given the requirements of this research, the methodological principles of a cluster analysis as described by granato et al [73], the utilization of a five-point rating scale, the unprocessed state of the data, and the expert evaluations that were subjective in nature during the study process, the following approaches were employed: • urban distance (manhattan, city block) – sum of absolute differences between position values. in most cases, this distance measure provides similar results to the regular euclidean distance. however, it should be noted that in the case of this measure, the influence of individual large differences (outliers) is suppressed due to not squaring them granato et al [73]. • the method chosen for grouping objects was the ward method, which falls under the category of hierarchical methods. this method determines distance through an analysis of variance approach, as emphasized by its effectiveness and popularity according to the studies [53,73–75]. • literature suggests using several measures to determine the number of clusters [76,77]. for the purposes of the analysis being conducted, it was decided to use two of them: • identification of the maximum of the measure 𝑔𝑖 = 𝑑𝑖 − 𝑑𝑖−1 (1) • calculation of the t. grabiński measure [32] http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 44 𝑞𝑖 = 𝑚𝑎𝑥 ( 𝑑𝑖 𝑑𝑖−1 ) (2) where 𝑑𝑖 is the length of the i-th branch of the tree the following sections present the results of the analysis conducted while maintaining the above methodological assumptions for the entire population, as well as for grouping based on the adopted idiographic and nomothetic approaches. 4.1 the quality determinants of the research process for the entire population of researchers being studied based on the assumptions adopted, an agglomeration of 33 variables (table 2) was obtained in 32 steps for the general determinants of the quality of the research process in management sciences. to determine the number of clusters and make a decision on where to cut the dendrogram, the assumptions of the individual indicators were calculated: • the maximum measure indicator was 434.329. • the t. grabiński indicator was 1.757. based on the obtained results, a decision was made to choose 7 clusters (fig. 1) by cutting the dendrogram at a linkage distance of 434.329. after operationalizing the obtained linkages with regard to the variables that determine them, they were named as follows: • s1 – assumptions in the process of building a research methodology. • s2 – assumptions for the research process. • s3 – reliability of the research process. • s4 – complexity of the research process. • s5 – factors determining the success of the research process. • s6 – course of the research process. • s7 – approach in the research process. 0 200 400 600 800 1000 1200 binding distance p33 p32 p31 p30 p29 p28 p27 p22 p14 p13 p12 p11 p10 p9 p8 p7 p6 p5 p26 p25 p24 p23 p20 p19 p18 p21 p17 p16 p15 p4 p3 p2 p1 s1 s5 s7 s6 s4 s3 s2 figure 1. classification of variables based on the identified quality determinants of the research process in management sciences. source: developed by the author. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 45 4.2 the quality determinants of the research process in the idiographic approach the idiographic approach concentrates on the individuality and exceptional qualities of every case or phenomenon being investigated [78]. rather than striving to make universal conclusions that can be extended to a broader population, this approach aims to obtain an in-depth comprehension of the particular circumstances and environment of each case. in order to define the quality determinants of the research process using an idiographic approach, exactly the same analytical procedure was adopted. based on the results of calculations of the adopted measures, a decision was made on the cut-off point of the dendrogram. in the case of the measures of the difference distance (𝑔𝑖 = 287.7326) and the product distance (𝑞𝑖 = 1.8504), the splitting point indicates the highest value of the indicator. the clustering of the identified four determinants of research process quality in the idiographic approach is presented in figure 2. 0 100 200 300 400 500 600 700 binding distance p31 p27 p22 p14 p13 p12 p8 p7 p6 p5 p30 p29 p20 p19 p21 p17 p16 p15 p26 p25 p24 p23 p28 p18 p11 p33 p32 p10 p9 p4 p3 p2 p1 s1 s4 s3 s2 figure 2. classification of variables based on the identified quality determinants of the research process in the idiographic approach source: developed by the author. after operationalizing the obtained linkages with regard to the variables that determine them, they were named as follows: • s1 – assumptions in the process of building a research methodology. • s2 – the quality of the research process. • s3 – reliability of the research process. • s4 – factors determining the success of the research process. 4.3 the quality determinants of the research process in the nomothetic approach the goal of the nomothetic approach is to recognize universal principles, laws, and theories that can account for behaviour in a more extensive population or group of cases [30,79]. it endeavours to expose regularities and connections that remain steady across various cases or circumstances [80]. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 46 similarly, to the other analyses, a decision on the cut-off point of the dendrogram was made based on the results of the calculated measures. the value of the difference distance measure was 248.248, while the value of the product distance measure was 1.956. for the nomothetic approach, the clustering identified only 3 determinants of research process quality (fig. 3). 0 100 200 300 400 500 600 binding distance p33 p32 p31 p30 p29 p28 p27 p12 p11 p10 p9 p22 p14 p13 p8 p7 p6 p5 p26 p25 p24 p23 p20 p19 p18 p21 p17 p16 p15 p4 p3 p2 p1 s1 s3 s2 figure 3. classification of variables based on the identified quality determinants of the research process in the nomothetic approach. source: developed by the author. after operationalizing the obtained linkages with regard to the variables that determine them, they were named as follows: • s1 – assumptions in the process of building a research methodology and the research process • s2 – reliability of the research process and factors determining the success • s3 – the quality of the research process 5. discussion in the ensuing discussion, the author endeavours to elucidate the identified determinants of research process quality in the field of management sciences, while also providing recommendations to augment the level of research process quality. s1 – assumptions in the process of building a research methodology research methodology is the backbone of any research and plays a critical role in achieving the objectives of the management sciences discipline. the primary objective of this field is to support the practice of economic life, which requires the researcher to provide effective http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 47 solutions in the area of organization and management [81–85]. however, providing solutions is not enough. the researcher must also provide methods to implement these solutions, ensuring that the research work conducted within the discipline is practical and grounded in theory. to achieve this, the researcher must make valid and reliable assumptions during the development of the research methodology. these assumptions form the basis of the study and influence the research outcomes. therefore, it is crucial to ensure the accuracy and appropriateness of these assumptions to avoid questionable results and ineffective solutions being proposed. a poorly constructed research methodology may lead to incomplete or biased data collection, which can significantly impact the validity of the study. the management sciences discipline requires researchers to provide models of effective solutions that can be applied in both theoretical and practical terms. this means that the research must be reliable, consistent, and grounded in sound theories and practices. the importance of a well-constructed research methodology cannot be overemphasized, as it determines the success of the study and the quality of the proposed solutions. ultimately, the goal of the management sciences discipline is to provide practical and effective solutions that enhance the practice of economic life. achieving this objective requires a rigorous and systematic approach to research methodology. s2 – assumptions for the research process assumptions play a vital role in research, and they can take various forms, such as related to research design, data collection methods, sampling techniques, or data analysis procedures. the validity and reliability of these assumptions are critical to the overall quality of the research process and its outcomes. assumptions should be formulated carefully and should be based on a thorough understanding of the research problem and the available literature. case studies should be used to support the use of qualitative methods in research to ensure that the research is credible and applicable. pilot studies are essential components of the research process as they help shape the direction of the study and ensure its success. pilot studies can identify potential problems and help refine research methodologies. researchers must develop effective models, procedures, or approaches based on the nature of the research being conducted to ensure that the research is successful. researchers have the freedom to choose methods based on the nature of the research, and this choice can affect the combination of quantitative and qualitative methods used in the study. in addition, quantitative and qualitative methods should be analysed initially for suitability after identifying research problems. this analysis can help ensure that the selected methods are appropriate for the study. the research assumptions are crucial for quality research, and effective models, procedures, and approaches are critical to ensuring research success. researchers must carefully formulate assumptions, use case studies to support quality methods in research, conduct pilot studies, and select appropriate methods to ensure the research validity and reliability. finally, recommendations for practice based on research results can raise the quality of both science and management. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 48 s3 – reliability of the research process reliability is one of the essential determinants of the research process, and it refers to the consistency and stability of research outcomes. it is crucial that research results can be replicated to demonstrate the reliability of the process. however, the complexity of research facilities, such as enterprises, can negatively affect the credibility of research results. this is because various factors that affect the research process, such as social [86,87], environmental [88–92] and economic conditions, can change over time, thereby affecting the reliability of the results. furthermore, the inclusion of qualitative factors that are difficult to measure can affect the research quality. therefore, it is essential to incorporate reliable and valid measures that accurately represent the concepts under study to ensure the research credibility. it is worth noting that the main downside associated with management sciences is not the instability of the statements made. rather, it is the complexity of the research facilities and the difficulty in accurately measuring qualitative factors. these factors can make it challenging to establish causality between the variables under study, leading to inaccurate or incomplete conclusions. to ensure reliability in the research process, scholars must choose appropriate research designs, data collection methods, and data analysis procedures that accurately capture the concepts under study. additionally, pilot studies can help establish the reliability of the research process before embarking on the actual research study. overall, maintaining reliability in the research process is essential to ensure that the research results accurately represent the concepts under study and can be replicated in future studies. s4 – complexity of the research process the complexity of the research process in the field of management science is affected by various factors such as the research design, data collection methods, and data analysis procedures. however, the assessment of the proposed and applied methods may differ between theoreticians and management practitioners, leading to potential discrepancies in research outcomes. moreover, the verifiability of scientific research results in management science can be challenging, leading to potential doubts about the research validity and reliability. to overcome these challenges, there needs to be strategic cooperation between science and business practice in managing contemporary enterprises. this collaboration can help bridge the gap between research and practice and ensure that research outcomes are applicable in realworld settings. another factor that can negatively affect the effectiveness of solutions in the management sciences is the time spent between a problem of management, its analysis, finding a solution, and implementation. it is crucial to minimize the time spent between these stages to ensure that solutions are timely and effective. therefore, the complexity of the research process in management science should be carefully considered, and efforts should be made to ensure that proposed and applied methods are valid, reliable, and applicable in practice. collaboration between science and business practice is essential, and timely implementation of solutions is critical for effective management. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 49 s5 – factors determining the success of the research process in addition to the existing assumptions, there are further factors that can impact the success of the research process in the field of management sciences. firstly, it is important to recognize that there is no universalism of developed concepts or solutions to problems in management sciences. this means that solutions or concepts developed in one context may not be suitable for another context. secondly, methodological triangulation is a necessary condition in research processes. this involves using multiple methods to collect data in order to enhance the validity and reliability of the research outcomes. thirdly, the development of a model, procedure, tool, or approach in the research process is not necessarily a guarantee of the reliability of results. the suitability of the model, procedure, tool or approach must be assessed in the context of the research problem and the available resources. the success of the research process in the management sciences is influenced by various factors such as the quality of the research methodology, the skills and expertise of the research team, the availability of resources, and the suitability of the research environment. it is important to consider these factors and additional assumptions such as the lack of universalism of concepts, the necessity of methodological triangulation, and the need for efficient implementation processes to ensure the reliability and applicability of research outcomes. s6 – course of the research process in the context of management sciences, the course of the research process can impact the quality of the research outcomes in several ways. for example, if the research process is poorly designed or executed, the research findings may not accurately reflect the reality of the situation being studied. on the other hand, a well-structured research process, which includes elements such as pilot studies, methodological triangulation, and case studies, can help to ensure that the research outcomes are reliable, valid, and applicable in real-world settings. as a result, the quality of the research is improved, and the likelihood of making informed decisions based on the research results is increased. s7 – approach in the research process in addition to the philosophical and methodological approach, there are other assumptions that can impact the research process and outcomes. one such assumption is that group expert assessment should be the basic method for verifying the direction of the conducted research. this means that the research direction should be determined through consultation with experts in the field, who can provide valuable insights and ensure that the research is heading in the right direction. observing the conducted research in natural conditions, where the researcher cooperates with the surveyed entities, is also important. this allows the researcher to gain a deeper understanding of the subject matter by observing it in its natural setting, rather than relying solely on data and information collected through surveys or other methods. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 50 another important assumption is that observational interventions that take place as part of managerial actions in the studied entities and where the researcher has a direct influence on the decisions made are important. this means that the researcher should be actively involved in the decision-making process within the studied entities, and that their interventions should be observed and studied in order to determine their impact on the outcomes of the research. these assumptions underscore the importance of a comprehensive and collaborative approach to the research process, which takes into account not only the philosophical and methodological approach, but also the context in which the research is conducted and the role of the researcher in shaping its outcomes. 6. conclusions the article is aimed at identifying the factors that influence the quality of the research process in management sciences. additionally, the author sought to examine the similarities and differences in these factors between the idiographic and nomothetic approaches in management sciences. the author used survey data from a group of 401 scientific employees and conducted a cluster analysis to identify the quality determinants of the research process for the entire sample and for individual groups representing the two approaches. the analysis of the results showed that the quality determinants of the research process are consistent between the idiographic and nomothetic approaches. the author focused on analysing and making recommendations for seven general determinants, including assumptions in research methodology development, assumptions for the research process, research process reliability, research process complexity, factors determining research process success, research process course, and research process approach. it is important to note that the accuracy and appropriateness of assumptions made during research methodology development are crucial to avoid questionable results and ineffective solutions. researchers should develop effective models, procedures, or approaches based on the nature of the research being conducted to ensure successful research. reliability is a critical determinant of the research process, referring to the consistency and stability of research outcomes. researchers should choose appropriate research designs, data collection methods, and data analysis procedures that accurately capture the concepts under study to ensure the credibility of the research. various factors affect the complexity of the research process in management science, including research design, data collection methods, and data analysis procedures. strategic cooperation between science and business practice is necessary to manage contemporary enterprises effectively. additionally, time spent on problem management, analysis, finding a solution, and implementation should be minimized to ensure timely and effective solutions. the survey findings should be interpreted with caution as the research had limitations. the study was conducted on a particular group of specialists, which may impact the interpretation of the results. additionally, the investigation relied solely on surveys as its source of data, potentially affecting the scope of the outcomes. future research should include a wider pool of http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) henryk dzwigol virtual economics, vol. 6, no. 2, 2023 51 participants and diverse data sources, such as interviews and observations, to overcome these limitations. author contributions: not applicable. funding: not applicable. data availability statement: not applicable. acknowledgements: not applicable. conflicts of interest: not applicable. references 1. coulet, j. c. 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(2021). energy efficiency profiles in developing the free-carbon economy: on the example of ukraine and the v4 countries. polityka energetyczna, 23(4), 49-66. https://doi.org/10.33223/epj/127397 http://www.virtual-economics.eu/ https://doi.org/10.3390/en15020545 https://doi.org/10.33223/epj/127397 4.1 the quality determinants of the research process for the entire population of researchers being studied 4.2 the quality determinants of the research process in the idiographic approach 4.3 the quality determinants of the research process in the nomothetic approach 5. discussion 6. conclusions кwilinski alex 41 www.virtual-economics.eu issn 2657-4047 (online) sergey kravchenko virtual economics, vol. 2, no. 3, 2019 2019 volume 2 number 3 (july) simulation of the national innovation systems development: a transnational and coevolution approach sergey kravchenko abstract. the current state of scientific and technological development of the world economy is quite specific, because advanced technologies already known are too complicated for simple mechanical copying and borrowing, and most of the technologies of industry 4.0 are in the making. thus, the development and further exploitation of all kinds of innovations today, more than ever, require an appropriate environment an effective national innovation system (nis), which determines the country's ability to generate innovation, which is the key to high competitiveness and world leadership. however, the formation of a full-fledged innovation system of the country is quite complicated, for at least two reasons: first, there exist purely national features of functioning and cooperation of the main agents of change, and secondly, in the modern globalized world many of the most important for innovation processes go beyond the borders of individual countries, creating a unique transnational "ecosystem" with its distinctive features, which, undoubtedly, must be considered. the article proposes the scientific approach of reliable identification of national and transnational (supranational, global) innovation systems (tnis) and the corresponding toolkit for simulating their development in the context of the quadruple helix concept. identification of innovative systems is based on the methods of cluster analysis, genetic algorithms and neural network training. as a result, there have been identified and qualitatively interpreted four basic types of tnis, which have stable characteristics determining the behavioural parameters and capabilities of the nis included. a neural network has been built to identify nis, which simplifies the process of simulating their development within the characteristic features of basic tnis. it is established that the nis of ukraine belongs to the basic type of tnis – “developed and developing countries with mixed extractive-inclusive institutions with a strong informal component (including the post-soviet type)”. the results of its functioning against the background of global and relevant cluster leaders are not satisfactory and necessitate the adjustment of the further development vector. in order to demonstrate the capabilities of the neural network built, four supranational associations have been identified and analysed. the proposed approaches and tools will facilitate variant analytics and forecasting studies in substantiating the optimal directions for the individual nis further development in the context of global and cluster trends. keywords: national and transnational innovation systems, cluster, quadruple innovation helix, identification, simulation, neural network jel classification: o1, o30, p00 42 www.virtual-economics.eu issn 2657-4047 (online) sergey kravchenko virtual economics, vol. 2, no. 3, 2019 author(s): sergey kravchenko institute for international cooperation development, 24/26/1 kazimierza wielkiego street, poznan, poland, 61-863 e-mail: sergey.iv.kravchenko@gmail.com https://orcid.org/0000-0001-8391-0445 citation: kravchenko, s. (2019). simulation of the national innovation systems development: a transnational and coevolution approach. virtual economics, 2(3), 41-54. https://doi.org/10.34021/ve.2019.02.03(4) received: february 23, 2019. revised: april 17, 2019. accepted: june 25, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) 1. introduction the effectiveness of nis is largely due to the state of science-education (se), state-political (sp), production-economic (pe) and socio-cultural (sc) complexes that form a single ecosystem within the concept of "quadruple helix" (carayannis & grigoroudis, 2016). changing the functioning parameters of any of them, as a result of national policies, will certainly affect both the status of others and the overall result, since there is a mutualism – a situation in which the effectiveness of interaction is important for the functioning of all together and separately. however, on the other hand, in order to understand the specific features of the national innovation systems functioning (vishnevsky & knjazev, 2018), it important to take into account the fact that in today's globalized and integrated world many of the most important processes for innovation go beyond individual countries (dalevska et al., 2019; kwilinski et al., 2019a; 2019b), forming a unique transnational (supranational) "ecosystem" with its characteristic features, which, in turn, determine the possibilities for further development. that is, regulating the development of national economies in isolation is conceptually incomplete and limited, which does not give a complete picture of their effectiveness, preconditions and potential for further functioning. given the abovementioned, the article is based on the scientific hypothesis that each nis, while maintaining a considerable degree of independence, evolves within the framework of tnis and together with it. that is why simulating an individual nis development should cover not only the transformation of its complexes’ constituents, but also the characteristic features of the corresponding "maternal" tnis, which is also transformed in time and space in a specific way, due to the influence of historical, geographical, economic, socio-cultural and other factors. 2. literature review nis research has been a popular trend in recent years. the founders of the nis concept (freeman, 2004; lundwall, 2007; metcalfe et al., 1988) generally consider that each nis is https://orcid.org/0000-0001-8391-0445 https://doi.org/10.34021/ve.2019.02.03(4) https://creativecommons.org/licenses/by/4.0/ 43 www.virtual-economics.eu issn 2657-4047 (online) sergey kravchenko virtual economics, vol. 2, no. 3, 2019 unique and inimitable, despite a number of universal features. this view is shared by researchers who focus more on national specificities and their dynamics (datta, saad, & sarpong, 2019). in addition to several versions of the basic nis concept, the focus of research is extended to levels other than national, including: sub-national realities silicon valley level (saxenian, 1994), sectoral (malerba et al., 2006) or technological (carlsson & jacobsson, 1997), regional (asheim & gertler, 2004; pająk et al, 2016), supra-national (jackson, 2014). some researchers (prokschet et al., 2019) identify specific clusters of supranational innovation systems that go beyond administrative boundaries. it is of the scientific and practical interest to study the three-tier taxonomy of nis-2005 (includes 69 countries of different economic development and location (godinho et al., 2005) and nis-2006 with empirical identification of cross-national specificities in the structure and activity of innovative systems of high-tech advanced economies (includes 18 oecd member countries (balzat & pyka, 2006). also, there are works that form the conceptual framework for global innovation systems (blinz & truffer, 2017). in general, the analysis of a number of works in this area proves that despite the differences in different authors’ approaches and tools, the hypothesis of the existence of typical transnational (supranational) innovative systems is objectively substantiated and confirmed by empirical observations. paying tribute to the scientific experience of the tnis taxonomy, it should be noted that due to the complexity and dynamism of national innovation systems as a socio-economic phenomenon, theoretical and practical issues of innovation development, previously disclosed, are restricted by the specificity of the authors' goal setting and are not universal. therefore, in the context of this study, we propose the author's approach to classifying transnational innovation systems, which will help solve a number of tasks related to identifying individual nis and specifying the composition of tnis, analysing already functioning supranational entities for belonging to one or another type of tnis, as well as acquiring future scenarios within nis foresight. the purpose of the article. given that each nis evolves within and along with a certain basic supranational system, the purpose of the article is to propose a scientific approach to authentic identification of national and transnational innovation systems and appropriate simulating tools for their development in the context of the quadruple helix concept. 3. methods based on the stated purpose and expected results, the research methodology involves using a number of economic and mathematical methods, which, from the initial set of indicators, allow: 1) establishing the kinship of national innovation systems and creating stable clusters corresponding to certain types of transnational innovation systems that are considered as basic; 2) developing a toolkit for assigning new objects to appropriate types of tnis. 44 www.virtual-economics.eu issn 2657-4047 (online) sergey kravchenko virtual economics, vol. 2, no. 3, 2019 the overall algorithm for identifying the basic types of transnational innovation systems can be summarized as follows: 1.a) substantiation of the tnis classification features (based on the concept of "quadruple helix", which combines all four elements of the developmental spiral); 1.b) formation of a representative set of indicators (used global integration index database: the global innovation index (gii) of insead international business school (global innovation index, 2019), human development index – hdi developed by undp (human development index, 2018), the global competitiveness index (gci) issued by the world economic forum (2019), the readiness index for the future, the valdai international debating club and the all-russian centre for the study of public opinion, information other bases of the unesco institute for statistics, the international energy agency and the world bank's energy sector management program, the travel weather averages, etc. the sample contains 136 countries, whose innovative systems state is determined by 148 quantitative and qualitative indicators, divided between the four classification traits (se, sp, pe and sc); 1.c) parameters standardization for correct comparisons (carried out according to the rule: the higher the value of the standardized indicator, the more effective is the functioning of the country's innovation system). the normalization allowed to bring the indicators to the range [0, 1], which is caused by the construction of a neural network that works with a binary data type; 1.d) each of the indicators analysed has been assigned a number, depending on which classification attribute (group) it refers to. using the resulting series as a target function, the countries that are most relevant for cluster formation based on the selected indicators were chosen by genetic algorithms. in fact, the reverse task has been performed: given that the objects are divided into groups, to select those indicators that influence the given partition most significantly. as a result, the output matrix was reduced to 95 countries, characterized by 148 indicators; 1.e) optimized sampling clustering (using the ward method that minimizes intragroup dispersion. the measure of distance is the euclidean squared distance. to accurately determine the number of clusters the quality functional the sum of the squared distances to the cluster centre is used. the calculations show that for splitting into 4 clusters the functional equals 255, for 5 clusters 235, for 6 clusters 254. therefore, splitting the original set of countries into 5 clusters is optimal. in order to solve the problem of assigning new objects to the tnis groups, a neural network was built. the overall algorithm for its formation can be summarized as follows: 2.a) collection, analysis and standardization of input (an earlier described sample of 136 countries and 148 indicators was used as data); 2.b) choice of architecture and definition of neural network structure (multilayer perceptron with one hidden layer: 148-60-5); 2.c) neural network training (70% of the original data optimized by genetic algorithms were used, and the training sample definition corresponds to 100% of the result); 45 www.virtual-economics.eu issn 2657-4047 (online) sergey kravchenko virtual economics, vol. 2, no. 3, 2019 2.d) neural network testing and verification (baseline breakdown: 15% for testing and 15% for verification, with the determination of the test sample corresponding to 92.9% of the result, the validation 85.7%, indicating a sufficiently high-quality network formed). 4. results and discussion as a result of the cluster analysis of a sample from 95 countries of the world with different economic development and location, according to 148 indicators characterizing the nis in terms of scientific, educational, industrial, economic, political and socio-cultural characteristics, five clusters were selected. however, sar hong kong, china, qatar, singapore and the united arab emirates are atypical examples of national innovation systems in which high performance is achieved through rental income. therefore, this cluster was excluded from the taxonomy of basic types of transnational innovation systems (godinho, mendonça, & pereira, 2005). so, as a result, four basic types of tnis were defined. using a built neural network for countries that were previously found to be insignificant for clustering and screened by genetic algorithms, as well as for ukraine, which was deliberately withdrawn from the initial sample under the experimental conditions, the basic type of tnis was determined. the complete grouping of all 136 countries analysed is given in table 1a and table 1b. table 1a. contents of tnis basic types (countries are ranked within individual clusters (tnis types) by value ni (bold indicates leaders and outsiders), (part 1). tnis "а" developed countries with predominantly inclusive institutions tnis "в" developing countries with mixed extractiveinclusive institutions with a strong socio-cultural component (predominantly muslim and buddhist-hindu types) 1. switzerland 2. sweden 3. netherlands 4. united states 5. united kingdom 6. germany 7. denmark 8. finland 9. ireland 10. japan 11. canada 12. korea, rep. 13. norway 14. israel 15. france 16. luxembourg 17. iceland 18. australia 19. austria 20. belgium 21. new zealand 22. estonia 23. malta 1. china 2. malaysia 3. chile 4. thailand 5. saudi arabia 6. kuwait 7. brunei darussalam 8. bahrain 9. oman 10. mauritius 11. panama 12. india 13. azerbaijan 14. indonesia 15. jordan 16. tajikistan 17. rwanda source: own research. 46 www.virtual-economics.eu issn 2657-4047 (online) sergey kravchenko virtual economics, vol. 2, no. 3, 2019 table 1b. contents of tnis basic types (countries are ranked within individual clusters (tnis types) by value ni (bold indicates leaders and outsiders), (part 2). tnis "c" developed and developing countries with mixed extractive-inclusive institutions with a strong informal component (including the post-soviet type) tnis "d" developing countries with institutes of predominantly extractive type 1. mexico 2. turkey 3. costa rica 4. uruguay 5. vietnam 6. brazil 7. colombia 8. philippines 9. peru 10. south africa 11. iran, islamic rep. 12. argentina 13. tunisia 14. jamaica 15. trinidad and tobago 16. sri lanka 17. morocco 18. dominican rep. 19. lebanon 20. ecuador 21. botswana 22. egypt, arab rep. 23. algeria 24. kyrgyz rep. 25. paraguay 26. kenya 27. namibia 28. el salvador 29. guatemala 30. honduras 31. cambodia 32. nicaragua 33. ghana 34. bangladesh 35. nepal 36. pakistan 37. tanzania 38. senegal 39. uganda 40. nigeria 41. cameroon 42. zambia 43. zimbabwe 44. madagascar 45. benin 46. malawi 47. ethiopia 48. guinea 49. mali 50. mozambique 51. burundi 52. yemen, rep. 1. spain 2. czech republic 3. italy 4. slovenia 5. cyprus 6. portugal 7. poland 8. lithuania 9. latvia 10. slovak republic 11. hungary 12. greece 13. bulgaria 14. russian federation 15. croatia 16. romania 17. montenegro 18. georgia 19. serbia 20. armenia 21. ukraine 22. kazakhstan 23. bosnia and herzegovina 24. moldova 25. mongolia 26. albania source: own research. in this study, the measure of nis development / efficiency is analysed in terms of all four elements of the helix. in this regard, in order to objectify the process of analysing different countries’ achievements, we have used the generalized results of three generally worldrecognized ratings: (gii), (gci), (hdi). the data of these ratings are adapted to the respective sample of countries: standardized and summarized in the integral index (ni) for each country (separate results are presented in table 2): √ (1) 47 www.virtual-economics.eu issn 2657-4047 (online) sergey kravchenko virtual economics, vol. 2, no. 3, 2019 where: і – the standardized value of the gii rating (2019) for the i-th country; і – the standardized value of the gci rating (2019) for the i-th country; і – the standardized value of the hdi rating (2018) for the i-th country. table 2. rating of developed and developing countries with mixed extractive-inclusive institutions with a strong informal component (including the post-soviet type) * no t n is t y p e country normalized index value b lo o m b e rg , p ts in n o v a ti o n e ff ic ie n cy ra ti o p ro d u ct iv it y o f in n o v a ti o n * * t h e l e v e l o f in co m e * * * gii-2019 gci2019 hdi2018 ni 1 c spain 0.9172 1.0000 0.9745 0.9633 64.52 0.6702 2 h 2 c czech republic 1.0000 0.8062 0.9592 0.9179 68.09 0.7834 2 h 3 c italy 0.8360 0.8326 0.9184 0.8614 72.85 0.6929 2 h 4 c slovenia 0.7810 0.7753 1.0000 0.8460 64.1 0.6728 2 h 5 c cyprus 0.9429 0.6079 0.8622 0.7906 52.1 0.7405 2 h 6 c portugal 0.7496 0.7841 0.7500 0.7611 62.79 0.6325 2 h 7 c poland 0.5746 0.7181 0.8418 0.7030 69.1 0.6216 2 h 8 c lithuania 0.5825 0.6960 0.8061 0.6888 59.7 0.6383 3 h 9 c latvia 0.6752 0.6344 0.7500 0.6849 55.46 0.6862 2 h 10 c slovak republic 0.6134 0.6256 0.7908 0.6720 58.03 0.7340 2 h 11 c hungary 0.7423 0.5507 0.7041 0.6602 63.05 0.7694 2 h 12 c greece 0.4484 0.4405 0.8673 0.5554 62.05 0.5498 2 h 13 c bulgaria 0.5244 0.5419 0.5765 0.5472 0.6778 2 um 14 c russian federation 0.3814 0.6211 0.5918 0.5195 66.81 0.5316 3 um 15 c croatia 0.3918 0.4097 0.6684 0.4752 54.98 0.5970 2 h 16 c romania 0.3363 0.5198 0.5663 0.4626 64.78 0.6154 2 um 17 c montenegro 0.3855 0.3612 0.5816 0.4327 0.6608 1 um 18 c georgia 0.3478 0.3524 0.4082 0.3685 0.5353 1 lm 19 c serbia 0.2813 0.3656 0.4439 0.3574 51.35 0.6045 2 um 20 c armenia 0.1907 0.3833 0.2806 0.2737 0.7259 1 um 21 c ukraine 0.3698 0.1938 0.2602 0.2652 48.05 0.8378 1 lm 22 c kazakhstan 0.0361 0.4537 0.5102 0.2030 0.4188 3 um 23 c bosnia and herzegovina 0.0561 0.0925 0.3469 0.1216 0.4811 2 um 24 c moldova 0.2713 0.1806 0.0000 0.0000 0.7426 1 lm 25 c mongolia 0.3117 0.0000 0.2092 0.0000 0.7180 1 lm 26 c albania 0.0000 0.2203 0.4337 0.0000 0.4316 2 um * the five largest values for each indicator are indicated in red, and the five smallest in blue. ** "1" higher than developmental expectations, "2" – corresponds to developmental expectations, "3" lower than developmental expectations. *** "h" high income, "um" upper-middle income, "lm" – low-middle income, "l" low income. source: own research. 48 www.virtual-economics.eu issn 2657-4047 (online) sergey kravchenko virtual economics, vol. 2, no. 3, 2019 this approach is intended to ensure a certain balance in assessing different countries’ achievements in the field of innovation, paying attention not only to the effectiveness of efforts in this direction, but also to the degree of society’s satisfaction with the results achieved. the measure of validity of using the specified integral indicator (ni) was proved by the close connection between this indicator and the values of the most innovative countries’ rating according to bloomberg (2019) using spearman's rank correlation coefficient in 60 countries. for further in-depth analysis of both the aggregate countries and individual clusters, the available information is supplemented by other supporting data from the global innovation index (2019): "innovation performance at different income levels" in the context of expectations of the level of innovative development of the country's economy and income (income); "innovation efficiency ratio" the ratio of the "innovation output sub-index" to the value "innovation input sub-index". according to the tnis taxonomy, ukraine belongs to the cluster "developed countries with strong informal institutions, including the post-soviet type", which includes another 25 countries (table 2). traditionally interpreted by the world bank, they are comparable to economically developed and innovative countries (italy, spain, etc.), and to middle-income countries, as well as to countries with lower-middle-class development and weak innovation systems (georgia, armenia, etc.). in order to increase the validity of the results of innovative development simulation, the division of individual countries into leaders and outsiders, both globally and in each type of tnis, is of particular interest. it is the understanding of the complete picture of what is going on that will allow evaluating correctly the current state of nis and choosing the vector of further development – worldor clusteroriented. so, by the overall rating, ukraine ranks 66th out of the 136 countries analysed. its middle position is driven not so much by its achievements but by its presence in the ranking table of other deliberately weaker countries. against the background of the countries in its cluster, ukraine looks less efficient it is stated among the bottom six of the list from 26 countries. moreover, ukraine, being in the same cluster with countries such as spain, czech republic, italy, which are close to developed countries with predominantly inclusive institutions, not only occupies one of the last places, but is also inferior to many developing countries with mixed extractive-inclusive institutions with a strong socio-cultural component (predominantly muslim and buddhist-hindu types) and even a number of countries with predominantly extractive-type institutions (such as mexico, turkey, costa rica, vietnam, argentina) (kravchenko, 2018). 49 www.virtual-economics.eu issn 2657-4047 (online) sergey kravchenko virtual economics, vol. 2, no. 3, 2019 thus, two possible vectors of innovative development can be considered for ukraine: either strengthening of position among countries of their own tnis type (having similar specificity of development) or aspiration for world leaders (conditions and nature of development differ significantly). obviously, in the second case, it will be necessary to mobilize much more resources and efforts, which is extremely difficult at the current stage of ukraine’s making. it should be specially noted that the proposed simulation tool allows analysing already existing supranational formations and predicting the specific features of forming new ones. as a demonstration of a built neural network application, the paper characterizes several supranational associations / alliances: the european union (eu) is an international formation of 28 european states that combines the features of interand superpower, but legally it is neither. there are 500 million inhabitants in the eu (third place in the world), the share as a whole in world gdp, ppp in 2018 accounted for about 23% (second place in the world); asia-pacific economic cooperation – (apec) – is included as the 21st economy of the asiapacific region. the purpose of the countries’ forum is to boost economic growth in the region and strengthen the asia-pacific trade community, as well as facilitate and liberalize investment. about 40% of the world's population resides in the participating countries, with a share of 53.34% in world gdp and ppps (2018); a group of five countries: brazil, russia, india, china, south africa (brics). a share in world gdp, ppp (2018) – 32.68%; commonwealth of independent states (cis) is an international organization (international treaty) that regulates the relations of cooperation between some states that previously composed the ussr. about 286.5 million of the world's population live in the participating countries, the share of world gdp, ppp (2018) 4.35%. for this purpose, on the basis of the sampling data that was used for clustering, the averaged parameters of these associations’ functioning (by 148 indicators) were formed and further identified by the neural network. the situation is shown in fig. 1. the results obtained can be summarized as follows: (a) all eu countries are quite successful in their innovative development, since the ni integral is on average 0.75 and does not fall below 0.57, which is the most successful result among all the associations analysed. almost all one hundred percent of countries have high productivity of innovation development at the level of expectations and above (the number of the latter reaches 30%). the eu as a whole (trust level is 0.63) has a-type tnas, that is, developed countries with predominantly inclusive institutions, even though just over half of the countries are c-type tnis, i.e. developed countries and developing countries with mixed extractive-inclusive institutions with a strong informal component (including the post-soviet type); apec, represented by countries of all tnis types, is, on the whole, less successful than the eu (ni averages 0.67), with a variation of more than 0.13 in guinea to 0.94 in the us. about 40% of the countries have innovative development productivity at the level of expectations and 45% at the level above expectations. a high-confidence neural network (cl = 0.84) is 50 www.virtual-economics.eu issn 2657-4047 (online) sergey kravchenko virtual economics, vol. 2, no. 3, 2019 recognized as an object with clear features of type b tnis, that is, developing countries with mixed extractive-inclusive institutions with a strong socio-cultural component (predominantly muslim and buddhist-hindu types); cl is the neural network confidence level. the diameter of the bubble is the productivity of innovative development: from "below the expected level" small diameter, to "above the expected level" large. figure 1. results of neural network identification of individual countries’ supranational entities ranked by integrated ni index source: own research. 0,1 0,3 0,5 0,7 0,9 0,5 1,5 2,5 3,5 4,5 а с в d * tnis type "eu" tnis "а" (cl = 0.63) "apec" tnis "в" (cl = 0.84) "brics" tnis "в" (cl = 0.64) "cis" tnis "с" (cl = 0.98) ni 51 www.virtual-economics.eu issn 2657-4047 (online) sergey kravchenko virtual economics, vol. 2, no. 3, 2019 brics is the smallest grouping of countries with an average ni integral of 0.55 and the smallest variation. all countries except russia meet or exceed an innovation performance level of expectations. with a valid level of confidence (cl = 0.63), the neural network recognizes this cluster as an object with clear features of type b "tnis", that is, developing countries with mixed extractive-inclusive institutions with a strong socio-cultural component (predominantly muslim and buddhist-hindu types). obviously, this is due to the presence of economies such as india and china, which, together with south africa (according to the gii), show innovation performance at a level higher than expected; the cluster of cis countries is the least successful of the countries analysed (the integral indicator ni is at the level of 0.46). about a third of countries have below-expected innovation performance. with a high level of confidence (cl = 0.98), the neural network recognizes it as an object with clear features of c-type tnis, that is, developed and developing countries with mixed extractive-inclusive institutions with a strong informal component (incl. post-soviet type). 5. conclusions the new regionalization of political gravity centres is of a cultural and technological character, leading to forming innovative ecosystems transnational entities that do not necessarily occupy adjacent territories. such an ecosystem can span several different regions of the world because it brings together people and territories that have historically shared values, sociocultural traits and technical and technological standards. for example, australia, located in the southern hemisphere of the earth and occupying a separate continent, but as a result of colonization, culturally and technologically became part of the western world – western europe and north america, although geographically i.e. is far removed from them. in this regard, in order to understand the characteristics of nis development, the concept of the quadruple innovation helix, which encompasses not only science, industry and power, but also society, that is, evolutionary and socio-cultural aspects of development, is of fundamental importance. in general, the proposed scientific and methodological approach is based on the hypotheses about: the expediency of simulating the national systems’ development within transnational basic or maternal entities that go beyond the administrative boundaries of individual countries; the need to take into account the co-evolutionary relationship of science, production, power and society the main elements of the helix. the paper identifies four basic types of transnational innovation systems that have persistent characteristics, in some cases unique due to different circumstances (resource, spatial, historical, etc.) that determine the behaviour parameters and capabilities of the national innovation systems that are part of them. 52 www.virtual-economics.eu issn 2657-4047 (online) sergey kravchenko virtual economics, vol. 2, no. 3, 2019 the contours of each tnis type are, of course, real, but extremely wide and flexible, allowing for an intersection with others and thus creating many versions for each national innovation system. in this regard, the motion vectors of the nis of an individual country, on the one hand, are diverse and, on the other, may be substantially restricted by the features of the specific type of tnis to which it belongs. this fact should be taken into account when developing specific national strategies based on the activation of innovative activities. an effective toolkit is proposed – a neural network, the use of which greatly simplifies the process of simulating the development of nis within the characteristic features of the basic tnis development and increases the degree of strategic decisions’ validity. it is established that the national innovation system of ukraine belongs to the basic type of tnis "developed and developing countries with mixed extractive-inclusive institutions with a strong informal component (including the post-soviet type)". the results of its functioning against the background of global and relevant cluster leaders are not satisfactory, which necessitates the adjustment of its further development vector. as a demonstration of the built neural network capabilities, four supranational associations / unions have been identified and analysed. the relative effectiveness of the eu as a supranational entity against the background of apec, brics, cis was noted. characteristic features that distinguish the author's approach from those available are the combination of genetic algorithms and cluster analysis to obtain a representative sample of national innovation systems, different in economic development, geographical location and dominant institutions. a limitation of the method is the need to attract "big data" for analysis, as well as blurred moving boundaries between different types of tnis, which are unstable in the long run. that is why it is proposed to perform further identification and allocation of specific national innovation systems among the identified basic types on the basis of neural network simulation. the obtained network model is able to accumulate experimental knowledge, learn from them and with high quality to assign new objects of analysis to the relevant clusters. the practical significance of the proposed results (typology of supranational innovation systems based on the concept of quadruple helix and neural networks) lies in the possibility of carrying out variant analytical and predictive studies in the part of justification of the optimal directions of further development of individual nis in the context of global and cluster trends. references asheim, b. t., gertler, m. s. 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(2019). gci report. retrieved from https://www.weforum.org/reports https://www.abacademies.org/articles/environmental-taxes-as-a-condition-of-business-responsibili%20ty-in-the-conditions-of-sustainable-development-1544-0044-22-si-2-354.pdf https://www.abacademies.org/articles/environmental-taxes-as-a-condition-of-business-responsibili%20ty-in-the-conditions-of-sustainable-development-1544-0044-22-si-2-354.pdf https://doi.org/10.1080/13662710601130863 https://doi.org/10.1093/oxfordhb/9780199286805.003.0014 https://doi.org/10.18371/fcaptp.v2i21.91052 https://doi.org/10.1016/j.respol.2018.08.004 https://doi.org/10.15407/scin14.04.055 https://www.weforum.org/reports кwilinski alex www.virtual-economics.eu issn 2657-4047 (online) iryna nyenno, vyacheslav truba, and liudmyla tokarchuk virtual economics, vol. 6, no. 2, 2023 72 review article managerial future of the artificial intelligence iryna nyenno, vyachesav truba, and liudmyla tokarchuk abstract. the developed concept for artificial intelligence (ai) introduction to the management system is concerned with a range of ethical, social, environmental and legal issues. management system as a form of organising chaos and complexity becomes the only platform to design business and to make it sustainable irrespective of location and personalities engaged. at the time of the world economy demand for social actors, activism in the necessary transition of management oriented to reach the sustainable development goals (sdg) is a crucial factor to form the new management digitized system. environmental, social and governance (esg) investing managed assets as a part of all corporate assets. esg initiative was a proposal of the un to promote principles for a sustainable economy. companies with better esg performance can increase shareholders’ value by managing risks related to emerging esg issues, namely bring the corporation to have energy transition experience. different approaches of millennials to managing enterprises show their higher interest than that of predecessors to introduce esg standards and tasks to the day-to-day management. millennials are more interested in social values than in the investment return. even the future of investments is dependent on the basic idea that investors are not short-termist but tend to be loyal to a project about which they have more relevant information. so, they may support new ai-based management in the case it becomes an efficient platform to design a human-oriented enterprise. this study aims at showing what the relationship of the management structure and process should be in order to manage the ai progress. understanding of management content and work with the ai representation is of strategic importance. keywords: management, artificial intelligence, ai, ethics, ai personality, managerial work. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) iryna nyenno, vyacheslav truba, and liudmyla tokarchuk virtual economics, vol. 6, no. 2, 2023 73 authors: iryna nyenno ku leuven, naamsestraat 69, 3000 leuven, belgium e-mail: iryna.nyenno@kuleuven.be https://orcid.org/0000-0003-0762-808x vyacheslav truba odesa i.i. mechnikov national university, 2, dvoryanska, 65082 odesa, ukraine e-mail: rector@onu.edu.ua https://orcid.org/0000-0001-7782-2166 liudmyla tokarchuk odesa i.i. mechnikov national university, 2, dvoryanska, 65082 odesa, ukraine e-mail: zilkovska@onu.edu.ua https://orcid.org/0000-0002-2202-5300 сorresponding author: iryna nyenno, e-mail: iryna.nyenno@kuleuven.be citation: nyenno, i., truba, v. & tokarchuk, l. (2023). managerial future of the artificial intelligence. virtual economics, 6(2), 72-88. https://doi.org/10.34021/ve.2023.06.02(5) received: january 25, 2023. revised: may 15, 2023. accepted: june 20, 2023. © author(s) 2023. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:iryna.nyenno@kuleuven.be https://orcid.org/0000-0003-0762-808x mailto:rector@onu.edu.ua https://orcid.org/0000-0001-7782-2166 mailto:zilkovska@onu.edu.ua https://orcid.org/0000-0002-2202-5300 mailto:iryna.nyenno@kuleuven.be https://doi.org/10.34021/ve.2023.06.02(5) https://creativecommons.org/licenses/by/4.0/ www.virtual-economics.eu issn 2657-4047 (online) iryna nyenno, vyacheslav truba, and liudmyla tokarchuk virtual economics, vol. 6, no. 2, 2023 74 1. introduction since 1990s certain studies [1] have already demonstrated that in order to have innovative progress the decision power should be transferred to those who have a direct access to knowledge, which will help to settle the conflict of real and formal authority. the ai active participation initiates the additional responsibility of management on the one hand and connected legal risks to proof the security of this kind of interaction. this kind of automatization is known to require smart systems monitoring to recognize an unsecure situation and threats to an enterprise. the design of the human-ai interaction has to be technically possible, economically reasonable and legally protected in view of human rights. so, to prove the reliability of their interaction it should be considered from the stakeholders’ perspective satisfaction answering the main questions: 1. what is the managerial work like while interacting with ai? 2. what is legally acceptable while interacting with ai? however, there following concerns can be framed: what precautions can a manager take to avoid the “socialization damage”? what precautions can the manager take to meet the ethical aspects of management when certain functions are automated and decrease security of each personality in a company? what precautions can be taken to guarantee legal rights of the safe personal state of the staff for a company to remain human-centred? this framework is even more influential taking into account the fact that from the technical point of view automated systems, including ai robotization, are presented being already able to handle autonomously a wide range of tasks. it can be named the replacement of a human being but does not this replacement mean the same as delegation? risk management in this sense should directly influence the degree of safety efficiency under the impact of robots and ai drivers. in a technologically advanced society, risks and risky behaviour become an inevitable part of life. it is supposed that the transition from an authoritative style of management to a democratic one may influence collective participation in the decision-making process of a subject and object of management, including the roles of lawyers, engineers and psychologists in final solutions of a human-oriented technological enterprise [2–6]. thus, different business-units need to cooperate closely and achieve successful results of a company. given this, the context of directives, laws, codes of conduct, corporate culture and standards are a mix of institutional environment [7– 12] which defines the future behaviour of an ai-based enterprise. by this, the hypothesis of this research is to make ai corporately responsible and manageable. the scope of responsibility nominations, namely visible through motto, internal documents, states of art, official webpages, intranet information systems, guidelines for future development, developers (innovators) themselves, other people’s values, is ultimately rooted in the content of management. the important legal point of the ai impact is that ai got a legal entity. the european parliament in its resolution as of february 16, 2017 [13] fixed that ai may be related to the concept of the “legal status” of an electronic person. however, there are wide-ranging discussions that it is impossible from the technical, normative, and ethical point of view. the realist theory insists that ai entities exist regardless the existence of their legal personhood. the example of this legal feasibility is the availability of corporate legal personhood analogy. autonomy, intelligence and awareness are the elements to receive the legal personhood. ai behaves http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) iryna nyenno, vyacheslav truba, and liudmyla tokarchuk virtual economics, vol. 6, no. 2, 2023 75 differently than software. it is self-learning; it sets goals, evaluates results and changes behaviour. on the other hand, recognition of ai as a legal entity should be supported with certain material assets. this limitation defines a still missing step for ai to become autonomous and to reach singularity. 2. literature review the world progress is connected with industrial revolutions, namely the 4th industrial revolution presented “innovation” as a form and method of development. the impact of generating innovations by the responsible fiduciary delegated persons was considered by dreyer, goldberg and schofield [14] in the context of the necessity to manage in the face of readiness to technological and ethical leadership. some questions about the specificity of ai responsibility have been recently studied by [15–18], which deeply considered the issues of complexity to engage ai to strategic versus routine activity. haefner et al. [19] made a conclusion that ai impact can be observed in a form of augmented innovation of an enterprise and defined its role for certain stages of innovative management. considering the overwhelming competitive advantage of the society’s creative population, such as artists, writers and inventors, there can be observed a definite interest in whether ai can be applicable in this area. namely, the human-centred examples, where the people’s talents and unique approaches to creativity are actually irreplaceable, it is innovative management that comes to mind. human-organised innovation management is a source of new development initiatives for each company. and if at the beginning of fundamental ai management studies, it was argued by simon [20] that ai is a way for “exploring the consequences of human behaviour alternative assumptions”, there are studies maintaining that ai augments organizational innovation. the first stages of innovation management are namely idea generation and idea development. accordingly, the main source of this opportunity is that technologically ai systems are designed so that they are trained by human ai experts. it is worth mentioning that usually managers’ judgement is complicated and needs participation of the whole team. the collaborative solutions perhaps may be a way of ai self-learning. zekos [21] stated that there is consequently developing consideration that ai and digitalised platforms, sooner or later, will become an important environment for the stakeholder’s management. the studies [22–32] provide evidence of the customer proactive role becoming the “prosumer” of the smart-energy consumption to reach sdg with the help of digital public good . smart customers, as the stakeholders can be called, whose decision-making process in concerned with ai, may create certain digital jurisdiction, like an autonomous environment. it is as well important that this area will remain manageable and/or predictable. business application for ai is considered by chan et al. [33], who explain that the core business processes may be supported by ai application, where expert systems are upheld with the casebased reasoning and procedural content generation. winkle [34] stated that general motivation for introducing ai is very often related to management intention to reduce self-responsibility. additionally, threats in the social cuts and http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) iryna nyenno, vyacheslav truba, and liudmyla tokarchuk virtual economics, vol. 6, no. 2, 2023 76 economic crisis escalate various legal court decisions concerned with inadequate social security systems of an enterprise and force top-managers to cover this damage financially. thus, even an effect of the damage “socialization” occurs. piñero et al [35] proposed to combine ai and project management training techniques in a certain ecosystem. and patrignani, 2020, insists on the statement that information and communication technologies (ict) should take into account three dimensions of social desirability, environmental sustainability, and ethical acceptability [36–47]. one of the earliest philosophers was jonas [48], who proposed the imperative of responsibility as an approach to searching ethics in the technological age for human beings to survive, taking care for the planet and its future. eichhorn and towers [49] state that the organizational structure, competencies and responsibilities are defined by the tasks generation and consequently concentrating positions, definition of the level of centralization and decentralization with the monitoring system based on the balanced scorecard. yet they are concerned more with economic efficiency rather than managerial. and talking about the macrolevel of management impact, the actual concern is provided in relation to sustainable development goals concept. mercier-laurent and kayakutlu [50] continue the series of workshops since 2012 dealing with artificial intelligence for knowledge management, energy, and sustainability where a plenty of practical solutions are presented, specifically in order to reach seventeen sdg. as mentioned by czarnitzki and carioli [51] highly innovative economies already face the scarcity of skills which is the greatest threat to the innovative projects. the solution to prevent this threat lays in the managerial perspective of creating the cooperative strategies with external partners to bridge the skills gap of the future employees. thus, the main research questions of this article are: • will it be possible to harmonize ethical, legal and management performance under conditions of ai impact? • what is the skills scarcity for ai to perform management work autonomously? 3. artificial intelligence impact evaluation artificial intelligence, once the subject of people’s imagination and the main plot of science fiction movies for decades, is no longer a piece of fiction but rather commonplace in people’s daily lives whether they realize it or not. ai refers to the ability of a computer or machine to imitate the capacities of the human brain, which often learns from previous experiences to understand and respond to language, decisions, and problems. these ai capabilities, such as computer vision and conversational interfaces, have become embedded throughout various industries’ standard business. among the myriad processes that artificial intelligence (ai) capabilities are embedded in, the leading process is robotic process automation. simply put, this is the process by which minor and repetitive parts of business functions are automated so as to not need a human worker to monitor them. natural-language understanding and generation is also found in both speech and writing as businesses endeavour to improve their capacity to deal autonomously with customer requests. the least focused fields include more abstract ai use, such as transformative programs (table 1). http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) iryna nyenno, vyacheslav truba, and liudmyla tokarchuk virtual economics, vol. 6, no. 2, 2023 77 table 1. primary artificial intelligence (ai) capability adaption rate in businesses globally in 2022, in % industry human resources manufa cturing marketing & sales product/ service development risk service operations strategy & corporate finance supply chain management all industries 11 8 5 10 19 19 21 9 business, legal, and professional services 11 10 9 8 16 20 19 12 consumer goods/ retail 14 4 3 4 15 31 29 11 financial services 1 8 7 31 17 24 23 2 healthcare/ pharma 15 7 2 4 22 12 8 8 high tech/telecom 6 6 4 7 38 21 25 8 source: [52]. in 2022, the global total corporate investment in ai reached almost 92 billion u.s. dollars, a slight decrease from the previous year. in 2018, the yearly investment in ai saw a slight downturn, but that was only temporary. private investments account for a bulk of total ai corporate investment. ai investment has increased more than sixfold since 2016, a staggering growth in any market. it is a testament to the importance of the development of ai around the world (fig. 1). figure 1. global total corporate artificial intelligence (ai) investment from 2015 to 2022 (in billion u.s. dollars) source: [53]. ai is actively applied for service operations and strategy and corporate finance, with nearly all industries reporting around 20 % usage of ai in these functions. the most considerable use of 12.75 17.7 44.08 43.81 48.85 67.85 93.5 91.9 0 10 20 30 40 50 60 70 80 90 100 2015 2016 2017 2018 2019 2020 2021 2022 in v e st m e n t in b il li o n u .s . d o ll a rs http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) iryna nyenno, vyacheslav truba, and liudmyla tokarchuk virtual economics, vol. 6, no. 2, 2023 78 ai in product making was in the financial services industry, with over 30 percent of respondents using ai in 2023. the use of ai in manufacturing and marketing is low, as these can require individual human instincts [54–58] and so lend themselves less easily to ai application and is summarised in table 2. table 2. artificial intelligence (ai) adoption worldwide 2022, by industry and function, % # ai capability rate 1 robotic process automation 39 2 computer vision 34 3 natural-language text understanding 33 4 virtual agents or conversational interfaces 33 5 deep learning 30 6 knowledge graphs 25 7 recommender systems 25 8 digital twins 24 9 natural language speech understanding 23 10 physical robotics 20 11 reinforcement learning 20 12 facial recognition 18 13 natural language generation 18 14 transfer learning 16 15 generative adversarial networks (gan) 11 16 transformers 11 source: [52]. finding ai-related tech jobs has been especially complicated for ai data scientists. last year, nearly 80 percent of respondents said their organisation found it very difficult or somewhat difficult to hire for such roles. design specialists were among the least difficult to hire. this might stem from the fact that ai data scientists are a very specialized role while design specialists are a slightly more open-ended position, allowing for more applicants. figure 2. perceived company difficulties in hiring artificial intelligence (ai) related roles worldwide from 2019 to 2022, by function. source: [59]. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% software engineers ai data scientists data architects design specialist translators very difficult somewhat difficult neither easy nor difficult somewhat easy very easy http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) iryna nyenno, vyacheslav truba, and liudmyla tokarchuk virtual economics, vol. 6, no. 2, 2023 79 4. results and discussion considering ai definition or understanding [18], such tools should be listed as: machine learning, natural language processing and computer vision to implement human’s ability to perform, cognize and sense the environment. yet all these tools cannot work without relevant knowledge-based systems (also natural language processing), knowledge representation and media processing. so finally, the aim of ai is to use knowledge and experience and to provide solutions to the problems based on them [60–63]. ai impact can be visible in almost every industry and this is visible as well in existing and new business-models and influence the economic growth on macro and micro levels. definitely, the main advantage and distinction of ai is that it follows self-learning model. thus, the level of complexity is increasing from raw data finding to certain concepts, rules and even heuristic models. comparison of this progress with management hierarchy demonstrates that the lower-level managers are working with raw data (field research), for the middle-managers it is necessary to use already generated reports in order to analyse them and to systematize. the top-management prerogative is generating strategy and policy. by this there is a movement from a routine to structured environment with the ability for selflearning and forecasting. ai is considered to be a tool for increasing efficiency of problem solving. previously the approach was different: systems were supportive, while at the moment, the potential of ai element is that of a player with certain autonomy impacts. this implies certain proactive behaviour and it is a part of the enterprise stakeholders relations. besides, this is evidence of moving from system (strategic) thinking [64,65] to computational thinking. the core game-changers are as well the consumers engaged to customer personalization process. it is strictly related to provision of the general data protection regulation [66]. active use of digital platforms in the investment process is explained by the easier access to the venture funds through fintech services [21]. this makes the stakeholder’s engagement easier. this way of decentralization impacts the ways an enterprise structures a management method. in the long-term perspective, this may be considered even as a firm governed by the algorithmic code. it is already in progress exemplified by the block-chain solutions of ibm and northern trust which allow collecting biometric information and creating the documents repository. namely, distribute ledger technologies may execute mechanically the limitations for actions caused by the internal and external regulations of a company. benkler [67] argues that “blockchain is considered as an opportunity to enable people to function together with the persistence and stability but without the hierarchy”. the principles of smart contracts on which the distributed autonomous organizations are based is simple and transparent unlike traditional bureaucracy of a management system. since 2016 certain aibased application for the investment consulting can be observed, while the substitution of the board of directors is something different. the directors’ level of multitasking can be comparatively less than those of managers. however, even the law gives minimum guidance on the role and tasks of managers. talking about the “future management by a machine”, which ai role is realistic: assistant, advisory or autonomous? independent decision-making should be based on an administrative and judgement role. in the future, it is obvious that an exclusive domain of ai will be the administrative work for scheduling, resource allocation, monitoring http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) iryna nyenno, vyacheslav truba, and liudmyla tokarchuk virtual economics, vol. 6, no. 2, 2023 80 and reporting. the definite gap for ai remains in motivating, understanding and interacting with human beings. the ai role can me named as a role of augmented intelligence. the main legal issues which arise while implementing this future boil down to the following: who will be legally responsible for the solutions caused by the unpredictable and ai behaviour? how to prevent the situation when a societal impact of ai will be more than human? and once again the answer is concerned with a value-based system of thinking encompassing morale, religion, and mentality. as certain studies showed [34], people do not follow the code of practice guidelines and the check-lists just because they think of already existing internal experience and prefer working together with consultants than with ai because they find it is more efficient and easier. thus, the ai engagement encounters a more user-friendly form of consultation headed by a responsible person. this team would give more practical applications and solutions with ai. it is called structured expert communication and is aimed at defining perspectives of staff like managers, engineers, lawyers and psychologists in the context of a company’s sustainable development. the gap is more and more serious if the sustainability principles are not based on harmonized value system of individual employees. each guideline application may occur in the case of the availability of each stakeholder’s personal advantages. many of them cannot see any value of ai introduction in their work and even can see threats and chaos from its impact. the old-fashioned way of adding the ai-based hierarchy cannot reflect the innovative approach either. however, structured expert guidelines meet the concept of human-oriented society and based on the inner development goals (idg) which mirror sdg principles. thus, because of the staff values harmonization the company aimed to become an introducing force to achieve 17 sustainable development goals (sdg). at the same time, the increase of external innovative pressure of ai, which develops steadily and consistently, leads to a challenge of legal risks, ethics and ai uncontrollable progress. the necessary balance in decision-making process which allows reducing risks increases certainty and prevents the punishments because delegating liability to ai should form the final consulting concept of participative decision-making based on the technologies of digitalization and philosophy of human-centred society. human-first approach opposite to stateor market-first is reflected in the european declaration on digital rights and principles [68]. sustainability of the development is concentrated on the people at the centre, solidarity and inclusion, participation, safety and security, and freedom of choice. chapter i puts people in the centre of digital transformation. moreover, chapter ii emphasises that technologies should be used to unite, not to separate people, as well as improve their work-life balance and protect them from unjustified surveillance. namely, freedom of choice is mentioned in chapter iii of the declaration. ai is defined as a tool to improve our well-being, “taking measures to ensure that research in artificial intelligence respects the highest ethical standards and relevant eu law”, while chapter vi “sustainability” assures that each digital product should be easily understandable regarding the information about environmental and social impact. ethics and legal issues are sure to contain such core values as: autonomy, justice and humanity values from the instrumental values. technological innovations are not good for liveability and privacy. that is why recapitulation is so important, which means asking such responsible questions as: what is the hierarchy of values? what is the connection between values and human rights? http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) iryna nyenno, vyacheslav truba, and liudmyla tokarchuk virtual economics, vol. 6, no. 2, 2023 81 mintzberg [69] proposed to consider five coordination mechanisms that mainly reveal the ways in which organizations may harmonise their activities: 1. mutual agreement. 2. direct control. 3. standardisation of work processes. 4. standardisation of output. 5. standardisation of skills and knowledge (qualifications). these mechanisms are implemented in the following way: agreement promotes work coordination through a simple process of informal communication. upon mutual agreement, control over a work process is carried out by employees themselves. because it involves a relatively simple mechanism, coordination is used in the simplest organizations. developing from the simplest form, an organization usually turns to the second coordination mechanism. direct control promotes coordination because one person is entrusted with the responsibility for the work of other people, defining tasks for them and monitoring their actions. the work process can be coordinated and there is no mutual coordination of actions or direct control. it can be standardised when coordination is achieved at the development stage before the work process begins. the work process itself, its results, and the initial conditions – skills (and knowledge) of the people who perform it – can be planned so that they meet specified standards. standardisation of work processes involves precise definition (specification) or programming of the work content. when work results are specified, for example, product parameters or production rate, it is customary to talk about standardisation of output. standardisation of skills and knowledge (qualifications) means the exact definition of the level of employees’ training necessary for participation in the labour process. at first glance, a person acts autonomously in his area (the performance of a good actor also gives an impression of complete improvisation). the same principle controls the work of ai. but in fact, if a manager has learned the roles by heart in advance, ai is not capable to do this. therefore, the standardisation of skills indirectly contributes to the fact that standardisation of work processes or work results is achieved directly: it controls and coordinates a purposeful joint activity. the key to coordination is their standardised qualification. at the moment, the possibility to standardise ai operations, but not the qualification can be observed. so, these coordination mechanisms were presented in a certain, very approximate order. as the organisation’s activities become more complex, the choice of coordination means changes: from mutual agreement to direct control and standardisation of work processes (mainly), output or knowledge and skills, and finally to mutual agreement again. in the case of individual work, there is no need for such mechanisms as coordination is carried out in the mind of a manager. but give a manager the help of the staff, and the situation will change significantly. people who work side by side in small groups adjust to each other, usually informally; for them, the most convenient form of coordination is mutual regulation, mutual http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) iryna nyenno, vyacheslav truba, and liudmyla tokarchuk virtual economics, vol. 6, no. 2, 2023 82 adjustment. however, as the number of group members increases, it becomes increasingly difficult to coordinate the work process in informal ways. there is a need for a leader. control over the group activities passes to one person, as a result, again to one head who controls the others; direct control becomes an optimal coordination mechanism. with the further complication of work, another stable tendency is manifested: towards standardisation. solving simple and monotonous tasks, the organisation can rely on the standardisation of work by itself performed by ai (chat-bots as an example). but the need to perform more complex tasks forces an organisation to turn to the standardisation of output, that is, specification of work results, leaving the choice of a work process to an employee. on the other hand, it is often impossible to standardise the results of a very complex work, and then the organization turns to standardising the employees’ qualifications. however, if the work divided into tasks cannot be standardized, it may be necessary to return to the simplest, but most convenient coordination mechanism: mutual agreement, after going through the entire cycle. as was noted, in extremely difficult situations, experienced managers get the job done with the help of informal communications. up to this point, it was assumed that, depending on the specific conditions, an organization makes a choice in favour of some coordination mechanism. it was also implied that all five mechanisms are, to some extent, interchangeable; an organization can move from one to another. but these assumptions do not mean that any organization can rely on a single coordination mechanism. in fact, all five are usually combined. regardless of the degree of standardisation, a certain amount of direct control and mutual regulation is always required. modern organizations simply cannot exist without a leader and informal communication, which are necessary at least to overcome the inelasticity of standardisation. while standardisation and even algorithmizing itself is successfully done by ai. mintzberg [69] identified a manager’s ten roles, and within these ten roles he managed to accommodate quite a variety of managers’ activities. he grouped them into three areas based on the following observation: whatever managers do, they are inevitably involved in one of three “things” – either decision-making, or information retrieval and processing, or interpersonal interaction. interpersonal roles: 1. a head is a formal leader of the organization or its units, represents them in both internal (within the organization) and external (outside) interactions. 2. a leader is an actual manager who inspires people and leads them to their intended goals, combining the needs of individuals and an organization. 3. a liaison provides and supports horizontal connections and interactions necessary for effective work. information roles: 1. a collector gathers and evaluates the necessary information about what is happening inside and outside an organization. 2. a distributor ensures information flows within the organization or divisions. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) iryna nyenno, vyacheslav truba, and liudmyla tokarchuk virtual economics, vol. 6, no. 2, 2023 83 3. a representative transmits information to the boundaries of an organization or divisions in order to ensure effective interaction with the external environment. decision-making roles: 1. an initiator makes decisions about appropriate changes and ways of their implementation. 2. a troubleshooter allows for unforeseen problems and obstacles. 3. an allocator of resources makes decisions about distribution of resources, including time, money, people and equipment. 4. a negotiator conducts negotiations with the aim of effective decision-making taking into account different viewpoints. all three categories of roles are always interconnected. mintzberg’s list helps to understand that certain types of activities that may seem like deviations from the real job of a manager are an integral part of that job. the time a manager spends attending a party with department employees, or the time spent attending meetings as a representative of the department, or the time spent communicating with other managers both inside and outside the organization – all this time, according to mintzberg, cannot be considered separate from the main work. in each of these situations, the manager performs one of the management roles, i.e., does what must be done and must be done by a manager. at the same time, the ability to effectively plan and allocate one's time becomes especially important. in table 3 there is a presentation of the role approach to management and the capability of human and ai to perform them autonomously. table 3. artificial intelligence (ai) and manager’s autonomy: a comparative approach roles in management roles in management work ai capabilities are autonomous for implementation managerial capabilities are autonomous for implementation yes no yes no interpersonal roles figurehead ▢ + + ▢ leader ▢ + + ▢ liaison ▢ + + ▢ information roles collector + ▢ ▢ + distributor + ▢ ▢ + representative ▢ + + ▢ roles in decision-making initiator ▢ + + ▢ troubleshooter ▢ + + ▢ resource allocator + ▢ ▢ + negotiator ▢ + + ▢ source: developed by the authors. one of the factors that significantly affect the managerial performance is the type of work performed autonomously based on intuition and managerial skills. it can be noted that managers http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) iryna nyenno, vyacheslav truba, and liudmyla tokarchuk virtual economics, vol. 6, no. 2, 2023 84 performing completely different work have similar concerns, but still, the specific requirements and limitations associated with a specific position can both help and hinder the quality of managerial work. thus, there must be considered the alternatives available to a manager because of the interaction with ai. 5. conclusions this article is an attempt to forecast the scarcity of ai capabilities to perform managerial work. it was based on the existing data of the width of ai application in different industries and business activities. the managerial work was presented through the roles approach by mintzberg. this short material will be useful for a deeper understanding of the nature of a manager’s work in the digitalization epoch. this research aimed to expand this understanding by providing an opportunity to compare managerial work content with ai application in business by offering theoretical approaches with the help of which the work performed and not performed by ai can be evaluated. the future outline of this study may lay in the definition of the content of computational thinking versus applied in management system or strategic thinking [64,65], where “computational thinking is solving problems in a systematized way with or without the help of computer tools”. it is in line with the development by senge’s approach to understanding management [70]. he described the five managerial disciplines, which include systems thinking; personal mastery; self-management and personal development; mental models common vision and team learning. author contributions: conceptualization, i.n. and v.t..; methodology, i.n.; software, i.n.; validation, l.t., and i.n.; formal analysis, v.t.; investigation, i.n.; resources, l.t..; data curation, v.t.; writing-original draft preparation, i.n.; writing-review and editing, i.n.; visualization, v.t.; supervision, i.n..; project administration, l.t..; funding acquisition, v.t. all authors have read and agreed to the published version of the manuscript. data availability statement: the data that support the findings of this study are available on request from the corresponding author [i.n.]. acknowledgements: the authors express their gratitude to the european education, audiovisual & culture executive agency, which supports the project “boosting the role of heis in the industrial transformation towards the industry 4.0 paradigm in georgia and ukraine (hein4.0) 609939-epp-1-2019-1-be-eppka2-cbhe-jp within the erasmus+ programme of the european union. this paper contains the results that have been received in the framework of this project. conflicts of interest: the authors declare no conflict of interest. the funders had no role in the design of the study; in the collection, analyses, or interpretation of data; in the writing of the manuscript; or in the decision to publish the results. http://www.virtual-economics.eu/ www.virtual-economics.eu issn 2657-4047 (online) iryna nyenno, vyacheslav truba, and liudmyla tokarchuk virtual economics, vol. 6, no. 2, 2023 85 references 1. christie, a. a., joye, m. p., & watts, r. l. 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(1994). the fifth discipline fieldbook: strategies and tools for building a learning organization. doubleday. http://www.virtual-economics.eu/ кwilinski alex 7 www.virtual-economics.eu issn 2657-4047 (online) lester ingber virtual economics, vol. 3, no. 2, 2020 2020 volume 3 number 2 (april) developing bid-ask probabilities for high-frequency trading lester ingber abstract. methods of path integrals are used to develop multi-factor probabilities of bid-ask variables to be used in high-frequency trading (hft). adaptive simulated annealing (asa) is used to fit the nonlinear forms, so developed to a day of bitmex tick data. maxima algebraic code is used to develop the path integral codes into c codes, and a sampling code is used for the fitting process. after these fits, the resultant c code is very fast and useful for forecasting upcoming ‘ask’, bid, midprice, etc., when narrow and wide windows of incoming data are used. a bonus is the availability of canonical momenta indicators (cmi) useful to forecast direction and strengths of these variables. keywords: path integral, financial markets, high-frequency trading jel classification: c32, c53, g17 author: lester ingber physical studies institute llc, ashland city, united states e-mail: ingber@caa.caltech.edu https://orcid.org/0000-0003-1502-3910 citation: ingber, l. (2020). developing bid-ask probabilities for high-frequency trading. virtual economics, 3(2), 7-24. https://doi.org/10.34021/ve.2020.03.02(1) received: february 24, 2020. revised: march 9, 2020. accepted: april 3, 2020 © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://doi.org/10.34021/ve.2020.03.02(1) https://creativecommons.org/licenses/by/4.0/ 8 www.virtual-economics.eu issn 2657-4047 (online) lester ingber virtual economics, vol. 3, no. 2, 2020 1. introduction although high-frequency trading (hft) is a relatively new development in financial markets, it has become a primary force in market pricing. a voluminous scientific literature has been published to understand the nature of these forces (ait-sahalia & saglam, 2017; avellaneda & stoikov, 2008; baradely et al., 2018; cartea et al., 2014; cont et al., 2011; cont et al., 2009; fodra & labadie, 2012; gueant, 2017; huang et al., 2014). since hft by definition implies fast trading, this has generally prevented complex sophisticated algorithms from being applied to trading in real time. this paper shows how complex algorithms can be developed, with parameters optimized by using simulated annealing, to produce code that can be used in real time. in this context, this paper applies a previously developed statistical mechanics of financial markets (smfm) (ingber, 1984; ingber, 1990; ingber, 1996a; ingber, 1996b; ingber, 2000; ingber, 2010; ingber, 2017a; ingber et al., 2001; ingber & mondescu, 2001; ingber & mondescu, 2003; ingber et al., 1991; ingber & wilson, 1999; ingber & wilson, 2000), here applied to developing joint bid-ask probabilities to high-frequency data, using two methods of fitting price data or returns data to (a) the distribution and (b) fitting the returns. the returns are also developed into closed-form algebra using the path-integral formalism. the path-integral algebra behind the algorithms used is introduced in section 2. this section also details how three equivalent methods of treating stochastic systems are developed: (a) path integrals, (b) sets of stochastic differential equations, and (c) fokker-planck or chapman-kolmogorov partial differential equations. section 3 describes the author’s numerical optimization algorithm, adaptive simulated annealing (asa). the algebraic and numerical algorithms used here have also been applied to systems in other disciplines, e.g., neuroscience (ingber, 1991; ingber, 1992; ingber, 1996c; ingber, 1997; ingber, 1998a; ingber, 2006; ingber, 2009a; ingber, 2009b; ingber, 2012a; ingber, 2012b; ingber, 2015; ingber, 2018a; ingber, 2018b; ingber, 2018c; ingber & nunez, 1995; ingber & nunez, 2010; ingber et al., 2014; ingber et al., 1996; nunez et al., 2013) and combat simulations (ingber, 1993a; ingber, 1998b) utilizing the asa c-code (ingber, 1993b; ingber, 1996d; ingber, 2012c). 9 www.virtual-economics.eu issn 2657-4047 (online) lester ingber virtual economics, vol. 3, no. 2, 2020 as was true for these other disciplines, here too the path-integral methodology is used to develop canonical momenta indicators (cmi), useful to forecast the direction and strengths of these variables. section 4 describes the development of the forecast code fit to data, using the algebraic language maxima (maxima.sourceforge.net) to develop c code which is used both to fit data to parameters, as well as to run very fast in real time for hft. the fitting process uses a sampling code developed for this project, to effectively sample and run a random subset of the data. section 5 is the conclusion. 2. path integral 2.1. path integral in stratonovich (midpoint) representation the path integral in the feynman (midpoint) representation can be developed in timedependent nonlinear systems (langouche et al., 1979; langouche et al., 1982; schulman, 1981). the einstein summation convention is often used wherein repeated indices signify summation; bars imply no summation. ∫ ∫ ( ∫ ) (1) ∏ ∏ (2) ̇ ̇ ̇ (3) (4) ̇ (5) 10 www.virtual-economics.eu issn 2657-4047 (online) lester ingber virtual economics, vol. 3, no. 2, 2020 (6) (7) (8) (9) (9) a riemannian-curvature potential is induced for dimension . is the dimensionality of the space being considered. boundary conditions may enter as a “potential” . in implies a prepoint evaluation. 2.2. path integral in ito (prepoint) representation an ito prepoint discretization for the same probability distribution gives a simpler algebraic form than the above midpoint discretization, (10) (11) this ito lagrangian does not satisfy a variational principle, and often finer meshes are required. 11 www.virtual-economics.eu issn 2657-4047 (online) lester ingber virtual economics, vol. 3, no. 2, 2020 2.3. three approaches mathematically equivalent three basic different approaches are mathematically equivalent: (a) fokker-planck/chapman-kolmogorov partial-differential equations, (b) langevin coupled stochastic-differential equations, (c) lagrangian or hamiltonian path-integrals. the path-integral approach is useful to define intuitive physical variables from the lagrangian in terms of variables : (12) (13) (14) (15) the momenta are used here as canonical momenta indicators (cmi). differentiation, especially of noisy systems, introduces more noise, and the path-integral often gives superior numerical performance because integration is a smoothing process. 2.3.1. stochastic differential equation (sde) the stratonovich midpoint discretized langevin equations are given in terms of the wiener process , or equivalently gaussian noise . ̂ (16) ̇ ̂ (17) 12 www.virtual-economics.eu issn 2657-4047 (online) lester ingber virtual economics, vol. 3, no. 2, 2020 (18) (19) (20) ̇ (21) (22) where represents gaussian white noise. as used here, this langevin representation of a set of stochastic differential equations (sde) is a convenient starting point to define the -moments of the distribution. 2.3.2. partial differential equation (pde) the fokker-planck or chapman-kolmogorov partial differential equation is: (23) (24) ̂ ̂ (25) ̂ ̂ (26) 13 www.virtual-economics.eu issn 2657-4047 (online) lester ingber virtual economics, vol. 3, no. 2, 2020 (27) replaces in the sde if the ito (prepoint discretized) calculus is used. 2.4. pathint applications path integrals and pathint have been applied across several disciplines, including combat simulations (ingber et al., 1991), neuroscience (ingber, 1994; ingber, 2017b; ingber & nunez, 1995; ingber & nunez, 2010), finance (ingber, 2000; ingber, 2016; ingber, 2017a; ingber, 2017b; ingber, 2017c; ingber et al., 2001; ingber & wilson, 2000), and other nonlinear systems (ingber, 1995; ingber, 1998b; ingber et al., 1996). 2.5. pathint/qpathint code qpathint is an n-dimensional code developed to calculate the propagation of quantum variables in the presence of shocks. many systems propagate in the presence of sudden changes of state dependent on time. qpathint is based on the classical-physics code, pathint. applications have been made to smni and statistical mechanics of financial markets (smfm) (ingber, 2017a; ingber, 2017b; ingber, 2017c). the pathint c code of about 7500 lines of code using the gcc c-compiler was rewritten to use double complex variables instead of double variables, and further developed for arbitrary n dimensions, creating qpathint. the outline of the code is described here for classical or quantum systems, using generic coordinates (ingber, 2016; ingber, 2017a; ingber, 2017c). the distribution (probabilities for classical systems, wave-functions for quantum systems) is numerically approximated to a high degree of accuracy using a histogram procedure, developing sums of rectangles of height and width at points . 2.5.1. pathint/qpathint histograms a one-dimensional path-integral in variable in the prepoint ito discretization is developed in terms of the kernel/propagator , for each of its intermediate integrals, as 14 www.virtual-economics.eu issn 2657-4047 (online) lester ingber virtual economics, vol. 3, no. 2, 2020 ∫ ∫ (28) ∑ (29) (30) this yields (31) ∫ ∫ (32) is a banded matrix representing the gaussian nature of the short-time probability centered around the drift. 2.5.2. meshes for [q]pathint explicit dependence of on time can be included. the mesh is strongly dependent on diagonal elements of the diffusion matrix, e.g., (33) by considering the contributions to the first and second moments, conditions on the time and variable meshes can be derived. can be measured by the diffusion divided by the square of the drift. these mesh considerations constrain the forecast time if consistency with the action is required, where (34) 15 www.virtual-economics.eu issn 2657-4047 (online) lester ingber virtual economics, vol. 3, no. 2, 2020 3. adaptive simulated annealing (asa) algorithm 3.1. importance sampling nonlinear and/or stochastic systems often require importance-sampling algorithms to scan or to fit parameters. methods of simulated annealing (sa) are often used. the asa code is open-source software, and can be downloaded free and used without any registration at https://www.ingber.com/#asa (ingber, 1993b; ingber, 2012c). this algorithm fits empirical data to a cost function over a -dimensional parameter space, adapting for varying sensitivities of parameters during the fit (ingber, 1989). 3.2. outline of asa algorithm for parameters (35) sampling with the random variable (36) (37) the default generating function is ∏ ∏ (38) in terms of parameter “temperatures” 16 www.virtual-economics.eu issn 2657-4047 (online) lester ingber virtual economics, vol. 3, no. 2, 2020 (39) this asa algorithm is faster than fast cauchy annealing, which has schedule , and much faster than boltzmann annealing, which has schedule . 3.3. asa applications the asa code (ingber, 1993b) and the original very fast simulated reannealing (vfsr) code (ingber, 1989) have been used by many researchers, including the author, in a range of disciplines, as referenced in the asa-readme.pdf that comes with the code, or in other papers in the ingber.com archive. 4. forecast code tick data was cleaned on-the-fly in c code, since this is a practical real-time consideration. the data was volume-weighted, and level-weighted by 0.9, using 20 levels each of bid and ask; the last level was weighted by . it is clear that in many hft markets such as the one used for this study, competitive traders’ tactics that “game” the book of bids and asks cause the volume at different levels to be much more volatile than the prices per se. at first, both prices and returns of bids and asks were fit. the returns are simple. (40) since the trends are for the first entitites to be swallowed by such markets, making them useless for trading, the asa fits had to work longer for fits with prices than with returns, so returns were used for most of the runs. 4.1. analytic returns the path integral formalism permits an analytic calculation of the most probable state (dekker, 1980), (41) 17 www.virtual-economics.eu issn 2657-4047 (online) lester ingber virtual economics, vol. 3, no. 2, 2020 4.2. maxima to c code the 2-factor functional forms used, with ask as and bid as , are indexed here by , without the einstein convention, (42) ̂ (43) ̂ ̂ (44) where the parameters are fit to the data. note that these simple functional forms, especially after inverses of the covariance matrix are taken, form padè approximates, ratios of polynomials, known to be quite robust functional forms to fit data. the cost function used is the effective action, (45) the analytic expression above for returns can be calculated using the algebraic language maxima. since such expressions can be about 1000 characters (without spaces), this is advisable. it is straightforward to convert maxima output to fortran code, but not so easy to covert to c. previous projects have used f2c from netlib.org to compile mixed c and fortran code, but here the main issue is that c requires powers to use the prefix operator-function pow(), whereas maxima uses postfix operators. this was circumvented simply by writing all powers as multiple factors with different names, converting to fortran, then renaming these the same after the calculations. 4.3. dynamic memory arrays for books of data over a day or more require 10’s of megabytes of memory. static arrays that size crashes c code, so dynamic memory using calloc() was used. 18 www.virtual-economics.eu issn 2657-4047 (online) lester ingber virtual economics, vol. 3, no. 2, 2020 4.4. sampling code it is not necessary to use all tick data to get very good fits. instead, a modification of asa subroutines that calculate random states was used to randomly sample the data that is already volume-weighted and level-weighted. it was found that a sample size of 100k gave as good results as a sample size of several million for a day of bitmex data. this random sample then was used for the asa cost function calculations that ran over the sample for each generated state. 4.5. windows of data the calculated distribution at any point is dependent on at least 2 points of weighted bid-ask data, and the calculation takes into account correlations and dynamics inherent in the functional form of the drifts and diffusions. therefore, the best use of this approach is to use narrow and wide windows for forecasting [ingber & mondescu (2001)]. although similar to a standard practice of using windows of raw data, the result is a different than would be calculated just using of raw incoming data (also volume-weighted and level-weighted), since results include most probable correlated future behavior of the market. if is fit directly, then the derived return equations were only accurate to a give , e.g., about 0.1 sec, in agreement with the expected mesh used in pathint as described above, so instead, returns were directly fit to future return data, typically requiring a few million asa generated states, by “looking ahead” to the next point, of course, pathint could be used to fold over the short-time distribution for many secs (as has been done in other systems), but most likely this would be too slow in the context of hft. if the returns are fit directly to the data, then just about any , ranging from 0.1 sec to 5 sec give the same forecast value for given current data (returns are transformed back into prices — 6 significant figures), since a realistic set of fitted drifts and diffusion matrices can have parameters slip some from their ideal range to still get good fits at another , and then the probability calculation at any given point just reflects essentially the same distribution. 4.6. library a library is easily created, within a desired range of ’s that are “reasonably” close to the ideal , by doing multiple asa fits to return data. this defines a library of probabilities that 19 www.virtual-economics.eu issn 2657-4047 (online) lester ingber virtual economics, vol. 3, no. 2, 2020 can be used as described here, yielding a range of choices to be made during hft, e.g., as required to take into account latencies of trades actually being posted. 4.7. updating parameters fitted parameters can be updated overnight with new asa runs. alternatively, e.g., if there is a sudden change in context of the market and if sufficient recent data of the new context is available, the fast modified nelder-mead simplex code that comes with the asa code typically used to efficiently gain some precision in fits, can be used to quickly update the parameters. 4.8. cmi the forecast also includes the cmi. however, similar to limitations in fitting , which cannot be fit directly to the returns data for any , here too the forecast cmi at a different than ideal need to have more asa generated states for additional precision to get stable cmi (which often are useful guides on upcoming directions and strengths of bids, ask, midprices, etc.). 4.9. volatility risk the risk associated with the probability distributions were straightforwardly calculated from the covariance matrix . a quick measure is its determinant . 4.10. additional functional complexity additional functional complexity, i.e., more terms added to the drifts and covariance matrix were added, but not much seemed to have been gained. 4.11. 3-factor model a 3-factor code of bid-ask-trades could have been processed the same way as the 2-factor bid-ask code, but it seemed dynamics were captured quite well by the 2-factor code, so only 2-factor runs were further developed. 20 www.virtual-economics.eu issn 2657-4047 (online) lester ingber virtual economics, vol. 3, no. 2, 2020 4.12. data the actual 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(1981). techniques and applications of path integration. new york: j. wiley and sons. кwilinski alex 7 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina virtual economics, vol. 2, no. 4, 2019 2019 volume 2 number 4 (october) development of the information economy under the conditions of global economic transformations: features, factors and prospects nataliia trushkina abstract. the article provides a content structure of the information economy, including the main components and factors of the development. the factors of influence on the development of the information economy are identified. they are conditionally classified into five groups: research and development in the field of ict; employee component; ict sector development; digital technologies in business; information security. the dynamics of the development indicators of the information economy is analyzed. prospective lines of the development of the information economy in the global cyberspace are identified, including the creation of a digital platform as a new business model; using the concept of industry 4.0 and the “smart factory” as drivers for the digital transformation of industrial development; implementation of the “cyber physical system” as a single complex of information resources, systems and physical processes. a formula is proposed for evaluating the effect of the information economy development. keywords: information economy, features, conceptual approaches, factors, components, prospects, digital technologies jel classification: a10, b30, d80, l86 author: nataliia trushkina institute of industrial economics of national academy of sciences of ukraine, 2 marii kapnist street, kyiv, ukraine, 03057 e-mail: nata_tru@ukr.net https://orcid.org/0000-0002-6741-7738 citation: trushkina, n. (2019). development of the information economy under the conditions of global economic transformations: features, factors and prospects. virtual economics, 2(4), 7-25. https://doi.org/10.34021/ve.2019.02.04(1) received: june 23, 2019. revised: august 3, 2019. accepted: september 9, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://orcid.org/0000-0002-6741-7738 https://creativecommons.org/licenses/by/4.0/ 8 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina virtual economics, vol. 2, no. 4, 2019 1. introduction the information economy is one of the prospective lines of development of national economies of different countries in the global cyberspace. the main backgrounds for the formation and rapid development of a new type of social relations are, first of all: globalization of the world economy and integration of world capital markets; transnationalization of innovative production; transformation of business practices and company building; change in the capital structure of the company; increased competition and differentiation of companies; organizational structure innovation; application of digital technologies; activation of e-business and e-commerce. mckinsey global institute experts (boden et al., 2010) claim that the process of developing the information (digital) economy is comparable in scale to the industrial revolution of the 18th19th centuries, which radically changed the whole world, giving many countries a rise for economic growth, changing the development model itself. the current transition to an information economy is becoming a key factor in gdp growth. this is due to not only the effect obtained from the automation of existing processes, but also from the introduction of new, breakthrough business models and technologies, including digital platforms, digital ecosystems, in-depth analytics of large data arrays, technologies "industry 4.0". review and generalisation of scientific literature confirm the relevance of various aspects of the development problem of the information economy. scientists pay considerable attention to the formation of evolutionary views on the conceptual apparatus, the study of modern trends and the identification of prospective lines of development of the information economy. at the same time, the versatility, multidimensionality, and argumentation possibility of individual issues on the chosen topic necessitates further scientific research. the aim of the article is to study features and identify factors that influence the development of the information economy; identification of prospective lines in the context of global economic transformations. 2. literature review review of the field-specific literature shows that there is no single scientific approach to the definition of the term “information economy”. it was found that researchers use many concepts to determine the conceptual meaning of the information economy (figure 1). the use of the term “new economy” was quite popular in the scientific literature, the first mention of which dates back to 1898, when l. gronlund in his work “the new economy. a peaceable solution of the social problem” (gronlund, 1898) pointed out the need for social transformation and defined the new economy as the economy of the dominance of collectivism. 9 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina virtual economics, vol. 2, no. 4, 2019 after that, the essentially similar concept of “knowledge economy” proposed by f. machlup (fritz machlup) in his work “the production and distribution of knowledge in the united states” (machlup, 1962) was used in literature. later, the concept of “digital economy” was introduced into scientific turnabout as a virtual economic system, the founder of which is d. tapscott (tapscott, 1996). the term “information economy” was first formulated in 1976 by m. porat (marc uri porat), who conducted in his dissertation a study in his dissertation, and predicted a rapid transition from classical production capital to intellectual property, that is, the production of information (porat, 1977). according to d. tapscott and e. williams (2009), it is the information (intangible assets, licenses, patents, technologies, know-how expressed in a specific form) that plays the largest part in the information economy, rather than knowledge representing an abstract category. nevertheless, information and knowledge are in dialectical unity, which means they are permanently and organically interconnected. the concept of the information economy includes a fundamental definition of the information society as a system of connections and relationships between individuals, which is formed in the process of exchanging information on social and economic activities. the information economy is significantly different in nature from the “goods economy” and forms new social relations that arise through the use of new information technologies (networks), and is accompanied by transformations of the industrial relations of an industrial society (pidoymo & buturlakina, 2010). figure 1. terms that identify the concept of "information economy" source: own research. digital economy new economy knowledge economy virtual economy emergent economy spatial economy mathematical economy (game theory) network economy web economy sharing economy internet-economy electronic economy information network economy internet of things industry 4.0 electromobility postindustrial economy digital knowledge-based economy gig economy or work-foryourself economy 10 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina virtual economics, vol. 2, no. 4, 2019 in literature sources there are numerous formulations of concepts related to the information economy: the new economy (pashkus, 2006; chumachenko, 2014; belotserkovets, 2015; dzwigol, 2019); information and network economy (dyatlov, maryanenko, selishcheva, 2016; kuzior et al., 2019; kwilinski et al., 2019a; 2019b; 2019c; lakhno et al., 2018; pajak et al., 2016 tkachenko et al., 2019a; 2019b; 2019c; 2019d); network economy (chumachenko, 2014); digital economy (tapscott, 1996; lane, 1999; margherio et al., 1999; brynjolfsson & kahin, 2000; mesenbourg, 2001; machlup, 2014; kit, 2014; tugui, 2015; apalkova, 2015; elmasry et al., 2016 ; knickrehm, berthon & daugherty, 2016; bahl, 2016; dahlman, mealy & wermelinger, 2016; kolyadenko, 2016; teslenko, 2016; panshin, 2016; bukh & heeks, 2017; baranov, 2018; gudz, 2018); information economy (machlup, 1973; pidoymo & buturlakina, 2010; chumachenko, 2014; shkarlet, 2014; matveeva & khomenko, 2017). the definition of any given concept is a reflection of time and contemporary trends. early interpretations put internet technologies at the forefront, which became a kind of technological mainstream of the 1990s. the authors of later definitions pay attention to the development of mobile and wireless networks, as well as cloud technologies and technologies for working with big data, or turn to a more general concept of digital technologies. the term “new economy” was used for some time at the turn of the century, but was not very popular. the network economy as a concept is much more “survivable,” but its definition is much more complicated than the digital economy, since the main focus is not on technology, but on structural changes. brynjolfsson, kahin (2000) stated that the definition of “information economy” has acquired the meaning of a broad, long-term trend for the further expansion of assets based on information and knowledge, as well as the value associated with real assets and products. bukh, heeks (2017) systematized the existing concepts of “digital economy”, identifying 4 approaches that have their own particular characteristics: resource-based approach is based on technology, information resources, that is, data processing (brynjolfsson, kahin, 2000), as well as human resources, that is, human knowledge and creativity, arising from information and communication technologies (tapscott, 1996); process approach is the use of technology for business operations (kling, lamb, 2000; mesenborg, 2001); new streams of information and data generated through ict (lane, 1999); ongoing transformations in technological processes (bahl, 2016); structural approach includes, as components of the digital economy, the transformation process (brynjolfsson, kahin, 2000) and developing structures based on web (network) technologies; business-based approach as components of the digital economy, new emerging business models are considered, that is, network business and electronic commerce (mesenborg, 2001) or digital platforms. thus, the review shows that most researchers identify the information economy with the digital one, which includes a type of economic system where the predominant part of the national product is provided by activities that are somehow related to the production, processing, storage and distribution of information. 11 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina virtual economics, vol. 2, no. 4, 2019 it should be noted that some scientists prefer to talk about the digital economy, the most important component of which is a sufficient level of technology used, transforming the relationship between business entities, changing the paradigm towards the development of flexible schemes for organizing the economy, where coordination occurs through digital technologies. in other definitions, in addition to economic activity, the social sphere is affected. still others focus on the factor of technological development of the production structure and the growing role of information and communications in the process of performing economic activities. 3. methods as a result of the study, many existing scientific points of view on the interpretation of the information economy are summarized (table 1). table 1. systematization of scientific approaches to the definition of the concept of "information economy" classification group contents science the science of studying the economic theory of the modern information society; the science that studies the patterns of using informational factors as components of an ecosystem; scientific field in economy, studying the influence of information on economic decisions a new type of economy economy based on network services; economy created on a new technological basis; economy based on digital technologies; a type of economy characterized by the active introduction and practical use of digital technologies; emergent economy existing in virtual reality; economy operating on electronic goods and services section of economic theory section of economic theory, where the object of research is the economy of the information society; the newest branch of economic science, studying the effective use of modern information technologies in the field of electronic data; economic theory of the information society information environment environment that exists through digital telecommunication networks; information environment conducive to the development of information and communication technologies; some kind of virtual environment addition system of economic relations network, system-organized spatial structure of relationships between business entities; total social relations emerging when using electronic technologies and electronic infrastructure; structure based on effective information management of the production system business profile type of economic activity that is carried out using information and communication technologies; automated business management based on advanced information technologies; economic activity in which the key factor in production is digital data; production of goods and services using information technologies instrument instrument to reduce transaction expenses source: own research. 12 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina virtual economics, vol. 2, no. 4, 2019 based on the conceptual provisions and own research results (kwilinski & trushkina, 2019; kwilinski, trushkina & rynkevich, 2019; kwilinski, 2018a; 2018b; 2018c; 2019), it is proposed to use the term “information economy” as a system of economic relations using modern information technologies, as well as the information environment, which is effectively developing with the help of digital technologies and the functioning of information infrastructure facilities (figure 2). figure 2. the informatory structure of the information economy source: own research. it is found that the development of the information economy is influenced by many factors that can be conditionally systematized into 5 groups: factors for the development of information economy resources (human, technological, financial, informational, etc.) approaches (system, process, functional, customer-oriented) flows (material, financial, informational, etc.) structure business model types of economic activity business processes system of economic relations organizational culture information infrastructure digital transformation of business innovative development digital skills mechanism (instruments, principles, means and technologies) institutional environment cognitive technologies information asymmetry information and communication technologies artificial intelligence exterritoriality virtual reality passionarity transparency transcendency transboundariness internet environment the main components of the information 13 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina virtual economics, vol. 2, no. 4, 2019 { ( ) ( ) ( ) ( ) ( ) } (1) where – research and development in the field of information and communication technologies (ict); – research and development costs in the area of "information and telecommunications"; – authors' publications in the journals indexed by scopus and web of science, in the areas of ict; – indices of scientific specialization of the countries according to the publications in editions indexed in scopus and web of science, in the areas of ict; – patent activity of applicants in the field of ict; –share of each country in the global number of patent applications in the field of ict; – development of advanced manufacturing technologies related to ict; – employee component; – share of ict specialists of the highest skill level in the total number of employees by country; – the number of ict specialists by the qualification level; – the number of ict specialists by the type of economic activity; – development of the ict sector; – the share of the ict sector in the number of people employed in the business sector by country; – the share of the ict sector in the gross value added of the business sector by country; – innovative activity of organizations in the ict sector; – costs of innovations of organizations in the ict sector, including technological, marketing, organizational innovations; – business activity of organizations providing services in the field of information technologies (demand for services, the number of contracts concluded, the cost of services rendered, prices for services, number of employees, competitiveness, investments, economic status of organizations); – the export structure of goods (services) in the field of ict in the global volume of export of goods (services); – the import structure of goods (services) in the field of ict in the global volume of import of goods (services); – digital technologies in business; – broadband internet access in organizations by country (in % of the total number of organizations in the business sector); – the intensity of the use of digital technologies in organizations (broadband internet; “cloud” services; rfid technologies, crm-, erp-, scm-systems; electronic sales); – internet access in organizations; 14 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina virtual economics, vol. 2, no. 4, 2019 – the presence of a website in organizations; – using of electronic data exchange technologies between internal and external information systems in organizations; – application of software in organizations; – the use of the internet in organizations to communicate with suppliers according to the purposes; – electronic purchases and sales in organizations; – cost structure of organizations for the implementation of ict; – information security; – the population’s collision with the problem of virus infection when using the internet and with threats to information security when using the internet; – using of information security means in organizations. 4. results key factors for evaluating the development of the information economy are: ∑ (2) where оc– evaluation of the development of the information economy; – gdp volume; – total information product; – the number of internet users (per 1000 people); – r&d expenses (in % to gdp); – expenses on education (in % to gdp); – gdp information capacity (the amount of information generated per 1 monetary unit of gdp); – total internet income; – softification coefficient of the economy, which shows an increase in the information capacity of industries, due to an increase in the share of non-material costs in gross output; – the share of labor resources employed in the information sector; – the share of labor resources employed in an innovative economy; – networked readiness index; – index of the information society; – human development index; – index of development of the society intellectual potential; – index of society informational support; – the creation of high-performance job opportunities. prospective lines of development of the information economy in the context of global digital transformations include: big data: in 2018, 50% of large companies received income from data-as-a-service; the volume of global ip-traffic will grow in 2016-2021 in 2.9 times (figure 3); 44 zettabytes of global volume of generated data by 2020 (4.4 zettabytes in 2013); $ 90 billion volume of global big data market in 2025 ($ 22.6 billion in 2015); 15 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina virtual economics, vol. 2, no. 4, 2019 figure 3. the dynamics of the world ip-traffic volume, petabytes source: own research on the basis of the world economic forum data, accenture, allied market research, bcg, idc, researchgate, telecompetitor, tractica. quantum technologies: 1 billion euros is planned to be allocated for the implementation of the quantum flagship program in the eu; 25% of the average annual growth rate of the quantum computing market in 2018-2024; components of robotics and sensorics: 10% average annual growth rate of the global robotics market for 2010-2025, including by sector: industrial 7.6%, defense 7.7%, commercial 13.2%, consumer 21 ,9%; 5 million jobs will be replaced by 2020 by robots; 25% average level of robotization in industry by 2025; $ 87 billion volume of the global robotics market in 2025; neurotechnologies and artificial intelligence: the market volume for artificial intelligence will increase in 2016-2025 in 42.6 times (figure 4); 2.3 million jobs will be created by 2020 thanks to artificial intelligence; 20% of employees engaged in non-routine tasks will rely on the help of artificial intelligence by 2022; 85% of customer interactions will be managed using artificial intelligence by 2025; $ 15.7 trillion global gdp growth thanks to artificial intelligence by 2030; new production technologies: the global market volume for smart materials will increase in 2014–2022 in 2.2 times (figure 5); $ 40 billion the global market volume for smart factories; $ 550 billion 3d printing contribution to the global economy by 2025; industrial internet: $ 21.5 billion the global market volume for the internet of robotic things in 2022; 500 million objects of production and logistics chains will be connected to the industrial internet of things by 2025; blockchain: 33% average cryptocurrency capitalization rate in 2017-2023; $ 20 billion bank savings from using blockchain technology in 2022; 10% of global gdp will be stored on blockchain networks in 2027; 96054 121694 150910 186453 228411 278108 0 50000 100000 150000 200000 250000 300000 2016 2017 2018 2019 2020 2021 16 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina virtual economics, vol. 2, no. 4, 2019 figure 4. dynamics of the artificial intelligence market volume, billion us dollars source: own research on the basis of the world economic forum data, accenture, allied market research, bcg, idc, researchgate, telecompetitor, tractica. wireless communication technologies: the number of connected devices in the world will increase in 2017-2022 in 1.6 times (wired connection) and in 4.9 times (wireless, lpwan); 50% of the world's population will have internet access in 2019; 85% coverage of the earth with wireless internet access in 2021; $ 16 billion the global market volume for wireless routers in 2025; figure 5. dynamics of the global market volume for smart materials, billion us dollars source: own research on the basis of the world economic forum data, accenture, allied market research, bcg, idc, researchgate, telecompetitor, tractica. 1.4 2.4 4 6.6 10.5 16.2 24.1 34.4 46.5 59.7 0 10 20 30 40 50 60 70 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 37.8 42 46.7 51.9 57.7 64.1 70.9 0 10 20 30 40 50 60 70 80 2016 2017 2018 20192020 2021 2022 17 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina virtual economics, vol. 2, no. 4, 2019 virtual and augmented reality technologies: the global market volume for augmented and virtual reality will increase in 2016-2021 in 35.2 times (figure 6). figure 6. the dynamics of the global market volume for augmented and virtual reality, billion us dollars source: own research on the basis of the world economic forum data, accenture, allied market research, bcg, idc, researchgate, telecompetitor, tractica. the effect of the implementation of prospective lines of the information economy development can be calculated using the formula below: ∑ ( ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ) (3) where – big data; – expanding the capabilities of processing unstructured data; – increasing the processing rate of large data arrays; – severization of requirements for standards for the collection, storage and processing of data; – tightening personal data protection standards; – development of predictive analytics; – creation of new job opportunities; 0 50 100 150 200 250 2016 2017 2018 2019 2020 2021 6.1 9.4 17.8 80.6 143.3 215 18 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina virtual economics, vol. 2, no. 4, 2019 – quantum technologies; – creation of new, almost unbreakable forms of encryption; – solution of specialized tasks requiring extremely reliable calculations; – processing huge amounts of data in large databases; – replacement of common computers, the computing power of which will reach the physical limit in the near future; – appearance of artificial intelligence technologies and computer-aided learning on a new level; – components of robotics and sensorics; – significant increase in labor productivity and the replacement of people in routine operations; – minimizing the number of accidents at production site; – optimization of business processes, achieving production flexibility; – reduction of energy costs, increasing of energy efficiency; – monitoring of online production; – neurotechnologies and artificial intelligence; – expanding the capabilities of automation and robotization of manual labor; – exclusion of subjectivity and irrationality in decision making; – restructuring the global labor market; – emergence of new forms of legal relations between robots and people; – transformation of educational processes in favor of personalization and the development of conceptual thinking; – new production technologies; – creation of high-tech job opportunities; – minimization of negative impact on the environment; – increasing the quality of products and reducing the time it takes to place on market; – improving the quality of life of the population; – reduction of production costs; – increase in the level of customization of products and services; – industrial internet; – growth of energy efficiency of the economy; – displacement of low-skilled labor; – acceleration of product entry into market; – reduction of capital costs for maintenance, support and updating of it systems; – blockchain; – improving transaction security and data storage; – minimizing the number of intermediaries in the financial sector; – mass use of p2p transfers; – development of cryptography; – simplification of international transfers and modernization of the currency exchange market; – starting the use of a pricing model after the transaction (consumption); – wireless communication technologies; – removal of geographical barriers; 19 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina virtual economics, vol. 2, no. 4, 2019 – increasing the availability of information; – minimization of energy costs; – the development of the internet of things; – the prevalence of the online format of social interactions; – virtual and augmented reality technologies; – predictive maintenance services; – optimization of production processes; – training of specialists in applied areas on a virtual basis; – development of the virtual native advertising segment. 5. conclusions the rapid development of digital technologies and the emergence of platform solutions lead to the formation of the concept of information economy. the study has found that most researchers identify the information economy with concepts such as digital economy, new economy, post-industrial economy, virtual economy, network economy, information and network economy, electronic economy, digital intellectual economy, internet economy, eeconomy, network economy, web economy, knowledge economy, industry 4.0, electromobility, emergent economy, spatial economy, gig economy or work-for-yourself economy, mathematical economy (game theory). scientific approaches to the definition of terminology with the problems of the development of the information economy are conventionally systematized into classification groups: science; a new type of economy; section of economic theory; information environment; system of economic relations; type of economic activity; instrument. as a result of generalization of existing scientific developments on the conceptual apparatus and analysis of its compliance with modern business conditions, the meaning of the concept of “information economy” as a system of economic relations using modern information technologies, as well as the information environment, which is effectively developed using digital technologies and the functioning of information infrastructure facilities, has been clarified. it was found that the development of the information economy is influenced by many factors that are conditionally classified into five groups: research and development in the field of ict; employee component; ict sector development; digital technologies in business; information security. the modern concepts of the information economy include: creation of a digital platform as a new business model, the essence of which is to provide business and the public with a specific service for coordinating the activities of various market participants. the platform allows sellers and buyers of goods (services) to quickly find each other, close a deal and perform settlements. digital platforms are mainly used in commercial and logistics activities. the functioning of these platforms accelerates and reduces the cost of 20 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina virtual economics, vol. 2, no. 4, 2019 production and exchange processes, eliminates unnecessary intermediary links, and improves the efficiency of markets; use of the concept "industry 4.0" and the “smart factory” as drivers for the digital development of industry; implementation of the concept of “cyber-physical system” as a single complex of computing resources, information systems and physical processes. this system includes: a supplier-client integration system in a single control loop for continuity business processes and data exchange; industrial robots and computer vision systems coordinating their interaction; 3d printing for prototyping and manufacturing of small batches at local sites; ar and vr technologies for creating visual “instructions-recommendation” at workplaces, as well as for promoting and selling products; computer-aided design systems cad/ cae; "big data" analysis to support online decision making. it should be noted that the implementation of qualitatively new digital technologies is a necessary but not sufficient condition for the effective development of the information economy. these technologies should bring a significant positive economic effect: increase productivity by increasing production volumes and reduce the amount of resources used for production. for such an increase in the level of productivity, it is advisable to comprehensively transform the business, in which the use of digital technologies is accompanied by improved management. it should be emphasized that in most cases, the digital transformation of the business gives positive results in the long term, since the initial investment in technological and associated changes therewith represents significant costs that will be compensated for a long period of time. as the results of a study by capgemini consulting and mit sloan school of management (2015) showed, the digital transformation process cannot be completely ignored. this is due to the fact that the decrease in profit in this case compared to competitors will be 24% per year. it is proved that the profit of companies grows by an average of 26%, if technologies and new management methods are used together. if only to improve management without resorting to digital technologies, then the profit of companies is growing by 9%. if you invest only in technologies, not paying attention to the necessary changes in management, profit does not grow at all, but falls by 11%. thus, the use of digital technologies improves the business and investment climate by increasing the availability and efficiency of public services, effective management in companies, transparency of conditions of business operations (electronic platforms for tendering and procurement, feedback portals), as well as the development of an ecosystem of business services (logistics services, mobile banking). in further studies, it is necessary to pay attention to the development of economic and mathematical modeling using factor analysis and the determination of strategic development benchmarks of the information economy; 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(2015). meta-digital accounting in the context of cloud computing. encyclopedia of information science and technology (3rd ed.), (pp. 20-32). usa: igi global. кwilinski alex 53 www.virtual-economics.eu issn 2657-4047 (online) bożena kamińska virtual economics, vol. 1, no. 1, 2018 2018 volume 1 number 1 (october) iterative signal processing in anticipatory management of industrial enterprise development bożena kamińska abstract. the article proposes the use of an iterative approach in anticipatory management that is based on a two-stage iteration of the noise correction of the detected signal and the establishment of a signal response base, which ensures obtaining the most accurate original content of the signal and the scope of the industrial enterprise by the intensity of its manifestation. it is expedient to establish a maximum and a minimum threshold value of the force of the detected and devoid of noise original signal in the established field of activity of the industrial enterprise (review base). setting the maximum and minimum threshold values is a necessary task, both in the case of forecasting the onset of crisis events, and in the case of identifying favorable conditions for development. it is proved that the principle of iterative signal processing is universal for controlling signals, which indicate the approach of critical events and opportunities for development. the developed approach can be applied in the anticipatory management in the internal and external environment of the industrial enterprise. keywords: management, development, signal, enterprise, iteration, filter, noise, correction, management decision. jel classification: с600, м110, м210 author(s): bożena kamińska the sejm of the republic of poland, 4/6/8 wiejska street, 00-902 warsaw, poland e-mail: biuro@bozenakaminska.pl https://orcid.org/00000002-0654-870x citation: kamińska, b. (2018). iterative signal processing in anticipatory management of industrial enterprise development. virtual economics, 1(1), 53-65. https://doi.org/10.34021/ve.2018.01.01(4) received: july 7, 2018. revised: august 7, 2018. accepted: september 7, 2018. © author(s) 2018. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2018.01.01(4) https://creativecommons.org/licenses/by/4.0/ 54 www.virtual-economics.eu issn 2657-4047 (online) bożena kamińska virtual economics, vol. 1, no. 1, 2018 1. introduction receiving signals about changing the state of the external and internal environment of an industrial enterprise prior to the occurrence of the events related to the change of this state in the future is the first step in anticipatory management if this type of management is applied to the enterprise. ignoring signals or delaying their interpretation leads to significant consequences, especially if the company implements a development program that is usually associated with an orientation towards the market, competitors, consumers, financial and credit institutions (berry et al., 2007). therefore, the monitoring of such signals, their identification, detection in a particular area of the enterprise is an urgent task, the solution of which requires the development of an appropriate approach, which in its properties ensures the accuracy of the recognition of the signals of the approaching crisis or changes in the conditions of development and operation of industrial enterprises. this approach is an iterative one (cockburn, 2008; larman & basili, 2003), unlike classical approaches: systemic, process, functional, and others. this approach to management is most often used in cases where it is necessary to carry out work in parallel with the continuous analysis of the results obtained and adjusting the previous stages of work. 2. literature review the feasibility of using the iterative approach has been proven in a number of scientific studies and publications. in the work (voloshchuk, 2014) it is proposed to use the iterative approach as one of the analytical tools for managing the economic security of an industrial enterprise, where the criteria of classification are the steps (iterations) of the procedures for assessing the economic security of the enterprise and their respective task of formation of analytical tools.. the author developed a two-stage iterative cycle for assessing the economic security of an industrial enterprise, where, at the first stage, individual blocks are evaluated; and the second stage is an integral estimation of the data array defined at the previous iteration stage. r. r. tan et al. grounded the necessity of using an iterative approach in modeling the optimal production program of an industrial enterprise (tan et al., 2016). thus, the author developed economic-mathematical models that are used in various iterations and differ both in the composition of restrictions and in the form of criteria indicators. in this case, individual iterations are carried out at different stages of the formation of the production program. the advantage of using the principles of an iterative approach is the increase in the efficiency of optimization calculations when forming an enterprise's production program and reducing the cost of analyzing the market demand. the need to use an iterative approach in the process of developing and adopting managerial decisions is emphasized (pamučar et al., 2017; kuzylyak et al., 2016; pająk et al., 2016, 2017; kwilinski, 2018). to streamline the process of making managerial decisions as a set of formal http://www.virtual-economics.eu/ 55 www.virtual-economics.eu issn 2657-4047 (online) bożena kamińska virtual economics, vol. 1, no. 1, 2018 and informal procedures, the authors are encouraged to use the technology of decisionmaking, which will allow to analyze the decisions made earlier and to make optimal managerial decisions. this process is presented in the form of several iterations: 1. setting a task. 2. preparation of managerial decisions. 3. adoption of managerial decisions. 4. implementation of the approved managerial decisions (kuzylyak et al., 2016). using the proposed approach will provide an improved quality assessment of probable managerial decisions that involves the collection and processing of operational data from the uncertain and risk area and the development of managerial decisions using iterative cycles (repetitions). using an iterative approach in management, due to the use of an unlimited number of stages of iteration (repetition) of input data processing, will improve the quality of managerial decisions. in the anticipatory management, such input data to be processed are the signals coming from the internal and external environment of the industrial enterprise and inform about the approach of the crisis, threats to the industrial enterprise or the creation of potential opportunities for the development of the organization, favorable conditions for the implementation of strategic development activities (ashley & morrison, 1997). therefore, despite the sufficient number of scientific papers on the methodology of the iterative approach, the spectrum of its action in the anticipatory management remains insufficiently studied. 3. methodology the main tools for such monitoring include: 3.1. concurrent analysis the purpose of this type of environmental monitoring tools is to determine the economic state of the industry, the main directions of its development, the level of competition and competitive positions of the main players of the market, to analyse the closest competitors to the investigated enterprise, to analyse the prospects of the industry, etc. in the general form of competitive analysis, the identification of weak and strong environmental signals is reduced to the following stages: 1. definition of the time period within which an analytical assessment will be carried out. 2. definition of product market boundaries. 3. definition of geographical boundaries of the market. 4. identification of the economic entities on the market. http://www.virtual-economics.eu/ 56 www.virtual-economics.eu issn 2657-4047 (online) bożena kamińska virtual economics, vol. 1, no. 1, 2018 5. calculation of the volume of the commodity market and the share held by the business entity. 6. determination of the degree of market saturation. 7. identification of barriers to entry. 8. assessment of the competitive environment (norik, 2005). when using this tool as the main one during monitoring, the main attention is paid to the competitors, as a factor of direct influence on the state of the enterprise, therefore, the analysis of the internal environment is secondary. 3.2. comparative industry analysis this type of analysis is carried out on the basis of comparison of the main indicators of production and economic activity of enterprises operating in one industry: profit; sales; cost of manufactured goods; profitability; wage fund; investments; volume of produced products, etc. comparison of the data of the enterprise and other enterprises-competitors is made on the same indicators with the average industry values. the advantage of using this tool as the main one in monitoring is the ability to identify weak and strong signals regarding the use of insufficient production capacity, marketing policy effectiveness, etc. 3.3. resource analysis it consists of describing and evaluating financial, organizational and technological resources (creating a resource profile), comparing the profile created according to the market requirements (identifying the strengths and weaknesses of the rated entity), and identifying specific competencies (the strengths and weaknesses of the rated entity are compared with the strengths and weaknesses of the underlying asset of a competitor). only the internal environment of the enterprise is analyzed and evaluated. the influence of environmental factors is completely excluded. the basis for further development of the strategy is the comparison with the activities of the main competitor (ognev & chernyshenko, 2013). 3.4. competitive analysis on the model of "five forces" by m. porter the use of this type of analysis as a tool for environmental monitoring involves analyzing the main external forces: market power of suppliers; market power of consumers; http://www.virtual-economics.eu/ 57 www.virtual-economics.eu issn 2657-4047 (online) bożena kamińska virtual economics, vol. 1, no. 1, 2018 market power of competitors; the threat of the emergence of new competitors on the market; the threat of the appearance of analogue products on the market. 4. results and discussion the scheme of application of the iterative approach in the processing of signals in anticipatory management is presented in figure 1 (part 1а and 2b). receipt of signals for the first stage of the iteration cycle is based on the results of continuous monitoring of the internal and external environments of the industrial enterprise (guselbaeva & pachkova, 2015). the analysis involves two steps: 1. assignment of quantitative indicators to determinants of five forces by expert assessment. 2. analysis of the strengths and weaknesses of the current competitive situation, as well as possible compensatory measures. 3. snw analysis. the purpose of this analysis is to characterize and assess the internal environment of the enterprise in three positions: strong (advantages of the enterprise activity); weak (restrictions in the activity of the enterprise); neutral. when applying this type of evaluation analysis exclusively for the internal environment of the enterprise as a resource, as a result you can see signals for expansion of activity or vice versa collapse. 4. step (pest) analysis. it is carried out by means of a detailed description and evaluation of social, technological, economic and political factors affecting the organization's activities. the factors of direct and indirect impacts of the organization's external environment are described and analyzed in details. the estimation of the factors of the internal environment is completely excluded (hedouri et al., 2007). according to the results of this type of analysis, it is possible to draw conclusions on the identification of signals for the implementation of measures related to the development of the industrial enterprise or the introduction of preventive measures to ensure the production and economic performance of current activities. 5. swot analysis. this type of analysis is the most common among the main tools for monitoring the threats and opportunities for enterprise development, which involves identifying strengths and weaknesses in the company's activities, identifying development potential and evaluating opportunities for implementing strategic measures. http://www.virtual-economics.eu/ 58 www.virtual-economics.eu issn 2657-4047 (online) bożena kamińska virtual economics, vol. 1, no. 1, 2018 figure 1a. an iterative approach in anticipatory management of the development of an industrial enterprise (part 1) source: own research. monitoring the environment competitive analysis comparative industry analysis resource analysis snw analysis step/pest analysis swot analysis signal detection iterative signal processing і stage noise correction signal filter 1 independent collection of materials remove noise elements 1 filter 2 matching results remove noise elements 2 filter 3 decryption of data remove noise elements 3 filter 4 recoding data remove noise elements 4 http://www.virtual-economics.eu/ 59 www.virtual-economics.eu issn 2657-4047 (online) bożena kamińska virtual economics, vol. 1, no. 1, 2018 figure 1b. an iterative approach in anticipatory management of the development of an industrial enterprise (part 2) source: own research. filter 5 reconstruction of the content remove noise elements 5 filter 6 systematization of data the resulting signal іі stage feedback base of the signal intensity of signal in the sphere of activity 1 counter 1 intensity of signal in the sphere of activity 2 counter 2 intensity of signal in the sphere of activity n counter n is the signal confirmed? yes no adaptive signal transformation setting max/min threshold values preparation of active / passive actions http://www.virtual-economics.eu/ 60 www.virtual-economics.eu issn 2657-4047 (online) bożena kamińska virtual economics, vol. 1, no. 1, 2018 there are different interpretations of swot analysis, but the main stages are reduced to the following: stage 1 definition of goal. swot-analysis is always carried out for a certain purpose, it is not abstract. strengths and weaknesses, opportunities and threats concepts are relative and depend on time, place, character of actions of subjects. stage 2 definition of the object of research. the analysis can be subjected to the company as a whole, separate units (branches, etc.) or a business unit. stage 3 identify the strengths and weaknesses in terms of the goal. stage 4 identify market opportunities and threats in terms of the goal (barinov & kharchenko, 2006; milova & chernyshenko, 2015). according to the results of using one of the presented (or several) tools for monitoring the state of the industrial enterprise environment for the purpose of detecting impulse messages about a crisis or favorable development opportunities, a weak signal can be set, which is then transferred to the iterative processing unit (figure 1). in the block of iterative processing, the received signal passes through the first stage of the iterations the stage of noise correction of the signal. this stage can be characterized as a procedure for setting up an outgoing message that was detected during a monitoring process that was distorted by external noise.noise in this context should be understood as random variances of various kinds of information distorting the output signal data. also, noise can be called the difference between the content of the input signal and the content of the resulting signal after the noise correction. to perform the noise correction of the signal in the first stage of the iterative signal processing, which was discovered by means of monitoring the internal and external environment of the industrial enterprise, it is proposed to use appropriate filters, through which the passage through which gradually eliminates the noise distorting the original content of the signal. each installed noise correction filter in the first stage of iterative processing as a result of its work must process the content of the signal for a minimum time interval, the longer the time is spent on noise processing, the higher the noise concentration increases (over time, the received signals acquire new content, which is explained by the dynamics of the external environment, the influx of distorted information in the media, using of technologies of reflexive attacks of rival enterprises, etc.). the criteria for the effectiveness of filters are as follows: minimum processing time of the signal; the optimum amount of computing resources; the quality of the result. http://www.virtual-economics.eu/ 61 www.virtual-economics.eu issn 2657-4047 (online) bożena kamińska virtual economics, vol. 1, no. 1, 2018 each filter of the first stage of the iterative signal processing has a certain purpose and tasks, where at the output (from switching from one to another filter) a "purified" signal from a certain amount of noise must be transmitted. if, as a result of one or more filters, a signal was transmitted without sufficient noise reduction, the iterative loop will return to the required filter, where the number of repetitions that is necessary to clear the signal occurs. thus, by varying the number of processing iterations in the first stage and the degree of noisiness detected during the monitoring signal, it becomes possible to control such indicators as the quality of the formation of the resulting signals and the speed of the iteration cycle. the first stage of the noise processing of the signal is proposed to be carried out through the passage of six filters, where after each there is removal of noise. so, the purpose of the first filter is to conduct an independent self-scanning environment for determining the authenticity of the signal entering the block of iterative processing. the following methods can be used in the first filter operation: polls; interviews; scanning; focus groups and others. according to the results of the first noise correction filter, the second filter receives a signal with a cellular difference in the amount of noise. the second filter compares the results obtained by its own independent collection of materials on the topic of the detected signal with the content of the signal received from the internal or external environment. by the results of the second filter, the noise is removed again. on the third filter of the first stage of the iterative signal processing information is obtained from the adjacent topics that distort the original content of the signal (for example: according to the monitoring results, a signal has been received that changes the expectations of consumers about the output of a new type of product manufactured by an industrial enterprise, the removal of noise in the second filter in this an example will be the appearance of analogue products on the market, purchasing power of consumers, etc.). the purpose of the third filter is to decode the signal data, which is already presented with the noise difference that occurred through the passage of the first and second filters. turning to the example of the signal about changing the expectations of consumers, here the decoding will be a rough approximation to the original content of the signal (is there a change in consumer expectations regarding the technical or economic characteristics of the product? or qualitative characteristics?). approximate focusing on the original content of a signal deprived of noise on previous filters of noise correction will allow to define a coarse description of the coordinates of the field of useful information that was inserted into the signal before its distortion in time. http://www.virtual-economics.eu/ 62 www.virtual-economics.eu issn 2657-4047 (online) bożena kamińska virtual economics, vol. 1, no. 1, 2018 the purpose of the fourth filter is to adapt the decoded signal in the conditions of the operation of the industrial enterprise. if the content of the signal after passing through the previous filters and the loss of noise will not be related to the activities of the industrial enterprise, the end of the iterative cycle can be considered without going to the fourth filter. if, based on the results of the transcoding of the content of the signal, it is concluded that this signal carries information about the approaching threat or the creation of favorable opportunities for the implementation of development measures, such a signal with the adapted (recoded) content in relation to the industrial-economic activity of the industrial enterprise passes to the fifth filter. the purpose of the fifth filter is the final reconstruction of the original content that was inserted into the signal to distort it in time before it is detected in the process of monitoring the internal and external environment. through the passage of this filter, the signal that was pre-processed from the noise component on the first, second, third, and fourth filters of the first stage of the iterative processing into the last is removed the remnants of noise, or the socalled "zero information", which does not contain information about the original content of the signal, but only increases the width of its spectrum due to noise. if the result of the work of the previous filters is qualitative and corresponds to the previously established criteria for the effectiveness of the filters, enterprise managers will be able to obtain the original content ("body") of the signal, the correct interpretation of which will provide the basis for the preparation and adoption of management decisions on the development of the industrial enterprise, however, these solutions will be conditional, more detailed specification will be possible after passing the second stage of the iterative signal processing and confirmation or refutation signal. on the sixth and final filter of the first stage of the iterative signal processing there is a systematization of data, the purpose and tasks of which are: data generation for noise correction at subsequent iterative cycles; compilation of calculations to determine the difference between the signal (original content and the presence of noise, zero information) that was detected during the monitoring and reconstructed content of the signal received as a result of passage through filters; generalization of data about distorted information, grouping it on a basis for use as a tool for iterative processing of analog signals. systematizing the data on the sixth filter and inserting it into a database for future work on noise processing will allow more efficient removal of noise at subsequent iterations, obtaining a better resultant signal and losing less time for its processing. after passing the first stage of the iterative signal processing, the resulting signal falls on the second stage of the iterative processing the establishment of the signal response base at the industrial plant. at this stage, the scope of activity of an industrial enterprise is divided into blocks, where by means of the meter the highest frequency of the intensity of the manifestation of the resulting signal is established. as the base blocks for the activities of the enterprise can be distinguished: http://www.virtual-economics.eu/ 63 www.virtual-economics.eu issn 2657-4047 (online) bożena kamińska virtual economics, vol. 1, no. 1, 2018 1. production. 2. staff. 3. material security. 4. finance. 5. investments. 6. marketing. 7. administrative and management personnel. 8. security service of the industrial enterprise. 9. accounting. 10. quality and standardization service. 11. design and development department. 12. planning department. counter the frequency of the resulting signal in a given area of the industrial enterprises (or a few at a time) reflects the severity of the signal by which to draw conclusions about the confirmation or refutation of the detected signal. if the signal is refuted, that the counter displays zero or very low frequency intensity of display signal in a given area of the industrial enterprises actions of returning to the initial phase monitoring of the environment (a priori this stage is to carry continuous nature) to signal detection of the occurrence of critical events or identifying potential for developing. if, after passing the second stage of the iterative processing of the establishment of the base of the response of the signal, the sphere of activity of the enterprise was detected, where the average (high) frequency of the intensity of the resultant signal is recorded, an adaptive signal transformation occurs, that is, conditional management decisions prepared during the passage of the fifth filter of the first stage iterative signal processing will be practical in nature, corrected for possible changes that occurred in time, which was spent on the second stage of the iterative signal processing. it is expedient to establish a maximum and a minimum threshold value of the force of the detected and devoid of noise of the original signal in the established field of activity of the industrial enterprise (review base). setting the maximum and minimum threshold values is a necessary task, both in the case of forecasting the onset of crisis events, and in the case of identifying favorable conditions for developing. depending on the thresholds obtained, active or passive manual actions are set. active actions include: jerk; overtaking competitors; conquest of new markets; production of a new type of product; development of investment projects; http://www.virtual-economics.eu/ 64 www.virtual-economics.eu issn 2657-4047 (online) bożena kamińska virtual economics, vol. 1, no. 1, 2018 expansion of the park of production equipment; introduction of new technological lines; modernization of the park of production equipment; acquisition of assets; diversification; expansion of the range of products; opening of new directions of activity; rebranding; absorption of competitors; increase in the number of staff, etc. passive actions include: preservation of current values of indicators of production and economic activity; preservation of the existing market share; partial reduction of staff; saving of share capital; partial preservation of production; release of investment funds from development projects; reduction of development programs, etc. depending on the set maximum and minimum threshold values of the strength of the detected signal in a given area of the enterprise, a combination of several types of active and passive actions of the management to respond to the state of the internal and external environment is allowed. thus, the proposed use of the iterative approach anticipatory management, which is based on two-step iteration correction of signal noise and installation base response signal, providing a maximum precision of the original signal content and scope of industrial enterprises for the intensity of its manifestation. the developed approach can be applied in anticipatory management both in the internal and external environment of an industrial enterprise. the principle of iterative signal processing is versatile to control signals indicating the approach of critical events and opportunities for development. references ashley, w.c., & morrison, j.l. (1997). anticipatory management: tools for better decision making. the futurist, 31(5), 47–50. barinov, v. a., & kharchenko, v. l. (2006). swot-analiz: vzaimosvyazi vnutrennej i vneshnej sredy [swot-analysis: interconnections between the internal and external environment]. strategicheskij menedzhment strategic management (pp. 138-143). moskva: infra-m (in russian). berry, a., sweeting, r., & holt, r. (2007). constructing risk management: framing and reflexivity of small firm owner-managers. proceedings of the 1st european risk management conference, university of münster, 5–7 september, 1–23. http://www.virtual-economics.eu/ 65 www.virtual-economics.eu issn 2657-4047 (online) bożena kamińska virtual economics, vol. 1, no. 1, 2018 cockburn, a. (2008). using both incremental and iterative development. stsc crosstalk usaf software technology support center, 21(5), 27–30. guselbaeva, g., & pachkova, o. 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(2017). multi-criteria decision making: an example of sensitivity analysis. serbian journal of management, 12(1), 1-27. https://doi.org/10.5937/sjm129464 tan, r.r., aviso, k.b., cayamanda, c.d., chiu, a.s.f., promentilla, m.a.b., ubando, a.t., & yu, k.d.s. (2016). a fuzzy linear programming enterprise input–output model for optimal crisis operations in industrial complexes, international journal of production economics, 181, part b, 410-418. https://doi.org/10.1016/j.ijpe.2015.10.012 voloshchuk, l. o. (2014). klasyfikatsiia pidkhodiv ta metodiv formuvannia analitychnykh instrumentiv otsiniuvannia ekonomichnoi bezpeky promyslovoho pidpryiemstva [classification of approaches and methods of analytical tools for assessing the economic safety of an industrial enterprise]. economics: time realities, 5(15), 224-231 (in ukrainian). http://www.virtual-economics.eu/ кwilinski alex 55 www.virtual-economics.eu issn 2657-4047 (online) ihor hroznyi, mykhailo tymoshyk, and eduard malevski virtual economics, vol. 2, no. 3, 2019 2019 volume 2 number 3 (april) risk optimization of industrial enterprise ihor hroznyi, mykhailo tymoshyk, and eduard malevski abstract. industrial enterprise risk management must take into account the conditions of the activities that are carried out and the goals that are set out under these conditions. to solve this problem, a scientific and methodological approach to targeted risk optimization of an industrial enterprise was developed based on a set of models of comparing the goals of the enterprise under operation conditions, matching the available resources with the needs and choosing the methods of risk management according to the limitations by goals and resources. the use of the developed scientific and methodological approach enables the enterprise to choose the most effective methods of risk management. keywords: industrial enterprise, risk management, development, model, optimization, operation conditions jel classification: c44, d81 author(s): ihor hroznyi zaporizhzhya national university, 66, zhukovskogo street, zaporizhzhya, ukraine, 69600 e-mail: grozny_igor@ukr.net https://orcid.org/0000-0001-8083-3050 mykhailo tymoshyk ternopil ivan puluj national technical university, 56, ruska street, ternopil, ukraine, 46001 e-mail: lunnagroup@gmail.com https://orcid.org/0000-0001-5105-0241 eduard malevski donetsk state university of management, 58, karpinskogo street, mariupol, ukraine, 87513 e-mail: adramblerru1@rambler.ru https://orcid.org/0000-0001-5901-7251 citation: hroznyi, i., tymoshyk, m., malevski, e. (2019). risk optimization of industrial enterprise. virtual economics, 2(3), 55-72. https://doi.org/10.34021/ve.2019.02.03(5) received: january 3, 2019. revised: february 6, 2019. accepted: june 9, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) mailto:grozny_igor@ukr.net https://orcid.org/0000-0001-8083-3050 mailto:lunnagroup@gmail.com mailto:adramblerru1@rambler.ru https://doi.org/10.34021/ve.2019.02.03(5) https://creativecommons.org/licenses/by/4.0/ 56 www.virtual-economics.eu issn 2657-4047 (online) ihor hroznyi, mykhailo tymoshyk, and eduard malevski virtual economics, vol. 2, no. 3, 2019 1. introduction when managing the risks of an industrial enterprise, it should be borne in mind that under different conditions the approaches to optimize risks and the tolerable magnitudes and probabilities of these risks may differ. risk that is unacceptable in the ordinary course of business of an industrial enterprise, may well be tolerated under crisis management environment, where the enterprise must agree with risky strategies and choose between bad and very bad. therefore, the risk management of an industrial enterprise must take into account the current operating conditions and be based on the goals set by the owners and managers of the enterprise. in addition, different operating conditions of an industrial enterprise set different goals. therefore, the risk optimization of an industrial enterprise should be targeted. 2. literature review risk management is the identification, evaluation, and prioritization of risks (defined in iso 31000 as the effect of uncertainty on objectives) followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities. certain aspects of many of the risk management standards have come under criticism for having no measurable improvement on risk; whereas the confidence in estimates and decisions seem to increase. (hubbard & douglas, 2009). (chernenko, 2014) reviewed the main current directions of risk management. he identified the types of risk minimization, such as avoidance, reduction, conservation and transfer. in addition, chernenko considers separating the transformation and financing of risk, understood as either minimizing risk or creating reserves to secure it. the proposed classifications are relevant in view of the further improvement of industrial enterprise risk management methods. in turn, (sifumba et al., 2017) states that risk management is one of the most important issues being the key for business success, but can negatively affect the profitability if not realized properly. (klimenko, 2013) believes that industrial enterprise risk management should be implemented by using a cumulative approach based on the bifurcation nature of industrial development. the risk-taking strategy of the enterprise is based on the assumption at every phase of life cycle, and the enterprise aims to maximize potential. (stepanova & volkov, 2017) offered a hierarchical classification of risks based on their probabilities, which allows managing the levels of information risk of the enterprise. despite the prospect of the study, it should be noted that the management of an industrial enterprise needs to take into account not only information but other types of risks. 57 www.virtual-economics.eu issn 2657-4047 (online) ihor hroznyi, mykhailo tymoshyk, and eduard malevski virtual economics, vol. 2, no. 3, 2019 according to the standard iso 31000 "risk management is the principles and guidelines on implementation" iso (2009), the process of risk management consists of several steps as follows: the social scope of risk management; the identity and objectives of stakeholders; the basis upon which risks will be evaluated, constraints; defining a framework for the activity and an agenda for identification; developing an analysis of risks involved in the process; mitigation or solution of risks using available technological, human and organizational resources. common risk identification methods are: objectives-based risk identification; scenario-based risk identification; taxonomy-based risk identification – the taxonomy in taxonomy-based risk identification is a breakdown of possible risk sources. based on the taxonomy and knowledge of best practices, a questionnaire is compiled. the answers to the questions reveal risks (carr et al., 1993); common-risk checking – in several industries, lists with known risks are available; each risk in the list can be checked for application to a particular situation; risk charting (crockford & neil, 1986) – this method combines the above approaches by listing resources at risk, threats to those resources, modifying factors which may increase or decrease the risk and consequences an enterprise wishes to avoid. once risks have been identified and assessed, all techniques to manage the risk fall into one or more of these four major categories (dorfman & mark, 2007): avoidance (eliminate, withdraw from or not become involved); reduction (optimize – mitigate); sharing (transfer – outsource or insure); retention (accept and budget). planning how risk will be managed in the particular project (virine & trumper, 2007): assigning a risk officer; maintaining live project risk database; creating an anonymous risk reporting channel; preparing mitigation plans for risks that are chosen to be mitigated; summarizing planned and faced risks, effectiveness of mitigation activities, and effort spent for the risk management (simon & hillson, 2012). (vihlyaeva & fedya, 2013) consider that the main cause of risks is lack of information, therefore, in order to optimize the risks of an industrial enterprise it is necessary to intensify the work of collecting and processing information, to provide diagnostics of the problem, formulation of restrictions, identification of alternatives, the choice of solutions. despite the logic and validity of the proposed measures, the main obstacle to the practical application of 58 www.virtual-economics.eu issn 2657-4047 (online) ihor hroznyi, mykhailo tymoshyk, and eduard malevski virtual economics, vol. 2, no. 3, 2019 this approach is the lack of formalized methods for determining the optimization criteria and quantitative characteristics of decisions made. in addition, the contribution to solving the risk optimization problem by such scientists should be noted (bajgoric, 2011; better et al., 2008; bonaccolto & caporin, 2016; dźwigoł, 2018; dźwigoł & dźwigoł-barosz, 2018; dźwigoł & wolniak, 2018; dzwigoł et al., 2019; eskandari & fuschi & tvaronavičienė, 2016; rabelo, 2007; fukushima, 2006; hroznyi et al., 2018; kamioska, 2018; karpenko et al., 2018; kouvelis & yu, 1997; kelly, 2002; kuzmak et al., 2018; kvilinskyi & kravchenko, 2016; кwilinski, 2017, 2018a, 2018b, 2018c, 2019; kwilinski et al., 2019a, 2019b; mackevičius et al., 2018; okoli et al., 2016; paulusch, 2017; ramalingama, 2018; savchenko et al., 2019; tarasova, 2018; tkachenko et al., 2019; zeng & skibniewski, 2013; zhou et al., 2016). the essence of the optimization system lies in pre-planned measures aimed at identifying possible adverse situations and reducing the degree of their possible impact on the project to an acceptable level. at the same time, risk optimization includes such targeted actions as planning, identification, assessment, processing, control and documentation of risks (kaminska, 2018). in situations where uncertainty is at the core of the problem — as it is in risk management — a different strategy is required. in the field of optimization, there are various approaches designed to cope with uncertainty (fukushima, 2006; eskandari & rabelo, 2007). in this context, the exact values of the parameters (e.g. the data) of the optimization problem are not known with absolute certainty, but may vary to a larger or lesser extent depending on the nature of the factors they represent. robust optimization may be used when the parameters of the optimization problem are known only within a finite set of values. in order to measure the robustness of a given solution, different criteria may be used. (kouvelis & yu, 1997) identify three criteria: 1) absolute robustness; 2) robust deviation; 3) relative robustness. practically every real-world situation involves uncertainty and risk, creating a need for optimization methods that can handle uncertainty in model data and input parameters. (better et al., 2008) described two popular methods, scenario optimization and robust optimization, that seek to overcome limitations of classical optimization approaches for dealing with uncertainty and that undertake to find high-quality solutions that are feasible under as many scenarios as possible. (opalenko, 2015) proposes to optimize the risks of a manufacturing enterprise based on four main types of risks (internal, which are divided into financial and non-financial, as well as external, which are market and regulatory) and four main activities of the manufacturing 59 www.virtual-economics.eu issn 2657-4047 (online) ihor hroznyi, mykhailo tymoshyk, and eduard malevski virtual economics, vol. 2, no. 3, 2019 enterprise (production, sales, management and financial activities). for each activity, the risk weight, the necessary costs and the maximum risk reduction are established; the purpose of optimization is to minimize the total necessary costs. the main disadvantage of this approach is the lack of attention of how it is proposed to reduce individual risks and to ignore the variety of generally accepted risk management methods. as a whole, it can be concluded that the majority of researchers did not take into account the current conditions of operation of an industrial enterprise and its objectives when developing risk optimization methods, which have an impact on the methods of risk management that can be used. 3. methods when managing the risks of an industrial enterprise based on the principles of goal-oriented optimization, it is necessary to take into account the list of possible goals for each type of enterprise functioning and dependence on the current capabilities of the enterprise. it is the current capabilities that determine the goals of an industrial enterprise in risk management, because, for example, if an enterprise lacks resources, it has limited capacity to exert influence on risky situations. at the same time, depending on the operating conditions, these restrictions may be extended, for example, in times of crisis, when an enterprise is already in danger of bankruptcy, it may be advisable to take greater risks than is reasonably practicable. the industrial enterprise risk optimization system receives the necessary input from the risk assessment system and the targeting system which is shown in fig. 1. the risk assessment system provides risk mapping and formulation of the operating conditions for risk map is being developed. in turn, the industrial targeting system provides its strategic goals and objectives that must be addressed in order to achieve goals. risk optimization is performed by using three models of primary data processing that provide formalized processing and validation of conclusions regarding risk optimization measures: model for comparing the goals of the enterprise under operating conditions and typical risks for these conditions; model for matching existing resources with the needs and outcomes of tasks; model for choosing risk management methods. the goal-setting model under operating conditions and the typical risks for these conditions provide for the formalization of the strategic goals of the industrial enterprise and for determining how those goals coincide with the specific risks inherent in the existing operating conditions. the model is based on the use of fuzzy set theory and enables the intersection of the goals and objectives of the enterprise with the goals of risk management, which are conditioned by the operating conditions. for each purpose of an industrial enterprise it is determined that negative deviation of the planned indicators is inadmissible. for this purpose, a set of membership functions is constructed for fuzzy sets corresponding to the linguistic variable ”tolerance.” the 60 www.virtual-economics.eu issn 2657-4047 (online) ihor hroznyi, mykhailo tymoshyk, and eduard malevski virtual economics, vol. 2, no. 3, 2019 membership function argument uses a metric that reflects the goal. for each type of operation of an industrial enterprise, its goal achievement indicators, or several such indicators, are established, and a function is built that relates indicator to the net profit and total sales of the industrial enterprise. figure 1. the structure of risk management of an industrial enterprise under various operating conditions source: own research. the membership function has a sigmoidal appearance, since all values of deviation less than a certain limit are admissible, all values above another limit are invalid, and those between them depend on the personal view of the leader and are therefore described by fuzzy sets: industrial enterprise risk assessment system map of actual risks of industrial enterprise conditions of operation of the enterprise targeting system of industrial enterprise objectives of the industrial enterprise the tasks of an industrial enterprise industrial enterprise risk minimization system model of goal matching to operating conditions target limits model of matching available resources to needs classification of risks by resource requirements highest management mid-level management model of choice of risk management methods risk minimization strategy 61 www.virtual-economics.eu issn 2657-4047 (online) ihor hroznyi, mykhailo tymoshyk, and eduard malevski virtual economics, vol. 2, no. 3, 2019 { (1) ),( vpfx x  (2) where: ),,( bax g  – the function of belonging to the linguistic variable "tolerance"; x – deviation of actual target from the planned one; ),( vpf x – a function that connects the deviation of the actual target from the planned profit and sales volume of the industrial enterprise; ba, – parameters of the sigmoidal membership function; p – net profit of an industrial enterprise; v – volume of industrial enterprise sales. similarly, the fuzzy set membership function can be constructed for each industrial enterprise task, if the depth of analysis requires it. depending on the conditions of operation of an industrial enterprise, different criteria are set when constructing the function of belonging to a fuzzy set, which characterizes the inadmissibility of deviations when reaching the goal. for normal operating activities, the main thing is to maintain profitability of the enterprise. therefore, the criterion is a change in profitability. when operating in an industrial manufacturing business, they end up trying to increase the volume of work to capture most of the market and need to use in the market that exists but needs to be kept clean. thus, to create the functionality of accessory in the production of an industrial enterprise is a pure existing or a separate place with a possible coefficient. finally, the functioning of an industrial enterprise under crisis conditions is of paramount value to solvency. therefore, given the management under crisis and generalized indicators with the goals of crisis management structure of the service, there are accessories that arbitrarily chose to worsen the current number of opportunities. therefore, depending on the operating conditions, the function of belonging to the linguistic variable ”tolerance” has different targets. in turn, for each risk identified in the assessment process, the expected losses in the event of a negative event or several adverse events in the case of complex risk are identified. these losses can also be seen as a reduction in net income. for industrial enterprise risk, a membership function is formed that describes the linguistic variable ”tolerable risk” and which has a z-shaped form (kelly, 2002): 62 www.virtual-economics.eu issn 2657-4047 (online) ihor hroznyi, mykhailo tymoshyk, and eduard malevski virtual economics, vol. 2, no. 3, 2019 { (3) ),( vrpfy y  (4) where: ),,( dcy r  – the function of belonging to the linguistic variable "acceptable risk"; y – the impact of the risk on the deviation of the actual target from the planned; ),( vrpf y  – a function relates the deviation of the actual target from the projected profit and risk-based sales volume; dc, – parameters of z-membership function; p – net profit of an industrial enterprise; r – expected loss from risk; v – volume of industrial enterprise sales. as a result of the intersection of fuzzy sets of ”tolerance” and ”acceptable risk,” you can get a fuzzy set that reflects constraints on the goals. for each type of functioning of an industrial enterprise, intersection is carried out. thus, the goal-setting model under operating conditions and the typical risks for these conditions is: , gro  (5) ),min( gro   (6) ),,( dcy rr   (7) ),,( bax gg   (8) where: o  – a fuzzy set that limits the scope of possible goals and risks; r  – a fuzzy set of ”acceptable risk”; g  – a fuzzy set of “inadmissible deviation”; y – the impact of the risk on the deviation of the actual target from the planned ; x – deviation of the actual target from the planned, where profitability is the target for normal development, profit or sales volume for development conditions, current liquidity for crisis conditions ; ),,( bax g  – the function of belonging to a linguistic variable of ”inadmissible deviation”; 63 www.virtual-economics.eu issn 2657-4047 (online) ihor hroznyi, mykhailo tymoshyk, and eduard malevski virtual economics, vol. 2, no. 3, 2019 ),,( dcy r  the function of belonging to the linguistic variable of ”acceptable risk.” for many risks and goals, the fuzzy sets g  and r  can have several variables that meet different goals and different risks. a graphical representation of the intersection of fuzzy sets with one risk and one goal. the shaded area is the area of feasible solutions in risk management in different operating conditions of an industrial enterprise. thus, the goal-setting model under operating conditions and the typical risks for these conditions makes it possible to identify the constraints and management decisions have too high risks or are unacceptable in view of achieving the global goals of an industrial enterprise. the needs matching model provides a classification of risks according to the resources needed to optimize them and the magnitude of the losses from those risks. the model based on the assumption that any task of industrial enterprise has to perform may have negative implementation scenarios that carry the risk of direct monetary losses or the cost overruns of the various types of resources required to complete the task. to identify resource constraints, it is suggested that each task of an industrial enterprise be compared with many characteristics that reflect the effect of the tasks, the cost of resources to accomplish the tasks, and the assessment of the associated risks. as a result, many of the tasks of an industrial enterprise are:  ,,...,,..., 1 mm qqqq  (9)   mmrrssfq mmmmmm  ,,,,, max (10) where: q – a set of tasks of an industrial enterprise;   mmmmm rrssf ,,,, max – characteristics of m-th task of an industrial enterprise; m f – the economic effect of the m-th task of an industrial enterprise; m s – the amount of expenses that are planned for the m-th task of an industrial enterprise; max m s – the maximum amount of costs that can be spent to fulfill the m-th task of an industrial enterprise; m r – the ratio of the consequences of negative and positive scenarios for the task; m r – mathematical expectation of the consequences of risks for the m-th task of an industrial enterprise; m – a set of tasks that are planned at an industrial enterprise. as a result of the analysis of tasks, resources and risks, the whole set of risks can be classified into several groups: risks that result in greater losses than the effect of the task; 64 www.virtual-economics.eu issn 2657-4047 (online) ihor hroznyi, mykhailo tymoshyk, and eduard malevski virtual economics, vol. 2, no. 3, 2019 risks that are personally critical to resources; risks that, together with others, are resource-critical; risks for which the loss / benefit ratio is worse than the corresponding effect and cost estimate for an industrial enterprise. the risks, the losses of which are greater than the effect of the task, are a set of 1  , for which the condition is fulfilled: 11 mm fr  11 mm  mm  1 (13) risks that are personally resource-critical have the expectation of a waste of resources, which more than the enterprise has for a single task, are a set of 2  , for which the condition is fulfilled: 22 mm sr  22 mm  mm  2 (14) risks that, along with others, are resource-critical, are a set of 3  , for which the condition is fulfilled:   3 3 3 3 m m m m sr 33 mm  mm  3 (15) the risks to which the loss-benefit ratio is worse than the corresponding impact-cost estimate for an industrial enterprise are a set of 4  , for which the condition is fulfilled: 4 4 4 m m m s f r  44 mm  mm  4 (16) 65 www.virtual-economics.eu issn 2657-4047 (online) ihor hroznyi, mykhailo tymoshyk, and eduard malevski virtual economics, vol. 2, no. 3, 2019 thus, the classification of risks according to their relevance to the tasks of the industrial enterprise, the resources required for these tasks, indicators of utility tasks and risks, etc. each risk can belong to several groups at the same time. the model of choice of methods of risk management based on the established restrictions on the purposes and classification of risks according to resource needs gives an opportunity to choose one of the possible methods of risk management. traditionally, the following risk management methods are distinguished (dorfman, 2012): evasion when an enterprise abandons risky projects, counterparties, products, etc.; diversification, where an enterprise carries out several activities or releases several products in a bypass that only one or more of them will result in losses and others will compensate for those losses; localization when the company creates individual projects or units with a limited budget, which allows to limit the risk to the maximum size and to better control its occurrence; compensation when an entity creates reserves (insurance or simply financial reserves) to cover risk losses in the event of adverse events. the task of risk optimization at an industrial enterprise is to determine which management method is the most appropriate, taking into account the current conditions of operation of the enterprise goals and available resources. for this purpose, optimization is performed by the criterion of maximizing the effect of achieving the goals of an industrial enterprise, while limiting the size of the risks and the types of the risks that the enterprise can handle. maximizing the effect of achieving the goals is in the context of tasks that decipher the goals of the industrial enterprise. to do this, use the target function:   max 4 1 ,,          mm u mumum lbf (17) where: mf – the economic effect of the m-th task of an industrial enterprise; mu b , – a logical variable that takes a value of 0 or 1, depending on whether it is appropriate to use the u-type of risk management for the m-th task; mu l , – the cost of implementing the u-th type of risk management for the m-th task; u – the type of risk management index, where 1-evasion, 2-diversification, 3-localization, 4-compensation. no more than one risk management method may be used for each risk, otherwise the risk could be decomposed into components. therefore, there is a limitation that only one or no risk management method is used:    4 1 , 1 u mu b (18) 66 www.virtual-economics.eu issn 2657-4047 (online) ihor hroznyi, mykhailo tymoshyk, and eduard malevski virtual economics, vol. 2, no. 3, 2019 possible risk management methods are identified for each risk group, which is classified by using a model of matching available resources. risks that result in greater losses than the effect of the task cannot be minimized through compensation and localization, so they are subject to the following limitations: (19) (20) risks that are personally critical to resources cannot be minimized by ways other than evasion, so they are subject to the following limitations: (21) risks that, together with others, are resource-critical, need to be eliminated from the highest risk of the same type of risk: ̅ ̅ (22) risks in which the loss/benefit ratio is worse than the corresponding effect and cost estimate for an industrial enterprise's task are not appropriate to minimize through localization or compensation: (23) in addition to the ratio of risks to specific resource groups, consideration should be given to identifying risks in the area of possible solutions for risk tolerance and non-tolerance for each target. if the risk solution is not in the area of acceptable solutions o  , then it must necessarily use risk management techniques, otherwise the enterprise may take that risk. that is, if the risk solution does not belong to the set o  , an additional limitation is:    4 1 , 0 u mu b (24) thus, the use of the proposed model of selection of risk management methods based on the established limits on the objectives and the classification of risks according to resource requirements allows to select the most favorable risk management program for the industrial enterprise in achieving goals. 67 www.virtual-economics.eu issn 2657-4047 (online) ihor hroznyi, mykhailo tymoshyk, and eduard malevski virtual economics, vol. 2, no. 3, 2019 the developed set of models for comparing the goals of the enterprise under operation conditions and resources forms the based on scientific and methodological approach to targeted risk, the optimization of an industrial enterprise, through which the enterprise can be adapted to different operating conditions and improve efficiency by minimizing losses from negative events. 4. results and discussion when testing the developed scientific-methodical approach of risk-oriented optimization of industrial enterprise risks at the kerammash, a selection of the most expedient methods for managing the risks of reducing profitability in the ordinary course of business was made. the main risks for pjsc “kerammash” are the exceedance of the defect rate, excess of the equipment downtime due to breakdowns, excess of the downtime when changing the production program, decrease of the market volume, decrease of competitive prices for products. selected, using the developed scientific and methodological approach, targeted risk optimization of industrial enterprise risk management methods are shown in table 1. table 1. selected risk management methods for pjsc ”kerammash” risk indicators the risk management method chosen selected events exceeding rate of spoiled goods avoidance improvement of the defect detection system in the initial stages of production to reduce the cost of repairing the defect breakdown of equipment downtime due to breakdowns avoidance optimization of equipment prevention schedule exceeding rate of downtime when changing production program avoidance improvement of the scheduling system to prevent downtime decrease in market volume by 10% or more percent diversification development of production of related products 5% reduction in competitive prices for products compensation conclusion of long-term contracts with consumers source: own research. most of these risk management measures do not require additional costs, but only developing the production of related products. at the same time, they can significantly reduce the risk of losses. the estimated results of the implementation of the risk management measures of pjsc “kerammash” are shown in table 2. 68 www.virtual-economics.eu issn 2657-4047 (online) ihor hroznyi, mykhailo tymoshyk, and eduard malevski virtual economics, vol. 2, no. 3, 2019 table 2. results of implementation of risk management measures of pjsc “kerammash” selected events cost of implementation, thousand uah reduction of possible losses, thousand uah improvement of the defect detection system in the initial stages of production to reduce the cost of repairing the defect 0 19 optimization of equipment prevention schedule 0 28 improvement of the scheduling system to prevent downtime 0 66 development of production of related products 283 1688 conclusion of long-term contracts with consumers 0 32 source: own research. the total cost of risk management of pjsc “kerammash” is uah 283 thousand and the total saving is uah 1834 thousand. thus, the total economic effect equals uah 1,551 thousand. 5. conclusions it is established that the risk management capabilities of an industrial enterprise differ depending on the operation conditions and the goals set. depending on the objectives set, the targets differ and the risk management system must therefore consider which deviations are acceptable. an analysis of industrial enterprise risk management approaches has revealed that most researchers have not taken into account the current operating conditions of an industrial enterprise and objectives, which have implications for risk management methods that are available for using when developing risk optimization methods. it is proposed to carry out the optimization of risks of an industrial enterprise using three models of processing of initial data that provide formalized processing and justification of conclusions about measures for optimization of risks: a model of comparison of the goals of the enterprise with the conditions of operation and typical risks for these conditions; model of matching available resources with needs; a model for choosing risk management methods. it is substantiated that the task of risk optimization at an industrial enterprise is to determine which management method is most appropriate taking into account the current conditions of operation of the enterprise, goals and available resources. for this purpose, optimization is performed by the criterion of maximizing the effect of achieving the goals of an industrial enterprise, while limiting the size of the risks and the types of risks that the enterprise can handle. maximizing the effect of achieving the goals is in the context of tasks that decipher the goals of the industrial enterprise. 69 www.virtual-economics.eu issn 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(2016). research on the robust optimization of the enterprise's decision on the investment to the collaborative innovation: under the risk constraints. chaos, solitons & fractals, 89, 284-289. https://doi.org/10.1016/j.chaos.2015.11.021 http://dspace.snu.edu.ua:8080/jspui/handle/123456789/1832 https://doi.org/10.34021/ve.2018.01.01(3) http://doi.org/10.21272/mmi.2019.2-20 https://doi.org/10.1080/17517575.2012.690049 https://doi.org/10.1016/j.chaos.2015.11.021 71 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, iryna tkachenko, polina puzyrova, and andriy klochko virtual economics, vol. 2, no. 4, 2019 2019 volume 2 number 4 (october) organizational and economic mechanism of a business security as a guarantee of its sustainable development volodymyr tkachenko, iryna tkachenko, polina puzyrova, and andriy klochko abstract. in the process of the writing of this article, it was established that the organizational and economic mechanism of a business security ensuring involves the use of various techniques, methods, and tools. their combination is necessary to ensure a reliable security system and stable sustainable development of a business activity as a whole. it has been established that enterprises of different sizes, types, volumes of activity possess unequal organizational and financial capabilities. in addition, various is the level of risk under which business entities are engaged. however, the conclusion is definite that the implementation of the organizational and economic mechanism for the enterprise security ensuring is vital in financial and economic aspects and can be organized in different business areas in different ways. it is proved that the security mechanism action from the point of view of financial and economic aspect implies enterprise adaptation to innovations under the following conditions: the innovations are to be maximally ready for implementation; the motivation to implement them is the need to protect the enterprise interests; the probability of obtaining a positive result in the implementation of innovations should be high. it has been established that significant factors in the process of increasing the level of a business security are the financial and economic measures, which aim to cover losses and to eliminate the causes of their occurrence, to recover (preserve) the liquidity and solvency, to reduce the amount of debt, to improve the working capital structure, etc. it is proved that further research in the field of planning and implementation of tactical measures for ensuring the financial and economic security of business is needed. it is aimed at the assessment and analysis of the level of a business security and its dynamics, which will allow to determine the effectiveness of the implemented measures; an assessment of the efficiency of utilization of the enterprise financial potential, which is the main basis for the implementation of measures to ensure the organizational and economic mechanism of a business security. since the implementation of organizational and economic tools into the security field often requires the allocation of significant financial resources and opportunities (financial potential), the substantiation of scientific recommendations for assessing costeffectiveness become significant. it was found that the organizational and economic mechanism of a business security ensuring would effectively use corporate resources, create preconditions for achieving business targets, timely identify and optimize all possible hazards, threats, and risks of the enterprise activity in the conditions of acute competition and changing environment. it is recommended to propose the following measures to enhance business security: development and implementation of security system (structure) in business processes of the enterprise activity; improvement and optimization of the existing enterprise security service; business security outsourcing services; services of the enterprise personnel security; provision of services to provide economic and internal 72 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, iryna tkachenko, polina puzyrova, and andriy klochko virtual economics, vol. 2, no. 4, 2019 security of the enterprise; providing necessary data and information for the business functioning security insurances; checking (auditing) of existing security services of enterprises for their effective work and reliability; services for the enterprise security employees training (advanced training); personnel selection of professionally trained staff for the enterprise security service. keywords: economic security, enterprise, efficiency, business security, development, management, organizational and economic mechanism. jel classification: m00, o10, l50 authors: volodymyr tkachenko the london academy of science and business, 3rd floor, 120 baker street, london, england, w1u 6tu e-mail: vladymyr8888@gmail.com https://orcid.org/0000-0003-2114-7194 iryna tkachenko academy of the state penitentiary service, 34, honcha street, chernihiv, ukraine, 14000 e-mail: irinat116@gmail.com https://orcid.org/0000-0001-9068-1054 polina puzyrova kyiv national university of technologies and design (knutd), 2, nemyrovycha-danchenka street, kyiv, ukraine, 01011 e-mail: komaretskaya@bigmir.net https://orcid.org/0000-0003-0839-8730 andriy klochko national academy for public administration under the president of ukraine, 20, ezhena pottier street, kyiv, ukraine, 03057 e-mail: klochko.andriy@gmail.com https://orcid.org/0000-0002-1691-2333 citation: tkachenko, v., tkachenko, i., puzyrova, p., & klochko, a. (2019). organizational and economic mechanism of a business security as a guarantee of its sustainable development. virtual economics, 2(4), 71-85. https://doi.org/10.34021/ve.2019.02.04(4) received: september 3, 2019. revised: september 29, 2019. accepted: october 3, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://orcid.org/0000-0003-2114-7194 https://orcid.org/0000-0001-9068-1054 https://orcid.org/0000-0003-0839-8730 mailto:klochko.andriy@gmail.com https://orcid.org/0000-0002-1691-2333 https://creativecommons.org/licenses/by/4.0/ 73 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, iryna tkachenko, polina puzyrova, and andriy klochko virtual economics, vol. 2, no. 4, 2019 1. introduction economic security of a business is a complex concept that connects not so much with the internal state of the business itself, as with the external environment influence, the subjects that it interacts with. thereby, it is more likely to state that business economic security creates coherence, balance of interests of the enterprise and the interests of environmental subjects (andrushkiv & maliuta, 2016; demirgüç-kunt et al., 2017). from this point of view, economic security of a business can be considered as the practical implementation of the theory provisions of resource interdependence, according to which the enterprise should take into account not only its own interests, but also the interests of the partners, whose activity range can be very broad (bertay et al., 2017). exactly, from this perspective of coherence of the enterprise interests and interacting subjects of the external environment, it is supposed to explore the concept of business economic security. 2. literature review the main issues related to modern aspects of economic security, management of economic security, its components and mechanism were covered in the following works of ukrainian scientists: (andrushkiv & maliuta, 2016; bilomistna et al., 2014) theoretical and methodological provisions of organization and economic security ensuring at the enterprise were considered. the organization of anti-raiding experience measures in the conditions of both ukrainian and cis countries enterprises and business activity is generalized; the origin and nature of raiding are presented; the classification that discloses methods and technology of property seizure with the use of experience, economic and legal means of protection against the raider seizure of the enterprise are proposed. next group of scientists (bondarenko, 2014; boiko et al., 2019; dzwigol et al., 2019a; 2019c; kwilinski, 2018; 2019a; 2019b; 2019c; savchenko et al., 2019) examined the economic security of an innovative enterprise, where they considered the essence and the basic principles of the economic security development and functioning system of innovative enterprises, the process and mechanism of this system managing; revealed the essence, basic functions and significance of economic security system management in the activity of the modern innovative enterprise. scientists (iershova et al., 2019) have revealed the theoretical and methodological foundations of enterprise economic security management, its place and role in the enterprise management system. for effective functioning and development of enterprises, the authors developed and offered methods of diagnostics of threats and complex estimation of the level of economic safety of the enterprises, organizational support of economic safety management of the enterprises. the authors have developed, and proposed the methods of threat diagnostics and the comprehensive evaluation of the level of economic security of the enterprises, of the economic security organizational management of the enterprises. the paper (momot, 74 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, iryna tkachenko, polina puzyrova, and andriy klochko virtual economics, vol. 2, no. 4, 2019 2015; dzwigol et al., 2019b) presents theoretical and methodological approaches of economic security ensuring at national and regional levels, development and practical implementation of tools, assessing and monitoring the european standards level of financial and economic security, systematic analysis of risks corruption to ensure effective interaction of state anti-corruption issues. the authors improved the information and analytical support processes of strategic analytics and audit in the system of financial and economic security of the state, region, business entities in the conditions of the aggravation of threats and challenges of a new type in the field of national and international security and absorption of european integration processes, taking into account the importance of the ukrainian national security policy adaptation within the framework of the european civilization model. in foreign countries, the issues of economic security were studied in the works of e. azara, l. brown, b. brody, 3. brzezinski, r. jackson, d. kauffman, l. kozhenovski, w. lippman, g. morgenthau, g. foster and others. 3. methods to write the article, the following general scientific and special methods of scientific research were used: concretization and abstraction – for consensual determination of economic security; grouping – for systematization approaches to management of the organizational and economic mechanism of economic security; logical generalization and comparison – to assess the mechanism of management of economic security of the enterprise; analysis and synthesis – with the study of cause-effect relations between the components of economic security, and the interests of the enterprise; formalization and systematization – in determining the conceptual principles of management of the financial component of the economic security of a business. 4. results and discussion economic security of a business can be considered as a measure of coherence in time and space of economic interests of the enterprise with the entity’s interests connected with the external environment acting outside the enterprise (buse & wu, 2007; cyert & march, 1992). proposed understanding of business economic security allows to assert that the enterprise activity itself is economically secured if its economic interests are cohered with the interests of the external environment consumers, suppliers, competitors, investors, the state and society as a whole (lien, 2017). the compacted systematization of external environmental entities, which interact with the enterprise, can be represented by the following directions (fig. 1) (andrushkiv & maliuta, 2016). in the study of the concept of “economic security of enterprises” (tkachenko et al., 2019a; 2019b; 2019c; 2019d), it follows that there is the study of the basic concept of “economic security” with the notion of “interests of the enterprise”, as well as naturally related to it the criterion of company’s interests observance (sobolev & soboleva, 2015). 75 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, iryna tkachenko, polina puzyrova, and andriy klochko virtual economics, vol. 2, no. 4, 2019 figure 1. the subjects of external environment interaction with the enterprise source: (sobolev & soboleva, 2015). the interpretation of the word “interest” meaning allows us to conclude that this is the benefit, the profit, the income, and the result of studying of enterprise interests as its interaction with the external environment subjects, which actively fulfill its activity, forcibly or by enterprise choice, which results in providing profit (andrushkiv & maliuta, 2016; drucker, 1986). the interests of enterprises are inalienable from their entities, as the interests of the enterprise are personalized category (dzhafarova et al., 2019). in this regard, it is necessary to allocate the enterprise interests. personification of the enterprise entities interests is conditioned by such factors as the form of ownership on the means of production and, accordingly, organizational and legal form of enterprise activity, as well as the kind of interests. according to these factors, the pyramid of enterprise interests can be presented in such a way which is shown in fig. 2 (andrushkiv & maliuta, 2016; johnson & scholes, 1993). external environment entities that interact with the enterprise sphere of financial support sphere of personnel providing sphere of resource support sphere of product sales financial mediators. investors. finance market. labor market. experts and consultants. consulting firms. suppliers of materials. equipment suppliers. innovative firms. market counterparties. consumers. marketing firms. 76 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, iryna tkachenko, polina puzyrova, and andriy klochko virtual economics, vol. 2, no. 4, 2019 figure 2. pyramid of interests according to the signs of systematization of enterprise interests source: (andrushkiv & maliuta, 2016). the control entity forms the system of interests of the company and, consequently, influences its economic security. real control over of the enterprise activities may be carried out by the third party entities, for example, creditors (hlynska, 2016; gorton et al., 2010). the coincidence or divergence of interests of the controlling entity and the enterprise is important (dźwigoł & wolniak, 2018; mavrotas & vinogradov, 2007). if their interests coincide, if the controlling entity has investments significant in terms of the structure of the time distribution the pyramid of enterprise entities interestes systematization of enterprises interests under certain signs signs economic, social, environmental, political nature of the interests of voluntary (natural), coercive global, priority, secondary current, strategic sectoral, regional, functional the owner of production means the leadership of the enterprise the management team of the enterprise the staff of the enterprise type of interests nature of interests significance level localisation of interests 77 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, iryna tkachenko, polina puzyrova, and andriy klochko virtual economics, vol. 2, no. 4, 2019 enterprise asset, for example, in the form of credits, if the controlling entity is interested in the sustainable and dynamic development of the enterprise, then the presence of the controlling entity cannot be considered as a negative factor in the enterprise development (andrushkiv & maliuta, 2016; gorton et al., 2010). due to the large number of environmental entities with which the enterprise directly or indirectly interacts, the interests of the enterprise are very diverse, and each enterprise is characterized by its own totality of interests, in some ways related to each other, having a different status, and belonging to different entities. the interests of the enterprise do not remain constant and change over time, the diversity and mobility of the enterprise interests cause the need for their systematization by a number of signs and arrangements based on this systematization (momot, 2015). therefore, it is advisable to systematize the enterprise interests in accordance with certain signs (fig. 2), (andrushkiv & maliuta, 2016). based on the study, it is expedient to distinguish a number of principles on which the process of forming the system of enterprise interests and ensuring its economic security is built (fig.3), (andrushkiv & maliuta, 2016). the process of forming the system of enterprise interests and ensuring its economic security complexity (systematic) implies the creation of such a security system, which would provide protection of the enterprise, its property, staff, information, various spheres of activity from all sorts of hazards and threats, force majeure circumstances, that is, security system. continuity priority measures preventing (timeliness) legislation planning security system should be built so that it can detect various destructive factors in the early stages, take measures to prevent their harmful actions and damage to the enterprise. security system should be built so that it operates constantly depending on the enterprise interests in the face of risk and counteraction to attackers. all actions to ensure the security of the enterprise should be carried out on the basis of the current legislation and not contradict it. to organize the security system functioning. it allows each participant to act logically in a consistent manner, strictly fulfilling the duties assigned to him. economy the combination of publicity and privacy the security system should be designed in such a way that the cost of providing was economically feasible, and the cost of expenditure was optimal and did not exceeded the level of the loss of their economic value. the ability, timely, to detect and prevent potential and real hazards and threats these are a number of ways, features, means, security methods that need to be legalized and well known by a very narrow circle of professionals, which will allow to deal more effectively both internal and external threats. principle principle characteristic competency security issues are handled by professionals, deeply aware and experienced in this case, which can timely assess the circumstances and make the right decision. 78 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, iryna tkachenko, polina puzyrova, and andriy klochko virtual economics, vol. 2, no. 4, 2019 figure 3. principles on which the process of forming the system of the enterprise interests and ensuring its economic security is built source: (andrushkiv & maliuta, 2016). organizational and economic mechanism of business security (green et al., 1991; hayesroth, 1991) (objects, subjects, principles, security functions, enterprise security policy, strategies) is a system of opinions, measures, decisions, actions in the field of security that creates favourable conditions for business targets achievement, that is, the security policy allows the company to perform the production program to produce competitive products (goods, services, works), increase production efficiency, increase ownership, get profits, etc. (andrushkiv & maliuta, 2016; korchevska & kokoreva, 2016). the security strategy is a set of the most significant solutions aimed at ensuring the programmatic level of security of the enterprise. the security strategies are different in their content. in practice, there are three types of enterprise security strategies. they are shown in fig. 4: figure 4. enterprise security strategies source: (korchevska & kokoreva, 2016). it should also be noted that the security system of the business is delimited by many interconnected elements that ensure the security of the enterprise and the targets of its business achievement (neanidis, 2019; osberg, 1997). the elements of such system are the object and security entity, security management mechanism, as well as strategic actions for security management. the object of security is the fact that the security efforts are directed. i strategy security strategy, is connected with the need to suddenly react to really arisen threat of industrial activity, property, personnel, etc. іі strategy security strategy, focused on prediction, advance detection of hazards and threats, study of economic and criminal situations of the enterprise. ііі strategy security strategy, aimed at compensation (recovery, compensation) of damage inflicted. strategies 79 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, iryna tkachenko, polina puzyrova, and andriy klochko virtual economics, vol. 2, no. 4, 2019 the objects include: different activities of the enterprise (production, commerce, delivery, management, etc.); enterprise property and resources (financial, material, and technical, information, intellectual, etc.); staff of the firm, its managers, shareholders, various structural subdivisions, services, partners, employees possessing information which is a commercial secret, etc. (liashenko, 2011; mishchenko et al., 2019). the enterprise security entities are those persons, subdivisions, services, bodies, departments, institutions which are directly engaged in business security ensuring. as the enterprise security activity is multifaceted, this task cannot be accomplished with the help of one or two bodies. as a rule, many entities are classified as security entities, which can be classified by different signs (andrushkiv & maliuta, 2016; nebava, 2017; nikitina et al., 2019): a) depending on their affiliation: the entities engaged in these activities directly at the enterprise, as well as external bodies and organizations; b) depending on the subject of direct engagement: special entities and other staff of the enterprise; c) depending on the action (impact) on the security entity: the entities of direct and indirect purpose; d) depending on legitimacy: official bodies and criminal structures (“roofs”); e) depending on the level of subordination: to public authorities and non-state bodies. therefore, all security entities can be identified in two groups (kadan et al., 2016): the first group includes those entities that enter the structure of the business itself and solve the tasks for ensuring its safety (special entities, as well as the rest of the company staff, who also care about the safety of their enterprise); the second group includes those entities that are outside the enterprise and are not subordinate to its management. first of all these are the state bodies that create the conditions for ensuring the security of the enterprise: legislative bodies – adopt laws that create the legal basis for security activities at the level of the state, region, enterprises and individuals; executive authorities – implement policies, detail security mechanisms; judicial authorities – ensure compliance with the legal rights of the enterprise and its employees; state institutions – carry out border protection, customs, currency export, tax control, etc.; law enforcement agencies – fight offenses and crimes; system of scientific institutions – implements the tasks of scientific elaboration of problems of security and training in that field (krainer, 2017; collins & gallagher, 2016). with the beginning of the market reforms, both state and non-state organizations, agencies, institutions began to form. these are various private security and detective organizations, 80 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, iryna tkachenko, polina puzyrova, and andriy klochko virtual economics, vol. 2, no. 4, 2019 analytical institutions, information services, educational, scientific, and consulting organizations, etc. they usually provide security services for an appropriate fee, provide information protection, trade secrets, collect information about competitors, unreliable partners, etc. (hammoudeh & mcaleer, 2013). 5. conclusions thus, in the process of the writing of this article, we have found that the organizational and economic mechanism for business security ensuring involves the use of techniques, methods, and tools, the combination of which is necessary to ensure a reliable security system and sustainable development of enterprise activity in general (tkachenko et al., 2019b). it is clear that enterprises of different sizes, types, volumes of activity possess unequal organizational and financial possibilities. in addition, the level of risk to which business entities operate is various. however, the definite conclusion is that the implementation of an organizational and economic mechanism to ensure the security of the enterprise in financial and economic aspects is vital and can be organized in different business areas in different ways (silva et al., 2017). the effect of the security mechanism regarding the financial and economic aspect implies the adaptation of the enterprise to innovations, provided by the following conditions: innovations should be maximally ready for implementation; motivated to implement them, it is necessary to protect the interests of the enterprise; probability of obtaining a positive result in the implementation of innovations should be high (allen & wood, 2006; williamson, 1975). a significant place in the process of increasing the level of a business security is occupied by financial and economic measures aimed at covering losses and eliminating the causes of their occurrence, restoration (preservation) of liquidity and solvency, reduction of the amount of debt, improvement of the current assets structure etc. the activity of forming a reliable system of financial and economic security at the enterprise may involve the application of such economic measures: optimization of direct and indirect expenses of activity; implementation of budget financing and funds centralization; saving resources; reduction of receivable accounts; improvement of the system of mutual settlements; improvement of the system of labor stimulation; price improvement; financing of activity and development of enterprise sources optimization. the prospect of further research is that without a proper level of a business security it is not possible to achieve a stable profitable business activity, within the informational measures is the important group of measures necessary for the development of the enterprise financial and economic security system: informing employees on the purpose, tasks, program, opportunities and consequences of the economic security management of a business activity policy; protection of important information and enterprise commercial secrets; informing 81 www.virtual-economics.eu issn 2657-4047 (online) volodymyr tkachenko, iryna tkachenko, polina puzyrova, and andriy klochko virtual economics, vol. 2, no. 4, 2019 about changes of plans, tasks to ensure business security (huang & wang, 2013; sobolev & soboleva, 2015; vishnevsky & kwilinski, 2019a; 2019b; lachno et al., 2018; pająk et al., 2016). further research is needed in the field of planning and implementation of tactical measures to ensure the financial and economic security of a business, which is aimed at: assessment, and analysis of a business security level and its dynamics, which will allow determining efficiency of implemented activities; assessment of efficiency of using the financial potential of the enterprise, which is the main basis when implementing measures to ensure the organizational and economic mechanism of a business security. since the implementation of organizational and economic means in the field of security often requires the allocation of significant financial resources and opportunities (financial potential), the substantiation of scientific recommendations for cost effectiveness assessment is of significant importance (chen et al., 2019). thus, it can be concluded that the organizational and economic mechanism of a business security ensuring will effectively use corporate resources, create preconditions for business targets achievement, timely identify and optimize all possible hazards, threats, and risks of enterprise activity in conditions of fierce competition and changing environment. also, to enhance business security, it is possible to propose the following: development and implementation of a system (structure) of enterprise business activity security processes; 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(1975). markets and hierarchies: analysis and antitrust implications. new york: free press. кwilinski alex 26 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 2019 volume 2 number 4 (october) factors of human capital modernization in the context of institutionalization of information economy maryna radieva and viktoriia kolomiiets abstract. the constant institutional transformations of society make it necessary to study their influence on the development of human capital and the dependence of the development of human capital on the conditions of institutionalization of the information economy. the aim of this scientific work: to identify the existence of a dependence of the development of human capital on the institutionalization of society in the information economy, to build correlationregression models of the dependence of the development of human capital on the level of development of the country's institutional system in the information economy. the study has proved the hypothesis that there is a relationship between the human capital index and the development of the country's institutional system. the selection of indicators describing the dependence of the development of human capital on the development of the country's institutional system in the information economy, which included political, legal, economic, social, institutional, using an expert analysis method, is carried out. for a multifactorial phenomenon, as the dependence of the development of human capital on the level of development of the country's institutional system in the information economy, the methods of multiple correlation and regression analysis are used. the study was conducted for 157 countries of the world for which the world bank determined the country's human capital index in 2018. as a result, correlation equations are constructed that give the dependence of the development of human capital on the level of development of the country's institutional system in the information economy. they should determine the feasibility of material costs for the development of a separate factor of the influence of the institutional system for the development of human capital. the constructed models have shown that the greatest correlation between the human capital index and the selected indicators of the country's institutional system development exists: for countries with a high human capital index and high gross national income per capita – government labor costs, tax burden; for countries with an average human capital index and with an average gross national income per capita, to which ukraine belongs, – freedom of the labor market, protection of property rights; for countries with a low human capital index and low gross national income per capita – effectiveness of the judicial system, government decency. the study of the dependence of the development of human capital on the development of the institutional system will interest not only the scientific layers of countries, but also state and government institutions. keywords: human capital, human capital index, institutionalization, institutional system, information economy jel classification: е02, е14, е24 27 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 authors: maryna radieva melitopol institute of public and municipal administration of the classic private university, 8/2, kakhovske shose, zaporizka region, melitopol, ukraine, 72311 e-mail: ra_va@ukr.net https://orcid.org/0000-0003-2288-3388 viktoriia kolomiiets melitopol institute of public and municipal administration of the classic private university, 8/2, kakhovske shose, zaporizka region, melitopol, ukraine, 72311 e-mail: vik2005vik@meta.ua https://orcid.org/0000-0003-3427-8986 citation: radieva, m., & kolomiiets, v. (2019). factors of human capital modernization in the context of institutionalization of information economy. virtual economics, 2(4), 26-45. https://doi.org/10.34021/ve.2019.02.04(2) received: july 19, 2019. revised: august 3, 2019. accepted: august 23, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) 1. introduction the information economy is based on human capital. it is from the creativity and creative achievements of a person that the development of the latest technologies, technological and social progress of society depends. it should also be noted that all the achievements of mankind are aimed at satisfying the diverse needs of man as a single object and human capital. thus, human capital in the information economy acts as a consumer of goods and as a resource, without which it is impossible to imagine the development of society. the institutionalization of the country's environment, as a process of determining and fixing norms, contributes to the development of human capital, helps individuals to feel comfortable in an institutional society, and allows the country to function exclusively in accordance with constitutional norms and rules. but in the context of the dynamic development of the information economy, the influence of the institutional environment on a person, its wellbeing, and the development of human capital are not considered enough. it is necessary to study the feasibility and significance of the influence of the institutional environment on the development of human capital. the aim of this scientific work: to identify the existence of a dependence of the development of human capital on the institutionalization of society in the information economy, to build correlation-regression models of the dependence of the development of human capital on the level of development of the country's institutional system in the information economy. mailto:ra_va@ukr.net https://orcid.org/0000-0003-2288-3388 https://orcid.org/0000-0003-3427-8986 https://creativecommons.org/licenses/by/4.0/ 28 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 the development of these correlation-regression models will make it possible to calculate the economic feasibility of material investments in the development of individual components of the institutional system for the development of the country's human capital. 2. literature review in the hierarchy of research, human capital is at the top of the information economy. significant results in the study of various aspects of human capital achieved by scientists g. becker, n. bhutoria, b. weisberg, l. gratton, j. mincer, l. turou, t. schulz. human capital is defined as a key result of the development of human resources (ali et al., 2018; bryukhovetska & chornaya, 2015; kolomiiets & golovkova, 2017; dalevska et al., 2019; mahmood & alkahtani, 2018; siddiqui & rehman, 2016; liashenko, 2016; flamholtz et al., 2002). a number of scientists are inclined towards the need for investments in the development of human resources in order to develop and maintain them in the future and preserve them in the present (bryukhovetska & chornaya, 2015; kolomiiets & golovkova, 2017; kwilinski et al., 2019; pajak et al., 2016; liashenko & pidorycheva, 2019; radieva, 2018). at the same time, it is recognized that human capital stimulates and ensures the formation of the economic viability of a person, enterprise, and state (liashenko, 2017; radieva, 2018). the conceptual definition of human capital is the subject of research by g. becker (1964). he aligned theoretical studies with practical results that established a positive correlation between the incomes of individuals and their level of education, employment, and duration of study (becker, 1964). many researchers have studied the question of what factors and factors affect human capital. the search for a connection between human capital and the country's economic growth was carried out by m. ali, a. egbetokun et m. memon (2018). they emphasize that the main factors influencing human capital are economic and institutional indicators and draw conclusions from empirical studies (ali et al., 2018). the theoretical formulations of the relationship between human capital and a country's growth consistently suggest that the knowledge embodied in a person is important for innovation, productivity and dynamic growth (ali et al., 2018). n. mahmood et n. alkahtani (2018), based on data for the period 1970-2017, and also by applying a regression model with a distributed lag, investigate the impact of human resources and the development of the financial market on the country's economic growth. the results of the study show that the interaction of human capital and human resources, as well as capital and the financial market, has a positive effect on economic growth (mahmood & alkahtani, 2018). studies of a. siddiqui et a. rehman (2016) are devoted to regional features of the development of human capital. they study what factors ensure the different development of human capital and emphasize the importance of spending on education and maintaining the health of human capital. the importance of human capital for regional development, its impact 29 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 on economic development is noted not only for individual countries, but also for entire regions and locations (lyashenko, 2017). v. lyashenko et i. pidorycheva (2019) note that the main source of economic growth and industrial development for developing countries is their absorption capacity or ability to use world knowledge and technology. the main ones are foreign direct investment, trade, research and development, codified knowledge flows and human capital. a review of literary sources shows that scientific studies of the dependence of the development of human capital in the information economy are focused on the manifestation of the influence of exclusively economic factors or the correlation between the growth of human capital and economic growth of the country. the influence of the institutional system on human capital remains without the attention of scientists. meanwhile, in the conditions of informatization of society, it is institutionalization that can give a general synergistic effect in politics, economics, and the social sphere and lead to the rapid development of human capital. institutional theory is based in the works of t. veblen, developed by j. commons, w. mitchell, j. gelbraith. the founders of the modern theory of institutionalism consider r. coase, d. north. institutionalization of a country is an ongoing process. intensive institutional transformations that determine the development of countries with economies in transition guide the vector of change in all areas. at the same time, human capital is limited in its actions by the institutional structure of society (radieva, 2018). institutional changes lead to the emergence of new and the withering away of old rules of behavior and appropriate mechanisms to ensure their transformation (tkach et al., 2018). there are also changes in the structure and nature of economic relations within the framework of the existing rules for their participants. such an approach to the determination of institutional changes takes into account that the current rules mean not only the emergence of new attitudes, but also new mechanisms that ensure their compliance with entities (tkach et al., 2018). along with the positive effects of institutionalization, other consequences are noted. among the many negative factors, the main ones are the weakness of the government, political instability, the judicial system, the right to apply contract rights and the low level of development of the institution of property rights, which in general can indicate an institutional crisis in the country (shashyna, 2018). the influence of the institutional environment is manifested as formed under the influence of a certain institutional system of human capital and its actual ability to produce the gross product and use it effectively (or inefficiently) to manage human capital. the constant institutional transformations of society make it necessary to study their influence on the development of human capital and the dependence of the development of human capital on institutionalization, especially in the context of the information economy. 30 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 3. methods the methodological basis of the study is the fundamental principles of economic theory, the development of information economy, institutional theory, presented in classical and modern scientific works of scientists on human capital and human resource management, economic development, institutionalists. to achieve this goal and solve certain problems, let’s use a set of scientific methods that ensure the conceptual integrity of the study, in particular: structural-logical analysis and generalization – for the logical structural construction of the work; economic-statistical and comparative analysis – for identification of the dynamics, level of development of human capital, establishing the dependence of the development of human capital and the institutional system of the country; grouping and systematization for ranking countries according to the gni level, identifying factors of influence on human capital, statistical and mathematical methods (multivariate correlation and regression analysis) – for building economic and mathematical models of the dependence of the human capital index on the level of institutional development of the country. measuring the dependence of the development of human capital on the institutionalization of society in the context of the information economy is quite difficult. practical measurements at the individual, collective, regional, national levels require the construction of a number of indicators. it is even more difficult to develop a methodology for measuring the dependence of human capital on the level of institutional development of a country. separate methods require comparing studies between people, organizations, and states. 4. results and discussion the information economy has contributed to a shift in emphasis closer to the consumer market, where consumer awareness and demand have increased. this has led to a shorter life cycle of products and services, making innovation and differentiation of products and technologies critical to competitiveness. existing indicators and tools have lost the ability to provide a comprehensive and sufficient picture of the country's effectiveness and status. there were no specific values, quantitative and qualitative descriptions (which existed, for example, for equipment, stocks) of human capital of the country's economy. the measurement of the dependence of the development of human capital on various factors has become a problem when trying to find an acceptable form and criteria for determination. in general, various dimensions of human capital are the process of identifying, defining, measuring, and sharing information on the importance of human capital for decision making (roslender, 2009). when determining the dependence of the development of human capital on various factors, it should be borne in mind that human capital, in appearance, is invisible and closely related to 31 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 the place, time and purpose, as well as the degree of protection of intellectual property, own developments (patents, licenses, know-how), legal documents on them. theoretical studies provided the basis for determining indicators describing the influence of factors on the development of human capital, and their grouping is shown in table 1. table 1. indicators of factors of influence on the development of human capital of the national economy by groups groups indicators of factors political and legal factors regulatory policy corruption level bureaucracy level trade and economic policy law enforcement effectiveness level of compliance with laws economic factors gni per capita investment rate minimum wage consumer price level unemployment rate labor migration rate social factors birth rate mortality rate healthcare costs culture expenses environmental performance index pension replacement rate organizational and administrative and information and communication factors country competitiveness index employee competitiveness access to the internet computer software access to communication systems provision of communication systems scientific and technological factors number of new technologies innovation costs science expenses research costs energy saving costs intellectual property protection institutional factors business freedom labor market freedom monetary freedom freedom of trade freedom of investment financial freedom fiscal health government spending tax burden government decency judiciary effectiveness protection of property rights source: own research. the group of political and legal indicators includes: regulatory policy, corruption level, bureaucracy level, trade and economic policy. the group of economic indicators includes unemployment, investment, minimum wage, consumer price level. the group of social indicators includes the birth rate, mortality rate, health care costs, cultural expenses, environmental performance index, pension replacement rate, labor migration rate, gender equality. an acceptable measurement of human capital can be based on an equation where the cost of an employee’s labor, wages, and other benefits will be proportional to economic benefits, such 32 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 as turnover or gross profit. but this approach does not take into account the opportunities created by human capital for developing a business or measuring the benefits of developing practices and processes. a common problem is to measure the value of hidden values: how much hidden factors of creating the value of human capital, such as rare skills, unique knowledge, skills, social skills, implicit knowledge, could be better used for the development of the country if they are recognized and discovered. the study hypothesizes that there is a relationship between the human capital index and the development of the country's institutional system. the selection of indicators describing the dependence of the development of human capital on the development of the institutional system of the country, which includes political, legal, economic, social, institutional, using an expert method of analysis, is carried out. when calculating the reliability of these indicators, the cronbach’s alpha coefficient value of 0.78 is obtained, which confirms the consistency of the characteristics within the group and the possibility of combining them into a single group. the relationship between the indicators shows that the variance between them is at an acceptable level in the range of 0.25-0.55. the cronbach’s alpha coefficient shows the internal consistency of characteristics describing a single object, but is not an indicator of the homogeneity of an object. the coefficient is often used in expert assessments when building tests and to test their reliability. the standardized cronbach’s alpha coefficient is calculated by the formula: ast = n × ȓ, (1) where n – the number of investigated components; ȓ – the average correlation coefficient between the components. cronbach's alpha can take the values: > 0.5 low consistency, > 0.6 – doubtful consistency, > 0.7 – sufficient consistency, > 0.8 – good consistency, > 0.9 –very good consistency. for multifactorial models or phenomena, which is the dependence of the development of human capital on the level of development of the country's institutional system in the context of the information economy, it is advisable to use methods of multiple correlation and regression analysis, which allow to study and quantify the internal and external investigative relationships between the factors forming the model and establish patterns functioning and development trends of the investigated effective trait. in a real economy, probabilities (stochastic) relationships between effective indicators and factors. the main task of the correlation and regression analysis methods is to analyze statistical data to identify the mathematical relationship between the studied features and to establish, using correlation 33 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 coefficients, a comparative estimate of the density of the relationship, which has a specific numerical expression. the following indicators are taken as evidence to identify the dependence of human capital development on a country's institutionalization in the information economy: human capital indices of 157 countries (the human, 2018), which are combined into 3 groups according to the level of gni per capita; indicators of the development of the country's institutional system are also combined into 3 groups according to the level of gni per capita (index, 2018). the basis for calculating the indicators of the development of the country's institutional system is the components of economic freedom (index, 2018). the study was conducted for 157 countries of the world for which the world bank determined the country's human capital index in 2018 (index, 2018). the resulting correlation equations should determine the feasibility of material costs for the development of a separate component of the institutional system for the development of human capital. the study of the dependence of the development of human capital on the development of the institutional system will interest not only the scientific layers of countries, but also state and government institutions. the countries were also ranked by gross national income per capita, which is shown in table 2 (jahan et al., 2018). table 2a. ranking countries by gni per capita (part 1) countries low gni per capita (less than 1,005 usd) average gni high gni per capita (from 12,236 usd or more) lower than the average gni per capita (from 1,006 to 3,955 usd) above average gni per capita (from 3956 to 12235 usd) benin armenia albania australia burundi bangladesh algeria austria chad bolivia argentina bahrain ethiopia ghana botswana barbados gambia guatemala brazil belgium guinea honduras bulgaria brunei liberia egypt china canada madagascar el salvador colombia chile malawi cambodia costa rica cyprus mozambique cote d'ivoire dominican republic denmark source: built by the author according to jahan et al., 2018. 34 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 table 2b. ranking countries by gni per capita (part 2) countries low gni per capita (less than 1,005 usd) average gni high gni per capita (from 12,236 usd or more) lower than the average gni per capita (from 1,006 to 3,955 usd) above average gni per capita (from 3956 to 12235 usd) nepal india ecuador estonia rwanda indonesia gabon finland senegal jordan guyana france sierra leone kenya iran germany tanzania kyrgyzstan jamaica greece mali lesotho macedonia iceland uganda mauritania malaysia ireland moldova mauritius israel mongolia mexico italy morocco namibia japan myanmar panama korea nicaragua paraguay kuwait nigeria peru latvia pakistan romania lithuania philippines russia luxembourg sri lanka serbia malta swaziland south africa netherlands tajikistan thailand new zealand tunisia turkey norway ukraine venezuela poland vietnam croatia spain yemen kazakhstan sweden zambia switzerland cameroon uae laos great britain usa source: built by the author according to jahan et al., 2018. 35 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 from each group, 10 indicative countries are selected to construct the matrix. the group of countries with high gross national income per capita (from 12,236 usd or more) includes australia, austria, belgium, the united kingdom, the united states, germany, japan, and israel. the group of countries with higher than average gross national income per capita (from 3956 to 12235 usd) includes bulgaria, china, the dominican republic, romania, turkey, kazakhstan, peru, and mexico. ukraine occupies slightly lower positions, entering the group of countries with lower than average gross national income per capita (from 1,006 to 3,955 usd). this group also includes moldova, kyrgyzstan, and india (jahan et al., 2018). the data for constructing correlation dependencies are given in the following tables. human capital index indicators for countries with a high level of gni per capita are shown in table 3. table 3. human capital index for countries with high gni per capita country hci country rank in hci rating australia 0,79 7 great britain 0,78 15 poland 0,75 30 norway 0,77 18 sweden 0,80 8 usa 0,76 24 finland 0,81 5 japan 0,84 3 estonia 0,75 29 lithuania 0,71 37 source: the human, 2018. a high human capital development index is observed in developed countries such as japan (3rd place), finland (5th place in the rating), australia (7th city in the rating). comparison with the data on the human development index in accordance with the undp report gives the following result are shown in fig. 2. not in all cases, the human capital index corresponds to the human development index, which is explained by a different methodology for determining indicators, which was also developed by completely different world institutions – the organization of unification of nations within the framework of undp and the world bank in the document “human capital development project”. in some cases, the data are significantly different. so, while norway ranks first in terms of the human development index, in the ranking of the human capital index it is only 18. former soviet union countries, estonia and lithuania rank 30 and 35 in the hdi, respectively, and 29 and 37 in the hci. 36 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 figure 2. human development index for countries with high gni per capita, 2017 source: built by the author according to jahan et al., 2018. table 4a and table 4b shows the data characterizing the development of the institutional system for constructing a matrix for countries with a high level of gni per capita (index, 2018). table 4a. data for calculating the development indicators of the institutional system of countries with a high level of gni per capita (part 1) country business freedom labor market freedom monetary freedom trade freedom investment freedom financial freedom variable х1 х2 х3 х4 х5 х6 australia 89,1 79,7 87,4 86,2 80 90 great britain 91,1 74,4 85,2 86,9 90 80 poland 67,2 63,9 85 86,9 75 70 norway 90,4 54,6 73,9 87,9 75 60 sweden 89,3 53,7 83,8 86,9 85 80 usa 82,7 91,4 78,6 86,7 85 80 finland 89,9 50,5 86 86,9 85 80 japan 81,7 79,2 85,4 82,3 70 60 estonia 75,6 54,8 85,1 86,9 90 80 lithuania 73,4 64,5 89,9 86,9 80 70 source: index, 2018. human development index for countries with high gni per capita lithuania estonia japan finland usa sweden norway poland great britain australia 0,8 0,82 0,84 0,86 0,88 0,9 0,92 0,94 0,96 37 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 table 4b. data for calculating the development indicators of the institutional system of countries with a high level of gni per capita (part 2) country fiscal health government spending tax burden government decency judicial efficiency protection of property right country х7 х8 х9 х10 х11 х12 variable 84,3 61,2 63 77,4 93,4 78,7 great britain 53,5 44,4 65,2 79 93,8 92,2 poland 81,5 47,8 75,9 50,9 56,6 61,8 norway 97,8 29,2 56,4 93,6 86 86,4 sweden 96,1 23,2 43,9 92,9 88,2 92,6 usa 54,8 56,5 65,1 71,9 76,9 79,3 finland 81,1 2,3 66,5 89,8 82,7 89 japan 49,3 54,1 67,4 79,2 73,2 86 estonia 99,8 52,6 80,7 75,7 83,9 80,4 lithuania 96,7 63,9 86,4 50,9 66,7 73,8 source: index, 2018. table 5 provides indicators of the human capital index for countries with an average level of gni per capita (the human, 2018). table 5. human capital index for countries with average gni per capita country hci country rank in hci rating kyrgyzstan 0,58 76 turkey 0,63 53 armenia 0,57 78 mexico 0,61 64 tajikistan 0,53 89 china 0,67 46 ukraine 0,65 50 romania 0,6 67 bulgaria 0,68 44 moldova 0,58 75 source: the human, 2018. 38 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 this group includes ukraine, which ranked 50th in this world bank rating. at the same time, china is observed along with ukraine 46th place. turkey is on the 53rd place. the countries of the former soviet space – moldova, kyrgyzstan, armenia, tajikistan – occupy 75, 76, 78, 89 places respectively. human development data for countries with average per capita gni are shown in fig. 3. figure 3. human development index for countries with average gni per capita, 2017 source: built by the author according to jahan et al., 2018. a comparison of the human capital index with the data on the human development index in accordance with the undp report gives the following result. in some cases, the data are significantly different. according to undp, ukraine takes 88th place in terms of human development, which is taken into account as an average indicator of the level of human development. in the group of countries with an average level of gni per capita among the above former countries of the soviet union, armenia occupies the highest city 83 (5 positions higher than ukraine). table 6 shows the data characterizing the development of the institutional system for constructing a matrix for countries with an average gni per capita (index, 2018). human development index for countries with average gni per capita moldova bulgaria romania ukraine china tajikistan mexico armenia turkey kyrgyzstan 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 39 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 table 6. data for calculating the development indicators of the institutional system of countries with an average level of gni per capita country business freedom labor market freedom monetary freedom trade freedom investment freedom financial freedom variable х1 х2 х3 х4 х5 х6 kyrgyzstan 73,3 77,9 74,9 74,5 60 50 turkey 63,3 47,6 72,3 78,6 75 60 armenia 78,7 69,9 75,8 80 75 70 mexico 67,5 59,8 79,2 88 75 60 tajikistan 63,4 52,2 69,6 70,6 25 30 china 54,9 61,4 71,4 73,2 25 20 ukraine 62,7 52,8 60,1 81,1 35 30 romania 65,2 66,8 82,8 86,9 75 50 bulgaria 64,3 66,1 82,8 86,9 70 60 moldova 66 39,9 73,2 78,3 55 50 country fiscal health government spending tax burden government decency judicial efficiency protection of property right variable х7 х8 х9 х10 х11 х12 kyrgyzstan 89,2 58,2 93,8 29,4 22,1 50,2 turkey 93,6 68,1 74,7 42 54,5 54,7 armenia 67,2 80 84,7 40,5 47,4 55,3 mexico 69,8 78,1 75,7 26,9 39 58,6 tajikistan 90,4 71,4 91,8 38,2 50,3 46,8 china 85,9 71,6 70,4 47,3 65,4 46,7 ukraine 75,9 45 80,2 29 29,5 41 romania 91,1 66,9 87,3 40 59,7 61 bulgaria 94,3 60,5 90,9 38,2 42,5 63,6 moldova 90 56,7 85,3 26,6 26,3 53,5 source: index, 2018. table 7 provides indicators of the human capital index for countries with a low level of gni per capita (the human, 2018). 40 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 table 7. human capital index for low per capita gni countries country hci country rank in hci rating guinea 0,37 141 senegal 0,42 121 madagascar 0,37 140 nepal 0,49 102 benin 0,41 127 gambia 0,4 130 ethiopia 0,38 135 tanzania 0,4 128 chad 0,29 157 mozambique 0,36 148 source: the human, 2018. this group includes the poorest countries of the modern world – mozambique, guinea, madagascar, chad, ethiopia. in the ranking of the human development index, they rank from 152 to 189. human development data for these countries are shown in fig. 4. figure 4. human development index for low gni countries per capita, 2017 source: built by the author according to jahan et al., 2018. data characterizing the development of the institutional system for constructing a matrix for countries with a low level of gni per capita is shown in table 8 (index, 2018). human development index for low gni countries per capita mozambique chad tanzania ethiopia gambia benin nepal madagascar senegal guinea 0 0,1 0,2 0,3 0,4 0,5 0,6 41 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 table 8. data for calculating the development indicators of the institutional system of countries with a low level of gni per capita country business freedom labor market freedom monetary freedom trade freedom investment freedom financial freedom variable х1 х2 х3 х4 х5 х6 guinea 54,1 54 71,8 61,2 50 40 senegal 51,5 41,4 84,7 66,7 60 40 madagascar 45,6 41,5 73,4 78 55 50 nepal 64,6 43,5 65,8 66,6 10 30 benin 60,7 49,9 84,7 55,6 80 50 gambia 54,2 64 63,2 64,7 75 50 ethiopia 40,2 51,3 67,1 60,7 35 20 tanzania 50 63,9 70,3 76,9 55 50 chad 29,4 40,3 79,9 52,2 60 40 mozambique 58 37,8 66,7 76,7 35 50 country fiscal health government spending tax burden government decency judicial efficiency protection of property right variable х7 х8 х9 х10 х11 х12 guinea 61 80,6 65,9 26,9 28,2 32,4 senegal 58,4 72,7 68,5 42,6 40,4 41,3 madagascar 82,5 92,9 90,3 17,8 21,4 33,2 nepal 98,5 87,6 84,2 24,6 36,2 37,5 benin 49,7 85,6 67,4 30,2 31,3 35,5 gambia 0 74 71,9 36,8 38,8 34,4 ethiopia 85,5 90,6 76,5 37,7 37,6 31,1 tanzania 79 89,8 79,8 31,8 34,7 38 chad 81,9 90,5 44,8 23,1 24,1 25,1 mozambique 0 60,7 70,6 28,2 36,3 35,4 source: index, 2018. to study the qualitative and quantitative assessment of the relationships between the level of development of the country's human capital and institutional factors of influence, multivariate correlation and regression analysis is used. to calculate, it is suggested to use the formula: 42 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 y = f(β , x) + ε, (2) where y – dependent variable; x = x (x1, x2, ..., xm) – independent variables (political and legal factors, economic factors, social factors, organizational and administrative and information and communication factors, scientific and technological factors, institutional factors); β = β (β0, β1, β2, ..., βm) – regression coefficient; ε – random error. in order to determine the dependence of human capital development on the level of development of the country's institutional system in the information economy, let’s construct twelve-factor correlation and regression models for 157 countries, which are combined into three groups according to the level of gross national income per capita. to calculate, it is suggested to use the formula: 1) for countries with a high level of gross national income per capita: y1 = 0,36 + 0,05 х1 + 0,05 х2 + 0,04 х3 + 0,06 х4 + 0,02 х5 + 0,05 х6 + 0,06 х7 + + +0,08 х8 +0,10 х9 + 0,04 х10 + 0,04 х11 + 0,05 х12 (3) 2) for countries with an average level of gross national income per capita: y2 = 0,28 + 0,04 х1 + 0,12 х2 + 0,04 х3 + 0,03 х4 + 0,02 х5 + 0,03 х6 + + 0,04 х7 + 0,07 х8 +0,08 х9 + 0,05 х10 + 0,06 х11 + 0,10 х12 (4) 3) for countries with a low level of gross national income per capita: y3 = 0,19 + 0,02 х1 + 0,03 х2 + 0,01 х3 + 0,05 х4 + 0,01 х5 + 0,02 х6 + + 0,01 х7 + 0,05 х8 +0,04 х9 + 0,07 х10 + 0,08 х11 + 0,06 х12 (5) calculation of the correlation matrix provided an opportunity to conclude that there is a significant relationship between the effective indicator and factor values. the multiple determination coefficient r 2 is 0.53, therefore, the effective indicator depends on 12 factors by 53%. the multiple correlation coefficient of 0.728 indicates a close relationship between the indicators and is significant and random (according to the f-criterion). 5. conclusions it is revealed the relationship between the human capital index and the development of the country's institutional system. the selection of indicators describing the dependence of the development of human capital on the development of the country's institutional system in the information economy, which included political, legal, economic, social, institutional, using an expert analysis method, is carried out. 43 www.virtual-economics.eu issn 2657-4047 (online) maryna radieva and viktoriia kolomiiets virtual economics, vol. 2, no. 4, 2019 for a multifactorial phenomenon, as the dependence of the development of human capital on the level of development of the country's institutional system in the information economy, the methods of multiple correlation and regression analysis are used. the study is conducted for 157 countries of the world for which the world bank determined the country's human capital index in 2018. as a result, correlation equations are constructed that describe the dependence of the development of human capital on the level of development of the country's institutional system in the information economy. they should determine the feasibility of material costs for the development of a separate factor of the influence of the institutional system for the development of human capital. the constructed models show that the greatest correlation between the human capital index and the selected indicators of the country's institutional system development exists: for countries with a high human capital index and high gross national income per capita – government labor costs, tax burden; for countries with an average human capital index and with an average gross national income per capita, to which ukraine belongs, freedom of the labor market, protection of property rights; for countries with a low human capital index and low gross national income per capita – the effectiveness of the judicial system, government decency. according to the calculated regression coefficients, it is established to what extent human capital is sensitive to the variability of the institutional system, it makes it possible to 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(2018). tendentsii zmin instytutsiionalnoho seredovyshcha ukrainy [trends in changes in the institutional environment of ukraine]. ekonomika, finansi, pravo – economics, finance, law, 12(5), 26-31. retrieved from http://konferencia.com.ua/images/_archieve/ 2018/efp%20125%202018.pdf [in ukrainian]. siddiqui, a., & rehman, a. ur (2016). the human capital and economic growth nexus: in east and south asia. applied economics, 49(28), 2697-2710. https://doi.org/10.1080/00036846.2016.1245841 http://konferencia.com.ua/images/_archieve/2018/efp%2012-5%202018.pdf http://konferencia.com.ua/images/_archieve/2018/efp%2012-5%202018.pdf https://doi.org/10.1080/00036846.2016.1245841 кwilinski alex 7 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 2018 volume 1 number 1 (october) mechanism of formation of industrial enterprise development strategy in the information economy aleksy кwilinski abstract. the article establishes that under the conditions of the information economy, industrial enterprises need a development strategy that takes into account the peculiarities of world changes in the spheres of production, marketing, management, etc. to solve this problem, a mechanism has been developed for forming a strategy for the development of an industrial enterprise in the information economy, based on the model of harmonization of specialized business processes with business process management, integration of management systems of specialized business processes into the general system of management of an industrial enterprise, as well as informatization and automation of business process management of the enterprise. implementation of the developed mechanism into the practice of managing the development of an industrial enterprise provides an opportunity to increase its competitiveness, increase sales and reduce the cost of production. keywords: mechanism, strategy, development, industrial enterprise, information economy, business processes, management, automation jel classification: c130, l690, g140 author(s): aleksy kwilinski the london academy of science and business, 3rd floor, 120 baker street, london, england, w1u 6tu e-mail: a.kwilinski@london–asb.co.uk https://orcid.org/0000-0001-6318-4001 citation: kwilinski, a. (2018). mechanism of formation of industrial enterprise development strategy in the information economy. virtual economics, 1(1), 7-25. https://doi.org/10.34021/ve.2018.01.01(1) received: july 7, 2018. revised: august 7, 2018. accepted: september 7, 2018. © author(s) 2018. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:a.kwilinski@london–asb.co.uk https://doi.org/10.34021/ve.2018.01.01(1) https://creativecommons.org/licenses/by/4.0/ 8 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 1. introduction the management of the development of an industrial enterprise requires the development of an appropriate strategy, in which the measures for the development of certain spheres of the industrial enterprise are combined and coordinated, and the development peculiarities due to the influence of the external environment are taken into account. in the conditions of the information economy, special attention needs to be paid to the development of the managerial sphere of an industrial enterprise, which is the completion of the development of other fields, and the integration of automation, robotization and informatization measures developed within the framework of this development into the overall strategy for the development of an industrial enterprise. the digital economy is expanding in several ways. global production of information and communications technologies (ict) goods and services now amounts to an estimated 6.5% of global gross domestic product (gdp), and some 100 million people are employed in the ict services sector. exports of ict services grew by 40% between 2010 and 2015. worldwide ecommerce sales in 2015 reached $25.3 trillion, 90% of which were in the form of business-tobusiness e-commerce and 10% in the form of business-to-consumer (b2c) sales. unctad estimates that cross-border b2c e-commerce was worth about $189 billion in 2015, which corresponds to 7% of total b2c e-commerce. sales of robots are at the highest level ever, worldwide shipments of three-dimensional printers more than doubled in 2016, to over 450,000, and are expected to reach 6.7 million in 2020. and by 2019, the volume of global internet traffic is expected to increase by factor of 66 from what it was in 2005 (unstad, 2017). top 10 economies by value added of ict services in 2015 are shown in fig. 1. figure 1. top 10 economies by value added of ict services in 2015 source: own research on the basis of eurostat data. 1106 697 284 223 92 65 54 48 32 30 0 200 400 600 800 1000 1200 v a l u e a d d e d ( $ b i l l i o n ) http://www.virtual-economics.eu/ 9 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 top 10 economies by number of internet users in 2015, and growth rates in number of users, 2012−2015 are shown in fig. 2. figure 2. top 10 economies by number of internet users in 2015, and growth rates in number of users, 2012−2015 source: own research on the basis of eurostat data. uk businesses around the world make intelligent use of information technology and data. together with the government's industry, it began a program to support the aspirations of industrial enterprises to take advantage of all the opportunities provided by the information economy. the program should reach 1.6 million enterprises over the next five years. the program will be built on existing governmental support, including tips on improving their cyber security and protecting their intellectual property (information economy strategy uk, 2013). consequently, it is necessary to take advantage of such perspectives for the development of industry in general and the development of enterprises in particular. 2. literature review some questions about the specifics of the information economy were discussed in the papers (arrow, 1999; bagheri & hjorth, 2007; aumann & heifetz, 2002; brynjolfsson & saunders, 2009; elsneret al., 2015; kwilinski 2018; lacy et al., 2010; lakhno et al., 2018; lippman & mccall, 2015; marston et al., 2011; morris, 2009; mycielski, 1992; reddy et al., 2009; roome, 2013; shenhar et al., 2007; sun et al., 2017; douma & schreuder, 2013; yakubovskiy et al., 0 1 2 3 4 5 6 7 0 100 200 300 400 500 600 700 800 china india united states of america brazil japan russian federation nigeria germany mexico united kingdom number of internet users in 2015 average annual penetration growth rates (per 100 inhabitants), 2012-2015 (right scale), % http://www.virtual-economics.eu/ 10 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 2017). however, despite the considerable contribution of scientific works, existing approaches differ in their narrow orientation; therefore, the study of their individual advantages and restrictions in use will allow determining the main directions of development in the conditions of the information economy. sustainable development is much debated as the burning challenge of the 21st century (lacy et al., 2010). the most commonly accepted definition, penned by the brundtland report (world commission on environment and development (wced), 1987), is the process of development that meets the needs of the present without compromising the ability of future generations to meet their own needs. sustainable development is a systems issue (roome, 2013), which requires that understanding of the system's problems flow from larger systems to smaller systems and involve multistakeholder perspectives (bagheri & hjorth, 2007). some authors propose to develop and implement a strategy for enterprise development through the construction of an integrated information system whose task is to provide managers with quality information. the peculiarity of this system is the use of integrated reporting, which makes it possible to establish a dependency between the indicators of enterprise sustainability, its ability to create value and reduce reputational risks. integration is generally considered to go beyond mere interoperability to involve some degree of functional dependence (panetto, 2007; tvaronavičienė, 2014). the main disadvantage of the approach is financial development, due to which insufficient attention is paid to the automation and informatization of the manufacturing sphere, which are very important in the conditions of the modern economy (pajak et al., 2016). one of the main factors that will have an impact on the development of industrial enterprises in the information economy is cloud technology, for which global leaders need to develop an appropriate it development strategy (marston et al., 2011). they offer an it strategy for the development of an industrial enterprise in five directions: the development of infrastructure, services, applications, business processes and sourcing. thanks to this, industrial enterprises will be able to benefit from data processing and the ability to quickly change the corporate information system. but cloud storage is just one of the newest technologies that provides benefits in the functioning of the enterprise in the information economy, so the other areas of the development need to be taken into account to ensure sustainable development of the enterprise. the main tool for the development strategy is an information system for automating management decisions (reddy et al., 2009). the main features of the proposed system are the consideration of external factors in determining the direction of development of economic potential, using of fuzzy modeling and modeling of organizational interaction. the result should be an active, passive or compensatory development model. ignoring the need for modernization of the industrial sphere of industrial enterprises and the need to reconcile this http://www.virtual-economics.eu/ 11 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 modernization with the general strategy of enterprise development should be noted among the discussion points of this approach. jan mycielski (1992) proposed an approach to automating the process of choosing an enterprise development strategy in a market environment and uncertainty, based on this approach, the game model and information system for its calculation are taken. the main criterion for optimizing the development strategy is the profit of the enterprise. but it is not sufficiently described which market uncertainty has been taken into account in the model, as well as how it is proposed to adapt to the modern information economy. adaptation of enterprises to the modern economy requires the creation of the appropriate infrastructure and proposes a strategy for the development of the information infrastructure of the machine-building enterprise (hroznyi et al., 2018). the main attention in the proposed strategy is given to the informatization of the management system, the modernization of the organizational structure, the scientific substantiation of the composition of the management apparatus. however, the question of production, marketing, supply and other important for the manufacturing enterprise spheres of activity remained out of sight. if you consider the strategy in individual projects, then the strategy research has focused largely on the strategic alignment perspective based on deliberate planned strategy between projects and parent organizations as a factor for successful projects and successful execution of organization strategy (morris, 2009; shenhar et al., 2007). recent research acknowledges the strategic character of individual projects, enabling them to emerge strategy with stakeholders so that they are competitive in the project context (vuori, 2013). 3. methods the analysis of the results of the research on the development of the industrial enterprise made it possible to establish that most researchers in solving the problem of forming a strategy for the development of an industrial enterprise in the modern economy are considering only individual components of the strategy, and generally development is considered in the general sense, without taking into account the features of the information economy. the enterprises that carry out production activities need to take into account the development of the manufacturing sector in the development strategy, and then build a strategy for general development, including the development of management, taking into account the need for automation, robotization and informatization of production and management processes in accordance with the requirements of the information economy. to solve this problem, a mechanism of the formation of the development strategy of an industrial enterprise in the information economy was developed, the main interrelations of which are shown in fig. 3. http://www.virtual-economics.eu/ 12 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 informatization and automation of management business processes of the enterprise harmonization of specialized business processes with management business processes b lo ck c h a in b ig d a ta a il c lo u d st o ra g e assessment of the impact of measures on the quality of managerial decisions optimization of the management development project preservation of managerial information control of management information preliminary processing of management information formation of measures for automation and informatization of managerial processes by control functions by types of influences analysis of resource costs an analysis for improving solutions assessment of compliance of business processes with incoming information flows assess business process compliance with outgoing information flows determination of the need for harmonization integration of management systems of specialized business processes into a general management system of an industrial enterprise building a graph of information flows between business processes assessment of managerial culture at the enterprise check the graph for the closure of all information flows composition of measures for various fields of activity of an industrial enterprise measures for the strategic development of an industrial enterprise in the conditions of the information economy figure 3. the mechanism of the development strategy formation of the industrial enterprise in the information economy source: own research. http://www.virtual-economics.eu/ 13 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 it is proposed to distinguish the process of development of the management system of an industrial enterprise and the development of certain spheres of its activity. moreover, in these spheres of activity of the industrial enterprise the production and management fields deserve special attention, because it is in these directions that the backlog from the world leaders negatively affects the efficiency of the industry. in each field of activity of an industrial enterprise there are specialized business processes that need to be improved, first of all, by automation and informatization in accordance with the requirements of the information economy. in addition, most enterprises need to improve the overall business process management. the peculiarity of the information economy is the emergence of the latest methods to support the adoption of managerial decisions that ensure the availability of the necessary information and accelerate its processing, which makes it possible to develop more grounded management decisions. from the point of view of a typical industrial enterprise, the main directions of improvement of the enterprise management system are: informatization and automation of business processes of the enterprise; integration of management systems of specialized business processes into a general management system by an industrial enterprise; harmonization of specialized business processes with management business processes. the proposed mechanism of the development strategy formation of the industrial enterprise in the information economy has at the entrance the projects of modernization of other spheres of the industrial enterprise activity in the conditions of the information economy, including modernization of the industrial sphere of the enterprise, which is of particular importance in the conditions of the information economy. for these projects a composition of measures for various fields of activity of an industrial enterprise is carried out, the result of which is the basis for the development of a management system by an industrial enterprise. with the development of an industrial enterprise in the information economy, informatization and automation of the business processes of the enterprise are a central element of development, as information from all specialized departments conducting the curriculum of certain spheres of the industrial enterprise activity should be assembled in a single decisionmaking center. it makes no sense to improve other areas of the industrial enterprise in accordance with the requirements of the information economy if the management system of the industrial enterprise as a whole cannot effectively communicate with the relevant departments and control the implementation of specialized business processes. business process management refers to the processes that result in the obtaining of managerial results or management (decision-making, control, analysis, etc.). the purpose of business process management is to manage other business processes (suleymanova & omarova, 2017). http://www.virtual-economics.eu/ 14 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 in order to ensure the effectiveness of the managerial business processes of an industrial enterprise in the conditions of the information economy, the following tasks should be performed: information preservation management, information control management, information pre-processing management in order to support decision-making. preserving the management information and giving the access to it to all managers who need it become non-trivial tasks in a situation where information collection is carried out on many sites, especially when production and sales of products are distributed. for this purpose, it is expedient to use cloud storage that solves most of the problems of scaling and distributed collection and use of information. control of the management information is the provision of access to information only to those employees who have the appropriate rights, as well as the logging of changes made by responsible persons. to ensure that logs are unaltered, the most effective use of encryption algorithms blockchain. preliminary processing of managerial information to support decision-making in the information economy has a huge amount of data collected, so the information system should use technologies of artificial intelligence (artificial intellect, ai) and processing big data (bigdata). table 1. range of evaluation of measures on informatization and automation of business process management type of management function type of influence on the decision speed reasonableness complexity planning [-5;5] [-5;10] [-10;5] organization [-10;10] [-3;3] [-3;3] motivation [-5;5] [-4;8] [-7;7] control [-4;4] [-3;3] [-10;10] source: own research. successful fulfillment of all these tasks and positive characteristics of the informatization of business process management constitute the overall quality of managerial decisions. measures of informatization and automation of managerial business processes increase the quality of managerial decisions. each of the measures can have both a positive and a negative impact on each of the managerial functions implemented by the business process management. in addition, each measure positively or negatively affects the speed, reasonableness and complexity of making managerial decisions. thus, as a whole the measure affecting the informatization and automation of business process management must find the sum of all its influences. to form a plan for informatization and automation of business process http://www.virtual-economics.eu/ 15 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 management, it is proposed to evaluate each of the possible measures in the ranges shown in table 1. to choose which of the possible measures should be implemented, it is proposed to use an optimization model whose purpose is to maximize the quality of managerial decisions:           u sf uu max, , sf,  (1)          u f s uu g , sf,  (2)    u uu r ,g r  (3) where 1or 0u – a logical variable that reflects whether it should be implemented u-th an event on informatization and automation of managerial business processes; u sf,  – quantitative impact assessment u-th an event on informatization and automation of managerial business processes for the quality of managerial decisions for f-th type of management function and s-th type of influence on the decision; s g – the minimum need to improve the quality of managerial decisions by the s-th type of influence on the decision; f g – the minimum need to improve the quality of managerial decisions for the f-th type of management function; r g – available resources for implementing information and automation of business process management. the integration of management systems for specialized business processes into the general management system of an industrial enterprise is the coordination of the channels of information transfer from the specialized units to the general system of management of the enterprise and in the opposite direction. it is necessary to ensure the following qualities: for each upstream information flow from specialized business processes there should be a corresponding receiving information flow from business process management; for each downstream information stream from management business processes there should be a corresponding receiving information stream from specialized business processes; each message must be processed replied, redirected or included in the pool of information for further management decision. all this can be done through the use of an appropriate information system that provides electronic document management and control of the movement of information messages. moreover, in addition to technical support, an appropriate management culture at the http://www.virtual-economics.eu/ 16 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 industrial enterprise is also required, in which managers of all units perform all necessary actions for the processing of information messages. the following indicator is proposed to evaluate the effectiveness of management culture in the processing of information messages:     , ~      i k i k i i k i k i k i k hw bhw in (4) where kin – the indicator of the efficiency of management culture in the processing of information messages; k iw – the importance of the type of information messages to which the i-th message relates; k i h – the time actually spent on the performance of an i-th notification; k ib – variable (0 or 1), which shows if the required action has been taken on the i-th notification; k i h – the time for which the regulation is required for action on the i-th notification; ii ,...,1 – the index of actions that were analyzed in assessing the effectiveness of management culture in the processing of information messages. an assessment of the importance of the action depends on its type and direction of the information message, which is shown in table 2. the value of the received indicator of the effectiveness of management culture in the processing of information messages can be in the range from 0 to 1. the units correspond to the case of complete fulfillment of all duties on processing of information messages, without delays and omissions. an indicator of the effectiveness of management culture in the processing of information messages can be calculated as a whole for all interactions of the industrial enterprise, and for certain types of interaction it is considered taking into account only informational messages between a separate unit or department and management, or only for certain types of specialized business processes. harmonization of specialized business processes with business process management is the creation of tools for balancing the information capabilities of related business processes. that is, the input capabilities of business processes should correspond to those informational messages that come to them, and outsourcing must meet the requirements for the information that the recipient needs from the business process. http://www.virtual-economics.eu/ 17 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 table 2. dependence of the importance of actions when processing information messages on their type recipient of an information message action importance lower link response to the acceptance of the order 1 response to the execution of the order 1 information on the current state of the protocol 2 informing about emergency events 5 upper link confirmation of receiving an informational message 1 order 3 inclusion to the pool of information for further processing 2 conjoined peer link informing about the need for coordination 2 coordination 2 forwarding 1 source: own research. to ensure the harmonization of specialized business processes with business process management, the following measures can be used: providing workers with technical means of collecting and transmitting information; training of information technology personnel; creation of systems of the automated information gathering and forecasting of the course of the business process; creation of automated information systems for all involved in the business process; creation of presentations and information systems, etc. to determine if measures are needed to harmonize specialized business processes with business process management, it is suggested to use indicators of incoming and outgoing information flows for their loading. to calculate, it is suggested to use the formula: , n i ,  n a cor na in i w cor (5) where i cor – the indicator of correspondence to the load of the information flow of the ith business process; cor na w , – estimation of the a-th characteristic of correspondence to the load of the information flow of the i-th business process in the n-th direction; n – the number of directions on which the information communication is carried out by the i-th business process. in order to assess the incoming flows compliance, it is proposed to consider the following characteristics: http://www.virtual-economics.eu/ 18 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 suitability of the qualification of the compliance officer, which reflects the availability of the required qualities in the employee who, according to the job descriptions, must create informational messages; the ability to replace a responsible employee reflects whether there are employees who have the required qualities and can perform the necessary functions; the influence of the human factor is an assessment of the quality of the formalization of the instructions and processes for creating information messages, and which, in this case, the false actions of the responsible employee can influence the quality; the sufficiency of technical support for the receipt of information messages, their presentation and analysis, as well as means of further processing. quantitative evaluations of the characteristics of compliance with the information load of the incoming information flows from the specialized business processes and business process management are shown in table 3. table 3. characteristics of compliance with the information load of incoming information flows characteristics qualitative assessments quantitative estimates sufficiency of qualification in the responsible employee enough 0.30 satisfactory 0.15 inappropriate 0.00 ability to replace responsible employee exist 0.20 there is in part 0.10 not exist 0.00 impact of human factor there are systems of reminder and control 0.20 execution depends entirely on the employee 0.10 sufficient technical support full 0.30 partial support 0.15 hand-crafted 0.00 source: own research. it is proposed to evaluate the conformity of incoming flows on the basis of the following characteristics: the degree of automation of the formation of information messages, which characterizes how exactly the collection, processing and sending of information are carried out automated or with the use of manual intervention of the responsible officer; the existence of formal rules for the formation of information messages, such as the approved form of reporting, "protection against mistakes" (foolproof) when filling data, algorithms for performing functions of interaction in job descriptions; http://www.virtual-economics.eu/ 19 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 the adequacy of technical support characterizes the availability of means for collecting, processing, sending information and monitoring the performance of the function of information interaction. quantitative evaluations of the characteristics of compliance with the information load of the output information flows, specialized and managerial, are shown in table 4. thus, the evaluation of compliance indicators with the information load of incoming and outgoing information flows gives an opportunity to evaluate the business process as a whole and analyze the components of this indicator for identifying the primary sources of the problem and developing measures for their elimination. table 4. characteristics of the correspondence to the information load of the output information flows characteristics qualitative assessments quantitative estimates the degree of automation of the formation of information messages enough 0.40 satisfactory 0.20 unsatisfactory 0.00 the presence of formal rules for the formation of information messages complete coverage of all functions 0.30 partial coverage of all functions 0.15 not developed 0.00 sufficient technical support full 0.30 partial support 0.15 hand-crafted 0.00 source: own research. the developed mechanism of formation of the development strategy of the industrial enterprise in the information economy is based on the assessment of the conformity of business process management with other advanced business processes and provides an opportunity to improve the efficiency of the management system of an industrial enterprise. in this case, computerization, automation and robotization of business processes are carried out in accordance with the requirements of the information economy, which ensures the high competitiveness of the industrial enterprise. 4. results approbation of the developed mechanism of the formation of the development strategy of an industrial enterprise in the information economy was carried out at enterpise a while improving the enterprise management system in accordance with the previously implemented modernization of the manufacturing sector and taking into account the impact of the information economy on both internal and external markets for thermal equipment in some countries. http://www.virtual-economics.eu/ 20 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 as a result of the analysis of the competitiveness of enterpise a it has been established that, for most indicators, the company has a better competitiveness than its competitors on the market. but according to the "degree of enterprise representation in the information space", the raiting of enterprise a was 0.40, while on average it reached 0.42 among its competitors. this area of evaluation relates mainly to the marketing sphere of the enterprise, therefore, in addition to the previously described modernization of the manufacturing sector, the development strategy of enterprise a must also include the improvement of marketing communications. as a result of building graphs of information flows between the improved business processes of the production and marketing areas of the enterpise a business and analyzing the closure of the links between them, it has been established that there are inconsistencies that require the implementation of measures to integrate the management systems of specialized business processes into the general control system of the industrial enterprise. among the main problems identified, the following should be noted: the absence of high-level management information processes and models for handling information messages from the manufacturing sector about positive deviations from the plan of pre-term execution, saving of raw materials or fuel, etc.; the absence of a high level of management information processes and models for processing informational messages from the marketing sphere concerning previous requests to enterprise a, which were not completed by contracts. to solve these problems, it is necessary to implement the following measures: development of staff assessment and promotion criteria with positive deviations from the plan; developing approaches to the continued use of good practices that have led to positive deviations from the plan; identifying the respondents for analyzing the potential unsatisfied demand resulting from the use of internet communications. in turn, when evaluating compliance of management and specialized business processes with incoming and outgoing information flows, it has been established that at the managerial level there are problems in the following areas: most management business processes have an unsatisfactory level in terms of "possibility of replacing a responsible employee" (for 56% there is no possibility of replacement, for 23% there is a partial replacement); for all managerial business processes, "impact of the human factor," implementation depends entirely on the employee, and there are no mechanisms for reminding and controlling the execution; for all managerial business processes, "the degree of automation of the formation of information messages" is unsatisfactory, that is, routine managerial decisions do not require the development of fundamentally new approaches, but can be created by the template, not automated; http://www.virtual-economics.eu/ 21 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 for specialized business processes in the industrial and marketing spheres of "enterprise a", the indicator "the availability of formal rules for the formation of information messages" is unsatisfactory, and in the job descriptions there are no necessary items. to eliminate these problems, it is necessary to implement measures for the harmonization of specialized business processes with business process management: improvement of organizational structure and extension of job descriptions in order to ensure interchangeability of officials; introduction of information management systems for document management and project management; carrying out researches on automation of the development of routine managerial decisions; improvement of job descriptions in order to formalize the rules of formation of information messages. thanks to the above-mentioned measures to improve the quality of managerial decisions, in addition to optimizing the integral indicator of the quality of managerial decisions of an industrial enterprise in the conditions of the information economy, an economic effect can be obtained. to calculate the economic effect, it is proposed to use the formula (zhadko, 2014; lobov, 2014): ,ief 2 1 2 1 2 1 ntrearncost t t t t t t  (6) where ef – economic effect for the time period t1-t2 from the implementation of the mechanism for forming the development strategy of an industrial enterprise in the information economy; 2 1 t t cost – reduction of the cost price for the period t1-t2 as a result of implementation of the mechanism of the formation of the development strategy of an industrial enterprise in the information economy; 2 1 t t earn – increase in sales volumes during the period t1-t2 as a result of implementation of the mechanism for forming the strategy of development of an industrial enterprise in the information economy; ntri – costs for the implementation of the mechanism of the formation of the development strategy of an industrial enterprise in the information economy. the calculation of the economic effect has been carried out over three years, and it has been assumed that the internal and external markets for thermal equipment will have the unchanged development trends and there will be no crises or sharp changes in demand. at the same time, the increase in sales volumes to enterprise a comes at the expense of redistribution of the market through better quality of products, more competitive price and the newest method of marketing information communications. reducing the cost of http://www.virtual-economics.eu/ 22 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 production is achieved by increasing the efficiency of the equipment (rotation of the dyeing chamber, automation of the control system of the drying chamber), reducing the number of defects (primarily due to the automation of the entrance control of shaped metal rolling, as well as the rotation of equipment), increase in productivity as a result of reducing the number of downtime and increasing ergonomics of production operations. costs of the implementation of the mechanism of the development strategy formation of an industrial enterprise in the information economy consist of the cost of purchasing new equipment, training workers, purchasing computer equipment, developing an information system. the components of the economic effect from the implementation of the mechanism of the development strategy formation of an industrial enterprise in the information economy is shown in the table 5. table 5. economic effect from the implementation of the mechanism of the development strategy formation of an industrial enterprise in the information economy component of economic effect amount, thousand £ reduced cost as a result of increased productivity 1200 decrease the cost as a result of automation and rotation of production operations 5600 increased sales due to improved product quality 4200 increased sales due to lower prices 8700 increased sales due to more efficient customer service 1200 costs for the development of the manufacturing sector 9450 costs for development of marketing sphere 560 costs for development of managerial sphere 1300 economic effect 9590 source: own research. consequently, due to the implementation of the mechanism of the development strategy formation of an industrial enterprise in the information economy, the estimated economic effect at the enterpise a is 9950 thousand pounds, which confirms the effectiveness and relevance of the proposed components of the development strategy. 5. conclusions most researchers, when solving the problems of the development strategy formation of an industrial enterprise in the modern economy, consider only certain components of the strategy and consider the development of general content without taking into account the peculiarities of the information economy and the state of industry. therefore, for enterprises that carry out production activities, it is necessary to develop a strategy taking into account http://www.virtual-economics.eu/ 23 www.virtual-economics.eu issn 2657-4047 (online) aleksy kwilinski virtual economics, vol. 1, no. 1, 2018 the need for automation, robotization and informatization of production and management processes in accordance with the requirements of the information economy. in order to ensure high competitiveness, a mechanism of the development strategy formation of an industrial enterprise in the information economy is developed, which is based on the assessment of the conformity of business processes with other developed business processes and provides an opportunity to increase the efficiency of the management system of an industrial enterprise. in this case, computerization, automation and business processes are carried out in accordance with the requirements of the information economy. the testing of the developed mechanism of the development strategy formation of the industrial enterprise in the information economy of enterprise a has been carried out, the enterprise management system has been improved taking into account the influence of the information economy on the internal markets of the thermal equipment of some countries. references arrow, k. j. 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(2014). aspects of assessing the economic efficiency of information systems accounting and economic analysis. scientific herald of the academy of municipal management. series: economics, 1, 192-199 (in ukrainian). http://www.virtual-economics.eu/ https://doi.org/10.9770/jesi.2014.1.3 https://doi.org/10.1108/17538371311291044 http://www.un-documents.net/ocf-02.htm https://institute-icd.org/wp-%20content/uploads/2016/07/monografia_kvilinskyi.pdf https://institute-icd.org/wp-%20content/uploads/2016/07/monografia_kvilinskyi.pdf кwilinski alex 95 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 2020 volume 3 number 1 (january) an agroforestry consortium: a multiderminant in instituting an agrisilviculture system to improve welfare darma surya, maria siti, lestari dirga, and darma dio caisar abstract. indonesia as the largest forest owner has a huge potential in exploration. before 1997, indonesia had lost 91,924,300 ha of forest due to deforestation. the government bodies just planted a thousand trees with no supervision and follow-up, so most of them were damaged and did not meet expectations. this research is carried out descriptively and qualitatively. the study is informed by the secondary data from the research library and from the relevant government agencies. the concept of an agroforestry consortium was based on a multi determination governance as a function, academics, education, audio-visual training system, and organizational institutions, and management rights’ holders to implement forest transfers. land rights are ensured by financial institutions and advocacy. the agroforestry consortium as a facility for farmers which will accommodate inputs in developing human resources, capital, and forest land, which will later be allocated to farmers. in post-production, farmers will provide instalments of credit and forest products for agroforestry consortia. thus, the funds can be channeled to financial institutions and forest products to practitioners. the agroforestry consortium is expected to ensure the welfare of the inhabitants in east kalimantan province. keywords: agroforestry consortium, agrisilviculture system, public welfare, farmers jel classification: q23, q15, d60, q12 http://www.virtual-economics.eu/ 96 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 authors: darma surya universitas mulawarman, gunung kelua, samarinda city, indonesia, 75243 e-mail: uyadarma60@gmail.com https://orcid.org/0000-0002-1160-0576 maria siti universitas mulawarman, jl. tanah grogot, no. 1, samarinda city, indonesia, 75117 e-mail: siti.maria@feb.unmul.ac.id https://orcid.org/0000-0002-9339-6985 lestari dirga universitas mulawarman, jl. tanah grogot, no. 1, samarinda city, indonesia, 75117 e-mail: dirga.lestari@feb.unmul.ac.id https://orcid.org/0000-0002-1644-2925 darma dio caisar sekolah tinggi ilmu ekonomi samarinda, jl. k. h. abul hasan, no. 77, pasar pagi, samarinda city, indonesia, 75242 e-mail: diocaisar@stiesam.ac.id https://orcid.org/0000-0002-3287-7670 citation: surya, d., siti, m., dirga, l., & dio caisar, d. (2020). an agroforestry consortium: a multiderminant in instituting an agrisilviculture system to improve welfare. virtual economics, 3(1), 95111. https://doi.org/10.34021/ve.2020.03.01(5) received: november 3, 2019. revised: december 9, 2019. accepted: january 6, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2020.03.01(5) https://creativecommons.org/licenses/by/4.0/ 97 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 1. introduction having a wide range of functions and benefits, forest resources can provide a variety of human needs and wants, ranging from the production function of goods and services for the benefit of direct and indirect consumption, various natural regulatory mechanisms such as water regulation, nutrient cycling, co2 absorption, even various other functions that until now have been unknown or inconceivable to humans (faculty of forestry. bogor agricultural university, 1999). forests play a role in preventing soil erosion, filter and flood control, pest and disease control, providing shelter, gathering of fauna that serves as pollinators and preventing global warming by absorbing carbon (vinceti et al., 2008). furthermore, shanley et al. (2008) suggest that non-timber forest supplies products such as medicines, food, and shelter, as well as serves a source of income for communities living around the forest. besides, the forest also provides food directly and indirectly. as follows from the above description, the forestry sector can contribute to food security through its function as a supporter, producer, and as a depositary of the food potential diversity. indonesia should be a source of food that can meet its consumption and for export. technically, the development of potential food in indonesia is not a problem. factors causing a decrease of food production are dominated by non-technical ones such as a lack of policy support, sociocultural changes, and the use of technological advances that are not adapted to the natural resources potential and socio-cultural potentials (fertile land, diversity of marine potentials and agrarian cultures). the types of food derived from forests can comprise foliage, fruit and seeds, palms, roots and tubers, mushrooms, some insects, fish, crabs, shrimps, etc. from mangrove ), and animal feed (vinceti et al., 2008). indonesia has a forest area of 143 million hectares, with 77 types of food sources of carbohydrates, 26 types of nuts, 75 types of oils and fats, 389 types of grains and fruits, 228 kinds of vegetables, 110 kinds of spices, 40 types of beverages, and 1260 types of medicinal plants (suhardi et al., 2002). the occurrence of overshoot symptoms in natural resource management is rooted in the uncontrolled amount of greed that develops in the society. due to the fulfilment of needs there occurs environmental damage, which is sustainable, especially by the collective and organized over-exploitation, which is a reflection of the damage to cultural values that exist in society (odum, 1998; talmod, 2008). in addition to having a close dependence on water, forests are also very influential in climate and weather. forests have a very important climatological function, especially in the distributing co2 during photosynthesis and, at the same time, releasing o2 in the same process. in its http://www.virtual-economics.eu/ 98 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 evolution, the earth has been protected by gases that are often referred to as "greenhouse gases". these gases, for example, co2, function as a shield to infrared radiation, which is heat from sunlight that bounces back from the earth's surface. thus, the temperature of the earth is felt now, as it has changed or adjusted. a lack of "greenhouse gas" can cause low temperatures that can reach -1800 c. and vice versa, if the concentration of co2 and similar gases increases, our planet will experience global warming. therefore, forest conservation impacts the future of our life. the tangible value of unmul forest education and research in kutai kartanegara regency accounts for 29.01% of the total economic value, where the value of wood is only 15.28%, while the rest of 70.99% is the intangible value of servicing the environment of the forest (roslinda, 2002). furthermore, roslinda (2003) also shows that the intangible value of the taman hutan rakyat (tahura) in east kalimantan is much higher than the tangible value, which amounts to 87% of tahura's total economic value and the intangible value of environmental services. theoretically, it is believed that forests have enormous economic value, but only a small fraction of forest resources really contribute to the revenue of the state and society. state revenue or sector contribution is often only seen from the viewpoint of the gross domestic regional product (gdrp) of the forestry sector, as well as the amount of commodity exports, the smaller a year as timber, is exhausted. based on this, there has been applied a development approach that sees the economic value of forest resources as a whole and can be utilized significantly in development. this study aims to consider the following alternatives: forestry condition; a multiterminal construction of an agroforestry consortium; and performance of a consortium agroforestry mechanism at the institution of agrisilvicultural system on forest land management in the province of east kalimantan. this scientific paper is expected to be useful for providing a new study topic as an alternative concept that can be developed to improve the forest land productivity and alleviate the socioeconomic poverty of east kalimantan agriculture through the agrisilvicultural system, and the government can apply this concept as an alternative program of accelerating economic development through managing the forest land by using the agroforestry consortium concept, as well as to increase farmers' income and welfare distribution for east kalimantan people. 2. literature review according to their functions, forests are divided into several groups, namely as follows: forest areas that, due to their nature, are used for water management, flood, and erosion prevention and for maintaining soil fertility; forest areas used to produce forest products to meet the needs of the community in general, and in particular, it is a forest area which because of its characteristics is used specifically for other biological protection; and forest areas that are specifically fostered and maintained for tourism or hunting purposes (sutikno & maryunani, 2006). http://www.virtual-economics.eu/ 99 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 biodiversity has several meanings and conditions, such as: biodiversity means the richness of genes, species, populations, and ecosystems; genes, types of population, or ecosystem must occupy the appropriate "niche"; and increasing diversity with exotic species without careful consideration can cause havoc. the evolution of forest functions has also affected the social production of the forest space. space, in this case, is not intended as an objective and immutable element but rather, as suggested by h. lefebvre (1974), as something that is strictly related to the social context. indeed, according to harvey (2006), apart from the absolute space, defined and measurable through euclidean geometry, such as the polygon defining a forest parcel, we can identify other spaces strictly linked to social and power dynamics. these include the relative notion of space, measured in terms of time or costs, and the relational concept of space, embedded in social, political, economic, and cultural relationships. since each forest function may have specific effects on the production of space, we can also highlight the evolution of the forest spaces through a diachronic analysis of these functions. what was in the past, and is now, the relationship between forest functions and the social production of forest spaces? forests with vegetation that are closely related to ecology, namely as a buffer for temperature and climate balance, maintaining water flow, preventing o2-produced erosion and so on. by looking at the many functions of forests for ecology, it is possible to note that the sustainability of forests has maintained environmental balance. for example, what happens to the forest will affect soil and water conditions. therefore, the act of managing forests well, in an integrated manner, is also an effort to conserve land and water. indonesia has dozens of watersheds (das) which have close links with forests, as their main buffer. as in java, ten watersheds are highly dependent on forests, namely the ciliwung, cisadane, ciujung, citarum, cimandiri, citanduy, lusi, serang, solo and brantas rivers (soerjani, 1997). various rivers in java have declined quite seriously with the increase of mud content in river water. this is in line with the increase in land damage and increasingly poor land-use patterns in the upper watershed. in addition to having a close connection with water, forests are also very influential in climate and weather. forests have a very important climatological function, especially in disseminating co2 during photosynthesis, and at simultaneously, releasing o2 in the same process. in its evolution, the earth is protected by gases which are often referred to as "glass chamber gas." these gases, for example, function as an infrared shield against sunlight heat that bounces back from the earth's surface. thus, the earth's temperature is felt now as it has undergone change or adjustment. a lack of the "greenhouse gas" can cause low earth temperatures that can reach -1800 c. and vice versa, if the concentration of co2 and similar gases increases, the planet will experience global warming. therefore, forest conservation has an impact on the planet’s life. the forestry sector is the second non-oil foreign exchange producer after textiles. in addition, the forestry sector also employs approximately 300,000 people directly and 700,000 people indirectly. the increasing use of the forestry sector cannot be separated from the role of law http://www.virtual-economics.eu/ 100 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 no. 1 of 1967 concerning the role of foreign capital and law no. 6 of 1968 concerning the role of domestic capital to be engaged in forest exploitation. since the enactment of the law, there has been a rapid development in the forestry sector, spurring development in indonesia. the concept of agroforestry is based on the expected role of on-farm and off-farm tree production in supporting sustainable land-use and natural resource management. while the aboveground and belowground diversity provides more stability and resilience for the system at the site level, the system provides connectivity with forests and other landscape features at the landscape and watershed levels (nair et al., 2008; garrett, 2009). these ecological foundations of agroforestry systems manifest themselves in providing environmental services such as soil conservation, carbon storage, biodiversity conservation, and enhancement of water quality. law no. 5 of 1967, law no. 7 of 1990, and presidential decree no. 32 of 1990 are the regulations that appear related to the public interest in forest areas with the following assumptions: (1) indonesia's biological resources and its ecosystem have an important role for life as a gift of god that needs to be managed and utilized sustainably, in harmony and balance for the welfare of the indonesian people in particular and humanity in general, both today and in the future; and (2) elements of biological resources and their ecosystem are interdependent with each other and influence each other so that the damage and extinction of one element will result in disruption of the ecosystem as a whole. forest development in the future requires a more accurate conception regarding the forest management mechanism, given the importance of forest functions. the best forest management is when the management concept includes the following: (1) efficiency of forest management and sustainability of resources; (2) demands of the regional autonomy; and (3) prevention of the community empowerment as an effort to alleviate poverty in communities around the forest. therefore, the concept of efficient forest management is needed while preserving resources by empowering the community around the forest, while at the same time, having an impact on developing the area around the forest; this concept is then called an agroforestry system. so, the agroforestry system is a pattern of forest land management with the function of empowering surrounding communities aiming at forest conservation, while increasing the welfare of the surrounding community and developing agricultural areas. the agrisilviculture system is a set of elements that form smallholder agriculture in forest land areas to produce output in totality, both forest products, and agricultural products (kamus besar bahasa indonesia, 2018). the advantages of the agrisilviculture system include: an increase in efficiency (labor and land use); the plant population can be adjusted as desired; one area manufactures more than one commodity; there is still an opportunity to get results when one plant species fails, a combination of some types of plants can create biological stability by suppressing pests and diseases, and by maintaining sustainability of land resources, namely soil fertility (arifin, 2001). http://www.virtual-economics.eu/ 101 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 the sole agricultural crop productivity (without trees) in the northern aspect was also higher than that in the southern aspect. an obvious difference in the annual productivity of trees and agriculture crops was observed between the northern aspect and southern aspect. the overall productivity in the traditional agrisilviculture system (crop + tree) was 24% (in northern aspect) and 21% (in southern aspect) higher than that in sole cropping system (bijalwan et al., 2009). 3. methods the research focuses on the multiterminal construction of a consortium agroforestry in an institution of the agrisilvicultural system as a form to improve the community welfare and solutions through the forestry sub-sector in east kalimantan province. to support this research, the authors conducted a deep literature study, namely by using descriptive research, and data used is a qualitative approach data. a descriptive method is a method of researching the status of a group of people, an object, a system of thought; or a class of events in the present. the purpose of this research is to make a description, describe or depict systematically, factually, and accurately facts, nature, and relationship among phenomena investigated (nazir, 2003). meanwhile, a qualitative approach is a procedure that produces descriptive data which include the written word on the object of research that is being conducted, supported by literature studies, based on the experience of literature review, either in the form of research data or numbers that can be understood well. also, the qualitative approach is more sensitive and adaptable to mutual influences, as well as the value patterns encountered in the field (moelong, 2002). this paper is informed by the secondary data, which are the source of research data obtained indirectly through intermediate media. secondary data generally exist in the form of evidence, records, or historical reports that have been kept in archives (documentary data), both published and unpublished (sugiyono, 2005). techniques used in collecting this data are library research ranging from direct records of documents or documents from relevant government institutions, copying and download from the source website concerned (moelong, 2002). sources of data are collected or obtained from the forestry office, and other data support sources during 2016 or updated data. data collection methods used in this paper are: (1) literature study of the related literature and supporting this writing, in the form of printed or electronic libraries (the internet data); (2) documentation study of the previously written reports and articles accessed in the internet, books, and journals that are relevant to the problem. http://www.virtual-economics.eu/ 102 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 as this research is literature-based, the data collected are qualitative (rangkuti, 2001). the data analysis conducted in this research goes back and forth and interactively, consisting of data collection, data reduction, data display, conclusion drawing, and verification. 4. results and discussion according to the presidential decree no. 32 of 1990, forest areas are divided into conservation forest, protected forest, and production forest. the data from table 1 show if the total forest area in east kalimantan province in 2017 is 14,274,506 ha. when specified according to the forest use agreement, the forest is still the largest forest type compared to the other, reaching 5,935,355 ha and the second fixed production forest is about 3,027,099 ha. on the one hand, forests with educational/research use are the smallest and do not even have an area of use, as shown in table 1. determination of critical land refers to land that has been severely damaged by a loss of vegetation cover, resulting in loss or diminution of its function as water retention, erosion control, nutrient cycling, microclimate regulator, and carbon retention. based on the vegetation condition, land conditions can be classified as very critical, critical, somewhat critical, critical potential, and normal conditions. therefore, the need for reforestation or forest rehabilitation is aimed at reforesting critical forest areas in watershed areas (das) carried out with the community in a participatory manner. table 1. forest area according to forest land use agreement in east kalimantan province, 2017 type (usage) large (ha) protected forest 1,844,969 nature and tourism forest 438,390 limited production forest 2,908,256 permanent production forest 3,027,099 permanent forest 5,935,355 production forest 120,437 education/research forest total 14,274,506 source: (bps-statistics of kalimantan timur province, 2019). the better growth and timber volume in the ‘tree+crop’ situation were mainly due to the application of fertilizers and weeding. crop yield reduction was observed with alder, mandarin, and cherry and as the distance from trees increased, yield also improved. however, in albizzia, the proximity of the tree did not reduce crop yield. the implications of the results are discussed in the context of the species’ suitability in this region and their usefulness in agroforestry systems (dhyani & tripathi, 1998). of the total reforested and rehabilitated trees, there are 60,869,495 units, of which industrial timber forestry is the main priority in east kalimantan province with 40,432,811 units. the rest http://www.virtual-economics.eu/ 103 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 is government activities in the reforestation sector in 2017 reaching 17,595,114 units, and the reforestation of the tree still plays an insignificant role of 4,440 units (forestry office of east kalimantan province, 2018). based on table 2, the production of processed wood of various types in east kalimantan province in 2017, as a whole, reaches 1,468,858.65 m3. according to its kind, processed chip (pulp) is the most ranged amounting to 910,478.32 m3, and plywood accounts for 473,296 m3. meanwhile, there has been no timber processed into flooring (parquet flooring) so far. table 2. the number of trees reforested and rehabilitated in east kalimantan province, 2017 activity units planting and enrichment 2,837,170 industrial forest 40,432,811 reforestation 17,595,114 greening 4,400 total 60,869,495 source: (bps-statistics of kalimantan timur province, 2019). with a huge forest area, east kalimantan province certainly turns this resource into commodity, such as processed wood and etc. utilization of timber forest products shall mean any form of business that utilizes and seeks timber forest products without damaging the environment and does not diminish the main function of the forest. this activity can only be carried out on forest areas that have the potential for timber forest product utilization and can be implemented after obtaining a business license. a timber forest product utilization permit in a natural forest is a permit to utilize a production forest, whose activities consist of harvesting, planting, maintaining, securing, processing, and marketing forest wooden products. this permit may be granted to individuals, cooperatives, private enterprises, and badan usaha milik negara/badan usaha milik daerah (bumn/bumd). production of primary forest products gained from forests is logging. logs are produced from the natural forests through the activities of forest concessionaires, timber permits for forest clearing, industrial timber plantation development, and community forestry activities. the term ‘agroforestry consortium’ in its etymology means agroforestry cooperation or partnership. thus, if the term ‘agroforestry consortium’ can be interpreted as a form of cooperation among several parties with the aim to empower the community (local farmers) to manage forest land as an effort to increase forest land productivity in conservative functions and to open agricultural land in order to provide useful output for the community. the agroforestry consortium has complexity in its formation, through several roles that are synergized with expectations that can provide effectiveness and efficiency to the performance of agroforestry consortiums, as shown in figure 1. http://www.virtual-economics.eu/ 104 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 a determinant (influence) in the agroforestry consortium is carried out by the government as a regulatory authority that initiates the concept. the government also has a role in ensuring protection to the agroforestry consortium , both from bureaucratic regulations and in the course of performance processes. therefore, the government has a role and function that are crucial because it exercises protection through the existing bureaucracy, so the concept performance corresponds to expectations. academia as intellectuals play their role in providing education and training. some knowledge and insight that should be given are the system of agrisilviculture pattern of forest management and an institutional pattern of organizational management of the agroforestry consortium. this training is oriented at giving stimulants (stimulus) for gapoktan to accelerate production with education that has been given. the role of practitioners, in this case, belongs to a forest management company, acting as a forest landowner. forest land will be transferred to the gapoktan management right so that gapoktan can manage through the farmers who joined. the transfer of these rights is carried out according to both time agreement and the sharing mechanism. in addition, the empirical ability of the practitioner becomes an important point that needs to be transformed to gapoktan as an executor to be able to run the agroforestry consortium either according to the normative theory from academia but also taking into account the empirical findings given by the practitioner. financial institutions perform the function of funding, financing the production process of the agroforestry consortium, because after the transfer of forest land rights by practitioners, production will require financing so that the role of the financial institution is to support operation of the agroforestry consortium. this financing is divided into two forms, namely credit or capital funding and savings as an investment by gapoktan. community development (comdev) or often called non-governmental organizations (ngos) perform an advocacy function that can provide protection ranging from legal discrimination to technical matters such as forest land disputes, for example. in addition, another form of advocacy provided by ngos is mediation with related parties when gapoktan has no way to interact. gapoktan is the construction subject of the agroforestry consortium which will execute forest land utilization with financing support and insight from the education given by each stakeholder. all the roles and functions of each stakeholder are efforts to realize the agroforestry consortium, which is a joint venture applying an organizational cooperation mechanism that will synergize stakeholders. in the body of this consortium, agroforestry will also run balancing control mechanisms (balanced control) among stakeholders to maintain the role and function to remain in the corridor of performance that is proportional in order to avoid overlap or void role and function. http://www.virtual-economics.eu/ 105 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 the agroforestry consortium has complex stakeholders’ synergy, so the mechanism there is slightly different from similar institutions such as cooperatives, trade partnerships, and other forms of cooperation. the complexity due to many roles is not an obstacle as long as each stakeholder is able to synergize and understand the roles and functions of each so that there is no overlap or vacancy of the stakeholder’s role. figure 1. mechanisms of constructing an agroforestry consortium source: designed by the authors. the agrisilvicultural system is an agroforestry system that combines forestry components (wooden plants) with agricultural (or non-wood) components. timber crops are meant to belong to crops (tree crops) and non-timber plants to annual crops (nair, 1985; young, 1989). in agrisilviculture, multipurpose trees are planted (see more detail on the multipurpose trees) or trees in the context of protected functions on farms (multipurpose trees/shrubs on farmlands, shelterbelt, windbreaks, or soil conservation hedges). http://www.virtual-economics.eu/ 106 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 furthermore, the agroforestry consortium will allocate them to the farmers according to the latter’s’ capacity. farmers will carry out a production process with the agrisilvicultural system of managing forest land. this process is supported by inputs in the form of trees, agricultural seeds, and capital funds, and the most important are the knowledge and skills of farmers to produce with this system in east kalimantan province. figure 2. the role of the agroforestry consortium in instituting the agrisilvicultural system source: designed by the authors. when the production is over and the harvest time comes, the farmer will produce two outputs, namely agricultural and forest products (see figure 2). agricultural produce will create income for farmers. their income, other than individual income, will also cover the instalment of credit payments on the capital obtained from financial institutions through the agroforestry consortium, which will accommodate mortgage payments from farmers in east kalimantan. meanwhile, forest products that become the property of practitioners or companies-owners of the right to manage forest lands will be submitted through the agroforestry consortium. http://www.virtual-economics.eu/ 107 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 however, as forest land managers, farmers will get a share of the profit from forest products that have been produced during their management. on the external side, the government and non-governmental organizations (ngos) provide protection and advocacy in the event of a dispute or problem both internally and externally of the agroforestry consortium. the financial and investment cycles in the agroforestry consortium are formed on three stakeholders: (1) a financial institution as a funding provider; (2) an agroforestry consortium as an intermediary; and (3) a farmer as a fund’s manager. this cycle begins with credits granted by financial institutions to the agroforestry consortium to be allocated to farmers. figure 3. the financial and investment cycle of the agroforestry consortium source: designed by the authors. an agroforestry consortium has a determinant complexity to form a distinct pattern of performance mechanisms. it will also shape its own pattern on the financial and investment flows of the agroforestry consortium. figure 3 explains the financial and investment flow of the agroforestry consortium. this agroforestry consortium will manage credit funds from financial institutions not only as a fund of the farmers' allocation of capital in managing forest land but also to the operational costs of the agroforestry consortium. this is done as an effort to http://www.virtual-economics.eu/ 108 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 professionalize organization so that the agroforestry consortium is truly professionally managed. furthermore, capital funds are allocated proportionally to the existing farmers in east kalimantan province. after producing output, farmers will return credit funds to the agroforestry consortium in accordance with the income earned. this is done so that the farmers are stimulated to produce in the next period because the credit funds are not fully disbursed, but in low-interest instalments with low-interest rates. in addition to credit instalments, farmers can also invest or save their income. furthermore, funds from farmers in the form of credit instalments and savings will be accommodated by an agroforestry consortium. funds that have been accommodated will be handed to the financial institution as well as the funds' deposits that are huge. deposits in the financial institutions become an effort to secure the funds of the agroforestry consortium so that the cash funds of the agroforestry consortium are only shortterm and just operational funds in east kalimantan province. the construction and implementation of the agroforestry consortium are expected to realize the expansion of agricultural land from former deforestation forest land. thus, it is expected to increase economic growth through the agricultural sector, which has been plagued by land issues (see figure 4). figure 4. expectations of the agroforestry consortium in realizing the development trilogy source: designed by the authors . the concept of empowerment in agroforestry will encourage the farmers’ empowerment around the forest migration outside the forest area so that this will support the equitable distribution of welfare in the community of farmers. the system of agroforestry empowerment and the agrisilvicultural system will make forest land become greener. and with the forest’s conservation, it is expected that natural resources in the forest can be sustainable in east kalimantan province. http://www.virtual-economics.eu/ 109 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 the increase of population and its associated pressures on agricultural land have threatened tropical forests with the production of food, fuel, and timber. after deforestation, it is often difficult to sustain annual crop production since nutrients are rapidly leached from the soil due to high rainfall in the tropics (kayatama & luna, 1998). 5. conclusions the agroforestry consortium as an institutional system of agrisilviculture is formed on several determinations of several stakeholders, namely the government as bureaucratic protection, academia as intellectuals conducting education and training, practitioners who will give rights to forest land and ngos as a function of advocacy. the concept of an agroforestry consortium as an accommodation among farmers (gapoktan) will mediate inputs in the form of investment of human resources development, capital credit, and forest land, which will then be allocated to farmers. the post-production of farmers will provide credit instalments and forest products to the agroforestry consortium so that funds can be channeled to financial institutions and forest products to practitioners. the agroforestry consortium concept is expected to help the society prosper (absorbing the workforce) of east kalimantan province. this study comparison with research of other countries demonstrated that india has been at the forefront of agroforestry research, since the organized research on agroforestry began 25 years ago around the world. given the country's unique land use, demographic, political, and sociocultural characteristics and strong record in agricultural and forestry research, india's experience in agroforestry research is important for agroforestry development, especially in developing countries. in india agroforestry has received much attention from researchers, policymakers, and others because of its ability to contribute significantly to economic growth, poverty alleviation, and environmental quality. progressive legal and institutional policies must be created to avoid the historical dichotomy between agriculture and forestry and encourage integrated land-use systems. the government policy holds the key to adopting agroforestry (puri & nair, 2004). references arifin, b. 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(2005). qualitative research methods. bandung: alfabeta. http://www.virtual-economics.eu/ 111 www.virtual-economics.eu issn 2657-4047 (online) darma surya, maria siti, lestari dirga, and darma dio caisar virtual economics, vol. 3, no. 1, 2020 suhardi, s.a., sudjoko, s., & minarningsih, m. (2002). forests and gardens as national food. jakarta: kanisius. sutikno, s., & maryunani, m. (2006). ekonomi sumber daya alam. malang: badan penerbit fakultas ekonomi, universitas brawijaya. talmod, z. (2008). partisipasi masyarakat dalam upaya konservasi sumber daya alam melalui sistem ekologi-organik. jurnal agritek, 16(4), 526-538. vinceti, b., eyzaguirre, p., & johns, t. (2008). the nutritional role of forest plant foods for rural communities human health and forests. a global overview of issues. practice and policy (ed. by carol, j). bogor: cifor. young, a. (1989). agroforestry for soil conservation. icraf science and practise of agroforestry, 16(4), 268-276. https://doi.org/10.1007/978-94-007-7723-1_9. http://www.virtual-economics.eu/ кwilinski alex 86 www.virtual-economics.eu issn 2657-4047 (online) yuliya orlovska and nika ilkova virtual economics, vol. 2, no. 4, 2019 2019 volume 2 number 4 (october) state policy on the functioning of institute of bankruptcy in ukraine yuliya orlovska and nika ilkova abstract. it is precisely in the course of adjusting the activities of these subjects the main task of state regulation of the bankruptcy institute is the formation of such conditions for the functioning of the national economy, which will reduce the risk of doing business for all its entities and promote the internal reorganization of its structure in accordance with the requirements of global transformations. the system of indicators describing the situation in a certain area of the functioning of national economic entities allows us to determine, directly or indirectly, the effectiveness of the bankruptcy institute at the macro-level. to analyze the impact of each of the factors on gdp, a sensitivity analysis was conducted according to which input data x were recorded at the values of 2018 and alternately changed by 10%. for each such change, gdp was calculated as compared to the model value for 2018. as a result of the calculations, the most sensitive factors were identified and features of the functioning of the bankruptcy institute in the ukrainian economy were identified. the main provisions of a state policy aimed at increasing the functional effectiveness of the bankruptcy institute are formulated. first of all, it is necessary to promote the country's position in the doing business rankings, as well as the indexes of economic freedom and corruption perceptions. on the other hand, an annual growth of the inflation index of around 10% and the level of the fiscal tax burden will also have a positive effect on gdp dynamics. keywords: bankruptcy institute, trend model, state policy, ukrainian economy, crisis jel classification: е02, е60, o11 authors: yuliya orlovska prydniprovska state academy of civil engineering and architecture, 24a chernyshevskogo street, dnipro, ukraine, 49600 е-mail: juliaorlov@ukr.net https://orcid.org/0000-0003-0966-931x nika ilkova prydniprovska state academy of civil engineering and architecture, 24a chernyshevskogo street, dnipro, ukraine, 49600 е-mail: expert_dndise@ukr.net https://orcid.org/0000-0002-7255-397х citation: orlovska, y., & ilkova, n. (2019). state policy on the functioning of institute of bankruptcy in ukraine. virtual economics, 2(4), 86-103. https://doi.org/10.34021/ve.2019.02.04(5) received: september 9, 2019. revised: september 29, 2019. accepted: october 9, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://orcid.org/0000-0003-0966-931x https://orcid.org/0000-0003-0966-931x https://orcid.org/0000-0002-7255-397х https://creativecommons.org/licenses/by/4.0/ 87 www.virtual-economics.eu issn 2657-4047 (online) yuliya orlovska and nika ilkova virtual economics, vol. 2, no. 4, 2019 1. introduction at present, in economic science, it is almost universally recognized that economic, political and social institutions operating in one or another country have a significant impact on a significant range of parameters of its economic development. the influence of institutes on the development of the national economy is recognized by many international organizations as well as by a number of national governments that carry out reforms aimed at improving the quality of national institutions. numerous empirical studies of the influence of institutions (clearly defined and securely protected property rights, the quality of contract protection, rule of law, independence of the judiciary, clarity of separation of powers, accountability to the public bodies of public administration, etc.) have clearly shown their correlation with indicators that reflect prosperity, economic growth, the volume of investments in the economy and many other parameters of the national economy (see for example (duginets, 2004). the bankruptcy institute is an integral part of a competitive market environment, that is, the very probability of bankruptcy forces enterprises to take measures to ensure financial stability, to increase efficiency and productivity of labor (yankovyi et al., 2019). at the same time, the state should also introduce certain measures to regulate the institute in order to reform the economy and ensure effective mechanisms for its functioning. at the same time, state intervention in the economy may be twofold: reducing transaction costs, by improving the quality of institutions (introducing "fundamental reforms"), or worsening the quality of the institutional environment, due to the erosion of property rights (the introduction of unnecessary administrative barriers). the national economy is a combination of economic interactions between economic entities operating at the national and international levels, not always remaining solvent. it is precisely in the course of adjusting the activities of these entities not only the elimination of loss-making enterprises, but also the improvement of those productions, where loss-making resulted from ineffective management. thus, the main task of state regulation of the bankruptcy institute from an economic point of view is the formation of such conditions for the functioning of the national economy, which will reduce the risk of doing business for all its entities and will facilitate the internal reorganization of its structure in accordance with the requirements of the global transformations of the xxi century. 2. literature review a lot of attention is focused on the problem of research of the bankruptcy institute and the substantiation of directions for improvement of its activities. so among the domestic and foreign scholars, who covered this issue in recent years, one can distinguish certain areas of research. for example, e. altman (2002), w. moulton and h. thomas (1993) as well as l. panchuk (2012) explore corporate strategies in a crisis, including bankruptcy as a focused strategy. different types and manifestations of the institute of bankruptcy are analyzed by j. ohlson (1980)], i. livshits, j. macgee, & m. tertilt (2007), t. jackson (1982); r. lieb (2006), r. porta et al (1998), o. hart (2000), i. yepifanova (2017). the features of the bankruptcy institute 88 www.virtual-economics.eu issn 2657-4047 (online) yuliya orlovska and nika ilkova virtual economics, vol. 2, no. 4, 2019 in different countries are defined by r. dakovic et al (2010), n. nosan (2016) and a. subbot (2014). the work of a. matviychuk (2013), i. trots (2014), k. golovach (2016) is devoted to research of different models of diagnostics of bankruptcy of enterprises and other issues of the functioning of the bankruptcy institute. it should be noted that in world science there are also studies that are at the intersection of economics and law. for example, in the work of f. fedin, a study was carried out on the consequences of two main policies for debt relief in the united states. the resulting model explains the observed interstate differences in consumer default rates (mitman, 2016). p. rolin's paper explored differences in bankruptcy laws in the us states; the results show that the laws on personal bankruptcy are an important political tool that governments can use to stimulate business growth without causing a business turnover (rolin & ross, 2016). a specific group of articles is devoted to the study of the institution of bankruptcy in various sectors of the economy of different countries. so, for example, the study of a. barreda, y. kageyama, d. singh and s. zubieta examines bankruptcy prediction of hospitality firms within u.s. equity markets. the results of the study showed that a significant number of hotel business enterprises were hit hard by the recent economic downturn; further research is needed to improve the accuracy of bankruptcy forecasting models (barreda et al., 2017). another example is a study of the construction industry in slovakia, which, together with the automotive industry, constituted the core of the slovak economy before the financial crisis. the results obtained by r. daniela, d. mária and j. lucia confirmed the hypothesis that, despite first signs of recovery in this sector, the overall recovery will take several years (daniela et al., 2016). research in this area was continued by t. kliestik, m. misankova, k. valaskova and l. svabova. they concluded that the number of bankruptcies in slovakia has been growing for several years for no apparent macroeconomic reason. as a result of the analysis using traditional bankruptcy forecasting tools, they proved that existing models can be adapted to local conditions, especially local legislation. however, it is becoming increasingly difficult to predict the risk of bankruptcy, since in modern conditions, enterprises are becoming ever more global and complex (kliestik et al., 2018). considering issues in the functioning of tnc production chains, based on cross -country differences that are constantly changing under the influence of scientific and technological progress, it can be stated that world production will continue to become more complicated (koval et al., 2019). this has added relevance to a number of studies of the institution of bankruptc y from the perspective of the global economy. for example, the paper of j. zhu, f. jia, h. wu analyzes the relationship between entry and exit of foreign direct investment (fdi) from the perspective of uncertainty in economic policy and the cost of resolving bankruptcy. the authors proved that increasing bankruptcy costs in a country exacerbate the dampening effect of economic policy 89 www.virtual-economics.eu issn 2657-4047 (online) yuliya orlovska and nika ilkova virtual economics, vol. 2, no. 4, 2019 uncertainty on both fdi entry and exit. moreover, the bankruptcy resolution channel does not exist for foreign portfolio investment, which is consistent with real option theory (koval et al., 2017; zhu et al., 2019). a specific group of articles is devoted to studying the relationship between bankruptcy and corporate functioning. so, in the paper of j. graham, h. kim, s. li and j. qiu, the conclusion is substantiated that wage premiums for the expected costs of bankruptcy are of sufficient value to be an important factor in deciding on the structure of corporate capital (graham et al., 2019). in turn, the paper discusses how the experience of directors affects corporate policy. so, firms begin to take more risks when one of their directors goes bankrupt in another firm, where they simultaneously act as a director. the results also indicate that directors, in particular independent directors, influence company policy not only in their monitoring role, but also as a consultant (gopalan et al., 2018). so, the resulting processing forms the theoretical and methodological basis for this study. however, in their studies, the authors indicated do not always take into account the role of the state in the functioning of the bankruptcy institute, which in the last decade has become particularly relevant in regulating the stability of national enterprises, taking into account the dynamic nature of economic crises and cycles. their research in most cases is devoted to substantiating various methods of diagnosing the risk of bankruptcy at the micro level. therefore, in spite of the existing number of existing developments in domestic and foreign literature, the socio-economic significance of defining the state policy regarding the functioning of the bankruptcy institution necessitates a more thorough analysis. the authors do not deny the significant contribution of existing developments to the improvement of the theoretical and methodological foundations of the problem under study. meanwhile, the significance of the transformational changes in the "rules of the game" in the business environment and the mechanisms for their practical implementation require substantiation of the directions of state policy in this area at the expense of a systematic study of interdependencies and interrelations between the indicators characterizing the functioning of the bankruptcy institute in the national economy. thus, the purpose of the study is to analyze the functioning of the bankruptcy institute in ukraine in order to substantiate the directions of its state regulation. 3. methods in order to realize the goal of the study, a complex of complementary methods of scientific knowledge of economic processes and phenomena was used, namely, a correlation analysis with elements of artificial intelligence technology, which allowed to identify the main directions of state regulation of the bankruptcy institute in ukraine with a view to its improvement. also in the work are used general scientific approaches and methods of modern 90 www.virtual-economics.eu issn 2657-4047 (online) yuliya orlovska and nika ilkova virtual economics, vol. 2, no. 4, 2019 research, based on fundamental theoretical and methodological and practical developments of domestic and foreign scientists in the scientific plane functioning of the institute of bankruptcy. 4. results and discussion it should be noted that the quality and effectiveness of the bankruptcy institute, unlike ordinary economic processes, have no direct indicators. meanwhile, in practice, there is a significant number of successful attempts to quantify the phenomena that do not have direct measurement indicators (see, for example, (yepifanova, 2017). also, at the moment there is a considerable number of works devoted to the problem of forecasting the probability of bankruptcy, which we conditionally divided into several groups. the first group of works the largest in size includes research, the basis of which is the construction of models for forecasting bankruptcy on the basis of analysis of indicators characterizing the financial state of enterprises (altman, 2002; grice & ingram, 2001; philosophov et al., 2008; shen et al., 2010). this approach involves the construction of a model of dependence (linear or nonlinear), as a rule, a complex variable of the probability of bankruptcy from a set of financial indicators selected by one or another principle. domestic legislation also uses this approach: companies are encouraged to pay attention to deteriorating financial indicators or compare them with normative values. the second group takes into account factors external to the enterprise, such as gdp, the level of real wages, real and nominal interest rates, inflation, the level of crediting (bernhardsen, 2001; vlieghe, 2001; liu, 2004). in this research group, the empirical method confirms the importance of macroeconomic variables in predicting bankruptcy. for example, the study (liu, 2004) confirmed the hypothesis that inflation has a direct correlation with the number of future bankruptcies, and according to another study, the real interest rate affects the number of long-term vlieghey long-term ventures. the third group includes the study of the role of corporate governance factors in predicting bankruptcy, this trend has been developing since the early 1990s (daily & dalton, 1994; fich & slezak, 2008; parker et al., 2002). these studies have revealed the importance of corporate governance factors and their impact on the probability of bankruptcy. in spite of the fact that the research topic forecasting bankruptcy of enterprises is quite popular, there are still a number of discussion issues: 1. with regard to the study of the bankruptcy institute in ukraine, many domestic works include attempts to adapt foreign methods to contemporary national realities, considering the political, economic and social peculiarities of our country (nosan, 2016; saturday, 2014). also recently, the works, which study the industry specificity of enterprises in the issue of forecasting the probability of bankruptcy, have gained considerable popularity (golovach; trots], external factors (panchuk, 201)], etc. at the same time, the influence of corporate governance factors on the bankruptcy institute in ukraine was not studied in practice. 91 www.virtual-economics.eu issn 2657-4047 (online) yuliya orlovska and nika ilkova virtual economics, vol. 2, no. 4, 2019 2. all factors affecting the institution of bankruptcy should be divided into external and internal (among the internal factors that characterize the quality of corporate governance of the organization, indicators of the financial state, as well as other internal in relation to the enterprise factors that do not belong to the group of financial indicators). these factors have been used in numerous studies, but at the same time it was not identified the priority of the impact of each individual unit in aggregate on the possible bankruptcy of the enterprise. in order to determine the impact of an entire unit (for example, corporate governance factors), it is necessary to combine them into one variable and identify the impact of the complex variable on bankruptcy of enterprises. note that the parameters of "corporate governance" and "financial status" can not be measured directly, because they are not clearly defined (these factors are often called latent variables). in this case, commonly used indicators that are associated with latent variable linear dependencies. 3. traditionally, in work related to forecasting the probability of bankruptcy of enterprises, the sample is divided into two classes: bankrupt and financially sound organizations. however, there is still no generally accepted definition of bankruptcy, which greatly complicates the process of primary classification of these companies and, as a consequence, increases the probability of a forecast error. when building models for forecasting the probability of bankruptcy, some domestic researchers eg, (matviychuk, 2013) consider the official publication of bankruptcy in the press sufficient condition for the recognition of this organization as a bankrupt. 4. in the ukrainian scientific community, there is almost no study of the role of the state in the functioning of the institution of bankruptcy, namely the identification of the macroeconomic and microeconomic goals of this process. for macroeconomic purposes, we understand the recovery of the national economy as a whole, and microeconomic is aimed primarily at restoring the financial sustainability of an insolvent enterprise. research in this area is becoming increasingly urgent, since as of 2011, 10 thousand 382 proceedings were initiated in these cases, and in 2017 1,692, with only 97% of enterprises business entities are going to liquidate (official web-portal "judiciary of ukraine"). that is, such statistics testify to the unsatisfactory performance of all the participants in the economic activity regarding the financial rehabilitation of enterprises. thus, in order to find out the state, structure, and tendencies of the bankruptcy institute at the macro-level, we propose to use certain indicators (quantitative or qualitative) that characterize the situation in a certain area of the functioning of national economic entities that directly or indirectly determine the effectiveness of the institute bankruptcy, patterns of its development, as well as the interaction of social, political, economic and other processes at the macro level. the following indicators were assigned to the selected indicators: doing business index, place in the rating (x1); economic freedom of the world index (efw), place in the rating (x2); index of economic freedom (economic freedom of the world index, efw), value (x3); inflation index, % (x4); corruption perceptions index, ranking (x5); number of business entities, units (x6); unemployment rate, % (х7); 92 www.virtual-economics.eu issn 2657-4047 (online) yuliya orlovska and nika ilkova virtual economics, vol. 2, no. 4, 2019 national taxes, quantity (х8); number of bankruptcy cases (x9); the level of the total tax burden, % (x10); the level of fiscal tax burden, % (х11); tax revenues to the consolidated budget, uah million (x12). it should be noted that the doing business index and the index of economic freedom are the main indicators, since a significant number of components of these ratings can be attributed to the functioning of the institution of bankruptcy (for more details see (ilkova, 2018). with regard to the corruption perceptions index, the question of the shadow economy can not be overlooked, as in recent years, the widespread occurrence of the ukrainian economy has become a deliberate bankruptcy, which does not always mean bankruptcy of the business and, accordingly, is not directly related to financial insolvency. others from the list of indicators characterize the features of the functioning of the bankruptcy institute at the level of the national economy. for analysis, data sets for 2008-2018 were used according to the proposed indicators. in this case, the number of input parameters exceeds the number of equations. this means that the system has many different solutions. therefore, for further analysis, it is necessary to reduce the number of input parameters. to do this, an autocorrelation analysis was conducted, according to which the pairwise correlation coefficients of all input and output fields are calculated, and it is determined that the largest mutual correlation coefficients are present between the fields: x1 (doing business index, ranking in place), x8 (national taxes, quantity), x10 (total tax burden, %), х12 (tax revenues to the consolidated budget, uah million). and also between x2 (economic freedom of the index index (efw), place in the rating) and x6 (number of business entities, units). this means that for analysis only the fields x1 (doing business index, place in the ranking) and x2 (economic freedom of the world index efw, place in the rating) can be left, as all others can be expressed through them for using linear dependence. consequently, gdp can be expressed in terms of the functional dependence of the species: y = f (x1, x2, x3, x4, x5, x7, x9, x11) (1) since the number of data is 10 years old and the unknown is 8, then the only way to find a functional dependence is the multiple regression analysis, the result of which is a functional dependence in the form of a linear equation: y=-20x1+142x2+15x3+264x4-0,002x5-237x7-0,023x9-118x11-1940 r=0.99 (2) 93 www.virtual-economics.eu issn 2657-4047 (online) yuliya orlovska and nika ilkova virtual economics, vol. 2, no. 4, 2019 to analyze the impact of each of the factors on gdp, a sensitivity analysis was conducted according to which input data x were recorded at the values of 2018 and alternately changed by 10%. for each such change, gdp was calculated as compared to the model value for 2018. the results of this analysis are given in table 1. table 1. analysis of the sensitivity of gdp to change of factors by 10% sensitivity x1 x2 x3 x4 x5 x7 x9 x11 deviation -5.29% 22.85% 5.70% 26.48% -13.06% -7.85% -1.34% -11.00% source: calculated by authors based on state statistics service of ukraine as can be seen from table 1, the most sensitive factor is x2 (economic freedom of the world index efw, place in the ranking) and x4 (inflation index, %). when the latter changes by 10%, the gdp will increase by 23% and 26% respectively. in the first case, this can be explained by the fact that the growth of economic freedom leads to an increase in the country's economy. for all 180 countries included in the 2017 report, a correlation of 0.61 between the index and gdp per capita is observed. and in some regions of the world (for example, in european countries) the correlation reached 0.7 (the world bank, 2017). with regard to rising inflation, its increase by 10% will positively affect the ukrainian economy: production is developing, unemployment is decreasing, consumers buy more money for goods and services. it should be noted that modern scientists believe that the level of inflation should not fall below 1%, but should not exceed the level of 4% (epstein, 2007; wright, 2009). but this applies to developed countries, such as the usa, france or the uk and germany. as for ukraine and other developing countries, it can be said that the maximum permissible inflation rate for ukraine is no more than 20%, or as an intermediate option, 16% (see for example (petryk & polovnev, 2003). therefore, an increase in the inflation rate by 10% annually will have a positive impact on the country's economy. the following are sensitivity factors: x5 (corruption perceptions index) and x11 (budget tax rate, %). their increase leads to a 13% and 11% reduction in gdp, respectively. in the first case, this is due to the fact that there is a stable relationship between the economy and corruption. corruption clearly impedes the country's economic growth, makes its citizens poorer, and the economy is less productive, as well as constrains the development of enterprises and state institutions (especially in less developed countries), since corrupt authorities are interested in this; and this, in turn, also negatively affects economic development. corruption also has not only economic consequences but also detrimental to the welfare of citizens as a whole because of its suffering social functions of the state (for example, medicine and education), poverty is increasing, income inequality increases, and public trust diminishes. these factors, in turn, also have an impact on economic development (the center for economic strategy, 2016). an increase in the level of budgetary load negatively affects the development of the economy, increasing the risks of shifts in business. it should be noted that in ukraine the tax burden is at the level of poland or spain. however, the ukrainian economy, institutions, the degree of civil society development and the qualifications of 94 www.virtual-economics.eu issn 2657-4047 (online) yuliya orlovska and nika ilkova virtual economics, vol. 2, no. 4, 2019 management operate at a much lower level, which has a negative impact on the effectiveness of the taxation institute. taking into account the obtained results regarding the identification of the most sensitive factors (index of economic freedom, place in the rating, corruption perceptions index, inflation index, % and budget tax rate, %) from the spheres of the general economic policy of the state, we have highlighted the peculiarities of functioning of the bankruptcy institute in the ukrainian economy. firstly, there is an urgent need to identify the main shortcomings of the existing tax system, with further justification of a number of key measures for its improvement. secondly, the necessity of forming a favorable institutional environment for the bankruptcy procedure. it should be noted that among the main stakeholders there can be lenders, owners, top management of the enterprise, government structures and regional administrations, various figs, which in the technological chain will bring (or may be included) the given enterprise, etc. therefore, the state should promote the formation of a set of health and / or reorganization procedures aimed at preserving and operating the main business of the debtor, serving as a priority for the realization of its economic interests. next, to determine the directions of state regulation of the bankruptcy institute, it is necessary to calculate the forecast gdp and to investigate the influence of changes in factors (indicators) on these trends. to do this, we have used trend models that allow us to predict the development of each of the factors for the future period. with this approach, it is assumed that the projected figure is formed under the influence of a large number of factors, which are either impossible or not relevant. in this case, the course of change of this indicator is associated not with factors, but with the passage of time, which manifests itself in the formation of one-dimensional time series. taking into account this, linear, polynomial, logarithmic and exponential trends were tested in the calculations. the best result was for polynomials with a power of 2: (3) where – is the trend for the input factor i, y – is the year. the results of the calculations are given in table 2. as can be seen from table 2, most models show high correlation coefficients except for x3 (economic freedom of the world index, efw), x7 (level without promise, %), х9 (number of bankruptcy cases). 95 www.virtual-economics.eu issn 2657-4047 (online) yuliya orlovska and nika ilkova virtual economics, vol. 2, no. 4, 2019 table 2. trend model coefficients for input and output factors a b с r x1 -1.40 5632.74 -5659400.07 0.96 x2 0.14 -573.42 577214.91 0.71 x3 0.47 -1878.91 1889816.00 0.35 x4 0.20 -792.73 797637.46 0.86 x5 31788.22 -128022599.46 128899962314.26 0.83 x7 0.01 -45.53 45617.34 0.62 x9 -119.06 480444.06 -484676379.76 0.52 x11 0.10 -395.48 397498.83 0.80 y 26.53 -106560.78 107021484.65 0.98 source: calculated by authors based on state statistics service of ukraine presentation of results in the form of a comparative graph of real data and trend forecasts are shown in fig. 1, confirms that the forecast data according to model (2) fairly well describe all fluctuations of real data. figure 1. comparison of real data calculated with trend models for y (gdp) source: calculated by authors based on state statistics service of ukraine. trend model shows significantly worse results. on the same graph, the forecast of the model (2) is presented for three years ahead according to the trend data calculated according to equation (3). thus, it is clear that gdp should increase substantially over the next 3 years. therefore, in order to evaluate the state regulation strategy, it is necessary to compare the results of the proposed strategy with the trend of gdp growth. 0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 2006 2008 2010 2012 2014 2016 2018 2020 2022 gdp, billions hryvnias model trend model 96 www.virtual-economics.eu issn 2657-4047 (online) yuliya orlovska and nika ilkova virtual economics, vol. 2, no. 4, 2019 however, before this, it is also necessary to assess the impact of strategies on the effectiveness of the functioning of the bankruptcy institute in order to determine the direction of justification of further measures on the state regulation of the institution of bankruptcy. in practice, it is necessary to change the factors x9 (number of bankruptcy cases) and y (gdp) in places (2) in model (2) and rebuild the model (2). the results of the regression analysis are given below: x9=-838x1+6087x2+647x3+11160x4-0,092x5-9986x7-42y-5088x11-84153 r=0.99 (4) as can be seen from the calculations, the correlation coefficient is also quite high. in fig. 2 shows comparison of real data with model. figure 2. comparison of real data with trend models for x9 (number of bankruptcy cases) for model (4) source: calculated by authors based on state statistics service of ukraine. as can be seen from fig. 2, the model (4) describes fairly well all the fluctuations of real data unlike the trend. the result of the sensitivity analysis is interesting and shown in table 3. 0 5000 10000 15000 20000 25000 30000 35000 40000 2006 2008 2010 2012 2014 2016 2018 2020 2022 number of bankruptcy cases model trend model 97 www.virtual-economics.eu issn 2657-4047 (online) yuliya orlovska and nika ilkova virtual economics, vol. 2, no. 4, 2019 table 3. analysis of the sensitivity of the number of bankruptcies to the change of factors by 10% sensitivity x1 x2 x3 x4 x5 y x7 x11 deviation -37.01% 161.58% 40.62% 184.75% -91.61% -54.55% -69.39% -77.95% source: calculated by authors based on state statistics service of ukraine. thus, we can see that factor x2 (economic freedom of the world index efw, place in the ranking) and x4 (inflation index, %) have a significant direct impact on the number of bankruptcies. in turn, factors x5 (corruption perceptions index, ranking in place), x11 (budget tax rate, %) and x7 (unemployment rate, %) have a strong retroactive effect on this indicator. given this weight of sensitivity is significantly different from the results of trend analysis (see table 1). the next step is to build a strategy for state regulation of the bankruptcy institute, by determining how it is necessary to influence various indicators to maximize gdp by 2021. therefore, the critical criterion is to prevent an increase in the level of bankruptcy (the number of bankruptcies). formally, the optimization task looks like this: max (5) where gdp value by 2021 according to model (2); the level of bankruptcy in 2021 according to the model (4) which should be at least 2018; change of y factor in year y relative to trend + accumulated change in previous years; p maximum allowable factor change (in our calculations is equal to 10%). since the changes in factors from the trend, and the trends themselves are nonlinear functions (3) optimization was carried out using a genetic algorithm with further refinement by the method of reduced gradients. the results of the calculation are given in table 4. as can be seen from the data given, the factors x1 (place in the doing business index rating), x2 (place in the index of economic freedom index), х5 (corruption perceptions index), х7 (unemployment rate, %) should be reduced each year, others on the contrary. 98 www.virtual-economics.eu issn 2657-4047 (online) yuliya orlovska and nika ilkova virtual economics, vol. 2, no. 4, 2019 table 4. changes in factors over three years in accordance with (5) x1 x2 x3 x4 x5 x7 x9 x11 2019 -10% -10% 10% 10% -8% -10% 10% 10% 2020 -10% -10% 10% 10% -7% -10% 10% 10% 2021 10% -10% 10% 10% -7% -10% 10% 10% 2019 43 45 117 35 2097456 9 23981 32 2020 16 42 111 42 2226182 9 26172 37 2021 -14 39 107 49 2420337 8 28320 43 source: own research. as a result, this will result in an increase in gdp by 24% in 2021 and a reduction in the level of bankruptcy relative to the trend, but in fact it will remain at the level of 2018 (table 5). that is, it can be said that such a state policy contributes to the more effective functioning of the institution of bankruptcy. as a result of the calculations, it is possible to formulate the main provisions of the state policy on increasing the effectiveness of the functioning of the institution of bankruptcy. first of all, it is necessary to promote the country's position in the doing business rankings, as well as the indexes of economic freedom and corruption perceptions. on the other hand, the annual growth of 10 percent of the inflation index and the level of budgetary tax burden will also have a positive effect on the gdp dynamics. table 5. gdp trend improvement according to model (5) year gdp increase bankruptcy increase 1 2019 3580 8% 20292 -7% 2 2020 4448 16% 18641 -14% 3 2021 5495 24% 18121 -15% source: own research. it should be noted that significant steps in this direction were made due to the adoption of the new code of ukraine on bankruptcy procedures, the enactment of which is scheduled for 21.10.2019, which will improve the position of ukraine in the doing business rating, both in terms of the restoration of solvency, and in the overall ranking. in the long run, this will improve the investment climate and the image of the country. it should also be noted that the code removes unnecessary barriers both for the debtor and for the creditor, regarding the procedure for restoring the debtor's solvency or recognizing it as a bankrupt. these are the procedures that were envisaged in the old law, the commercial procedural code, which in fact allowed the delay, indefinitely delay the intermediate processes of restoration of solvency. the second innovation is the question of the possibility of reconciliation between the creditor and 99 www.virtual-economics.eu issn 2657-4047 (online) yuliya orlovska and nika ilkova virtual economics, vol. 2, no. 4, 2019 the debtor through reorganization procedures and a global agreement. that is, the code regulates everything in such a way that the procedure to be applied really does, in the maximum number of cases, give a positive result, namely: reaching a compromise, in a certain, ideal case, and a consensus among all actors in order to: a) and save the company; b) repay the debts and claims of creditors as much as possible. 5. conclusions considering that the main goal of any system of insolvency regulation is the restoration of the solvency of economically viable economic entities experiencing temporary financial difficulties, as well as the rapid withdrawal of non-viable enterprises, the main directions of support in this area should be as follows: planning of a responsible state body for conducting state policy in the field of bankruptcy, medium and short-term bankruptcy (objectives) in the field of bankruptcy based on analytical data and proposals from institutions of different subordination, which ensure the implementation of a unified state policy in the relevant branch of economy. the result of such planning may be specific decisions to protect the interests of the state in bankruptcy and bankruptcy proceedings, including through timely planning of budget financing of measures to restore the solvency of problem organizations (for more detail, this aspect will be dealt with in the third section); clarification of the priorities of support when placing orders for the supply of goods, works, services for state needs that affect the achievement of the goals of financial rehabilitation. a clear and consistent application of a single state policy in the field of bankruptcy will allow the timely adoption of decisions on the elimination of insolvent organizations, including stateowned enterprises, thus ensuring a concentration of state efforts to restore the solvency of large strategic and system-building enterprises and the social protection of workers released following the elimination of organizations. it should also be noted that obstacles to economic instability are caused by lack of understanding by the economic agents of the laws and the logic of such changes. however, in the absence of long-term state policy, planned changes are either not taking place (rejected) or delayed and accompanied by high costs and losses for the national economy. among the main reasons why the functioning of the institution of bankruptcy does not lead to the expected result in ukrainian society, one can note the following: first, in the process of establishing an institution of bankruptcy, the principle of institutional complementarity is not taken into account, in this connection there are reactions to its perversion. the very fact that the institutes complement each other desirable economic effect is achieved only on the basis of interrelated institutional changes. second, the bankruptcy system is rather complex and opaque. this circumstance is connected with the heterogeneity of this institute. it consists of formal and informal rules that regulate 100 www.virtual-economics.eu issn 2657-4047 (online) yuliya orlovska and nika ilkova virtual economics, vol. 2, no. 4, 2019 the relationship between economic agents in the area of insolvency, the mechanisms for enforcing these rules, as well as a set of possible interpretations of rules that determine the nature of their further use. thirdly, wider distribution of fictitious bankruptcy in economic practice compared with other countries. so, in ukraine, unscrupulous lenders have many different ways to acquire property rights over the necessary property of the debtor company at various stages of bankruptcy. however, the need for evidence of direct intent makes the specified norm virtually inactive. after all, in most cases the commission of actions determined by the article may be justified by the incompetence of the leader or the owner, that is, the lack of direct intent. also, in ukrainian practice there is insufficient definition of peculiarities of the application of bankruptcy procedures for such specific enterprises as enterprise developers and credit unions, which actually can not be properly eliminated or sanitized under general procedures, taking into account the availability of property claims of citizen investors and so on (in more detail the problem of intentional bankruptcy in the ukrainian economy is investigated in the next section). fourthly, the existing unfavorable economic situation in the country, considering which, the implementation of the bankruptcy institute should be based on a differentiated approach to the choice of liquidation or reorganization procedures in relation to certain groups of enterprises, which guarantees the maximum increase in the cost of a company experiencing financial difficulties. thus, the main directions of regulation of the bankruptcy institute should include the substantiation and implementation of a system of measures to create an organizational-legal field oriented to the development of market relations, as well as to stimulate the mechanisms of market self-organization. that will allow to improve the development of the economy as a whole, including optimizing the protection of the legitimate interests 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(2019). bankruptcy costs, economic policy uncertainty, and fdi entry and exit. review of international economics. https://doi.org/10.1111/roie.12412 кwilinski alex 58 www.virtual-economics.eu issn 2657-4047 (online) lim chandeth, antonina shostakovska, petro tsymbal, & ganna vlasova virtual economics, vol. 3, no. 1, 2020 2020 volume 3 number 1 (january) quality control development at the strategic level lim chandeth, antonina shostakovska, petro tsymbal, and ganna vlasova abstract. the paper deals with the scientific and methodological approach to quality control of the industrial enterprise development at the strategic level based on adapting the control system to the life cycle stages of the organizational structure and products of the industrial enterprise, through which the transition between the stages of the life cycle and the quality of the enterprises’ development in a strategic term can be detected. in terms of the products’ life cycle, the task of control at the strategic level is to detect promptly the stage when the products no longer meet the needs of the market, and to control the transition efficiency from stage to stage. to solve this task, it is proposed to use the following indicators: the dynamics of sales volumes; the dynamics of the products’ market share; the coefficient of products’ competitiveness; the dynamics of products’ profitability; the coefficient of product expectation on the market, etc. keywords: adaptation, control system, quality, development, stages, life cycle, industrial enterprise jel classification: c44, d81 http://www.virtual-economics.eu/ 59 www.virtual-economics.eu issn 2657-4047 (online) lim chandeth, antonina shostakovska, petro tsymbal, & ganna vlasova virtual economics, vol. 3, no. 1, 2020 authors: lim chandeth panha chiet university, 13-20-24, sangkat teuk laak 3, khan toul kok, phnom penh, cambodia, 12158 e-mail: chandethlim@gmail.com https://orcid.org/0000-0001-5261-0829 antonina shostakovska european university, 16v vernadsky boulevard, kiev, ukraine, 02000 e-mail: av_kafgp@ukr.net https://orcid.org/0000-0001-8948-5777 petro tsymbal national university of the fiscal service of ukraine, 31 university street, irpin, ukraine, 08200 e-mail: tsymbal52@meta.ua https://orcid.org/0000-0002-7244-4669 ganna vlasova european university, 16v vernadsky boulevard, kyiv, ukraine, 02000 e-mail: vlasovaann@ukr.net https://orcid.org/0000-0002-5616-3904 citation: chandeth, l., shostakovska, a., tsymbal, p., & vlasova, g. (2020). quality control development at the strategic level. virtual economics, 3(1), 58-73. https://doi.org/10.34021/ve.2020.03.01(3) received: september 6, 2019. revised: december 12, 2019. accepted: january 12, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2020.03.01(3) https://creativecommons.org/licenses/by/4.0/ 60 www.virtual-economics.eu issn 2657-4047 (online) lim chandeth, antonina shostakovska, petro tsymbal, & ganna vlasova virtual economics, vol. 3, no. 1, 2020 1. introduction managing the quality of industrial enterprise’s development effectively is impossible without taking into account the life cycle. moments of the life cycle stages are very important for an industrial enterprise, and the quality of enterprise development depends on what management decisions were made. when considering an industrial enterprise as an economic system under the life cycle refers to the stages of the process, covering all the states of the system, from the moment of the enterprise’s establishment and to its shutdown (blanchard & fabrycky, 2010). also, it should be borne in mind that an industrial enterprise is an artificial, not a living system, therefore, the closing stage is not mandatory. that is, the life cycle of an industrial enterprise can be regarded as a limited set of stages or states in which the enterprise is developing. depending on what stage of the life cycle the industrial enterprise is, it is necessary to focus attention on various aspects of activities. thus, in the initial stages of the life cycle, it is necessary to increase control of costs, and in the stages of maturity the main thing is to control and forecast the income for timely adaptation to changes in the competitive environment. moreover, in terms of quality control over the industrial enterprise’s development, the life cycle includes both that of the enterprise as an organizational structure and the life cycles of products. these components of the overall life cycle of an industrial enterprise determine which factors are subject to strengthened control and analysis to ensure timely correction and direction of development in the most promising trajectory. 2. literature review quality management ensures that an organization, product or service is consistent. it has four main components: quality planning, quality assurance, quality control and quality improvement (rose & kenneth, 2005). as systemic thinking is bringing more holistic approaches to quality, the process and products are considered together rather than as independent factors in quality management. the influence of quality thinking has spread to non-traditional applications outside the walls of manufacturing, extending into service sectors and into areas such as sales, marketing and customer service (selden & paul, 1998). the issue of quality control development at the strategic level is not new among today's publications of scientists who offered tools to handle the components of this issue (huang et al., 2018; mcadam et al., 2019; rehhausen et al., 2018). but it should be noted that these researchers did not consider sufficiently the specificity of control at the strategic level; moreover, the issue of adapting the control system to those stages of the life cycle, which is now an industrial enterprise, remains beyond their analysis. that is, the life cycle of an industrial enterprise can be regarded as a limited set of stages or states in which the enterprise develops (azevedo et al., 2017). depending on what stage of the life cycle the industrial enterprise is, it is necessary to focus attention on various aspects of activities. thus, in the initial stages of the life cycle, it is necessary to increase control over costs, and in the stages of http://www.virtual-economics.eu/ 61 www.virtual-economics.eu issn 2657-4047 (online) lim chandeth, antonina shostakovska, petro tsymbal, & ganna vlasova virtual economics, vol. 3, no. 1, 2020 maturity, there should be monitoring and forecast of income in order to timely adapt to changes in the competitive environment. moreover, in terms of quality control over the industrial enterprise’s development, the life cycle includes that of the company as an organizational structure and the life cycles of its products (ali et al., 2019). these components of the overall life cycle of an industrial enterprise determine which factors are subject to strengthened control and analysis to ensure timely correction and direction of development in the most promising trajectory. the findings proved that scientific community around the world analysed quality control development from the different points of views: competitive advantages (boiko et al., 2019; dźwigoł et al., 2020; kwilinski et al., 2020); production costs (dementyev & kwilinski, 2020); research methodology (dźwigoł & dźwigoł-barosz, 2018; dźwigoł, 2019a); controlling in the management process (dźwigoł & wolniak, 2018); enterprise restructuring process (dźwigoł, 2019b); national security (dzwigoł et al., 2019a); investment attractiveness (dzwigol et al., 2019b lyulyov, et al. 2017); management system at an enterprise (dźwigoł et al., 2019c); innovation development (kondratenko et al., 2020; kuzior & zozuľak); sustainable development (dalevska et al., 2019; kuzior et al., 2019; lyulyov et al., 2019; vasylieva et al., 2018; 2019); ict development for the management (кwilinski, 2017; 2018a; 2018b; 2018c; 2018d; 2019; kwilinski et al., 2019a; 2019b; 2019c; 2020a; kwilinski & kuzior, 2020; tkachenko et al., 2019a; 2019b; 2019c); financial activity (kwilinski et al., 2020b; pająk et al., 2016); and energy security (pająk et al., 2017). 3. methods when considering the quality control over an industrial enterprise development from the standpoint of operational, tactical and strategic control, adaptation to the life cycle refers to strategic control. strategic quality control of the industrial enterprise’s development is characterized by the following features: it covers significant time periods in which significant changes in the environment occur; it summarizes the conclusions of operational and tactical control; it provides the basis for determining the further strategic objectives of the industrial enterprise; it determines the main types of products of the industrial enterprise and monitors the need for their changes; it creates a knowledge base on developing industrial, financial, marketing, personnel, innovation, investment and other activities of the industrial enterprise; it provides a comparison of the achieved quality development indicators with possible alternatives; it serves as a basis for correcting strategic plans; it creates the information basis for the long-term distribution of the industrial enterprise’s resources; it establishes performance indicators for further quality control development, both strategic and operational and tactical; it provides study of the environment and adaptation to it. it is proposed to control the quality of the industrial enterprise’s development at the strategic level to carry out both the assessment and analysis of the trajectories of quality indicators of development that are comparable to the stages of the industrial enterprise’s life cycle. in turn, the industrial enterprise’s life cycle is characterized by the state of the environment and by http://www.virtual-economics.eu/ 62 www.virtual-economics.eu issn 2657-4047 (online) lim chandeth, antonina shostakovska, petro tsymbal, & ganna vlasova virtual economics, vol. 3, no. 1, 2020 the stage the components of the overall life cycle of the enterprise are at. finding a company, its products or technologies at individual stages of the life cycle determines which strategic goals can be set for an enterprise and how the quality of development should be monitored. when analysing an industrial enterprise as an organizational structure, the following stages of the life cycle are traditionally separated (voronina, 2010; romanov, basenko, and zhukov, 2009). these are: the stage of creation, on which the organizational structure is formed, the assortment of products and technologies production is determined, contacts with the key contractors are established; the stage of development, at which the required level of specialization is achieved, formal communications are established, production volumes are expanded and the staff is growing, and the organizational culture of the enterprise crystallises; the stage of maturity, at which the organization receives the maximum effect from the previous stages, above all, the economic effect; the stage of the crisis, at which traditional methods of activity are ineffective because of inconsistencies with the external environment that has undergone significant changes. the task of controlling the quality of the industrial enterprise development in terms of controlling the life cycle of an organizational structure is to ensure the transition from the first and second stages to the third one, and the maximum long-term retention in the third stage (maturity stage) with the timely detection of signs of the fourth stage (crisis) in order to avoid it by implementing restructuring (return to the second stage). in order to identify the organizational structure’s crisis, the control system for the industrial enterprise development at the strategic level should promptly identify changes in the external environment that adversely affect the economic efficiency of the enterprise and cannot be eliminated without restructuring and reorganization of the enterprise. also, the monitoring system for the industrial enterprise development should oversee the achievement of the goals and objectives that were previously set for solving problems that need to be reorganized. as indicators that characterize the quality of the industrial enterprise’s development in terms of control over the life cycles of the organizational structure, the following are the most relevant indicators: conformity of the branch network to the actual market; the risk of antimonopoly investigations; compliance of capacities with demand volumes; an indicator of decision-making efficiency; indicators of the dynamics of overall economic efficiency, etc. the first three indicators give an opportunity to assess how the current organizational structure of the industrial enterprise is in line with the external environment, and whether there are signs of transition from the third stage of the life cycle (maturity) to the fourth (crisis) one. the correspondence of the branch network to the actual market is proposed as a comparison of the amount of support costs to the amount of savings from its reduction in the case of an over-developed network, or as a comparison of the amount of the network support costs to the amount of potential revenue loss from the lack of branches in the event of a lack of network development: http://www.virtual-economics.eu/ 63 www.virtual-economics.eu issn 2657-4047 (online) lim chandeth, antonina shostakovska, petro tsymbal, & ganna vlasova virtual economics, vol. 3, no. 1, 2020            o v v los vv o v red vv f v m,m v vv m,m vv vv m sup sup sup sup (1)    t ttv vrv supsup (2)    t red tt red v vrv (3)    t los tt los v vrv (4) where f v m – conformity of the network of branches of the industrial enterprise’s organizational structure to the actual market for v -th network option; sup v v – the cost of maintaining an additional network of affiliates for v -th the network option for the time period considered; red v v – saving on reducing the network of branches for the v -th variant of the network for the considered time period; los v v – the amount of potential revenue loss due to the lack of affiliates for the v -th option for the network over the period considered; v m – number of affiliates for the v -th option of the network; o m – the optimal number of branches at the current level and distribution of demand for the industrial enterprise’s products; t r – discount rate t -th period for bringing monetary indicators to a single measurement; sup t v – costs to support an additional network of affiliates t -th period; red t v – savings from reducing network affiliates t -th period; los t v – amount of possible income loss from the absence of affiliates t -th period; v – number of branch network options; vv ,...,1 . branch network options are considered over a period of time that is adopted at an industrial enterprise as a basis for strategic management. at the same time, for each time period, there may be various versions of the organizational structure of the industrial enterprise’s branches and subdivisions. the cost of the solution for each of these options is reduced to one period due to the discount rate. this indicator allows controlling the development of the enterprise in accordance with changes in volumes and geography of demand. if the indicator is beyond the scope of standards, an industrial company must make strategic decisions on creating new http://www.virtual-economics.eu/ 64 www.virtual-economics.eu issn 2657-4047 (online) lim chandeth, antonina shostakovska, petro tsymbal, & ganna vlasova virtual economics, vol. 3, no. 1, 2020 branches and production facilities, or vice versa, reducing existing ones to optimize logistics costs. capacity compliance ratio reflects whether distribution and capacity are relevant to the demand geography. this indicator is related to the previous one and provides an opportunity to control the initial signs of gaps between the production and consumption of industrial products. the calculation of the gap is proposed to take into account the cost of production and consider the same negative as excess production over consumption, and vice versa:      kg kg d kg kg kg d kg s kg sd pq pqq r , ,, , ,,, (5) where sdr – an indicator of the gap between industrial products’ production and consumption; s kg q , – production output k -th species in the g -th region in the natural measure; d kg q , – consumption of products k -th species in the g -th region in the natural measure; kg p , – the cost of producing k -th species in g -th region; k – the number of product types manufactured by an industrial enterprise; g – the number of geographic regions in which the company is present; kk ,...,1 ; gg ,...,1 . an indicator of the antitrust investigations risk is relevant for large industrial enterprises, which, due to their successful operation, seized a large market share, which leads to the risk of applying antimonopoly legislation to them. in case of excessive risk of antimonopoly measures, the industrial enterprise must restructure its organizational structure, for example, splitting up the company into several smaller ones. an indicator of decision-making efficiency reflects whether the industrial enterprise’s organizational structure meets the requirements of modern management. with the enterprise growth, the management system may not be able to keep up with the scale of activity and the increasing complexity of the organizational structure; therefore, monitoring the indicator of decision-making efficiency makes it possible to assess the quality of how this particular aspect of the industrial enterprise’s management develops. the indicator of decision-making efficiency consists of speed estimations, formalization and automation of the decision-making process, and the calculation is based on the principle of "passing through a bottleneck", that is, the worst of the component results is chosen:  atmfrmspddes dddd ,,min (6) http://www.virtual-economics.eu/ 65 www.virtual-economics.eu issn 2657-4047 (online) lim chandeth, antonina shostakovska, petro tsymbal, & ganna vlasova virtual economics, vol. 3, no. 1, 2020 where desd – an indicator of the decision making efficiency of the industrial enterprise; spd d – the rate of decision-making of the industrial enterprise; frm d – an indicator of formalization of the decision-making process at an industrial enterprise; atm d – an indicator of automation of the decision-making process at the industrial enterprise. the speed of decision-making is evaluated as the weighted average for a typical set of decisions on managing an industrial enterprise, with the weighting of each decision depending on the terms of its approval or acceptance:   3      artspd spd pw d (7)       excellent rysatisfacto toryunsatisfac w spd |3 |2 |1  (8) where spdd – the rate of decision-making of the industrial enterprise; sp d w – assessment of the speed of acceptance or approval  -th typical solution at an industrial plant; art p – a fraction  -th a typical solution in the total number of management decisions reviewed by an industrial enterprise. table 1. evaluating the speed of decision making in the organizational structure of the industrial enterprise the level at which the decision arises / the level at which the decision is approved or accepted rate estimation excellent satisfactory unsatisfactory strategic / strategic less than 3 hours less than 1 day more than 1 day strategic / tactical less than 5 hours less than 1 day more than 1 day strategic / operational less than 1 day less than 2 days more than 2 days operational / strategic less than 2 days less than 3 days more than 3 days operational / tactical less than 1 day less than 2 days more than 2 days operational / operational less than 1 day less than 2 days more than 2 days tactical / strategic less than 5 hours less than 2 days more than 2 days tactical / tactical less than 1 day less than 2 days more than 2 days tactical / operational less than 5 hours less than 2 days more than 2 days source: the authors’ own research. http://www.virtual-economics.eu/ 66 www.virtual-economics.eu issn 2657-4047 (online) lim chandeth, antonina shostakovska, petro tsymbal, & ganna vlasova virtual economics, vol. 3, no. 1, 2020 speed is evaluated when coordinating decisions among different levels of management, or among different units at the same level. the evaluation criteria are shown in table 1. evaluation of the managerial decision formalization is made by analysing job descriptions and establishing, firstly, how complete the description of the processes necessary to make a decision in job descriptions is, and secondly, whether there are conflicts among various job descriptions.   3      artfrmfrm frm pwc d (9)       excellent rysatisfacto toryunsatisfac w frm |3 |2 |1  (10)       essential antinsignific absent c frm |2,0 |5,0 |1  (11) where frmd – the indicator of decision-making formalization at the industrial enterprise; frm c – evaluation of the existence of conflicts in the adoption or approval of a typical solution at an industrial enterprise; frm w – evaluation of the formalization of acceptance or approval  -th typical solution at an industrial plant; art p – a share  -th of the typical solution in the total number of management decisions considered at the industrial enterprise. the evaluation criteria of whether the formalization of the processes of managerial decision making in the job descriptions is sufficient and transferred to the quantitative assessment are shown in table 2. evaluation of whether there exist collisions at the acceptance or approval of model decisions at an industrial enterprise is proposed based on the following assumptions. in the absence of collisions, a coefficient equal to one is used and formalization estimates are not adjusted. if there is no more than one conflict when the same function or process according to the instructions is to be performed by different persons with the same authority, then the coefficient 0.5 is used. if there are more collisions, then it significantly worsens the possibility of effective management, therefore it is necessary to use a coefficient of 0.2. the indicator of automation of the decision-making process at the industrial enterprise is calculated as a share http://www.virtual-economics.eu/ 67 www.virtual-economics.eu issn 2657-4047 (online) lim chandeth, antonina shostakovska, petro tsymbal, & ganna vlasova virtual economics, vol. 3, no. 1, 2020 of business processes, the execution of which is accompanied in the information system of the enterprise. table 2. evaluation of the decision-making formalization in the organizational structure of the industrial enterprise type of management decision rating unsatisfactory satisfactory excellent approval of decisions missing in job descriptions only liability is established established responsibility and timing solutions development missing in job descriptions only the basic principles of decision making are defined there are separate methodological guidelines and guidelines decomposition of solutions missing in job descriptions the responsibility and basic principles of decomposition are defined a hierarchy of decomposition is established control over execution of decisions missing in job descriptions only liability is established criteria and norms of control are established source: the authors’ own research. also, when analysing an organizational structure, indicators that are less related to life cycles can be used, but they can provide additional information on the quality of the industrial enterprise’s development: the coefficient of lanquity, the coefficient of functions duplication, the coefficient of centralization, the coefficient of information use efficiency, the coefficient of the control level, the coefficient of territorial concentration (olubodun et al., 2010). indicators of the dynamics of overall economic efficiency, which are subject to control at the strategic level, provide an opportunity to identify and assess the change in the life cycle stages of an industrial enterprise. these indicators include: profitability; market share; the company’s market value; production volumes, etc. thus, depending on the stage at which the vital organizational structure of the cycle is, the basic indicators of control can differ. at the stage of creation, the main thing is the correspondence of the branch network to the actual market and the matching of capacities to demand volumes. at the stage of development, the indicators of market share, volumes of production and sales, and market value of the company are coming to the fore. at the stage of maturity, the importance of the risk indicator for antimonopoly investigations, the efficiency of decision-making, and the market value of the company increases. at the stage of the crisis, the main indicators are profitability, as well as those indicators that are related to the causes of the crisis. http://www.virtual-economics.eu/ 68 www.virtual-economics.eu issn 2657-4047 (online) lim chandeth, antonina shostakovska, petro tsymbal, & ganna vlasova virtual economics, vol. 3, no. 1, 2020 thus, the proposed indicators provide an opportunity to monitor the quality of development and life cycles of industrial production at the strategic level. at the stage of research and development, the main factor is the coefficient of product expectation on the market; at the stage of introduction into production and market output, these are the dynamics of sales volumes and the dynamics of the products’ share in the market; in the stage of maturity and maximum sales, these are the dynamics of sales volumes, the dynamics of profitability of products and the coefficient of competitiveness of products; and at the stage of aging and withdrawal from the market, it is the dynamics of products’ profitability. consequently, the quality control of the industrial enterprise’s development at the strategic level requires considering the life cycle of an enterprise, first of all, taking into account the lifecycle stage of its organizational structure and the life-cycle stages of the products it manufactures. depending on the life-cycle stages, various indicators are evaluated, which makes it possible to analyse the quality of the enterprise development and to take management decisions in order to increase the effectiveness of the industrial enterprise’s strategic development. 4. results and discussion the proposed models of quality control over the industrial enterprise’s development at the strategic level were tested at pjsc "keramash", which allowed identifying strategic threats for the enterprise and developing recommendations on preventive management of the development under conditions of changing stages of the enterprise’s life cycle. pjsc "keramash" is not a new enterprise, as its organizational structure has been at the stage of maturity for a long time. therefore, the task of control at the strategic level is to monitor the signs of the beginning crisis phenomena that need to be reorganized and restructured. products manufactured by pjsc "keramash" comprise thermal equipment, which was introduced to the market long ago. thus, for the control at the strategic level, the following indicators were selected: the risk of antimonopoly investigations, the efficiency of decision-making, the dynamics of changes in sales volumes, the coefficient of products’ competitiveness. besides, for the risks’ timely identification at the onset of the crisis stage, the products’ profitability has been added to the control indicators. the pjsc "keramash" results of the quality control over the industrial enterprise’s development at the strategic level are summarised in table 3. the analysis of these indicators made it possible to draw conclusions about the quality of pjsc "keramash" development in the strategic term considered and to develop recommendations for improving the development strategy. as a strategic term, the last five years of the company’s operation were considered from 2012 to 2016. it is established that for the enterprise there is no risk of antimonopoly investigations. but the efficiency of decisionmaking turned out to be equal to 0.52, which indicates the availability of opportunities for improving the organizational structure and decision-making system. http://www.virtual-economics.eu/ 69 www.virtual-economics.eu issn 2657-4047 (online) lim chandeth, antonina shostakovska, petro tsymbal, & ganna vlasova virtual economics, vol. 3, no. 1, 2020 table 3. results of quality control development of pjsc "keramash" at the strategic level indicator rating the risk of antimonopoly investigations absent an indicator of decision-making efficiency 0.52 the coefficient of competitiveness of products 0.80 the dynamics of changes in sales volumes 0.61 the dynamics of products’ profitability for the considered period 0.34 cost-effectiveness of products in the last period 0.28 the dynamics of the enterprise’s (assets) profitability for the considered period 0.08 the enterprise’s (assets) profitability in the last period 0.10 source: the authors’ own research. among the three components, the worst of which determines the efficiency of decisionmaking at industrial enterprises, the bottleneck was the indicator of formalizing the decisionmaking process. the speed of decision making is also slightly higher than average, with the coefficient equal to 0.57. in comparison with most ukrainian industrial enterprises, the automation of the decision-making process, whose coefficient was 0.75, is quite high. thus, we can conclude that the development of an enterprise as an organizational structure requires the adoption of measures to improve the speed and formalization of decision-making. the positive value of the profitability of pjsc "keramash" assets as a value for 2016, as well as aggregated indicator of profitability dynamics of assets, are both positive from the point of view of development quality. moreover, the profitability of assets in 2016 was more than aggregated over the last five years, including the crisis of 2014-2015, which indicates the steady position of pjsc "keramash" at the stage of maturity. indicators of production manufactured by pjsc "keramash" also demonstrate that it is in the stage of constant maturity. the indicator of the volume of product sales is more than zero and less than one, which shows that, even for the strategic management period considered, there were declines in sales, but, overall, the trend is positive. the profitability of products is slightly lower than the aggregated indicator of profitability dynamics, but, in general, both of these indicators are at a rather high level, which gives grounds to conclude that the products of pjsc "keramash" are still far from the stage of aging. however, fluctuations in sales volumes in the long run require attention to reduce dependence on economic crises in consumer countries. consequently, the quality control of the pjsc "keramash" development at the strategic level allowed maintaining that: pjsc "keramash" products and the enterprise as a whole are at the stage of constant maturity; pjsc "keramash" products have a high degree of profitability and competitiveness; the system of making management decisions at pjsc "keramash" is http://www.virtual-economics.eu/ 70 www.virtual-economics.eu issn 2657-4047 (online) lim chandeth, antonina shostakovska, petro tsymbal, & ganna vlasova virtual economics, vol. 3, no. 1, 2020 satisfactory, but to compete under modern conditions, it needs to be improved and modernized; for pjsc “keramash” the risks of economic crises in countries that consume its thermal equipment are high; for pjsc "keramash" development, it is necessary that the strategy of enterprise development includes measures aimed at improving the decisionmaking system and expanding the presence on the markets of other countries. if the proposed measures are implemented, the calculated economic effect consists of profits due to the new markets’ development and the costs reduction resulting from more effective decision-making and implementation of the measures proposed as a result of control at the tactical level. negative and positive components of the economic effect are as follows: additional profit from selling products in the markets of the baltic and eastern europe makes up $ 8.6 million; reduction of production cost accounts for $ 2.1 million; expenses on developing representative offices in the markets of other countries amount to $ 1.3 million; modernization of equipment and staff qualification development in order to prevent the growth of the percentage of shortages with the intensification of production make $ 2.1 million; implementation of information systems for supporting the making of administrative decisions accounts for $ 0.7 million. thus, the expected expenses on implementing the proposed measures will amount to $ 4.1 million, while additional profits and savings will account for $ 10.7 million. the overall economic effects will make $ 6.6 million. 5. conclusions it has been found that changing the life-cycle stages is very important for an industrial enterprise and depends on what management decisions were made. therefore, for the effective control over and overall management of the quality of industrial enterprise’s development it is necessary to take into account life cycle. depending on what stage of the life cycle the industrial enterprise is, it is necessary to focus attention on various aspects of activities. among the indicators characterizing the quality of the industrial enterprise’s development in terms of monitoring the life cycles of the organizational structure, the most relevant are the following: the correspondence of the affiliates network to the actual market; the risk of antimonopoly investigations; capacities’ compliance with demand volumes; the indicator of decision-making efficiency; indicators of the dynamics of overall economic efficiency, etc. depending on the stage at which the vital organizational structure of the industrial enterprise life cycle is, the basic indicators for control can differ. at the stage of creation, the main thing is the correspondence of the branch network to the actual market and the matching of capacities to demand volumes. at the stage of development, indicators of the market share, volumes of production and sales, and the company’s market value are coming to the fore. at the stage of maturity, the significance of the indicator of the antimonopoly investigations risks, the efficiency of decision-making, and the company’s market value increases. at the stage of http://www.virtual-economics.eu/ 71 www.virtual-economics.eu issn 2657-4047 (online) lim chandeth, antonina shostakovska, petro tsymbal, & ganna vlasova virtual economics, vol. 3, no. 1, 2020 the crisis, the main indicators are profitability, as well as those indicators that are related to the causes of the crisis. the task of control at the strategic level in terms of the products life cycle is to timely detect the stage when the products no longer need the market, and to control the transition efficiency from stage to stage. to solve this problem, it is proposed to use the following indicators: the dynamics of sales volumes; the dynamics of the products share in the market; the coefficient of products competitiveness; the dynamics of products profitability; the coefficient of product expectation on the market, etc. the proposed indicators provide an opportunity to monitor the quality of development and life cycles of the industrial enterprise products at the strategic level. at the research and development stage, the main factor is the coefficient of product expectation in the market; at the stage of introduction into production and market output these are the dynamics of sales volumes and the dynamics of the share of products in the market; in the stage of maturity and maximum sales, these are the dynamics of sales volumes and 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(in ukrainian). http://www.virtual-economics.eu/ кwilinski alex 26 www.virtual-economics.eu issn 2657-4047 (online) joanna mazurkiewicz and piotr lis virtual economics, vol. 1, no. 1, 2018 2018 volume 1 number 1 (october) diversification of energy poverty in central and eastern european countries joanna mazurkiewicz and piotr lis abstract. household energy security, and in particular affordability of energy services and the energy poverty issue, is a debated topic both at the eu level and at the level of individual countries. the aim of the paper is to investigate the energy poverty diversity in the central and eastern european countries. the energy poverty index that aggregates three aspects: availability and affordability of energy services, as well as household energy efficiency, has been presented. this framework allows for comparison between countries and discloses the diversity of their energy poverty profiles. analysis of energy poverty indicates diversification of level and dynamics of this phenomenon in the studied countries. among countries of central and eastern europe, there are both countries, where the problem of energy poverty is the highest, and the lowest in europe. almost all studied group is characterized by decreasing level of energy poverty in that particular period. analysis of index components indicates diversification of energy poverty profiles. important factor shaping the ability to acquire energy services was also the consequence of economic crisis, especially lowering the level of incomes and the increase of energy prices as a result of increasing tax burdens imposed on energy carriers. keywords: energy poverty, energy services affordability, households jel classification: e00, o52, r00 author(s): joanna mazurkiewicz poznań university of economics and business, al. niepodległości 10, 61-875 poznań, poland e-mail: joanna.mazurkiewicz@ue.poznan.pl https://orcid.org/0000-0002-6607-5270 piotr lis poznań university of economics and business, al. niepodległości 10, 61-875 poznań, poland e-mail: piotr.lis@ue.poznan.pl https://orcid.org/0000-0001-7942-2668 citation: mazurkiewicz, j., & lis, p. (2018). diversification of energy poverty in central and eastern european countries. virtual economics, 1(1), 26-41. https://doi.org/10.34021/ve.2018.01.01(2) received: july 12, 2018. revised: september 7, 2018. accepted: september 17, 2018. © author(s) 2018. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2018.01.01(2) https://creativecommons.org/licenses/by/4.0/ 27 www.virtual-economics.eu issn 2657-4047 (online) joanna mazurkiewicz and piotr lis virtual economics, vol. 1, no. 1, 2018 1. introduction energy markets in the eu countries are undergoing strong changes having two factors as their catalysts: technological progress and political decisions taken by the member countries and on the supranational level. the consequences of these processes are among others the introduction of market mechanisms to a strongly regulated sector, the reduction of access barriers to it and the increase of competition among entities operating on the energy markets, changes in the structure of energy supply resulting from the stricter environmental requirements. these changes have an influence on the functioning of households. on the one hand, they gained the possibility of active participation in the energy market, free choice of energy service suppliers or even participation in the market as prosumers. on the other hand, households have been put at higher risk due to the fluctuation of energy prices. demand for energy is characterized by low price flexibility, and with the lack of substitutes or efficient possibilities to store energy, when the prices increase, expenses for energy services become a significant and difficult to control component of household budgets. in this light, energy security of households must be considered in a wider sense, than only in the category of stability and continuity of energy supplies. it is especially important to pay attention to the ability of households to purchase energy services as well as to the problem of energy poverty. in the last decade these issues became the subject of interest, both by science and economic policy as well as for market regulators in the eu countries (bouzarovski et al., 2012; dagoumas and kitsios, 2014; european economic and social committee, 2010, 2013). the aim of the following report is to analyze the energy poverty in the selected eu countries. the report proposes the energy poverty index, considering accessibility to energy services, the ability of households to purchase energy services as well as the level of energy efficiency in households the analysis will be conducted for six countries of central and eastern europe (bulgaria, czech republic, poland, rumania slovakia, hungary) and the baltic states (lithuania, latvia and estonia). the subsequent parts of the report will present the definition of energy poverty and the methods of measuring it, together with the concept of energy poverty measure, which will be then estimated for an indicated group of countries. 2. the idea of energy poverty energy poverty is a phenomenon of the lack of access of households to modern and safe energy services provided in an undisturbed, safe and ecologically responsible way with the aim of providing economic development (pachauri and spreng, 2011). energy services were originally defined as access to energy and other sources of energy designed for the realization of elementary needs, mainly for the preparation of meals (international energy agency, 2002, 2010). currently energy services are understood wider, as transforming the carriers of primary energy into the diversified streams of final energy provided to consumers: electric energy, heat, coolness, transport fuels. the types of energy services and the access to them for households can then differ depending on the level of economic development, accessible sources of energy or energy policy of a particular country, nevertheless the catalogue of http://www.virtual-economics.eu/ 28 www.virtual-economics.eu issn 2657-4047 (online) joanna mazurkiewicz and piotr lis virtual economics, vol. 1, no. 1, 2018 household needs realized due to the access to energy is relatively stable (lightning, keeping the right temperature at home, preparation of meals, transport, communication). the above presented definition of energy poverty shows the features that should characterize energy systems. the first is the necessity to apply an adequate technology, which ensures seamless, undisturbed access to energy services with prices that are not a significant access barrier for households. simplifying this, we could say that energy technologies should be as cheap as possible in conditions accessible for a particular society. in relation with the above, we can indicate the existence of dependence between the wealth of society and the forms and diversification of used sources of energy (gonzález-eguino, 2015). generally, wealthier countries are characterized by more diversified energy baskets, whereas the poorer countries have relatively small number of available energy sources, with a significant predominance of solid fuels (including biomass). at the same time, the increase in wealth of households results in replacing solid fuels by cleaner sources of energy. this dependency indicates abandoning cheaper and worse quality fuels (wood, wastes, kerosene) and choosing more efficient, modern sources of energy (electric power, liquid fuels) together with the increase in the wealth of households (van der kroon et al., 2013; cook et al., 2005). the factor conditioning the choice of energy technologies is also the minimalization of the negative influence on the natural environment – intensive transformation of the natural environment for the needs of energy production, dedication of agricultural land for energy aims and the emission of greenhouse gasses. finally, the definition of energy poverty refers to the aim of providing access to energy services, which is an economic development. we should indicate at the same time, that this development is not understood only as reaching a suitable level of income (or in this case the size of energy consumption per capita). nowadays the access to energy services is conditioned by meeting both the lower and the higher orders. thereby the lack of access to suitable energy services leads not only to the deprivation in the scope of elementary needs of existence (such as: no possibility to keep the right temperature at home, to heat the water etc.), but also the elements necessary for self-development, such as: education, communication, participation in social life. reasons for the existence of energy poverty phenomenon can be twofold. firstly, energy poverty can be the result of the physical lack of energy availability. secondly, the impossibility to realize elementary energy needs can be caused by relatively high prices of energy services, which create economic barriers to access to them. the first mentioned reason relates to a greater extent to the countries with a lower level of development, whereas the problems with economic availability of energy can be also observed in highly developed countries. in order to underline the dissimilarity of the problem – physical access to energy services in developing countries and economic access to energy services in developed countries – while studying the second group, the term of fuel poverty will be applied simultaneously (boardman, 2012; healy and clinch, 2002, 2004; karpenko et al., 2018; li et al., 2014; moore, 2012; tvaronavičienė, 2016). http://www.virtual-economics.eu/ 29 www.virtual-economics.eu issn 2657-4047 (online) joanna mazurkiewicz and piotr lis virtual economics, vol. 1, no. 1, 2018 3. methodology of the study. measures of energy poverty economic availability of energy is directly influenced by the factors that can be classified into three groups: price factors, income factors and factors conditioning the level of energy consumption in households. among the price factors, besides 1) the level of prices for energy carriers and 2) diversification of tariffs for using energy, the significant factors are also 3) fiscal and environmental policies of the state, which decide on the rate of taxes and fees imposed on energy and 4) the scope of regulation of energy prices. the factors, which influence the burden of household budgets with energy costs are also 5) the types of used fuels and 6) the possibility to substitute them in order to lower the fuel costs. the second group constitutes the income factors, the most important of which are as follows: 1) the sources and the amount of income obtained by households and 2) the amount of social transfers connected with the use of energy. the third group should include the factors determining the level of energy consumption and energy efficiency of households. among the most important here are: 1) the type and energy consumption of the devices, which are used in households, 2) energy efficiency of the inhabited buildings and 3) customs and consumption patterns. among the factors indirectly influencing the level of energy poverty we should mention above all: 1) the size and the structure of a household that shape the specific energy needs of the household, 2) the legal right to the occupied property, conditioning the scope of decisions taken with the aim of improving energy efficiency and 3) the level of liberalization of energy market, influencing the diversification of energy offer and the possibility of active management for energy demand by the households. large quantity of factors shaping the level of energy poverty allows for the classification of households experiencing limited accessibility to energy services. in the first group of households the energy poverty is connected with the income poverty. limitations of access to a wide range of energy services and high contribution of expenses on energy in the household budget are in this case the result of a low level of the obtained income. at the same time, it is worth noticing, that not every household with relatively low incomes will be immediately energy poor. high level of energy efficiency of such a household can simply counter negative influence of the income factors. the second group made up of the households, which are not poor in the category of obtained income, nevertheless they experience energy poverty. the reason for such condition can be a high level of energy price, low level of energy efficiency of these households or the existence of both these factors at the same time. presently, both the social sciences and the economic practice, have not yet elaborated comprehensive and universal factor that will enable monitoring and international comparison of energy poverty level. energy poverty is measured with the use of three alternative, supplemental methods. the first method underlines the necessity to provide access to http://www.virtual-economics.eu/ 30 www.virtual-economics.eu issn 2657-4047 (online) joanna mazurkiewicz and piotr lis virtual economics, vol. 1, no. 1, 2018 modern energy services. energy poverty is measured here by the percentage of population without the access to electricity and using the most traditional sources of energy (wood, biomass, charcoal) to prepare meals. this concept was complemented by widening the scope of measured energy services by the use of household goods and services serving education, entertainment and communication. the above described indicators show the access of households to energy sources, but do not reflect costs connected with the consumption of energy and their energy efficiency. the level of energy poverty can be also determined in relation to the minimal amount of energy that is necessary for meeting the elementary needs of the poorest households and the types of fuels used by these households. this way of measuring enables for a greater documentation of household diversity and consideration of the specificity of the examined community. finally, the level of fuel poverty can be measured by the level of expenses incurred by the households on energy services. it is assumed then, that the energy poor households are those that spend 10-15% of all incomes on energy services. in international, comparative studies of energy poverty, the most commonly used estimation is, due to the lack of other measures, the answer to the question concerning the existence of difficulties in maintaining the adequate level of heat in the place of living, which is given to the household owners in the scope of study about conditions of life of eu-silc citizens conducted by eurostat. it seems, though, that for the needs of international comparisons, these estimations should be supplemented by at least data reflecting differences in burdens, which represent expenses for electricity and heat in household budgets. due to this fact, in the following parts of this report, energy poverty is measured by the index that includes availability of energy services and the capability of households to purchase them, as well as the energy efficiency of the studied entities (fig. 1). merit of the index constitutes the sum of partial measurement (availability of energy services, capability to purchase energy services, energy efficiency), which were given equal weight (33.33%). the measurement is conducted with the use of data concerning: difficulties in maintaining adequate level of heat in the place of living, existing delays in housing payments, percentage of costs of housing maintenance in household budgets, consumption of energy in households and energy efficiency of buildings (measured by the percentage of population inhabiting places with leaking roofs, wet walls, floors and fundaments or not tight windows). energy poverty can be examined on a macro-, meso-, and microeconomic scale depending on the aim of the analyses and the level of aggregation of available data (table 1). international comparisons of countries belonging to the eu are possible thanks to data collected by eurostat and iea (international energy agency). a significant source of information is the research on living conditions (eu-silc). however, this data cannot be compared in a direct way. this is mainly due to the diversification of countries in terms of factors determining the level of energy poverty, including: structure of households and their budgets, energy and fiscal policy tools, sources of energy used in households, prices of energy, profile of housing substance http://www.virtual-economics.eu/ 31 www.virtual-economics.eu issn 2657-4047 (online) joanna mazurkiewicz and piotr lis virtual economics, vol. 1, no. 1, 2018 (including the structure of ownership). additionally, the available data is both quantitative and qualitative. figure 1. construction of energy poverty index source: own research. table 1. observation levels of energy poverty phenomenon scale data sources aim of analysis macroeconomic level (international) macroeconomic data bases and international questionnaire research international comparisons, observation of long-term trends macroeconomic level (national) national statistics of household types and their budgets, living conditions, consumption of energy, deprivation forms of households description of types of energy poor households and tools of national economic policy designed to limit this phenomenon mesoeconomic level (sectorial or regional) regional and local data bases description of specificity of energy poor households of a particular region and tools of regional and local policy with the aim to limit the energy deprivation microeconomic level households data description of energy efficiency level of a household and methods to limit or prevent the problem of energy poverty source: dubois, u., & meier, h. (2016). energy affordability and energy inequality in europe: implications for policymaking. energy research & social science, 18, 21-35. https://doi.org/10.1016/j.erss.2016.04.015 due to the above mentioned, the accepted study proceeding is the analysis of the distance to the countries with the highest level of such indicator. this method is used in international comparative studies, among others as a tool to evaluate regulatory practices. in the case of energy poverty, the highest observed level of the indicator relatively specifies the highest level index of energy poverty limited accessibility to energy services inability to maintain the right temperature at home consumption of solid fuels in households limited energy services affordability existence of arreas in payments for housing high costs of home maintenance low level of energy efficiency consumption of final energy in households energy efficiency of buildings http://www.virtual-economics.eu/ 32 www.virtual-economics.eu issn 2657-4047 (online) joanna mazurkiewicz and piotr lis virtual economics, vol. 1, no. 1, 2018 of this phenomenon. in the construction of the index, this means 100. the results for other countries are calculated in relation to the country that was characterized by the highest level of the observed phenomena. this enables for a more precise plotting of the relative position of the countries than ranking. the index values below 100 obtained by a certain country means, that this country did not reach the highest point values in all studied criteria. referential values for each of the studied variables were calculated with the consideration of all member countries of the eu. time range of the analysis covers the years 2007-2016, and the study was conducted for the central and eastern european countries as well as the baltics, for which the eu-silc data is available. the scope of this analysis is conditioned by the availability and completeness of the data. 4. analysis of energy poverty in selected eu countries in the studied group of countries (with the exception of lithuania) it was possible to observe the improvement of the situation in the scope of energy poverty (table 2), though against all the eu countries, there are the economies, where the problem of energy poverty is particularly significant, which is indicated by the position in the ranking in all studied timespan. exceptions are slovakia, czech republic and estonia, where the level of energy poverty is the lowest. among the studied countries, the highest level of energy poverty in all the timespan can be observed in bulgaria, which records the highest level of energy poverty in all eu. table 2. energy poverty index for selected eu countries 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 bulgaria 67% (1)* 70% (1) 61% (1) 54% (1) 56% (1) 58% (2) 57% (2) 54% (2) 52% (2) 54% (2) czech 34% (9) 34% (13) 32% (14) 32% (17) 35% (17) 34% (17) 33% (15) 32% (16) 31% (17) 29% (18) estonia 28% (19) 28% (19) 32% (16) 33% (16) 36% (16) 35% (14) 32% (17) 30% (18) 28% (21) 26% (21) hungary 41% (4) 45% (5) 38% (8) 46% (6) 50% (5) 53% (4) 50% (3) 46% (4) 42% (6) 41% (4) lithuania 35% (8) 35% (10) 35% (10) 39% (10) 47% (6) 44% (8) 42% (8) 39% (10) 41% (7) 39% (6) latvia 41% (6) 42% (6) 46% (4) 50% (3) 55% (2) 53% (3) 50% (4) 46% (5) 43% (5) 35% (11) poland 66% (2) 56% (2) 52% (2) 53% (2) 53% (3) 51% (5) 49% (5) 46% (3) 45% (4) 43% (3) romania 49% (3) 52% (3) 49% (3) 48% (5) 45% (7) 47% (7) 44% (7) 36% (13) 35% (13) 34% (12) slovakia 30% (16) 21% (24) 26% (22) 24% (25) 25% (26) 24% (26) 22% (28) 22% (26) 21% (26) 17% (27) * in brackets there are the positions in the ranking of eu-28 countries; due to availability of data in 2007-2009 without croatia, 2014-2016 without malta. source: own research on the basis of eurostat data (eurostat energy statistics and eu-silc). http://www.virtual-economics.eu/ 33 www.virtual-economics.eu issn 2657-4047 (online) joanna mazurkiewicz and piotr lis virtual economics, vol. 1, no. 1, 2018 4.1. changes in the scope of energy services availability the biggest difficulties in providing access to energy services existed in three countries: bulgaria, poland and lithuania (table 3, fig. 2). bulgaria is the country, where the highest percentage of population unable to maintain the right temperature of houses was recorded. this percentage in the studied period decreased significantly (from 67.4% in 2007 to 39.2 in 2016), however it still remained the highest both in the studied group of countries, and in the eu-28. in the case of poland the value of the indicator reflecting the availability of energy services results from a high contribution of solid fuels in the consumption of final energy. the data indicate specifically shaped structure of energy sources used in households, where the contribution of solid fuels reaches 34%, which is a tenfold of the average of eu-28, which amounts to 3.4%. for comparison, in ireland and the czech republic, which are the next when it comes to the consumption of solid fuels, this indicator in 2016 stood at 14.7% and 12.5% respectively. the level of consumption of hard coal by polish households results from the widespread use of solid fuels for heating purposes. almost half of all domestic households, that is 49.2%, use heating installations (to heat rooms) which use solid fuels, among which the most common fuels were hard coal and fuelwood. in cities, solid fuels are used by one third of households (28%), and in the country by almost all households (92.8%). coal and wood were usually used simultaneously or alternatively in the same installations. reversible boilers used by 47.7% and single-purpose boilers used by 29.3% of households were heated by solid fuels and almost all households (97% and 93.3% respectively) used them as basic installations. moreover, 15.3% of households used the most traditional heating installations, such as stoves in rooms (mainly tiled stoves), and the further 7% of households using solid fuels used fire places, mostly with closed input. these installations provided the fundamental source of heating rooms in 83.3% and 19.7% of households, respectively. such shaped structure of using fuels results from the structure of prices for energy carriers for the households, where hard coal remains the cheapest fuel. decreasing availability of energy services in lithuania also deserves our attention, in the case of this country, percentage of population declaring difficulties with maintaining the right temperature at homes increased over twofold in the studied period (from 33.2% in 2007 to 74.7% in 2016). what is interesting, between 2010 and 2013, in the period of the greatest growth of the indicator, the consumption of solid fuels in households in lithuania also increased. the percentage of solid fuels in the total consumption of energy till 2009 was at the level of 3.3%, in 2010 it increased to 4.4%, and in 2013 it amounted to 5.1%. this phenomenon is in accordance with the previously presented concept, according to which households experiencing difficulties with access to energy services (here: heating) use solid fuels to a larger extent. http://www.virtual-economics.eu/ 34 www.virtual-economics.eu issn 2657-4047 (online) joanna mazurkiewicz and piotr lis virtual economics, vol. 1, no. 1, 2018 table 3. changes of indicator limiting accessibility to energy services in selected eu countries between 2007 and 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 bulgaria 68% 66% 64% 60% 62% 65% 64% 63% 59% 59% czech repulic 22% 20% 19% 20% 25% 27% 26% 28% 26% 24% estonia 6% 3% 3% 4% 5% 6% 5% 4% 4% 4% hungary 14% 11% 11% 12% 16% 20% 20% 17% 15% 14% lithuania 21% 23% 24% 24% 45% 44% 39% 40% 46% 43% latvia 17% 15% 15% 16% 27% 24% 25% 22% 20% 15% poland 67% 65% 63% 61% 65% 64% 63% 61% 60% 59% romania 25% 19% 18% 15% 17% 16% 17% 16% 18% 19% slovakia 6% 8% 7% 6% 8% 9% 9% 9% 9% 8% source: own research on the basis of eurostat data (eurostat energy statistics and eu-silc). figure 2. changes of indicator limiting accessibility to energy services in selected eu countries between 2007 and 2016 source: own research on the basis of eurostat data. 4.2. changes in the ability to acquire energy services in the accepted methodology, the ability of households to acquire energy services (table 4) is shaped by two variables: percentage of the households getting behind with the on-time payments for using homes and percentage of households, for which the payments for using homes are high. for the first criterion the referential countries were bulgaria (between 2007 and 2011) and greece (between 2012 and 2016), because these countries recorded the highest values of the indicator in the respective periods. for the second criterion, the 0% 10% 20% 30% 40% 50% 60% 70% 80% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 bulgaria czech republic estonia hungary latvia lithuania poland romania slovakia http://www.virtual-economics.eu/ 35 www.virtual-economics.eu issn 2657-4047 (online) joanna mazurkiewicz and piotr lis virtual economics, vol. 1, no. 1, 2018 referential countries were bulgaria (in 2007), denmark (between 2009 and 2010) and greece (in 2008 and between 2011 and 2016). table 4. changes of indicator limiting the ability to acquire energy services in selected eu countries between 2007 and 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 bulgaria 100% 80% 64% 63% 68% 67% 68% 60% 55% 63% czech republic 31% 33% 25% 29% 27% 22% 22% 19% 16% 15% estonia 20% 19% 25% 31% 36% 29% 25% 24% 18% 15% hungary 56% 47% 51% 61% 67% 61% 55% 46% 33% 30% lithuania 27% 21% 25% 41% 44% 33% 30% 23% 21% 21% latvia 37% 37% 47% 58% 67% 52% 45% 38% 30% 24% poland 54% 37% 36% 43% 44% 38% 34% 31% 22% 21% romania 62% 78% 71% 78% 69% 74% 65% 49% 40% 39% slovakia 52% 18% 37% 33% 29% 22% 20% 19% 18% 7% source: own research on the basis of eurostat data (eurostat energy statistics and eu-silc). the adoption of the criterion of ability to acquire energy services enables for a distinction of two groups of countries. the first group constitutes the countries, where the limitations in the ability to acquire energy services were on the increase between 2008 and 2011, and later decreased significantly (fig. 3). this group of countries reported relatively quick increase in energy prices in the period of crisis. it is worth emphasizing, that the level of energy prices is influenced by the market factors, fiscal and regulatory policies of the country, and in the countries belonging to the studied subgroup the additional burdens in the scope of taxes from energy were introduced to respond to the crisis. these changes include in particular: excise duty imposed on electricity, energy carriers (oil, natural gas, coal) and transport fuels (petrol, diesel) as well as taxes connected with the emission of co2. figure 3. changes of indicator limiting the ability to acquire energy services in hungary and the baltic states between 2007 and 2016 source: own research on the basis of eurostat data. 0% 20% 40% 60% 80% 100% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 estonia lithuania latvia hungary http://www.virtual-economics.eu/ 36 www.virtual-economics.eu issn 2657-4047 (online) joanna mazurkiewicz and piotr lis virtual economics, vol. 1, no. 1, 2018 the second group of countries constitutes the economies, where limitations in the ability to acquire energy services successively decrease (fig. 4). this is the result of relatively stable energy prices (which increase in the case of poland is additionally regulated by the state) and the increase of income levels of households. figure 4. changes of indicator limiting the ability to acquire energy services in bulgaria, the czech republic, poland, romania and slovakia between 2007 and 2016 source: own research on the basis of eurostat data. 4.3. changes in the energy efficiency of households according to the adopted method of measurement, changes in the energy efficiency of households are shaped by two factors: consumption of energy in households and level of energy efficiency of buildings inhabited by these households. the level of energy consumption is influenced by changing consumption patterns and changes in the household equipment for modern appliances, the use of which requires access to different forms of energy, whereas the biggest changes take place in the use of electricity. the referential country during all studied period was luxembourg, where the consumption of energy in households was the highest. in the studied group of countries relatively higher level of energy consumption (fig. 5) was recorded in five countries (estonia, latvia, the czech republic, poland and hungary). the second indicator (energy efficiency of buildings) enables to observe changes in energy efficiency resulting from the improvement in the state of buildings inhabited by the studied households. during the studied period this indicator was decreasing successively in all countries, except hungary, where according to eu-silc data, the level of this indicator increased from 19.2% to 26.7%. hungary is therefore a country, where the shaping of energy efficiency in households (table 5) is influenced both by the level of energy consumption and by the low efficiency of residential buildings. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 bulgaria czech republic poland romania slovakia http://www.virtual-economics.eu/ 37 www.virtual-economics.eu issn 2657-4047 (online) joanna mazurkiewicz and piotr lis virtual economics, vol. 1, no. 1, 2018 figure 5. changes of energy efficiency indicator in selected eu countries between 2007 and 2016 source: own research on the basis of eurostat data. table 5. changes of energy efficiency indicator in selected eu countries between 2007 and 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 bulgaria 33% 63% 53% 39% 38% 42% 40% 38% 41% 39% czech 50% 50% 53% 48% 52% 53% 50% 49% 50% 47% estonia 58% 61% 68% 64% 66% 71% 67% 62% 62% 58% lithuania 57% 61% 57% 53% 52% 56% 58% 54% 56% 53% latvia 67% 75% 78% 76% 72% 83% 80% 76% 80% 67% poland 79% 65% 58% 54% 51% 52% 50% 47% 54% 50% romania 59% 58% 57% 50% 49% 50% 50% 44% 47% 45% slovakia 33% 38% 35% 33% 38% 42% 37% 37% 37% 36% hungary 55% 77% 51% 65% 66% 77% 77% 75% 78% 78% source: own research on the basis of eurostat data (eurostat energy statistics and eu-silc). 5. overview the analysis of energy poverty indicates diversification of level and dynamics of this phenomenon in the studied countries. among the countries of central and eastern europe, there are both the countries, where the problem of energy poverty is the highest (bulgaria), and the lowest in europe (slovakia). nevertheless, almost the whole studied group is characterized by decreasing level of energy poverty during that particular period. the analysis of the index components indicates diversification of energy poverty profiles. some countries experienced difficulties in the scope of two criteria: either the accessibility and affordability of energy services (bulgaria) or the accessibility of energy services and energy efficiency 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 bulgaria czech republic estonia latvia lithuania hungary poland http://www.virtual-economics.eu/ 38 www.virtual-economics.eu issn 2657-4047 (online) joanna mazurkiewicz and piotr lis virtual economics, vol. 1, no. 1, 2018 (latvia and hungary). other countries were characterized by high indicators only in one of the studied areas (poland – accessibility of services, romania – energy services affordability, estonia – energy efficiency). important factor shaping the ability to acquire energy services was also the consequence of economic crisis, especially lowering the level of incomes and the increase of energy prices as a result of increasing tax burdens imposed on energy carriers. 6. conclusions and recommendations the aim of the conducted study was an analysis of the level and the reason for energy poverty in selected eu member countries. results indicate, that the central and eastern european countries report relatively high level of energy poverty. the presented diversification of the countries indicates, that it is not possible to implement uniform programs counteracting energy poverty on the eu level. these activities should remain the domain of member countries and should be conducted on the national level. instruments of the state policy aimed at fighting the energy poverty should include diversification of households’ profiles experiencing this problem. identification of the main reasons for the creation of energy poverty is important for the creation of solutions that will reduce the scale and the scope of this phenomenon. in the case of households that are poor in the income and energy category, the reduction of economic poverty is the necessary condition of reducing the energy poverty. however, if the energy poverty affects the households with average incomes, nonetheless constituting sensitive groups, the role, character, scope and efficiency of the state impact changes. because of the factors shaping energy poverty, we can distinguish three directions of actions that enable the reduction in the scope of this phenomenon: direct financial support of households, shaping the system of energy tariffs, which enables for the reduction of expenses on energy services as well as instruments supporting the improvement of energy efficiency in households. what is important, among the indicated actions, only the improvement in energy efficiency allows to counteract the phenomenon of energy poverty in the longer run. other actions are only interim actions, because they do not lead to the elimination of the reasons for the phenomenon. it should be also underlined, that the used instruments should have a selective character. their correct addressing requires more precise studies conducted on a microeconomic level. as it was already mentioned, diversification of the countries makes it impossible to conduct policy that would prevent energy poverty on the eu level. at the same time, however, it is worth starting a discussion about the costs of transforming energy systems. important is the fact, that the costs of this process do not deepen the phenomenon of energy poverty and do not worsen the situation of the most sensitive groups of households. when discussing further research on energy poverty on international level there is a need for common definition. the present lack of such agreement means that there are no official figures about the extent of energy poverty, and it estimates the range in dependence on the http://www.virtual-economics.eu/ 39 www.virtual-economics.eu issn 2657-4047 (online) joanna mazurkiewicz and piotr lis virtual economics, vol. 1, no. 1, 2018 metrics that are used. although it is not possible to implement common economic 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(2016). doing business 2016: measuring regulatory quality and efficiency. washington, dc: world bank. http://www.virtual-economics.eu/ https://doi.org/10.1016/j.enpol.2004.01.001 https://doi.org/10.1016/j.enpol.2012.04.058 https://doi.org/10.1016/j.esd.2012.05.006 https://doi.org/10.9770/jesi.2016.4.1 https://doi.org/10.1016/j.rser.2012.11.045 кwilinski alex 52 www.virtual-economics.eu issn 2657-4047 (online) oleksii dubina, yana us, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 3, no. 3, 2020 2020 volume 3 number 3 (july) customer loyalty to bank services: the bibliometric analysis oleksii dubina, yana us, tetyana pimonenko, and oleksii lyulyov abstract. systematisation of literary sources on and approaches to solving the problem of enhancing customer loyalty indicated that scholars had contributed significantly to enriching the scientific research aimed at ensuring the effective long-term consumer interaction. accordingly, the current paper aims at conducting the bibliometric analysis of publications on customer loyalty to banks institutions. the object of research is the scientific documents published in the biggest abstract database scopus. the paper follows in the next logical sequence. firstly, the authors search scientific studies indexed by scopus database from 2000 to 2019 in the domain of customer loyalty. the document search was conducted in the following areas: the article title, abstract and keywords. herewith, the combinations of keywords included: bank and customer; bank and loyalty, bank reputation and loyalty; bank confidence and loyalty; bank trust and loyalty; bank and customer; bank and communication strategy. with the irrelevant documents excepted and the duplicate ones eliminated, the determinate sample of documents investigated amounted for 2752 items. secondly, the selected papers were visualised with vosviewer software to build the network maps displaying the relationships among the keywords. thus, the obtained results allowed describing the main directions in the scientific treatise on customer loyalty to banking as well as highlighting the scientific schools interested in exploring the investigated theme. the authors noted that the findings might be the base for future investigation on developing the communication strategies to increase customer loyalty to bank institutions. keywords: loyalty, bank, customer, confidence jel classification: g21, d12, m3 http://www.virtual-economics.eu/ 53 www.virtual-economics.eu issn 2657-4047 (online) oleksii dubina, yana us, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 3, no. 3, 2020 authors: oleksii dubina sumy state university, sumy, ukraine e-mail: liondan2011@gmail.com https://orcid.org/0000-0003-1451-0450 yana us sumy state university, sumy, ukraine e-mail: y.us@fem.sumdu.edu.ua https://orcid.org/0000-0003-1451-0450 tetyana pimonenko sumy state university, sumy, ukraine e-mail: tetyana_pimonenko@econ.sumdu.edu.ua https://orcid.org/0000-0001-6442-3684 oleksii lyulyov sumy state university, sumy, ukraine e-mail: alex_lyulev@econ.sumdu.edu.ua https://orcid.org/0000-0002-4865-7306 citation: dubina, o., us, y., pimonenko, t., & lyulyov, o. (2020). customer loyalty to bank services: the bibliometric analysis. virtual economics, 3(3), 52-66. https://doi.org/10.34021/ve.2020.03.03(3) received: january 15, 2020. revised: march 12, 2020. accepted: june 18, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:liondan2011@gmail.com https://orcid.org/0000-0003-1451-0450 mailto:y.us@fem.sumdu.edu.ua https://orcid.org/0000-0003-1451-0450 mailto:tetyana_pimonenko@econ.sumdu.edu.ua https://orcid.org/0000-0001-6442-3684 mailto:alex_lyulev@econ.sumdu.edu.ua https://orcid.org/0000-0002-4865-7306 https://doi.org/10.34021/ve.2020.03.03(3) https://creativecommons.org/licenses/by/4.0/ 54 www.virtual-economics.eu issn 2657-4047 (online) oleksii dubina, yana us, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 3, no. 3, 2020 1. introduction nowadays, the economic crisis developing due to the virus covid-19 causes the necessity to strengthen the stability of financial institutions. in turn, the customer level of confidence in financial institutions is the determinant factor in providing their stable functioning (lyulyov & shvindina, 2017). it worth noting that a retrospective analysis of banking industry’s functioning in independent ukraine has demonstrated the massive bank shutdown. figure 1 shows the number of commercial banks decreased by approximately 60% in january 2020 compared to january 2008. the facts mentioned above resulted in reducing the customer confidence in the banks. consequently, the banks are to change their communication strategies to earn customer loyalty and develop a reliable reputation. figure 1. the dynamic of commercial banks’ emergence in ukraine from 2008 to 2020 source: developed by the authors based on the data from the national bank of ukraine. the analysis of scientific studies indicated the existence of some factors influencing the loyalty level of bank customers (matute-vallejo et al., 2011; baumann et al., 2007). thus, in the process of decision-making, the bank customers, first of all, pay attention to the level of a bank’s reliability, history and reputation. herewith, the highly-ranked banks always analyse the customer behaviour and changes in their preferences to react and adapt their management techniques operationally. moreover, the obtained research result noted that bank reputation is one of the main factors that influence the level of customer loyalty. systematisation and summarisation of scientific studies in the investigated field allowed making a conclusion about the absence of the unique conventional technique to estimate the loyalty of the bank customers. in that context, it is appropriate to analyse and determine the “golden formula” of customer loyalty. this study aims to determine the impact factors on the level of customer loyalty to banks based on the analysis of the scientific schools comprehensively investigating customer loyalty to banks. at the same time, the banking system was considered as a vital part of the state activity. 175 184 182 176 176 176 180 163 117 96 82 77 75 http://www.virtual-economics.eu/ 55 www.virtual-economics.eu issn 2657-4047 (online) oleksii dubina, yana us, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 3, no. 3, 2020 2. the literature review an in-depth analysis of the literature background indicated the growing scientific interest in investigating customer loyalty to bank institutions (chygryn et al., 2018; bilan et al., 2019). consequently, in the framework of the current article, the bibliometric analysis was conducted to structure the scientific background, to identify the main research directions and to find out the fundamental scientific schools studying this issue. in the study by loveman (1998), the loyalty level to banks was considered in the view of customer and employee satisfaction. the author noted that the bank’s financial performance was one of the determinate factors to increase the customer trust to a specific bank. the researchers bloemer j., de ruyter k., and peeters p. (bloemer et al., 1998; aurier & n’goala, 2010; dzwigol et al., 2020) provided the complex analysis of the relationship between customer loyalty to banks and impact factors such as bank service quality, its position on the financial market and customer satisfaction. several scientific papers (ibragimov et al., 2019; matsenko et al., 2011; lyulyov & pimonenko, 2017; sweeney & swait, 2008; kwilinski, 2019; kwilinski et al., 2020; pająk et al., 2016; tkachenko et al., 2019; vishnevsky & kwilinski, 2019) aimed at analysing the brand of a particular bank and financial innovation. the authors used the economic base to prove that the bank brand played a significant role in increasing customer loyalty and trust. some papers (jones et al., 2002; cooil et al., 2007; chyhryn & scherbak, 2011) provided the findings on analysing the customer’s profile to build the effective communicative strategy with the bank target group. casalo et al. (2008) described the concepts of customer loyalty and the effect of positive wordof-mouth regarding e-banking services. the findings of this research indicated the necessity to prioritise customer needs and simple customer interactions with e-bank services. the authors of another scientific paper (han et al., 2008) built the integrative model to measure the multidimensional view of customer loyalty. the authors noted that the customer loyalty depended on the several factors such as: trust, service quality, customer satisfaction, bank friendship, etc. 3. methods in the frame of this article, achieving the main purpose necessitated implementing several steps. during the first step, the scientific papers on the investigated theme were searched in the scopus database. application of different sets of keywords combinations allowed selecting the most relevant articles to achieve the purpose of the current research. the document search was conducted in such fields as: article title, abstract and keywords. therefore, such combinations of keywords as “bank* and customer* loyalty” resulted in 241 documents; “bank* and loyalty” gave 1027 documents; “bank* reputation and loyalty” resulted in 38 papers; “bank* confidence and loyalty” – in 27, “bank* trust and loyalty” – in 228.; “bank* and customer*” – in 97; “bank* and communication strategy*” – i 1115. then, the period of documents’ publication was restricted to that of 2000 – 2019. moreover, the irrelevant versions of keywords and double papers were extracted to make the sample more accurate. http://www.virtual-economics.eu/ 56 www.virtual-economics.eu issn 2657-4047 (online) oleksii dubina, yana us, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 3, no. 3, 2020 as a result, the determinate sample of investigated documents amounted to 2752 items. it is worth mentioning that the boolean operator “and” was used to find the documents which included both keywords in the article title or keywords of the article and the abstract. furthermore, to save the specific phrases, the doubled quotes were applied. herewith, the sign “*” allowed including the keywords which had the plural or different ending. it is worth emphasising that the scopus database is the largest database of abstracts presenting high-quality scientific documents. it allowed finding the permanent data, explore the new research, scientific journals, research in the investigated field. thus, based on the scopus data, the bibliometric analysis was on the consumer loyalty to the bank was carried out in the view of publication activity dynamics, the most cited authors, countries, affiliations and funding sponsors. on the second step, the data of the documents selected were visualised with vosviewer software. vosviewer tool allowed creating the network maps based on combining the several documents formulated with the scopus tools. thus, the results allowed visualising the relationships among the keywords and allowed describing the main directions in the scientific treatise on customer loyalty to banks as well as highlighting the scientific schools interested in exploring the investigated theme. notably, the network maps consist of different sized circles, colours, and links. herewith, the size of the circle means the number of published documents under the specific item. furthermore, the bigger size of the circle means that more documents were presented with this keyword (panchenko et al., 2020). then, the colours allow identifying the particular cluster. the links provide information on the items’ interactions. in turn, the distance between two circles shows the frequency of the item’s appearance in the documents. the longer the distance is, the more times the items appear. 4. results and discussion the result of analysing the publication activity in the scopus database has revealed the growing number of scientific studies dedicated to investigating customer loyalty and building the bank reputation. in the framework of this article, 2752 scientific documents indexed by scopus database were considered. as showed in figure 2, the publication activity on customer loyalty to bank institutions and its systems was increasing during the financial crises 2008-2009 and 2014-2015. notably, the economic crises caused the outflow of customers and capitals. in turn, the interest is in investigating the determinative factors which influence on the customer solution to be loyal to the bank. http://www.virtual-economics.eu/ 57 www.virtual-economics.eu issn 2657-4047 (online) oleksii dubina, yana us, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 3, no. 3, 2020 figure 2. the dynamic of publication activity on customer loyalty to banks from 2000 to 2019 source: developed by the authors based on the scopus database. figure 3. the structure of publication activity on customer loyalty to banks by countries from 2000 to 2019 source: developed by the authors based on the scopus database. according to figure 3, the most significant share of documents dedicated to customer loyalty to bank institutions was published by researchers from the united states. thus, the authors 30 30 31 52 54 57 72 92 91 152 158 173 189 197 190 256 219 256 274 331 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 573 395 238 162 149 124 123 108 94 87 75 74 70 65 55 http://www.virtual-economics.eu/ 58 www.virtual-economics.eu issn 2657-4047 (online) oleksii dubina, yana us, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 3, no. 3, 2020 presented 573 scientific papers in the scopus database from 2000 to 2019. in turn, there are 395 documents published by the researchers from the united kingdom. it is worth noting that the scientists from the eu countries paid significantly less attention to exploring customer loyalty to banking. in turn, the most documents were published by researchers from germany – 124 studies, spain – 75, the netherlands – 74, italy – 70, france – 65, sweden –55, etc. figure 4. the network map of co-authorship of investigated documents by the countries (from 2000 to 2019). source: developed by the authors using the software vosviewer 1.6.15 and the scopus database. the obtained results of the bibliometric analysis have indicated that the researchers with the usa affiliation have published the most significant number of scientific papers. moreover, the visualization of co-authorship of the papers investigated (figure 4) allowed demonstrating the scientific schools investigating the loyalty of bank customers. given that, it proved the built http://www.virtual-economics.eu/ 59 www.virtual-economics.eu issn 2657-4047 (online) oleksii dubina, yana us, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 3, no. 3, 2020 hypothesis of this investigation that the scientific school of behavioral economics were formulated in the usa. in turn, according to figure 4, the us researchers mostly collaborated with those from the united kingdom, india, canada, australia, etc. figure 5. the top-10 funding sponsors of papers on customer loyalty to banks (from 2000 to 2019). source: developed by the authors based on the scopus data. however, the analysis findings of the main funding sponsors of investigated documents suggested that the national natural science foundation of china was a leader in financing scientific research on customer loyalty and bank reputation. furthermore, its collaboration with foreign partners provided the research experience and a tendency of concept development on the customer loyalty across the world. it is worth indicating that the world bank was in the top-10 funding sponsors. consequently, it proved the hypothesis of the bank concernment on analyzing the behavior of bank customers (fig. 5). based on the obtained results it was found that the research investigated the issue of the customer loyalty to banking sector from the different points of view, such as: marketing, psychological, economic, financial, etc. the bibliometric analysis findings allowed pinpointing five clusters combining the keywords by thematic relationship. in turn, the most used keyword proves to be “trust”, which belongs to the first cluster and has 614 citations (fig. 6). the most significant cluster (red) may be notionally named an “impact factor of trust”. this cluster consists of scientific papers focused on exploring the main determinants of customer behavior and trust, among which are: onlinebanking, finance crisis, safety, electronic commerce, etc. the second cluster (green) was 6 6 8 8 8 9 13 15 17 20 0 5 10 15 20 25 bil and melinda gates foundation australian research council world bank group national science foundation national human genome research institute national institute of health european commission economic and social research council wellcome trust national natural science foundation of china http://www.virtual-economics.eu/ 60 www.virtual-economics.eu issn 2657-4047 (online) oleksii dubina, yana us, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 3, no. 3, 2020 named “social and ethical”. thus, this cluster demonstrated scientific papers on the psychological aspects of customer behavior, analysis of the ethical issues of bank services in the medical sector, particularly medical insurance. the third cluster, named “methodological”, mostly included the scientific works presenting the methods used to investigate customer loyalty. thus, prevalently the researchers applied the methods as follows: a questionnaire survey, scientific analysis of literature resources, systematization, etc. figure 6. the network map visualisation of keywords co-occurrence of investigated documents (from 2000 to 2019). source: developed by the authors using the software vosviewer 1.6.15 and the scopus database. the in-depth analysis of the most significant cluster (red) allowed identifying 438 links among the keywords. herewith, the keywords which had the greatest number of links were banking, customer satisfaction, customer loyalty, the internet, service quality, electronic commerce. moreover, the detailed exploring of this cluster named an “impact factor of trust” combines the different bank tendencies and innovative technologies. first, it can be clearly seen that one of the most important factors was using the internet technology in the bank, which is connected with the internet-banking, electronic commerce, customer demand satisfaction, etc. in view of that, it proved the thesis on the appropriateness of digitalizing the bank services. furthermore, the next significant factor was the direct satisfaction of customers’ needs. indeed, the banks must be universal and offer a wide spectrum of services and opportunities. after that, the third significant impact factor of trust http://www.virtual-economics.eu/ 61 www.virtual-economics.eu issn 2657-4047 (online) oleksii dubina, yana us, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 3, no. 3, 2020 was the service level. besides, the level of safety, privacy, protection of the customer operations were among the significant factors. in this case, it is worth noting that the considerable impact is made by the level of technology development to the point of mobile banking, the possibility to manage and perform the bank functions using the mobile application, etc. figure 7. the itemisation of the keywords co-occurrence of the red cluster an “impact factor of trust”. source: developed by the authors using the software vosviewer 1.6.15 and the scopus database. it should be emphasized that the keyword “banking” belonged to the red cluster and has 287 links. this keyword is mostly connected with the keywords as follows: trust, customer satisfaction, customer loyalty, electronic commerce, service quality, etc. (fig. 8). the second cluster, named “social and ethical” had 122 links. herewith, it has to be noted that the keywords humans, priority journal, ethic, health care facility, informed consent, biobank, access to information, policy, etc. had the greatest number of links (fig. 9). http://www.virtual-economics.eu/ 62 www.virtual-economics.eu issn 2657-4047 (online) oleksii dubina, yana us, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 3, no. 3, 2020 figure 8. visualising the links of the keyword “banking” in the red cluster “impact factor of trust”. source: developed by the authors using the software vosviewer 1.6.15 and the scopus database. figure 9. the itemisation of the keywords co-occurrence in the green cluster “social and ethical” source: developed by the authors using the software vosviewer 1.6.15 and the scopus database. http://www.virtual-economics.eu/ 63 www.virtual-economics.eu issn 2657-4047 (online) oleksii dubina, yana us, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 3, no. 3, 2020 figure 10 demonstrates the relationship among the keywords of the third (blue) cluster named. in turn, there were 122 links among the presented keywords (fig.10). the detailed analysis of the cluster’s links allowed suggesting the scientists’ investigation in the field of relationship between consumer loyalty and gender and age aspects. it can be clearly seen that the authors of those studies generally investigated the consumer behavior change depending on gender and age using the methodological tools like questionnaires, surveys, controlled studies etc. herewith, the results of that study can be useful in building the communication strategy with customers of different age and gender. figure 10. the itemisation of the keywords co-occurrence of the blue and yellow clusters. source: developed by the authors using the software vosviewer 1.6.15 and the scopus database. the fourth yellow cluster combines 61 items aimed at investigating the field of biological patterns, biological specimen banks, biomedical research, biological studies, etc. according to figure 10, it is to be noted that this cluster had a strong relationship with the second “social and ethical” and the third “methodological” clusters. in turn, the smallest cluster consists of 40 items where the main focus was on psychology, evolution, population, ecosystem, etc. 5. conclusions the obtained results of the current research proved that the issues on bank institutions’ reliability and customer loyalty were always urgent. herewith, the publication activity has a positive tendency. moreover, the emerging financial crises cause new challenges to appear in the bank sector and boost the growth of researchers’ interest. furthermore, the findings allowed highlighting the several scientific schools investigating the issues on customer loyalty http://www.virtual-economics.eu/ 64 www.virtual-economics.eu issn 2657-4047 (online) oleksii dubina, yana us, tetyana pimonenko, and oleksii lyulyov virtual economics, vol. 3, no. 3, 2020 to banks, the american one being the largest. herewith, the terminological network maps provided five clusters demonstrating the considered aspects of the investigated theme. summarizing conclusions of the scientific papers involved, it was clear that the level of customer loyalty to banks institutions depended on their reputation, service quality, credibility, gender and age aspects, etc. thus, the findings of the current research on the bibliometric analysis might be the base for future investigation on developing the communication strategies to increase customer loyalty to bank institutions. 6. sources of funding this research was funded by the grant from the ministry of education and science of ukraine (no. 0117u003932; no. 0118u003569). references aurier, p., & n’goala, g. 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(2019). recent trends in us monetary policy and its influence on economic development: an analytical review. economy of industry, 3(87), 125-142. http://www.virtual-economics.eu/ кwilinski alex 67 www.virtual-economics.eu issn 2657-4047 (online) larysa kovchuha virtual economics, vol. 3, no. 3, 2020 2020 volume 3 number 3 (july) evaluating the relationship between investment in innovation and the volume of sold innovative products in the industry of ukraine larysa kovchuha abstract. applying the correlation and regression analysis, the study of the relationship between the volume and structure of innovation costs and the volume of sold innovative products (sip) in industry was carried out on the example of ukraine. the time lag of the costsof-sales impact was also considered. it was hypothesized that the total volume of sold innovative products and their structure (the share of new products for the market, the share of products sold abroad) depend on different types of investment in innovation. the correlation and regression analysis showed that the components of investment in innovation influenced differently the volume and structure of sip, which confirmed the hypothesis. the total amount of sip largely depends on the level of costs to purchase machinery, equipment and software, as well as costs related to the component "other". positive dynamics of sold innovative products that are new to the market, as well as the products sold abroad, is largely determined by the volume of expenditures on external scientific research. thus, by influencing the structure of investment in innovation, a company can significantly increase the level of its competitiveness. keywords: innovations, costs of innovation activity, structure of innovation costs, industry, innovative products, level of competitiveness jel classification: d920, o310 author: larysa kovchuha institute of industrial economics of the national academy of sciences of ukraine, 2 maria kapnist street, kyiv, ukraine, 03057 e-mail: larakovi@ukr.net https://orcid.org/0000-0001-6448-0400 citation: kovchuha, l. (2020). evaluating the relationship between investment in innovation and the volume of sold innovative products in the industry of ukraine. virtual economics, 3(3), 67-79. https://doi.org/10.34021/ve.2020.03.03(4) received: december 27, 2019. revised: march 24, 2020. accepted: june 3, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://orcid.org/0000-0001-6448-0400 https://doi.org/10.34021/ve.2020.03.03(4) https://creativecommons.org/licenses/by/4.0/ 68 www.virtual-economics.eu issn 2657-4047 (online) larysa kovchuha virtual economics, vol. 3, no. 3, 2020 1. introduction investment in innovation is one of the important factors of enterprises’ innovative development. investment is a dominant factor in the stable development of the economy. innovation and investment are two inextricably connected economic processes. investments form financial resources needed to implement most innovations, especially technological ones. that is why most researchers consider investment and innovation processes as interdependent phenomena. 2. literature review there is a considerable number of studies evaluating the relationship between innovation costs and company performance. for example, morris (2018) empirically proved that innovatively active companies are much more productive in the manufacturing sector as well as in the sector of services. a positive impact of product innovations on the companies’ efficiency in developing countries was revealed in the work by ramadani et al. (2019). the results of this study showed that company performance is most positively influenced by such factors as personnel qualifications, modern technologies and cooperation with foreign companies. the econometric analysis, presented in the work by ciocanel et al. (2015), was conducted to confirm the existence of a cause-and-effect relation between innovation and competitiveness on the example of then 28 countries of the european union. the analysis of innovation impact on competitiveness has confirmed that an "innovation paradigm" is resilient to restoring the competitive advantages lost by the countries during the economic crisis. however, a positive relationship between innovation and productivity is not always clear. the study presented by haltiwanger et al. (2003) showed that the application of advanced technologies gave a larger work productivity increase in the united states than in germany. in the work by carvalho et al. (2016), the insignificant impact of innovations on the productivity of brazilian enterprises was empirically proven. the ukrainian scientists have found that in the industrial regions of ukraine the factor of research and development and innovation does not play a meaningful role in forming a gross regional product (soldak & shamileva, 2018). the analysis of the literature shows a significant interest of scientists in the problem of the relationship between innovation costs, company performance and competitiveness of the national economies. however, there is still no consensus among the economists on the benefits of innovation as a determinant of the productivity increase (alymov et al., 2014; amosha et al., 2019; amosha et al., 2018; boiko et al., 2019; czyżewski et al., 2019; dementyev & kwilinski, 2020; dzwigol, 2020a; 2020b; dzwigol et al., 2019a; 2019b; 2019c; 2020b; dźwigoł & wolniak, 2018; golovatyuk et al., 2018; jamel et al., 2020; furmaniak et al., 2018; 2019a; 2019b; kuzior et al., 2019; kuzior & kuzior, 2020; кwilinski, 2019; kwilinski & kuzior, 2020; kwilinski et al., 2019a; 2019b; 2019c; 2019d; 2020a; 2020b; 2020c; 2020d; 2020e; miśkiewicz, 2018; miśkiewicz, & wolniak, 2020; pająk et al., 2016; 2017; savchenko et al., 2019; tkachenko et al., 2019a; 2019b; 2019c; 2019d). the research results differ both in terms of types of innovation, and among countries. http://www.virtual-economics.eu/ 69 www.virtual-economics.eu issn 2657-4047 (online) larysa kovchuha virtual economics, vol. 3, no. 3, 2020 unlike the majority of the existing works, this article has the objective to evaluate the relationship not only between innovation costs and their results, but also to identify the dependence of the volume of sold innovative products (sip) and their share, which is new to the market, as well as the volumes of products sold outside ukraine, on the various types of innovation costs. 3. methodology to achieve the objective set, the methods of analysis and synthesis, comparative analysis and correlation-regression analysis were applied. the application package "statistika" software was used. the industry of ukraine was chosen as the object for observation. the specificity of the statistical information available determined 2017 as the time framework of the analysis. the research hypothesis is formulated as follows: the total volume of sip and its share, which is new for the market, as well as sip volume outside ukraine, depend on different types of investments in innovation. therefore, the following tasks were set: to study the interdependence between the volume and structure of costs for innovation activities and the volume of sold innovative products, taking into account the time lag of the impact of costs on sales volumes; to research the relationship between the costs of innovation and the volume of sold innovative products that were new to the market; to study the relationship between innovation costs and the volume of sold innovative products in the overseas markets. the relationship between sip volumes and total volumes of investment, including innovation, is stochastic. first of all, this is due to the fact that sales volumes, in addition to costs, are influenced by other factors, including market conditions in domestic and foreign markets, the level of knowledge-intensive economic activities and others. under such conditions, determining the relationship between costs and results of innovation and its quantitative measurement is based on the econometric modelling, in particular, correlation-regression dependencies. regression models are based on the following initial hypothesis: the innovation costs affect the change in the volume of sip both directly "year after year", and with oneor two-year time lag. a general view of regression models will be as follows: 𝑌𝑥𝑖,𝑡 = 𝐹(𝑥𝑖,𝑡 ); 𝑜𝑟 𝑌𝑥𝑖,𝑡 = 𝐹(𝑥𝑖,𝑡−1); 𝑌𝑥𝑖,𝑡 = 𝐹(𝑥𝑖,𝑡−2) (1) where 𝑌𝑥𝑖,𝑡 is estimated sales of innovative products in the t year; 𝑥𝑖,𝑡 are expenditures for the t year; 𝑥𝑖,𝑡−1; 𝑥𝑖,𝑡−2are the costs for (t-1) and (t-2) years respectively; 𝑖 is the areas of innovation. http://www.virtual-economics.eu/ 70 www.virtual-economics.eu issn 2657-4047 (online) larysa kovchuha virtual economics, vol. 3, no. 3, 2020 expenditures in those areas of innovation which are presented in statistical books are: 𝑥1 is total expenditures on innovation; 𝑥2 is costs of internal scientific research and development (r&d); 𝑥3 is costs of external scientific research and development; 𝑥4 is the purchase of machinery, equipment and software; 𝑥5 is acquisition of existing knowledge from other enterprises or organizations; 𝑥6 is other types of costs. regression models are built on the official statistics of ukraine, presented in the state statistics service of ukraine (2018, рр. 90, 103, 105). the form of the regression model which most adequately corresponds to the developed dependences is chosen based on the combination of optimum approximation criteria : 𝑚𝑖𝑛 σ (𝑌 − 𝑌𝑥𝑖,𝑡 ) 2 , a criterion of the least-squares method, max f-criterion (fisher-snedecor), 𝑚𝑖𝑛 𝐸𝑟𝑒𝑙 (relative approximation error), and the regression model must be statistically significant by f-criterion (𝐹𝑝 > 𝐹𝛼 ). under such conditions, the model parameters objectively reflect the dependence that was developed on the set of objects that act as observation points. 4. results and discussion the 2017 identified pair dependences indicate that there was a fairly close relationship between the volume of sip (𝑌1) and the total costs of innovation (𝑥1) (see equations (2) and (3). 𝑌1𝑥1 = 475,935 − 1,137𝑥1 + 0,003𝑥1 2; 𝐷𝑦1𝑥1 = 0,697; 𝐹𝑝 = 11,5; 𝐹𝛼 {𝛼 = 0,05; 𝜐1 = 2; 𝜐2 = 7} = 4,74; (2) 𝑌1𝑥1 = 5,87𝑥1 0,802; 𝐷𝑦1𝑥1 = 0,616; 𝐹𝑝 = 17,6; 𝐹𝛼 {𝛼 = 0,05; 𝜐1 = 2; 𝜐2 = 8} = 5,32; (3) the density link is approximately the same, taking into account the one-year time lag. this is shown in equations (4), (5), (6). the calculated coefficients of determination (𝐷𝑦1𝑥1) show that, on average, the change in the volume of sold innovative products by 60.0% 70.0% is due to the change in the total costs for innovation. 𝑌1𝑥1 = 5,16 + 1,87𝑥1 − 0,0001𝑥1 2; 𝐷𝑦1𝑥1 = 0,703; 𝐹𝑝 = 11,84 𝑌1𝑥1 = 5,16 + 1,87𝑥1 − 0,0001𝑥1 2; 𝐷𝑦1𝑥1 = 0,703; 𝐹𝑝 = 11,84 (4) 𝑌1𝑥1 = 475,935 − 1,137𝑥1 + 0,003𝑥1 2; 𝐷𝑦1𝑥1 = 0,697; 𝐹𝑝 = 11,5 (5) 𝑌1𝑥1 = 40,0𝑥1 0,553; 𝐷𝑦1𝑥1 = 0,533; 𝐹𝑝 = 12,54 (6) http://www.virtual-economics.eu/ 71 www.virtual-economics.eu issn 2657-4047 (online) larysa kovchuha virtual economics, vol. 3, no. 3, 2020 when analysing the impact of total costs in certain areas of innovation, it was determined that the greatest change in the volume of sip entails the costs of purchasing machinery, equipment and software. the density link is about 0.93 (see equation (7). the most condensed link was formed when estimating the impact of costs on the volume of sip in the same year (2017) (see equations (7) and (8). therefore, we can conclude that the volume of sold innovative products depends on those investments in innovation that were made in the same period. the elasticity of change in equation (8) is 0.701, that is, each % of costs in this area is accompanied by an increase in sip by 0.701 %. 𝑌1𝑥4 = 413,44 − 0,752𝑥4 + 0,004𝑥4 2; 𝐷𝑦1𝑥4 = 0,93; 𝐹𝑝 = 65,5 𝑌1𝑥4 = 413,44 − 0,752𝑥4 + 0,004𝑥4 2; 𝐷𝑦1𝑥4 = 0,93; 𝐹𝑝 = 65,5 (7) 𝑌1𝑥4 = 16,5𝑥4 0,701; 𝐷𝑦1𝑥4 = 0,628; 𝐹𝑝 = 18,5 (8) the second most condensed factor 𝑥6 includes the costs of other types of innovation (staff training, market adaptation of innovations, design development, etc.), which is proved by significant coefficients of determination (0.752 and 0.532). the dependence of sip on the factor 𝑥6 was calculated taking into account the one-year time lag – equations (9), (10) and two-year time lag – equation (11). 𝑌1𝑥6 = 26,83 − 30,31𝑥6 − 0,057𝑥6 2; 𝐷𝑦1𝑥6 = 0,752; 𝐹𝑝 = 15,5 𝑌1𝑥6 = 26,83 − 30,31𝑥6 − 0,057𝑥6 2; 𝐷𝑦1𝑥6 = 0,752; 𝐹𝑝 = 15,5 (9) 𝑌1𝑥6 = 126,2𝑥6 0,55; 𝐷𝑦1𝑥6 = 0,532; 𝐹𝑝 = 12,5 𝑌1𝑥6 = 126,2𝑥6 0,55; 𝐷𝑦1𝑥6 = 0,532; 𝐹𝑝 = 12,5 (10) 𝑌1𝑥6 = 361,4𝑥6 0,291; 𝐷𝑦1𝑥6 = 0,233; 𝐹𝑝 = 3,34 𝑌1𝑥6 = 361,4𝑥6 0,291; 𝐷𝑦1𝑥6 = 0,233; 𝐹𝑝 = 3,34 (11) the study showed a rather moderate link between the volume of sip and the costs of external r&d (𝑥3) with a one-year lag. they cause the change in sip by 30.2% – equation (12); with a two-year lag , the link was rather weak. it is determined that the costs of other areas of innovation (internal research (𝑥2), and acquisition of other external knowledge (𝑥5) have a very little effect on the sip dynamics. 𝑌1𝑥3 = 1126,6 − 16,01𝑥3 + 0,26𝑥3 2; 𝐷𝑦1𝑥3 = 0,302; 𝐹𝑝 = 2,16 𝑌1𝑥3 = 1126,6 − 16,01𝑥3 + 0,26𝑥3 2; 𝐷𝑦1𝑥3 = 0,302; 𝐹𝑝 = 2,16 (12) there have been identified multifactor regression models, which determine the impact of all types of costs on the total amount of sip in the areas of innovation: a linear model in kind – equations (13), (14): http://www.virtual-economics.eu/ 72 www.virtual-economics.eu issn 2657-4047 (online) larysa kovchuha virtual economics, vol. 3, no. 3, 2020 𝑌1𝑥𝑖 = −149,61 + 2,641𝑥2 − 29,607𝑥3 + 0,001𝑥4 + 149,1𝑥5 + 21,76𝑥6; 𝑌1𝑥𝑖 = −149,61 + 2,641𝑥2 − 29,607𝑥3 + 0,001𝑥4 + 149,1𝑥5 + 21,76𝑥6; 𝐷𝑦1𝑥𝑖 = 0,912; 𝐹𝑝 = 4,5; 𝐹𝛼 {𝛼 = 0,05; 𝜐1 = 5; 𝜐2 = 7} = 3,97; (13) power model: 𝑌1𝑥𝑖 = 19,03𝑥2 0,367𝑥3 −0,251𝑥4 0,282𝑥5 0,128𝑥6 0,346 𝑌1𝑥𝑖 = 19,03𝑥2 0,367𝑥3 −0,251𝑥4 0,282𝑥5 0,128𝑥6 0,346 (14) it is established that the set of factors of the multifactor regression model (13) causes the change in the volume of sip in the set of industries by 91.2%. all factors, except 𝑥3, directly affect the change in the volume of sip. partial coefficients of elasticity of the power function (14) show probable influence of factors: 1% of the costs of internal research provides an increase in sip by 0.367%, an increase of 1% in other innovations increases the volumes of sip by 0.346%, an increase of 1% in machine costs provides the increase in sip by 0.282%. a very important characteristic of the innovation effectiveness is the indicators of the volume of sold innovative products which were new to the market and which were sold outside ukraine. the change in the volume of sold innovative products new to the market is only 30% due to the impact of the total costs of innovation (see equations (15), (16)). there is a direct dependence with a moderate density link. 𝑌4𝑥1 = −18,93 − 0,664𝑥1 − 0,0001294𝑥1 2; 𝐷𝑦4𝑥1 = 0,308; 𝐹𝑝 = 2,22 𝑌4𝑥1 = −18,93 − 0,664𝑥1 − 0,0001294𝑥1 2; 𝐷𝑦4𝑥1 = 0,308; 𝐹𝑝 = 2,22 (15) 𝑌4𝑥1 = 𝑒 −1,112𝑥1 0,952; 𝐷𝑦4𝑥1 = 0,294; 𝐹𝑝 = 4,58 𝑌4𝑥1 = 𝑒 −1,112𝑥1 0,952; 𝐷𝑦4𝑥1 = 0,294; 𝐹𝑝 = 4,58 (16) the largest change in the volume of sip which are new to the market is determined by the volume of costs for the purchase of machinery, equipment and software (𝑥4) – equation (17). the theoretical coefficient of elasticity determined by equation (18) shows that each increase of percentage in costs in this area is accompanied by an increase in sales of innovative products new to the market by 79.5%. 𝑌4𝑥4 = −96,358 + 1,812𝑥4 − 0,001𝑥4 2; 𝐷𝑦4𝑥4 = 0,416; 𝐹𝑝 = 3,57 𝑌4𝑥4 = −96,358 + 1,812𝑥4 − 0,001𝑥4 2; 𝐷𝑦4𝑥4 = 0,416; 𝐹𝑝 = 3,57 (17) http://www.virtual-economics.eu/ 73 www.virtual-economics.eu issn 2657-4047 (online) larysa kovchuha virtual economics, vol. 3, no. 3, 2020 𝑌4𝑥4 = 𝑒 0,31𝑥4 0,795; 𝐷𝑦4𝑥4 = 0,274; 𝐹𝑝 = 4,15 𝑌4𝑥4 = 𝑒 0,31𝑥4 0,795; 𝐷𝑦4𝑥4 = 0,274; 𝐹𝑝 = 4,15 (18) regarding the impact of costs with a one-year lag , all types of costs in the areas of innovation were taken into account. it was found that the strength of the impact of 2016 total costs on the volume of sip new to the market almost coincides with the results of 2017. there is a direct impact with moderate density link: each percentage increase in costs is accompanied by an increase in sales volumes of the new to the market innovative products by 0.65% (19). when estimating the impact of costs on separate areas of innovation, the highest density link was formed with 𝑥4(𝐷𝑦4𝑥4 = 0,3), 𝑥2(𝐷𝑦4𝑥2 = 0,286), 𝑥6 (𝐷𝑦4𝑥6 = 0,216). there is a direct moderate dependence in these areas of costs. the growth of each factor is accompanied by an increase in the volume of new to the market sip. taken together, these three factors account for almost 50% of changes in sales of innovative products that are new to the market (20), and standardized ratios (21) show twice the impact of costs of domestic r&d than other areas of costs. 𝑌4𝑥1 = 𝑒 0,651𝑥1 0,65; 𝐷𝑦4𝑥1 = 0,285; 𝐹𝑝 = 4,38 𝑌4𝑥1 = 𝑒 0,651𝑥1 0,65; 𝐷𝑦4𝑥1 = 0,285; 𝐹𝑝 = 4,38 (19) 𝑡𝑌4𝑥1 = 0,52𝑡𝑥2 + 0,283𝑡𝑥4 + 0,288𝑡𝑥6 𝑡𝑌4𝑥1 = 0,52𝑡𝑥2 + 0,283𝑡𝑥4 + 0,288𝑡𝑥6 (20) 𝑌6𝑥1 = 𝑒 1,18𝑥1 0,672; 𝐷𝑦6𝑥1 = 0,243; 𝐹𝑝 = 3,2 𝑌6𝑥1 = 𝑒 1,18𝑥1 0,672; 𝐷𝑦6𝑥1 = 0,243; 𝐹𝑝 = 3,2 (21) thus, the change in the volumes of sold innovative products which are new to the ukrainian market is determined by a third of the previous-year costs of internal research and the purchase of machinery, equipment and software. the dependence of the volume of sold innovative products outside ukraine (𝑌6, 𝑌7) on the basis of regression models shows that there is a close link with the total costs of innovation (𝑥1), which were made in the previous period, that is, with a one-year lag (22): 𝑌6𝑥1 = 152,2 + 0,186𝑥1 − 0,0000014𝑥1 2; 𝑌6𝑥1 = 152,2 + 0,186𝑥1 − 0,0000014𝑥1 2; 𝐷𝑦6𝑥1 = 0,932; 𝐹𝑝 = 53,8; 𝐹𝛼 {𝛼 = 0,05; 𝜐1 = 2; 𝜐2 = 9} = 4,26; (22) a differential analysis of the impact of expenditures on separate areas of innovation indicates virtually no link between the volume of sip outside ukraine and the costs of domestic research (𝑥2) – equations (23), (24), (25), (26) – where the link density is very low. this indicates the lack of knowledge and skills at enterprises to implement research and development on their http://www.virtual-economics.eu/ 74 www.virtual-economics.eu issn 2657-4047 (online) larysa kovchuha virtual economics, vol. 3, no. 3, 2020 own at the required level, sufficient to produce innovation and products competitive in the foreign markets. 𝑌6𝑥2 = 662,43 − 2043,7 1 𝑥2 𝐷𝑦6𝑥2 = 0,047; 𝐹𝑝 = 0,5 𝑌6𝑥2 = 662,43 − 2043,7 1 𝑥2 𝐷𝑦6𝑥2 = 0,047; 𝐹𝑝 = 0,5 (23) 𝑌6𝑥2 = 𝑒 4,6𝑥2 1,162; 𝐷𝑦6𝑥2 = 0,032; 𝐹𝑝 = 0,33 𝑌6𝑥2 = 𝑒 4,6𝑥2 1,162; 𝐷𝑦6𝑥2 = 0,032; 𝐹𝑝 = 0,33 (24) 𝑌6𝑥2 = 574,42 − 1204,6 1 𝑥2 𝐷𝑦6𝑥2 = 0,081; 𝐹𝑝 = 0,885 𝑌6𝑥2 = 574,42 − 1204,6 1 𝑥2 𝐷𝑦6𝑥2 = 0,081; 𝐹𝑝 = 0,885 (25) 𝑌6𝑥2 = 𝑒 4,316𝑥2 1,264; 𝐷𝑦6𝑥2 = 0,121; 𝐹𝑝 = 1,4 𝑌6𝑥2 = 𝑒 4,316𝑥2 1,264; 𝐷𝑦6𝑥2 = 0,121; 𝐹𝑝 = 1,4 (26) expenditures on purchasing the machinery, equipment and software have a greater impact on the change in sales outside ukraine, even coefficients of determination for all versions of the statement show that an increase of this type of costs by 25% 28% determines the change in sales. however, the expenditures of the previous year have a more significant impact on the parameters of power regression (see equation (27)). each increase of percentage in expenditures in this area causes an increase in sip outside ukraine by 0.533%. expenditures on external r&d (𝑥3) have even more significant impact on the dynamics of this indicator, taking into account the one-year lag – equation (28). thus, the change in the volume of sip outside ukraine by 77.5% is due to the costs of external research, which were made in the previous year. 𝑌6𝑥4 = 𝑒 42,284𝑥4 0,533𝐷𝑦6𝑥4 = 0,409; 𝑌6𝑥4 = 𝑒 42,284𝑥4 0,533𝐷𝑦6𝑥4 = 0,409; 𝐹𝑝 = 6,92; 𝐹𝛼 {𝛼 = 0,05; 𝜐1 = 2; 𝜐2 = 10} = 4,96; (27) 𝑌6𝑥3 = 278,23 − 14,4𝑥3 + 0,212𝑥3 2; 𝑌6𝑥3 = 278,23 − 14,4𝑥3 + 0,212𝑥3 2; 𝐷𝑦6𝑥3 = 0,775; 𝐹𝑝 = 15,54; 𝐹𝛼 {𝛼 = 0,05; 𝜐1 = 2; 𝜐2 = 9} = 4,26; (28) the results of the study showed a significant link between investment in innovation and the production of innovative products. it is revealed that, on average, the change in the volumes of sold innovative products by 60.0% 70.0% is due to the change in the total costs of innovation activities. a correlation-regression analysis also revealed a different impact of the http://www.virtual-economics.eu/ 75 www.virtual-economics.eu issn 2657-4047 (online) larysa kovchuha virtual economics, vol. 3, no. 3, 2020 components of innovations costs on the volume and structure of sold innovative products, which confirms the hypothesis. the total amount of sip largely depends on the level of costs to purchase machinery, equipment and software. each percentage of costs in this area is accompanied by an increase in sip by 0.701%, as well as costs related to the component "other". the growth of the costs by 1% leads to an increase in the volume of sip by 0.55%. the positive dynamics of sold innovative products new to the market is mainly determined by the costs of internal research, machinery and equipment, as well as other costs. all together, these three factors cause changes in sales of almost 50%, but standardized ratios show twice as much impact of costs on domestic r&d than other areas of expenditure. volumes of sold innovative products outside ukraine are largely determined by the volume of expenditures on external research. calculations have shown that the change in the volume of sip outside ukraine by 77.5% is due to the costs of external research, which incurred in the previous year. thus, influencing the structure of innovation costs, a company can achieve maximum economic return from them and significantly increase the level of its competitiveness. 5. conclusions the results of the analysis confirmed the research hypothesis on the existence of the dependence of the total volume of sold innovative industrial products and its share that is new to the market, as well as the volume of products sold outside ukraine, on different types of innovation costs. these results are consistent with the conclusions of most ukrainian and foreign scientists on the existence of a close positive relationship between investment in innovations and company performance. the study showed that, in general, the total costs of innovation is quite closely related to the amount of sip both in the respective years and taking into account the oneand two-year lag of costs. it is determined that approximately 70% of the change in the volume of sip is due to the direct dynamics of the total costs of innovation. among the components of costs in the areas of innovation, the greatest impact, both in separate years and the lags, is observed in the costs of purchasing machinery, equipment and software. there is a high-density link between the volume of sip and the costs in the direction of "other". the change in the volume of sold innovative products new to the market is only one third due to the impact of total expenditures on innovation in the current year. expenditures for the previous year have a more significant impact. each percentage of their growth causes an increase in sales in this area by 0.65%. expenditures on external r&d, which were invested in the previous year, have the greatest impact on the change in the volume of new products sold in the market. the volume of sip outside ukraine mainly depends on the volume of total expenditures on innovation for the previous year. each percentage of expenditures is accompanied by an increase in the volume of sold innovative products outside ukraine in the following year by 0.62%. expenditures on external r&d in the previous year have the most significant impact on the volume of sip outside ukraine. http://www.virtual-economics.eu/ 76 www.virtual-economics.eu issn 2657-4047 (online) larysa kovchuha virtual economics, vol. 3, no. 3, 2020 within the framework of further research, the development of proposals for optimizing the structure of innovation costs in the industry of ukraine, taking into account the results of the evaluation, seems relevant. references alymov, o. m. et al. 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(2019d). theoretical and methodical approaches to the definition of marketing risks management concept at industrial enterprises. marketing and management of innovations, 2, 228-238. http://doi.org/10.21272/mmi.2019.2-20 http://www.virtual-economics.eu/ http://www.ukrstat.gov.ua/druk/publicat/kat_u/%202018/zb/09/zb_nauka_2017.pdf http://www.ukrstat.gov.ua/druk/publicat/kat_u/%202018/zb/09/zb_nauka_2017.pdf кwilinski alex 25 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 2020 volume 3 number 2 (april) money leaks in banking atm’s cash-management systems julia garcía cabello abstract. some widely-accepted practices on banking atm networks may negatively affect efficient liquidity management. this paper analyses atm cash management in light of empirical evidence which suggests that banking atms tend to be overloaded beyond the customer’s needs. this, in turn, results in high opportunity costs. while this is not perceived by banks as particularly harmful, it might have a damaging impact on other business which revolves exclusively around atm networks, such as cashback sites. a dormant money case may be solved by an appropriate tool matching the atm’s cash to the user’s needs. supported by a large database of banking records, this paper also provides model validation for a set of theorems previously developed by the author, resulting here in a cutting-edge, reliable forecasting system, suitable for anticipating atms cash demand as well as coupling with other supply chain planning processes. keywords: atms cash management, stochastic processes, bank data processing, new methodology tested, cashback sites jel classification: c61, c63, g17, g21 author: julia garcía cabello university of granada, campus cartuja s/n, granada, spain, 18071 e-mail: cabello@ugr.es https://orcid.org/0000-0003-0682-0678 citation: garcía cabello, j. (2020). money leaks in banking atm’s cash-management systems. virtual economics, 3(2), 25-42. https://doi.org/10.34021/ve.2020.03.02(2) received: january 24, 2020. revised: march 12, 2020. accepted: april 27, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://doi.org/10.34021/ve.2020.03.02(2) https://creativecommons.org/licenses/by/4.0/ 26 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 1. introduction cash management is one of the most important tasks performed by corporate firms as far as it is the control key for handling crucial operations such as treasury administration and working capital and mezzanine financing. particularly in the banking sector, the financial crisis which started in 2007, revealed that the liquidity was the most vulnerable aspect of the banking system as long as the whole sector could be seriously affected by the crunch whenever banks do not retain adequate safety liquidity levels. actually, cash management is of such paramount importance because a liquidity shortfall at a single institution can have system-wide repercussions. by such crisis situations, the banking sector needs to incorporate all technological knowledge which might involve a more efficient management of their liquid resources: amongst other things, to meet the regulatory framework which fixes their safety liquidity levels (basel iii rules). as many authors claim, the branch efficiency study could significantly help improve the global bank institution performance, (camanho & dyson, 1999), (paradi & zhu, 2013). since the concept of liquidity management covers a very broad spectrum of short/medium term cash-based activities (cash management in atms is amongst these activities at the branch level) this paper will focus on improvements in optimization of cash inventories at branch atm level under the premise that any improvement at the aggregate level has beneficial repercussions on the global institution’s efficiency. for what reasons is it recommendable to undertake a new revision of the costs of atms as cash manipulation channels? it is mainly due to the spectacular increase in the number of atm machines. indeed, forty years after the first atm (called dac, de la rue automatic cash system) a total of 3 million atms have been distributed across the length and breadth of the whole world 1 . then, although the introduction of atms along with other technological innovations such as e-banking has reduced the management costs of bank liquid assets (valverde & humphrey, 2009) the impressive usage of atms recommends upgrading this cash supply channel. it should not be forgotten that the current situation of fierce competition requires an effort on the part of the banking sector in order to oversee keeping costs. bank managers, however, may argue that current low interest rates mitigate the impact of these potential losses. even in that case, banks would still incur opportunity costs of not generating profits if cash is invested in appropriate financial products. but, apart from the banking case, there are other examples in which business revolves exclusively around atms and, in consequence, such liquidity management is of capital importance for keeping the company afloat. exchange currency companies provide an example of this. this is also the case of cashback sites. cashback sites physical and websitesare currently a highly topical subject since they are being thought to be 1 date research was conducted: march 29, 2019. sources: atmia, national atm council, see http://www.statisticbrain.com/atm-machine-statistics/ 27 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 implemented in spain, although they have already been operating for a long time in some countries like uk throughout supermarkets, post offices etc. cashback sites offer services to retail buyers under which a quantity of money (payout) is added to the total purchase price of a transaction made by debit cards, in such a way that the customer receives the payout in cash along with the purchase 2 . as cashback sites provide cash to the customers if required, they act as atms: thus, they should anticipate uncertain demand without generating dormant money to avoid opportunity costs. while opportunity costs are not perceived by banks as particularly harmful, it might have a damaging impact on cashback sites. the primary objective of this paper is to show that the cash management of an atm network as significant room for improvement is particularly related to some practices which may be generating losses and opportunity costs. we mainly refer to overloading atms beyond the real cash necessities. actually, this paper analyses branch atm cash management in light of empirical evidence (database formed by real atm-level records) showing a mismatch between quantities of cash placed in the atms and real cash needs of atm’s consumers. along with this problem, this paper attempts to provide a potential solution to overcome dormant money a new methodology as a handy decision making a support system for cash managers. the theoretical fundamentals of the proposed methodology, developed earlier by the author of this paper in (garcía cabello, 2013a), were conceived only as a set of theorems based on stochastic jump processes together with a dynamic mathematical setting in order to model the atms cash flow. in this paper, by means of the corresponding model validation, it will be proved that this set of theorems, pointed in the right direction, become an effective forecasting system for atms. as a matter of fact, the aim of this paper is twofold. first, we warn of the pressing need to improve the atm cash management by specifically being aware of some widely-accepted practices which may result in inefficiencies. the second aim of this paper is to promote this new forecasting system as long as it shows an immediate practical relevance for management practitioners. the key decision for the bank as far as its atms are concerned is how much cash to maintain in that account from an initial overall sum to be loaded. it should be noticed that, despite the fact that it technologies are present at branches (commonly used from centralized it planning centers), the procedure to compute the initial amount of cash to be loaded into the atm strongly relies on manager’s expertise, who further fine-tune the centralized predictions by taking into account the specific branch features derived from the local demographics. and the manager’s expertise relies on historical data handling as part of the branch’s routines. that means that the branch registers the cash quantity on particular weeks (workable, holidays …) and the resulting outcome (cash exceed or cash shortage) and copies the successful amounts. however, in the decision-making process, branch managers make a decision with only incomplete information. as a result, the branches tend to overload the atms to avoid refilling the atms more than once a day. in truth, the banking 2 for instance, a customer purchasing 8.99\euro worth of goods at a supermarket might ask for thirty euros cashback. he would pay a total of 38.99\euro (8.99 + 30.00) with their debit card and receive 30\euro in cash along with their goods. 28 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 information processed in this paper suggests that this could happen. this banking information is database of real banking records on atms data transactions. as a matter of fact, about 250,000 excel multicolumn cells have been compiled. as far as the author knows, this is one of the few times that such dataset has been addressed in the literature, due to the strict rules on using real data transactions at branch level. a large database of banking records has been also employed in order to validate the new methodology proposed in this paper, showing it as a matching solution which adjusts atm’s cash to user’s needs. actually, the model validation process has been carried out in parallel with the attempt to find out that atms tend to be overloaded, proceeding by comparing the following three items: a) real banking data on cash loaded into atms; b) consumer’s real cash necessities; c) forecasted cash amounts obtained from the method which predicts the right quantities of cash which should be loaded into the atm in order to meet an uncertain demand. it should be noticed that this new methodology has been mainly intended and designed to forecast future atm cash needs by analyzing past needs. hence, as its forecasting mechanism is based on past branch data, which implicitly include specific atm features inside, this methodology does take into account such specific branch characteristics for each case. on the one hand, this forecasting system is very precise with minimum human intervention. on the other hand, it is very simple to be implemented in the branch daily practices 3 assuring costs reductions. these characteristics allow this methodology to co-exist with other technologies as a complement which supports branch manager’s decisions and helps notably ameliorate the atm cash management. moreover, it has the potential to be applied to other contexts apart from the banking environment (or cashback sites) providing, thus, sustainable competitive advantage since, in general terms, forecasting demand is an important issue in any supply chain planning process (hill et al., 2015; xu et al., 2020). actually, the use of technology to anticipate demand establishes accurate management to get to know up-to-date information for procuring both demand forecasting and supply management, specifically by early warning of potential oversupply or stock-outs. as a matter of fact, the generality of the methodology employed greatly extends the range of its possible industrial uses 4 . 3 following (hill et al, 2015), implementing systems and procedures based on forecasting systems in real organizations should not be taken lightly. however, the methodology exposed in this paper -since it may be carried out through an excel sheet or easily converted into an algorithm directly throughout the banking institution’s own computer servicesshould be both inexpensive and easily implementable in the daily branch routine. 4 in subsequent papers, applications for computer components suppliers and electric utility industry will be studied. 29 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 this paper is organized as follows: in section 2, a literature review is carried out. section 3 is devoted to outlining the general formulation of the theoretical methodology stating its main features as well as running throughout a small sample intended for illustrative purposes. section 4 is devoted to the numerical experiments. finally section 5 concludes the paper. 2. literature review the body of the banking literature points at liquidity management as an essential function of banks. in particular, the seminal references to the role of financial intermediaries (diamond & rajan, 2011) already paid attention to deposits as the main input for banks, as well as to the consequences of random deposit withdrawals and the role of deposit insurance to reduce the risk of bank runs. these models have evolved over time, as in (barth et al., 2004), and have been largely revisited after the financial crunch by 2007, given that liquidity tensions have been a main concern in the banking industry and for financial stability in general, see, for example (bolt, 2010). there has been also a strand of the literature dealing with the evolution of cash in the economy, as well as on the impact that electronic payments and atms have on the demand for currency. humphrey et al. (2006) consider that transition from cash to electronic payments could save around a 1% of gdp for a sample of 12 eu countries. valverde & humphrey (2009) find similar gains for spain. attanasio et al. (2002) analyze the impact of atm transactions on the demand for currency. additionally, other studies have shown the importance of atms and cash in reducing the penetration of debit and credit cards in some countries, as in (valverde & humphrey, 2009) for spain. from a bank management-level perspective there is, to the author’s knowledge, a more limited number of studies dealing with efficiency improvements in liquidity management. in particular, there is a paucity of research analyzing branch-level cash management. there are only a few exceptions. the analysis of the early stages of atm deployment in greece and empirical evidence found demonstrate that atms transactions could be improved only through attracting new deposits, enlarging the atm network and direct mail advertising campaigns (kouzelis, 1987). other studies have directly focused on optimizing atms using inventory models and, more recently, operational research techniques. undertaken simulations on how to optimize an atm network found that up to 28% cost saving can be achieved by improving the inventory policies and cash transportation decisions (wagner, 2007). as the problem stated and solved in this paper may be viewed as the optimal management of an inventory of cash holdings within the bank’s atm under uncertainty, models of supply chain planning and inventory models should be mentioned. some of them have relied on supply management optimization techniques, as in (alonso-ayuso et al., 2003), where a complete algorithmic approach for supply chain management under uncertainty is developed. a good summary of these models can be found in (osorio & toro, 2012) who, in turn, show that there are many similarities between cash supply chains and the typical 30 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 chains for physical products. castro (2009) follows an operational research perspective and develops a solution to optimize the atm cash management based on algorithms which administer the cash in atms and banks. finally, a more recent perspective has made use of clustering and neural networks to forecast cash demand at atms. in particular, venkatesh et al. (2014) show that the cluster-wise cash demand forecast helps the bank’s top management to design similar cash replenishment plans for all the atms in the same cluster. this cluster-level replenishment plans could result in saving huge operational costs for atms operating in a similar geographical region. other papers of the existing literature focused on atms are (van der heide et al., 2020), (ekinci et al., 2015), (jadwal et al., 2018) or (teddy and ng, 2011) who optimize the atm cash replenishment or develop different systems for predicting the daily amounts withdrawn from atm´s. under the inventory management view, in (naserabadi et al., 2014), an approach for an inventory system is developed. other approaches on atm forecasting techniques are in (darwish, 2013), where a brief summary of the existing methods for cash forecasting are presented. 3. methodology this section, devoted to explaining the methodology used, is divided into two parts: the first one provides an overview of those theoretical foundations which were conceived as a set of theorems, developed in (garcía cabello, 2013a). in next section, through the corresponding model validation, it shall be proved that different ways of executing these theorems may result in an accurate decision-making model for supporting atm cash management. it should be also mentioned that the theoretical foundations upon which the forecasting method tested in this paper is based, do not specify how to determine the expected quantity of cash. this leaves the door open to applying the method in several ways 5 . hence, in the second part of this section, one of the ways in which this method may work in practice beyond its fundamentals shall be detailed. this will be carried out through a small sample (one week) intended for illustrative purposes. 3.1. fundamentals in this section a brief summary of the theoretical setting developed in (garcía cabello, 2013a), will be exposed. these are based on stochastic jump processes (compound poisson processes). with regard to the process of withdrawing cash from atms, there are two stochastic unknowns: the number of atm customers and the amounts of cash withdrawn each time. the first one is described by means of the arrival process known as counting process: if is the number of atm users in the time interval (0, t), the main properties of this arrival process considered as poisson process with parameter λ are: the number of atm customers in a time lag (0, t) is a poisson distribution with parameter λ·t: p* ] = 5 the best option to employ the method would depend on the (economic, social, demographic) circumstances of each atm bank branch. see the section 5 for complete explanations about possible methods of computing. 31 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 provides the likelihood of having atm customers throughout the time t. the expected value and variance of are respectively e[ += λ·t, var[ += λ·t. particularly, λ represents the average of atm withdrawals per day. as for the second stochastic unknown, the amounts of cash withdrawn each time , these are modelled by a compound poisson process: ∑ (1) garcía cabello (2013a) proved that the amount represents the quantity withdrawn by the customers throughout the day. by the compound poisson process properties, this is equal to λ·e* + where λ is the average of the number of withdrawals per day whereas e[ ] stands for the average of quantity withdrawn from the atm per day. hence, if represents the quantity to be loaded into the atm at the beginning of the day, this may be as follows: [ ] (2) this equation shall be at the heart of the subsequent model validation. let it be noticed that the proposed forecasting method equation 2 does not predict atm cash demand depending on the total number of atm arrivals but only on atm arrivals in which money has been withdrawn. that is, other arrivals without cash withdrawn at the atm 6 , including an eventual atm failure, are not considered in equation 2. the theoretical setting developed for atms in (garcía cabello, 2013a), on which the present model validation relies, was enlarged in subsequent works for branches. specifically, in (garcía cabello, 2013b) a theoretical programme of cash efficiency for bank’s branches is proposed thereby providing a significant reduction of cash holdings at branches. in (garcía cabello et al, 2017), an effective algorithm to optimize branch cash holdings is designed as a cutting-edge methodology to enhance the efficiency of bank branches regarding the liquidity management. 3.2. employing the method through a short sample as mentioned before, the set of theorems developed in (garcía cabello, 2013a; 2017) may be applied in several ways in order to produce adequate forecasted amounts of cash. this subsection is devoted to detailing one of these: in few words, database processing will be made in such a way that inputs for each step are the mean of cash withdrawn in all previous stages. other ways of employing the method would select only a group of inputs instead of 6 like paying routine bills, fees, taxes, printing bank statements, updating passbooks, transferring money between linked accounts, purchasing tickets -concert tickets, lottery tickets, movie tickets, train tickets etc. and many other functions. 32 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 using all of them, simulating some widely-accepted manager’s practices of clustering the time into groups (weeks/months/years) of similar features 7 . for illustrative purposes, a small sample (one week) will be processed. the banking information comes from partial extracts of daily atm cash count sheets corresponding to a representative office in demographic and sociological terms of an emblematic spanish bank firm. due to confidentiality arrangements we provide some general descriptive statistics. throughout this section, the banking partial extracts of daily atm cash count sheet’s specific terminology has been kept: particularly, the term return means withdrawals while the label total delivered coincides with the real needs of cash delivered by the atm at the end of the day. in order to explain how the method may be employed in practice, we will carry out the contrast amongst: a) banking data on quantities of cash charged into atms; b) users’ real cash needs; c) atm forecasts. the final result will be displayed in table 3. previous proceedings in order to get final computations are shown in following table 1. table 1. previous proceedings on the atm forecasting method employment source: developed by the author. now, by applying previous equation 2, 7 that refers to those periods of time where spending increases (pre-holidays such as beginning of july or december) or decreases (periods of austerity such as the so-called ‘hard january’) total delivered td total returns tr average of quantity withdrawn from atm= day 1 10,090 € 104 97.01 € day 2 3,160 € 17 185.8 € day 3 3,980 € 34 117.05 € day 4 3,090 € 24 128.75 € day 5 5,050 € 51 99.01 € day 6 6,540 € 79 82.78 € day 7 1,320 € 17 77.64 € 33 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 (3) this makes the following amount: 5,242.54 €. that is to say, by processing the small sample of banking records, the atm forecasting methodology produces an output of 5,242.54 €, which should be enough to satisfy the atm users’ demand for cash every day. before contrasting the aforementioned forecasted amount with real necessities for cash, let us pay attention to the following data: table 2. a mismatch between real needs and cash loaded total delivered total intro (loaded) day 1 10,090 € 25,770 € day 2 3,160 € 47,100 € day 3 3,980 € 43,940 € day 4 3,090 € 39,960 € day 5 5,050 € 36,870 € day 6 6,540 € 31,820 € day 7 1,320 € 23, 680 € 33,230 € total delivered 249,140 € total intro source: developed by the author. if compared with the previous table 2, here the big difference between the real daily needs for cash (labeled total delivered) and the amounts of cash loaded into the atm (labeled total intro) is prominently displayed. later on, when processing a large database of real banking records (more than 250,000 excel multicolumn cells with information about urban and rural atms), the mentioned hypothesis of overloading atms will be reinforced. this alone should make it reasonable enough to revisit the current atm cash management procedures. in order to finally draw an overall comparison amongst a) provision of funds for the atms on the banking firms (i.e., average of the total intro by the branch staff), b) atm users real cash needs (i.e., average of the atm total delivered) and c) predictions of cash on the proposed methodology, as the two first quantities are both averages per week, the corresponding quantities should be now 34 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 € and €, i.e., 35,591.43€ and 4,741.14€, as it is shown as the mentioned global comparison is following table 3: table 3. overall comparison average total delivered average total intro forecasted amount 4,741.14€ 35,591.40€ 5,242.54€ source: developed by the author. table 3 displays a mismatch between provision of funds and banking atms’ real needs for cash (see the two items underlined). this mismatch is shown as well in figure 1, where the area between green and blue/red lines (blue and red lines practically coincide) represents the atm surplus cash. incidentally, both table 3 and figure 1 also show the high level of precision and reliability of the proposed atm forecasting methodology: figure 1. the comparative graph source: developed by the author. 4. numerical experiments this section is devoted to performing some numerical tests aimed at validating the theoretical model. it could be considered as one of the most important contribution of this paper as it clarifies how to employ the model in practice (see also the next section, where €0 €5 000 €10 000 €15 000 €20 000 €25 000 €30 000 €35 000 €40 000 €45 000 €50 000 day 1 day 2 day 3 day 4 day 5 day 6 day 7 provision of funds for the atm on the banking firms atm users real needs of cash predictions of cash of the garcía cabello's program 35 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 different ways of applying the model are discussed). the data set is formed by more than 250,000 daily atm branch transactions of two different branches of an emblematic spanish bank. these experiments have been carried out as a sensitivity test on atms withdrawals for two kinds of branches: urban and rural. despite our initial data set was originally written using the entity’s specific code, significant external operations have been extracted/separated from those internal organizational orders (accounting entries) as part of the database processing. to comply with legislation, the name of the bank must be kept confidential. for both kinds of atms, in urban/rural locations, two graphs have been developed: the first one (a bar chart) draws a comparison between the quantities of cash charged into atms and the real needs for cash in order to define trends in atms practices as the possible overload. the second graph (a diagram of functions) displays jointly the three functions corresponding to: a) banking data on quantities of cash loaded into atms; b) real needs for cash; c) atm forecasts, aimed at establishing the degree of accuracy of the proposed forecasting methodology for atms. for all these graphs, the x axis shows months and the y axis displays cash amounts (in euros). as mentioned before, there is more than one way to employ the methodology, which would be more or less suitable depending on the context. in order to be consistent with former sections, database processing will be still made in such a way that each inputs iteration is the average of cash withdrawn in the sum of previous stages. let it be noticed that the distinction between city and rural branches is the usual categorization of branches amongst branch managers although it does not correspond only to demographic parameters. on the contrary, it includes other factors like branch size, for example. at this point, let us make a few comments on the branch size. the branch size in a notion that represents somehow the branch’s solvency. practitioners use a wide range of parameters to delimit the size of a branch, the volume of loans, the maximum volume of cash allowed to be stored or the number of staff being amongst the most used. moreover, it is a notion closely related to local demographics in the sense that the size of a branch strongly depends on the number and the volume of branch cash transactions which, in turn, depend on the branch clients’ needs for cash (which have a high level of dependence on the clients’ demographic area). for the model validation, we consider two main categories of branches: city center branches versus rural ones. according to the branch managers’ view, the corresponding data sets (one per each of these categories) include the corresponding demographic features inside to record the branch managers’ normal practice of grouping branches according to their solvency, not according to their geographical location. this means that branches which are geographically placed in rural locations may be treated by practitioners as urban if their cash benchmarks exceed the corresponding values for rural ones. 4.1 a city center branch 36 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 according to experts, the main feature of urban bank branches atms is a constant and high client flow, with over 50% of them not being regular customers. branch atm consumers’ habits are not therefore fully known. in figure 2, the blue bars display real needs for cash, while the red ones show the quantities loaded into atms. a huge difference can be observed between both items. figure 2. city center atms’ overload source: devoloped by the author. figure 3. the overall comparison of city center atms source: devoloped by the author. 0 200 000 400 000 600 000 800 000 1 000 000 1 200 000 1 400 000 real needs of cash cash loaded 0 200 000 400 000 600 000 800 000 1 000 000 1 200 000 1 400 000 real needs of cash cash loaded forecasted amounts 37 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 the same conclusion is reached as far as figure 3 is concerned, where, additionally, a high degree of coincidence may be observed between the forecasted amounts of cash and the real needs. importantly, figure 3 shows a small distortion of forecasts (january, beginning of february) corresponding to the so-called ‘hard january’. this seasonal dissimilitude is expected by the city-center branch managers. 4.2. a rural site branch the main features of atm bank branches located in rural areas are a constant and medium/low client flow, with less than 20% not being regular customers. consequently, branch consumer habits are well known by the branch staff. the withdrawals flow is homogeneous with medium/low level of cash quantity. figure 4 and figure 5 provide findings similar to those of the urban case: firstly, the mismatch between quantities of cash placed in the atms and real needs for cash of atms’ consumers; and secondly, a high accuracy level of the proposed methodology in forecasting the quantity of cash to be loaded into the atm in response to an uncertain demand for cash. one further conclusion may be drawn: in rural locations, the atm consumers’ habits tend to be more homogeneous than in urban areas. this is the probable reason as to why such branch managers do not overload atms as disproportionately as those in the urban locations. figure 4. rural atms overload source: developed by the author. 0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 90 000 real needs of cash cash loaded 38 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 similar to figure 3, in figure 5 there is a small deviation between forecasts and real needs for cash. it is caused by the population increase in rural areas due to their travelling from city centers to rural districts (holidays / vacations, july, august). seasonal varieties are expected by the rural branch managers. figure 5. the overall comparison for rural atms source: developed by the author. 5. exploring the forecasting method opportunities the precise way of computing used in the model validation is detailed when employing the method throughout a small sample (see section 3.2). however, the existence of alternative ways of computing is suggested. this is because, as mentioned earlier, the set of seminal theorems at the heart of the proposed methodology does not specify how to compute the forecasted amounts for atms leaving the door open to several opportunities, whose effectiveness may be tested in different scenarios. let us remind that the forecasting model (summarized in the central equation 2) provides the explicit formula for determining the expected amount of case by means of two unknowns: i) withdrawals and ii) quantities withdrawn per day. of course, the days from which these data are extracted (i.e., the reference days) must be prior to the forecasting day. the fact that these reference days may be chosen following several methods, open many opportunities of computing according to the needs. some ways of computation are listed below as well as some of their intrinsic characteristic (such as learning capabilities, i.e., progressively improving performance) which would help to identify those contexts where such way of computing would fit better: 0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 90 000 real needs of cash cash loaded forecasted amounts 39 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 the last day: to use for the current day the data extracted from the last one. this method assumes that all days are similar. this way of computation would be suitable for branches with not too many peaks and falls. the last similar day: to use for the current day the data extracted from the last similar one where similar means with similar specific features. in such case, days are grouped (clustering) depending on specific features such as work days, holidays, etc. in order to take samples from the corresponding cluster. this way of computation would be suitable for those branches with more extreme swings. an accumulated average: to use the historical average of atm cash needs. this method assumes that all days are equal and will never account for extreme values. it will however, slowly adapt to rising or decreasing needs since the corresponding temporal sequence has steps which become broader. here, the outputs starting at that give rise to more information (on both withdrawals and quantities withdrawn) are used as inputs for the next steps. thus, these outputs meet a temporal sequence which becomes larger with each new iteration in such a way that the cumulative error becomes smaller. that is, the proposed methodology has learning capabilities if performed this way. an accumulated average with the initial learning period: a modification of the former because during the initial period, the average is very sensible to extreme variations. both an accumulated-average and an accumulated-average-with-initial-learning-period methods would be suitable versions for branches with large volumes of atms transactions. these are general guidelines while exploring potential fine-tuning of the proposed method should be carried out by testing the procedure with the real data of each kind of a branch (see conclusions section for further details). thus, in addition to the versatility in employing the method, other further fine-tunings could be implemented in order to fit best the characteristic of each scenario. as a matter of fact, each atm location represents itself a particular scenario whose set of features ranges from the market conditions to the special conditions of the site where the atm is located. 6. conclusions the employment of atms network as an additional alternative to cash window has spread enormously amongst the bank entities’ users now reaching massive proportions. this alone should be a reason significant enough to revisit the current atm cash management procedures in order to detect money leaks. moreover, in spain within a foreseeable period of time, the new companies’ establishing (cashback sites) may have a high chance of occurrence. cashback sites would act as atms by offering services to retail customers while providing cash added to the total purchase price of the debit card transactions, as shown in figure 6. a similar provision exists, with regard to other companies which use atms machines to expend 40 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 money, such as exchange currency companies. all these settings should anticipate uncertain demand without generating dormant money to avoid opportunity costs. while opportunity costs are not perceived by banks as particularly harmful, it might have a damaging impact on cashback sites or similar companies. figure 6. cashback сompanies source: developed by the author. this paper puts on the table the pressing necessity of enhancing atms performance as well as learning from possible inefficient atm branching practices such as overloading the atms beyond the users’ needs. as a matter of fact, the large dataset formed by real banking information used in this paper suggest that it is probably the common practice for banks to overload atms with cash, which, in turn, can generate large losses and opportunity costs. along with this problem, this paper aims to provide a potential solution to ameliorate banking cash management by optimizing the atm replenishments through a cutting-edge methodology matching the atms’ cash with the users’ needs. the tests performed in this paper (through large atm database in order to reduce noise as much as possible) show this methodology as sound and reliable. actually, our findings demonstrate that the proposed method may significantly reduce the mismatch between provision of funds for the atms and the atm users’ real needs for cash. furthermore, our approach is a non-expense-based methodology aimed at co-existing with other it technologies as an extra decision support system for practitioners. it has also the potential to be applied to other contexts apart from the banking environment, thus, providing a sustainable competitive advantage. as mentioned along the paper, the set of seminal theorems at the proposed methodology’s heart does not specify how to compute the forecasted amounts for atms, leaving the door open to several opportunities, whose effectiveness may be tested in different scenarios. 41 www.virtual-economics.eu issn 2657-4047 (online) julia garcía cabello virtual economics, vol. 3, no. 2, 2020 7. acknowledgements the financial support from the spanish ministry of science and innovation ``regulación financiera y sector bancario en tiempos de inestabilidad: mecanismos de prevención y resolución de la crisis'' (eco2014-59584-p), junta de andalucía ``excellence groups'' (p12.sej.2463), and junta de andalucía (sej340) is gratefully acknowledged. declarations of interest: none. references alonso-ayuso, a., escudero, l.f., garín, a., ortuño, m., & pérez, t. 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(2020). status review and research strategies on product-service supply chain. proceedings of the institution of mechanical engineers, part b: journal of engineering manufacture, 234(8), 1075-1086. https://doi.org/10.1177/0954405420905199 javascript:void(0) javascript:void(0) https://www.scopus.com/authid/detail.uri?origin=resultslist&authorid=57195488930&zone= https://www.scopus.com/authid/detail.uri?origin=resultslist&authorid=55437035500&zone= https://www.scopus.com/authid/detail.uri?origin=resultslist&authorid=55605779560&zone= https://www.scopus.com/authid/detail.uri?origin=resultslist&authorid=56530226200&zone= https://doi.org/10.1016/0377-2217(87)90015-4 https://www.scopus.com/authid/detail.uri?origin=resultslist&authorid=57211441479&zone= https://www.scopus.com/authid/detail.uri?origin=resultslist&authorid=54890623600&zone= https://www.scopus.com/record/display.uri?eid=2-s2.0-85073982702&origin=resultslist&sort=plf-f&src=s&st1=forecasting+cash+atm+&st2=&sid=b75e39ef3f078d01401202486b85ed7c&sot=b&sdt=b&sl=36&s=title-abs-key%28forecasting+cash+atm+%29&relpos=0&citecnt=0&searchterm= https://www.scopus.com/record/display.uri?eid=2-s2.0-85073982702&origin=resultslist&sort=plf-f&src=s&st1=forecasting+cash+atm+&st2=&sid=b75e39ef3f078d01401202486b85ed7c&sot=b&sdt=b&sl=36&s=title-abs-key%28forecasting+cash+atm+%29&relpos=0&citecnt=0&searchterm= https://www.scopus.com/sourceid/24355?origin=resultslist https://www.scopus.com/sourceid/24355?origin=resultslist https://www.scopus.com/authid/detail.uri?origin=resultslist&authorid=54791755100&zone= https://www.scopus.com/authid/detail.uri?origin=resultslist&authorid=56915869700&zone= https://www.scopus.com/authid/detail.uri?origin=resultslist&authorid=55371383400&zone= https://www.scopus.com/record/display.uri?eid=2-s2.0-85081976769&origin=resultslist&sort=plf-f&src=s&st1=demand+forecasting+supply+chain&nlo=&nlr=&nls=&sid=3d71fa07bf21877888c13145fa059614&sot=q&sdt=b&sl=51&s=title-abs-key-auth%28demand+forecasting+supply+chain%29&relpos=3&citecnt=0&searchterm= https://www.scopus.com/record/display.uri?eid=2-s2.0-85081976769&origin=resultslist&sort=plf-f&src=s&st1=demand+forecasting+supply+chain&nlo=&nlr=&nls=&sid=3d71fa07bf21877888c13145fa059614&sot=q&sdt=b&sl=51&s=title-abs-key-auth%28demand+forecasting+supply+chain%29&relpos=3&citecnt=0&searchterm= https://www.scopus.com/sourceid/20406?origin=resultslist https://www.scopus.com/sourceid/20406?origin=resultslist кwilinski alex 80 www.virtual-economics.eu issn 2657-4047 (online) shafiu ibrahim abdullahi and shuaibu mukhtar virtual economics, vol. 3, no. 3, 2020 2020 volume 3 number 3 (july) measuring advertising expenditure effects on the nigerian economy shafiu ibrahim abdullahi and shuaibu mukhtar abstract. this study explores relationships between annual advertising expenditure and major macroeconomic variables in nigeria. advertising is sometimes viewed as a concern of business units only not worth being researched at macroeconomic level. this nature has been mostly studied on advertising industries in the advanced economies. due to a lack of high frequency time series data on advertising expenditure in the developing economies, this work has been limited to an exploratory study using the multiple regression and correlation analysis. the study covers the period of 2001 to 2018. its findings show that advertising has positive relationship with gdp and savings. this study provides further evidence on the cyclical nature of advertising that moves with the state of the economy. during the economic slowdown in the period of 2015 to 2017, nigeria advertising expenditure continued to fall. in 2013, the period with the highest advertising revenue in the study, the ratio of advertising expenditure as percentage of gdp accounted for 0.061%, which was below 0.2%, a very negligible number indicating more scope for growth in the market. keywords: advertising expenditure, macroeconomic variables, correlation, regression, gdp, consumption, inflation, stock market capitalization, savings and fdi jel classification: o3, m3, l1, e3, d8 authors: shafiu ibrahim abdullahi bayero university, kano, nigeria e-mail: shafiuibrahim@gmail.com https://orcid.org/0000-0003-3471-4493 shuaibu mukhtar kebbi state polytechnic, dakingari, nigeria e-mail: mukhs001@yahoo.com https://orcid.org/0000-0002-9924-7323 citation: shafiu, i. a. and shuaibu, m. (2020). measuring advertising expenditure effects on the nigerian economy. virtual economics, 3(3), 80-93. https://doi.org/10.34021/ve.2020.03.03(5) received: march 18, 2020. revised: april 24, 2020. accepted: july 03, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:shafiuibrahim@gmail.com https://orcid.org/0000-0003-3471-4493 mailto:mukhs001@yahoo.com https://orcid.org/0000-0002-9924-7323 https://doi.org/10.34021/ve.2020.03.03(5) https://creativecommons.org/licenses/by/4.0/ 81 www.virtual-economics.eu issn 2657-4047 (online) shafiu ibrahim abdullahi and shuaibu mukhtar virtual economics, vol. 3, no. 3, 2020 1. introduction unlike most research papers on advertising which stem from the business management and marketing schools and consider advertising at the micro level, this paper (though mainly informed by economics) studies the issue at the macro level. generally, even works on advertising in economics tend to look at the matter from microeconomics rather than macroeconomics perspectives (molinari & turino, 2006). most economists do not consider advertising as an area worth researching. according to stigler (1961), “advertising is treated with a hostility that economists normally reserve for tariffs or monopolists”. since the time stigler made this declaration, over half a century ago, not much seems to have changed. this, of course, has its origin in the history of economics, pioneered by classical economists in the 19th century (and their predecessors) who did not care to research the matter of advertising (bagwell, 2007). important works on economics of advertising originated in 20th century, starting with the works by alfred marshal (bagwell, 2007). some scholars opposed advertising, seeing it as a form of ostentation encouraged by capitalism. this, they argued, can be noticed from the fact that anglo-saxon capitalist nations like the us and the uk promoted advertising more than, for example, european nations such as germany and france, or even japan. studies on intangible investments in oecd prove that the us and the uk show high contribution to intangibles, followed by such countries as france, denmark and germany; while such countries as czech republic and greece are grouped as catch-up countries in the third group. in the laggard group there are italy and spain (ark et al., 2009). on the one hand, the positive aspect of advertising is that it assists buyers to find information about products. it, therefore, puts consumers in a better position while making their decisions about how to spend their money. according to stigler (1961), advertising acts as means of identifying buyers and sellers in the process helping to reduce the cost of search. on the other hand, the persuasive nature of advertising is emphasized by some scholars as the one that encourages monopoly and is anti-competitive. information economics or economics of information is a branch of the microeconomic theory that deals with how information and information systems affect economic activities. it is concerned with how information along with the quality and value of this information affect an economy and economic decisions. information can be inexpensively created, can be reliable, and, when reliable, is valuable (teall, 2018). information asymmetry means that the interacting parties have different information on the subject of the interaction; for example, one party of the transaction has more or better information than another. a mere expectation of one party to have better information than the other party leads to a change in behavior. the less informed party may try to prevent another party from taking advantage of it. spence (1973) has originally proposed the idea of signaling in his well-known paper on job market signaling. he proposed that in a situation with information asymmetry, it is possible for people to signal their type, thus credibly transferring information to another party and resolving the asymmetry. advertising is considered as one of the media of signaling and passing the relevant information from one party to another. according to lippman & mccall (2015), prior to the 1980s, the subject of ‘economics of information’ meant economics of search. research on economics of search began in the 1960s with the seminal work by stigler (1961). information http://www.virtual-economics.eu/ 82 www.virtual-economics.eu issn 2657-4047 (online) shafiu ibrahim abdullahi and shuaibu mukhtar virtual economics, vol. 3, no. 3, 2020 economics relates to the game theory; different types of games may apply such games with perfect information, complete information. information has economic value because it allows individuals to make choices that yield higher expected payoffs or expected utility than they would obtain from choices made in the absence of information. the game theory meaning of ‘economics of information’ centers on contractual relationships between parties. the incentives of parties to a contract are determined by the different information possessed by each (lippman & mccall, 2015). stigler (1961) has illustrated the importance of subjecting information to economic analysis, observing that ‘advertising ... is an enormously powerful instrument for the elimination of ignorance ... and is normally ‘'paid'’ for by the seller.’ the information technology revolution has changed the field of information economics from the condition that obtained during the time of stigler to today’s era of the internet advertising, where information is nearly free and available at the speed of light across the globe. this, further, makes advertising very essential to the modern economy: you either advertise what you are selling or the world will not know about you. advertising is theorized to have positive relationship with democracy, as non-democratic regimes look at advertising as part of media freedom they restricted, while democratic governments welcome the freedom that goes with advertising (kshetri et al., 2007). in nigeria, the period before returns to democracy in 1999 was characterized by low advertising expenditure, due to reasons mentioned above and slow economic growth of the period. this was period of military dictatorship that stifled media freedom. expenditures in advertising are theorized to be proportionate to participation of industry and service sectors in an economy i.e. urbanization (pesavento & marques, 2016). thus, presence of industries and services in an economy is healthy for development of advertising industry. percentage of average annual advertising expenditure in nigeria as a ratio of average annual gdp from 2001 to 2017 is 0.069%. in 2013, the period with the highest advertising revenue in the study, ratio of advertising expenditure as percentage of gdp is 0.061% which is below 0.2% a very negligible number indicating more scope for grow in the market. as a developing country, the contribution of advertising to gdp is less than is found in advanced economies. this may affect relationship between advertising and macroeconomic variables as well as the final results obtainable in study of this nature. thus, advertising expenditure may have weak effects on macroeconomic variables in nigeria and other developing economies. despite that, advertising market in nigeria has been growing since the return to democracy in 1999 (abdullahi, 2017). nigeria ranked among the biggest advertising market in africa, that also included south africa and egypt. as largest economy in africa, the potential of advertising market in nigeria is bright. a recent report by pwc (2017), observed that nigeria is on course to become world’s fastest-growing entertainment and media (e&m) market over the coming five years (2017-2021), growing at rate of 12.1%. advertising form part of what is referred to as intangibles that included research and development. intangibles has been traditionally categorized as expenses. but recently there were initiatives to categorize some intangibles as capital, some of these intangibles include software expenditure (information technology) and research and development (ark et al., 2009). intangible expenditures on software, r&d, advertising, training, and managerial capital http://www.virtual-economics.eu/ 83 www.virtual-economics.eu issn 2657-4047 (online) shafiu ibrahim abdullahi and shuaibu mukhtar virtual economics, vol. 3, no. 3, 2020 are critical investments that sustain a firm’s market presence in future years through reduction in cost and raising profits beyond the current accounting period and maintaining economic competitiveness around the world. intangibles capital around the world are concentrated in developed countries. five countries – us, japan, germany, france and uk – account for 75 percent of r&d spending in the world in 2005 (oecd, 2008). studies have shown that intangible capital is positively related to stock market capitalization and venture capital growth (ark et al., 2009). 1.1 problem statement there is scarcity of research on advertising and its effects on the macroeconomy in developing economies such as that of nigeria. this paper tries to fill the gap in the literature that exists related to empirical works on effects of aggregate advertising expenditure on macroeconomics variables in nigeria. the aim of the paper is, therefore, to provide empirical evidence that help guide businesses and policy makers in nigeria and around the world regarding nigerian advertising industry. the paper explores how aggregate advertising in nigerian economy is related to macroeconomics variables such as gross national product (gdp), aggregate consumption, foreign direct investment (fdi), inflation, savings, and stock market capitalization. advertising expenditure which is here taken to mean aggregate advertising is defined following molinari & turino (2009) as the total spending of domestic and foreign firms that advertised their products in nigeria. the source of data used for this purpose is annual advertising expenditure generated by media reach (in their annual media factsnigeria). media reach started generating annual advertising expenditure in nigeria from 2001. the methodology used for computation is correlation analysis and multiple regressions. 2. literature review 2.1 theoretical literature all things being equal, the growth rate of advertising in developing countries should be higher than in developed countries; just like with the rate of economic growth among economies. some academics proposed a hypothesis that the rate of advertising in emerging economies should be higher relative to those in developed economies due to the fact that advertisers’ offerings to the buying populace in the developing economies are new; thus, marketers are expected to disseminate more information (kshetri et al., 2007). therefore, implying a higher advertising spending-sales ratio in developing countries than in developed ones, advertising budgets in the last decades has been drawn up in billions of us dollars for big multinationals. firms take various decision as far as advertising expenditure is concerned. they can decide to sell lower quality products at a lower price with higher advertising, or decide to offer a higher quality product at a higher price with lower advertising (feichtinger et al., 1994). advertising generally is theorized to favor creating imperfect competition in a particular niche market. but, in some industries, instead of supporting concentration of market power in the advertising firm, advertising is theorized to be pro-competition, i.e. enhancing competition in the industry (bearne, 1996; bagwell, 2007). the extensive economic literature accumulated http://www.virtual-economics.eu/ 84 www.virtual-economics.eu issn 2657-4047 (online) shafiu ibrahim abdullahi and shuaibu mukhtar virtual economics, vol. 3, no. 3, 2020 over centuries has not much to say regarding advertising as an important driver of macroeconomic variables. instead, the focus has been on the market structure, investment, business cycle, research and development (r&d), economic growth, finance, international trade, to mention just a few of the comprehensive areas of economics (stigler, 1961; nayaradou, 2006; bagwell, 2007). even within the field of advertising the focus has been on the micro analysis rather than the macro analysis. nevertheless, there is a vast literature on advertising economics; for survey of literature see feichtinger et al. (1994), bearne (1996), and bagwell (2007). bagwell’s (2007) survey is the most comprehensive. apart from economists, other researchers interested in advertising include management scholars, media people, and psychologists. at the level of consumers, who are the target of advertisements produced daily, the education level and religious belief, among other variables, were observed as having influence on advertising messages targeted at consumers (abdullahi, 2018). galbraith (1967, 1969) argued that advertising is an important instrument in raising national consumption level, which, in turn, helped boost the economic growth. however,, he was also critical of the wasteful nature of advertising and its effects on consumerism. traditionally, galbraith had different opinions on various aspects of economics, that is why he was viewed as some kind of a rebel. theoretically, advertising only affects consumption, with advertising not having much impact on investment; whereas investment represents the alternative option for the consumer who does not want to consume (molinari & turino, 2009). there is a hypothesis in the literature that considers advertising as cyclically moving together with the economy. thus, during recession the volume of advertising goes down, while in period of boom the advertising volume increases. there also exists another hypothesis that sees advertising as anticyclical. according to hall (2014), advertising should be countercyclical, rising during recession and falling during the period of growth. it is argued so because firms need to advertise aggressively during a slump period in order to boost the sales growth. but, the reality, according to hall’s findings, is that advertising is cyclical. for example, those who consider advertising as investment argue that just like investment that is cyclical and depreciative, advertising is also cyclical and has higher depreciation rate than tangible investment (hall, 2014). thus, scholars knowing the matter favor advertising as being cyclical rather than anti-cyclical. the advertising industry’s actors also seem to have the same viewpoint. foreign direct investment (fdi) is linked with an advertising increase in the receiving country, as multinational corporations investing in the receiving country build their marketing and advertising activities (kshetri et al., 2007). hence, based on this, fdi should be positively related to advertising. yet this view, just like most matters in advertising, is not universally held. 2.2 empirical literature the economic growth goes hand in hand with advertising expenditure, which, according to study by (wurff et al., 2008; molinari & turino, 2009), is more pronounced in the case of advertising spending in newspapers. according to picard (2001), the print media are more affected by recession than the broadcast media in the ratio of 4 to 1. bughin & spittaels (2012) found that advertising has fueled, on average, about 15 percent of gdp growth for the major http://www.virtual-economics.eu/ 85 www.virtual-economics.eu issn 2657-4047 (online) shafiu ibrahim abdullahi and shuaibu mukhtar virtual economics, vol. 3, no. 3, 2020 g20 economies for over a decade. rehme & weisser (2007) found the effect of advertising on consumption to be positive in the short run but negative in the long run. this means the advertising impact is immediate and does not last. this is consistent with the human memory, which is short. kshetri et al. (2007) found that advertising spending in the economy is driven by the income level and fdi inflow. in their study on relationship between aggregate advertising and aggregate consumption spending, ashley et al. (1980) observed that advertising did not cause consumption; on the other way round, they found some evidence suggesting that consumption might cause advertising. another study (rehme & weisser, 2007) found that advertising did not granger-cause growth but granger-caused consumption, which, in turn, granger-caused the gdp growth. so, an advertising effect on the economic growth is through consumption. using a general equilibrium context, molinari & turino (2009) found the impact of advertising on consumption to be very strong. molinari & turino (2006) calculated that advertising expenditures were positively correlated to both consumption and investment, and they were more volatile than consumption but less than investment and durable consumption. studying the uk advertising industry, sturgess (1982) found that the results of his analysis did not support the hypothesis that total advertising expenditures altered aggregate consumer behavior. he tested causality using data covering the period from 1969 to 1980. empirical works (molinari & turino, 2006; molinari & turino, 2009; bughin & spittaels, 2012) show positive correlation between advertising and the economic growth, thus, further supporting the argument that advertising is pro-cyclical. picard (2001) also found out that advertising expenditure declined during the time of recession by an average of 5% when there is decline of 1%. empirical literature on advertising has largely remained inconclusive and controversial (bagwell, 2007; molinari & turino, 2006). for example, nayaradou (2006) in his phd thesis on advertising and economic growth found a positive correlation between the advertising investment rate and productive efficiency (which is by itself an original indicator of the economic growth efficiency). the greater is the increase in advertising investment rate, the greater is the increase in productive efficiency (and vice versa). however, this is not to maintain that advertising directly causes the economic growth; it is just a correlation which may be a result of boom in investments or consumption in those sectors. thus, this is short of providing a causality direction. yet in his conclusion nayaradou (2006) observed that an advertising effect on the growth was through a channel of stimulating consumption, innovation and competition. chen & waters (2017) found that advertising expenditures were directly related to profits for industries with significant advertising expenditures. bughin & spittaels (2012) also found that advertising (especially digital advertising) improves the company performance. other studies like that of metwally (1975) on advertising expenditures of australian firms revealed its contribution to profit to be inconclusive. joshi & hanssens (2009) empirically tested an effect of advertising on the firm’s own market capitalization in the long run. their findings showed its effect was positive on the firm’s capitalization and might have a negative impact on valuating a competitor of a comparable size. martínez-fernández et al. (2014) used a cointegration analysis to measure effects of advertising investment on macroeconomic variables such as gdp, the national income, http://www.virtual-economics.eu/ 86 www.virtual-economics.eu issn 2657-4047 (online) shafiu ibrahim abdullahi and shuaibu mukhtar virtual economics, vol. 3, no. 3, 2020 savings, consumption, and fixed capital formation in spain. their findings showed the so-called galbraith’s hypothesis did not work in a spanish case. using the data on the us economy, molinari & turino (2006) found that the result of their findings confirmed the galbraith’s conjecture that advertising affects not only the total amount of consumption expenditures but also the output composition. the scholars also observed that advertising resulted in inducing a strong substitution effect between consumption and leisure. chowdhury (1994) reinvestigates the relationship between advertising expenditures and macro-variables using the aggregate data from the united kingdom. adopting cointegration and a causality approach his analysis fails to show any meaningful relationship between advertising expenditure and the level of the national income, disposable income, and personal consumption expenditures. yet, there was only found a strong uni-directional causality existing from advertising activity to unemployment rate. in their study on advertising using a dynamic stochastic general equilibrium (dsge) model, molinari & turino (2006) observed that advertising expenditures have non-negligible effects on the aggregate economy in the long run and short run. the study by pesavento & marques (2016) in brazil showed that inflation had negative impacts on advertising expenditure. while empirical evidence of the role of advertising in deterring new competitors from entering a market has been mixed, ‘the appropriate interpretation of advertising–entry relationship is subtle and seems to vary across industries’ (bagwell, 2007). regarding the advertising-price relationship, bagwell’s (2007) survey also found the evidence to be mixed; and also inconclusive in case of the advertising-quality relationship. 3. data and methodology 3.1 data two sets of data informed this study: the first set used to analyze our multiple regression model comprises the quarterly data of advertising revenue, consumption, gdp and inflation from 2010 to 2018. the second set encompasses the annual data of advertising revenue, consumption, foreign direct investment, savings, stock market capitalization, gdp, and inflation from 2001 to 2017. the second set of data was used to make correlation analysis of the variables in the study. the data for the study were selected based on their relevance to the advertising industry and their significance as major variables determining what happens in the wider economy. the study period covered the most recent time for which the annual advertising expenditure data in nigeria is available. the data for a longer period is not available, which is the reason why the study is exploratory in its nature. it also explains the choice of methods for analysis. the study, among others things, attempts to find out the dynamic regression and cross correlation among the variables studied. the data was sourced from media reach (annual media facts) for aggregate advertising expenditure and the nigerian bureau of statistics (nbs) and index mundi (www.indexmundi.com) for macroeconomic variables data. statistical analysis was adopted to explain individual variables and how they relate with one another. 3.2 multiple regression analysis http://www.virtual-economics.eu/ 87 www.virtual-economics.eu issn 2657-4047 (online) shafiu ibrahim abdullahi and shuaibu mukhtar virtual economics, vol. 3, no. 3, 2020 a multiple regressions model of analysis is employed in testing the relationship between the variables in the study. the model takes quarterly advertising expenditure in the economy as dependent on consumption, gross domestic products and inflation. the estimation method that is most commonly used with regression models is that of least squares. it is derived by using the method of moments, which is a very general principle of estimation that has many applications in econometrics (davidson & mackinnon, 1999). generally, regression analysis has remained the most commonly used method in estimating econometric relationship. the model: 𝑎𝑑𝑒𝑥𝑝 = 𝛽0 + 𝛽1𝑐𝑠𝑚 + 𝛽2𝑔𝑑𝑝 + 𝛽3𝑖𝑛𝑓 + 𝜇 (1) where adexp is annual advertising expenditure; csm is aggregate consumption; gdp is gross domestic products; inf is inflation; 𝛽 is parameters; 𝜇 is error term. 3.3 correlation correlation analysis is employed to find out the relationship between advertising expenditure and respective variables in the study. according to zaman (1996), elementary graphical and exploratory data analysis often produces good results which can be supported by the advanced method of data analysis. correlation is often used to suggest hypotheses or to confirm those previously held suspicious (pindyck & rubinfeld, 1998). the correlations here are, thus, computed to measure the strength of association among our sampled variables. 4. results and discussions 4.1 multiple regressions the multiple regressions analysis shows that there is a negative and statistically significant relationship between quarterly advertising expenditure and consumption. this may be a result of many factors, one of which includes the fact that organization that spends hardly on advertising takes into consideration quarterly consumption spending, their eyes are on the annual spending. second, an increase in consumption may lead to advertisers’ being satisfied with their advertising level, and thus, to refusing to increase the level of advertising spending. third, the nature of the consumption expenditure is connected to gdp (calculated by expenditure), which comprises different types of consumption expenditures including those that are not directly influenced by advertising. http://www.virtual-economics.eu/ 88 www.virtual-economics.eu issn 2657-4047 (online) shafiu ibrahim abdullahi and shuaibu mukhtar virtual economics, vol. 3, no. 3, 2020 figure 1. the result of multiple regressions source: developed by the authors. the fact that consumption spending is a subset of gdp may have brought about the problem of multicollinearity in the analysis. this has to be noted in considering the result of the analysis. multicollinearity is usually a problem in most regression analyses, but this does not mean that the entire result is not blind. the main effect of the problem is in making the result less efficient. the fact that we have no choice over the data used for the analysis makes the problem inevitable. besides, the sign of the consumption coefficient is statistically significant. see gujarati et al. (2012) for a detail analysis of the phenomenon of multicollinearity. for the other variables, advertising expenditure is positively related to gdp; this result was also predicted by the theory. this means that an increase in gdp leads to an increase in advertising expenditure and vice versa. the result also shows that the influence of inflation on advertising expenditure is not significant. the model has significant predictive capacity with an adjusted r of 0.98. 4.2 results of correlation analysis 1 advertising-consumption: the level of correlation between advertising and consumption is strong at 0.88. this means that higher advertising may be responsible for higher consumption and/or the other way round; that is higher consumption is responsible for higher advertising. they might be linked through the higher gdp that both of them are highly correlated. thus, both advertising practitioners, businesses and government must watch movements in consumption as a good indicator of future prospects of the advertising industry when they are planning for their businesses. higher consumption expenditure in the economy is a good indicator of time to start advertising by firms and other agencies. while, lower consumption expenditure means it is a poor time to advertise to the consuming public as they have lower http://www.virtual-economics.eu/ 89 www.virtual-economics.eu issn 2657-4047 (online) shafiu ibrahim abdullahi and shuaibu mukhtar virtual economics, vol. 3, no. 3, 2020 propensity to consume. the higher level of advertising may also have the effect of making people to consume more, hence the high positive correlation between advertising expenditure and consumption. the differences in the nature of data used for multiple regression analysis may have explained why the result differs from the result here. table 1. results of correlation analysis covariance analysis: ordinary date: 26/05/20 time: 15:17 sample: 2001 2017 included observations: 17 correlation t-statistic probability adv csm fdi gdp inf nse sav adv 1.000000 ---- ---- csm 0.881115 1.000000 7.216165 ---- 0.0000 ---- fdi 0.644370 0.322587 1.000000 3.263491 1.319937 ---- 0.0052 0.2066 ---- gdp 0.903657 0.970481 0.398200 1.000000 8.172306 15.58455 1.681264 ---- 0.0000 0.0000 0.1134 ---- inf -0.295219 -0.290030 -0.209817 -0.364287 1.000000 -1.196716 -1.173733 -0.831119 -1.514975 ---- 0.2500 0.2588 0.4189 0.1506 ---- nse 0.647389 0.618205 0.553819 0.675920 -0.630823 1.000000 3.289765 3.046112 2.576070 3.552126 -3.148708 ---- 0.0050 0.0082 0.0211 0.0029 0.0066 ---- sav 0.783158 0.768614 0.464762 0.892569 -0.371169 0.615658 1.000000 4.877855 4.653376 2.032915 7.666491 -1.548122 3.025880 ---- 0.0002 0.0003 0.0602 0.0000 0.1424 0.0085 ---- source: developed by the authors. 2 advertising-gdp: advertising and gdp have the strongest correlation of any two variables in the study with correlation of 0.9 to gdp. this gives credence to previous studies that found strong relationship between advertising and gdp in other economies around the world. thus, during the periods of strong rally in the economy, advertising tends to grow with the economy, and during periods of recession or slowdowns, the advertising level declines. advertising also causes consumers to purchase more goods and services helping the economy to continue growing. so, media agencies look at the growth in advertising by businesses and government as a good sign of time when advertising revenue starts coming in. during the economic slowdown, just like other businesses, media companies strategize and tighten up as a sign of more difficult time to come. advertising has a positive effect on economic growth; and economic growth also influences advertising positively. http://www.virtual-economics.eu/ 90 www.virtual-economics.eu issn 2657-4047 (online) shafiu ibrahim abdullahi and shuaibu mukhtar virtual economics, vol. 3, no. 3, 2020 3 advertising-inflation: advertising has a negative, but statistically insignificant, relationship with inflation. a previous study (pesavento & marques, 2016) showed that advertising has a negative relationship with inflation in brazil. 4 advertising-savings: savings is another variable that has good correlation with advertising at 0.78. this may point to the fact that companies and individuals save when they have surpluses above their budgeted consumption expenditure. it, therefore, serves as a good indicator of the economy’s performance. savings can also serve as a source of money for financing advertising expenditure for firms and households. though, this may only happen in rare occasions when advertising is urgent or is demanded by necessity. savings relation to investment may also help in explaining these relationships. 5 advertising-fdi-stock market capitalization: foreign direct investment (fdi) and stock market capitalization have almost identical correlation with advertising at 0.644 and 0.647, respectively. this is due to the fact that stock market is one of the main corridors through which foreign investments come into the nigerian economy. they also serve as major indicators of the economy’s performance. multinational corporations investing in nigeria build their marketing and advertising activities during the period of rising advertising expenditure. thus, based on this, fdi and stock market capitalization is positively related to advertising. high fdi and capitalization also mean that nigeria-based firms and their foreign collaborators have the surplus capacity and the business motivation to advertise. the reverse is also the case where lower fdi and capitalization usher in a lower business activity and a desire to lower expenditures such as that of advertising. some fdi are directed towards marketing and advertising industry, thus, helping the industry development. 4.3 implications of the study macroeconomic variables have an important role to play in shaping the state of advertising industry. it acts as an important barometer of the industry performance. the performance of these variables heralds the coming of good things for the advertising sector, while a poor performance by the same variables heralds the difficult times ahead for the sector. previous studies such as lee et al. (2011) showed that advertisers (in financial services industry) increased the level of informative advertisement after financial/economic crisis in order to boost their market appeal, but the increase was at a declining rate when compared to the period of an economic boom. this indirectly supports the finding of this paper and previous works on this topic that advertising is countercyclical. managers and advertising practitioners should pay more attention to macroeconomic variables rather than to the level of attention they are giving to these variables at the moment, because their successes and failures depend on them. over the years, the nigerian advertising industry has grown in terms of the market size and employment generation. the fact that the industry is sensitive to happenings in the economy has implications on the economic lives of all the major stakeholders in the industry who include workers, investors, advertising public and revenue collection agencies. 5. conclusions http://www.virtual-economics.eu/ 91 www.virtual-economics.eu issn 2657-4047 (online) shafiu ibrahim abdullahi and shuaibu mukhtar virtual economics, vol. 3, no. 3, 2020 globally, advertising is a billions-of-dollars industry that contributed to creating jobs and national income. this paper has demonstrated links between some important macroeconomics variables and advertising expenditure in nigeria. this further debunks the view that advertising has little to say regarding policy-making by governments at various levels. the study is unique due to the types of variables involved and the scarcity of this type of works on the nigerian advertising market. advertising is sometimes viewed as of concern to only business units and as not worth researching at the macroeconomic level. studies of this nature have mostly been conducted on advanced economies’ advertising industries. the general lackluster attitude toward advertising shown by the government should stop. advertising is a money-spinner at the heart of success of the internet giants such as facebook, google and yahoo. thus, no any serious government around the world will leave the industry on its own in terms of coopting it into a government policy-making framework. one drawback of this research is in data generation. there is scarcity of long-term time series data for this kind of study in a developing economy like that of nigeria. only availability of data going back into years and/or availability of high frequency data will make it possible to conduct a rigorous analysis enabled by modern econometric packages. thus, this research will remain an exploratory study acting as a guide for business and decision makers. references abdullahi, s. i. 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(1996). statistical foundations for econometric techniques. oxford: academic press. http://www.virtual-economics.eu/ https://doi.org/10.1080/08997760701806827 кwilinski alex 7 www.virtual-economics.eu issn 2657-4047(online) sotiris folinas, marie-noëlle duquenne, and theodore metaxas virtual economics, vol. 3, no. 3, 2020 2020 volume 3 number 3 (july) problems and opportunities in the hospitality industry in a masked and rubber-gloved world sotiris folinas, marie-noëlle duquenne, and theodore metaxas abstract. as the global tourism industry is under sway of the novel coronavirus, and the world still remains with a limited medical capacity to threat the pandemic, with no vaccine and with its only weapon of precautionary measures, masks, gloves and lockdown, a part of hospitality industry develops new stratagems and applies new tactics to survive the upcoming financial debacle. the almost worldwide lockdown, the brutal impact of mass cancelations caused by the virus spread, and the people's significantly reduced willingness to travel produce major upheavals in the tourism economy. the purpose of this study is to systematize the problems and opportunities in the hospitality industry in a pandemic. for this study there has been applied the secondary research methodology with several pieces of literature such as scientific journal articles, preprint papers, government documents, data from global organizations and mass media data etc., but no primary research was conducted. as the phenomenon is still ongoing, there is not yet the significant number of published papers about the opportunities in the hospitality sector. the main findings of the present study are demonstrating that, although this situation makes tourism highly vulnerable, the sector is also in a unique position to contribute to broader and just recovery plans and actions. significant conclusions are the vulnerability of the travel sector and travel restrictions’ effects on hospitality industry, the appearance of a new form of hotel clients ‘quarantine guests’, and the need of new survival strategies on hotel industry based on virtualization and domestication. keywords: coronavirus, covid-19, problems, opportunities, hospitality industry, global tourism, economic impact jel classification: z32 http://www.virtual-economics.eu/ 8 www.virtual-economics.eu issn 2657-4047(online) sotiris folinas, marie-noëlle duquenne, and theodore metaxas virtual economics, vol. 3, no. 3, 2020 authors: sotiris folinas* department of planning and regional development, university of thessaly, volos, greece e-mail: sfolinas@uth.gr; *corresponding author https://orcid.org/0000-0002-1791-0305 marie-noëlle duquenne department of planning and regional development, university of thessaly, volos, greece e-mail: mdyken@uth.gr https://orcid.org/0000-0002-3189-5658 theodore metaxas department of economics, university of thessaly, volos, greece e-mail: metaxas@econ.uth.gr https://orcid.org/0000-0002-6781-1401 citation: folinas, s., duquenne, m.n., & metaxas, t. (2020). problems and opportunities in the hospitality industry in a masked and rubber-gloved world. virtual economics, 3(3), 7-24. https://doi.org/10.34021/ve.2020.03.03(1) received: march 9, 2020. revised: june 3, 2020. accepted: july 6, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:sfolinas@uth.gr https://orcid.org/0000-0002-1791-0305 mailto:mdyken@uth.gr https://orcid.org/0000-0002-3189-5658 mailto:metaxas@econ.uth.gr https://orcid.org/0000-0002-6781-1401 https://doi.org/10.34021/ve.2020.03.03(1) https://creativecommons.org/licenses/by/4.0/ 9 www.virtual-economics.eu issn 2657-4047(online) sotiris folinas, marie-noëlle duquenne, and theodore metaxas virtual economics, vol. 3, no. 3, 2020 1. introduction the world health organization (who) announced in early january 2020 a novel coronavirus to be the cause of pneumonia cases whose cause was unclear in prc. the infection came to be known as a coronavirus disease (covid-19) caused by severe acute respiratory syndrome coronavirus 2 (sars-cov-2) (correa-martínez et al., 2020). as coronavirus spread around the world, europe shortly became the cynosure of the pandemic, which has since been overtaken by the united states (wen et al., 2020). the pandemic’s spread threatens to a great extent the hospitality sector (yang et al., 2020) given its reliance on human mobility (domínguez-mujica et al., 2011; lamsfus et al., 2015). the consequences of the novel coronavirus for the economy are the most disastrous in comparison with any other crisis in the recent history (gretzel et al., 2020; hall et al., 2020). the response to covid-19-related crisis events provides insights into opportunities to challenge and make adjustments to the contemporaneous global economic conditions (prideaux, 2020). in the entire human history, emergencies and disasters have been essential to societies’ process and development (mishkin, 1992). so, in particular, diseases and pandemics have diachronically helped advance health-care systems, wars and conflicts have fuelled technological innovations and the global financial crisis helped advance tech companies such as ‘airbnb’ (oskam & boswijk, 2016; aznar et al., 2017) or ‘uber’ (kim et al., 2018). therefore, the covid-19 pandemic, without doubt, will not be an exception; entrepreneurs and tourism practitioners can be expected to rise to the challenge. 2. research methodology to meet the objective this study follows secondary research methodology approach. as the phenomenon of novel coronavirus spread is still in progress, there are not yet many published articles demonstrating a full range of both problems and opportunities in hospitality sector in the time of covid-19 outbreak. criteria for selecting data that come from various sources, such as scientific journals, preprints, governmental and official authorities’ announcements, online mass media and international organizations intelligence are the validity of the source, authors’ expertise and the significance of information. 3. the effects of the pandemic on the global economy as the novel coronavirus declared a pandemic outbreak, stocks entered the bear market in january 2020, but that decline did not last long and losses were quickly compensated. january’s and february’s declines were, generally, in the asian markets, especially in china. despite the strict measures taken into account in china, it was impossible to prevent the global spread of virus, so the stock markets at the global level collapsed. the stock markets further declined when the world health organization announced coronavirus as a global pandemic on january 30, 2020, and a public health emergency is of international concern (kumar, 2020). from 1 january to 1 april, msci world index -25%, msci emerging markets index -26%, msci europe index -27% and g7 index -25% depreciated (şenol & zeren, 2020). in early march of 2020, the brutal drawdown in global financial markets probably indicates that the global economy is on a path to recession (carlsson-szlezak et al., 2020). the pandemic has also led http://www.virtual-economics.eu/ 10 www.virtual-economics.eu issn 2657-4047(online) sotiris folinas, marie-noëlle duquenne, and theodore metaxas virtual economics, vol. 3, no. 3, 2020 to increases in stock-price volatility, decreases in nominal interest rates, and leads to contractions of real economic activity, as reflected in the real gdp (barro et al., 2020). this economic downturn does not seem to be avoided, as even the crash of oil prices clearly shows it (albulescu, 2020). several countries are facing a slowdown because of the integrated international supply chain and prices for oil, metals or other materials have also fallen on expectations of lower demand. even such sectors as technology and the global fashion industry feel the impacts (maffioli, 2020). the negative effects of covid-19 have also been observed in e-commerce sector and business travel (hasanat et al., 2020). furthermore, according to fernandes (2020), comparisons of the covid-19 pandemic with previous global crises, like the 2008 financial crisis, are not possible, because now the planet is facing a number of new challenges, which prevent simple comparisons with the past, such as: a global spread of the phenomenon, the fact that it does not focus on low/middle income countries, the fact that the word is much more integrated, interest rates are not in historical lows, the fact that the current crisis is generating spillover effects throughout supply chains, and simultaneous destruction of demand and supply. figure 1. implied volatility given by the vix index for the 16th march last thirty years (19912020) source: cboe (2020). the implied volatility of equity markets is often used as an indicator of how risky the current environment is, and how uncertain the future is. for instance, the vix index is commonly referred to as the “fear index.” it is based on the traded prices of options on the s&p 500 index http://www.virtual-economics.eu/ 11 www.virtual-economics.eu issn 2657-4047(online) sotiris folinas, marie-noëlle duquenne, and theodore metaxas virtual economics, vol. 3, no. 3, 2020 and represents the market expectation of stock volatility over the next 30 days (fernandes, 2020). as figure 1 shows, the vix long-term average is approximately 20 per cent. however, it can clearly be seen that it rose significantly in the aftermath of the 2007/2008 financial crisis, thus, reflecting the investors’ uncertainty about the future. today, it is actually above those levels. all previous crises have been triggered by different events such as program trading collapse (bossomaier et al., 2018), sovereign debt crisis (lane, 2012; arghyrou & kontonikas, 2012; beirne & fratzscher, 2013), banking crisis (englund, 1999; chava & purnanandam, 2012), ltcm default (jorion, 2000; kabir & hassan, 2005; dungey et al., 2006), dot-com bubble (goodnight & green, 2010), political events, wars, etc., but the difference is that, in all those cases, central banks had at their disposal tools to prevent further damages. none of the previous examples was in the periods where the starting point of interest rates was so low, and, in some cases, negative. this could raise concern in the markets that there is little room for an effective policy response (fernandes, 2020). all these considered, it may be said that covid-19 triggered a deep crisis in almost all the economies of the planet, and it is set to result in, perhaps, the worst recession since the 1920 great depression. mobility and spending reduced drastically at the global level, and experts predict a slow economic recovery. 3.1. consequences of the novel coronavirus for the global tourism industry a rapid spread of the novel coronavirus (2019-ncov) since the first case that occurred in december 2019 in wuhan, mainland china (ayittei et al., 2020; hoque et al., 2020), led to a significant reduction in almost all global tourism (folinas& metaxas, 2020; estrada et al., 2020). with a lack of proper vaccines against the coronavirus and a limited medical capacity to treat the disease (gössling et al., 2020), the planet seems to face an economic shock by declining export and tourism revenue in a large scale due to restricted export policies and travel bans. tourism, the world's largest service sector industry (lew, 2011; metaxas &folinas, 2016), has been badly battered, as summer vacations seem to be off the table this year. covid19 has led to some changes in the touristic consumer behaviors and also has generated risk, uncertainty and fear (aydın & doğan, 2020). the travel and tourism industry came to a complete halt (kumar, 2020), and the spread of the novel coronavirus demonstrates once again the tourism sector vulnerability to various types of crises, such as epidemics, terror, natural disasters, economic or political crises (yozcu & cetin, 2019). in the opinion of chang et al. (2020), the coronavirus has changed the world forever in every imaginable respect and has impacted heavily on the worldwide travel-tourism demand and the hospitality industry, one of the world’s largest employers. correspondingly, the world is now experiencing a temporary de-globalization, and by virtue of the heavy travel restrictions and the suspension of international travel, geographical barriers between places have re-emerged, relative distances have increased and remote places have again become truly remote (niewiadomski, 2020). http://www.virtual-economics.eu/ 12 www.virtual-economics.eu issn 2657-4047(online) sotiris folinas, marie-noëlle duquenne, and theodore metaxas virtual economics, vol. 3, no. 3, 2020 3.2. the demolition of the global air travel industry by the coronavirus several researchers agree that air connectivity is one of the outstanding factors for the tourism development in the global level (ivy et al., 1995; bannò & redondi, 2014). in addition, the connectivity brought by air transport is indispensable for the conveyance of people and goods, especially in places where surface transport networks are underdeveloped (eric et al., 2020). regarding the significance of air connectivity to tourism development, van houts (1984) argues that while mass tourism was possible by other means of transport, the great step forward was achieved by developments in commercial aviation. in other words, international approachability by air is required for developing any tourism destination and for integrating into the worldwide economy. more than fifty percent of all tourists arrive to their destinations by air and with their spending contribute to a 285 million jobs in global air transportation industry (eric et al., 2020). as the worldwide economy is becoming more and more intertwined, the aviation industry is one of the fastest transportation sectors. commercial airlines transported more than 4.5 billion passengers in 2019 and were expected to generate more than 580 billion u.s. dollars in global revenue in 2020. air transportation also plays a significant role in tourism, contributing to economic growth, especially in developing countries. the number of global tourist arrivals escalated from 1.32 billion in 2017 to 1.4 billion in 2018; more than a half of tourists chose to reach their destination by air (statista, 2020). the mobility trend at the global level has been rising over the last ten years at a pace that is faster than the global world population growth (recchi et al., 2019). however, air traffic flows have been shaped at the regional and national scale by shocks due to economic crises, terrorism or political instability (gabrielli et al., 2019). in addition, the aviation industry has shown strong dependency on the past pandemic outbreaks, such as 2003 sars or 2015 mers (iacus et al., 2020), with effects that had repercussions at the regional and international scale. since the coronavirus global outbreak, the air industry is undergoing the worst crisis in its history. the impact of this new crisis is more serious than the 9/11 terrorist attacks, the 2008 financial crash and virtually every other history-altering event of the jet age combined (business insider, 2020a). as reported by the ibis world market research, during the coronavirus crisis, the airline revenues lose about $1.6 billion per day, while the aviation industry is typically worth around $825 billion per year in the worldwide economy (condé nast traveler, 2020). while landed the air industry cannot generate cash, cannot repay debts and cannot remunerate its own equity (european investment bank, 2020). despite the $58 billion bailout that the u.s. president signed for the aviation industry, capa centre for aviation alerts that the majority of global airlines are being threatened with bankruptcy due to the current pandemic (business insider, 2020b). since early february 2020, fifty-nine airline companies have limited or suspended flights to mainland china, and several other countries such as the united states, italy, russia and australia, have imposed travel restrictions, issued by governments (chinazzi et al., 2020). in the middle of april 2020, the region with the most drastic air traffic reduction globally was the http://www.virtual-economics.eu/ 13 www.virtual-economics.eu issn 2657-4047(online) sotiris folinas, marie-noëlle duquenne, and theodore metaxas virtual economics, vol. 3, no. 3, 2020 persian gulf. skies are usually congested with wide-body planes serving the three major hub airports there, which then connect to europe, asia, and australia. in recent weeks, emirates and etihad have grounded all aircraft, except for a few repatriation flights departing the united arab emirates. qatar continues to fly passengers, while some cargo plans also operate. according to worldaware (2020), the result is an almost-empty airspace, with fewer than fifty airplanes in the skies at any one time, that is, around 300 aircraft fewer compared with the previous year (condé nast traveler, 2020). figure 2. the worldwide revenue with passengers in air traffic in billions of u.s. dollars (2005 -2020) source: statista (2020). in the agreement with (oag, 2020), europe has seen the most extensive contraction of air services of any world region in the period of march-may 2020. while the european countries, including the united kingdom, france, ireland, spain and italy, are in the process of easing their lockdown conditions, there is a lot of caution and air travel, especially international air travel, continues to be widely restricted. the last week of may 2020, the number of scheduled flights operating was down by 68% compared to the same week of 2019. furthermore, a lot of countries continue to maintain restrictions on arrivals of air travelers, and also in many markets appear to have stabilized frequency reductions (oag, 2020). additionally, india, which was supposed to come out of lockdown in the last week of may, extended the lockdown for another fortnight, and this means that air industry will continue to be affected. http://www.virtual-economics.eu/ 14 www.virtual-economics.eu issn 2657-4047(online) sotiris folinas, marie-noëlle duquenne, and theodore metaxas virtual economics, vol. 3, no. 3, 2020 figure 3. the worldwide change in flights compared to 2019 (the week of 25th may 2020) source: oag (2020). table 1. the global scheduled flights change in january-may 2020 countries january february march april may 4 may 11 may 18 may 25 all 0.8% -8.6% -14.8% -64.5% -69.9% -68.4% -67.6% -68.6% spain -3.7% -1.8% -23.2% -94.0% -92.3% -92.1% -94.4% -94.5% hong kong -9.7% -46.5% -77.6% -93.5% -93.6% -89.7% -89.3% -89.1% germany -8.5% -6.9% -30.7% -92.9% -90.5% -91.2% -91.4% -92.1% singapore -0.1% -16.1% -43.1% -93.8% -97.0% -96.9% -95.7% -96.7% italy -3.3% -4.2% -48.0% -85.6% -78.1% -78.3% -84.2% -92.4% france -0.8% 0.4% -15.3% -90.6% -91.9% -91.1% -91.9% -92.1% the uk -3.8% -3.3% -22.8% -92.3% -92.5% -92.3% -93.9% -94.6% australia -3.5% -3.2% -5.7% -82.6% -83.0% -83.6% -84.0% -82.2% sweden -9.2% -5.6% -22.7% -87.0% -88.5% -88.5% -89.4% -87.9% the uae -1.9% -3.0% -23.1% -81.1% -78.1% -77.4% -78.8% -82.0% south korea 2.2% -11.6% -49.5% -56.7% -49.5% -50.7% -49.1% -48.7% the usa 1.7% 1.2% -2.2% -56.9% -74.5% -74.7% -73.5% -73.9% india 2.1% 6.3% 7.6% -83.3% -90.9% -66.8% -24.6% -44.9% china 4.3% -55.1% -40.2% -42.6% -32.0% -27.4% -28.8% -27.0% japan 2.4% -3.5% -16.5% -40.3% -47.0% -47.9% -44.9% -48.8% source: oag (2020). http://www.virtual-economics.eu/ 15 www.virtual-economics.eu issn 2657-4047(online) sotiris folinas, marie-noëlle duquenne, and theodore metaxas virtual economics, vol. 3, no. 3, 2020 figure 4. a comparison that shows the dramatic impact of the coronavirus lockdown on the flights across the european airspace. the data published by eurocontrol (2020) shows there was a fall of 88% on flights compared with 2019. source: eurocontrol (2020). the main conclusion that could be drawn is that the novel coronavirus’s rapid spread globally is forcing the aviation industry and air transport to survive in uncertainty. mass cancellations of flights around the world produced devastating financial losses. the situation is classified as an ‘extraordinary circumstance’ and it is beyond the air companies’ control. 4. predictions for the future of tourism in the post-coronavirus era a recent report suggests that self-isolation could lead to an increase in consumers’ searching their future holidays. a survey found that 55% of the us consumers, who usually travel five or more times per year, say they may or will likely purchase a future holiday while confined to their homes during the covid-19 outbreak, while for frequent business travelers, this figure rises to 61% (econsultancy, 2020). on the other hand, as specified by the managing director of hospitality and tourism international consulting (hti consulting), a possible timeline is between one and two years for the hospitality industry across africa and the middle east to reach pre-coronavirus levels (travel daily news, 2020). as long as the planet confronts the realities of the worldwide pandemic, there is an opportunity to rethink what tourism will look like for the decades ahead (brouder, 2020). as hospitality, travel and tourism industries work to recover from the coronavirus crisis, stakeholders’ decisions must be grounded on creditable scientific authentication. it is also significant to remember that covid-19 is not the first disaster of its kind to strike the tourism industry, as in 2003 sars brought similar effects (wen et al., 2020). a come-back to prepandemic growth patterns requires time and depends on the depth and extent of the recession sparked by the novel coronavirus (prideaux, 2020). http://www.virtual-economics.eu/ 16 www.virtual-economics.eu issn 2657-4047(online) sotiris folinas, marie-noëlle duquenne, and theodore metaxas virtual economics, vol. 3, no. 3, 2020 as businesses catalyze outstandingly both in helping society get through a financial crisis and in creating innovations that shape the society after an emergency, there arises a principal issue: how will the current crisis modify the future society? while it seems hard to predict the future, it is more feasible to develop understanding of what is ahead by analyzing current trends. there have already been observed considerable changes in business practices (delaporte & pena, 2020), and the new global norm is to work from home (dingel & neiman, 2020; gallacher & hossain, 2020). as maintained by vivekwadhwa (foreign policy, 2020) it is very possible that the next leap forward will come from the virtual reality, which is advancing at a breakneck speed. activities such as family vacations, business meetings, and leisure activities will increasingly move into the virtual world. in the past decades, e-tourism, as an area of scientific research, has evolved into a sizeable body of knowledge with the focus on theory and information technology development oriented towards the core issues in tourism (gretzel et al., 2020). in short, it can be argued that the coronavirus has accelerated technology trends almost in all the human activities. during the pandemic, technologies are playing an important role as they keep the society functional in times of quarantines and lockdowns. technological applications such as virtual reality could be significantly useful for promotion strategies of travel destinations after the travel restrictions period. 5. hotels’ new policies in crisis times the hospitality industry is facing an existential crisis, because of the coronavirus spread and the global lockdown. this pandemic creates panic among the public, which contributes to a decrement trend in the tourism industry (bakar & rosbi, 2020). as the coronavirus pandemic spreads around the world, many hotels are starting to advertise quarantine packages to guests (folinas& metaxas, 2020). lockdown (bakar & roshbi, 2020, sheresheva, 2020) as an extended practice adopted by a number of countries around the world produces the need to self-isolate for a lot of people. so, several hotels earn money by offering their rooms to people who want to self-isolate due to the spread of the pandemic (folinas & metaxas, 2020). although this situation makes tourism highly vulnerable, the sector is also in a unique position to contribute to broader and just recovery plans and actions. all over the world, tourism represents development opportunities, promotes solidarity and understanding beyond borders, while domestic tourism also helps to foster cohesion within nations (dunc, 2020). chains and boutique hotels alike are offering quarantine packages for those interested in selfisolation (boutique hotel news, 2020). thailand’s ‘a-one’ hotel group is one of the first to offer a self-isolation package within its doors. bangkok and pattaya hotels offer full board packages to thais or other residents seeking to isolate in their hotels, with the various towels, linens and other essential services handled separately by special staff. rates for these packages have been slashed by 20% as the hotel hopes to gain traffic during an industry wide downturn (chang et al., 2020; lapointe, 2020). with few people traveling right now, thailand’s a-one hotels group is employing a new tactic to attract bookings by offering a self-quarantine http://www.virtual-economics.eu/ 17 www.virtual-economics.eu issn 2657-4047(online) sotiris folinas, marie-noëlle duquenne, and theodore metaxas virtual economics, vol. 3, no. 3, 2020 package at its bangkok and pattaya hotels. these full-board packages are targeted at thais or residents who wish to isolate themselves for 14 days. meals are delivered to the rooms on trolleys, while dishes, cutlery and bed sheets used by guests in self-isolation will be separated for special handling. a special team will provide daily housekeeping services and help monitor the conditions of the guests under quarantine. should any of these guests become unwell or develop any coronavirus symptoms during their stay at the hotel, they will be immediately sent to the several hospitals located in the hotel’s vicinity, according to the company’s director. these packages are priced very competitively with rates slashed by 20% (skift, 2020). this risky strategy is a first reaction to the challenge that faces the global hospitality industry (the wall street journal, 2020). this policy seems to be followed by other hotel industry companies around the world; the dorsett chain of hotels, for example, is selling a two-week or 27-day quarantine package at nine locations, according to the wall street journal. guests must have their temperatures checked twice a day to see if they’re exhibiting symptoms of the virus, which include fever. they can order meals through online food delivery services or through the hotel’s concierge. some of hong kong’s high-end hotels are offering similar packages as well. the park lane hong kong has a 14-day package that runs for $2,525 and includes three meals a day. in singapore, some hotels are offering reduced rates to people who need to quarantine. the fairmont singapore has a two-week package with a daily rate of about half the hotel’s usual rate (the real deal, 2020). at the same time, asset world corp has announced the temporary closure of five hotels in bangkok from march 26 to april 15 to reduce the risk of spreading the covid19 disease. the five hotels closed are: bangkok marriott marquis queen's park hotel, doubletree by hilton sukhumvit bangkok hotel, le meridien bangkok hotel, the okura prestige hotel bangkok and the bangkok marriott hotel the surawongse (skift, 2020). in australia, the novotel sydney brighton beach (2020), a resort-style 4.5-star hotel, which belongs to accor hotels group, is offering an extended stay discount of 40% off the best available rate for bookings of 14 nights or more. the promotion comes with several perks, including a complimentary room upgrade, an all-inclusive room service package and complimentary wi-fi & parking (the points gay news, 2020). according to the hotel, selfisolating guests will be provided with fresh linens and amenities on request, delivered to their door, and left outside for collection, and also common areas of the hotel are frequently and thoroughly cleaned and disinfected to the most stringent standards, paying special attention to high touch-point areas. in switzerland, the ‘bijou hotel & resort’ made up of repurposed luxury apartments, advertises them as "quarantine apartments" on its covid-19 service page. furthermore, this hotel invites all healthcare workers fighting the coronavirus and need a break to stay at ‘le bijou’ free of charge (le bijou, 2020). this strategy could bring future benefits to the company, as the literature shows that relationship marketing, focused on transactional tactics, such as trips and holiday gifts, is possible to be a major instrument for hospitality enterprise development (khan & mccleary, 1996; kim et al., 2001; bowen & shoemaker, 2003). http://www.virtual-economics.eu/ 18 www.virtual-economics.eu issn 2657-4047(online) sotiris folinas, marie-noëlle duquenne, and theodore metaxas virtual economics, vol. 3, no. 3, 2020 in south africa, the national coronavirus command council has announced risk-adjusted strategy regulations effective from march 27, 2020. all domestic and international travel remains prohibited as well as interprovincial movement but in exceptional circumstances. all hotels and establishments remain closed. the only exception is about accommodating international tourists who remain in south africa, or providing accommodation for essential services people (official covid-19 recourse centre for south african tourism, 2020). the only chance to stay open for the hotels in south africa is to be appointed as quarantine facilities. these accommodations establishments must be approved by the department of health as appropriate. in greece, as well, despite the governmental decision ordering the temporary closure of the country’s hotels, those establishments which could offer accommodation to medical and healthcare personnel, armed forces, the eu officials, foreign students, impacted individuals, education staff, asylum seekers or refuges, were excluded from the ban. the hellenic chamber of hotels chose fifty among those that expressed interest (greek city times, 2020). thus, summarizing the above, it can be noted that even in very difficult times of travel restrictions and almost no tourism activity, some hospitality companies exploit the potential of the current situation adapting to a changing business environment, create and provide new packages for the new kinds of clients. 6. conclusions one of the vulnerabilities of the tourism industry is that it is built entirely around a discretionary commodity: the travel. travel restrictions are often the first action suggested as the most effectual way to diminish the spread of a transmittable disease or pandemic in cases of health emergencies. in consequence, in the case of covid-19 outbreak, the official rules and governmental restrictions that limit the worldwide travel, have brought catastrophic effects on the global tourism industry. in conclusion, the coronavirus has paralyzed the worldwide economic system. the global gtp growth was infected highly due to the almost general lockdown of the planet. airlines industry already feels the catastrophic effects of its diachronic enemy – the economic recession. tourism industry, which depends exceedingly on transport and mobility, may be considered as the ‘great patient of the pandemic’. tens of millions of employees have already faced or are facing losing jobs, and as reflected, the coronavirus-induced crisis will cast a long shadow over the hospitality sector. but even in these critical times, with upcoming crises in the fragile sector of tourism, some hotels succeed to drum up business, from the potential tourists’ current needs, and they promote new products like self-quarantine packages. thus ‘quarantined guests’ are a new type of hotel clients but only for the big hospitality companies which have the possibility to provide premium isolation with daily health-care monitoring. tour operators and hospitality sector stakeholders have to be specialized in smaller groups’ host. furthermore, hospitality managers and tourism sector practitioners must take steps to set up crisis management plans http://www.virtual-economics.eu/ 19 www.virtual-economics.eu issn 2657-4047(online) sotiris folinas, marie-noëlle duquenne, and theodore metaxas virtual economics, vol. 3, no. 3, 2020 which must provide survival strategies such as reduction of costs, virtualization, orderliness, domestication and integration. a lot of indicators show that global tourism activity is heading towards a change of paradigm, a new framework that is yet to be discovered, explored, and adapted. 7. acknowledgements i address my sincere thanks to marie-noëlle duquenne, a professor of 'statistical and econometric methods for spatial analysis' at the university of thessaly, for her patience, availability and all her wise advice, which have fueled my reflection, s.f. 8. formatting of funding sources the authors declare that they haven’t received any funding to support their research. 9. disclosure statement no potential conflict of interest was reported by the authors. references albulescu, c. 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(2019). a strategic approach to managing risk and crisis at tourist destinations. in n. kozak & m. kozak (eds.), tourist destination management (pp. 273-287). cham: springer. https://doi.org/10.1007/978-3-030-16981-7_16 http://www.virtual-economics.eu/ кwilinski alex 61 www.virtual-economics.eu issn 2657-4047 (online) amir azam virtual economics, vol. 3, no.2, 2020 2020 volume 3 number 2 (april) the comparative analysis of the industrial policy impact on export performance in the military and democratic regime of pakistan amir azam abstract. since independence, the economy has always suffered from the power struggle between democracy and autocracy, which significantly damaged the economy and gave birth to different economic issues, the export sector being one of the top most affected. once titled among asian tigers, the country’s export overseas yields even to bangladesh. the current study attempts to analyse the impact of industrial policy on export performance under democracy and autocracy. many authors and past studies have argued that pakistan lacks the long-term farsighted industrial policy. the paper considers the industrial policy instruments, import tariff, export subsidy, export rebate, r&d expenditures, industrial expenditures and export processing zone, while export sophistication, export diversification and export competitiveness are used as indicators of export performance from 1980 till 2018. the result of the study indicates that the democracy type of a regime promotes industrialization with expanding export base and competitiveness, while the autocratic type of a regime is helpful in producing sophisticated goods. the analysis is focused on the descriptive basis by comparing the changes and growth in democracy and autocracy, while the error correction model has been applied to see the adjustment of shocks and structural changes. export sophistication and export diversification show a significant convergent effect, while export competitiveness demonstrates a divergent relation with our independent variables. the findings suggest that it is of sheer necessary to have a long-term farsighted industrial policy under conditions of stability to attract more and more investment in the economy to sophisticate, diversify and promote competitiveness. keywords: industrial policy, export performance, democracy regime, autocracy regime jel classification: c82, f13, f68, h2, h5, l16, l52 author(s): amir azam pakistan institute of development economics (pide), islamabad, 44000, pakistan e-mail: amirazam_17@pide.edu.pk https://orcid.org/0000-0003-0757-7825 citation: azam, a. (2020). the comparative analysis of the industrial policy impact on export performance in the military and democratic regime of pakistan. virtual economics, 3(2), 61-76. https://doi.org/10.34021/ve.2020.03.02(4) received: january 6, 2020. revised: march 12, 2020. accepted: april 9, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://doi.org/10.34021/ve.2020.03.02(4) https://creativecommons.org/licenses/by/4.0/ 62 www.virtual-economics.eu issn 2657-4047 (online) amir azam virtual economics, vol. 3, no.2, 2020 1. introduction with an inherited state of few industrial sectors, the economy, once known as asian tiger, is now 26th largest in terms of purchasing power parity and 42nd (wits, 2018) in terms of nominal gdp in the world. pakistan started its journey in 1947, with only 9 industrial units, accounting now for more than 24% share in gdp. the economy has seen some golden and worst periods in its entire journey, and a lack of long term farsighted industrial policy is one of the main issues that has remained debatable for a long time (hayat, 1999). s. hussain and v. ahmed (2012) argue that the economy of pakistan has witnessed five different waves of significant industrial policies that varied from time to time depending on the emerging shocks and structural changes because since independence pakistan has always suffered from the struggle between democracy and autocracy. i. hussain (2009) states that there has always been a power battle between democratic and authoritarian rulers, which made the economy suffer and put direct and indirect pressure and shifts in macroeconomic variables. kanwal (2015) argues that it is this battle between regimes that promotes instability of the economic growth. since export is also one of the important factors and dimensions of the economic growth have also been affected severely, the economy has always suffered from trade deficit, except few years (nyambane, 2013) and relied on few products that contribute the most to the total exports (fatima & rehman, 2012). there is a contradiction in policy aims and objectives in authoritarian and democratic rule, which has significantly influenced the export performance. burki (2008) maintains that the power battle between democracy and autocracy have always inversely affected the export performance because after the power change the previous policies were abolished and new policies took time to launch, and when they finally started to bring outcomes, another disturbance took place, and the economy started its journey from scratch. in pakistan, the authoritarian government has always preferred to liberalise foreign trade, to cancel subsidies and rebates with a limited focus on r&d expenditures and industrial investment promotion (anjum & sgro, 2017), while in the opposite case, as hayat (1999) argues, the democratic rule in pakistan believes in restricting imports by imposing nominal tariff, providing subsidies to encourage investors to produce more efficiently and increasing r&d expenditures to promote innovations and development, with increasing the development and industrial expenditures. so, both types of government focused only on the issues and challenges to occur without focusing on the long-term policies. therefore, the economy unable to sophisticate and diversify is not competitive in the world market, and this made the economy suffer because pakistan’s export performance has remained unsatisfactory in last few decades (mahmood & ahmed, 2017). from the wits report (2018), pakistan's export share in the global market have declined from 0.18% in 1990 0.14% in 2017, while in the same period the other south asian economies’ share in the global market is increasing substantially, with india being able to increase its share from 0.61% to 1.66% and bangladesh export share increasing from 0.06 to 0.181% in the respective period. abbas (2015) concludes that pakistan is focusing on extending its exports but is unable to get good shares in the world market because of too many reasons such as too narrow export base, low diversification, primary and semi-manufactured goods, 63 www.virtual-economics.eu issn 2657-4047 (online) amir azam virtual economics, vol. 3, no.2, 2020 outdated technology, technical barriers, currency devaluation and the lack of a long term farsighted industrial policy. mahmood and ahmed (2017) conclude that the export performance of pakistan has the exports vulnerable to world shocks, and the constant power battle between democracy and autocracy has always encouraged this vulnerability. the industrial policy is of a paramount significance in promoting export performance. in this paper the authors try to answer the question how differently the industrial policy instruments affect the export performance under democratic and autocratic types of rule. 2. the literature review the question of which type of a regime is good for economic growth has always been debatable. many studies have produced different findings. some authors (tavares & wacziarg, 2001; knutsen, 2012; zouhaier & kefi, 2012; arif et al. 2012) argue that democracy plays a significant role in improving economic growth while others (zaouali & ouechtati, 2013; shabbir, 2017; robinson, 2006; drury et al., 2006; masaki & walle, 2014) were against democracy as, in their view, it encourages corruption, growth imbalance, nepotism which cause the economy to slow down, while autocracy is good for economic growth and development. export is an important factor of economic growth (saleem & sial, 2015), and export performance indicates the betterment of the export sector. there are many determinants of export performance such as real exchange rate, unit of the goods value, world production capability, nominal effective exchange rate, net national investment, gdp, and gross capital formation (gul & rehman, 2014). sousa et al. (2008) elaborate a brief discussion on export performance determinants and indicators, in which they state that export diversification and competitiveness reveal the overall direction of export performance (edward, 1993) and that any economy before looking towards diversification and competition looks towards export sophistication because it encourages the domestic economy to transform from low sophisticated goods to highly sophisticated. export sophistication explains the nature of exporting goods, how much they are sophisticated. weldemicael (2012) says that by measuring export sophistication we can easily make the choice of the production or shift in producing goods on the basis of their sophistication. edward (1993) maintains that newly-industrialised countries of east asia are able to make highly sophisticated goods and make the transition to capital-intensive goods. as far as export sophistication determinants are concerned, hausmann et al. (2007) argue that per capita income in purchasing power parity, fdi, export to gdp ratio, trade openness, human capital and share of manufacturing in total exports matter the most. according to khan and saqib (1993), there is a strong correlation between industrial policy instruments and export performance indicator, and empirical results confirm the presence of cointegration among exports and output growth, export growth performance and diversification and structural change in exports for pakistan over the period of 1973-1998. arslan and tatlıdil (2012) conducted a study on the determinants of export diversification around the world, which concludes that export concentration using gini coefficient as the dependent variable with trade openness, human capital, remoteness, terms of trade, import 64 www.virtual-economics.eu issn 2657-4047 (online) amir azam virtual economics, vol. 3, no.2, 2020 of technology, domestic credit and exchange rate volatility, among which exchange rate volatility plays an insignificant role, while other variables positively influence the dependent variable. regarding the importance of competitiveness, kharel (2016) emphasizes that competitiveness in the manufacturing sector and export diversification play a key role. the history witnessed that those economies that were competitive with their goods on the market managed to pass the way from being underdeveloped nations to newly industrialized countries because of their long term industrial policies and strategies. from the above studies, we can see that export performance is an important indicator of economic growth and economic development, and stability of the economy plays a major role in promoting better export performance. industrial policy, which sometimes correlates with trade policy, plays a significant role in promoting export performance. however, there have been made few contributions in the literature concerning the relations between the industrial policy and export performance, especially comparing the relations under different regimes. the current study tries to determine this relationship using simple econometrical tools and techniques both by checking the individual relationship impact and the impact by constructing an index that will denote the industrial policy running with the determinant of dependent variables. 3. research methodology to meet the objective set the current study follows two different approaches, i.e. descriptive statistics and econometrical tools and techniques. in descriptive statistics, we will rely on average growth and changes in the mentioned variables with graphical, diagrammatical and frequency distribution in the study period while in econometrical tools first, we will see the time series characteristic features of variables and an error correction model to find the speed of adjustment and long-term policy shocks. the econometrical specification and technique are explained below. 3.1. econometric technique as for the presence of unit root cause spurious regression, engle and granger (1987) state that trended time series data could create major problems in empirical estimation due to spurious regression and the estimated values are insignificant in reality, and the problem can be resolved by taking the difference of variables until the time series get stationary and then running the regression analysis. asteriou and hall (2007) argue that it is also not an ideal solution to the problem of spurious regression, rather it is not only difference of the error term in the estimation, but it also gives no long-run solution. for the general equation, the following relationship can be obtained through a simple regression model. (1) where yt denotes the dependent variable that in our study are export sophistication, export diversification and export competitiveness; 65 www.virtual-economics.eu issn 2657-4047 (online) amir azam virtual economics, vol. 3, no.2, 2020 xt shows determinants of the dependent variable; i.p represents the industrial policy instruments which in the case we are taking import tariff, export subsidy, industrial expenditures, rebate, export processing zones and research and development expenditures; denotes the error term. to avoid spurious regression, we will rely on the difference of both dependent and independent variables. (2) so, from the above equation a significant conclusion can be drawn because both variables now have been transferred into difference equation and make it stationary, through which we can draw short-run relationship. but we are not only interested in a short run relationship; we are also interested in a long run relationship through which we can forecast a long-run farsighted policy. since we pointed out that yt and xt are both first-order integrated and their combination gives i(0), then it means that our dependent and independent variables are co-integrated, thus in case of regression from equation 1 has now no more problem of spurious regression and now it provides us with a linear combination of dependent and independent variables. (3) here our error term connects dependent and independent variables in the long run. since yt, xt and i.p showed co-integration by definition εt is stationary at level; therefore, we can introduce an error correction model between dependent and independent variables. (4) equation 4 has now the advantage of both short-run and long-run information. in the given equation β1 and β2 shows the relationship between the dependent and independent variable in the short run while the parameter of (εt-1) shows the adjustment among the dependent and independent variables in the long run. since we are interested in seeing the impact of industrial policy on export performance comparing the impact of democracy and autocracy, therefore we will use two different options to see this impact. first, we will regress the overall variables and time period in second equations and by introducing another independent variable that will treat as a dummy, i.e. "1" for autocracy and "0" for democracy. this will help us to see the entire impact on export performance. in the second option we will separate the time period regime, i.e. from 1980-1988 & 1999-2008 showing the military regime and 1989-1998 & 2009-2018 as a democracy, and will run two different equations and compare the 66 www.virtual-economics.eu issn 2657-4047 (online) amir azam virtual economics, vol. 3, no.2, 2020 significance of variables in each type of a regime. so, the long-run elasticity among export sophistication, export diversification and export competitiveness and industrial policy instruments are captured by βs, αs and γs. 4. the data analysis 4.1. the descriptive analysis the current section analyses the descriptive features of variables in the respective regimes through graphical and diagrammatical representation of export performance and industrial policy instruments. there are many determinants of export performance, i.e. real exchange rate, a unit of the goods value, world production capability, nominal effective exchange rate, net national investment, gdp, and gross capital formation (gul & rehman, 2014). beleskaspasova (2014) elaborates a brief discussion on the determinants and indicators of export performance, in which she states that export diversification and competitiveness reveal the overall direction of export performance. so, we will use export sophistication, export diversification and export competitiveness as the determinants of export performance. the state bank of pakistan shows that pakistan’s export share in the global market has declined from 18% in 1991 to 0.14% in 2017, while in the same period the export performance of competing asian economies have shown a substantial increase, specifically the share of bangladesh in the world exports have increased from 0.06% to 0.19%, and that of india has jumped from 1.64% to 2.5% respectively in the same period. the overall exports of the economy have shown substantial growth, increasing from $3.2 billion in 1980 to 26.8 billion in 2016 with a peak of $ 31.4 billion in 2011 and $3.2 billion in the 1980s. the average growth has amounted to 6.17% from 1980 to 2017, respectively; however, it will be a mistake to look at this growth in isolation. when we carefully analyse pakistan's export performance in the military and democratic regimes we can see that in the period of zia regime our export base increased from 0.15% in 1980 to 0.18% in 1990, which in the period of democracy came down to 0.15%. in musharaf’s regime our export base remained unchanged while the further democratic regime witnessed the export share fall to 0.14%. the table 1 below gives a quick overview of the export share in the global market. table 1. the share of pakistan's export in the world exports country 1980 1990 2000 2010 2016 bangladesh 0.04 0.05 0.09 0.1 0.19 india 0.43 0.57 0.7 1.56 2.5 pakistan 0.15 0.18 0.15 0.15 0.14 source: the world bank (2017). since 1980s the economy shows unstable export growth because the overall performance indicates that pakistan’s economy suffered from vulnerable export performance, which sometimes went to the negative values even when we adopted the sensitive and export 67 www.virtual-economics.eu issn 2657-4047 (online) amir azam virtual economics, vol. 3, no.2, 2020 promotion policies. figure 1 demonstrates that there have been observed many fluctuations in export growth of the economy, and these fluctuations went even worse in the democratic regime as compared to autocracy. there are mainly three pillars of export performance showing the nature of exports, namely export sophistication, export diversification and export competitiveness. deeply analysing the export sophistication comparing both regimes, we can see that the autocracy promotes more of the sophistication while democracy is helpful in promoting competitiveness in the global market (abbas, 2015) and both have fluctuation experience in export diversification in terms of market and goods. the economy performed much better in the 1980s both in terms of sophistication and diversification while 1990s promoted political instability, security threats, nepotism and barbarism and discrimination in privatisation and deregulation (ahmad & hamid, 2014), which undermined the trust on the national and international markets, therefore, all three indicators of export performance, i.e. sophistication, diversification and competitiveness were badly affected. figures 2, 3 and 4 show the growth and changes in the indicators of export performance in both autocracy and democracy. we can see that in terms of sophistication the economy saw the golden period in 2003-2006 while economy observed more diversification in 2007-2009 while becoming more competitive in the global market during 2006-2010. figure 1. pakistan's export growth since 1980 source: world integrated trade solution (wits, 2018). 68 www.virtual-economics.eu issn 2657-4047 (online) amir azam virtual economics, vol. 3, no.2, 2020 figure 2. pakistan's export sophistication source: world integrated trade solution (wits, 2018). figure 3. pakistan's export diversification source: world integrated trade solution (wits, 2018). figure 4. export competitiveness in autocracy and democracy source: world integrated trade solution (wits, 2018). 69 www.virtual-economics.eu issn 2657-4047 (online) amir azam virtual economics, vol. 3, no.2, 2020 4.2. industrial policy instruments in democratic and autocratic regimes since the industrial policy is considered an important accelerator to promote the export performance, both of the regimes have their own preferences and policies. the zia regime is known as the period of liberalisation in the pakistani history because the zia regime cut off the import tariff and made the economy open to international trade (fatima & rehman, 2012). on average, the import tariff was reduced from 77% in 1981 to 51% in 1988, while through denationalisation policy more than 80 nationalised industrial units were privatised under that regime. the export subsidies to exporting industries increased from 9.15% in 1980 to 10.08% in 1988 as a percentage of total subsidies. the grants increased from 0.94% to 1.99% in 1980 and 1988 respectively while the r&d expenditures as a percentage of total national expenditures rose from 0.08% in 1980 to 0.094% in 1988. the government passed export processing zone bill in 1980 that established pakistan's first epz in karachi, which started functioning in 1994 and up to now the total export from this epz has been recorded at $4900 million. after launching the structural adjustment program, the economy became more open to the international market (saleem & sial, 2015), but the speed of liberalisation was very low as compared to other neighbouring asian economies because in 2000 the average import tariff rate of pakistan, bangladesh, sri lanka and india were 22.29%, 22.3%, 8.03% and 29.13% respectively. the export subsidies have been reduced from 10.08% in 1988 to 7.27% in 1998 while the r&d expenditures increased 0.094% to 0.115% in the respective periods. the export rebates and grants were reduced by the democratic regime of ppp and pml (n) in the period that went up from 1.99% to 1.28% in 1988 and 1999 respectively. the share of industrial expenditures went up in that regime from 19% to 21% in the respective period, which helped to promote the new industrial zones, and the epzs of sialkot, risalpur and hattar were a part of the regime that contributed and is now contributing a good share to our total exports. in the musharaf’s regime, the government focused on encouraging fdi and privatisation. the regime of musharraf covered the period of 1999-2007, and during this period the economy observed a very fast growth in the export sector. the exports increased from $4.13 billion in 1999 to $14.23 billion in 2008. the import tariff further dropped from 14.86% in 1999 to 13% in 2008 while the export subsidies were reduced from 7% to 5% in the same period. for the first time in pakistani history, the share of r&d expenditures reached 0.5% share of total expenditures and government increased the share from 0.115% in 1999 to 0.6325% in 2008, which revived the sector, and that government started to seek a new era of competitive market, while the government that followed saw the competitive market position in the international market. the second round of the democratic regime launched the industrial policy of liberalisation and privatisation focusing on diversification and competitiveness, but the sophistication sector was badly affected in the entire regime of 2008-2018. after the 18th amendment in the pakistani constitution, the industrial policies were handed over to the provincial governments, and now the provincial governments make their industrial policies according to their natural resources, geographical location and 70 www.virtual-economics.eu issn 2657-4047 (online) amir azam virtual economics, vol. 3, no.2, 2020 infrastructure. figures 5 and 6 give a quick overview of changes in the industrial policy instruments in the democracy and autocracy regimes. figure 5. industrial policy instruments in the military regime source: world integrated trade solution (wits, 2018). figure 6. industrial policy instruments in the democracy regime source: world integrated trade solution (wits, 2018). 71 www.virtual-economics.eu issn 2657-4047 (online) amir azam virtual economics, vol. 3, no.2, 2020 4.3. the analysis of industrial policy instruments in the military vs democratic regimes in pakistan table 2 below gives econometric estimations of the coefficients of industrial policy instruments with export performance indicators differentiating the type of regimes. comparing the impact of industrial policy instruments on export sophistication, export diversification and export competitiveness under the military and democratic regimes, it can be seen that industrial expenditures play a significant and positive role in export diversification and export competitiveness in democratic regimes while having a positive impact in military regime only in export competitiveness, while in export diversification it has no significant role in diversifying the economy. table 2. the industrial policy instruments’ impact on dependent variables under the military vs democratic regimes export sophistication export diversification export competitiveness variables military democracy military democracy military democracy industrial 0.000811 0.0472** -0.0213 0.471 0.0176* -0.0369** p(values) (-0.09) (3.48) (-0.15) (1.46) -3.03 (-3.05) subsidy 0.0251 -0.00320** 0.0629 -1.104*** 0.0152 -0.0428*** p(values) (-0.83) (-3.01) (-0.13) (-4.36) -0.79 (-4.51) r&d 0.605** -0.00071 7.118* -0.0885 0.605*** -0.0198 p(values) (-3.6) (-0.97) (-2.65) (-0.05) -5.62 (-0.30) import tariff -0.085** -0.0003 0.0850* 0.117* -0.00161 0.00429* p(values) (-3.23) (-0.09) (-2.94) (-2.63) (-1.39) (-2.58) rebate -0.0347 -0.00052 -1.196 0.0823 0.0302 -0.0404 p(values) (-0.72) (-1.39) (-1.56) -0.09 -0.98 (-1.21) _cons 3.722*** 3.314*** 45.19*** 62.52*** 2.701*** 4.333*** p(values) (-12.92) (-8.54) (-9.84) (-10.48) (-14.64) (-19.37) source: the author’s own calculation. the export subsidy plays a negative role in export sophistication, export diversification and export competitiveness. as most of the nation use export subsidy as an instrument to increase the export performance, in the case of pakistan export subsidy has a negative impact both under the military and democratic regimes. haq & kemal (2007) explain that export promotion subsidy schemes are difficult to administer and are subject to 72 www.virtual-economics.eu issn 2657-4047 (online) amir azam virtual economics, vol. 3, no.2, 2020 manipulation for rent-seeking purposes. according to our analysis of export subsidies, promoting export performance in both regimes had no significant impact on export performance, and even in democratic regimes the export subsidy shows significant negative impact, proving that increasing an export subsidy causes to reduce export performance. a careful analysis of the r&d expenditures demonstrates that they influence export performance indicator positively and significantly in the military regimes, while in the democratic regimes, the r&d shows insignificant positive results. the import tariff values reveal that its harmful for export performance in both regimes and will cause to reduce the export performance with a significant value of 1%, while the export rebate has no significant impact on export performance in both regimes. the wald test to remove the export rebate from the model shows it is insignificant and have no relationship with export performance, so it can be removed from the equation. 4.4. ecm estimations in the autocratic and democratic types of a regime the above calculations in 4.3 give us a comparative analysis of the relationship between industrial policy instruments and export performance indicators showing the short-run relationship. we know that industrial policy is a qualitative measure that comprises many sets of quantitative and qualitative variables describing the strength of industrial policy. usually, policies are highly affected by internal and external shocks, structural changes, policy changes, randomness and the nature of variables. since independence the economy has observed many structural and policy shifts because there has always been a battle between autocracy and democracy for power control and both work on a different vision and perspective. hence, it is important to highlight the speed of adjustment in policymaking to see what kind of adjustment is caused by the industrial policy in the long term. the table below provides a comparative analysis of the error correction model to check the speed of adjustment in the long run. from the findings of table 3 below it becomes evident that industrial expenditures play a significant role in industrialisation in both types of a regime, where the strength of development has more features of convergence in the long run in autocracy as compared to democracy. this means that in export sophistication it takes a short-time period in autocracy to get back to the original position or initial point which has been caused by policy and structural changes or the speed of adjustment in autocracy is faster than in democracy while in the case of export diversification the speed of adjustment in the long run in democracy is quicker than in autocracy because it has both features of significant and negative convergence faster than in autocracy. a careful analysis of the adjustment speed in both types of a regime proves that in export competitiveness both regimes have similar features of convergence in the long run with almost the same speed of adjustment. the variable coefficient indicates that industrial expenditures in autocracy have no significant impact on export performance except export sophistication, while in democracy it plays a significant positive role with export performance indicators. export subsidies and rebate showed no significant relationship with export performance, while r&d expenditures have a significant positive impact with all indicators of export performance in both types of a regime. import 73 www.virtual-economics.eu issn 2657-4047 (online) amir azam virtual economics, vol. 3, no.2, 2020 tariff shows the negative and significant impact in both types of a regime proving that instead of a protective measure to boost export performance we should rely on the competitive economy in a global level to boost up the export sector of the economy. the value of r2 and adjusted r2 show that the model is best fitted while aic and sic show the minimum values for lag length selection and the values for durban watson statistics suggests there is no problem of autocorrelation in the data. table 3. ecm estimations in the autocracy and democracy types of a regime export sophistication export diversification export competitiveness v a ri a b le s a u to cr a cy p (v a lu e ) d e m o cr a cy p (v a lu e ) d e m o cr a cy p (v a lu e ) a u to cr a cy p (v a lu e ) a u to cr a cy p (v a lu e ) d e m o cr a cy p (v a lu e ) d (i e ) 0.00992 0.0714*** -0.00055 0.0048* 0.8624 0.1099 -0.12382 0.0495** 0.01112 0.4050 0.03884 0.0241** d (e s ) 0.047148 0.1405 8.18e-05 0.3698 0.324602 0.454 0.318233 0.4814 0.013876 0.2576 0.006039 0.554 d (r d ) 0.459716 0.045** 0.0015 0.0387** 0.445487 0.0821*** 5.442718 0.0554** 0.423964 0.0087* 0.09759 0.0689*** d (i m p ) -0.00778 0.0028* -1.01e-05 0.6443 -0.046843 0.6477 0.057354 0.2207 -0.00019 0.8734 0.004121 0.1001*** d (r e ) -0.06509 0.0496** -0.00021 0.3111 -0.7244 0.4509 -0.86936 0.2313 0.015002 0.4262 -0.0104 0.6329 d e q (1 ) -1.00816 0.0047* -0.00032 0.0232** -26.9968 0.0906*** -0.05627 0.1024*** -0.6554 0.0472** -0.58628 0.0044* r 2 0.970212 _ 0.87107 _ 0.980163 _ 0.967201 _ 0.900073 _ 0.896984 _ a d jr 2 0.920308 _ 0.86193 _ 0.978418 _ 0.92502 _ 0.89075 _ 0.85925 _ a ic -3.06891 _ -12.2924 _ 4.651985 _ 3.262653 _ -4.00638 _ -2.92042 _ s ic -2.77483 _ -11.9983 _ 4.946061 _ 3.556728 _ -3.71231 _ -2.62634 _ d w 1.944225 _ 1.925302 _ 2.12455 _ 2.023458 _ 1.898831 _ 1.963187 _ source: the author’s own calculation. 74 www.virtual-economics.eu issn 2657-4047 (online) amir azam virtual economics, vol. 3, no.2, 2020 5. conclusion and policy recommendations the relationship between industrial policy and export performance has remained one of the most debatable topics in the economic history, and after the success of east asian economies’ industrial policy and instruments, it attracted more attention globally. some economists favoured the viewpoint that a long-term farsighted industrial policy makes economy able to stand for a long-term growth depending on stability and structural changes occurring in the economy. in pakistani developing economy, export is considered vulnerable in terms of sophistication, diversification and competitiveness. the direction and nature of exporting pakistani goods and market are limited, usually due to little amount of market and goods while the political instability inside the territory makes it more difficult and vulnerable on the international market. since independence, the economy has seen an almost equal periods of both autocracy and democracy. therefore, the economy failed to adopt any long term significant industrial policy. autocracy of the economy proved to be mostly successful in sophistication while badly affecting diversification and competitiveness. in the meantime, democracy played an insignificant role in sophistication, while in diversification it has a positive and significant role, yet having the least contribution in competitiveness. to make the study more coherent and simpler the current study focused only on the quantitative instruments of industrial policy, i.e. industrial expenditures, export subsidy, export rebate, import tariff and r&d expenditures. the findings of the study suggest that for industrialization autocracy has no significant impact in all cases of export performance, while democratic regime shows a significant positive impact on industrial expenditures and export performance indicators. the export 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(2012). democracy, investment and economic growth. international journal of economics and financial issues, 2(3), 233-240. кwilinski alex 43 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 2020 volume 3 number 2 (april) the nexus between education and economic growth: analysing empirically a case of middle-income countries lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi abstract. the purpose of this paper is to examine empirically the nexus between education accumulation and economic growth for a sample of middle-income countries through panel data regressions. the sample consists of 28 middle-income countries from various continents: north africa and the middle east (6 countries), sub-saharan africa (7 countries), latin america and the caribbean (8 countries), east asia and the pacific (3 countries), and europe and central asia (4 countries). education is measured by quantitative (average years of labour force study) and qualitative indicators (student scores on international assessments of educational achievements). to test the impact of education accumulation on gdp per capita growth, a static panel is used during the period of study from 1970 to 2014. a dynamic panel is also being developed to estimate the effect of the education stock on the growth rate of gdp per capita. the results confirm the positive and significant impact of the education quantity and quality on economic growth, both in level and variation. the stock of education and its increase positively affect the growth. moreover, this paper’s original findings suggest that the quality of education is more significant than its quantity. keywords: quality of education, quantity of education, economic growth, static and dynamic panel jel classification: c23, i2, o4 44 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 authors: lamia jamel department of finance and economics, college of business administration, taibah university, saudi arabia email: lajamel@yahoo.fr https://orcid.org/0000-0002-3244-068x monia ben ltaifa human resource department, community college in abqaiq, king faisal university, saudi arabia email: monia_mbl@yahoo.fr https://orcid.org/0000-0001-9202-2554 ahmed k elnagar department of administrative and financial sciences and techniques, community college, taibah university, saudi arabia; suez canal university, egypt email: ahmed_karam@tourism.suez.edu.eg https://orcid.org/0000-0003-1787-8189 abdelkader derbali* department of administrative and financial sciences and techniques, community college, taibah university, saudi arabia; department of management sciences, higher institute of informatics and management of kairouan, kairouan university, tunisia email: derbaliabdelkader@outlook.fr, *corresponding author https://orcid.org/0000-0003-4098-3120 ali lamouchi college of business administration in al rass, qassim university, saudi arabia email: ali_lamouchi@yahoo.fr https://orcid.org/0000-0001-6398-3268 citation: jamel, l., ben ltaifa, m., elnagar, a.k., derbali, a., & lamouchi, a. (2020). the nexus between education and economic growth: analyzing empirically a case of middle-income countries. virtual economics, 3(2), 43-60. https://doi.org/10.34021/ve.2020.03.02(3) received: january 12, 2020. revised: february 26, 2020. accepted: april 9, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://orcid.org/0000-0001-9202-2554 https://orcid.org/0000-0003-1787-8189 https://orcid.org/0000-0001-6398-3268 https://doi.org/10.34021/ve.2020.03.02(3) https://creativecommons.org/licenses/by/4.0/ 45 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 1. introduction the place of the human factor and its collective appropriation in production constitute the core of the contributions of endogenous growth models to the macro-economy. technical progress is endogenous because it is explained by the agents’ saving behaviour. it is, directly or indirectly, introduced by the concept of human capital. the employees’ productivity is improved by the higher quality of the work factor. either because the "intelligence" of men makes it possible to produce more efficient machines, or because in the production system itself, human capital acts directly on the quantity and quality of production. the precursor models emphasized two modes of human capital accumulation: accumulation outside the production process the individual distributes his time between training and production (lucas, 1988), and accumulation inside the production process the very fact of producing allows knowledge accumulation (romer, 1986, 1990). here we find the traditional distinction by becker (1964) between two components of human capital, in-service training and learning. these endogenous growth models are in line with microeconomic analyses of the human factor. however, reading these models, considering the analyses carried out in the economics of education, makes it possible to set their theoretical limits, which some recent models have exceeded. these limits relate to the assumptions applied to the mode of individual accumulation of human capital and to the supply of education. for example, in lucas's model, there is no education offer (lucas, 1988). since the work of barro (1991) and mankiw et al. (1992) led to identifying a positive and significant link between education and economic growth, research on the subject has multiplied without leading to a clear consensus on the nature of the education impact on growth or on its channels of transmission. many avenues were then explored to find this positive link between education and growth, among which the one initiated by hanushek & kimko (2000) proposes to consider the quality of education, not just its quantity. both authors suggest measuring the quality of education by referring to international assessments of student achievement. radieva & kolomiiets (2019) examine the availability of dependence of the human capital development on institutionalization of the society in the information economy, to figure relationship regression models of the dependence of the human capital development on the level of the country's institutional system development in the information economy. they find out that the highest relationship among the human capital index and the selected indicators of the country's institutional system development exists for the countries with a high-level human capital index and high-level gross national income per capita, government labour costs, and tax burden. 46 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 in line with their work, education quality databases have emerged in the case developed by hanushek & woessmann (2013), that of barro & lee (2013) and finally the database of altinok et al. (2014). the objective of this paper is to examine empirically the link between education and economic growth for a sample of 28 middle-income countries through panel data regressions . the sample consists of 28 middle-income countries from different continents: north africa and the middle east (6 countries), sub-saharan africa (7 countries), latin america and the caribbean (8 countries), east asia and the pacific (3 countries) and europe and central asia (4 countries). to test the impact of education accumulation on gdp per capita growth, a static panel is applied through the period of study from 1970 to 2014. the empirical findings prove the positive and significant influence of the quantity and quality of education on economic growth, both in level and variation. the stock of education and its increase positively affect economic development. moreover, the quality of education is more significant than its quantity. the article is structured as follows: the second section presents the conceptual framework, while the third one is devoted to explaining the methodology used; the fourth section outlines the results, and finally, section 5 concludes the study. 2. literature review empirical literature on this subject can be categorized according to several parameters, the main of which being the proxy used to measure human capital, the perception of the role of education in the growth or nature of the econometric models selected. 2.1. measure of education: quantity or quality? the plurality of proxies used by economists to measure education led woessmann (2000) to draw up a list to identify them. referring to indicators that measure the amount of education received by an individual can be distinguished from those that appreciate the quality of the education. 2.1.1. quantitative indicators of education there are several indicators listed, the most popular of which are the rate of enrolment per a cycle of education and the average number of years of schooling for the entire population or a certain age group. 2.1.1.1. the enrolment rate used in cross-sectional studies (barro, 1991; mankiw et al., 1992), the enrolment rate indicator has been subject to considerable criticism. indeed, flow variables are inappropriate to account for the stock of human capital unless very restrictive assumptions about 47 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 stationary balance are accepted. and even then, it must be admitted that enrolment rates fluctuate little over all the years studied, which is far from the reality for most developing countries. 2.1.1.2. the average number of years of education for population today, it is rather the total number of years of schooling for the adult population that economists take as a direct measure of the human capital stock. many authors have constructed series of this measure (nehru et al., 1995), but the most frequently used today are those by barro and lee (2013). this indicator is not beyond criticism, including for ignoring the declining performance of education and for the possibility of a year of study to have the same effect on accumulating human capital for all countries. 2.1.2. indicators of education quality among many indicators that can measure the quality of education, it is the scores obtained by students in international assessments that tend to be more significant in recent research. 2.1.2.1. the hanushek and kimko quality indicator first of all, the quality index established by hanushek and kimko (2000) is based on the results of the timss (trends in international mathematics and science study) surveys conducted by iaeea (international association for the evaluation of educational achievement) which also conducts the pirls (progress in international reading literacy study) surveys. both authors obtain a positive but insignificant coefficient for the quantitative indicator of education and a positive and very significant coefficient of the qualitative indicator of education. 2.1.2.2. barro quality indicator barro (2001) builds different indicators depending on the area of competence (mathematics, science and reading). these results show a positive but insignificant coefficient for the indicator of education quantity corresponding to the average levels of secondary and higher education completion, while that of the education quality has a positive and highly significant coefficient. the iaeea's investigations suffer from two main limitations. first, these tests were mainly carried out in the developed countries. second, the survey questionnaire is too dependent on the u.s. curricula, which undermines the reliability of the results obtained by the developing countries. 48 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 for this reason, the organization for economic co-operation and development decided to launch its own program to assess student achievements called pisa (program for international student assessment) in 1997. unlike the iaeea surveys, this test evaluates students who are all 15 years old, regardless of their level of grade. it consists of assessing students' skills, independently of curricula, in three areas: reading comprehension, mathematical culture and scientific culture. while the iaeea and oecd surveys are the only ones today to have an international scope, there are still others practicing on scales including the cesap (country educational systems analysis program) survey organized by the french-speaking countries of sub-saharan africa or the sacmeq, llece and mla surveys coordinated by unesco (united nations educational, scientific and cultural organization). 2.1.2.3. the altinok et al. quality indicator realizing the diversity of student achievement surveys , and aiming at having indicators of the education quality for the largest number of countries, altinok (2006) decided to set up a new database from six different international survey groups (iaeea, pisa, sacmeq, pasec, llece and mla). it consolidates them on common scales by exploiting the results of the countries that participated in several surveys simultaneously. it obtains qualitative indicators of human capital (qihc) for three areas of competence (mathematics, science, reading). this database, which includes 105 countries, is used to test the relationship between education and growth. it concludes that qualitative indicators of human capital help explain economic growth between 1960 and 2000 (altinok, 2006). 2.2. role of education: model of accumulation or stock? depending on the underlying approach to the relationship between human capital and growth, econometric models fall into two categories (gurgand, 2000). the first group is those that equate human capital with physical capital. the second category considers that human capital indirectly affects growth through research and development activities. 2.2.1. accumulation patterns the founding writings of the human capital theory indicate that spending on education contributes to improving the quality of the workforce and increasing its productivity. as a result, human capital is part of the production function , a factor that accumulates and increases overall productivity with constant technology (barro, 1991; mankiw et al., 1992). the main limitation of these models is the assumption that the marginal product of education can remain indefinitely positive for the entire population. pritchett (2001) goes so far as to question the very existence of this supposed impact of education. the author takes up the mrw specification using physical and human capital stock data. it builds a panel on 49 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 the average number of years of productive force studies over 5-year intervals for the 19601985 period for many countries. the result of his study shows that the impact of human capital growth on the growth rate is negative and insignificant. 2.2.2. stock models the second approach is based on nelson and phelps (1966) analysis, which suggests that the ability of a given economy to adapt to technological change depends on its human capital endowment. for these two authors, human capital, therefore, indirectly affects growth through innovation and technological adaptation, which are the real drivers of productivity growth. this approach is applied by many authors including benhabib & spiegel (1994), hanushek & woessmann (2008) and vandenbussche et al. (2006), who estimated a panel of oecd countries from 1960 to 2000 to show that the interaction between higher education and technology positively affects growth for countries close enough to the united states. 2.2.3. are these two approaches incompatible? in a critical review of the literature on the subject, krueger & lindahl (2001) reject the idea that the two approaches presented above are irreconcilable. they succeed in highlighting a significant role in the growth of both accumulation and initial level of human capital in a panel of 110 countries observed between 1960 and 1990. similarly, aghion & cohen (2004) confirm the impact on growth of both an increase in the number of years of study and the number of years of study itself. both authors make numerous regressions on educational data from 90 countries for the period 1960 2000. their results show a macroeconomic performance of 8% in education and an effect of the initial level of education on subsequent growth of 0.5% per year. 2.3. econometric models: instant cuts versus panel data while early models use cross-sectional data, more recent studies use panel data. indeed, the first approach risks attributing to human capital the effect on income of intrinsic characteristics (institutional, political...) of countries (islam, 1995). for this author, there are many variables that are correlated with both income and education and whose exclusion in a cross-sectional regression can lead to overestimating the effect of education on growth. it is for this reason that he proposes to test a model in panel data. the variable explained is the gdp per capita at the end of every five-year period in the course of 1960-1985, while the explanatory variables are the gdp of 1960, the investment rate and the population size. the regression carried out by using a fixed-effect model leads to a negative and significant impact of education on economic growth (islam, 1995). 50 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 3. methods the objective of this paper is to examine empirically the link between education and economic growth for a sample of middle-income countries through regressions on panel data during the period of study from 1970 to 2014. the sample consists of 28 middle-income countries from different continents. these countries spread over the following regions: north africa and the middle east (algeria, jordan, tunisia, egypt, syria, lebanon), sub-saharan africa (angola, botswana, cameroun, mali, burkina faso, sudan, kenya), latin america and the caribbean (brazil, colombia, cuba, costa rica, dominica, ecuador, mexico, jamaica), east asia and the pacific (thailand, philippines, vietnam) and europe and central asia (albania, azerbaijan, kazakhstan, serbia). our goal was to include all developing countries with the education quality indicator adopted by this study. the developed countries are excluded because the related literature review has taught us that the link between education and growth is likely to suffer from a possible threshold effect. in order to use linear modelling, it seemed more plausible to retain relatively homogeneous countries. 3.1. data sources of the study table 1 summarizes the list of variables used in our study and their sources. regarding the observation period, since educational variables vary little from year to year, we opted for five-year periods and extend the duration of the study as much as possible to increase the number of observations. 3.2. descriptive analysis of study variables although the countries in the sample belong to the same category of middle-income countries, they show heterogeneous economic and social data in terms of initial level, trajectory, or current level. 3.2.1. gdp per capita and its growth the gdp per capita of the richest country in the sample in 1970 accounted for $7,189, which is 21 times more than that of the poorest country at that time, lesotho. this heterogeneity of the initial conditions is also attested by the standard deviation, which reaches 70% of the sample average. the same is true of gdp per capita in 2014, with a maximum value of 10 of the minimum value, while the standard deviation is 60% of the average. 51 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 table 1. the list of variables and their sources no variables notations form sources 1 gdp per capita with purchasing power parity (ppp) gdp in $ us constants 2010 wdi 2 investment rate inv as a percentage of the gdp wdi 3 degree of the economy’s commercial openness op sum of the imports and % exports on gdp wdi 4 inflation rate inf annual rate of pci variation wdi 5 growth rate of the population pop as a percentage of country’s total population wdi 6 quantitative variable of education: average number of school years adult people over 15 years old s in years barro & lee (2015) 7 qualitative variable of education: qualitative indicator of human capital qihc index altinok et al. (2014) 8 the amount of education adjusted for the quality of the education sqihc sit * qihci / qihcusa our calculations 9 civil liberties cl score from 1 to 7 freedom house (2016) note: world development indicators (wdi) source: own elaboration. 3.2.2. the amount of education as early as 1970, there were significant differences among the countries in the sample in terms of the average length of study of the working-age population. thus, the leading country, namely cuba, had a value of 5.4 years or a multiple of 7.5 of that of the country most lagging, morocco in that case (0.72). these gaps will only be partially filled by schooling efforts. the average for the sample increased from 3.40 to 8.10 years. while the trend is general, there are still significant differences between countries. 3.2.3. the quality of education the average sample is 419.2; the standard deviation is 73.65, a coefficient of variation of just 17%. the maximum value rises to 588.9; it concerns cuba and corresponds to the period 2005-2009. the minimum value of 244.4 refers to the ivory coast and dates back to the same period. 52 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 3.2.4. the amount of education corrected to compensate for the lack of data on the quality of education, altinok (2007) proposes to readjust the quantitative variable of education by measuring its quality. following his approach, we calculated this new variable sqihcit according to the following equation: (1) thus, all observations concerning the average number of years of schooling for a given country are multiplied by the same indicator of the education quality invariant over time, the last available in this case. to obtain comparable data, years of education in the united states are used as baseline data. adjusting the average number of years of education by its quality leads to a decrease in this indicator’s value for all countries in the sample. this is due to the low scores obtained by students from the abovementioned countries in international assessment. 3.3. the analysis of correlations among variables the correlation among gdp per capita and educational variables is positive but it is less than 0.5 for the quantity or quality of education. it is still higher than the correlation among gdp per capita and control variables other than gdp per capita at the beginning of the period. the correlation between quality and quantity of education is strong and positive. countries with the most years of adult schooling have the highest scores in international student assessment. 3.4. presentation of models the approach chosen consists of three steps: selection of the most appropriate model, its implementation and, finally, verification of the residues’ normality. 3.4.1. accumulation of education and economic growth the model to be estimated is: (2) 53 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 where i refers to the country shown with i = 1, ...., 28; t represents the time period with t = 1, ...., 9; αi the specific effect or individual effect; βi with i = 1 to 8 are parameters to estimate; εi,t indicates the error term. from the equation (2) which includes the two educational variables simultaneously, we estimated other equations by breaking down the education variable. after applying the hausman test, we opted for a fixed-effect model. individual effects are invariant over time but potentially correlated to regressors. for this reason, we used the robust errors option of stata software that corrects heteroscedasticity errors. to gain more assurance about the estimates’ robustness, there was chosen the jarque-bera test, the results of which confirm that the residues of the model generated after the estimate follow a normal law. 3.4.2. education stock and economic growth the model to be estimated is: (3) where α represents the fixed effect or country-specific effect factor (individual specific effect); βk with k = 1 to 7 is the parameters to be estimated in this model; εi,t indicates the error term that takes into account uncured factors that have an impact on economic growth. in the equation (3), we regress the natural logarithm of gdp per capita at the end of each five-year period (lpibhf), with its delayed value, as well as other control variables. the formulation of the model in differences then means that the regression now shows how variations in the education indicator influence the rate of economic growth. diagnostic statistics is favourable. self-correction tests of the raw differences in the residues of the equation (2) validate the model specification: the hypothesis of no self-correction of the second order of residues is not rejected. the zero sargan and hansen test hypothesis of asymptomatic non-correlation of instrumental variables with model residues is not rejected either. as a result, the instruments used are significant and valid. 54 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 although gmm estimators are robust and do not necessarily require an identical or normal distribution of residues (saban, 2003), we verified the normality of the residues through the skewness/kurtosis test. 4. results and discussion the objective of this study is to assess empirically the linkage between education and economic growth for a sample of 28 middle-income countries through regressions on panel data during the period for study from 1970 to 2014. to analyse the impact of education on economic growth, we use two estimations based on the accumulation and stock approaches. 4.1. the approach in terms of accumulation table 2 summarizes the static panel estimates results. variability explained by the different versions of the model is very high both at the intraand inter-individual level. the significance and magnitude of the coefficients of the educational variables depend on the version chosen. according to column 2, the amount of education alone is insignificant and influences gdp per capita negatively. this result, consistent with many published studies, confirms that this indicator cannot be considered a true measure of education. however, the quality of education has a positive and significant effect on gdp per capita even when it is alone (column 3). this result is also consistent with the literature reviewed; it indicates that the quality indicator better reflects differences in human capital among the countries. column 1 shows that educational variables together are significant and their impacts on per capita income are positive. the quality of education is significant at the 1% threshold, while the quantity of education is at the 10% threshold. this significance is not affected by the introduction or withdrawal of the gdp log per capita at the beginning of the period. in terms of the magnitude of the impact, the accumulation of quantity and the improvement in the quality of education have a tangible impact on gdp per capita. indeed, the increase in the average study time per year increases gdp per capita by 8.4% while the improvement in the education quality index by 100 points increases gdp per capita by 12%. for control variables, the gdp coefficients per capita at the beginning of the period and the civil liberties index are significant. the other variables lose their significance when gdp per capita is introduced at the beginning of the period. 55 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 the gdp per capita ratio at the beginning of the period is positive; this means that the level of gdp per capita at the end of the period remains largely dependent on that at the beginning of the period. this is quite normal for a five-year span. investment is also positive, indicating that the countries that invest more are those with the highest income level. the commercial opening also shows a positive coefficient; it can be inferred that the countries in the sample tend to open more as their gdp per capita increases. in terms of population growth, the negative coefficient indicates that the countries with the highest incomes have reached a more advanced stage of demographic transition. the positive inflation ratio is difficult to comment on. the literature tells us that the relationship between gdp per capita and inflation is not linear. in fact, we found that this variable is too volatile for our sample. table 2. static panel estimates results variables fixed effects (1) fixed effects (2) fixed effect (3) log (gdp) 0.463*** (0.138) 0.770*** (0.0350) 0.553*** (0.129) s 0.0847* (0.0480) -0.0144 (0.0138) inv 0.00222 (0.00320) 0.00538* (0.00301) -0.000466 (0.00373) op 0.000266 (0.000806) 0.000615 (0.000567) 0.00113* (0.000634) inf 0.00193 (0.00265) 0.000138*** (4.19e-05) 0.00155 (0.00324) pop -0.00913 (0.0146) -0.0195 (0.0242) -0.00670 (0.0152) cl -0.0851** (0.0370) 0.00372 (0.00965) -0.0797* (0.0418) constant 3.501*** (1.021) 1.863*** (0.327) 3.297*** (1.030) indicators for periods yes yes yes indicators for countries not not not number of observations 51 205 51 number of countries 28 28 28 r² 0.951 0.869 0.939 note: ***, ** and * significant coefficients are 1%, 5%, and 10% respectively. source: own elaboration. 56 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 finally, the regression indicates a significant and negative effect of the civil liberties index. restrictions of civil liberties decrease, as income increases, as the freedom house index is initially ranked between 1 (more civil liberties) and 7 (less civil liberties). our model confirms, therefore, the existence of a link in terms of accumulation between education and growth. what is then the effect of the education level on the growth rate of gdp per capita? 4.2 the stock approach table 3 summarizes the results of dynamic panel estimates. the results show that the amount of corrected education (sqihc) positively and significantly affects the value of gdp per capita observed at the end of each period. indeed, this variable shows a positive and significant rate at the threshold of 5%. table 3. results of dynamic panel estimates variables gmm in system log (gdpf) 0.810*** (27.96) sqihc 0.0444** (2.68) inv 0.00752*** (8.52) pop 0.0110 (0.53) op 0.000727 (0.81) inf -0.000970* (-1.84) cl -0.0225** (-2.39) constant 1.263*** (8.74) number of observations 188 number of countries 28 sargan test 1 0.415 hansen test 1 0.450 ar (1) 1 0.035 ar (2) 1 0.311 note: ***, ** and * significant coefficients are 1%, 5%, and 10% respectively. typical errors given in parentheses are robust to heteroscedasticity. estimates contain temporal muteness whose coefficients are not reported. 1 denotes the p-value values associated with the various tests and specifically indicates that the instruments used in gmm in the system are good. source: own elaboration. 57 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 thus, the increase in a standardized school year (one point of sqihc) leads to an annual increase of about 0.4 points in the rate of gdp growth per capita for the countries in the sample. this result corresponds to that found by altinok (2006). regarding control variables, the delayed dependent variable and the investment rate are positive and significant at the 1% threshold, which is in line with our expectations and previous results. the civil liberties indicator is negative and significant at the 5% threshold, which is a result that corroborates our expectations and conclusions of regression in static panel. the inflation rate has a negative and significant coefficient at the 10% threshold. lower inflation is more conducive to greater economic growth even if the value of the coefficient remains low. the coefficient of trade opening is positive but statistically insignificant. the only result that does not conform to the predictions published in the literature is population growth. indeed, the coefficient of this variable appears with a positive sign reflecting a positive impact of population growth on the pace of growth. however, it is not significant. 5. conclusions the purpose of this paper is to examine empirically the relationship between education and economic growth for a sample of 28 middle-income countries through panel data regressions during the period for study from 1970 to 2014. using the altinok et al. (2014), we experiment with different econometric models of panel data to assess the relationship between quantitative and qualitative educational variables and economic growth for a sample of the developing countries. we have highlighted a positive and significant impact of education on gdp per capita and its growth. the static panel estimate indicates that the increase in the average study time per year increases gdp per capita by 8.4%, while the improvement in the education quality index by 100 points increases gdp per capita by 12%. the results of the dynamic panel indicate that the increase in a standardized school year leads to an annual increase of about 0.4 points in the per capita gdp growth rate. these results confirm the role of education as the main lever for accumulating human capital and, thus, as a spring for long-term growth. they indicate that developing countries have an interest in intensifying measures to fill the gaps in this area. having accumulated significant quantitative and qualitative delays, the sample countries do not have to make choices between these two dimensions of education. moreover, since they are strongly correlated, any progress on one level can only be positive for another. 58 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 however, the low qualities of learning mitigate the extent of progress around generalization of learning and schooling. appropriate programmes to improve the quality of education systems must be implemented. compared to other work of the same nature, this contribution has the distinction of applying a comparable level of development to a sample of countries and to cover a relatively long and recent observation period. the originality of our paper is observed in two points; (1) the positive and significant impact of the quantity and quality of education on economic growth, both in level and variation; (2) the quality of education is more significant than the quantity. these results encourage us to continue the investigation of this field of research, which opens too many issues that are still insufficiently explored. this is, for example, the search for the determinants of the education quality in the macro-economic and micro-economic dimension. 6. acknowledgements the authors are thankful to the editor in chief and anonymous reviewers for their supportive and important remarks and suggestions. 7. formatting of funding sources the authors declare that they haven’t received any funding to support their research. references aghion, p., & cohen, e. 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(1991). economic growth in a cross section of countries. quarterly journal of economics, 151, 407-443. https://doi.org/10.2307/2937943 barro, r.j. (2001). education and economic growth. paris, france: oecd press, 14-41. becker, g.s. (1964). human capital. new-york et londres: colombia university press. benhabib, j., & spiegel, m. (1994). the role of human capital in economic development: evidence from aggregate cross-country data. journal of monetary economics, 34, 143-179. https://doi.org/10.1016/0304-3932(94)90047-7 freedom house. (2016). freedom in the world country ratings 1973-2016, database. washington, dc: freedom house. gurgand, m. (2000). human capital and growth: empirical literature at a turning point? public economy, 6, 71-93. hanushek, e.a., & woessmann, l. (2013). do better schools lead to more growth? cognitive skills, economic outcomes, and causation. journal of economic growth, 17(4), 267-321. https://doi.org/10.1007/s10887-012-9081-x hanushek, e.a., & woessmann, l. (2008). the role of cognitive skills in economic development. journal of economic literature, 46(3), 607-668. https://doi.org/10.1257/jel.46.3.607 hanushek, e.a., & kimko, d.d. (2000). schooling, labor-force quality, and the growth of nations. american economic review, 90(5), 1184-1208. https://doi.org/10.1257/aer.90.5.1184 islam, n. (1995). growth empirics: a panel data approach. quarterly journal of economics, 110(4), 1127-1170. https://doi.org/10.2307/2946651 krueger, a.b., & lindahl, m. (2001). education for growth: why and for whom. journal of economic literature, 39(4), 1101-1136. https://doi.org/10.1257/jel.39.4.1101 lucas, r.e. (1988). on the mechanics of economic development. journal of monetary economics, 22, 3-42. https://doi.org/10.1016/0304-3932(88)90168-7 mankiw, n., romer, d., & weil, d. (1992). a contribution to the empirics of economic growth. quarterly journal of economics, 107, 407-437. https://doi.org/10.2307/2118477 nehru, v., swanson, e., & dubey, a. (1995). a new database on human capital stock in developing and industrial countries: sources, methodology, and results. journal of development economics, 46(2), 379-401. https://doi.org/10.1016/0304-3878(94)00054-g nelson, r., & phelps, e. (1966). investment in humans, technological diffusion and economic growth. american economic review, 61, 69-75. retrieved from https://www.jstor.org/stable/1821269 pritchett, l. (2001). where has all the education gone? world bank economic review, 15, 367-391. retrieved from http://documents.worldbank.org/curated/en/859821468180273788/wherehas-all-the-education-gone 60 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel, monia ben ltaifa, ahmed k elnagar, abdelkader derbali, and ali lamouchi virtual economics, vol. 3, no. 2, 2020 radieva, m., & kolomiiets, v. 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(2000). schooling resources, education institutions, and student performance: the international evidence. working paper, no. 983. kiel, germany: kiel institute of world economics. кwilinski alex 46 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 2019 volume 2 number 4 (october) the concept of the system approach of the enterprise restructuring process henryk dźwigoł abstract. the article presents methodical requirements for the restructuring programme in the context of strategic management and shaping of strategic forms. the author described the corporate restructuring model as a basis for transformations designed to achieve a knowledgebased organisation. the author attempted to address the following question: how should the knowledge management model be perceived in modern companies? furthermore, the importance of organisational forms in the corporate restructuring process was underlined. the restructuring process should be carried out on the basis of specific restructuring objectives resulting from the scope of changes. keywords: system approach, enterprise, restructuring process jel classification: l2, m1, o1 author(s): henryk dźwigoł faculty of organization and management, silesian university of technology, roosevelta street 26-28, zabrze, 41-800, poland e-mail: henryk.dzwigol@poczta.fm https://orcid.org/0000-0002-2005-0078 citation: dźwigoł, h. (2020). the concept of the system approach of the enterprise restructuring process. virtual economics, 2(4), 46-70. https://doi.org/10.34021/ve.2019.02.04(3) received: june 6, 2019. revised: august 9, 2019. accepted: september 3, 2019. © author(s) 2019. licensed under the creative commons license attribution 4.0 international (cc by 4.0) https://doi.org/10.34021/ve.2019.02.04(3) https://creativecommons.org/licenses/by/4.0/ 47 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 1. introduction the notion of a model generally means a simplified projection of a complex object (groble, 2006). the model arrangement can help to understand its existing and complex stance, i.e. its structure, operation and development. in order to be able to boast any scientific values, the modelling results should be verified by means of a simulation (sudoł, 2007). as new systems tend to become more and more complex, the systems responsible for their designing have to face ever growing requirements. one intends to find new designing techniques which would allow to shorten the designing process in question and achieve topquality designing solutions. one of essential opportunities in terms of designing is to have recourse to modelling techniques. the essence of modelling lies in presenting a genuine phenomenon in a simplified way. the genuine phenomenon is understood as a scrap of the reality within the scope of existing or future, real physical objects or processes. the model is an abstract pattern, a reflection of a genuine phenomenon achieved by means of ignoring the features which are not a subject of our attention. the model, being a substitute for the genuine phenomenon, is less complex that the reality it tends to reflect. thus, it is easier to apply models for the scientific or design purposes. the model is therefore a qualitative, quantitative or qualitative and quantitative manifestation of the original phenomenon, which allows to pattern and comprehend– examine essential features of interdependencies between researched factors. it is a compromise between one’s strive for faithful representation of a fragment of the researched reality (as regards to taking into consideration the greatest possible number of factors) and its representation possibilities (the more factors a model takes into consideration, the more difficult it is to establish a model, assess it and draw relevant conclusions). one can notice that the simpler the model is, the more abstract it is. as the model becomes closer to the reality, there appear more and more influence factors, while the model becomes difficult to control. hence, in order to establish a model, one should apply simplifying assumptions and constraints which will always provoke a discussion on the ‘model versus reality’ relationship. the sense of modelling manifests in the fact that a model is more comfortable for examining than a genuine phenomenon, without a need to cover excessive costs. as far as modelling is concerned, two issues are especially significant: a purpose for which a given model is created; reciprocal correlations between features of the model and the ones of the genuine phenomenon (dźwigoł, 2015b). the purpose for which a given model is created determines the model’s arrangement and a level of its simplification. while creating a model, we ignore some features for the benefit of putting an emphasis on the others. the purpose of abstracting, perceived as the most essential element of modelling, is to separate inessential (as regards to the modelling purpose) features from the essential ones, i.e. the features which are subject to scientists’ interest and research. 48 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 a level of simplification of a genuine phenomenon’s features for the benefit of modelling is affected by reciprocal correlations between particular qualities of the said phenomenon. it cannot be allowed to discard a feature which is strongly correlated with features being researched by us, since it would result in creation of an incorrect model. modelling is generally based on the theory of isomorphism, i.e. mutual homogeneity of physically heterogeneous phenomena. it helps to reproduce or represent real phenomena and objects by means of isomorphic models which vary from real occurrences in terms of their physical character. an analogy is a certain kind of correspondence between phenomena. analogies are used in every field of human activity, including designing. while breaking down a complex research problem into simpler problems, it is often easy to notice an analogy between the current problems and problems which have already been solved, or an analogy between other classes of problems (dźwigoł, 2015b). models are characterised by some specific features which reflect models’ nature. the said features are the following: hypothetical character: a model is a ‘supposition’ that an original, presented in a simplified way, is its adequate representation; subjectivism: a model is a representation of an original to the extent determined by needs; relative simplicity: a model is a simplification aiming to reduce the number of values contained in the model and dependencies between them, as well as to decrease the form of the dependencies in question; diversity: there co-exist various models of the same original destined for different purposes; this co-existence is indispensable as it allows to embody the original from different points of view. the above-mentioned concept proves that particular elements of the organisational model are complementary to a great extent. taking into account other approaches mentioned herein and related to the organisation modelling, one should bear in mind that in case of modelling the enterprise’s restructuring processes, the scope of modelling is always determined by: particular restructuring goals and ensuing scope of changes within the enterprise; general principles and methodological guidelines as regards to organisational changes to be implemented (dźwigoł, 2015a). in the research process, the author used the following research methods: literature analysis; analysis of enterprise operational documentation, observation; interview; case studies. the author also used extremely important methods used in the general methodology of induction sciences: observations carried out in natural conditions, but the investigating observer is an external person who does not belong to the subject of observation; 49 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 observations conducted in natural conditions, and the researcher cooperates with the observed situation; observations-interventions that take place as part of transformation activities in organizations. this type of activity appears to be privileged in management and quality sciences. the author, using his own experience in enterprise restructuring, has developed a new concept of a systematic approach to the restructuring process on the example of a mining enterprise. 2. literature review strategic management of the enterprise, under conditions of constant changes, requires to review current approaches. one should take into account a few essential issues, namely: 1. research conducted in the usa and germany has shown that the necessity for strategic planning is more pressing in bigger enterprises than in smaller ones. 2. to facilitate decision-making processes for managers, some methods were developed, especially in the usa. the methods in question are used for assessing the attractiveness of particular branches for a given company – they are known as portfolio management methods. 3. apart from the strategy for a whole company, there is also a need for more detailed strategies for particular activity areas, known as strategic activity areas or strategies of activity profiles – fields or field-related business strategies. activity-profile strategies refer to independent organisational units within the scope of the activity, which units are regarded as strategic business units. 4. within the enterprise, there can also occur functional strategies (marketing-related, financial, production-related, personal, product-related, research and development related, etc.). 5. within the scope of particular functional strategies, there are also substrategies (price strategy, advertisement strategy – for the area of marketing; employees’ appraisal strategy – the hr area) (sudoł, 2006). nowadays, a strategic reorientation (a strategic shift) is a relatively common occurrence, connected with a revaluation, or even a rejection of the ongoing strategy. with reference to the foregoing, there occurs the necessity to develop a new dynamic approach to strategic management, which approach allows to formulate a strategy in line with opportunities and innovations (rokita, 2006). the current concept of strategic planning needs to be supplemented by processes for achieving and maintaining a competitive advantage, by means of dynamic approach to the strategic management (carpenter & sanders, 2007). the question should be posed whether strategic planning is feasible under unpredictable future conditions (romanowska, 2007)? 50 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 the organisation fluctuates between stability and instability, generating determined but changeable behavioural patterns. we are on the verge of chaos. managers have two solutions – either to resign from strategic planning, or to reproduce thinking and behavioural logic from the past. both solutions are wrong. the process of succeeding does not involve having the right people, appropriate tools or role models, but it does involve having the right strategy (trout, 2005). today, companies must be able to transform much faster than the environment which surrounds them – roland berger. creating a strategy adjusted to challenges of the 21st century requires to take all necessary actions, namely: 1. to replace development strategies by an activity model or a business model (slyvotzky, 2000). the solution in question releases managers from their obligation to forecast and make a plan for the entire business activity in an ordered, systematic and systemic way. 2. to shift one’s interest from radical choices to emerging strategies and chances. the latter, combined with a perfect organisation and cell-related effectiveness allows the company to adjust quickly to changes. 3. in unpredictable situations, we are looking for a success by means of portfolio restructuring, i.e. through mergers, take-overs and capital alliances. 4. the process of success restoring is perceived as the strategic regeneration skill, which is the ability to introduce changes before the changes become unavoidable. this is a kind of anticipative change (hamel & valikangas, 2003). for innovative companies of the 21st century, strategy does not correspond to any formal planning, but to intuition. strategies are defined but partly, at the intuitive level; they become more elaborate afterwards. harold geneen in his work entitled “management” offers a perfect illustration of the issue in question: “this is a three-sentence course on business management. you read a book from beginning to end. you run a business the opposite way. you start at the end, and then you do everything you must to reach it." in the assumed situation, i.e. facing the unpredictability of the environment, a question arises which of the following solutions should be employed: 1. an approach based on a new formula of the planning school, which means searching for a rational way to build a strategy within the difficult environment by means of emphasising the stage of strategic analysis and scenario-based forecasting. 2. a proposal to replace planning techniques by wisdom, expertise and experience which allow to indicate seemingly intuitive trends of the enterprise’s development. the trend in question is characteristic of the resource school. the resource-related concept of the strategic management is established on the assumption saying that the management of strategic resources and skills, and their proper application are a key factor for success of the enterprise. in the unpredictable world, the organisations that make use of their collective wisdom, combined with business research and data collection, are 51 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 prepared in the best way for changes. thus, man, his skills and motivation are treated as a strategic ability. the following dilemmas are therefore to be resolved by managers: what approach should be employed to adjust the enterprise to the new reality? whether the process of strategic reasoning is either a rational and deductive process or a creative activity requiring imagination? whether making of strategic decisions requires either to train managers in procedures pertaining to rational reasoning supported by scientific methods, or to opt for nonconventional creative solutions which intuition suggests (de wit & meyer, 2007)? there is nothing wrong with the fact that the theory of the strategic management is treated as a sack of ideas and conceptions. perhaps this concept is not attractive from the scientific point of view, however, sticking to it as the only correct approach may be perilous for the enterprise. within the scope of the strategic management, one has to face a series of uncertainties. brilliant scientists hold the opinion that one should strive for a new organisational paradigm – perspectives for the development of the strategic management, with an emphasis given to (dźwigoł, 2015a): environmental uncertainty; method deficiency; information barriers. one should seek opportunities for the enterprise’s development among its internal factors. the enterprise is treated as a set of resources and competencies. what is essential is to manage them adroitly. it is necessary to develop a new organisational model for the enterprise, which would cover rules advocated by researchers and managers, and used for recognising and describing the organisational reality. the model should also compose of rules for formulating cognitive and pragmatic methods which can shape competencies and principles for managers’ activity. in the operational layer, the restructuring process is formulated by means of a restructuring programme. premises of the restructuring programme should be developed in consideration of conditions reigning both in external and internal environment of the enterprise (dźwigoł, 2015a). a strategy is selected in accordance with the enterprise’s development pace, its anticipated goals to be achieved, costs which the enterprise is able to cover. if the enterprise’s development pace is rapid, then radical restructuring strategies should be applied. the restructuring programme should include: an analysis report and evaluation of the enterprise’s strategic situation, along with a diagnosis (dźwigoł, 2007); an undertaking’s design which is a main document for implementation of changes in the enterprise; the design is created on the request of the enterprise’s manager; a type of a business plan, based on a selected restructuring strategy; a vision of the enterprise’s future condition, freed from current problems and hazards; long-, middleand short-term action plans, destined to ensure that the vision comes alive. 52 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 the restructuring programme can be drawn up by the enterprise’s employees – in this case the programme generally lacks radicalism and contains substantive errors, or by external specialists – in that case the programme boasts its higher quality and comprehensiveness, facing at the same time difficulties connected with its implementation, since the enterprise’s staff protests against radical changes. mixed teams consisting of employees and external consultants should be preferred, as this solution: will guarantee a suitable substantive level of the restructuring programme and operation of a mixed research-project team; will help to convince the enterprise’s staff about the necessity of suggested changes. the structure of every restructuring programme should be based on a root cause of the enterprise’s unsatisfactory situation. the programme allows to outline the scope of desired changes, which scope is called subjective scope of restructuring. thus, the concept of the system approach of the enterprise restructuring process is directly related to scientific and technological progress in various aspects of economic activity: the controlling in the management process (dzwigol and wolniak, 2018); the long-term industry restructuring (jonek-kowalska, 2015); the economic and social aspects of restructuring (dalevska et al., 2019; kwilinski et al., 2019d; manowska et al., 2017); new trends in economy (ahmady at el., 2016; baatartogtok et al., 2018; ekambaram et al., 2018; kwilinski, 2019a; 2019c; lakhno et al., 2018; pajak et al., 2016; tkachenko et al., 2019a; 2019b; wang et al., 2019); the innovation and economic growth in the industry (dementyev and scherbakov, 2017; fan et al., 2017; kwilinski, 2018; 2019; 2019d); the entrepreneurial activity (boiko et al., 2019; savchenko et al., 2019; tkachenko et al., 2019c); the business responsibility (kwilinski et al., 2019b); the energy security in regional policy (pajak et al., 2017); 3. methods the model of organisational restructuring, owing to solutions contained therein, essentially responds to modern global challenges, and allows a hard coal mining company to formulate a global strategy and functional strategies (in defined areas), accompanied by solutions which take into consideration ever-changing managing conditions. the model of organisational restructuring is also an instrument applied for a continuous development of the hard coal mining company through, among others, flexible selection of functional areas subjected to organisational restructuring, along with the management support system. an important role is played by an area of informational resources, which, if used effectively, favours identification of opportunities and hazards, supports implementation of strategic management methodology and introduces elements of managerial handling of information – being one of the most essential conditions for successful fulfilment of the enterprise’s mission and goals, and constituting a considerable element of its non-tangible resources. how should the model of the knowledge management system be perceived in the modern company? deliberations pertaining to the subject should be initiated by clarifying the notions 53 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 of intellectual capital and social capital, and by considering their potential influence on the arrangement of the knowledge management model. intellectual capital includes human relations within the enterprise, that is: cognitive capital (common vocabulary, language and convictions), competencies (knowledge, skills), innovativeness, entrepreneurship, motivation. on the other hand, social capital refers to such social features like trust, standards and bonds which may contribute to the improvement of social competencies through facilitating coordinated actions. alike other types of capital, social capital is productive; it allows to achieve certain targets which otherwise would not be attainable. z. malara presents the enterprise’s learning process in the form of knowledge loop of an intelligent enterprise. the process in question should take into consideration the occurrence of predictions based on prior experiences, with simultaneous systemising and capitalising of the knowledge, while the latter is supposed to be a foundation for issuing future decisions and actions. knowledge management is an effective process of learning, connected with searching for, using and disseminating knowledge (explicit and implicit). the process, employing appropriate technologies and cultural environment, is aimed at enhancing the organisation’s intellectual capital and effectiveness (jashapara, 2006). what needs to be underlined is the fact that knowledge management should be of utilitarian character, the latter being understood as a practical approach, closely connected to the effectiveness of knowledge management processes within all areas of the enterprise’s activity. the management in question also determines the level of the enterprise’s competitiveness (kobyłko & morawski, 2006). knowledge management is designed to ensure a smooth flow of information and knowledge between all members of the organisation. in numerous papers, authors enumerate the following positive results (intended as goals of the concept implementation) of putting the knowledge management programmes into practice: increase in innovations of productive, technological, organisational and corporate character; deliberate achievement and exploitation of external sources of knowledge (customers, clients, competitors, co-operators); better understanding of customers’ needs and expectations; anticipation and shaping of customers’ needs and expectations; increase in profit as a result of rapid pace of introducing new products and services into the market; shortening of manufacturing cycle in terms of state-of-the-art products; reinforcement of information bonds between employees (speed, availability, updated information); open communication between employees (informal meetings, sharing knowledge and ideas, free and frank discussion, insightful atmosphere); enhancement of creativity, provision of opportunities for thinking creatively and formulating bold solutions; improvement in speed and quality of decision-making processes; reinforcement of information bonds, as well as intellectual and emotional bonds between employees; recruitment of employees with great intellectual and professional potential; 54 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 emphasis on continuous education and development of employees; more flexible organisational structure (collectivity, lesser formalisation, changeable scopes of tasks and responsibilities, decentralisation of decisions). technical complexity characterising contemporary manufacturing and managing systems entails the need to acquire a higher level of knowledge necessary for employees. the most essential tools for knowledge management include: document management systems, workflow systems; groupware systems; intranet – internal communication network using it tools; corporate portals – allow to exchange information; data warehouses – easily accessible, comprehensible databases; decision-supporting systems, expert systems (sobczak & strojny, 2004). new technologies contributed to the development of knowledge-based economy, where enterprises more and more often endeavour to create intelligent organisations. the model of the knowledge management system should be a tool supporting the transformation of a learning organisation into an intellectual one (krzakiewicz, 2007). to fulfil it, one should answer the following two questions (dźwigoł, 2015a): 1. are we able to predict the continuity of the enterprise’s activity and manage our development effectively? 2. is partial improving of the enterprise effective in the long-term perspective? basic determinants of successful learning within the organisation are the following: systems thinking; individual professionalism; organisational culture; development of a general vision; group learning (rolet, 2003). currently, one may deal with knowledge process outsourcing, which means the outsourcing of knowledge management processes to an external entity (perechuda, 2007). however, this approach has many opponents among top executives. will the knowledge process outsourcing become a basis factor affecting the shape of the contemporary model of knowledge management? advantages and disadvantages of the approach in question can be presented as follows: disadvantages of the process: doing away with a basic resource for the enterprise, that is with knowledge; in contemporary enterprises, knowledge management becomes a rudimentary process; outsourcing of core activities may result in the occurrence of a so-called „zeroing” of the enterprise internal structures. this may bring about the annihilation of the enterprise (demolition, termination of activity) (minbaeva, 2007; nielsen & michailova, 2007). 55 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 advantages of the process (dźwigoł, 2015a): releasing owners of enterprises from their obligation to deal with basic and ancillary processes; greater specialisation requires to outsource some areas of the enterprise’s activity (nowadays, it is difficult to achieve comprehensive knowledge in terms of a given discipline); virtualisation of business activity makes one transfer basic and ancillary activities to cooperators, in compliance with customers’ various needs; keeping basic and ancillary processes within the parent company may, in the long term, turn out to be too costly; transferring basic processes to middle-size enterprises makes the enterprise’s operation more flexible, as the bureaucratic machine is released from hierarchised arrangements and decisions (e.g. airbus, siemens, philips). before making a decision pertaining to outsourcing of ancillary functions, it is necessary to assess the risk connected with losing of the enterprise’s operational qualities. it does not change the fact that outsourcing is a dynamic factor for the development of modern enterprises. one should bear in mind that corporation’s consistency and operational qualities can be maintained by employing a proper strategy as regards to a vision, mission and responsibility towards the environment. within the scope of knowledge-based economy, a basic factor determining the competitiveness does not just mean having productive resources at one’s disposal, it also involves being able to access and use them (herman, 2003). as far as knowledge management is concerned, one of its priorities involves establishing and making use of the banks of data and skills, which every employee has at his/her disposal. intellectual organisations become especially important when competing with rivals, as the organisations are able to come up quickly with ingenious solutions, while the latter may be a reply to the conditions of the environment changed as a result of social and economic system (tkaczyk, 2003). a particular asset of the intellectual organisation encompasses effective knowledge management and abilities in terms of intellectual capital accumulation. although knowledge is reflected in all aspects of the enterprise’s activity, it is mainly used within the scope of organisation, technology and production (grudzewski & hejduk, 2002). r. borowiecki holds the opinion that restructuring has recently become deeply rooted in the development of today enterprises. the need to introduce changes arises from the necessity to continuously improve effectiveness, while the requirement for permanent restructuring is a natural consequence of the information paradigm pertaining to the enterprise’s activity (borowiecki, 2003). the paradigm in question manifests in the achievement of restructuring objectives, while the said objectives reflect themselves in enhanced competitiveness of the enterprise, improved adaptability and flexibility of the enterprise’s activity, the finest possible integration of activities, creation of a modern organisational culture along with innovative attitudes. the importance of the informative resource area which is one of elements of the organisational restructuring model, for the process of creating an intelligent organisation, has been recognised by w. m. grudzewski and i. k. hejduk. the researchers maintain that the process of implementing intelligent enterprises into economic practice requires to develop, 56 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 within the scope of organisation and management systems, communication based on it networks of lan type (local area network), on intelligent terminals which create the internet and use other databases (grudzewski & hejduk, 2004). activities, set forward within the scope of the organisational restructuring model, and pertaining to modelling of informative resources introduce modern and massive processing of data and information, application of expert systems in terms of production, marketing, sales and finances (e.g. integrated systems of production management). the said concept of informative system favours integration of all aspects of the enterprise’s activity. with reference to the foregoing, the model of organisational restructuring manifests in a preliminary stage of creating an intelligent organisation in compliance with the resource-based view, already know from the strategic management. according to the strategic management, knowledge hidden in the key abilities can provide the enterprise with a durable competitive advantage. in terms of changes, particularly important for setting foundations of an intellectual organisation is the reorientation of, e.g., hard coal mining companies towards task-based activities (project management method), supplemented by diversification of rigid organisational structures and opportunities pertaining to improved flexibility of employment as regards to the needs of the labour market. the globalisation of the world economy forces enterprises to introduce changes to management systems and rigid organisational structures to the benefit of more flexible ones. single-plant enterprises are a basic legal and organisational form of conducting the business activity. nowadays, the opportunities to develop organisations within their rudimentary scope of activity – i.e. focusing solely on a single business or national market – are exhausting (pierścionek, 2011). the organisational structure and the form of the enterprise’s activity that have been so far regarded as the most optimal ones, should evolve towards a transparent structure consisting of just a few hierarchical layers. in functional enterprises, there occurs a profound division of labour, whereas the processes, especially intra-functional ones, are rarely the subject of interest. the process-oriented enterprises tend to depart from the fragmentary division of organisations, with the purpose of treating globally all activities covered by the processes taking place in particular organisational units (mccormack & joh, 2001; cyfert, 2006). disadvantages of functional organisations: monotony and its influence on performance and quality; within a determined function, there occur only these processes which are necessary for the fulfilment of a given function; lack of process identification; lack of ordered and systematic modelling, and of process management; lack of employees in charge of processes and process teams; process chains are broken by boundaries of functional areas (subsidiaries, ‘departmentislands’ of processes at different levels); managers fail to discern final results, which are of importance to customers; 57 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 emphasis is put on the interior of the organisation and not on customers who determine the enterprise’s further prosperity; the management is usually concentrated on the parts of the processes; there exists a real danger of blurring the responsibility for final results of the enterprise’s activity (nowosielski, 2007). advantages of functional organization (dźwigoł, 2015a): use of top-class experts; use of specialist machines and appliances in particular functional divisions; improved quality; clear division of responsibilities; significant transparency. the process organisation is the highest form of organisational development, whereas internal organisational units are created on the basis of economic processes (schmelzer & sesselman, 2003). advantages of the process organisation: lack of ‘free economic spaces’ within the enterprise; customer-oriented approach is reinforced in the whole enterprise; reduction of hierarchical links; flexible attitude towards changes; motivational system oriented to customers and process performance; specialisation means enhancing the process organisation’s abilities, up to its multi-functionality. disadvantages of the process organisation: less effective use of the enterprise’s resources due to their fragmentation into processes; necessity to pursue time-consuming, horizontal coordination of the activity; the system cannot cover the whole activity of the enterprise; employment of additional staff may be required; access to resources and knowledge sharing are hindered. this is a combination of elements typical for functional and process structures, which treats both dimensions equally. on the one hand, one can notice the customer-related approach, whereas, on the other hand, there exist functions’ competencies. the process management requires to take into consideration the double subordination and plenitude of crossing points for functions and processes (stoeger, 2005). in the matrix (hybrid) organisation, one should take into account (dźwigoł, 2015a): functional units which prepare resources for particular processes, and perform on them some determined services; responsibility for resources lies with managers of functional units; responsibility for process results lies with process managers; 58 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 motivational system should be applied in case of a process manager and functional manager; the enterprise should be divided into responsibility centres (cost centres, profit centres); conflicts between functional cells and processes. the application of process and hybrid organisations requires considerable promptness to introduce changes, and notably a shift in awareness and the enterprise’s organisational culture. the employment of this type of organisation is particularly important in enterprises operating on the project-management basis. considering the above-mentioned approaches pertaining to organisation modelling, one should bear in mind that in case of modelling of restructuring processes, the scope of the restructuring in question is outlined by: specific restructuring objectives and ensuing scope of changes to be introduced in the enterprise, general rules and method-related guidelines for the implementation of organisational changes. what is important here is to maintain an individual approach to every restructuring action, with the assumption that there is no single and universal model of restructuring process, which would be useful for all enterprises and in all situations. considering the systems approach (which defines the organisation), one should focus on seven areas of the enterprise’s activity, also defined as ‘principal areas’, which were treated as the most essential frames for diagnosing. the key areas are the following (dźwigoł, 2015a): marketing and sales area; production area; human resources area; tangible resources area; financial resources area; organisational resources area; informational resources area. consequently, the area mentioned above should be the basic elements of the modelling of the enterprise’s activity within the scope of restructuring process. the considerations related to the directions of organizational activities aimed at improving the effectiveness of mining enterprises were based on an analysis of the functioning of the hard coal mining sector. the considerations concern the following issues (dźwigoł, 2010): restructuring mining enterprises; consolidation of mining enterprises, including enterprises from the environment; privatization of mining enterprises. two consolidation options are possible: 59 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 merger by acquisition transfer of all the assets of a company taken over to another (acquiring) company for shares or stocks which the acquiring company issues to the partners of the acquired company; merger by establishment of a new company establishment of a capital company to which the assets of all merging companies are transferred for shares in a new company. legal effects of merger registration: acquisition by the acquiring company of all the rights of the company being acquired acquisition by the connecting company of the assets of the merged company; taking over by the acquiring company of the obligations incumbent on the company being acquired, including tax obligations and obligations arising from events that took place on the part of the company being acquired before the merger; general succession on the part of the acquiring company (they also pass permits and concessions, unless the concession decision provides otherwise). the experience of mining enterprises related to merging mines confirms a significant decrease in the employed crew. the proposed concept will give further opportunities to increase the scope of technical restructuring of mines, e.g. the liquidation of further unnecessary shafts opens the possibility of obtaining additional resources trapped in these pillars, reduction of railway infrastructure, better and full possibilities of using the processing capacity of modern processing plants, more optimal time-spatial projection of mining works, rational drainage of underground waters and minimization of negative impacts on the environment, as well as disposal of unnecessary assets (buildings, structures and mining areas) (pyka, 2004). 4. results and discussion the consolidated company creates a complete and comprehensive customer service system based on diversified primary fuel sources. the created consolidated unit is a highly complex and unlimited area. this does not mean that organizational units combined according to the spatial and logistics criterion cannot be created within the consolidated group. this applies in particular to combined heat and power plants and heat distribution plants, as well as lignite mines and lignite power plants. the concept should meet the criterion of compliance with the state's energy policy aimed at creating competitive units, as well as the criterion of energy security. only strong, consolidated entities have a chance to stay on the market. these units can afford modernization and development investments, and can also cooperate with energy giants operating on the eu integrated market. the company consolidated under model xiv is difficult to restructure due to its complexity. high inertia and resistance to change can be expected. it is also worth paying attention to the possibility of concealing malfunctions behind the facade of a large organization, where the results are averaged. 60 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 the value offered to recipients consists of: a wide range of products and services offered; reliability and quality of deliveries and service efficiency; security of energy media supplies. thanks to our own resource base, added value is obtained in the following processes: hard coal mining; obtaining gas, as well as in the process of generating electricity and heat. sample consolidation concept model entities the concept assumes the existence of many entities located at various levels of the value added chain. the power level consists of: hard coal mines; brown coal mines; group of hard coal mines (pyka, 2004; dźwigoł, 2010). the nature of connections creating a concept in terms of connections between all phases of the value chain enables the isolation of subsequent links in the process from the acquisition of primary energy sources, through its conversion into electricity or heat and transmission through networks, up to sale to the final customer. this directional sequence of vertical dependencies in energy conversion logistics does not preclude horizontal relationships within individual industries. in many proposed consolidation models in the fuel and energy sector, a system of connections between a brown coal mine and a brown coal power plant was identified. the geographical proximity of these entities and the technological link allow the display of this specific type of spatial and technological connections. management the concept applies to a large capital group covering all separate phases in the energy sector. the management of such a large unit requires a reasonable shaping of the internal structure. a holding structure that groups companies around a particular distribution company seems to be a good solution. the creation of an organization with horizontal relationships gives large effects resulting from the concentration of enterprise functions, such as joint marketing effort, joint research, and concentration of financial resources for investments. on the other hand, horizontally combined units according to industry logic are not very flexible. key competences the concept generates a need for various competences that create a barrier to entry into the sector. in mining processes, skills and knowledge of exploration and cutting of hard coal deposits, recognition and preparation of deposits for surface exploitation, safe and deep mining of hard coal deposits, and exploitation of gas deposits are necessary. ecological protection and compliance with environmental protection standards are important 61 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 competences. heaps, saline water, drainage, mining damage are just some of the threats to the natural environment. the production of electricity and heat from coal requires the solution of many technical and organizational problems, such as ecological burning of coal, the use of waste or its removal. the necessary competences are not limited to forms of obtaining energy sources and its processing (pyka, 2010). the necessary competences in the area of distribution and marketing are listed below, which condition efficient customer service. in particular, these are competences in the field of: distribution of electricity; heat distribution; gas distribution; trading in electricity; servicing corporate clients in the scope of energy and gas supplies; individual customer service (households); providing services to smes; risk management on the wholesale electricity market; purchase and sale of electricity on the stock exchange and balancing market. material resources the group's basic wealth is natural resources: hard and brown coal; gas (pyka, 2010; dźwigoł, 2010). capital intensive technologies are required to obtain raw materials. particularly large outlays should be incurred for the construction and equipment of deep coal mines. also lignite mining and drainage equipment, excavators, loaders and conveyors make up the capital-consuming technical equipment of mines. technical equipment for gas intakes complements the assets of resource extraction enterprises. equipping with machines, devices, generating sets, transport means of power plants and combined heat and power plants is the third, valuable group of resources. the fourth group of resources are transmission and distribution networks: electricity, heat, gas. environmental protection devices also need to be separated. their value increases with the tightening of environmental protection regulations. in the context of eu regulations, one should take into account the increase in expenditure on this type of resources. the development of internet service and integrated customer service will require extensive resources creating computer and telephone centers. large financial and human capital is necessary for the smooth functioning of the consolidated group. staff with different qualifications is a resource that decides about the use of material resources. the total material resources of the consolidated group are supplemented by coal and gas reserves. intangible resources these resources mainly form functional systems. belong to them: deep coal mining systems; open-cast brown coal mining systems; 62 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 gas extraction system; coal mining securing systems (drainage, methane drainage); environmental protection systems; cogeneration; electricity and heat distribution system; gas distribution system; network management system; network security systems; integrated customer service system; debt collection systems; employee selection and training systems; group management systems and procedures, including the financial system; motivating system; internal control system (audit). behind the functional systems there are resources of human knowledge and competences as well as experience necessary to run and supervise the mentioned systems. the durability of the competitive advantage of the consolidated group according to model xiv is ensured by: raw material resources; closing the value chain from obtaining raw materials to customer service. hard coal mining consists of individual mines with very different characteristics, but in essence it is an economic organism that cannot function properly without a coherent, pro-effective investment policy implemented in the structures above mines; without a jointly maintained scientific and research base, ensuring the necessary progress in combating threats, in the development of technology and equipment, etc .; without own financial reserves enabling safe operations in conditions of high uncertainty. hence, the economic and financial condition of coal companies and the entire coal mining industry will largely depend on the accuracy of the selection criteria for joining mines into larger economic organisms. for strategic reasons, it also seems advisable to have a capital connection within the capital group of entities carrying out, e.g. coal sales. a link within the capital group of coal producers and entities selling coal that on the principles of dealership would implement a uniform marketing strategy integrated with uniform planning of the volume and quality of coal production depending on market needs. in addition, the functioning of specialized plants (commercial law companies), e.g. those dealing with accounting services for coal concerns and handling logistics processes of concerns should be included in such a mining structure. as part of the new structure, the privatization process of non-productive assets of mines will be continued, on the basis of which independent economic entities are created, aimed at becoming independent from the mining sector and entering external markets. 63 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 mining enterprises will be able to develop a uniform and rational policy of reducing employment in mines based more on the principle of moving the best experienced staff between mines and creating new jobs created by the joint effort of mines and municipalities. the creation of a large economic organism will shape the conditions and social climate conducive to the creation of an adequate number of jobs within the mining enterprise. in particular, remediation and development of areas devastated by existing mining activities provides great opportunities. the implementation of these tasks as part of a coal group, using its facilities for this purpose (as a separate plant or commercial law company) will also quite easily attract external investment capital. the possibility of separating specialized plants within the group, whose activity would be based on the ongoing liquidation of the effects of mining operations, the so-called mining damage. from the point of view of creating new jobs, there is also an ecological aspect of coal production. a large field of activity in this field is carried by the entire sphere of post-flotation waste management, which, thanks to the use of modern technologies, can be an excellent component of proppant mixtures, material for the production of prefabricated building materials, or material used in road construction. the economic use of rich methane resources can be another direction these types of projects, in addition to scientific support, require adequate funds to finance investments, but the use of such opportunities by the capital with a strong coal concern with the participation of external financing sources (european union funds, budget funds) will definitely change the strategy of employment restructuring in the mining industry (from passive to active ) in terms of creating new jobs, and at the same time may turn out to be the realization of the "ecologist's dream" of full recycling and the economist's dream of obtaining the product at the lowest cost, in this particular case from waste. as part of a strong capital group, you should also consider the possibility of starting a banking or property and personal insurance business. in terms of current opportunities to implement research challenges: realization of research challenges requires undertaking systemic measures on the scale of the entire economy as well as local ones in the area of mining. system solutions must create mechanisms for a situation of mutual interest in innovative solutions. the entrepreneur (e.g. mine) should have specific financial preferences that would constitute a kind of bonus for his striving to implement innovative progress in his enterprise. it seems necessary to create special funds at the state level that can support innovative activity on specific, preferential conditions; solutions that can be shaped within the hard coal mining industry require a determined pursuit by scientific and research units and mining entrepreneurs to create real and significant innovative progress and adequate research challenges for it (pyka, 2004). in the scope of consolidation and privatization: 64 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 the enterprise will have large assets, and thus its market value will be very high. this creates opportunities for cheap acquisition of external power both in financial capital and working capital; the company will have a strong competitive position in all offered products. it results from the possessed competences, but also from huge assets and the possibility of concentration of accumulated own and external resources for investments and innovations; by diversifying production electricity, heat, gas, water and other complementary services the company reduces market risk; a transparent organizational structure built on the principles of individual responsibility will enable decentralization of management and improvement of its effectiveness and efficiency; concentrating strategic decisions in one decision center implementing the principle of uniform management in a group of enterprises; increase in the efficiency of using coal resources, uniform group of enterprises, rational, selective deposit management as well as increased investment opportunities and comprehensive modernization of mine technical equipment; increasing the ability to meet market needs in terms of quality and product range, and increasing flexibility in responding to market changes. improving the efficiency of coal distribution, strategic market management, segmentation of the coal market and optimal use of distribution channels of coal sales centers. meeting the challenges posed to polish hard coal mining requires above all a systematic approach to solving the basic organizational problems of the sector and a thorough reconstruction of all economic and social relations. the sector restructuring processes will be as effective and efficient as the corresponding changes in the management system and organizational structures correspond to. the proposed organizational structure is optimal from the point of view of achieving a balance between social protection and competitiveness within a flexible enterprise with programmed ability to change (pyka, 2004; dźwigoł, 2010). 5. conclusions in the modern world, objectives of the enterprise must be more comprehensive, and thus we face the evolution of the enterprises, which evolution is aimed at automatisation and flexibility (bąk, 2009). with reference to the foregoing, the diagnosis is the starting point to formulate strategies for the enterprise’s development. therefore, the diagnosis should be carried out by interdisciplinary teams which consist of competent professionals and experienced practitioners selected among and beyond the enterprise’s specialists. an essential thing is to invite to the teams those specialists who boast wide experience in organising and managing, as well as expertise in other disciplines needed for establishing the said diagnosis. in this case, management and leadership must attempt to meet a series of conditions as to make possible the fulfilment of goals in the most effective way. relationship between management and leadership is of key importance here. it is necessary that every organisation knows what tasks 65 www.virtual-economics.eu issn 2657-4047 (online) henryk dźwigoł virtual economics, vol. 2, no. 4, 2019 should be performed by its manager, what responsibilities should be assigned to its leader, and what should be the common area for both roles (koźmioski & jemielniak, 2011). it is not possible to create a single restructuring model which would be suitable for every enterprise. while preparing a restructuring programme, although one uses similar operating rules, more detailed solutions depend on the specific character of the enterprise in question. questions pertaining to anticipated dimensions of restructuring and a scope of business activity to be affected: they will all depend on a kind and influence of factors which triggered the process in question; as well as on the restructuring goal. the restructuring process can cover the whole enterprise or its greater part. one cannot forget that restructuring is a comprehensive and continuous process, designed to restore, maintain or improve the enterprise’s competitive advantage on the market (dźwigoł, 2015a). continuous 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(2019). how do policies take effect in the development of the urban mining industry? a local capability perspective: evidence from miluo, china (2000–2017). journal of cleaner production, 240, 118216. https://doi.org/10.1016/j.jclepro.2019.118216 кwilinski alex 66 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 2018 volume 1 number 1 (october) reflexive coordination of communications in the construction of models for the development of an industrial enterprise oleksii bezchasnyi abstract. the article develops the mechanism of hierarchical-reflexive coordination of communications at the enterprise, which involves coordinating the actions of management agents in the process of interactions. it was established that in the process of implementation of the mechanism of hierarchical coordination of communications, the interests of agents are coordinated in the horizontal and vertical directions. accordingly, two types of reflection are used: informational (horizontal coordination) and strategic (vertical). the mutual influence of these types of reflection and the mismatch of the interests of agents within the hierarchy levels lead to contradictions and conflicts of inter-level (vertical) interactions. it is proved that reflection serves as the central management of the enterprise, it is the same task of the administrative function of coordination, at the same time, the task of coordination is the reflection of decisions that are taken as part of their coordination functions. moreover, due to reflection there is a certain selection, filtering of management information, and coordination in turn serves as a managerial task that allows the company to move in the chosen direction. keywords: reflection, coordination, communication, model, mechanism, development, industrial enterprise, interaction, hierarchy jel classification: м120, c610, о120 author(s): oleksii bezchasnyi department of accounting and audit, state university of infrastructure and technology, kyiv, ukraine e-mail: olbez@ukr.net https://orcid.org/00000003-2663-4688 citation: bezchasnyi, o. (2018). reflexive coordination of communications in the construction of models for the development of an industrial enterprise. virtual economics, 1(1), 66-83. https://doi.org/10.34021/ve.2018.01.01(5) received: july 7, 2018. revised: august 7, 2018. accepted: september 7, 2018. © author(s) 2018. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://creativecommons.org/licenses/by/4.0/ 67 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 1. introduction constant changes in the socio-political, economic and other conditions of modern life require from the person changes in its value orientations and social orientations. new economic conditions in particular require a new understanding of the role of time in society and objects of the economy, the realization that management is a science with certain laws, and possessing it requires time and appropriate professional training. in the science of management, the past half century has accumulated many theories and approaches, and one of the most popular is the approach in which management is understood as a process consisting of interconnected, continuous actions that are equally important for the development and success of the organization. these actions are called management functions and, depending on the specifics of the object of management, allocate them to one or another set. 2. literature review. in the theory of management is aimed at ensuring the stability of the system. representatives of the cybernetic school (viner, 1958) consider management as a "targeted influence" in complex mobile systems that can move from one state to another. due to such influences, you can maintain the stability of the system and maintain its dynamic balance with the environment, and due to the internal factors of the system. d.м. gvishiani (1972) observes that such an approach reduces management to a set of concrete actions; while outside the control sphere there are those processes and phenomena that precede actions of the result. management as an artificially created human process is opposed to the order of nature in the work i. prigogine and і. stingers (1984). in their view, the actions of the management are aimed at resisting the forces of nature and they are completely subjective. this idea makes the discussion thesis of cybernetics that the management system is self-governing, and its stability can be provided by internal factors. consequently, the definitions of "management" are given visualize differently positioned accents, due to which we have different interpretations that influence the further development of ideas about the management of a specific object and the need to allocate certain components to improve the efficiency of such management. the object of this research is an industrial enterprise our task is to formulate conditions for its more effective development taking into account modern laws and market requirements, a new type of economic behaviour, adapting all aspects of production activity to a changing and complicated situation in ukraine. at this time, we consider only one of the whole set of conditions that is related to the role of the employee and his contribution to the final results of the enterprise. http://www.virtual-economics.eu/ 68 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 in other words, the purpose of this unit is to find effective ways of managing labor, which ensure the activation of the human factor (aubrey, 2015). the first one who accumulates the energy of the industrial enterprise development and directs it in a certain direction is the management of the enterprise. in order for the leader to act consciously and not as a blind man, he must be armed with all kinds of professional means necessary for management the information resource, personnel, which collectively form the appropriate focal point, in which all communication flows converge and which develops a strategy of moving the company forward. coordination as a key function of the named centre allows you to trace and ensure compliance with the operating regime, performed operations and procedures proposed standards and norms. thanks to it, the management functions are performed continuously and uninterruptedly. the object of coordination activity is both managed and managment system. to coordinate their action among themselves and to avoid ineffective duplication of functions is a complex task of management of the production-economic system, including the industrial enterprise. the latin term "coordination" ("c" (cum) together and "ordinatio" ordering), means not just the coordination, but the coordination of the actions of several elements in the system. the system in which the coordination provides an additional movement is not static, but dynamic and is in constant motion. depending on which direction the system chooses in the universe of human activity, the role of coordination among other management functions depended. for example, such a role is constructive if it is understood as an agreement, a connection, an order, respectively (actions, concepts, constituents of something) (gaponenko & pankrukhin, 2004). it depends on the goals set by the enterprise, if this is understood as the process of uniting the work of divisions and other structural components of the enterprise (burkov & novikov, 2004). the following is the most commonly used definition in the special scientific literature for coordination. coordination is the process of achieving the unity of efforts of all subsystems (divisions), organizations for the realization of tasks and goals (parakhina & ushvitskiy, 2003). coordination management activity, which is to ensure the interconnection and coherence of subjects, objects and processes of work in time and space (gaponenko & pankrukhin, 2004). coordination is the achievement of consistency in the work of all parts of the system by establishing rational connections between them (hedouri et al., 2007). http://www.virtual-economics.eu/ 69 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 as it proves м.d. mesarović (1970), the central principle of coordination is the principle of observance of feedback. following it, the head has the opportunity to correct the decision and monitor the progress of its implementation, if necessary, making the necessary adjustments. thus, at each stage of the management decision, it is possible to remove information about the implementation, analyze it and develop it and make possible corrective points that can improve the implementation of the decision. in extreme cases, an ineffective decision, if not timely received information about its ineffectiveness, can be canceled at all. such changes in the external and internal environment occurring at the enterprise are based on the implementation of solutions for adaptation and correction, resource manoeuvre, and this forms the content of coordination. an important form of manifestation of the mechanisms of self-regulation and selfpreservation of the system is coordination v.d. rudashevsky (1990). he believes that the highest level of complexity are those measures that relate to the qualitative transformation of the entire system. a separate task of managing an enterprise in the process of coordination is the achievement of a coherent operation of systems that are at a lower level of its hierarchy (mesarović et al., 1970). to do this, g.l. morrisey believes that it is necessary to create conditions for the organization members to perform the actions necessary to achieve the goals of the organization (morrisey, 1977). consequently, the above definitions of the term "coordination" reflect two interrelated aspects of the concept the coordination of interests and the provision of interaction of elements. it is through coordination that relations between the subjects of management activity can be defined, which can be defined as horizontal, that is, the links between disparate directly by the subjects of management activity. based on research objectives, the main task of coordination is to achieve consistency in the work of all units of the organization by establishing rational ties between them. such consistency allows to ensure continuity and continuity of the management process. this task may be the basis for defining the concept of "coordination of managerial decisions at industrial enterprises," which we understand as the mechanism for establishing rules of interaction between the subjects of management activity in the enterprise. from the foregoing it can be concluded that coordination as a function of the management process at industrial enterprises is very important. without coordination of actions and decisions of separate units of the enterprise it is impossible to professionally manage it, in this case, the implementation of strategic plans will be impossible. vertical coordination was the object of research in the theory of hierarchical managment system, so it is traditionally considered that processes of coordination arise in organizations such as "hierarchy" to reconcile goals and objectives. it is mandatory to have a coordinator in http://www.virtual-economics.eu/ 70 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 place on the principles of stimulation and restriction. coordination efforts largely depend on the style of leadership: if the style is authoritarian, coordination is based on the statute and laws, the hierarchy; in a liberal style, informal methods are used, and so on. the main roles of coordination activities: preventive (anticipation of problems and difficulties); eliminates (eliminating interruptions in the work of the organization); stimulating (improving the organization even in the absence of a problem); regulating (preserving the existing scheme of work). there are number of approaches to coordination: informal non-programmed coordination, carried out on a voluntary basis and without a prior plan, is based on mutual understanding, general attitudes, interests and psychological stereotypes; programmed impersonal coordination, carried out in complex organizational structures, is based on standard impersonal methods and rules of work that are laid down in plans, programs, projects for frequent problems of coordination; programmable individual coordination, carried out in order to ensure that the performer does not interpret the tasks and directions of their work on their own; рrogrammatic group coordination, conducted in the form of collective discussion at the meetings, which allows for individual preferences, group and general organizational interests, and the opinions of various narrow-profile professionals (mesarović et al., 1970). problems of coordination in management work in one way or another are disclosed к. bagrinovsky (1977), v.n. burkov and d.a. novikov (2004), d. kahneman and а. tversky (1979), т. klebanova et al. (2002), h. dźwigoł and m. dźwigoł-barosz (2018), almeida j., silvestre c., pascoal a. (2008), l. hossain and a. wu (2009), w.s. alaloul, m.s. liew, and n.a. zawawi (2016), k. pająk et al. (2016), y. wang, y. liu, and c. canel (2018), and so on. but constant practical achievements in this area require the continuation of scientific description and theoretical substantiation of this phenomenon on the basis of new models and approaches. but first we consider some basic methodological provisions for further theorizing. the modelling of the task of coordination of work in project management on the basis of the use of the theory of fuzzy sets is carried out in the work c.y. lam and k. tai (2018). in the work (vasiliev, 1973) аlso widely discussed are the issues of information support for the coordination of the activities of structural elements at all levels of the hierarchical pyramid enterprise management. three types of coordination for enterprise management systems were proposed by w.g. ouchi. in particular, he highlighted: rigid (authoritarian), economic (market) and organizational type of coordination using the procedures for coordinating interests. in his work (ouchi & jaeger, 1978) an attempt was made to formulate a methodological approach to the synthesis of these three types of coordination for integration into the situational mechanism of preparation and adoption of managerial decisions at the enterprise, and formalizing it to the level of specific economic and mathematical models. http://www.virtual-economics.eu/ 71 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 as for industrial enterprises, ukranian researchers т.s. klebanova, e.v. moldavskaia, and kh. chang (2002) proposed a classification of coordination activities according to the following criteria: operational, investment, financial and economic, reflexive, marketing, innovative, reflexive. the last of the criteria of coordination reflexive in the opinion of the authors, should become a key point in the adoption and agreement of management decisions. thus, in our further considerations, there are grounds for discussing a reflexive approach to the preparation and adoption of managerial decisions at industrial enterprises (dymchenko, 2013) (malchik, 2010). further research here requires organizational, methodological, methodological and other problems, since the processes of awareness, rationality of decision making by market participants, etc are not described in detail at present, and even more so these descriptions have not been verified by the corresponding formal models. consequently, for the management of an industrial enterprise, the manager must first establish a management activity (his own "reflexive" activity (kalinescu, 2013), and then coordinate by involving subordinates an adequate object activity for him. reflexion (reflexio (latin) – turning back, reflection) is understood as the form of human theoretical work aimed at understanding their own actions and laws. the content of reflection is determined by subject-sensory activity. reflexion is the realization of practice, the objective world. simultaneously, this is the method of philosophy. in the xviii century devid yum (1998) refers to the reflection of secondary perceptions (perception), those ideas that are based (secondary) on the already realized sense perception (primary). а. schopenhauer (2000) defines reflexion, as a phenomenon of secondary order, which is preceded by a visual representation, generalization to the concept, and then reflection as a reproduction of the primary visual material, meaningful in certain notions of the world. l.p. grimak (1991) suggests that rené descartes identified reflexion with the individual's ability to concentrate on the content of his thoughts, abstracting from all external; j. locke shared the philosophy and feeling, interpreting the first as a special source of knowledge internal experience (reflection), in contrast to the external, based on feelings. psychologist s.l. rubinstein (2000) deduced the definition of reflection in terms of two ways of life: the first is the direct life in interpersonal relationships, the second (reflection) is the ability of a person to take a position outside of life, to look at life from the side, it is through reflection, he argued, there arises a person's philosophical awareness of life, and therefore its moral formation takes place. it is important for us in these definitions to identify (and this is common in them) that a person reflects on his own thoughts, feelings and other spiritual achievements thoughts (descartes), feelings (d. hume and j. locke), the will (a. schopenhauer), the life (s.l. rubinstein). similarly, the reflection in management is possible in a person only in relation to his own activities. http://www.virtual-economics.eu/ 72 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 3. methodology. as it is deepened into the subject of research, we can say that the reflection for the subject of governance itself gives a new quality of understanding of the situation, since it summarizes it even more by introducing its actualization, specification, coordination and demand itself. of the many manifestations, hidden, and even potentially possible variants of the situation, the subject of management (in our case, the head of an industrial enterprise) chooses one such generalization, which, on the one hand, allows us to focus on the development of something specific, on the solution of some, on the opinion of the head, the most actual problem in this situation, and, and, on the other hand, allows you to bring management beyond the framework of the program of reflective management. concrete contributes to the development of management process due to the fact that the subject of management overcomes the complexity of infinite variety of practices, updating for itself in one of its area. the property of the specifics of reflexive management partially corresponds to the situation that exists in any professional field each of them "in-itself" is specialized. but there is also a significant difference: management works with the whole continuum of problems, whereas any other professional activity deals with a certain (always limited) context. withdrawing from the reflexive control of external constraints, we arrive at a certain selfsufficiency of the subject of control. and the essence of the practice of reflexive management can now be considered self-actualization of its subject. in other words, a professional manager (leader), unlike a person who performs a reflection for self-development and solves certain personal tasks, performs socially significant work (building an institution and integrating it into a general social context with different types of transactions), engages in such their activities are professional institutions and personnel. any professional task, which not related to management also needs reflexive moves of performer and concentration on a particular actual task for this activity at that time, that is, a certain specialization. but the manager works with all the contexts of the problem, while the development of a professional task all the time narrows the field of general search and actualises individual skills and predispositions of a person. in view of this, we distinguish the features of reflexive management, which are: actualization of socially significant demand; construction of a set of unique managerial concepts (abstractions) and relations in this set the so-called conceptual enterprise; implementation of the conceptual enterprise management activity, including through the involvement of professional experts in the conceptual enterprise conceptualization; coordination of management activities in the construction of the organizational structure of the industrial enterprise. consequently, we have proved that reflection serves as the central management of the enterprise is the same task of the administrative function of coordination, at the same time, the task of coordination is the reflection of decisions that are taken within their framework of http://www.virtual-economics.eu/ 73 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 managerial coordination functions. moreover, due to reflection there is a certain selection, filtering of management information, and coordination in turn serves as a managerial task that allows the company to move in the chosen direction. in the field of enterprise management, the preservation of effective and appropriate coordination is ensured through the reflection of reconciling decisions. the word "concordance" here indicates that there is communication between different actors of management and we have predictions that more subjects facilitate a more balanced and responsible management decision. in addition, in the process of reflection, the effects of learning and mutual enrichment as a result of informative exchange are constantly revealed. as a management support function, сoordination covers the idea of information provision inherent in information-oriented coordination concepts. in contrast to the latter, the information task here follows from the highest management function of coordination, and thus it is included in the internal organization field of action. on the basis (lepskiy, 2006) created figure 1, which presents the characteristics of traditional and new types of enterprises that have an organizational structure of different levels of rigidity. this allows us to draw conclusions about certain aspects of the organization of reflexive processes in industrial enterprises of the xx and xxi centuries. the comparison of the characteristics of the organizational structure of enterprises represented in figure 1, typical to the past and present century, gives grounds for talking about: 1) increase the role of subjective attitude towards employees on the part of managers each employee should be not formally, but sincerely interested in the results of the enterprise, and management should take into account his view on the management and organization of production processes; 2) increase responsibility for the result and its differentiation by level of authority or level of employee contribution to the production process; 3) increasing the role of reflexive technologies in building a communicative enterprise system; 4) new requirements for basic knowledge, skills and communication skills of employees; 5) creation of conditions for the development of reflexive abilities of "carriers of reflection." to consolidate this conclusion, we quote the statement of the well-known management theorist piter drucker: "the foundation of modern society, economics and human relations is not technology or information and not productivity. the foundation of modern society, economy and human relations is a managed organization as a social institution whose purpose is to achieve the result" (drucker, 2007). http://www.virtual-economics.eu/ 74 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 figure 1. types of organizational structure of the enterprise and its characteristics (communicative, reflexive, coordination) source: formed by the author on the basis (lepskiy, 2006). organizational structure of the enterprise rigid (enterprises of the xx century) flexible (enterprises of the xxi century) employees are focused on specific tasks, there is no feedback and they do not reflect on the quality of their performance. the top manager is responsible for the entire production chain communication hierarchical, vertical, business communication is of a formal nature high level of subordination coordination of actions of employees on the basis of job descriptions basic requirement for an employee: knowledge of the subject and technology the development and stimulation of the development of reflective thinking of workers is absent employees are focused on the goals of the enterprise, are responsible for their own and overall results, are interested in the development of the organization top managers and each employee within their authority are responsible for the production line communication vertical and horizontal, business communication is built on the combination of formal and informal forms the level of subordination is medium or low coordination of employees' actions takes place on the basis of procedures developed on the basis of reflexive technologies the basic requirement for an employee: the ability to communicate, be prepared for learning, have reflexive thinking development and stimulation of the development of reflective thinking of employees is a constant and mandatory condition for the functioning of the enterprise http://www.virtual-economics.eu/ 75 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 the managerial coordination function always takes into account the goals of the higher order enterprise (as the individual leader applies the entire set of information for the solution both beyond the management system and the one that reflects the communicative connections within the system). given the appearance of possible deviations caused by incomplete or distorted information about the actual state of affairs of the enterprise, the performance of tasks of reflective coordination is exposed to such principled methodological difficulties. first, the system of communication at the enterprise in practice is formed not according to the given parameters, but arises from extremely complex relations of exchange and interactions. because of this, it is difficult to achieve a clear subordination and build a structured hierarchical system that is geared towards strict adherence to rules and goals. secondly, the reflection of the subjects of management may be too broad, focused on specific details, which can be omitted from the attention of the higher order objectives. therefore, there is a need for constant verification of goals, their specifics to individual tasks and the perfect tools for evaluating the results. thirdly, when evaluating management activities, there are accounting problems. on the one hand, managerial action in most cases has an immediate effect on several goals, and on the other, several management measures can affect one and the same purpose. these three major problems can be limited, but not completely solved. the latter has great consequences for the organization of coordination of economic processes in the enterprise. under the traditional type of organizational structure of an enterprise, if the manager even delegates’ powers, then in order to control and verify the "delegated" activities, there is an established idea of how one or other function must be performed. it is here that the property of reflectivity, through which changes in the policy direction of development does not occur because the direction of development and key issues is developed on the basis of the vision of such a leader. that is, there is an effect of the identity of the manager and the enterprise. if the organizational structure of the company is based on the principles of reflexive management (that is, as the ratio of officials (managers and specialists) of the enterprise), then each manager's attitude to the subordinates is adequate to the structure of his own activities, that is, any problem (if you look at it through the prism of the structure) can always be localized to the exact and sole responsible official for it. and this localization is achievable and carried out within the activities of the head of this person. accordingly, the professional duty of the manager of the lowest level is not to "issue" the problem beyond his own activities (that is, at the upper levels of management). and any problem, if the company operates the principle of reflexive management, manifests itself at an adequate level in the activity of a specific manager or specialist responsible for it. the property of coordination at the same time always provides sufficient informational completeness of the given official for the professional solution of the problem. http://www.virtual-economics.eu/ 76 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 in view of this, there is no need to reflect the organizational structure of the enterprise in the form of a scheme in order to trace the way of solving the problem and participation in these particular units. because an official who is responsible for solving it situatively creates a team that can solve it. this practice is accepted, for example, in japanese firms that do not have a certain organizational structure (duncan, 1999), and where the delegation of fragments to subordinates (one of the main points of structuring) is determined only by the organization of each manager of his own activities, provided that it can and should change, accompanied by change, removal, and constantly evolving as changes of external circumstances and as the improvement of their activities by leaders of different levels of government. figure 2 shows the feedback control scheme required by the manager who manages the traditional methods. this scheme manager should apply to each object of the set of processes (technological, economic, industrial, etc.), which are carried out by its subordinate managers and specialists with a diverse and quite complex professional activities for everyone. figure 2. feedback control scheme source: formed by the author (duncan, 1999). in order to make competent decisions and act according to the above scheme, the manager should not only know the specifics of individual processes of the enterprise, but also perform a coordinating function between these processes. such, is not feasible for one person, therefore in the practice of management are used two simplifying methods: 1) the head enters into operation an institution of deputies, who take over the work or part of the work in separate areas (and models), thereby unloading the first person (relations between the head and deputies are not formalized these deputies differ from the heads of subordinate units); 2) the models, which the manager works are so simplistic that activities within their framework become accessible to him. in both cases, the application of such a scheme (figure 3), the leader really "loses" in personal competence. the subject of management (decision-making) the object of management leading influence (li) feedback (fb) model object http://www.virtual-economics.eu/ 77 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 figure 3. real control circuit with feedback source: developed by the author in the first case, it releases part of its activities from the hands, and in the second case, the models are so "simplistic" that they do not reflect the real state of affairs. and then, in the presence of local and contradictory interests in the subordinates, the head can take inadequate real situation solution. in the first case, he also receives additional "human" problems in connection with the introduction of new officials (deputies) into the scope of their activities. the complexity of the position in this control scheme is to achieve the adequacy of the model of the managed object, as well as the appearance of the model itself. what the basis for building the model of the enterprise or its individual production processes? a priori, it does not exist, nobody represents its director. to consider that the head (for example, from many years of experience in various positions at a given or similar enterprises) is competent enough to construct such a model (or models) also wrong, because in such a competence the head of the model eliminates the very necessity. in addition, this feedback scheme can not reflect the situation of enterprise development, when a new production process is being built, there is no existing function of the existing enterprise, but there is a function only of the activities of the manager and therefore can not reveal in the scheme the subject cognitive relations. 4. results and discussion there is a need to consider the functions of coordination in a differentiated way as a management function and as a function of management support that would simultaneously provide the enterprise with the tasks of distribution, stimulation, provision of communications, coordination of interests, etc. this would have a purposeful influence on the decision-making model of management agents to ensure their coordinated interaction in the subject of management deputy 1 (model 1… n) coordination ... object 1 object 2 object n deputy 2 (model 1… n) deputy m (model 1… n) http://www.virtual-economics.eu/ 78 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 accordance with the rules established by the coordination centre, which are aimed at achieving the common goal of the operation/development of the enterprise. the solution of the above-mentioned coordination tasks in hierarchically organized management structures, including industrial enterprises, is impossible without formalizing the interconnection of the elements of the corresponding mechanism, which determines the feasibility of constructing an object model for the coordination of managerial processes within a hierarchical reflexive approach. before defining the main and secondary levels of coordination and modeling the relationships, it is necessary to identify key management objects, find out their place in the structure of the enterprise, identify and describe their information potential. immediately predict that the key objects of the general mechanism of coordination of managerial processes at the enterprise are most tied to the goals of the operation / development of the system z ,z 1,z . according to the goals formulate more specific tasks within the overall strategy of enterprise development. this allows the whole spectrum of goals to be divided into separate blocks (tasks) b,b 1,b and bring it to the level of local solvable tasks c ,c 1,c . at traditional enterprises, where the management structure has the form of hierarchy, according to the levels of hierarchical control, all tasks are distributed. at the same time, the strategic and coordination tasks of management are separated from operational activities: strategic directions and goals of development formulate top managers, they also take the most important industrial and economic decisions; coordinates the activities of all divisions of the enterprise middle management level; operational management of tasks and organization of activities in structural sub-divisions engaged in management of the lower level. means and methods for reaching the set goals operational level of management (lower and partially middle managers) develops and performs independently, but only within the framework of those relationships and interdependencies that are established within the enterprise and are regulated by senior management. r.n. lepa (2006) has developed a general scheme of management of an industrial enterprise, having identified the following levels of governance: government (level 0); general manager (level 1); managers for functional areas (level 2); heads of enterprise divisions (level 3); specialists of enterprise divisions (level 4); enterprise operating system (level 5). having taken this scheme for the methodological basis of the mechanism of coordination of management processes, we denote a hierarchically organized structure of an industrial enterprise that contains six key levels of management ii , i 0,5 . objects organizational structure of the enterprise, which are distributed at certain levels of the hierarchy, are management agents responsible for the implementation of a certain range of tasks assigned to them, functions f , f 1,f . the latter may take the form of job descriptions, http://www.virtual-economics.eu/ 79 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 production, technological, financial, design, information tasks, etc., but their main characteristic is the establishment of communicative information interchange in order to fulfill these tasks. if we return to the management scheme, which we adopted for the methodological basis of the developed mechanism for coordination of managerial processes,then for level 0 members of the board of directors of the enterprise, level 1 general manager, level 2 managers of functional directions (for the industrial enterprise chief engineer, chief economist, chief of production, heads of main workshops, chief accountant, deputy director of commercial matters, deputy of personnel and social issues, etc.), level 3 heads of enterprises a (heads of departments and shops of industrial enterprises), level 4 specialists of enterprise divisions, level 5 operating system of the enterprise. in the process of implementation of the mechanism of coordination of managerial processes in the enterprise, agents interact with each other through information links. considering the connections in hierarchical organizational systems, the authors of the work (burkov et al., 1989) substantiate their horizontal and vertical direction, emphasizing that the vertical direction shows not only the subordination relations (as traditionally), but also the movement of information flows from the bottom up and in the opposite direction, while the horizontal links show the position of the control elements relative to the external environment and among themselves within the framework of the considered level of the hierarchy. thus, the information reflexive links of agents within a single level of the hierarchy are defined as horizontal interactions of agents, interlayer interactions as vertical ones. on the example of a pair of management agents, we consider the possible types of interactions that arise in the process of coordinating management processes at enterprises. assume that certain management agents i j a і k q a (where j( q ) serial number of management agent at i( k ) th level of the hierarchy) interact with each other in the process of coordinating management processes i p k j q v a , a    . тhen: at i p observe a horizontal connection, or interaction of agents within the same level of management; at i p observe a horizontal connection, or interaction between management agents of different levels of the hierarchy; if j q i p    there is a reflection of the management agent about their own ideas about reality, the principles of their activities, etc. (autoreflection). in addition, the presence of strategic and informational reflection in the process of interaction of management agents should be noted. information reflection is the process and result of the agent's reflection on the values of the uncertain parameters that these opponents are aware of and their opponents think (other agents); strategic reflection is the process and http://www.virtual-economics.eu/ 80 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 result of the agent's reflection on which decision-making principles is used by his opponents (other agents) within the framework of the awareness he attributes to them as a result of information reflection, that is, strategic reflection precedes the decision-making by the agent of the chosen actions (novikov & chkhartishvili, 2002). the development of the mechanism of hierarchical and reflexive coordination at the enterprise involves the coordination of the agents of management in the process of interactions of agents k v with the help of information flows kv g , which contain a large number of indicators   vk g x on realization of planned (target) tasks of enterprise management. at the same time moving from the top down to the hierarchical structure of the set   vk g x is detailed according to the level of the hierarchy. thus, each of the agents of the respective levels of management has a set of planned indicators   vk t g x , which corresponds to the goals of enterprise development at a certain point in time t. but, each of the agents of management perceives sets of such indicators   vk t g x through the prism of their own intentions and goals, which requires the consideration of reflexive components in the process of implementing the mechanism of coordination of managerial processes. in addition, it is important to take into account the completeness of the agents of management awareness, their competence and the motives for making decisions when implementing relevant planning tasks. thus, there is a need to take into account the subjective factor of the perception of the agents of management of the relevant indicators of management in the composition of information flows kv g . to do this, in the object model of the coordination of managerial processes in the enterprise within the hierarchical-reflexive approach to determine kv g except for sets of planned indicators   vk g x distinguish characteristics of information flows   vk g h and appropriate intents of control agents   i j vk a g u . at the same time, under the characteristics of information flows   vk g h is the probability of distortion of the truth due to the incompetence or ignorance of the agents of management, and the probability of ambiguous interpretation of the information received, which is determined by the intentions (intentions) of the agents   i j vk a g u of management   i j vk a g u in the process of implementing the scheduled management tasks. http://www.virtual-economics.eu/ 81 www.virtual-economics.eu issn 2657-4047 (online) oleksii bezchasnyi virtual economics, vol. 1, no. 1, 2018 thus, in the process of implementing the mechanism of hierarchical coordination, the interests of agents are coordinated horizontally and vertically. accordingly, for such an agreement, two types of reflection are used: informational (horizontal coordination) and strategic (vertical). the mutual influence of these types of reflection and the mismatch of the interests of agents within the hierarchy levels lead to contradictions and conflicts of inter-level (vertical) interactions. in view of this, the necessity of using the tools of complex harmonization of the interests of the participants of interactions within the framework of the mechanism of hierarchical and reflexive coordination is updated. references alaloul, w.s., liew, m.s., & zawawi, n.a. 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(2003). osnovy teorii upravlenia [fundamentals of the theory of management]. moscow: finance and statistics (in russian). prigogine, i., & stengers, i. (1984). order out of chaos. new york: bantam books. rubinstein, s.l. (2000). osnovy obshchej psihologii [the basis of general psychology]. saint petersburg: peter (in russian). schopenhauer, a. (2000). novyi paralipomenon [new paralympion]. moscow: exmo-press. vasilyev, yu.p. (ed.) (1973). informacionnye sistemy v upravlenii proizvodstvom [information systems in production management]. moscow: progress (in russian). wang, y., liu, y., & canel, c. (2018). process coordination, project attributes and project performance in offshore-outsourced service projects. international journal of project management, 36(7), 980991 https://doi.org/10.1016/j.ijproman.2018.02.005 viner, n. (1958). kibernetika i obshhestvo [cybernetics and society]. moscow: sovetskoye radio (in russian). http://www.virtual-economics.eu/ кwilinski alex 74 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 2020 volume 3 number 1 (january) the poles’ perception of the european integration before the accession referendum dariusz krawczyk abstract. the announcements of poland leaving the european union structures were met with disapproval by the majority of the society. why is the possible “polexit” perceived negatively by nearly 90% of the poles? previously unpublished results of a public opinion survey carried out one month before the referendum, in which the polish people supported accession to the european union, are presented in the paper. the research focused on studying the reasons for positive and negative views regarding the possibility of including poland in the european union structures. the project’s objective was to obtain the data on the respondents’ attitude to the european integration in order to reveal the causes of their disapproval or enthusiasm. the results obtained in 2003 reflect the respondents’ expectations and fears regarding the upcoming change, at the same time revealing the level of their knowledge on the course and nature of integration processes. they are also a source of information about the social perception of opportunities and threats associated with accession, making it possible to compare them with the results of opinion surveys about the european union carried out 15 years after the presented research project. comparison with opinion polls on the european union carried out fifteen years after the described research study shows that in 2018 positive feelings in poland towards integration are equally well established. keywords: poland, european union, european integration, polexit, accession referendum jel classification: p16, z13 author: dariusz krawczyk social contacts department in the city hall in zabrze, 1 religi street, zabrze, poland, 41-800 e-mail: d.krawczyk@olpress.pl https://orcid.org/0000-0003-1823-0309 citation: krawczyk, d. (2020). the poles’ perception of the european integration before the accession referendum. virtual economics, 3(1), 74-94. https://doi.org/10.34021/ve.2020.03.01(4) received: october 30, 2019. revised: december 15, 2019. accepted: december 27, 2019. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://orcid.org/0000-0003-1823-0309 https://doi.org/10.34021/ve.2020.03.01(4) https://creativecommons.org/licenses/by/4.0/ 75 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 1. introduction the paper covers the analysis of previously unpublished results of a public opinion survey carried out one month before the nationwide referendum, in which the poles were to decide on their country’s accession to the european union. analysing the process of individual countries’ accession “to the european communities and then to the european union” it was not everywhere that the decision was made during referendum. first of all, there were no accession referenda in six founding member states of the european communities, i.e. in france, germany, italy, belgium, the netherlands and luxembourg (grabowska, 2003, p. 96). however, the law in poland required this procedure, as in the case of ireland, denmark, austria, sweden, finland, and also in great britain, where it was the first referendum in history. direct quotations from respondents' statements that reflect the sentiment related to the possibility of poland's accession to the european union are included in the paper. they are a record of hopes and fears, as well as a projection of opportunities and threats caused by integration perceived by the average residents. 2. literature review before poland's incorporation into the eu structures, the researchers focused on the globalization process related to integration (budnikowski, 2001). after accession, among others, the economic aspect was analysed (zielinska-głębocka, 2018) with a particular emphasis on structural funds (swistak, 2016). attention was paid to the issue of euroregions in organizational, financial and functional terms, as well as their impact on development in connection with regional policy (greta, 2013). the phenomenon of reforming the eu structures was also subject to scientific reflection (witkowska et al., 2017). moreover, crises within the european union were analysed (stolarczyk, 2016). the findings proved that scientific community analysed european integration from different points of views: renewable electricity integration (bernath et al., 2019); integration in the european electricity market (saez et al., 2019); economic integration (boglioni, 2019; davydchyk et al., 2018; cutrini, 2019); institutional integration (campos et al., 2019); innovation and sustainable development (dalevska et al., 2019; kharazishvili et al., 2019; kuzior & zozul’ak, 2019; kwilinski et al., 2019; mikhnevych et al., 2020); economic transformation (głowski & kvilinskyi, 2017); scientific integration (lyashenko & pidorycheva, 2019); europeanization of physical activity (mnich, 2019); and social integration (schnittker, 2019). 3. description of the study the research project was aimed to learn the residents’ opinion regarding the accession of poland to the european union, and – what is most important – justification of the opinions expressed. the survey was carried out one month before the nationwide referendum on granting consent to ratifying an international agreement, which was held on the 7th and 8th june 2003. the poll was carried out at the “laziska” power plant, a large industrial plant in the silesian voivodship, where the employees were given the opportunity to share their feelings about including their http://www.virtual-economics.eu/ 76 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 country in the eu structures. with the approval of director klemens ścierski1, the author of this paper prepared a survey addressed to the company’s personnel. the conditions of real voting by ensuring the two-day functioning of the commission accepting the questionnaires from employees2, completed on a voluntary basis, in a way guaranteeing the universality of all employees’ participation in the study , with no possibility of assigning responses to individual persons participating in the survey, were recreated in the project. the point for completing the questionnaire forms operated in “laziska” power plant3 from the 7th to the 8th may 2003. the forms included the question about the respondent’s attitude to the european integration and preferences regarding participation in the polish referendum scheduled for the 7th and the 8th june. written responses given, the questionnaires were placed by the employees in ballot boxes. the employees were informed about the opportunity to participate in the survey by means of internal communication media4. consequently, 590 people, i.e. 51.9% of the employees who were present in the power plant during the survey, participated in the project. the majority of respondents supported the accession of poland to the european union. 83.4% of respondents expressed their approval for accession. only 14.4% of respondents5 had a negative opinion on inclusion of the country to the eu structures. at the same time, 84.9% of employees declared their will to participate in a national referendum. one month after the end of the survey among the employees of the power plant, there was held a nationwide referendum, during which the turnout amounted to almost 59%. 77% of voters supported the european integration, while 23% of people participating in the referendum voted against6. 4. the sources of approval for the european integration 1 klemens ścierski, born on the 8th november 1939 in ledziny, a polish politician and manager, was the director of “laziska” power plant during 29 years. he was, among others, the minister of industry and trade, the second term member of the sejm of the republic of poland and the fifth term senator of the senate of the republic of poland. died on the 1st of november 2018. 2 1423 persons were employed in the “laziska” power plant at the time of the survey. 75% of the staff were men. the average length of service was 22 years, and the average age of the employees was 43 years. 3 the “laziska” power plant has existed since 1917. in the 1990s it was thoroughly modernized. during realization of the research project it was one of the most modern polish power plants (installed capacity of 1155 mw) supplying more than 4% of electricity produced in the whole country. it was a part of the poludniowy koncern energetyczny s.a. the “laziska” power plant was the first power plant in poland that simultaneously implemented the quality (iso 9001), environment (iso 14001) and work safety (pn-en 18000) integrated management system. 4 the information was published in the „laziska” power plant monthly, broadcast by the company cable radio and placed on the notice boards. 5 the rest of respondents submitted questionnaires that did not meet the formal requirements, that is e.g. without marking the preferred answer. 6 the data from the official website of the state election commission at http://referendum2003.pkw.gov.pl [accessed 14th december 2017]. http://www.virtual-economics.eu/ http://referendum2003.pkw.gov.pl/ 77 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 the main objective of the project was to find out the reasons shaping the residents’ opinions about the european integration. that is why there were two open questions in the questionnaire form. 58.6% of participants of the research project answered the first of them: “why do you want poland to be a member of the european union?” supporters of integration gave the individual reasons for a positive decision (figure 1). a belief that the accession will expand job opportunities providing financial satisfaction (11.8% of answers); besides, a belief in more or less conceivable “better future” for children of people participating in the survey (11.6%) dominated among the reported motivations. hopes for generally favourable changes in the country were at the similar level (11.2%). positive image aspects related to the formal affiliation of poland to the european structures (10.4%) as well as economic and social development of the country (10.1%) were the next responses in terms of their number. the respondents’ opinions also showed a significant scale of disapproval in relation to the national authorities’ functioning (8.9%), which, in combination with hope for limiting the corruption (5.5%), revealed a considerable disappointment over the internal situation in poland. a marginal share of responses regarding the introduction of the monetary union (0.5%) or the possibility of obtaining funds from the european union to finance development projects (1.2%) is typical. this may be a sign of low effectiveness of information activities carried out at that time to present the consequences of integration. in comparison with the most frequently quoted reasons for positive opinions such as a relatively small share of answers related to improving the quality of social benefits (0.8%), freedom of travel associated with the abolition of border controls (4.9%) or a forecast of increase in the wealth of a eu member state’s society (6.9%) can be astonishing. figure 1. reasons for the respondents’ positive opinions on integration with the european union. source: the author’s own research. 11.8 0.8 11.6 6.9 8.9 0.5 2.3 5.5 10.1 1.1 1.2 4.9 11.2 11.8 6.6 0.2 1.4 4.0 0 2 4 6 8 10 12 14 work better future disappointment with authorities law development of the country eu funds hope for changes inevitability of integration free market http://www.virtual-economics.eu/ 78 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 4.1 hopes for the labour market nearly 12% (11.8%) of respondents approving the accession of poland to the european union counted on improvement of working conditions both in poland and other member states. the vision of making it easier to get employed abroad was especially attractive. in this context it is worth recalling that as a result of integration with the european union, starting from 1 may, 2004, the polish citizens could freely become legally employed in great britain, ireland, sweden and newly admitted member states (with the exception of malta) (ossowski, 2014, p. 83). the answers that documented emotions of respondents who emphasized, among others, their hope to get a job abroad deserve researcher’s attention. according to them integration is “an opportunity to work abroad in the eu countries”, “a chance to improve wages, working conditions and greater presence in other countries”, “a greater opportunity to work abroad”, “an opportunity to work abroad, there will be more workplaces for young people”, “work in the european union, better wages”, “the borders will be open and there will be a possibility to work”. here we have also answers emphasizing greater opportunities for attractive employment7: “expanding the labour market and improving the quality of work”, “opening the markets, work for us and for future generations, free movement of people, better political prospects, chance for us in the field of equal treatment”, “better prospect of finding a job, higher salary”. in fact, the later research of the scientists dealing with the funds transfer to poland concluded that after integration "workers’ remittances came mainly from the eu countries, mainly from ireland and great britain. the earnings in those countries increased in 2004-2007" (puzio-wacławik, 2010, pp. 185). specific hopes, such as “i hope that a situation on the labour market will improve and that it will be possible to get a favourable credit”, “a possibility to be employed abroad means elimination of unemployment”, “more workplaces, better life conditions. it is an open window to the world for us”, were also associated with the opportunity to work abroad. a belief in improvement of working conditions in poland after the country's inclusion in the eu structures can also be found among the responses, exemplified by the statements like “connecting europe – equal work and pay conditions”, “i hope that working conditions will improve”, “i think that it will improve the standard of the poles’ life and reduce unemployment”, “equal (eu) work and pay conditions”, “i hope that then it will be easier to find a job, not only abroad, but also in poland”. people also sincerely hoped that salaries will increase in poland: “maybe salaries and comfort of life will increase”, “i am interested in salary calculated in eur after poland’s accession to the european union” , “so that it is better and the job is better paid”. the belief in the improved situation on the labour market was emphasized: “employment for all the people and adequate pay”, “to ensure job, to improve existence and situation”, “for improvement of working conditions”, “employment of young people, reduction of unemployment”, “maybe there will be fewer unemployed people”, “increase in the number of 7 integration was also associated with expectations of people from the energy sector to get a job abroad: “maybe the obligation to verify the qualifications of those responsible for energy devices, installations and networks will be abolished”. http://www.virtual-economics.eu/ 79 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 jobs”, “creating new jobs”. positive changes in perceiving the employment by the employees were also expected: “maybe there will be more workplaces and we will change our attitude to work”. however, wishful thinking, such as “i want poland to be a member of the european union to live more comfortably and to ensure work for everyone”, prevailed. the prospect of internal stabilization was also seen through the increase in the number of job-offers generated by the eu integration: “joining the european union rises the hope of unemployed people to get a job, to live with dignity and to earn their bread. maybe at last it will be better to live in this country”. 4.2 precise expectations in relation to accession a conviction about an increase of accessibility and quality of services in poland, associated with accession, appeared among the respondents’ detailed answers describing the sources of positive perception of the european integration. less than 1% of respondents counted specifically on “improvement of health care”, “improvement of life due to state-of-the-art medicine” and “improvement of social care for ordinary people”. a vision of monetary union was another argument for integration. however, only 0.5% of people polled articulated the possibility of joining the euro zone as a reason for approval. it is worth noting that in the end poland did not adopt the common currency, although the forecasts assumed that “the effect of trade expansion may occur after announcement of the decision to join the euro zone and undertaking the commitment to stabilize the exchange rate. moreover, joining the euro zone should contribute to further increase of polish trade, in particular export to other euro zone countries” (cieślik et al., 2009, p. 85). respondents hoped simply for e.g. „salary in euro” or believed in long-term benefits of adopting euro: “for the benefit of generations, because there will be a common currency”. a little bit more than 2% of respondents counted mainly on the improvement of polish legal system which, according to them, would be forced by the accession to the european union. in their opinion “most of cases will be settled clearly and transparently, connections and deals will be stopped and then maybe finally it will be normal in this country”, “the law will be understandable”, “i think that the law will change, that it will be equal for everyone”, “maybe the law, which nowadays frequently changes, will be finally fixed”. it was emphasized that the “european union legal standards are better thought out than the polish ones, and accession of poland to the european union will definitely systematize our economic life and open our country to the world”. “organizing the state issues after introduction of the eu law” was also supposed to be a positive aspect of integration. slightly more than 1% of respondents paid attention to technological advance provided by the eu integration. they emphasized, among others, an “access to newer technologies that will improve everyday life”, “opening the market for the eu products and technology” or increase of “availability of new technologies”. implementing the principles of free market economy, such as “there will be private health insurance, it will be more difficult, but more beautiful”, “new opportunities for collaboration with foreign companies”, “elimination of customs duties”, “a chance for our country to be http://www.virtual-economics.eu/ 80 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 competitive with the rest of european countries”, “opening of boarders and a broad market”, was an important aspect in favour of integration for less than 1.5% of respondents. some respondents also focused on the absorption of the eu funds. a small number of this type of responses shows low effectiveness of campaigns encouraging to vote in the referendum, which were carried out at that time. only slightly more than 1% of respondents pointed to the fact of an “access to the eu funds”, a “possibility of using the eu funds, greater opportunities for faster development, and a regional situation of poland will require it”, “poland will receive the eu money for development”, “possibility of using the eu funds, rather than isolating poland in europe”. 4.3 awareness regarding the future benefits the will to secure better living conditions for future generations was one of the most common reasons for expressing approval for the european integration. nearly 12% of respondents had such a motivation, which was the second largest category after the responses highlighting the importance of opening up the labour market. both these groups are closely related to each other. first of all, the attention was paid to equal educational opportunities for children and youth as well as to the opportunity to provide them with employment within the member states. a typical argumentation was a reference to getting a job: “our young people will have greater opportunities to find a job in the eu countries” or “work and education for children”, although more general phrases such as: “i hope that my children will have a better future”, “hope to improve the existence of future generations” or “i am for the poland’s entry to the european union, because i hope for better tomorrow for young generation”, “i hope that entry to the european union will ensure better future for our children” were equally often used. therefore, referring to the possibility of: “education and work abroad”, “taking up legal work in the eu countries by young people”, “better start for young people” dominated among the responses. the following was emphasized: “…children to have greater prospects of learning and getting a profession…”, “…my children to live better, to have a job…”, “…my children to have better future, good job and good existence” or “…greater opportunities to be educated and to learn the world”. it was emphasized that integration is a unique chance for the “development of young people”, “better future for children”, and a “better start in adult life for young generation”. a disappointment over the internal situation of poland, manifested in expressions such as “because as for now i do not see the future in this country, but i hope that one day my children will have a better life”, “maybe something will change for better and there will be work for young people”, “so that it is better, i hope that conditions of life will improve, maybe not my life’s conditions, but my children’s ones” or “maybe finally our children will have a better life”, was also more or less deliberately emphasized in the context of ensuring the european standard of http://www.virtual-economics.eu/ 81 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 living to the young generation. people also believed that integration will contribute to changing the situation in the country with time: “living conditions in poland and future of the next generation will improve”. 4.3.1 prosperity of the society nearly 7% of respondents expected the increase of society prosperity when giving the reasons for their approval of the european integration. a hope to implement in poland the living conditions that are characteristic of the western european countries was reflected in the responses such as “because in all member states the rate of life and wealth of the average citizen is higher than in poland”, “adapting of earnings to the european level in the future”, “due to accession the european union, poland will join the highly developed countries, what will enable to reach the standard of life similar to the standard in those countries” or “so that life is prosperous and fair”. a dream about an increase in the ownership was reflected in the following statements: “a great prosperity awaits us”, “so that prosperity of the country and society increases”, “improvement of material situation” or “improvement of the standard of living”. the prosperity was also supposed to be a consequence of poland’s operation within the eu structures: “i hope for stabilization and country development, and thus for increase of the standard of living and increase of aid to the poorest”. the mood of people in this group is documented by the following phrase used by one of the respondents: “better living conditions and an open door to europe”. 4.3.2 economy and development of the country another group of responses provoked a reflection on the greater opportunities for the country’s development within the eu structures. over 10% of respondents referred to the country’s comprehensive progress, economic recovery and development, which were thought to be the effect of the european integration. in this context, the following economic and political arguments were given: “poland cannot be away from europe, because it would be economically disadvantageous”, “the european union gives us and poland better prospects for the future, in terms of economy and development it creates new opportunities”, “in the current political situation in europe it is the only way, economic issues are also important – it would be more difficult to act alone”. integration was seen as a way to improving the “economic position in the world”, as well as “improving the economic situation”, “improving the economic situation and reducing the unemployment”, “improving the economy, living and political conditions” and “not falling behind other countries”. the eu progress was contrasted with the vision of a single state: “so that poland is not a parochial country and that it further develops among the leaders”. http://www.virtual-economics.eu/ 82 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 comparisons to other member states, such as: „this is a great opportunity for poland, in which i see a better future for the next generations and the largest development of our country, like it was, for example, in greece”, were also made. 4.4 disappointment over the national authorities negative assessment of the functioning of the legislative, executive and judiciary structures in poland was an important reason for the respondents to opt for the consent for accession. almost 9% of respondents clearly emphasized the need to implement control over institutions managing the country. they saw the eu monitoring and supervision as the most important opportunity associated with integration. the need for increased control was reflected in such statements as: “poland should be in the european union to have proper control over the parliament”, “maybe finally somebody will force us to order and to obey the law, to open up to the world, etc.”, “greater control over state finances will reduce unnecessary waste of money, it is better to stay together, because we cannot govern ourselves, but rather need to be directed” or “maybe with time the situation in our country will become normal and an ordinary citizen will be treated with due respect”. at the same time, there was disapproval of people involved in governance who were accused of incompetence, ineffectiveness and nepotism. the nature of criticism is reflected in such statements as, for example: “maybe there will be less thievery and fraud among so-called elites”, “i hope that the mentality of polish political class will change”, “maybe they will curb this bold rudeness and thievery”, “to end this warsaw trash” or “it will raise our country and reduce corruption at the top of power”. generally, “with the current government in poland – and not just the last one – we do not have any chances for development, refusing to join is a hazard to marginalize the poland’s role in the world and increase the poverty of the poles”. what is more, referring to the experience of previous generations it was emphasized that: “the poles cannot manage themselves, i am really sorry, but we need someone’s supervision – that is what the history of poland shows” or “the poles cannot effectively exercise power – they must be supervised so that corruption cannot develop”. various symptoms of the country’s social life were evaluated negatively: “it is the only chance in the current economic chaos”, “i hope that degenerations in the field of politics and economy will be at least partly stopped”, “without the european union poland will not cope with agriculture, industry, safety, etc.”, “so that polish economy is more controlled” or “the political situation will improve, as it could not be worse”. due to integration “maybe the situation will improve after 13 years of promises that have not been kept by the politicians”, “polish politicians will take for themselves, in perspective – it will be better”, “maybe finally the situation in our beloved homeland will be normal”. http://www.virtual-economics.eu/ 83 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 a belief in the effectiveness of the eu verification solutions was also expressed: “so that our government is under supervision of the eu specialists,” “so that our government is under strict control,” “we will be closer to the world and we cannot deal with managing, maybe something will go forward under the eu supervision.” a belief that joining the eu structures is “the last resort for poland,” because without accession “we cannot get out of this poverty by ourselves,” reflects the mood of people from that group. 4.4.1 reducing corruption mentioning the reduction of corruption in the country as the main reason for the european integration corresponded to the negative evaluation of the internal situation in poland. creating a barrier to using public functions in order to gain illegal benefits was the main argument for 5.5% of those supporting the accession. accessing the european union meant, among others, “reducing corruption, better opportunities for all the people, not only for protégés,” “reducing corruption and improving the functioning of executive bodies,” “elimination of corruption in public offices” or “less corruption and internal order.” for the respondents from that group, a belief in “reducing corruption among state officials” or “limiting the thievery, corruption and privacy” resulted from the belief that “the eu regulations limit corruption.” 4.5 the european identity and the image aspects over 10% of respondents expressed their belief in the poles’ european identity, declared their will to take decisions jointly about the future of the european community, as well as emphasized their fear of marginalizing the role of poland in the future fully united europe. the following statements confirm such opinions of the people supporting the integration: “i want to participate in co-decisions about the future of poland and europe”, “it is necessary to create a common europe, we cannot stand aside”, “it is better together, just like in a family”, “because poland is in the middle of europe”. there are statements that also express the sense of significance, and even the pride of possible joining the eu structures by poland. this can be noticed in the following sentences: “maybe we will finally become the citizens of europe”, “because it is a historical chance to exist in europe” or “it is the unique and only chance for our country’s development, remaining outside the european union would be an economic catastrophe and isolation of our country from the surrounding neighbours – members of the european union,” “we are already in europe,” “i am a european”, “poland is a european country,” “poland is already in europe,” “because we are in europe,” “i want to be a fully-fledged european” or “poland is as european a country as, for example, germany.” threats caused by the lack of consent for integration were also mentioned. it was said that “europe is one and should not be divided into better and worse”, “further separation from the european countries will only deepen the distance,” “not to be left behind and not be the third http://www.virtual-economics.eu/ 84 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 world,” “so that poland would not lag behind other european countries” or “i do not want us to be the second-class country.” the fear of marginalizing the country and blocking its citizens the access to the eu privileges was reflected in such statements as: “i want to be a real european, and not the citizen of the second category,” “this is the only reasonable way not to be marginalized,” “not becoming a member of the european union would be a huge and irreparable loss – also for me,” “at present, when more and more countries are becoming the members of the european union, a country that will be beyond the union will have more and more difficult conditions for further development.” “better future for poland” was mentioned among the opportunities, because “in the european union there are good examples to follow, in the economy and democracy.” “co-management of europe,” which “will open us the gate to better tomorrow,” and, in consequence, will ensure that “europe will be united,” seemed to be a new quality. that is why integration “is necessary and is associated with a lot of good for poland.” less enthusiastic respondents pointed out that „we are in europe and we should enter its economic structures” or “it cannot be predicted which benefits will be gained by poland, but it will certainly not hurt to be in the forefront of better countries”. 4.5.1 the abolition of border controls free traveling to member countries was the accession’s biggest benefit for nearly 5% of respondents. a vision of visa-free travelling and abolition of control at the internal borders of the eu countries, which signed the schengen agreement on the 14th june 1985, frequently called by the respondents the “abolition of borders”, were especially important for them. the statements’ analysis demonstrated that integration “will be a civilization lift for poland, and that formalities related to crossing the borders of the eu countries will be lifted”. the respondents wanted that “opening the borders”, “removal of borders”, “extending the borders”, “elimination of borders”, “easy traveling around europe” or “traveling without borders” come true. “facilitations in international travles”, “no queues at border crosssings” and “normal treatment of the poles at the airports, and not as if they were the citizens of the third world” were mentioned as those of primary importance. 4.6 a hope for positive changes over 11% of respondents who wanted integration of poland with the european union voiced a widely understood belief in improvement of the living conditions as a justification for their approval. however, the statements approving the accession did not include specific social, political or economic reasons. respondents motivated their opinions by the statements of the following types: “i hope for improvement in many areas of life”, “improvement”, “it should be better”, “i hope that something will improve”, “more opportunities”, “a chance for better tomorrow”, “maybe it will be better?” or “maybe we will live a little bit better”. http://www.virtual-economics.eu/ 85 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 the respondents wrote: “i see the future in the european union”, “entering the european union means new perspectives”, “opening to the world”, “better and more certain future”. at the same time the awareness that advantageous changes need time, because “probably we will have better life in the future” or “after a few or several years it should be better”, was articulated. 4.7 a sense of integration’s inevitability a bit over 6.5% of respondents emphasized that europe-wide integration processes are inevitable, and, if stopped, they can harm both poland and the poles. the respondents from that group were usually convinced in the need to access the european union, resulting from the need to resist civilisation regress that would be a consequence of staying beyond the eu structures. they assumed that as a country “we have nothing to lose”, and moreover, “it is the only chance for poland”, “we have no other option”, “it is the only option for our country”, as well as they showed a “lack of alternative acceptable solution”. they accented “the need for unification”, because “there is no alternative, otherwise we may be isolated”, and they determined integration as “the move of last chance”. they emphasized that if “there is the european union, poland should also be within this union”, and regarding the country’s development “it should be determined where our place is”. so, there was a conclusion that “not to enter means to block development of the economy, which will cause an increase in the costs of living” and that “our country cannot function outside the european community, it is important for economic development”, because “if not in the european union, then where?”. some even put forward a thesis that poland “will enter no matter if we, ordinary people, want it or not, as the government has the final word in that matter”. 4.8 a conviction about the need for integration as a favourable balance the broadly understood favourable balance between possible profits and losses related to accession was the source of a positive opinion on the european integration in the case of 4% of respondents. this opinion was reflected not only in such positive statements as: “entering the european union is more advantageous than leaving the country in isolation and a lack of prospects for convergence of economic levels”, but also in neutral statements such as: “poland should have more benefits than losses resulting from accession to the european union” and disapproval was justified as: “a classical situation when you have to choose between what is wrong and what is less wrong, at lack of reasonable alternative”. 5. the sources of disapproval of the european integration the questionnaire form included an open question “why are you against poland’s entering the european union?”, answers to which were given by 9.4% of participants of the research project (figure 2). http://www.virtual-economics.eu/ 86 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 the possibility of worsening the situation for the poles was mentioned by 21.4% of respondents, which was the dominant justification of critical opinions. it correlated with the answers revealing a lack of belief in improvement of living conditions (12.5%). negative verification of integration conditions was the reason for opposing integration by 19.6% of respondents. unfavourable balance between accession benefits and predicted losses and threats were the reasons for 12.5% of respondents to express their opposition. 10.7% of people participating in the research claimed that the country is insufficiently prepared. the next group of people referred to the threat of losing independence and to poland’s being abused by the european union (8.9%), threat of being dependant on the eu structures (5.3%), as well as negative image-related aspects (3.5%). the rest of people answering the open question did not substantiate their opposition to integration. figure 2. the reasons for the critical opinions on poland’s accession to the european union expressed by the respondents. source: the author’s own research. 5.1 the fear of worsening the poles’ situation 21% of respondents based their disapproval of accession to the european union on the conviction that the european integration will be associated with lowering the living standards of the residents. referring to the social costs of the process, the respondents formulated the statement: “our standard of living, which is not the best one, will worsen and we will be a socalled ‘fifth wheel of the wagon’ in the european union, i.e. we will be a servant if we enter the union under conditions that were negotiated by our government”. there were also the following statements in that group of answers: “there may be problems with employment”, “the vague future, high prices, job insecurity”, “an increase of unemployment, decrease in the standard of living, a sale of assets and land”, “our standard of living, which is not the best one, will worsen, we will be the servants in the european union”. the respondents expressed their opposition to accession saying that “only the prices in the shops and the payments, except the salaries, will be those of the eu”. they were afraid of “increasing taxes and prices” and “an increase of unemployment, worsening social conditions – too long-time to wait for improvement”. they also saw the reality of the poles as the residents 3.5 12.5 19.6 12.5 5.3 8.9 21.4 10.7 5.3 0 5 10 15 20 25 negative image-related aspects unfavourable integration balance critical assessment of integration conditions disbelief in improvement of living conditions dependance on the eu structures using poland by the union worsening of the situation of poles insufficient preparation of the country opposition without motivation http://www.virtual-economics.eu/ 87 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 of the united europe through “firing workers, low salaries, black labour, no social rights”. they noticed a possibility of increasing social inequalities: “i do not like that i will earn too little, it is unfair that people performing physical work earn so little”. a lack of agreement on accession was also motivated by the forecasts that “the conditions related to salaries and hospital treatment as well as other social conditions may worsen” and a possibility of “the increasing gap between the poverty and wealth, similarly to the case of the south america”. 5.2 critical evaluation of accession conditions for nearly 20% of respondents the awareness that “a model of european integration has to be measured by the criteria of international organization of interstate (intergovernmental) type. international agreements concluded between the member states are the base for the european union operation” (barcz et al., 2012, p. 27) in combination with critical opinions about the competences of the polish central authorities caused the lack of belief in effectiveness of accession negotiations. according to the respondents, the government agreed on unfavourable conditions to access the european union. it was reflected in such statements as: “the negotiated conditions are bad”, “the truth is not being told to the poles. they are not informed about the details regarding the situation after entering the union”, “the bad conditions of poland’s accessing the european union”, “an uncertain situation after entering”, “not at all cost” or “i am against entering the union under conditions negotiated by our government”. it was even emphasized that “i am not against entering the union, but on the terms other than those currently negotiated”. the accession would be possible, but “on equal terms, so not now”, remembering that “it is poland that the european union needs, and not vice versa”. 5.3 the country’s insufficient preparation nearly 11% of respondents opposing accession referred to the problem of the country’s insufficient preparation to be included in the eu structures. along with statements of a general nature, the economic, functional and communication aspects were emphasized. according to the respondents, “we as a country are not prepared for this” due to “the economy being unprepared to the eu requirements”, and what is more – in the context of concluded accession agreements – “we are not properly prepared to enter the union”. as it has turned out recently, there may be problems with translating the documents into polish. our interpretation is different. are we sure what we have signed?”. it was also pointed out that “we cannot afford to pay contributions”, and there was a regret due to deficiency of the country’s information policy, because there was a “lack of sufficient information for middle class” related to accession. 5.4 abusing poland by the union for nearly 9% of people opposing poland’s accession to the european union a vision of poland being abused by the eu structures and other member states was the basic reason of negative perception of integration. the mood of those people is reflected in the following statements: “i do not want my country to lose its sovereignty and pay extra for it”, “poland will be a cinderella. it will be abused by the previous eu members” or “i am against, because the european union is http://www.virtual-economics.eu/ 88 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 searching for the market for its goods and does not care about our domestic manufacturers”. it was pointed out that "the first period will be a period of being plundered by rich countries", and it was also stated that "being a cash cow is not nice!!!". 5.5 unfavourable integration balance respondents who disapproved the european integration also pointed out an unfavourable ratio of possible benefits to possible losses. for 12.5% of respondents poland’s accession to the eu structures would result in a civilisation regress. such emotions are reflected in the following statements: “poland will lose more than gain”, “poland will lose financially after joining”, “because of worsening the financial situation of poland” or “i do not want the rest of the country to be sold, as it has been done so far”. 5.5.1 being dependant on the eu structures excessive dependence of poland on the eu structures and mechanisms was a part of unfavourable attitude to the european integration of 5% of respondents. “high economic dependence – higher than in other economies” was emphasized, as well as there was a justification that “i am against, because the poles, and especially people in power can be astonished by various decisions of the union”. 5.5.2 a disbelief at improving the living conditions a disbelief at the positive effects of accession was the next factor to decide to oppose the integration. according to the people belonging to this group, potential benefits at most will balance the losses, but even if a global balance will be beneficial for poland, it will not be perceived as such by ordinary residents. 12.5% of respondents claimed, for example, that “there will be no improvement for the poor and unemployed”, “i do not see any perspectives in relation to this fact”, “it will give nothing, because all the time poland is in the union but we are not aware of it”, “the situation will not improve”, “i do not know if living conditions of people will improve” or “i do not believe in fundamental changes that they offer”. finally, the accession will mean that “only the elite will benefit from accessing the union”. 5.5.3 negative image-related aspects negative image-related aspects were the cause to oppose for nearly 3.5% of respondents, who gave a specific reason for their critical reaction on the european integration. their statements were as follows: “there will be no german spitting in our face” (stalmach, 1908)8 and “our 8 a participant of the research project cited “rota”, polish patriotic song dated 1908, including the sentence: “nie będzie niemiec pluł nam w twarz, i dzieci nam germanił” (“there will be no german spitting in our face and germanising our children”) spelling in accordance with the first edition of the poem dedicated to the silesian people, which “was written and addressed by the famous poet especially for >>gwiadka cieszyńska<< as she wanted to increase the national spirit in the poles from silesia, who are currently going through hard times”. http://www.virtual-economics.eu/ 89 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 fathers fought for free poland”, referring to the possibility of losing the independence. other participants of the research project (5.3%) answered the open question, but they were not able to justify their opinions, e.g. “it is difficult to say and describe”. 6. social consequences of perceiving the european integration positively showing the reasons for approval and sources of concern on poland’s accession to the european union, this research can still be used to analyze the reasons for the poles’ extremely positive attitude towards integration processes. social feelings described in this research turned out to be extremely durable. the report by the centre for public opinion research (cbos) on the country’s foreign policy published in 2018 reveals that the relationships with the european union were the most visible source of disputes with participation of poland on the international scene. non-compliance with the eu law, the failure during voting for the head of the european council or the direction of political actions aiming at removing the country from the eu structures were indicated among the factors that had impact on lowering their quality. at the same time, “in the social opinion, improvement of collaboration within the european union should be the priority of the polish foreign policy at present” (roguska, 2018, p. 8). answering the question “what should be the main objectives and directions of poland’s foreign policy?” as many as 66% of respondents stated that normalization of relationships with the european union is the challenge. according to the authors of cbos statement, “this postulate is not surprising if we take into account almost widespread public support for the membership of poland in the european union. approval of belonging of our country to the european union has been very high for years. during the survey that was carried out in april, 88% of respondents expressed their support for poland’s membership in the european union, while only 8% of respondents were against” (roguska, 2018, p. 10). positive opinions about the presence of poland in the eu structures, which have been consistently declared for fifteen years, were reflected in the reluctance towards actions aiming at so-called “polexit”. the possibility of removing the country from the european union was met with strong disapproval of most of the poles, which was confirmed by the studies in 2018 when “during a potential referendum on further presence of poland in the european union nearly 88% of respondents would definitely or rather vote for remaining of our country in the organization structures. only 9% declare that they would like poland to leave the eu” (2018, report: attitude of the poles towards the european union and “polexit”). the attitude expressing approval for the european union was maintained, despite dissemination of the anti-eu content by some mass media. this shows that in 2018 a well-established belief of the poles that the benefits of european integration prevail over its costs did not change significantly. 7. conclusions the research project recreating conditions of the two-day accession referendum, which was held in june 2003, was carried out in may 2003. all employees of the power plant in laziska gorne, http://www.virtual-economics.eu/ 90 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 which is one of the largest power plants in poland, could participate in it. during a questionnaire survey, which was carried out in the electoral commission room opened for 48 hours, the employees completed the questionnaires including the questions about their attitude to integration as well as their declaration of participation in the referendum. the answers regarding the reasons for approval (expressed by 83.4% of respondents) or the reasons for opposition (14.4%) to the european integration are of the greatest analytical value. the analysis of respondents’ opinions reveals that most of expectations were associated with a possibility of legal employment within the european union, a hope for broadly understood positive changes and pride in the possibility of co-deciding about the future of the european community. the main concerns referred to the vision of worsening the life situation and consequences of accession on conditions unfavourable for the country. 15 years after the accession referendum in poland the views of people collected before the referendum was held have not only a historical value, but also present the material for analysis of possibilities of the “polexit”, i.e. to move the country out of the eu structures following the example of great britain. the research project, which was carried out one month before the nationwide accession referendum, revealed the poles’ hopes and fears associated with the country’s inclusion to the eu structures. the issues related to the extending availability of job offers in the eu member states and improving the situation on the polish labour market were the sources for the highest expectations. integration was perceived as an investment aiming at ensuring better living conditions and education for the young generation as well as at realizing their professional aspirations. a vision of joining the european union was associated with the opportunity to develop the country and to solve the internal problems related to, among others, corruption, ineffective authorities or poverty. it was possible to feel trust in realizing dreams about the improved living conditions and a civilisation leap, at least in a perspective of the next generations. when evaluating the effects of the eu social integration strategy, which were achieved in poland as well, it should be taken into account that “ineffectiveness of the strategy is to a high extent a consequence of the method implemented, which, in turn, results from the lack of legal competences of the union to take actions in the field reserved for the competences of the member states” (żukowski, 2010, p. 6.), but despite 15 years that passed the support of the european integration did not decrease. analysing the poles’ opinions expressed one month before the referendum in june 2003, it can be assumed that realization of a hope for extending the availability of legal employment in the european union, which was most commonly articulated, was then one of the reasons of social dissatisfaction that led to the decision of great britain to leave the eu structures, made during referendum in june 2016. a vision of the decreasing standard of living associated, among others, with the connection of a poor country, being under political transformation, to the prosperous countries community with state-of-the-art economic, political and social solutions, was one of the most frequently articulated threats. thus, there was a fear of being a disabled integration participant, a “servant http://www.virtual-economics.eu/ 91 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 of europe” abused by stronger partners who reached a higher level of civilization development. opinions that the country is not prepared to function within the european union were undermined by, among others, the quality of polish presidency in the eu council from the 1st july 2011 to the 31st december 2011, as, according to the researchers, “polish presidency will be remembered as effective and competent and it would be difficult to find any major mistakes” (kubin, 2013, p. 62). besides referring to the country being unprepared to the membership, a lack of belief in the improving economic situation of the society and critical evaluation of opportunities offered by the european union, as well as the concern about losing the right to self-determination could be found in the respondents’ statements. the practice has shown that “despite expectations, the idea of nation state associated with the integration processes did not fail. the promised overcoming of nationalism and nation state” (malendowski, 2010, p. 11) also did not happen and, what is more, after 15 years the polish government was at the stage of a serious conflict with the european union. the case concerned respecting the rule of law in the country, and on the 20th december 20179 the european commission “analysed the laws on the supreme court and on the national council of the judiciary. during the meeting, the eu commissioners decided to activate article 7.1 of the treaty on european union towards poland. it says that at a justified request from one-third of the member states, the european parliament or european commission, the eu council can say that there is a clear risk of serious violation of the eu values by the member country” (sobczak, 2017). meanwhile, after 15 years from the described research was realized and the nationwide referendum in poland was held, there was still high support for the european integration. the polls indicated that 88% of the poles support integration, while there is only 8% of opponents, and that respondents “clearly express their support for the membership of our country in the european union, and more than two-fifths would like to deepen the european integration. the fear of creating europe of two speeds and marginalizing poland in the european union is clearly visible. these fears may be strengthened by evaluating the ruling party’s policy” (public opinion research centre, 2017, pp. 18). so, the poles continued to support their country’s participation in the eu structures, exceeding the positive result obtained during the referendum in 2003 by 11%. analysing the anti-european activities of the polish government, polish scientists published a report, in which they stated, among others, that “we both weaken the entire european union and we move away from its core. we voluntarily move to the edges of the common home of the european values, becoming its troublesome member. it is contrary to the interests of poland and to the will of most of our society” (wilkin, 2018, p. 7). on the basis of this material a timeline of the road leading to accession can also be determined: on may 25, 1990, i.e. several months after starting the system transformation, poland submitted an application to start the negotiations on the association agreement with the european union; on december 16, 1991 this agreement, a so-called poland-eu association agreement, was signed and it entered into force on february 1, 1994. on april 8, 1994, poland submitted its application for membership in the european union. on may 31, 1998, poland started its negotiations for membership, and on 9 the actual state in december 2017, i.e. at the end of the paper preparation. http://www.virtual-economics.eu/ 92 www.virtual-economics.eu issn 2657-4047 (online) dariusz krawczyk virtual economics, vol. 3, no. 1, 2020 december 13, 2002 the negotiations were completed. on april 16, 2003, poland signed the treaty of accession. on june 7 and 8, 2003 the described referendum was held, and on may 1, 2004, poland joined the structures of the european union. 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(in polish). http://www.virtual-economics.eu/ кwilinski alex 29 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 2020 volume 3 number 4 (october) the relation between tourism and economic growth: a case of saudi arabia as an emerging tourism destination lamia jamel abstract. this paper examines empirically the relation between tourism and economic growth in saudi arabia. the author tries to justify how tourism contributes to the economic growth of saudi arabia. there are applied descriptive statistics, unit root test, var model and granger causality test as an econometric methodology to examine the connection between tourism and economic growth in saudi arabia for the annual data in the period from 1990 to 2018. the main empirical results of the study find out that tourism affects positively the economic growth in saudi arabia. also, there is found a positive nexus among tourism and economic growth. furthermore, co2 emissions and financial development impact positively the tourism sector, while trade openness predicts a negative effect on tourism. additionally, co2 emissions, financial development, and trade openness have a positive impact on economic growth in saudi arabia. finally, the granger causality test provides evidence of bidirectional nexus between tourism and economic growth in saudi arabia. this paper contributes to the current research by explaining the causal nexus among tourism and economic growth in saudi arabia during the period from 1990 to 2018, applying a vector autoregressive model and granger causality. keywords: tourism, economic growth, time series, vector autoregressive, granger causality jel classification: f43, z32 author: lamia jamel department of finance and economics, college of business administration, taibah university, medinah, saudi arabia. email: lajamel@yahoo.fr https://orcid.org/0000-0002-3244-068x citation: jamel, l. (2020). the relation between tourism and economic growth: a case of saudi arabia as an emerging tourism destination. virtual economics, 3(4), 29-47. https://doi.org/10.34021/ve.2020.03.04(2) received: july 15, 2020. revised: september 25, 2020. accepted: october 3, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2020.03.04(2) https://creativecommons.org/licenses/by/4.0/ 30 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 1. introduction for several decades, international tourism has experienced dynamic growth and sustained expansion. cross-border travel for recreation, leisure or business has become one of the most dynamic economic activities in the world. the international tourism is an important part of economic growth in developing countries, particularly for the least developed ones and other small, structurally weak and vulnerable countries which, without this sector, would have faced enormous challenges in a trading system. now highly competitive and rapidly evolving, tourism is “like an iceberg: the visible part consists of travel, accommodation and tourist services, below the surface, there are multiple possibilities for households, micro and small businesses". many countries are endowed with often unique resources of a historical, natural or cultural nature capable of being transformed into travel destinations. tourism is thus a universal activity with a significant local impact. tourism stimulates the local economy in destination countries thanks to the links existing in the value chain with other economic sectors, notably with agriculture. it also promotes entrepreneurship and the growth of local smes; it allows better diversification of the local economy while generating income linked to exports. goods and services from this industry create new jobs, especially for young people and women, contributing to poverty reduction. in poor and remote rural areas, tourism can help generate income for the population of these areas while reducing urban migration flows. in some countries, tourism revenues have created funds to finance biodiversity conservation and natural resource protection programs behind this tourism. finally, tourism can help to make a country's external image positive. tourism is mainly an activity handled by the private sector. however, without the existence and application of coherent policies and actions coordinated by the government, in the tourism sector but also in other related sectors, tourism cannot be fully integrated into an objective of inclusive and sustainable growth and development. worse, without political will, financial leakage (the loss of tourism revenue linked to the acquisition of goods and services outside the country) can significantly erode the economic benefits of tourism and weaken the country’s environmental, social, cultural and economic development. tourism is a sector made up of different branches (transport, accommodation, catering, cultural and sporting activities, etc.) which also concern non-tourists. it occupies an increasing place in service activities, and it has considerable effects on the economies, societies, cultures of the countries and territories concerned. saudi arabia is an important cultural and historical destination both religiously and economically. the state-sponsored modern tourism concept promote multiple benefits of tourism in the economic, cultural, heritage, social and environmental aspects. the saudi museums contain artifacts found in modern archaeological excavations of the umayyad and abbasid period, the medieval and late islamic era, and finally the reunification period of saudi arabia. there are also more than 10,000 heritage and cultural sites in the country, including 500 mentioned in the ancient arabic poetry, and about 400 others mentioned in the biography http://www.virtual-economics.eu/ 31 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 of the prophet, but mecca remains the most attractive city for visitors, followed by medina. along the coast of the red sea there are beaches that qualify to be an attractive place for tourists: approximately 1800 km from the west and 700 km on the coast of the arabian gulf from the east. saudi arabia plans to attract 100 million visitors a year in 2030, and to increase tourism contribution to the economy from five to 18 percent. in the literature, there are some current research papers investigating the correlation between tourism and economic growth in various countries across the world (manzoor et al., 2019; mishra et al., 2011; ridderstaat et al., 2014; letunovska et al., 2020; kharazishvili et al., 2020). nevertheless, none of them concentrate on evaluating the link between tourism and the economic growth in saudi arabia. so, our purpose is to resolve the following questions: what is the connection between tourism and economic growth in saudi arabia? how do these indicators associate in the short run and long run? to do so, the main task of this research is to investigate empirically the link between tourism and economic growth in saudi arabia. there are applied a vector autoregressive (var) model and causality granger test as an appropriate econometric methodology for the annual data for saudi arabia in the period from 1990 to 2018. the main empirical findings of the study show that tourism positively affects the economic growth in saudi arabia. also, it was found that gdp has a positive impact on tourism. furthermore, co2 emissions and financial development have a positive impact on the tourism sector, while trade openness predicts a negative effect on tourism. however,, co2 emissions, financial development, and trade openness have a positive impact on economic growth in saudi arabia. additionally, the main conclusions of the granger causality test provide evidence of bidirectional link between tourism and economic growth. furthermore, our results indicate the existence of unidirectional link between tourism and trade openness in granger's sense. the rest of this study is organized as follows: section 2 presents a literature review for the link between tourism and economic growth. section 3 explains the econometric methodology used in this paper. the data is analysed in section 4. the main empirical findings are presented in section 6. finally, section 7 makes conclusions. 2. literature review for the reason that tourism potentially contributes to economic growth, efforts have been made to assess the economic effects of various modes of tourism. the current investigations comprise papers in sports tourism (daniels et al., 2004; li & jago, 2013), rural tourism (fleischer & tchetchik, 2005; park et al., 2014), ethnic tourism (theerapappisit, 2009), park tourism (ma et al., 2009; mayer, 2014; saayman & saayman, 2006), conference, convention, and exhibition tourism (hanly, 2012), religious tourism (saayman et al., 2014), festival tourism (clarke & hoaas, 2007; saayman & rossouw, 2011), casino gaming tourism (benar & jenkins, 2008; wan, 2012), and heritage tourism (dredge, 2004). http://www.virtual-economics.eu/ 32 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 it is generally believed that tourism has contributed positively to economic growth as exports have strongly triggered economic development. the worldwide trade theories are supportive of a positive nexus among export and economic growth (thornton, 1997; xu, 1996; ahmed & kwan, 1991; jin, 1995). several papers including that by marin (1992) suggest that a unidirectional exports growth influences economic expansion in developed countries such as united states, japan, united kingdom and germany. furthermore, export support and economic growth have significantly strengthened each other in south america and africa (jin, 1995; bahmani-oskooee & alse, 1993). moreover, kulendran & wilson (2000) and shan & wilson (2001) show a great reciprocal nexus among international trade and international travel in australia and china. theoretical models that consider a causal connection among non-traded goods, such as tourism and economic growth, are recent phenomenon (kim et al., 2006). in a recent study of economic growth some academics maintain that tourism has a long-run economic growth influence (lanza et al., 2003; balaguer & cantavella-jorda, 2002; tang & jang, 2009; katircioglu, 2009; oh, 2005; ridderstaat et al., 2014), and several of them suggest that there is a reciprocal causality nexus among tourism development and economic growth (kim et al., 2006; dritsakis, 2004; durbarry, 2004; kumar & kumar, 2012; lee & chang, 2008). the tourism-led growth literature argues that tourism specialization stimulates economic development (algieri, 2006; perez-dacal et al., 2014; ridderstaat et al., 2014). the possibility of tourism growth is revealed through augmented terms of trade (tot). the empirical investigations confirm these theoretical proposals because despite the pessimistic predictions of the endogenous growth theory, small islands were able to develop (brau et al., 2007; croes, 2013; holzner, 2011). a various number of papers have employed many methods to investigate the nexus between tourism and economic growth, such as the econometric models, the tourism satellite account (tsa), computable general equilibrium (cge) models and dynamic stochastic general equilibrium (dsge) models. this section briefly reviews the related papers and summarizes the research objectives of this paper. in the econometric models, cointegration and the granger causality are commonly employed to study the nexus between tourism and economic growth (brida et al., 2016; song et al., 2012). for instance, chiu & yeh (2017) apply cross-sectional data models to detect a correlation link between tourism and economic growth. several papers such as belloumi (2010), croes & vanegas (2008) and shahzad et al. (2017) employ time series models. other papers use panel data models (bilen et al., 2017; liu & song, 2018; salifou and haq, 2017), which give a larger degree of freedom in the model estimation and are particularly useful when the time series are brief (song et al., 2019; wu et al., 2017). po & huang (2008) use a cross-sectional study of 88 nations during the period from 1995 to 2005. they find a nonlinear correlation between the expansion of tourism and economic http://www.virtual-economics.eu/ 33 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 growth, divided all the data collected into three regimes for their investigation. the empirical results of the threshold regression when (qi) is below 4.048% (regime 1.57 nations) or above 4.73% (regime 2.23 nations) show a confident nexus between tourism and economic growth. karimi (2018) examines the connection between leisure industry and economic growth in malaysia. karimi (2018) shows a positive impact of the leisure industry on the economic growth. he demonstrates a significant and considerable long-term impact on variables such as exchange rate, trade, and inflation, which were essential for the malaysian economic growth. karimi (2018) reports that tourism can stimulate economic growth, but for it to have an impact the policymaking requires successful promotion of inbound tourism. as brida et al. (2016) found, although various empirical investigations employing granger causality and cointegration tests support a granger causality connection between tourism and economic growth, they can only study the sequence of occurrence between tourism and economic growth, rather than a real cause-effect connection (song et al., 2012). 3. methods in this part there are presented the model and all variables used in this paper. compared to simultaneous equations (a basis of macro-econometrics until the 1970s), the var model has the advantage of capturing the variation of the model's parameters (system of equations) over time, and thus makes it possible to better restore the system dynamics, which gives credibility to the economic policy (macroeconomic forecasts) which adjusts and adapts to variations or shocks (innovations) experienced by the socioeconomic environment. then, there is used a vector autoregressive (var) to estimate the dynamic relationship between tourism and economic growth in saudi arabia during the period of study from 1990 to 2018. let a vector process {𝑦𝑡}𝑡∈ℤ of dimension (k,1) admit a representation var(p): 𝑦𝑡 = 𝑐0 +𝐴1𝑦𝑡−1+.. .+𝐴𝑝𝑦𝑡−1 +𝜈𝑡 (1) 𝐴(𝐿)𝑦𝑡 = 𝑐0 +𝜈𝑡 (2) with, 𝐴0 = 𝐼𝑘 , 𝐴𝑝 ≠ 0𝑘 and 𝐴𝑖 = 𝐴0 if i = 0 as mentioned in equation 7. where, 𝑦𝑡 represents the dependent variable, 𝑦𝑡−𝑖 (i periods back) is called the i-th lag of y, 𝐴𝑖 is a time-invariant (k × k)-matrix, 𝑐0 is a k-vector of constants, p indicates the order of the var model which is obtained by the var lag order selection criteria test, t indicates the time period (t = 1, …, 29), 𝜈𝑡 is a k-vector of error terms 𝐿 𝑖 = 𝑦𝑡−𝑖 and indicates the endogenous variables. http://www.virtual-economics.eu/ 34 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 the matrices 𝐴𝑖,∀𝑖 ∈ [1,𝑝] are of dimension (k,k). the innovation vector 𝜈𝑡 is 𝐼.𝐼.𝐷(0𝑘,ω) and where ω is a positive definite symmetric square order matrix (k). the innovation vector must satisfy the following requirements: 𝐸(𝜈𝑡) = 0𝑘 (3) 𝐸(𝜈𝑡𝜈′𝑡) = { ω,𝑗 = 0 0,𝑗 ≠ 0 0𝑘 (4) the model var(p) is following: 𝑦1𝑡 = 𝑎1 0 +𝑎11 1 𝑦1,𝑡−1 +𝑎12 1 𝑦2,𝑡−1+.. .+𝑎1𝑘 1 𝑦𝑘,𝑡−1 +𝑎11 2 𝑦1,𝑡−2 +𝑎12 2 𝑦2,𝑡−2+.. .+𝑎1𝑘 2 𝑦𝑘,𝑡−2 ⋮ +𝑎11 𝑝 𝑦1,𝑡−𝑝 +𝑎12 𝑝 𝑦2,𝑡−𝑝+.. .+𝑎1𝑘 𝑝 𝑦𝑘,𝑡−𝑝 +𝜈1𝑡 (5) 𝑦2𝑡 = 𝑎2 0 +𝑎21 1 𝑦1,𝑡−1 +𝑎22 1 𝑦2,𝑡−1+.. .+𝑎2𝑘 1 𝑦𝑘,𝑡−1 +𝑎21 2 𝑦1,𝑡−2 +𝑎22 2 𝑦2,𝑡−2+.. .+𝑎2𝑘 2 𝑦𝑘,𝑡−2 ⋮ +𝑎21 𝑝 𝑦1,𝑡−𝑝 +𝑎22 𝑝 𝑦2,𝑡−𝑝+.. .+𝑎2𝑘 𝑝 𝑦𝑘,𝑡−𝑝 +𝜈2𝑡 (6) where, 𝑎𝑖𝑗 𝑠 indicates the coefficients of endogenous variables with s indicating shift, i differentiates the coefficients of variables between equations and j differentiates the coefficients among variables in the same equation. again, the matrix form can be found while complying with the following scriptures: 𝑦𝑡 = ( 𝑦1𝑡 𝑦2𝑡 ⋮ 𝑦𝑗𝑡 ⋮ 𝑦𝑘𝑡) 𝑐0 = ( 𝑎1 0 𝑎2 0 ⋮ 𝑎𝑗 0 ⋮ 𝑎𝑘 0) 𝐴𝑖 = ( 𝑎11 𝑖 𝑎12 𝑖 ⋯ 𝑎1𝑘 𝑖 𝑎21 𝑖 𝑎22 𝑖 ⋯ 𝑎2𝑘 𝑖 ⋮ 𝑎𝑗1 𝑖 ⋮ 𝑎𝑘1 𝑖 ⋮ ⋮ ⋮ 𝑎𝑗2 𝑖 ⋯ 𝑎𝑗𝑘 𝑖 ⋮ 𝑎𝑘2 𝑖 ⋮ ⋯ ⋮ 𝑎𝑘𝑘 𝑖 ) 𝑖∈[1,𝑝] 𝑦𝑡−𝑖 = ( 𝑦1,𝑡−𝑖 𝑦2,𝑡−𝑖 ⋮ 𝑦𝑗,𝑡−𝑖 ⋮ 𝑦𝑘,𝑡−𝑖) 𝑖∈[1,𝑝] 𝑣𝑡 = ( 𝑣1𝑡 𝑣2𝑡 ⋮ 𝑣𝑗𝑡 ⋮ 𝑣𝑘𝑡) (7) http://www.virtual-economics.eu/ 35 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 thus, we arrive at joining the general matrix writing of a multivariate var (p) which is represented in its reduced form. 𝑦𝑡 = 𝑐0 +∑𝐴𝑖𝑦𝑡−𝑖 +𝑣𝑡 = 𝑝 𝑖=1 𝑐0 +∑𝐴𝑖𝐿 𝑖𝑦𝑡 +𝑣𝑡 𝑝 𝑖=1 (8) to estimate our model and to test the impact of tourism on economic growth in saudi arabia, we use tourism and economic growth as endogenous variables, and we use co2 emissions, financial development, and trade openness as exogenous variables. the definition of all variables used is presented in table 1. table 1. variables’ definitions indicator name code extended definition source gdp growth (annual %) gdp annual percentage growth rate of gdp in market prices based on constant local currency. aggregates are based on constant 2010 u.s. dollars. world bank national accounts data, and oecd national accounts data files. international tourism, number of arrivals nta international inbound tourists (overnight visitors) are the number of tourists who travel to a country other than their permanent residence, outside their usual environment, for a period not exceeding 12 months and whose main purpose in visiting is other than an activity remunerated from within the country visited. world tourism organization, yearbook of tourism statistics, compendium of tourism statistics and data files. stocks traded, total value (% of gdp) to the value of shares traded is the total number of shares traded, both domestic and foreign, multiplied by their respective matching prices. world federation of exchanges database. domestic credit to private sector (% of gdp) fd domestic credit to private sector refers to financial resources provided to the private sector by financial corporations, such as through loans, purchases of nonequity securities, and trade credits and other accounts receivable, that establish a claim for repayment. for some countries these claims include credit to public enterprises. international monetary fund, international financial statistics and data files, and world bank and oecd gdp estimates. co2 emissions (metric tons per capita) co2 carbon dioxide emissions are those stemming from burning fossil fuels and the manufacture of cement. they include carbon dioxide produced during consumption of solid, liquid, and gas fuels and gas flaring. carbon dioxide information analysis centre, environmental sciences division, oak ridge national laboratory, tennessee, united states. source: developed by the author. http://www.virtual-economics.eu/ 36 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 4. data 4.1. descriptive analysis this study aims to examine the causal link between tourism and economic growth in saudi arabia during the period of study from 1990 to 2018. there were used the annual data obtained from the world bank databases. table 2 summarizes the descriptive statistics of the indicators used in this study. this table demonstrates that in average the higher value is for the number of arrivals in international tourism (9,207,963) followed, respectively, by total value of stocks traded (65.91166), financial development (32.99158), co2 emissions (16.15351) and gdp growth (3.645280). for the two statistics of skewness (asymmetry) and kurtosis (leptokurtic), it can be remarked that the two variables used in this study are characterized by non-normal distribution. the negative sign of the skewness coefficients indicates that the co2 variable is skewed to the left and it is far from being symmetrical for all variables. however, the skewness coefficients indicate that the variables gdp, nta, to and fd are skewed to the right, and all variables are far from being symmetrical. also, the kurtosis coefficients confirm that the leptokurtic for all variables employed in this paper show the existence of high peak or fat-tailed volatilities. based on the estimate coefficients of jarque-bera, there can be rejected the null hypothesis of normal distribution of the variables used in our study. then, the high value of jarque-bera coefficients reflects that the series is not normally distributed at the level of 1%. finally, and based on the three statistics  skewness, kurtosis and jarque-bera  it can be concluded that all variables employed in this paper are not normally distributed at the level of 1%. table 2. descriptive statistics to gdp co2 fd nta mean 65.91166 3.645280 16.15351 32.99158 9207963. median 31.71435 2.788402 16.69630 32.35426 8037000. maximum 372.2599 15.19343 19.71427 58.11449 18260000 minimum 10.48277 -3.763285 10.49777 14.82210 3114422. std. dev. 91.42413 4.766838 2.842125 12.34316 5565735. skewness 2.322804 0.849053 -0.533751 0.497256 0.336534 kurtosis 7.689675 3.404697 2.192900 2.391514 1.616944 jarque-bera 52.65280 36.82207 21.64091 46.42498 28.58754 probability 0.000000* 0.000000* 0.000000* 0.000000* 0.000000* observations 29 29 29 29 29 note: this table reports the descriptive statistics of all indicators used in this paper. there was employed the annual data for saudi arabia during the period from 1990 to 2018. statistical implication at the threshold level of 1 percent is denoted by *. source: developed by the author. http://www.virtual-economics.eu/ 37 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 4.2. a correlation matrix this section analyses the correlation among all variables used. moreover, table 3 summarises the estimation coefficients of the pearson correlation matrix among all indicators employed in this paper. the empirical results presented in this table show that all estimating coefficients are inferior to the tolerance limit of pearson (0.7), which does not cause problems in estimating the four equations. since there is no correlation problem in this case, the analysis can be continued based on a set of econometric tests and estimates. table 3. a correlation matrix to gdp co2 fd nta to 1 0.09719 0.25163 0.21857 0.18646 gdp 0.09719 1 -0.01440 -0.24915 -0.02403 co2 0.25163 -0.01440 1 0.39781 0.27419 fd 0.21857 -0.24915 0.39781 1 0.29766 nta 0.18646 -0.02403 0.27419 0.29766 1 note: this table recapitulates the estimated coefficients of correlation among all indicators. there are used the annual data for saudi arabia during the period of study from 1990 to 2018. source: developed by the author. 4.3. a unit root test a study of the causal relationship between economic growth and tourism in saudi arabia first requires stationarity tests to determine the order of integration of each series. the results of the augmented dickey-fuller test applied to the series are shown in table 4 for the case of saudi arabia. thus, the acceptance or rejection of the null hypothesis of the test is based on the value of probabilities and statistics relating to the indicated test. these probabilities are compared to a 10% threshold. if these probabilities are less than 10%, then the null hypothesis is rejected and if these probabilities are greater than 10%, then the null hypothesis is accepted. for the case of saudi arabia and according to table 4, it can be observed that only the variable gdp is stationary in the level according to the augmented dickey-fuller test but all the variables are stationary in first difference according to this test. then, all the variables are stationary in first difference based on the unit root test. so, all the variables are integrated of order 1. the unit root test confirms the stability of the var model which will be used in our study. http://www.virtual-economics.eu/ 38 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 table 4. a unit root test variables augmented dickey-fuller test statistic level first difference t-statistic p-value t-statistic p-value nta -0.607050 0.8537 -5.091188 0.0004* to -2.870534 0.0621 -7.317033 0.0000* gdp -4.366631 0.0019* -5.665164 0.0001* co2 -1.897034 0.3288 -4.711808 0.0013* fd -0.602136 0.8548 -4.897344 0.0005* note: this table recapitulates the results of a stationary test. in this test the calculate p-value is compared to 10%. if the calculate p-value <10% therefore, the hypothesis h0 is refused and if the calculate p-value > 10% then the hypothesis h0 is accepted. with the hypothesis h0: all variables are non-stationary. statistical meaning at 1% is presented by (*). source: developed by the author. 5. results and discussion 5.1. var estimation after having the stationary variables, there is built a var (vector auto regressive) model. such models allow, on the one hand, analysing the effects of one variable on the other through random shock simulations and, on the other hand, conducting an analysis in terms of causality. in the case of a var process, each of the variables is modelled according to its own delays and the delays of the other variables. to determine the optimal delay number for the var representation, there are estimated several models for an order ranging from 1 to h (h being the maximum delay admissible by economic theory or by the available data). the delay p which will minimize the criteria lr (sequential modified lr test statistic (each test at 5% level)), fpe (final prediction error), aic (akaike information criterion), sc (schwarz information criterion) and hq (hannan-quinn information criterion) will be retained. according to the criteria used in table 5, it can be noticed that the optimal number of delays is equal to 4 for the four models to be estimated. in this case, a var model of order 4 is estimated. http://www.virtual-economics.eu/ 39 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 table 5. a var lag order selection criteria test lag logl lr fpe aic sc hq 0 -201.0897 na 127346.2 17.42414 17.81683 17.52832 1 -181.9726 28.67564 36690.76 16.16438 16.75341 16.32065 2 -177.0315 6.588147 35002.13 16.08596 16.87133 16.29432 3 -172.7422 5.004114 36099.69 16.06185 17.04357 16.32230 4 -162.0020 10.74029* 22508.18* 15.50016* 16.67822* 15.81270* 5 -160.6854 1.097161 32360.55 15.72378 17.09818 16.08841 note: * indicates a lag order selected by the criterion, lr: sequential modified lr test statistic (each test at 5% level), fpe: final prediction error, aic: akaike information criterion, sc: schwarz information criterion, hq: hannan-quinn information criterion. source: developed by the author. the var model of order 4 is applied to study the dynamic relationship between economic growth and tourism for the case of saudi arabia during the period from 1990 to 2018. table 6 summarizes the estimation of the var model. this table shows that the coefficients of determination for the two estimates are greater than 0.6, therefore, the two estimates are characterized by a good linear fit. for the estimation of the variable nta which measures the number of arrivals of international tourism, it can be noticed that there are six significant variables, but with different signs. it is shown that the variable nta on date (t-1) which measures tourism expressed by the number of international tourists arriving in saudi arabia has a positive impact on tourism on the date t at a threshold of 5%. so, if the number of international tourists arriving in saudi arabia on date (t-1) increases by five units, then, the number of international tourists arriving in saudi arabia on date t increases by 0.650799 units. for the second endogenous variable gdp, which measures the economic growth rate in saudi arabia, it is found out that the variable gdp at date (t-1) has a positive impact on tourism at date t at a threshold of 1%. then, if economic growth in saudi arabia on date (t-1) increases by one, then the number of international tourists arriving on date t increases by 6.320594 units. also, it is found that the variable gdp at date (t-4) has a negative impact on tourism at date t at a threshold of 5%. so, if economic growth in saudi arabia on date (t-1) increases by five units, then the number of international tourists arriving on date t decreases by 5.135529 units. for the exogenous variables, it is remarked that co2 emissions have a positive impact on tourism at a threshold of 1%. this means that if the co2 variable increases by one unit then the number of international tourists arriving in saudi arabia increases by 24.122230 units. http://www.virtual-economics.eu/ 40 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 the variable fd which measures the level of financial development in saudi arabia has a positive impact on tourism at a threshold of 10%. this means that if financial development increases by ten units then the number of international tourists arriving in saudi arabia increases by 0.063256 units. this result reflects the importance of credits granted to the private sectors for financing tourism projects. the to variable which measures trade openness in saudi arabia has a negative impact on tourism at a threshold of 5%. this means that if the trade openness increases by five units then the number of international tourists arriving in saudi arabia decreases by 1.19e-056 units. for the second endogenous variable gdp which measures the growth rate of gdp in saudi arabia, it is noticed that there are six significant variables. we find that the variable nta on date (t-1) which measures tourism expressed by the number of international tourists arriving in saudi arabia has a positive impact on economic growth on date t at a threshold of 1%. then, if the number of international tourists arriving in saudi arabia on date (t-1) increases by one, then economic growth in saudi arabia on date t increases by 0.011089 units. also, it is shown that tourism at date (t-2) measured has a positive impact on economic growth at date t at a threshold of 1%. so, if the number of international tourists arriving on date (t-2) increases by one, then economic growth in saudi arabia on date t increases by 0.010192 units. the variable gdp at date (t-4) has a negative impact on economic growth in saudi arabia at date t at a threshold of 1%. so, if economic growth in saudi arabia on date (t-1) increases by one unit, then economic growth in saudi arabia on date t decreases by 0.190905 units. for the exogenous variables, it was found out that co2 emissions have a positive impact on economic growth in saudi arabia at a threshold of 1%. this means that if the co2 variable increases by one unit then economic growth in saudi arabia increases by 0.709785 units. the variable fd which measures the level of financial development in saudi arabia has a positive impact on economic growth in saudi arabia at a threshold of 1%. this means that, if financial development increases by one unit then economic growth in saudi arabia increases by 0.306281 units. this result confirms the importance of credits granted to the private sectors for the financing of the economy. the variable to which measures trade openness in saudi arabia has a positive impact on economic growth in saudi arabia at a threshold of 5%. this means that if the trade openness increases by five units then economic growth in saudi arabia increases by 5.06e-07 units. http://www.virtual-economics.eu/ 41 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 table 6. var estimations variables nta gdp nta(-1) 0.650799 0.011089 [2.14147]** [5.41437]* nta(-2) 0.058536 0.010192 [0.13208] [3.26119]* nta(-3) 0.107259 -0.018737 [0.29664] [-0.58849] nta(-4) -0.310363 0.009102 [-1.48686] [ 0.49521] gdp(-1) 6.320594 -0.160076 [ 1.88945]*** [-0.54345] gdp(-2) 0.912583 -0.441427 [0.28915] [-1.58840] gdp(-3) -1.668374 -0.127812 [-0.65700] [-0.57161] gdp(-4) -5.135529 -0.190905 [-2.43354]** [-3.02736]* c -231.7766 -0.791857 [-2.36522]** [-0.09177] co2 24.12230 0.709785 [ 2.90869]* [2.97199]* fd 0.063256 0.306281 [1.93659]*** [4.17052]* to -1.19e-05 5.06e-07 [-2.02362]** [1.97816]** r-squared 0.888411 0.832525 adj. r-squared 0.793989 0.747646 sum sq. resids 24536.92 190.2444 s.e. equation 43.44485 3.825465 f-statistic 9.408961 0.900774 log likelihood -121.5867 -60.84138 akaike aic 10.68694 5.827311 schwarz sc 11.27200 6.412371 mean dependent 74.74685 2.915520 s.d. dependent 95.71787 3.737464 note: this table recapitulates the estimated coefficients from the var model. to examine empirically this model, there are used the annual data for saudi arabia in the period from 1990 to 2018. statistical significance at 1%, 5%, and 10% level are presented by (*), (**), and (***), respectively. source: developed by the author. http://www.virtual-economics.eu/ 42 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 0 20 40 60 80 100 1 2 3 4 5 6 7 8 9 10 percent nta variance due to nta 0 20 40 60 80 100 1 2 3 4 5 6 7 8 9 10 percent nta variance due to gdp 0 20 40 60 80 100 1 2 3 4 5 6 7 8 9 10 percent gdp variance due to nta 0 20 40 60 80 100 1 2 3 4 5 6 7 8 9 10 percent gdp variance due to gdp variance decomposition figure 1. the variance decomposition test source: developed by the author. in addition, the variance decomposition test was used to confirm the results received by means of the var model. however, the variance decomposition separates the volatility in an endogenous variable into the component shocks to the var model. thus, the variance decomposition provides information about the relative significance of each random innovation in affecting the variables in the var. figure 1 presents the variance decomposition test. this figure shows the impact of tourism on economic growth in saudi arabia after a period of two years. this result provides the same findings to the var estimation. also, there was employed the impulse response function test to continue the justification of our empirical findings (figure 2). nevertheless, the impulse response functions trace the impacts of a shock of one endogenous variable on to the other variables in the var model. based on this figure, it can be observed that tourism in saudi arabia has an important and positive impact on economic growth. http://www.virtual-economics.eu/ 43 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 -2,000,000 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 1 2 3 4 5 6 7 8 9 10 response of nta to nta -2,000,000 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 1 2 3 4 5 6 7 8 9 10 response of nta to gdp -2 -1 0 1 2 3 4 1 2 3 4 5 6 7 8 9 10 response of gdp to nta -2 -1 0 1 2 3 4 1 2 3 4 5 6 7 8 9 10 response of gdp to gdp response to cholesky one s.d. innovations figure 2. the impulse response function test source: developed by the author. 5.2. a causality test it is necessary to check whether tourism causes economic growth or whether economic growth causes tourism in saudi arabia. the causal relationship between tourism and economic growth in saudi arabia is determined by using the granger causality test. the acceptance or rejection of the null hypothesis of the granger causality test is based on a 5% threshold. if the probability of the test is less than 5%, in this case we reject the null hypothesis and if this probability is more than 5% then we accept the null hypothesis of no causal link. table 7 summarizes all results of the granger causality test between tourism and economic growth for the case of saudi arabia during the period from 1990 to 2018. table 7 shows that there is a two-way relationship between tourism and economic growth in the sense of granger. this result confirms that tourism can cause economic growth in the granger's sense. thus, economic growth can cause tourism in the sense of the granger’s causality. in addition, it has been noticed that there is a one-way relationship between tourism and trade openness. that is to say that only tourism in saudi arabia can cause trade openness in the granger's sense. http://www.virtual-economics.eu/ 44 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 table 7. a causality granger’s test null hypothesis: obs f-statistic prob. gdp does not granger cause nta 27 18.6017 0.0000* nta does not granger cause gdp 21.9395 0.0000* co2 does not granger cause nta 27 0.07314 0.9297 nta does not granger cause co2 0.02863 0.9718 fdi does not granger cause nta 27 0.06853 0.9340 nta does not granger cause fdi 0.10641 0.8995 to does not granger cause nta 27 0.39716 0.6770 nta does not granger cause to 17.7532 0.0000* note: the * is significant at 5 percent. source: developed by the author. 6. conclusions this paper examines the causal nexus between tourism and economic growth in saudi arabia. for that goal, there are used a var model and a granger causality test as an econometric methodology for the annual data of saudi arabia in the period from 1990 to 2018. there are employed a descriptive analysis, a person correlation test, a unit root test, a var model and a granger causality test as an empirical methodology to examine the impact of tourism on economic growth in saudi arabia. the main empirical results of our study find out that tourism affects positively economic growth in saudi arabia. it is concluded that gdp at (t-1) has a positive impact on tourism. the gdp per capita at (t-4) predicts a negative link with tourism in saudi arabia. furthermore, co2 emissions and financial development impact positively the tourism sector in saudi arabia. however, trade openness is predicted to have a negative influence on tourism. there is also found a positive connection between tourism at (t-1) and at (t-2) and economic growth. the gdp per capita at (t-4) predicts a negative link with gdp at t in saudi arabia. then, co2 emissions, financial development, and trade openness impact positively the tourism sector in saudi arabia. also, the main empirical conclusions of the causality test prove an evidence of a bidirectional connection between tourism and economic growth. also, there is found a unidirectional link between tourism and trade openness in the granger's sense. finally, these are macroeconomic aggregates that describe the size and economic importance of tourism, such as value-added tourism (vat), financial development, trade openness and tourism gdp consistent with the same aggregates established for the national economy. in this context, saudi arabia is obliged to establish a link between monetary data and other nonmonetary information on tourism. thus, there is needed the measurement of the economic impacts of tourism in the same way as it is done for other productive activities within the framework of the national accounts. http://www.virtual-economics.eu/ 45 www.virtual-economics.eu issn 2657-4047 (online) lamia jamel virtual economics, vol. 3, no. 4, 2020 based on the empirical conclusions of this study, it is proposed, firstly, that the saudi government must implement a modern policy and strategy of economic growth based on the tourism industry. second, public infrastructure among saudi cities and increasing their connectivity should be implemented. lastly, more social protection strategies should be established, which would increase the nation’s sustainability under conditions of its regional challenges. 6. acknowledgements the author is grateful to the editor in chief and anonymous reviewers for their supportive and important remarks and suggestions to improve the quality of this paper. references ahmed, j., & kwan, a. c. 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(1996). on the causality between export growth and gdp growth: an empirical reinvestigation. review of international economics, 4, 172–184. http://www.virtual-economics.eu/ кwilinski alex 25 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 2020 volume 3 number 3 (july) measuring student and staff satisfaction with the university facilities abdelkader derbali and ahmed k elnagar abstract. today in the world, service companies are always concerned with the quality of services, which is used by many universities to increase their competitiveness under conditions of fierce competition. universities, therefore, think of students as their main clients, as well as seek teachers and administrators’ satisfaction by improving the quality of their services (nguyen, 2012). the purpose of this article is to evaluate the quality of services offered by the community college in taibah university to its students and staff. the data are collected by questioning a sample of 281 respondents in the community college at taibah university during the 2018-2019 academic year. a descriptive analysis is used to define the variables of our study, and the principal component analysis (pca) is applied to determine the contribution of each variable as a factor that affects the respondents’ preferences. the principal component analysis method captures the key variables of the staff satisfaction at the community college in taibah university regarding the services provided. the empirical findings of this study let the authors show that the student and staff satisfaction of the community college in taibah university is related to certain factors which constitute a necessity for respondents of both genders. these results serve as benchmarks to allow managers of the institution to improve the quality of their services. keywords: satisfaction, principal component analysis, community college, quality of services jel classification: l84, j28 http://www.virtual-economics.eu/ 26 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 authors: abdelkader derbali department of administrative and financial sciences and techniques, community college, taibah university, saudi arabia; department of management sciences, higher institute of informatics and management of kairouan, kairouan university, tunisia email: derbaliabdelkader@outlook.fr, *corresponding author https://orcid.org/0000-0003-4098-3120 ahmed k elnagar department of administrative and financial sciences and techniques, community college, taibah university, saudi arabia; suez canal university, egypt email: ahmed_karam@tourism.suez.edu.eg https://orcid.org/0000-0003-4098-3120 citation: derbali, a., & elnagar, a.k. (2020). measuring student and staff satisfaction with the university facilities. virtual economics, 3(3), 25-52. https://doi.org/10.34021/ve.2020.03.03(2) received: april 12, 2020. revised: june 6, 2020. accepted: july 9, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:derbaliabdelkader@outlook.fr https://orcid.org/0000-0003-4098-3120 mailto:ahmed_karam@tourism.suez.edu.eg https://orcid.org/0000-0003-4098-3120 https://doi.org/10.34021/ve.2020.03.03(2) https://creativecommons.org/licenses/by/4.0/ 27 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 1. introduction quality is seen as a determinant of competitiveness and a source of sustainable competitive advantage (moore, 1987; lewis, 1989). for higher education, quality is a determining factor in satisfaction of students, who are the main consumer. some authors consider that satisfaction with the education system is the most important objective that the educational establishment is to aim for. in the university environment, student satisfaction is strongly linked to the quality of higher education services and the learning environment. it is considered by cronin and taylor (1992), clemes et al. (2008; 2010), omar et al. (2009) as the source of efficiency in the organization's communication policy. this keeps the image of the university and increases its students’ satisfaction rate with the service provided. the concept of satisfaction, developed particularly in the context of service activities, has been the subject of much research in management sciences. the analysis of the individual consumer satisfaction (transactional or relational) by studying their behaviour has become an essential research pole (moutte, 2007; madden, 2017; tran et al., 2020; alsulami and makhbul, 2020). compared with the commercial or industrial sector, previous research shows that quality service in higher education is still a major concern (sultan and wong 2010). it was since 1980s that higher education has paid more attention to quality service. this improvement has been due to the intention of educational institutions to meet their consumers’ demands. higher education is one of the main drivers of economic development. teaching excellence is a key to strong and growing economy. it consists of providing quality training that improves knowledge, and creates prerequisites for students to acquire adequate profiles and to become more competitive in the job market, which is constantly changing with technology, globalization, and demographics that influence the country. the university in general is obliged to cope with an increasingly globalized environment and international competitiveness, which is now based on innovation and competence in new technologies. as a result, it must adopt effective structures and strategies to meet the demands of its students, who are the main consumer of the university services. in this context, student satisfaction is strongly linked to the quality of higher education services and the learning environment. it is considered by cronin and taylor (1992), clemes et al. (2008), and omar et al. (2009) as the source of efficiency in the organization's communication policy, which preserves the image of the university and increases the satisfaction rate of its students with the services provided. according to the analysis by alves and raposo (2007), satisfaction contributes significantly to the relationships between students and educational institutions. this explains the causal relationship between the quality of the service offered in the educational establishment and the students’ satisfaction (cronin et al., 2000). some http://www.virtual-economics.eu/ 28 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 authors consider that the satisfaction with the education system is the most important objective that the educational establishment is to aim for. the quality of service becomes a key factor of competitiveness. as the level of customer demand increases with the level of competition becoming more intense, quality dominates economic profitability. therefore, it seems particularly important to understand at best what the expectations and perceptions of customers are if we want to aim at their satisfaction. as far as the higher education sector in saudi arabia is concerned, the competition is intensifying, and staff are constantly expanding the range of providers. this competitiveness is due to an uncontrolled and unbalanced quantitative growth of the workforce. the fragmentation of supply into a multitude of small establishments is followed by an increase in demand as students may choose to keep or leave their institutions at the end of each year or academic cycle. it is, therefore, important to know the determinants and the result of customer satisfaction, which, up to now, have remained a major challenge and a critical management problem (balemba, 2013). in this paper, we try to examine empirically the satisfaction of staff (teachers, administrators and students) of the community college at taibah university in saudi arabia during the 20182019 academic year. this satisfaction is related the service quality offered by the community college. in this context, we used a questionnaire addressed to teachers, administrators, and students. two approaches were applied to analyse the empirical results of this survey. firstly, we used a descriptive analysis based on studying the distribution of respondents according to their responses using the number of individuals and frequencies. secondly, we applied the principal component analysis (pca) method to capture the determinants of the services quality provided by the community college at taibah university to its staff during the 20182019 academic year. to achieve the purpose set, this paper is organized as follows: section 2 presents a literature review. in section 3, we outline the econometric methodology applied and look at the data. section 4 is devoted to the presentation of empirical results. finally, section 5 summarises the conclusions. 2. literature review 2.1. consumer satisfaction the concept of satisfaction comes from two latin words: ‘satis’ and ‘facere’. these terms mean respectively ‘enough’ and ‘do’. explicitly, the notion of satisfaction means ‘providing what is sought to the point where it is enough’ (vanhamme, 2001). nowadays, however, the definition of consumer satisfaction differs a lot, according to the researchers. this is the very explanatory basis of its measurement by several methods (park, 2007). http://www.virtual-economics.eu/ 29 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 according to microeconomic approaches, consumer satisfaction is the result of the partial or complete destruction of a commodity (or even commodities). the level of satisfaction achieved and the quantity of several goods consumed are related to the utility function. it is, therefore, appropriate to note that the level of consumer satisfaction is a function of the quantity of one or more goods consumed. it is the optics of goods. from a perspective of goods and services, the notion of satisfaction is the subject of a topic that has even been considered the cornerstone of marketing. satisfaction would, therefore, be appreciated in three ways: satisfaction because of services, satisfaction as benchmarking and satisfaction as an assessment of the quality of services (cantin and rocheleau, 2006). in the marketing literature on services, many studies based on wolfinbarger and gilly have examined the link between satisfaction and the quality of services (bressolles et al., 2007). in this context, the notion of satisfaction is a concept with uncertain limits because some authors call it a feeling, a positive emotional state, and a psychological state (jouandeau, 2004). satisfaction is defined as an evaluation of surprise inherent in the acquisition of a product and/or a consumption experience. in other words, satisfaction is a psychological state of a client that results from the comparison between his expectations of a product or service, and his feelings after purchase and consumption of a product. this state implies that consumption emanates only a positive feeling, but also neutral and negative feelings. a positive feeling means satisfaction, a neutral feeling means indifference, and a negative feeling means dissatisfaction (bressolles et al., 2007; ilunga, 2011). it follows that satisfaction results from the gap between expectations and perceived quality (le roy, 2004). here, consumer satisfaction is, therefore, induced by the quality of goods or services consumed. these two components (expectations and perceived quality) show that consumer satisfaction can be divided into two stages based on the moment of purchase. according to oliver, this is the pre-purchase process and the post-purchase process. in the pre-purchase process, the consumer is waiting for the performance of a product based on various information. then, in the after-purchase process, he judges whether his expectations and needs, formed before the purchase, are well gratified. then he makes his judgment on satisfaction/dissatisfaction (park, 2007). 2.2. determinants of satisfaction to learn the customers’ opinion on the company services, there arises the question of which criteria this evaluation should be based on. it is important to know what must be measured, i.e. to identify the services offered by the organization. this is the stage of identifying the elements of the service which shape different opinions of customers. these elements are grouped under general themes called "dimensions". other authors prefer the terminology of "engines", "determinants", "key factors", or "components" (tremblay, 2006). the terms http://www.virtual-economics.eu/ 30 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 "dimensions and/or components", "determinants" and/or "factors" are retained as part of this research. 2.3. importance of customer surveys in the direct marketing journal, charles gengler says, "customer satisfaction surveys are not just a tool for measuring customer behaviour but they can also be used as a proactive crm tool." regular monitoring of customer satisfaction levels and a corresponding response can increase loyalty and retention levels. below, the paragraphs highlight the importance of the most consistent benefits of using customer surveys to create a regular dialogue with consumers: re-deploy resources to address the most important issues: surveys can quickly highlight the most important issues for clients, employees or the management team, on which the team and the company should focus. improve the quality of service: a customer satisfaction survey can provide a more complete picture of overall service delivery, not just problems that require a "quick response". this is one of the crucial elements of the process of continuous improvement of services. demonstrate commitment to customers: even if customers and prospects never respond to polls, asking for their opinion helps to score points and earn their respect. offer an escape to customers: surveys provide disgruntled customers with a way out of negative feelings while allowing the company to obtain key data to help correct the situation. measure the performance of the team: by associating surveys with individual transactions or activities, and by collecting these data on a regular basis, the company can gain a reliable insight into the performance of its team as it interacts with customers and prospects. encourage new orders: while it is common to see customers ordering services or products only once, a survey can usually allow the company to remember customers’ "good memories" and encourage them to place new orders or to give clues as to the potential needs that the company should satisfy. collect information about the competition: simple market surveys can give the company access to true business intelligence in terms of its positioning as well as its products and services compared to competitors. get feedback on new products and services: it is question of why the new offer of the company knows a success or a failure. in other words, it is important to identify simple actions to take in order to achieve important improvements. a well-crafted survey allows the company to address these concerns. inform the product and service development department: a prospect-focused survey will help the company anticipate market needs and will give it a better overview of the service offerings it should consider developing in the future. prioritization of development resources: it is a question of knowing better to prioritize the resources for developing the products and services of the company by carrying out a survey intended for both customers and prospects. http://www.virtual-economics.eu/ 31 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 3. data and methodology 3.1. data collection technique data collection techniques focus on qualitative and quantitative studies. the qualitative studies focus on the questionnaires sent to community college staff of both genders; while, quantitative studies cover the pre-survey, the determination of the sample size and the actual survey. for example, the interview was conducted with 281 respondents in the community college at taibah university during the 2018-2019 academic year. however, referring to the theoretical foundations, two criteria are necessary to determine the individuals to be interviewed (rorer, 1983): the semantic saturation criterion, for which it is useless to proceed to new interviews since the latter no longer brings new information compared to the previous ones; and the theoretical saturation criterion, according to which it is no longer necessary to conduct new interviews once the entire theoretical field to be covered is effective. the questionnaire is sent to community college staff at taibah university during the academic year 2018-2019 to be answered by teachers (39), administrators (31) and students (211). 3.2. data processing technique the data are processed by spss 24. however, the results are analysed based on some previous studies by such authors as: (tremblay and beauregard, 2006; tremblay, 2006; balemba, 2013; ilunga, 2011; fouquereau et al., 2006; nguyen, 2012; gonzalez, 2004; park, 2007; sempels, 2005). data collection technique: these techniques focus on qualitative and quantitative studies. the qualitative studies focus on the questionnaires sent to community college staff of both genders; while, quantitative studies cover the pre-survey, the determination of the sample size and the actual survey. in our case, we use an interview for a sample composed of 281 community college respondents at taibah university through the 2018-2019 academic year. nevertheless, regarding the hypothetical fundamentals, two principles are required for the purpose of the population to be questioned: the semantic capacity principle and the theoretic capacity criterion. the questionnaire is sent to the community college staff at taibah university during the academic year 2018-2019 to be answered by teachers (39), administrators (31) and students (211). data processing technique: http://www.virtual-economics.eu/ 32 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 the data processing technique is based on a descriptive analysis and the method of analysis by the main component. principal component analysis (pca), or the application domain karhunen-loève transformation (klt), is a method of the family of data analysis and, more generally, of multivariate statistics, which consists of transforming linked variables (called "correlated" in statistics) into new uncorrelated variables. these new variables are called "principal components", or main axes. it allows the practitioner to reduce the number of variables and make the information less redundant. the contributions of each variable to forming the principal components are defined in the same way as those of the individuals. they are calculated as follows: 𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑜𝑓 𝑒𝑎𝑐ℎ 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 = 𝐹𝑎𝑐𝑡𝑜𝑟𝑖 2 𝑂𝑤𝑛 𝑉𝑎𝑙𝑢𝑒𝑠 (1) the questionnaire differs according to the nature of the community college respondents of both genders, male and female. tables 1, 2, and 3 present respectively the different questions addressed to teachers, students, and administrators. table 1 presents the questions and their items addressed to the academic faculty of both genders, male and female, in the community college at taibah university during the academic year 2018-2019. table 2 presents the questions and their items addressed to the students of both genders, male and female, in the community college at taibah university during the academic year 2018-2019. table 3 presents the questions and their items addressed to the administrative personnel of both genders, male and female, in the community college at taibah university during the academic year 2018-2019. 4. empirical results 4.1. descriptive analysis in this part, we use a descriptive analysis to present the repartition of the employed sample. the aim of this questionnaire is to measure the quality level of services provided at the community college at taibah university in medina. this questionnaire was sent electronically to all members of the community college at taibah university: administrative staff, faculty, and students. table 4 presents personal information of the academic staff of both genders, male and female. as for the distribution of faculty members by nationality, we note that in the student segment, 36% are saudi and the rest 64% are foreigners. among the female respondents, 59% are saudis and the remaining 41% are non-saudian. with regard to the distribution of faculty members by degree, we note that they consist of two members at the rank of a teaching assistant, 4 members at the rank of a lecturer, 14 members at the rank of an assistant professor and two members at the rank of an associate professor. as for the female faculty members, we note that they comprise 4 members at the rank of a teaching assistant, 6 members at the rank of a http://www.virtual-economics.eu/ 33 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 lecturer, 6 members at the rank of an assistant professor and one member at the rank of an associate professor. most academic staff have between 5 and 10 years of experience for both genders: male (64%) and female (46%). table 1. selected questions and items in the questions addressed to the academic staff variables items code personal information nationality 1 degree 2 years of experience 3 work \ position 4 statements related to the material supply the college provides classrooms suitable for lectures 5 parking is available next to the college 6 the number of devices in laboratories proportional to the number of students 7 college offers scientific (electronic paper) books 8 facilities for students with special needs available at the college 9 plates and benchmarks installed to facilitate access to the various sections of the college 10 there is a website for a privileged college on the internet 11 highly-efficient administrative body available at the college 12 appropriate recreational activities available at the college 13 the college is dedicated to offer workshops training courses at the college halls 14 phrases related to the dependency dimension the college organizes the design of new students' programs 15 college offers students an academic advisor to help throughout the study period 16 the college offers special assistance for talented students 17 students are encouraged to participate in the activities of field experience 18 the curriculum is flexible 19 statements related to the reliability dimension relationships between faculty and administrative staff and students are based on trust and respect 20 students evaluate the performance of justice 21 the college is dedicated to the students with the concepts of research ethics and scientific integrity 22 the college keeps information about beneficiaries confidential 23 i feel proud of belonging to the college 24 aspects of the social empathy dimension faculty shows student assessment procedures at the beginning of teaching courses 25 the communication between faculty and students is effective 26 the college provides communication channels through which students can express any problem they face 27 the college is keen to identify student needs periodically 28 the department of the college is interested in organizing timetable in the interest of students 29 phrases related to the dimension of enthusiasm i feel the enthusiasm in doing my job 30 i accept the challenge in the tasks that i perform 31 i enjoy high flexibility in my job 32 phrases related to the dimension of dedication i am proud of the work i do 33 i feel that the work i do has value and purpose 34 i have enough perseverance to work even in the worst circumstances 35 http://www.virtual-economics.eu/ 34 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 phrases related to the absorption dimension i am enjoying my work performance 36 i have spent a long time in my performance 37 i feel happy to do double work 38 source: developed by the authors. table 2. selected questions and items of the questions addressed to students variables items code personal information type 1 nationality 2 department 3 study level 4 cumulative average 5 statements relating to the material elements of the concrete the college provides classrooms suitable for lectures 6 parking is available next to the college 7 the number of devices in laboratories is proportional to the number of students 8 the college offers scientific (electronic paper) books 9 facilities for students with special needs available at the college 10 plates and benchmarks installed to facilitate access to the various sections of the college 11 there is a website for a privileged college on the internet 12 highly-efficient administrative body available at the college 13 appropriate recreational activities available at the college 14 the college is dedicated to offer workshops training courses at the college halls 15 aspects of the social empathy dimension faculty shows student assessment procedures at the beginning of teaching courses 16 the communication between faculty and students is effective 17 the college provides communication channels through which students can express any problem they face 18 the college is keen to identify student needs periodically 19 the department of the college is interested in organizing timetable in the interest of students 20 phrases related to the responsiveness dimension the faculty members are willing to answer all the students' questions 21 the college staff is highly motivated to serve the students 22 the college accurately informs beneficiaries of the dates of service 23 the team is interested in meeting the beneficiaries' requests immediately 24 the advisory council responds the students’ needs quickly 25 statements related to the reliability dimension relationships between faculty and administrative staff and students are based on trust and respect 26 students evaluate the performance of justice 27 the college is dedicated to the students with the concepts of research ethics and scientific integrity 28 the college keeps information about beneficiaries confidential 29 i feel proud of belonging to the college 30 source: developed by the authors. http://www.virtual-economics.eu/ 35 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 table 3. selected questions and items of the questions addressed to the administrative staff. variables items code personal information nationality 1 years of experience 2 statements related to the material supply the college provides classrooms suitable for lectures 3 parking is available next to the college 4 the number of devices in laboratories proportional to the number of students 5 college offers scientific (electronic paper) books 6 facilities for students with special needs available at the college 7 plates and benchmarks installed to facilitate access to the various sections of the college 8 there is a website for a privileged college on the internet 9 highly-efficient administrative body available at the college 10 appropriate recreational activities available at the college 11 the college is dedicated to offer workshops training courses at the college halls 12 phrases related to the responsiveness dimension the faculty members are willing to answer all the students' questions 13 the college staff is highly motivated to serve the students 14 the college accurately informs beneficiaries of the dates of service 15 the team is interested in meeting the beneficiaries' requests immediately 16 the advisory council responds the students’ needs quickly 17 statements related to the reliability dimension relationships between faculty and administrative staff and students are based on trust and respect 18 students evaluate the performance of justice 19 the college is dedicated to the students with the concepts of research ethics and scientific integrity 20 the college keeps information about beneficiaries confidential 21 i feel proud of belonging to the college 22 phrases related to the dimension of enthusiasm i feel the enthusiasm in doing my job 23 i accept the challenge in the tasks that i perform 24 i enjoy high flexibility in my job 25 phrases related to the dimension of dedication i am proud of the work i do 26 i feel that the work i do has value and purpose 27 i have enough perseverance to work even in the worst circumstances 28 phrases related to the absorption dimension i am enjoying my work performance 29 i have spent a long time in my performance 30 i feel happy to do double work 31 source: developed by the authors. table 4. descriptive statistics for academic staff. gender personal information items number of individuals frequency male nationality saudi 8 36% non-saudi 14 64% total 22 100% female saudi 10 59% http://www.virtual-economics.eu/ 36 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 non-saudi 7 41% total 17 100% male degree professor 0 0% associate professor 2 9% assistant professor 14 64% lecturer 4 18% teaching assistant 2 9% total 22 100% female professor 0 0% associate professor 1 6% assistant professor 6 35% lecturer 6 35% teaching assistant 4 24% total 17 100% male years of experience from 1 year to 5 years 2 9% from 5 to less than 10 years 14 64% from 10 to less than 15 years 5 22.5% from 15 years and more 1 4.5% total 22 100% female from 1 year to 5 years 4 24% from 5 to less than 10 years 8 46% from 10 to less than 15 years 2 12% from 15 years and more 3 18% total 17 100% male work \ position academic only 17 77% academic and administrative 5 23% total 22 100% female academic only 10 59% academic and administrative 7 41% total 17 100% source: developed by the authors. table 5 shows the personal information of the academic staff of both genders, male and female. as for the distribution of students by nationality, we note that all students are of saudian nationality. among the males, 56% are from department of administrative and financial sciences and techniques and the remaining 44% are from the department of computer sciences and information. among female respondents, 34% are from department of administrative and financial sciences and techniques and the remaining 66% are from the department of computer sciences and information. 54% of the male students are in the first study level, while the female respondents are in the third study level. table 5. descriptive statistics for students part personal information items number of individuals frequency male nationality saudi 78 100% non-saudi 0 0% total 78 100% female saudi 134 100% non-saudi 0 0% total 134 100% male department department of administrative and financial sciences and techniques 44 56% department of computer sciences and information 34 44% department of humanities and techniques 0 0% http://www.virtual-economics.eu/ 37 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 total 78 100% female department of administrative and financial sciences and techniques 46 34% department of computer sciences and information 88 66% department of humanities and techniques 0 0% total 134 100% male study level first 42 54% second 4 5% third 26 33% fourth 6 8% total 78 100% female first 36 26% second 0 0% third 88 66% fourth 10 8% total 134 100% male cumulative average excellent a 36 46% very good b 22 28% good c 18 23% acceptable d 2 3% total 78 100% female excellent a 84 63% very good b 34 25% good c 14 10% acceptable d 2 2% total 134 100% source: developed by the authors. table 6 summarizes the personal information of the administrative staff of both genders, male and female. as for the distribution of administrative personnel by nationality, we conclude that they all are saudian of both genders, male and female. most academic staff of both genders, male and female, have between 1 and 10 years of experience; male: 50% between 1 and 5 years and 50% between 5 and 10 years and female: 45% between 1 and 5 years and 55% between 5 and 10 years. table 6. descriptive statistics for administrative personals part personal information items number of individuals frequency male nationality saudi 10 100% non-saudi 0 0% total 10 100% female saudi 20 100% non-saudi 0 0% total 20 100% male years of experience from 1 year to 5 years 5 50% from 5 to less than 10 years 5 50% from 10 to less than 15 years 0 0% from 15 years and more 0 0% http://www.virtual-economics.eu/ 38 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 total 10 100% female from 1 year to 5 years 9 45% from 5 to less than 10 years 11 55% from 10 to less than 15 years 0 0% from 15 years and more 0 0% total 20 100% source: developed by the authors. 4.2. the results of pca the principal components analysis makes it possible to answer three main questions namely: are the data factorizable? how many factors are there to remember? how should the results be interpreted? 4.2.1. academic faculty 4.2.1.1. academic faculty (a male segment) tables 7-13 present the results of the pca relative to the questions and their items addressed to the male academic faculty in the community college at taibah university during the academic year 2018-2019. in these tables (7-13), we present only the variables which are important and represent the principal factors that impact the favourites of the academic staff. table 7 shows the contribution of each variable in the statements related to the material supply. from this table, we find that three items (9, 10, 11) are important and represent the principal factors that affect the preferences of the male academic faculty in the community college at taibah university during the academic year 2018-2019. these three factors are: "facilities for students with special needs available at the college; plates and benchmarks installed to facilitate access to the various sections of the college; and there is a website for a privileged college on the internet". table 8 presents the contribution of each variable in the phrases related to the dependency dimension. from this table, we remark that two items (17, 18) are crucial and represent the principal factors that affect the preferences of the male academic faculty. these two factors are: “college offers special assistance for talented students;” and “students are encouraged to participate in the activities of field experience”. table 7. contribution of each variable in the statements related to the material supply contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 fact. 6 fact. 7 fact. 8 fact. 9 fact. 10 9 0.0983 0.2949 0.2966 0.2983 0.3000 0.3017 0.3034 0.3051 0.3069 0.3086 10 0.1160 0.3480 0.3500 0.3519 0.3540 0.3560 0.3580 0.3600 0.3621 0.3642 11 0.1369 0.4106 0.4129 0.4153 0.4177 0.4200 0.4224 0.4248 0.4273 0.4297 source: developed by the authors. http://www.virtual-economics.eu/ 39 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 table 8. contribution of each variable in the phrases related to the dependency dimension contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 17 0.7467 2.2400 2.2528 2.2656 2.2785 18 0.8811 2.6432 2.6583 2.6734 2.6887 source: developed by the authors. table 9 presents the contribution of each variable in the statements related to the reliability dimension. from this table, we find that two items (23, 24) are critical and represent the principal factors that affect the preferences of the male academic staff. these two factors are: ‘the college keeps information about beneficiaries confidential;’ and ‘i feel proud of belonging to the college’. table 10 summarizes the contribution of each variable in the aspects of the social empathy dimension. from this table, we find that two items (28, 29) are essential and represent the main factors that affect the preferences of the male academic staff. these two factors are: ‘the college is keen to identify student needs periodically;’ and ‘the department of the college is interested in organizing timetable in the interest of students’. table 9. the contribution of each variable in the statements related to the reliability dimension contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 23 0.7775 2.3325 2.3458 2.3592 2.3727 24 0.9952 2.9857 3.0027 3.0198 3.0370 source: developed by the authors. table 10. the contribution of each variable in the aspects of the dimension of social empathy contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 28 0.7312 2.1936 2.2062 2.2187 2.2314 29 0.8628 2.5885 2.6033 2.6181 2.6330 source: developed by the authors. table 11 summarizes the contribution of each variable in the phrases related to the dimension of enthusiasm. from this table, we find out that one item (32) is vital and represent the principal factor that affects the preferences of the male academic professionals. this factor is: "i enjoy high flexibility in my job". http://www.virtual-economics.eu/ 40 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 table 11. the contribution of each variable in the phrases related to the dimension of enthusiasm contributions of each variable fact. 1 fact. 2 fact. 3 32 0.5378 1.6134 1.6226 source: developed by the authors. table 12 shows the contribution of each variable in the phrases related to the dimension of dedication. from this table, it is obvious that one item (35) is very important and represent the main factor that affects the preferences of the male academic professionals. this factor is: "i have enough perseverance to work even in the worst circumstances". table 12. contribution of each variable in the phrases related to the dimension of dedication contributions of each variable fact. 1 fact. 2 fact. 3 35 0.3986 1.1957 1.2025 source: developed by the authors. table 13 reports the contribution of each variable in the phrases related to the absorption dimension. from this table, we find out that one item (38) is vital and represent the principal factor that affects the preferences of the male academic staff. this factor is: "i feel happy to do double work". table 13. contribution of each variable in the phrases related to the absorption dimension. contributions of each variable fact. 1 fact. 2 fact. 3 38 0.4612 1.3837 1.3916 source: developed by the authors. 4.2.1.2. academic staff (the female segment) tables 14-20 present the results of the pca relative to the questions and their items addressed to the female academic professionals in the community college at taibah university during the academic year of 2018-2019. in these tables (14-20), we introduce only the items which are crucial and correspond to the principal determinants that influence the preferences of the female academic staff. table 14 reports the contribution of each variable in the statements related to the material supply. this table shows that three items (9, 10, 11) are important and represent the principal factors that affect the preferences of the female academic staff in the community college at http://www.virtual-economics.eu/ 41 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 taibah university during the academic year of 2018-2019. these three factors are: ‘facilities for students with special needs available at the college’; ‘plates and benchmarks installed to facilitate access to the various sections of the college’; and ‘there is a website for a privileged college on the internet’. table 15 shows the contribution of each variable in the phrases related to the dependency dimension. this table illustrates that two items (17, 18) are vital and represent the principal factors that affect the preferences of the female academic faculty. these two factors are: ‘the college offers special assistance for talented students;’ and ‘students are encouraged to participate in the activities of field experience’. table 14. the contribution of each variable in the statements related to the material supply contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 fact. 6 fact. 7 fact. 8 fact. 9 fact. 10 9 0.5983 1.7949 1.8051 1.8154 1.8258 1.8362 1.8466 1.8572 1.8677 1.8784 10 0.7060 2.1180 2.1300 2.1422 2.1544 2.1667 2.1790 2.1914 2.2039 2.2165 11 0.8331 2.4992 2.5134 2.5278 2.5422 2.5567 2.5712 2.5859 2.6006 2.6155 source: developed by the authors. table 15. the contribution of each variable in the phrases related to the dependency dimension contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 17 1.0948 3.2843 3.3030 3.3219 3.3408 18 1.2918 3.8755 3.8976 3.9198 3.9421 source: developed by the authors. table 16 summarizes the contribution of each variable in the statements related to the reliability dimension. this table shows that two items (23, 24) are important and represent the principal factors that affect the preferences of the female academic professionals. these two factors are: ‘the college keeps information about beneficiaries confidential;’ and ‘i feel proud of belonging to the college’. table 17 summarizes the contribution of each variable in the aspects of the social empathy dimension. this table shows that two items (27, 28) are essential and represent the main factors that affect the preferences of the female academic staff. these two factors are: "the college provides communication channels through which students can express any problem they face’; and ‘the college is keen to identify student needs periodically’. http://www.virtual-economics.eu/ 42 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 table 16. the contribution of each variable in the statements related to the reliability dimension contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 23 0.5993 1.7979 1.8081 1.8184 1.8288 24 0.7671 2.3013 2.3144 2.3276 2.3408 source: developed by the authors. table 17. the contribution of each variable in the aspects of the social empathy dimension. contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 27 0.3967 1.1900 1.1967 1.2036 1.2104 28 0.4681 1.4042 1.4122 1.4202 1.4283 source: developed by the authors. table 18 shows the contribution of each variable in the phrases related to the dimension of enthusiasm. this table shows that one item (32) is important and represent the principal factor that affects the preferences of the female academic staff. this factor is: "i enjoy high flexibility in my job". table 18. the contribution of each variable in the phrases related to the dimension of enthusiasm contributions of each variable fact. 1 fact. 2 fact. 3 32 0.3359 1.0077 1.0135 source: developed by the authors. table 19 shows the contribution of each variable in the phrases related to the dimension of dedication, with one item (35) being very crucial and represent the main factor that affects the preferences of the female academic personnel. this factor is: "i have enough perseverance to work even in the worst circumstances". table 19. contribution of each variable in the phrases related to the dimension of dedication contributions of each variable fact. 1 fact. 2 fact. 3 35 0.6057 1.8171 1.8275 source: developed by the authors. http://www.virtual-economics.eu/ 43 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 table 20 reports the contribution of each variable in the phrases related to the absorption dimension, with one item (37) being vital and represent the principal factor that affects the preferences of the male academic professionals. this factor is: " i have spent a long time in my performance". table 20. the contribution of each variable in the phrases related to the absorption dimension contributions of each variable fact. 1 fact. 2 fact. 3 37 0.5856 1.7567 1.7667 source: developed by the authors. 4.2.2. students tables 21-24 present the results of the pca relative to the questions and their items addressed to the students of both genders, male and female, in the community college at taibah university during the academic year of 2018-2019. in these tables (21-24), we propose only the variables which are crucial and correspond to the principal contributing factor that affects the students’ predilections. table 21 shows the contribution of each variable in the statements related to the material supply, with three items (6, 7, 8) being important and representing the principal factors that affect the preferences of the academic staff of both genders, male and female, in the community college at taibah university during the academic year of 2018-2019. these three factors are: ‘the college provides classrooms suitable for lectures;’ ‘parking is available next to the college;’ and ‘the number of devices in laboratories is proportional to the number of students’. table 22 presents the contribution of each variable in the aspects of the social empathy dimension, with two items (17, 19) being crucial and representing the principal factors that affect the preferences of the academic staff of both genders, male and female. these two factors are: ‘the communication between faculty and students is effective’; and ‘the college is keen to identify student needs periodically’. table 21. the contribution of each variable in the statements related to the material supply contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 fact. 6 fact. 7 fact. 8 fact. 9 fact. 10 6 0.6211 1.8633 1.8739 1.8846 1.8953 1.9061 1.9170 1.9279 1.9389 1.9500 7 0.7329 2.1987 2.2112 2.2238 2.2365 2.2492 2.2620 2.2749 2.2879 2.3009 8 0.8648 2.5944 2.6092 2.6241 2.6390 2.6541 2.6692 2.6844 2.6997 2.7151 source: developed by the authors. http://www.virtual-economics.eu/ 44 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 table 22. the contribution of each variable in the aspects of the social empathy dimension contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 17 0.3074 0.9223 0.9276 0.9329 0.9382 19 0.4281 1.2843 1.2916 1.2990 1.3064 source: developed by the authors. table 23 presents the contribution of each variable in the phrases related to the responsiveness dimension, with two items (21, 22) being critical and representing the principal factors that affect the preferences of the academic staff of both genders, male and female. these two factors are: ‘ the faculty members are willing to answer all the students' questions’; and ‘the college staff is highly motivated to serve the students’. table 24 summarizes the contribution of each variable in the statements related to the reliability dimension, with two items (28, 29) being essential and representing the main factors that affect the preferences of the male academic professionals. these two factors are: ‘the college is dedicated to the students with the concepts of research ethics and scientific integrity’; and ‘the college keeps information about beneficiaries confidential.’ table 23. the contribution of each variable in the phrases related to the responsiveness dimension contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 21 0.3415 1.0246 1.0305 1.0364 1.0423 22 0.4030 1.2091 1.2160 1.2229 1.2299 source: developed by the authors. table 24. the contribution of each variable in the statements related to the reliability dimension contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 28 0.4211 1.2632 1.2704 1.2776 1.2849 29 0.5390 1.6169 1.6261 1.6354 1.6447 source: developed by the authors. 4.2.3. administrative personnel 4.2.3.1. administrative personnel (the male segment) http://www.virtual-economics.eu/ 45 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 tables 25-30 present the results of the pca relative to the questions and their items addressed to the administrative personnel of both genders, male and female, in the community college at taibah university during the academic year of 2018-2019. in these tables (25-30), we present only the variables which are vital and correspond to the most important factors that impact the preferences of the male administrative personnel. table 25 shows the contribution of each variable in the statements related to the material supply, with three items (7, 8, 9) being important and representing the principal factors that affect the preferences of the male administrative personnel in the community college at taibah university during the academic year of 2018-2019. these three factors comprise: ‘facilities for students with special needs available at the college’; ‘plates and benchmarks installed to facilitate access to the various sections of the college’; and ‘there is a website for a privileged college on the internet". table 26 presents the contribution of each variable in the phrases related to the responsiveness dimension, with two items (16, 17) being crucial and representing the principal factors that affect the preferences of the male administrative personnel. these two factors are: ‘the team is interested in meeting the beneficiaries' requests immediately’; and ‘the advisory council responds the students’ needs quickly’. table 25. the contribution of each variable in the statements related to the material supply contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 fact. 6 fact. 7 fact. 8 fact. 9 fact. 10 7 0.5983 1.7949 1.8051 1.8154 1.8258 1.8362 1.8466 1.8572 1.8677 1.8784 8 0.7060 2.1180 2.1300 2.1422 2.1544 2.1667 2.1790 2.1914 2.2039 2.2165 9 0.8331 2.4992 2.5134 2.5278 2.5422 2.5567 2.5712 2.5859 2.6006 2.6155 source: developed by the authors. table 26. the contribution of each variable in the phrases related to the responsiveness dimension contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 16 0.2350 0.7049 0.7089 0.7130 0.7170 17 0.2773 0.8318 0.8365 0.8413 0.8461 source: developed by the authors. table 27 presents the contribution of each variable in the statements related to the reliability dimension, with two items (21, 22) being critical and representing the principal factors that affect the preferences of the male administrative staff. these two factors are: ‘the college keeps information about beneficiaries confidential’; and ‘i feel proud of belonging to the college’. http://www.virtual-economics.eu/ 46 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 table 28 summarizes the contribution of each variable in the phrases related to the dimension of enthusiasm, with one item (24) being vital and representing the principal factor that affects the preferences of the male administrative personnel. this factor is: "i accept the challenge in the tasks that i perform". table 27. the contribution of each variable in the statements related to the reliability dimension contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 21 0.8666 2.5999 2.6147 2.6296 2.6446 22 1.1093 3.3278 3.3468 3.3659 3.3851 source: developed by the authors. table 28. the contribution of each variable in the phrases related to the dimension of enthusiasm contributions of each variable fact. 1 fact. 2 fact. 3 24 0.5856 1.7567 1.7667 source: developed by the authors. table 29 shows the contribution of each variable in the phrases related to the dimension of dedication, with one item (27) being very important and representing the main factor that affects the preferences of the male administrative staff. this factor is: "i feel that the work i do has value and purpose". table 30 reports the contribution of each variable in the phrases related to the absorption dimension, with one item (31) being vital and representing the principal factor that affects the preferences of the male administrative staff. this factor is: "i feel happy to do double work". table 29. the contribution of each variable in the phrases related to the dimension of dedication contributions of each variable fact. 1 fact. 2 fact. 3 27 0.2316 0.6947 0.6987 source: developed by the authors. http://www.virtual-economics.eu/ 47 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 table 30. the contribution of each variable in the phrases related to the absorption dimension contributions of each variable fact. 1 fact. 2 fact. 3 31 0.6144 1.8432 1.8537 source: developed by the authors. 4.2.3.2. administrative personnel (the female segment) tables 31-36 present the results of the pca relative to the questions and their items addressed to the female administrative staff in the community college at taibah university during the academic year of 2018-2019. in the tables 31-36, we give only the variables which are essential and correspond to the most crucial elements that influence the preferences of the female administrative personnel. table 31 shows the contribution of each variable in the statements relating to the material supply, with three items (10, 11, 12) being important and representing the principal factors that affect the preferences of the female administrative personnel in the community college at taibah university during the academic year of 2018-2019. these three factors are: ‘highlyefficient administrative body available at the college’; ‘appropriate recreational activities available at the college’; and ‘the college is dedicated to offer workshops training courses at the college halls’. table 32 presents the contribution of each variable in the phrases related to the responsiveness dimension, with two items (16, 17) being important and representing the principal factors that affect the preferences of the female administrative personnel. these two factors are: ‘the team is interested in meeting the beneficiaries' requests immediately;’ and ‘the advisory council responds the students’ needs quickly’. table 33 presents the contribution of each variable in the statements related to the reliability dimension, with two items (21, 22) being vital and representing the principal factors that affect the preferences of the female administrative personnel. these two factors are: ‘the college keeps information about beneficiaries confidential’; and ‘i feel proud of belonging to the college’. table 34 summarizes the contribution of each variable in the phrases related to the enthusiasm dimension, with one item (25) being vital and representing the principal factor that affects the preferences of the female administrative personnel. this factor is: "i enjoy high flexibility in my job". http://www.virtual-economics.eu/ 48 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 table 31. the contribution of each variable in the statements related to the material supply contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 fact. 6 fact. 7 fact. 8 fact. 9 fact. 10 10 0.3110 0.9331 0.9384 0.9438 0.9492 0.9546 0.9600 0.9655 0.9710 0.9765 11 0.3670 1.1011 1.1074 1.1137 1.1200 1.1264 1.1328 1.1393 1.1458 1.1523 12 0.4331 1.2993 1.3067 1.3141 1.3216 1.3292 1.3367 1.3444 1.3520 1.3597 source: developed by the authors. table 32. the contribution of each variable in the phrases related to the responsiveness dimension contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 16 0.2325 0.6976 0.7015 0.7055 0.7096 17 0.2744 0.8231 0.8278 0.8325 0.8373 source: developed by the authors. table 33. the contribution of each variable in the statements related to the reliability dimension contribution of each variable fact. 1 fact. 2 fact. 3 fact. 4 fact. 5 21 0.3667 1.1001 1.1064 1.1127 1.1190 22 0.4694 1.4081 1.4162 1.4242 1.4323 source: developed by the authors. table 34. the contribution of each variable in the phrases related to the dimension of enthusiasm contributions of each variable fact. 1 fact. 2 fact. 3 25 0.5587 1.6761 1.6856 source: developed by the authors. table 35 shows the contribution of each variable in the phrases related to the dimension of dedication, with one item (28) being very important and representing the main factor that affects the preferences of the female administrative personnel. this factor is: "i have enough perseverance to work even in the worst circumstances". http://www.virtual-economics.eu/ 49 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 table 35. the contribution of each variable in the phrases related to the dimension of dedication contributions of each variable fact. 1 fact. 2 fact. 3 28 0.5462 1.6387 1.6480 source: developed by the authors. table 36 reports the contribution of each variable in the phrases related to the absorption dimension, with one item (31) being essential and representing the principal factor that affects the preferences of the female administrative staff. this factor is: "i feel happy to do double work". table 36. the contribution of each variable in the phrases related to the absorption dimension contributions of each variable fact. 1 fact. 2 fact. 3 31 0.4125 1.2375 1.2445 source: developed by the authors. 5. conclusions the purpose of this study was to evaluate the quality of the services offered by the community college in taibah university to its clients. it was worthwhile to conduct this research, the concept of satisfaction being the subject considered as the cornerstone of marketing. a methodological approach meant to answer the initial questions that would arise before the research. the methodology is structured in two sub-steps: the first presents the techniques of data collection and the second describes techniques for processing the data collected. thus, the data are collected by the questionnaire technique on a sample of 281 respondents in the community college at taibah university during the 2018-2019 academic year. we use a descriptive analysis to show our sample and principal component analysis to determine the contribution of each variable. the principal component analysis method captures the key variables of staff satisfaction at the community college in taibah university of the services provided. in the end, it emerges from this work that quality of service has become a key factor of competitiveness. the demand level of the staff increases with the level of competition which becomes more intense and the quality dominates the economic profitability. the companies that deliver quality services are then less vulnerable to a price war or any promotional action of their competitors. otherwise, rather than seducing customers, the risk is to end up http://www.virtual-economics.eu/ 50 www.virtual-economics.eu issn 2657-4047 (online) abdelkader derbali and ahmed k elnagar virtual economics, vol. 3, no. 3, 2020 annoying them. in our article, the satisfaction is expressed by the factors determined by the pca method. this study presented the satisfaction of the staff of both genders at the community college in taibah university by certain factors which constitute a necessity for them. it was then that the hypotheses of this research were confined to the viewpoint that the students of community collage at taibah university remained generally satisfied with the various university services. as a result, the university is able to offer its students a quality service, to encourage them to continue their higher education in order to be more competitive in the economic and social environment. the pca model has a positive impact on quality service in academic institutions, allowing them to assess and control the quality of their service provided. in order to guarantee a high level of satisfaction to the students, and to preserve the image of the establishment by gaining their trust. 6. acknowledgements the authors are thankful to the editor in chief and anonymous reviewers for their supportive and important remarks and suggestions. 7. formatting of funding sources the authors declare that they haven’t received any funding to support their research. references alsulami, h.a.j., & makhbul, z.k.m. 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(2001). transaction-specific consumer satisfaction: definition, antecedents, measurement and modes. leuven: labacc / fucam, katholieke universiteit leuven. http://www.virtual-economics.eu/ кwilinski alex 91 www.virtual-economics.eu issn 2657-4047 (online) doaa salman, dina seiam, and eman fayaz virtual economics, vol. 3, no. 4, 2020 2020 volume 3 number 4 (october) how can the aviation sector survive after covid-19? doaa salman, dina seiam, and eman fayaz abstract. this paper aims to analyse the adaptation of the airline industry after the hit of coronavirus pandemic. this virus is affecting the global economy by targeting the most profitable industries and making them collapse. by making a qualitative analysis of the topic, this research paper examines how the airline industry faces such a challenge. also, it analyses how several airline companies shut down through the huge debt that they faced and how tourism declined sharply in all countries. this paper also examines the slow comeback which was experienced by the airline industry. finally, the paper proposes a set of policies to overcome the current crisis and future setbacks. keywords: coronavirus, pandemic, aviation, industry, tourism, problem, qualitative jel classification: g28, k2, l93 authors: doaa salman october university for modern sciences and arts, cairo, egypt e-mail: dsalman@msa.eun.eg https://orcid.org/0000-0001-8276-0959 dina seiam october university for modern sciences and arts, cairo, egypt e-mail: dinaseiam@gmail.com https://orcid.org/0000-0002-0204-6753 eman fayaz october university for modern sciences and arts, cairo, egypt e-mail: eman.yasser1@msa.eun.eg https://orcid.org/0000-0002-4399-0249 citation: salman, d., seiam, d., & fayaz, e. (2020). how can the aviation sector survive after covid19? virtual economics, 3(4), 91-105. https://doi.org/10.34021/ve.2020.03.04(5) received: june 6, 2020. revised: august 21, 2020. accepted: september 26, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2020.03.04(5) https://creativecommons.org/licenses/by/4.0/ 92 www.virtual-economics.eu issn 2657-4047 (online) doaa salman, dina seiam, and eman fayaz virtual economics, vol. 3, no. 4, 2020 1. introduction viruses pose a serious threat to human health. they have caused far more deaths over the last century than all military wars during the time. influenza was responsible for about 100 million deaths, most of them after the major epidemic of 1918-1919, known as the spanish flu, as well as the hiv which caused around 30 million deaths. in the year of 2020, there is a new virus causing the death of thousands of people known as covid-19. since its first appearance in china at the beginning of the year, the current coronavirus (covid-19) has spread to almost every country in the world. there has been reported infection among over 2 million people and over 134,000 deaths (gulland, 2020). such kind of viruses causes a serious damage to the society, both to health and economy. the economy in china was the first to be shut down by the coronavirus transmission; however, when it spread through europe and america, countries all over the world took dramatic measures to seek and curb it. businesses and banks were closed and residents were restricted to their houses. standard economic processes were disrupted in peacetime to an unparalleled degree, as daily life habits changed. governments were taking steps trying to keep businesses afloat and livelihoods from being threatened. most analysts conclude that the economy has already reached a recession. the global effects of the pandemic promise to be one of the worst disruptions in decades (bernard, 2020). the aviation industry is currently fighting for survival and avoiding bankruptcy. this introduction overviews the aviation industry’s strategy to cope with the current pandemic from an economic perspective. the pandemic cleared the sky from airplanes landing them on the ground with empty flights. this fact is the main reason behind this research analyzing the impact of this virus on the airline industry, losing billions of dollars of global revenues, and this impact was expected to continue growing if the virus is not controlled. many airlines cut capacity and took emergency measures to cut costs. governments need to take notice as airlines are making every effort to stay afloat as they perform the vital task of linking the economies of the world. as governments targets to stimulus measures via consideration for tax relief, charges and slot allocation will be required for the airline industry, if not, it is expected to file bankruptcy which is not favorable for the country's economy since most airlines are currently striving desperately to preserve cash and many are asking or forcing staff to take unpaid leave, in addition to cutting flights. the research is divided into different sections as we start with a literature review that discusses three points: first is the pandemic, second is an externality, and the third point is the types of externality. then, we could see how different countries are affected by airlines like flybe, trans states airlines, and compass airlines. moreover, the effect on tourism will be elaborated. eventually, the research is ended with future expectations of what may happen in the airline industry after the end of the pandemic. http://www.virtual-economics.eu/ 93 www.virtual-economics.eu issn 2657-4047 (online) doaa salman, dina seiam, and eman fayaz virtual economics, vol. 3, no. 4, 2020 2. the literature review pandemic is a disease outbreak that has spread through a wide area, such as several countries, or across the globe. externality applies to a loss or benefit (spill-out) paid or earned by a third party. the third-party, however, does not influence the development of the expense or benefit. externality may be either positive or negative and may result either from the manufacture or consumption of a good or service. breakdowns are the subject of a broad analysis outside of any financial activity. besides, externalities emerge from the decisions that individuals and firms make in civil society and on the markets. economic measures, such as disease prevention, can create externalities and unexpected effects (fisman & laupland, 2009). the disease is a pandemic and can affect the economies of the country due to its widespread. besides, we can see that the covid-19 is causing different externalities from a pandemic; these externalities can be either positive or negative. the negative externalities that can be illustrated by panic buying in supermarkets, people after knowing the dangers of the virus they rushed to the supermarkets and emptied its shelves like toilet papers, essential goods, masks, and hand sanitizers without giving other people chances to purchase, and that can lead to an increase in the commodity prices. the panic buying is irrational because buying more and more will not solve the panic. panic purchasing during the crisis can push costs up and get essential commodities out of people's hands that need them most (e.g. health workers' face masks) (lufkin, 2020). another negative externality is the macroeconomic fall-out since there is a lock-down: factories are unable to produce, which caused many individuals to lose their jobs, or cut-out their incomes since there is no productivity. here the country faces different problems which will result in the rise in government debts and cause tax burden on companies in the future. also, social behaviors that spread infection is a negative externality, when citizens don't follow the guidelines of preventing the spread of the disease like social distancing, wearing masks, washing hands, etc. that causes an increase in the number of cases. on the other hand, there are positive externalities like the decline in pollution due to the lockdown: the factories, schools, malls are closed, so output slowed down company operations and limited transportation that result in lower c02 and n02 emissions and cleaner oceans. china is one of the most polluted countries, yet current satellite images indicate a drastic decrease in pollution rates in china, also nasa maps display a drop in nitrogen dioxide (no2) levels relative to the first 2 months of 2019 (okyere et al., 2020). moreover, in italy, the canal water in venice became clean, first in a very long time, and dolphins started showing up. an additional positive externality is the development of technology as a result of social distancing at schools and universities around the country. good health and quality of life are perceived to be a global and jointly associated life commodity, which ensures that economic and health growth interrelates into a fundamental driver for sustainable economic development. several researchers have demonstrated that building a healthy community is a permanent benefit for the growth of society and economic growth. several related studies have been undertaken over recent years by different http://www.virtual-economics.eu/ 94 www.virtual-economics.eu issn 2657-4047 (online) doaa salman, dina seiam, and eman fayaz virtual economics, vol. 3, no. 4, 2020 academics to draw public and private sector’s attention to the effect of health care and climate on economic growth and whether the government can achieve sustained economic growth mainly during the times of health crisis (alhassan et al., 2020). due to covid-19, countries face a decline in economic growth, but what differentiates one country from another is the health expenditure. when the nation has advanced health care, it will be able to control the disease more than a country that doesn’t have one. tourism is also one of the main aspects that control the economic growth. the top four countries that are reliant on tourism are mexico, spain, italy and turkey. tourism is one of the world's biggest businesses and one of economic activity's fastest growing industries. several studies have shown the long-term impact of economic development on tourism, also numerous developing nations view tourism as a big part of economic growth and sustainability policies, as a source of limited financial services, employment, foreign currency profits and technological aid (akan et al., 2007). 3. research methodology this study is an exploratory conclusive research design since there are cause and effect relations that seek to achieve better understanding of covid-19's current situation in the aviation industry to reveal new concepts and perspectives. a more detailed understanding of certain areas of the topic has been demonstrated. this article relies on qualitative proof regarding conclusions and the usage of secondary data derived from prior scientific articles. 4. the impact of covid-19 on the world airline industry contribution of the travel and tourism sector in the direct gdp growth rate is 10.2%, which represents usd 7.6 trillion. for instance, during one year the gdp for travel and tourism increased from 3.1% in 2016 to 3.85% in 2017. this sector during 2016 provided 292 million equivalent jobs. moreover, 6.6% of total world exports and almost 30 % of total world exports of services are represented by this sector (unwto, 2020). however, the covid-19 outbreak has had a negative influence on the aviation sector in many respects. the demand for travel to asia from the rest of the world plunged almost as soon as the news of the virus became viral in late january. just before conservation across the globe was implemented, airlines began dramatically cutting flights to china, and other asian destinations as covid-19-related fears and worries led travelers to avoid traveling to the area. however, it became clear within weeks that routes to asia were not the only flights to deal with lower demands. when the epidemic extended to europe, followed by america and africa, demand for travelers plunged worldwide. one was doubting trips away from home and sought to prevent anything requiring air travel, despite the space given between each seat, people found it risky to fly (business insider, 2020). 4.1. an overview of the impact on the aviation market http://www.virtual-economics.eu/ 95 www.virtual-economics.eu issn 2657-4047 (online) doaa salman, dina seiam, and eman fayaz virtual economics, vol. 3, no. 4, 2020 in december 2019, after the united states and the united kingdom, china was considered the world's third-largest aviation market, but four weeks after the beginning of the january 2020 outbreak, china's ranking fell to 25th place. the coronavirus undoubtedly had a significant effect on airline activities, thus, on global aviation supply and demand, with many flights canceled either by the airline itself or as a result of the authorities shutting airports or roads (mhalla, 2020). figure 1. the number of international and domestic seats operated within and from china. source: oag schedules analyzer, 2020. the above figure shows the number of weekly international seats that operated from china has fallen to 1.7 million seats, which is an 80% reduction. while the domestic chinese market saw 10.4 million fewer seats operated. according to the official airline guide (oag), a global source of travel information, the top three asian countries that have been greatly affected by the coronavirus outbreak are japan, the first market for chinese travelers to record a decrease in scheduled airline ability of more than 200,000 seats a week relative to the week of 20 january, a decline of 74.6 percent in four weeks. thailand is the second as a country that greatly benefits chinese travelers, particularly tourists visiting the country, reported a drop in ability of more than 76% between 20 january and 17 february, and the third is south korea, which also reported a sharp drop of more than 69% in its airline capacity. other major countries have recorded, as the same source states (oag) that there has also been a dramatic reduction of capacity over the four weeks, including indonesia (92 percent), singapore (-89 percent), hong kong (sar) china (80 percent) and the usa (-86 percent). the ban policies of some countries also did not represent explicitly such capabilities as italy, 0 2 4 6 8 10 12 14 16 20-jan 27-jan 03-feb 10-feb 17-feb s ch e d u le d s e a rs ( m il li o n s) domestic international http://www.virtual-economics.eu/ 96 www.virtual-economics.eu issn 2657-4047 (online) doaa salman, dina seiam, and eman fayaz virtual economics, vol. 3, no. 4, 2020 although the magnitude of the effect was highlighted by the direct air links to other markets such as hungary, oman, and maldives (mhalla, 2020). figure 2: the international traffic collapse: an unprecedented decline in history source: icao air transport, 2020. according to the icao (2020), the consequences of the covid-19 pandemic is way larger than the impacts observed during the sars epidemic that was in 2003 this is because of two main reasons: the first reason is that since 2003, china's overall air traffic weight from and to the country has doubled, and on the other hand, the domestic flights have decreased. the second reason is that air traffic dropped substantially ever since 70 airlines canceled their long haul flights. the total number of chinese carriers has been reduced by 40%. the icao also illustrated that until the spread of the covid-19 outbreak, the affected airlines expected to increase the capacity to and from china by 9% in the first quarter of 2020 compared to the same time-frame in 2019. however, this was not the case due to the outbreak; a decision was made to reduce the airline capacity, in which no less than 16.4 to 19.6 million travelers would potentially miss the call. this significant capacity reduction would lead to an overall loss of gross revenue of $4 billion to $5billion. the spread of the pandemic will also have a negative impact on the profitability and the cash flows of the airlines, due to the cancellations; this could cause the airlines' massive sums of money in terms of lost income and operating expenses and would deprive certain sectors of the travel industry, particularly hotels and retailers (mhalla, 2020). 4.2. the impact on international airline companies the international air transport association (iata) announced that the estimated global airline industry sales losses are predicted to hit around 250 billion us$ in 2020, up from the previous forecast of 113 billion us$. the sharp rise in the forecast of losses comes with more and more -44% to -80% decline in international passengers in 2020 http://www.virtual-economics.eu/ 97 www.virtual-economics.eu issn 2657-4047 (online) doaa salman, dina seiam, and eman fayaz virtual economics, vol. 3, no. 4, 2020 countries closing their borders to global airlines. in addition, iata officials said that the recovery of the global aviation industry is unlikely to come soon because the world has never seen a pandemic correlate with a global recession (bureau, 2020). in europe and america, regulatory laws allow airlines to refund costs when flights are canceled, but instead, airlines have provided vouchers or travel credits, in certain cases, that are expected to be used by the year-end. (may 2022 was extended by other airlines via voucher window). generally, vouchers are available if travelers change travel arrangements due to flight alerts, residency orders, and other limitations (schaper, 2020). in march 2020, the british airline flybe crashed as a result of the recent coronavirus outbreak that gave the carrier its final blow. the airline has been failing for quite a time. the uk government announced in january that its finances were being debated and rescreening options were being examined, adding that the flybe management and its shareholders were putting the airline "on the road to recovery," but flybe was "complemented by a coronavirus outbreak that had a serious impact on the market in recent days," said the airline. although flybe was on the verge of failure, despite big investment from a consortium caused by virgin atlantic the last summer, the crash of the coronavirus forced flybe over. about 40% of uk domestic flights were run by flybe. in addition, the uk transportation department announced that it would help flybe workers "as soon as possible" look for new jobs, and loganair, a scottish airline, announced that it will take more than 16 flight routes and that over the next four months, flights would be launched in phases (toh, 2020). multiple airlines suspended penalties for flight booking modifications and cancelations after the coronavirus epidemic following an appeal by sen. richard blumenthal. between the 20th of january and the 7th of march 2020, the us airline stock prices decreased by 30%. flight prices for domestic flights have also fallen. on 25 march, the us senate passed a bill offering $58 billion in loans and grants to aviation-related businesses, including $25 billion for passenger carriers and $4 billion for freight carriers, plus $17 billion for businesses "essential to preserve national security" such as boeing. airlines accepting the package should be restricted from raising executive pay, offering dividends, or purchasing back shares over the assist era (slotnick, 2020a). trans states airlines is a regional airline from missouri that operates under the united express name on routes to the united states. the airline is expected to close its operations with expressjet airlines, another regional airline in the united states, by the end of 2020. compass airlines, a regional carrier operating in the us and delta, said that demand is collapsing as some of the first job cuts in u.s. airlines are occurring in the crisis of the coronavirus. airlines struggle to save money and are cutting their networks drastically while seeking government assistance of more than $50 billion. trans states airlines, told employees that it would move a scheduled closing of its eponymous airline up to april 1 (josephs, 2020). on the 21st of april, virgin australia, australia's bankruptcy counterpart, entered "volunteer administration." although brisbane's most operations were suspended and employees were flooded, the airline continued to lose money on about 65 day-to-day flights. in the http://www.virtual-economics.eu/ 98 www.virtual-economics.eu issn 2657-4047 (online) doaa salman, dina seiam, and eman fayaz virtual economics, vol. 3, no. 4, 2020 restructuring process, the airline said it would continue working. after an appeal for aid from the australian government was denied, it entered the administration (slotnick, 2020b). accords with the interview by allan kilavuka, kenya airways interim president and ceo at the eastafrican, kenya weekly newspaper the coronavirus outbreak (covid-19) is going to constitute a big income blow to kenya airways (kq), even began to take action to minimize their economic losses. the company anticipates a revenue loss of approximately $8 million for both passengers and freight. the israeli national corporation el al also reported last week that it will be willing to cut 1,000 of its 6,000 workers and that its expenses would be between $50 million and $70 million for the first quarter alone. losses that may lead the organization to decline dramatically. air canada reports, however, that 5,100 airlines are temporarily employed and would cancel most of its international flights, including finnair, norwegian air, westjet, and many others, but they are confronted by several difficulties and are trying to find out how to keep them laying off workers in the market (mhalla, 2020). 4.3. tourism shock tourism is considered one of the most quickly expanding sectors to be vulnerable, i.e. tourism is influenced by any external or internal unexpectedness or tension in contrast to other industries. the new corona (covid-19) epidemic has triggered disasters in the entire world in this relation. a significant influence on the tourism industry is being exerted by the covid-19 pandemic and steps introduced to restrict its spread. figure 3. the 2020 forecast international tourist arrivals, world (millions) source: (unwto, 2020). 2003 sars -3 million -0.4% 2009 global economic crisis -37 million -4.0% 2020 (estimate) covid-19 -290 to -440 million -20% to -30% 1020 1170 http://www.virtual-economics.eu/ 99 www.virtual-economics.eu issn 2657-4047 (online) doaa salman, dina seiam, and eman fayaz virtual economics, vol. 3, no. 4, 2020 according to the united nations world tourism organization (unwto), the covid-19 pandemic will result in a contraction of the tourism sector by 20% to 30% in 2020. this estimate is likely to be conservative for countries relying on foreign tourists, as the recent data on daily air traffic indicate a drop of almost 80% since january 2020. although certain economic industries will rebound after draconian controls have been abolished, this pandemic may have a longer-term impact on international tourism. this is partly due to lower consumer morale and the possibility that the free movement of people will be more limited. according to the wttc, the estimated time of rehabilitation for travelers to a destination in past viral epidemics was around 19 months (hamilton, 2020). obviously, all the countries are affected negatively by the pandemic that results in travel restrictions. every country is trying to control the virus by canceling flights in order to control the number of cases, but that affected the economy significantly. in this section, we will discuss the situation in several countries facing numerous problems due to temporarily suspension of all international flights. approximately two-thirds of international flights to and from china were scrapped in february 2020. flights between japan and china saw a 60% decrease in traffic, while the us and china saw a decrease of 86%. two-thirds of domestic flights inside china were likewise canceled, accounting for about 10,000 flights a day, while ticket prices for the remaining flights decreased – the south china morning post announced a three-hour flight seat between shanghai and chongqing rate. passenger traffic fell by 75% between january 25 and february 14 relative to the same time in 2019 (lee, 2020). it is reported that indian airlines are reporting usd 600 million losses in the period january-march (not including state-owned air index). the government of india is considering a bailout package for the aviation industry amounting to inr 120 billion (usd 1.6 billion) (reuters, 2020). 5. future expectations first, covid-19 seemed like past crises: traffic and sales strike followed by a return to normal, even though there was confusion about the magnitude and length of the impact. the decline in sales suffered by airlines this year as a result of covid-19 significantly exceeds the effects of previous crises. it has got the characteristics of a civil war. moreover, the next recession is expected in 2020/21, which means that the rebound will take longer. moreover, even after healing, 'natural' is not going to be the same as before. there are expected to be permanent effects on the air travel market. as a result of lockdowns, or close lockdowns, around the world, people are increasingly finding new ways to live their lives, both at work and leisure. more than ever before, technology is becoming a more practical and more commonly used alternative to commercial air travel. 5.11 an estimated impact on the international passenger traffic and revenues the figure below shows how deeply the covid-19 epidemic will influence regions' capability, passengers, and revenues in 2020. according to the icao estimates (2020), it is anticipated that north america will reduce its capacity from 33% to 65%, drop in the number of passengers http://www.virtual-economics.eu/ 100 www.virtual-economics.eu issn 2657-4047 (online) doaa salman, dina seiam, and eman fayaz virtual economics, vol. 3, no. 4, 2020 will significantly decrease from 65 million to 120 million, and the loss of revenues will increase from us$17 billion to us$32 billion. figure 4. the estimated effect on the international traffic and revenues by region for 2020 source: icao estimates, 2020. it is anticipated that latin america and the caribbean will reduce their capacity from 35 percent to 65 percent, passengers are estimated to drop from 50 million to 90 million, and revenues are estimated to decline from $10 billion to $18 billion. while europe's airline capacity is projected to decline by 419 to 731 million, and revenues are estimated to go down by $57 billion to $101 billion. it is expected that the airline capacity in africa will decrease by 34 million to 61 million travelers, and revenues will drop by $7 billion to $13 billion. the middle east airline’s capacity is estimated to decline by 37% to make up 70%, as a result, passengers will drop by 66 million to 119 million people, and the revenues’ loss will range from $12 billion to $22 billion. finally, the airline capacity of asia and the pacific will be reduced by 39% to reach 715, the number of passengers will decrease from 238 million to 420 million people and the revenues will decrease by $50 billion to account for $88 billion. 5.2. the expected global impact on aviation, tourism, trade, and economy international air passenger traffic might deal with an average decline in the international passengers from 44% to 80% in 2020 compared with 2019 (icao, 2020). airports may experience an expected loss of two-fifths of passengers carried and 45% or more than $76 billion of airport revenues in 2020 (icao, 2020). tourism may face a decrease in international tourism industry receipts between about $300 billion and $450 billion in 2020, nearly 1/3 of the $1.5 trillion created in 2019, with travel restrictions of 96 percent of world destinations (icao, 2020). trade may have a decrease in the amount of global trade in goods by 13 % to 32% in 2020 compared to the previous year (who, 2020). http://www.virtual-economics.eu/ 101 www.virtual-economics.eu issn 2657-4047 (online) doaa salman, dina seiam, and eman fayaz virtual economics, vol. 3, no. 4, 2020 global economy may have to cope with a predicted 3 percent fall in the global gdp in 2020, much greater than in the financial crisis of 2008-2009 (imf, 2020). 5.3. expected travel-related losses in the us 2020 travel industry losses: 31% drop is expected throughout 2020, with a 75% decrease in revenues in the coming months and ongoing losses hitting $455 billion for the rest of the year. gdp losses: losses from the travel industry will have a cumulative impact on gdp of $450 billion in 2020. the us economy is expected to face a recession based on a projected decline in travel alone. the recession will likely last for at least three quarters. tax losses: $55 billion reduction in taxes will be recognized as a result of reductions in travel in 2020. employment losses: the united states economy is expected to cut 4.6 million jobs as a consequence of a fall in travel in 2020. the rate of unemployment will naturally increase by 3.5% in the following months. over the coming months, travel-related job losses alone could drive the unemployment rate up to 3.6 percent, as shown in figure 5. figure 5. jobs losses expected in the tourism industry source: oxford economics, 2020. as seen in the figure above, job losses in the tourism industry will increase but will continue with 1.6 million jobs already lost in december for the rest of the year. at the lowest point this year, 4.6 million people will lose their employment as a result of a downturn in tourism, including 3.6 million jobs directly in the travel industry (oxford economics, 2020). -5000 -4500 -4000 -3500 -3000 -2500 -2000 -1500 -1000 -500 0 mar apr may jun jul aug sep oct nov dec t h o u sa n d s direct loss total loss http://www.virtual-economics.eu/ 102 www.virtual-economics.eu issn 2657-4047 (online) doaa salman, dina seiam, and eman fayaz virtual economics, vol. 3, no. 4, 2020 6. the travel industry recovery the travel industry will take a long time to recover or return to its previous levels after the covid-19 pandemic; however, the recovery will be in stages. the domestic and regional travels are expected to see a comeback before the international travel takes place. according to a survey undertaken by the global business travel association of its member organizations, businesses are twice as likely to have avoided international travel as domestic travel has been avoided since july 2020. in the case of domestic travel, trips which may take place in personal or rented vehicles may replace short regional flights before the convenience of businesses to send employees by aircraft rises (curley et al., 2020). international travel would take longer to recover due to the uncertainty of government restrictions, statutory quarantines, and high likelihood of fast-changing policies. in asia, some governments (e.g. malaysia and singapore) investigate the establishment of business corridors to support economic growth under strict guidelines authorizing exemptions from quarantine measures, (curley et al., 2020). 7. recommendation and polices the covid-19 epidemic has had and will continue to have a significant effect on the aviation industry in europe and abroad. the condition is deteriorating every day. in the next few weeks, traffic is expected to drop further. the european commission will propose tailored regulations to partially exempt airlines from their airport slot use restrictions, under the eu law in order to help mitigate the effects of this pandemic. green recovery for the airport sector can only occur as airlines start resuming their services. nonetheless, in order to do so, nations would first need to remove travel bans and border controls. china claims to be managing the covid-19 pandemic and opening up its airspace, only to enforce additional limits on foreign flights shortly after that to deter imported incidents. this is possible that domestic air traffic will be the first to restart if a country thinks that its internal situation is relatively stable. to bring the international air traffic back on its feet there must be confidence that the pandemic is under global control and that traffic is secure. until an appropriate solution is available, any recovery is required to proceed at a calculated rate. besides, applying safety measures and hygiene will be a lifestyle that the whole globe had to apply in order to retain the industry. in order to minimize transmission of diseases beyond covid-19, airports will seek automated, hands-free, self-processing options for passengers during the flight. some common user self service (cuss) market-based approaches now exploit touchless biometrics, such as iris scanning and face recognition. covid-19 may well be a mechanism that promotes the widespread acceptance of touchless technology. countries need to apply an immunity passport showing the vaccination from covid-19 similar to the current measure that is applied in different countries across the globe. http://www.virtual-economics.eu/ 103 www.virtual-economics.eu issn 2657-4047 (online) doaa 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(2020). retrieved from https://www.who.int/emergencies/diseases/novelcoronavirus-2019 http://www.virtual-economics.eu/ https://www.who.int/emergencies/diseases/novel-coronavirus-2019 https://www.who.int/emergencies/diseases/novel-coronavirus-2019 кwilinski alex 7 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 2020 volume 3 number 1 (january) digital transformation of organizational culture under conditions of the information economy nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova abstract. this article presents the results of an expert survey as a method of empirical research to identify current problems, barriers, features, trends, and directions of transformation of organizational culture, and applies the concept of “organizational culture” in evaluating the case of ukrainian enterprises. first, the authors present the methodological approach, using the analytic hierarchy process, to evaluate the optimal scenario choice for developing the organizational culture of enterprises based on the twelve most important criteria and their systematization into four groups (adaptability, mission, consistency, and involvement). second, they test a hypothesis that the optimal direction of transforming organizational culture depends on digital transformation which includes introducing digital technologies, information-powered enterprise ecosystems, innovative business models, and efficiency in b2b and p2p communications. third, they argue that the key barriers hindering the effective development of organizational culture could be provisionally classified into seven groups: personnel, information, organization, marketing, education, technology, and investment-financial. fourth, the authors evaluate the expediency of applying an integrated approach as a symbiosis and a constant inter-relation of influencing factors, constituent elements, digital competencies and skills, and information technologies. in conclusion, they summarize the findings of the study and discuss formulas to evaluate the impact of digital transformation on the organizational culture of enterprises in the information economy towards a people-oriented, innovative, customer-centric, and agile system in the case of ukraine. keywords: organizational culture, information economy, features, barriers, components, perspectives, transformation, digital technologies jel classification: c10, m14 http://www.virtual-economics.eu/ 8 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 authors: nataliia trushkina institute of industrial economics of the national academy of sciences of ukraine, 2, marii kapnist street, kyiv, ukraine, 03057 e-mail: nata_tru@ukr.net https://orcid.org/0000-0002-6741-7738 rafis abazov columbia university, 116th and broadway, new york, ny 10027, united states e-mail: r.abazov@yahoo.com https://orcid.org/0000-0002-6741-7738 natalia rynkevych prydniprovsk state academy of civil engineering and architecture, 24a, chernyshevskoho street, dnipro, ukraine, 49600 e-mail: starnarysharm@gmail.com https://orcid.org/0000-0002-1229-6051 guzelya bakhautdinova faculty of oriental studies, al-farabi kazakh national university, 71, al-farabi avenue, almaty, republic of kazakhstan, 050040 e-mail: info@kaznu.kz https://orcid.org/0000-0002-2577-9503 citation: trushkina, n., abazov, r., rynkevych, n., & bakhautdinova, g. (2020). digital transformation of organizational culture under conditions of the information economy. virtual economics, 3(1), 7-38. https://doi.org/10.34021/ve.2020.03.01(1) received: september 9, 2019. revised: december 16, 2019. accepted: january 3, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://orcid.org/0000-0002-6741-7738 https://orcid.org/0000-0002-6741-7738 https://orcid.org/0000-0002-1229-6051 https://doi.org/10.34021/ve.2020.03.01(1) https://creativecommons.org/licenses/by/4.0/ 9 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 1. introduction the development of today’s information society involves the digital transformation of business processes with the intensive use of digital technologies, forming new requirements including a new level of digital skills and knowledge among the enterprise personnel. changes in the organizational culture lead to a growing demand for specialists in the field of information and communication technologies (ict), and to modernization of the education system. studies on the development of the information society and innovative economy in belarus, kazakhstan, ukraine and some other countries (united nations economic commission for europe – unece, 2012; 2013) suggest that the creation and implementation of national programs should include the development of general and professional digital competencies and knowledge in the context of the lifelong learning concept (lll), which, in turn, would impact the organizational culture development. recent studies of digital transformation demonstrate not only a growth in demand for digital skills in the labor market but also the need to develop and implement a set of measures to transform the organizational culture of enterprises in the context of the information societies’ rapid development. for each business entity, digital transformation means modernization of its organizational culture as well as the introduction of digital technologies and communications, permitting it to expand its opportunities and create an ecosystem in collaboration with its contact audiences (kokorev, 2019). according to mckinsey, productivity increases of 45–55% as a result of the business processes’ automation constitute an important prospect for industry development in the information economy (mckinsey & company, 2016). the analysis and synthesis of scientific literature indicates the relevance of various aspects of organizational culture development. scientists pay considerable attention to forming evolutionary views on the conceptual apparatus, studying current trends, justifying scientific and methodological approaches, and elaborating proposals for organizational culture development and management of improvements in the system of enterprise administration in the context of changing corporate culture. at the same time, the versatile, multidimensional, and debatable nature of individual issues on the chosen topic necessitate further scientific research. this topic is especially important as digital transformation comprises cultural, organizational, and social components, and, therefore, it might be the solution to many problems or it might become a cause for challenging conditions in the context of the information economy. the purpose of the article is to develop methodology for identifying key barriers to the effective development of organizational culture under current conditions, and to assess how digital transformation impacts organizational culture (not only organizational but also operational and communication components) and transforms the information economy, using the case of ukraine. http://www.virtual-economics.eu/ 10 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 to achieve this purpose, the authors adopt a tailored research methodology integrating and systematizing qualitative and quantitative approaches to analyzing organizational culture, and using methods of abstraction and analogy, induction and deduction, analysis and synthesis, economic statistical data, and expert surveys for evaluating impacts of digital transformation on organizational culture. 2. literature review many international studies on the development of the information society and innovative economy in belarus, kazakhstan, ukraine and some other countries (united nations economic commission for europe (unece), 2012; 2013) suggest that the information technologies have been playing an increasingly growing role in promoting innovations and in the transition to the information economy over the past two decades. business models of many companies are closely dependent on applied information technology (it) management methods. at the same time, the role of it in companies has changed significantly. some scholars suggest (byrd & turner, 2001) that information technology is no longer considered just as a tool to support business processes; it is regarded now as a resource for innovative activity and solving technological problems. in certain circumstances, it can become a “strategic vehicle” and a source of competitive advantage for a company. companies are interested in making information technology contribute to the performance in a more measurable, direct, and flexible way (johannsen & goeken, 2006). earlier information technologies used to perform auxiliary functions; today they are the “driving force behind business innovation” (kieβling et al., 2010). that is, at present, in the developed countries, information technology management has transformed from a business support function to an efficiency improving tool and a driver of business innovation and digital transformation (nissen et al., 2018). business digitalization received considerable attention both from the side of academia and business community, who define digitalization as the companies’ focused efforts to use digital technologies actively at all levels to optimize internal processes and to modify the overall business model (united nations economic commission for europe (unece), 2012; 2013). digitalization of the economy involves transformation of the technological environment in which companies operate. researchers and practitioners have not yet reached a common understanding of the term “digitalization” and what aspects of management are affected by this process. as a result, a variety of approaches are applied from focusing on technology to digital customer involvement in production, new digital business models. from a company perspective, digitalization affects all structural aspects of a business, including goals, business models, and business processes (bhattacharya & seddon, 2009; bharadwa et al., 2013). the main goal of digitalization is to maximize the use of information technology resources and systems, in particular, to increase productivity and reduce costs. this requires a transformation of the overall philosophy and orientation of the company. http://www.virtual-economics.eu/ 11 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 altogether, investments in ict are an important factor in determining a success of a new value creation through integrating business and technologies (haes & grembergen, 2009). as a consequence, the discussion about the priority of technological or business aspects of digital transformation indicates the need to integrate it and business (especially strategies) for solving the tasks set (bharadwa et al., 2013; kane et al., 2015; bley et al., 2016; urbach et al., 2017). in this context, effective ict management implies the development of a set of business change management mechanisms that support the goals, strategy, value system, norms, and culture of the company (weill & ross, 2004). initially, the main objectives of it management were to provide it services and improve the efficiency of business processes. as it advanced and consolidated, its role in developing innovative products, creating new business models, and identifying additional sources of profit increased (hanschke, 2010). in order to achieve a competitive advantage, modern companies should develop a wellthought-out information policy, have their information priorities clearly identified, establish a corporate culture that takes into account information moments, and have highly-qualified employees able to carry out assigned tasks of informational nature (strelets, 2008). the term “information proficiency” has been introduced into scientific circulation, which means the company's ability to optimally and systematically use the information to achieve strategic goals this is a way of combining the company's information skills with those advantages that are provided by electronic forms of exchange (dearstyne, 2001). a japanese economist j. nonaka draws attention to a need to form a so-called “knowledgecreating company.” it implies that companies should quickly produce new methods of control and management that are in line with changes in modern economic life, apply advanced technologies, and provide close communication links among various departments of the company and a common cognitive basis for the company employees’ interaction (nonaka, 1998). knowledge becomes a key, as an economic model based on nonrenewable resources gives way to ict-based economic activity (strelets, 2008). in the information society, the organizational culture changes, particularly the ethics of the company. the reward system is being modified, since, in the presence of horizontal relationships and highly specialized tasks facing employees, it is difficult, and sometimes impossible, to exercise administrative control. it focuses more on the employees’ internal motivation, that is, on strengthening the position of highly-qualified personnel. american economists r. kaplan and d. norton made several assumptions offering indicators for measuring various activity and management actions in a company in the information society. among them, the role of highly skilled personnel is fundamental (kaplan & norton, 1996). analysis of specialized literature shows that studies of the concept "organizational culture" lead to different definitions of "organizational culture" (alvesson, 2002; sheyn, 2007; armstrong, 2006; kharchyshyna, 2011; simosi, 2012; robbins & judge, 2012; pennington, http://www.virtual-economics.eu/ 12 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 2014; iljins et al., 2015; gopalakrishnan & zhang, 2017; otenko & chepeliuk, 2018; fokinamezentseva, 2018; knein et al., 2019; eniola et al., 2019). theoretical, methodological, and applied aspects of managing the enterprises' organizational culture development in a constantly changing and unstable environment are reflected in the research by the following scientists: didenko, 2012; lacatus, 2013; volianska-savchuk, 2014; thanomwan & buncha, 2014; bavik, 2016; lee et al., 2016; dubey et al., 2017; matinaro & liu, 2017; shahzad et al., 2017; upadhaya & kumar, 2020; derhachova & fedirko, 2018; ogbeibu et al., 2018; dai et al., 2018; androsova, 2019; schalaile et al., 2019; balaji et al., 2020. over the past two decades, the leading scholars paid significant attention to the organizational culture and identifying factors influencing the enterprises’ effectiveness and competitiveness and interdependences between organizational culture and financial results. they also elaborated how the use of ict impacts organizational culture development, including the improvement of personnel management system (denison, 1984; denison, 1990; yilmar & ergun, 2008; millington & schultz, 2009; cameron & quinn, 2011; hofstede, 2011; kuznetsov, 2013; dwivedi et al., 2014; lapina et al., 2015; ahmady et al., 2016; voinarenko & volianskasavchuk, 2016; nam & kim, 2016; arditi et al., 2017; trang, 2017; tolstykh et al., 2017; dzwigol, 2017a; 2017b; 2019; kwilinski, 2018a; 2018b; 2019; rudenko, 2018; dasgupta & gupta, 2019; suryaningtyas et al., 2019; tortorella et al., 2019; martinez-caro et al., 2020; upadhyay & kumar, 2020; veiga et al., 2020). figure 1. elements of organizational transformation in conditions of the information economy source: adapted and created by the authors based on (galimova, 2019). with the introduction of digital technologies, the enterprises’ organizational culture has digital culture strategies communication businessmodels leadership and leader's competencies personnel management http://www.virtual-economics.eu/ 13 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 experienced significant transformational changes, which, in turn, contributed to the formation and development of a new “digital culture” (figure 1). many international studies (world bank, 2015; abazov, 2015; 2016; 2018) suggested that at least 30 professions will vanish within a decade. but instead of disappearing professions, there will emerge 186 new professions that will require a qualitatively new level of knowledge, that is, the digital one. the european commission identifies 5 dimensions of a digital entrepreneurship development program (figure 2). figure 2. digital knowledge and skills in the context of the information business space source: compiled by the authors based on (autio et al., 2018). the authors of the empirical study “digital business redefines talent management applications,” conducted by the consulting company gartner, concluded that by 2022, 80% of organizational skills in companies should be reviewed due to digital transformation (kostoulas, 2018). thus, the development of the companies’ organizational culture in the information economy includes lll training, new skills development, and creating favorable conditions for staff development. 3. methods there is a strong body of evidence that suggests that the key directions of digital transformation include as follows: 1) changes in organizational culture, 2) business models, 3) product transformation, and 4) the growth of enterprise flexibility. digital business environment digital knowledge and ict market access to finance for business digital skills of employees and e-leadership creating of supportive enterpreneur culture http://www.virtual-economics.eu/ 14 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 for example, altimeter’s annual research state of digital transformation notes that at the present stage the role and importance of organizational culture are growing, which creates opportunities for innovation, modernization, growth, and acceleration, as about 95% of company executives state the need to transform corporate culture (engert et al., 2019). another example is the cisco company, whose experts suggest that the impact of digitalization will be 10 times more than of the internet. international data corporation estimates the economic value of digital transformation being at $ 20 trillion, or more than 20% of gdp. according to a survey of more than 400 large companies in various industries conducted by capgemini consulting and mit sloan management, enterprises that actively use digital technologies and new management methods (digital leaders – digirati) on average 26% are more profitable than their competitors. more conservative companies (digital conservatives), which improve only management, receive +9% in profit. organizations that invest a lot in digital technology, but pay little attention to management (digital fashionistas), are not able to get a synergistic effect and create a significant added value based on digital applications. their financial indicators are 11% lower. and companies that don’t use sufficiently both the potential of digital technology and the potential of management (digital beginners) have a profit of 24% less than their competitors. the bcg research (hemerling et al., 2018) found out that about 80% of enterprises – who focused on organizational culture – consistently got high productivity results. based on an assessment of 40 digital transformations, it was found that the share of companies reporting a breakthrough or strong financial performance is 5 times higher (90%) among those who focused on organizational culture than among those who neglected it (17%). a diagnostics of the organizational culture of 75 public companies shows a clear relationship between the strength of the enterprises’ organizational culture and their financial performance. it is proved that, over five years, the tsr (total shareholder return) of companies with a strong organizational culture (24%) was 2 times higher than that of companies with an average culture (13%) and 2.4 times higher than the tsr of companies with weak organizational culture (10%). the productivity effect is also evident in the long-term perspective: companies with a strong organizational culture have 2 times higher ten-year tsr than companies with a mixed culture. the authors compiled a large number of methods (table 1) that have been developed for evaluating the enterprises’ digital maturity and tested an assumption that organizational culture was one of its components. indeed, studies conducted by international organizations (the united nations economic commission for europe (unece), 2012; 2013) indicate that one of the most significant obstacles to successful digital transformations is an absence of corresponding organizational culture and the unwillingness of personnel (including managers at various levels of management) to work in new conditions. thus, cgi global 1000 research, conducted in 2016 by the cgi group, showed that a key barrier to digital transformation is a change in the organizational culture through overcoming the company employees’ resistance. http://www.virtual-economics.eu/ 15 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 table 1. a comparative analysis of existing methods to evaluate digital maturity and business processes transformation at the enterprises title content deloitte company digital maturity model evaluating digital capabilities in 5 core dimensions: customer, strategy, technology, operations, organization and culture. they are divided into 28 sub-dimensions, which, in turn, are divided into 179 individual criteria to evaluate digital maturity digital transformation index developed by an analytical agency arthur d. little there are the following directions of assessment: strategy & governance; products & services; customer management; operations & supply chain; corporate services & control; information technology; workplace & culture enterprise digital maturity index (gileva, 2019) there are 5 enlarged areas of assessment: strategy and business-model; consumers; organizational culture and personnel; operational processes; information technology digital business aptitude by kpmg company includes 5 directions of assessment: vision & strategy; digital talent; digital first processes; agile sourcing & technology; governance. a feature and advantage of this model is a self-assessment diagnostic tool free to access digitization piano model developed by global center for digital business transformation by the imd and cisco company initiative there are 7 transformation categories, which constitute the most important elements of the organization's value chain: business model; organizational structure; employees (people); processes; it capability; offerings; engagement model a feature of this model is determining a gap between the current and required levels in each direction index of digital change, proposed by ionology company includes 5 blocks: strategy & culture; staff & customer; process & innovation; technology; data & analytics industry 4.0 maturity index by acatech developed by the german national academy of sciences and technology there are 4 core areas of digital transformation: resources; information systems; culture; organizational structure. particular attention is paid to transforming organizational structure and culture index of strategic changes in the process of digital transformation, proposed by russian company komanda-a (kmda) includes 6 main directions: customer-centricity (digital customer service, omnichannel, digital marketing and communications); collaboration (representing business as an ecosystem, creating and developing a platform for interacting with partners); data (widespread use of analytical tools, the use of data to adapt products and services, behavioral marketing); innovation (innovative culture inside the company, creating a system of continuous improvement and development); value (defining and creating of a value proposition management system); personnel (new approaches to employee engagement and development based on digital culture and thinking) enterprise’s digital maturity index (savich, 2018) directions to evaluate the level of digital maturity are: clarifying and forming a single digital transformation strategy; analyzing and evaluating the effectiveness of applied software services and platforms; assessing the level of digital marketing and communications; participating in the software product development process; implementing agile it; analyzing, assessing, auditing digital processes; the level of organizational culture; the level of enterprise’s innovative potential; assessing equipment and systems and their subsequent modernization; competitive environment study. source: compiled by the authors. http://www.virtual-economics.eu/ 16 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 figure 3. skills available at companies for digital transformation source: compiled by the authors based on (hoberg et al., 2017). figure 4. skills required for digital transformation to improve the effectiveness of business processes source: compiled by the authors based on (hoberg et al., 2017). an expert survey of 116 executives from 18 countries, conducted in 2017 by the specialists from the technical university of munich (tum) together with sap and idt (hoberg et al., 2017), allowed determining that to effectively implement digital technologies for business 88% 87% 84% 84% 76% 75% 71% 66% 65% 63% 56% 50% 36% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% digital security mobile technology business changes management big data analytics cloud computing internet of things business network product/service integration databases and memory databases social media artificial intelligence new interfaces blockchain 0% 10% 20% 30% 40% 50% 60% artificial intelligence blockchain new interfaces internet of things big data analytics product/service integration business network databases and memory databases digital security business changes management mobile technology cloud computing social media 21% 24% 29% 32% 34% 36% 42% 43% 45% 46% 46% 49% 57% http://www.virtual-economics.eu/ 17 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 innovation the use of technological skills is not enough (figure 3). this study of “skills available at companies” suggests that 84% of respondents believe that “business change management” and 71% believe that “business network” are important for digital transformation (figure 3). however, the study of “skills required for digital transformation” suggested that only 46% of the specialists believe that they require new skills such as “business change management” and “business network” for digital transformation to improve effectiveness (figure 4). 57% believe that they need to have “social media” skills. according to this study, one of the main factors of successful “digital transformation” is the reduction of the gap between the “available” and “current” digital skills of personnel in companies (figures 3 and 4). nevertheless, only 16% of the respondents have prepared and implemented special recruitment or training programs to create the base of necessary skills for companies’ digital future forming. according to the experts, investing in the employees’ education and training is of great importance, since the development of personnel digital knowledge is a prerequisite for the continuous digital transformation of the enterprise’s business processes (hoberg et al., 2017). the cio survey in 2018 stated that 39% of organizations need “digital transformation,” but only 35% possess skills required for its successful implementation. business executives fail to guide employees to form “digital culture”. they face difficulties in forming “organizational culture”, in turn, it negatively affects the level of employees’ involvement. in 2018, only 36% of organizations noted that everyone has an opportunity to participate in a discussion of digital initiatives. employees don’t strive to achieve the goals of digital transformation and make efforts for personal development. most companies are unable to manage changes properly. clearly defined digital initiatives were stated by 32% of respondents. only 40% of respondents reported the existence of processes that ensure that digital transformation efforts are aligned with corporate goals. it has been found that only an insignificant part of it cios pays due attention to advanced technologies. for example, only 29% of the respondents invest in the internet of things; in artificial intelligence – 17%; in the blockchain – 11%; in augmented reality – 10%. russel reynolds associates has interviewed more than 2,000 top managers from 15 industries about the impact of digital technology on their business. 90% of businesses have already developed a digital development strategy, but in many organizations, the lack of qualified personnel impedes its implementation. only 50% of the respondents answered affirmatively the question "do you have the right people to work on the company's digital strategy?" a survey of 700 representatives of more than 300 russian companies from 15 industries conducted by kmda in 2018 (ryzhkov et al., 2018) evaluated the main barriers to the digital transformation of enterprises. the study listed barriers as follows: insufficient competencies and knowledge (64.1% of respondents); a lack of qualified personnel (60.9%); a lack of strategy (53.2%); a fear of change (45.3%); insufficient financing (39.1%); a leadership position (31.3%); risks (23.4%). http://www.virtual-economics.eu/ 18 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 70.3% of respondents reported that they were looking for new specialists when they see a lack of competencies. a significant part (65.6%) of respondents also noted that they seek to improve the qualifications of currently employed personnel (“old”), as they are confident in their ability to work and loyalty to the company. 15.6% of experts suppose that they don’t need to take any steps in this direction, since their company already has enough competent employees. most of the respondents (21.9%) rated the qualifications of their staff at 6 out of 10 points; 4.7% 10 out of 10. but most of the assessments (49.9%) were in the range from 1 to 5, which once again proves the existence of problems in the development of digital competencies among employees. the most important digital competencies of employees are: flexibility and ability to learn (61% of respondents); analytical competencies (55%); knowledge of innovative technologies (53%); understanding of methods and processes (51%); wide horizons and creativity (47%); understanding of the essence of digital transformation (42%); the ability to use big data (34%); programming skills (21%). the research conducted by oliver wyman (2019) in january-march 2019 confirmed, on the one hand, the increasing importance of corporate culture as a tool of organizational strategy implementation in the digital era, and on the other hand, the absence of proper management attention to corporate culture issues. as a result of the survey, there were received expert opinions on the following issues: “how important is the role of corporate culture in achieving strategic objectives?” 7.4 points; “how does senior management understand the importance of the role of corporate culture?” 6.1 points; “how efficient is the communication process in the company as a whole?” 3.8 points; “how effectively does corporate culture help in implementing transformational changes?” 6.7 points. in february 2019, coleman services conducted an empirical study “hr functions: actual tasks, priorities, challenges” using an online survey of hr specialists from 69 enterprises functioning in the sphere of industry and services. as a result of the survey, the key areas of digitalizing hr functions in companies are identified, among them: personnel administration (77% of respondents); personnel assessment (55%); staff training and development (32%); internal communications (23%); recruitment function (21%). many studies suggest that most international companies face a lack of “digital culture”. firstly, this is because of the wrong understanding of the essence of the term “digital transformation”. secondly, most of the employees do not have motivation yet and the necessary digital skills and competencies to participate in qualitative changes in the organizational culture. this is also proved by the results of the survey “the digital culture problem: bridging the gap between employees and managers”, in which 340 european and american companies from 5 industries took part. 40% of executives believe that their companies already have a digital culture, but only 27% of subordinates agree with them. http://www.virtual-economics.eu/ 19 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 a marketing research conducted by the analytical center nafi and skolkovo found that the level of digital skills of russian companies’ employees were below average. the research suggests that enterprises generally pay relatively low attention to employees’ training in digital technology; high-tech startups show a higher level of activity: educational programs in the field of digital technologies were implemented by 33% of respondents. the low level of digitalization was associated with the fact that enterprises focus on technological modernization and the introduction of information and communication technologies; but they underestimate the organizational aspects, which include digital culture, leadership competencies and human resources (galimova, 2019). indeed, companies’ needs for a highly skilled workforce are growing sharply and especially for specialists in digital technologies, data analytics and employees trained in science, technology, engineering and mathematics (stem) – new methods of personnel search and training programs formed considering the challenges of industry 4.0, will be critical in the long term perspective. personnel is the central element of digital transformation. however, the global digital operations survey in 2018 “digital champions. how leaders create integrated operating ecosystems to develop integrated solutions for consumers” (pwc, 2018) showed that 2/3 of all companies do not have a clear digital vision and strategy to support the digital transformation process and the corresponding corporate culture. only 27% of the respondents said that their employees have the necessary qualifications to fulfil the digital future into the company's activities. a survey of 1155 international companies allowed determining how corporate culture and organizational structure contribute to digital transformation: failure is considered as a recognized part of the development process (38% of respondents); the company has horizontal hierarchies that allow achieving flexibility in work and speeding up the decision-making process (37%); the focus is made on providing digital quality of service throughout the entire process of work with customers (35%); the company's management has a clear understanding of the digital future and acts as a role model (34%); the company encourages culture of innovation by attracting multidisciplinary groups (32%); the company selectively attracts expert partners as additional external resources (32%); employees have the necessary qualifications for the digital future (27%); the company invests a significant amount in educational training in order to prepare employees for digital transformation (26%); training groups are created in the company, uniting the digital generation, and experienced employees (22%). http://www.virtual-economics.eu/ 20 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 specialists of mit sloan management review and deloitte university press found that more than 75% of respondents provide their employees with resources and opportunities to develop digital skills and competencies. 71% of companies with a high level of digital maturity claim that they attract new talents using digital technologies and invest them, while only 10% of them can do this at an early stage (kane et al., 2016). organizational culture in ukraine. in june-august 2019, the authors of this article conducted their own empirical research on the specific features of the organizational culture development at the ukrainian enterprises of various types of economic activity (trushkina & rynkevych, 2019a; 2019b; rynkevych, 2019). the researchers interviewed 115 experts in different spheres of activity: food industry, coal industry, construction, wholesale and retail trade, services (transport, banking, consulting, internet services, energy, domestic services for the population), education and science, public administration. they found out that the organizational culture of the enterprises surveyed has the following features and differences: top managers have a greater influence on forming organizational culture (63.5% of respondents); middle managers affect the formation of organizational culture less (11.3%), hr department (11.3%), ordinary employees (10.4%) and customers (10.4%); organizational culture, as a rule, is formed by the company management (78.3%), the remaining experts (13%) noted that it was formed spontaneously, and 8.7% of the respondents say that there is no organizational culture at all; the organizational culture of the company is ineffective (36.5% of respondents) and has several disadvantages: obstruction to functional disunity of data exchange (18.3%); the organization’s focus on sales and profits, not on the consumer, that is, the company is not customer-oriented (14.8%); no employees’ understanding of what a “customer-oriented approach to the formation of organizational culture” is (12.2%); a lack of a generally accepted definition of customer focus (11.3%); organizational culture not built around the customers’ needs (11.3%); a lack of digital platforms to manage data (10.4%); insufficient digital competence of company personnel (8.7%); the inability in the company to maintain marketing communications with customers (5.2%); key barriers to transform companies organizational culture in the information economy: a low level of employee involvement (28.7% of respondents); the insufficient amount of financial resources (27.8%); the imperfection of the organizational structure (27%); a lack of a clear vision and leadership support (25.2%); a lack of understanding of digital trends (22.6%); inability to make the necessary changes in organizational culture (20%); underdevelopment of it infrastructure (20%); a lack of specialists with digital skills and knowledge (18.3%); a lack of databases (3.5%); organizational culture affects the financial results of enterprises: absolutely (65.2% of respondents) or partially (24.4%); organizational culture of enterprises primarily affects: an increase in sales by improving the quality of logistics services (38.3% of respondents); an increase in profitability (32.2%); reduction of expenditures and, consequently, cost reduction (27.8%). http://www.virtual-economics.eu/ 21 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 using the research result, the authors came up with a methodological approach proposing to choose the optimal direction of organizational culture transformation at the enterprises, the essence of which is to determine the most significant assessment criteria, which are systematized into four groups: ),,,(),,(),,(),,( 4342414333231323222121312111 kkkkkkkkkkkkkkkkk  (1) where 1 k is adaptability (ability to adapt): the ability to organizational changes ( 11 k ); customer focus ( 12 k ); organizational training ( 1 3k ); 2 k is the mission: strategic directions and intentions ( 21 k ); goal setting ( 22 k ); vision ( 23k ); 3 k is consistency (coherence): coordination and integration ( 3 1 k ); ability to reach consensus ( 32 k ); distribution of key values ( 33 k ); 4 k is involvement: development of abilities ( 41 k ); orientation on teamwork ( 42 k ); responsibility and authority ( 43 k ). to evaluate and select the optimal direction of organizational culture transformation at the enterprises, it is proposed to use the analytic hierarchy process (t. saaty method), which allows quantifying the import criteria taking into account specific features and influences of external and internal factors on the enterprises’ organizational culture development. this study considers the main provisions of the analytic hierarchy process (ahp) when choosing the optimal directions of enterprises’ organizational culture transformation. first of all, the task is structured, within the framework of which the goal, criteria, and alternatives are determined, and the relations among them are established (figure 5). as can be seen from figure 5, the goal is the first level of the hierarchy, the second level is the criteria, that is, a quantitative or qualitative characteristic. alternatives – objects, among which it is necessary to make a choice – are evaluated according to the system of criteria. they make up the third level of the hierarchy. in this article, alternative 1 is the transformation of organizational culture through the introduction of digital technologies (trushkina, 2019; trushkina & rynkevych, 2019c), which will allow optimizing business processes at the enterprise; alternative 2 is personnel development, which will meet the modern requirements of companies’ operation (koev et al., 2019). alternative 3 is the use of a customer-focused approach to forming and developing the enterprises’ organizational culture, that is, the company's customer orientation (trushkina & rynkevych, 2019b). in the process of choosing the best option, the criteria and alternatives are compared in pairs concerning each criterion with the use of special “scale of relative importance” (or “scale 19”, “saaty scale”). the saaty scale numbers are used to show how many times an element with a higher rating of advantage dominates an element with a lower rating according to their common criteria. http://www.virtual-economics.eu/ 22 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 figure 5. a hierarchical model for choosing the best option for transforming enterprises’ organizational culture. source: compiled by the authors based on (saati, 1993; ershova, 2015; jevstrat & kushneruk, 2012). the form of presenting the results of pairwise comparisons is the inverse symmetric matrix: , 1... 11 ............ ...1 1 ...1 ... ....... ... ... . 21 2 12 112 32 22322 11312 1 21 11                                    nn n n nnnn n n n aa a a aa aaa aaa aaa a a a (2) where njni a a ij ij ,1;,1, 1  refer correspondingly to rows and columns; n is the number of items to compare; ij a is the numbers that correspond to certain grades of advantage. according to the data of this matrix, a set of local priorities is formed by calculating the values of the vector and further normalization of its components according to the following scheme: goal to choose the optimal direction of organizational culture transformation in order to increase the enterprise efficiency i level ii level (criteria) к1 к2 кn … iii level (alternatives – scenarios) а1 а2 а3 http://www.virtual-economics.eu/ 23 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 ,...;;⇒...⇒ ⇒ ... ....................................... ... ... ⇒ ... ....... ... ... . 2 2 1 1 21 321 22232221 11131211 32 22322 11312 1 21 11 n n n n n nnnnn n n n n nnnn n n n d d d d d d dddd daaaa daaaa daaaa aaa aaa aaa a a a                                   (3) where   n  ,...,, 21 is a priority vector. similarly, the value v is calculated. estimates of the relative importance elements compared must be consistent. to determine the level of consistency of these estimates, the consistency index should be calculated: , 1 max n n ci   (4) ,... ∑∑∑ 1 2 1 1 1 max 21 n n j j n j j n j j n aaa                              (5) where n≥ max  is the maximum value of the pairwise comparisons matrix. the consistency ratio is determined by the formula: , n p ci cr  (6) where np is a random consistency index, the value of which depends on the dimension of the matrix: no. 1 2 3 4 5 6 7 8 9 10 n p 0 0 0.58 0.90 1.12 1.24 1.32 1.41 1.45 1.49 at the last stage, the efficiency ( s ) of alternatives (scenarios) is calculated: )(...)()( .................................................................. )(...)()( )(...)()( 2211 22 22 2 112 11 22 1 111 m nn mm m nn nn vvvs vvvs vvvs       (7) http://www.virtual-economics.eu/ 24 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 based on this, the optimal direction of transforming the enterprise’s organizational culture can be chosen: the alternative with the maximum value of efficiency ( s ) is the best in terms of the set of criteria, taking into account its relative importance. as a result of the calculations, it was found that the degree of deviation from the consistency of expert estimates of the matrix is acceptable and equals to 17.5%, that is, in the range of 1020%. thus, on the basis of the hierarchy analysis method, it is proved that the introduction of digital technologies is recognized as the optimal way to modernize the organizational culture of the examined enterprises, which will allow optimizing business processes since it has the highest efficiency (0.401) compared to the other two directions. this is also confirmed by the results of an expert survey that engaged the specialists from a number of ukrainian enterprises. it was revealed that at the enterprises surveyed a partial (48.7% of respondents) or complete (39.1%) transformation of organizational culture is required. in their opinion, modernization of organizational culture should involve: developing staff qualification (51.3%); implementing digital technologies to optimize business processes (43.5%); improving the efficiency of communications among employees, increasing funding, eliminating the bureaucratic component in organizing business processes at enterprises (2.6%). at the same time, even though the customer-focused approach is the key activity of enterprises, only 20% of experts consider it advisable to transform the customer relations management system. taking into account all mentioned above, it is found that effective development of organizational culture in the information economy is hindered by many barriers, which can be conditionally divided into 7 groups:             )( );( );,( );,,( );,,( );,,( );,,,( 717 616 52515 4342414 3332313 2322212 141312111 xx xx xxx xxxx xxxx xxxx xxxxx x (8) http://www.virtual-economics.eu/ 25 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 where 1 x is personnel: a lack of a digital strategy for managing the company’s personnel ( 11 x ); ignoring the need for cultural change ( 12 x ); low employee engagement ( 1 3x ); a lack of qualified and competent personnel in the context of global economic transformation ( 14 x ); 2 x is informational: a lack of a unified approach to the definition of categorical-conceptual apparatus (for example, “digital transformation”, “information economy”) ( 21 x ); difficulties with operations covering the digital design of products and services, quick adaptation of operational processes and real-time monitoring ( 22 x ); a lack of knowledge in the field of the information economy and work with advanced technologies ( 23 x ); 3 x is organizational: a lack of a well-defined digital transformation strategy, a vision of the digital future of the company and the weaknesses of leadership ( 3 1 x ); inability to manage organizational change ( 32 x ); a lack of a “reasonable” approach to risk management in the digital transformation of business processes (i.e., a low level of the digital readiness of risk management functions for digital transformation) ( 33 x ); 4 x is marketing: an inefficient use of corporate communications tools ( 41 x ); a lack of a generally accepted concept of “customer focus” ( 42 x ); insufficient application of a customerfocused approach to the formation of the enterprise’s organizational culture ( 43 x ). 5 x is educational: cross-functional barriers in the knowledge of business leaders and it specialists (that is, insufficient application of a cross-functional approach, which requires knowledge in the field of strategy development and its implementation as well as the necessary technological knowledge and skills) ( 5 1 x ); deficit of digital skills and qualifications among staff ( 52 x ); 6 x is technological: archaic it systems and applications ( 61 x ); 7 x is investment and financial: insufficient investment in advanced technologies (the internet of things, artificial intelligence, blockchain, etc.) 4. results in the context of the information economy, companies can achieve successful development of organizational culture by adhering to the following principles: employees and teams work to achieve results: they are committed to their work, goals, and objectives of the organization, ready to do everything necessary to achieve the goal; employees and teams work to promote the enterprise strategy; organizational environment (leadership, organizational design, performance management, staff development methods, resources and tools, vision and values, informal interaction) is set up to stimulate interaction and promote behavior that will implement the corporate development strategy. http://www.virtual-economics.eu/ 26 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 the main components of the organizational culture in the information economy are digital skills and competencies, the type of thinking and behavior, business relations and sources of professional knowledge, career development models (figure 6). figure 6. the content structure of organizational culture in the information economy source: elaborated by the authors. thus, the specific features of the enterprises’ digital culture are: encouraging external rather than internal orientation: the organizational culture helps orient employees outside and interacts with customers and contractors to make new decisions. an example of external orientation is customer focus. employees form product development and improve the quality of customer service, putting themselves in their place; delegating instead of control: decision-making extends deep inside the organization. instead of receiving explicit instructions on how to do the work, employees follow guidelines so that their opinions can be trusted; risk incentive: employees are encouraged to take risks, quickly cope with failures and learn from mistakes; emphasis on actions instead of planning: supporting the need for speed and promoting continuous iteration rather than improving a product or idea before launching it; cooperation valued more than individual efforts: success comes through teamwork and the exchange of information among departments and divisions. the iterative and fast pace of digital work requires a much higher level of transparency and interaction. skills: human-machine interaction; transition to flexible methods of work; data and analytics; multi-competent interaction; technological skills; digital iq; coding type of thinking and behavior: new goal and methods of work; digital type of thinking and vision; creativity and innovation; efficiency in decision making; new leadership styles; entrepreneurial potential; delegation of authority business relations and sources of professional knowledge: work platforms upon request; internal and external labor integration; personnel reserve network; partnerships; brainstorming; the digital strategy of the company development and recruitment process career growth: career development models, staff assessment, a bonus system; multifunctional teams; flexible working hours; horizontal hierarchies; self-development and lifelong learning; feedback; introduction of digital technologies; staff adaptation http://www.virtual-economics.eu/ 27 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 figure 7. a comprehensive approach to the digital transformation of enterprises’ organizational culture in the information economy source: elaborated by the authors. to increase the efficiency of developing enterprises’ organizational culture in the information economy, it is advisable to implement a comprehensive approach, the essence of which is the symbiosis and constant interconnection of influencing factors, constituent elements, digital competencies and skills, and information technologies (figure 7). hrmaps, a modular personnel management platform, is a comprehensive solution for automation of hr processes, consisting of 4 modules and an hr portal: factors affecting the organizational culture development in the information economy: innovative activity entrepreneurial thinking customer-centricity networking developed human capital cognition creativity corporateness of the culture speed of managerial decision making digital technology constituent elements: digital erudition digital talent digital enthusiasm organizational change management knowledge management leadership activation stimulating employee engagement empathy holacracy customer focus cross-functional interaction and distributed forms of work digital competencies and skills flexibility learning analytical competencies knowledge of innovative technologies programming skills the essence of digital transformation the ability to use big data wide horizons creativity information support for organizational culture development employee-driven management technologies a modular platform hrmaps for hr management a digital cloud platform providing a digital format for all personnel processes hr solutions information system (peoplehr, peoplerecruit, peoplepulse, peopletime, peopleperform) http://www.virtual-economics.eu/ 28 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 personnel assessment (measure): the module allows performing different types of assessments, namely, by competencies, goals, kpi; annual assessment, regular interviews, surveys, and tests; recruitment and adaptation (attract): helps to manage the recruitment process, from opening a vacancy to adaptation at a new workplace planning and career (plan): allows drawing up plans of career development and succession, manage potentials and mobility; training and development (succeed): the module allows creating training plans, recording and delivering training, and providing an exercise control. the introduction of this platform is necessary for an hr specialist to optimize and automate routine personnel processes; for the head of the company to increase the employees’ efficiency and productivity; for a business owner to increase control over the company and increase profitability by achieving goals quickly. implementation of the hrmaps information system promotes centralizing information for reliable data storage; automating labor-intensive administrative tasks; accelerating and simplifying recruiting and integration processes; forming a talent management system; improving the efficiency of personnel management tasks performance. the hr solutions information system allows automating hr processes, centralizing all information in one place, keeping the best talents, speeding up recruitment processes, evaluating productivity, carrying out the collaboration between employees, and tracking employee involvement. this system includes the following: peoplehr – centralization and solution of all hr-tasks providing transparency within the company; peoplerecruit – a recruiting system that helps to find the best talents twice as fast; peoplepulse – creating and planning surveys to monitor and analyze engagement and satisfaction; peopletime – time tracking for each of the projects and analysis of statistics on aggregated reports; peopleperform – employee performance and progress tracking through goals and objectives. the effect from introducing perspective directions of transforming digital organizational culture at the enterprises in the information economy can be calculated using the formula below: max,)),,,,(( 109858483828187654321  yyyyyyyyyyyyyyye (9) http://www.virtual-economics.eu/ 29 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 where 1 y is double reduction of time for labor-intensive processes in personnel management; 2 y is an increase of the employee involvement level in the digitization process by 38%; 3 y is competencies and skills management optimization; 4 y is acceleration of new digital solutions launches by 33%; 5 y is an employee productivity increase by implementing the customer-focused approach; 6 y is risk reduction in the selection of personnel; 7 y is customer service and logistics services quality improvement; 8 y is cost reduction for: adaptation and training ( 81 y ); personnel certification ( 82 y ); hr management as a result of automation and optimization of hr processes up to 90% ( 83 y ); due to the efficient distribution of human resources ( 84 y ); rational investment in employee development ( 85 y ); 9 y is company employees’ average salary growth; 10 y is an increase in the number of qualified employees. 5. conclusions the ict intensive development has had a significant impact on all areas of business activities, including organizational culture development (unece, 2012; 2013). a comparative analysis of existing methods for assessing digital maturity and business processes transformation confirms that organizational culture development makes a significant impact (both positive and negative) on the effectiveness of businesses. the methodological approach (trushkina, 2019a) is proposed to choose and assess the optimal direction for transforming the enterprises’ organizational culture. the essence of the approach is to determine, using the analytic hierarchy process, the most significant criteria that are divided into four groups: adaptability, mission, consistency, and involvement. this approach hypothesizes that the best option for organizational culture modernization is not only the introduction of digital technologies that would optimize business processes but also “digitalization” of organizational culture transformation (not only organizational but also operational and communication components), which would lead to higher efficiency of entire enterprises. the expert survey (trushkina, 2019a) focused on the technological aspect of digital transformation (ranging from new forms of communications and information sharing to big data, ai, machine learning, etc.) and identified factors that hinder the effectiveness of organizational culture development of ukrainian enterprises in various fields. these factors are as follows: functional fragmentation interfering with data exchange; a lack of digital platforms to manage large databases; insufficient digital competency of personnel; a lack of the generally accepted definition of customer focus; a lack of understanding of the essence of the customer-focused approach to organizational culture formation; and inability to maintain http://www.virtual-economics.eu/ 30 www.virtual-economics.eu issn 2657-4047 (online) nataliia trushkina, rafis abazov, natalia rynkevych, and guzelya bakhautdinova virtual economics, vol. 3, no. 1, 2020 communication with customers in the company. these assumptions were supported by the results of the expert survey. according to the survey conducted for this research, companies pay more attention to traditional tools for transforming organizational culture: the professional development of employees (51.3%), the introduction of digital technologies to optimize business processes (43.5%) and customer focus (20%). however, sometimes the enterprises surveyed do not pay due attention to applying digital transformation to developing organizational culture, which is recognized as one of the priority directions in the digital era. this research also assumed the importance of the human element of digital transformation (agility, p2p collaboration, lll, ict empowerment, communication and skills mobility, etc.) that influences successful organizational culture development through effective digital transformation in the context of the information economy in ukraine. however, the collected data suggest that successful organizational culture development is possible only at those enterprises where managers have promoted the formation of a distinct “digital culture,” by reducing communication barriers between all departments, and establishing effective communication among divisions at different levels. however, the formation of distinct digital culture is hindered by many barriers, which can conditionally be divided into seven groups: information, organization, personnel, marketing, education, technology, and investment and finance. this assumption was tested in the survey, with results indicating that the main obstacles to transforming organizational culture of companies in ukraine could be grouped into several societal categories: low level of employees’ involvement; a lack of financial resources; imperfection of the organizational structure; a lack of a clear vision and leadership support; a lack of digital trends understanding; inability to make the necessary changes in organizational culture; underdevelopment of it infrastructure; a lack of specialists with digital skills; and a lack of databases. the survey indicated a direct correlation between the organizational culture of enterprises and their financial results. in addition, the survey also indicated that digital transformation should use a comprehensive holistic approach in careful integration of technological and human (societal) aspects of digital transformation by adapting capacity building for all employees and involving all employers in transformation of their organizational culture. in order for the company employees to understand the goals of digital transformation, firms should provide their employees with digital training and education. such training should, in fact, become a prerequisite for effective digitization of the company’s business processes. enterprise executives should develop and implement programs for digital skills training of staff, using opportunities for distance learning, partnership with academic institutions, universities, and innovative start-ups, as well as various other forms of organizational culture development. the main path of successful transformational changes in the digital era is to bridge gaps between the required special digital skills and those currently held by the company’s personnel. in addition, the use of ict allows cutting the cost of personnel management by reducing risks in selecting personnel, efficient distribution of human resources, automation and optimization of hr processes, and rational investment in employees’ self-development; 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(2008). organizational culture and firm effectiveness: an examination of relative effects of culture trains and the balanced culture hypothesis in an emerging economy. journal of world business, 43(3), 290-306. https://doi.org/10.1016/j.jwb.2008.03.019 http://www.virtual-economics.eu/ кwilinski alex 72 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 2020 volume 3 number 4 (october) institutional regulation of the healthcare system in the context of spreading covid-19 in the russian federation violetta rusova and anait mkrtumova abstract. the modern era of globalization creates specific socio-ecological conditions for the existence of the world human community, which, in turn, determine the singularity of the epidemiological behaviour of many infectious diseases. the year 2020 has challenged the humanity with a pandemic that is rapidly spreading around the world. global relations are fraught with global epidemiological problems. such manifestations of globalization as intensified international migration of population, roaring international trade in agricultural products, domestic and wild animals and birds, food, raw materials and goods, development of high-speed transport, turn the world into a single global socio-ecological epidemiological system, in which all processes are interconnected and mutually dependent. the purpose of the paper is to study and analyse the system of institutional regulation of the health system in the context of a pandemic. the study used such methods as the analysis method, analogies, comparisons, observations, as well as statistical methods to analyse various indicators necessary for research. using the above methods, a large amount of literature, legislation, regulatory and institutional regulations on this issue was analyzed, some existing indicators were summarized, and a conclusion was made about the process of institutional regulation in an unfavourable epidemiological situation. as a result of the study, based on a large number of official documents, it was concluded that measures were taken in the russian federation to counteract the active spread of a new coronavirus infection. implementation of the state policy for preventing the spread of the pandemic resulted in no high mortality rate from new coronavirus infection compared to other world states. it should be noted that due to the federal structure of the country, the heads of regions independently decide on the regulation of mechanisms to counter the spread of infection on the territory of the subject, in this regard, it is not possible to promptly update information on the effectiveness of the measures taken. currently, the risk-based approach described in the article is a mechanism for studying the epidemiological situation, which allows determining the risk factors that affect it and, on this basis, to rank epidemiological problems by their degree of importance. due to the fact that the pandemic as a new virus was an unexpected risk, the clinical picture remains blurred, but the institutional form of state regulation is fused to protect the rights of citizens to health care under conditions of the pandemic. keywords: health care, coronavirus (covid-19), response strategy, risk-based approach, medical care, government regulation jel classification: i150, i180, i190 http://www.virtual-economics.eu/ 73 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 authors: violetta rusova saint-petersburg state university of economics, 21 sadovaya street, saint petersburg, russia e-mail: vio.rus.info@mail.ru https://orcid.org/0000-0002-1816-4295 anait mkrtumova saint-petersburg state university of economics, 21 sadovaya street, saint petersburg, russia e-mail: mkrtumova-anait@mail.ru https://orcid.org/0000-0002-0640-9945 citation: rusova, v., & mkrtumova, a. (2020). institutional regulation of the healthcare system in the context of spreading covid-19 in the russian federation. virtual economics, 3(4), 72-90. https://doi.org/10.34021/ve.2020.03.04(4) received: july 15, 2020. revised: september 26, 2020. accepted: october 3, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2020.03.04(4) https://creativecommons.org/licenses/by/4.0/ 74 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 1. introduction at the end of 2019, an outbreak of a new coronavirus infection occurred in the people's republic of china (prc) with an epicenter in the city of wuhan (hubei province), the causative agent of which was given the temporary name 2019-ncov. on february 11, 2020, the world health organization (who) assigned the official name of the infection caused by the new coronavirus – covid-19 ("coronavirus disease 2019"). on february 11, 2020, the international committee on virus taxonomy assigned an official name to the infectious agent-sars-cov-2. the emergence of covid-19 has given healthcare professionals the task of quickly diagnosing and providing medical care to patients. currently, information about the epidemiology, clinical features, prevention and treatment of this disease is limited. it is known that the most common clinical manifestation of a new variant of the coronavirus infection is bilateral pneumonia (ministry of health of the russian federation, 2020). the spread of the covid-19 virus between 2019 and 2020 on a global scale has caused an overload of health systems, including social and economic destabilization, suspending public and economic life. this current situation goes beyond the crisis in the field of health, striking and highlighting the problems of all spheres of human life. in a relatively short time, the covid-19 outbreak is characterized by the following distinctive features. first, the speed and scale of the spread mean a rapid increase in the number of people who have a new viral infection. secondly, these are the degree of the disease severity and the fatal outcome of sick patients. third, it is economic and social destabilization, which is a public shock, as a result of restrictive measures taken by various states of the world in order to reduce and control the spread of the virus. according to the world health organization worldwide, as of may 11, 2020, there were 4,013,728 confirmed cases of covid-19, including 278,993 deaths reported (world health organization, 2020). thanks to digital technologies, it is now possible to monitor the number of covid-19 cases online. there is an official website in the russian federation https://covid19.rosminzdrav.ru/, whose data is updated automatically, with the reference to the sources: who and rospotrebnadzor. according to official data as of may 11, 2020, the russian federation ranks third in the ranking of countries with the number of cases in the world, and the number of deaths is 2009 people. the pandemic outbreak necessitated an analysis of the health care system, since various states were unable to provide human guarantees for health care in the conditions of the virus spread. the restrictions that were used to regulate the spread of this viral infection have changed the philosophy of thinking about health and life in general. since the restrictive measures were very severe and had a significant impact on the world economy, and the debate about their application does not stop, we have made an analysis of the health care system organization in the country during the period of the covid-19 spread. http://www.virtual-economics.eu/ 75 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 2. the literature review first of all, it should be noted that the article deals with a new virus, which has not been thoroughly investigated yet due to various circumstances. the special complexity of diagnostic measures and laboratory studies is conditioned by the nature of the virus and the geographical and other features of its habitat. in this regard, a rapid response strategy has been chosen in many countries to minimize the spread of infection. institutional regulation of health care has become particularly important in this regard. the article analyzes the strategy published by the world health organization to combat covid 19, which served as methodological recommendations for establishing regulation of the health care system in the russian federation (world health organization, 2020b) the analysis of the works by the russian scientist b. l. cherkassky "risk in epidemiology" and "global epidemiology" served as the basis for defining the category of the concept "epidemiological risk". despite the fact that the problem of the epidemics spread in the context of globalization has been consecrated by the author in his scientific works, the concept of the domestic epidemiology has not been elaborated. currently, the risk-based approach is a mechanism for implementing control and supervisory activities in the russian federation (alfa.ru, 2020; cherkassky, 2007). temporary recommendations from the ministry of healthcare (ministry of health of the russian federation, 2020) are largely based on the materials devoted to the diagnosis, prevention and treatment of covid-19 published by who, chinese, american and european centers for disease control, the analysis of domestic and foreign scientific publications, regulatory documents of the ministry of healthcare of russia and rospotrebnadzor, and serve as a statement intended for heads of medical institutions and their departments, general practitioners, infectious disease specialists, pediatricians, obstetricians and gynecologists, resuscitators of intensive care units in infectious hospitals, emergency physicians, as well as other specialists working in the field of medical care organization for the patients with covid19. the analysis of the legal framework for state regulation of the health care system in the context of the covid-19 spread served as the basis for making a conclusion that the russian federation has implemented a mechanism of institutional relations to ensure the citizens’ protection. 3. methods 1. the methodological basis of the research is a dialectical method of the reality cognition in its connection and interaction, in the form of an objective, comprehensive and concrete consideration of state and legal phenomena. http://www.virtual-economics.eu/ 76 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 2. in the process of research, the observation method was used, which consists in the object’s active, systematic, purposeful, planned and deliberate perception, during which knowledge about the external sides, properties and relations of the object under study is obtained. 3. applying the scientific method of a description, it was possible to characterize the data presented in the article, using the system of data collection, primary analysis and presentation. 4. the system-structural scientific method of cognition, which is a sequence of actions to establish structural links among variables or elements of the system under study, allowed establishing institutional links of health care system regulation in the conditions of covid-19 distribution. 5. using the logical method of scientific knowledge allowed determining the interrelation of goals and objectives to solve the problems that arose to contain the spread of the pandemic in the country. 6. the document analysis method used as a data collection tool in the course of the health regulatory system study identified the existence of institutional impacts on the health care system. 7. the statistical method of scientific knowledge allowed monitoring of fatal outcomes during the spread of a new coronavirus infection. 4. results and discussion covid-19 is a new disease that differs from other diseases caused by coronaviruses, such as severe acute respiratory syndrome (sars) and middle east respiratory syndrome (mers) (ministry of health of the russian federation, 2020). this virus has a distinctive characteristic, which is a rapid spread in the form of an epidemiological outbreak, with an exponential increase in infection. currently, there are no therapeutics or vaccines with proven treatment or prevention capabilities for covid-19, although national governments, who and its partners are urgently coordinating the accelerated development of medical responses (world health organization, 2020). coronaviruses (coronaviridae) are a large family of rna containing viruses that can infect humans and certain animals. in humans, coronaviruses can cause a range of diseases, from mild forms of acute respiratory infection to severe acute respiratory syndrome (sars). four coronaviruses (hcov-229e, -oc43, -nl63, and-hku1) are currently known to circulate in the population, which are present year-round in the structure of arvi, and usually cause mild to moderate upper respiratory tract damage. based on serological and phylogenetic analysis, coronaviruses are divided into four genera: alphacoronavirus, betacoronavirus, gammacoronavirus, and deltacoronavirus. the natural hosts of most of the currently known coronaviruses are mammals. clinical manifestations of acute respiratory infection include body temperature above 37.5 °c and one or more of the following signs: cough, dry or with http://www.virtual-economics.eu/ 77 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 scant sputum, shortness of breath, chest congestion, blood oxygen saturation according to pulse oximetry (spo2) ≤ 95%, sore throat, runny nose and other catarrhal symptoms, weakness, headache, anosmia, diarrhea – in the absence of other known causes that explain the clinical picture regardless of the epidemiological history (ministry of health of the russian federation, 2020). 4.1. the global response strategy for covid-19 the world health organization has developed a global response strategy for covid-19, which aims to control the pandemic by slowing virus transmission and reducing mortality. the global strategic objectives were formed as follows: mobilising all structures and populations to fight the pandemic, including hand hygiene, "respiratory etiquette" and physical distancing of everyone; controlling sporadic cases and foci, preventing transmission of the virus among the population by quickly identifying and isolating all cases; tracking and quarantine; reducing mortality by providing appropriate clinical care for covid-19 patients; ensuring continuity of primary health and social care services and protection of firstline workers in the fight against the virus and vulnerable populations; developing safe and effective vaccines and therapeutics that can be available and to the required extent, depending on needs. achieving the implementation of the global covid-19 response strategy will depend on the ability of national and regional authorities to meet the key criteria. first, covid-19 transmission is controlled at the level of sporadic cases and foci, all of which originate from known contacts with the sick or imported cases, and the number of new cases must be maintained at a level that the health system can handle, while reserving significant resources for medical care. second, there are sufficient public health resources to enable a broad transition from detecting and treating serious cases to identifying and isolating all cases, regardless of their severity and origin: detection: suspected cases should be recognized soon after symptoms occur through active case detection, self-reporting, entry screening, and other approaches; testing: for all suspected cases, test results should be provided within 24 hours of identification and sampling, and sufficient resources should be available to confirm that the virus is not present in patients who have recovered; isolation: all confirmed cases have been effectively isolated (in hospitals and/or designated housing in cases of mild or moderate illness, or at home with sufficient support if there is no designated housing) immediately and until they are no longer contagious; quarantine: all people who had close contact with the sick were tracked down, quarantined and monitored for a period of 14 days, whether in designated areas or at home. http://www.virtual-economics.eu/ 78 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 monitoring and support can be provided through visits from local volunteers, combined with phone calls or text messages. third, the risks of outbreaks in high-vulnerability areas are minimized, which requires identifying all the main factors and/or causes of increased covid-19 transmission, with appropriate measures taken to minimize the risk of new outbreaks and hospital-based infection (for example, appropriate prevention and control of infection, including medical triage, and the provision of personal protective equipment in medical and long-term care settings). fourth, preventive measures have been introduced at the workplace to reduce risk, including appropriate guidance and resources to promote and implement standard covid-19 prevention measures, i.e. physical distance, hand washing, "respiratory etiquette" and, possibly, temperature monitoring. fifth, the risk of imported cases is managed by analyzing the likely origin of cases and routes of entry, and measures have been implemented to quickly identify and manage cases of suspected disease among passengers (including the possibility of quarantining people arriving from the areas where there is the virus spread among the population). sixth, there is full interaction with local authorities, who understand that there is a broad transition to be made from detecting and treating only serious cases to identifying and isolating all cases, that preventive measures regarding behavior must be maintained, and that all citizens play a key role in the feasibility and, in some cases, in the implementation of new controls (world health organization, 2020b). 4.2. a risk-based approach to epidemiological hazards in 2007, b. l. cherkasskiy's monograph "risk in epidemiology" was published in which, as he himself wrote, an attempt was made to form the concept and methodology of risk assessment in the epidemiology of infectious diseases. in his understanding, an "epidemiological risk" is a complex and multidimensional concept that is inextricably associated with the patterns of occurrence, development and termination of the epidemic process. this concept application in practice is the introduction of a mechanism for studying the epidemiological situation, which allows determining the risk factors that affect it and on this basis to rank epidemiological problems by their degree of importance (alfa.ru, 2020; cherkasskiy, 2007). in 2008, the last monograph of b. l. cherkasskiy "global epidemiology" was published (cherkasskiy, 2008). it substantiates the position that the modern era of globalization creates specific socio-ecological conditions for the existence of the world human community, which, in turn, determine the singularity of the epidemiological behaviour of many infectious diseases. the main epidemiological consequence of forming a single interconnected, interdependent and interpenetrating world was the formation of a pandemic character of previously local epidemic processes of many infectious diseases, including particularly http://www.virtual-economics.eu/ 79 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 dangerous ones. in this regard, prevention and control of such diseases increasingly require the joint efforts of the health services in developing and economically developed countries that are interested in protecting the health of their populations. currently, the risk-based approach is a method of organizing and implementing state control (supervision), in which, in cases stipulated by law, the choice of intensity (form, duration, frequency) of control measures, measures to prevent violations of mandatory requirements is determined by the attribution of the activities by a legal entity, an individual entrepreneur and (or) production facilities used by them in carrying out such activities belong to a certain risk category or a certain class (category) of danger (konsultantplus, 2008). despite the fact that in the decree of the president of the russian federation of june 6, 2019 no 254 "on the strategy for the development of healthcare in the russian federation for the period up to 2025" among the threats to national security in the field of public health protection there were identified: the risk of complicating the epidemiological situation against the background of the unfavorable situation in foreign countries for a number of new and dangerous infectious diseases; the risk of new infections caused by unknown pathogens, the introduction of rare or previously unknown infectious and parasitic diseases on the territory of the russian federation, the emergence and spread of natural focal infections, spontaneous infection with infectious agents, the return of extinct infections, the overcoming of interspecific barriers by microorganisms; the risk of illegal use of biological and other related technologies, the implementation of dangerous man-made activities (including the use of genetic engineering technologies), as well as biological terrorism, the epidemiological health system was not prepared for the threats and challenges that arose (official internet resources of the president of russia, 2019). during the covid-19 coronavirus pandemic, roszdravnadzor national institute of quality developed checklists under the section "epidemiological safety" for internal control of medical organizations (national institute for quality, 2020). the checklist (list of control questions) is presented in the form of mandatory requirements that are most significant in terms of preventing the threat of harm to the life and health of citizens. internal control of the quality and safety of medical activities carried out in order to ensure the rights of citizens to receive medical care in necessary quantity and of the appropriate quality in accordance with the orders of medical care, taking into account standards of care and on the basis of clinical recommendations and compliance to ensure the quality and safety of medical activities. any healthcare facility in the russian federation, regardless of its profile, must have a stepby-step plan of action in case a patient with covid-19 is identified. the readiness of medical organizations should be checked according to the checklists that were developed by the federal state budgetary institution "national institute of quality" of roszdravnadzor. http://www.virtual-economics.eu/ 80 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 4.3. the key principles and methods of providing outpatient medical care to patients diagnosed with covid-19 temporary guidelines by the ministry of health of the russian federation regulate the algorithm for providing medical care in outpatient settings to patients diagnosed with covid19. upon receiving a positive result of laboratory tests of the patient's biological material for the presence of covid-19 (hereinafter referred to as the covid-19 test result), the authorized person of the medical organization: notifies the patient of a positive covid-19 test result; notifies the head of the medical organization of a positive covid-19 test result; enters the planned dates for repeated collection of biological material (smears from the nasopharynx and oropharynx) in the log of patients with covid-19 3rd, 11th days; organizes the examination of medical organization employees who have come into contact with a sick patient and, if symptoms of acute respiratory viral infection are detected, the collection of their biomaterial (smears from the nasopharynx and oropharynx) for laboratory testing for the presence of covid-19; conducts patients’ interviews in order to clarify their status; informs the medical professional who is sent to provide medical care to the patient about the positive result of the covid-19 test. medical professionals who provide home health care to patients who test positive for covid19 must: use personal protective equipment (glasses, disposable gloves, respirator of the appropriate protection class, type 1 anti-plague suit or disposable robe, shoe covers); have a stock of at least 20 medical masks and offer them to a patient before starting the interview and examination; recommend that a patient should wear a medical mask during the examination and interview by a medical professional; treat their gloved hands with disinfectant; keep personal protective equipment while staying in a patient's apartment; after leaving a patient's apartment, remove personal protective equipment, pack it in a class b medical waste bag, and ensure that it is transported for disposal in accordance with the requirements; upon completion of medical care to a patient, inform the authorized person of the medical organization about the people who have contact with the patient. medical care for a patient with a positive covid-19 test result can be provided at home in the absence of clinical manifestations or a mild course of the disease (body temperature is less than 38.0 °c, bdd is less than or equal to 22 per minute, blood oxygen saturation according to pulse oximetry (spo2) is more than or equal to 93%, for children 95% or more). a patient with a positive covid-19 test result with a mild course of the disease is recommended to prescribe treatment in accordance with the guidelines of the ministry of http://www.virtual-economics.eu/ 81 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 health of the russian federation. patients with lung disease should be informed by a medical worker about the necessity of calling a doctor or ambulance if you feel unwell (body temperature more than 38,0 °c, the appearance of difficult breathing, breath shortness, new or increased cough, lowering the blood oxygen saturation according to pulse oximetry (spo2) less than 93%), as well as possible ways of access to medical care. people who live with a patient with a mild disease in the same room should be informed about the risks of covid-19 disease and the need for temporary residence in another place. patients with lung disease and persons living with the patient should be informed that the infringement of sanitary-epidemiological rules, entailed on imprudence mass disease, may bring them to criminal liability under article 236 of the criminal code of the russian federation. a patient with a mild course of the disease and those living with such a patient should be provided with information materials on the care of patients with covid-19, and general recommendations for protection against airborne and contact-borne infections. if a decision is made to continue providing medical care to a patient in an outpatient setting (at home), consent to provide medical care in an outpatient setting (at home) and compliance with the isolation regime for treatment of covid-19 is issued. a patient with a positive covid-19 test result should be hospitalized if one of the following circumstances exists: one or both sscs, regardless of the temperature value: bdd 22 or more movements per minute, blood oxygen saturation according to pulse oximetry (spo2) less than 93%; a mild course of the disease, if a patient is over 65 years of age or has symptoms of acute respiratory viral infections in combination with chronic heart failure, diabetes, respiratory system disease (bronchial asthma, chronic obstructive pulmonary disease), pregnancy; cohabitation with persons belonging to risk groups (persons over the age of 65, as well as persons suffering from chronic diseases of the bronchopulmonary, cardiovascular and endocrine systems, pregnant women) and the inability to move them out, regardless of the severity of the disease in a patient; a mild course of the disease in children under the age of 3 years or the presence of symptoms of acute respiratory viral infections in children under the age of 18 years in combination with chronic diseases: heart failure, diabetes, bronchial asthma, congenital heart and lung diseases that are on immunosuppressive therapy; pregnancies. a medical organization that observes a child with a positive covid-19 test result and no clinical manifestations of diseases, provides a daily survey by a district nurse (by phone) about the patient's condition at least 2 times a day, as well as the patronage of a district pediatrician at least once every 5 days. a medical organization that observes a child with a positive covid-19 test result and a mild course of the disease provides a daily survey by a district nurse (by phone) about a patient's condition at least 2 times a day, as well as the patronage of a district pediatrician (paramedic), taking into account a child's condition at least once every 2 days. a legal representative who provides care for a child with a positive covid-19 test result , who is receiving medical care at home, must be informed about the risks of covid-19 disease and http://www.virtual-economics.eu/ 82 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 the need to comply with recommendations to get protected from airborne and contact infections, the specifics of caring for patients with this infection, and also have information that breaching sanitary and epidemiological rules that caused a mass illness through negligence may lead to criminal prosecution, article 236 of the criminal code of the russian federation. 4.4. state regulation of the healthcare system in the context of covid-19 distribution thus, in accordance with the decree of the rf government dated 27.03.2020 no. 748-r in 2020, the finance ministry allocated funds from reserve fund of the government of the russian federation on granting the budgets of subjects of the russian federation to support measures on provision of balanced budgets of the constituent entities of the russian federation in the amount of 33.44 billion rubles for the equipment (retrofitting) further created or repurposed bed fund of medical institutions of the executive authorities of the constituent entities of the russian federation in the sphere of health and local municipal governments, to provide medical care to patients with novel coronavirus infection in accordance with the general requirements to the equipment of beds for patients with novel coronavirus infection approved by the ministry of health of russia (the official internet-portal of legal information, 2020d). by the order of the government dated 17 april 2020, no. 1049-r the reserve fund allocated 32.4 billion rubles for the following: on vehicle (conversion) to be additionally generated, repurposed and (or) modernized hospital beds medical organizations subordinated to executive bodies of subjects of the russian federation in the sphere of health protection and local municipal administrations, in accordance with the minimum requirements for implementation of medical activities aimed at the prevention, diagnosis and treatment of new coronavirus infection; to carry out works on provision of centralized supply of medical gases (oxygen); additionally generated, repurposed and (or) modernized hospital beds medical organizations subordinated to executive bodies of subjects of the russian federation in the sphere of health protection and local municipal administrations, in accordance with the minimum requirements for implementation of medical activities aimed at the prevention, diagnosis and treatment of new coronavirus infection; to provide medical and other employees of structural divisions of medical organizations subordinate to the executive authorities of the subjects of the russian federation in the field of health protection and local administrations of municipalities with personal protective equipment in accordance with the minimum requirements for the implementation of medical activities aimed at the prevention, diagnosis and treatment of a new coronavirus infection; on equipment (re-equipment) of the medical organizations subordinated to executive bodies of subjects of the russian federation in the sphere of health protection and local municipal administrations, in accordance with the orders of medical care for "anesthesiology and reanimatology", "pulmonology" infectious diseases. funds are allocated separately for agencies such as the fmba, etc. http://www.virtual-economics.eu/ 83 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 by the order of the government of russia no. 974-r of april 12, 2020, the federal medical and biological agency was allocated about 640 million rubles from the reserve fund of the government of russia for the conversion of the bed fund of medical organizations located in closed administrative-territorial entities in order to provide medical care to patients with a new coronavirus infection (the official internet-portal of legal information, 2020f). the government approved a number of measures to simplify the purchase of artificial lung ventilation (ventilator) and extracorporeal membrane oxygenation (ecmo) devices in 2020. so, the ministry of industry and trade will buy devices from a single supplier. in addition, the contracts will provide work and services for the devices’ delivery to medical organizations of the russian federation. the ministry of health will present a list of institutions that need to be equipped with ventilators and ecmo. recipients will install the devices at their own expense. according to these contracts, the contractor will not provide security for the contract executution or guarantee obligations. however, an advance can be provided for at the rate of 100% of the contract price within the approved budget commitment limit. such contracts should be valid until december 31, 2020 at the most (the official internet-portal of legal information, 2020b). 10 billion rubles have been allocated for this purpose from the reserve fund of the russian government for the production and purchase of equipment and products for the diagnosis, detection, prevention and treatment of epidemic diseases, personal protective equipment, medicines and medical devices. enterprises and companies engaged in the supply of goods, performance of works and provision of services for the state budget will be able to receive up to 50% of the contract price as an advance. this resolution was signed by prime minister mikhail mishustin. previously, the limit on the amount of advances for executors of the state contracts was 30%. the decision to increase it was made as part of the plan of additional measures to ensure sustainable economic development. this measure is designed to support businesses in a difficult situation (the official internet-portal of legal information, 2020c). measures to regulate prices for medicines approved on 26.03.2020, amendments to federal law no 61 "on circulation of medicines" from 12.04.2010 will allow the russian government to control prices in cases where there is an emergency, the threat of the emergence and spread of infectious diseases, and if within 30 days there is an unjustified increase in prices by more than 30%, with a preliminary decision of the government to conduct monitoring (rgru, 2010). this will allow the government of the russian federation, in the event of an emergency and the threat of spreading the diseases that pose a danger to others, to set for 90 days the maximum allowable prices for medicines and medical devices that are not officially included in the list of vital, but in fact become so under certain threats. on march 31, the state duma and the federation council met to approve amendments to the administrative code of the russian federation in connection with the spread of covid-19. in particular, the changes will affect article 14.4.2 on liability for violations of legislation on the circulation of medicines (official internet resources of the president of russia, 2019; rgru, 2010; the official internetportal of legal information, 2020a). http://www.virtual-economics.eu/ 84 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 at the suggestion of the ministry of economic development of russia, the council of the eurasian economic commission decided to exempt from customs duties when importing goods necessary to prevent the coronavirus infection from spreading. the duty-free import regime applies to personal protective equipment (masks and respirators, glasses, gloves, suits, shoe covers), vaccines, laboratory reagents, boxes and stretchers for transporting patients, bags for transporting hazardous biological waste, blood transfusion systems, tubes for artificial ventilation, syringes and catheters, materials used for producing personal protective equipment, disinfectants. the measure applies to goods imported between march 16 and september 30, 2020 (alfa.ru, 2020). the ministry of health approved a temporary procedure for organizing work to prevent and reduce the risks of covid-19 spread. medical organizations will be guided by it until 2021. this document contains temporary rules for organizing: provision of emergency, including emergency specialized, medical care (appendix n 2 to the order); work of medical organizations providing medical care on an outpatient basis and in a day hospital (appendix n 3 to the order). for hospitals, the basic principles of organizing medical care for those who are ill with covid-19 are defined (appendix n 5 to the order). to prevent nosocomial spread of coronavirus infection, a protocol of measures is provided (appendix n 7 to the order). in the order, medical workers will be able to find algorithms for actions when providing medical care: in outpatient conditions for patients with arvi (appendix n 4 to the order); in hospital conditions for patients with arvi and viral pneumonia (appendix n 6 to the order). the order provides for the creation of special centers where you can get information support on the diagnosis and treatment of covid-19 and pneumonia. for example, we are talking about federal and regional remote consultation centers of anesthesiology and resuscitation for adults, children and pregnant women (garant.ru, 2020). in view of non-fulfillment of the order of the president of the russian federation as of april 15, 2020 no pr-665 "list of instructions on countering the spread of a new coronavirus infection (covid-2019)" in the regions of the russian federation" no additional payments were paid for special working conditions to health care workers whose activities are directly related to providing medical care to patients with a new coronavirus infection (covid-2019) (official internet resources of the president of russia, 2020a). the ministry of health of the russian federation in connection with the numerous requests received by medical organizations for implementing incentive payments for performing particularly important work to medical and other employees directly involved in providing medical care to citizens 17.05.2020 clarified that a one-time surcharge for each month is calculated in the prescribed amount (80 thousand, 50 thousand or 25 thousand rubles). it is paid in full if an employee has http://www.virtual-economics.eu/ 85 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 worked according to the approved schedule. however, the number of shifts and (or) hours does not matter: the surcharge is provided for the risk of working with patients with coronavirus. surcharges are made within the time limits set by the organization for transferring salaries. incentive payments should include the following: coefficients (regional, for work in desert and waterless areas, in high-altitude areas); percentage allowances for work experience in areas with special climatic conditions. at the hospitals treating covid-19, the head of the medical organization forms its temporary staff schedule and, if necessary (including when repurposing), redistributes the functionality of physicians. thus, the positions of all health workers who are directly involved in the care of patients with coronavirus are included in the corresponding list. it includes those who are entitled to incentive payments (alfa.ru, 2020). the question of the reason for the relatively low incidence in russia is closely related to the methods of detecting and registering covid-19. the relatively low incidence in russia at the first stages was associated with lower coverage of the population with diagnostic covid-19 tests in comparison with other countries. however, current data show a high level of coronavirus testing in the russian federation per one citizen. another reason for possible underestimation of the real number of cases at the first stages is the relatively low sensitivity of some diagnostic covid-19 tests, according to some experts, that is, a high number of false negative results. this leads to a different cause of death being indicated (for example, sars). the american newspaper the new york times, citing demographers, writes that the number of coronavirus infection victims may be slightly higher than the official statistics in russia report. the newspaper published a letter from the head of the moscow health department, alexey khripun, in which he responds to suspicions of understating the death rate from coronavirus in the russian capital (khripun, 2020). for health care in different countries, the most important thing when monitoring covid-2019 is to obtain reliable statistical data on the situation of morbidity and mortality associated with covid-19. russian statistics of covid-19 mortality are based on new principles established by the world health organization's international classification of diseases (icd-10), taking into account international guidelines for certifying and coding covid-19 as a cause of death. when choosing the cause of death in cases related to covid-19, it was recommended to use rules similar to those for the flu. all deaths associated with covid-19 are divided into two groups: cases where covid-19 is stated as the initial cause of death; cases where covid-19 is stated as the other cause of death, including cases where covid-19 is significant in the development of the underlying disease and its fatal complications. most often, if the icd-10 rules are followed when selecting the underlying disease in the covid-19-related cases, the selected disease will be the original cause of death. however, it should be noted that in all cases, the certificate must indicate the logical sequence of pathogenesis of death from covid-19. therefore, the diagnosis must necessarily reflect all the existing complications, which in case http://www.virtual-economics.eu/ 86 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 of a fatal outcome are the direct and intermediate causes of death indicated in the chain of events that led to death. an error in issuing a death certificate is recording the cause of death in a single line without a logical sequence of states (world health organization, 2020). the regulatory framework for medical organizations was insufficient to respond quickly to the situation with coronavirus. this applies to the following: regulation of changes in the profile of medical organizations in the context of the coronavirus spread; legislation in the field of compulsory medical insurance, which did not provide for mechanisms to compensate for the loss of income of medical organizations, their work in standby mode; a permissive sphere of medical care: the need to have licenses for medical activities when temporarily converting medical organizations into infectious, pulmonological, as well as in terms of providing telemedicine services by doctors from home; qualification requirements for medical professionals: internship (residency), professional training, certificates (certificates of accreditation), if necessary, doctors of other specialties to provide medical care to patients with coronavirus; the labor legislation (inconsistency of legislation in relation to distance labor, loan labor) legislation in the field of telemedicine technologies. 5. conclusions the era of globalization creates specific socio-ecological conditions for the existence of the global human community, which, in turn, determine the singularity of the epidemiological behavors of many infectious diseases. the year 2020 has challenged the humanity with a global pandemic that is rapidly spreading around the world. the emergence of covid-19 has given healthcare professionals the task of quickly diagnosing and providing medical care to patients. currently, information about the epidemiology, clinical features, prevention and treatment of this disease is limited. the global response strategy developed by the who has set goals and targets for countries around the world to control the pandemic by slowing down virus transmission and reducing mortality. the analysis of the works by the russian scientist b. l. cherkasskiy "risk in epidemiology" and "global epidemiology" served as the basis for defining the category of the concept "epidemiological risk". despite the fact that the problem of spreading pandemics in the context of globalization has been consecrated by the author in scientific works, the concept of the domestic epidemiology development has not been elaborated. currently, the risk-based approach is a mechanism for implementing control and supervisory activities in the russian federation. http://www.virtual-economics.eu/ 87 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 temporary guidelines by the ministry of health of the russian federation regulate the algorithm for providing medical care to patients diagnosed with covid-19. the analysis of the legal framework for state regulation of the health system in the context of the spread of covid-19 served as the basis for establishing the conclusion that the russian federation has implemented a mechanism of institutional relations to ensure the protection of citizens. references alfa.ru (2020). reshenie soveta eek ot 08.04.2020 № 38 "o vnesenii izmeneniya v reshenie soveta evrazijskoj ekonomicheskoj komissii ot 16 marta 2020 g. n 21" [decision of the eec council dated 08.04.2020 no. 38 "on amending the decision of the council of the eurasian economic commission dated march 16, 2020 no. 21"]. https://www.alta.ru/tamdoc/20sr0038/ [in russian]. cherkasskiy, b.l. 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(2020a). retrieved from https://www.who.int/ http://www.virtual-economics.eu/ 90 www.virtual-economics.eu issn 2657-4047 (online) violetta rusova and anait mkrtumova virtual economics, vol. 3, no. 4, 2020 world health organization. (2020b, april 14). covid-19 strategy update. geneva, switzerland: world health organization. retrieved from https://www.who.int/docs/defaultsource/coronaviruse/covid-strategy-update-14april2020.pdf?sfvrsn=29da3ba0_19 http://www.virtual-economics.eu/ кwilinski alex 131 www.virtual-economics.eu issn 2657-4047 (online) oleksii lyulyov and bogdan moskalenko virtual economics, vol. 3, no. 4, 2020 2020 volume 3 number 4 (october) institutional quality and shadow economy: an investment potential evaluation model oleksii lyulyov and bogdan moskalenko abstract. the article summarizes some arguments as regards the scientific challenge on improving approaches to evaluating the country’s investment potential. the main objective of the research is to identify the features and perspectives of applying the variables such as the shadow economy and the integrated institutional quality index into a model evaluating the country’s investment potential. to solve this task, systematization of the related theoretical and methodological materials has been done. the methodological tools of the research are carried out in the following logical sequence: systematization of existing statistical methods for estimating the shadow economy; time data series analysis; and regression analysis. the scope of the shadow economy could be estimated as a dependent variable, with both its determinants and indicators detected and measured. the macro methods, such as multiple indicators multiple causes (mimic) are suitable approaches from an econometric standpoint to evaluate the shadow economy. institutional quality is crucially an important variable for empirical studies related to evaluating the country’s investment potential. the proposed approach considers significance and direction of the six worldwide government indicators’ (wgi) impact on foreign direct investment net inflow, eliminating the issue of their multicollinearity. however, political instability and high frequency of foreign and domestic policy changes during the last decades distort statistical significance of the results obtained. fdi inflow, as well as the quality of governance, and the shadow economy, is influenced by many other factors, both internal and external, so to build a qualitative model for evaluating the country’s investment potential of the national economy it is necessary to expand the set of factors for analysis. the results of the research can be useful for a more accurate investment potential evaluation on the macroeconomic level, and forecasting foreign direct investment inflows for the following time periods. keywords: country investment potential, foreign direct investment, shadow economy, national economy, institutional quality jel classification: e22, e29, e44, e60, g31 http://www.virtual-economics.eu/ 132 www.virtual-economics.eu issn 2657-4047 (online) oleksii lyulyov and bogdan moskalenko virtual economics, vol. 3, no. 4, 2020 authors: oleksii lyulyov sumy state university, 2 rimski-korsakov st., sumy, ukraine, 40007 e-mail: alex_lyulev@econ.sumdu.edu.ua https://orcid.org/0000-0002-4865-7306 bogdan moskalenko sumy state university, 2 rimski-korsakov st., sumy, ukraine, 40007 e-mail: b.mos.sumdu@gmail.com https://orcid.org/0000-0003-3972-1705 citation: lyulyov, o., & moskalenko, b. (2020). institutional quality and shadow economy: an investment potential evaluation model. virtual economics, 3(4), 131-146. https://doi.org/10.34021/ve.2020.03.04(7) received: august 26, 2020. revised: september 15, 2020. accepted: september 27, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:alex_lyulev@econ.sumdu.edu.ua https://orcid.org/0000-0002-4865-7306 https://doi.org/10.34021/ve.2020.03.04(7) https://creativecommons.org/licenses/by/4.0/ 133 www.virtual-economics.eu issn 2657-4047 (online) oleksii lyulyov and bogdan moskalenko virtual economics, vol. 3, no. 4, 2020 1. introduction foreign direct investment (fdi) has a perceptible impact on local economic development, and is widely considered within related studies as the main driver of host countries’ economic growth (mathur & singh, 2013; ali & bohara, 2017; agnihotri & arora, 2019; huynh et al., 2019). economic relations are not always conducted within the framework of the bureaucratic public and private sector establishments. in this case, we consider an informal part of economy, so-called shadow, hidden or parallel economy. recent publications in this field proposed a wide range of the shadow economy definitions. in this study we use the definition provided by medina & schneider (2018), according to which the shadow economy is explained as all economic activities which are hidden from official authorities due to monetary, regulatory, and institutional reasons. the informal economy creates various challenges for the whole society as it has a tangible reciprocal relationship among all-important macroeconomic, social, and cultural spheres. the problem of measuring the informal or shadow economy has been discussed for the last few decades (lackó, 1996; lippert & walker, 1997; schneider & enste, 2000; wu & schneider, 2019; dell'anno et al., 2007; medina & schneider, 2018; nair-reichert & weinhold, 2001; pimonenko et al., 2018; palienko & lyulyov, 2018; elgin, 2019). empirical research of current studies which were employed to measuring the size of the shadow economy allows organizing the most common approaches into the related groups, are shown in table 1. table 1. a taxonomy of approaches to measuring the size of the shadow economy type of approach definition direct approaches in this group we include surveys, auditing and other expert methods. using them, it is possible to gather detailed information about the structure of shadow economy. it should be mentioned that the received information may not be representative and may not be consistent from country to country. indirect approaches these methods include the incongruity between income and expenditure measures of gdp; the difference between official salaries and consumption growth; unemployment dynamic and average income per capita. such variables are sensitive to the given assumptions (elasticity, local currency ratio, base year of comparison, gdp or gnp measurement). a modelbased approaches the models such as the multiple indicator, multiple causes (mimic) models, proposed by frey & week-hanneman (1984) and improved by schneider et al. (2010). using those models, the size of the shadow economy could be estimated as a dependent variable (an index), with both its determinants and indicators detected and measured. the obtained equation will be estimated and the fitted values of the latent variable are used to compute an estimate of the size of the shadow economy as a share of gdp (medina & schneider, 2018). source: compiled by the authors on the basis of medina & schneider, 2018. http://www.virtual-economics.eu/ 134 www.virtual-economics.eu issn 2657-4047 (online) oleksii lyulyov and bogdan moskalenko virtual economics, vol. 3, no. 4, 2020 according to medina & schneider’s (2018) estimations, within last 20 years the size of ukrainian shadow economy was fluctuating within the range of 35-55%, see figure 1. it is noticeable that the shadow economy dynamic was highly related to the political situation and the following changes in the government in this period. figure 1. the shadow economy (% of gdp, left axis) and fdi inflow (% of gdp, right axis) in ukraine in the period of 1999–2017. source: world bank (2018a), medina & schneider (2018). the early surveys and econometric analyses showed inconclusive results as far as the relation between shadow economy and fdi is concerned. substantial research has been carried out on the relation between fdi and institutional environment of a host country economy. the impact of fdi on the host country economy depends on the quality of the government institutions (globerman & shapiro, 2003; mathur & singh, 2013; pimonenko & lushyk, 2017). kaufmann et al. (2011) proposes a worldwide governance indicators methodology. according to this approach, six main indexes are proposed to estimate the quality of the government institutions which include the following: the process by which the governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them (world bank, 2018b). the wgi of ukraine is shown in figure 2. 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 0% 10% 20% 30% 40% 50% 60% 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 shadow economy (% of gdp) fdi (% of gdp) http://www.virtual-economics.eu/ 135 www.virtual-economics.eu issn 2657-4047 (online) oleksii lyulyov and bogdan moskalenko virtual economics, vol. 3, no. 4, 2020 va -voice and accountability, rq regulatory quality, ge government effectiveness, rl rule of law, cc control of corruption, ps political stability and absence of violence figure 2. worldwide governance indicators of ukraine in the period of 1996–2017. source: world bank (2018b). figure 2 depicts the fact that the institutional quality did not improve within the analysed period in ukraine. it is noticeable that political instability, which started in 2013 and largely developed due to upcoming annexation of the crimea and following military action in the donbas region, has influenced the country’s investment potential and economic activity. therefore, it is imperative to comprehensively understand the shadow economy in ukraine in relation with other variables including fdi inflows and institutional quality. 2. the literature review some questions about the specificity of evaluating the country’s investment potential considering the shadow economy and institutional quality were discussed in the papers by (lackó, 1996; lippert & walker, 1997; dell'anno et al., 2007; schneider et al., 2010; elgin et al., 2019; ali & bohara, 2017; prokopenko et al., 2017; nikopour et al., 2009; globerman & shapiro, 2003; mathur & singh, 2013; goel et al., 2019; jöreskog & goldberger, 1975). -2,1 -1,9 -1,7 -1,5 -1,3 -1,1 -0,9 -0,7 -0,5 -0,3 -0,1 0,1 0,3 va rq ge rl cc ps http://www.virtual-economics.eu/ 136 www.virtual-economics.eu issn 2657-4047 (online) oleksii lyulyov and bogdan moskalenko virtual economics, vol. 3, no. 4, 2020 ali & bohara (2017) and nikopour et al. (2009) studied the cross-collinearity between fdi inflows and the size of shadow economy. they resumed that the shadow economy increase could attract fdi. the presence of shadow economy twists the allocation of resources in the economy, transforms income distribution and reduces tax revenue (alm & embaye, 2013). some studies explored a range of the shadow economy effects: government fiscal policy (cicek & elgin, 2011), state employment policy (schneider & enste, 2000), inflation and economic growth (asfuroglu & elgin, 2016), and total factor productivity (d’erasmo & boedo, 2012). goel et al. (2019) discussed the influences of fdi inflows, inward development aid, and immigration on the informal sector. they found a positive correlation between fdi inflows and shadow economy. discrepancy between national expenditure and income statistics in the process of measuring the shadow economy was explored by yoo & hyun (1998). weak institutional quality was found to be a key determinant of the size of shadow economy (dabla-norris et al., 2008; oviedo et al., 2009). they suggested that regulatory burden and weak governance can drive the evolution of the shadow economy. some authors (chen, 1981; dell'anno et al., 2007; posey, 2015) proposed to develop the multiple indicators, multiple causes (mimic) approach based on the statistical theory of unobserved variables developed in the 1970s by zellner (1970). schneider et al. (2010) further expanded mimic approach so it allows to compare the size of shadow economy across countries and to conduct panel data analysis. it is also necessary to note the applied nature of the work by scientists (bogachov et al., 2020; boiko et al., 2019; czyżewski et al., 2019; chygryn et al. 2020; dalevska et al., 2019; dementyev & kwilinski, 2020; drozdz et al., 2019; 2020; dzwigol, 2019a; 2019b; 2020a; 2020b; 2020c; dzwigol & wolniak, 2018; dzwigol & dźwigoł-barosz, 2018; 2020; dzwigol et al., 2019a; 2019b; 2019c; 2020a; furmaniak et al., 2018; 2019a; 2019b; kharazishvili et al., 2020; kondratenko et al., 2020; kuzior et al., 2020; kwilinski, 2017; 2018a; 2018b; 2018c; 2018d; 2019; kwilinski et al., 2019a; 2019b; 2019c; 2019d; 2019e; 2019f; 2019g; 2020a; 2020b; 2020c; 2020d; kwilinski & kuzior, 2020; kyrylov et al., 2020; lakhno et al., 2018; miskiewicz, 2017a; 2017b; 2018; 2020a; 2020b; miśkiewicz & wolniak, 2020; pająk et al., 2016; 2017; prokopenko & miśkiewicz, 2020; saługa et al., 2020; savchenko et al., 2019; tkachenko et al., 2019a; 2019b; 2019c; 2019d; 2019e; yelnikova & miskiewicz, 2020), in which special attention is paid to assessing the effectiveness of economic mechanisms’ functioning of various scales of activity. the received results could be applied into other panel data model analyses such as an investment potential evaluation. http://www.virtual-economics.eu/ 137 www.virtual-economics.eu issn 2657-4047 (online) oleksii lyulyov and bogdan moskalenko virtual economics, vol. 3, no. 4, 2020 3. methods despite abundance of existing approaches to measuring the size of shadow economy, there is no leading or prevailed one, each of them having some conceptual or practical strengths and weaknesses. it is suitable to choose the needed methodology based on the data available, or the research aims. methods combination might be employed as well, in order to improve preciseness of the estimations. in this study we decided to use the shadow economy estimation results proposed by medina & schneider (2018). the combination of macroeconomic, microeconomic, and institutional factors which drive the shadow economy could be presumed as the following formula: 𝑆𝐸𝑖,𝑡 = 𝛼𝑖 + 𝛽𝑋𝑖𝑡 + 𝛿𝑡 𝑇𝑖𝑚𝑒𝑡 + 𝑢𝑖,𝑡 (1) where sei,t represents the size of the shadow economy in the country 𝑖 at a time period 𝑡 as a share of gdp; αi are the country’s fixed effects; 𝑋𝑖𝑡 is a vector of macroeconomic variables and institutional indicators; 𝑇𝑖𝑚𝑒𝑡 are time fixed effects, which are included to control unexpected year-related variation and special events; 𝑢𝑖,𝑡 is the error term; 𝛽, 𝛿 are individual specific effects. worldwide governance indicators methodology calculates six indexes which represent the quality of governance, as it is shown in figure 2. some of them are correlated with each other. thus, bilan et al. (2019) proposed the approach to integrate wgi index based on the fishburne’s method, considering the impact’s power and direction of the different subindexes wgi on fdi inflow and eliminating the issue of multicollinearity. to calculate, it is suggested to use the formula: 𝑊𝐺𝐼 = ∑ 𝑤𝑖 × 𝑊𝐺𝐼𝑖 = ∑ 2(𝑛 − 𝑗 + 1) 𝑛(𝑛 + 1) × 𝑊𝐺𝐼𝑖,𝑡 , 𝑛 𝑖=1 𝑛 𝑖=1 (2) where 𝑤𝑖 is the weight of 𝑖 sub-index; n is the quantity of sub-indexes; j is a rank of sub-index; 𝑊𝐺𝐼𝑖,𝑡 are the calculated 𝑖 sub-index values. the calculated independent variables (integrated wgi, and the shadow economy rate) are supposed to be applied into an investment potential evaluation model. the general model is presumed by the formula: http://www.virtual-economics.eu/ 138 www.virtual-economics.eu issn 2657-4047 (online) oleksii lyulyov and bogdan moskalenko virtual economics, vol. 3, no. 4, 2020 𝐹𝐷𝐼𝑖,𝑡 = 𝛼0 + 𝛼1𝐹𝐷𝐼𝑖,𝑡−1 + 𝛼2𝑋𝑖,𝑡 + 𝛼3𝑊𝐺𝐼𝑖,𝑡 + 𝛼4𝑆𝐸𝑖,𝑡 + 𝑖𝑡 (3) where 𝐹𝐷𝐼𝑖,𝑡 is the fdi net inflow in country 𝑖 at a time period 𝑡 as a share of gdp; 𝛼0 − 𝛼4 are individual specific effects. some of statistical data ought to be represented as their logarithmic interpretation in order to achieve a visual effect needed. the data processing was done via stata 14. 4. results and discussion as explained in the previous section, the mimic model assumes specific effects and determinants that are used to measure the size of the shadow economy. table 2 shows the regression results for the models from equations (1) – (3). empirical results of the shadow economy influence on fdi are provided in the studies by medina & schneider (2018). the source of calculating integrated wgi index is the world bank (2018b). table 2. the regression analysis of the shadow economy and the quality of governance impact on fdi net inflows. source ss df ms number of obs = 19 f (1, 18) = 29.04 model 2.86323374 1 1.43161687 prob > f = 0.0000 residual 0.788767185 16 0.049297949 r-squared = 0.7840 total 3.65200092 18 adj r-squared = 0.7570 root mse = 0.22203 lnfdi coef. std. err. t p> |t| [95% conf. interval] se -0.0731997 0.0129622 -5.65 0.000 -0.1006784 -0.0457211 wgi 1.26816 0.4443008 2.85 0.011 0.3262838 2.210035 _cons 11.39487 0.5331893 25.12 0.000 12.26456 14.52518 sources: developed by the authors. the analysis results showed that the impact of the shadow economy and the institutional quality on fdi inflow is considerable, and could be applied on the country investment evaluation model, see table 2. the regression analysis has shown that r2 = 0.78, which means a significant impact of the shadow economy rate and institution quality on fdi net inflows, although p-value (p>|t|) is less than 0.05, which indicates a high level of statistical significance of the whole model. following the results shown in table 2, the change in fdi inflow can be characterized by a regression model: http://www.virtual-economics.eu/ 139 www.virtual-economics.eu issn 2657-4047 (online) oleksii lyulyov and bogdan moskalenko virtual economics, vol. 3, no. 4, 2020 𝑌 = 11.39487 + 1.26816 𝑊𝐺𝐼 − 0.0731997𝑆𝐸 (4) where y is ln(fdi net inflows, usd); wgi is an integrated wgi index based on the fishburne’s method; se is the shadow economy rate (% of gdp). the main result obtained from the regression model shows that one unit increase in shadow economy rate (% of gdp) decreases fdi inflows by 0.073 (at logarithmic scale). at the same time, the quality of governance has a positive and significant impact on fdi inflow. this means that multinational companies look for opportunities to evade taxes when making investment decisions, but consider investing in the countries with a reasonably good governance infrastructure. it should be noted that the dynamics of fdi inflow, as well as the quality of governance, and the shadow economy, are influenced by many other factors, both internal and external, so to build a qualitative model evaluating a country’s investment potential of the national economy it is necessary to expand the set of factors for analysis. the concluding section follows. 5. conclusions adding to the literature on the investment potential evaluation approaches, this paper studies the problems and prospective of applying independent variables such as the size of shadow economy and an integrated index of institutional quality. the obtained results show that the shadow economy rate, calculated by mimic methodology, is suitable for applying into an investment potential evaluation model. it should be noticed that the shadow economy itself could be measured by fdi as an indicator. an institutional quality creates the environment for economic activity in a country. thus, evaluation of this variable is crucially important for each related empirical study. at the same time, a relatively high frequency of foreign and domestic policy changes during the last decades distorts the statistical significance of the obtained results. nevertheless, there is still significant room for improving as well as for expanding the evaluation approach discussed in the current study. first, the used dataset can be further expanded provided the data are available for several countries. second, the empirical analysis, which is conducted after the evaluation, should be deepened, with more data series applied. 6. formatting of funding sources this research received no external funding. http://www.virtual-economics.eu/ 140 www.virtual-economics.eu issn 2657-4047 (online) oleksii lyulyov and bogdan moskalenko virtual economics, vol. 3, no. 4, 2020 references agnihotri, an., & arora, sh. 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(1970). estimation of regression relationships containing unobservable independent variables. international economic review, 11(3), 441–454. https://doi.org/10.2307/2525323 http://www.virtual-economics.eu/ https://www.imf.org/en/publications/publications-by-author?author=dong++frank+wu&name=dong%20%20frank%20wu https://www.imf.org/en/publications/publications-by-author?author=friedrich++schneider&name=friedrich%20%20schneider кwilinski alex 147 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and tetyana pimonenko virtual economics, vol. 3, no. 4, 2020 2020 volume 3 number 4 (october) the green deal policy for renewable energy: a bibliometric analysis yevheniia ziabina and tetyana pimonenko abstract. the industry attention to the environment has been reducing lately, leading to irreversible climate change, reaching the limit of mining, and critical indicators of со2 emissions. that is why the eu has launched a new green policy which includes strategic directions for energy efficiency and which is expected to restore biodiversity and slow down the pace of climate change. thus, on december 11, 2019, there was held the presentation of the “european green course”, the main targets of which are to increase the level of energy saving by creating closed cycles in the economy; to minimize greenhouse gas emissions by 2050; to form biodiversity and climate neutrality. accordingly, countries that accept the terms of the green deal policy need to review all aspects of their economy, from energy production to food consumption, from industry to transport and construction. the purpose of the article is to analyse publications in order to identify public’s awareness of radical changes in economic and ecological spheres. the article provides a bibliometric analysis of research in the field of green deal policy, energy conservation and energy efficiency through the introduction of renewable energy sources. the authors selected 337 papers which were published in 19992019. scopus provided the database for analysis. by means of vosviewer the results of bibliometric analyses were visualized in a definitions map. it allowed identifying six clusters that combine 131 terms. as a result of the research, the connection between the terms – renewable energy sources and energy saving – was revealed with the help of the constructed bibliographic map. keywords: green economy, green deal policy, renewable energy sources, energy saving, energy modernization, energy security, carbon-neutral economy jel classification: q42 http://www.virtual-economics.eu/ 148 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and tetyana pimonenko virtual economics, vol. 3, no. 4, 2020 authors: yevheniia ziabina sumy state university, sumy, ukraine e-mail: e.ziabina@econ.sumdu.edu.ua https://orcid.org/0000-0003-0832-7932 tetyana pimonenko sumy state university, sumy, ukraine e-mail: tetyana_pimonenko@econ.sumdu.edu.ua https://orcid.org/0000-0001-6442-3684 citation: ziabina, ye., & pimonenko, t. (2020). the green deal policy for renewable energy: a bibliometric analysis. virtual economics. 3(4), 147-168. https://doi.org/10.34021/ve.2020.03.04(8) received: july 24, 2020. revised: september 16, 2020. accepted: september 29, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2020.03.04(8) https://creativecommons.org/licenses/by/4.0/ 149 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and tetyana pimonenko virtual economics, vol. 3, no. 4, 2020 1.introduction after the tragic radiation accident on march 11, 2011 at the fukushima-1 nuclear power plant (japan), which became the largest accident in the nuclear power industry after the chernobyl accident (1986), almost all countries reconsidered their priorities in the energy sector and began to carry out reforms on modernization and re-profiling of energy production. the most prospective directions were alternative energy sources and the transition to a carbon-neutral economy. for example, the eu countries have agreed on the energy efficiency action plan for 2007-2020 (verkhovna rada of ukraine, 2006), which is a 20-20-20 plan to reduce co2 emissions by 20%, to increase energy efficiency by 20% and to increase the share of renewable energy sources in the energy sector by 20%. ukraine's plans at this stage are to reach 11% of renewable energy sources in the structure of final energy consumption and increase the level of energy saving by 9%. at the same time, ukraine, which has acceded to the paris climate agreement, has set a goal to reduce co2 emissions by 40% by 2030 as compared to 1990 (verkhovna rada of ukraine, 2016). but taking into account that almost all partner countries have met the targets by 2020, strong investment potential and opportunities of the eu allowed not stopping at the first successes, and in mid-2019 the european commission announced a new european green deal (european commission, 2020), which was presented on december 11, 2019. the european green deal covers all sectors of the economy and consists of eight main strategic targets: a climate ambition (formation and development of the “climate law”); clean, affordable and secure energy (regulation of the energy sector and development of the smart sector integration); an industrial strategy for a clean and circular economy (the eu industry reform); a sustainable and smart mobility (encouragement of the alternative fuels production, development of infrastructure for cars running on alternative fuels); greening the common agricultural policy/a “farm to fork” strategy (development of the measures to ban the use of inorganic fertilizers and pesticides in farming); preserving and protecting biodiversity (measures to protect forests and biodiversity); towards a zero-pollution ambition for a toxic free environment; mainstreaming sustainability in all the eu policies (european commission, 2020). the european green deal is a roadmap for the transition to a carbon-neutral economy, taking into account the competitiveness of a clean economy and sustainable development, living standards and health. the main goal of the green policy is economic growth decoupled from the resource use. achieving the ambitious results of the european green deal is not possible without all countries’ participation, because the climate change and co2 emissions are global in nature, and solving these problems on one continent will not be of much benefit to the whole world. that is why the eu campaigns all countries for joining the green agreement and developing economic relations on equal competitive conditions. http://www.virtual-economics.eu/ 150 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and tetyana pimonenko virtual economics, vol. 3, no. 4, 2020 in january 2020, ukraine supported the eu initiative and agreed to cooperate in the areas of decarbonisation of the environment and become an integral part of the european green deal. 2. the literature review nowadays, a large number of scientific papers are devoted to studying the feasibility of introducing renewable energy sources in the context of energy conservation and energy security of the country. a large number of articles (ziabina, 2016; dkhili, 2018; lyulyov et al., 2015; bilan et al., 2019; palienko & lyulyov, 2018) are devoted to the theoretical analysis of the “green” economy and macroand micro-indicators that affect its sustainable development. in the scientific works by (bigerna et al., 2019; prokopenko et al., 2017; cebula & pimonenko, 2015; yevdokimov et al., 2018; bogachov et al., 2020; boiko et al., 2019; czyżewski et al., 2019; chygryn et al. 2020; dalevska et al., 2019; dementyev & kwilinski, 2020; drozdz et al., 2019; 2020; dzwigol, 2019a; 2019b; 2020a; 2020b; 2020c; dzwigol & wolniak, 2018; dzwigol & dźwigoł-barosz, 2018; 2020; dzwigol et al., 2019a; 2019b; 2019c; 2020a; furmaniak et al., 2018; 2019a; 2019b; kharazishvili et al., 2020; kondratenko et al., 2020; kuzior et al., 2020; kwilinski, 2017; 2018a; 2018b; 2018c; 2018d; 2019; kwilinski et al., 2019a; 2019b; 2019c; 2019d; 2019e; 2019f; 2019g; 2020a; 2020b; 2020c; 2020d; kwilinski & kuzior, 2020; kyrylov et al., 2020; lakhno et al., 2018; lyulyov & pimonenko, 2017; miskiewicz, 2017a; 2017b; 2018; 2020; miśkiewicz & wolniak, 2020; pająk et al., 2016; 2017; pimonenko & lyulyov, 2018; pimonenko et al., 2018; prokopenko & miśkiewicz, 2020; saługa et al., 2020; savchenko et al., 2019; tkachenko et al., 2019a; 2019b; 2019c; 2019d; 2019e; yelnikova & miskiewicz, 2020), special attention is paid to sustainable development in the context of promoting renewable energy sources and digitalizing processes in the eu. namely, the introduction of carbonneutral development taking into account the potential economic, climatic and social opportunities of each region in combination with the eu environmental policy. the articles by (pimonenko et al., 2018a; lyulyov et al., 2015; vanickova, 2020; chygryn et al., 2018) consider the essence of green investing as one of the effective methods of developing a carbon-neutral economy in ukraine and in the world as a whole. they distinguish such a notion as «greenwashing» and its features in the field of marketing communications in the green investment development. the works by (chygryn, 2018; matsenko et al., 2011) consider the main tendencies of global consumption, including «green» consumption as a systemic and holistic approach that influences the development of renewable energy sources in the world. the article by (chel, 2009) “building integrated renewable energy technologies: embodied energy, economic analysis and potential of co2 emission mitigation” reveals the main directions of increasing energy efficiency and energy conservation through introducing solar photovoltaic panels, heating devices, wind turbines, etc. http://www.virtual-economics.eu/ 151 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and tetyana pimonenko virtual economics, vol. 3, no. 4, 2020 sineviciene lina, sotnyk iryna, kubatko oleksandr (sineviciene et al., 2017) analysed in their study the terms “energy efficiency” and “energy consumption” in eastern europe of 19962013. according to their study results, the dependence of the gdp level on energy efficiency and energy consumption was established. in a scientific study, (wiginton et al., 2010; lyulyov & shvindina, 2017) prove the relevance of solar photovoltaic technology and present a developed five-stage model for assessing the photoelectric potential of the roof of a house, taking into account geographical, climatic and technical aspects. the article «minimising carbon footprint of regional biomass supply chains» (lam et al., 2010) presented a regional approach targeting energy-oriented demand, which is used to assess possible ways to transferring energy from renewable sources to consumers in the certain region. publications concerning the countries with underdeveloped energy systems, including african countries, should also be considered. africa today can become a global hub in «green» energy given the continent's natural potential. thus, the study «energy and sustainable development in nigeria: the way forward» (oyedepo, 2012) presents the relation between energy supply and socio-economic development of the country. the article reveals the main problems associated with frequent power outages, especially in remote areas, as well as environmental problems with the use of fossil fuels for energy. john-felix k. akinbami presents the main obstacles to producing renewable energy sources and provides recommendations for optimal and consistent transition to alternative energy supply in terms of reducing co2 emissions and economic growth and development (john-felix, 2001). it is also worth noting the research (akinwale et al., 2014) based on opinion polls related to understanding the nigerian population in the relevance and feasibility of introducing renewable energy sources. the results also show that the population is willing to pay more for electricity on the condition of an uninterrupted supply. 3. methods the search for relevant information for bibliometric analysis took place in several successive stages (figure 1). in the first step, shown in figure 1, the search query in the scopus database using the “and” command consisted of such key basic concepts as “renewable energy sources” and “energy conservation” in the “title, abstract, keywords” category. the number of results obtained at this stage was 896 scientific sources. http://www.virtual-economics.eu/ 152 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and tetyana pimonenko virtual economics, vol. 3, no. 4, 2020 for the clarity of this study, in the second stage of this array of information the scope of research was narrowed to the following scientific domains: “economics, econometrics and finance,” “multidisciplinary,” “business, management and accounting,” “social sciences.” the number of documents received at the end of the second stage was 337, which reveals the problems of energy efficiency and the use of renewable energy sources in the economic and social spheres. all data were saved and processed using the excel software. figure 1. the stages of bibliometric research source: developed by the authors. in the third stage, a bibliographic map based on the relevant scopus data was constructed using the vosviewer research visualization and clustering analysis tool. vosviewer is a software designed to build and visualize bibliometric links. the bibliometric analysis using vosviewer made it possible to identify 131 out of 2483 keywords, which corresponds to the threshold and the minimum number of occurrences in the title, keywords and abstract 5. 4. results and discussion in the course of information processing, there was a growing interest in researching the implementation of renewable energy sources, and improving energy efficiency. figure 2 shows the results of the publishing activity analysis in a particular direction. the results of the analysis show that, compared to 2009, in 2018 the number of scientific publications increased almost fourfold. according to the constructed trend line, it can be noted that the rapid growth of publishing activities on the selected topic has increased significantly since 2012, due to the active work of many countries in the direction of converting the energy sector to renewable energy sources and reducing nuclear and fuel energy to a minimum and reduction of co2 emissions. collection of information by key terms preservation and processing of data construction of a bibliographic map based on relevant data i stage scopus ii stage excel iii stage vosviewer http://www.virtual-economics.eu/ 153 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and tetyana pimonenko virtual economics, vol. 3, no. 4, 2020 figure 2. the dynamics of published documents in the period of 2000-2019 sources: developed by the authors based on scopus (2020). figure 3. a bibliometric map of the keywords in the investigated articles (2000-2019). source: developed by the authors based on vosviewer (2020). 2 1 3 1 3 3 6 6 3 13 10 9 14 13 22 29 39 42 49 36 0 10 20 30 40 50 60 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 http://www.virtual-economics.eu/ 154 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and tetyana pimonenko virtual economics, vol. 3, no. 4, 2020 from the constructed bibliographic map (figure 3) it is possible to note a certain evolution vector of the research urgency in the field of developing renewable energy sources. in the period of 2015-2017, scientists actively began to study issues of energy conservation, energy efficiency, alternative energy sources, global warming, neutral carbon economy, etc. it was during this period that the eu countries announced the first successful effects of the directive 2009/28/ec adopted by the european parliament and of the council as of 23 april 2009 on promoting the use of energy from renewable sources in developing renewable energy sources due to the use of energy-saving technologies in the household and industry (ligazakon, 2009). during the established period of time (2000-2020) the results of research on renewable energy sources and energy conservation were published: articles – 237, conference papers – 55, book chapters – 24, reviews – 13, books – 2, and etc. the results of scientific works have been tested in more than 60 professional publications – journal of cleaner production (42), sustainability switzerland (23), international journal of energy economics and policy (16) sustainable cities and society (11), international conference on the european energy market eem (8) etc. figure 4 shows twenty countries with the largest number of published research examining the problems of energy saving and energy efficiency in implementing renewable energy sources in the field of «economics, econometrics and finance», «multidisciplinary», «business, management and accounting», «social sciences» from 2000 to 2019 to the scopus database. figure 4. top 20 countries in terms of quantitative dynamics of publishing activity, 20002019. source: developed by the authors based on (scopus, 2020). it should be noted that in some countries there is a direct relation between publishing and progress in implementing renewable energy sources and increasing energy efficiency. namely, italy is the leader in the number of publications on energy efficiency and renewable energy in the economic sphere. this country is among the top 10 eu countries that at the beginning of 2017 implemented the” plan 20-20-20” regulated by directive 2009/28/eu of the european parliament and of the council as of 23 april 2009 on promoting the use of energy from 0 5 10 15 20 25 30 35 31 26 24 23 22 22 19 11 11 9 9 8 7 6 6 6 5 5 5 5 http://www.virtual-economics.eu/ 155 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and tetyana pimonenko virtual economics, vol. 3, no. 4, 2020 renewable sources. at the beginning of 2017, germany, spain, great britain, greece, poland and portugal failed to reach 20% of renewable energy sources in the structure of the energy complex (ligazakon, 2009). ukraine ranks 9th in the number of publications studying the selected problems in the field of economics this is due to the ukrainian scientists’ participation in a large number of both domestic and foreign research programs and grants. let us consider in more detail the cluster map of cooperation in the publishing field of the research domain presented in figure 5. figure 5. a bibliometric map of the analysed documents by countries published between 2000-2019. source: developed by the authors based on vosviewer (2020). thus, we can distinguish six clusters of co-authorship. the red cluster is the largest (nine countries), uniting the countries of europe, asia and africa. the green cluster includes eight countries (including the usa, italy, and india). the blue cluster comprises only 6 eu countries. the yellow cluster covers the eu and the middle east. however, the last two clusters of purple and blue colours show the co-authorship of the eu countries in the publications studied. http://www.virtual-economics.eu/ 156 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and tetyana pimonenko virtual economics, vol. 3, no. 4, 2020 from the researched data set, the first 10 articles with the largest number of citations were selected, and the studied publications were analysed (table 1). table 1. field-weighted citation impact of top-10 cited articles rank journal title year of publicatio n citations fieldweighted citation impact 1 energy, sustainability and society hydrogen from catalytic reforming of biomass-derived hydrocarbons in liquid water 2002 1574 2,35 2 american association for the advancement of science ethanol for a sustainable energy future 2007 841 17,98 3 energy, sustainability and society a molecular molybdenum-oxo catalyst for generating hydrogen from water 2010 475 5,6 4 energy economics energy consumption and economic growth: evidence from china at both aggregated and disaggregated levels 2008 348 8.44 5 computers, environment and urban systems quantifying rooftop solar photovoltaic potential for regional renewable energy policy 2010 210 7.75 6 technovation hydrogen: the energy source for the 21st century 2005 173 15.62 7 resources, conservation and recycling minimising carbon footprint of regional biomass supply chains 2010 133 8.93 8 energy, sustainability and society energy and sustainable development in nigeria: the way forward 2012 126 2.02 9 transportation research, part d: transport and environment training urban bus drivers to promote smart driving: a note on a greek eco-driving pilot program 2007 107 1.09 10 proceedings of the national academy of sciences of the united states of america dependence of hydropower energy generation on forests in the amazon basin at local and regional scales 2013 103 2.62 source: developed by the authors based on scopus (2020). table 1 shows the top 10 items that explore the development and problems of implementation of renewable energy sources and their impact on energy efficiency in the http://www.virtual-economics.eu/ https://energsustainsoc.biomedcentral.com/ https://energsustainsoc.biomedcentral.com/ https://energsustainsoc.biomedcentral.com/ https://energsustainsoc.biomedcentral.com/ https://energsustainsoc.biomedcentral.com/ https://energsustainsoc.biomedcentral.com/ https://energsustainsoc.biomedcentral.com/ https://energsustainsoc.biomedcentral.com/ https://energsustainsoc.biomedcentral.com/ 157 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and tetyana pimonenko virtual economics, vol. 3, no. 4, 2020 economic sphere. the relevance and appropriateness of the article is assessed by several indicators, including the number of citations and field-weighted citation impact (fwci) the ratio of the total number of citations actually received to the total number of citations that can be expected based on the average value of the subject field. the article with the largest number of citations (cortright et al., 2002) reveals questions about alternative ways of hydrogen production not only from natural gas and oil, but also from renewable sources, including water and biomass. this is a very relevant study, because hydrogen is used in many areas of production: fuel (rocket fuel and coolant), food industry (food additive e949), chemical industry (in the production of soap, methanol, plastics), meteorology, etc. figure 6. a bibliometric map of the keywords in the investigated articles, 2000-2019. source: developed by the authors based on vosviewer (2020). in second place in table 1 is the article (goldemberg, 2007) with the largest field-weighted citation impact, which explores issues related to producing ethanol from sugar cane, and its processing into environmentally friendly fuel, which is gaining popularity today. ethanol is a http://www.virtual-economics.eu/ 158 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and tetyana pimonenko virtual economics, vol. 3, no. 4, 2020 substance in demand today and is widely used as a fuel in the chemical and food industries, in medicine, as well as in the production of perfumes, etc. the research of thematic focus publications have been carried out by a visualization tool and analysis of clustering research vosviewer, which allowed building a bibliographic map (figure 6) of terms such as renewable energy, energy conservation and energy efficiency with a minimum number of occurrences in the title, keywords and abstract 5 times. as a result of constructing the terminological map, 5 clusters were identified, which united the key concepts in terms of thematic proximity. the main criteria for reading a bibliographic map are the size of the circle (characterizing the frequency of use of the term) and the length of the line (visualizes the strength of the connection between the concepts). thus, the first cluster is red and includes 37 keywords, such as renewable resource, energy resource, carbon dioxide, energy market. this cluster was given a conventional name ‘energy’. in the “green” cluster there are 26 main terms, including renewable energy, energy conservation, energy saving, investments. thus, the second cluster will be given a conventional name ‘energy conservation’. the third cluster has a conventional name ‘sustainable development’ and includes 26 keywords: life cycle, climate change, global warming, and is of blue colour. the fourth cluster is yellow and is called ‘renewable energy resources’. it includes 21 terms such as energy efficiency, renewable energy resources, commerce, energy management. the purple cluster no 5 with a relevant name ‘costs’ includes 21 terms: costs, cost benefit analysis. considering all the clusters of the terminological map, we can conclude that the main terms under study – renewable energy and energy conservation – are interrelated, as evidenced by the lengths of the connecting lines, although they belong to different clusters. it is also necessary to note the sizes of circles which designate analysing terms: they are big enough compared to others, which gives understanding of the dynamics of their use in research. 5. conclusions research of scientific results using the scopus database provides great opportunities to present relevant and reliable information published by scientists around the world. thus, such research is of great importance for further directions of developing scientific theories, views, etc. the bibliographic analysis consisted of such key basic concepts as “renewable energy sources” and “energy conservation” in the category “title, abstract, keywords.” the results account for 896 scientific sources. the number of publications decreased after filtering according to the scientific areas: “economics, econometrics and finance,” “multidisciplinary,” “business, management and accounting,” “social sciences,” and decreased to 337, which http://www.virtual-economics.eu/ 159 www.virtual-economics.eu issn 2657-4047 (online) yevheniia ziabina and tetyana pimonenko virtual economics, vol. 3, no. 4, 2020 reveals the problems of energy efficiency and renewable energy sources in economic and social spheres. the tool for visualization and analysis of clustering the scientific research, vosviewer, allowed achieving the goal set with the necessary degree of detail. thus, the bibliometric analysis identified 5 main clusters, which visualized the results of the study and allowed proving the dependence of the main research terms: renewable sources and energy efficiency. thus, from the above material we can draw the following conclusions. first, according to the terminological map, the relation between the terms ‘renewable energy,’ ‘energy saving’ and ‘energy efficiency’ is strong and dynamic. accordingly, these three main terms have approximately the same time of occurrence in the scientific research. energy saving is based on two main factors: 1) introduction and use of renewable energy sources; 2) energy efficiency of equipment that supplies and produces energy, as well as the facilities themselves, which must retain and receive energy from the environment as much as possible. secondly, during the study of publications, new directions in producing alternative energy sources in transition to a carbon-neutral economy were identified. thirdly, it could be forecasted that in the process of studying the field of green deal policy research, the number of publications will increase as a new cycle in developing a neutral carbon economy is about to begin. 6. formatting of funding sources this research was funded by the grant from the ministry of education and science of ukraine (0120u102002) and by the grant from the national research foundation of ukraine “stochastic modelling of road map for harmonizing national and european standards for energy market regulation in the transition to a circular and carbon-free economy” (id 2020.02/0231). references akinwale, y.o., ogundari, i.o., ilevbare, o.e., & adepoju, a.o. 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(2016). theoretical aspects of the formation of a ’green’ economy in the context of sustainable development. mechanism of economic regulation, 3, 116-121. http://www.virtual-economics.eu/ кwilinski alex 169 www.virtual-economics.eu issn 2657-4047 (online) olena korobets, olena chygryn, maryna saienko, and liliia liulova virtual economics, vol. 3, no. 4, 2020 2020 volume 3 number 4 (october) development evolution of the environmental risk management theory: a meta-analysis olena korobets, olena chygryn, maryna saienko, and liliia liulova abstract. due to the continuing trends of emergencies, the attention to solving the environmental risk problems has not lost its relevance for research in various fields. changes in the development of the modern economy encourage the search for new methods of influencing environmental risks. therefore, the relevance of the research topic is caused by looking for interrelated perspective directions of future research. in recent decades, the work of many scientists has been devoted to the environmental risks study. the growth of publishing activity has allowed accumulating a significant database, the consideration of which with the help of bibliometric analysis methods can help to identify new areas of research. the article provides a bibliometric analysis of the "environmental risk" concepts. the use of bibliometric data analysis tools allows working with a large number of publications, which makes it possible to identify research trends that are difficult to achieve without using special tools. for the analysis, the frequency dynamics of searching "environmental risk" in the google search engine and the dynamics of publication activity on this concept in the scientometric database scopus, for the period of 2004-2019 were determined. on the basis of selected publications with the help of vosviewer software, visualization maps were constructed according to the selected concepts and their main points of intersection were determined. the results of the study revealed a decrease, but there exists stable attention to the problems of taking into account environmental risk in the economic entities’ activity. the research method of the "ecological risk" concept from the point of view of its essence and structure is substantiated and described step by step. keywords: environmental risk, risk management, searching system, bibliometric analysis, pattern jel classification: a30, m21, n50, p28 http://www.virtual-economics.eu/ 170 www.virtual-economics.eu issn 2657-4047 (online) olena korobets, olena chygryn, maryna saienko, and liliia liulova virtual economics, vol. 3, no. 4, 2020 authors: olena korobets sumy state university, 2 rimski-korsakov st., sumy, ukraine, 40007 e-mail: e.korobets@fem.sumdu.edu.ua https://orcid.org/0000-0001-6977-4280 olena chygryn sumy state university, 2 rimski-korsakov st., sumy, ukraine, 40007 e-mail: o.chygryn@econ.sumdu.edu.ua https://orcid.org/ 0000-0002-4007-3728 maryna saienko sumy state university, 2 rimski-korsakov st., sumy, ukraine, 40007 e-mail: m.saienko@kmm.sumdu.edu.ua https://orcid.org/0000-0003-4939-6379 liliia liulova sumy state university, 2 rimski-korsakov st., sumy, ukraine, 40007 e-mail: l.lyulyuva@econ.sumdu.edu.ua https://orcid.org/0000-0002-2912-722x citation: korobets, o., chygryn, o., saienko, m., & liulova, l. (2020). development evolution of the environmental risk management theory: a meta-analysis. virtual economics, 3(4), 169-187. https://doi.org/10.34021/ve.2020.03.04(9) received: august 3, 2020. revised: september 15, 2020. accepted: october 3, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ mailto:o.chygryn@econ.sumdu.edu.ua https://doi.org/10.34021/ve.2020.03.04(9) https://creativecommons.org/licenses/by/4.0/ 171 www.virtual-economics.eu issn 2657-4047 (online) olena korobets, olena chygryn, maryna saienko, and liliia liulova virtual economics, vol. 3, no. 4, 2020 1. introduction in order to determine the most widely used term of environmental risk, the frequency of search "environmental risk", "ecological risk", "ecorisk", "green risk" in the google search engine was analysed using the google trends tool. this application allows revealing the frequency of popularity search of a particular term in relation to the total volume of searches in different regions of the world. it should be noted that this tool has limitations in the data collection period, and starts from 2004. the period from january 2004 to june 2020 was chosen for the study. the search for "ecological risk" and "ecorisk" contained a small amount of data for analysis, so they were not taken into account. the analysis results of the search frequency dynamics of the terms "environmental risk" and "green risk" are shown in figure 1. figure 1. the search for frequency dynamics of "environmental risk" and "green risk" in the search engines for the period of january 2005 june 2020 source: developed by the authors using the google trends tool. the highest search activity in all terms is observed in the period from 2004 to 2006. despite the decline in search dynamics since 2006, the trend has remained stable over the past 15 years. geographically, the intensity of using the above terms is distributed as follows: the term "environmental risk" is used when searching in asian countries by 36.6%, africa 30.2%, europe 12.8%, oceania 12.2%, north america 7.9%, south america. the term "green risk" 0 20 40 60 80 100 120 2 0 0 4 -0 1 2 0 0 4 -0 8 2 0 0 5 -0 3 2 0 0 5 -1 0 2 0 0 6 -0 5 2 0 0 6 -1 2 2 0 0 7 -0 7 2 0 0 8 -0 2 2 0 0 8 -0 9 2 0 0 9 -0 4 2 0 0 9 -1 1 2 0 1 0 -0 6 2 0 1 1 -0 1 2 0 1 1 -0 8 2 0 1 2 -0 3 2 0 1 2 -1 0 2 0 1 3 -0 5 2 0 1 3 -1 2 2 0 1 4 -0 7 2 0 1 5 -0 2 2 0 1 5 -0 9 2 0 1 6 -0 4 2 0 1 6 -1 1 2 0 1 7 -0 6 2 0 1 8 -0 1 2 0 1 8 -0 8 2 0 1 9 -0 3 2 0 1 9 -1 0 2 0 2 0 -0 5 n u m b e r o f se a rc h q u e ri e s year environmental risk green risk http://www.virtual-economics.eu/ 172 www.virtual-economics.eu issn 2657-4047 (online) olena korobets, olena chygryn, maryna saienko, and liliia liulova virtual economics, vol. 3, no. 4, 2020 is used in european countries by 34.31%, north america 22.42%, oceania 16.57%, asia 14.62%, and africa 12.09%. at the same time, a number of searches were noted that accompany the selected terms for analysis and are searched in parallel with them. thus, for the term "environmental risk" the most popular related searches comprise environmental risk assessment (100), risk assessment (99), environmental assessment (98), environmental risk management (56), environmental management (55), risk management (55), environmental factors (52), environmental health (52), risk factors (52), environmental risk factors (52), which means this term is aimed at identifying and managing risks. the term "green risk" is accompanied by risk management (100), green tea (67), risk assessment (60), green book (25), green revolution (12), blue green algae (10), green banking (9), green bay packers (9), blue green algae health risk (6), benefits of green tea (6). in this case, the term is aimed more at reducing the risks of final consumption of products produced using environmentally friendly technologies. the analysis indicates the relevance of further study of the environmental risk management evolution, and a more detailed bibliometric analysis. 2. the literature review in order to study the main trends in the evolution of the environmental risk management theory, a bibliometric analysis of research on this issue was carried out. the results of the scientific literature systematization give us grounds to conclude that the word "risk" comes from the arabic word "risk", or the latin "risiqum". the first means something that is given by higher powers and with which you can benefit, the second is related to the challenge that a reef may pose to a sailor. initially the concept of risk was expressed in two general meanings: as an action that will lead to a positive result, or as a possibility of danger, failure, loss (picou & marshall, 2002; pimoenenko et al., 2018a, prothero & fitchett, 2002; taranyuk, 2014; tepman, 2002; vasilyeva et al., 2018). however, a review of the literature on risk issues shows that there is no consensus among researchers on the definition of environmental risk and no a clear understanding of the nature of risk. this is explained, in particular, by the multifaceted nature of this phenomenon and ignoring it in real economic practice and management. analysing the literature on risk, we can identify a number of definitions of the "environmental risk". risk has played a major role throughout the human history, as everyone who started a new business was at risk (burkov et al., 2008; hyett, 2010; kachinskij, 2001; karayeva et al., 2013, kozmenko, 2008; pimoenenko et al., 2018b). but the first risks described in history were, firstly, voluntary and, secondly, individual. according to u. beck (beck, 2000), the meaning of "risk" in modern conditions has changed. in the new industrial environment, the nature and society are in danger that deprive risk of its individual nature, and environmental risks become global. in addition, environmental risks are http://www.virtual-economics.eu/ 173 www.virtual-economics.eu issn 2657-4047 (online) olena korobets, olena chygryn, maryna saienko, and liliia liulova virtual economics, vol. 3, no. 4, 2020 increasingly difficult to understand and comprehend, because the essence of their action is hidden in chemical (toxins) or physical (electromagnetic fields) formulas. there exist two states of risk: 1) risk as a possible future event that will lead to a certain result; 2) risk as a result that has already occurred. the first definition is the cause of the risk, and the second is the result, as a consequence of the cause action (in the case of environmental risk analysis it is always negative). risk serves as a link because it shows, on the one hand, an outcome that has not yet materialized and, on the other hand, selects potential damage. by its very nature, risk is an abstraction, that is, something that may or may not affect performance results. based on the above, risk is seen as a step-by-step process in which each stage allows an effective response to a step forward. there are several successive stages of environmental risk. it is often identified with the concept of danger, probability, and damage. most authors (pimonenko, 2019; mcdonald et al., 2019; yevdokimov et al., 2018; abaas et al., 2018) define risk as a measure of these concepts. but it is necessary to take into account a significant difference in these terms. to summarize a threat, it is an object that, under the influence of a certain factor or set of factors in a certain period of time, can cause damage. threats underlie the cause of risk and form the first stage in the process of risk development. stages of origin and development of an emergency situation are usually hidden and associated with accumulation of a destructive potential. at the climax, there are many dangerous and harmful factors that combine into one or more striking factors. having determined the list of threats and factors influencing them, we can proceed to the stage of determining the probability of their occurrence (gordon et al., 2011; chygryn et al., 2018; belz & peattie, 2009; lyulyov et al., 2018; panchenko et al., 2020). any event, under a certain set of conditions, corresponds to some degree of possibility. at the same time, it was noticed that more possible events at repeated research on the average come more often, and less possible ones come less often. a quantitative measure of the degree of an adverse event possibility is the probability of the event. the development functioning of many economic processes is characterized by situations that do not have a clear result or solution, so, the contributing factor of probability is uncertainty. uncertainty means absence, incompleteness, inadequacy of information about an objects of threat, or a situation of risk in general, or presence of a high level of uncertainty in the accuracy of existing information. in the market economy, there are many sources of uncertainty for different economic entities (kilbourne, 1998; korobets et al., 2018; us et al., 2019; pimonenko et al., 2017; peattie & crane, 2005; menon & menon, 1997; bogachov et al., 2020; boiko et al., 2019; czyżewski et al., 2019; chygryn et al. 2020; dalevska et al., 2019; dementyev & kwilinski, 2020; drozdz et al., 2019; 2020; dzwigol, 2019a; 2019b; 2020a; 2020b; 2020c; dzwigol & wolniak, 2018; dzwigol & dźwigoł-barosz, 2018; 2020; dzwigol et al., 2019a; 2019b; 2019c; 2020a; furmaniak http://www.virtual-economics.eu/ 174 www.virtual-economics.eu issn 2657-4047 (online) olena korobets, olena chygryn, maryna saienko, and liliia liulova virtual economics, vol. 3, no. 4, 2020 et al., 2018; 2019a; 2019b; kharazishvili et al., 2020; kondratenko et al., 2020; kuzior et al., 2020; kwilinski, 2017; 2018a; 2018b; 2018c; 2018d; 2019; kwilinski et al., 2019a; 2019b; 2019c; 2019d; 2019e; 2019f; 2019g; 2020a; 2020b; 2020c; 2020d; kwilinski & kuzior, 2020; kyrylov et al., 2020; lakhno et al., 2018; miskiewicz, 2017a; 2017b; 2018; 2020; miśkiewicz & wolniak, 2020; pająk et al., 2016; 2017; prokopenko & miśkiewicz, 2020; saługa et al., 2020; savchenko et al., 2019; tkachenko et al., 2019a; 2019b; 2019c; 2019d; 2019e; yelnikova & miskiewicz, 2020). to determine the degree of the environmental risk, the level of damage is important. damage is realized through risk, acquiring specific shapes. we can say that this is a quantitative criterion of failure, which is considered as the final stage of the risk development process (pimonenko et al., 2019; rettie et al., 2012). the methodology for assessing the damage from various risks in the most complete form should include information about both direct and indirect damages. direct damage in the case of environmental risk analysis is a direct impact on the environment in a short period of time, the consequences of which are immediate (rapid changes in air, soil, water, flora and fauna). indirect damage arises as a result of implementing a certain action over a long period of time, but the consequences appear after a certain period (a gradual change in the indicators specified in the implementation of direct damage). as practice shows, indirect damage is often many times larger than direct one. 3. methods in this paper, based on the search analysis of "environmental risk" in the google search engine, the relevance of the environmental risk management theory study is determined. in order to identify related areas of research that require more detailed study, with the help of bibliometric analysis, the main patterns of environmental risk research are formed. the method of bibliometric analysis is performed using vosviewer software. it allows analysing the effectiveness of research and visualizing it. the scopus scientometric database was selected for bibliometric analysis, on the basis of which the selection of publications was carried out using scopus tools (korobets, 2020). 4. results and discussion vosviewer software was used to determine research patterns for economic risk. this program allows visualizing groups of major scientific trends based on the analysis of the keywords’ occurrence frequency in the articles. the study focused on publications indexed in the scopus scientometric database. to identify the level of the research relevance in the scientific field, articles were selected on the keywords "environmental risk" and "green risk". according to the scopus scientometric database, the first documents mentioning environmental risk appeared in 1946 in medical publications (markman, b.j., lewis, j.t.). a total of 138,602 publications were found. since 1986, there has been a clear growth dynamic of publications in various fields of knowledge. currently, the largest share of publications is research in medicine (27.8%), ecology (24.5%), http://www.virtual-economics.eu/ 175 www.virtual-economics.eu issn 2657-4047 (online) olena korobets, olena chygryn, maryna saienko, and liliia liulova virtual economics, vol. 3, no. 4, 2020 biochemistry, genetics and molecular biology (6.2%), engineering (5.6%), pharmacology, toxicology and pharmaceuticals (5.3%). economic directions of research are represented by 3282 publications (2.4%). the dynamics of publishing activity over the past 20 years proves that the number of publications each year increases by an average of 8%. thus, if 414 articles were published in 1986, this figure amounted to 10,079 already in 2019. it was also noted that since 2000, the growth rate of publications has increased sharply, averaging 9% per year. when comparing the analysis results of the average value of search frequency of terms "environmental risk" and "green risk" in the google search engine with the dynamics of publication activity for the period 2004-2019, a direct correlation of data was found (table 1). the correlation coefficient indicated the presence of a medium or strong relationship with the value of 0.703 (limit value 0.7). this suggests that with the growth of publishing activity, interest in the concept of environmental risk in search engines grows as well. in order to generate articles for bibliometric analysis, a selection of publications in the scientometric database scopus was made. this selection was based on the established criteria: the language english; keywords "environmental risk", "green risk"; the period 2004-2019; a document type – an article; areas of research business, management and accounting, economics, econometrics and finance, decision sciences. based on the selection, 1,791 articles were generated, making the basis for further analysis. table 1. the relation between the average value of search frequency of terms "environmental risk" and "green risk" in the google search engine with the dynamics of publication activity for the period of 2004-2019. year search frequency in the google search engine dynamics of publishing activity year search frequency in the google search engine dynamics of publishing activity 2004 4,826 48.33 2012 7,096 22.75 2005 4,788 37.21 2013 7,362 21.25 2006 5,151 33.29 2014 7,752 21.08 2007 5,359 27.15 2015 8,155 20.38 2008 5,707 24.63 2016 8,348 21.75 2009 5,778 24.75 2017 8,475 22.46 2010 6,116 24.04 2018 9,111 21.33 2011 6,862 22.54 2019 10,079 21.67 correlation coefficient = 0.703 source: compiled by the authors on the basis google and scopus. the analysis allowed clustering the international research networks on the theory of environmental risk management by a geographical area (figure 2). the largest number of http://www.virtual-economics.eu/ 176 www.virtual-economics.eu issn 2657-4047 (online) olena korobets, olena chygryn, maryna saienko, and liliia liulova virtual economics, vol. 3, no. 4, 2020 publications on this issue was published by scientists from the united states, china, britain, canada and germany. patterns by geography were distributed as follows: pattern 1 great britain, the netherlands, sweden, pattern 2 – the usa, germany, france, spain, pattern 3 hong kong, south africa, thailand, pattern 4 canada, australia, pattern 5 italy, japan, south korea, pattern 6 china, new zealand. visualization of the research network allows identifying patterns of citation among scientists in the field of research (figure 3). figure 2. the results of the patterns selection by a geographical location of international research networks based on the bibliometric analysis of scientific papers on the theory of environmental risk management for 2004-2019. source: developed by the authors using the vosviewer based on the scopus database. in general, there can be identified 6 main patterns of researchers studying the theory of environmental risk management by quoting each other and deepening the conceptual principles of risk management developed by their predecessors: pattern 1 w. zhang, l. wang, http://www.virtual-economics.eu/ 177 www.virtual-economics.eu issn 2657-4047 (online) olena korobets, olena chygryn, maryna saienko, and liliia liulova virtual economics, vol. 3, no. 4, 2020 w.w. piegorch; pattern 2 y. liu, j. liu, q. wang, y. li; pattern 3 j. wang, y. yang, z. li; pattern 4 a.p.j. mol, y. lu; pattern 5 y. wang, j. wu, x. zang; pattern 6 g.h. huang. figure 3. the results of identifying scientists whose research papers on environmental risk management are most cited in publications, indexed by the scientometric database scopus. source: developed by the authors using the vosviewer based on the scopus database. according to the results of the bibliographic analysis, 5 structural and functional patterns were formed that unite the key concepts on thematic proximity. the constructed visualization map (figure 4) shows the frequency of the terms use (the size of the circle), the strength of the links between them (the closer, the stronger) and different combinations of terms both within clusters and among them. the issues of environmental risk management are most often studied in close connection with the theories of the economic analysis (pattern 1), management theories (pattern 2), theories of nature management (pattern 3), theories of sustainable development (pattern 4), theories of production (pattern 5). pattern 6 pattern 5 pattern 3 pattern 2 pattern 4 pattern 1 http://www.virtual-economics.eu/ 178 www.virtual-economics.eu issn 2657-4047 (online) olena korobets, olena chygryn, maryna saienko, and liliia liulova virtual economics, vol. 3, no. 4, 2020 figure 4. the results of the patterns distribution by the frequency of key phrases use in scientific papers for 2004-2019. source: developed by the author using the vosviewer based on the scopus database. the size of circles on figure 3 shows the frequency of using a particular term along with the concept of environmental risk. the largest is the red pattern (1). it includes assessment methods used in the analysis of the economic entities’ impact on the environment. the green pattern (2) is the second largest. here the key terms are: management, responsibility, strategic planning, efficiency, etc. they all relate to evaluating organizational activities and management effectiveness. the blue pattern (3) includes concepts related to climate change, agricultural land, water balance, assessment of sustainability and uncertainty, environmental policy, and so on. the yellow pattern (4) shows the set of objects and subjects of the natural environment that are affected: society, health, animals, land, air, water, forest, etc. it also includes assessment methods used to analyse such effects. therefore, it is called "environment impact assessment". the purple pattern (5) is the second largest. in this cluster, the most common terms that are the outcome of the enterprise: pollution, waste, recycling, life cycle, and so on. it has also been observed that the patterns of the economic analysis theory (1) and the production theory (5) have been actively followed since 2008. it is these studies that have given impetus to the development of other groups of patterns. pattern 1 pattern 2 pattern 3 pattern 5 pattern 4 http://www.virtual-economics.eu/ 179 www.virtual-economics.eu issn 2657-4047 (online) olena korobets, olena chygryn, maryna saienko, and liliia liulova virtual economics, vol. 3, no. 4, 2020 5. conclusions based on the study, the frequency of searches in search engines was determined using the google trends application. the highest search activity for the selected variants of the term was observed in the period 2004-2006. despite the decrease in the search dynamics since 2007, the trend has remained stable in recent years. the analysis of publications that study aspects of environmental risk revealed 138,602 scientific articles in publications indexed by the scopus scientometric database. the selection of publications according to the definite parameters (the language of a publication, keywords, the period of a publication, areas of research) allowed generating 1,791 articles for more detailed research. the bibliometric analysis made it possible to identify 6 patterns of geographical location of international research networks that have mostly influenced the evolution of the theory of environmental risk management: pattern 1 – the uk, the netherlands, sweden, pattern 2 – the usa, germany, france, spain, pattern 3 hong kong, south africa, thailand, pattern 4 canada, australia, pattern 5 italy, japan, south korea, pattern 6 china, new zealand. based on the analysis of citations, there were selected the most authoritative researchers and 6 research teams who significantly influenced the development of the theory of environmental risk management. the analysis results of the keywords frequency use identified 5 structural and functional patterns. it is found that the most common issues of environmental risk management are studied in close connection with the theories of economic analysis (pattern 1), management theories (pattern 2), theories of nature management (pattern 3), theories of sustainable development (pattern 4), theories of production (pattern 5). 6. formatting of funding sources this research was funded by the grant from the ministry of education and science of ukraine (№0120u102002). references abaas, m. s. m., chygryn, o., kubatko, o., & pimonenko, t. 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(2018). biogas as an alternative energy resource for ukrainian companies: eu experience. innovation marketing, 14, 7-15. http://www.virtual-economics.eu/ кwilinski alex 211 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 2020 volume 3 number 4 (october) the ukrainian employers’ experience of introducing dual studies: the first-year results of the national experiment olena buchynska, olena davlikanova, and iryna lylyk abstract. the transition to the knowledge-based economy emphasizes the need of bridging the gap between the employers’ needs and expectations with regard to their employees’ knowledge and skills and the existing level of the knowledge and skills of the workforce, including the graduates of tertiary educational establishments (tees). one of the instruments that has already proven its efficiency in “building bridges” between the companies and higher educational institutions is dual studies (ds). companies view such cooperation as the investment in its competitiveness, which, in its turn, is viewed as one of the factors of the national economic development. thus, the friedrich-ebert-stiftung office in ukraine (fesukraine) launched a project aimed at presenting and adapting the experience of germany in dual studies organization in 2013. as a result, in 2019, the ministry of education and science of ukraine (mes) launched a national experiment on introducing ds in 44 pre-tertiary and tertiary educational establishments. the article aims to present the results of the survey conducted among the ukraine-based employers that participated in the first year of this experiment. the authors’ questionnaire survey was carried out from june to september 2020. the respondents included 111 companies indicated as partners by the tees listed in the ministerial order #1296 on the launch of the experiment planned for the period of 2019-2023. the answers were obtained from 93 companies, 55 of which presented details of tee-company cooperation. the data obtained allowed performing both quantitative and qualitative analysis. the findings show that companies are interested in dual studies and are ready to invest in training students as their potential employees. german approaches to the ds organization cannot be simply copied due to the specific features of the national legislation and the state of the national economy. however, they may be successfully adapted and implemented in ukraine. therefore, the obtained information has been used for elaborating recommendations to the stakeholders (tees, employers and their associations, the mes and other relevant state bodies etc.). keywords: dual higher education, dual form of education, dual studies, dual study models, dual tertiary education, duales studium, employers, higher educational institutions, human capital, ministry of education and science of ukraine, pilot project, students, tertiary education jel classification: a20, m00 http://www.virtual-economics.eu/ 212 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 authors: olena buchynska kiev national economic university kyiv, ukraine e-mail: elenabuchynska@gmail.com https://orcid.org/0000-0003-2991-2110 olena davlikanova friedrich ebert foundation, office in ukraine, kyiv, ukraine e-mail: elena100deals@gmail.com https://orcid.org/0000-0001-8536-3959 iryna lylyk president of the ukrainian marketing association, kyiv, ukraine e-mail: iryna.lylyk@kneu.ua https://orcid.org/0000-0003-4748-5407 citation: buchynska, o., davlikanova, o., & lylyk, i. (2020). the ukrainian employers’ experience of introducing dual studies: the first-year results of the national experiment. virtual economics, 3(4), 211-234. https://doi.org/10.34021/ve.2020.03.04(11) received: september 3, 2020. revised: september 15, 2020. accepted: october 6, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2020.03.04(11) https://creativecommons.org/licenses/by/4.0/ 213 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 1. introduction tertiary education (te) is not only considered a pillar of human development, but also one of the engines of economic success of countries and individuals; and it becomes even more important in the xxi century, when throughout the world economy, more than ever, knowledge is becoming the major driver of production and innovation (world bank, 2002; oecd, 2008; council of the european union, 2009). decision-makers understand the need in responding to the global challenges and are looking for solutions in order to create conditions for increasing compatibility of national economies by means of investments in human capital. thus, the eu countries have established objectives of reaching the common benchmark of 40% of the 30-34-year olds with a higher education or equivalent, viewing education and training as a driving force for creating jobs and economic growth, as well as a factor of sustainable development (european commission, 2019a). and this trend is expected to continue (figure 1). figure 1. the labor force – a share of qualifications in the eu countries, 2000-2025, a baseline scenario. source: (cedefop, 2013). one can never have excessive education and skills, thus, in some respects, they may be considered merit goods. it is rational for individuals to invest in their qualifications to ensure their competitiveness on the labor market and career prospects; likewise, an economy can never overinvest in its human capital, but only if the skills produced generate a return to those investing. (dolphin, 2015). thus, the balanced combination of theory and practice within curricula are essential for bridging the gap between the results of studies and the needs of employers as of graduates’ qualifications. 32 22 14 46 47 47 23 31 39 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2000 2010 2025 high middle low http://www.virtual-economics.eu/ 214 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 due to the relatively mild influence of the world economic crises on the economy of the federal republic of germany and the low level of unemployment among the youth in the country, in search for solutions more and more interested actors from abroad are paying attention to the dual education system, which foresees combination of at least two study places – an educational institution and a company (graf, 2015; bibb, 2020a; 2020b). only 1% of the graduates were unemployed a year and a half after completing a dual bachelor's degree in contrast to 6% of the graduates with a regular bachelor's degree. dual study programs also ensure that qualifications and competencies acquired by students are needed by the employers. ds improves the school-to-work transition for young people and increases their chance for permanent employment (hermann, 2020). though, such approach was first applied and later developed into the “export item” on the level of vocational education and training (“duale ausbildung”), in recent decades german higher education absorbs some features of the dual vet in the format of dual studies (“duales studium”) (wissenschaftsrat, 2013; bibb, 2017; hippach-schneider et al., 2017). ukraine is one of those countries that has attempted to adapt german models of both dual vet education and dual studies to the national context (the ministry of education and science of ukraine, 2016; 2020a). taking into account that young people in the age group of 15-24 are still pursuing their education, the age group of 25-29 (mostly graduates) are the group most vulnerable to unemployment with the higher than average numbers (figure 2). figure 2. the level of unemployment in ukraine, 2004-2020, by age groups (%) source: developed by olena davlikanova based on the state statistic service data (2004-2020). this article does not cover efforts aimed at introducing the dual vet but rather concentrates on dual tertiary education (dual studies). the impact of higher education on the life prospects http://www.virtual-economics.eu/ 215 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 of a person and the overall development of a country is undeniable. individuals with higher education degree reported to have higher earnings over their lifetime and a better quality of life overall, as well as better understanding of civic issues and the world development trends (chism et al., 2016), while for a country a bigger share of citizens with at least bachelor’s degree correlates with lucrative community, a higher tax pool and overall global competitiveness. “for these reasons, higher education remains the best avenue to prosperity, opportunity, and a stronger nation.” in 2019 the mes launched a national experiment on introducing of dual studies in 44 pretertiary and tertiary educational establishments in partnership with a number of volunteering companies. the article presents information regarding the dual studies introduction experience of ukraine-based employers gathered by the authors in the framework of one in the series of studies compiled for the ministry of education and science of ukraine (the mes). the first study was devoted to the experience of the pre-tertiary and tertiary educational establishments (chaikovska et al., 2020); the second – of the employers involved into dual studies introduction experiment (buchynska et al., 2020); and the third one – to the experience of the dual students (in-progress) (figure 3). figure 3. a comparison of quantitative data gathered in the framework of studies conducted among educational establishments and employers during the first year of the ds introduction experiment (2019-2020) source: developed by olena davlikanova based on the results of the “analytical report on the 1st year of the ds introduction – educational establishments’ perspective” (chaikovska et al., 2020); the “analytical report on the 1st year of the ds introduction – employers’ perspective” (buchynska et al., 2020), and the “analytical report on the 1st year of the ds introduction – students’ perspective”. the experiment is the result of the efforts by the friedrich ebert foundation office in ukraine http://www.virtual-economics.eu/ 216 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 that in cooperation with local partners launched a project «adaptation of dual studies elements to the ukrainian national context» in 2013. during the whole period of its implementation, among such partners there were the ministry of education and science of ukraine, state and private educational establishments, companies, an ngo «ukrainian marketing association», the federation of metallurgists of ukraine, the methodological center for pre-tertiary and tertiary education etc. as a result, stakeholders compiled the concept of the dual form of education/studies (the ministry of education and science, 2018); amendments introducing dual studies were made to the laws “on education” and “on higher education” in 2018-2019; and as a final step, in 2019 the experiment on the introduction of the dual form of education in 17 pre-tertiary and 27 tertiary educational establishments was launched. the concept, as well as the efforts of the fes-ukraine and partners was first concentrated on the dual higher education due to the abovementioned global trends. only on the final stage the concept, being a conceptual document, also included vet by the decision of mes. however, the following work was again divided into two separate directions – vet and tertiary education – due to a number of specific features in the organization of the education. in addition, the state and funding of ukrainian vet and te differ greatly, as well as their popularity among the youth and their parents (figure 4). the article aims to describe the main findings of the authors’ survey among the ukraine-based employers as of their experience in the framework of the first year of dual studies experiment. it includes four parts. the first part – the literature review – presents ideas of researchers and experts on the global megatrends impacting the nature of work, polarization of jobs, importance of education, especially tertiary education, as well as cooperation of educational establishments and business as a factor of ensuring high level of labor force qualifications as a prerequisite for the national economy development with the focus on the knowledge economy and changes on the labor market caused by the automation and digitalization; as well as the review of publications devoted to the dual studies in germany and their adoption in other countries. the second part – methodology and research methods – outlines methods applied by the authors to conduct the survey among the employers enrolled into the dual studies experiment on the request by the ministry of education and science of ukraine. the third part – results and discussion – summarizes the main findings of the authors on the first year of dual studies experiment. the fourth part – conclusions – presents implications for further research of the initiatives aimed at the dual studies introduction. http://www.virtual-economics.eu/ 217 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 figure 4. a comparison of ukrainian vet, pre-tertiary and tertiary education source: developed by the authors 1990/ 91 1991/ 92 1992/ 93 1993/ 94 1994/ 95 1995/ 96 1996/ 97 1997/ 98 1998/ 99 1999/ 00 2000/ 01 2001/ 02 2002/ 03 2003/ 04 2004/ 05 2005/ 06 2006/ 07 2007/ 08 2008/ 09 2009/ 10 2010/ 11 2011/ 12 2012/ 13 2013/ 14 2014/ 15 2015/ 16 2016/ 17 2017/ 18 2018/ 19 2019/ 20 number of tees 149 156 158 159 232 255 274 280 298 313 315 318 330 339 347 345 350 351 353 350 349 345 334 325 277 288 287 289 282 281 number of ptees 742 754 753 754 778 782 790 660 653 658 664 665 667 670 619 606 570 553 528 511 505 501 489 478 387 371 370 372 370 338 nember of vet ees 1246 1285 1282 1211 1197 1179 1156 1003 995 980 970 965 962 953 1011 1023 1021 1022 1018 975 976 976 972 968 814 798 787 756 736 723 number of tee students (thnd) 881,3 876,2 855,9 829,2 888,5 922,8 976,9 1110 1210,31285,41402,9 1548 1686,91843,82026,72203,82318,62372,52364,52245,22129,81954,81824,91723,7 1438 1375,21369,4 1330 1322,31266,1 number of ptee students (thnd) 757 739,2 718,8 680,7 645 617,7 595 526,4 503,7 503,7 528 561,3 582,9 592,9 548,5 505,3 468 441,3 399,3 354,2 361,5 356,8 345,2 329 251,3 230,1 217,3 208,6 199,9 173,6 number of vet students (thnd) 643,4 648,4 647,2 629,4 572,8 555,2 539,7 528,1 529 527,7 524,6 512,3 501,9 493,1 507,3 496,6 473,8 454,4 443,6 424,3 433,5 409,4 423,3 391,2 315,6 304,1 285,8 269,4 255 245,8 0 500 1000 1500 2000 2500 http://www.virtual-economics.eu/ 218 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 2. the literature review digital transformation, globalization and demographic changes are the megatrends of today shaping the landscape of a labor market through creating and destructing jobs as well as changing the nature of existing occupations and shaping skills demand. all this puts an unprecedented pressure on traditional education and training systems to provide opportunities for developing in-demand skills (ilo & oecd, 2018). a number of studies worldwide projected significant changes in sectoral employment structures not only for the developed but even more for the transition countries, demonstrating “a shift away from simple and manufacturing activities towards knowledge-based and other consumer services” (dach, 2013; cedefop, 2016; bakhshi et al., 2017; tkachenko et al., 2019). the changes are so tangible that even ‘elementary’ jobs that usually required no or low-level qualifications are becoming more complex (cedefop, 2013). the pattern of the demand for labor force with higher-level formal qualifications, including a university degree, has existed for some time already. however, polarization within the labor market is expected to continue till 2030 and beyond, which results in significant raise in opportunities for high-skill occupations and some growth of the number of the low skilled jobs, while the medium-skill occupations are those in danger of extinction. yet, growth of employment at the bottom of the wage distribution will not contribute to the individuals’ welfare (cedefop, 2013, 2018) (figure 5). figure 5. an employment share by the skill level in the eu, 2000-2025, baseline scenario (%) source: (cedefop, 2013). 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2000 2010 2020 2025 9,80% 10,20% 10,90% 11,20% 29,20% 24,80% 22,80% 22,10% 24,50% 24,50% 23,20% 22,60% 36,50% 40,50% 43,10% 44,10% highly skilled skilled non-manual skilled manual elementary http://www.virtual-economics.eu/ 219 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 when assessing trends in skills needed, it is not enough to consider the qualification level required for a job, but also how complex or routine it is becoming (cedefop, 2013). researchers emphasize the impact of the 'routine-biased technological change' or job polarization, when demand for routine jobs and tasks (no matter if of a cognitive or manual character) is falling considerably (card & dinardo, 2002). though, not all routine tasks can be automated, in a number of cases, instead of replacing entire jobs, tasks within occupations are becoming more technology-intensive. however, this trend also favors higher education. though, he does not give immunity against unemployment or loss of a job to automation, but it gives way to less automatable jobs. it is projected that the more general problem-solving skills, which are taught at higher education establishments, will not only be more demanded on the labor market, but will also provide a wider range of opportunities for re-qualification; while the occupation-specific skills imparted by vocational training tend to become obsolete faster. those with vocational training are more likely to be working in an automatable job than those with a university degree or may find themselves shifting from one precarious job to another with no prospects for a better future (ilo, 2017). according to some estimations, tertiary education reduces the risk of losing a position for automation by 8.6 percentage points in lowand middle-income countries and 8.8 percentage points in oecd countries; on the other hand, vocational training increases such risk by 2.3 and 2.5 percentage points respectively (ilo & oecd, 2018). moreover, a rise in the demand for highly skilled workers leads to a rise in earnings inequality. the lowand high-skilled occupations are classified based on the average wage over the period 1997-2013; the difference between these two groups is around 130%. though the wage structure cannot be easily explained, the phenomenon should be studied in more detail (card & dinardo, 2002; haskel & slaughter, 2002). in addition, as of the access of high-skilled labor force to better paid jobs, according to some assumptions, trans-national enterprises, which are more productive due to possessing unique technologies and knowledge of production methods, and pay higher wages, will enjoy more skilled employees due to reduction of routineand low-skilled job tasks, while local and smaller companies will hire routineand low-skilled employees (heyman & sjöholm, 2019) (figure 6). the young people and the low-skilled workers are the most vulnerable groups with regard to the occurring changes on the labor market (oecd, 2019). the youth continue to be overrepresented among the unemployed, while among those employed most currently young people have jobs of poor quality characterized by precarious working conditions, absence of legal and social protection, little or no opportunities for training and career prospects, and low wages. though they see opportunities in the “fourth industrial revolution”, they also tend to worry about possible loss of their current or potential jobs to robots and artificial intelligence (ilo, 2017). skill obsolescence is defined as the “degree to which professionals lack the up-todate knowledge or skills necessary to maintain effective performance in their current or future work roles” (kaufman, 1974). technological progress has always been a reason of skill obsolescence; however, industry 4.0 and the current changes on the labor market, including the raise of the number of more demanding jobs, place the economic skill obsolescence and issues of education and training on top of the agenda (cedefop, 2012). http://www.virtual-economics.eu/ 220 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 figure 6. the projected change by broad occupation for the eu countries, 2016-2030, thousands source: (cedefop, 2018). though, technological change and globalization may improve work-life balance and create new opportunities for a variety of groups to take an active part in the labor market, a better world of work cannot be guaranteed without the right policies and institutions in place (oecd, 2019). investing in people’s skills and competences is the factor of a country’s and a company’s success in the highly dynamic and competitive world. in order to ensure return on investments it is essential to anticipate which skills remain relevant and which new ones will be demanded in a short-, midand long-term perspective. the issue is essential to national and international debate (cedefop, 2018). thus, policies regarding education, economic development, and social protection should be developed along with the policies on public employment services and social protection, labor market regulation, taxation and even housing, transport, competition law and industrial policy (ilo, 2017). it is also important to involve social partners in national, sectoral and local governance arrangements, the design, monitor and evaluate education and training curricula, identify skills needed, assure quality etc. (european commission, 2019b). state and private financial returns to tertiary education may be ensured 2 046 4 902 5 763 -689 1 657 -765 -1 335 423 2 876 -2 000 -1 000 0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 1 elementary occupations plant and machine operators and assemblers craft and related trades workers skilled agricultural and fishery workers service workers and shop and market sales workers clerks technicians and associate professionals professionals http://www.virtual-economics.eu/ 221 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 only if curricula are of high quality, skills taught are demanded and there is a sufficient amount of jobs requiring high-level qualifications to avoid overload of overqualified job-seekers. taking all this into account, the strategy for reforming higher education in ukraine until 2020 and the strategy for reforming higher education in ukraine 2021-2031 underline the importance of focusing on graduates’ qualifications required by the employers, involvement of employers and professional associations in decision-making in the sphere of education, fostering cooperation between educational establishments and enterprises, and introduction of the new forms of practice-oriented students’ training, including dual education (mes, 2020b). there have been a number of experiments worldwide aimed at the adaptation of the dual education and dual studies in order to strengthen the link between the real economy and the education system (graf et al., 2014). when it comes to the experiments on the level of tertiary education, the process becomes more complicated as, unlike the well-established dual vet («duale ausbildung»), there is an ongoing dialogue in the federal republic of germany on the concept and models of dual studies («duales studium») (bibb, 2017). thus, a «copy-paste» approach does not work for the agents of positive change. 3. methodology in order to safeguard the relevance of the article to the demand of the national experiment on introducing the dual studies, a cabinet study of the earlier works on ensuring the acquisition of the combination of profound theoretical knowledge and relevant skills by the workforce, with a special focus on the experience of the federal republic of germany and ukraine, had been conducted before launching the research. based on the information gathered, in july 2020, the authors compiled a questionnaire for the companies named as partners by the tees listed in the order №1296 on dual studies experiment issued by the ministry of education and science of ukraine. the list of such partner-companies is presented in the previous study conducted by one of the authors and devoted to the experience of the ukrainian tees participating in the experiment. the questionnaire consists of 24 questions, 4 of which are aimed at gathering general information about the company-respondent and 20 multiplechoice and open questions aimed at receiving information on the cases of dual studies organization. the questionnaire was presented for a review to the representatives of the federation of the metallurgists of ukraine, hr union and education experts. in july-august 2020, the in-depth interviews were conducted by the researchers among the respondents from an overall sample. the data were analyzed and presented in a report in september 2020. thus, the method applied is the case-study, which allowed gathering the detailed data on the experience of the ukraine-based companies introducing the dual studies. due to the relatively small sample the universal coverage was chosen – 109 companies named by the tees indicated in the ministry of education and science order no. 1296. however, the study results are based on the answers of 55 companies (table 1). http://www.virtual-economics.eu/ 222 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 table 1. the final sample formation number of companies named by the tees as partners companies not reached by the researchers invalid answers valid answers 109 16 38 55 source: developed by the authors. companies were not reached by the researchers because tees provided no or incorrect contact information. the invalid answers included the answers of companies that terminated their activities, planned but did not introduce ds in 2019-2020 (mainly due to the covid-19 pandemic) or did not know about their participation in the experiment. the answers were provided by people responsible for dual studies in the companies or their directors. the following hypothesis has been tested: dual studies may be adapted to the ukrainian national context, but it requires change of employers’ understanding of their role in education. 4. results the non-response rate is 0.25; the valid response rate is 0.51. among 55 companies – respondents in the framework of the survey – 26 are representatives of big business, 20 – of medium business and 9 small businesses. the overall number of students reported being dual students trained by the companies accounts for 481. 22 companies train 1-2 students each; 19 companies – 3-9 students; 8 companies – 10-19 students; 6 companies – over 20 students each. 29 companies initiated cooperation with the tees in the framework of the experiment, while 26 respondents accepted the proposal of the pre-tertiary and tertiary educational establishments (figure 7). other motives included the awareness of the positive experience of german companies, viewing ds as a development of existing cooperation, desire to ensure quality education of employees etc. according to the statements of some respondents, they realize that companies located in smaller cities, especially villages, or less economically developed regions have to compete with the employees from more advanced regions, bigger cities, especially the capital, or other countries. http://www.virtual-economics.eu/ 223 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 figure 7. employers’ motivation to introduce dual studies source: developed by the authors. as for the establishment of the partnerships, some are based on the long-term cooperation in the framework of internships/practical training organization. apart from the specialties and the cooperation tested by time; employers try to pick tees located not far from the company’s facilities. this allows them to save funds for students’ travel and accommodation, with the exception of companies needing graduates of rare specialties like an aircraft designer. the prestige of tees also influences the decision of employers, when choosing partners for cooperation (figure 8). figure 8. the criteria for choosing partner-tees source: developed by the authors. 4 6 10 27 3 5 another motive desire to save time for adaptation in the workplace desire to save time for additional training desire to have high-qualified staff desire to be in the forefront of the innovations improving company's image 14 9 11 21 initiative of a hee location (same region) previous long-lasting cooperation with a hee work of relevant department/specialty in a hee http://www.virtual-economics.eu/ 224 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 48 companies indicated that they have a cooperation coordinator: in 45 cases this is a specially assigned person, in 3 cases – an employee who also works at a tee. most often the assigned persons are the heads of personnel departments, hr specialists, personnel training department representatives, or even deputy directors or directors. the last two options are typical of small businesses. among 7 companies, which have no coordinators, 3 communicate with partner tee through students. 12 companies communicate with educational establishments on a monthly basis, 6 organize discussions more often. not all the respondents confirmed meeting the existing formal requirements to the documentation of the ds partnerships. 42 companies signed bilateral cooperation agreements with tees and only 13 have trilateral agreements between a tee, a company and a student. most of the employers base their work on bilateral agreements with educational establishments and work-contracts with students. 30 companies said they do not influence the content of educational programs or students’ individual education plans. the most common reasons for the lack of such influence are as follows: “not interested”, “fully trust the tee”, “never knew we could”, “we do not care what happens in the classroom, we will learn everything in the workplace” etc. 43 companies elaborated the selection procedure, while 12 respondents stated they accept all the students interested in dual studies. the selection procedure also includes selection criteria. the most significant criterion is the recommendation of a tee (24 responses). the other criteria are the students’ academic achievements, successful interview or test organized by the company, as well as the desire of the staff to pursue higher education. among the 55 company-respondents 16 have stated that they have no tutors, 4 of which do not even know they need to have one. 27 companies provide 1 tutor for the whole period of dual studies; 7 have 2-3 tutors per student for the whole period of the in-company training; and 5 companies state they foresee the work of more than 3 tutors. the last two cases allow rotation of students in different departments during the in-company training. more than a half of the respondents state that the tutors have received special training on methodological and psychological aspects of student training. 27 companies introduced mechanisms of tutor motivation, though their fees did not exceed 30 euro per month. there are also quarterly or annual bonuses, additional vocation days or fully-covered vocations. at the same time, 12 respondents mentioned that they did not pay for tutorship as “employees get moral satisfaction” from transferring the knowledge to the younger generation. as for the dual education models, the two most popular analogues of german models are the one with the integrated practical training and the one with the integrated professional training. the first one is foreseen for those who receive first higher education and have no professional background or qualification, while the second model is applied for training of persons with some qualifications/degree. in the framework of the model with the integrated http://www.virtual-economics.eu/ 225 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 practical training most students shift to the dual form of education on the 3rd or 4th year of the bachelor program or the 1st year of the master program. according to the needs of the company, specific features of training on some specialties (seasonal works), as well as the distance between the facilities and a tee, the parties choose the model of schedule formation – a divided day model, a divided week model, a block model (several weeks or months) etc. unfortunately, there are cases, when students work full-time without breaks for academic education. such approach breaches formal demands to organizing dual studies (figure 9). figure 9. the share of the in-company training in the education program source: developed by the authors. the law of ukraine “on higher education” indicates a clear delta of ects credits that should be foreseen for the in-company training. table 2. the amount of credits for the in-company training that qualify a program as dual according to the ukrainian legislation. education level minimum amount of credits (25%) maximum amount of credits (60%) junior bachelor (240 credits) 60 144 junior bachelor (160 credits) 40 96 bachelor (240 credits) 60 144 master (90 credits) 23 54 master (120 credits) 30 72 source: an analytical report on the first-year results of the experiment on introducing dual studies in the pretertiary and tertiary educational establishments. 2 8 10 16 7 12 hard to tell share of 50% share of 50-70% share of 70-80% share of 80-90% share of 100% http://www.virtual-economics.eu/ 226 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 only 4 companies have a formula for calculating costs of the in-company training of one dual student and only a few calculated such costs approximately. all the companies named salary as the main budget line when it comes to dual students. 10 respondents additionally cover transportation costs, meals and accommodation, when needed. the costs for accommodation are mostly covered by the remotely located companies or when due to the need in students of rare specialties a company partners with a tee located over a 100 km away. some respondents also offer the so-called “scholarships” in addition to salaries. the formulas additionally include payments to tutors, costs of the uniform for dual students and consumables. one more and least popular budget line is costs of studies in a tee. only 7 employers are ready to cover such costs of students getting education in private educational establishments or in state tees but on a contractual basis. 28 respondents mentioned they are not ready to cover such costs as they are not sure a student would stay in the company after graduation. there are no official mechanisms of obliging students to continue working for a company after graduation, thus, especially in the times of economic instability such investments are seen as highly risky. by the end of the first year of the experiment, 6 cases of terminating company-student cooperation have been reported, 5 of which are caused by the corona-crisis and 1 – by student’s violations of obligations. there are also 16 cases when termination of such cooperation was initiated by students. two main reasons for taking such decisions were a desire to change the major and a gap between students’ expectations and the working life reality. the number of such cases may be reduced if the selection procedure is improved or in some cases at least applied. one more worrisome reason was mentioned: “a hardship for women to adapt to a men’s team”. the analysis of the reasons behind such a statement is beyond the scope of this article; yet such cases must be eliminated from the very start of ds introduction. employers emphasize that one of the pervasive problems causing the poor quality of a “product” released by tees to the labor market is a low level of teachers’ practical training and lack of access to modern technologies. thus, 30 respondents are ready to open their doors for training tee teaching faculty, though only 18 actually do so. the situation is explained by the teachers’ unwillingness to raise their qualifications, as employers see it. as for the obstacles and challenges, the respondents have indicated the following: a lack of established and widely-accepted national philosophy of dual studies and the principles of cooperation between the parties; a need to enroll dual students in a position that corresponds to their qualification level. this is not an issue when applicants have already obtained a certain qualification, graduated from a vocational education institution or are getting their master degree; low motivation of educational institutions to introduce ds as university administrations and teaching staff are afraid of the workload reduction due to the bigger share of credits foreseen for the in-company training; http://www.virtual-economics.eu/ 227 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 employers’ concerns that their investments in a dual student will not return or, even worse, their competitors will benefit from such investments into future workforce. current norms do not oblige graduates to work at the company for some period of time after graduation, thus, ex-dual student may shift to a different company in ukraine or abroad. even when domestic companies offer competitive salaries, the overall infrastructures of ukrainian cities, as well as political and economic climate, reinforce labor migration. moreover, national producers cannot compete with the trans-national companies, when it comes not only to remuneration, but to other benefits as well. a lack of the employers’ willingness to deal with all bureaucratic nuances that educational institutions are required to adhere to. they noted that paperwork could be a reason for terminating the existing cooperation or non-participation in ds development in the future, because it requires too many person-hours. nevertheless, all 55 companies view dual studies as a positive development with great potential. thought, 11 respondents emphasized that it should not be considered a panacea, rather a modern tool of advancing competitiveness of a student, a company and a national economy as a whole. 5. conclusions the survey results demonstrate that some ukraine-based employers feel the need in cooperating with educational establishments; and for many of them, especially those located in the regions, this is not even the matter of ensuring company’s leading positions on the market, but rather a survival. labor migration, trans-national corporations, poor infrastructure of many ukrainian cities, towns and villages lead to the drain of the most talented and skilled. in addition to that, “severe hunger” for qualified work force that meets the employers’ expectations is caused, among other factors, by the lack of educational programs’ modernization and poor connection of education and business. in the framework of the interviews employers underlined that for decades those had been the factors defining the development of the ukrainian education, which turned into self-serving industry of issuing diplomas. however, despite recognizing the problem, many discussions and the instruments and norms of the legislation available for many years, the cooperation of tees and business used to be mostly faked and dealt with as a formality rather than an opportunity (with rare exceptions). the fes-ukraine project aimed at presenting and adapting the german models of dual studies that was launched in 2013 and engaged a wide circle of stakeholders, including the ministry of education and science of ukraine, contributed to the education reform and helped to establish or re-launch tees-business cooperation. it is too early to talk about a dual studies system yet, as there are too many elements still missing, like the active role of the chambers of trade and commerce, local self-government, regional unions of employers, or even a widely accepted clear philosophy or finalized rules of parties’ cooperation. failure to meet the already established formal requirements to the ds organization such as the amount of credits (2560%) envisaged for the in-company training, ensuring the work of a tutor, bilateral and http://www.virtual-economics.eu/ 228 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 trilateral agreements and others demonstrate the insufficient understanding by both educational institutions and employers of the content and features of the dual form of education. entrepreneurs emphasized the need in the awareness rising campaign and methodological materials, as well as additional explanatory work to clarify the difference between work, practice, distance learning, evening and dual forms of education. yet ds is already included in the legislation and defined as a form of education, and the process of establishing a mechanism of the dual studies implementation is being tested within the national experiment to be conducted in the period of 2019-2023. however, ukraine-based employers already see the ds advantages (see table 3). table 3. ds advantages according to the employers for employers for students for higher educational establishments saving funds for training employees. possibility to learn about the specific features of a particular production and corporate culture for more informed career choices. possibility to modernize the content of education programs due to communication with employers. saving time for adaptation of young specialists and staff training. possibility to study based on real cases and to have access to latest technologies. advancing qualification level of the teaching staff and access to new technologies. possibility to enroll the most motivated and talented graduates for the benefit of the company. due to rotation possibility to make better choices as of specialization. improving the image and attracting applicants’ attention. overcoming the challenge of finding qualified staff, especially in the regions. financial support (salary, benefits, etc.). advancing one’s competitiveness on the labor market. source: developed by the authors. though, as of today only 55 companies are actively participating in the experiment, while more than a hundred are indicated in the mes order #1296, the interest to dual studies is generally high. the three most widespread reasons preventing companies to open their doors for dual students are the cautious position of tees due to the motives discussed above and a desire to learn on others’ mistakes, worsening of the economic situation and interruption of the operation processes because of the quarantine caused by the covid-19 pandemic and lack of all necessary normative framework. for the most of the companies interviewed the openness of a tee for real (not formal) cooperation was the prerequisite for establishing cooperation and partnership in the http://www.virtual-economics.eu/ 229 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 framework of the experiment; while the main motive was a desire to get a highly-qualified labor force. the variety of the companies interested in ds should be noted. these are enterprises of different forms of ownership located in all regions of ukraine, except the occupied territories, representing different sectors of the economy – mining, metallurgical and food industries, engineering, agriculture, energy, transport, it, finances etc. it sector requires special attention as some specific challenges in ds introduction have been identified, which require additional study given the potential of this sector. in the first year of the experiment, it was employers who often initiated cooperation with educational institutions. first of all, these are enterprises that need specialists with technical qualifications. sometimes, an employer has no alternative at all when choosing a partner, because only one or two educational institutions have a respective faculty (for example, when it comes to the aerospace or mining industry). in turn, such a narrow focus determines mutual interest, promotes long-term cooperation that emerges between large enterprises and narrow-profile educational institutions. this close cooperation often determined the student selection procedure. in such cases, the recommendation of the educational institution played a crucial role. however, employers should pay more attention to forming their own opinions based on tests or personal interviews conducted by a company itself. the lack of well-tailored selection procedure leads to early termination of contract relationships with the students. technical majors like "mechanical engineering", "electrical engineering" and "agricultural sciences and food" were the most demanded. during 2019-2020 academic year 17 companies trained 52 ds students studying economics and social sciences, while 38 enterprises provided places for 467 students of technical specialties. currently in ukraine there are no mechanisms to oblige applicants to work at the company after graduation. therefore, employers are concerned about their investments in the students who after graduation may choose to work for a competitor. yet most interviewed employers note that they have not calculated the cost of training yet. regarding the employer’s participation (influence) in shaping the content of education, the organization of educational process or choosing the topic of students’ research activities, almost half of the employers do not participate in these processes due to distrust in relations with tees on this matter. in their turn, not all the respondents are ready to provide opportunities for tee teaching staff to develop their professional qualifications using their facilities. but even more often the staff is not interested in professional development of the kind. as a result of the study, a number of problems were identified. according to the employers, not all educational institutions are able to provide a sufficient level of education; not all tees agree to provide enterprises with the powers foreseen in the normative documents regarding ds or to develop new educational/training programs. they do not always explain to employers http://www.virtual-economics.eu/ 230 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 that the dual nature of this form of education is provided by combining two places of study, namely, educational institutions and enterprises. in this case, there are significant differences in the perception of ds and expectations. among the obstacles to the fast spread of ds in ukraine employers named the following: instability of the political situation in the country and the overall state of the economy; a lack of the finalized normative framework; a lack of state financial support or tax cuts; the overall poor state of the national education system and especially the low level of students’ knowledge and skills; additional financial and time costs required; a lack of mechanisms to oblige a student to stay with a company after graduation and high level of labor migration; students’ unrealistic expectations from work; a lack of capacities to train tutors, etc. in general, the dual studies implementation has revived the dialogue between educational institutions and employers, because, unlike workplacement and distance learning, the ds creates better conditions for establishing parity, finding compromises and meeting the needs of all parties. in order to strengthen public-private partnerships in the field of education and to avoid confusion when it comes to the ds, a comprehensive information campaign should be launched. special programs for training tutors would also be helpful. moreover, the normative framework should be finally formed and methodological and information materials should be elaborated, which would help decrease the tension. in addition, it is advisable to read the study of dual students’ experience, which provides another perspective of the issue. a gender aspect of introducing ds should also be studied more carefully, as in the first year of the experiment less than third of all the dual students were female, and respondents also mentioned that “it might be hard for a girl to fit in a men’s team”, which should be a red flag for a tee when looking for partners. the results support the suggestion that dual studies are adaptable to the ukrainian national context, but this requires a flexible approach and change of employers’ mentality as of stateprivate partnership in the sphere of education. the results presented are the milestone for introducing ds in ukraine and might become a factor of the youth unemployment rate drop and economic development in the long run. 6. acknowledgements the authors are grateful to the ministry of education and science of ukraine, all the companies, tees, students and other enthusiasts, who invest their time and effort into introducing ds and share their experience in the framework of the experiment. http://www.virtual-economics.eu/ 231 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 references bakhshi, h., downing, j., osborne, m., & schneider, p. 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[recommendations on the development of dual study programmes: position paper]. berlin: wissenschaftsrat. verkhovna rada of ukraine. (2019). the law of ukraine “on higher education” no. 392-ix as of 18.12.2019. retrieved from https://zakon.rada.gov.ua/laws/show/1556-18 http://www.virtual-economics.eu/ 234 www.virtual-economics.eu issn 2657-4047 (online) olena buchynska, olena davlikanova, and iryna lylyk virtual economics, vol. 3, no. 4, 2020 world bank. (2002). constructing knowledge societies: new challenges for tertiary education. retrieved from https://openknowledge.worldbank.org/bitstream/handle/10986/15224/2497 30pub0repl00knowledge0societies.pdf http://www.virtual-economics.eu/ кwilinski alex 188 www.virtual-economics.eu issn 2657-4047 (online) sviatoslav zhukov and olesia diugowanets virtual economics, vol. 3, no. 4, 2020 2020 volume 3 number 4 (october) multinational corporations’ international marketing in the focus of the global regionalization process sviatoslav zhukov and olesia diugowanets abstract. modern international economic relations are characterized by active integration, internationalization and globalization. all of them affect the political, economic, social and cultural aspects of people's lives in different countries, as well as the scientific and technological development of national economies. the prospects for expanding the scale of production and markets with a lifelong problem of resource provision remain important. the latter affects the intensification of competition among multinational corporations, the main tool of which is to reduce production costs by moving production to countries with the necessary resources and cheap labour. this leads to the expansion of the tncs’ network in the world market and encourages adaptability to national markets, and will ensure the sale of products and profits. a decisive place in the tncs’ activities belongs to the use of international marketing based on the opposite processes, e.g. globalization and regionalization. the purpose of the article is to generalize theory and practice, identify trends and establish interdependencies among the processes of globalization, regionalization and the use of types of tncs’ international marketing. the research used such methods as general, materialistic, comparative, the method of comparative analysis, the method of displaying research results in graphical and tabular form, system approach, analysis, synthesis, induction, deduction, abstraction, modelling, and comparison. as a result, the modern development of globalization, regionalization and their hybrid known as global regionalization (glocalization) is studied; the reasons and preconditions of changes in the tncs’ strategic orientation in the context of current trends in the process of global regionalization are identified; the directions of reorientation of the tncs’ international marketing strategy from local marketing to global marketing are determined; the use of such types of international marketing as cascade, global and transnational, is characterized and substantiated. the study came to the following conclusions: a modern positive phenomenon in the tncs’ development is international marketing in the context of global regionalization, as an effective and promising hybrid of two modern trends of globalization and localization (regionalization); tncs should reorient from a global business strategy to a transnational one, adhering to the principle of "global and local thinking", using international marketing, adhering to a global marketing strategy; studies of cascade, global and transnational types of international marketing have shown significant differences in cascade and global types of marketing, and transnational marketing is characterized by mediocrity of most indicators, which indicates the rationality of its use. keywords: globalization, localization, regionalization, global regionalization, glocalization, transnational corporation, international marketing, cascade marketing, global marketing, transnational marketing jel classification: f01, f61, m31 http://www.virtual-economics.eu/ 189 www.virtual-economics.eu issn 2657-4047 (online) sviatoslav zhukov and olesia diugowanets virtual economics, vol. 3, no. 4, 2020 authors: sviatoslav zhukov uzhhorod national university, 46 pidhirna st., uzhhorod, ukraine, 88000 e-mail: zhukgiga@gmail.com https://orcid.org/0000-0002-0499-7990 olesia diugowanets uzhhorod national university, 46 pidhirna st., uzhhorod, ukraine, 88000 e-mail: lables@ukr.net https://orcid.org/0000-0003-2933-4306 citation: zhukov, s., & diugowanets, o. (2020). multinational corporations’ international marketing in the focus of the global regionalization process. virtual economics, 3(4), 188-210. https://doi.org/10.34021/ve.2020.03.04(10) received: september 3, 2020. revised: september 19, 2020. accepted: october 3, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2020.03.04(10) https://creativecommons.org/licenses/by/4.0/ 190 www.virtual-economics.eu issn 2657-4047 (online) sviatoslav zhukov and olesia diugowanets virtual economics, vol. 3, no. 4, 2020 1. introduction at the current stage, the world economy and international economic relations are characterized by the intensification of integration, internationalization and globalization, that determine the human’s life quality and are the locomotive of political, economic and cultural world processes. at the same time, there is a rapid growth of productive forces due to comprehensive scientific and technological development, which affects the borders of national economies, that have become narrow. all mentioned above, on the one hand, leads to the expansion of production and markets, and on the other hand it has created a problem of resource provision (shchetynin, 2011). the global problem of resources had been considered as an environmental or economic problem till the recent times, and then it was recognized as the resource availability problem (exhaustibility, inventory balances), where it is measured by the ratio between reserves and consumption (koriava, 2018). the problem of resource provision increases competition between monopolies, mainly transnational corporations (tncs), and requires production costs reduction, mainly by relocating production to poorer countries where resources and cheap labour are needed. this became the basis for expanding the network of own productions in the world economy and using the factor of adapting to the specific features of national markets, which will ensure the sale of manufactured products and, accordingly, profits (shchetynin, 2011). an important place in the tncs’ activities belongs to the international marketing management at all levels of economic activity, which requires the use of new marketing approaches, while taking into account two opposite modern processes known as globalization and regionalization. rapid changes in the current internationalization processes of economic relations and globalization of the world economy require in-depth study of the impact of globalization and regionalization on international marketing, in particular, the development of its strategy and management. this formed the basis for formulating the purpose of the article, namely: systematization, extrapolation and a combination of two important theoretical and practical areas of research: global regionalization (glocalization) as a factor in the formation of the strategy of tncs’ international marketing and typification of tncs’ international marketing, depending on the degree of impact on them of the processes of globalization and regionalization. 2. the literature review scientific research in the domain of globalization, regionalization and glocalization has been conducted by many scientists from different countries (featherstone et al., 1995; honcharova, 2009; kudryashova, 2007; shavkun, 2008; spiegler, 2000; albrow & king, 1990; ball et al., 2003; khondker, 1994; holt et al., 2004; bogachov et al., 2020; boiko et al., 2019; czyżewski et al., 2019; chygryn et al. 2020; dalevska et al., 2019; dementyev & kwilinski, 2020; drozdz et al., 2019; 2020; dzwigol, 2019a; 2019b; 2020a; 2020b; 2020c; dzwigol & wolniak, 2018; http://www.virtual-economics.eu/ https://context.reverso.net/%d0%bf%d0%b5%d1%80%d0%b5%d0%b2%d0%be%d0%b4/%d0%b0%d0%bd%d0%b3%d0%bb%d0%b8%d0%b9%d1%81%d0%ba%d0%b8%d0%b9-%d1%80%d1%83%d1%81%d1%81%d0%ba%d0%b8%d0%b9/inventory+balances 191 www.virtual-economics.eu issn 2657-4047 (online) sviatoslav zhukov and olesia diugowanets virtual economics, vol. 3, no. 4, 2020 dzwigol & dźwigoł-barosz, 2018; 2020; dzwigol et al., 2019a; 2019b; 2019c; 2020a; furmaniak et al., 2018; 2019a; 2019b; kharazishvili et al., 2020; kondratenko et al., 2020; kuzior et al., 2020; kwilinski, 2017; 2018a; 2018b; 2018c; 2018d; 2019; kwilinski et al., 2019a; 2019b; 2019c; 2019d; 2019e; 2019f; 2019g; 2020a; 2020b; 2020c; 2020d; kwilinski & kuzior, 2020; kyrylov et al., 2020; lakhno et al., 2018; levitt, 1983; miskiewicz, 2017a; 2017b; 2018; 2020; miśkiewicz & wolniak, 2020; pająk et al., 2016; 2017; prokopenko & miśkiewicz, 2020; saługa et al., 2020; savchenko et al., 2019; tkachenko et al., 2019a; 2019b; 2019c; 2019d; 2019e; yelnikova & miskiewicz, 2020). however, the marketing issues focused on global regionalization, glocalization have dealt with a few scientists, among whom we can highlight the studies by (korzh & zhukov, 2012a; lamben, 1996). their research is important, however, they do not have a sufficiently defined impact of globalization and regionalization on international marketing. therefore, this branch of scientific research is relevant and requires some additional research. glocalization is a complex and poorly studied phenomenon, and from the point of view of academic science, the concept is insufficiently theorized without an appropriate theoretical school. glocalization, on the other hand, is a popular and widespread term in the economic, social and political spheres, which is why there are attempts “to add glocalization to the socialscientific vocabulary as an analytically autonomous concept, and not as a simple appendage to globalization, cosmopolitanization or theories of global distribution (gobo, 2016). chanchal sharma states that the term officially made its way into the english language in the 1991 when it was included in the oxford dictionary of new words (sharma, 2009). according to the oxford english dictionary, glocalization is “the action, process, or fact of making something both global and local, specifically the adaptation of global influences or business strategies in accordance with local conditions; global localization.” (oxford university press, 2018). in the modern period, the term has been used in the japanese marketing field to reflect the idea that consumers are likely to prefer localized adaptations of global products, and that cultural values are highly important in this process (martin & arch, 2008). giampietro gobo noted that roland robertson was the first scientist to introduce the concept of "glocalization" into scientific discourse in 1992. this idea has been criticized by scientists such as ritzer (2003), radhakrishnan (2010), but roland robertson argues that today there is only glocal, and we are not global and not local (robertson, 1995). glocal is the result of a historically long struggle between the global and the local, in which both have lost. in addition, ritzer (2003) agrees that at one time there was a conditionally local, but with the advent of capitalism it lost the fight against globalization. when the local disappears, what is left is the glocal, because local and global are mutually exclusive, and therefore, the purely global and purely local no longer exist (gobo, 2016). robertson rejects polarities between the global and the local, such as between economic globalization and local culture. traditionally, local identities have been invented and nurtured http://www.virtual-economics.eu/ 192 www.virtual-economics.eu issn 2657-4047 (online) sviatoslav zhukov and olesia diugowanets virtual economics, vol. 3, no. 4, 2020 mainly through contacts with others. they have been stimulated and shaped primarily by translocal interaction, comparison, and trends. the local is fundamentally shaped by the global, but the opposite is also true, for example, the opening of national borders to trade and investment only increased the economic importance of location. similarly, the expanding information economy did not distribute production and consumption across geographic space. joachim blatter noted the following: “glocalization, the simultaneous occurrence of both universalizing and particularizing tendencies in contemporary social, political, and economic systems. the term, a linguistic hybrid of globalization and localization, was popularized by the sociologist roland robertson and coined, according to him, by japanese economists to explain japanese global marketing strategies” (blatter, 2007; robertson, 1992). robertson's idea of the dynamics and interaction of equal two forces – global and local, is shared by jeffrey alexander, who states that “glocalization is very much like a refraction where the local is not annihilated or absorbed by globalization, but instead, the local shapes the global and they exist symbiotically together to create heterogeneity" (gobo, 2016). anthony giddens shares another point of view on glocalization. he suggests that there is a hierarchy between the two forces, where glocalization is a phenomenon caused by globalization, leading to the revival of local cultural identity (“local” is thus the responses to the forces that are “global”) (giddens, 2000). from this definition it is clear that the global is the main force which triggers the local manifest itself and does not imply a direct conflict between them. rudometoph recommends considering glocalization as an autonomous concept. the scholar argues that we should consider glocalization as an autonomous concept, and global and local forces as specific phenomena that have the ability to shape each other (roudometof, 2016a). however, this approach cannot be said to be perfect either due to its failure to address the often unequal forces between the local and the global. also, roudometof sees a close affinity between glocalization and cosmopolitanization. the theory of cosmopolitanization was developed by ulrich beck (beck, 2006) and he, in contrast to rudometoph, insisted on the distinction between the concepts of "glocalization" and "cosmopolitanization", since glocalization, in his opinion, is primarily associated with the economic aspect, while cosmopolitanization includes many aspects from different spheres of social life (roudometof, 2016b). what we can take away from roudometof’s approach is that there is a multitude of glocalities, so that glocalization also has its own characteristics when applied to the field of marketing. in the marketing context, glocalization means the creation of products or services for the global market by adapting them to local cultures. matusitz and forrester defined glocalization in marketing as the idea that, in order to be successful in overseas markets, tncs must take into account the local culture by immersing themselves in it and applying unconventional http://www.virtual-economics.eu/ 193 www.virtual-economics.eu issn 2657-4047 (online) sviatoslav zhukov and olesia diugowanets virtual economics, vol. 3, no. 4, 2020 marketing techniques, while focusing on the culture and preferences of the country or region where the product will be sold (matusitz & forrester, 2009). according to meyrowitz (2005), we live in “glocalities”, each of which is unique in many ways, and yet each is reciprocally influenced by global trends and global consciousness. glocalization should not be seen as a great new phenomenon for the social sciences and humanities. today, glocalization is the result of the globalization failure, so it is necessary to rethink the very concept of globalization itself. no treatment of glocalization can be final and comprehensive without reconsidering its relationship to its older and far more established ‘sibling’, namely globalisation. in the voluminous literature on globalisation, there is no shared definition of the concept and no authoritative vantage point from where to establish a simple or straightforward correlation between the global and the glocal (gobo, 2016). as a result of the literature review, we note that all opinions on glocalization remain incomplete and open for further discussions related to glocalization. through this, scientists will be able to more fruitfully use this concept as a new addition to the terminology of the humanities and social sciences, and as an autonomous concept in these areas and disciplines. 3. methodology the research methodology is based on the general scientific methods of system analysis, comparison and generalization of foreign, ukrainian and russian studies of the problem of interaction between the processes of globalization and regionalization, as well as their impact on the tncs’ development, and on the choice of their international marketing strategy. the article used the following scientific research methods. materialistic dialectics (or dialectical materialism) was used: 1) in the first chapter in the context of the law of unity and struggle of opposites while studying the processes of globalization and regionalization; 2) in the second chapter as a method for studying the category of development in the analysis of types of marketing. a comparative method (comparative analysis) was used in the first chapter when comparing, establishing the general, particular and separate in such studied phenomena as globalization and regionalization, and the patterns of their further development (transformation) into the process of global regionalization (or glocalization). the display of research results in graphical and tabular form was used in the first (figures 1, 2) and the second (table 1) chapters of the article. figure 1 reflects the research results and offers possible options for choosing a management decision; figure 2 reflects the results of the study and offers four options for the international macroenvironment, each of which requires a specific organizational form of international marketing management of tncs; table 1 reflects the results of studying the types of marketing. http://www.virtual-economics.eu/ 194 www.virtual-economics.eu issn 2657-4047 (online) sviatoslav zhukov and olesia diugowanets virtual economics, vol. 3, no. 4, 2020 a systemic approach: in the first chapter, global regionalization (glocalization) is investigated as an integral system, consisting of elements globalization and regionalization, between which there is a certain set of relations and connections; in the second chapter, three factors (elements) are investigated, which are interconnected, induce a change in the types of international marketing and form an integral system of factors. analysis and synthesis, induction and deduction as the methods of theoretical research, were used to reveal and substantiate the phenomena of globalization, regionalization (in the first chapter) and international marketing (in the second chapter). abstraction. abstractions were used: in the first chapter, from excessive detailing of the phenomena and processes of globalization and regionalization in favour of revealing the essence of global regionalization (glocalization); in the second chapter, from clarifying the essence of international marketing in favour of a detailed analysis of its types. simulation. this method in the first chapter outlines specific application cases for marketing strategies based on figure 1 and specific variants of a specific organizational form of international marketing management of tncs, based on figure 2. comparison. the first chapter compares globalization and regionalization, and the second chapter compares the types of marketing. 4. globalization and regionalization as the factors of forming tncs’ international marketing strategy globalization is an essential process of the world economy evolution. it intensifies relations among the national economies of individual countries, affects all enterprises, regardless of their presence in the foreign markets, which allows enterprises and their countries to become embedded in the world economy, which is characterized by informational technology and economic revolution and the forming the horizontal connections in the world economic structures (korzh & zhukov, 2012b). for non-global processes taking place in recent years in the world it is likely to be characterized by a more modern term "glocalization". roland robertson noted that global and regional (or local) trends are complementary on the one hand, and competing with each other on the other, which makes them interact together nowadays (featherstone et al., 1995). this approach assumes that the world economy has entered a newer "post-global" phase of evolution, called "global regionalization", which is a close combination of global and regional, where the local is an aspect of globalization and the global creates the local. the slogan "global thinking but local acting" is appropriate to describe it (shavkun, 2008). considering international marketing in relation to this slogan, we note that due to international cooperation, mainly in production, there is a strengthening of interdependence, which influenced the understanding of tncs to take into account two opposites: globalization http://www.virtual-economics.eu/ 195 www.virtual-economics.eu issn 2657-4047 (online) sviatoslav zhukov and olesia diugowanets virtual economics, vol. 3, no. 4, 2020 of their business using global marketing tools, and regionalization which means differences among the world countries or their integration groups, which requires application of differentiation in the regional (territorial, cross-border) marketing principle. the breadth of covering tncs' business activities with a focus on certain areas encourages them to form the international marketing management system more rationally and effectively. firstly, we outline the common and priority areas for research by marketing services and departments, which are: 1) social, cultural, and domestic (different cultures and languages, differences in intellectual development and mentality, habits and traditions); 2) economic (different economic systems and the degree of openness / closeness of markets, different sales conditions, currency differences, different levels of infrastructure development and competition); 3) political and legal (different political systems, different legacy standards). in developing a strategy for managing tncs' international marketing, research and analysis of these areas serve as a core in deciding to use one of the opposite principles known as globalization and regionalization, or alternatively a combination of the two. examining the practice of strategic management of international marketing, scientists have identified two opposing vectors for using marketing strategies. the first, which is more profitable due to the reduction of marketing costs (it is global marketing), is the conflict between the tncs’ desire for homogeneity and standardization of marketing approaches around the world. the second is based on the differences in national tastes of consumers from different countries, which is inherent in regional marketing. possible options for choosing a management solution are clearly shown by bartlett & ghoshal (1989) in the form of a matrix "globalization regionalization" (figure 1). regionalization (differentiation) low high g lo b a li za ti o n (i n te g ra ti o n ) high 1 globalization strategy 3 mixed strategy low 2 mixed strategy 4 regionally oriented strategy figure 1. a matrix "globalization regionalization". source: bartlett & ghoshal (1989). figure 1 shows that, given the two opposing approaches mentioned above, tncs can take advantage of a global strategy (field 1) through the advantages of scale and price competition, or the benefits of differentiation (field 4), which allows offering unique products to the local consumers. these fields of the matrix are the areas of simple but risky strategic marketing decisions. as an example, we note the following top-seven successful tncs in terms of market http://www.virtual-economics.eu/ 196 www.virtual-economics.eu issn 2657-4047 (online) sviatoslav zhukov and olesia diugowanets virtual economics, vol. 3, no. 4, 2020 capitalization as of september 2020, which adhere to field 1: “saudi aramco” (1,685 $bn), “microsoft” (1,359 $bn), “apple” (1,286 $bn), “amazon” (1,233 $bn), “alphabet” (919 $bn), “microsoft” (584 $bn), “alibaba” (545 $bn). market capitalization, along with annual income and total assets, is one of the methods for evaluating the investment attractiveness of a company. using market capitalization to show the size of a company is important because the size of a company is the main factor determining the various characteristics investors are interested in, including risks (most valuable companies in the world – 2020, (2020)). other areas require less risky, but no less difficult complex solutions. strategies for field 2 are related to standardized marketing, but situations may require decentralization of international marketing management with adaptation to the individual countries’ specifics. in field 3, the needs for integration and differentiation are high, and this situation requires the integration of production in combination with the requirements of regional differentiation in international marketing. this field is characterized by a high degree of intercultural relations and is associated with "localization of global orientation", and it is the riskiest for tncs (panchenko, 2007). the tncs’ solution on a global approach depends on many factors, but research and analysis of the external macro-environment are decisive here. in this case, the global benchmark itself is proposed to be assessed according to two indicators: 1) the global forces, due to many reasons, including consumer’s behaviour, the benefits of economies of scale in the standardization strategy, the level of competition, etc.; 2) the local forces that draw attention to regional features e.g. the diversity of cultures, legal norms, the originality of the production and marketing system, standardization, and so on. for these landmarks, two levels are distinguished. these are low and high, which form a twodimensional matrix represented by j.-j. lamben (lamben, 1996) in figure 2 with four variants of the international macro-environment, each of which requires a specific organizational form of management of international marketing of tncs. locality low high g lo b a li ty h ig h global environment (ethnocentrism) transnational environment (ethnopolycentrism) lo w neutral international environment (inert-centrism) multinational environment (polycentrism) figure 2. a matrix of the international macro-environmental analysis. source: adapted from the source (lamben, 1996). firstly, we are going to characterize the quadrants of the matrix from figure 2. http://www.virtual-economics.eu/ 197 www.virtual-economics.eu issn 2657-4047 (online) sviatoslav zhukov and olesia diugowanets virtual economics, vol. 3, no. 4, 2020 the global environment is purely standardized without the influence of local factors, and it is characterized by excessive but justified industrial security, because tncs are high-tech organizations where responsibility and management are directed towards centralization known as ethnocentrism. radically opposite to the global environment is multinational, which is dominated by the characteristics of a particular country including local preferences, culture, traditions of behaviour and legal norms. in such an environment, the food industry and the hotel and restaurant business function comfortably, when tastes and culinary traditions have a strong influence on preferences and shopping habits. this forces tncs to adapt to local characteristics and form a decentralized organizational structure known as polycentrism. in a neutral international environment, both global and local forces are equally weak to influence the efficiency of businesses such as the cement industry and ferrous metallurgy. its most successful name is inert-centrism. the transnational environment is characterized by the influence of both global and local forces, which complicates the tncs’ functioning through the simultaneous use of centralization and coordination by the parent company and the support of strong regional subsidiaries. transformation from a global strategy to a transnational one occurs frequently; for example, the "carlsberg" brand is a global brand that is present in more than 100 countries around the world with the same taste, label and bottle format. however, the culture of beer consuming in various countries differs, so it is more appropriate to have a transnational structure with some autonomy across countries. another tnc "volvo truck", having a global organizational structure with highly centralized management and producing the same products on the world market, is not always timely adapted to regional markets, so its dealers, providing after-sales service and warranty, regularly make adjustments to the product policy (lamben, 1996). these examples justify solving the problems of markets’ internationalization due to the need for tncs to think globally, using global marketing strategies, and act locally, using international (regional, cross-border) marketing, which is mainly tactical in nature with a focus on local differences. in the author's previous studies, cross-border marketing is defined as “a philosophy based on the theory and practice of making managerial decisions on forming a strategy for developing cross-border markets based on research and analysis of the factors of the marketing environment in order to realize the socio-economic interests of the territory, aligning the interests of the communities on these territories, with an orientation to the needs of target groups-consumers of goods and services living on both sides of the borders” (zhukov, 2010). however, the principle of "global thinking and local acting" implies the ability of tncs to create products without taking into account the results of local needs analysis, trying to get them accepted worldwide later, which shows the unwillingness of tncs to change global marketing strategy to transnational orientation. an alternative to this principle is the procter & gamble’s principle of "thinking both globally and locally", i.e. the development of product policy at both http://www.virtual-economics.eu/ 198 www.virtual-economics.eu issn 2657-4047 (online) sviatoslav zhukov and olesia diugowanets virtual economics, vol. 3, no. 4, 2020 regional and global levels, which corresponds to ethnopolycentrism. within its limits there is a so-called glocal marketing, whose strategy provides four-stage functions: 1) an analysis of local (regional) needs in a particular country; 2) globalization of the concept of goods developed locally; 3) adaptation of the product to each specific environment of the region; 4) implementation of the strategy through adapted operational marketing (lamben, 1996). 5. a typification of tncs’ international marketing depending on the degree of globalization and regionalization influence the most difficult for the international marketing organization in the tncs’ activities is ethnopolycentrism (transnationalism), in which ethnoand polycentrism are equally strong. according to these two multi-vector forces, there are three types of marketing: cascade, global and transnational, and both ethnopolycentric and inert-centric can use one of three marketing types. determining the type of marketing provides important information about competitors and partners, which allows judging the nature of the products in terms of their competitiveness, as well as the capabilities of tncs, as not every firm is capable of global and transnational marketing. in the countries which are insufficiently developed, for the enterprises at the initial stage of their foreign economic activity due to their limited capabilities, primarily financial (marketing budget), it is advisable to use cascade marketing. cascade marketing involves the consistent development of different foreign markets and marketing activities in one or more foreign markets that are not related to the domestic market. it is still prevalent in the countries with the developed market economies and in the ukrainian enterprises (naydenov et al., 2003). instead, if successful in their international activities, tncs can use all types of international marketing, which will ensure the rational use of their competitive advantages. the transformation of marketing types from one to another depends on many reasons and is associated with the tasks facing tncs in implementing each type of international marketing (sobolev, 2004). there are three important factors that encourage changes in the types of international marketing. the first factor is the dynamics of consumer’s needs. in international markets, the variability and ever-increasing rate of change in customer demand, improving the quality of goods and services encourage tncs to change the type of international marketing, for example from cascade one to another one. this is due to the fact that cascade marketing, although it is deeply adaptable to the market conditions of a particular country and meets the demands of consumers as much as possible, but due to excessive complexity and accuracy of accounting for changes in marketing, it is too slow. therefore, the main focus of cascade marketing is not on the speed of change in consumer needs, but on the compliance of the marketing complex with the market requirements. http://www.virtual-economics.eu/ 199 www.virtual-economics.eu issn 2657-4047 (online) sviatoslav zhukov and olesia diugowanets virtual economics, vol. 3, no. 4, 2020 while implementing the global marketing, a strategy of standardizing goods or services is implemented, and the decisive role belongs to the timely transition to another, new marketing complex in accordance with changes in consumer demand. because of this, global marketing is characterized by a high degree of risk to meet consumer needs late and to fail to satisfy the quality market needs. as a result, in conditions of mass demand for goods and services, tncs are moving to the use of transnational marketing. the second factor is the desire to enter foreign markets. as the number of markets grows, tncs are inclined to a strategy of globalization, taking into account the characteristics of individual markets. it seems that the growth of the markets’ number and, accordingly, business activities using global marketing may affect the inhibition in developing tncs. however, this cannot be allowed, as it threatens to give competitors an advantage by using the concept of transnational marketing. within the functioning of cascade marketing, the growth of the number of markets is less important than the profitability of foreign economic activity. this is due to different internal and external marketing complexes, and the secondary economies of scale. the opposite is the situation with the global marketing effectiveness, which is determined by the number of countries in which a standardized marketing mix is used. therefore, it is the combined use of the benefits of cascading and global types of marketing that benefits transnational marketing and allows exploring international markets on an even larger scale. the third factor is the tncs’ competitiveness. improving the tncs’ competitiveness, as in previous factors, is associated with the studied types of marketing. tncs’ competitiveness is a complex concept with certain criteria (in our case – the quality of goods and services, the cost of their production, the number of international markets), which make it possible to assess the impact of types of international marketing on the tncs’ competitiveness. an indicator of increasing the level of tncs’ competitiveness is the availability of goods and services of international quality with a price available to the target market segment of the selected country. despite the very number of international markets, even without defining their positions in them, tncs already indicate high competitiveness in a highly competitive environment. in order to establish the particular country’s market needs, tncs use cascade marketing, which contributes to creating goods and services of high quality. instead, this type of marketing does not allow tncs to save on the scale of production, and therefore they are non-competitive in price. the small number of markets compared to other types of marketing also reduces the effectiveness of cascading marketing. this is explained by the fact that the rapid change in market conditions, even in one country, often complicates the financial performance of tncs and weakens their competitiveness in other international markets (sobolev, 2004). http://www.virtual-economics.eu/ 200 www.virtual-economics.eu issn 2657-4047 (online) sviatoslav zhukov and olesia diugowanets virtual economics, vol. 3, no. 4, 2020 the global marketing, in comparison with the cascade one, is able to affect positively two of the three factors of tncs’ competitiveness: a) the cost of goods (services) production; b) the number of countries whose markets the corporation enters. at the same time, standardized products in global marketing are not always able to meet the consumers’ needs best, which reduces the tncs’ competitiveness. comparing the transnational type of marketing with the other two types, it should be noted that it reduces costs compared to cascade marketing, but not below the level of global marketing, and by adapting products to markets of different countries helps to meet market needs better. in addition, the ability to develop new markets in transnational marketing is much greater than in the global one. three defined factors of transition from one type of marketing to another reflect the general laws of applying the international marketing depending on the change of a market situation. however, it is problematic to define these types of marketing practically. tncs, having performed certain tasks in foreign trade, usually use several types of marketing at the same time, or make the transition to global or transnational marketing, bypassing the cascade one. the latter is possible if relevant products or services with a high level of competition and the necessary resources are available, and contribute to the already existing positive experience of tncs that have managed to quickly move from cascading marketing to global and transnational (e.g. software, communications, office equipment etc). it should be noted that tncs can use one of three types of international marketing, and simultaneously combine two or three types. in the latter case, each of the types will cover a different number of markets, have different performance and be used for various purposes. table1. a comparative characteristics of the international marketing types indicators international marketing types cascade global transnational 1. the level of adaptation to one foreign country high low medium 2. the possibility of simultaneous distribution in several countries low high medium 3. standardization of marketing systems not implemented high medium 4. economic and political risk low high medium 5. projected economic efficiency low high medium 6. types of international marketing with which it is most combined transnational transnational global, cascade 7. speed of reaction to the market needs low high medium 8. the degree of consumer needs’ satisfaction high low medium 9. speed of marketing activities high low medium 10. the level of distribution among firms high medium medium 11. level of qualification of marketing staff high medium high 12. marketing costs per country high low medium source: adapted from the source (sobolev, 2004). http://www.virtual-economics.eu/ 201 www.virtual-economics.eu issn 2657-4047 (online) sviatoslav zhukov and olesia diugowanets virtual economics, vol. 3, no. 4, 2020 after studying international marketing, sobolev v. (2004) made a comparative description of the three types of international marketing, which is shown in table 1. the research of three types of international marketing shows a fundamental difference in its cascade and global types. on the other hand, transnational marketing is characterized by the mediocrity of the values of most indicators without significant distortions in one or another direction, which gives grounds to argue about the rationality of using this international marketing type. 6. conclusions a modern positive phenomenon in developing international business in general and international marketing activities in particular is glocalization, which means an effective and promising hybrid of two modern trends known as globalization and localization (regionalization). glocalization is an accelerator of international economic activity through adapting production and consumption of universal goods and services to the specificity of the regional market. given the new promising phenomenon called glocalization, it is an advisable for companies to reorient from a global business strategy to a transnational one: start from "thinking globally", carrying out strategic marketing, and continue "acting locally", conducting operational (tactical) marketing focused on specific regions. the study showed that not all companies are ready to change the global orientation of marketing to its transnational type. the most promising strategy for global companies is the principle of "global thinking and local acting", which means the need to develop and implement marketing product policy at both regional and global levels, i.e. to adhere to a glocal marketing strategy. this is confirmed by the ratings: fortune global 500, the criterion of which is the company's revenue (fortune global 500, 2020); global top 100 is based on market capitalization (global top 100 companies, 2020); forbes global 2000 ranked it according to four indicators: sales, profits, assets and market value of companies (global top 100 companies, 2020). in the matrix in figure 2, four quadrants (variants) of the international macroenvironment are highlighted. each field of the matrix has a different focus on marketing strategy. for a neutral international environment with weak influence and global and local forces, it is proposed to use the term inert-centrism. the first chapter focuses on the fact that for tncs, in addition to international marketing, it is advisable to use regional or cross-border marketing with a focus on local differences. the development of two opposite but interdependent processes – globalization and localization – is promising on the authors’ opinion. it means, that it will be the subject of further research and discussion in the scientific community. for some researchers, these http://www.virtual-economics.eu/ 202 www.virtual-economics.eu issn 2657-4047 (online) sviatoslav zhukov and olesia diugowanets virtual economics, vol. 3, no. 4, 2020 processes are part of a something whole, and the relations among them are strengthened and intertwined. for the others, it is the coexistence of opposite, antagonistic, with significant contradictions among them. the second chapter examines the types of tncs’ international marketing, depending on the strength of the impact of globalization and regionalization processes: cascading, global and transnational. however, there are no clear patterns of their use, and tncs may use either several types of marketing at the same time or not use one of them. three main factors of influence on changes in the types of tncs’ international marketing, changes in the priority of consumer needs, the desire to enter foreign markets, and increased competitiveness are identified. taking into account the comparative characteristics of the types of international marketing in the 12th indicators in table 1, certain differences are established in the cascading and global types of marketing, and transnational marketing is characterized by mediocrity of values among most indicators, shows its rationality in use in practice. regarding the study of cascade, global and transnational types of international marketing, we note the significant differences in cascade and global types of marketing, and transnational marketing is characterized by mediocrity of values among most indicators, which shows its rationality in its practical use. as a result of generalization and systematization of the theory of globalization and regionalization, as well as the practical experience of tncs, a connection was established between global regionalization and international marketing activities of tncs. in accordance with the purpose of the article, this made it possible to substantiate the choice of the type of international marketing for tncs depending on the process of global regionalization. references albrow, m., & king, e. 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(2010). mekhanizmy zastosuvannia rehionalnoho marketynhu v systemi transkordonnoho ekonomichnoho spivrobitnytstva prykordonnoho rehionu (na materialakh zakarpatskoi oblasti): monohrafiia. mukachevo: v-tvo “elara.” [in ukrainian]. http://www.virtual-economics.eu/ кwilinski alex 48 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 2020 volume 3 number 4 (october) empirical evaluation of the education expenditure impact on economic growth olena vorhach abstract. this study expounds an empirical evaluation of (a) the interrelation between higher education expenditure and the share of highly qualified employed population of ukraine, (b) the dependence of the population qualification level on the higher education expenditure in foreign countries and (c) dependence of these countries’ gdp on the qualification of people. it has been hypothesized that an increase in funding for higher education contributes to the growth of the share of highly qualified population and the gdp volume per capita. the regression analysis results indicate inverse dependence of the population's qualification on real expenditure on higher education in ukraine, that is, as the expenditure decreases, the share of population with high qualification increases, while the number of higher school teachers goes down. this situation is inconsistent with economic theory and is fraught with long-term adverse consequences for the national economy. the analysis of the average figures in 24 foreign countries has not revealed a pronounced dependence of the population qualification on expenditure on higher education and that of gdp on qualification. nevertheless, the general trend is observed, i.e., in the countries with heavier expenditure on higher education there is a higher percentage of qualified population and higher gdp. the same trend, but in a more explicit form, has been established based on the results of regression analysis for the individual eu countries, confirming the research hypothesis. keywords: industry 4.0, economic growth, gdp, higher education expenditure, human capital, highly qualified staff, higher education jel classification: h24, h52, i25, o15 author: olena vorhach institute of industrial economics of the national academy of sciences of ukraine, 2 maria kapnist street, kyiv, ukraine, 03057 e-mail: vorgach.lena@gmail.com https://orcid.org/0000-0003-3686-4858 citation: vorhach, o. (2020). empirical evaluation of the education expenditure impact on economic growth. virtual economics, 3(4), 48-71. https://doi.org/10.34021/ve.2020.03.04(3) received: june 3, 2020. revised: august 12, 2020. accepted: september 26, 2020. © author 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2020.03.04(3) https://creativecommons.org/licenses/by/4.0/ 49 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 1. introduction the level of people’s education and skills is an important factor in economic growth, especially in the current environment. digitalization and the fourth industrial revolution determine significant changes in the nature of labor (miśkiewicz, 2019; dzwigol et al., 2020). this leads to a shift in occupations (some of them disappear, while the others emerge), increased requirements for the people’s knowledge and skills (frey & osborne, 2013; d2l, 2018), which will allow them to handle the high-tech equipment and manage the digital production processes (analyze big data, predict changes in the machine operation, make decisions in real time, etc.) (benesovaa & tupa, 2017). the workforce with digital skills, so-called stem (science, technology, engineering, and mathematics), is becoming an important component of modern industry (industry 4.0), which requires the search for its development opportunities. in this regard, the importance of education, especially tertiary education, and its accessibility to a wider community of people for continuous professional development and retraining in line with the development of latest technologies is growing (d2l, 2018; becker et al., 2011). yet there are reasonable fears (stiglitz, 2014; ford, 2016; frey & osborne, 2013) that the development of industry 4.0 could lead, on the one hand, to increased unemployment due to the automation and robotization of production processes and, on the other hand, to a shortage of qualified personnel due to changing training requirements and problems with the organization of rapid training and retraining. however, an analysis of a number of companies that have already implemented digital technology showed that at the current level of technological development, only about 5% of occupations are fully automated and about 1/3 of individual tasks can be automated in 60 % of occupations (mckinsey & company, 2017). it follows that, at least in the coming years, the employers do not plan to replace all employees with robots (albeit the relevance of production automation and robotization increasing significantly due to the pandemic covid-19). at the same time, there is still shortage of "digital" personnel, and by 2030, this shortage is expected to grow by 26 % in the u.s. and by 22 % in europe in all industries (manpowergroup, 2019). therefore, many managers of enterprises already implement in-company training and retraining courses, as well as outsource staff training through cooperation with educational institutions. experience in some countries shows that investment in staff training pays off well; for example, in north america the cost of replacing employees accounts for more than 30 % of the cost of wages, while the cost of training is less than 10 % (manpowergroup, 2019). an important role in overcoming the stem staff shortage is played by the government, which is designated not only to finance education (primarily higher education, advanced training and retraining of adults), but also to create good conditions for the other economic actors to invest in human capital. the tasks of the government in this direction (deloitte, 2018; iza, 2018; agolla, 2018) include reforming education to meet the requirements of digitalization and development of advanced technologies, its adequate direct and indirect budget financing (through provision of tax benefits and preferences to students). http://www.virtual-economics.eu/ 50 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 it is estimated that the accelerated industrial development and economic growth of a country is due not so much to digitalization in itself (vyshnevskyi, 2020) but to human capital, i.e. the sum of knowledge, skills and abilities of people (agolla, 2018). therefore, the ability to develop industry 4.0 and ensure economic growth largely depends on the organization of employees’ continuous training in line with developing digital technologies, highlighting the need for investment in their education, professional development and retraining. 2. literature review 2.1. theoretical literature the fundamentals of the modern concept of human capital were laid by the studies by the economists schultz (1960; 1961) and becker (1964; 1975). in particular, schultz (1960; 1961), who was one of the first to define human capital, considered investment in people's knowledge as that in production factors to obtain an additional product, that is, defined education as one of the main economic growth factors. in his papers, he emphasized investment as a required step to improve the quality of staff, and, in particular, he explored these investments beyond formal education. g. becker’s (1964, 1975) paper findings guided many subsequent studies (thurow, 1970; romer, 1990; nordhaug, 1993; grossman, 1972; lau et al., 1993; nelson & phelps, 1966) in the field of human capital theory. he looked at investing in education both from the perspective of employees, allowing them to increase their income, from the perspective of a company, which increases its productivity and profits by training its personnel, as well as from the perspective of the state, which can enjoy economic growth due to educating people. becker paid considerable attention to the analysis of investments in staff education and the impact of these investments on the companies’ profits and economic benefits of the state. in general, the theory of human capital has become widely spread in the scientific literature, and its followers continue to emphasize the importance of investment in staff education, justifying it by the growth of production and economy (rosenzweig, 1990). however, it is not easy to identify and prove their direct relationship. investments in education do not automatically provide economic growth; much depends on the circumstances of the place and time, state of the art and technology development, specific features of the national mentality and culture, including the technical one, quality of institutional environment, etc. in this regard, empirical studies (mankiw et al., 1992; benhabib et al., 1994; judson, 1998; benos & zotu, 2014; jamel et al., 2020) are of great interest. 2.2. empirical literature the analysis carried out by pelinescu (2015) on the basis of the constructed model of human capital influence on economic growth has revealed close relations between (1) gdp per capita and innovation potential of employees, (2) gdp per capita and qualification, which corresponds to the conceptual provisions of the theory about positive influence of human http://www.virtual-economics.eu/ 51 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 capital quality on economic growth. at the same time, a negative correlation between gdp per capita and expenditure on education was revealed, which was explained by the different level of the countries’ economic development. negative results related to the indicators under study were observed during the global financial and economic crisis 2008-2009. in general, the author confirmed the positive impact of staff qualification on the economic growth in the country. the results of the econometric model by teixeira & queirosb (2016), based on selected indicators, showed that the interaction of human capital and high-tech industries has a positive impact on economic growth, but it follows different paths in countries with different development levels. in highly developed countries, this relationship is positive. in transition economies, human capital has a significant impact on overall economic growth, but the relation is negative in high-tech industries. according to the authors, in the absence of hightech production in a country, the availability of highly qualified personnel will not lead to faster economic growth. the regression analysis of the relation between gdp and human capital indicators in the scandinavian countries and southeast europe conducted by kokotovic (2016) showed that among the variables he selected, the relation between overall public expenditure on education and gdp is the closest. besides, the author notes that the human capital has the greatest impact on gdp growth in developed countries. the study by radulescu et al. (2018) emphasizes the role of higher education in ensuring the economic development of several eu countries (poland, czech republic, slovakia, hungary, bulgaria, and romania). the results of the regression analysis of the tertiary education impact on the economic competitiveness and gdp per capita showed a strong correlation of the higher education variable with other variables. this allowed the authors to argue that higher education improves the country's economic competitiveness and contributes to gdp growth. from a brief review of scientific papers, it follows that theoretical and empirical works of economists generally confirm the positive impact of the level of people’s education on economic growth, taking into account the other factors (including the overall level of the country’s development). further, in empirical studies, scientists note the difficulties in interpreting the results of analysis for transition economies (with a low level of technological development) and during economic crises (pelinescu, 2015; teixeira & queirosb, 2016; kokotovic, 2016; radulescu et al., 2018). they also draw attention to the fact that the interaction of highly qualified personnel and new production technologies can help accelerate economic growth. the issues of assessing the impact of education financing on economic growth are also relevant for ukraine, which aims at digitalizing its economy. according to recent research, the country has certain prospects for developing the national smart industry in certain sectors, but so far there have been many risks that may prevent this from occurring, including in the domestic labor market (vyshnevskyi et al., 2019; vishnevsky & knjazev, 2017). priority is given http://www.virtual-economics.eu/ 52 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 to the further development of human capital capable of working with new technologies, based on developing and implementing strategies for the effective use, preservation and development of labor potential (including the research and production) in the course of implementing industry 4.0 technologies, as well as staff retraining following stem principles (pankova et al., 2020). in turn, it is necessary to also note the works by the scientists (bogachov et al., 2020; boiko et al., 2019; czyżewski et al., 2019; chygryn et al. 2020; dalevska et al., 2019; dementyev & kwilinski, 2020; drozdz et al., 2019; 2020; dzwigol, 2019a; 2019b; 2020a; 2020b; 2020c; dzwigol & wolniak, 2018; dzwigol & dźwigoł-barosz, 2018; 2020; dzwigol et al., 2019a; 2019b; 2019c; 2020a; furmaniak et al., 2018; 2019a; 2019b; kharazishvili et al., 2020; kondratenko et al., 2020; kuzior et al., 2020; kwilinski, 2017; 2018a; 2018b; 2018c; 2018d; 2019; kwilinski et al., 2019a; 2019b; 2019c; 2019d; 2019e; 2019f; 2019g; 2020a; 2020b; 2020c; 2020d; kwilinski & kuzior, 2020; lakhno et al., 2018; miskiewicz, 2017a; 2017b; 2018; 2020a; 2020b; miśkiewicz & wolniak, 2020; pająk et al., 2016; 2017; prokopenko & miśkiewicz, 2020; saługa et al., 2020; savchenko et al., 2019; tkachenko et al., 2019a; 2019b; 2019c; 2019d; 2019e; yelnikova & miskiewicz, 2020), in which special attention is paid to the issues of processes’ informatization in the context of increasing the efficiency of the economic mechanisms’ functioning of various scales of activity. since the development of digital economy and the establishment of industry 4.0 increases the need for highly qualified personnel in ukraine, it directs the focus of economists on education as an important factor in forming human capital and economic development. in this regard, this article is intended to test the hypothesis that an increase in expenditure on tertiary education increases the share of the population with high qualifications in the country, and this, in turn, contributes to its economic growth. based on the above, the purpose of this article is to empirically evaluate the dependence of the population’s professional development on the amount of higher education expenditure in ukraine and some foreign countries and to justify the impact of higher education on economic growth. 3. methodology the research was conducted using the comparative and regression analysis based on two data sets, for ukraine and foreign countries. the data for ukraine include: 1) employment indicators: the total number of employed population 15-70 years old and in terms of qualification levels (with high and low qualification). the highly qualified people are the sum of employed population 15-70 years old with full higher and basic higher education isced2011 levels 5 to 8; the low qualified ones are the sum of employed population of the same age with incomplete higher, vocational, full general and basic general secondary http://www.virtual-economics.eu/ 53 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 education, as well as with primary or no education at all (state statistics service of ukraine, 2020). 2) tertiary education financing indicators: in terms of the sources of financing (governmental and non-governmental) and stages of higher education (first and second stages of higher education), which correspond to isced2011 levels 5 to 8, as well as the total costs, represented by the sum of first and second stages. expenditure of the public sector on tertiary education is covered from the state and local budgets, while the expenditure of the nongovernmental sector – from private enterprises and households. the first stage of higher education includes obtaining an appropriate degree in higher education institutions of the 1st to 4th accreditation degrees, while the second (postgraduate higher education) covers postgraduate and doctoral studies, postgraduate education in institutions of the 3rd to 4th accreditation levels, in particular in academies, institutes, centers for advanced training, retraining, etc. (state statistics service of ukraine, 2020). the following indicators were used to generate a data set for foreign countries: 1) gdp per capita; 2) a total (governmental and non-governmental) expenditure on higher education isced2011 levels 5 to 8 per student; 3) a share of population with higher education of isced2011 levels 5 to 8 15-64 years old. the data of ukraine are received on the website of the state statistics service of ukraine from the statistical collection of economic activity of the population of ukraine, labor market section, on employment indicators, and collection of national accounts of education of ukraine, education section, on financing indicators. the data of foreign countries were collected on the oecd website, productivity section, on gdp per capita and education and training section on the total expenditure on higher education of isced2011 levels 5 to 8 per 1 student (oecd, 2020a; oecd, 2020b), as well as on the eurostat website, population by educational attainment level section on the share of population with higher education of isced2011 levels 5 to 8 at the age of 15-64 years old (eurostat, 2020). the research period for ukraine and foreign countries covers the years for which the data on all selected indicators are available. 4. results and discussion 4.1. empirical results for ukraine as the analysis of the scientific literature has shown, education is an important component of the country's economic growth. providing people with education, particularly higher education, requires significant financial investments from the state and individuals, especially to train stem personnel. consequently, the higher the country’s current expenditure for education (advanced training and retraining) of the population is, the more opportunities it has, with all other things being equal, to quickly address the problem of deficit of the highly qualified personnel required for the modern industry development. http://www.virtual-economics.eu/ 54 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 since this issue is also relevant for ukraine, it is advisable to analyze and evaluate the capabilities of the state in terms of training the highly qualified personnel. for this purpose, it is required to investigate changes in the higher education expenditure in the long term, as well as changes in the share of the population with high qualification in the country, and to determine whether the level of qualification depends on the education increased expenditure. table 1 presents the data on the number of highly qualified, low skilled and total employed population of ukraine for 2007-2018. since some years of this period take into account the data on the temporarily occupied territories of crimea, donetsk and luhansk regions, before entering the table, they were given in a comparable form by calculating the factor of transition to a new reporting pattern based on the total number of employees. according to table 1, the period under study shows a decrease in the number of employed people, the sharpest after 2014. in terms of qualification levels, the decline was observed mainly as regards low-skilled population, while a slight decrease in their number began after the financial and economic slowdown of 2008-2009, which may be explained by labor migration to foreign countries. at the same time, a slow growth of highly qualified population was observed throughout the entire period. table 1. employment indicators in ukraine by skill level, thousands of people year highly qualified low qualified total employees 2007 4,890 14,895 19,785 2008 4,956 14,893 19,849 2009 5,034 14,076 19,110 2010 5,211 13,969 19,180 2011 5,391 13,844 19,235 2012 5,568 13,694 19,261 2013 5,583 13,731 19,314 2014 5,854 12,219 18,073 2015 5,464 10,980 16,443 2016 5,439 10,838 16,277 2017 5,504 10,652 16,156 2018 5,734 10,627 16,361 source: developed by the author based on the data of (state statistics service of ukraine, 2020). to evaluate the impact of higher education expenditure on the increase in the number of highly qualified population in the country, the analysis of the overall financing of higher education was carried out in terms of funding sources and stages of education in the period under study. before entering the data into table 2, they were converted into a comparable form by linking them to the prices of 2010. further, the data in table 2 were translated into http://www.virtual-economics.eu/ 55 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 million u.s. dollars at the exchange rate of 2010 and excluding the temporarily occupied territories. when comparing the data in table 2, it was found that in 2011, the total expenditure on higher education in ukraine began to gradually decline, but the largest decrease was observed after 2014. the situation is similar if we consider the costs in terms of the sources of funding and stages of higher education. at the same time, the amount of costs for the second stage of higher education (postgraduate and doctoral studies, advanced training and retraining) is much lower than for the first stage. that is, adult education and retraining is financed to a lesser extent, which is inconsistent with trends in many countries across the world, considering this as an opportunity to quickly address the stem personnel shortage. the share of governmental expenditure on education in ukraine is significantly higher than that of nongovernmental expenditure, despite the fact that the government has significantly reduced these costs over the past five years. non-government expenditure has also decreased in real terms. table 2. expenditure of ukraine on higher education in 2007-2018 year total expenditure on higher education isced2011 levels 5 to 8 governmental expenditure on higher education isced2011 levels 5 to 8 non-governmental expenditure on higher education isced2011 levels 5 to 8 total expenditure on stage i of higher education total expenditure on stage ii of higher education 2007 4,643 2,685 1,958 4,464 180 2008 4,717 2,997 1,720 4,534 182 2009 4,646 2,994 1,653 4,482 165 2010 4,753 3,142 1,611 4,571 181 2011 4,393 2,930 1,463 4,226 167 2012 4,322 3,004 1,318 4,162 160 2013 4,264 2,945 1,319 4,074 190 2014 3,557 2,488 1,069 3,408 149 2015 2,973 1,951 1,022 2,296 91 2016 2,725 1,895 830 2,607 118 2017 2,431 1,721 710 2,314 117 2018 2,393 1,697 697 2,266 127 source: developed by the author based on the data of (state statistics service of ukraine, 2020). then the dependence of qualification growth on the increase in higher education expenditure in ukraine for 2007-2018 was analyzed (table 3). for this purpose, based on the values of table 1, the share of highly qualified population in the total number of the employed annually was calculated and compared with higher education expenditures from table 2. http://www.virtual-economics.eu/ 56 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 the amount of the total higher education expenditure in this period is gradually decreasing against the background of slow growth of the share of highly qualified population (table 3), i.e. qualification is growing regardless of the amount of expenditure on it. the graphical presentation of data (fig. 1) shows the inverse dependence of qualification on education expenses more clearly (with the correlation factor being 0.95), i.e. the share of highly qualified personnel increases with decreasing higher education expenditure. table 3. comparison of a share of highly qualified population and higher education expenditure year share of highly qualified population, % of total employees total expenditure on higher education isced2011 levels 5 to 8, us$ million 2007 24.7 4,643 2008 25.0 4,717 2009 26.3 4,646 2010 27.2 4,753 2011 28.0 4,393 2012 28.9 4,322 2013 28.9 4,264 2014 32.4 3,557 2015 33.2 2,973 2016 33.4 2,725 2017 34.1 2,431 2018 35.0 2,393 source: developed by the author based on the data of (state statistics service of ukraine, 2020). figure 1. statistical correlation between the share of highly qualified population versus the total mass of employees and higher education expenditure in 2007-2018 in ukraine. source: developed by the author. y = -0,0037x + 44,072 r² = 0,9166 22 24 26 28 30 32 34 36 2 000 2 500 3 000 3 500 4 000 4 500 5 000 s h a re o f h ig h ly q u a li fi e d p o p u la ti o n , % o f th e t o ta l e m p lo y e e s total expenditure on higher education of isced2011 levels 5-8, us$ million http://www.virtual-economics.eu/ 57 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 such a result clearly contradicts the provisions of economic theory and allows assuming either distortions in statistical estimates of the real level of the personnel qualification , and/or the presence in ukraine of a significant "shadow" pay for teachers, and/or the operation of the educational sphere, in this case, the employees in the system of higher, post-secondary professional education and scientific sphere, at the expense of reduced pay for the teachers while maintaining their workload. as a rule, this is observed when the number of budget recipients (educational institutions) is reduced, as well as when budget funding for their maintenance and organization of the educational process therein is reduced. the decrease in public expenditure on higher education in ukraine is a result of the reform ongoing since 2014, at the beginning of which, along with improved quality of education and knowledge gained, it has been planned to eliminate some higher education institutions (osvita, 2015). according to the state statistics service of ukraine, the number of higher education institutions within one academic year since the beginning of the reform has decreased significantly, i.e. the number of institutions of the 3rd to 4th accreditation levels in 2013/14 academic year was 309, while that in 2014/15 – 277, and the number of institutions of the 1st to 2nd accounted for 458 and 387, respectively. this was accompanied by a reduction in the number of full-time staff and an increase in part-time employment. the number of students also decreased, which is explained by the fall of the birth rate in 1998-2003 (the years of their admission to higher education institutions are 2015-2020). therefore, the burden on institutions and teachers of higher education remains the same (due to the reduction of both teachers and students), and may increase in the future due to an increase in the birth rate since 2004. during the reform, the law on education (verkhovna rada of ukraine, 2017) fixed the guaranteed minimum wage for teachers of higher education institutions, increased the requirements for accreditation of institutions and certification of teachers. this has not yet had a significant impact on education quality, but did lead to lower real budget expenditure for it and reduced the number of institutions and teachers. recent legislative changes (the cabinet of ministers of ukraine, 2019) have radically changed the way the institutions of higher education are funded, i.e. not by the number of students, but by their educational, scientific and international activities, which has helped to reduce governmental funding of many of them. besides, the cabinet of ministers of ukraine (the cabinet of ministers of ukraine, 2020) introduced a step-wise increase in the cost of contract training for popular specialties up to 80 % of the cost of budget expenditure on them, which may have a negative impact on people's incentives to study and lead to a decrease in private funding of higher education. thus, reduction of higher education budget expenditure is a consequence of the reform carried out by the government, which suggests a further reduction in funding. at the same time, the burden on employees in the higher education sector remains high. during the past years, non-governmental expenditure on education have been decreasing, albeit insignificantly, but steadily. in the future, such actions may lead to a decrease in the stratum of population with higher education in ukraine (taking into account its quality), which will http://www.virtual-economics.eu/ 58 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 hinder availability of highly qualified personnel, because the situation when costs are reduced and results grow cannot last for long. contrarily, in foreign countries, the government expenditure on higher education is increasing (as described below). 4.2. empirical results for european countries by investing in the knowledge and professional skills of people, the state directly or indirectly invests in production, because more highly skilled labor is involved in creating a national product, which, in turn, contributes to economic growth. in this context, it is advisable to study the trends observed in foreign countries. developing the ideas of research (pelinescu, 2015; kokotovic, 2016; radulescu et al., 2018), the relation among the volume of gdp per capita, expenditure on higher education and the share of highly qualified personnel in the selected european countries (the graph shows the size of gdp) were analyzed based on the average data for 2014-2016 (fig. 2). figure 2. statistical correlation of gdp per capita, amount of higher education expenditure and share of population with higher education. source: developed by the author according to the data of (oecd, 2020a; oecd, 2020b; eurostat, 2020). http://www.virtual-economics.eu/ 59 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 visual evaluation of the graph (fig. 2) shows a general trend that the countries with higher gdp per capita have higher expenditure on education and more skilled population. that is, in general, there is a direct and logical dependence, i.e. an increase in expenditure on education ⇒ increased qualification of the people ⇒ economic growth. at the same time, it should be noted that linear dependence describes the growth of gdp per capita in the selected countries well (the determination factor being 0.9464), while the expenditure on education (0.5025) and the share of highly qualified personnel (0.3071) is worse. it should be taken into account that such results are partly explained by specific problems with higher education financing in individual countries (e.g. lithuania and latvia), as well as by the fact that in the countries with a less developed industrial sector there is no acute need for highly qualified personnel. in general, as was mentioned above, the cost-qualificationeconomic growth dependencies can be traced (fig. 2), which provides a basis for their research at the level of individual countries. 4.3. empirical results for selected european countries taking into account ukraine's european integration aspirations, it is advisable to analyze the interdependence of higher education expenditure, the share of highly qualified population, and gdp in individual eu countries. for this purpose, new eu member states (poland, estonia, czech republic, slovakia, latvia, lithuania, and slovenia), which, like ukraine, used to be classified as plan-based economies, were included in the study. figure 3. statistical correlation between the share of highly qualified population and the amount of higher education expenditure in poland, estonia, slovakia, and latvia. source: developed by the author based on the data of (oecd, 2020a; eurostat, 2020). poland y = 0.002x + 6.0791 r² = 0,8541 estonia y = 0.0005x + 27.328 r² = 0,8261 slovakia y = 0.0004x + 12.998 r² = 0,635 latvia y = 0.0011x + 17.229 r² = 0,3971 12 17 22 27 32 37 4500 6500 8500 10500 12500 14500 16500 p o p u la ti o n w it h h ig h e r e d u ca ti o n 1 5 -6 4 y e a rs o ld , % o f th e t o ta l p o p u la ti o n total expenditure for higher education per student, us$ thousand, current ppps http://www.virtual-economics.eu/ 60 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 figure 4. statistical relation between the share of highly qualified population and the amount of higher education expenditure in the czech republic, slovenia, and lithuania. source: developed by the author using the data of (oecd, 2020a; eurostat, 2020). based on the statistical data (oecd, 2020a; oecd, 2020b) on total (governmental and nongovernmental) higher education expenditure per student and gdp per capita, as well as the data of (eurostat, 2020) on the share of population with higher education, fig. 3 and fig. 4 show a graph of statistical dependence of selected indicators per each country in 2010-2016. the diagrams of approximating functions by foreign countries (fig. 3, fig. 4) reflect the presence of linear dependence of the share of highly qualified personnel on higher education expenditure: 1) the determination factors of poland (0.8541), estonia (0.8261), and slovenia (0.7313) have high values, indicating a strong correlation between the indicators; 2) the czech republic (0.602) and slovakia (0.635) are characterized by the presence of an average correlation and latvia (0.3971) – by a weak correlation; 3) lithuania shows almost no dependence of qualification on expenditure (the determination factor being 0.0586). according to the data of (oecd, 2020a), the czech republic has seen a slight decrease in expenditure in 2013 and 2016 against the background of an overall increase; slovakia and latvia have seen a sharp decline in 2016, while lithuania's expenditure is leapfrogging throughout the period. in latvia, this is due to the reduction in the number of students (by 17 % over the period under study) (oecd, 2019a) and the reform of higher education, which resulted in introducing a new model for its financing in 2015-2016 aimed at improving the quality of education and a model for teachers' remuneration aimed at improving the quality of their work and the efficient use czech republic y = 0.0017x + 0.6622 r² = 0,602 slovenia y = 0.0033x 8.7909 r² = 0,7313 lithuania y = 0,0006x + 24,669 r² = 0,0586 10 15 20 25 30 35 40 6500 7000 7500 8000 8500 9000 9500 10000 10500 11000 11500 p o p u la ti o n w it h h ig h e r e d u ca ti o n 1 5 -6 4 y e a rs o ld , % o f th e t o ta l p o p u la ti o n total expenditure on higher education per student, us$ thousand, current ppps http://www.virtual-economics.eu/ 61 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 of public funds (oecd, 2017a). fluctuations in higher education expenditure in lithuania were influenced by the demographic situation, which led to a 32 % decrease in the number of students (over the years under study), resulting in a decrease in the number of teachers and higher education institutions. further, low public funding for higher education in lithuania is 1.1 % of the country's gdp (oecd, 2019b; oecd, 2017b). contemporary studies (unesco, 2016; hanushek et al., 2008) point to the fact that it is highly qualified staff that has a strong influence on gdp growth during the periods of economic growth. therefore, given the rapid development of industry 4.0, the role of highly skilled labor is increasing, as it promotes the launch of new technologies into production. fig. 5 and fig. 6 present statistical dependence of gdp per capita on high qualification of employees for 2010-2016 in the foreign countries under study. figure 5. statistical relation of gdp per capita and the share of highly qualified population in poland, czech republic, latvia, and estonia. source: developed by the author using the data of (oecd, 2020b; eurostat, 2020). all considered countries show a strict linear dependence between gdp growth and increase in the share of population with higher education (fig. 5, fig. 6). this is proved by high values of determination factors: poland – 0.971, estonia – 0.9681, czech republic – 0.9204, slovakia – 0.9404, latvia – 0.9761, lithuania – 0.9267, and slovenia – 0.8861. this allows asserting that high qualification of the population is positively related to the volume of the country’s gdp and, therefore, improved skills of people contribute to economic growth. poland y = 1099.3x 241.98 r² = 0,971 czech republic y = 1297.2x + 7963.3 r² = 0,9204 latvia y = 1217.2x 9450.7 r² = 0,9761 estonia y = 2368.2x 49211 r² = 0,9681 15000 20000 25000 30000 35000 40000 13 18 23 28 33 38 g d p p e r ca p it a , u s $ th o u sa n d , cu rr e n t p p p s population with higher education 15-64 years old, % of the total population http://www.virtual-economics.eu/ 62 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 figure 6. statistical relation between gdp per capita and a share of highly skilled population in slovakia, lithuania, and slovenia. source: developed by the author using the data of (oecd, 2020b; eurostat, 2020). in general, the analysis of the new eu member states allowed identifying: (a) the existence of a dependency of the highly skilled population on higher education expenditure and (b) the existence of a dependency of gdp on the share of highly skilled population. however, for the sake of the picture completeness, it is advisable to perform calculations and evaluate the existence of such a dependence in the other eu countries, which may constitute the subject of further research in this direction. 5. conclusions following the economic theory, it can be argued that investment in education has a positive impact on the skills level of the population, which, in turn, leads to higher productivity and, all other things being equal, contributes to sustainable economic growth. in practice, taking into account the level of science and technology, as well as the nature of the institutional environment, not all countries, including ukraine, are able to achieve this. the analysis conducted in the article showed that during the period under study, the share of highly qualified population of ukraine is growing gradually. this could be considered as a good basis for forming stem-personnel and increasing the national labor productivity, if the real costs of higher education, professional development and retraining of people (almost twice in 2015-2018), mainly the governmental ones, were not reduced. this is partly due to the reform of the education system, which, according to the government's plan, should improve its quality. it is difficult to evaluate its results so far, but currently there is a decrease in higher education funding, as well as a decrease in the number of universities and teachers. slovakia y = 1174x + 7177.7 r² = 0,9404 lithuania y = 1327.2x 14161 r² = 0,9267 slovenia y = 740.51x + 12530 r² = 0,8861 19000 21000 23000 25000 27000 29000 31000 33000 35000 13 18 23 28 33 38 g d p p e r ca p it a , u s $ th o u sa n d , cu rr e n t p p p s population with higher education 15-64 years old, % of the total population http://www.virtual-economics.eu/ 63 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 the regression analysis revealed an inverse dependence of people's qualification on real expenditure on higher education in ukraine. that is, a decrease in funding is accompanied by a certain increase in the share of people with high qualifications, which is inconsistent with the theory of human capital and practice in many european countries. obviously, this situation cannot last long and may lead to long-term adverse consequences for the national economy. the analysis of relevant indicators of eu member states has shown that, in general, there is no strongly pronounced dependence of the population's qualifications on education expenditure and gdp on qualifications. however, it can be argued that there is a certain general trend according to which the countries with high expenditure on higher education have a higher percentage of highly skilled population and higher gdp. regression analyses of individual eu countries that are former plan-based economies have confirmed these findings. most of them show a strong linear relationship between people's qualifications and expenditure on higher education. also, there is an even stronger linear dependence of gdp on the qualifications of people in these countries. thus, in europe the hypothesis that those countries, which better finance higher education (re-training and professional development) of people, provide an increase in the share of highly qualified work and, consequently (given the achieved level of science and technology), ensure the gdp growth per capita is confirmed analytically. to sum up, it should be noted that the revealed inverse dependence of the share of highly qualified population in ukraine on real expenditure on higher education cannot be considered normal, especially against the background of the fourth industrial revolution. reduction of higher education expenditure in ukraine backed up by an insignificant increase in the number of highly qualified population (taking into account the problems of education quality) reduces the opportunities of the country in terms of stem-personnel formation and economic growth. to avoid irreversible changes in the quality of human capital, it is advisable for the government to reconsider the attitude towards governmental funding of higher education and to stimulate private funding, bringing it in line with the best european practices. in order to determine specific ways to solve these problems, the further scientific research is needed to obtain quantitative estimates of the expected return on investment in human capital, taking into account the institutional specific features of 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[in ukrainian]. http://www.virtual-economics.eu/ http://doi.org/10.1016/j.respol.2016.04.006 71 www.virtual-economics.eu issn 2657-4047 (online) olena vorhach virtual economics, vol. 3, no. 4, 2020 yelnikova, y., & miskiewicz, r. (2020). implementation mechanism of impact investing in the postconflict regions. financial markets. institutions and risks, 4(3), 53-65. https://doi.org/10.21272/fmir.4(3).53-62.2020 http://www.virtual-economics.eu/ кwilinski alex 106 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 2020 volume 3 number 4 (october) global and ukrainian labour markets in the face of digitalization challenges and the threats of the covid-19 pandemic yulia zaloznova, oksana pankova, and yaroslav ostafiichuk abstract. in the situation of growing global problems and dangers of anthropo-technological, medical-epidemiological, economic, environmental, demographic nature, the demand for identifying transformational changes in global and national labour markets is relevant. the fourth industrial revolution, the threats of the covid-19 pandemic, the transition to society 5.0 (super smart society or society 5.0) are the challenges that change the nature of the world of work, the man of labour, in every country and in humanity as a whole. they create new dangers, are accompanied by unpredictable consequences, but at the same time, they open new opportunities. therefore, these processes require in-depth research. the purpose of the article is to study transformations on the global and national labour markets caused by the complex impact of digitalization processes and the covid-19 pandemic. the theoretical and methodological basis of the study combines modern concepts of sustainable development, decent work, social risk and digital economy. emphasis is placed on the importance to ensure the complementarity of sustainable, labour and digital development. the authors put forward and confirmed the hypothesis that today the transformations in the labour and employment markets are due to the complex influence of modern megatrends, first of all – the covid-19 pandemic and the digitalization of the economy and society. in the present situation, the covid-19 pandemic can be a trigger (accelerator) of the digitalization process. the results of the study show that the spread of the covid-19 pandemic and quarantine restrictions stimulated the growth of demand for digital technologies to meet the communication, professional, consumer and economic needs of the people, contributed to the spread of new non-standard forms of employment using information and communication technologies. the authors present a system of transformational changes in the social and labour sphere in terms of digital and sustainable development; also, they propose key imperatives, priorities of strategic and tactical level to ensure the stabilization and balance of the labour market and employment in ukraine. keywords: digital development, sustainable development, social development, labour development, covid-19 pandemic, transformations, risks, employment jel classification: а13, f29, j21, о33 http://www.virtual-economics.eu/ 107 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 authors: yuliya zaloznova institute of industrial economics of the national academy of sciences of ukraine, 2 marii kapnist street, kyiv, ukraine, 03057 e-mail: zaloznova.iep@gmail.com https://orcid.org/0000-0003-3106-1490 oksana pankova institute of industrial economics of the national academy of sciences of ukraine, 2 marii kapnist street, kyiv, ukraine, 03057 e-mail: pankovaiep@gmail.com https://orcid.org/0000-0002-2003-8415 yaroslav ostafiichuk institute of industrial economics of the national academy of sciences of ukraine, 2 marii kapnist street, kyiv, ukraine, 03057 e-mail: ost_ya@ukr.net https://orcid.org/0000-0003-2495-4100 citation: zaloznova, y., pankova, o., & ostafiichuk, y. (2020). global and ukrainian labour markets in the face of digitalization challenges and the threats of the covid-19 pandemic. virtual economics. 3(4), 106130. https://doi.org/10.34021/ve.2020.03.04(6) received: september 9, 2020. revised: september 26, 2020. accepted: october 6, 2020. © author(s) 2020. licensed under the creative commons license attribution 4.0 international (cc by 4.0) http://www.virtual-economics.eu/ https://doi.org/10.34021/ve.2020.03.04(6) https://creativecommons.org/licenses/by/4.0/ 108 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 1. introduction modern megatrends connected with globalization, digitalization, greening, demographic change, migration and others actualize the problems of transforming and exacerbating imbalances in labour and employment, which seriously affect the state of labour markets both on the global and national levels. the shocking impact of the covid-19 pandemic on the global and national economies requires in-depth reflection and a consolidated collective response. this situation requires national governments to identify and address imbalances in national labour markets through public policy instruments, taking into account the recommendations by the united nations, the organization for economic co-operation and development (oecd), the international labour office (icbm), and the international labour (ilo) and other relevant international organizations. this is also important for ukraine in the context of fulfilling the association agreement with the eu. it has become clear that the spread of the covid-19 pandemic, which has negatively affected economies and labour markets of the vast majority of europe, north america, east and central asia, will further widen global employment imbalances. according to the ilo forecast, depending on the scale of the covid-19 pandemic impact on the dynamics of world gdp, in 2020 the growth of unemployment in the world may range from 5.3 million ("soft" option) to 24.7 million people ("hard" option); total losses of workers' potential income will potentially range from 860 billion to 3.4 trillion us dollars; the increase in the number of workers impoverished may reach from 8.8 to 35.0 million people, although until recently it has been planned to reduce it by 14.0 million people (ordonez, 2020). due to objective reasons (market imbalances, shocks and cyclical effects etc.), the existence of employment imbalances today is characteristic of almost all national economies. the economic systems of the european union are not an exception. the imbalance of labour markets hinders the processes of inter-country and interregional convergence (convergence on key parameters of socio-economic development), and instead causes the opposite processes of divergence. thus, the imf report "prospects for the world economy" for 2019 argues that an influential factor in strengthening the interregional divergence of labour markets in developed countries are imbalances between professional skills and employers' demands due to production automation processes, and overcoming negative trends requires reforms that increase the level of human capital and flexibility of labour markets (international monetary fund. research dept., 2019). there is a low adaptability of the ukrainian labour market to the latest global changes and threats, the covid-19 pandemic has led to rising unemployment, job losses and layoffs, underemployment, declining incomes, and social tensions. the current eu policy agenda is based on the paradigm of the fourth industrial revolution (national programs "industry 4.0", "employment 4.0", etc.), digitalization, the knowledge society, and social inclusion (unlike ukraine). at the same time, the latest eu policy is clearly focused on "human-centric" approaches developed by the global commission on the future http://www.virtual-economics.eu/ 109 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 of labour, which provide for increased investment in developing human abilities and labour institutions, in decent and stable employment (kostrytsia & burlay, 2020). the meaning of the fourth industrial revolution is comprehensive automation and robotization of production, cyberphysical systems, biotechnology, 3d printing, alternative energy, artificial intelligence, network economy, augmented reality, circular economy, internet of things, blockchain technology, cloud computing, quantum technologies. the use of such technologies has led to digitalization of the real sector of the economy, the change of conventional business models, the spread of employment on platforms. as a result, social and labour relations are being modernized in global and national societies, remote employment is spreading, "digital jobs" are being created, and a new category of labour market actors is emerging: the so-called "smart workers" (petrova, 2019). the specific features of using labour are flexibility, mobility, rapid updating of knowledge, change of subject-object relations of management, development of creative self-realization in labour processes. according to some estimates, a share of the global information economy, already taking into account digital skills and digital capital, accounts for 22.5% of the global economy (knickrehm et al., 2016). this generates serious challenges for all countries in the world without exception and is likely to lead to the degradation of inefficient, non-innovative economies unable to meet these challenges (sidenko et al., 2017). therefore, national economies are faced with the need to ensure their own competitiveness and innovation, the ability to respond to the latest challenges of digitalization, to identify opportunities for transition to new technological systems. joint burning issues for almost all countries of the world are the extremely low ability to predict the possible consequences of radical technological changes for a man, society, economy, state, and the world as a whole. the effectiveness of digitalization processes in national economies differs significantly. it depends, firstly, on the readiness of certain countries to implement the latest digital technologies (the development level of information and communication technologies and their infrastructure, the parameters of accumulation and use of digital capital, digital skills of the population, etc). secondly, how ready are the economies for modern production transformations in general: what is the technical and technological level of production, how complex and diverse are its products, how does the national sphere of r&d contribute to modern industrial development etc. it is obvious that digitalization is not an economic panacea itself, because in a weak innovation sphere, outdated production technologies and worn-out machines and equipment, shortage of stem staff, it has few prospects and can lead mainly to job losses in services (vyshnevskyi et al., 2020). in recent years, numerous studies have been conducted on the problems of the economy digitalization. however, the issues connected with complex impact of digitalization in interaction with other global trends still remain insufficiently disclosed. the presence of a direct effect on the jobs’ dynamics (the disappearance of some and the emergence of others) is obvious. but there are also a number of indirect influences, such as changes connected with the rapid spread of information and communication technologies, the impact of the covidhttp://www.virtual-economics.eu/ 110 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 19 pandemic, changes in individual and group behavioural patterns that determine modern patterns of behaviour of economically active population in the labour market. such processes are integral and contradictory, and their study requires new scientific approaches. the purpose of the article is to identify the transformations of the global and national labour markets caused by the integral impact of digitalization challenges and threats of the covid19 pandemic. achieving this purpose seems possible if the following tasks are implemented: to identify transformational changes in the labour and employment markets in the context of the economy and society digitalization, the impact of the threats of the covid-19 pandemic; to substantiate complementarity of sustainable, labour and digital development to provide worthy answers to modern challenges; to identify the key imperatives, strategic and tactical guidelines for stabilizing and balancing of the national labour market in the current conditions. 2. the literature review basic methodological aspects of the concepts of global change, transformations of the world of work and man are presented in the fundamental works by j. atkinson (atkinson, 1985), a.b. laffer (laffer, 2004), d.f. gordon (gordon, 1974), j.m. keynes (keynes, 2008), a.c. pigou (pigou, 2013), r. florida (florida, 2016), c.b. frey (frey, 2017), f. fukuyama (fukuyama, 2007), m. castells (castells, 2000) and others. issues of functioning, transformations, disparities of the labour market in the context of globalization at the present stage are researched by (boeri & jimeno, 2015; kapeller et al., 2019; mau, 2020; roubini, 2020; bogachov et al., 2020; boiko et al., 2019; czyżewski et al., 2019; chygryn et al. 2020; dalevska et al., 2019; dementyev & kwilinski, 2020; drozdz et al., 2019; 2020; dzwigol, 2019a; 2019b; 2020a; 2020b; 2020c; dzwigol & wolniak, 2018; dzwigol & dźwigoł-barosz, 2018; 2020; dzwigol et al., 2019a; 2019b; 2019c; 2019d; 2020; furmaniak et al., 2018; 2019a; 2019b; kharazishvili et al., 2020; kondratenko et al., 2020; kuzior et al., 2020; kwilinski, 2017; 2018a; 2018b; 2018c; 2018d; 2019; kwilinski et al., 2019a; 2019b; 2019c; 2019d; 2019e; 2019f; 2019g; 2020a; 2020b; 2020c; 2020d; kwilinski & kuzior, 2020; lakhno et al., 2018; miskiewicz, 2017a; 2017b; 2018; 2019; 2020a; 2020b; miśkiewicz & wolniak, 2020; pająk et al., 2016; 2017; prokopenko & miśkiewicz 2020; saługa et al., 2020; savchenko et al., 2019; tkachenko et al., 2019a; 2019b; 2019c; 2019d; 2019e; yelnikova & miskiewicz, 2020) and others. problems of transformations in the sphere of labour and employment and the risks that arise under the influence of digitalization are also researched by ukrainian scientists a. kolot (kolot, 2020) , o. gerasimenko (gerasimenko, 2019), o. grishnova (grishnova et al., 2019), n. azmuk (azmuk, 2019), v. bliznyuk and i. petrova (bliznyuk & petrova, 2018), v. kostrytsya and t. burlay (kostrytsia & burlay, 2020), v. vyshnevskiy, o. garkushenko, s. knyazev (vyshnevskyi et al., 2020), v. ljashenko (ljashenko & vyshnevskyj, 2018), o. novikova (novikova et al., 2019), yu. marshavin (marshavin, 2018), l. lisogor (lisogor et al., 2019), o. khandii ta l. shamileva (khandii & shamileva, 2019), o.v. panjkova and o. kasperovich (panjkova & kasperovych, 2019), a. shastun (shastun, 2020) and others. their works reveal the factors and http://www.virtual-economics.eu/ 111 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 conditions for emerging socio-economic risks and threats in the socio-labour sphere, and propose preventive measures to minimize their impact. however, the issues that cover the transformations of the sphere of labour and employment in the context of global trends, the disparities that arise in this regard, the problems of complementarity of sustainable, labour and digital development are not given enough attention. all this determined the choice of the topic and the purpose of this article. 3. methodology the scientific and methodological principles of this study are based on an interdisciplinary approach, due to the complexity of internal relations in the political, economic, socio-cultural systems in the face of increasing challenges and threats at the global and local levels. the theoretical and methodological basis of the study is a combination of modern concepts of sustainable development, decent work, social risk and digital economy. the authors’ approach to the study is based on the hypothesis that today transformations in the social and labour sphere are largely the result of a number of global trends, among which digitalization and technological transition to industry 4.0 are becoming increasingly important. an important factor in the transformation is the covid-19 pandemic, which has spread to all continents of the planet, which could be a trigger (accelerator) of the digitalization process. 4. results and discussion for now, the functioning of global and national economies need to achieve balance and coherence on the basis of paradigms of digital, sustainable security development. and in the context of the covid-19 pandemic, this request has special significance and requires appropriate research in ideological (methodological), strategic and tactical fields. the key principle of counteracting the negative consequences of the covid-19 pandemic, in particular in the field of labour and employment, is the principle of "building back better", without returning to the level where they were before the covid-19 crisis. this is a key guideline of the international labour organization (ilo) the ilo concept note “global summit: covid-19 and the labour sphere” states that whatever the future trajectory of the pandemic is, the labour sphere will be characterized by higher unemployment, inequality, poverty, debt, and possibly, the higher level of popular frustration and intolerance (ilo, 2020a). in this regard, un secretary-general a. gutterish emphasizes the need to achieve human interests, economic, sustainable and comprehensive recovery using the potential of new technologies to create decent jobs for all and based on creative and positive methods that companies and employees have adapted to this time (guterres, 2020). and this is just a focus on a complementary system of social, economic, labour, digital development – this is what the authors of this article emphasize. http://www.virtual-economics.eu/ 112 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 according to the national system of sustainable development goals (ministry of economic development and trade of ukraine, 2017), the vision of strategic prospects for social and labour transformations is based on the concept of decent work. in the ilo normative documents and declarations, decent work is presented mainly as a political platform designed to “ensure sustainable development, comprehensive and progressive economic growth, mutual benefit and improved integration of policies and goals in macroeconomic, investment and employment, social protection and environmental protection” (ilo, 2020b). according to the ilo's idea of a "just transition" to environmentally sustainable economies, the imperative of a fair and secure transition to a digital economy and digital society should be respected (ilo, 2013). connection among labour, economic and technological growth, human development, and the environment is synergistic, but not automatic. jobs provide livelihood and economic security, promote skills and knowledge, facilitate access to education and health services, expand the choice of economic and social behaviour, promote full participation in society, build social cohesion and strengthen ties (ilo, 2015; undp, 2015). awareness of the nature of new phenomena and processes under the influence of which a new economy and a new social order are formed in connection with digital transformations requires appropriate changes in theoretical and philosophical understanding of the reality as such: societal and technical-technological, economic and social-labour reality etc. this process is widely discussed in scientific circles. systematic rethinking of the role and consequences of emerging phenomena is very relevant and in demand for both the international and ukrainian scientific community. in this regard, a valuable conception on this issue is substantiated by anatolii kolot – the concept of a new reality, which the author calls "labour 4.0", as an attempt to combine these aspects into an all-in-one system (kolot, 2019). the major points of "work 4.0" are: a new labour paradigm that is immanent to the new economy, the network-digital and technological basis of which is "industry 4.0" (digital transformation of production processes in enterprises); it is a new platform (model) of social and labour development, an institution that ensures the use of labour resources in the conditions generated by the fourth industrial revolution. we agree with the author that “this phenomenon is not a set of linear, single-vector transformations and mega-changes. in fact, it is a symbiosis of large-scale, multi-vector, ambiguous transformations, some of which open up new possibilities; the second require the reaction of all subjects of social and labour relations, changes in motivational guidelines, values; the third is frightening without exaggeration”. in their essence, they create a new reality, which challenges the traditional system of guaranteeing social protection, social security and national security in general. guarantees of stable full employment, the system of remuneration, social protection of workers, registration of labour relations, etc. are subject to transformations. these changes are difficult, contradictory and risky processes that simultaneously generate new threats and opportunities (figure 1). http://www.virtual-economics.eu/ 113 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 figure 1. the scheme of transforming the social and labour sphere under conditions of digital and sustainable development source: developed by the authors. a specific feature of global trends is a wide range of their impact on all systems of state and society, and the point is that the same trend can affect different situational processes in different countries, localizing a range of problems for the social and labour sphere or creating certain chances for its sustainable development. potentially, changes caused by global trends can be exacerbated by societal processes at the national level and lead to unpredictable and irreversible changes for the country as a whole. in the modern world, globalization is an objective process that covers all spheres of economic, political and social life of the country. due to this, the intensity of connection of national systems to global processes, spatial coverage and the density of interaction among countries and populations are constantly increasing. researchers show that today the labour market global trends national trends risks: threats and chances risk management transformations of the social and labor sphere g o a ls o f d ig it a li za ti o n o f th e e co n o m y a n d s o ci e ty s u st a in a b le d e v e lo p m e n t g o a ls labour transformations:  content and subject of work;  tools of work;  mode of operation etc. transformations of social and labor relations employment transformations:  sectoral structure;  species structure;  professional qualification structure, etc. economic securitysocial securityecological security national security http://www.virtual-economics.eu/ 114 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 and employment in ukraine, directly or indirectly, are affected by a wide range of global trends, the main among them being: 1) environmental; 2) demographic; 3) medical and epidemiological; 4) socio-behavioural; 5) digital and technological; 6) economic; and 7) political and managerial. given the purpose of the article, we will focus on environmental, digital and technological and economic trends, their impact on employment from the standpoint of sustainable balanced and digital development. ideas and principles of sustainable development make changes in the philosophy of digitalization processes evaluation. in this perspective, the key task of digitalization is to provide sustainable development using digital technologies for achieving an optimal balance between natural, physical (artificial) and human capital (figure 2). that is, the greening of the economy should be seen as a process of transition to energy-efficient, resource-saving, innovative and socially inclusive economic model based on the use of digital technologies, technological and social innovations. figure 2. the relations between digitalization and ecologization of the economy source: developed by the authors.  combatting climate change and mitigating its effects;  protection and restoration of ecosystems;  conservation of biodiversity.  rational use of resources and optimization with the help of ict of all levels of added value;  “green economy” and “green” work places;  sustainable economic growth.  responsible consumption;  good health and well-being;  decent work;  reduction of inequality. sustainable development e c o lo g iz a t io n d ig it a li z a t io n natural capital (ecosystems) physical capital (economy) human capital http://www.virtual-economics.eu/ 115 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 ecological trends that affect the transformation of the ukrainian labour and employment sphere, the parameters of human potential (health, life expectancy etc) are climate change, exacerbation of shortages of natural production resources, accumulation of waste, etc., which indirectly causes changes in the structure of demand and labour supply, defining new requirements for production engineering, as well as the attitude of the population to consumption and the nature. the climate change and depletion of the natural resources dictate new conditions for restructuring economies, their reorientation to new technological areas. they also actualize the need to find new resources that can fully or partially replace the existing ones. in particular, the popular concept of a "green" economy sets the task of combating climate change by "greening" work places. digitalization can both increase the man-made burden on the environment (it is estimated that information and communication technologies consume about 3.6% of global electricity and generate 1.4% of carbon emissions with a tendency to increase (vaughan, 2018)) and significantly accelerate the pace of "greening", especially through the development of the renewable energy, electric transport, environmental services, which will change the distribution of labour demand by sectors of the economy, quantitative and qualitative characteristics of jobs. according to the concept of development of digital economy and society of ukraine for 2018-2020, the main areas of the ecology digitalization and environmental protection are: smart usage "smart" and responsible use and availability of resources (water, etc.), sanitation and hygiene; smart energy "smart" energy consumption, increasing the efficiency of energy production and supply; smart city management "smart" integrated planning and city management; clear air ensuring the purity of air, atmosphere; smart ecosystems "smart" use of terrestrial and aquatic ecosystems and prevention of biodiversity loss (cabinet of ministers of ukraine, 2018). analyses of the digitalization processes made by the climate group and the global initiative for sustainable development emphasize that the world can implement a green economy and move to a low-carbon economy by providing three key functions of information and communication technologies: standardization, monitoring and, consequently, increasing accountability of energy and resources; rethinking based on big data analysis of how we live, learn and work; transformation of existing value chains and integration of infrastructure processes and systems in all sectors of the economy (perelet, 2018). the largest share of newly created "green" jobs in the world is covered by the production of green goods and services. thus, according to irena (international renewable energy agency, 2016) forecasts, doubling the share of renewable energy sources in the global energy balance will have created more than 24 million jobs by 2030. the total number of jobs in this area in the world continues to grow, in stark contrast to the depressed labour markets in the broad energy sector. "green" jobs are created not only in new sectors of the economy (renewable energy, etc.), but also in such traditional ones as agriculture, industry, and construction. so called "green restructuring" is spreading now as a process of reorienting traditional industries in accordance with environmental priorities. in addition, cross-sectoral linkages of green industries also benefit other segments of the economy and create additional jobs http://www.virtual-economics.eu/ 116 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 (indirect jobs) in service activities. "green restructuring" should become a mandatory direction for implementing reforms in ukraine. practically, however, care must be taken to ensure that the process of creating new jobs or “greening” the existing ones based on digital technologies also involves the development of precautionary strategies and action plans aimed at anticipating, identifying, assessing and limiting hazards and risks. the green economy and digitalization do not only create new employment opportunities, they also contain certain threats and the potential for negative consequences for employment. current employment structure in ukraine is such that the dismissal of workers in traditional industries may exceed the labour needs in the newly created “green” jobs, which may contribute to rising unemployment and social tensions. this problem needs additional thorough research. it is necessary to identify what priority public policy measures are needed to address the “fair transition to digital economically sustainable economies” and to minimize the negative consequences while promoting “green” and decent jobs and “greening” traditional industries. according to experts, the transition to a "green" economy for different countries will occur in different scenarios. for an effective transition to a “green” economy in ukraine, effective policy frameworks must be created to provide the development and implementation of strategies for developing a “green” economy based on an integrative approach, covering all spheres of public life (razumkov center, 2019). transformations in the field of labour and employment are influenced by trends related to technological innovations, including digital technologies. network-based use of information and communication technologies (ict), development of artificial intelligence, intellectualization of data processing and decision-making mechanisms, cloud technologies, new management systems based on digital platforms – all these actively influence the social and economic environment of countries. thus, when analysing forecasts for future changes in labour markets, experts from the ilo's global commission on the future of labour have highlighted those related to technological change – the automation of jobs and operations. the report "working for a better future" states that technological advances (artificial intelligence, automation and robotics) will create new jobs, but those who lose their jobs during this transition may be the least prepared to take advantages of new employment opportunities. the skills that are in demand today will not match the jobs of tomorrow, and the skills acquired may quickly become obsolete (international labor office, 2019). the results of recent studies assessing the impact of automation on workplaces differ significantly depending on methodology, coverage and assumptions made. at the same time, it is undeniable that changing employment patterns will also affect the nature and quality of labour relations and employment, as well as affect the public policy. the relation between productivity and wages is becoming more complex and less direct. in the modern world of technological and digital transformations, data becomes an asset. collection, description, storage and processing of big data allow obtaining valuable http://www.virtual-economics.eu/ 117 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 information to be used in business processes, public life, the work of the government. the ability to work with data and analyse it is an opportunity to be the first to receive valuable market "insights", to be more competitive. this opens up previously inaccessible opportunities to concentrate information at such a level that the real labour market can get a cloud representation in the form of an online labour exchange, similar to stock markets. this creates an effective tool for monitoring the dynamics of the labour market, identifying the need for professional skills and relevant trends at different levels (for example, on a territorial or sectoral basis). it involves the development and use of algorithms and artificial intelligence systems to analyse labour market data to assist in providing the effective policy and decision making (eurostat statistics explained, 2020). this knowledge, in turn, gives the direct participants in the labour market interaction the opportunity to make their own predictions and take productive decisions. the greatest benefit from the analysis of big data enterprises are obtained by reducing production costs and creating greater opportunities for innovation. big data analysis also significantly changes sales practice and marketing and significantly affects the field of industry research and development (r&d). the use of big data in the public sector of the economy ensures the effectiveness of implementing the results of forecast modelling, provides new opportunities to save time and public funds in taxation and social security, to reduce corruption etc. transformation of the labour market and employment is influenced by global economic trends established tendencies in economic systems, building economic ties in the global space, sustainable technologies, forms and approaches to doing business. they are manifested in transforming the models of economic development, the emergence of new business models and new models of employment, the liberalization of state regulation of the economy and more (idsd nasu, 2019). in particular, the specific feature of the new business models is the network nature of interaction with buyers and sellers, the global nature of value chains, clustering and technology of business spaces and processes, contactless business transactions and more. models of social and non-commercial entrepreneurship aimed at obtaining a social rather than economic effect from organizing activities are becoming widespread. the world economy is significantly affected by business models of the sharing economy, examples of which are cohabitation, car-sharing, office coworking and so on. the number of people working in new employment models (telework, freelance, outsourcing, outstaffing, staff leasing) is increasing by 3-5% annually and now in economically developed countries accounts for about a quarter of the officially employed. in countries with developed legal framework in the social and labour sphere, most of the new forms of employment are legitimate and have certain mechanisms of social protection for both the employee and the employer. in less developed countries, non-standard forms of employment are often used as a way to conceal illegal employment or non-permanent temporary employment from time to time due to the lack of appropriate legal framework and culture of social and labour relations. at the same time, websites of crowd-work (micro-tasks) and getting work through electronic applications, which form the economy of digital platforms, can recreate the labour practice of the xix century and form future generations of "digital day-workers". http://www.virtual-economics.eu/ 118 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 according to an annual global human capital trends survey by a consulting company deloitte (deloitte insights, 2019), technology helps organizations gain a competitive advantage, but if mismanaged, it also leads to employees’ losing their identity in the workplace. therefore, among companies there is a need to use adequate approaches to personnel management in the modern conditions. by investing in new methods of staff development, leading organizations meet the needs of people in the constant expansion of knowledge and skills to make learning an integral part not only of the work process, but also of life (implementation of the concept of "lifelong learning"). for the career development purposes, continuous training and employee development becomes a prerequisite for job retention. in ukraine, the formation of the digital economy goes on slowly. the spread of digital employment is uneven, which leads to separating three segments, where pure digital, mixed and non-digital products are produced. in the future, the maximum share of digital employment will be concentrated in the areas where a pure digital product is produced. according to the available statistics, the number of digital employees in ukraine in 2018 amounted to 277.8 thousand people, or 3.2% of the total number of employees. the projected estimate of their number by 2023 will be more than 300 thousand people, or 4.9% of the total number of employees. the largest share of employees will be in the field of programming (3.7% of the total number employed). the insignificant share of digital employment in ukraine is caused by the structure of technological modes in its economy, where iii and iv modes predominate with a very insignificant share of v mode. this structure leads to low demand for digital employment in ukraine. as a result, the majority of digital workers are outsourced from other countries (azmuk, 2020). according to the ukrainian experts, resources needed to provide an economic basis for productive employment transformations in ukraine are extremely limited and underdeveloped. there is a significant institutional weakness of the financial sector of the ukrainian economy. ukraine is not only characterized by the "embryonic" (compared to developed countries) state of the stock market, but also by the banking system, which survived after 2014 one of the most difficult periods and is determined by a low level of financial stability and efficiency. this is especially evident in the case of investment into a large-scale infrastructure projects that are needed for economic stabilization, to ensure the conditions for sustainable and digital development. the volume of long-term lending to innovative projects by commercial banks remains limited. at the same time, monetary policy directly affects the availability of bank lending negatively (razumkov center, 2019). thus, the key imperatives for stabilizing and developing the ukrainian labour market are: 1) to transform labour market institutions and ensure their balanced dynamics under the conditions of external and internal destructive influences, including the negative consequences of the covid-19 pandemic; 2) to improve the quality and change the structure of employment in accordance with current environmental, technological, economic and other global trends; 3) to transform values in the field of employment, form an innovative labour market; 4) to increase labour productivity, providing a policy of decent wages. http://www.virtual-economics.eu/ 119 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 the imperatives for ensuring the balance of the labour market must be strategic and integrated into the system of strategic development of the social and labour sphere of the ukraine. 5. conclusions 1. transformations of the ukrainian social and labour sphere are (to some extent) a consequence of global influences and cannot be assessed without understanding the relevant global preconditions. this approach allows distinguishing between the scope of national and supranational policies for developing social and labour spheres, determining the tools for influence. 2. researching the problems of megatrends’ influence on the labour markets in the newest conditions needs definition of the system methodological positions: strategic principles and perspective directions of employment transformation in ukraine, taking into account influence of the main megatrends (opportunities and threats they pose to ukraine), analysis and estimation of the newest scientific concepts of management according to key dominants, and the national goals of sustainable development for the future, on the one hand, and the existing potential of the state, including basic natural resources, social and labour potential on the other. 3. modern megatrends that were identified in the study interact with each other, and their impact on national processes is integral and controversial. the close interaction of global trends speaks of the integrity, interdependence and globalization of the processes that occur in the demographic, environmental, economic, social and political spheres of every country. particularly important in terms of the level of integrated impact are global trends that are emerging in the field of information and technological innovation, which indicates their paramount importance. first of all, this applies to the trend of information and communication revolution and digitalization. 4. thus, analysis of the modern megatrends’ impact on labour markets has shown that digitalization in the context of global environmental trends can both increase the man-made burden on the environment and significantly accelerate the pace of "greening" the economy. given the current employment structure in ukraine, the dismissal of workers in traditional industries may exceed the labour needs in the newly created “green” jobs, which will contribute to rising unemployment and social tensions. global economic trends are accompanied by the spread of new non-standard employment models, employment growth in the digital economy and on digital platforms. also, it should be noted that the spread of the covid-19 pandemic and quarantine restrictions stimulated the demand for digital technologies to meet the communication, consumer and economic needs of the people, especially possibilities for remote employment. http://www.virtual-economics.eu/ 120 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 5. strategic objectives for adapting the social and labour sphere to epidemiological challenges are the use of entrepreneurial potential to stabilize the situation on the labour market and the potential of new flexible forms of employment based on digital technologies. assistance should be provided in developing the ecosystem for supporting and accelerating small (including micro) business, in creating a system of competence development, which should help entrepreneurs take their rightful places in the processes of innovative development. 6. “green restructuring” should become a mandatory reform focus in ukraine. the process of creating new or “greening” of existing jobs based on digital technologies should involve the development of prevention strategies and action plans aimed at anticipating, identifying, assessing and limiting hazards and risks. the green economy and digitalization do not only create new employment opportunities, they also entail certain threats and potential for negative consequences for employment. given the current employment structure in ukraine, the dismissal of workers in traditional industries may exceed the labour needs in the newly created “green” jobs, which will contribute to rising unemployment and social tensions. it is advisable to set public policy priorities to address the “fair transition to digital economically sustainable economies” and to minimize the negative consequences while promoting “green” and decent jobs and landscaping of traditional industries. 7. the use of big data in the real sector of the economy will allow the labour market to get a cloud representation in the form of an online labour exchange, similar to stock markets. this opens up new previously unavailable opportunities to concentrate information of such a level that can be the basis for creating effective tools to monitor the labour market dynamics, to identify needs and demand for specific professional skills (for example, on a territorial or sectoral basis). the key point is to develop and use algorithms and artificial intelligence systems to analyse labour market data in order to provide effective policies and decisionmaking. 8. effective policy, consolidated interaction of main actors of social, socio-economic, technological and innovative development, including investors, an active state position and an effective state policy in the field of digitalization, innovations and investments, sustainable and balanced development should be the basis for overcoming ukraine's digital, technological lag behind the world's leading countries and the preconditions for transition to energy efficient, resource-efficient, innovative and socially inclusive economy. for ukraine, important priorities for international cooperation in the face of the covid-19 pandemic threats should be: 1. consistent strengthening of the ukrainian government’ participation in implementing the international open government partnership initiative in order to ensure transparency, timeliness and accessibility of information on government activities in accordance with basic international standards of open data on anti-crisis coverage and countering the spread of the covid-19 pandemic in ukraine. 2. ensuring ukraine's participation in the processes of creating of an international online platform on the activities of the wto working group on the support and development of http://www.virtual-economics.eu/ 121 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 micro, small and medium enterprises during the covid-19 pandemic. participation in the activities of this international online platform includes providing: an open access to data that reveals effective mechanisms for ensuring the viability and development of micro, small and medium enterprises in different countries, in particular the results of research and cross-country statistics on them, micro, small and medium enterprises state support programs, information on conferences and seminars, and links to other useful resources; information to both representatives of small and medium-sized businesses and civil servants involved in the formation of state policy in this area; an opportunity to learn about and disseminate best practices of different countries in implementing the policies on support and development of micro, small and medium enterprises, regulatory impact assessments on such companies and concerning activities in this field carried out by such organizations as the icc, the oecd, the international telecommunication union, the alliance of world trade specialists. an important strategic guideline for balancing the labour market and employment is the transformation of the labour market into an adaptive self-development ecosystem. this will eliminate imbalances and will help find effective solutions for overcoming the negative effects of the covid-19 pandemic, other risks and threats. formation and implementation of the state policy of ukraine should be carried out taking into account the positive experience of the european union and ilo recommendations, but the priority should be given to the national interests of ukraine and the proper protection of social and labour rights of its citizens. in ukraine, the policy of effective government response to challenges and threats should be implemented in the following tactical areas and stages: in the short term adaptation and coordination of the state program of economic stimulation adopted by the cabinet of ministers of ukraine to overcome the negative effects caused by restrictive measures to prevent the occurrence and spread of acute respiratory disease covid-19 for the period 2020-2022 years (including oecd recommendations on the urgent action of employment and social policy needed to support the population and business in response to the covid-19 pandemic). it is expedient to develop and adopt a strategy for overcoming the economic crisis in ukraine and counteracting the consequences of quarantine restrictions in connection with the spread of the covid-19 pandemic; in the long term (after stopping the covid-19 pandemic and abolishing the quarantine regime) the priorities of the state policy should be the adoption of new labour legislation of ukraine, comprehensive programs to preserve existing and create new jobs, strengthening the institutional role of the state employment service, improving the national labour payment system etc. effective policy, consolidated interaction of main actors of social, socio-economic, technological and innovative development, including investors, an active state position and an effective state policy in the field of digitalization, innovations and investments, sustainable http://www.virtual-economics.eu/ 122 www.virtual-economics.eu issn 2657-4047 (online) yulia zaloznova, oksana pankova, and yaroslav ostafiichuk virtual economics, vol. 3, no. 4, 2020 and balanced development should be the basis for overcoming ukraine's digital, technological lag behind the world's leading countries and the preconditions for transition to energy efficient, resource-efficient, innovative and socially inclusive economy. among the areas of further research are the search for optimal models and ways to balance and minimize imbalances in the national labour market and employment during the process of transition to a new technological system (industry 4.0) and the impact of global and local risks and threats. it is expedient to form a conceptual vision of the adaptive structural model of the labour market ecosystem in ukraine. prospects for further research are primarily related to developing scientific approaches to quantifying the risks of digitization; substantiating models and ways of balancing and minimizing imbalances in the labour market and employment in the transition to a new technological way 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