International journal of Contemporary Business Studies

International Journal of Contemporary Business Studies 

Vol: 3, No: 6. June, 2012 ISSN 2156-7506 

Available online at http://www.akpinsight.webs.com 

ISSN 2156-7506 

International Journal of 

Contemporary Business Studies 

VOLUME 3 

NUMBER 6 

June, 2012 

 

In this Issue: 

A Review on the Role of Managerial Levers In Innovation Management 

Suriati Bt Zainal Abidin , Sany Sanuri Bin Mokhtar , Rushami Zien Bin Yusoff 

Relationship of Age, Gender, Tenure, Rank and Job Satisfaction- 

Empirical Evidence from Business Institute of Pakistan 

Dr. Niaz Ahmed Bhutto, Naveed Anwar, Hyder Ali Khawaja 

A Study on Retail Investors’ Behavior 

Dr. P G K Murthy, Divyang Joshi 

.. 

The impact of Budget Participation on Organizational Performance via 

Competitiveness 

Lassaad Ben Mahjoub, Khamoussi Halioui 

. 

An International Journal Published by 

Academy of Knowledge Process 

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Copyright © 2012. Academy of Knowledge Process 

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A journal of Academy of Knowledge Process 

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Contents: 

VOLUME 3, NUMBER 6 

June, 2012 

A Review on the Role of Managerial Levers In Innovation Management 

Suriati Bt Zainal Abidin , Sany Sanuri Bin Mokhtar , Rushami Zien Bin Yusoff……………………………...6 

Relationship of Age, Gender, Tenure, Rank and Job Satisfaction- Empirical Evidence from 

Business Institute of Pakistan 

Dr. Niaz Ahmed Bhutto, Naveed Anwar, Hyder Ali Khawaja……………………………………….…15 


Dr. P G K Murthy, Divyang Joshi………………………………………………………………………….….28 

The impact of Budget Participation on Organizational Performance via Competitiveness 

Lassaad Ben Mahjoub, Khamoussi Halioui………………………………………………………………..38 



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A Review on the Role of Managerial Levers 

in Innovation Management 

Suriati Bt Zainal Abidin 1 

Sany Sanuri Bin Mokhtar 2 

Rushami Zien Bin Yusoff 3 

1, 2, 3 College of Business 

Universiti Utara Malaysia 

06010 UUM Sintok, 

Kedah Darul Aman, MALAYSIA. 

ABSTRACT 

Managerial levers are essential elements to ensure the synchronization 

between people and system which would assist in implementing 

innovation in the organization. Based on the diverse literature, this paper 

reviews five types of managerial levers: strategy, organization structure, 

resource allocation, knowledge management and organizational learning 

and culture. Each lever has its beneficial function to be effectively assist 

innovation process. Despite the fact that innovation is a dynamic process 

and involved multi-dimensional factors, the role of managerial levers is 

considered fundamental building blocks that will shape innovation. This 

review indicates that managerial levers should be applied side by side in 

the innovation management in order to ensure that innovation is establish 

and managed efficiently. 

Keywords: Managerial Levers, Innovation Management, Innovation 

Process, 



Vol: 3, No: 6. June, 2012 

pp.6-14 

©Academy of Knowledge Process 

1. INTRODUCTION 

Levers are the basic structure of any organization and it must be linked consistently to 

maximize efficiency (Steward, 2010). It is claimed that seven managerial levers are 

needed in order to be a strong company: strategy, structure, leadership, information and 

decision processes, people, culture, reward and incentives (Steward, 2010). In a study of 

cultivating new mental space for business innovation, managerial levers act as a 

technique that enable organizations to find new opportunity by adapting to rapid changes 

(Leibold, Voelpel, & Tekie, 2004). While in a case study of 124 companies in USA, it 

has shown that structural and skill levers of strategy implementation is proven in building 

a capable organization (Crittenden & Crittenden, 2008). It has also emphasized that 

organization need to have a clear understanding of each lever role so that it could really 

bring impact on organization ability to succeed (Crittenden & Crittenden, 2008). 

Managerial levers facilitate in creating new market or customer, product, service, value chain and 

capability space (Leibold, et al., 2004) According to Crossan and Apaydin (2010) managerial levers is a 


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meta-construct consolidating firm level variables that support innovation. Five types managerial levers 

used are strategy, structure, resource allocation, organizational learning and knowledge management tool 

and culture (Crossan & Apaydin, 2010). Innovative organization faced dilemmas such as structure and 

action, dilemma with opposition of persistence and change or repetition and novelty which appeared as 

tensions between different time horizons (Chanal, 2004). In this context, managerial levers is used to 

overcome the innovation dilemmas (Chanal, 2004). The following discussions will describe each of the 

managerial levers. 

1.1Strategy 

The first managerial lever is strategy. Strategy has been perceived as a continuous management activities 

(Drejer, 2006; Li, Zhou, & Si, 2010). Indeed, it is an activity the most necessary form of and the 

foundation for innovation (Ian Steward & Peter Fenn, 2006). Strategy is needed in order to overcome 

managerial challenge which might arise from potential disruptive with existing resource endowments, 

capabilities and organizational routines (Blumentritt & Danis, 2006). Strategy is claimed to defined the 

gaps between the current and desired performance and thus it is vital for innovation in pursuing 

competitive advantage (Ian Steward & Peter Fenn, 2006). Therefore, the role of innovation and firm‟s 

innovative target should be linked with the competencies and strategic orientation of particular firm 

(Blumentritt & Danis, 2006). In fact, a study in manufacturing firms has showed that innovation strategy 

with formal structure are significant predictors of performance (Terziovski, 2010). Strategy managed to 

differentiate organizational pattern between the high innovation performance and the less successful ones 

(Pullen, Weerd-Nederhof, Groen, Song, & Fisscher, 2009). 

Innovation practices differ among firms with different strategic orientation (Blumentritt & Danis, 2006). 

For instance, the SMEs firms achieved high innovation performance combine both analyzer (used for 

incremental innovation) and prospector (used for radical innovation) business strategy (Pullen, et al., 

2009).This is because strategy concerned the survival of entire organization and involved large portion of 

resources and also strategic thinking of tactical level (Drejer, 2006). When discussed the importance of 

strategy with innovation, Drejer (2006) has come out to define strategic innovation as the ability to 

create and revitalize the business idea and concept of the company by changing both the market of the 

company and the competencies and business system of the company. In an empirical study of Taiwanese 

electronics industry, found that product innovation is strongly related to differentiation strategy while the 

process innovation was strongly related to differentiation and cost leadership strategies (Liang-Hung & 

Chun-Hsien, 2008). 

Empirically, Blumentritt and Danis (2006) indicated that approaches to innovation vary across firms with 

different strategic orientation and firm‟s strategies played significant role in deciding which to pursue and 

which to disregard. As mention by Y. Chen and Yuan (2007), a firm needs to seek optimal balance 

between internal R&D and technology outsourcing when formulating innovation strategy. Innovation 

which is oriented by strategy is essential in determining organization direction in the long run, generate 

innovativeness and contribute to the different pattern of innovation orientation (Stock & Zacharias, 2011). 

For instance, it is found that innovation orientation of strategy contributed high scores to integrated 

innovator and top-down innovator while scored low to the internally driven and proactive customer 

innovator type (Stock & Zacharias, 2011). In a case study of Chinese firms, Q. Xu, Liu, and Chen (2002) 

have argued the use of knowledge strategy to be integrate with technological innovation to ensure 

companies effective and efficient. This is important due to the fast changing environment and firm need 

to articulate knowledge strategy to stimulate innovative activities (Xu, et al., 2002). 

Various elements and measures are used to represent strategy in relation to innovation study. A study of 

600 Australian small and medium enterprises of manufacturing sector, the innovation strategy has 

emphasize on vision or mission, strategic goals, increase in production, customer satisfaction, 

administrative, employee skill and employee commitment (Terziovski, 2010). While Stock and Zacharias 


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(2011) has used strategy that is first to entry product and services into the market and product offering 

that will increase the performance. Blumentritt and Danis (2006) used business strategy type (marketing, 

R&D, project based, new lines of product or service, deal with competitors, managing procedures and 

firm activities). In a study of different innovation outcome between radical and incremental, Ettlie, 

Bridges and O'Keefe (1984) utilized the organization strategy to describe the innovation process. 

Technology Policy is the strategy measure for radical innovation and market dominated growth, 

diversification and organization size are strategies for incremental innovation (Ettlie, et al., 1984). Sahu 

(2004), revealed the use of strategy focused product innovation process through several process such as 

product mobilization through leadership, product development, aligning product design and development 

into product innovation, make product innovation strategy in every engineers job and as continuous 

process. Liang-Hung and Chun-Hsien (2008), indicates the use of corporate strategy (differentiation and 

cost leadership) used to enhance innovation process. In this context, differentiation strategy focus on 

creating new market by providing new products while cost leadership strategy focused on low cost and 

efficient production (Liang-Hung & Chun-Hsien, 2008). 

1.2Organization Structure 

The second managerial lever is structure. The structure of an organization concerned about the way 

employee are grouped and work and thus organization should provide sufficient freedom for creativity, 

control to manage innovation efficiently (Adams, Bessant, & Phelps, 2006). According to the 

organizational theory, it is about distribution of tasks, responsibilities and power to determine 

organization‟s standardization, complexity and the extent of centralization role (Shen, Xu, & Shu, 2010). 

Structure can be modified to impact innovation inside organization and it assists to set balance between 

idea generation and implementation (Prakash & Gupta, 2008). Structure relates the way of various parts 

of organization are configured with organization‟s ability to manage innovation (Smith, Busi, Ball, & 

Meer, 2008). An organizational structure can differentiate between innovative and non innovative 

organizations (Adams, et al., 2006). Innovative firms should transform the organizational structure to 

motivate employee creativity, boosting innovative culture and set a standard base on innovation process 

(Wichitchanya, Durongwatana, & Vadhanasindhu, 2012). Conceptually, organizational structure 

influence the ability to manage innovation through its direct relationship with employee (Smith, et al., 

2008). This is done through an organized formality of teamwork with collaborative organizational culture 

(Smith, et al., 2008). It is found that internal organizational structure conditions of centralization and 

connectedness facilitate the innovation at firm level (Chang, Hughes, & Hotho, 2011). Structure and 

system factors comprise of the administrative intensity of the organization (Damanpour, 1991). Among 

them are specialization and centralization, formalization and type of innovation (Damanpour, 1991) . In a 

study of the role of organizational structure towards product innovation capabilities, the effect of radical 

product innovation capability on new product performance is insignificant under a formal structure, while 

the effect is positive under the informal structures (Menguc & Auh, 2010). However, incremental product 

innovation has a positive effect in the formal structure and negative effect in informal structures (Menguc 

& Auh, 2010). 

Empirical evidence by the work of Terziovski (2010) indicates that a formal structure combined with 

innovation strategy are significant predictors to organization performance. Several items used to measure 

this formal structure stressed on the allocation of resource within the cross functional teams, monitoring 

system by the employees, facilitation of formal communication by managers, procedures and flat 

structures (Terziovski, 2010). This is indeed supported that by the evidence that organizational 

formalization accelerate the positive effect of bottom-up learning on the incremental innovation because 

employee focus more on the dynamic change of the job (Wei, Yi, & Yuan, 2011). While Stock and 

Zacharias (2011) revealed that the structure of innovation orientation in an organization depended on a 

specific unit who in charge of innovation have the competencies, sufficient resource and clearly 

regulated. 


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In a study to explore relationship between organization structure and perceived innovation of India 

manufacturing sector, five components of structure are use as the measures: vertical complexity, 

horizontal complexity, formalization, centralization, concentration of authority and participation 

indecision making (Prakash & Gupta, 2008). A positive relationship were established between horizontal 

complexity, formalization, participation in decision making and innovation, however negative 

relationship between centralization structure and innovation (Prakash & Gupta, 2008). In order to increase 

the number of innovations, Prakash and Gupta (2008) suggested to focus on the participation in decision 

making, decentralization through staff empowerment and informal network within the organization. 

Similarly, in the logistic service innovation, the decentralization and formalization structure showed a 

positive relationship whereas the specialization structure showed negative relationship (Daugherty, Chen, 

& Ferrin, 2011). 

Due to the rapid development of information technology and to recapture competitiveness in serviceenhance 

manufacturing firm, Shen, et al., (2010) has proposed four dimensions for its organizational 

structure: self-management, interdependence, centralization of power and boundary infiltration. This new 

dimension is proposed because it is argued that production based is no longer a traditional manufacturing 

companies and thus, they need to change the new organizational structure to meet the new economy 

(Shen, et al., 2010). Nevertheless, the role of organizational structure is open for arguments. It is noted 

that competitiveness issue is also related to the environment factor. Therefore, organizational structure 

need to balance the demands for efficiency and flexibility in the high technology firms where it is needed 

to facilitate innovation and adapt the dynamic change of environment (Sholes, Barnett, & Utley, 2011). 

Organization that is operated in a stable environment in terms of demand, competitors, low level product 

change is best suited by centralized decision making, formal job description and, emphasis on chain of 

command and well process control (Sholes, et al., 2011). On the other hand, decentralize structure is 

suited for the dynamic, complex technologies and competitive instable environment (Sholes, et al., 2011). 

Since decentralized structure focus on goal specification to allow increase in rates and intensity, its 

promotes proactive adaptability and innovation. The situations also differ from the perspective of 

innovation types. For instance, technological innovation which is more complex process is affected by the 

R&D level, managerial ability and investment need a structure that have rules and regulation that 

encourage creativity, self-directed work and learning, few layers of hierarchical to enable quick response, 

high level of horizontal integration to increase knowledge transfer, decentralized decision making and 

high level of vertical and horizontal communication to ensure action (Shi & Xin, 2006). Although few 

layers hierarchical is better, organization also need to flat organization so that it could made close contact 

among employees, department and top management (Wichitchanya, et al., 2012). 

1.3Resource Allocation 

Consequently, the third managerial lever is resource allocation which is also important in innovation 

management. According to Lau, Yam and Tang (2010), resource allocation capability is referred to 

firm‟s ability to mobilize and expand its technological, human and financial resources in the innovation 

process. It is found that resource allocation has improve the performance rate of new product which 

contribute to the technological innovation capabilities of an organization (Lau, et al., 2010). Besides, 

resource allocation is also interdependence with business models and knowledge creation and this has 

made the innovation knowledge-intensive environment is depended upon resource allocation as one of the 

important lever (Grand, Krogh, Leonard, & Swap, 2004). The importance of resource is proven by a study 

conducted in small medium enterprise in Malaysia where firm resource drive product innovation 

performance (Bakar & Ahmad, 2010). 

1.4Knowledge Management and Organizational Learning 

The fourth managerial lever is knowledge management and organizational learning. Knowledge 

management is identified as an important antecedent of innovation (Darroch & McNaughton, 2002). 

Knowledge management is closely related to organizational learning initiatives (Mundra, Gulati, & 


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Vashisth, 2011). This is because an organizational learning process involved high degree of parallelism 

and depended on the knowledge based of organization (Weerd-Nederhof, Pacitti, Gomes, & Pearson, 

2002). According to Garcıá-Morales, et al., (2006), organizational learning and innovation is positively 

related to organizational performance. Even, in a study of cultural organization, learning orientation 

influences innovativeness and performance (Garrido & Camarero, 2010). 

Due to the broad process of innovation, the learning has enables the implementation of new idea, product 

and process, new management styles in communication and marketing, organizational structure and 

relations with clients (Garrido & Camarero, 2010). The impact of learning orientation is studied through 

three dimensions: commitment to learning, an open mind and a shared vision. Similarly, Phromket and 

Ussahawanitchakit (2009) has also found that organizational learning have positive effect on innovation 

outcome and export performance. In the study, organizational learning comprise of unique knowledge 

establishment, useful knowledge integration, holistic knowledge expansion and effectively knowledge 

utilization (Phromket & Ussahawanitchakit, 2009). 

Four processes integrally linked organizational learning : Information acquisition, information 

distribution, information interpretation and organizational memory used as tool for improvement (Weerd- 

Nederhof, et al., 2002). In a study to foster innovation, organizational learning is found to be a significant 

antecedent effect on performance (Jimeńez-Jimenez, Vall, & Hernandez-Espallardo, 2008). According to 

this author organizational learning is a process to develop new knowledge and insight from people 

common experiences within organization and it also include four processes such as knowledge 

acquisition, information distribution, information interpretation and organizational memory (Jimeńez- 

Jimenez, et al., 2008). 

Plessis (2007), defined the value proposition of knowledge management in innovation process as assist in 

creating tools, platform and processes for tacit knowledge creation and sharing, converting tacit 

knowledge to explicit knowledge, facilitates collaboration in the innovation process, ensures the 

accessibility of both tacit and explicit knowledge in innovation process, flow of knowledge, integration of 

organization‟s knowledge base, identify gaps in the knowledge, building competencies, provide 

organizational context, gathering explicit and tacit knowledge and provide knowledge-driven culture. 

As noted in the previous section, innovation process involved a dynamic form of activities. Therefore, 

knowledge management is much needed in this phase such as knowledge creation and knowledge sharing 

on the innovativeness of the firm (C.-J. Chen, Huang, & Hsiao, 2010). The study showed empirical 

evidence that knowledge management is positively related to firm innovativeness; however it is 

moderated by organizational structure. Employees are incline in managing knowledge and translated new 

knowledge when the structure is less formalized, less centralized and more integrated (C.-J. Chen, et al., 

2010). Apart from being direct influence on innovation, knowledge management is crucial as mediating 

role when examined the relationship between social interaction and innovation performance (Jing-Wen 

Huang, 2009). However, the dimensions only focus on knowledge acquisition, knowledge sharing and 

knowledge application (Jing-Wen Huang, 2009). 

According to Adams, et al., (2006) , there are three areas within the knowledge management that is 

important for innovation management: idea generation, knowledge repository (including implicit and 

explicit knowledge), and information flows (information gathering and networking. Besides, knowledge 

management orientation comprise of knowledge acquisition, knowledge dissemination and responsive to 

knowledge (Darroch & McNaughton, 2002). In a study to examine the relationship between knowledge 

management practices and types of innovation, it has postulated that incremental innovation came from 

firms that sensitive to information about marketplace and responded to knowledge about technology. 

While radical innovation came from firms developed innovation that change consumer behavior (Darroch 

& McNaughton, 2002). 


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1.5Culture 

The final managerial lever is culture. Organizational culture includes shared vision where clearer vision 

would act as effective facilitator to innovation (Adams, et al., 2006). In fact, culture brings values and 

beliefs, attitudes and experiences which is shared by personnel in organization (Kanchan & Gupta, 2009; 

Martins & Terblanche, 2003). In order to influence creativity and innovation, culture is influenced by 

several determinants such as strategy, structure, support mechanisms, behavior, and open communication 

(Martins & Terblanche, 2003). Culture also reflect a degree to which values, norms and artifacts support 

the organization‟s innovativeness (Stock & Zacharias, 2011). Thus, it is noted that organizational culture 

will push organizational members towards creating innovation mentality (Stock & Zacharias, 2011). 

According to Ahmed (1998), culture has multiple elements which could enhance of exhibit tendency to 

innovate. He pointed that culture should not be isolated and need to match with organizational context. 

Thus, balance and understanding of context is important because culture with strong drive towards 

innovation could lead to problems when market circumstances and customer requirements demand 

predictability and conforming to specifications (Ahmed, 1998). 

Implementing innovation in the organization would accommodate risk of failure and uncertainty, 

Therefore, Kanchan and Gupta (2009) has suggested to change the corporate culture which is important to 

have a set of understanding that people of an organization share in common. In this context, several 

criteria have been highlighted to change corporate culture include: committed in becoming innovative 

organization through informed decision and investment, consistent communication, physical and 

organizational support, stimulating environment, encouragement for innovation and compensation 

(Kanchan & Gupta, 2009). These criteria shared similar arguments by previous scholar, Madan (2000), 

which added the importance of the leadership role of top management values, attitudes and leadership 

style. There is also other approach to indicate that culture is an operating mechanism to support 

innovation. For instance, „culture field concept‟ is proposed to promote innovation through climate style 

management entity (Qingrui, Ling, & Zhangshu, 2003). In this approach, firm need to cultivate employee 

individual innovative ability so that their firm will form core competencies in all elements of innovation 

(Qingrui, et al., 2003). 

An empirical findings on innovation in SMEs has proven that general organization culture and specific 

organization culture with regards to innovation projected good impact on innovation levels (Kenny & 

Reedy, 2006). General organization culture is the familiarity of mission statement and R&D aspects of the 

company while specific culture of innovation were the innovation strategy, type of innovation engaged, 

drivers and constrains of innovation (Kenny & Reedy, 2006). It is noted most authors have stress on the 

importance of innovative culture due to the innovation activities as a method of competitive 

differentiation and ways of customer value creation. For that matter, Dobni (2008) has empirically 

presented innovation culture constructs based on seven factors: innovation propensity, organizational 

constituency, creativity and empowerment, market orientation, value orientation and implementation 

context. 

In a study of product innovation, it is found that companies should foster cultures with external and 

flexibility orientation and culture is also act as determinant to innovation strategy (Julia C. Naranjo 

Valencia, Valle, & Jimenez, 2010). Thus, hocratic cultures (emphasizes flexibility and change) could 

enhance the development of new products or service while hierarchical cultures inhibit product 

innovation (Julia C. Naranjo Valencia, et al., 2010). Organization that implemented both radical and 

incremental innovation is found to have culture that cultivate learning and knowledge sharing contributed 

significant relationship into innovation (Lin & Edward F. McDonough III, 2011). Besides, innovation 

culture which is promoted in the organization would depended on the right types norms which is widely 

shared and activate creativity (Ahmed, 1998). These norms include challenge and belief in action, 

freedom and risk taking, dynamism and future orientation, external orientation, trust and openness, 


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debates, cross functional interaction, myths and stories, leadership commitment, rewards, innovation time 

and training, corporate identification and unity and organizational structure (Ahmed, 1998). 

2. CONCLUSION 

In conclusion, the above reviews have showed that managerial levers is one of the important essentials in 

determine the success of innovation implementation. Five managerial levers (strategy, organization 

structure, resource allocation, knowledge management and organizational learning and culture) as 

mentioned earlier have their own strength in assisting innovative performance in organization and it 

seems that those five are interrelated and supported each other (Smith, et al., 2008). For instance, 

structure configured organization to operate effectively and strategy is implemented through the structure 

(Crittenden & Crittenden, 2008). In fact, culture has acted as the key factor of innovation management 

because it impact other levers and also impacted by changes of other levers (Smith, et al., 2008). In fact, 

the role of knowledge management and also organizational learning is also related to each other. Thus, 

this paper proposes, the task of those levers would drive the innovation process of organization. 

Furthermore, the use of managerial levers would be in line with the theoretical perspective as innovation 

process interlink with the resource view and capability view (Muller, Valikangas, & Merlyn, 2005). 

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Relationship of Age, Gender, Tenure, Rank 

and Job Satisfaction- Empirical Evidence 

from Business Institute of Pakistan 

Dr. Niaz Ahmed Bhutto 

Associate Professor 

Sukkur Institute of Business Administration, Sukkur, PAKISTAN 

Naveed Anwar (Correspondence Author) 

Research Scholar 

Sukkur Institute of Business Administration, Sukkur, PAKISTAN 

& 

Faculty Member 

Shaheed Zulfikar Ali Bhutto Institute of Science and Technology, Larkana, Pakistan 

Hyder Ali Khawaja 

Faculty Member & Research Scholar 

Sukkur Institute of Business Administration, Sukkur, Pakistan 

ABSTRACT 



Vol: 3, No: 6. June, 2012 

Pp15-27 


Job satisfaction is widely studied area by many researchers around the 

globe. Especially Job satisfaction among the teaching staff of higher 

education institutes had been an area of curiosity for both management as 

well as the policy makers. The lack of quality and dedicated staff is a 

dying need of every education institute. Most of the qualified staff is 

migrating to other countries and those presently working as teachers have 

many concerns with their jobs. Thus, a comprehensive study was 

required in this domain with a special reference to Pakistani context. The 

main objective of this study is to measure the job satisfaction level of the 

faculty members, those who work with business institutes of Pakistan, 

and to find the relationship of overall job satisfaction level with variables 

like age, gender, tenure and rank. Convenience sampling method was 

adopted to select the sample for research.The sample (N= 191) consisted 

upon the faculty members of business institutes of four provinces of 

Pakistan, Sindh, Punjab, Baluchistan and Khyber Pahtoon Khaw. Both 

genders male as well as females have participated as respondents. 

Samples were having different salary levels ranging from 1 to 8 scales, 

categorized in to the following ranks: Professor, Associate Professor, 

Assistant Professor, and Lecturers. The Job Description Index (JDI) and 

a biographical questionnaire were administered to collect the data. The 

instrument used for research JDI is a reliable tool to measure the overall 

satisfaction level based on five main facets, staff relationship with people 

or coworker, the satisfaction with pay staff receive, the quality of 


15




supervision, the chances of promotions in organization and the 

satisfaction with the job being performed by the staff.The results of the 

study showed that the faculty members of business institutes in Pakistan 

(included in sample) have shown their satisfaction with the nature of 

work, coworkers or the people along with they are working, followed by 

the supervision they received in their organizations. Chances for 

promotion and salary (pay) were the main sources for job dissatisfaction. 

The relationship among overall job satisfaction, rank of staff and tenure 

was found be significant. Age and job satisfaction was positively related, 

whereas gender was found to be as the weakest predictors of overall job 

satisfaction. Though study indicate a relationship among overall job 

satisfaction and other variables such as age , gender, tenure and rank and 

also with five aspects of job satisfaction used in JDI but there is a need 

for continuous research to find the relationship among job satisfaction 

and other extraneous variables. 

Key Words: Job Satisfaction, Faculty members, Business Institutes, Pakistan 


The main focus of this study is job satisfaction level of the employees of business institutes under certain 

indicators. An attempt has been made to find out those indicators which can increase or decrease the job 

satisfaction level of faculty members.As far education sector is concern, Pakistan is facing immense 

challenges, in term of low literacy rate, less number of quality educational institutes, poor facilities and 

more important the low motivation level of many of those who are the knowledge workers, the main 

pillars of educational sectors, of course the faculty. 

Keeping in views above mentioned problems, it is a daunting task for both management of the 

universities and more important the Government, to take really focused efforts to enhance the quality of 

education and provide better opportunities to the young generation. To provide quality facilities, updated 

courses related to 21 st century, highly motivated teachers, teachers those who can lead the young 

generation towards success .The problems of educational sectors can only be removed when, faculty, 

management and the policy makers can join their hands together to overcome the issues faced by the 

education sector of Pakistan. 

Job satisfaction has become a buzz world in educational institutes as well as in other organizations. Job 

satisfaction is the most important factor, which every organization dream to cultivate in their staff. Much 

of the research work in this area has analyzed that turnover, absenteeism; job roles and extra jobs 

behavior are the main factors which affect on job attitude of staff. Satisfaction is an outcome of the 

reinforce system of the organization and the needs of the staff (Lofquist & Dawis, 1969, p.53). In Another 

research (Locke, 1976) indicated that it is a positive inner drive that one gets out of the good appraisal of 

his or her job. Job satisfaction is sense of happiness that staff will feel when they fulfill their tasks and 

they achieve their results (Locke & Henne, 1986, p.21) and further Porter et al. (1975) found that it is a 

feeling that one gets when he / she achieve his or her goals. Job satisfaction has been researched since 

many years in and outside Pakistan; a lot of researches have been conducted on the topic. Great deal of 

literature is available which is focused on explain job satisfaction and factors affecting the level of job 

satisfaction among staff and how job satisfaction is related with the job, people along with staff works, 

supervision that they get , salary , working environment, organizational rules, and policies and the 

chances of promotion . Majority of published work found that job satisfaction is about balance among 


16




desired and actual outcomes of a job. That mean, whatever staff desired from a job and what they get out 

of it define the level of their job satisfaction. Unfortunately, there is lack of empirical research in Pakistan 

on job satisfaction related to Academic institutes, in term of indicators of the overall job satisfaction. As, 

the management of universities is trying their level best to provide a conducive working environment to 

faculty and want to enhance level of job satisfaction, so that teachers can give their maximum 

performance in term of teaching, administration and research. Job satisfaction is a key domain of study 

which not only interest staff but it is also a grey area for most of the employers, where they are trying to 

comprehend the different aspects of it. By knowing the relationship of these variables with job 

satisfaction higher education institutes management will be able to understand the hidden aspect which 

may cause impact on the overall job satisfaction level of faulty members and more important to take 

corrective actions to enhance the job satisfaction among faculty members. Though ,much research have 

been conducted to explain these concepts related to job satisfaction, i.e. job satisfaction factors and, job 

dissatisfaction factors (which will be reviewed on coming pages) but there is a great need for a study in 

Pakistan that could explain the indicators of overall job satisfaction. 

The key aspiration of this research is to investigate the overall job satisfaction among faculty members of 

business institutes and to investigate the type of relationship among the overall job satisfaction with 

different biographical variable such as age, tenure, gender and the ranks of the staff. This research will try 

to validate the relationship of job satisfaction and above-mentioned variables, that either they have any 

impact on job satisfaction or not. 

Teachers always talk about job satisfaction but do they really know about what motivates them? What 

satisfy or dissatisfy them the most? Is there any relationship among the age, rank, tenure and gender of 

faculty and their overall job satisfaction level? The main issue is not to know the job satisfaction level of 

staff but the crust of the matter is to find out the why people vary when it come to job satisfaction level, 

How to motivate them according to their respective needs as something needed by one group may or may 

not be needed by another group of faculty members. This gap in research has become inspiration of this 

research effort. We will also try to provide finding and suggestions to management of educational 

institutes, so that they can make rational decisions to increase job satisfaction of faculty members. 

In contrast with our study aims, we will try to explore the available researches on the given topic through 

the review of literature. We will try to gage the level job satisfaction among faculty members in term of 

the job, people along with staff works, supervision that they get salary, working environment, and the 

chances of promotion. Further, the relationship of overall job satisfaction with age, rank, tenure and 

gender will be investigated. 

2.LITERATURE REVIEW 

Literature review will take a look at various studies, which focus on the relationship of age, gender, tenure 

and rank with job satisfaction. 

2.1 Job Satisfaction and its Relationship with Gender 

Mason (1995) found Relationship between job satisfaction and gender has been studied by many 

researchers. Conversely many studies result is disagreement regarding the relationship of job satisfaction 

and sex of employees. Weaver (1974) observed higher number of men with greater satisfaction level than 

women. 

It is imperative to notice here, that study on this topic show no major difference between the two i.e. 

Gender and job satisfaction, keeping in view the statistical controlled factors (Golembiewski, 1977). The 

research result suggested by Centres and Bugental (1966) showed other deviations in change of values for 

both male and female were there on workplace. Female‟s more desirable value was social factor of a job 

than to males‟, on the other hand males demands expression in work. 


17




Study showed, women prefer pleasant employers to work with in comparison to men, whereas, to have a 

authority on important decision and opportunity, to direct the work for others is more desirable by men at 

work place (Schuler, 1975) 

Weaver (1977) confirms results for the hypothesis for unconnected link between two factors when the 

effect of other variables is minimized. Other researches from Forgionne and Peters (1982) found that 

there are many other factors which affects on this relation, it is not only gender and job satisfaction, we 

are talking about but also the other left over factors such as the number of family members, how many 

dependents are there in one‟s family, furthermore which position is being held by the staff in the 

organization does matter on this relation. 

Conclusion was that the direct effect of other variables should be considered and the direct link between 

gender and its effect on job satisfaction appears very little. We cannot agree with satisfaction level 

difference between two when having equal chance for education employment promotion equal job 

opportunity and so on. According to DeSantis and Durst (1996) the outcome of researches lying on 

gender difference effect on job satisfaction is arguable from 1950s to date. 

2.2 Job Satisfaction and Rank 

Individual‟s job role within organization is considered as its rank. This term is link with job seniority of a 

person in a business classification, any one in education sector, working as Professor, Associate 

Professor, Assistant Professor and Lecturer. According to Ronen (1978) professional level increases job 

satisfaction, eighteen (18) variables were examined to get the strong predictors of job satisfaction by Near 

et al (1978), he got the results that the occupational level in term of rank and age are powerful tool for a 

satisfied employee. 

Grimes (1997) took 102 economists who worked in US institution of higher learning and were PhDs as 

sample ,in order to test number of publications and job rank. Expected result of positive correlation 

between job rank and publishing was proved. On the other hand there is no effort made by researchers on 

the relationship between the job rank and job satisfaction. Job satisfaction, productivity and career 

activities were correlated through a sample of 293 psychologists were surveyed by Holden and Black 

(1996). Analysis shows that academic ranks effect on productivity and satisfaction. Assistant or associate 

professor are less productive and satisfied than full professor. Literature reveals that job satisfaction is 

related with rank, and staff at higher ranks tends to have high job satisfaction. Therefore, it is proposed by 

literature that rank have a greater impact on productivity and job satisfaction, the higher rank people are 

more satisfied than the lower rank employees. 

2.3 Job Satisfaction and Tenure 

Time period or number of years a person have spent working in an organization, is considered as Length 

of service. Many research studies designed to inspect that if the tenure increases the job satisfaction 

increase or not. The hypothesis that change in job satisfaction with length of service at a particular job 

resembles a U-shaped curve was confirmed by Ronen (1978), when researcher examined the relationship 

between two variables. Problem of promotion, salary policies and administrative practices as a hub of 

turnover was concluded by Nicholson and Miljus (1972) in their studies. However, satisfaction or 

dissatisfaction level of job was not directly associated with turnover and length of service by researchers. 

The idea that by controlling the perceived net value of employee for firm, employees‟ length of service 

nurtures the protection in opposition to job loss was presented by Abraham and Medoff (1984). Ability in 

promotion process and length of service has a comparative importance is also verified by Abraham and 

Medoff (1985). To judge the job satisfaction promotion is consider as key variable and long tenure and 

job satisfaction is logically connected (Wanous, 1972). When workers are long established in their 

experience, the satisfaction level is high for both male and female, studied by Black and DiNitto (1994). 


18




Study on some firms in Hong Kong investigated to get the relationship of source of stress with 

psychological distress, job satisfaction and intension of quitting from job is directly the outcome of locus 

of control and organizational commitment (Siu and Cooper, 1998). On the other hand, the study on staff 

and nurses in UK was made to investigate the staff turnover ratio, staff age and tenure and found that 

tenure is a strongly associated with job satisfaction (Gray et.al, 1994) 

3. METHOD 

In order to extract data on job satisfaction of employees the JDI (Job Description Index) was used. In 

1969, JDI was developed by Kendall, Smith and Hulin. According to Kreitner and Kinicki (1995) this is 

most widely used tool to measure staff overall job satisfaction. Spector (2000) found JDI the most reliable 

tool to measure Job satisfaction level of employees, and it help us to measure the different aspects of job 

satisfaction separately from each other. JDI want respondents to explain jobs they perform compare to ask 

direct question “How much satisfied you are” in order to ensure that person filling the questionnaire 

should provide feedback which is related to job rather than satisfaction in general. The Job Description 

Index measudeal with five aspects for job satisfaction perceptions, Salary or pay, chances for promotions, 

supervision staff get in office, office mates or co-workers and the job staff performs (Spector, 2000). 

Seventy two (72) items have been included in this measuring instrument out of which ,nine (9) items are 

used for each aspect of promotion and pay, and eighteen (18) items each for work, supervision, and coworkers 

(Smucker & Kent, 2004). In order to get total score of the responses, employees are requested to 

specify whether each statement does or does not explain their jobs. The score of responses is measured as 

(yes) = 3, (?) = 1 and (no) = 0 for positive items, whereas (yes) = 0, (?) = 1, and (no) = 3 used for negative 

items (Cherrington, 1994). Job satisfaction level is related with the overall score, Satisfaction will be as 

high as the score (Kreitner & Kinicki, 2001). All questionnaires were distributed through post and emails. 

In order to find relationship among rank, age, gender and tenure with overall job satisfaction, The 

Multiple Regression Model was used. 

Overall Job Satisfaction (OJS) = β 0 +β 1 rank+β 2 gender+β 3 length+β 4 age+ ε 

4. DISCUSSION OF RESULTS 

Table 1Dimensions of Job Satisfaction – Descriptive Statistics 

Frequency Minimum Maximum Mean Value Standard Deviation 

Job 191 15 45 39.01 5.842 

Pay 191 5 32 16.52 5.926 

Supervision 191 12 45 33.59 6.014 

Promotion 191 5 23 13.87 2.310 

People 191 9 48 29.66 9.554 

Valid N (list 

wise) 

191 

Faculty members are satisfied with the nature of work (mean = 39.01), coworkers (mean = 29.66) as well 

as the supervision (mean =33.59) they get in their institute. The mean values of pay and promotion 

subscales were 16.52 and 13.87 respectively, both values reflects that our respondents are less satisfied 

with pay they receive and the chances of promotion they get in their institutes. 


19




Table 2: Rank 

Frequency % Valid % Cumulative % 

Valid Professor 30 15.7 15.7 15.7 

Associate professor 24 12.6 12.6 28.3 

Assistant professor 48 25.1 25.1 53.4 

Lecturer 89 46.6 46.6 100.0 

Total 191 100.0 100.0 

Table 2 shows the classifications of ranks of the respondents, the sample consists upon Professor (15.73 

%, n= 30), Assistant Professor (25.1%, n= 48), and Lecturer (46.6%, n= 89) 

Table 3: Race 


Valid Sindhi 98 51.3 51.3 51.3 

Punjabi 50 26.2 26.2 77.5 

Pashtoon 23 12.0 12.0 89.5 

Baloch 20 10.5 10.5 100.0 

Total 191 100.0 100.0 

The Table 3 reflects the composition of sample in term of race, where is clear that Sindhi faculty 

members mostly participated in the research (51.3 %, n = 98), Punjabi 26.2 %, n= 50) and Pashtoon were 

around 12% (n= 23). Baloch were the least represented group (n=20, 10.5%) 

Table 4 :Education 


Valid 0 1 .5 .5 .5 

Phd 44 23.0 23.0 23.6 

MS 47 24.6 24.6 48.2 

MBA 99 51.8 51.8 100.0 

Total 191 100.0 100.0 

Table 4 shows the education level of sample, As far as the education level of respondents is concerned , 

majority of respondents were PhD (23%, n= 44) , 24.6% (n = 47) has MS and 51.8 % of sample are MBA 

Table 5 depicts the distribution of sample according to gender. The Male respondents represent larger in 

number compare to female respondents. Almost 78.4% (n= 149) respondents were male compare to 

(21.6%, n= 41) of female respondents. The high response rate from male is attributed to the reality that 

majority of faculty teaching in business institutes are male. 


20




Table 5 : Gender 


Valid Male 149 78.0 78.4 78.4 

Female 41 21.5 21.6 100.0 

Total 190 99.5 100.0 

Missing 1 .5 

Total 191 100.0 

Table 6: Age 

Frequency Percent Valid Percent 

Cumulative 

Percent 

Valid 25-30 42 22.0 22.1 22.1 

31-35 73 38.2 38.4 60.5 

36-40 36 18.8 18.9 79.5 

41-45 17 8.9 8.9 88.4 

46-50 14 7.3 7.4 95.8 

51-55 3 1.6 1.6 97.4 

>55 5 2.6 2.6 100.0 

Total 190 99.5 100.0 

Missing System 1 .5 

Total 191 100.0 

Tables 6 demonstrate sample‟s age distribution. The major part of sample 38.4% , n= 73 was of the age 

group between 31-35. Only 1.5%, n= 3 respondents belong to the age group of 51-55 years (being the 

minority of the respondents). One respondent did not mentioned his/ her age.. From the following results 

it can be understood that the major part of sample consisted upon the faculty which represent the young 

cohort of age ranging from 25-35 years. 

Table 7 shows the sample composition in term of their tenure (Years of service), almost 104 respondents 

54.5% belong to service group of 1-5 years of service. 18.3 % of sample fall in to the service group of 6- 

10 years. The service group of 31-35 years service group represent the smallest cohort (n=3). 

Table 8 present Pearson correlation results among age, tenure, gender, and rank with overall job 

satisfaction level of sample, which is measured with JDI (Job Description Index). The coefficients of 

correlation varied from -0.162 (Gender) and 0.724(age).Te Ranks and job satisfaction level of the 

respondents was significantly correlated (r=-0.828 at Significance level of 0.01, p< 0.01). On the other 

side age and job satisfaction level was also strongly correlated and significant (p< 0.01) (r= 0.724) as well 

as tenure & Job satisfaction (r=0.712) (p




Table 7: Tenure 

Frequency Percent Valid Percent 

Cumulative 

Percent 

Valid 0 3 1.6 1.6 1.6 

1-5 years 104 54.5 54.5 56.0 

6-10 35 18.3 18.3 74.3 

11-15 8 4.2 4.2 78.5 

16-20 12 6.3 6.3 84.8 

21-25 12 6.3 6.3 91.1 

26-30 14 7.3 7.3 98.4 

31-35 3 1.6 1.6 100.0 

Total 191 100.0 100.0 

Table 8: Job Satisfaction & Biographical Data – Pearson Correlation 

Overall Job Satisfaction 

Rank Pearson Correlation -.828 ** 

Sig.(2-tailed) .000 

N 191 

Gender Pearson Correlation -.162 * 


N 190 

Age Pearson Correlation .724 ** 


N 190 

Tenure Pearson Correlation .712 ** 


N 191 

* Correlation is significant at the 0.05 level (2 – tailed) 

** Correlation is significant at the 0.01 level (2 – tailed) 

Table 9 depicts the Pearson correlations for the relationship among different aspects of job satisfaction of 

faculty members, which were assessed through JDI. The strongest correlation was found for coworkers 

“the people along with faculty members work with” (r = 0.724). The factor of pay showed weak but 

positive relationship with job satisfaction (r= 0.278).Whereas, a strong correlation was obtained among 

Job itself and job satisfaction of faculty members (r= 0.626), the weakest correlation was obtained among 

promotion and job satisfaction (r= 0.248). But the relationship among supervision and job satisfaction 

was found significant (p < 0.01) . 


22




Table 9: Aspects of Job Satisfaction -Pearson Correlation Matrix 

Overall Job Satisfaction 

Job Pearson Correlation .626 ** 


N 191 

Pay Pearson Correlation .278 ** 


N 191 

Supervision Pearson Correlation .504 ** 


N 191 

Promotion Pearson Correlation .248 ** 


N 191 

People Pearson Correlation .724 ** 


N 191 

* Correlation is significant at the 0.05 level (2 – tailed) 

** Correlation is significant at the 0.01 level (2 – tailed) 

Multiple Regression Analysis 

In order to determine the impact of rank, gender, age and tenure on job satisfaction level of faculty 

members, multiple regression analysis was performed. 

Table 10: Multiple Regression Model 

Model R R- Square Adjusted R Square Std. Error of the Estimate 

1 .834 .696 .680 1.770 

Table 10 present the results of multiple regression analysis, where demographic variables (independent 

variables) are regressed against the job satisfaction (dependent variable).The R square is about 0.696 and 

adjusted R square is 0.680. Therefore the model can explain 68 % variation in dependent variable (Job 

satisfaction) due to demographic independent variables, so 32 % variance in job satisfaction is caused by 

other factors which are not included in the study. 

Table 11: Multiple Regression Model 

Model β SE t Sig 

1 (Constant) 35.671 1.620 21.877 .000 

rank -2.781 0.333 -8.339 .000 

gender .151 0.301 .473 .636 

age .098 0.171 .539 .591 

tenure -.374 0.178 -2.099 .037 


23




The values of individual Beta‟s are given in table 11, Tenure got negative Beta weight of –(0.374), which 

suggest job satisfaction and tenure of staff is negatively related ( inverse), with more tenure are 

experiencing lower job satisfaction level. The Beta weight of age is positive (0.098), which suggest that 

older faculty members have higher level of job satisfaction. Gender was found to be not statistically 

significant. Thus among faculty members of business institutes of Pakistan it is observed that rank and 

employee tenure are significant to predict level of job satisfaction, on the other side staff age and gender 

are weak predictors of job satisfaction among the faculty members. 

5. CONCLUSION 

This research provides the evidence of an empirical study; where the impact of age, gender, rank and job 

tenure on job satisfaction of business institutes was explored. Job Satisfaction is key to individual as well 

as organizational success. Faculty members like other employees have certain issues when it‟s come to 

job satisfaction. This study was conducted to explore deep in to this context through Job description 

Index, the faculty members working in business institutes of Pakistan (from four provinces namely, 

Sindh, Punjab, KPK and Baluchistan) have shown their satisfaction with coworkers, nature of work , and 

supervision they received in their institutes. The study found Pay and chances for promotion is the causes 

of job dissatisfaction among the participants of the study. Tenure of staff and their rank was significantly 

associated with the overall level of job satisfaction (p




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27





Dr. P G K Murthy 

Director of Parul Institute of Research and Management 

Vadodara, Gujarat, India 

Divyang Joshi 

Assistant Professor, 

S. G. Patel Institute of Management Studies 

Dharmaj. Dist: Anand 

State: Gujarat, India 

ABSTRACT 

The financial world has been changed greatly since last 20 years. 

Individual investors have started to participate actively in the investment 

activities. It has become very crucial to understand the investors‟ 

behavior for their investment decision. This study examines the 

investors‟ behavior with the help of different behavioral finance theories 

viz. overconfidence, disposition effect, conservatism, cognitive 

dissonance, rationality and regret theory. A sample survey of 130 

investors from the Anand, Petlad and Khambhat (Cities of Gujarat, 

Anand District) was conducted during February to April 2012 with the 

help of structured questionnaire. The study found that investors are 

irrational with different investment options, investors were found 

overconfident. The findings also support the disposition effect theory and 

regret theory. 

Key words: Rational behavior, disposition effect, overconfidence, regret, 

chi-square. 


The Efficient Market Hypothesis (EMH) believes that the prices of securities fully reflect the 

available information and the price changes are random. The EMH also assumes that investors 

are rational. Many researches do not support EMH. In 1980s, most of studies were done for EMH 

and behavioral model with the help of market data. 



Vol: 3, No: 6. June, 2012 

pp.28-37 


Special Acknowledgement 

Mr. Krunal Bhatt 

Student of MBA Semester IV 

S. G. Patel Institute of Management Studies Dharmaj. 


28




The traditional finance theory and research believe that investors always try to maximize their utilities by 

compromising their feelings and emotions. The traditional finance theory has always ignored the 

investors‟ psychology (Kadir Can YALCIN) and believed that humans are emotionless. In contrast to 

traditional finance theory, the behavioral finance theorist believes that individuals suffer from irrationality 

at a time of decision making. According to behavioral finance theory, investors‟ psychology can be 

classified as overconfidence, optimism, hindsight, overreaction to chance, errors of preferences, regret of 

omission & commission, regret & risk taking (Daniel and Mark, 1998). According to Kahneman D and 

Amos (1979) individuals‟ investment decisions are not rational. Their decisions are affected by inevitable 

cognitive and emotional biases which make their decisions irrational. This phenomenon is more relevant 

in case of stock market investors‟ behavior. The different studies have opposite conclusions, e.g. 

Jegadeesh and Titman (2001) found the momentum effect as a cause of irrational behavior in the stock 

market while in against of that Daniel and Titman (2000) found strong momentum in growth stocks 

compare to value stocks which shows rational behavior of investors. Majority of the research were done 

with the help of stock market data but there was no direct interaction with investors. Some factors for 

irrational behavior in the stock market were witnessed but it could be inappropriate and injustice to 

generalize and extrapolate those factors. With an objective to study natural effect of psychological biases 

on investors‟ decisions, this study examines the investors‟ behavior with the help of different behavioral 

finance theories viz. overconfidence, disposition effect, conservatism, cognitive dissonance, rationality 

and regret theory. 

BEHAVIORAL THEORIES AND LITERATURE REVIEW 

Behavioral finance attempts to explain and increase the understanding of reasoning patterns of investors, 

including the emotional processes involved and the degree to which they influence the decision-making 

process. Essentially, the behavioral finance attempts to explain “what”, “why”, and “how” of finance and 

investment, from a human perspective. Ricciardi and Simon (2000) discussed some general principles of 

behavioral finance including the overconfidence, financial cognitive dissonance, the theory of regret, and 

prospect theory, and compare it with modern portfolio theory and the efficient market hypothesis. Raiffa 

(1968) introduced 3 approaches for analyzing decision making of investors. First, the Normative Analysis 

which is the rational solution to the decision problem. Second, the Descriptive Analysis is the way in 

which real people actually make decisions and third, prescriptive Analysis is which is concerned with 

practical advice and help that people could use to make more rational decisions. Kahneman (1998) 

explained the concept of beliefs, preferences, and biases of investment advisors should know about. 

Rationality 

A rational decision is one that is not just reasoned, but is also optimal for achieving a goal or solving a 

problem. Rabin (1998) discussed and compared the view of economist and psychologist and concluded 

that in short duration investors were irrational but in long duration the human nature became rational. 

Sevil, Sen and Yalama (2007) surveyed and analyzed the attitude of investors of Istanbul Stock 

Exchange. Through the questionnaire they examined the prospect theory, regret aversion, cognitive 

dissonance and heuristics. They found that investors were not totally rational. 

Disposition Effect 

The common behavior of investors to hold looser stocks too long and sell the winner stock too early is 

called disposition effect (Grinblatt and Han, 2002). Investors may rationally, or irrationally, believe that 

their current losers in future will outperform their current winners. They may sell winners to rebalance 

their portfolios or they may refrain from selling losers due to the higher transactions costs of trading at 

lower prices. The disposition effect was studies by Odean (1998). He analysed 10,000 trading accounts 

and their trading pattern. He found that the investors demonstrate a disposition effect; it means hold 

losing investment too long and sells winning investment soon. 


29




Regret theory 

According to Investopedia “simply regret theory deals with the emotional reaction people experience after 

realizing they've made an error in judgment. Faced with the prospect of selling a stock, investors become 

emotionally affected by the price at which they purchased the stock. So, they avoid selling it as a way to 

avoid the regret of having made a bad investment, as well as the embarrassment of reporting a loss.” 

Overconfidence 

Overconfidence defines as “an overestimation of the probabilities for a set of events by Mahajan, J. 

(1992). Operationally, it is reflected by comparing whether the specific probability assigned is greater 

than the portion that is correct for all assessments assigned that given probability.” J. Michailova (2010) 

tests the overconfidence bias among the gender with the help of questionnaire of 50 questions. She 

concludes that there is no significant difference among expressed overconfidence by both the genders and 

they did not appear to be associated with overconfidence. 

Conservatism 

Conservative is simply means traditional. Conservatism as psychological attitude means human being has 

some excess attachment to the things which they have already with them. And something new offer to 

them then they are not ready to accept that new thing or slowly and gradually they are accept that new 

thing. Edward (1962) explains conservatism bias. It means “Investors are too slow (too conservative) in 

updating their beliefs in response to recent evidence. This means that they might initially under react to 

news about a firm, so that prices will fully reflect new information only gradually. Such a bias would give 

rise to momentum in stock market returns.” 

Financial Cognitive Dissonance 

As individuals, we attempt to reduce our inner conflict (decrease our dissonance) in one of two ways: 1) 

we change our past values, feelings, or opinions, or, 2 we attempt to justify or rationalize our choice. This 

theory may apply to investors or traders in the stock market who attempt to rationalize contradictory 

behaviors, so that they seem to follow naturally from personal values or viewpoints. Goetzmann and Peles 

(1993) explain the cognitive dissonance. According to them, an individual try to reduce his/her inner 

conflict by changing their past values, feelings or opinion or he/she attempt to justify his/her choices. 

Prospect theory 

Prospect theory deals with the idea that people do not always behave rationally. This theory holds that 

there are constant biases motivated by psychological factors that influence people‟s choices under 

conditions of uncertainty. Prospect theory considers preferences as a function of “decision weights,” and 

it assumes that these weights do not always match with probabilities. Specifically, prospect theory 

suggests that decision weights tend to overweigh small probabilities and under-weigh moderate and high 

probabilities. Kahneman and Smit (2002) had used insights from cognitive psychology regarding the 

mental processes of answering questions, forming judgments, and making choices, to help us better 

understand how people make economic decisions. The explained heuristics and biases, prospect theory, 

decision making differences according to economy and psychology. Schwarz (1998) conclude that if 

investors faced with the possibility of losing money they often take a riskier decisions aimed at loss 

aversion. So, investors‟ prospects changed according to the probabilities of being in profit or loss. 

OBJECTIVE OF THE STUDY 

The primary objective of the study was to understand the behavior of investors with the help of different 

behavioral finance theories. The theoretical concept of different behavior finance theories like 

overconfidence, disposition effect, conservatism, cognitive dissonance, rationality and regret theory were 

used to understand the investors‟ behavior. 


30




HYPOTHESIS 

1) H o = 60% investors are Rational. 

2) H o = 60% investors are Over Confident. 

3) H o = 60% investors are affected by Disposition Effect. 

4) H o = 60% investors are conservative. 

5) H o = 60% investors are affected by Cognitive Dissonance. 

6) H o = 60% investors are Regret Investors. 

The behavior can‟t be 100% same for all situations and for all human being. So for hypothesis testing, 

60% was taken as a benchmark for getting inventors‟ behavior. The alternative hypothesis for all H o was 

“less than 60%.” 

DATA AND METHODOLOGY 

Sampling unit 

For the survey respondent must be the person who invests in the Stock Market. Convenient sampling 

method is used for data collection. The questionnaires were filled out through personnel meeting with the 

investors. The respondents were survey outside the broking houses at respective cities. 

Sample Size 

The pilot study was conducted by surveying 20 investors. The human behaviour can not predict 

accurately. So, the confidence level was taken 93%. At 93% confidence, the sample size was derived at 

124. For reducing error and safer side the sample size was increased to 150. Total 150 questionnaires 

were distributed in Anand, Petlad and Khambhat (50 in each) out of which 130 generated valid responses. 

50, 46 and 34 questionnaire received from Anand, Petlad and Khambhat respectively. The sample was 

drawn as per convenience. The visitors and investors approached outside the brokerage house. The 

collected data were analyzed with the help of Minitab 16. 

Questionnaire Design 

The questionnaire (Annexure No. 1) was formed with 15 questions. Each question starts with a particular 

scenario or situation that may happen in the stock market. Then the respondents were offered a set of 

responses, which generally observed at a time of decision making. The questions were arranged in the 

following sequence to get proper understanding of investors‟ behavior and response. 

Question Number 

Behavioral Theory 

1, 10 and 11 Rationality 

2, 9 and 12 Over confidence 

3, 8 and 13 Disposition Effect 

4 and 14 Conservatism 

7 Cognitive Dissonance. 

5, 6 and 15 Regret Theory 


31




DATA ANALYSIS AND INTERPRETATION 

Hypothesis 1:- Ho = 60% investors are Rational. 

* Table -1 Rationality of Investors 

Question No. Rational Option Rational Investor in Irrational Investor Total 

1 Option No. 2 71 59 130 

10 Option No. 1 74 56 130 

11 Option No. 1 21 109 130 

Here in question-1, investors who supposed to be rational would like to select option 2 because compare 

to option 1 option 2 is profitable. In analysis 71 investors select option 2nd it show that 55% investors are 

rational and 59 investors select option 1st it means 45% investors are irrational. 

In question-10, under the rationality assumption of expected utility theory investors have to choose option 

1 because option 1 offered loss of Rs. 100 and option 2 loss of Rs. 140. 74 investors select option 1st it 

show that 57% investors are rational and 56 investors select option 2nd it means 43% investors are 

irrational. 

In question no. 11 As per Rationality theory of behavior finance, intuition of investors is not playing any 

role in deciding or taking decision. The investors who are Rational they select option 1, that contain “no 

effect” of intuition and who are irrational investors they select option 2 & 3, these contain “little effect” 

and “high effect”. 21 investors select option 1 means 16% investors are rational on the other hand 109 

investors who select option 2 & 3 means 84% investors are irrational. 

N=130, x=55, p^=55/130 = 0.4230, p=.60, q=.40, = 7%, confidence level =93% 

P^ p 0.4230 

0.60 

Z cal = 

pq / n 0.60 *0.40 /130 

= 

= -0.1769/0.0429 = -4.12 

Z cal




Hypothesis 3:- 60% investors are affected by Disposition Effect 

* Table - 3 Affected by Disposition Effect 

Question No. 

Option for 

Disposition effect 

Disposition Effect No Disposition Effect Total 

3 1 102 28 130 

8 2, 3 & 4 121 9 130 

13 1 110 20 130 

The disposition effect means sell the winner too soon and hold the looser too long. To check the 

disposition effect 3 questions were formed in a case form. Investors were asked about there decision for 

holding or selling winning stock and looser stock. The investors who prefer to sell winning stock and 

ready to hold looser stock were categorized as investors affected by disposition effect. 

N=130, x=111, p^=111/130=0.8538, p=.60, q=.40, = 7%, confidence level =93% 

P^ p 0.8538 

0.60 

Z cal = 

pq / n 0.60 *0.40 /130 

= 

= 0.2538/0.0429 = 5.903 

Z tab At = 7% from the normal table is = -1.48, Z cal >Z tab 

H 0 is failed to reject; it means 60% investors are affected by Disposition Effect. 

Hypothesis 4:- 60% investors are conservative 

* Table - 4 Conservative investors 

Question No. 

Option for Conservative Non conservative 

Conservatism Investors 

Investors 

Total 

4 1 & 2 39 91 130 

14 3 & 4 55 75 130 

Conservative is simply means traditional. Conservative investors believe in past information. They are 

very slow to accept any new information that available in market regarding particular stock. Here, in 

question 4 and 14 particular case was given for their investment and asked about their decision regarding 

current investment. From the table it can observe that at the time of negative news (Question 4) investors 

were less conservative compared to positive news (Question 14). 


P^ p 0.3615 

0.60 

Z cal = 

pq / n 0.60 *0.40 /130 

= 

= -0.2385/0.0429 = -5.55 

Ztab At = 7% from the normal table is = -1.48, Zcal




investors select options 3 or 4 so it is said that 53% investors are Cognitive Dissonance investors. They 

are ready to change in investment pattern to support financial information that available in market. 61 

investors select options 1 or 2 that mean 47% investors are non cognitive dissonance investors that means 

they are stick to their past experience and investment (Conservatism). 


P^ p 0.5307 

0.60 

Z cal = 

pq / n 0.60*0.40 /130 

= 

= -0.0693/0.0429 = -1.61 

Z tab At = 7% from the normal table is = -1.48, Zcal Z tab 

H 0 is accepted; it means 60% investors are Regret Investors. 

CONCLUSION AND DISCUSSION 

The paper tends to examine the Indian investors‟ behavior. Six main cognitive biases namely Rationality, 

over confidence, Disposition Effect, Conservatism, Cognitive Dissonance and Regret Theory were used 

to check the investors‟ behavior. The best manner to explore the investors‟ behavior is to interact directly 

with the investors and try to extract their opinion. So, the questionnaire survey technique was adopted and 

questions based on these psychological biases were asked. The responses collected through the 

questionnaire were analyzed and hypothesized. The findings support the rationality, disposition effect and 

theory of regret concepts of behavioral concept. But findings do not support the overconfident, 

conservatism and cognitive dissonance concepts. 

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Annexure 

Q-1. You have Rs 10,000 for making investment in the following options. Which option would you 

select? 

1)30% probability to earn 5000 Rs 2) 40% probability to earn 4000 Rs 

Q-2. What was high made by NIFTY 50 in 2008? 

1) 6387 2) 6257 3) 6417 

How much confident are you? ______% 

Q-3. You bought share A for Rs 350 which is currently being sold @ Rs400 and stock B, for Rs 500 

which is also currently being sold @ Rs400. You are in need of money. Which Stock would you 

like to sell? 

1) Stock A 2) Stock B 

Q-4. From your holdings, for specific company there are rumors that company is in Problem, what will 

you do? 

1. Indifferent 2.Maintain position/ keep investing. 

3. Reduce/ sell half of the share. 4. Sell all shares and liquidate position. 

Q-5. Your friend had purchased RIL @ price of Rs 1200 and it goes high up to Rs 2500. Now due to 

uncertainty price goes down to Rs 700. Your friend bares big loss. Do you think this was...? 

1) A Mistake 2) A bad luck 

Q-6. During your investment experience, what contribution has been made by following factors which 

led you towards loss? 

No Particular Contribution % 

1 Broker advice 

2 Friend Advice 

3 Own Analysis 

4 Suggestions by TV and News papers 

5 Your Intuition 

Total 100% 

Q-7. Your broker advises you to sell all shares from your portfolio and invest in hotel and agriculture 

sectors which were not the part of your investment. Your strategy will be... 

1. Indifferent 2.Think and analyses recommendation 

3. Sell half and invest as per advice 4. Sell all and follow the advice. 

Q-8. You are having following stocks in your portfolio. You are in need of 150,000 Rs. Which stock 

would you like to sell? 

Q-9. 

No Company name Purchase. 

Quantity 

Purchase. 

Price 

Current 

mkt. price 

Profit/loss 

per share 

1 RIL 100 1600 700 -900 

2 L&T 100 800 1200 +400 

3 NTPC 100 75 175 +100 

4 HUL 100 190 390 +200 

5 Bharti AIRTEL 100 800 400 -400 

How good your analysis is proved for investment as compared to other investors? 

1. I am extremely good 2. I am good 

3. Same like other 4. I am not good 

5. I am not extremely good 

Hold/Sell 


36




Q-10. You have Rs 10000 for making investment in the following options. Which option would you 

select? 

1) 10% probability to loose 1000 Rs 2) 20% Probability to loose 700 Rs 

Q-11. What do you think is the role of intuition (your internal feeling) while deciding about purchasing a 

stock? 

1) No effect 2) Little effect 3) High effect 

Q-12. What was rate of GDP in 2010-11? 

1) 9.3% 2) 8.7% 3) 8.3% 

How much confident are you? ______% 

Q-13. In the period of higher volatility in stock market, which group of stock would you prefer to sell? 

1) The one which earn profit. 2) The one which earn loss. 

Q-14. From your holdings of different companies‟ share, there is positive news for specific 

company. What will do? 

1) Indifferent 

2) Maintain position/ keep investing 

3) Increase/ purchase half of the share 

4) Sell other share and invest in news specific company. 

Q-15. During your investment experience, what contribution has been made by following 

which led you towards profit? 

No Particular Contribution % 

1 Broker advice 

2 Friend Advice 

3 Own Analysis 

4 Suggestions by TV and News papers 

5 Your Intuition 

Total 100% 

factors 

General Information: 

Name & Address of Respondent : _______________________________________________ 

Age 

: ________ Years. 

Gender : Male Female 

Occupation: 

1) Professional 3) Service 

2) Business 4) Other _________________________ 

Thank you for Your Response!!! 


37




The impact of Budget Participation on 

Organizational Performance via 

Competitiveness 

Lassaad Ben Mahjoub 

Assistant professor of accounting, 

Department of Accounting and Finance, 

Faculty of Economic Sciences and Management, Sfax, 

Tunisia. 

Khamoussi Halioui 

Associate Professor of Accounting, College of Economics, Management and Information 

Systems, University of Nizwa, 

OMAN 

ABSTRACT 

This paper aims to inquire aspect of linkage between budgetary and 

organizational performance across market competitiveness as an 

important variable affecting this relation. To test this association, the 

data is obtained via survey from 89 managers working in accounting 

and finance sub-departments in Tunisia in 2009. In the analysis of 

data, descriptive statistics, correlation analysis, factor analysis, 

multiple regression analysis and t-test analysis were used. The 

results of survey are consistent with the proposition that businesses 

with high performance are more participative and have higher 

competitiveness level than businesses with low performance. 

However, we conducted a bi-dimensional analysis of the budgetary 

participation, we obtained two dimensions 1 : influence and 

involvement. We concluded that the second dimension is the 

responsible of the studied effect. 

Keywords: Budgetary Participation; Organizational Performance; 

Competitiveness; Dimensional Analysis 



Vol: 3, No: 6. June, 2012 

pp.38-49 



Budgetary participation that means participation of managers to determination 

process of resources using in their own activities and operations, has been 

1 The two dimensions are: involvement and influence. For the purpose of this study, the involvement dimension of 

budgetary participation is defined as the extent to which information is exchanged between managers about factors 

that affect their budget, while the influence dimension of budgetary participation refers to the extent to which 

managers have command over the budget setting process that established the criteria under which they may be 

evaluated (Hassel and Cunningham, 1993, 1996). 


38




interested in the literature of management accounting for a long time as an important subject. 

Indeed, the basic utility of the subject comes from increasing importance of determining 

dimensions of budgetary participation‟s effects on managers‟ performance in the present 

competitive conditions for firms. 

From psychological and cognitive perceptions, there are two advantages of managers‟ 

participation in budgeting process. First, owing to identification and ego-involvement with 

budget objectives, participation is associated to performance and so, leads to enhanced 

motivation and commitment to the budget (Brownell, 1982; Shields & Shields, 1998). The 

second reason is improving flow of information between superiors and subordinates, budgetary 

participation leads to good decision making. From this standpoint, participation escorts to higher 

motivation, higher commitment, higher quality decisions and consequently higher performance. 

2. LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT 

The effect of budgetary participation on the organizational performance has been the subject of 

considerable research in management accounting (Chong et al., 2005).Early empirical studies 

used a universalistic approach to examine the effect of budgetary participation. However, the 

results have been mixed (Murray, 1990; Kren, 1992; Chong et al., 2005; Jermias & Setiawan, 

2008). 

Subsequent studies have attempted to reconcile the conflicting results by adopting a contingency 

approach (Brownell, 1982a; Govindarajan, 1986; Chong et al., 2005). The empirical evidence 

generated by these studies suggests that contingency factors such as locus of control (Brownell, 

1982, 1983), perceived environmental uncertainty (Govindarajan, 1986), leadership style 

(Brownell, 1983), decentralization (Gul et al., 1995), role ambiguity and role conflict (Chong & 

Bateman, 2000), and feedback (Chong & Chong, 2002a) have an impact on participationperformance 

linkage. 

The present work aims to extend this field of research by examining another contingent variable, 

namely level of competitiveness, which is an important external environmental factor. 

Competitiveness has been identified as a major reason for companies to choose a customerfocused 

strategy for gaining a competitive edge (Porter, 1979). It has been suggested that 

managers will always be faced with problems associated with market conditions in their routine 

planning and controlling behaviors. 

The budgetary participation gives legitimacy to individuals to discuss problems of their 

organization with their superiors, it can also provide a framework within which people can 

exchange information and ideas to solve problems and agree on future actions, this may affect 

the performance of their businesses (O‟Connor, 1995). However by adopting a contingent 

approach, Chong et al., (2005) argues that, under conditions of low competition, companies are 

focusing more on short-term trading. It follows that managers don‟t need to collect market 

information for planning purposes. 

It is further argued that managers in firms facing intense market competition are more likely to 

make greater use of multiple performance measures in their attempt to trace the various market 


39




factors and achieve competitive advantage (Mia & Clarke, 1999).Similarly, Shields & Shields 

(1998) find that in situations of low competitiveness, decisions become more routine. In these 

circumstances, the decisions of leaders themselves as the obvious solutions and considered 

wasteful of time. Therefore, these managers are less satisfied in their mission if they become 

involved in the preparation of budgets. Therefore, one can conclude that under conditions of low 

competitiveness, managers will be less incentive to participate in the process of preparing the 

budget (Powell, 1992). 

It is possible that a high level of participation is inconsistent with the organizational structure and 

business environment; this is due to a low level of performance (due to wasted time and effort of 

managers) and dissatisfaction at work. In another side, if the intensity of competitiveness is 

strong, managers may need additional information relevant to the complexities of the external 

market environment (Brownell, 1983; Kren, 1992; Tsui, 2001). The works of Kren (1992) and 

Chong & Chong (2002b) show that budgetary participation provides a convenient opportunity 

for leaders to gather relevant information to make informed decisions. Thus we assume that a 

high level of competitive market, managers participating in the budget process, seeking more 

information. This opportunity allows them to increase their satisfaction because their 

participation is a tool to express their values (Shields & Shields, 1998, p. 59). 

Hence, the first hypothesis could be formulated as follows: 

Hypothesis 1: The direct effect of budgetary participation on organizational performance is low. 

Both assumptions are made and are based on a literature review using the budgetary participation 

as an independent variable, taking a comprehensive approach to this variable (dimensional scale 

of the variable budgetary participation). However, in seeking to identify the true extent of 

participation that influences organizational performance in the presence of competitive 

conditions (high or low), we adopt a more dimensional approach to the budgetary participation 

(Hassel & Cunningham, 1993, 1996; Chong & al., 2005).The dimension "involvement" of 

budgetary participation is defined as the extent of information exchanged between managers 

regarding the factors affecting their budget. While the dimension "influence" means the level of 

influence on manager for the determination of his budget (Hassel & Cunningham, 1993, 1996). 

Given the bi-dimensionality of the budgetary participation, we make the following assumptions: 

Hypothesis 2: There is a positive relationship between the dimension "involvement" of budgetary 

participation and organizational performance when there is a high level of competitiveness. 

Hypothesis 3: There is a positive relationship between the dimension "influence" of budgetary 

participation and organizational performance of the company when there is a high level of 

competitiveness. 

3. RESEARCH METHODOLOGY 

3.1. Data collection and sample characteristics 

This study employed a questionnaire survey method to collect data. A sample was composed 

from 89 top managers from companies in the industrial sector.The administration of the survey 

questionnaire consisted of the following steps. First, a questionnaire with a cover letter 

explaining the objective of the study and a reply paid self-addressed envelope were mailed to 


40




each manager. The survey questionnaire asked them to provide data for three variables namely: 

intensity of market competition, budgetary participation, and organizational performance. 

Of the 113 questionnaires distributed starting at 113 Tunisian companies, 93 responses were 

obtained. These responses have been purified to reach a final sample of 89 industrial companies 

in Tunisia. 

The characteristics of target companies and managers are summarized in Table 1 and Table 2 

Table 1. Characteristics of the companies 

Companies 

89 

Number of employees 

50-100 100-200 >200 

15 29 45 

Table 2. Characteristics of the managers 

managers Service held Years of experience in current position 

Financial or Others 8years 

89 Accounting 

79 10 14 5 28 23 19 

3.2. Variables measurement and reliability of constructs 

3.2.1. The dependent variable: Organizational Performance 

The major challenges in measuring organizational performance lived in three levels. First is the 

validity of the construct of organizational performance. The second is the relationship between 

the purpose of research and the proper definition of organizational performance that can give a 

proper measure of this variable. Is it is a measure against a market accounting measure, a 

financial measure against a non-financial measure or a measure based on objective criteria 

against subjective criteria? 

Referring to the study of Venkatraman (1989), organizational performance is defined as the 

effectiveness and efficiency of the elements may affect the profitability and growth of 

organizations. From this definition, Desphandé et al. (1993)‟ measure of organizational 

performance based on the following six items: a prosperous, market share, the rate of growth, 

profitability and innovation (Appendix A). 

Table 3. Factor analysis for Organizational Performance 

Items Factor Loading 

PO1 a 0.728 

PO2 0.603 

PO3 0.851 

PO4 0.724 

PO5 0.533 

Extraction Method: Principal Components Analysis 

Only one dimension is extracted 

Cronbach reliability coefficient = 0.795 b 

b results from SPSS.17 output 

a PO1, … PO5 are the items measuring Organizational Performance 


41




Regarding the internal validity of this scale of measurement, the reliability coefficient α is 0.795 

which means that the measurement scale has good internal validity. 

The factor analysis extracted one factor whose Eigen value is 2.81 and explains 56, 20% of total 

variance, which allows us to admit the one-dimensionality of the scale measuring this variable. 

3.2.2. Independent variable: Budgetary Participation 

The choice of instrument for measuring the budgetary participation has been critical in 

highlighting its effects. In counting the previous studies related to the extent of budgetary 

participation, Chong et al., (2005) stated that the instrument developed by Milani (1975) was the 

most used due to its reliability demonstrated by a plethora of research (Brownell, 1982; Dunk, 

1993 ...). The instrument consists of six items Milani each of which uses a response on a Likert 

scale of seven points. The scale is designed for construction of an additive total score (Appendix 

B). 

a 

Table 4. Factor analysis for Budgetary Participation 

Factor Loading 

Items First factor 

Second factor 

PB1 a 0.695 

PB2 0.817 

PB3 0.735 

PB4 0.888 

PB5 0.829 

PB6 0.860 


Two dimensions are extracted 

Cronbach reliability coefficient = 0.828 

PB1, …, PB6 are the items measuring the budgetary participation 

The internal validity of the measurement scale of the variable budget participation is measured 

by the Cronbach reliability coefficient (α). This value is high at 0.828, which means that this 

scale of measurement is reliable since α value was well above the limit set by Nunnally (1978) to 

0.6. 

The Kaiser-Meyer-Olkin (KMO) index of this scale of measurement is 0.750. Items can be 

factorizable when the value exceeds KMO value for 0.5. Note also that, over the index, the 

higher the number of factor is low. We can therefore conclude that our data lend themselves to a 

factor analysis. 

A principal component analysis gave us two main factors. Indeed, a rotation of axes allowed us 

to eliminate cases where one or more items are several factors in the same proportions. She 

identified two independent factors, each containing three items. 

We can conclude that budgetary participation can have two distinct dimensions: "involvement" 

and "influence". 


42




The first factor (PB1) can be interpreted as the dimension of "influence", it consists of items (see 

appendix B) 3, 4 and 5 (Milani, 1975; Hassel & Cunningham, 1993, 1996) explains 54, 73% of 

the total variance. This factor has a Cronbach α value of 0.803. 

The second factor (PB2) is the “involvement” (items 1, 2 and 6) which explains 16, 66% of the 

total variance. The reliability coefficient of this factor is 0.771. 

3.2.3. The moderator variable "intensity of market competition (COMP) 

The measurement of this variable was originally made by Khandwalla (1972). However, several 

criticisms and shortcomings have been addressed to this measure.Mia & Clarke (1999) propose 

an alternative measure into six items describing the state of competitiveness of the company 

(Appendix C); the answers are spread on a Likert scale of five points ranging from 1 (very poor) 

to 5 (very strong). 

For the internal validity of the construct, the reliability coefficient is 0.451, it is less than 0.6. So, 

all items constituting the scale of measurement is not reliable. It is advisable to proceed with a 

measure of adequacy of sampling and factor analysis to find the items or responsible for this 

anomaly. 

The study of the scale dimensionality of this variable showed that the measure of sampling 

adequacy of KMO was 0.426. This value is low, which indicates the absence of the 

unidimensionality of instrument. 

Table 5. Factor analysis for Intensity of Market competitiveness 

Factor Loading a 

Items First factor Second factor Third factor 

COMP1 b 0,741 

COMP2 0,860 

COMP3 0,718 

COMP4 0,809 

COMP5 0,884 

COMP6 0,617 0,549 


Rotation Method: Varimax with Kaiser Normalization 

Three dimensions are extracted 

Cronbach Reliability coefficient = 0.451 

a Values below 0.5 are eliminated 

b 

COMP1, …, COMP6 are the items measuring the intensity of market competitiveness 

The results of the rotation axis factor analysis showed that the items are divided into three 

factors. The inverse matrix and anti-image correlation matrix enabled us to retain the factor 

composed by the following items: 1, 3 and 4 (Competitive Price, Competitive Marketing, 

Competitiveness market share). 


43




4. DATA ANALYSIS AND DISCUSSION OF THE RESULTS 

For treatment of collected data, we used the statistical software SPSS 17.0 and E-Views 6 which 

have enabled us to perform all statistical tests necessary to validate research hypotheses. 

4.1. Descriptive Statistics 

It is to identify the characteristics and criteria for evaluating the measuring instrument object 

variables of the study. The results of the descriptive analysis are summarized in the following 

table: 

Table 6. Descriptive statistics for all variables 

Variable Items Mean Min Max Range Variance 

Budgetary Participation 6 3,565 3,279 4,033 0,754 0,076 

Intensity of market 

competition 

6 3,511 3,361 3,689 0,328 0,020 

Organizational Performance 5 3,889 3,672 4,164 0,492 0,032 

These results may confirm the existence of the practice of budgetary participation in in our 

sample of Tunisian firms, since the average score per item exceeded the average score (3.565> 3) 

and given a low score reflects a low level of budgetary participation and a high score reflects a 

high level of budgetary participation. 

For the variable "organizational performance", we note that most of the means of item scores are 

well above the average; this can be interpreted by an acceptable performance of sample firms. 

The above table also shows that the intensity of the competitiveness of Tunisian companies, 

target of our search, is not as strong as the average score per item, it increased slightly above 

average. 

4.2. Test assumptions and interpretation of results 

To achieve reliable tests, we conducted an audit of assumptions (conditions) before application 

of the regression technique: the linearity of the model, normality of the dependent variable, 

multicollinearity and homoscedasticity. 

The following model is used to test these hypotheses: 

Y i = α 0 + α 1 + X i1 + α 2 X i2 + α 3 X i1 *X i2 + ε 

Where, according to the hypothesis to test, Y: organizational performance Xi1: the budgetary 

participation (composite score), size, influence or involvement dimension, Xi2: intensity of 

competitiveness X i1 *X i2 : the interaction term, and ε: the error term. 

4.2.1. The direct effect of budgetary participation on organizational performance 

Panel A from Table 7 present a regression analysis of the direct effect of the explanatory variable 

(PB) on organizational performance, the results confirm the first hypothesis. The effect of the 

budgetary participation is poor (p>=0.891), the solution is to find a moderate effect by a 

contingency variable. In our case this is the intensity of market competition. 


44




Table 7. Regression analysis results 

Panel : Direct relationship between Budgetary Participation and Organizational Performance 

Variables Coefficient Standard error t-Value P 

Constant 0.064 0.124 0.518 0.606 

Budgetary 

participation (X1) 

0.012 0.090 0.138 0.891 

Adjusted R 2 = 0.23 

Panel B: Moderate effect of Intensity of competitiveness in the relation Budgetary participation 

(composite score) and Organizational performance 

Constant 0.178 0.195 1.87 0.004 

Budgetary 0.089 0.781 0.13 0.891 


Intensity of market 0.961 1.233 1.02 0.446 

competition (X2) 

X1*X2 0.345 1.089 1.764 0.063 


Panel C: Performance on the “involvement dimension” of budgetary participation and intensity 

of market competition 

Constant 0.085 0.028 0.71 0.481 

Involvement 

dimension of 

Budgetary 

Participation (X1) 

0.130 0.120 1.08 0.283 

Intensity of market 0.256 0.107 1.28 0.297 


X1*X2 0.351 0.189 3.29 0.002 


Panel D: performance on the “influence dimension” of budgetary participation and intensity of 

market competition 

Constant 0.063 0.042 0.98 0.561 

Influence Dimension 

of Budgetary 


Intensity of market 


0.076 0.945 1.23 0.117 

1.056 1.129 1.56 0.109 

X1*X2 1.349 1.267 1.08 0.179 


4.2.2. Effect of budgetary participation on organizational performance through the 

intensity of market competition: the moderate effect 

Panel B in Table 7 shows a regression coefficient α is 0.345; it is positive and significant (at 10% 

level). This result confirms the first hypothesis and show that organizational performance is 

influenced by the budgetary participation (composite score 2 ) in a context of high level of 

2 In this regression, we use the composite score of the Budgetary Participation (only one factor) 


45




competitiveness.The question, posed now is: which dimension of budgetary participation has a 

significant effect in the studied relationship? 

The answer to this question will depend on the results of subsequent regressions. 

4.2.3. Dimensional analysis: effect of the “involvement” 

Panel C of Table 7 shows an adjusted R2coefficient equal to 15.1%. 

The regression coefficient α is 0.451, it is positive and significant (t = 3.29 at 5% level). This 

result confirms the hypothesis 2 that there exists a positive relationship between the size of 

"involvement" of budgetary participation and organizational performance of the company when 

there is a high level of competitiveness. In a similar context, Jermias & Setiawan (2008) and 

Chong et al., (2005) find same results. 

4.2.4. Dimensional analysis: effect of the “influence” dimension of budgetary participation 

Hypothesis 3 posits that the dimension "influence" of the budgetary participation, in interacting 

with the intensity of competitiveness, hasn‟t a significant effect on organizational performance. 

The model referred to this case (Panel D of table 7) doesn't present a sizeable explanatory power 

(adjusted R ² = 10.2%). 

The regression coefficient is positive (0.076) but not significant with a value t-statistic equal to 

1.23. So the dimension "influence" of the budgetary participation has no significant effect on 

organizational performance of firms in a context of strong competitiveness. This confirms the 

third hypothesis. The results of linear regressions are aligned with those obtained by Hassel & 

Cunningham (1993, 1996). 

CONCLUSION 

This study examined the impact of budgetary participation on organizational performance 

through the intensity of market competition. It offers a combination of strong budgetary 

participation and a high level of competitiveness will enable to improve organizational 

performance of firms. The conduct of this work was largely influenced by the study of Chong 

and al., (2005) and that of Jermias & Setiawan (2008). In general, the results obtained confirm 

the hypotheses developed in this study. They showed that the "involvement" dimension of the 

budgetary participation is a source of improved organizational performance especially under 

conditions of high competitiveness. A dimensional analysis of the budgetary participation into 

two factors "involvement" and “influence” showed that only the first dimension involve in 

interaction with the intensity of market competition to increase organizational performance. The 

contribution of this work appears in two levels. From a theoretical perspective, the results of this 

study may enrich the management accounting literature, and introducing of "market competition" 

as new contingency factor. In practical terms, the results are an encouragement tool of company 

managers to budgetary participation especially in situations of high competitiveness to improve 

the performance of their businesses. It is important to remember that this research suffer from a 

number of limitations. Indeed, the sample size is limited which makes it difficult to generalize 

the results. On the other hand, instruments for measuring variables even if they are to criticism, 

our choice are justified for the sake of comparison. 


46




Appendixes 

APPENDIX A: Organizational Performance 

In focusing on the variable 'organizational performance', please check the number that 

corresponds to the level of business performance following the scale of 1 begins: "lowest" to 6 

"above". 

Compared with its competitors, your business: 

1. More prosperous 

2. Has the largest market share 

3. Has higher growth rate 

4. More profitable 

5. More innovative 

APPENDIX B: The budgetary participation 

In focusing on the variable budgetary participation, please state your opinion on each of the 

following statements by circling the appropriate number: 1 "totally agree" to 6 "strongly agree". 

1. I participate in the budgeting process for my department. 

2. My supervisor provides me with reasons and / or explanations when the budget is revised. 

3. I encourage discussions with my supervisor about the budget without wondering. 

4. I feel I have an influence on the final budget. 

5. My contribution to the budget is important. 

6. My supervisor asks my opinions and / or my proposals relating to the budget when it is 

already developed 

APPENDIX C: The intensity of competitiveness 

Please indicate, by circling the appropriate number, the intensity of market competitiveness of 

your business using the following scale (scale: 1 = very poor, 2 = poor, 3 = moderate, 4 = strong, 

5: very strong): 

1. Competitive prices 

2. Competitiveness for development of new products 

3. Competitive Marketing (or chain of distribution) 

4. Competitive Market Share 

5. Actions of competitors 

6. Number of competitors in the industry 


47




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