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<strong>International</strong> Journal <strong>of</strong> <strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
Vol: 3, No: 6. June, 2012 ISSN 2156-7506<br />
Available online at http://www.akpinsight.webs.com<br />
ISSN 2156-7506<br />
<strong>International</strong> Journal <strong>of</strong><br />
<strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
VOLUME 3<br />
NUMBER 6<br />
June, 2012<br />
<br />
In this Issue:<br />
A Review on the Role <strong>of</strong> Managerial Levers In Innovation Management<br />
Suriati Bt Zainal Abidin , Sany Sanuri Bin Mokhtar , Rushami Zien Bin Yus<strong>of</strong>f<br />
Relationship <strong>of</strong> Age, Gender, Tenure, Rank and Job Satisfaction-<br />
Empirical Evidence from <strong>Business</strong> Institute <strong>of</strong> Pakistan<br />
Dr. Niaz Ahmed Bhutto, Naveed Anwar, Hyder Ali Khawaja<br />
A Study on Retail Investors’ Behavior<br />
Dr. P G K Murthy, Divyang Joshi<br />
..<br />
The impact <strong>of</strong> Budget Participation on Organizational Performance via<br />
Competitiveness<br />
Lassaad Ben Mahjoub, Khamoussi Halioui<br />
.<br />
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<strong>International</strong> Journal <strong>of</strong> <strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
Vol: 3, No: 6. June, 2012 ISSN 2156-7506<br />
Available online at http://www.akpinsight.webs.com<br />
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<strong>International</strong> Journal <strong>of</strong> <strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
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<strong>International</strong> <strong>journal</strong> <strong>of</strong> <strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
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<strong>International</strong> Journal <strong>of</strong> <strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
Vol: 3, No: 6. June, 2012 ISSN 2156-7506<br />
Available online at http://www.akpinsight.webs.com<br />
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<strong>International</strong> Journal <strong>of</strong> <strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
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Available online at http://www.akpinsight.webs.com<br />
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Contents:<br />
VOLUME 3, NUMBER 6<br />
June, 2012<br />
A Review on the Role <strong>of</strong> Managerial Levers In Innovation Management<br />
Suriati Bt Zainal Abidin , Sany Sanuri Bin Mokhtar , Rushami Zien Bin Yus<strong>of</strong>f……………………………...6<br />
Relationship <strong>of</strong> Age, Gender, Tenure, Rank and Job Satisfaction- Empirical Evidence from<br />
<strong>Business</strong> Institute <strong>of</strong> Pakistan<br />
Dr. Niaz Ahmed Bhutto, Naveed Anwar, Hyder Ali Khawaja……………………………………….…15<br />
A Study on Retail Investors’ Behavior<br />
Dr. P G K Murthy, Divyang Joshi………………………………………………………………………….….28<br />
The impact <strong>of</strong> Budget Participation on Organizational Performance via Competitiveness<br />
Lassaad Ben Mahjoub, Khamoussi Halioui………………………………………………………………..38<br />
E n r i c h K n o w l e d g e t h r o u g h Q u a l i t y R e s e a r c h<br />
Copyright © 2012. Academy <strong>of</strong> Knowledge Process<br />
5
<strong>International</strong> Journal <strong>of</strong> <strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
Vol: 3, No: 6. June, 2012 ISSN 2156-7506<br />
Available online at http://www.akpinsight.webs.com<br />
A Review on the Role <strong>of</strong> Managerial Levers<br />
in Innovation Management<br />
Suriati Bt Zainal Abidin 1<br />
Sany Sanuri Bin Mokhtar 2<br />
Rushami Zien Bin Yus<strong>of</strong>f 3<br />
1, 2, 3 College <strong>of</strong> <strong>Business</strong><br />
Universiti Utara Malaysia<br />
06010 UUM Sintok,<br />
Kedah Darul Aman, MALAYSIA.<br />
ABSTRACT<br />
Managerial levers are essential elements to ensure the synchronization<br />
between people and system which would assist in implementing<br />
innovation in the organization. Based on the diverse literature, this paper<br />
reviews five types <strong>of</strong> managerial levers: strategy, organization structure,<br />
resource allocation, knowledge management and organizational learning<br />
and culture. Each lever has its beneficial function to be effectively assist<br />
innovation process. Despite the fact that innovation is a dynamic process<br />
and involved multi-dimensional factors, the role <strong>of</strong> managerial levers is<br />
considered fundamental building blocks that will shape innovation. This<br />
review indicates that managerial levers should be applied side by side in<br />
the innovation management in order to ensure that innovation is establish<br />
and managed efficiently.<br />
Keywords: Managerial Levers, Innovation Management, Innovation<br />
Process,<br />
<strong>International</strong> Journal <strong>of</strong><br />
<strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
Vol: 3, No: 6. June, 2012<br />
pp.6-14<br />
©Academy <strong>of</strong> Knowledge Process<br />
1. INTRODUCTION<br />
Levers are the basic structure <strong>of</strong> any organization and it must be linked consistently to<br />
maximize efficiency (Steward, 2010). It is claimed that seven managerial levers are<br />
needed in order to be a strong company: strategy, structure, leadership, information and<br />
decision processes, people, culture, reward and incentives (Steward, 2010). In a study <strong>of</strong><br />
cultivating new mental space for business innovation, managerial levers act as a<br />
technique that enable organizations to find new opportunity by adapting to rapid changes<br />
(Leibold, Voelpel, & Tekie, 2004). While in a case study <strong>of</strong> 124 companies in USA, it<br />
has shown that structural and skill levers <strong>of</strong> strategy implementation is proven in building<br />
a capable organization (Crittenden & Crittenden, 2008). It has also emphasized that<br />
organization need to have a clear understanding <strong>of</strong> each lever role so that it could really<br />
bring impact on organization ability to succeed (Crittenden & Crittenden, 2008).<br />
Managerial levers facilitate in creating new market or customer, product, service, value chain and<br />
capability space (Leibold, et al., 2004) According to Crossan and Apaydin (2010) managerial levers is a<br />
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<strong>International</strong> Journal <strong>of</strong> <strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
Vol: 3, No: 6. June, 2012 ISSN 2156-7506<br />
Available online at http://www.akpinsight.webs.com<br />
meta-construct consolidating firm level variables that support innovation. Five types managerial levers<br />
used are strategy, structure, resource allocation, organizational learning and knowledge management tool<br />
and culture (Crossan & Apaydin, 2010). Innovative organization faced dilemmas such as structure and<br />
action, dilemma with opposition <strong>of</strong> persistence and change or repetition and novelty which appeared as<br />
tensions between different time horizons (Chanal, 2004). In this context, managerial levers is used to<br />
overcome the innovation dilemmas (Chanal, 2004). The following discussions will describe each <strong>of</strong> the<br />
managerial levers.<br />
1.1Strategy<br />
The first managerial lever is strategy. Strategy has been perceived as a continuous management activities<br />
(Drejer, 2006; Li, Zhou, & Si, 2010). Indeed, it is an activity the most necessary form <strong>of</strong> and the<br />
foundation for innovation (Ian Steward & Peter Fenn, 2006). Strategy is needed in order to overcome<br />
managerial challenge which might arise from potential disruptive with existing resource endowments,<br />
capabilities and organizational routines (Blumentritt & Danis, 2006). Strategy is claimed to defined the<br />
gaps between the current and desired performance and thus it is vital for innovation in pursuing<br />
competitive advantage (Ian Steward & Peter Fenn, 2006). Therefore, the role <strong>of</strong> innovation and firm‟s<br />
innovative target should be linked with the competencies and strategic orientation <strong>of</strong> particular firm<br />
(Blumentritt & Danis, 2006). In fact, a study in manufacturing firms has showed that innovation strategy<br />
with formal structure are significant predictors <strong>of</strong> performance (Terziovski, 2010). Strategy managed to<br />
differentiate organizational pattern between the high innovation performance and the less successful ones<br />
(Pullen, Weerd-Nederh<strong>of</strong>, Groen, Song, & Fisscher, 2009).<br />
Innovation practices differ among firms with different strategic orientation (Blumentritt & Danis, 2006).<br />
For instance, the SMEs firms achieved high innovation performance combine both analyzer (used for<br />
incremental innovation) and prospector (used for radical innovation) business strategy (Pullen, et al.,<br />
2009).This is because strategy concerned the survival <strong>of</strong> entire organization and involved large portion <strong>of</strong><br />
resources and also strategic thinking <strong>of</strong> tactical level (Drejer, 2006). When discussed the importance <strong>of</strong><br />
strategy with innovation, Drejer (2006) has come out to define strategic innovation as the ability to<br />
create and revitalize the business idea and concept <strong>of</strong> the company by changing both the market <strong>of</strong> the<br />
company and the competencies and business system <strong>of</strong> the company. In an empirical study <strong>of</strong> Taiwanese<br />
electronics industry, found that product innovation is strongly related to differentiation strategy while the<br />
process innovation was strongly related to differentiation and cost leadership strategies (Liang-Hung &<br />
Chun-Hsien, 2008).<br />
Empirically, Blumentritt and Danis (2006) indicated that approaches to innovation vary across firms with<br />
different strategic orientation and firm‟s strategies played significant role in deciding which to pursue and<br />
which to disregard. As mention by Y. Chen and Yuan (2007), a firm needs to seek optimal balance<br />
between internal R&D and technology outsourcing when formulating innovation strategy. Innovation<br />
which is oriented by strategy is essential in determining organization direction in the long run, generate<br />
innovativeness and contribute to the different pattern <strong>of</strong> innovation orientation (Stock & Zacharias, 2011).<br />
For instance, it is found that innovation orientation <strong>of</strong> strategy contributed high scores to integrated<br />
innovator and top-down innovator while scored low to the internally driven and proactive customer<br />
innovator type (Stock & Zacharias, 2011). In a case study <strong>of</strong> Chinese firms, Q. Xu, Liu, and Chen (2002)<br />
have argued the use <strong>of</strong> knowledge strategy to be integrate with technological innovation to ensure<br />
companies effective and efficient. This is important due to the fast changing environment and firm need<br />
to articulate knowledge strategy to stimulate innovative activities (Xu, et al., 2002).<br />
Various elements and measures are used to represent strategy in relation to innovation study. A study <strong>of</strong><br />
600 Australian small and medium enterprises <strong>of</strong> manufacturing sector, the innovation strategy has<br />
emphasize on vision or mission, strategic goals, increase in production, customer satisfaction,<br />
administrative, employee skill and employee commitment (Terziovski, 2010). While Stock and Zacharias<br />
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<strong>International</strong> Journal <strong>of</strong> <strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
Vol: 3, No: 6. June, 2012 ISSN 2156-7506<br />
Available online at http://www.akpinsight.webs.com<br />
(2011) has used strategy that is first to entry product and services into the market and product <strong>of</strong>fering<br />
that will increase the performance. Blumentritt and Danis (2006) used business strategy type (marketing,<br />
R&D, project based, new lines <strong>of</strong> product or service, deal with competitors, managing procedures and<br />
firm activities). In a study <strong>of</strong> different innovation outcome between radical and incremental, Ettlie,<br />
Bridges and O'Keefe (1984) utilized the organization strategy to describe the innovation process.<br />
Technology Policy is the strategy measure for radical innovation and market dominated growth,<br />
diversification and organization size are strategies for incremental innovation (Ettlie, et al., 1984). Sahu<br />
(2004), revealed the use <strong>of</strong> strategy focused product innovation process through several process such as<br />
product mobilization through leadership, product development, aligning product design and development<br />
into product innovation, make product innovation strategy in every engineers job and as continuous<br />
process. Liang-Hung and Chun-Hsien (2008), indicates the use <strong>of</strong> corporate strategy (differentiation and<br />
cost leadership) used to enhance innovation process. In this context, differentiation strategy focus on<br />
creating new market by providing new products while cost leadership strategy focused on low cost and<br />
efficient production (Liang-Hung & Chun-Hsien, 2008).<br />
1.2Organization Structure<br />
The second managerial lever is structure. The structure <strong>of</strong> an organization concerned about the way<br />
employee are grouped and work and thus organization should provide sufficient freedom for creativity,<br />
control to manage innovation efficiently (Adams, Bessant, & Phelps, 2006). According to the<br />
organizational theory, it is about distribution <strong>of</strong> tasks, responsibilities and power to determine<br />
organization‟s standardization, complexity and the extent <strong>of</strong> centralization role (Shen, Xu, & Shu, 2010).<br />
Structure can be modified to impact innovation inside organization and it assists to set balance between<br />
idea generation and implementation (Prakash & Gupta, 2008). Structure relates the way <strong>of</strong> various parts<br />
<strong>of</strong> organization are configured with organization‟s ability to manage innovation (Smith, Busi, Ball, &<br />
Meer, 2008). An organizational structure can differentiate between innovative and non innovative<br />
organizations (Adams, et al., 2006). Innovative firms should transform the organizational structure to<br />
motivate employee creativity, boosting innovative culture and set a standard base on innovation process<br />
(Wichitchanya, Durongwatana, & Vadhanasindhu, 2012). Conceptually, organizational structure<br />
influence the ability to manage innovation through its direct relationship with employee (Smith, et al.,<br />
2008). This is done through an organized formality <strong>of</strong> teamwork with collaborative organizational culture<br />
(Smith, et al., 2008). It is found that internal organizational structure conditions <strong>of</strong> centralization and<br />
connectedness facilitate the innovation at firm level (Chang, Hughes, & Hotho, 2011). Structure and<br />
system factors comprise <strong>of</strong> the administrative intensity <strong>of</strong> the organization (Damanpour, 1991). Among<br />
them are specialization and centralization, formalization and type <strong>of</strong> innovation (Damanpour, 1991) . In a<br />
study <strong>of</strong> the role <strong>of</strong> organizational structure towards product innovation capabilities, the effect <strong>of</strong> radical<br />
product innovation capability on new product performance is insignificant under a formal structure, while<br />
the effect is positive under the informal structures (Menguc & Auh, 2010). However, incremental product<br />
innovation has a positive effect in the formal structure and negative effect in informal structures (Menguc<br />
& Auh, 2010).<br />
Empirical evidence by the work <strong>of</strong> Terziovski (2010) indicates that a formal structure combined with<br />
innovation strategy are significant predictors to organization performance. Several items used to measure<br />
this formal structure stressed on the allocation <strong>of</strong> resource within the cross functional teams, monitoring<br />
system by the employees, facilitation <strong>of</strong> formal communication by managers, procedures and flat<br />
structures (Terziovski, 2010). This is indeed supported that by the evidence that organizational<br />
formalization accelerate the positive effect <strong>of</strong> bottom-up learning on the incremental innovation because<br />
employee focus more on the dynamic change <strong>of</strong> the job (Wei, Yi, & Yuan, 2011). While Stock and<br />
Zacharias (2011) revealed that the structure <strong>of</strong> innovation orientation in an organization depended on a<br />
specific unit who in charge <strong>of</strong> innovation have the competencies, sufficient resource and clearly<br />
regulated.<br />
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<strong>International</strong> Journal <strong>of</strong> <strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
Vol: 3, No: 6. June, 2012 ISSN 2156-7506<br />
Available online at http://www.akpinsight.webs.com<br />
In a study to explore relationship between organization structure and perceived innovation <strong>of</strong> India<br />
manufacturing sector, five components <strong>of</strong> structure are use as the measures: vertical complexity,<br />
horizontal complexity, formalization, centralization, concentration <strong>of</strong> authority and participation<br />
indecision making (Prakash & Gupta, 2008). A positive relationship were established between horizontal<br />
complexity, formalization, participation in decision making and innovation, however negative<br />
relationship between centralization structure and innovation (Prakash & Gupta, 2008). In order to increase<br />
the number <strong>of</strong> innovations, Prakash and Gupta (2008) suggested to focus on the participation in decision<br />
making, decentralization through staff empowerment and informal network within the organization.<br />
Similarly, in the logistic service innovation, the decentralization and formalization structure showed a<br />
positive relationship whereas the specialization structure showed negative relationship (Daugherty, Chen,<br />
& Ferrin, 2011).<br />
Due to the rapid development <strong>of</strong> information technology and to recapture competitiveness in serviceenhance<br />
manufacturing firm, Shen, et al., (2010) has proposed four dimensions for its organizational<br />
structure: self-management, interdependence, centralization <strong>of</strong> power and boundary infiltration. This new<br />
dimension is proposed because it is argued that production based is no longer a traditional manufacturing<br />
companies and thus, they need to change the new organizational structure to meet the new economy<br />
(Shen, et al., 2010). Nevertheless, the role <strong>of</strong> organizational structure is open for arguments. It is noted<br />
that competitiveness issue is also related to the environment factor. Therefore, organizational structure<br />
need to balance the demands for efficiency and flexibility in the high technology firms where it is needed<br />
to facilitate innovation and adapt the dynamic change <strong>of</strong> environment (Sholes, Barnett, & Utley, 2011).<br />
Organization that is operated in a stable environment in terms <strong>of</strong> demand, competitors, low level product<br />
change is best suited by centralized decision making, formal job description and, emphasis on chain <strong>of</strong><br />
command and well process control (Sholes, et al., 2011). On the other hand, decentralize structure is<br />
suited for the dynamic, complex technologies and competitive instable environment (Sholes, et al., 2011).<br />
Since decentralized structure focus on goal specification to allow increase in rates and intensity, its<br />
promotes proactive adaptability and innovation. The situations also differ from the perspective <strong>of</strong><br />
innovation types. For instance, technological innovation which is more complex process is affected by the<br />
R&D level, managerial ability and investment need a structure that have rules and regulation that<br />
encourage creativity, self-directed work and learning, few layers <strong>of</strong> hierarchical to enable quick response,<br />
high level <strong>of</strong> horizontal integration to increase knowledge transfer, decentralized decision making and<br />
high level <strong>of</strong> vertical and horizontal communication to ensure action (Shi & Xin, 2006). Although few<br />
layers hierarchical is better, organization also need to flat organization so that it could made close contact<br />
among employees, department and top management (Wichitchanya, et al., 2012).<br />
1.3Resource Allocation<br />
Consequently, the third managerial lever is resource allocation which is also important in innovation<br />
management. According to Lau, Yam and Tang (2010), resource allocation capability is referred to<br />
firm‟s ability to mobilize and expand its technological, human and financial resources in the innovation<br />
process. It is found that resource allocation has improve the performance rate <strong>of</strong> new product which<br />
contribute to the technological innovation capabilities <strong>of</strong> an organization (Lau, et al., 2010). Besides,<br />
resource allocation is also interdependence with business models and knowledge creation and this has<br />
made the innovation knowledge-intensive environment is depended upon resource allocation as one <strong>of</strong> the<br />
important lever (Grand, Krogh, Leonard, & Swap, 2004). The importance <strong>of</strong> resource is proven by a study<br />
conducted in small medium enterprise in Malaysia where firm resource drive product innovation<br />
performance (Bakar & Ahmad, 2010).<br />
1.4Knowledge Management and Organizational Learning<br />
The fourth managerial lever is knowledge management and organizational learning. Knowledge<br />
management is identified as an important antecedent <strong>of</strong> innovation (Darroch & McNaughton, 2002).<br />
Knowledge management is closely related to organizational learning initiatives (Mundra, Gulati, &<br />
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<strong>International</strong> Journal <strong>of</strong> <strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
Vol: 3, No: 6. June, 2012 ISSN 2156-7506<br />
Available online at http://www.akpinsight.webs.com<br />
Vashisth, 2011). This is because an organizational learning process involved high degree <strong>of</strong> parallelism<br />
and depended on the knowledge based <strong>of</strong> organization (Weerd-Nederh<strong>of</strong>, Pacitti, Gomes, & Pearson,<br />
2002). According to Garcı´a-Morales, et al., (2006), organizational learning and innovation is positively<br />
related to organizational performance. Even, in a study <strong>of</strong> cultural organization, learning orientation<br />
influences innovativeness and performance (Garrido & Camarero, 2010).<br />
Due to the broad process <strong>of</strong> innovation, the learning has enables the implementation <strong>of</strong> new idea, product<br />
and process, new management styles in communication and marketing, organizational structure and<br />
relations with clients (Garrido & Camarero, 2010). The impact <strong>of</strong> learning orientation is studied through<br />
three dimensions: commitment to learning, an open mind and a shared vision. Similarly, Phromket and<br />
Ussahawanitchakit (2009) has also found that organizational learning have positive effect on innovation<br />
outcome and export performance. In the study, organizational learning comprise <strong>of</strong> unique knowledge<br />
establishment, useful knowledge integration, holistic knowledge expansion and effectively knowledge<br />
utilization (Phromket & Ussahawanitchakit, 2009).<br />
Four processes integrally linked organizational learning : Information acquisition, information<br />
distribution, information interpretation and organizational memory used as tool for improvement (Weerd-<br />
Nederh<strong>of</strong>, et al., 2002). In a study to foster innovation, organizational learning is found to be a significant<br />
antecedent effect on performance (Jime´nez-Jimenez, Vall, & Hernandez-Espallardo, 2008). According to<br />
this author organizational learning is a process to develop new knowledge and insight from people<br />
common experiences within organization and it also include four processes such as knowledge<br />
acquisition, information distribution, information interpretation and organizational memory (Jime´nez-<br />
Jimenez, et al., 2008).<br />
Plessis (2007), defined the value proposition <strong>of</strong> knowledge management in innovation process as assist in<br />
creating tools, platform and processes for tacit knowledge creation and sharing, converting tacit<br />
knowledge to explicit knowledge, facilitates collaboration in the innovation process, ensures the<br />
accessibility <strong>of</strong> both tacit and explicit knowledge in innovation process, flow <strong>of</strong> knowledge, integration <strong>of</strong><br />
organization‟s knowledge base, identify gaps in the knowledge, building competencies, provide<br />
organizational context, gathering explicit and tacit knowledge and provide knowledge-driven culture.<br />
As noted in the previous section, innovation process involved a dynamic form <strong>of</strong> activities. Therefore,<br />
knowledge management is much needed in this phase such as knowledge creation and knowledge sharing<br />
on the innovativeness <strong>of</strong> the firm (C.-J. Chen, Huang, & Hsiao, 2010). The study showed empirical<br />
evidence that knowledge management is positively related to firm innovativeness; however it is<br />
moderated by organizational structure. Employees are incline in managing knowledge and translated new<br />
knowledge when the structure is less formalized, less centralized and more integrated (C.-J. Chen, et al.,<br />
2010). Apart from being direct influence on innovation, knowledge management is crucial as mediating<br />
role when examined the relationship between social interaction and innovation performance (Jing-Wen<br />
Huang, 2009). However, the dimensions only focus on knowledge acquisition, knowledge sharing and<br />
knowledge application (Jing-Wen Huang, 2009).<br />
According to Adams, et al., (2006) , there are three areas within the knowledge management that is<br />
important for innovation management: idea generation, knowledge repository (including implicit and<br />
explicit knowledge), and information flows (information gathering and networking. Besides, knowledge<br />
management orientation comprise <strong>of</strong> knowledge acquisition, knowledge dissemination and responsive to<br />
knowledge (Darroch & McNaughton, 2002). In a study to examine the relationship between knowledge<br />
management practices and types <strong>of</strong> innovation, it has postulated that incremental innovation came from<br />
firms that sensitive to information about marketplace and responded to knowledge about technology.<br />
While radical innovation came from firms developed innovation that change consumer behavior (Darroch<br />
& McNaughton, 2002).<br />
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1.5Culture<br />
The final managerial lever is culture. Organizational culture includes shared vision where clearer vision<br />
would act as effective facilitator to innovation (Adams, et al., 2006). In fact, culture brings values and<br />
beliefs, attitudes and experiences which is shared by personnel in organization (Kanchan & Gupta, 2009;<br />
Martins & Terblanche, 2003). In order to influence creativity and innovation, culture is influenced by<br />
several determinants such as strategy, structure, support mechanisms, behavior, and open communication<br />
(Martins & Terblanche, 2003). Culture also reflect a degree to which values, norms and artifacts support<br />
the organization‟s innovativeness (Stock & Zacharias, 2011). Thus, it is noted that organizational culture<br />
will push organizational members towards creating innovation mentality (Stock & Zacharias, 2011).<br />
According to Ahmed (1998), culture has multiple elements which could enhance <strong>of</strong> exhibit tendency to<br />
innovate. He pointed that culture should not be isolated and need to match with organizational context.<br />
Thus, balance and understanding <strong>of</strong> context is important because culture with strong drive towards<br />
innovation could lead to problems when market circumstances and customer requirements demand<br />
predictability and conforming to specifications (Ahmed, 1998).<br />
Implementing innovation in the organization would accommodate risk <strong>of</strong> failure and uncertainty,<br />
Therefore, Kanchan and Gupta (2009) has suggested to change the corporate culture which is important to<br />
have a set <strong>of</strong> understanding that people <strong>of</strong> an organization share in common. In this context, several<br />
criteria have been highlighted to change corporate culture include: committed in becoming innovative<br />
organization through informed decision and investment, consistent communication, physical and<br />
organizational support, stimulating environment, encouragement for innovation and compensation<br />
(Kanchan & Gupta, 2009). These criteria shared similar arguments by previous scholar, Madan (2000),<br />
which added the importance <strong>of</strong> the leadership role <strong>of</strong> top management values, attitudes and leadership<br />
style. There is also other approach to indicate that culture is an operating mechanism to support<br />
innovation. For instance, „culture field concept‟ is proposed to promote innovation through climate style<br />
management entity (Qingrui, Ling, & Zhangshu, 2003). In this approach, firm need to cultivate employee<br />
individual innovative ability so that their firm will form core competencies in all elements <strong>of</strong> innovation<br />
(Qingrui, et al., 2003).<br />
An empirical findings on innovation in SMEs has proven that general organization culture and specific<br />
organization culture with regards to innovation projected good impact on innovation levels (Kenny &<br />
Reedy, 2006). General organization culture is the familiarity <strong>of</strong> mission statement and R&D aspects <strong>of</strong> the<br />
company while specific culture <strong>of</strong> innovation were the innovation strategy, type <strong>of</strong> innovation engaged,<br />
drivers and constrains <strong>of</strong> innovation (Kenny & Reedy, 2006). It is noted most authors have stress on the<br />
importance <strong>of</strong> innovative culture due to the innovation activities as a method <strong>of</strong> competitive<br />
differentiation and ways <strong>of</strong> customer value creation. For that matter, Dobni (2008) has empirically<br />
presented innovation culture constructs based on seven factors: innovation propensity, organizational<br />
constituency, creativity and empowerment, market orientation, value orientation and implementation<br />
context.<br />
In a study <strong>of</strong> product innovation, it is found that companies should foster cultures with external and<br />
flexibility orientation and culture is also act as determinant to innovation strategy (Julia C. Naranjo<br />
Valencia, Valle, & Jimenez, 2010). Thus, hocratic cultures (emphasizes flexibility and change) could<br />
enhance the development <strong>of</strong> new products or service while hierarchical cultures inhibit product<br />
innovation (Julia C. Naranjo Valencia, et al., 2010). Organization that implemented both radical and<br />
incremental innovation is found to have culture that cultivate learning and knowledge sharing contributed<br />
significant relationship into innovation (Lin & Edward F. McDonough III, 2011). Besides, innovation<br />
culture which is promoted in the organization would depended on the right types norms which is widely<br />
shared and activate creativity (Ahmed, 1998). These norms include challenge and belief in action,<br />
freedom and risk taking, dynamism and future orientation, external orientation, trust and openness,<br />
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debates, cross functional interaction, myths and stories, leadership commitment, rewards, innovation time<br />
and training, corporate identification and unity and organizational structure (Ahmed, 1998).<br />
2. CONCLUSION<br />
In conclusion, the above reviews have showed that managerial levers is one <strong>of</strong> the important essentials in<br />
determine the success <strong>of</strong> innovation implementation. Five managerial levers (strategy, organization<br />
structure, resource allocation, knowledge management and organizational learning and culture) as<br />
mentioned earlier have their own strength in assisting innovative performance in organization and it<br />
seems that those five are interrelated and supported each other (Smith, et al., 2008). For instance,<br />
structure configured organization to operate effectively and strategy is implemented through the structure<br />
(Crittenden & Crittenden, 2008). In fact, culture has acted as the key factor <strong>of</strong> innovation management<br />
because it impact other levers and also impacted by changes <strong>of</strong> other levers (Smith, et al., 2008). In fact,<br />
the role <strong>of</strong> knowledge management and also organizational learning is also related to each other. Thus,<br />
this paper proposes, the task <strong>of</strong> those levers would drive the innovation process <strong>of</strong> organization.<br />
Furthermore, the use <strong>of</strong> managerial levers would be in line with the theoretical perspective as innovation<br />
process interlink with the resource view and capability view (Muller, Valikangas, & Merlyn, 2005).<br />
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Relationship <strong>of</strong> Age, Gender, Tenure, Rank<br />
and Job Satisfaction- Empirical Evidence<br />
from <strong>Business</strong> Institute <strong>of</strong> Pakistan<br />
Dr. Niaz Ahmed Bhutto<br />
Associate Pr<strong>of</strong>essor<br />
Sukkur Institute <strong>of</strong> <strong>Business</strong> Administration, Sukkur, PAKISTAN<br />
Naveed Anwar (Correspondence Author)<br />
Research Scholar<br />
Sukkur Institute <strong>of</strong> <strong>Business</strong> Administration, Sukkur, PAKISTAN<br />
&<br />
Faculty Member<br />
Shaheed Zulfikar Ali Bhutto Institute <strong>of</strong> Science and Technology, Larkana, Pakistan<br />
Hyder Ali Khawaja<br />
Faculty Member & Research Scholar<br />
Sukkur Institute <strong>of</strong> <strong>Business</strong> Administration, Sukkur, Pakistan<br />
ABSTRACT<br />
<strong>International</strong> Journal <strong>of</strong><br />
<strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
Vol: 3, No: 6. June, 2012<br />
Pp15-27<br />
©Academy <strong>of</strong> Knowledge Process<br />
Job satisfaction is widely studied area by many researchers around the<br />
globe. Especially Job satisfaction among the teaching staff <strong>of</strong> higher<br />
education institutes had been an area <strong>of</strong> curiosity for both management as<br />
well as the policy makers. The lack <strong>of</strong> quality and dedicated staff is a<br />
dying need <strong>of</strong> every education institute. Most <strong>of</strong> the qualified staff is<br />
migrating to other countries and those presently working as teachers have<br />
many concerns with their jobs. Thus, a comprehensive study was<br />
required in this domain with a special reference to Pakistani context. The<br />
main objective <strong>of</strong> this study is to measure the job satisfaction level <strong>of</strong> the<br />
faculty members, those who work with business institutes <strong>of</strong> Pakistan,<br />
and to find the relationship <strong>of</strong> overall job satisfaction level with variables<br />
like age, gender, tenure and rank. Convenience sampling method was<br />
adopted to select the sample for research.The sample (N= 191) consisted<br />
upon the faculty members <strong>of</strong> business institutes <strong>of</strong> four provinces <strong>of</strong><br />
Pakistan, Sindh, Punjab, Baluchistan and Khyber Pahtoon Khaw. Both<br />
genders male as well as females have participated as respondents.<br />
Samples were having different salary levels ranging from 1 to 8 scales,<br />
categorized in to the following ranks: Pr<strong>of</strong>essor, Associate Pr<strong>of</strong>essor,<br />
Assistant Pr<strong>of</strong>essor, and Lecturers. The Job Description Index (JDI) and<br />
a biographical questionnaire were administered to collect the data. The<br />
instrument used for research JDI is a reliable tool to measure the overall<br />
satisfaction level based on five main facets, staff relationship with people<br />
or coworker, the satisfaction with pay staff receive, the quality <strong>of</strong><br />
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supervision, the chances <strong>of</strong> promotions in organization and the<br />
satisfaction with the job being performed by the staff.The results <strong>of</strong> the<br />
study showed that the faculty members <strong>of</strong> business institutes in Pakistan<br />
(included in sample) have shown their satisfaction with the nature <strong>of</strong><br />
work, coworkers or the people along with they are working, followed by<br />
the supervision they received in their organizations. Chances for<br />
promotion and salary (pay) were the main sources for job dissatisfaction.<br />
The relationship among overall job satisfaction, rank <strong>of</strong> staff and tenure<br />
was found be significant. Age and job satisfaction was positively related,<br />
whereas gender was found to be as the weakest predictors <strong>of</strong> overall job<br />
satisfaction. Though study indicate a relationship among overall job<br />
satisfaction and other variables such as age , gender, tenure and rank and<br />
also with five aspects <strong>of</strong> job satisfaction used in JDI but there is a need<br />
for continuous research to find the relationship among job satisfaction<br />
and other extraneous variables.<br />
Key Words: Job Satisfaction, Faculty members, <strong>Business</strong> Institutes, Pakistan<br />
1. INTRODUCTION<br />
The main focus <strong>of</strong> this study is job satisfaction level <strong>of</strong> the employees <strong>of</strong> business institutes under certain<br />
indicators. An attempt has been made to find out those indicators which can increase or decrease the job<br />
satisfaction level <strong>of</strong> faculty members.As far education sector is concern, Pakistan is facing immense<br />
challenges, in term <strong>of</strong> low literacy rate, less number <strong>of</strong> quality educational institutes, poor facilities and<br />
more important the low motivation level <strong>of</strong> many <strong>of</strong> those who are the knowledge workers, the main<br />
pillars <strong>of</strong> educational sectors, <strong>of</strong> course the faculty.<br />
Keeping in views above mentioned problems, it is a daunting task for both management <strong>of</strong> the<br />
universities and more important the Government, to take really focused efforts to enhance the quality <strong>of</strong><br />
education and provide better opportunities to the young generation. To provide quality facilities, updated<br />
courses related to 21 st century, highly motivated teachers, teachers those who can lead the young<br />
generation towards success .The problems <strong>of</strong> educational sectors can only be removed when, faculty,<br />
management and the policy makers can join their hands together to overcome the issues faced by the<br />
education sector <strong>of</strong> Pakistan.<br />
Job satisfaction has become a buzz world in educational institutes as well as in other organizations. Job<br />
satisfaction is the most important factor, which every organization dream to cultivate in their staff. Much<br />
<strong>of</strong> the research work in this area has analyzed that turnover, absenteeism; job roles and extra jobs<br />
behavior are the main factors which affect on job attitude <strong>of</strong> staff. Satisfaction is an outcome <strong>of</strong> the<br />
reinforce system <strong>of</strong> the organization and the needs <strong>of</strong> the staff (L<strong>of</strong>quist & Dawis, 1969, p.53). In Another<br />
research (Locke, 1976) indicated that it is a positive inner drive that one gets out <strong>of</strong> the good appraisal <strong>of</strong><br />
his or her job. Job satisfaction is sense <strong>of</strong> happiness that staff will feel when they fulfill their tasks and<br />
they achieve their results (Locke & Henne, 1986, p.21) and further Porter et al. (1975) found that it is a<br />
feeling that one gets when he / she achieve his or her goals. Job satisfaction has been researched since<br />
many years in and outside Pakistan; a lot <strong>of</strong> researches have been conducted on the topic. Great deal <strong>of</strong><br />
literature is available which is focused on explain job satisfaction and factors affecting the level <strong>of</strong> job<br />
satisfaction among staff and how job satisfaction is related with the job, people along with staff works,<br />
supervision that they get , salary , working environment, organizational rules, and policies and the<br />
chances <strong>of</strong> promotion . Majority <strong>of</strong> published work found that job satisfaction is about balance among<br />
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desired and actual outcomes <strong>of</strong> a job. That mean, whatever staff desired from a job and what they get out<br />
<strong>of</strong> it define the level <strong>of</strong> their job satisfaction. Unfortunately, there is lack <strong>of</strong> empirical research in Pakistan<br />
on job satisfaction related to Academic institutes, in term <strong>of</strong> indicators <strong>of</strong> the overall job satisfaction. As,<br />
the management <strong>of</strong> universities is trying their level best to provide a conducive working environment to<br />
faculty and want to enhance level <strong>of</strong> job satisfaction, so that teachers can give their maximum<br />
performance in term <strong>of</strong> teaching, administration and research. Job satisfaction is a key domain <strong>of</strong> study<br />
which not only interest staff but it is also a grey area for most <strong>of</strong> the employers, where they are trying to<br />
comprehend the different aspects <strong>of</strong> it. By knowing the relationship <strong>of</strong> these variables with job<br />
satisfaction higher education institutes management will be able to understand the hidden aspect which<br />
may cause impact on the overall job satisfaction level <strong>of</strong> faulty members and more important to take<br />
corrective actions to enhance the job satisfaction among faculty members. Though ,much research have<br />
been conducted to explain these concepts related to job satisfaction, i.e. job satisfaction factors and, job<br />
dissatisfaction factors (which will be reviewed on coming pages) but there is a great need for a study in<br />
Pakistan that could explain the indicators <strong>of</strong> overall job satisfaction.<br />
The key aspiration <strong>of</strong> this research is to investigate the overall job satisfaction among faculty members <strong>of</strong><br />
business institutes and to investigate the type <strong>of</strong> relationship among the overall job satisfaction with<br />
different biographical variable such as age, tenure, gender and the ranks <strong>of</strong> the staff. This research will try<br />
to validate the relationship <strong>of</strong> job satisfaction and above-mentioned variables, that either they have any<br />
impact on job satisfaction or not.<br />
Teachers always talk about job satisfaction but do they really know about what motivates them? What<br />
satisfy or dissatisfy them the most? Is there any relationship among the age, rank, tenure and gender <strong>of</strong><br />
faculty and their overall job satisfaction level? The main issue is not to know the job satisfaction level <strong>of</strong><br />
staff but the crust <strong>of</strong> the matter is to find out the why people vary when it come to job satisfaction level,<br />
How to motivate them according to their respective needs as something needed by one group may or may<br />
not be needed by another group <strong>of</strong> faculty members. This gap in research has become inspiration <strong>of</strong> this<br />
research effort. We will also try to provide finding and suggestions to management <strong>of</strong> educational<br />
institutes, so that they can make rational decisions to increase job satisfaction <strong>of</strong> faculty members.<br />
In contrast with our study aims, we will try to explore the available researches on the given topic through<br />
the review <strong>of</strong> literature. We will try to gage the level job satisfaction among faculty members in term <strong>of</strong><br />
the job, people along with staff works, supervision that they get salary, working environment, and the<br />
chances <strong>of</strong> promotion. Further, the relationship <strong>of</strong> overall job satisfaction with age, rank, tenure and<br />
gender will be investigated.<br />
2.LITERATURE REVIEW<br />
Literature review will take a look at various studies, which focus on the relationship <strong>of</strong> age, gender, tenure<br />
and rank with job satisfaction.<br />
2.1 Job Satisfaction and its Relationship with Gender<br />
Mason (1995) found Relationship between job satisfaction and gender has been studied by many<br />
researchers. Conversely many studies result is disagreement regarding the relationship <strong>of</strong> job satisfaction<br />
and sex <strong>of</strong> employees. Weaver (1974) observed higher number <strong>of</strong> men with greater satisfaction level than<br />
women.<br />
It is imperative to notice here, that study on this topic show no major difference between the two i.e.<br />
Gender and job satisfaction, keeping in view the statistical controlled factors (Golembiewski, 1977). The<br />
research result suggested by Centres and Bugental (1966) showed other deviations in change <strong>of</strong> values for<br />
both male and female were there on workplace. Female‟s more desirable value was social factor <strong>of</strong> a job<br />
than to males‟, on the other hand males demands expression in work.<br />
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Study showed, women prefer pleasant employers to work with in comparison to men, whereas, to have a<br />
authority on important decision and opportunity, to direct the work for others is more desirable by men at<br />
work place (Schuler, 1975)<br />
Weaver (1977) confirms results for the hypothesis for unconnected link between two factors when the<br />
effect <strong>of</strong> other variables is minimized. Other researches from Forgionne and Peters (1982) found that<br />
there are many other factors which affects on this relation, it is not only gender and job satisfaction, we<br />
are talking about but also the other left over factors such as the number <strong>of</strong> family members, how many<br />
dependents are there in one‟s family, furthermore which position is being held by the staff in the<br />
organization does matter on this relation.<br />
Conclusion was that the direct effect <strong>of</strong> other variables should be considered and the direct link between<br />
gender and its effect on job satisfaction appears very little. We cannot agree with satisfaction level<br />
difference between two when having equal chance for education employment promotion equal job<br />
opportunity and so on. According to DeSantis and Durst (1996) the outcome <strong>of</strong> researches lying on<br />
gender difference effect on job satisfaction is arguable from 1950s to date.<br />
2.2 Job Satisfaction and Rank<br />
Individual‟s job role within organization is considered as its rank. This term is link with job seniority <strong>of</strong> a<br />
person in a business classification, any one in education sector, working as Pr<strong>of</strong>essor, Associate<br />
Pr<strong>of</strong>essor, Assistant Pr<strong>of</strong>essor and Lecturer. According to Ronen (1978) pr<strong>of</strong>essional level increases job<br />
satisfaction, eighteen (18) variables were examined to get the strong predictors <strong>of</strong> job satisfaction by Near<br />
et al (1978), he got the results that the occupational level in term <strong>of</strong> rank and age are powerful tool for a<br />
satisfied employee.<br />
Grimes (1997) took 102 economists who worked in US institution <strong>of</strong> higher learning and were PhDs as<br />
sample ,in order to test number <strong>of</strong> publications and job rank. Expected result <strong>of</strong> positive correlation<br />
between job rank and publishing was proved. On the other hand there is no effort made by researchers on<br />
the relationship between the job rank and job satisfaction. Job satisfaction, productivity and career<br />
activities were correlated through a sample <strong>of</strong> 293 psychologists were surveyed by Holden and Black<br />
(1996). Analysis shows that academic ranks effect on productivity and satisfaction. Assistant or associate<br />
pr<strong>of</strong>essor are less productive and satisfied than full pr<strong>of</strong>essor. Literature reveals that job satisfaction is<br />
related with rank, and staff at higher ranks tends to have high job satisfaction. Therefore, it is proposed by<br />
literature that rank have a greater impact on productivity and job satisfaction, the higher rank people are<br />
more satisfied than the lower rank employees.<br />
2.3 Job Satisfaction and Tenure<br />
Time period or number <strong>of</strong> years a person have spent working in an organization, is considered as Length<br />
<strong>of</strong> service. Many research studies designed to inspect that if the tenure increases the job satisfaction<br />
increase or not. The hypothesis that change in job satisfaction with length <strong>of</strong> service at a particular job<br />
resembles a U-shaped curve was confirmed by Ronen (1978), when researcher examined the relationship<br />
between two variables. Problem <strong>of</strong> promotion, salary policies and administrative practices as a hub <strong>of</strong><br />
turnover was concluded by Nicholson and Miljus (1972) in their studies. However, satisfaction or<br />
dissatisfaction level <strong>of</strong> job was not directly associated with turnover and length <strong>of</strong> service by researchers.<br />
The idea that by controlling the perceived net value <strong>of</strong> employee for firm, employees‟ length <strong>of</strong> service<br />
nurtures the protection in opposition to job loss was presented by Abraham and Med<strong>of</strong>f (1984). Ability in<br />
promotion process and length <strong>of</strong> service has a comparative importance is also verified by Abraham and<br />
Med<strong>of</strong>f (1985). To judge the job satisfaction promotion is consider as key variable and long tenure and<br />
job satisfaction is logically connected (Wanous, 1972). When workers are long established in their<br />
experience, the satisfaction level is high for both male and female, studied by Black and DiNitto (1994).<br />
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Study on some firms in Hong Kong investigated to get the relationship <strong>of</strong> source <strong>of</strong> stress with<br />
psychological distress, job satisfaction and intension <strong>of</strong> quitting from job is directly the outcome <strong>of</strong> locus<br />
<strong>of</strong> control and organizational commitment (Siu and Cooper, 1998). On the other hand, the study on staff<br />
and nurses in UK was made to investigate the staff turnover ratio, staff age and tenure and found that<br />
tenure is a strongly associated with job satisfaction (Gray et.al, 1994)<br />
3. METHOD<br />
In order to extract data on job satisfaction <strong>of</strong> employees the JDI (Job Description Index) was used. In<br />
1969, JDI was developed by Kendall, Smith and Hulin. According to Kreitner and Kinicki (1995) this is<br />
most widely used tool to measure staff overall job satisfaction. Spector (2000) found JDI the most reliable<br />
tool to measure Job satisfaction level <strong>of</strong> employees, and it help us to measure the different aspects <strong>of</strong> job<br />
satisfaction separately from each other. JDI want respondents to explain jobs they perform compare to ask<br />
direct question “How much satisfied you are” in order to ensure that person filling the questionnaire<br />
should provide feedback which is related to job rather than satisfaction in general. The Job Description<br />
Index measudeal with five aspects for job satisfaction perceptions, Salary or pay, chances for promotions,<br />
supervision staff get in <strong>of</strong>fice, <strong>of</strong>fice mates or co-workers and the job staff performs (Spector, 2000).<br />
Seventy two (72) items have been included in this measuring instrument out <strong>of</strong> which ,nine (9) items are<br />
used for each aspect <strong>of</strong> promotion and pay, and eighteen (18) items each for work, supervision, and coworkers<br />
(Smucker & Kent, 2004). In order to get total score <strong>of</strong> the responses, employees are requested to<br />
specify whether each statement does or does not explain their jobs. The score <strong>of</strong> responses is measured as<br />
(yes) = 3, (?) = 1 and (no) = 0 for positive items, whereas (yes) = 0, (?) = 1, and (no) = 3 used for negative<br />
items (Cherrington, 1994). Job satisfaction level is related with the overall score, Satisfaction will be as<br />
high as the score (Kreitner & Kinicki, 2001). All questionnaires were distributed through post and emails.<br />
In order to find relationship among rank, age, gender and tenure with overall job satisfaction, The<br />
Multiple Regression Model was used.<br />
Overall Job Satisfaction (OJS) = β 0 +β 1 rank+β 2 gender+β 3 length+β 4 age+ ε<br />
4. DISCUSSION OF RESULTS<br />
Table 1Dimensions <strong>of</strong> Job Satisfaction – Descriptive Statistics<br />
Frequency Minimum Maximum Mean Value Standard Deviation<br />
Job 191 15 45 39.01 5.842<br />
Pay 191 5 32 16.52 5.926<br />
Supervision 191 12 45 33.59 6.014<br />
Promotion 191 5 23 13.87 2.310<br />
People 191 9 48 29.66 9.554<br />
Valid N (list<br />
wise)<br />
191<br />
Faculty members are satisfied with the nature <strong>of</strong> work (mean = 39.01), coworkers (mean = 29.66) as well<br />
as the supervision (mean =33.59) they get in their institute. The mean values <strong>of</strong> pay and promotion<br />
subscales were 16.52 and 13.87 respectively, both values reflects that our respondents are less satisfied<br />
with pay they receive and the chances <strong>of</strong> promotion they get in their institutes.<br />
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Table 2: Rank<br />
Frequency % Valid % Cumulative %<br />
Valid Pr<strong>of</strong>essor 30 15.7 15.7 15.7<br />
Associate pr<strong>of</strong>essor 24 12.6 12.6 28.3<br />
Assistant pr<strong>of</strong>essor 48 25.1 25.1 53.4<br />
Lecturer 89 46.6 46.6 100.0<br />
Total 191 100.0 100.0<br />
Table 2 shows the classifications <strong>of</strong> ranks <strong>of</strong> the respondents, the sample consists upon Pr<strong>of</strong>essor (15.73<br />
%, n= 30), Assistant Pr<strong>of</strong>essor (25.1%, n= 48), and Lecturer (46.6%, n= 89)<br />
Table 3: Race<br />
Frequency % Valid % Cumulative %<br />
Valid Sindhi 98 51.3 51.3 51.3<br />
Punjabi 50 26.2 26.2 77.5<br />
Pashtoon 23 12.0 12.0 89.5<br />
Baloch 20 10.5 10.5 100.0<br />
Total 191 100.0 100.0<br />
The Table 3 reflects the composition <strong>of</strong> sample in term <strong>of</strong> race, where is clear that Sindhi faculty<br />
members mostly participated in the research (51.3 %, n = 98), Punjabi 26.2 %, n= 50) and Pashtoon were<br />
around 12% (n= 23). Baloch were the least represented group (n=20, 10.5%)<br />
Table 4 :Education<br />
Frequency % Valid % Cumulative %<br />
Valid 0 1 .5 .5 .5<br />
Phd 44 23.0 23.0 23.6<br />
MS 47 24.6 24.6 48.2<br />
MBA 99 51.8 51.8 100.0<br />
Total 191 100.0 100.0<br />
Table 4 shows the education level <strong>of</strong> sample, As far as the education level <strong>of</strong> respondents is concerned ,<br />
majority <strong>of</strong> respondents were PhD (23%, n= 44) , 24.6% (n = 47) has MS and 51.8 % <strong>of</strong> sample are MBA<br />
Table 5 depicts the distribution <strong>of</strong> sample according to gender. The Male respondents represent larger in<br />
number compare to female respondents. Almost 78.4% (n= 149) respondents were male compare to<br />
(21.6%, n= 41) <strong>of</strong> female respondents. The high response rate from male is attributed to the reality that<br />
majority <strong>of</strong> faculty teaching in business institutes are male.<br />
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Table 5 : Gender<br />
Frequency % Valid % Cumulative %<br />
Valid Male 149 78.0 78.4 78.4<br />
Female 41 21.5 21.6 100.0<br />
Total 190 99.5 100.0<br />
Missing 1 .5<br />
Total 191 100.0<br />
Table 6: Age<br />
Frequency Percent Valid Percent<br />
Cumulative<br />
Percent<br />
Valid 25-30 42 22.0 22.1 22.1<br />
31-35 73 38.2 38.4 60.5<br />
36-40 36 18.8 18.9 79.5<br />
41-45 17 8.9 8.9 88.4<br />
46-50 14 7.3 7.4 95.8<br />
51-55 3 1.6 1.6 97.4<br />
>55 5 2.6 2.6 100.0<br />
Total 190 99.5 100.0<br />
Missing System 1 .5<br />
Total 191 100.0<br />
Tables 6 demonstrate sample‟s age distribution. The major part <strong>of</strong> sample 38.4% , n= 73 was <strong>of</strong> the age<br />
group between 31-35. Only 1.5%, n= 3 respondents belong to the age group <strong>of</strong> 51-55 years (being the<br />
minority <strong>of</strong> the respondents). One respondent did not mentioned his/ her age.. From the following results<br />
it can be understood that the major part <strong>of</strong> sample consisted upon the faculty which represent the young<br />
cohort <strong>of</strong> age ranging from 25-35 years.<br />
Table 7 shows the sample composition in term <strong>of</strong> their tenure (Years <strong>of</strong> service), almost 104 respondents<br />
54.5% belong to service group <strong>of</strong> 1-5 years <strong>of</strong> service. 18.3 % <strong>of</strong> sample fall in to the service group <strong>of</strong> 6-<br />
10 years. The service group <strong>of</strong> 31-35 years service group represent the smallest cohort (n=3).<br />
Table 8 present Pearson correlation results among age, tenure, gender, and rank with overall job<br />
satisfaction level <strong>of</strong> sample, which is measured with JDI (Job Description Index). The coefficients <strong>of</strong><br />
correlation varied from -0.162 (Gender) and 0.724(age).Te Ranks and job satisfaction level <strong>of</strong> the<br />
respondents was significantly correlated (r=-0.828 at Significance level <strong>of</strong> 0.01, p< 0.01). On the other<br />
side age and job satisfaction level was also strongly correlated and significant (p< 0.01) (r= 0.724) as well<br />
as tenure & Job satisfaction (r=0.712) (p
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Table 7: Tenure<br />
Frequency Percent Valid Percent<br />
Cumulative<br />
Percent<br />
Valid 0 3 1.6 1.6 1.6<br />
1-5 years 104 54.5 54.5 56.0<br />
6-10 35 18.3 18.3 74.3<br />
11-15 8 4.2 4.2 78.5<br />
16-20 12 6.3 6.3 84.8<br />
21-25 12 6.3 6.3 91.1<br />
26-30 14 7.3 7.3 98.4<br />
31-35 3 1.6 1.6 100.0<br />
Total 191 100.0 100.0<br />
Table 8: Job Satisfaction & Biographical Data – Pearson Correlation<br />
Overall Job Satisfaction<br />
Rank Pearson Correlation -.828 **<br />
Sig.(2-tailed) .000<br />
N 191<br />
Gender Pearson Correlation -.162 *<br />
Sig.(2-tailed) .026<br />
N 190<br />
Age Pearson Correlation .724 **<br />
Sig.(2-tailed) .000<br />
N 190<br />
Tenure Pearson Correlation .712 **<br />
Sig.(2-tailed) .000<br />
N 191<br />
* Correlation is significant at the 0.05 level (2 – tailed)<br />
** Correlation is significant at the 0.01 level (2 – tailed)<br />
Table 9 depicts the Pearson correlations for the relationship among different aspects <strong>of</strong> job satisfaction <strong>of</strong><br />
faculty members, which were assessed through JDI. The strongest correlation was found for coworkers<br />
“the people along with faculty members work with” (r = 0.724). The factor <strong>of</strong> pay showed weak but<br />
positive relationship with job satisfaction (r= 0.278).Whereas, a strong correlation was obtained among<br />
Job itself and job satisfaction <strong>of</strong> faculty members (r= 0.626), the weakest correlation was obtained among<br />
promotion and job satisfaction (r= 0.248). But the relationship among supervision and job satisfaction<br />
was found significant (p < 0.01) .<br />
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Table 9: Aspects <strong>of</strong> Job Satisfaction -Pearson Correlation Matrix<br />
Overall Job Satisfaction<br />
Job Pearson Correlation .626 **<br />
Sig.(2-tailed) .000<br />
N 191<br />
Pay Pearson Correlation .278 **<br />
Sig.(2-tailed) .000<br />
N 191<br />
Supervision Pearson Correlation .504 **<br />
Sig.(2-tailed) .000<br />
N 191<br />
Promotion Pearson Correlation .248 **<br />
Sig.(2-tailed) .001<br />
N 191<br />
People Pearson Correlation .724 **<br />
Sig.(2-tailed) .000<br />
N 191<br />
* Correlation is significant at the 0.05 level (2 – tailed)<br />
** Correlation is significant at the 0.01 level (2 – tailed)<br />
Multiple Regression Analysis<br />
In order to determine the impact <strong>of</strong> rank, gender, age and tenure on job satisfaction level <strong>of</strong> faculty<br />
members, multiple regression analysis was performed.<br />
Table 10: Multiple Regression Model<br />
Model R R- Square Adjusted R Square Std. Error <strong>of</strong> the Estimate<br />
1 .834 .696 .680 1.770<br />
Table 10 present the results <strong>of</strong> multiple regression analysis, where demographic variables (independent<br />
variables) are regressed against the job satisfaction (dependent variable).The R square is about 0.696 and<br />
adjusted R square is 0.680. Therefore the model can explain 68 % variation in dependent variable (Job<br />
satisfaction) due to demographic independent variables, so 32 % variance in job satisfaction is caused by<br />
other factors which are not included in the study.<br />
Table 11: Multiple Regression Model<br />
Model β SE t Sig<br />
1 (Constant) 35.671 1.620 21.877 .000<br />
rank -2.781 0.333 -8.339 .000<br />
gender .151 0.301 .473 .636<br />
age .098 0.171 .539 .591<br />
tenure -.374 0.178 -2.099 .037<br />
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The values <strong>of</strong> individual Beta‟s are given in table 11, Tenure got negative Beta weight <strong>of</strong> –(0.374), which<br />
suggest job satisfaction and tenure <strong>of</strong> staff is negatively related ( inverse), with more tenure are<br />
experiencing lower job satisfaction level. The Beta weight <strong>of</strong> age is positive (0.098), which suggest that<br />
older faculty members have higher level <strong>of</strong> job satisfaction. Gender was found to be not statistically<br />
significant. Thus among faculty members <strong>of</strong> business institutes <strong>of</strong> Pakistan it is observed that rank and<br />
employee tenure are significant to predict level <strong>of</strong> job satisfaction, on the other side staff age and gender<br />
are weak predictors <strong>of</strong> job satisfaction among the faculty members.<br />
5. CONCLUSION<br />
This research provides the evidence <strong>of</strong> an empirical study; where the impact <strong>of</strong> age, gender, rank and job<br />
tenure on job satisfaction <strong>of</strong> business institutes was explored. Job Satisfaction is key to individual as well<br />
as organizational success. Faculty members like other employees have certain issues when it‟s come to<br />
job satisfaction. This study was conducted to explore deep in to this context through Job description<br />
Index, the faculty members working in business institutes <strong>of</strong> Pakistan (from four provinces namely,<br />
Sindh, Punjab, KPK and Baluchistan) have shown their satisfaction with coworkers, nature <strong>of</strong> work , and<br />
supervision they received in their institutes. The study found Pay and chances for promotion is the causes<br />
<strong>of</strong> job dissatisfaction among the participants <strong>of</strong> the study. Tenure <strong>of</strong> staff and their rank was significantly<br />
associated with the overall level <strong>of</strong> job satisfaction (p
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<strong>International</strong> Journal <strong>of</strong> <strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
Vol: 3, No: 6. June, 2012 ISSN 2156-7506<br />
Available online at http://www.akpinsight.webs.com<br />
A Study on Retail Investors’ Behavior<br />
Dr. P G K Murthy<br />
Director <strong>of</strong> Parul Institute <strong>of</strong> Research and Management<br />
Vadodara, Gujarat, India<br />
Divyang Joshi<br />
Assistant Pr<strong>of</strong>essor,<br />
S. G. Patel Institute <strong>of</strong> Management <strong>Studies</strong><br />
Dharmaj. Dist: Anand<br />
State: Gujarat, India<br />
ABSTRACT<br />
The financial world has been changed greatly since last 20 years.<br />
Individual investors have started to participate actively in the investment<br />
activities. It has become very crucial to understand the investors‟<br />
behavior for their investment decision. This study examines the<br />
investors‟ behavior with the help <strong>of</strong> different behavioral finance theories<br />
viz. overconfidence, disposition effect, conservatism, cognitive<br />
dissonance, rationality and regret theory. A sample survey <strong>of</strong> 130<br />
investors from the Anand, Petlad and Khambhat (Cities <strong>of</strong> Gujarat,<br />
Anand District) was conducted during February to April 2012 with the<br />
help <strong>of</strong> structured questionnaire. The study found that investors are<br />
irrational with different investment options, investors were found<br />
overconfident. The findings also support the disposition effect theory and<br />
regret theory.<br />
Key words: Rational behavior, disposition effect, overconfidence, regret,<br />
chi-square.<br />
1. INTRODUCTION<br />
The Efficient Market Hypothesis (EMH) believes that the prices <strong>of</strong> securities fully reflect the<br />
available information and the price changes are random. The EMH also assumes that investors<br />
are rational. Many researches do not support EMH. In 1980s, most <strong>of</strong> studies were done for EMH<br />
and behavioral model with the help <strong>of</strong> market data.<br />
<strong>International</strong> Journal <strong>of</strong><br />
<strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
Vol: 3, No: 6. June, 2012<br />
pp.28-37<br />
©Academy <strong>of</strong> Knowledge Process<br />
Special Acknowledgement<br />
Mr. Krunal Bhatt<br />
Student <strong>of</strong> MBA Semester IV<br />
S. G. Patel Institute <strong>of</strong> Management <strong>Studies</strong> Dharmaj.<br />
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The traditional finance theory and research believe that investors always try to maximize their utilities by<br />
compromising their feelings and emotions. The traditional finance theory has always ignored the<br />
investors‟ psychology (Kadir Can YALCIN) and believed that humans are emotionless. In contrast to<br />
traditional finance theory, the behavioral finance theorist believes that individuals suffer from irrationality<br />
at a time <strong>of</strong> decision making. According to behavioral finance theory, investors‟ psychology can be<br />
classified as overconfidence, optimism, hindsight, overreaction to chance, errors <strong>of</strong> preferences, regret <strong>of</strong><br />
omission & commission, regret & risk taking (Daniel and Mark, 1998). According to Kahneman D and<br />
Amos (1979) individuals‟ investment decisions are not rational. Their decisions are affected by inevitable<br />
cognitive and emotional biases which make their decisions irrational. This phenomenon is more relevant<br />
in case <strong>of</strong> stock market investors‟ behavior. The different studies have opposite conclusions, e.g.<br />
Jegadeesh and Titman (2001) found the momentum effect as a cause <strong>of</strong> irrational behavior in the stock<br />
market while in against <strong>of</strong> that Daniel and Titman (2000) found strong momentum in growth stocks<br />
compare to value stocks which shows rational behavior <strong>of</strong> investors. Majority <strong>of</strong> the research were done<br />
with the help <strong>of</strong> stock market data but there was no direct interaction with investors. Some factors for<br />
irrational behavior in the stock market were witnessed but it could be inappropriate and injustice to<br />
generalize and extrapolate those factors. With an objective to study natural effect <strong>of</strong> psychological biases<br />
on investors‟ decisions, this study examines the investors‟ behavior with the help <strong>of</strong> different behavioral<br />
finance theories viz. overconfidence, disposition effect, conservatism, cognitive dissonance, rationality<br />
and regret theory.<br />
BEHAVIORAL THEORIES AND LITERATURE REVIEW<br />
Behavioral finance attempts to explain and increase the understanding <strong>of</strong> reasoning patterns <strong>of</strong> investors,<br />
including the emotional processes involved and the degree to which they influence the decision-making<br />
process. Essentially, the behavioral finance attempts to explain “what”, “why”, and “how” <strong>of</strong> finance and<br />
investment, from a human perspective. Ricciardi and Simon (2000) discussed some general principles <strong>of</strong><br />
behavioral finance including the overconfidence, financial cognitive dissonance, the theory <strong>of</strong> regret, and<br />
prospect theory, and compare it with modern portfolio theory and the efficient market hypothesis. Raiffa<br />
(1968) introduced 3 approaches for analyzing decision making <strong>of</strong> investors. First, the Normative Analysis<br />
which is the rational solution to the decision problem. Second, the Descriptive Analysis is the way in<br />
which real people actually make decisions and third, prescriptive Analysis is which is concerned with<br />
practical advice and help that people could use to make more rational decisions. Kahneman (1998)<br />
explained the concept <strong>of</strong> beliefs, preferences, and biases <strong>of</strong> investment advisors should know about.<br />
Rationality<br />
A rational decision is one that is not just reasoned, but is also optimal for achieving a goal or solving a<br />
problem. Rabin (1998) discussed and compared the view <strong>of</strong> economist and psychologist and concluded<br />
that in short duration investors were irrational but in long duration the human nature became rational.<br />
Sevil, Sen and Yalama (2007) surveyed and analyzed the attitude <strong>of</strong> investors <strong>of</strong> Istanbul Stock<br />
Exchange. Through the questionnaire they examined the prospect theory, regret aversion, cognitive<br />
dissonance and heuristics. They found that investors were not totally rational.<br />
Disposition Effect<br />
The common behavior <strong>of</strong> investors to hold looser stocks too long and sell the winner stock too early is<br />
called disposition effect (Grinblatt and Han, 2002). Investors may rationally, or irrationally, believe that<br />
their current losers in future will outperform their current winners. They may sell winners to rebalance<br />
their portfolios or they may refrain from selling losers due to the higher transactions costs <strong>of</strong> trading at<br />
lower prices. The disposition effect was studies by Odean (1998). He analysed 10,000 trading accounts<br />
and their trading pattern. He found that the investors demonstrate a disposition effect; it means hold<br />
losing investment too long and sells winning investment soon.<br />
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Regret theory<br />
According to Investopedia “simply regret theory deals with the emotional reaction people experience after<br />
realizing they've made an error in judgment. Faced with the prospect <strong>of</strong> selling a stock, investors become<br />
emotionally affected by the price at which they purchased the stock. So, they avoid selling it as a way to<br />
avoid the regret <strong>of</strong> having made a bad investment, as well as the embarrassment <strong>of</strong> reporting a loss.”<br />
Overconfidence<br />
Overconfidence defines as “an overestimation <strong>of</strong> the probabilities for a set <strong>of</strong> events by Mahajan, J.<br />
(1992). Operationally, it is reflected by comparing whether the specific probability assigned is greater<br />
than the portion that is correct for all assessments assigned that given probability.” J. Michailova (2010)<br />
tests the overconfidence bias among the gender with the help <strong>of</strong> questionnaire <strong>of</strong> 50 questions. She<br />
concludes that there is no significant difference among expressed overconfidence by both the genders and<br />
they did not appear to be associated with overconfidence.<br />
Conservatism<br />
Conservative is simply means traditional. Conservatism as psychological attitude means human being has<br />
some excess attachment to the things which they have already with them. And something new <strong>of</strong>fer to<br />
them then they are not ready to accept that new thing or slowly and gradually they are accept that new<br />
thing. Edward (1962) explains conservatism bias. It means “Investors are too slow (too conservative) in<br />
updating their beliefs in response to recent evidence. This means that they might initially under react to<br />
news about a firm, so that prices will fully reflect new information only gradually. Such a bias would give<br />
rise to momentum in stock market returns.”<br />
Financial Cognitive Dissonance<br />
As individuals, we attempt to reduce our inner conflict (decrease our dissonance) in one <strong>of</strong> two ways: 1)<br />
we change our past values, feelings, or opinions, or, 2 we attempt to justify or rationalize our choice. This<br />
theory may apply to investors or traders in the stock market who attempt to rationalize contradictory<br />
behaviors, so that they seem to follow naturally from personal values or viewpoints. Goetzmann and Peles<br />
(1993) explain the cognitive dissonance. According to them, an individual try to reduce his/her inner<br />
conflict by changing their past values, feelings or opinion or he/she attempt to justify his/her choices.<br />
Prospect theory<br />
Prospect theory deals with the idea that people do not always behave rationally. This theory holds that<br />
there are constant biases motivated by psychological factors that influence people‟s choices under<br />
conditions <strong>of</strong> uncertainty. Prospect theory considers preferences as a function <strong>of</strong> “decision weights,” and<br />
it assumes that these weights do not always match with probabilities. Specifically, prospect theory<br />
suggests that decision weights tend to overweigh small probabilities and under-weigh moderate and high<br />
probabilities. Kahneman and Smit (2002) had used insights from cognitive psychology regarding the<br />
mental processes <strong>of</strong> answering questions, forming judgments, and making choices, to help us better<br />
understand how people make economic decisions. The explained heuristics and biases, prospect theory,<br />
decision making differences according to economy and psychology. Schwarz (1998) conclude that if<br />
investors faced with the possibility <strong>of</strong> losing money they <strong>of</strong>ten take a riskier decisions aimed at loss<br />
aversion. So, investors‟ prospects changed according to the probabilities <strong>of</strong> being in pr<strong>of</strong>it or loss.<br />
OBJECTIVE OF THE STUDY<br />
The primary objective <strong>of</strong> the study was to understand the behavior <strong>of</strong> investors with the help <strong>of</strong> different<br />
behavioral finance theories. The theoretical concept <strong>of</strong> different behavior finance theories like<br />
overconfidence, disposition effect, conservatism, cognitive dissonance, rationality and regret theory were<br />
used to understand the investors‟ behavior.<br />
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<strong>International</strong> Journal <strong>of</strong> <strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
Vol: 3, No: 6. June, 2012 ISSN 2156-7506<br />
Available online at http://www.akpinsight.webs.com<br />
HYPOTHESIS<br />
1) H o = 60% investors are Rational.<br />
2) H o = 60% investors are Over Confident.<br />
3) H o = 60% investors are affected by Disposition Effect.<br />
4) H o = 60% investors are conservative.<br />
5) H o = 60% investors are affected by Cognitive Dissonance.<br />
6) H o = 60% investors are Regret Investors.<br />
The behavior can‟t be 100% same for all situations and for all human being. So for hypothesis testing,<br />
60% was taken as a benchmark for getting inventors‟ behavior. The alternative hypothesis for all H o was<br />
“less than 60%.”<br />
DATA AND METHODOLOGY<br />
Sampling unit<br />
For the survey respondent must be the person who invests in the Stock Market. Convenient sampling<br />
method is used for data collection. The questionnaires were filled out through personnel meeting with the<br />
investors. The respondents were survey outside the broking houses at respective cities.<br />
Sample Size<br />
The pilot study was conducted by surveying 20 investors. The human behaviour can not predict<br />
accurately. So, the confidence level was taken 93%. At 93% confidence, the sample size was derived at<br />
124. For reducing error and safer side the sample size was increased to 150. Total 150 questionnaires<br />
were distributed in Anand, Petlad and Khambhat (50 in each) out <strong>of</strong> which 130 generated valid responses.<br />
50, 46 and 34 questionnaire received from Anand, Petlad and Khambhat respectively. The sample was<br />
drawn as per convenience. The visitors and investors approached outside the brokerage house. The<br />
collected data were analyzed with the help <strong>of</strong> Minitab 16.<br />
Questionnaire Design<br />
The questionnaire (Annexure No. 1) was formed with 15 questions. Each question starts with a particular<br />
scenario or situation that may happen in the stock market. Then the respondents were <strong>of</strong>fered a set <strong>of</strong><br />
responses, which generally observed at a time <strong>of</strong> decision making. The questions were arranged in the<br />
following sequence to get proper understanding <strong>of</strong> investors‟ behavior and response.<br />
Question Number<br />
Behavioral Theory<br />
1, 10 and 11 Rationality<br />
2, 9 and 12 Over confidence<br />
3, 8 and 13 Disposition Effect<br />
4 and 14 Conservatism<br />
7 Cognitive Dissonance.<br />
5, 6 and 15 Regret Theory<br />
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DATA ANALYSIS AND INTERPRETATION<br />
Hypothesis 1:- Ho = 60% investors are Rational.<br />
* Table -1 Rationality <strong>of</strong> Investors<br />
Question No. Rational Option Rational Investor in Irrational Investor Total<br />
1 Option No. 2 71 59 130<br />
10 Option No. 1 74 56 130<br />
11 Option No. 1 21 109 130<br />
Here in question-1, investors who supposed to be rational would like to select option 2 because compare<br />
to option 1 option 2 is pr<strong>of</strong>itable. In analysis 71 investors select option 2nd it show that 55% investors are<br />
rational and 59 investors select option 1st it means 45% investors are irrational.<br />
In question-10, under the rationality assumption <strong>of</strong> expected utility theory investors have to choose option<br />
1 because option 1 <strong>of</strong>fered loss <strong>of</strong> Rs. 100 and option 2 loss <strong>of</strong> Rs. 140. 74 investors select option 1st it<br />
show that 57% investors are rational and 56 investors select option 2nd it means 43% investors are<br />
irrational.<br />
In question no. 11 As per Rationality theory <strong>of</strong> behavior finance, intuition <strong>of</strong> investors is not playing any<br />
role in deciding or taking decision. The investors who are Rational they select option 1, that contain “no<br />
effect” <strong>of</strong> intuition and who are irrational investors they select option 2 & 3, these contain “little effect”<br />
and “high effect”. 21 investors select option 1 means 16% investors are rational on the other hand 109<br />
investors who select option 2 & 3 means 84% investors are irrational.<br />
N=130, x=55, p^=55/130 = 0.4230, p=.60, q=.40, = 7%, confidence level =93%<br />
P^ p 0.4230<br />
0.60<br />
Z cal =<br />
pq / n 0.60 *0.40 /130<br />
=<br />
= -0.1769/0.0429 = -4.12<br />
Z cal
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Hypothesis 3:- 60% investors are affected by Disposition Effect<br />
* Table - 3 Affected by Disposition Effect<br />
Question No.<br />
Option for<br />
Disposition effect<br />
Disposition Effect No Disposition Effect Total<br />
3 1 102 28 130<br />
8 2, 3 & 4 121 9 130<br />
13 1 110 20 130<br />
The disposition effect means sell the winner too soon and hold the looser too long. To check the<br />
disposition effect 3 questions were formed in a case form. Investors were asked about there decision for<br />
holding or selling winning stock and looser stock. The investors who prefer to sell winning stock and<br />
ready to hold looser stock were categorized as investors affected by disposition effect.<br />
N=130, x=111, p^=111/130=0.8538, p=.60, q=.40, = 7%, confidence level =93%<br />
P^ p 0.8538<br />
0.60<br />
Z cal =<br />
pq / n 0.60 *0.40 /130<br />
=<br />
= 0.2538/0.0429 = 5.903<br />
Z tab At = 7% from the normal table is = -1.48, Z cal >Z tab<br />
H 0 is failed to reject; it means 60% investors are affected by Disposition Effect.<br />
Hypothesis 4:- 60% investors are conservative<br />
* Table - 4 Conservative investors<br />
Question No.<br />
Option for Conservative Non conservative<br />
Conservatism Investors<br />
Investors<br />
Total<br />
4 1 & 2 39 91 130<br />
14 3 & 4 55 75 130<br />
Conservative is simply means traditional. Conservative investors believe in past information. They are<br />
very slow to accept any new information that available in market regarding particular stock. Here, in<br />
question 4 and 14 particular case was given for their investment and asked about their decision regarding<br />
current investment. From the table it can observe that at the time <strong>of</strong> negative news (Question 4) investors<br />
were less conservative compared to positive news (Question 14).<br />
N=130, x=47, p^=47/130=0.3615, p=.60, q=.40, = 7%, confidence level =93%<br />
P^ p 0.3615<br />
0.60<br />
Z cal =<br />
pq / n 0.60 *0.40 /130<br />
=<br />
= -0.2385/0.0429 = -5.55<br />
Ztab At = 7% from the normal table is = -1.48, Zcal
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investors select options 3 or 4 so it is said that 53% investors are Cognitive Dissonance investors. They<br />
are ready to change in investment pattern to support financial information that available in market. 61<br />
investors select options 1 or 2 that mean 47% investors are non cognitive dissonance investors that means<br />
they are stick to their past experience and investment (Conservatism).<br />
N=130, x=69, p^=69/130=0.5307, p=.60, q=.40, = 7%, confidence level =93%<br />
P^ p 0.5307<br />
0.60<br />
Z cal =<br />
pq / n 0.60*0.40 /130<br />
=<br />
= -0.0693/0.0429 = -1.61<br />
Z tab At = 7% from the normal table is = -1.48, Zcal Z tab<br />
H 0 is accepted; it means 60% investors are Regret Investors.<br />
CONCLUSION AND DISCUSSION<br />
The paper tends to examine the Indian investors‟ behavior. Six main cognitive biases namely Rationality,<br />
over confidence, Disposition Effect, Conservatism, Cognitive Dissonance and Regret Theory were used<br />
to check the investors‟ behavior. The best manner to explore the investors‟ behavior is to interact directly<br />
with the investors and try to extract their opinion. So, the questionnaire survey technique was adopted and<br />
questions based on these psychological biases were asked. The responses collected through the<br />
questionnaire were analyzed and hypothesized. The findings support the rationality, disposition effect and<br />
theory <strong>of</strong> regret concepts <strong>of</strong> behavioral concept. But findings do not support the overconfident,<br />
conservatism and cognitive dissonance concepts.<br />
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Edwards, W (1962) “Conservatism in human information processing” in: Kleimutz, B ed.: Representation<br />
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Goetzmann, W. N. and N. Peles (1993) “Cognitive Dissonance and Mutual Fund Investors.” The Journal<br />
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Gutter M S, Fox J and Montalto C P (1999), “Racial Differences in Investor Decision Making”, Financial<br />
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Journal <strong>of</strong> Finance, Vol. 59, No. 1, pp. 137-163.<br />
Hugh Schwartz (1998) Prospect Theory Article “subjects (investors) tend to evaluate prospects or<br />
possible outcomes in terms <strong>of</strong> gains and losses relative to some reference point rather than the<br />
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Explanations”, Journal <strong>of</strong> Finance, Vol. 56, No. 2, pp. 699-720.<br />
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Academic <strong>Studies</strong>, Vol. 12. August 2010.<br />
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Econometrica, Vol. 47, No. 2, pp. 263-292.<br />
Kahneman, D - V. Smith (2002). "Foundations <strong>of</strong> Behavioral and Experimental Economics" The Royal<br />
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Miller, M, H. (1986). Behavioral rationality in finance: the case <strong>of</strong> dividends. Journal <strong>of</strong> <strong>Business</strong>, vol.<br />
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Porter, M. (1992). Capital choices: Changing the way America invests in industry. Boston: Council on<br />
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Pavabutr P (2002), “Investor Behavior and Asset Prices”, Sangvien Conference.<br />
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Ritter, J, R. (2003). Behavioral finance. Pacific-Basin Finance Journal, 11: 429-437.<br />
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Schlarbaum, G., Lewellen, W., & R. Lease. (1978a). The Common-Stock-Portfolio Performance Record<br />
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Sevil, G., Sen, M. and Yalama, A. (2007). Small Investor Behavior in Istanbul Stock Exchange (ISE).<br />
Euro<strong>journal</strong> Publishing, Inc, Middle Eastern Finance and Economics, pp. 74-79<br />
Shefrin (1999). Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology <strong>of</strong><br />
Investing. Boston, MA: Harvard Press.<br />
Terrance Odean, “Are Investors Reluctant to Realize Their Losses?” The Journal <strong>of</strong> Finance, Vol. 53, No.<br />
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Victor Ricciardi and Helen K. Simon. “What is Behavioral Finance?” <strong>Business</strong>, Education and<br />
Technology Journal Fall 2000.<br />
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Journal, Vol. 22, No. 1, pp. 92-109.<br />
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Annexure<br />
Q-1. You have Rs 10,000 for making investment in the following options. Which option would you<br />
select?<br />
1)30% probability to earn 5000 Rs 2) 40% probability to earn 4000 Rs<br />
Q-2. What was high made by NIFTY 50 in 2008?<br />
1) 6387 2) 6257 3) 6417<br />
How much confident are you? ______%<br />
Q-3. You bought share A for Rs 350 which is currently being sold @ Rs400 and stock B, for Rs 500<br />
which is also currently being sold @ Rs400. You are in need <strong>of</strong> money. Which Stock would you<br />
like to sell?<br />
1) Stock A 2) Stock B<br />
Q-4. From your holdings, for specific company there are rumors that company is in Problem, what will<br />
you do?<br />
1. Indifferent 2.Maintain position/ keep investing.<br />
3. Reduce/ sell half <strong>of</strong> the share. 4. Sell all shares and liquidate position.<br />
Q-5. Your friend had purchased RIL @ price <strong>of</strong> Rs 1200 and it goes high up to Rs 2500. Now due to<br />
uncertainty price goes down to Rs 700. Your friend bares big loss. Do you think this was...?<br />
1) A Mistake 2) A bad luck<br />
Q-6. During your investment experience, what contribution has been made by following factors which<br />
led you towards loss?<br />
No Particular Contribution %<br />
1 Broker advice<br />
2 Friend Advice<br />
3 Own Analysis<br />
4 Suggestions by TV and News papers<br />
5 Your Intuition<br />
Total 100%<br />
Q-7. Your broker advises you to sell all shares from your portfolio and invest in hotel and agriculture<br />
sectors which were not the part <strong>of</strong> your investment. Your strategy will be...<br />
1. Indifferent 2.Think and analyses recommendation<br />
3. Sell half and invest as per advice 4. Sell all and follow the advice.<br />
Q-8. You are having following stocks in your portfolio. You are in need <strong>of</strong> 150,000 Rs. Which stock<br />
would you like to sell?<br />
Q-9.<br />
No Company name Purchase.<br />
Quantity<br />
Purchase.<br />
Price<br />
Current<br />
mkt. price<br />
Pr<strong>of</strong>it/loss<br />
per share<br />
1 RIL 100 1600 700 -900<br />
2 L&T 100 800 1200 +400<br />
3 NTPC 100 75 175 +100<br />
4 HUL 100 190 390 +200<br />
5 Bharti AIRTEL 100 800 400 -400<br />
How good your analysis is proved for investment as compared to other investors?<br />
1. I am extremely good 2. I am good<br />
3. Same like other 4. I am not good<br />
5. I am not extremely good<br />
Hold/Sell<br />
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Q-10. You have Rs 10000 for making investment in the following options. Which option would you<br />
select?<br />
1) 10% probability to loose 1000 Rs 2) 20% Probability to loose 700 Rs<br />
Q-11. What do you think is the role <strong>of</strong> intuition (your internal feeling) while deciding about purchasing a<br />
stock?<br />
1) No effect 2) Little effect 3) High effect<br />
Q-12. What was rate <strong>of</strong> GDP in 2010-11?<br />
1) 9.3% 2) 8.7% 3) 8.3%<br />
How much confident are you? ______%<br />
Q-13. In the period <strong>of</strong> higher volatility in stock market, which group <strong>of</strong> stock would you prefer to sell?<br />
1) The one which earn pr<strong>of</strong>it. 2) The one which earn loss.<br />
Q-14. From your holdings <strong>of</strong> different companies‟ share, there is positive news for specific<br />
company. What will do?<br />
1) Indifferent<br />
2) Maintain position/ keep investing<br />
3) Increase/ purchase half <strong>of</strong> the share<br />
4) Sell other share and invest in news specific company.<br />
Q-15. During your investment experience, what contribution has been made by following<br />
which led you towards pr<strong>of</strong>it?<br />
No Particular Contribution %<br />
1 Broker advice<br />
2 Friend Advice<br />
3 Own Analysis<br />
4 Suggestions by TV and News papers<br />
5 Your Intuition<br />
Total 100%<br />
factors<br />
General Information:<br />
Name & Address <strong>of</strong> Respondent : _______________________________________________<br />
Age<br />
: ________ Years.<br />
Gender : Male Female<br />
Occupation:<br />
1) Pr<strong>of</strong>essional 3) Service<br />
2) <strong>Business</strong> 4) Other _________________________<br />
Thank you for Your Response!!!<br />
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The impact <strong>of</strong> Budget Participation on<br />
Organizational Performance via<br />
Competitiveness<br />
Lassaad Ben Mahjoub<br />
Assistant pr<strong>of</strong>essor <strong>of</strong> accounting,<br />
Department <strong>of</strong> Accounting and Finance,<br />
Faculty <strong>of</strong> Economic Sciences and Management, Sfax,<br />
Tunisia.<br />
Khamoussi Halioui<br />
Associate Pr<strong>of</strong>essor <strong>of</strong> Accounting, College <strong>of</strong> Economics, Management and Information<br />
Systems, University <strong>of</strong> Nizwa,<br />
OMAN<br />
ABSTRACT<br />
This paper aims to inquire aspect <strong>of</strong> linkage between budgetary and<br />
organizational performance across market competitiveness as an<br />
important variable affecting this relation. To test this association, the<br />
data is obtained via survey from 89 managers working in accounting<br />
and finance sub-departments in Tunisia in 2009. In the analysis <strong>of</strong><br />
data, descriptive statistics, correlation analysis, factor analysis,<br />
multiple regression analysis and t-test analysis were used. The<br />
results <strong>of</strong> survey are consistent with the proposition that businesses<br />
with high performance are more participative and have higher<br />
competitiveness level than businesses with low performance.<br />
However, we conducted a bi-dimensional analysis <strong>of</strong> the budgetary<br />
participation, we obtained two dimensions 1 : influence and<br />
involvement. We concluded that the second dimension is the<br />
responsible <strong>of</strong> the studied effect.<br />
Keywords: Budgetary Participation; Organizational Performance;<br />
Competitiveness; Dimensional Analysis<br />
<strong>International</strong> Journal <strong>of</strong><br />
<strong>Contemporary</strong> <strong>Business</strong> <strong>Studies</strong><br />
Vol: 3, No: 6. June, 2012<br />
pp.38-49<br />
©Academy <strong>of</strong> Knowledge Process<br />
1. INTRODUCTION<br />
Budgetary participation that means participation <strong>of</strong> managers to determination<br />
process <strong>of</strong> resources using in their own activities and operations, has been<br />
1 The two dimensions are: involvement and influence. For the purpose <strong>of</strong> this study, the involvement dimension <strong>of</strong><br />
budgetary participation is defined as the extent to which information is exchanged between managers about factors<br />
that affect their budget, while the influence dimension <strong>of</strong> budgetary participation refers to the extent to which<br />
managers have command over the budget setting process that established the criteria under which they may be<br />
evaluated (Hassel and Cunningham, 1993, 1996).<br />
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interested in the literature <strong>of</strong> management accounting for a long time as an important subject.<br />
Indeed, the basic utility <strong>of</strong> the subject comes from increasing importance <strong>of</strong> determining<br />
dimensions <strong>of</strong> budgetary participation‟s effects on managers‟ performance in the present<br />
competitive conditions for firms.<br />
From psychological and cognitive perceptions, there are two advantages <strong>of</strong> managers‟<br />
participation in budgeting process. First, owing to identification and ego-involvement with<br />
budget objectives, participation is associated to performance and so, leads to enhanced<br />
motivation and commitment to the budget (Brownell, 1982; Shields & Shields, 1998). The<br />
second reason is improving flow <strong>of</strong> information between superiors and subordinates, budgetary<br />
participation leads to good decision making. From this standpoint, participation escorts to higher<br />
motivation, higher commitment, higher quality decisions and consequently higher performance.<br />
2. LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT<br />
The effect <strong>of</strong> budgetary participation on the organizational performance has been the subject <strong>of</strong><br />
considerable research in management accounting (Chong et al., 2005).Early empirical studies<br />
used a universalistic approach to examine the effect <strong>of</strong> budgetary participation. However, the<br />
results have been mixed (Murray, 1990; Kren, 1992; Chong et al., 2005; Jermias & Setiawan,<br />
2008).<br />
Subsequent studies have attempted to reconcile the conflicting results by adopting a contingency<br />
approach (Brownell, 1982a; Govindarajan, 1986; Chong et al., 2005). The empirical evidence<br />
generated by these studies suggests that contingency factors such as locus <strong>of</strong> control (Brownell,<br />
1982, 1983), perceived environmental uncertainty (Govindarajan, 1986), leadership style<br />
(Brownell, 1983), decentralization (Gul et al., 1995), role ambiguity and role conflict (Chong &<br />
Bateman, 2000), and feedback (Chong & Chong, 2002a) have an impact on participationperformance<br />
linkage.<br />
The present work aims to extend this field <strong>of</strong> research by examining another contingent variable,<br />
namely level <strong>of</strong> competitiveness, which is an important external environmental factor.<br />
Competitiveness has been identified as a major reason for companies to choose a customerfocused<br />
strategy for gaining a competitive edge (Porter, 1979). It has been suggested that<br />
managers will always be faced with problems associated with market conditions in their routine<br />
planning and controlling behaviors.<br />
The budgetary participation gives legitimacy to individuals to discuss problems <strong>of</strong> their<br />
organization with their superiors, it can also provide a framework within which people can<br />
exchange information and ideas to solve problems and agree on future actions, this may affect<br />
the performance <strong>of</strong> their businesses (O‟Connor, 1995). However by adopting a contingent<br />
approach, Chong et al., (2005) argues that, under conditions <strong>of</strong> low competition, companies are<br />
focusing more on short-term trading. It follows that managers don‟t need to collect market<br />
information for planning purposes.<br />
It is further argued that managers in firms facing intense market competition are more likely to<br />
make greater use <strong>of</strong> multiple performance measures in their attempt to trace the various market<br />
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factors and achieve competitive advantage (Mia & Clarke, 1999).Similarly, Shields & Shields<br />
(1998) find that in situations <strong>of</strong> low competitiveness, decisions become more routine. In these<br />
circumstances, the decisions <strong>of</strong> leaders themselves as the obvious solutions and considered<br />
wasteful <strong>of</strong> time. Therefore, these managers are less satisfied in their mission if they become<br />
involved in the preparation <strong>of</strong> budgets. Therefore, one can conclude that under conditions <strong>of</strong> low<br />
competitiveness, managers will be less incentive to participate in the process <strong>of</strong> preparing the<br />
budget (Powell, 1992).<br />
It is possible that a high level <strong>of</strong> participation is inconsistent with the organizational structure and<br />
business environment; this is due to a low level <strong>of</strong> performance (due to wasted time and effort <strong>of</strong><br />
managers) and dissatisfaction at work. In another side, if the intensity <strong>of</strong> competitiveness is<br />
strong, managers may need additional information relevant to the complexities <strong>of</strong> the external<br />
market environment (Brownell, 1983; Kren, 1992; Tsui, 2001). The works <strong>of</strong> Kren (1992) and<br />
Chong & Chong (2002b) show that budgetary participation provides a convenient opportunity<br />
for leaders to gather relevant information to make informed decisions. Thus we assume that a<br />
high level <strong>of</strong> competitive market, managers participating in the budget process, seeking more<br />
information. This opportunity allows them to increase their satisfaction because their<br />
participation is a tool to express their values (Shields & Shields, 1998, p. 59).<br />
Hence, the first hypothesis could be formulated as follows:<br />
Hypothesis 1: The direct effect <strong>of</strong> budgetary participation on organizational performance is low.<br />
Both assumptions are made and are based on a literature review using the budgetary participation<br />
as an independent variable, taking a comprehensive approach to this variable (dimensional scale<br />
<strong>of</strong> the variable budgetary participation). However, in seeking to identify the true extent <strong>of</strong><br />
participation that influences organizational performance in the presence <strong>of</strong> competitive<br />
conditions (high or low), we adopt a more dimensional approach to the budgetary participation<br />
(Hassel & Cunningham, 1993, 1996; Chong & al., 2005).The dimension "involvement" <strong>of</strong><br />
budgetary participation is defined as the extent <strong>of</strong> information exchanged between managers<br />
regarding the factors affecting their budget. While the dimension "influence" means the level <strong>of</strong><br />
influence on manager for the determination <strong>of</strong> his budget (Hassel & Cunningham, 1993, 1996).<br />
Given the bi-dimensionality <strong>of</strong> the budgetary participation, we make the following assumptions:<br />
Hypothesis 2: There is a positive relationship between the dimension "involvement" <strong>of</strong> budgetary<br />
participation and organizational performance when there is a high level <strong>of</strong> competitiveness.<br />
Hypothesis 3: There is a positive relationship between the dimension "influence" <strong>of</strong> budgetary<br />
participation and organizational performance <strong>of</strong> the company when there is a high level <strong>of</strong><br />
competitiveness.<br />
3. RESEARCH METHODOLOGY<br />
3.1. Data collection and sample characteristics<br />
This study employed a questionnaire survey method to collect data. A sample was composed<br />
from 89 top managers from companies in the industrial sector.The administration <strong>of</strong> the survey<br />
questionnaire consisted <strong>of</strong> the following steps. First, a questionnaire with a cover letter<br />
explaining the objective <strong>of</strong> the study and a reply paid self-addressed envelope were mailed to<br />
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each manager. The survey questionnaire asked them to provide data for three variables namely:<br />
intensity <strong>of</strong> market competition, budgetary participation, and organizational performance.<br />
Of the 113 questionnaires distributed starting at 113 Tunisian companies, 93 responses were<br />
obtained. These responses have been purified to reach a final sample <strong>of</strong> 89 industrial companies<br />
in Tunisia.<br />
The characteristics <strong>of</strong> target companies and managers are summarized in Table 1 and Table 2<br />
Table 1. Characteristics <strong>of</strong> the companies<br />
Companies<br />
89<br />
Number <strong>of</strong> employees<br />
50-100 100-200 >200<br />
15 29 45<br />
Table 2. Characteristics <strong>of</strong> the managers<br />
managers Service held Years <strong>of</strong> experience in current position<br />
Financial or Others 8years<br />
89 Accounting<br />
79 10 14 5 28 23 19<br />
3.2. Variables measurement and reliability <strong>of</strong> constructs<br />
3.2.1. The dependent variable: Organizational Performance<br />
The major challenges in measuring organizational performance lived in three levels. First is the<br />
validity <strong>of</strong> the construct <strong>of</strong> organizational performance. The second is the relationship between<br />
the purpose <strong>of</strong> research and the proper definition <strong>of</strong> organizational performance that can give a<br />
proper measure <strong>of</strong> this variable. Is it is a measure against a market accounting measure, a<br />
financial measure against a non-financial measure or a measure based on objective criteria<br />
against subjective criteria?<br />
Referring to the study <strong>of</strong> Venkatraman (1989), organizational performance is defined as the<br />
effectiveness and efficiency <strong>of</strong> the elements may affect the pr<strong>of</strong>itability and growth <strong>of</strong><br />
organizations. From this definition, Desphandé et al. (1993)‟ measure <strong>of</strong> organizational<br />
performance based on the following six items: a prosperous, market share, the rate <strong>of</strong> growth,<br />
pr<strong>of</strong>itability and innovation (Appendix A).<br />
Table 3. Factor analysis for Organizational Performance<br />
Items Factor Loading<br />
PO1 a 0.728<br />
PO2 0.603<br />
PO3 0.851<br />
PO4 0.724<br />
PO5 0.533<br />
Extraction Method: Principal Components Analysis<br />
Only one dimension is extracted<br />
Cronbach reliability coefficient = 0.795 b<br />
b results from SPSS.17 output<br />
a PO1, … PO5 are the items measuring Organizational Performance<br />
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Regarding the internal validity <strong>of</strong> this scale <strong>of</strong> measurement, the reliability coefficient α is 0.795<br />
which means that the measurement scale has good internal validity.<br />
The factor analysis extracted one factor whose Eigen value is 2.81 and explains 56, 20% <strong>of</strong> total<br />
variance, which allows us to admit the one-dimensionality <strong>of</strong> the scale measuring this variable.<br />
3.2.2. Independent variable: Budgetary Participation<br />
The choice <strong>of</strong> instrument for measuring the budgetary participation has been critical in<br />
highlighting its effects. In counting the previous studies related to the extent <strong>of</strong> budgetary<br />
participation, Chong et al., (2005) stated that the instrument developed by Milani (1975) was the<br />
most used due to its reliability demonstrated by a plethora <strong>of</strong> research (Brownell, 1982; Dunk,<br />
1993 ...). The instrument consists <strong>of</strong> six items Milani each <strong>of</strong> which uses a response on a Likert<br />
scale <strong>of</strong> seven points. The scale is designed for construction <strong>of</strong> an additive total score (Appendix<br />
B).<br />
a<br />
Table 4. Factor analysis for Budgetary Participation<br />
Factor Loading<br />
Items First factor<br />
Second factor<br />
PB1 a 0.695<br />
PB2 0.817<br />
PB3 0.735<br />
PB4 0.888<br />
PB5 0.829<br />
PB6 0.860<br />
Extraction Method: Principal Components Analysis<br />
Two dimensions are extracted<br />
Cronbach reliability coefficient = 0.828<br />
PB1, …, PB6 are the items measuring the budgetary participation<br />
The internal validity <strong>of</strong> the measurement scale <strong>of</strong> the variable budget participation is measured<br />
by the Cronbach reliability coefficient (α). This value is high at 0.828, which means that this<br />
scale <strong>of</strong> measurement is reliable since α value was well above the limit set by Nunnally (1978) to<br />
0.6.<br />
The Kaiser-Meyer-Olkin (KMO) index <strong>of</strong> this scale <strong>of</strong> measurement is 0.750. Items can be<br />
factorizable when the value exceeds KMO value for 0.5. Note also that, over the index, the<br />
higher the number <strong>of</strong> factor is low. We can therefore conclude that our data lend themselves to a<br />
factor analysis.<br />
A principal component analysis gave us two main factors. Indeed, a rotation <strong>of</strong> axes allowed us<br />
to eliminate cases where one or more items are several factors in the same proportions. She<br />
identified two independent factors, each containing three items.<br />
We can conclude that budgetary participation can have two distinct dimensions: "involvement"<br />
and "influence".<br />
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The first factor (PB1) can be interpreted as the dimension <strong>of</strong> "influence", it consists <strong>of</strong> items (see<br />
appendix B) 3, 4 and 5 (Milani, 1975; Hassel & Cunningham, 1993, 1996) explains 54, 73% <strong>of</strong><br />
the total variance. This factor has a Cronbach α value <strong>of</strong> 0.803.<br />
The second factor (PB2) is the “involvement” (items 1, 2 and 6) which explains 16, 66% <strong>of</strong> the<br />
total variance. The reliability coefficient <strong>of</strong> this factor is 0.771.<br />
3.2.3. The moderator variable "intensity <strong>of</strong> market competition (COMP)<br />
The measurement <strong>of</strong> this variable was originally made by Khandwalla (1972). However, several<br />
criticisms and shortcomings have been addressed to this measure.Mia & Clarke (1999) propose<br />
an alternative measure into six items describing the state <strong>of</strong> competitiveness <strong>of</strong> the company<br />
(Appendix C); the answers are spread on a Likert scale <strong>of</strong> five points ranging from 1 (very poor)<br />
to 5 (very strong).<br />
For the internal validity <strong>of</strong> the construct, the reliability coefficient is 0.451, it is less than 0.6. So,<br />
all items constituting the scale <strong>of</strong> measurement is not reliable. It is advisable to proceed with a<br />
measure <strong>of</strong> adequacy <strong>of</strong> sampling and factor analysis to find the items or responsible for this<br />
anomaly.<br />
The study <strong>of</strong> the scale dimensionality <strong>of</strong> this variable showed that the measure <strong>of</strong> sampling<br />
adequacy <strong>of</strong> KMO was 0.426. This value is low, which indicates the absence <strong>of</strong> the<br />
unidimensionality <strong>of</strong> instrument.<br />
Table 5. Factor analysis for Intensity <strong>of</strong> Market competitiveness<br />
Factor Loading a<br />
Items First factor Second factor Third factor<br />
COMP1 b 0,741<br />
COMP2 0,860<br />
COMP3 0,718<br />
COMP4 0,809<br />
COMP5 0,884<br />
COMP6 0,617 0,549<br />
Extraction Method: Principal Components Analysis<br />
Rotation Method: Varimax with Kaiser Normalization<br />
Three dimensions are extracted<br />
Cronbach Reliability coefficient = 0.451<br />
a Values below 0.5 are eliminated<br />
b<br />
COMP1, …, COMP6 are the items measuring the intensity <strong>of</strong> market competitiveness<br />
The results <strong>of</strong> the rotation axis factor analysis showed that the items are divided into three<br />
factors. The inverse matrix and anti-image correlation matrix enabled us to retain the factor<br />
composed by the following items: 1, 3 and 4 (Competitive Price, Competitive Marketing,<br />
Competitiveness market share).<br />
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4. DATA ANALYSIS AND DISCUSSION OF THE RESULTS<br />
For treatment <strong>of</strong> collected data, we used the statistical s<strong>of</strong>tware SPSS 17.0 and E-Views 6 which<br />
have enabled us to perform all statistical tests necessary to validate research hypotheses.<br />
4.1. Descriptive Statistics<br />
It is to identify the characteristics and criteria for evaluating the measuring instrument object<br />
variables <strong>of</strong> the study. The results <strong>of</strong> the descriptive analysis are summarized in the following<br />
table:<br />
Table 6. Descriptive statistics for all variables<br />
Variable Items Mean Min Max Range Variance<br />
Budgetary Participation 6 3,565 3,279 4,033 0,754 0,076<br />
Intensity <strong>of</strong> market<br />
competition<br />
6 3,511 3,361 3,689 0,328 0,020<br />
Organizational Performance 5 3,889 3,672 4,164 0,492 0,032<br />
These results may confirm the existence <strong>of</strong> the practice <strong>of</strong> budgetary participation in in our<br />
sample <strong>of</strong> Tunisian firms, since the average score per item exceeded the average score (3.565> 3)<br />
and given a low score reflects a low level <strong>of</strong> budgetary participation and a high score reflects a<br />
high level <strong>of</strong> budgetary participation.<br />
For the variable "organizational performance", we note that most <strong>of</strong> the means <strong>of</strong> item scores are<br />
well above the average; this can be interpreted by an acceptable performance <strong>of</strong> sample firms.<br />
The above table also shows that the intensity <strong>of</strong> the competitiveness <strong>of</strong> Tunisian companies,<br />
target <strong>of</strong> our search, is not as strong as the average score per item, it increased slightly above<br />
average.<br />
4.2. Test assumptions and interpretation <strong>of</strong> results<br />
To achieve reliable tests, we conducted an audit <strong>of</strong> assumptions (conditions) before application<br />
<strong>of</strong> the regression technique: the linearity <strong>of</strong> the model, normality <strong>of</strong> the dependent variable,<br />
multicollinearity and homoscedasticity.<br />
The following model is used to test these hypotheses:<br />
Y i = α 0 + α 1 + X i1 + α 2 X i2 + α 3 X i1 *X i2 + ε<br />
Where, according to the hypothesis to test, Y: organizational performance Xi1: the budgetary<br />
participation (composite score), size, influence or involvement dimension, Xi2: intensity <strong>of</strong><br />
competitiveness X i1 *X i2 : the interaction term, and ε: the error term.<br />
4.2.1. The direct effect <strong>of</strong> budgetary participation on organizational performance<br />
Panel A from Table 7 present a regression analysis <strong>of</strong> the direct effect <strong>of</strong> the explanatory variable<br />
(PB) on organizational performance, the results confirm the first hypothesis. The effect <strong>of</strong> the<br />
budgetary participation is poor (p>=0.891), the solution is to find a moderate effect by a<br />
contingency variable. In our case this is the intensity <strong>of</strong> market competition.<br />
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Table 7. Regression analysis results<br />
Panel : Direct relationship between Budgetary Participation and Organizational Performance<br />
Variables Coefficient Standard error t-Value P<br />
Constant 0.064 0.124 0.518 0.606<br />
Budgetary<br />
participation (X1)<br />
0.012 0.090 0.138 0.891<br />
Adjusted R 2 = 0.23<br />
Panel B: Moderate effect <strong>of</strong> Intensity <strong>of</strong> competitiveness in the relation Budgetary participation<br />
(composite score) and Organizational performance<br />
Constant 0.178 0.195 1.87 0.004<br />
Budgetary 0.089 0.781 0.13 0.891<br />
participation (X1)<br />
Intensity <strong>of</strong> market 0.961 1.233 1.02 0.446<br />
competition (X2)<br />
X1*X2 0.345 1.089 1.764 0.063<br />
Adjusted R 2 = 0.140<br />
Panel C: Performance on the “involvement dimension” <strong>of</strong> budgetary participation and intensity<br />
<strong>of</strong> market competition<br />
Constant 0.085 0.028 0.71 0.481<br />
Involvement<br />
dimension <strong>of</strong><br />
Budgetary<br />
Participation (X1)<br />
0.130 0.120 1.08 0.283<br />
Intensity <strong>of</strong> market 0.256 0.107 1.28 0.297<br />
competition (X2)<br />
X1*X2 0.351 0.189 3.29 0.002<br />
Adjusted R 2 = 0.151<br />
Panel D: performance on the “influence dimension” <strong>of</strong> budgetary participation and intensity <strong>of</strong><br />
market competition<br />
Constant 0.063 0.042 0.98 0.561<br />
Influence Dimension<br />
<strong>of</strong> Budgetary<br />
participation (X1)<br />
Intensity <strong>of</strong> market<br />
competition (X2)<br />
0.076 0.945 1.23 0.117<br />
1.056 1.129 1.56 0.109<br />
X1*X2 1.349 1.267 1.08 0.179<br />
Adjusted R 2 = 0.102<br />
4.2.2. Effect <strong>of</strong> budgetary participation on organizational performance through the<br />
intensity <strong>of</strong> market competition: the moderate effect<br />
Panel B in Table 7 shows a regression coefficient α is 0.345; it is positive and significant (at 10%<br />
level). This result confirms the first hypothesis and show that organizational performance is<br />
influenced by the budgetary participation (composite score 2 ) in a context <strong>of</strong> high level <strong>of</strong><br />
2 In this regression, we use the composite score <strong>of</strong> the Budgetary Participation (only one factor)<br />
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competitiveness.The question, posed now is: which dimension <strong>of</strong> budgetary participation has a<br />
significant effect in the studied relationship?<br />
The answer to this question will depend on the results <strong>of</strong> subsequent regressions.<br />
4.2.3. Dimensional analysis: effect <strong>of</strong> the “involvement”<br />
Panel C <strong>of</strong> Table 7 shows an adjusted R2coefficient equal to 15.1%.<br />
The regression coefficient α is 0.451, it is positive and significant (t = 3.29 at 5% level). This<br />
result confirms the hypothesis 2 that there exists a positive relationship between the size <strong>of</strong><br />
"involvement" <strong>of</strong> budgetary participation and organizational performance <strong>of</strong> the company when<br />
there is a high level <strong>of</strong> competitiveness. In a similar context, Jermias & Setiawan (2008) and<br />
Chong et al., (2005) find same results.<br />
4.2.4. Dimensional analysis: effect <strong>of</strong> the “influence” dimension <strong>of</strong> budgetary participation<br />
Hypothesis 3 posits that the dimension "influence" <strong>of</strong> the budgetary participation, in interacting<br />
with the intensity <strong>of</strong> competitiveness, hasn‟t a significant effect on organizational performance.<br />
The model referred to this case (Panel D <strong>of</strong> table 7) doesn't present a sizeable explanatory power<br />
(adjusted R ² = 10.2%).<br />
The regression coefficient is positive (0.076) but not significant with a value t-statistic equal to<br />
1.23. So the dimension "influence" <strong>of</strong> the budgetary participation has no significant effect on<br />
organizational performance <strong>of</strong> firms in a context <strong>of</strong> strong competitiveness. This confirms the<br />
third hypothesis. The results <strong>of</strong> linear regressions are aligned with those obtained by Hassel &<br />
Cunningham (1993, 1996).<br />
CONCLUSION<br />
This study examined the impact <strong>of</strong> budgetary participation on organizational performance<br />
through the intensity <strong>of</strong> market competition. It <strong>of</strong>fers a combination <strong>of</strong> strong budgetary<br />
participation and a high level <strong>of</strong> competitiveness will enable to improve organizational<br />
performance <strong>of</strong> firms. The conduct <strong>of</strong> this work was largely influenced by the study <strong>of</strong> Chong<br />
and al., (2005) and that <strong>of</strong> Jermias & Setiawan (2008). In general, the results obtained confirm<br />
the hypotheses developed in this study. They showed that the "involvement" dimension <strong>of</strong> the<br />
budgetary participation is a source <strong>of</strong> improved organizational performance especially under<br />
conditions <strong>of</strong> high competitiveness. A dimensional analysis <strong>of</strong> the budgetary participation into<br />
two factors "involvement" and “influence” showed that only the first dimension involve in<br />
interaction with the intensity <strong>of</strong> market competition to increase organizational performance. The<br />
contribution <strong>of</strong> this work appears in two levels. From a theoretical perspective, the results <strong>of</strong> this<br />
study may enrich the management accounting literature, and introducing <strong>of</strong> "market competition"<br />
as new contingency factor. In practical terms, the results are an encouragement tool <strong>of</strong> company<br />
managers to budgetary participation especially in situations <strong>of</strong> high competitiveness to improve<br />
the performance <strong>of</strong> their businesses. It is important to remember that this research suffer from a<br />
number <strong>of</strong> limitations. Indeed, the sample size is limited which makes it difficult to generalize<br />
the results. On the other hand, instruments for measuring variables even if they are to criticism,<br />
our choice are justified for the sake <strong>of</strong> comparison.<br />
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Appendixes<br />
APPENDIX A: Organizational Performance<br />
In focusing on the variable 'organizational performance', please check the number that<br />
corresponds to the level <strong>of</strong> business performance following the scale <strong>of</strong> 1 begins: "lowest" to 6<br />
"above".<br />
Compared with its competitors, your business:<br />
1. More prosperous<br />
2. Has the largest market share<br />
3. Has higher growth rate<br />
4. More pr<strong>of</strong>itable<br />
5. More innovative<br />
APPENDIX B: The budgetary participation<br />
In focusing on the variable budgetary participation, please state your opinion on each <strong>of</strong> the<br />
following statements by circling the appropriate number: 1 "totally agree" to 6 "strongly agree".<br />
1. I participate in the budgeting process for my department.<br />
2. My supervisor provides me with reasons and / or explanations when the budget is revised.<br />
3. I encourage discussions with my supervisor about the budget without wondering.<br />
4. I feel I have an influence on the final budget.<br />
5. My contribution to the budget is important.<br />
6. My supervisor asks my opinions and / or my proposals relating to the budget when it is<br />
already developed<br />
APPENDIX C: The intensity <strong>of</strong> competitiveness<br />
Please indicate, by circling the appropriate number, the intensity <strong>of</strong> market competitiveness <strong>of</strong><br />
your business using the following scale (scale: 1 = very poor, 2 = poor, 3 = moderate, 4 = strong,<br />
5: very strong):<br />
1. Competitive prices<br />
2. Competitiveness for development <strong>of</strong> new products<br />
3. Competitive Marketing (or chain <strong>of</strong> distribution)<br />
4. Competitive Market Share<br />
5. Actions <strong>of</strong> competitors<br />
6. Number <strong>of</strong> competitors in the industry<br />
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Vol: 3, No: 6. June, 2012 ISSN 2156-7506<br />
Available online at http://www.akpinsight.webs.com<br />
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Copyright © 2012 IJCBS<br />
Enrich the Knowledge through<br />
Quality Research<br />
An <strong>International</strong> Journal Published by<br />
Academy <strong>of</strong> Knowledge Process<br />
www.akpinsight.webs.com<br />
Copyright © 2012. Academy <strong>of</strong> Knowledge Process<br />
Copyright © 2012 IJCBS<br />
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