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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS 

IJCRB 

Vol .2, No. 9 

January 2011 

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IJCRB is a peer reviewed Journal and IJCRB Editorial Board consists of Phd doctors 

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countries. 

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Senior Lecturer, Dept. of Statistics, University of the Western Cape, South Africa 

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Sr. MBA, Ph.D. 

American Intercontinental University http://www.aiuniv.edu/ 


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Dr Cara Peters 

Assistant professor of marketing , Winthrop University , Rock Hill, South Carolina. 

PhD in business administration , University of Nebraska 

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Dr.Rashid Rehman 

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Kent Business School University of Kent , UK 

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Business School, Jiangnan University, 

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Ravi Kiran 

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Lecturer, School of Business IT and Logistics 

RMIT University, Melbourne, Australia 

Office: +61 3 99255918 

Dr Ganesh Narasimhan 

Lecturer, Management Sciences ,Sathyabama University 

Board of Advisor - AN IIM Alumina Initiative & International Journal Economics, 

Management, & Financial Markets Denbridge press, New York, USA 


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Contents 

Title Page 

Ethnic Evaluations of Black Models in Advertising: 11 

Identity, Comparison, and Skin Tone 

Dr. Stevie Watson , Dr. Corliss G. Thornton, Dr.Edith F. Davidson 

Human Resource Management Practices in Logistic Service 32 

Provider Industry: A Case Study 

Goh Hui Chyn, Dr. Maniam Kaliannan 

Organizational Environment, Job Satisfaction and Career 45 

Growth Opportunities: A Link to Employee Turnover 

Intentions in Public Sector of Pakistan 

Khurram Shahzad, Sajjad Hussain, Sajid Bashir 

Anwar F. Chishti, Zafar Mueen Nasir 

The Imperative of Extraction and Production of 57 

Refined Vegetable Oil from Palm Kernel 

Project in Eastern Nigeria. 

Dr. Chinedu Chidinma Nwachukwu, Onwadi Confidence 

A study of Globalization in International Business 88 

Mohammad Reza Noruzi, Mohammad Bakhtazmai 

A Consumer Focused Study of Transport Service 91 

Quality: A Case Study of Selected State Transport 

Corporations in Nigeria 

Dr. Gunu Umar 

Antecedents of Turnover and Absenteeism: Evidence from 108 

Public Sector Institutions of Pakistan 

Khurram Shahzad, Khansa Hayat 

Muhammad Abbas, Sajid Bashir, Kashif-ur-Rehman 

Modernization and the Alterations of the Malay 121 

Wedding Foodways in the Urban Area 

Mohd Salehuddin Mohd Zahari, Mohd Zain Kutut 

Rabiatul Adawiyah, Norhayati Mohd Yusof 


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Title Page 

The Relationship between Extrinsic and Intrinsic 135 

Attributes of Product Quality with Brand Loyalty on Malaysia 

National Brand Motorcycle/Scooter, MODENAS 

Mohd Rizaimy Shaharudin , Anita Abu Hassan, Musdiana Mohamad Salleh 

Siti Meriam Ali, Etty Harniza Harun, Muna Abdul Jalil, Nurazila Abdul Aziz 

How Service Quality affects Performance of 150 

Conventional Banks in Pakistan 

Dr. Ashfaq Ahmad, Dr. Muhammad Bashir, Sultan Mubariz 

1999-2010 – Eventful Years of Advancements in Economic 157 

and Military Bilateral Relations of Pakistan & China 

Professor Muhammad Abdul Malik, Naveed ur Rehman 

Arsalan Mujahid Ghouri 

An Empirical Study of Impact of Job Satisfaction on 167 

job Performance in the Public Sector Organizations 

Dr. Muhammad Safdar Rehman, Ajmal Waheed 

How Customer Satisfaction affects Performance of 182 

Islamic Banks in Pakistan 

Dr. Ashfaq Ahmad, Asad Afzal Humayoun 

Muhammad Mussarat Nawaz, Dr. Muhammad Bashir 

Role of Integrated Secondary School Mathematics 189 

on Learning Business Mathematics 

Shahinshah Babar Khan, Shaheen Ashraf Taherkheli 

Determinants of Foreign Direct investment and its 198 

impact on GDP Growth in Pakistan 

Prof. Dr. Ch. Abdul Rehman, Orangzab, Ali Raza 

Entrepreneurial Intentions Among the Business Students of 206 

Higher Education Institutes of Punjab 

Muhammad Jawad Hasan Qureshi, Naveed Ahmed, M. Sarfraz Khan 

Exchange Rate Depreciation and Import 221 

Demand in Nigeria (1986 – 2008) 

Dr Imimole Benedict 


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Title Page 

Does market size affect FDI? The Case of Pakistan 237 

Muhammad Muazzam Mughal,Muhammad Akram 

Value, Size and Market Risk Premium in Karachi stock 248 

Exchange (Pakistan) during Bull, Neutral and Bear Market Trends 

Nadia Asghar,Maria Tahir,Anam Ejaz Ahmad Sheikh, Dr. Muhammad Iqbal Saif 

Exploring the Paradox of Organizational Learning 257 

and Learning Organization 

Dr. Naveed Akhtar , Dr. Rashid Ahmad Khan 

Comparison among Opinions of Teachers by Designation, 271 

Age, Experience and Qualification Regarding the Role of Heads of 

Teaching Departments in the Promotion of Communication at 

Postgraduate Level 

Rahmat Ullah Shah, Umar Ali Khan, Javed Iqbal & Zafar Khan 

Attitude and Awareness of Bannu 280 

Community towards Reproductive Health Education 

Rukhsana Aziz, Rahmatullah Shah. Zafar Khan 

Effect of Leadership on Employees Performance in 286 

Multinational Pharmaceutical Companies in Pakistan 

Bilal Durrani,Obaid Ullah, Sabeeh Ullah 

Evaluation of Member Service Quality; 300 

A Case Study of Royal Palm Golf & Country Club 

Nasir Mehmood , Muhammad Zia-ur-Rehman, Majed Rashid 

Effect of Organizational Culture on Success of Knowledge 321 

Management System's Implementation (Case Study: Saderat 

Bank in Isfahan province) 

Seyed Mohsen Allame, Bagher Asgarnejad Nouri, Seyed Yasin Tavakoli 

Sayed Ahmad R Shokrani 


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Title Page 

Studying of the Relation between Emotional Intelligence 347 

and Job Satisfaction with due regard to Regulative Role of Organizational 

Learning Capability (Case Study: Saderat Bank in Isfahan province) 

Seyed Mohsen Allameh, Bagher Asgarnejad Nouri, Seysd Yasin Tavakoli 


The Impact of Accounting Information Systems on 365 

Effectiveness of Internal Control in Jordanian 

Commercial Banks "Field Study" 

Gassan Mustafa Ahmed Al-Qudah 

Impact of HR Practices on Employee Engagement in 378 

Banking Sector of Pakistan 

Saima Sardar, Dr. Ch. Abdul Rehman, Usman yousaf 

Asad Aijaz 

Does Correlation Exist Between Inflation and Corruption: 390 

Comparison of Pakistan with India 

Dr. Saqib Gulzar, Khuram Shafi, Muhammad Faisal Siddiqui 

Trust Models in e-Business; Analytical-Compare Approach 398 

Nour mohammad Yaghoubi, Razieh Yekkeh khani, Mohammad Javad Esmaeali 

Muslim Response to Modernity and a new 417 

strategy of peace in the world 

Rana Zamin Abbas, Dr. Muhammad Amin ,Dr.Zulfqar Ahmad 

Sustainable Aspects of Short Sea Shipping: 428 

A Case Study of Europe 

Samsul Islam, Paul Leinberg, Rezbin Nahar 

Short and Long Run Dynamics of Export Composition 446 

and Economic Growth: Empirical Evidence from Pakistan 

Asim Iqbal, M.Wasif Siddiqi, M.Afzal Tabassum 

Developing a User’s Feedback Index to Improve the Design 463 

and Construction Phase of Private Housing in Developing Metropolitan 

Afaq Hyder Chohan, Abdul Waheed Memon, Naveed Agro 

Dr. Adi Irfan Che-Ani, Nor Haniza Ishak 


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Title Page 

A Study to Explore Task and Role of Educational Managers in 

Educational Organizations of NWFP 484 

Dr Muhammad Naseer Ud Din, Mr. Faridullah Khan, Dr. Ali Murtaza 

A Snap Shot on Business Ethic and Ethic in Business 496 

Hassan Danaee Fard, Mohammad Reza Noruzi 

Exploring Motivational Factors in the Professional Development 501 

Career Choice of a Teacher 

Dr Muhammad Naseer Ud Din, Mr. Faridullah Khan, Dr. Ali Murtaza 

The Influence of Personal Factors on the Perceived 511 

Organizational Climate: Evidence from the Pakistani Industrial 

Organizations 

Adnan Iqbal 

Improved Hidden Markov Model in DNA Sequence Alignment 528 

Naila Rozi, Nasiruddin Khan 

Policy and Policy Making in Iran; Issues and Process 540 

Hassan Danaee Fard, Mohammad Reza Noruzi 

Impact of Emotional Intelligence on Team Effectiveness, Job 545 

Satisfaction and Job Performance 

Dr. Mohammad Majid Mahmood Bagram 

Umad-Ud-Din 

Sidra Aslam Chaudhry 

Mohsin Altaf 


JANUARY 2011 

VOL 2, NO 9



Ethnic Evaluations of Black Models in Advertising: 

Identity, Comparison, and Skin Tone 

Dr. Stevie Watson (Corresponding Author) (Ph.D., Mississippi State University) 

Assistant Professor of SCM & Marketing Sciences 

Rutgers Business School 

94 Rockafeller Road, 228 Janice H. Levin Bldg. Piscataway, New Jersey, USA 

Dr. Corliss G. Thornton (Ph.D., Florida State University) 

Associate Professor of Marketing 

Georgia State University 

J. Mack Robinson College of Business 

35 Broad Street N.W., P.O. Box 3991 Atlanta, GA 

Dr.Edith F. Davidson (Ph.D., University of Tennessee) 

Assistant Professor of Marketing 

Auburn University, 415 W. Magnolia Ave., 248 Lowder Business Bldg. Auburn, AL 

Stevie Watson (Ph.D., Mississippi State University) is an Assistant Professor of SCM & 

Marketing Sciences at Rutgers Business School. His primary research interests include ethnic 

advertising and consumer behavior, marketing and public policy and marketing ethics. He has 

had articles published in the Journal of Public Policy & Marketing, Journal of Marketing 

Communications, Journal for Advancement of Marketing Education, Educational and 

Psychological Measurement, and Communication Research Reports. 

Corliss G. Thornton (Ph.D., Florida State University) is an Associate Professor of Marketing at 

Georgia State University. Her research examines ethnic consumers‘ attitudes toward targeted 

advertising and the impact of ethnicity on consumer response to various sales promotions. Her 

research has been published in several journals including the Journal of Marketing, Journal of 

Retailing, Journal of Advertising, Journal of Advertising Research, and Journal of 

ServicesMarketing. 

Edith F. Davidson (Ph.D., University of Tennessee) is an Assistant Professor of Marketing at 

Auburn University. Her research interests include integrated marketing communications, retail 

communications, and consumer behavior. Her research has been published in the Journal of 

Consumer Marketing, several marketing conference proceedings, and book chapters.Ethnic 

Evaluations of Black Models in Advertising: Identity, Comparison, and Skin Tone 

Abstract 

This study investigates the interaction effects of strength of ethnic identity (high/low), 

social comparison (comparer/noncomparer), and model skin tone (light/dark) on source 

credibility and advertisement evaluations among Black respondents. A 2 x 2 x 2 betweensubjects 

experimental design revealed a marginally significant two-way interaction 

(strength of ethnic identification x model skin tone) and a significant three-way 

interaction. Strong ethnic identifiers rated light-skinned and dark-skinned Black character 

advertisements higher on source credibility and Aad than did weak ethnic identifiers, with 

greater rating differences for the dark-skinned Black character advertisement. Black 

comparers with high ethnic identification evaluated the light-skinned Black character 


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advertisement more favorably on source credibility and attitude toward the ad than did 

Black comparers with low ethnic identification. Research findings, implications, and 

limitations are discussed. 

Keywords: Strength of Ethnic Identification, Model Skin Tone; Social Comparison, 

Advertising, source credibility 

1. Introduction 

Although content analysis studies have shown an increase in the use of Black models in 

advertising (Bristor, Lee, & Hunt, 1995; Mastro & Stern, 2003; Zinkhan, Qualls, & 

Biswas, 1990; Wilkes & Valencia, 1989), advertisers commonly use light-skinned Black 

models to target diverse consumer segments (Frisby, 2003; Green, 1991; Keenan, 1996; 

Leslie, 1995; Sengupta, 2000). Critics argue that the frequent use of light-skinned Black 

models marginalizes the appearance of most Black viewers (Brown, 1993; Hill, 2002; 

Sekayi, 2003) and reflects an industry-wide bias for Black models with Eurocentric 

features (e.g., light skin tone) (Baker, 2005; Bristor, Lee, & Hunt, 1995; Cortese, 2004; 

Stanford, 2000). In fact, researchers contend that the scarcity of dark-skinned Black 

female models is especially concerning, because it communicates narrow beauty ideals 

and ignores the social meaning of skin tone within the Black community (Bristor, Lee, & 

Hunt, 1995; Brown, 1993; Jewell, 1993; Hasinoff, 2008; Li, 2008; McAllister, 2005; 

Stanford, 2000). 

In summary, content analysis findings suggest that advertisers prefer light-skinned Black 

female models over dark-skinned Black female models. However, until recently, 

empirical studies on Black viewers‘ evaluations of light-skinned and dark-skinned Black 

character advertisements have been largely nonexistent. With the exception of a few 

studies using college student samples (Meyers, 2008; Watson, 2006), past empirical 

investigations on issues pertaining to model skin tone and advertising (Kerin, 1979; 

Ramos, 2003; Sengupta, 2000) have failed to address the potential effect of strength of 

ethnic identification on Black viewers‘ evaluations of light-skinned and dark-skinned 

Black character advertisements. 

Skin tone is the most visible trait used in race distinctions (Holmes, 1995; Russell, 

Wilson, & Hall, 1992) and is the physical trait most pertinent to the experience of racism 

by all ethnic subcultures (Hall, 1992; Pascoe, 1996). The historical linkage of lightskinned 

Blacks to mixed-race parentage and partial European lineage and dark-skinned 

Blacks to African lineage (Lincoln, 1967; Jones, 2000; Maddox, 1998) is likely to have 

important social meaning among Black viewers concerned with racial and ethnic issues 

(Baumann, 2008; Meyers, 2008; Watson, 2006). Since race-relevant cues (i.e., skin tone) 

are more salient to persons concerned with racial and ethnic issues (Appiah, 2002; 

Ferguson, Rhodes, Lee, & Sriram, 2001), high (low) Black ethnic identifiers may 

consider dark-skinned (light-skinned) Black female models to be more ‗racially 

authentic‘ (mainstream), which could, in turn, affect their evaluations of the model‘s 

credibility and the advertisement itself. 

On the other hand, the awareness of and preference for Black models is heightened 

among Black viewers with strong racial (Whittler, 1991) and ethnic identities (Appiah, 

2001, 2004; Green, 1999; Williams, Qualls, & Grier, 1995). Visually salient physical 


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traits (i.e., skin tone) frequently associated with a cultural or a subcultural group are 

likely to activate cultural models associated with that group, which should have a 

favorable affect on advertising and source credibility ratings (Brumbaugh, 2002). Lightskinned 

female models may be associated with in-group (Black) membership due to their 

partial African lineage (Sengupta, 2000). However, the associative strength of darkskinned 

female models to African lineage (versus light-skinned female models to mixedrace 

lineage) may have a greater effect in activating cultural models associated with 

Black subcultural groups (Brumbaugh, 2002) among high and low Black ethnic 

identifiers. In this case, high Black ethnic identifiers may evaluate both dark-skinned and 

light-skinned Black character advertisements more favorably on source credibility and ad 

attitudes than low Black ethnic identifiers, but the evaluative differences between high 

and low Black ethnic identifiers would be greater for the dark-skinned Black character 

advertisement (greater associative strength to Black subculture) as compared to the lightskinned 

Black character advertisement (weaker associative strength to Black subculture). In 

addition to strength of ethnic identification, evaluations of light-skinned and dark-skinned 

Black character advertisements may also be affected by the level to which Black viewers 

compare themselves to the model featured in the ad. Social comparison theory suggests 

that men and women consciously and subconsciously compare themselves to female 

models and actresses who they believe represent social and cultural ideals (Gulas & 

McKeage, 2000; Hafner, 2004; Richins, 1991; Thomsen, 2002). While researchers 

suggest that Black subculture is less likely to engage in social comparisons with 

mainstream media ideals (Evans & McConnell, 2003; Milkie, 1999), Black viewers may 

compare themselves to advertising images containing other Black persons (Frisby, 2004; 

Schooler, Ward, Merriwether, & Caruthers, 2004). As more idealized images of Black 

female models permeate advertising, the number of Black viewers making social 

comparisons with those images are likely to increase (Botta, 2000; Poran, 2006), which 

may affect viewers‘ ratings on source credibility and attitude toward the advertisement. 

However, many Black viewers employ race as their frame of reference when evaluating 

models (Grier & Brumbaugh, 1999; Schooler et al., 2004) and may resist aesthetic 

images featuring Black female models with Eurocentric features (Sekayi, 2003). In 

addition, strength of ethnic identification may interact with social comparison (Makkar & 

Strube, 1995; Molloy & Herzberger, 1998) and model skin tone to affect source 

credibility and advertisement evaluations among Black respondents. Therefore, given the 

prevalence of, social meaning attached to, and perceived idealization for light-skinned 

Black female models in advertising, this research investigates for possible two-way and 

three-way interaction effects of strength of ethnic identification (high or low), level of 

social comparison (comparer or noncomparer), and model skin tone (light or dark) on 

source credibility and advertisement evaluations among Black respondents. This study 

investigates the following research questions: 

RQ1: Will strength of ethnic identification, level of social comparison, and model skin 

tone interact to have significant effects on source credibility and attitude toward the ad? 

RQ2a. Will strength of ethnic identification interact with model skin tone to have 

significant effects on source credibility and attitude toward the ad? 


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RQ2b. If a significant interaction is found in RQ2a, will the evaluative differences 

between high and low Black ethnic identifiers be greater for the dark-skinned Black 

character advertisement versus the light-skinned Black character advertisement? 

RQ3. Will level of social comparison interact with model skin tone to have significant 

effects on source credibility and attitude toward the ad? 

2. Methods 

2.1 Sample and Design 

Three hundred seventy-five Black respondents were selected from an online panel 

administered by Zoomerang. Respondents ranged from 18 to 94 years of age (M = 

39.47; SD = 15.46) and randomly received either a light-skinned (n = 192) or darkskinned 

(n = 183) Black character advertisement promoting a fictitious brand of 

toothpaste. The effects of strength of ethnic identification, level of social comparison, and 

model skin tone on source credibility and attitude toward the ad were examined by a two 

(high ethnic identifier vs. low ethnic identifier) by two (comparer vs. noncomparer) by 

two (light-skinned female model vs. dark-skinned female model) multivariate analysis of 

covariance. 

2.2 Independent Variables 

Independent variables included strength of ethnic identification, level of social 

comparison, and model skin tone. Median splits were performed on the strength of ethnic 

identification and social comparison scales. Respondents who scored below the median 

on the summed five-item, seven-point ethnic identification scale (Appiah, 2001) were 

considered low ethnic identifiers. All other respondents were considered high ethnic 

identifiers. The ethnic identification scale included the following items (α = .90): (1) I 

feel a strong attachment towards my own ethnic group); (2) I feel good about my ethnic 

background; (3) I am happy that I am a member of the ethnic group I belong to; (4) I 

have a lot of pride in my ethnic group; and (5) I have a strong sense of belonging to my 

own ethnic group. 

Similarly, respondents who scored below the median on the summed three-item, sevenpoint 

social comparison scale (Bower, 2001) were categorized as noncomparers. All 

other respondents were categorized as comparers. The social comparison scale included 

the following items (α = .76): (1) I think most of my female friends would compare 

themselves to the model in this advertisement; (2) If the average woman interested in 

using this type of product noticed this advertisement, how likely is it that she would 

compare herself to the model?; and (3) If you were to notice this advertisement in a 

magazine, how likely is it that you would compare yourself to the model? 

A Black female model (SCAP #5: medium skin tone; PMS #145), chosen from a 

stock photography website, was digitally manipulated using the CMYK color model in 

Adobe Photoshop to correspond with PMS #155 (SCAP #2: light skin tone) and PMS 

#469 (SCAP #8: dark skin tone). Using Adobe Photoshop, mixtures of cyan, magenta, 

yellow, and black (CMYK) were combined as closely as possible to match the colors 

found on the Skin Color Assessment Procedure (SCAP) (Bond & Cash, 1992). The 

SCAP contains nine colors derived from the Pantone Matching System (PMS), a color 

standardization system consisting of hundreds of colors and shades in the printing 


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industry. The nine SCAP colors, ranging from 1 (very light) to 9 (very dark), represent 

the hues of Black people. Original PMS colors were not used due to cost and availability 

constraints. 

2.3 Dependent Variables 

Dependent variables included two 7-point scales: source credibility and attitude 

toward 

the ad. Source credibility was measured using a fifteen-item semantic differential scale 

(Ohanian, 1990), which included items such as unattractive/attractive, 

untrustworthy/trustworthy, and unknowledgeable/knowledgeable. The scale was found to 

be highly reliable (α = .96). 

Attitude toward the ad (Aad) was measured on a four-item semantic differential 

scale adopted from Holbrook and Batra (1987). Respondents indicated their level of 

agreement (1 = strongly disagree; 7 = strongly agree) to the following statements: (1) I 

like the ad; (2) I react favorably to the ad; (3) I feel positive toward the ad; and (4) The ad 

is good. This scale was also found to be highly reliable (α = .97). 

2.4 Covariates 

Metric covariates are typically included in experimental designs to remove 

extraneous 

influences from the dependent measures (Hair, Anderson, & Tatham, 1987). Three 

covariates 

were controlled for in the current study: brand familiarity, social desirability bias, and 

respondent age. Significant relationships were found among the covariates and the 

combined dependent measures: brand familiarity [F(2, 363) = 3.55; p < .05; partial etasquared 

= .019], social desirability bias [F(2, 363) = 3.66; p < .05; partial eta-squared = 

.020], and respondent age [F(2, 363) = 17.21; p < .05; partial eta-squared = .087]. 

Although this study used a fictitious product brand to limit the effects of 

differences in 

respondents‘ past knowledge (Garretson & Burton, 2005), exposing respondents to 

fictitious brand names can lead to false familiarity effects (Holden & Vanhuele, 1999), 

which may affect their attitudes toward the advertisement and source perceptions. Brand 

familiarity was measured using a three-item, seven-point scale: unfamiliar/familiar, 

inexperienced/experienced, and not knowledgeable/knowledgeable (Machleit, Allen, & 

Madden, 1993). 

Social desirability bias, assessed using a 10-item scale developed by Crowne and 

Marlowe (1960), is often used as a covariate in research (Fisher, 2000) and may affect 

how Black respondents evaluate same-race advertising models of different skin tones. 

Finally, since our study included a random sample of Black respondents chosen from an 

online consumer panel, older respondents may feel that the young Black female model is 

less representative of their age cohort. In addition, older respondents are more likely to be 

sensitive to skin tone and other race-related issues than are younger respondents, which 

might affect their ratings on the dependent measures. 


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3. Results 

3.1 Test of Interaction Effects 

3.1.1 Strength of Ethnic Identification by Social Comparison by Model Skin Tone Effects 

RQ1 investigated a three-way interaction among strength of ethnic identification, level of 

social comparison, and model skin tone. The results indicated a significant three-way 

interaction effect on the combined dependent variables [Wilks‘s Λ = 0.98, F(2, 363) = 

3.46; p < .05; partial � 2 = .019]. When the results for the dependent variables were 

considered separately, both source credibility [F(1, 364) = 5.26; p < .05, partial � 2 = 

.014] and attitude toward the ad [F(1, 364) = 6.14; p < .05, partial � 2 = .017] reached 

statistical significance. 

Closer examination of the interaction revealed that Black comparers with high 

ethnic identification evaluated the light-skinned Black character advertisement (n = 57) 

more favorably on source credibility (M = 5.42, see Figure 1) and attitude toward the ad 

(M = 5.55, see Figure 2) than did Black comparers with low ethnic identification (n = 43) 

on source credibility (M = 4.61, see Figure 1) and attitude toward the ad (M = 4.38, see 

Figure 2). However, when Black noncomparers evaluated the light-skinned Black 

character advertisement, strength of ethnic identification did not have a major effect on 

source credibility and attitude toward the ad. 

____________________________ 

Insert Figure 1 about here 

____________________________ 


The parallel lines displayed in Figure 3 suggest that there was no significant interaction 

between strength of ethnic identification and level of social comparison for the darkskinned 

Black character advertisement on source credibility. Similarly, the parallel lines 

displayed in Figure 4 suggest that there was no significant interaction between strength of 

ethnic identification and level of social comparison for the dark-skinned Black character 

advertisement on attitude toward the ad. 

____________________________ 


____________________________ 


3.1.2 Strength of Ethnic Identification by Model Skin Tone Effects 

RQ2a investigated an interaction effect between strength of ethnic identification 

and model skin tone. The results revealed a marginally significant two-way interaction 

effect on the combined dependent variables [Wilks‘s Λ = 0.99, F(2, 363) = 2.82; p = 

.061; partial � 2 = .015]. 


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When the results for the dependent variables were considered separately, source 

credibility [F(1, 364) = 5.60; p < .05, partial � 2 = .015] was statistically significant while 

attitude toward the ad [F(1, 364) = 2.99; p < .10, partial � 2 = .008] was marginally 

significant. 

Closer examination of the interaction revealed that high Black ethnic identifiers evaluated 

the dark-skinned Black character advertisement (n = 93) more favorably on source 

credibility (M 

= 5.22, see Figure 5) and attitude toward the ad (M = 5.41, see Figure 6) than did low 

Black ethnic identifiers (n = 90) on source credibility (M = 4.33, p < .01; see Figure 5) 

and attitude toward the ad (M = 4.22, p < .01; see Figure 6). 

____________________________ 


___________________________ 


Similarly, high Black ethnic identifiers evaluated the light-skinned Black character 

advertisement (n = 103) more favorably on source credibility (M = 5.03, see Figure 5) 

and attitude toward the ad (M = 4.94, see Figure 6) than did low Black ethnic identifiers 

(n = 89) on source credibility (M = 4.59, p < .01; see Figure 5) and attitude toward the ad 

(M = 4.29, p < .01, see Figure 6). 

RQ2b investigated whether the evaluative differences between high and low 

Black ethnic identifiers would be greater for the dark-skinned Black character 

advertisement versus the light-skinned Black character advertisement. The line graphs in 

Figures 5 and 6 illustrate a larger gap in mean scores on the dependent measures between 

high Black ethnic identifiers and low Black ethnic identifiers for the dark-skinned Black 

character advertisement as compared to the light-skinned Black character advertisement. 

Specifically, low Black ethnic identifiers‘ ratings of the light-skinned Black character 

advertisement were higher on source credibility and attitude toward the ad than their 

ratings of the dark-skinned Black character advertisement, whereas high Black ethnic 

identifiers‘ ratings of the dark-skinned Black character advertisement were higher on 

source credibility and attitude toward the ad than their ratings of the light-skinned Black 

character advertisement. 

3.1.3 Level of Social Comparison by Model Skin Tone Effects 

RQ3 investigated an interaction effect between level of social comparison and model skin 

tone. No significant interaction was reported on the combined dependent measures 

[Wilks‘s Λ = 1.00, F(2, 363) = 0.01; p = .992; partial � 2 = .000]. Interestingly enough, 

despite the lack of a significant interaction, Black comparers rated both the light-skinned 

and dark-skinned Black character advertisements higher on source credibility (see Figure 

7) and attitude toward the ad (see Figure 8) than did Black noncomparers. 

____________________________ 


____________________________ 



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4. Discussion and Implications 

There is ―an implicit assumption within the advertising industry‖ (Sengupta, 2000, p. 

211) that dark-skinned Black female models are less effective and elicit less favorable 

consumer evaluations than light-skinned Black female models (Russell, Wilson, & Hall, 

1992; Strutton & Lumpkin, 1993). It has been alleged that advertisers prefer light-skinned 

Black female models in advertisements, because light skin tone is a closer approximation 

to Eurocentric ideals than is dark skin tone. This study not only adds to the sparse 

research on how Black viewers‘ evaluate light-skinned and dark-skinned Black character 

advertisements, but also contributes to the advertising field by investigating possible 

interaction effects among strength of ethnic identification, social comparison, and model 

skin tone on source credibility and ad attitudes among Black respondents. 

The study results found that high Black ethnic identifiers rated both the lightskinned 

and dark-skinned Black character advertisements higher on source credibility and 

attitude toward the ad than did low Black ethnic identifiers, but the evaluative differences 

between high and low Black ethnic identifiers were greater for the dark-skinned Black 

character advertisement (greater associative strength to Black subculture) as compared to 

the light-skinned Black character advertisement (weaker associative strength to Black 

subculture). This finding supports research on the effects of visually salient traits (i.e., 

skin tone) on activation of cultural models associated with subcultural groups 

(Brumbaugh, 2002). 

The study also reported a significant three-way interaction among strength of 

ethnic identification, social comparison, and model skin tone on the dependent measures. 

Specifically, Black comparers with high ethnic identification evaluated the light-skinned 

Black character advertisement more favorably on source credibility and attitude toward 

the ad than did Black comparers with low ethnic identification. However, when Black 

noncomparers evaluated the light-skinned Black character advertisement, strength of 

ethnic identification did not have a major effect on source credibility and attitude toward 

the ad. It may be that Black comparers with high ethnic identification evaluated the lightskinned 

Black female model more favorably on the dependent measures than did Black 

comparers with low ethnic identification, becausesuch models are the primary sources of 

information and evaluation in advertisements targeted to diverse consumers. Thus, the 

frequent use of light-skinned Black female models in ads is a likely reference point of 

evaluation for Black comparers with high ethnic identification. No significant interaction 

between strength of ethnic identification and level of social comparison was reported for 

the dark-skinned Black character advertisement on the dependent measures. 

Other findings from this study suggest that no interaction was present between 

level of social comparison and model skin tone on the dependent measures. This finding 

suggests that social comparison, by itself, does not interact with model skin tone to affect 

source credibility and attitude toward the advertisement ratings among our sample 

respondents. 

Although the evaluative differences between high and low Black ethnic identifiers on the 

dependent measures were lower for the light-skinned Black character advertisement 

versus the dark-skinned Black character advertisement, managers should not assume that 


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this finding justifies the prevalent use of light-skinned Black female models. High Black 

ethnic identifiers respond favorably to both light-skinned and dark-skinned Black 

character ads. The positive mean scores on the dependent measures also suggest that 

dark-skinned Black character ads can be effective among low Black ethnic identifiers. 

These overall findings suggest that, when targeting Black audiences, managers should 

consider advertisements that feature Black female models with diverse skin tones 

(Cortese, 2004). 

This research also speaks to the role of advertisers in presenting images that not 

only sell products, but that also reflect an accurate portrayal of ethnic consumers 

(Keenan, 1996; Mayo, Mayo, & Mahdi, 2005). The predominant use of light-skinned 

Black female models raises ethical concerns on advertising‘s role in reinforcing social 

stereotypes (Bristor, Lee, & Hunt, 1995; Cohen-Eliya & Hammer, 2004; Lantos, 1987; 

Pollay, 1986). As Black female models continue to be underrepresented in advertising 

(Bowen & Schmid, 1997; Mastro & Greenberg, 2000), managers can improve target 

advertising to Black consumers by increasing the presence of Black female models and 

showing sensitivity to the importance of skin tone diversity. 

5. Limitations of the Study 

The current study asked an online panel of Black consumers to evaluate a samerace 

female advertisement in one of two skin tone conditions. Although the online 

experiment eliminated interviewer bias and enabled the data collection and analysis of a 

national sample of Black respondents, online respondents may respond differently to the 

measurement instruments and experimental conditions than non-online respondents. In 

addition, this study used only a female model and focused on a general product. To 

enhance the generalizability of this research, future studies should examine Black 

consumers‘ responses offline, incorporate male models, and select additional product 

categories, including race-based and skin tone based products. 

The issue of skin tone diversity in media images is not be limited to Black female 

models. Recent content analysis studies have reported that an overwhelming majority of 

images showed Hispanic females possessing light skin tones (Johnson, David, & Huey- 

Ohlsson, 2003; Mayorga, 2007). Skin tone may also play a role in Asian consumers‘ 

evaluations of advertisements (Rondilla & Spickard, 2007). Future studies should 

investigate the responses of Hispanic consumers and Asian consumers to light-skinned 

and dark-skinned character advertisements of their respective ethnicities. 


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Annexure 

Figure 1: Source Credibility Ratings by Ethnic Identity and Social Comparison 

Light-Skinned Black Character Advertisement 

Source Credibility Ratings 

6.0 

5.5 

5.0 

4.5 

4.0 

3.5 

3.0 

Low High 

Strength of Ethnic Identification 


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Noncomparers 

Comparers



Figure 2: Attitude Toward the Ad Ratings by Ethnic Identity and Social 

Comparison , Light-Skinned Black Character Advertisement 

Attitude Toward the Ad Ratings 

6.0 

5.5 

5.0 

4.5 

4.0 

3.5 

3.0 

Low High 



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Noncomparers 

Comparers



Figure 3 

Source Credibility Ratings by Ethnic Identity and Social Comparison 

Dark-Skinned Black Character Advertisement 


6.0 

5.5 

5.0 

4.5 

4.0 

3.5 

3.0 

Low High 



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Noncomparers 

Comparers



Figure 4 

Attitude Toward the Ad Ratings by Ethnic Identity and Social Comparison 

Dark-Skinned Black Character Advertisement 


6.0 

5.5 

5.0 

4.5 

4.0 

3.5 

3.0 

Low High 



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Noncomparers 

Comparers



Figure 5 

Source Credibility Ratings by Ethnic Identity and Model Skin Tone 


6.0 

5.5 

5.0 

4.5 

4.0 

3.5 

3.0 

Low High 



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Light-Skinned Model 

Dark-Skinned Model



Figure 6 

Attitude Toward the Ad Ratings by Ethnic Identity and Model Skin Tone 


6.0 

5.5 

5.0 

4.5 

4.0 

3.5 

3.0 

Low High 



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Figure 7 

Source Credibility Ratings by Level of Social Comparison and Model Skin Tone 


6.0 

5.5 

5.0 

4.5 

4.0 

3.5 

3.0 

Noncomparer Comparer 

Level of Social Comparison 


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Figure 8 

Attitude toward the Ad Ratings by Level of Social Comparison and Model Skin Tone 

Attitude toward the Ad Ratings 

6.0 

5.5 

5.0 

4.5 

4.0 

3.5 

3.0 

Noncomparer Comparer 

Level of Social Comparison 


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Human Resource Management Practices in Logistic Service 

Provider Industry: A Case Study 

Goh Hui Chyn 

Faculty of Management 

Multimedia University Malaysia 

Cyberjaya, Malaysia 

Dr. Maniam Kaliannan, PhD 

Faculty of Administrative Science & Policy Studies 

Universiti Teknologi MARA 

Shah Alam, Malaysia 

Abstract 

Due to the continuous changes in external environment, the function of human resource 

(HR) department in an organization has been evolving from personnel management to 

strategic human resource management (SHRM). According to the resource-based view of 

the firm (Barney, 1986, 1991, 1995), an organization can achieve sustainability 

competitive advantage by creating value that is rare and difficult to imitate by 

competitors. Literature reviews highlighted that the ‗change hand‘ effect of the logistic 

industry can be addressed by enhancing both the operation efficiency and organizational 

competencies. The core competencies of the logistic service provider can be created 

through strategic Human resources management system (HRMS) using the integrated 

framework proposed by M. Progoulaki and I. Theotokas. A firm exhibits strategic human 

resource management [SHRM] when the human resource function is vertically aligned 

with the mission and objectives of the organization and horizontally integrated with other 

organizational functions. A qualitative case study methodology utilized interviews, 

documentation and observation was adopted to study the HR practices in a selected 

logistic provider in Malaysia. The organization has 25 HR practices but still facing 

failure in aligning the organization structure, collaboration among workers, disciplinary 

issues, high turnover rate among the lorry drivers. A strategic human resource 

management plan with setting up Business Development Department ,Business 

Continuity Plan, Develop Team Synergy , HR ―fit‖ (Vertical & Horizontal) into business 

strategies and a Human Resource Management Information System (HR MIS as the 

initiatives was proposed to the management of). 

Keywords: Strategic Human Resource Management, Logistic Service Provider 

Industry. 


The function of human resource (HR) department in an organization has been evolving 

from personnel management to human resource management (HRM). Over time, these 

focus shifted from managing people to creating strategic contributions. Hence, the 

Strategic Human Resource Management (SHRM) and International Strategic Human 

Resource Management (ISHRM) become major interest among practitioner and 

academic. The reasons for the HR function‘s transformation are due to the continuous 


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changes in external environment such as globalization, competition, markets and 

technology. In order to achieve sustainable competitive advantage, the organization has 

to ensure its HR practices and management must be flexible and fit to environment 

changes. 

According to the resource-based view (Barney, 1986, 1991, 1995), an organization can 

achieve sustainability competitive advantage by creating value that is rare and difficult to 

imitate by competitors. HR was claimed by Itami (1987) as an ―invisible asset‖ of the 

firm. This asset creates value and it is so embedded in the operational systems of an 

organization that is enhances the firm‘s capabilities and imitability. This interpretation is 

also consistent with the emphasis on ―core competencies‖ by Prahalad and Hamel (1990). 

Hence, many firms are investing in developing their HR capabilities and plan 

strategically the HR practices or HR bundling (Dry & Reeves, 1995) to improve firm 

performance and achieving its strategic objectives. 

One of the major problems faced by logistic service providers is the problem of 

collaboration, communication and high turnover rate, especially among the drivers. The 

lack of strategic role in human resource of the firm could be the reasons that affect 

business performance. Hence, it is imperatives for the Management to evaluate and 

transform its human resource practices to strategic contributions. By doing so, it may 

further enhance the company core competencies and improve business performance. 

The aim of this study is to conduct a research regarding the human resource management 

practices of a selected organization which specialises in logistic service and propose a 

strategic human resource management plan for future development of HR strategic roles 

in the company that align to company strategic objectives. This research study carries 

three main objectives: 

• To identify and elaborate on the human resource management practices of the firm; 

• To evaluate the human resources practices in the context of its relevancy to current 

environmental challenges and requirements; 

• To propose a strategic plan on human resource management for the organization 

based on the outcome of the research. 

2. Background to the Study 

The logistic service industry has been experiencing a continual growth since late 1980 

(Yew Wong, C., and Karia, N.,2009) However, most of the contracts were limited to only 

transport and warehouse services and found to ―change hand‖ in every two years (Yew 

Wong, C., and Karia, N.,2009). Literature reviews highlighted that the ‗change hand‘ 

effect can be addressed by enhancing both the operation efficiency and organizational 

competencies [E] of the logistic service providers. This can be achieved by developing 

its core competencies through integration and restructuring of resources available [A]. 

The resources include both tangible and intangible assets of the firm (Ching-Chiao Yang, 

Peter B. Marlow and Chin-Shan Lu.,2009). Accordingly, these resources are physical, 

human, information, knowledge and relational resources (Yew Wong, C., and Karia, 

N.,2009). 


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The results of the works done by C.C.Yang and P.B.Marlow indicated that resources had 

a significant positive effect on both the service and innovation capabilities of the logistic 

industry (Ching-Chiao Yang, Peter B. Marlow and Chin-Shan Lu.,2009).The capability 

of a firm is its ability to perform the tasks using resources available [D]. The results also 

highlighted the positive effects of logistic service capabilities on organizational 

performance (Ching-Chiao Yang, Peter B. Marlow and Chin-Shan Lu.,2009). Hence, 

strategic bundling and acquiring of resources catalyst the development of organizational 

competitive advantages (Yew Wong, C., and Karia, N.,2009). This was supported by 

C.Y.Wong and N. Karia (2009) who concluded that logistic firms can create an 

inimitable capability through bundling of physical, human, information, knowledge and 

relational resources (Yew Wong, C., and Karia, N.,2009). 

The logistic service industry is a ―people‖ oriented business so the strategy values of 

human assets have to be recognized as it may directly affect cost, quality, responsiveness 

and customer satisfaction (Yew Wong, C., and Karia, N.,2009). Beside that skillful and 

competence human resources were identified as an inspiration to quick service and 

performance achievement [B]. These competencies can be developed using the 4 skills 

sets – social, decision, problem-solving and time management skills suggested by Myers 

(2004) (Yew Wong, C., and Karia, N.,2009). Some recent literatures suggested that 

collaboration could be one of the organizational core competencies that encouraged 

effective supply chain management (Yew Wong, C., and Karia, N.,2009). 

On the other hand, the core competencies of the logistic service industry, VRIO (value, 

rareness, imitability, organization support) (Maria Progoulaki and Ioannis 

Theotokas.,2010) can be created through strategic management of HR skills, talents and 

organization supports such as team spirit creation, rewards and HRM practice Maria 

Progoulaki and Ioannis Theotokas., (2010). In this context, VRIO representing the 

combination of logistic service resources and capabilities of the firm (Maria Progoulaki 

and Ioannis Theotokas.,20) and this is where corporate business strategies built upon 

(Ching-Chiao Yang, Peter B. Marlow and Chin-Shan Lu.,2009). 

Hence, the human resources management (HRM) can be developed into an integrated 

human resources management system (HRMS) using the five-steps integrated framework 

(Fig.1) proposed by M. Progoulaki and I. Theotokas(2010) Broadly, this process involves 

the identification of human resources, detail study of the existing HR practices, 

understanding and creation of new HR core competencies, integration and 

reconfiguration of HR follow by the development of HRM system. This integrated HRM 

system then can be used to identify the human resources gap and incompetence (Maria 

Progoulaki and Ioannis Theotokas.,2009) of the firm. 


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Figure 1: A proposed integrated framework by M. Progoulaki and I. 

Theotokas(2010) 

As such, human resource management is crucial to the strategic management of a firm. A 

firm exhibits strategic human resource management [SHRM] when the human resource 

function is vertically aligned with the mission and objectives of the organization and 

horizontally integrated with other organizational functions (Kenneth W. Green, Cindy 

Wu, Dwayne Whitten and Bobby Medlin, 2006). Results of research work done by 

K.W.Green and others (2006) shown that SHRM correlated positively and significantly 

to the organizational performance. The SHRM model proposed by S.A.Way and.E. 

Johnson (2005) (Fig. 2) is capable of incorporate vertical and horizontal linkage of the 

organizational functions (Kenneth W. Green, Cindy Wu, Dwayne Whitten and Bobby 

Medlin, 2006). 


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Figure 2 : A framework for SHRM research by S.A.Way and.E. Johnson (2005) 

The above reviews indicated that human resources are critical to the core competencies of 

logistic service industry. It is imperative for the industry to develop, integrate and 

reconfigure the internal and external human resources competencies as a measure to 

address the ―change hand‖ syndrome. 

3. Methodology of the Study 

This research study involved three major processes which were the preparation of lists of 

interview questions and the HR related documents, the interview session and the data 

collection and analysis. The methodology of this study utilized three key aspects of case 

study research, that is, interviews, documentation and observation. Lists of questions to 

be used for interviews and itemized HR related documents were prepared. 

Comparatively, more data was collected by interview and documentation then direct 

observation. In order to maintain confidentiality and trade secrecy, documents considered 

sensitive were precluded in this report. 

In this research, the five-step integrated framework (Fig.1) proposed by M. Progoulaki 

and I. Theotokas (2010) was used as a procedural guideline. Most of the data were 


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collected by interviewing and documentation. Each interview lasted approximately one 

hour and conversations were revolved around the pre-prepared questions. In order to 

improve the validity and credibility of information and ensured that viewpoints 

represented varying levels of responsibility within the firm data were collected by source 

rather than by method. The summary of the interviews was communicated to the general 

manager for accuracy validation. The data was then analyzed using content analysis via 

the descriptive and comparison approaches. 

4. Findings and Analysis of Human Resource Identity 

Table 1 shows that all the employees of in this organization. can be classified into two 

major categories. The three months average for the first category was 132 permanent 

staffs and 127 for the contract-based lorry drivers. The collaboration of the two groups 

makes the logistic service possible with the lorry drivers responsible for the most 

significant delivery role. Hence, contributions of the lorry drivers should not be 

neglected. 

Table 1: Total Employees 

Month Permanent Staff Drivers 

(Contract Basis) 

Total Staff 

January 132 128 260 

February 131 127 258 

March 132 126 258 

4.1 Findings and analysis of existing human resource practices 

A total of twenty five activities were listed as the responsibilities of the HR Department. 

Each of these practices carries a well designed process flow. Below are the lists of HR 

activities carried out in the organization: 

� Manpower Planning 

� Recruitment/Hiring 

� Registration Package 

� Induction 

� Personal Files 

� Punch Card 

� Payroll 

� Job Description 

� Performance Appraisal 

� Dialogue Sessions 

� Disciplinary Actions 

� Compensation & Benefits 

� Termination/Exit Interviews 

� HR Policy 


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� HR Development 

� Public Relations 

� Uniforms & Safety Shoes 

� Communication 

� Housekeeping 

� Headcount Report 

� Occupational Safety & Health 

� Security Services 

� Employee ID Badge 

� Sports & Recreation 

� Foreign Workers 

Based on the interviews conducted, one of the major problems faced by this organization 

is the high turnover rate among the lorry drivers. For example, for the first three months 

of 2010, a total of fifteen lorry drivers had resigned from this organization. This relatively 

high turnover rate could be an indication of weaknesses in HR management on the lorry 

drivers. It also reflected inconsistency in HR practices on the permanent staff and the 

contract-based lorry drivers. 

Besides that, another possible reason could be caused by the earnings of the lorry drivers. 

The earning of drivers consists of base pay and trip allowance. The inconsistency in 

terms of their monthly income has reduced the motivation among these drivers and 

therefore they seek out for organizations which promise higher base salary. In addition, 

different route payments for the drivers also have added to this problem whereby drivers 

are looking for highly paid routes and therefore the other routes will suffer from this. In 

short, figure 3 indicates the differences between the HR practices among the permanent 

and lorry drives in this organization. 


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Figure 3: Comparison of the Current HR practices on Permanent Staff 

and Lorry Drivers 


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Evaluations of Current HR Practices 

Highlight 

• Well structure on HR functional role , 

policy, practices, rules and regulation. 

(Technical Effectiveness, Huselid,1997) 

• Right Strategy on HR Bundles for 

Permanent Staff (high retention) 

HR Bundle (Permanent Staff) 

Basic Salary (Market rate) / Bonus 

Insurance ( Personal Accident, Life, Hospitalization 

& Surgical) 

Annual Leave/ MC/HL/CL/ML/MTL 

EPF/Socso 

Training & Development (0.5% of Total Salary) 

• The involvement of HR Manager in The 

Quarterly Management Meeting become 

more substantial (currently, as a secretary 

of the meeting) 

Lowlight 

• The urgent demand for daily service 

delivery simply not enough time for HR 

Manager to integrate and perform both 

functional and strategic role. 

• Strategy on HR Bundles for Drivers is 

ineffective (high turn over rate) 

HR Bundle for Drivers (Contract Staff) 

Low Basic 

Trip Allowance 

EPF / Socso 

Truck Insurance (include Lorry Driver & Co-driver) 

• Disciplinary issue among drivers 

• HR heavily involve in handling disciplinary 

issues, recruitment, payroll (4 

paydays/month), calculating trip 

allowance manually, fleet card tracking 

etc) 

Generally, the HR functional role was well structured with its practices, policy, rules and 

regulations. The HR department is excellence in delivery its technical role (Huselid,



1997) able to deliver its duties and specifically delineated with two different HR bundles. 

However the analysis of this research study indicated some weaknesses of the current 

HRM system. Thw fact that the HR deal for the permanent staff is more comprehensive 

than that of the contract lorry drivers, this asymmetry in compensation could be one of 

the reasons directly gave rise to high retention of permanent staff and a relatively high 

turnover of the lorry drivers. The lack of a prominent business development department 

could be the root cause of the inconsistency earnings of the lorry drivers. The disciplinary 

issues of the lorry drivers are equally detrimental to the HR department besides preparing 

the weekly remuneration payments to the lorry drivers. 

Obviously, HR manager is heavily involved in daily administrative routines and the 

strategic role of the HR department in managing the human resources was neglected. 

Majority of the time of HR department were engaged in administrative works, 

compliance and service oriented duties. The time of HR department was occupied by 

continuous recruitment and compliance matters due to high turnover rate and disciplinary 

issues among the drivers. Furthermore, HR department is manually calculating the trip 

allowance and recording the usage of fleet card. As such a strategic human resources 

management (SHRM) strategy could be the next innovative capability to improve the 

impact of HRM quality on firm performance. 

5. Recommended Strategic Human Resource Management (SHRM) Proposal 

This section aimed to work out a strategic human resource management plan for the 

Management. The outcomes of analysis and evaluation on current HR practices suggested 

five critical human resource initiatives as the strategies of SHRM plan. These HR 

strategies are proposed as below. 

5.1 Setting up business development department (BDD) 

The setting up of business development department has two purposes. Firstly, it helps to 

generate more sales that create more trips for the lorry drivers, thereby increase their 

earnings and lower turnover rate. In other words, increase in earning could be a way to 

reduce the disciplinary issues such as fleet card abuse and toll manipulation. Secondly, 

setting up business development department also acts as a strategy in align with the 

organization goals. The role of business development is more focus than overlapping 

with operation. Hence, more business development forces to focus on business expansion 

may improve the business performance. 

5.2 Business Continuity Plan 

Lorry drivers play significant role in the business model of the organization. They are 

responsible for ensuring timely delivery in good conditions. Without them, the entire 

flows of business may be paralyzed and demand unforeseen operation cost. Hence, HR 

department should value the role of contract-based lorry drivers as part of the 

organization‘s family. They deserve a comprehensive HR bundle. This new HR bundle 

should include compensation and benefit such as retention bonus, insurance and attractive 

base pay. Special monetary or non-monetary rewards such as ―Best Driver Award‖ could 


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be an effort to recognize and motivate them. Lastly, engaging external logistic firms as 

outsourcing strategy could be a contingency measure to ensure business continuity. 

5.3 Develop Team Synergy (Competencies and skilful human resources) 

Collaboration is the driving force behind effective supply chain management and may be 

the ultimate core capability (Min, 2005; Yew & Karia, 2009). In order to improve the 

collaboration among the workers, both permanent and contract staff, HR department is 

urged to develop team synergy through team building and training. In order to build up its 

human capital in logistic, team building and training should focus on building the 

employees social skills, decision skills, problem-solving skills and time management 

skills in order to build up human capital in logistic (Myers 2004; Yew & Karia, 2009). As 

a result, the employee can work closely to reduce costs and improve delivery quality, 

reliability, speed and flexibility. Hence, improve the overall organization performance. 

5.4 HR “fit” (Vertical & Horizontal) into Business Strategies 

The transformation of HR role, from administrative to strategic, created a new 

perspective of HR as a strategic function to the company. This functional differentiation 

demands the HR manager to develop a dynamic and flexible HR department that able to 

―fit‖ horizontally to the organization. 

In the vertical ―fit‖ aspect, supports of the top management are crucial. Top Management 

has to recognize the strategic contribution of HR function in achieving the organization 

strategic goals. Besides that, the strategic management role of HR manager in the 

management meeting has to be more participative rather than acting as the ‗minutes 

taking‘ secretary. 

In addition, the strategic HR manager has to regularly review the core capabilities of the 

human resources. Management courses should be organized for the relevant parties as a 

strategy to ensure the organizational core capabilities meet the logistic industry standards. 

5.5 Human Resource Management Information System (HRMIS) 

The results of the interviews show that majority of the time of HR department were 

engaged in administrative works, compliance and service oriented duties. As such, the 

HR Manager lack of time to integrate and perform effectively its technical and strategic 

HRM (Huselid, 1997). 

To improve the situation, the organization definitely needs an integrated HR MIS system. 

This system should be able to track the usage of fleet card and minimize the abuse of 

fleet card among the drivers. In addition, the automation of drivers trips allowances 

calculation able to reduce the real HR processing time. This fully integrated HR MIS 

system can be acquired by engaging an external software vendor or hiring a competent IT 

manager to set up a new IT department. 


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A summary of strategic human resource management plan is proposed base on 5W1H 

(What, Who, Where, Why, When and How) as part of the requirement of this study 

(Figure 4). 

Figure 4: Summary of Strategic Human Resource Management Plan Proposal 

What Who Where Why When How 

Setting Up 

Business 

Development 

Department 


Continuity 

Plan 

Develop Team 

Synergy 

(Competencie 

s and skillful 

human 

resources ) 

HR “fit” 

(Vertical & 

Horizontal) 

into business 

strategy 

HR MIS 

HR 

Manager 

All Branches 

Drivers All Branches 

General 

Managers 

and 

Executives 

Group 

MD, HR 

Manager 

& 

Branches 

General 

Managers 

IT 

Manager 

All Branches 

All Branches 

Companywide 

To functionalize the Business 

Development Process, 

thereby increase the sales 

volume that create more 

trips for the drivers. 

As a risk management 

strategy on human (drivers) 

To improve a more effective 

and efficient demand and 

supply chain. Hence, 

improve the Collaboration. 

Collaboration - the ultimate 

core capability (Min,2005) 

To make company wide 

operational process 

possible. Current and future 

routine. 

To improve the efficiency of 

HR processes 

Immediately 

After 

implementation 

of Business 

Development 

Structure 

Immediately 

Immediately 

Management 

Meeting 


Strategy 

Meeting 

Immediate 


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Implementing Business 

Development Organization 

Structure throughout the 

organization. 

1. New HR Bundles for Drivers 

(e.g: Team motivation, Selection, 

Compensation & Incentive, Value) 

2. Drivers Outsourcing Strategy 

3. MISC Best Practices 

(Retention Bonus, Converting& 

Senior as Coach) 

Team Building aimed at 

developing FOUR SKILL SETS 

(social skills, decision skills, 

problem-solving skills and time 

management skills- Myers, 2004) 

1. Recognition 

Of HR Strategic Role 

2. HR Manager to take proactive 

action to participate (dynamic & 

flexible HR Role) 

3. Change Management 

Engaging IT Vendor 

(Logistic Software)



6. Conclusion 

According to Itami (1987), HR is an ―invisible asset‖ of the firm. It is embedded in the 

operational system and creates value to the organization to enhance its core competencies 

(Prahalas and Hamel, 1990). In order for the HR department to perform its strategic role, 

shortcomings of current HR practices have been identified. The shortcomings of current 

HR practices had caused the high turnover rate of lorry drivers, discipline issues and 

collaboration deficiency. Based on the outcome of this study, five critical human resource 

initiatives have been suggested as the strategies of the SHRM plan to be proposed to The 

Management. These HR strategies are setting up of the business development 

department, business continuity plan; develop team synergy, HR ―fit‖ into business 

strategy and HR Management Information System. By doing so, the HR department 

should be able to play the role as HR strategic partner of the Management Team in 

helping the organization to realize its vision and mission. 


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References 

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logistic industry. Decision Support Systems. Vol. 48, pp 568-581.



Organizational Environment, Job Satisfaction and Career 

Growth Opportunities: A Link to Employee Turnover 

Intentions in Public Sector of Pakistan 

Khurram Shahzad 

PhD Scholar, Mohammad Ali Jinnah University, Islamabad 

Assistant Professor, Faculty of Management Sciences, 

Riphah International University, Islamabad 

Sajjad Hussain 

Management Sciences, Riphah International University, Islamabad 

Sajid Bashir 

Management Sciences, Mohammad Ali Jinnah University, Islamabad 

Anwar F. Chishti 

Faculty of Management Sciences, Mohammad Ali Jinnah University, Islamabad 

Zafar Mueen Nasir 

Head of Research, Pakistan Institute of Development Economics, Islamabad 

Abstract 

This study is aimed at finding the impact of organizational environment, job satisfaction 

of employees and career growth opportunities upon the employee‘s intent to leave the 

organization in the public sector of Pakistan. We have used standardized scales to collect 

data from a random sample of 100 employees of different public sector organizations of 

Pakistan. Inferential statistical tests were conducted to analyze the data for exploration of 

the extent of relevance among the variables taken into the consideration in this study. The 

results of this study indicate significant negative correlations among three independent 

variables and turnover intentions. The study contributes for understanding of the factors 

other than compensation on the employee‘s decision of retention with current employer 

in a developing country like Pakistan. 

Key Words: Organizational Environment, Job Satisfaction, Career Growth 

Opportunities, Turnover Intentions, Public Sector, Pakistan. 


Resources are at the heart of Resource Based View (Barney, 1986) and Resource Based 

View of firm suggests that resources must be valuable, rare and non-substitutable for the 

sustained competitive advantage of the firm (Barney, 1991). Human capital is the core 

asset of the organization, therefore, an organization‘s high performance and productivity 

is cohesive to the employee‘s support and contribution (Bhatti & Qureshi, 2007; Samad, 

2006). Employee turnover not only is a loss to the organization in the form of flight of 

human capital but also as negative impacts on the rest of employees in the organization. 

Hence flight of human capital can create hurdles (Maertz, Wiley, LeRouge, & Campion, 


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2010) for sustained competitive advantage achievement efforts of organization. For these 

reasons researchers have long been concerned with the issues and problems encountered 

by employee turnover in the organization. 

In the developed countries the importance of human capital and their retention in the 

organization has been recognized vastly (Morrison & Robinson, 1997) but in the under 

developed countries like Pakistan the research on the turnover intentions on the part of 

employee has not gained much importance. Therefore it is very necessary to address the 

factors that influence employee‘s intent to leave the organization. 

Compensation and turnover intentions have been the focus of developing countries 

keeping in mind the economic factor of poverty but the least attention has been paid to 

the contextual factors like job satisfaction and organizational environment. These 

concerns in Pakistani context urged us to analyze the role of job satisfaction, 

organizational environment and career growth opportunities in employee‘s intent to leave 

or stay in the organization. 

2. Literature Review 

Cotton and Tuttle (1986) stated turnover intention as an individual‘s estimated 

probability to leave the organization. A conscious willingness to seek for other 

alternatives in other organization depicts the individual‘s intent to leave (Tett & Mayer, 

1993). Actual turnover increases as intention to leave the organization increases (Mobley, 

1977). Therefore, intent to leave has been recognized as a final cognitive variable having 

an immediate cause effect on actual turnover. 

Productivity as measured through performance and profit margin has been seen as 

decreasing through employee turnover and the turnover intentions in an organization 

(Eriksen, 2010). For top management CEO turnover can create succession planning 

problems (Cao, Maruping, & Takeuchi, 2006). Turnover can also bring disastrous 

impacts in the organization in the form of not only less productivity but also in the form 

of negative psychological impacts on the survivors in the organization. These 

psychological impacts can include low performance, less commitment and decreased 

fairness (Maertz et al., 2010). 

Turnover intentions on the part of employee have been studied by the researchers with 

the multifaceted aspects (Samad, 2006) regarding human as the important organizational 

asset. There are many factors that contribute to the employee‘s decision to leave the 

organization including the attitudinal, behavioral and organizational factors (Samad, 

2006). Researchers also identified work related issues, personal, external and job related 

factors that play an important role in employee‘s decision of retention or leaving the 

organization. Demographic variables have been found related to turnover intentions of 

employees (Cohen, 1993). 

Firstly, personal factors like organizational identity, commitment, wages, and internal 

promotion policies can contribute in employees‘ decision to leave (Cole & Bruch, 2006). 

Higher the organizational identity for an employee, lower will be turnover intentions. 

Similarly, if wages are high with favorable organizational policies then it can predict 

lower turnover ratios (Batt, Colvin, & Keefe, 2002). Internal career advancement 

opportunities perceived by the individual have been seen lowering turnover intentions 

(Batt et al., 2002). Personal traits and demographics have also been found related with 

employee‘s intentions to leave the organization. These factors include, age, sex, martial 

status and income. Research has shown more intentions leave the organization in young 


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persons (Cohen, 1993). Also persons with low income and single persons without family 

have also been observed to exhibit high turnover intentions (Chen, 2006). Female 

composition of employees in an organization decreased overall aggregate turnover 

intentions (Batt et al., 2002). Males who received training in an organization start 

searching for new jobs and better alternative while case is opposite for female workers 

who were trained by the organization (Sieben, 2005). 

Secondly, attitudinal/behavioral factors have also been found to be related with turnover 

intentions and these are due to work related and job related factors. On the workplace 

social networks shape behaviors of employees which could further lead to the decision of 

leaving or staying in the organization (Moynihan & Pandey, 2008). If these relationships 

build positive perception of the employees than it will lead to lower turnover intentions 

(Martin, Jones, & Callan, 2005), hence, it is very important to manage employee‘s 

emotion and psychological contracts fulfillment to reduce turnover intentions in the 

organization (Cho, Cheong, & Kim, 2009). Particularly, organization politics can harm 

employee‘s decision to sell him somewhere else. Moreover absences of supervisory 

career support, participative decision-making, work autonomy (Lto & Brotheridge, 2005) 

and lack of recognition in work environment can lead to turnover intention and 

automatically increase turnover (Paré, & Tremblay, 2000). 

Thirdly, organizational factors that contribute in the employee‘s intention to leave current 

job include management policies, rules, procedures, action and philosophy that directly 

affect employees of organization. When employees feel these management deals 

meaningless breaching their psychological contracts, they start resisting and on failure 

they quit from organization (Hong & Kaur, 2008). Researchers explored that unfair 

treatment on the part of organization can create procedural and distributional 

discrimination (Cole, Bernerth, Walter, & Holt, 2010) which could affect the fairness 

perception of employee leading him to quit his organization. Due to this discrimination 

trustworthiness of organization is vastly affected and it reduces organizational attachment 

of employees (Spreitzer & Mishra, 2002). Furthermore, lack of organizational 

commitment (Joo, 2008) and inconsistency in processes and policies vex employees‘ 

feeling that employer does not value them which could again lead to employee‘s 

intention to run away from organization (Ton & Hickman, 2008). 

Other than above mentioned factors there are some external factor that organization could 

face like in a competition based industry where market is growing, labor can be snatched 

from other companies (Achoui & Mansour, 2007) by providing more compensation and 

benefits. External job opportunities relate with turnover intentions positively (Rahman, 

Naqvi & Ramay, 2008; Tao, 2007). In this case turnover is linked up with market based 

job opportunities (Baldwin et al, 2006). Also when employees feel no representation in 

the form of labour unions to bargain for their rights they could switch themselves in some 

other organization which allow them more flexibility (Batt et al., 2002). 

2.1 Job Satisfaction and Turnover Intentions 

Job satisfaction is the reflection of feelings of an employee about his job whether he is 

contented for his job or not (Odon, Boxx, & Dunn, 1990; Demir, 2002). Job satisfaction 

is the employee perceived difference between what he deserves and what he has from his 

job (Cranny, Smith, & Stone, 1992). Job satisfaction is attitudinal response of employee 

towards its organization (Kumar & Gupta, 2010). 


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Job satisfaction is important for an organization because it could prevent employee‘s 

psychological frustration and low productivity (Cranny et al., 1992). Job dissatisfaction 

leads to the employee‘s intentions to leave the organization (Samad, 2006). Job 

satisfaction has a negative relationship to turnover intentions and females have high job 

satisfaction and, hence, low turnover intentions (Kumar & Gupta, 2008). Job satisfaction 

may ultimately lead to organizational satisfaction and organizational dissatisfaction 

creates turnover intentions (Stahl, Chua, Caligiuri, Cerdin, & Taniguchi, 2009). 

Therefore, we hypothesize that job satisfaction have negative relationship with 

employee‘s intent to leave. 

H1: Job satisfaction will have negative relationship with employee‘s intent to leave the 

organization in public sector of Pakistan. 

2.2 Career Opportunities and Turnover Intentions 

Perceived career opportunities outside the organization and lack of career advancement 

opportunities inside organization increase the employee‘s intentions to leave the 

organization (Stahl et al., 2009). Actual trigger behind search for job opportunities 

outside the organization is organizational failure to provide necessary growth 

opportunities for their employees (Negrin & Tzafrir, 2004). Search for alternative job 

opportunities for employee, career growth has been found second largest variable 

explaining employee‘s intent to leave the organization (Lambert, Hogan, & Barton, 

2001). Job opportunities along with organizational commitment explain large variance of 

turnover intentions (Lto & Brotheridge, 2005). Insufficient career patterns lead to 

increased intersectoral turnover intentions (Terviö, 2006). Therefore, we can hypothesize 

that turnover is correlated with career opportunities. 

H2: Career growth opportunities within organization are negatively related with 

employee‘s intent to leave the organization in Public sector of Pakistan. 

2.3 Organizational Environment and Turnover Intentions 

Voluntary turnover appears to be a rational worker response to adverse workplace 

conditions including physical hazards such as loud noise, vibration or poor lighting and 

these physical hazards have been found to increase in the probability of turnover from the 

average turnover rate (Cottini, Kato, & Nielsen, 2009, Martin et al., 2005). Perceived 

meaningless and burdensome rules and regulations creates stress and reduces job 

likeliness and if employees feel that there is no clarity about the authority and 

accountability then they automatically intent to leave the organization (Hong & Kaur, 

2008). Work related stress can cause significant intentions to leave the organization 

(Leontaridi, & Ward-Warmedinger, 2002). Supervisor‘s relationship with their 

subordinates largely contributes in the intentions to leave or to retain. Furthermore, lack 

of representation of employee voice can restric emloyee to take themselves into job. 

Hence, it will create isolation and disatisfaction with their job and leads to emloyees‘ 

decision to quit (Batt et al., 2002). Therefore, based on these evidences we can argue our 

third hypothesis. 

H3: Organizational environment/climate have negative relationship with employees 

turnover intention in Public Sector of Pakistan. 


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2.4 Theoretical Framework 

[Insert figure 1] 

3. Methodology 

3.1 Sample 

Main public sectors organizations of Pakistan were our area of interest where pay will be 

similar across similar ranks. Therefore, we collected data from main five public sector 

organizations of Pakistan. We distributed 120 questionnaires out of which 100 usable 

were received back. 

3.2 Measures 

Turnover intentions of employees were treated as dependent variable. While job 

satisfaction of employees, career growth opportunities within an organization, and 

organizational environment were used as independent variables that influences the 

dependent variable. 

3.2.1 Turnover Intentions Scale 

We used Donnelly & Ivancevich‘s (1985) three items scale with five point likert scale 

using 1 for strongly disagree to 5 for strongly agree. Items included statements of ―It is 

likely that I will actively look for a new job next year‖, ―I often think about quitting‖, and 

―I will probably look for a new job next year‖. Reliability of the scale was 0.872. 

3.2.2 Job Satisfaction Scale 

We Modified from Egan, Yang, & Bartlett (2004) scale and used three items scale with 

five point likert scale using 1 for strongly disagree to 5 for strongly agree. Items include 

statements of ―Overall, I am satisfied with my job‖, ―In general, I enjoy at working at my 

current job‖, and ―I am generally satisfied with the kind of work I do on my job‖. 

Reliability of the scale was 0.759. 

3.2.3 Career Growth Opportunities Scale 

We used Dockel (2003) six items scale with five point likert scale using 1 for strongly 

disagree to 5 for strongly agree. Items included six items initially but after reliability 

check we modified it and items were reduced to 3 only. Reliability of the scale was 

0.767. 

3.2.4 Organizational Environment Scale 

We used a comprehensive 26 item Litwin & Stringer‘s (1968) Organizational Climate 

Questionnaire (LSOCQ) but reduced it to only 15 items after reliability analysis with five 

point likert scale using 1 for strongly disagree to 5 for strongly agree. Reliability of the 

scale was 0.74. 

3.3 Demographics 

Six main demographics were included in this study. These include function, age, gender, 

education, tenure, and income level of people. These demographics were further 


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categorized in more than one category. Demographic data has not been used in the 

analysis of the study. Description of demographics is given in the following table. 

[Insert table 1] 

4. Findings 


Overall results (Table 2) showed that there is a slight turnover intention with mean value 

of 3.0933 in public sector of Pakistan and people working in these organizations are 

satisfied (mean value is 3.4267) with their job. However they do not feel that these 

organizations provide internal career growth opportunities as mean value is 2.8433 and 

there is not a feasible organizational environment with mean value of 2.7140 in public 

sector of Pakistan. 


Correlation matrix results concluded that there is a significant negative relationship 

between job satisfaction and turnover intentions in employees of Public Sector of 

Pakistan. The significance of these results is at p



a job. People that are dissatisfied of organizational career growth opportunities and 

organizational environment must be tired of bureaucratic environment and centralized 

authority as suggested by the questions in the questionnaire. As per results obtained 

through correlation and regression analysis in this study, it is found that there is a 

significant relationship between job satisfaction and turnover intentions in public sector 

of Pakistan. The significance of results reinforced the predicted hypothesis and we can 

say that job satisfaction plays a key role in employees‘ intent to leave its organization. 

These findings are consistent with the findings of Samad (2006). Secondly, career growth 

opportunities also have negative relationship with employees‘ decision to quit but the 

results are not significant enough. It showed a mild relationship between internal career 

growth opportunities and turnover decision on the part of employee in public sector of 

Pakistan. This mild relationship can be due to not accounting organizational commitment 

with organizational career growth opportunities as suggested by the Lto and Brotheridge 

(2005). In the last results of organizational environment showed that feasible 

environment in organization has a negative impact on employee‘s decision to leave the 

current employer. These findings are consistent with the findings of Cottini et al. (2009) 

and Martin et al. (2005) and suggest that there is a need to make environment feasible to 

work for thus reducing turnover intentions in public sector of Pakistan. 

6. Conclusion 

This research implies an urge to find of the largely unexplained variance of turnover 

intentions in Pakistani public sector organizations as in this study‘s presented model 

adjusted R Square is only 0.23 that means the variables presented in the study explain 23 

percent of overall turnover intentions. Therefore there is a need to dig up more deeply to 

explore other antecedents of turnover intentions in Pakistani public sector organization. 

Overall satisfied workers can be a very healthy sign for public sector organizations in 

Pakistan but there is also need to create a feasible environment to increase and enhance 

satisfaction of employees. Perhaps these organizations are enjoying advantage of 

Pakistani labor market where people could not find job easily and are reluctant to leave 

the present organization. One limitation of this study is that it has a small data sample and 

this needed to be overcome by other researchers get increase the generalizibility of 

results. 


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Annexure 

Job satisfaction 

Internal Career 

growth opportunities 

Organizational 

environment 

Figure 1: Model of the study 

Table 1: Description of Demographics 

Turnover 

Intentions 

Demographics Categories Frequency Percent Mean Std. Deviation 

Function 

Management 

Technical 

44 

56 

44.0 

56.0 

1.5657 .49819 

Less than 20 12 12.0 

Age 

21~30 years 

31 ~40 years 

58 

19 

58.0 

19.0 

2.2900 .82014 

Above 40 years 11 11.0 

Gender 

Male 

Female 

95 

5 

95.0 

5.0 

1.0500 .21904 

SSC 19 19.0 

Education 

HSSC 

Graduate 

29 

40 

29.0 

40.0 

2.4500 .93609 

Post Graduate 12 12.0 

Less than a year 5 5.0 

Tenure 

1~ 5 years 

5~10 years 

49 

25 

49.0 

25.0 

2.6162 .87723 

Above 10 years 21 21.0 

Less than 10, 000 34.0 34.0 

Income Level 10, 000 to 20, 000 44.0 44.0 1.8687 .73743 

Above 20, 000 22 22.0 


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Table 2: Descriptive Statistics 

Mean Std. Deviation N 

TI 3.0933 1.11220 100 

JS 3.4267 .81935 100 

CGO 2.8433 .92654 100 

OE 2.7140 .48440 100 

Table 3: Correlations Matrix 

TI JS CGO OE 

TI Pearson Correlation 1 -.443(**) -.175 -.306(**) 

Sig. (2-tailed) .000 .081 .002 

N 100 100 100 100 

JS Pearson Correlation -.443(**) 1 .544(**) .282(**) 

Sig. (2-tailed) .000 .000 .005 

N 100 100 100 100 

CGO Pearson Correlation -.175 .544(**) 1 .421(**) 

Sig. (2-tailed) .081 .000 .000 

N 100 100 100 100 

OE Pearson Correlation -.306(**) .282(**) .421(**) 1 

Sig. (2-tailed) .002 .005 .000 

N 100 100 100 100 

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

Table 4: Regression Results 

Variables Beta t- value p- value 

Turnover Intentions 

Job Satisfaction -.476 -4.516 .000 

Career Growth Opportunities .190 1.703 .092 

Organizational Environment -.252 -2.584 .011 

n = 100, R Square= 0.254, F-value = 10.923, Adj. R Square = 0.231, 

Significance p < 0.01 


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THE IMPERATIVE OF EXTRACTION AND PRODUCTION 

OF REFINED VEGETABLE OIL FROM PALM KERNEL 

PROJECT IN EASTERN NIGERIA. 

Dr. Chinedu Chidinma Nwachukwu 

B.Sc (Est Mgt), M.Sc (Project Mgt), Ph.D (Project Mgt), PMP, ANIVS, RSV, FCRMI, 

Lecturer, Department of Project Management Technology, 

Federal University of Technology, Owerri, Imo State. 

Onwadi Confidence 

Federal University of Technology, Owerri, Imo State 

Abstract 

The extraction of the palm kernel oil from palm kernel is made by various techniques and 

the obtained oil is used as well in the food domain as non-food domains. Oilseed 

processing and oil extraction processes are designed to obtain high quality oil with 

minimal undesirable components, achieve high extraction yields and produce high value 

meal. There are several techniques for extracting oil from oilseeds. Two common oilseed 

extraction processes are solvent extraction and mechanical extraction using a screw press. 

But today, other extraction method has been discovered. Refining removes most of the 

contaminant that might be in the oil. Oil refining involves three major stages which are 

degumming bleaching and deodorisation. This project will be achieved at Food and 

Science Technology laboratory, federal University of Technology, Owerri, Imo state. The 

results showed that oil obtained has percentage FFA as low as 0.126%, moisture value of 

0.02% and peroxides value of 0.00%. 

Keywords: Extraction, Refined Vegetable Oil, Palm Kernel, Oil Project. 


Fats and oil for both food and non food use have played an important role for the well 

being of man and his activities. Useful oils are recovered from diverse biological sources. 

These materials include both animal tissue (example beef , pork) and crops specifically 

produced for oil or protein (example soya, palm , palm kernel , olive etc)and by-products 

of crops grown for fibre(example cotton seed), food (corn, rice bran, and cocoanut) and 

confections (example peanuts, almonds etc). There are many chemical and physical 

difference between these biological materials. The similarities are that the oils can be 

extracted from the materials by heating , mechanical pressing , solvent extraction or the 

combination of both mechanical pressing and solvent extraction. The preparation of 

various materials to be extracted varies. Some need extensive cleaning, drying, fibre 

removal, dehaulling, flaking, extruding etc ; all of which affect the yield, composition 

and the quality of oils obtained. 

Processing oil seeds into edible and industrial oil and protein rich fractions for livestock 

feeding is one of the oldest agribusiness. The ancient Egyptians and Asians crushed 

sesame and soybean respectively with edgestone and cage presses driven by human 

slaves or oxen. During the 19thcentury, prior to the acceptance of steam power, draft 

horses are used to furnish the power to squeeze oil from oil seeds by means of levers, 

screw jack or hydraulic cylinders in a manner similar to that still in use in some apple 

cider mill. 

The advent of hydraulic presses, first patented Bromak in 1785 in England made 

extraction of oil seed widely practical . in the early 1900s,continuous screw presses such 


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as those developed by Anderson, revolutionalized the oilseed processing industries. in 

the early years ,the continuous screw presses where powered a line shaft connected to a 

steam engine. Now motors as large as 300hp are used to powered individual screw 

presses. 

Recently, there has been interest in coupling low cost extruders /expanders with screw 

presses to produce industrial oils and feed ingredient distribution close to the plant. 

These small plants use extruders /expanders to replace other forms of heating that require 

steam generation. This technology is also being used in developing countries where there 

local markets for unrefined edible oil. 

Some cotton seed, peanut , sesame , palm fruits and palm kernels are still hard pressed. 

Considerable amount of cotton seeds and most sun flower and rape seed are pre-pressed 

solvent extracted; thus solvent extraction. Over the years different methods of extraction 

has been discovered for a continuous process to enhance the extraction of oil from palm 

kernel. 

Mechanical extraction is suitable for both small scale- and large scale capacity operation. 

Three stages are required for the mechanical extraction method; namely: 

� Kernel pre-treatment which is necessary to efficiently extract oil from the kernels. 

� Screw- pressing which extracts oil from the meal as it is being compressed by a 

revolving helical thread (worm )inside a stationary perforated cylinder called barrel. 

� Oil clarification in which large impurities and fine solids are removed. 

Since different crushers are use different procedures for mechanical oil extraction, then 

the overall extraction can be classified under three variations. These are: 

� Direct screw –pressing: some mills crush the kernels directly in the presses without 

any pre-treatment. Double pressing is usually required to ensure efficient oil 

extraction. 

� Partial pre- treatment: the kernels are first broken down to smaller fragments by 

grinding prior to screw-pressing. Some cases require cooking. 

� Complete pre-treatment : full pre-treatment are carried out prior to screw-pressing. 

Solvent extraction process uses solvent to extract oil from crushed palm kernel. The 

flakes are allowed to mix with the solvent which forms a homogeneous liquid(miscella) 

with the oil. The homogeneous mixture is then separated, giving rise to the oil and 

solvents used. This process of oil extraction has high extractability than the mechanical 

method . It is divided into three main units operation: 

� Kernel pre-treatment as in mechanical extraction. 

� Oil extraction using an ideal solvent. 

� Solvent recovery from the oil and meal. 

The traditional oil extraction method is to fry the palm kernels, after which the fried 

kernels are pounded or grounded to paste in a motorised grinder. The paste is mixed with 

small quantity of and heated to release the palm kernel oil. The released oil is skimmed 

from the top periodically. 

Supercritical fluid extraction method was suggested as an alternative for many organic 

solvents by Saito(2001),who reviewed research activity. CO2 has been suggested as a 


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replacement for n-hexane or toluene in de-solventization. Other methods used for the 

extraction of oil from palm kernel shall be discussed in this project. 

Refining involves the various treatments to which crude palm kernel oils are subjected to; 

to obtain products of which the taste , odour ,and the colour of the oil is appealing and 

good for human consumption. Undesirable constituents such as trace metals, free fatty 

acid(FFA) ,phosphatides(gums) etc are removed during the process of refining. Refining 

can be classify it into Physical Refining & Chemical Refining according to different 

technology. Features of these two technologies are: 

Physical Refining which remove gums in oil with special degumming method. FFA in oil 

is removed by steam. Physical refining Features: 

� High oil refining rate, less oil loss 

� No waste water discharged; 

� More FFA distilled out; 

Chemical refining is especially suitable for oils of high acid value, and low gum content; 

Chemical refining neutralizes FFA in the oil with alkali. The gum and soap produced are 

removed with centrifuges. It Features: 

� Less requirements to crude oils; 

� The finished oil is more consistent in quality; 

� Less bleaching earth used compared with physical refining; 

Chemical (alkali refining) or physical refining requires three main stages namely: 

� Degumming(pre-treatment) 

� Bleaching 

� Deodorisation, which is shown in Figure1. 


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Figure 1: Palm Kernel Oil Refining 

Also, clay-heat refining is another refining technology that gives an improved oil quality 

as an end product. The process may be applied to a wide variety of oils including most of 

the usual edible oils and fats of commerce. The process can also be applied to inedible 

fatty materials such as inedible tallow, fatty acids and crude oils for the paint industry. 

The fatty substances which have been successfully treated by the process include soybean 

oil, rapeseed oil, marine oil, sunflower seed oil, peanut oil, palm oil, palm kernel oil, 

cocoanut oil, lard, inedible tallow, and oleic acid. 

2. Problem Statement 

Over the years, the major source of vegetable oil was mostly from groundnut and soya 

bean. But the price of refined oil from these seed is continuously increasing due to the 

processes involved. With the increasing demand of vegetable oil due to its diverse and 

importance, an alternative/substitute oil that will serve the same purpose with cheaper 

price has to be provided. Refined palm kernel oil is a substitute/alternative vegetable oil 

that can serve the same purpose. The extraction and refining processes are not complex. 

3. Justification 

The production of refined vegetable oil from palm kernel, right from its extraction stage 

is relatively cheap for a continuous process. The refined palm kernel oil is very cheap 

when compared to vegetable oils gotten from groundnut, olive, soya bean etc. The raw 

material, palm kernel is readily available and obtainable; having the percentage oil 

content of about 45%-50%. The extracted / refined palm kernel oil can positively affect 

the nation‘s economy in that it can be used in bio-fuel/biodiesel production, it can be used 

in many processing industries as raw materials, the meal can be used as animal feed, the 

activated kernel shell can be used as an adsorbent, the refined product and by-product are 

used in confectionaries. 

4. Objectives and Scope 

To extract and produce a refined vegetable oil from palm kernel, that good for human 

consumption, free of gums and fatty acids, with a long shelf life.This work will focus on 

the extraction of crude palm kernel oil ( PKO) from palm kernel; refining of the extracted 

crude PKO through degumming process, bleaching and deodorising process. The refined 

oil will be tested for free fatty acid(FFA) content, peroxide value and moisture and 

impurity content.This project will be carried out using laboratory sized equipment; 

therefore, the chemicals and materials will be of laboratory quantity. The will be first 

dehaulled with stone after which crude palm kernel oil is to be extracted from palm 

kernel by frying the palm kernel seed.The crude palm kernel will be pre-treated with 

food grade phosphoric acid to remove the phosphatides(gums) present in the crude palm 

kernel oil, followed by bleaching and deodorization to obtain a refined bleached 

deodorised oil(RBDO). The refined oil is then tested of moisture content, peroxide value 

and free fatty acid (FFA) percentage. 


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5. PALM KERNEL OIL 

Palm kernel oil is an edible plant oil derived from the kernel of the African oil palm 

Elaeis guineensis (Hartley, 1988),which has long been recorganized in West African 

countries. It contains lauric acid apart from cocoanut oil ,both being the only oils among 

the seventeen oils and fats in the world‘s oil trade, that contains lauric acid(oil world 

Annual,2000). Palm kernel on wet basis ,contains about 45% to 50% oil(Tang and 

Teoh,1985). Palm kernel oil rich, in lauric acid contains about C12 ,and the remaining 

fatty acids are myristic acid(C14)and oleic acid C18 (Tang and Teoh,1985;Rahmar and 

Hassan,1998). Palm oil is highly saturated vegetable fats and it is semi-solid at room 

temperature. Like all other vegetable oils, palm kernel oil do not contain cholesterol. 

Generally, palm kernel oil from oil palm Elaeis guinnensis, is believed to have 

originated from the jungle forest of East Africa. There was evidence that palm oil was 

used in Egypt at the time of the Pharoahs, some 5000 years ago(Cottrell.1991).In Assente 

confederacy, state owned slaves built large plantation of oil palm trees. In 1856, a law 

was passed in the kingdom of Dahomey by king Ghezo, restricting its subjects from 

cutting down oil palms. By 1870,palm kernel oil constitute the necessary export of some 

West African countries such as Ghana and Nigeria; although this was overtaken by cocoa 

in the 1880s. Many people who are into commerce will remember that until the mid 

1970s, Nigeria was the world‘s largest producer of palm kernels while Europe do most of 

the crushing and was therefore, effectively the world‘s palm kernel oil producer. But 

now, all the crushing are done in the palm oil producing countries, and Europe does no 

crushing at all. European trading with West Africa occasionally purchase palm kernel oil 

for use in Europe. But since the oil is bulky and cheap, palm kernel oil remains rare 

outside West Africa. Palm kernel oil became a highly sought after commodity by British 

traders for use as an industrial lubricant for machines during the British industrial 

revolution. 

In 1977/88, Malaysia overtook both Nigeria and Europe to become the world‘s largest 

producer of palm kernels and palm kernel oils(pko). This is due to the fact that oil palm 

only grow well in the tropical climates and so all the palm kernel producing counties are 

mostly in Southeast Asia, Sub-Sahara Africa and South America(Oil world 

Annual,2000). Malaysia being by far , the largest producer of palm kernel 

oil,(pko),currently account for about 50% of the world‘s production while Malaysia and 

Indonesia account for about 80% of the world‘s palm kernel oil production and about 

88% percent of the export. However, Malaysia oleochemical has been absorbing very 

large and increasing quantities of their palm kernel oil and her lead in export has been 

reduced (Malaysian Palm oil Board(MPOB), 2001). In fact, Indonesia export was higher 

than Malaysian‘s in year 2000. 


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Figure 2: World Production of Vegetable Oil (MPOB,2002) 

5.1 Varieties 

The varieties of palm kernel is classified according to the palm fruit type. These are ; 

i. Wild type called dura, characterised by relatively thin layer of flesh covering the 

seed,, which consist of a hard thick shell within which the kernel lies. 

ii. Pisifera, a fleshy fruit with thick layer of flesh and small kernel. 

iii. Tenera, a thick flesh fruit with shell and kernel of intermediate size 

5.2 CHEMICAL COMPOSITION OF PALM KERNELS OIL. 

Palm kernel oil is made up of chemical compound of one molecule of glycerol bound to 

three molecules of Fatty Acid. 

CH2 – OH + R1-COOH CH2 – COOR1 

CH – OH + R2-COOH CH – COOR2 + 3H2O 

CH2 – OH + R3-COOH CH2 – COOR3 

Glycerol Fatty Acid Triglyceride Water 

The fatty acids could be of the same type or they could be different. 

Palm kernels are rich in lipids (53%), contain 35% of carbohydrates, 10% of proteins and 

2% of inorganic compounds. The lipids content is close to 54% with the palm kernels in 

Nigeria. 

5.3 FATTY ACID CONTENT OF PALM KERNEL OIL 

The types and the proportions of fatty acids present in the triglycerides of an oil has a 

major influence on the physical, chemical and the nutritional values of oil. Fatty acid 

composition is therefore its most important chemical characteristics. The fatty acids 

themselves are different depending on their chain length and degree of saturation. The 

short chain fatty acids are of lower melting point and are more soluble in water. Whereas, 

the longer chain fatty acids have higher melting points. The melting point is also 


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dependent on degree of non-saturation. Unsaturated acids will have a lower melting point 

compared to saturated fatty acids of similar chain length. 

Palm kernels oil contains approximately 89% of saturated fatty acid against 11% of 

unsaturated fatty acids. Among these saturated fatty acids, fatty acids with short chains 

(C8-C14) are most strongly represented, the lauric acid (C12) occupy approximately, 

55% with regards to the total fatty acids. 

Table 1. FATTY ACID CONTENTS 

TYPE OF FATTY ACID PERCENTAGE 

Lauric saturated c12 55.2% 

Myristic saturated c14 16.2% 

Palmitic saturated c16 8.4% 

Capric saturated c10 3.4% 

Caprylic saturated c8 3.3% 

Stearic saturated c18 2.5% 

Oleic mono unsaturated c18 10.3% 

Linoleic poly unsaturated c18 0.7% 

Others/ unknown 0.4% 

Source; Secondary data of the study 

5.4 PHYSICAL PROPERTIES OF PALM KERNEL OIL. 

Palm kernel oil has physical properties similar to some motor oils, and may possibly be 

able to replace our current sources of motor oil. 

Pour Point = 22 degrees Celsius 

Fire Point = 251 degrees Celsius 

Flash Point = 242 degrees Celsius 

Melting Point = approximately 25 degrees Celsius 

Specific Density (mg/ml) = 0.8 

Smoking Point = 232 degrees Celsius 

Maximum Storage Duration (at 24 degrees Celsius) = 6 months 

Density = 0.952 per cubic centimetre 

6. USES OF PALM KERNEL OIL 

Palm kernel oil is commonly used when making soap and candles. In recent years it has 

been used for making detergent, margarine, cooking oil, mayonnaise, and several 

different kinds of baked goods. Palm kernel is a tropical oil similar to the more popular 

coconut oil. In many places these two oils can be used interchangeably. Palm kernel oil 

can also be used as an industrial lubricant, too. 

� Speciality fats(cocoa butter substitutes): speciality fats are used extensively in 

food industries for applications where specific physical chemical properties are 

important. 

� In ice creams: palm kernel oil and cocoanut oil. In most cases, filling creams are 

made from palm kernel oil and its hydrogenated version. the finest creams for 

biscuit, wafer filling and cakes and cakes are made from palm kernel oil. 

� In toffees and caramels. 


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� In imitation of whipping creams 

� In the production of medium chain triglycerides. 

� In soap production: Soap is made from fatty acids. When palm kernel oil is 

turned into soap it has the following properties: very hard white soap, with quick 

but non - lasting lathering, fair cleansing properties. It can be used in varieties of 

soaps such as toilet soap, household soap and shaving soap. 

� In suppositories(pharmaceutical uses). 

� Palm kernel oil, like other vegetable oils, can be used to create biodiesel for 

internal combustion engines. Biodiesel has been promoted as a renewable energy 

source to reduce net emissions of carbon dioxide into the atmosphere. Therefore, 

biodiesel is seen as a way to decrease the impact of the greenhouse effect. 

7. ECONOMIC IMPORTANT OF PALM KERNEL OIL PROJECT 

Palm kernel oil is comparatively cheap with An appreciably discount to soya bean oil 

which is the market leaders most of time. 

It has technical attributes useful in food industries especially its good stability to 

oxidation and its natural solid fat content. 

7.1 EFFECT OF PALM KERNEL OIL ON HUMAN HEALTH. 

Some persons are allergic to palm kernel oil. Symptoms of an allergic reaction vary from 

person to person. However, they are usually comprised of one or more of the following: a 

red, itchy rash and/or hives, coughing, shortness of breath, wheezing, stuffy or runny 

nose, sinus congestion, facial swelling, and/or itchy eyes. It is important to stay alert of 

symptoms as soon as they appear. 

In rare cases, a life-threatening reaction called anaphylaxis, can occur. The symptoms of 

this problem include difficulty breathing, extremely low blood pressure, and/or 

confusion. It is important to note that the symptoms of anaphylaxis can come about 

suddenly and lead to unconsciousness within minutes. If you know you have this 

condition to palm kernel oil, it is important to see an allergist so appropriate monitoring 

and medication can be given. When the oil is highly refined it poses no threat to someone 

with a palm kernel oil allergy. While most palm kernel oils are highly refined and not 

allergenic, it is important to verify the refinement process before consumption in 

someone with a palm kernel oil allergy. Refined Palm kernel oil is usually considered 

safe for those who suffer from nut allergies, providing they do not specifically have a 

palm kernel oil allergy. Allergies are usually caused by an inflammatory reaction in the 

body to a protein (although this is not the case in a palm kernel oil allergy). Palm kernel 

oil does not contain any proteins and, therefore, is free of any possible offending nut 

proteins. 

Also, palm kernel oil content can affect human health in the following ways: 

� The saturated fat content of palm kernel oil can elevate cholesterol and damage coronary 

arteries. Palm kernel oil also contains lauric acid, a compound that has been linked to clogged 

arteries. 

� Cancers of the breast, prostate and colon, along with obesity and an increased risk of heart 

attack, are linked to high fat consumption. 


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8. HISTORY OF OIL EXTRACTION 

Over the years, human beings have found that fats and oil can be extracted from nuts and 

seeds by heat , solvent and pressure. Extraction involves the removal of the constituent 

component from its source which of paramount importance to the individual involved. 

Early small-scale systems converted various seeds, nuts ,and fruits into liquid and solid 

components for both food and non food uses. The advancement of processing technology of 

recovering oil have been primarily driven by economics and productivity. After thousands 

of years of practices with stone mills and several centuries of simple hydraulic or lever 

presses , the continuous mechanical presses became reality during the early 1900s. Not until 

1930s did extraction solvent became available which greatly enhance the recovery of oils 

from oil bearing seeds or materials(P.J Wan, P.J Wakelyn, 2004). 

Generally, oil extraction from palm kernel can either be by mechanical also known as 

expeller method or by solvent extraction also known as chemical method. With the 

advancement the technology of vegetable oil processing industries, other extraction methods 

have been discovered over the years to enhance oil extraction from palm kernel. the 

following oil extraction methods shall be reviewed in this project topic: 

� Mechanical extraction 

� Solvent extraction 

� Supercritical fluid extraction technology 

� Traditional extraction method 

� Liquefied gas extraction technology 

� Gas assisted mechanical extraction technology 

� Enzyme assisted extraction 

� Aqueous extraction technology 

8. MECHANICAL EXTRACTION/EXPRESSION(EXPELLER) METHOD 

Mechanical expression is the oldest method used for oil extraction from seeds. The seeds are 

placed between permeable barriers and mechanical pressure is increased by reducing the 

volume available for the seeds. This way oil is squeezed from the seeds. In practice, this 

operation can take two shapes: a hydraulic, uni-axial press or a screw press (also called 

extruder or expeller). The advantages of a screw press compared to a hydraulic press are its 

slightly higher yield and its continuous mode of operation. Mechanical expression results in 

high quality oil, but has a relatively low yield. Generally it is only used for smaller capacity 

plants, speciality products or as a prepress operation in a large scale solvent extraction 

plant.This extraction method involves size reduction operation, surface area and 

extractability increase operation. Mechanical extraction processes are suitable for both 

small- and large- scale capacity operations. The three basic steps in mechanical oil 

extraction method are: 

� Kernel pre -treatment 

� Screw- pressing 

� Oil clarification 


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8.1 KERNEL PRE-TREATMENT 

Proper kernel pre-treatment is necessary to efficiently extract oil from the kernels. the 

feed kernels must undergo such pre-treatment as dehaulling, cleaning, destining, cooking 

/ heating , drying to optimum moisture/temperature levels and flaking. foreign materials 

are removed during the process of cleaning to avoid damaging of the screw presses, 

increasing cost and downtime and contamination of the products. 

A swinging hammer grinder, breaker rolls or the combination of both breaks the kernels 

into small fragments. This process increase the surface area of the kernels, thus 

facilitating flaking. The kernel fragments subsequently are subjected to flaking in the 

roller mill. The thickness of the kernel cake is progressively reduced as it travels from top 

roller to the bottom roller. This progressive rolling initiates rupturing of the cell walls. 

The flakes at the bottom nip are from 0.25mm to 0.4mm thick(Golden oil,2002). The 

kernel flakes are then conveyed to a stack cooker for steam conditioning; the purpose of 

which is to: 

� Adjust the moisture content of the meal to an optimum level 

� Rupture the cell wall of the palm kernel, initiated by rolling. 

� Reduce viscosity of the oil. 

� Coagulate the protein in the meal to facilitate oil separation from protein material. 

The meals are normally cooked to a moisture content of 3 % at 104-1100C. 

8.3 SREW-PRESSING 

The properly cooked meal is fed to the screw press, which consist of an interrupted 

helical thread (worm); which revolves within a stationary perforated cylinder called the 

cage or barrel. The meal is forced through the barrel by the action of the revolving 

worms. The volume axially displaced by the worms diminishes from the feeding end to 

the discharge end, thus compressing the meal as it passes through the barrel. 

The expelled oil drains through the perforation of the lining bars of the barrel while the 

de-oiled cake is discharged through annular orifice. In order to prevent extreme 

temperatures that could damage the oil and cake quality, the worm- shaft is always 

cooled with circulating water while the barrel is cooled by recycling some cooled oil. The 

following facts can be drawn from the concept of screw pressing: 

� With increasing pressure the yield increases reaching a limit at higher pressures. This 

limit is dependent on the type of seed, seasonal variations, pre-treatment of the seed 

and the equipment used. Most data available in literature are limited to pressures 

below 35 MPa, with a few exceptions(.; Ford, R. J.; Wulfsohn, D.; Bargale, P. C 

Irudayaraj, J.; Sosulski, F. W.Journal of Agricultural Engineering Research 2000.) 

� Quality requirements for the oil or the meal may restrict the maximum allowable 

temperature to prevent undesired cell wall components polluting the oil. It is therefore 

desirable to reach high yields at lower temperatures. 

� Starting from dry seeds, increasing the moisture content (MC) of the seeds increases 

the yield until a seed-specific maximum. Increasing the moisture content beyond this 

optimum decreases the yield again. This is due to two counteracting phenomena. 

Increasing the moisture content of the seeds is reported to make the cell walls more 

permeable (Bargale, P. C.; Singh, J. Journal of food science and technology 2000),( 

which increases the yield), but also, to cause a plasticization of the seed material 


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which reduces the oil yield. Time is a factor of influence, although for small-scale 

operations over 95% of the attainable yield is obtained in the first ten minutes. 

8.4 OIL CLARIFICATION 

The expelled oil invariably contain some quantity of fines and foots that need to be 

removed. The oil from the presses is drained to the reservoir. It is either pumped to a 

decanter or to revolving coarse screen to remove large part of the solid impurities. The oil is 

then pumped to a filter press to remove the remaining solids and fines in order to produce 

prior to storage. The cakes discharged from the are conveyed for bagging, bulk storage or 

sent to the boiler as a source of fuel(FAO Co-operate Document). The flow diagram of 

mechanical is shown in fig 2 below: 

Figure 3 Mechanical extraction process diagram. 

Source; Secondary Data of the study 

9. SOLVENT EXTRACTION 

Solvent extraction is a mass transfer process in which materials are transported from one 

phase to another for the purpose of separating one or more compounds from their 

mixtures(P.J Wan and P.J Wakelyn). In the case of palm oil extraction, crude palm kernel 


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oil is dissolved in a solvent, to separate it from the insoluble meal that is primarily 

composed of protein and carbohydrate. 

Various liquids has been in use as solvents for commercial oil extraction by the vegetable 

oil industries and others has been proposed based upon encouraging laboratory results. 

However, mixture of hexane rich in n-hexane, have been the solvent of choice by the oil 

seed processing industries for the past 50years. Due to the toxicological, environmental 

and economic reasons, other solvents have been proposed as an alternative to hexane. 

Palm kernels are usually prepared for solvent extraction by cracking, heating and flaking 

or by conditioning, screw-pressing, grinding and flaking. 

In a (continuous) solvent extraction process, the seeds are contacted with a solvent, 

generally hexane. The oil contained in the seeds is dissolved in the solvent after which 

solvent and solids are separated. The solvent/oil mixture (usually 20-33 wt% oil) 

(Technology and solvents for extracting oilseeds and nonpetroleum oils; Wan, P. J.; 

Wakelyn, P. J., Eds.; AOCS Press: Champaign,2004) is sent to the solvent recovery 

operation, where solvent is removed by evaporation. The residual cake is sent to a desolventiser 

/ toaster, which also removes the solvent by evaporation. Both oil and solids 

therefore undergo a heat treatment, which is detrimental for the oil and cake quality. The 

co-extraction of undesired components further reduces the quality of the oil. However, 

with this method it is possible to recover almost all of the oil from the seeds. Generally, 

this method is used in the high(est) capacity plants. To further improve the efficiency of 

the process, the extraction can be preceded by a pre-pressing step. Here part of the oil is 

recovered by a screw press, which reduces the size of the extractor and improves the 

permeability of the solids. 

Figure 4: Hexane solvent extraction flow diagram. 

Source; Wan, P. J.; Wakelyn, P. J., Eds.; (2004) 


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9.1 CHARACTERISTICS OF EXTRACTION SOLVENT 

� Ability to dissolve triglyceride at low temperature. 

� It must be non toxic to plant workers and to animals and humans when meal is used 

for food or as feed. 

� The solvent must be easily recovered from the meal and the oil. 

� Non flammability or flammability within a narrow temperature range of explosion to 

reduce the hazard of fire and explosion. 

� It should be stable to heat , light and water. 

� The solvent must be re-useable and must withstand high temperatures. 

9.2 ADVANTAGES OF SOLVENT EXTRACTION METHOD 

� The oil is almost completely recovered (about 98.5% oil recovery). 

� The oil and meal are recovered , undamaged by heat. 

9.3 LIMITATIONS OF SOLVENT EXTRACTION METHOD 

� High capital cost for extraction equipment. 

� Emission criteria pollutant that is volatile organic compound (VOC) into the 

environment/atmosphere. 

� The hazard of explosion by flammable solvent. 

10. SUPERCRITICAL FLUID EXTRACTION TECHNOLOGY 

SFE is the process of separating one component (the extractant) from another (the matrix) 

using supercritical fluids as the extracting solvent. Extraction is usually from a solid 

matrix, but can also be from liquids. 

SCF technology has been examined as an alternative technique for the conventional oil 

and oilseed processing methods for more than two decades. Carbon (iv) oxide has been 

suggested as a replacement for n-hexane or toluene in desolventization. In their 

supercritical state, carbon (iv) oxide and water can be used in many extraction and has 

been recorganised as earth compatible solvents.(Arain and Adschiri,1999.) The 

supercritical carbon dioxide (SC-CO2) technique, which utilizes carbon dioxide above its 

critical pressure (7.3 MPa) and temperature (31°C) as solvent, has been the choice for the 

majority of edible applications. The unique advantage of SC-CO2 is the easy removal of 

solvent from the extract. Palm kernel oil has a good solubility in supercritical carbon 

(iv)oxide at high pressure(>30MPa) and temperatures(>350K). Thus extraction of palm 

kernel oil requires relatively high temperatures and pressures for separation of oil from 

kernel as palm kernel is hard and compact; and has an intricate honey combed pericarp 

(Hassan etal,2000; Rahman etal,2001; Zaidul etal, 2003; Zaidul etal, 2006). 

The flow rates of co2 has a large effects on the mass transfer of the extraction which can 

be divided into 

� Solubility controlled region and 

� Diffusion controlled region. 

A lower solvent flow rates improves the extraction performance, particularly in the 

solubility controlled region and decreases the total solvent mass required to extract a 

given oil. At lower pressure, the oil yield directly proportional to the amount of the 


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carbon (iv) required as expected for extraction in the solubility controlled 

region.(Gomez,Martinez,2000). Lower flow rates allow the system to attain equilibrium 

in the later stages of extraction process even when the quantity of oil is very small. 

Higher flow rate can cause flaked palm kernel to compact , restricting CO2 movement 

into and out of the palm kernel flake, reducing the amount of CO2 available for mass 

exchange as noted by Tonthubthimthong, Chanprasert,, Douglas and 

Lewisutthichat(2001). 

The effect of temperature and pressure on SC-CO2 is to enhance the extraction, 

increasing the total yield of palm kernel oil. Norulaini etal (2004) and Zaidul et al (2003) 

stated that at pressures of 20.7and 27.6MPa ,the increase in vapour pressures of palm 

kernel oil due to an increase in temperature appeared to compensate for decrease in 

solubility caused by decease in SC-CO2 density at the higher temperature. 

10.1 WHY CO2 IS AN IDEAL SOLVENT FOR SFE. 

� It is non toxic. 

� It is non explosive. 

� It is inexpensive. 

� It is readily available. 

� It is easily recovered from the extracted product 

10.2 ADVANTAGES OF SUPERCRITICAL FLUID EXTRACTION 

i. Solvent free products, both extract(oil) and raffinate (meal) can be extracted 

ii. When using CO2, the extraction process is relatively benign, permitting the 

removal of heat and oxygen sensitive compounds. 

iii. The process causes little or no environmental pollution, particularly if CO2 is 

used as extracting solvent. 

iv. CO2, the principal extraction fluid is readily available and can be stored or 

recycled for continual use as extraction medium. 

v. Lighter coloured oil and better tasting oil can be achieved with supercritical fluid 

extraction technology. 

10.3 LIMITATIONS OF SFE TECHNOLGY 

i. Capital cost of high pressure vessels is very high. 

ii. The bulk density of the input material has a direct impact on throughput so SFE 

is most cost effective with high value, high bulk density input. 

iii. Carbon dioxide itself is non-polar, and has somewhat limited dissolving power, 

so cannot always be used as a solvent on its own, particularly for polar solutes. 

11. GAS ASSISTED MECHANICAL EXTRACTION (GAME) 

Present day industrial technologies for the production of vegetable oils include hydraulic 

pressing, screw pressing and solvent extraction with hexane. Of these methods, solvent 

extraction has the highest yield, but results in a lower quality of the oil compared to the 

mechanical methods. The pressing methods produce higher quality oils, but lower yields. 

Today, consumers are getting more aware of the presence of potentially hazardous 

chemicals in foodstuff. It is therefore necessary to prevent the use of organic solvents in 

the production of vegetable oils. Two potential alternatives for the production of oil with 

high yields but without organic solvent residues are extracted with supercritical carbon 


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dioxide (SCE) and a recently introduced process called Gas Assisted Mechanical 

Expression (GAME)(Venter, M. J.; Willems, P.; Kuipers, N. J. M.; de Haan, A.. The B 

Journal of Supercritical Fluids 2006). 

In the Supercritical extraction process, the oil is dissolved in CO2 and thereby extracted 

from the plant material. However, the solubility of oil in CO2 is limited to only a few 

weight percent at reasonable conditions2,3. This results in the use of huge amounts of 

CO2, which makes the process uneconomical for commodity oils. The GAME process, 

however, exploits the solubility of CO2 in the vegetable oils, which can be up to 50 wt% 

and thereby drastically reduces the amount of CO2 require. 

In the GAME process, CO2 is dissolved in the oil contained in the seeds before pressing. 

The same effective mechanical pressure (absolute mechanical pressure minus the actual 

CO2 pressure) the liquid content is the same in both conventional and GAME press 

cakes. The liquid in the GAME press cake is saturated with CO2 (typically 20-50 wt%), 

reducing 

The oil content compared to the conventional cake by the same amount. The contribution 

of this effect increases with increasing solubility of the CO2 in the oil. Furthermore, the 

dissolved CO2 reduces the viscosity of oil by about an order of magnitude(Venter, M. J.; 

Willems, P.; Kareth, S.; Weidner, E.; Kuipers, N. J. M.; de Haan, A. B. The Journal of 

Supercritical Fluids 2007, 41)which increases the rate of pressing. After pressing, the 

CO2 is easily removed from the cake and oil by depressurisation. During depressurisation 

of the cake, some additional oil is removed by entrainment in the gas flow. 

11.1ADVANTAGES OF GAS ASSISTED MECHANICAL EXTRACTION. 

The advantages of GAME include: 

� Mechanical pressure can be lower than conventional pressing (50 MPa compared to 

100 MPa) while still obtaining higher yields. 

� Required CO2 pressure is lower than for supercritical extraction (10 MPa compared 

to 45-70 MPa) 

� The amount of CO2 required is much lower than for supercritical extraction (around 

1 kg CO2 per kg oil compared to 100 kg CO2 per kg oil). 

� A virtually solvent free product, remaining solvent is not detrimental to consumer 

health. 

� It is suggested that CO2 at the conditions employed has a sterilising effect. (White, 

A.; Burns, D.; Christensen, T. W. Journal of Biotechnology 2006, 123), (Spilimbergo, 

S.; Bertucco, A. Biotechnology and Bioengineering 2003, 84). 

12. LIQUIFIED GAS EXTRACTION TECHNOLOGY 

Liquefied technology is not considered to be a supercritical technology because the 

operating pressures are considered lower. liquefied gases such as propane , butane, 

carbon(iv) oxides etc, having favourable solvent properties have been used as gas 

extraction solvents. These solvents are highly volatile and have low boiling points. They 

exhibit liquid properties at lower temperatures and pressures; and gaseous behaviours at 

higher temperature and pressure. Thus, they are capable of dissolving large amount of 

oils while they have rates of diffusion and extraction that are ordinarily high when 

compared with liquid solvents. The ease of separation implies either a totally immiscible 


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system or partially miscible system in which separation by other means such as 

distillation is simple. 

Liquefied gas extraction process consist of a series of extraction stages. The number of 

stages, mixing times and settling stages are process parameters that are determined 

primarily by the degree of oil desired and the behaviour of the material under process 

condition. 

The palm kernel has to undergo crushing and grinding. Complete extraction is achieved 

by transferring a specified quantity of feed material(crushed palm kernel); determined by 

the size of the extractor, into extraction vessel. An extraction stage involves mixing the 

feed material(crushed palm kernel) and the solvent within the extraction vessel for a 

specific period of time. Agitation is provided by variable speed mixer. For a low speed 

mixing, a rake is used and for a high speed mixing, an impeller with a baffle cage is used. 

Heating the liquefied gas has the effect of increasing the extraction efficiency and 

decreasing the total extraction time. the heat require to 

perform extractions at increased temperatures is either by steam or hot oil pumping 

system. The heat generated can be used in various operations of the extraction unit to 

facilitate separation process. Heating the liquefied gas allows the vapour to exit the 

extract(oil) and raffinate (cake).variation in temperature and pressure create conditions 

that readily convert from liquid to vapour and vice versa within the system, with minimal 

solvent being lost. Also, variation in temperature and pressure allows the solvent to 

separate from the extracted oil into a simple cost efficient manners. The solvent is 

captured and recycled in a continuous process. 

The system can either be cleared by flushing the system with liquefied gas or by 

dismantling the units, one section at a time and cleaning it manually. 

12.1 ADVANTAGES OF LIQUEFIED EXTRACTION METHOD 

� It requires inexpensive and readily available solvents. 

� The process is environmental friendly . 

� Faster oil separation at lower pressure. 

� The properties of liquefied gas allows high extraction efficiencies in seeds with 

lower water and high oil content. 

� Near 100% extraction of oil from the original materials. 

� Due to high volatilities of liquefied gases, solvent recovery from the extract and 

raffinate is facilitated. 

12.2 LIMITATIONS OF LIQUIFIED EXTRACTION METHOD 

� At cold temperatures, the separation from the extracted oil can be very slow process if 

heat is not used. 

� It may cause explosion/ risk of explosion. 

� The solvent may attract water along with oil or freeze with water causing the lines in 

the unit to plug. 

13. AQUEOUS EXRTACTION METHOD 

Industrial processes for the extraction of edible oil from oilseeds generally involve a 

solvent extraction step which may or may not be preceded by pressing. Hexane is the 

preferred solvent; hexane-based processes have been in commercial operation for a long 


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time. For such processes, it is possible to achieve oil yields in excess of 95% with a 

solvent recovery of over 95%. In the past, the main concern of this process has been the 

safety implications surrounding the use of hexane. This prompted attempts to develop 

processes based on the use of aqueous extraction media which were unsuccessful mainly 

due to low oil yields. The process called water-flotation has been used for extracting 

coconut and palm oil. It involves heating oily material, grinding with or without water, 

and boiling with water to liberate the oil. The oil, which appears on the surface, is 

collected and heated to remove moisture. Oil extraction yields of around 50 percent are 

generally considered to be satisfactory for traditional non-commercial processes. This 

process can be used to extract oil as well as high quality proteins. In order to improve oil 

and protein extraction yields and to undertake extraction under milder processing 

conditions, some enzymes or surfactants are added to the extraction medium. 

13.1 ADVANTAGES AQUEOUS EXTRACTION 

� Simultaneous production of edible oil and protein isolate or concentration in the same 

process. 

� Lower protein damage during extraction. 

� Improved process safety due to the lower risk of fire and explosion. 

� Aqueous extraction processes may be more cost effective since the solvent recovery 

step is eliminated. 

� An environmentally cleaner alternative technology for oil extraction. 

13.2 LIMTITATIONS OF AQUEOUS EXTRACTION 

� Lower efficiency of oil extraction. 

� De-emulsification requirements to recover oil when emulsions are formed. 

� Treatment of the resulting aqueous effluent. 

� Enzyme and surfactant costs. 

� Finely ground seeds, which cause dusting, may lead to an explosion if the processing 

area is not ventilated well. 

14. OIL REFINING 

Vegetable oil refining is a necessary process required to convert a crude that is 

undesirable for human consumption into a wholesome nutritious food oil. The oil 

removed or extracted from an oil seed by mechanical or solvent extraction has many 

undesirable components. The components ranges from merely giving bad taste to being 

harmful for human consumption. The refining process remove non oil components from 

the oil while maximizing the oil yield at a minimum cost and maximum quality. The 

primary non-oil component removed are; the free fatty acid, phospholipids(gums), 

tocopherols, sterols, pigments and other minor impurities. The removal of these 

impurities gives the oil properties that are important to consumer such as taste, light 

colour, long shelf life and goo ked odour. The compositions of crude palm kernel oil is 

as shown in the table below. 


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Substances Content 

Free Fatty Acid (FFA) 3 - 5% 

Gums (phospholipids, phosphotides) 300 ppm 

Dirt 0.01% 

Shell Trace 

Moisture and Impurities 0.15% 

Trace metal 0.50% 

Oxidation Products Trace 

Pigments 500-1000mg/kg 

Table 2: Compositions of crude palm kernel oil 

Source; Secondary data of the study 

As mentioned earlier, vegetable oil refining can either be by alkali refining also called 

chemical refining; and physical refining. But with improvement in technology, clay-heat 

refining oil refining has been discovered to be a better method of oil refining. 

14.1PHYSICAL REFINING 

In physical refining, deodorisation is combined with neutralisation. The free fatty acids 

are stripped off with steam at slightly higher temperature than applied for deodorisation. 

Although this process was at first attractive mainly for oils with relatively high FFA such 

as palm oil, it is now more widely considered in light of environmental debate because it 

avoids chemicals and soap splitting which leads to loaded with sodium sulphate . 

The requirement for physical refining is very low content of gums(p



14.1.1 DEGUMMING 

Before further processing of the extracted crude oil, the crude oil has to be degummed. 

Degumming removes the phosphatides and mucilaginous gums, which becomes insoluble 

in the oil when hydrated. Degumming is done for two primary reasons. 

i. To produce lecithin in the case of soybean and 

ii. To produce an oil suitable for long term storage or transport (the presence of 

substantial amount of phosphatides lead to dark coloured and off-flavoured oil). 

Phospholipids has both hydrophilic and lipophilic components that makes them excellent 

emulsifiers but they also allow faster spoilage of the oil because they are more 

susceptible to oxidation than triglycerides. Lecithin is an important by- product of the 

degumming process. 

Degumming is carried out using two methods. 

i. Degumming with water 

ii. Degumming with acid water. 

Degumming with water involves mixing the oil with about 2% water at 60-80 o C for about 

30 minutes to hydrate the phosphatides, thereby reducing their solubility in the oil. 

Degumming with acid and water follows a similar procedure, except the oil is first 

vigorously mixed with about 0.1-0.5% of 50% solution of citric acid, malic acid or 

phosphoric acid and then mixed gently with 2% water. Degumming with acid and water 

also removes the non-hydratable phosphatides. Following contact of the oil with water or 

acid and water, the oil is centrifuged to remove the precipitated materials. 

14.1.2 BLEACHING. 

With few exceptions such as olive oil, consumer expect their oil to have little or no 

colour. In addition, many pigments are pro-oxidants that will make the oil more 

susceptible to oxidation. 

Alkali refined oil must be bleached to remove pigments, metallic components, residual 

soaps and traces of oxidation products. The exact process varies depending on the 

equipments used in the bleaching process. 

The process generally involves mixing the oil with bleaching earth (an acid treated 

bentonite clay) at about 100 o C under vacuum for about 5-30minutes.The amount of the 

activated bleaching earth used variesfrom1-3% depending on the level of the residual 

phosphatides present in the oil. The bleaching earth is a natural clay of aluminium silicate 

containing magnesium, calcium, sodium and iron; with PH 8, and apparent density of 0.7- 

0.9gml. The clay, absorbed components and precipitated materials are removed by 

filtration. Bleaching of the oil can be achieved in the following ways: 

i. By adsorption on solids 

ii. By leaching 

iii. By catalytic hydrogenation 

iv. By chemical bleaching agent. 


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The factors affecting adsorption are : the type of adsorbent, the bleaching temperature, 

the medium(solvent or oil)and the concentration of the solute to be adsorbed. In general, 

the higher the temperature, the smaller the smaller the adsorption and the smaller the 

solubility, the more complete the adsorption. All these occur because of the more 

favourable condition for attaining equilibrium. 

14.1.3 DEODORISATION 

This is usually the last stage of oil refining process. The primary objectives of 

deodorization process is the removal of residual compound characteristics of the taste and 

odor of the seed; odoriferous compounds formed during bleaching and traces of oxidation 

products. 

Deodorizing is basically a high temperature, high vacuum distillation process. The oil is 

heated to 225 o C-260 o C under vacuum and sparging steam applied to remove/ reduce 

odors, flavor constituents and other volatile compounds such as free fatty acids to a very 

low level. Steam increases the volatility of the compounds and improves the efficiency of 

the process. When vegetable oil are physically refined, deodorization serves to remove 

the small amount of the free fatty acid in the oil. It is important that the oil be free of 

chlorophyll, phosphatides and metallic components prior to deodorization. 

Deodorization involves the following stages: 

� Oil de-aerating and heating 

� Oil deodorizing 

� Oil cooling and 

� Oil polishing. 

14.2 CLAY-HEAT OIL REFINING 

Crude fatty substances, including edible and inedible fats and oils and free fatty acids, are 

refined by heat treatment in the temperature range of about 121°-260°C in the presence of 

a bleaching adsorbent or in the presence of phosphoric acid and a bleaching adsorbent. 

This refining can be used in lieu of the conventional alkali-refining of fats and oils. 

This a process for the refining of crude fatty substances without the use of alkali. The 

crude fatty substance is contacted with an adsorbent, which is preferably an acidactivated 

clay, at a temperature in the range of about 121°C to 260 O C in the substantial 

absence of air, for a short time. This step is improved by carrying out the heat treatment 

process in the presence of a small amount of phosphoric acid, which has the effect of 

lowering the temperature of treatment and improving the quality of the product. After this 

treatment the adsorbent and impurities adsorbed thereon are removed by filtration. 

Treated oils and fats can be deodorized directly or hydrogenated prior to deodorization. 

Alternatively, a mixture of oil, adsorbent and acid without filtration and after addition of 

a suitable catalyst can be hydrogenated directly; the clay with adsorbent impurities and 

spent catalyst are then filtered off, and the filtered oil is finally deodorized. In the course 

of these deodorizations the volatiles including the free fatty acids are removed from the 

oil. 


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14.2.1 CLAY-HEAT REFINING PROCESS 

A process for refining crude fatty substances selected from the group consisting of 

unrefined vegetable oils and fatty acids such as palm kernel oils, palm oils, soya bean oils 

etc; which comprises heating crude fatty substances under vacuum or inert atmosphere in 

the presence of about 0.1 to 1.0 percent of phosphoric acid and about 0.1 to 6.0 percent of 

acid activated clay to a temperature of from about 163° to 260 O C. 

Any of the commercial bleaching adsorbents may be used in the process but it has been 

found that the bleaching clays and especially acid-activated bleaching clays (e.g. Special- 

Filtrol) are significantly better than the other bleaching adsorbents. It has further been 

found that the acid-activated bleaching clay may be used either in freshly prepared form 

or in the form of a spent activated clay from other oil refinery processes. The clay is 

preferably used in an amount in the range of from about 0.1 to about 6% by weight based 

on the weight of the oil, depending upon the nature of the oil being processed. Thus, a 

relatively clean oil, such as palm kernel oil, may require only about 0.1 percent 

adsorbent, whereas corn oil may require, for example, about 6 percent. A small amount of 

filter aid, such as diatomaceous earth, may be added with the adsorbent to facilitate the 

eventual filtration. This is usually less than about 1.0 percent by weight based on the 

weight of the oil with 0.5 percent being quite satisfactory. Diatomaceous earths have no 

adsorbent properties and are used solely for improving filtration. Where the adsorbent is 

used without pre-addition of phosphoric acid the temperature of treatment is usually in 

the range of from about 400°-500°F. Satisfactory treatment of edible oils with acidactivated 

clay alone has been attained at about 232.22°C. treatment of edible oils with 

acid-activated clay alone has been attained at about 232 o C 

The phosphoric acid is employed in an amount which may vary from about 0.1 percent to 

1.0 percent. Again, the amount of phosphoric acid depends to some extent upon the 

nature of the oil being treated. The amount of phosphoric acid also depends to some 

extent upon the temperature at which the oil is to be processed. Lower treating 

temperatures can be used where more phosphoric acid is used in the pre-treatment stage. 

The preferred temperature at which the oil is heated in the presence of the adsorbent clay 

is about 163°-177°FC where a pre-treatment with about 0.1 percent H 3 PO 4 has been 

carried out. The phosphoric acid may be mixed with the oil or fat at any temperature at 

which the oil or fat is in liquid condition. Preferably a short pre-treatment of the oil or fat 

with phosphoric acid is effected by agitating the acid with the oil or fat at a temperature 

ranging from about room temperature to about 38°C following which the adsorbent clay 

is added and the mixture of oil, acid and adsorbent is then heated to a temperature in the 

desired higher range. The pre-treatment of the oil with phosphoric acid at the relatively 

low temperature prevents foaming during heating of the oil. 

The time of the treatment is relatively short, normally requiring only that the fatty 

substance be thoroughly contacted with the treating agent at the maximum temperature 

involved. Where bleaching adsorbent is used alone it may be added to the fatty substance 

prior to heating and the fatty substance and adsorbent are then heated together, under 

vacuum or inert atmosphere, to the maximum temperature, e.g. 232.22°C, followed by 

immediate cooling and filtering. It will be understood, however, that the adsorbent can 

also be added to preheated fatty substance or to the fatty substance at any heating stage. 

Where phosphoric acid is employed it is preferred that it be added at relatively low 


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temperature and contacted with the fatty substance for a short period of time, e.g. about 

10 to 30 minutes prior to adding the adsorbent and heating to maximum treating 

temperature. Alternatively the phosphoric acid and adsorbent may be added together to 

the oil prior to heating or at any heating stage. 

The use of vacuum during the heating is ordinarily for the purpose of excluding air. 

However, the process may be combined with steam stripping while drawing a vacuum so 

as to remove free fatty acids and other volatiles. Alternatively, the heat treatment can be 

conducted under an atmosphere of inert gas, e.g. nitrogen. H 3 PO 4 -clay-heat refining 

operation may be satisfactorily combined with steam stripping to provide a refined 

product of reduced free fatty acid content. This process is especially applicable to 

treatment of oils which have high FFA content and which are to be hydrogenated. The 

free fatty acids which may interfere with hydrogenation are reduced at the same time that 

colour bodies and other impurities are being removed. 

This process is capable of many adaptations and variations without deviating from the 

spirit and scope vegetable oil refining. 

15. MATERIALS AND METHODOLGY 

The following materials were used for the practical aspect of the study. 

i. Palm kernel nut. 

ii. Bleaching earth. 

iii. Sieves: wooden basket, pap sieve, filter paper. 

iv. Reagents such as ethanol(C2H5OH), sodium hydroxide(NaOH), phenolphthalein, 

citric acid, phosphoric acid(H3PO4), potassium iodide, sodium thiosulphate( 

Na2SO3), acetic acid, chloroform. 

15.1 APPARATUS 

The following apparatus were also used; 

i. Cooking kerosene stove. 

ii. Cooking pot. 

iii. Conical flasks. 

iv. Round bottom flasks. 

v. Pipettes. 

vi. Weighing balance (beam and digital weighing balance) 

vii. Beakers. 

viii. Stone. 

ix. Thermometer. 

15.2 PROCEDURES 

15.2.1 OIL EXTRACTION 

The palm nut, tenera specie was crushed using stone to separate the palm kernel from its 

shell. About 1450g palm kernel were obtained. The palm kernel obtained was fried using 

cooking pot and stove as a source of heat; to extract oil from the kernel by traditional 

means. The charred kernel was then grounded to paste. The kernel paste was boiled with 

water for about 20 minutes. The boiled mixture was allowed to cool, after which oil was 

skimmed / decanted from the kernel paste-water mixture. 

The percentage yield of oil was calculated thus: 


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% yield = (weight of oil extraction / weight of palm kernel fried) * 100 

The crude palm kernel oil extracted was then tested for free fatty acid content, moisture/ 

impurity content and peroxide value. 

15.3 TEST FOR FREE ACID CONTENT (FFA) 

1% phenolphthalein solution was first prepared by dissolving 1g of phenolphthalein 

powder with 50ml ethanol in a beaker and making it up with 50ml water. 0.1M NaOH 

was prepared by dissolving 2g of NaOH pellet with 500ml water using a 500ml calibrated 

beaker. 

A solution of 25ml diethyl ether, 25ml ethanol and 1ml phenolphthalein, was exactly 

neutralised with a few drops of 0.1M NaOH. 3.01g of crude palm kernel oil was mixed 

with the resulting mixed cold neutral solvent. The 0.1 NaOH was titrated against then oilsolvent 

mixture until the colour changes. The end point is pink. The percentage free fatty 

a Type equation here.cid present in the oil is calculated thus: 

% FFA = 

15.4TEST FOR MOISTURE AND VOLATILE CONTENT 

10g of oil was weighed out as sample. The sample was heated for 1hour using a cooking 

pot, to a temperature of about 110 o C . the sample was allowed to cool and was 

reweighed. The weight loss was used to calculate the moisture content of the oil. The 

percentage moisture content is calculated thus: 

% moisture content = ( moisture loss / original weight of sample) * 100 

15.5 PEROXIDE VALUE TEST 

3g of oil was used as sample. It was weighed into a conical flask.2ml acetic acid was 

mixed with 1ml chloroform. The mixture was added to the conical flask containing the 

oil. The mixture was continuously swirled until a homogenous mixture was obtained. 

Potassium iodide was added to the mixture and was shaken for about 1minute with a few 

drops of starch indicator, resulting in different two phases. 0.2M sodium thiosulphate 

was titrated against the solution, until the blue colour disappears in both phase. 

The percentage peroxide value is calculated thus: 

% PV = 

15.6 DEGUMMING PROCESS 

400g of crude palm kernel oil was measured into a cooking pot and was heated to about 

60 o C. At this temperature, 0.4ml of phosphoric acid was added to precipitate the gums. 

Heating process continued for about 20minutes with continuous stirring, at a temperature 

of about 90 o C. The oil was allowed to stand for about 1hour 30 minutes so that the gums 

will settle at the bottom of the cooking pot. The oil is then separated from the gums by 

decanting. 

15.7 BLEACHING PROCESS. 

The decanted oil from the degumming process was heated to a temperature of 110 o C. 60g 

of bleaching earth was added to the hot oil. Neutralisation was achieved together with 

bleaching because the bleaching earth is alkaline in nature with the P h of 8. Thus, the 


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effect of phosphoric acid in the oil was neutralised. The bleaching process was carried 

out with continuous stirring. The bleached oil was filtered cloth sieve (pap sieve) and 

filter paper respectively. 

15.8 DEODORISING PROCESS. 

A distillation set up was used for the oil deodorisation. One of the round bottom flask 

was place inside a pot containing boiling water of 250 o C . This temperature was 

maintained to allow the free fatty acid (FFA) and other volatile components as well as 

odour to be stripped off from the oil. Citric acid was added as a preservative to enhance 

the oil‘s shelf-life. FFA , steam and other components that were stripped off, were 

collected in another round bottom flask. The process was allowed for 30 minutes. 

16. RESULT AND DISCUSSION 

This chapter analyses the results obtained from the materials and methodology chapter. 

The result obtained from the free fatty acid(FFA) analysis of the crude palm kernel 

oil(PKO) shows that the free fatty acid content in the palm kernel oil is 2.8%, which is 

0.3% higher than the standard value( 2.5%).This is as a result time difference between oil 

extraction period and the refining period. 

FFA is as a result of hydrolysis of fats, and moisture must be present for hydrolysis to 

take place. The moisture and volatile content analysis of the of the crude palm kernel oil 

showed 0.4% which is 0.1% above specification. This also contributes to the percentage 

FFA above specification. The FFA of the crude is usually dependent on the 

enzymatic(lipase) in the palm kernel before extraction and on the charring of the kernel. 

Other minor constituent of crude palm kernel oil include traces of hydrocarbon, ketones 

and other unidentifiable materials which gives the individual member their distinctive 

odour and flavours. 

The peroxide value analysis of the crude palm kernel oil showed that the peroxide is 0.75 

which is within the acceptable limit. 

During the bleaching and degumming process, the pigments as well as the gums, metal 

traces, soap traces if any and other impurities in the oil were removed. Most of these 

products are removed after the continuous stirring of the oil with an adequate bleaching 

earth for a given period of time at temperature between 90 o C and 110 o C. The quality of 

the bleaching earth is of utmost important also the capacity of the bleaching earth which 

determines the amount of leaching earth that is required to obtain the desired result. The 

quantity of bleaching earth used for this experiment was 15%. Natural colouring matters 

were easily removed but the colours that were developed in the crude oil were difficult to 

eliminate. The colours that were developed/fixed in the crude PKO could be as a result of 

prolong storage, excessive heating of oilseeds during extraction or by prolong crude oil 

storage at high temperature. 

Also, during deodorising process, odorous and flavouring matters which are mainly 

aldehydes, ketones, alcohols and hydrocarbons are removed at the same time as the free 

fatty acid. Some unsaponifiables such as tocopherols are evaporated at the same time 

because they are more volatile than the oil at the temperature of 250 o C. The rate of the 

removal of these materials is proportional to length of time the oil remains in the 

deodoriser and tonne the temperature at which the deodorisation takes place. 


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After the experiment, the refined oil is analysed for free fatty acid, peroxide value and 

moisture and volatile component value. The FFA test gave 0.126% in excess of 0.026% 

against 0.1 which is the standard value for FFA in a refined bleached deodorised(RBD) 

palm kernel oil. The peroxide test gave zero(0%) because the mixture of the refined oil 

with chloroform, acetic acid and potassium iodide were colourless. The moisture and 

volatile content test for the refined oil gave 0.02%. the percentage yield of oil after 

filtration is 58%. 

Table 3: Composition of crude palm kernel oil and refined palm kernel oil 

COMPOSITION OF CRUDE PALM KERNEL 

OIL 

Free fatty acid 2.8 

Peroxide value 0.75 

moisture and volatile matter 0.4 

COMPOSITIONS OF REFINED PALM 

KERNEL OIL 

Free fatty acid 0.126 

Peroxide value 0.00 

Moisture and volatile matter 0.02 

Yield after filtration 58 

Source; Primary data Analysis result 

PERCENTAGE(%) 


% 

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17. Conclusion 

With respect to the objectives of this project crude oil was extracted from palm kernel 

(45%)using traditional method. The extracted crude palm kernel oil was subjected to 

degumming using phosphoric acid, bleached using bleaching earth (bentonite) and 

deodorised at high temperature. The refined bleached deodorized (RBDO) was tested for 

free fatty acid content (FFA), peroxide value (PV) and moisture impurity value (MIV) 

and the RBDO was found to be of edible grade. Thus, the aim of this project has been 

achieved. 

18. Recommendation 

This study critically analyse different methods of which oil can be extracted from palm 

kernel and how the extracted oil can be refined. These technologies can equally be 

applied to other oil bearing seeds such as soya beans, palm fruit, cocoanut, cotton, 

jathopha etc. Since most companies uses only mechanical expression and solvent 

extraction, this study covering other technologies that are more cost effective, economical 

and environmental friendly, is recommended for the vegetable oil producing companies. 

Also, for refining aspects, apart from physical and chemical refining, clay heat refining is 

recommended to vegetable oil producing companies since it is more efficient refining 

method when compared the physical and chemical refining method. 

In terms of the oil quality of the oil produced, if the colour of the oil is inherent, repeated 

bleaching and recycling/recirculation of the oil should be applied until clearer colour is 

obtained. Also prior to deodorising, the oil should be completely free of any trace of 

bleaching earth. 


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References 

Arai, K., & Adschiri, T. (1999). Importance of phase equilibria for understanding 

supercritical fluids environments. Fluid Phase Equilibria, 673. 

Bargale, P. C.; Singh, J.(2000). Journal of food science and technology. 

Cottrell, R.C(1991). Nutritional aspect of palm oil. 

FreePatentsOnline.com.,(2004-2010);Activated carbon improved vegetable oil refining 

process. United States Patent 4154750. 

Hartley, C. W. S. (1988). The Oil Palm, 3rd edn. Longman Scientific and Technical, 

Harlow, U.K. 

Hassan etal, (2001). The effect of dehulling on supercritical extraction of palm kernel oil. 

Journal of Chemical Engineering of Japan, 34(3), pg 407 

"http://www.appropedia.org/Original:Small_Scale_Vegetable_Oil_Extraction_6. King, 

Jerry W. (2002). "34, Supercritical Fluid Technology for Lipid Extraction, 

Fractionation and Reactions". Lipid Biotechnology. New York: Marcel Dekker 

Inc.. pp.663. 

http://scrub.lanl.gov/pdf/king/157_supercritical_fluid_technology_for_lipid_ 

xtraction.pdf.R. 

Mazza .G. (2004). Functional Foods, Biochemical processing aspect. Technomic 

publishing company, USA. 

MEOMA(2001), MEOMA Handbook, 2000-2001. The Malaysian Edible Oil 

Manufacturers Association Kuala, Lampur. 

MPOB (2003). Report of Malaysian palm oil research board (Palm Oil Research Board of 

Malaysia 

Musa, John J. (January-June 2009). "Evaluation of the Lubricating Properties of Palm 

Kernel Oil". Leonardo Electronic Journal of Practices and Technologies (14): 

107. ISSN 1583-1078. 

Norulaini, N. A. N., Zaidul, I. S. M., Anuar, O., & Omar, A. K. M. (2004). Supercritical 

reduction of lauric acid in palm kernel oil (PKO )to produce cocoa butter 

equivalent (CBE). Journal of Chemical Engineering of Japan, 37(2). 

Omar, A. K. M., Rahman, N. A. N., & Hassan, M. N. (1998). Process for a 

simultaneous extraction and fractionation of palm kernel oil using supercritical 

carbon dioxide as a solvent Malaysian patent (P19805730). 

Pantzaris, T.P(2000). Pocket book of palm oil uses, fifth edition. MPOB, Bangi. Pg 102. 

Poku, Kwasi (2002). "Origin of oil palm". Small-Scale Palm Oil Processing in Africa. 

FAO Agricultural Services Bulletin 148. Food and Agriculture Organization. 

ISBN 92-5-104859. 

Saito, S. (2001). Research activities on supercritical fluid science and technology in 

Japan – a review. Journal of Supercritical Fluids, 8,177. 

Scott Smith, .J, Hui, Y.H,(2004). Food processing principles and application. Blackwell 

publishers, New York. 

Sosulski, F. W.Journal of Agricultural Engineering Research 2000. Taylor, Larry T 

(1996). Supercritical Fluid Extraction. Techniques in analytical chemistry. John 

Wiley and Sons, Inc.. ISBN 0-471-11990-3. 

Venter, M. J.; Willems, P.; Kareth, S.; Weidner, E.; Kuipers, N. J. M.; de Haan, A. 

B.(2007). The Journal of Supercritical Fluids pg 41. 


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Wan, P. J.; Wakelyn, P. J., Eds.; (2004), Technology and solvents for extracting oilseeds 

and nonpetroleum oils; AOCS Press: Champaign. 

White, A.; Burns, D.; Christensen, T. W. (2006), Journal of Biotechnology pg 123. 

Willens , P (2007), Gas Assisted Mechanical Expression of oilseeds. Gilde print, Kyoto, 

Japan. 

Zaidul, I. S. M., Norulaini, N. N. A., Omar, A. K. M., & Smith, R. L. Jr., (2006). 

Supercritical carbon dioxide (SC-CO2) extraction and fractionation of palm 

kernel oil from palm kernel as cocoa butter replacers blend. Journal of Food 

Engineering, 73(3), 210. 


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APPENDIX 

CALCULATIONS 

PERCENTAGE OIL YEILD DURING OIL EXTRACTION 

% yield = Total mass of oil extracted 

Total mass of palm kernel fried 

Mass of oil extracted = 630g 

Mass of palm kernel fried = 1400g. 

Therefore, 

%yield = 45% 

% FREE FATTY ACID CONTENT OF THE CRUDE PALM KERNEL OIL(PKO) 

Where a = volume of sodium hydroxide (NaOH) used in titration. 

W= the weight of the oil used as sample. 

2= lauric oil acid factor. 

From titration, a = 4.3ml 

W= 3.105g. 

Thus, 

PEROXIDE VALUE CALCULATION FOR CRUDE PALM KERNEL OIL(PKO) 

Where b = titre value/ the volume of sodium thiosulphate(Na2 SO3) used for titration. 

N = molar concentration of the sodium thiosulphate. 

W= weight of the oil sample used. 

And 

b= 12ml 

N= 0.2M 

W= 3.20g. 


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Thus, 



MOISTURE AND VOLATILE CONTENT OF THE CRUDE PALM KERNEL OIL(PKO) 

Moisture loss = (weight of sample prior to heating − weight of sample after heating) 

Weight of oil sample prior to heating = 10g. 

Weight of oil sample after heating = 9.96g. 

Thus, 

Moisture loss = (10.00−9.96)g = 0.04g. 

Therefore, 

REFINED BLEACHED DEODORISED OIL (RBDO) CALCULATIONS. 

%FFA OF RBDO 

Where 2 = lauric oil acid factor 

w = weight of the RBDO sample 

a = volume of sodium hydroxide(NaOH) used for titration and 

w = 4.76g 

a = 0.30g 

Therefore, 

%FFA 

PERCENTAGE MOISTURE AND VOLATILE MATTER CONTENT OF THE RBDO 

Recall that 

%MV = (Moisture loss) * 100 

( Original weight of sample) 

And: Moisture loss= (weight of sample prior to heating − weight of sample after heating) 

Weight of sample prior to heating = 10.000g 

Weight of sample after heating = 9.998g 


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Therefore, 

thus, 

moisture loss = (10.000−9.998) = 0.002g 

%MV= 0.02. 


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A study of Globalization in International Business 

Mohammad Reza Noruzi, (Corresponding Author) 

EMBA, PhD in progress , Public Sector Policy Making 

Islamic Azad University, Bonab Branch, Iran 

Young Researchers Club Member, IAU Bonab Branch, Iran 

Mohammad Bakhtazmai 

PhD in progress, Islamic Azad University, Bonab Branch, Iran 

Abstract 

In a rapidly changing environment, organizations constantly change goals and seemingly 

confront corporate cultural conflicts. And the global economy has altered economic 

structures and social policies and cause communities to enter to such a dynamic 

environment. In this dynamic environment called globalization every company should try 

to learn the lessons of globalization. This paper aims to study the globalization and its 

related issues in detail. 

Keywords: Globalization, Culture, International, Business 


Most scholars would not argue that organizational culture is a source of competitive 

advantage for firms (Barney, 1986; Kotter and Heskett, 1992; Schein, 1992). 

Within the competitive challenges posed by global markets of the nation-states and 

organizations, forces of increasing complexity and intensity are being identified. Nationstates 

and organizations use this knowledge to adapt to change and develop processes to 

identify the characteristics of their global competitors, taking into account their 

associated competitive advantages. Both entities, as do the new institutions, need to be 

endowed with powers and abilities to coexist in turbulent environments. 

2. Globalization and culture 

The globalizing market economy is not a homogeneous structure. It seeks the emergence 

of a decentralized regulation of markets coupled with a cosmopolitan and liberal 

democracy provided by transnational institutions. Cosmopolitan nations only work with a 

cosmopolitan democracy that moves towards globalization but also reaches down to 

social local organizations. This cosmopolitan democracy expands to regulate the 

efficiency of the global economy. The global economy, as it is today, is a complex and 

contradictory set of global markets, national development strategies and competitive 

corporate strategies (Borrus and Zysman, 1997). 

According to J. H. Mittelman, globalization is "a historical transformation in economy 

and cultural diversity." Globalization is the idea of making the world act like a huge 

country. Globalization affects this world and its people in many ways. Globalization 

affects the economic status of a country. It has indeed weakened the position of poor 

countries and exposed poor people to harmful competition. 

Globalization and international culture 

National cultures are linked to institutional structures of national business systems. The 

origins and evolution of institutions requires an understanding of cultural differences. 

International business has traditionally interpreted the term culture to mean national 


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cultures exclusively and has emphasized the differences among nations as a central, 

unique focus of the field. This focus is particularly evident in international business 

research distilling national cultures into a small number of universal dimensions. 

Hofstede (1991:253) has warned against applying national culture dimensions to 

subnational levels. This research has long been criticized for oversimplifying the complex 

cultures, generalizing from a limited number of firms, assuming that culture and social 

structures are static and ignoring within country heterogeneity. 

3. Globalization and partnerships 

Findings from the study conducted by the Center for Substance Abuse Prevention 

(CSAP) have demonstrated that effective community partnerships include the following 

characteristics: 

� A comprehensive vision that encompasses all segments in a community and aspects 

of community life. 

� A widely shared vision that has been agreed on by groups and citizens across the 

community. 

� A strong core of committed partners who have been involved in the partnership from 

the very beginning. 

� Inclusive and broad-based memberships that reflects the participation from all 

segments of the community, including the work place. 

� Avoidance or quick resolution of conflict hat might create a misunderstanding about a 

partnership‘s basic purpose. 

� Decentralized units such as local planning councils or neighborhood teams, which not 

only encourage action directed at the needs of the small areas within a community, 

but also enlist residents to take the necessary actions or decisions. 

� Reasonable staff turnover that is not disruptive. 

� Extensive prevention activities and support for local prevention. (CSAP, 2000). 

Partnerships also strengthen democratic practices. The greatest challenge of community‘s 

partnerships is to use their own assets and to internalize the need to better their life styles 

that can be achieved through individual and community empowerment. The factors that 

exist in a community are called assets defined by three interrelated characteristics: 

include the capacities of the members, internally focused and driven by relationships. To 

empower the community means that it may be able to create wealth and the basis of 

sustainable development using all the resources and all the vehicles at its disposal. 

4. Conclusion 

The challenge remains the urgent need to develop new social technologies capable of 

incorporating the informal sectors of the economy so that they can benefit from economic 

globalization processes. This is in clear contradiction with the current hegemonic 

development model. The pace, magnitude and direction of change caused by 

globalization will continue to progress rapidly through technology transfer. It will join 

societies and cultures, change community values, and widen the gap between the rich and 

the poor. But it will also create opportunities and challenges for companies and 

organizations. Managing the change of dynamic management (Dowbor, 2001) requires an 

ongoing process of adjustment of different segments of social reproduction. 


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References 

Borrus, M. And Zysman, J. (1997) "Globalization with borders: The rise of Wintelism 

asthe future of global competition". Industry and innovation, 1997, 141-66. 

CSAP (2000). “Community Partnerships Work In Preventing Substance Use”, Prevention 

Alert, Volume 3, No. 14, Mayo 8, 2000. 

Dowbor, Ladislau (2001). “Descentralization and governance”, 

http://www.ppbr.com/ld/govern.shtml 

Barney, J. B. (1986). „Organizational culture: Can it be a source of sustained competitive 

advantage?‟. Academy of Management Review, 11, 656–65. 

Kotter, J. P., and Heskett, J. L. (1992). Corporate Culture and Performance. New York: 

Free Press. 

Schein, E. H. (1983). “The role of the founder in creating corporate culture.” 

Organizational Dynamics, xx, 13-28. 

Hofstede, G. (1991). Cultures and Organizations: Software of the Mind. Berkshire: 

McGraw-Hill Book Company. 


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Abstract 

A CONSUMER FOCUSED STUDY OF TRANSPORT SERVICE 

QUALITY: A CASE STUDY OF SELECTED STATE TRANSPORT 

CORPORATIONS IN NIGERIA 

Dr. Gunu, Umar Ph.D 

DEPARTMENT OF BUSINESS ADMINISTRATION 

UNIVERSITY OF ILORIN, ILORIN, NIGERIA 

The development of a safe quick and cheap transportation system in Nigeria is becoming 

increasingly difficult to achieve because of the down-turn in the economy. In response to 

this problem, both the Federal and the State governments introduced the Urban Mass 

Transit Programme to complement the efforts of the existing public transport 

corporations. These corporations were plagued by insensitivity to the needs of their 

customers. The public nature of these enterprises and proliferation of mass transit 

services has informed the current research of determining whether the mass transit 

enterprises are delivering the right quality of services to their consumers.Specifically, this 

study identified the present level of commuter satisfaction and assessed overall quality of 

transportation service.Six states‘ Transport Corporations were used as the focal point, 

600 commuters constituted our sample. The data used for the study were generated 

through questionnaire. The questionnaire used for this study had a battery of 29 service 

quality attributes which respondents were requested to rate and they were also asked to 

comment on service attributes that caused dissatisfaction/satisfaction. Factor analysis was 

used to reduce the number of variables (29) and to confirm the underlying dimensions of 

transportation service quality. Multiple regression was used to explore the relationship 

between service dimension and commuter satisfaction. Factor analysis results indicated 

that ten (10) dimensions – comfort, timeliness, and safety, attitude of drivers, transport 

fare, convenience, breakdown, affordability, accessibility and empathy, best described the 

dimensions of transport service phenomena. The results also indicated that commuters are 

dissatisfied with their service experience and service firms are not consumer focused. All 

service providers lacked a formal mechanism for handling problems and 

complaints.Based on the findings, it was recommended that the ten underlying 

dimensions be adopted as the dimensions of transportation service quality and customer 

care propositions. This should form the basis for customer care strategy development. 

Furthermore, it was recommended that public transport service providers should avail 

themselves of best practices in the industry, and welcome complaints from customers as 

this would help management build a clearer understanding of customers‘ experiences. 

Customer problems and complaints can become powerful change mechanism. Finally, it 

was recommended that frontline staff (drivers, bus, conductors and ticket clerks) be 

integrated into the fundamental service offer so that they can become highly 

knowledgeable about all facets of service offer and are always there to offer support and 

advice to customers. It was concluded that if transport corporations in Nigeria put their 

customers at center stage, it will help them create a culture that is appropriately 


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responsive to customers. This will ensure that they get the ―basics‖ right because 

exploiting new opportunities will require a company to build on existing capabilities. 

The stronger these capabilities the more other profitable opportunities a company is likely 

to have. Good performance can only come from a solid foundation of knowing one‘s 

customers and how they choose, and delivering consistently whatever it is that matters 

most to them. 

Keywords: Transport Service, Service Quality, Customers, Affordability, Empathy of 

Customers 


There are different modes of transportation namely road, rail, air, water and pipeline etc. 

Out of these modes, road transportation is the most dominant in Nigeria. Road transport 

mode seemed to be most favoured and important in Nigeria based on two crucial 

determinants of the nature and pattern of transport, namely the physical and human 

geography of Nigeria. The road mode provides easy access to every nook and cranny of 

the country traversing the length and breadth of the nation linking the industrial, 

commercial and agricultural centres (FRN, 1998). 

The contrast feature between roads and vehicle ownership in Nigeria is that while the 

roads are publicly owned, vehicles are owned mostly by private individuals and 

organisation. However, a substantial number of vehicles are owned by the government 

either for commercial or official purposes. The public vehicles used for commercial 

purposes are usually owned by state – owned mass transit corporations, which compete 

on routes plied by private operators, although with lower fares (Arosnayin, 2004). 

The demand for public transport is dependent on two major factors:- 

i). The desire to make a particular trip at all and the drive to do so by public transport, 

and 

ii). Possibly the characteristics and nature of public transport modes that are available 

(Aworemi et al. 2008). Formal public transport system is high passenger occupancy 

vehicles, which are usually provided by government and other government and nongovernmental 

agencies at users‘ costs in the form of fares. Formal public transport system 

is deemed significant because of the following reasons; 

(i) The growth of private car-use tends to intensify congestion costs, environmental 

hazards, energy costs, which are socially and politically unacceptable. 

(ii) For reasons of age, disability or poverty a large proportion of the population may 

never own private vehicles hence there is need to provide public transport for them 

(Passweel and Reeker, 1978 and Hay, 1984). 

The supply of formal public transport vehicles varies from place to place all over the 

world. In less developed countries, the supply of public transport is far below the demand 

for the mode. Furthermore the public transport systems are grossly mismanaged and in 

most case inefficient. Prior to the introduction of the National Urban Mass Transit 

Programme in 1988 over 90 percent of the commuting needs in the major urban centres 

of Nigeria were met by private road transporters. The balance of 10 percent were spread 

between private motorization, government municipal owned operators where they 


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existed, the skeletal rail services in Lagos and port Harcourt, and ferry services in the 

coastal cities like Lagos, Calabar, and Port Harcourt. The surviving municipal operators 

were by the end of 1987 found only in Lagos, Port Harcourt, Kaduna and Benin City. The 

other defunct state owned companies operating intra-city and inter-city in Oyo, Kwara, 

former Benue and Plateau, Kano, and Borno states had collapsed in 1980. Indeed there 

were cases in which two or three other previous efforts of establishing State Transport 

Corporations had failed. Such examples include Kano state and Ibadan municipality. 

Factors responsible for the collapse of these erstwhile companies included inefficient 

management, fraud, lack of autonomy from supervising state ministry, adverse 

competition from numerous small-scale private operators and heavy operational deficits. 

However, these companies were relative to most private operators operating on fixed 

routes. They are more safety conscious and possessed better trained staff and 

maintenance facilities (Bolade, 1993). 

Commencing from January 1988, the federal and state urban mass transit programmes 

were embarked upon to mitigate against some of the deficiencies and inadequacies in 

public transportation.The establishment of an urban mass transit task force preceded the 

implementation of the federal programme. To implement the programme, the sum of 

N700 million was initially budgeted in the 1988 fiscal year. Budgetary realities during the 

year permitted the release of N151 million within the limit of available funds. Federal 

efforts are intended to complement and strengthen the states‘ programme where the prime 

responsibilities for urban transport lie. 

At the state level, the most pronounced activities have been connected with the 

establishment of transport companies through which both the federal allocated and state 

owned buses are being operated. Starting at different dates from March 1988, all the 

states have commenced mass transit operations. 

Although the state owned mass transit companies started operations at different dates 

from March 1988, a few, such as Lagos, Bendel (present day Edo and Delta states) and 

Kaduna had operated established services before this date. For example, Kaduna state and 

Lagos state transport services were incorporated on March 2, 1979. Oyo, Ondo, and 

Anambra were among the first set of states in the federation to embrace the urban mass 

transit programme. Each of the states set up a limited liability company. For Oyo (now 

Oyo and Osun states) the Trans City Transport Company (TCPC) was incorporated on 

December 7, 1987, but was officially launched on July 9, 1988, commencing commercial 

operations on July 11, 1988. For Ondo (now Ondo and Ekiti States), the Owena Mass 

Transport Company (OMTC) started operations on August 1, 1988 while in Anambra 

(now Enugu and Anambra states) the Transport Company of Anambra (TRACAS) was 

commissioned on September 12, 1988 (Filani and Abumere, 1993). 

The public nature of these enterprises and proliferation of mass transit services has 

informed the current research of determining whether the mass transit enterprises are 

delivering the right quality of services to their consumers. The concept of quality is of the 

major value customers expect from their service providers. Most consumers will no 


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longer accept average quality. Higher levels of quality result in higher levels of customer 

satisfaction, which support higher prices and often lower cost (Kotler, 2003) 

Quality is the totality of features and characteristics of a product or service that bear on 

its ability to satisfy stated or implied needs (Miller, 1993). This is clearly a customer 

centred definition. We can say that the seller has delivered quality whenever the seller‘s 

product or service meets or exceed the customers‘ expectation. A company that satisfies 

most of its customer needs most of the time is called Quality Company. 

The objectives of the research are the identification of transport service dimensions that 

contribute to quality and identification of features of mass transit services that contribute 

to quality of service offered to customers. 


In ordinary language, quality implies some degree of excellence or superiority. In 

industrial context, quality is more concerned with ―fitness for purpose‖, (Juran, 1988) and 

quality management is about ensuring products or services meet their planned level of 

quality and conform to specifications.Juran‘s (1988) definition includes two elements: 

quality of design; which can include the customer satisfaction built into the product and 

quality of conformance i.e. lack of defects in the finished goods. 

Demming (2000) saw quality as aiming at ―the needs of the consumer, 

present and future‖. His approach was looking at products from the 

customers‘ point of view and then meeting customer requirements in close 

collaboration with suppliers. Crosby, (1979) and Cole, (2006) saw quality 

primarily as ―conformance to requirements and idea of zero defects‖. 

Crosby, (1979) proposed fourteen steps that management could take to 

improve quality throughout business. This is mostly concentrated on 

raising awareness about quality and gaining collaboration for the 

achievement of zero defects. 

For services, like transport services customers cannot judge the technical quality even 

after they have received the service (Kotler 2003). There are three categories of quality 

for products and services. There are goods high in search qualities – that is characteristic 

the buyer can evaluate before purchase; good and services high in experience quality – 

characteristic the buyer can evaluate after purchase; good and service high in credence 

qualities – characteristics the buyer normally finds hard to evaluate even after 

consumption (Ostrom and Iacobucci, 1995) 

Because services are generally high in experience and credence qualities there is more 

risk in purchase, this has several consequences. First service consumers generally rely on 

word of mouth rather advertising. Second, they rely heavily on price, personnel, and 

physical cues to judge quality. Third they are highly loyal to service providers who 

satisfy them (Kotler 2003) these apply to transport services provided by state transport 

corporations since the corporations do not always advertise their services so commuters 

rely on price, personnel and infrastructure facilities of the corporations. 


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The service quality of a firm is tested at each service encounter. Customers form service 

expectation from past experience, word of mouth, and advertising. Customers compare 

the perceived service with expected service. If the perceived service falls below the 

expected service, customers are disappointed. If the perceived service meets or exceeds 

their expectations, they are apt to use the provider again (Berry and Parasuraman 1999; 

Berry 1995; and Berry 1999). 

Various studies have shown that well-managed service companies share the following 

common practices: a strategic concept, a history of top management commitment to 

quality, high standards, self service technologies, systems for monitoring service 

performance and customer complaints, and emphasis on employee satisfaction (Kotler, 

2003). 

Attempts to measure service quality depend on a synthesis of two underpinning models 

of consumption, the attribute model and the disconfirmation model. The first notable 

recognition and review of the attribute model is that of Myers and Alpert (1968). The 

basic model views quality in terms of attributes of a consumer product. The attribute 

model holds that consumers assess quality by allocating value weightings to these quality 

attributes, which are mentally ‗averaged‘ to form an overall quality rating. Particular 

attributes may differ in their relative importance to individual consumers (Bettman and 

Jacoby, 1976). Thus consumers are believed to envisage the attributes of different 

product brands as a matrix, with which they weigh potential benefits against potential 

sacrifices, such as inconvenience or costs. Swan and Combs (1976) develop the attribute 

concept to include product performance attributes acknowledging the model‘s relevance 

to service offerings, which have a strong performance component (Johns, 1999) as well 

as to tangible products. Thus, the developed attribute model contains three elements: 

discrete quality attributes, relative values/ importance which are ascribed to these 

attributes and universality i.e. relevance to consumer quality assessment of both goods 

and services. 

The disconfirmation model (Oliver, 1980; Bolton and Drew, 1991) proposes that 

customers perceive quality as a comparison between their expectations and the actual 

performance they receive. Positive disconfirmation is deemed to occur when service 

performance exceeds expectation and negative disconfirmation when opposite is the case 

(Johns, 2002). The disconfirmation model has been incorporated into theories of service 

consumption (Parasuraman et al, 1985) and has been further elaborated into a ‗gap 

theory‘ of service quality assurance. This proposes four potential gaps at different stages 

of service design and delivery, between what the service providers intends and what the 

consumer actually receives. Bridging these gaps is thought to ensure that a fifth crucial 

gap does develop, between what customers expect and what they actually feel they 

receive (Brogowicz et al; 1990). 

Parasuraman, Zeithaml, and Berry (1985) formulated a service quality model that 

highlights the main requirements for delivering high quality service. The model identifies 

five gaps that cause unsuccessful delivery: Gap between consumer expectation and 

management perception, Gap between management perception and service quality 

specifications, Gap between service quality specifications and service delivery, Gap 

between service delivery and external communications and Gap between perceived 

service and expected service. The researchers found five determinants of service quality: 

reliability, responsiveness, assurance, empathy and tangibles. 


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The current ‗standard‘ for measuring perceived quality of services, is the SERVQUAL 

questionnaire (Parasuraman et al; 1986), which draws from both attribute and 

disconfirmation Models. This instrument seeks to measure service quality by separately 

scoring two parallel sets of scaled items, encompassing five different dimensions of 

service quality: tangibles, reliability, responsiveness, assurance and empathy. One of the 

items sets is designed to elicit customers‘ expectations and the other their perceptions of 

service performance. Item scores represent the weights given to specific statements and 

they may be summed to produce dimension attribute score or an overall quality scores 

(Johns, 2002). Using factor analysis Parasuraman et al; (1986) have produced five 

empirical dimensions, which have their counterparts in theory and reflect the attribute 

model. 

Several authors have expressed concern with the SERVQUAL instrument, on both 

empirical and theoretical grounds. Cronin and Taylor (1992), Taylor et al; (1993), have 

all questioned the use of separate data sets on empirical grounds, and although some 

researchers have managed to find a five- factor pattern, a substantial number have failed. 

Parasuraman et al; (1991) themselves were unable to replicate their own work in a later 

study. Various suggestions have been put forward to explain discrepancies between 

theoretical prediction and empirical observation. Cronin and Taylor (1992) note that the 

‗expectations‘ series of SERVQUAL questions have poor discriminatory power and Teas 

(1994) proposes that the wording of ‗expectation‘ questions should be changed. Overall 

therefore, there seems to be general agreement about the appropriateness of the attribute 

model in measuring service quality, but there is considerable empirical evidence to doubt 

the validity of disconfirmation model (Johns, 2002). 

Other techniques have been used in an attempt to overcome this difficulty, for example 

constant sum/point allocations (Malhotra, 1993) in which respondents indicate 

preference, perceived importance e.t.c. by distributing a constant number of counters 

between different products or brand name. This method is suggested by Zeithaml et al; 

(1990) as a means of deriving the relative importance of service attributes. This is 

independent of scaled questionnaire approaches. Its effectiveness stems partly from the 

visual and tactile nature of the chips, but it is time consuming and limited in terms of 

number of products that can be handled at one time (Roslow and Nicholls, 1996). An 

indirect approach to the measurement of attribute importance is offered by Cronin and 

Taylor (1992) who use a stepwise regression process. However, such value must of 

necessity be derived from the single data set and independence from expectation and 

performance scores cannot be claimed (Johns, 2002). 


The population of the study is customers of thirty six state transport Corporations in 

Nigeria and samples were Customers of : Kwara state transport Corporation, Lagos State 

transport Corporation, Imo state transport corporation, Kaduna State transport 

Corporation, Rivers state transport corporation, Gombe state transport corporation. 

The descriptive research design is adopted by this study. The variables used are 

qualitative and were collected based on perceptions of respondents through a field 

survey. Ordinal level of measurement was used by constructing a five - Point Likert 

scale. 


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The research made use of Primary data that were generated through a survey of Transit 

corporations. Questionnaires were administered to customers of six State Transport 

Corporations. The questionnaire elicited information on the service quality and their 

satisfaction with the services rendered by state Transport Corporations. 

The commuters that patronize the services of the state transport corporations were 

randomly selected. The commuters were selected on the basis of routes plied by the 

vehicles of the selected state transport corporations using stratified random sampling. A 

total of 600 questionnaires were administered to the sampled commuters of the six 

selected state transport corporations and 482 questionnaires were returned. 

Instrumentation for this research is questionnaire. The questionnaire is the structured 

non–disguised questionnaire. The level of measurement that was used is the ordinal scale. 

The questionnaires were administered by research Assistants to the respondents between 

July to November 2005 in all the selected state transport corporations. 

Analyses were carried out on the data that were collected. Inferential statistics such as 

factor analysis and multiple regression were used to analyze the nonparametric data. 

4. Analyses of Data 

The breakdown of the customers‘ responses gave rise to 66 respondents from Gombe, 

which is 13.7%, 67 respondents from Imo, which is 13.90%, 99 respondents from 

Kaduna which is 20.50%, 62 respondents from Kwara, which is 12.90%, 98 respondents 

from Lagos which is 20.3% and 90 respondents from Rivers, which is 18.76%. 

Factor analysis is adopted in this research to identify the latent structure of the set of 29 

variables from the questionnaire. Factor analysis was used here to change our large 

number of variable (29) to smaller number of factors (10). 

The values of KMO test for the data and variables is 71.04% signifying very good fit 

between the data and variables and factor analysis model indicating an excellent fit 

between the data and variables and factor analysis model. On the fulcrum of these results, 

the factor analysis model offers a very good fit and is robust for our data. 

The value of Bartlett‘s test of sphericity is 1 and the associated level of sphericity is 0.05. 

These results indicate that the population correlation matrices are identity. Therefore, the 

hypotheses that the population correlation matrix is an identity cannot be rejected. This is 

based on the fact that the sample size is 482 for our respondents and 29 variables are 

considered large enough to enable the use of factor analysis. The results of Bartlett‘s test 

of sphericity shows an exact fit between the factor analysis and the data and sample. 

The latent rule criterium was used in this research to determine the number of factors. 

There are 10 factors with latent roots greater than one; latent rule suggests 10 factor 

solution for our data. The total variation in the data explained by the 10-factor solution is 

56.78% respectively. 

The Eigen value for our factors is contained in tables 1. There is no difference between 

the extracted sum of squared loading and rotation sum of square loading so they all add 

up to the same values of 56.780%. 


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Factor 1 has the highest extraction sum of square loading of 4.110 representing 14.17% 

and also the highest score of the rotation sum of square loadings of 4.110 accounting for 

14.17% for our respondents. 

Factor 10 has the least on both extracted and rotation sum of square loading with 1.006 

representing 3.469% and 1.006 accounting for 3.469% respectively for our respondents. . 

The result indicates that no factor is considered redundant with both rotated and unrotated 

solutions. The sum of square loadings for the other factors fall between the ranges 

described above. Mostly the contributing power of the factors to the explanation of the 

variance in the variables is considered very significant. 

Table 1: Total Variance Explained 

Component 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

29 

Total Variance Explained 


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Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings 

Total % of Variance Cumulativ e % Total % of Variance Cumulativ e % Total % of Variance Cumulativ e % 

4.110 14.172 14.172 4.110 14.172 14.172 2.234 7.703 7.703 

2.190 7.552 21.724 2.190 7.552 21.724 1.928 6.647 14.350 

1.845 6.361 28.085 1.845 6.361 28.085 1.872 6.455 20.805 

1.489 5.133 33.218 1.489 5.133 33.218 1.851 6.383 27.188 

1.317 4.543 37.761 1.317 4.543 37.761 1.633 5.631 32.819 

1.191 4.106 41.867 1.191 4.106 41.867 1.574 5.426 38.246 

1.180 4.069 45.935 1.180 4.069 45.935 1.442 4.971 43.217 

1.098 3.787 49.722 1.098 3.787 49.722 1.412 4.870 48.087 

1.041 3.591 53.313 1.041 3.591 53.313 1.344 4.635 52.723 

1.006 3.469 56.782 1.006 3.469 56.782 1.177 4.059 56.782 

.929 3.203 59.984 

.904 3.117 63.101 

.885 3.051 66.153 

.856 2.952 69.105 

.806 2.778 71.882 

.777 2.681 74.563 

.734 2.532 77.095 

.715 2.465 79.560 

.694 2.392 81.952 

.651 2.245 84.197 

.636 2.193 86.390 

.590 2.033 88.423 

.567 1.956 90.379 

.551 1.901 92.280 

.535 1.843 94.124 

.482 1.661 95.785 

.423 1.458 97.243 

.408 1.408 98.651 

.391 1.349 100.000 

Extraction Method: Principal Component Analy sis. 

Source: Author‟s Computation



The examination of Table 2 of loading indicates the following observations 

Factor 1 

Variables 2, 9, 10,12,15,16, and 26 load heavily on factor 1 which accounts for 14.72% 

of the total variance explained. 

Factor 2 

Variables 11 and 18 load heavily on factor 2 that accounts for 7.55% of the total variance 

explained. 

Factor 3 

Variables 20, 23, 25, and 28 are the only variables that correlates highly with factor 3, 

which accounts for 6.361% of the total variance, explained. 

Factor 4 

Only variable 7 loads heavily on factor 4 and it accounts for 5.133% of the total variance 


Factor 5 

Variable 9 is the only variable that correlates highly with factor 5, which accounts for 

4.543% of the total variance, explained. 

Factor 6 

Variable 3, 4, and 28 have low correlation coefficients with factors 6 with a total variance 

explained of 4.106% 

Factor 7 

Two variables, 27 and 28 correlates moderately with factor 7 which accounts for 

4.0690% of total variance explained 

Factor 8 

Only variable 1 load heavily on factor 8 that account for 3.78% total variance explained 

Factor 9 

Variables 5, 6, 16, 17, 21, and 25 correlates moderately with factor 9, which accounts for 

3.591% of total variance explained 

Factor 10 

Only variable 19 loads moderately on factor 10 that accounts for 3.469 of total variance 


The factor loading Score for the initial factors are greater than -+ 0.40 and therefore, the 

variables were identified under each of the factors from the factor loading matrices in 

Table 2 


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Table 2 Factor Matrix (Customers) 

Variables 

Frequency of Trav el 

Timely Departure 

Timely Arrival 

Drivers are Time 

Concious 

Drivers Do not keep to 

Time 

Few Accident Cases 

Good Driv ing Habits 

Ticket collection 

consumes time 

Adequate Leg Space 

No Overload 

Carry Excess 

Passengers 

Comfortable Seats 

Air-conditioned Buses 

with Video and 

Television 

Satisf action with 

quantity and quality of 

infrastructure 

Comparative quality of 

service 

Satisf ied experience 

with serv ices 

Justification of fares 

charged 

Bus conductors create 

inconviences 

Vehicles do not 

breakdown too often 

Refund of fare when 

there is breakdown 

Moderate Fares 

Fares not reviewed 

f requently 

No additional charge on 

luggage 

Separate charge for 

luggage 

Commuters travel on 

credit 

Loyalty of commuters 

Reasons for Utilisation 

of services 

Reasons for 

non-utilisation 

Overall View on 

Perf ormance 


a. 10 components extracted. 

Source: Author‟s Computation 

Component Matrix a 


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Component 

1 2 3 4 5 6 7 8 9 10 

-.125 .130 -.128 .241 -.250 -.154 .190 .655 -.109 .127 

.509 .354 -.317 -.036 -.396 .188 .089 .079 .004 -.039 

.496 .143 -.175 -.006 -.393 .360 .062 .014 -.253 -.087 

.345 .254 -.244 .097 .072 .340 -.131 .121 -.217 .002 

-.159 .442 .151 .110 .230 .044 -.206 .121 .211 -.044 

.380 .213 -.235 .064 .294 .137 .275 -.111 .208 .245 

.301 .318 .022 .589 .201 -.033 .036 -.080 .074 -.019 

-.241 .488 .190 .240 .113 .042 -.300 .011 -.120 -.101 

.545 .017 .138 -.053 .409 -.058 -.172 .143 -.217 .058 

.552 -.140 .170 -.199 .229 -.108 -.272 .129 -.271 .064 

-.351 .556 .029 -.179 -.021 .062 .001 -.166 -.062 .038 

.610 .057 .047 -.207 .189 -.230 -.052 .175 -.017 -.121 

-.046 .336 -.189 -.285 .309 .217 -.230 .105 .183 .093 

.407 .252 .020 -.091 -.153 .172 -.175 .053 .168 -.407 

.546 -.143 .027 .275 .192 .203 .187 .030 -.108 -.009 

.526 -.131 -.063 .198 .053 .056 -.155 .052 .208 .209 

.472 -.011 -.282 .112 .037 -.132 .267 -.057 .283 .139 

-.296 .586 -.016 .035 .009 -.089 .061 -.193 -.017 .241 

.407 .203 .002 .002 -.180 -.152 -.086 -.337 -.227 .415 

.247 .220 .463 .020 .045 -.359 .295 .103 -.039 .087 

.357 .185 -.203 -.350 .100 -.245 .125 -.073 .282 -.381 

-.025 .374 -.166 -.487 -.059 -.223 .091 .182 -.269 .164 

.297 .035 .498 -.255 -.204 .087 -.063 .159 .197 .063 

-.123 .415 .051 .367 -.102 -.334 .053 .095 -.021 -.308 

.078 .063 .645 .093 -.288 .191 -.223 .021 .196 .188 

.523 .101 .118 -.115 -.309 -.227 -.113 -.234 .254 .081 

.019 .149 .338 -.137 .164 .216 .351 -.358 -.283 -.222 

-.118 .110 .420 -.191 .135 .349 .508 .260 .157 .093 

.498 -.088 .311 .162 -.082 -.083 .111 -.120 -.190 -.198



Table 3 gives the rotated component/factor matrices. The result in this table shows that 

rotation has made factor loadings more interpretable because it reduces the number of 

variables that have high loading on any given factors. This makes it easy to identify each 

variable to a single factor 

Table 3: Rotated Factor Matrix 

Frequency of Trav el 

Timely Departure 

Timely Arrival 

Drivers are Time 

concious 

Drivers Do Not Keep to 

Time 

Few Accident Cases 

Good Driv ing Habits 

Ticket Collection 

Consumes Time 

Adequate Leg Space 

No Overload 

Carry Excess 

Passengers 

Comfortable Seats 

Air-conditioned Buses 

with Video and Telev ision 

Satisf action with Quantity 

Quality od Inf rastructure 

Comparative Quality of 

Serv ice 

Satisf ied Experience with 

Serv ice 

Justification of Fares 

Charged 

Bus Conductors Create 

Inconviences 

Vehicles Do Not 

Breakdown Too Of ten 

Refund of Fare when 

there is Breakdown of 

Vehicles 

Modearte Fares 

Fares not Rev iewed 

Frequently 

No Additional Charge on 

Luggage 

Separate Charge f or 

Luggage 

Commuters Trav el on 

Credit 

Loyalty of Commuters 

Reasons for Utilisation of 

Serv ices 

Reasons for 

Non-utilisation of services 

Overall View on 

Perf ormance 


Rotation Method: Varimax with Kaiser Normalization. 

a. Rotation converged in 14 iterations. 


Rotated Component Matrix a 

Component 

1 2 3 4 5 6 7 8 9 10 

-.069 .104 -.032 .085 -.074 .089 .096 -.118 .114 -.782 

-.026 .709 .255 -.039 .106 .152 .017 .249 -.082 -.147 

.068 .776 .068 -.137 .075 .024 .140 .027 -.017 .011 

.248 .544 .141 .148 -.124 -.015 -.174 -.086 -.012 -.006 

-.003 -.094 .004 .550 .112 .028 -.276 .052 .096 -.028 

.095 .140 .670 .013 -.089 .077 -.141 .066 .143 .098 

.101 .119 .469 .525 -.046 -.156 .208 -.041 -.057 .000 

-.005 .028 -.199 .663 .022 .102 -.084 -.136 -.026 .045 

.742 .071 .157 .064 .022 -.027 -.007 .021 .016 .062 

.754 .076 -.012 -.133 .129 -.008 .028 .029 -.105 .062 

-.257 .037 -.142 .334 -.006 .483 -.178 .001 .113 .160 

.590 .100 .154 -.044 .087 .024 .063 .398 -.018 -.053 

.097 .058 .061 .167 -.025 .155 -.625 .108 .075 .067 

.106 .438 -.037 .173 .226 -.160 -.054 .445 -.024 .079 

.351 .272 .377 -.049 -.055 -.305 .222 -.084 .150 .064 

.279 .140 .436 -.076 .211 -.264 -.055 -.026 -.203 -.063 

.049 .087 .626 -.163 -.028 -.041 .083 .234 -.082 -.093 

-.261 -.058 .114 .398 -.017 .525 -.084 -.107 .010 .055 

.200 .207 .303 -.046 .206 .418 .204 -.166 -.340 .168 

.269 -.181 .163 .166 .265 .254 .417 .123 .251 -.125 

.111 .056 .164 -.047 -.071 .085 -.036 .757 -.007 .099 

.146 .094 -.128 -.087 -.095 .673 -.131 .157 .061 -.194 

.190 .064 -.060 -.079 .647 .001 .018 .134 .189 -.013 

-.149 -.010 -.060 .556 -.101 .073 .315 .200 -.063 -.245 

-.012 .010 -.083 .166 .758 -.104 .070 -.215 .069 .049 

.099 .122 .266 -.093 .483 .120 .177 .319 -.318 .104 

.037 .091 -.088 .080 -.070 .150 .289 .006 .446 .525 

-.074 -.066 .054 -.029 .229 .050 -.064 -.049 .814 -.038 

.308 .180 .076 .006 .160 -.148 .532 .092 .017 .148 


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Factors 1 (Comfort) 

Three variables load heavily on factor I after varimax rotation and they can be interpreted 

as comfortability of the services provided by the state Mass transit corporations 

Factor 2 (timeliness) 

Three variables load on factor 2 and these can be interpreted as timeliness of the drivers. 

Factor 3 (safety) 

Two variables load on factors 3 and they explain safety of the services of state Mass 

transit corporations. 

Factor 4 (Attitude of drivers) 

Three variables load on factor 4 and they explain attitude of drivers of state Mass transit 

corporations. 

Factor 5 (Transport fare) 

Two variables load on factors 5 and they explain transport fare of mass transit services. 

Factors 6 (Convenience) 

Two variables load on factors 6 and they explain convenience of services of state 

transport corporations. 

Factor 7 (Breakdown of vehicles) 

Only one variable loads on factor 7 and it explains refund of fare when a repair of 

broken down bus is immediate. 

Factor 8 (Affordability) 

Only one variable loads on factors 8 and it explain moderate fares charged by state 

transport corporations. 

Factors 9 (Accessility) 

Only one variable loads on factor 9 and it explains reasons of utilisation of mass transit 

services. 

Factor 10 (Empathy) 

Only one variable loads on factors 10 and it explains reasons of non-utilisation of mass 

transit services. 

Factor Analysis was used to reduce the numbers of variables for our respondents. 

These factors were used as independent variables for multiple regression analysis. 

The ten factors identified by factor analysis were used as independent variables 

while customer satisfaction was the dependent variable for the multiple regression 

analysis as shown in table 4 .40 

Table 4: Multiple Regression Analysis between Service Dimension and 

Customer Satisfaction. 

Model Variable DF SS MS Cal.F Cri. R Adjusted 

F square 

1 Regression 10 98.906 9.891 12.889 1.83 0.244 

(24.40%) 

Residual 400 306.95 0.767 

Total 410 405.856 10.658 

R square 

0.225 

(22.50%) 


Table 4 presents the result of multiple regression analysis of dependent variable 

(customer satisfaction) and independent variables (service dimension). The results in 


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table 4 show that customer satisfaction is predicted by service dimension. From the 

multiple regression analysis in table 4, F value, when customer satisfaction was regressed 

with customer dimension was 12.889, F (10/410 = 12.889, P = 0.05). The regression is a 

significant explanation of the variation in the satisfaction of customers of state Mass 

Transit corporations since 12.889 is higher than critical value of F = 1.83 at 0.05 alpha 

level. The coefficient of determination was 24.40%. 

The coefficients of the model are shown in table 5. 

Table 5: Coefficient (Customers) 

Model 1 Unstandardised Standardised T Sig R 

Coefficient 

Coefficient 

2 

B Std Error Beta 

Constant 0.00528 0.43 0.122 0.903 

2 

Comfort 0.200 0.43 0.201 4.621 .000 0.040 

Timeliness 0.07977 0.43 0.080 1.844 0.066 0.066 

Safety 0.334 0.43 0.335 7.714 .000 0.112 

Attitude 

Drivers 

of 0.0680 0.43 -0.068 -1.572 0.117 0.005 

Transport Fare 0.09534 0.43 0.096 2.204 0.028 0.009 

Convenience -0.186 0.43 -0.187 -4.310 0.000 0.035 

Breakdown of -0.00766 0.43 -0.008 -01.77 0.860 0.0001 

Vehicles 

Affordability -0.0616 0.43 -0.062 -1.424 0.155 0.004 

Accessibility -0.162 0.43 -0.163 -3.752 0.200 0.0266 

Empathy -0.0696 0.43 -0.070 -1.609 0.100 0.0049 


From Table 5, four factors were not significant, which were factor 4, factor 7, 

factor 8 and factor 10. Factor 3 was the attitude of drivers, factor 7 was breakdown of 

vehicles, factor 8 was affordability of transport services and factor 10 was empathy of 

customers towards the services of State Mass Transits Service. 

From table 5, factor 3 had the highest coefficient of determination which was 

11.20%, followed by factor 1 which had 4.00%, then factor 6, which had 3.50% and 

factor 9, which had 2.66%. Factor 3 was safety of services, factor 1 was comfortability, 

factor 6 was convenience of services and factor 9 was accessibility of services by 

customers. Other factors had less than 1% of coefficient of determination. 

5. Summary and Conclusions 

Commuter perception of transport service quality of state transit corporations depends on 

timeliness of the service as revealed by the study and supported by multiple regression 

analysis revealed three major variables of safety and timelessness of state transport 

services – timely arrival at destination, good driving habits of the drivers of state Mass 

Transit corporations and drivers not keeping to time schedules. This is also supported by 

the results of factor 2 of principal component analysis. The variables in factor 2 are; 

timely arrival for departure, timely arrival at destination and time consciousness of 

drivers. 

The variables revealed by study were of two categories – positive relationship and 

negative relationship. Timely arrival at destination and good driving habits of drivers



have positive relationship with performance but divers not keeping to time schedules has 

negative relationship with performance. Drivers not keeping to time schedules 

discourages commuter from patronizing the services of state Transport corporations but 

timely arrival and good driving habits of drivers of the corporations encourage patronage 

of the service, the three variables of factor 2 also has positive relationship with patronage 

of the services of state transit companies. 

Apart from and timeliness, comfortability of the services also commands some 

patronage of commuters of the services of state transport corporations. Comfortability 

factors were relative quality, adequate leg space, air conditioned buses, refund of fare 

during breakdown of vehicles when repairs are not immediate, satisfaction with 

infrastructure put in place to aid circulation of passengers and excessive passengers. 

Relative quality, adequate leg space, refund of fare when repair of broken down vehicles 

is not immediate and satisfaction with infrastructure put in place to aid circulation of 

passengers have positive relationship with patronage of the services of state transport 

corporations .Factor 1 of principal component analysis had adequate leg space, no over 

load with excessive passengers and comfortable seats as the major comfortability 

variables that aid the patronage of the services of state mass transit corporation 

Affordability and economy of fare charged by state transport providers equally have their 

effect on the patronage of the services of the corporations as revealed by the study which 

were customer loyalty and no additional fare on luggage as the main variable that dictated 

their patronage of the services of State Transport corporations. Consumers have varying 

degrees of loyalty to specific brands, stores, and companies. Oliver (1997) defines 

loyalty as a deeply held commitment to buy or re-patronize a preferred product or 

services in the future marketing of efforts having the potential to cause switching 

behaviour. The responses of the respondents supports the view above because they 

indicated that they will continue to patronize the service of state transport corporations 

even if they have money to pay for private transport or even if they own their own 

personal cars, if the number of this customers increases the performance of the state 

transit corporations would be better. 

The results of factors 5, 6 and 7 indicated no additional charge on luggage for factor 5, 

infrequent breakdown of vehicles for 6 and refund of fares if repairs are not immediate 

for 7 respectively .A comparison between fares charged by private transport providers 

and state transport provider revealed that the fare charged by state transport providers 

was low hence the willingness of commuters to patronize the services of state transit 

corporations. The reasons revealed by multiple regression analysis for not patronizing 

mass transit services were; buses of state mass transit corporations not regularly available 

at their bus-stops, low speed of the vehicles, buses not regular, impolite conductors, 

nearness of residence to work place, pick – pocket problem and ownership of personal 

cars. These problems can be surmounted by an increase in fleet size of state transit 

corporation, regular maintenance of vehicles and change of disel engines to petrol 

engines 

Based on the findings, it was recommended that the ten underlying dimensions be 

adopted as the dimensions of transportation service quality and customer care 

propositions. This should form the basis for customer care strategy development. 

Furthermore, it was recommended that public transport service providers should avail 

themselves of best practices in the industry, and welcome complaints from customers as 


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this would help management build a clearer understanding of customers‘ experiences. 

Customer problems and complaints can become powerful change mechanism. Finally, it 

was recommended that frontline staff (drivers, bus, conductors and ticket clerks) be 

integrated into the fundamental service offer so that they can become highly 

knowledgeable about all facets of service offer and are always there to offer support and 

advice to customers (Gunu, 2007). 

It was concluded that if transport corporations in Nigeria put their customers at 

center stage, it will help them create a culture that is appropriately responsive to 

customers. This will ensure that they get the ―basics‖ right because exploiting new 

opportunities will require a company to build on existing capabilities. The stronger these 

capabilities the more other profitable opportunities a company is likely to have. High 

quality of service can only come from a solid foundation of knowing one‘s customers and 

how they choose, and delivering consistently whatever it is that matters most to them. 


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Antecedents of Turnover and Absenteeism: Evidence from 

Public Sector Institutions of Pakistan 

Khurram Shahzad 

PhD Scholar, Mohammad Ali Jinnah University, Islamabad, Pakistan. 

Assistant Professor, Faculty of Management Sciences, 

Riphah International University, Islamabad, 

Khansa Hayat 

Faculty of Management Sciences, Riphah International University, Islamabad 

Muhammad Abbas 

Lecturer, Faculty of Management Sciences, Riphah International University, Islamabad 

Sajid Bashir 

Management Sciences, Mohammad Ali Jinnah University, Islamabad 

Kashif-ur-Rehman 

Associate Professor, Faculty of Management Sciences, Iqra University, Islamabad 

A bstra ct 

In this study, we examined main factors that determine the turnover intentions and 

absenteeism in public sector institutions of Pakistan. Data was collected through self 

administered questionnaires. Results indicate that in public sector, turnover and 

absenteeism rates largely depends upon job stress, career opportunities and job 

satisfaction. Turnover and absenteeism can be reduced by implementing new techniques 

and strategies like providing better career opportunities and enhanced working 

environment, fairly rewarding employees, appreciating equally and by giving incentives 

to the hardworking, punctual and attentive employees. Over and above, if turnover and 

absenteeism ratio is reduced, it encounters a strong psychological affect on the employees 

as well as to an organization. 

Keywords: Turnover, Absenteeism, Job Satisfaction, Job Stress, Career Opportunities, 

Public Sector, Pakistan. 


The layman definition of turnover is to leave any current organization or 

switching over to other organizations due to some reasons. This dilemma is increasing 

with time and is costly as well (Peterson, 2009). Literature on job satisfaction and 

absenteeism presents such unsystematic reviews that provide variety of interpretations to 

be discussed (Scott & Taylor, 1985). 

Absenteeism is supposed to be occurring when an employee is not present at 

his/her work when he/she is expected to be at work according to the schedule (Brooke, 

1986). Absenteeism depends on both internal and external economic conditions of the 

organization (Markhan and Mckee, 1991). Muchinsky (1977) concluded that a 

relationship between job satisfaction and absenteeism seems to exist. Employees with 


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high rate/level of burnout leave the organization before they critically analyze other 

aspects and demands of a job (Schaufeli, Bakker, & Rhenen, 2009). 

Similarly, job stress is one of the highly investigated individual level job 

outcomes at the workplace (Liu, Spector, & Shi, 2007). Hendrix, Spencer and Gibson 

(1994) stated that women are facing more work stress as compared to men. It is not a 

comparison of men and women work stress but it depicts that due to a number of working 

women organizations may be facing a high rate of absenteeism and turnover. 

Absenteeism and stress both affect each other. Stress is a cause of absenteeism and 

absenteeism is a cause of stress (Hendrix, Spencer & Gibson, 1994). So absenteeism can 

be reduced by handling stress properly. Job stress threatens the physical and mental wellbeing 

of an individual, which in the long-run causes turnover & absenteeism. 

Giga, Hoel, and Cooper (2003) concluded that high rates of mergers, acquisitions, 

growing economic interdependence among countries, due to many reasons, have changed 

the organizational lifestyle that has resulted in time pressure, excessive work demands, 

role conflicts, ergonomic insufficiencies and problematic customer relationship all of 

which cause stress. 

Job security provides a high level of satisfaction to employees. But many 

researchers proved that in some cases complete job security causes a high rate of turn 

over and absenteeism. Employees adopt turnover to seek better opportunities that are 

offered by other companies including growth opportunities by providing a challenging 

job (Walsh & Taylor, 2007). 

Well structured rewards are helpful in bringing down the level of absenteeism 

(Camp & Lambart, 2006). Female employee‘s absenteeism is related with generalized 

views so they face barrier in organizations (Patton & Johns, 2007). Turnover decreases 

when there are satisfactory working terms with peers because there is negative 

relationship between turnover and satisfaction with coworkers (Golden, 2007). 

Although, there is a considerable amount of research conducted on absenteeism 

and turnover in developed countries, however, less attention has been paid to this issue. 

There is some research on this issue but not enough to determine the actual factors that 

actually cause absenteeism and turnover. Job dissatisfaction is one of most important 

determinant of turnover and absenteeism. Korunka, Hoonakker, and Carayon (2008) 

found strong correlation between emotional exhaustion and job satisfaction and turnover 

intention. 

Pakistan is a developing country and public sector of Pakistan is facing high rate 

of turnover and absenteeism which causes inefficiency in this sector. After reviewing the 

relevant literature we found that research in this area is very rare especially in public 

sector. Hence, this research attempts to fill the gap by studying this phenomenon in 

public sector. As public sector institutions provide better facilities and better job security, 

medical and housing facilities to the employees but instead of all these facts, turnover 

rate is increasing due to many reasons like less career opportunities and job 

dissatisfaction. This research will try to find the determinants of the turnover and 

absenteeism in public sector. 

This research would be helpful in developing such strategies that would be useful 

in reduction of absenteeism and turnover rate in public sector institutions of Pakistan. 


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2.1 Turnover 

According to Price and Mueller (1981) turnover can be named as voluntary 

leaving. When employee leaves a job or switches over to another organization with 

his/her own choice this situation is considered as turnover. Employees who experience a 

fair system, where they are correctly rewarded on their efforts and hard work are in a 

situation where they have less intention to leave the organization (Korunka et al., 2008). 

Turnover depends on healthy working environment (O‘Brien-Pallas et al., 2006), healthy 

environment means clean and workable atmosphere, where employees feel themselves 

comfortable and easy to work. This environment affects employees in such a way that 

they work with interest so turnover will be less. QWL (quality of working life) has been 

found to be a key predictor for turnover intention and turnover decisions by (Korunka et 

al., 2008). 

Identification of an area where deficiency lies is most important. If organization is 

successful in identifying such areas where actual problem exists and where there is a need 

of improvement, then turnover can be reduced by overcoming this problem. 

2.2 Absenteeism 

During finding out the cases of absenteeism and turnover, 55 percent cases were due to 

job dissatisfaction (Lee, Mitchell, Wise, & Fireman, 1996). Employees remain absent 

when they are not satisfied with their job. Short term absenteeism can be reduced by 

applying penalty on employees (Chaudhury and Ng, 1992). If employees are punished for 

their absenteeism without any genuine reason then absenteeism can be reduced. 

Absenteeism is found to be less among such employees, who are not permanent in the 

organization (Wilson and Peel, 1991). It is a reality that temporary employees are more 

motivated and they have less absenteeism as they expect to be permanent for being 

regular. 

There is a weak relationship that exits between pension and absenteeism but it‘s a 

positive relationship (Allen, 1981), if pension is related to absenteeism to some extent 

then there is a relationship between pension and absenteeism. There is a negative 

relationship between absenteeism and wages (Allen, 1981); employees will avoid 

absenteeism when it depends on wages, it means if an employee is absent from his or her 

job so his/her wages will be cut down. Firm must be aware of the type of absenteeism it 

is facing (Chaudhury and Ng, 1992). 

2.3 Job Satisfaction 

Job satisfaction is multifaceted construct and an attitude that employees‘ have 

about their own jobs and the organizations in which they perform their jobs tasks and 

duties (Mosadeghrad, Ferlie, & Rosenberg, 2008). Job is more satisfying when the 

employees are committed to their work. Job commitment has a positive effect on job 

satisfaction. When job commitment increases job satisfaction also increase as employees 

commitment with the job has a long term relationship with job satisfaction, evidence 

provided by Judkins and Rind (2005). Job satisfaction is strongly correlated with turnover 

intention, greater the employees‘ job satisfaction, the lesser would be their turnover 

intention (Mosadeghrad et al., 2008). 


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Increment in job satisfaction is an important factor that helps in reduction of 

turnover and absenteeism, but before doing this; the responsible person must be aware of 

the factors that influence job satisfaction (Lembert, Hogan and Barton, 2002). When 

employees are not treated and rewarded equally, they become dissatisfied with their jobs. 

To achieve a high level of job satisfaction, organizations should treat all the deserving 

employees equally. As it is human nature that they perform well when their effort is 

recognized. 

As Alqashan and Alzubi (2009) stated that unequal treatment and recognition 

issue is a cause of employee‘s dissatisfaction. Job satisfaction has a close relationship 

with the quality of life (Tsang & Wong, 2005). Income level is one of the most important 

factors that affect job satisfaction (Sur et al., 2004). There is a strong relationship 

between job satisfaction and absenteeism (Trevor, 2001). Job satisfaction is effected by 

two factors one is individual (intrinsic) and other is organizational (extrinsic) factors 

(Castle, 2008). An employee might be feeling dissatisfied with the job due to both 

factors. Organizational factors include; working environment, relationship with peers, 

work stress etc. while individual factors include; work family conflicts, flexible working 

hours etc. So while finding out the determinants of job satisfaction both of these should 

be kept in mind. 

Information about the organization plays an important role in job satisfaction 

(Addae & Parboteeah, 2006). Job insecurity negatively affects job satisfaction 

(Chirumbolo & Hellgren, 2003). When employees are not in a state where the job 

security is ensured to them then it would have a negative impact on job satisfaction. Job 

security is an important determinant of job satisfaction. If the company involves the 

employees in policy making and policies are possibly in favor of employees then turn 

over will be reduced and there would be satisfaction among the employees. 

There is a strong relationship between working environment and job satisfaction 

(Sahibzada, Hammer, Neal and Kuang, 2005). Employees working in public sector 

organizations have a high level of job satisfaction as they are satisfying their needs and 

desires, as the environment is less compatible so employees do not go for turnover 

(Bright, 2008). Proper supervision and appropriate working conditions lead to a high 

level of job satisfaction (Koustelios & Tsigilis, 2005). If employees are provided proper 

supervision and their working conditions are satisfactory then job satisfaction will be 

increased. When employees are highly motivated, their level of job satisfaction is also 

high (Demmer, 2002). 

Job satisfaction is related with task satisfaction if an employee is satisfied with his/her 

task then he/she is also found to be satisfied with the job (Mason and Griffin, 2002). 

Satisfaction has a strong relationship with organizational commitment (Lambert, 2004). 

While observing the cases of absenteeism and turnover, 55 percent were due to job 

dissatisfaction (Lee et al., 1996). 

Employees with low satisfaction with their jobs are more probable to quit their 

jobs (Tet & Meyer, 2010). Employees having a low level of job satisfaction are expected 

to leave their jobs within a year (Castle, Engber and Anderson, 2007). If level of job 

satisfaction is increased turnover is likely to reduce (Castle, Engber and Anderson, 2007). 

Employees with low level of inherent job satisfaction and compensation (reward etc) are 

less likely to switch to another job (Tang, Kim and Tang, 2000). 


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H-1: There is a negative relationship between job satisfaction and Turnover. 

H-2: There is a negative relationship between job satisfaction and Absenteeism. 

2.4 Job Stress 

Employees with single parent families are facing more stress (Hendrix, Spencer 

and Gibson, 1994). Sager (1994) found positive relationship between job stress and 

quitting intentions. An employee can be facilitated by providing him some breaks or 

leisure time in order to prevent turnover. Stress is not a reliable predictor of turnover and 

absenteeism (Steel and Rentsch, 1995). Good relationship among employees and 

professional working environment provides less job stress and a high level of job 

satisfaction (Paoline, Lambert and Hogan, 2006). If a professional approach is 

implemented in the organization, employees will find it easy to handle the job stress and 

as a result they will be satisfied with their jobs. 

If an employee is not satisfied with his job, he might be facing a high level of job 

stress so to increase job satisfaction, reduction of job stress is a must. Some employees 

are facing high level of stress due to dual role and work overload and in this situation 

they opt for turnover (Hendrix, Spencer and Gibson, 1994). Job stress is a condition 

which negatively affects the employees and their work (Lambert, Hogan and Griffin, 

2008). When an employee is clear about the characteristics of his/her job, it would be 

helpful in increasing job satisfaction and reducing job stress. If the working environment 

of an organization is not satisfactory then they would prefer to switch over to another job 

or they will start being absent from the work, it would eventually affect the productivity 

of organization. 

It may be evident by the presence of headache, sleep disturbances, difficulty in 

concentration. Hendrix, Spencer and Gibson (1994) stated that, women are facing more 

work stress as compared to men. It is a fact that a woman has to work hard at home as she 

has many duties at home and if she is working outside the home means she is doing job 

so she has to face double stress. Organizations that provide medical benefits to their 

employees are less likely to face job stress and this can be seen from the efficiency and 

productivity of the organization. Employees having financial dissatisfaction are likely to 

face stress at work (Kim and Garman, 2004). When employees are financially satisfied 

they will be living a good family life and in this way employees can avoid work family 

conflicts, it will result in a reduced job stress. Employees working in private 

organizations face high level of work stress as compared to employees working in 

government organizations (Tankha, 2006). 

Work to family conflict results in job dissatisfaction, turnover and job stress, 

where as family to work conflicts are a major cause of stress and absenteeism (Anderson, 

Coffey and Byerly, 2002). If the work of employee is a barrier for his family life then it 

would result in job dissatisfaction and if family life and responsibilities is the barrier then 

it will cause job stress. The job and role of the employee must be very clearly defined 

because if there are conflicts then it would cause job stress and absenteeism. 

Job related stress (like ambiguity and work pressure) and less career opportunity 

causes the work exhaustion which indirectly causes turnover intension and job 

dissatisfaction (Kim and Wright, 2007). 

H-3: There is a positive relationship between Job Stress and Turnover. 

H-4: There is a positive relationship between Job Stress and Absenteeism. 


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2.5 Career Opportunities 

Career opportunities are a great motivator for the employees so to reduce turnover career 

opportunities should be there in the organizations. Career prospects have a direct impact 

on job satisfaction and turnover (Anderson, Coffey and Byerly 2002). Career is a major 

concern of employees so opportunities play an important role in job satisfaction and 

turnover. Transparent procedures of selection and promotion provide equal opportunities 

of promotion and career development to the employees (Rosenblatt and Shirom 2006). 

Employees adopt turnover to seek better opportunities that are offered by other 

companies, it includes growth opportunities by providing a challenging job (Walsh and 

Taylor, 2007). This reference supports the argument that some employees are motivated 

if they are provided with some challenging job so employee turnover and absenteeism 

can be reduced by providing them their desired challenging jobs. It is clear now that 

better career opportunities in other organizations result in employee turnover (Griffeth, 

Hom and Gaertner, 2000). 

H-5: There is a negative relationship between Career Opportunities and Turnover 

H-6: There is a negative relationship between Career Opportunities and Absenteeism 

[Insert Figure 1] 


The data that has been used in this study is collected through questionnaires; the 

questionnaires were distributed among the employees of public sector institutions of 

Pakistan, it included four large organizations of public sector in Rawalpindi and 

Islamabad i.e. Capital Development Authority, WAPDA, Water Management Wing, 

Directorate of Education and National Highway Authority. The correlation and 

regression analysis of the data is done in order to find out the actual determinants of 

turnover and absenteeism in public sector organizations of Pakistan and the data of this 

study is analyzed on SPSS. The sample of our data consists of 200 employees of 

managerial level, functional level and other designations and ranks. 

3.1 Measures 

All variables were tapped using self reported measures. We gathered responses for all 

variables using 5-point scales ranging from 1 = ‗strongly disagree‘, 2 = ‗Disagree‘, 3 = 

‗neither disagree/nor agree‘, 4 = ‗Agree‘, to 5 = ‗strongly agree‘. In such way, higher 

responses obtained against a variable represented higher level of the construct. 

Job Satisfaction: A 6-item version (Agho, Price, & Mueller, 1992) was used to measure 

overall job satisfaction. Example include ―I find real enjoyment in my work‖ 

Job Stress: The shortened version of Job Stress developed by Jamal and Baba (1992) was 

used to measure job stress. The example items include ―I have too much work and too 

little time to do it‖. 

Career Opportunities: to measure career opportunities, the 3-item scale by Tessema & 

Soeters (2006) was used. 

Turnover Intentions: A 3-item scale (Vigoda, 2000) was used to measure intention to 

leave. Examples include ―Lately, I have taken interest in job offers in the newspaper‖. 


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Absenteeism: The data for absenteeism for each participant in this sample was gathered 

from HR departments. Specifically, we asked the respective HR departments to provide 

the number of scheduled work days missed by each respondent for the last 3 months. 

4. Results & Discussion 

Inter-correlation among all study variables are shown in Table 1. Correlation analysis 

indicates that there is a significant negative relationship between job satisfaction and 

turnover (r = -.32, p < .001); and absenteeism (r = -.20, p < .01) respectively. Job stress 

was not significantly related to turnover (r = .11, n.s) but it was positively related to 

absenteeism (r = .19, p < .01). Similarly, career opportunity had a significant negative 

relationship with turnover (r = -.29, p < .001), but it was not related to absenteeism (r = - 

.09, n.s). 

[Insert Table 1] 

Further, we conducted multiple regression analysis to test hypotheses 1 to 6. The 

regression analysis results for turnover are presented in Table 2, and those for 

absenteeism are presented in Table 3. Table 2 shows that job satisfaction and career 

opportunities significantly predicted turnover (B = -.25, p



The current study examines the key factors that determine the turnover intentions 

and absenteeism in public sector institutions of Pakistan. Our results indicate that, in 

public sector, turnover and absenteeism rates largely depends upon job stress, career 

opportunities, and job satisfaction. Turnover and absenteeism can be reduced by 

implementing new techniques and strategies like providing better career opportunities 

and enhanced working environment, fairly rewarding employees, appreciating equally 

and by giving incentives to the hardworking, punctual and attentive employees. Over and 

above, if turnover and absenteeism ratio is reduced, it encounters a strong psychological 

affect on the employees as well as to an organization. 


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Annexure 

J o b S a t i s f a c t i o n 

J o b S t r e s s 

C a r e e r 

O p p o r t u n i t i e s 

Figure 1: Model of the study 

1. Turnover 

2. Absenteeism . 1 0 -- 

Table 1: Correlation Analysis 

1 2 3 4 5 

-- 

3. Job Satisfaction -.32** -.20* -- 

4. Job Stress . 1 1 . 1 9 * -.13 -- 

5.Career Opportunities -.29** -.09 . 3 3 ** -.16* -- 

* P < .01, ** P < .001 

Table 2: Regression Analysis Turnover 

Tur n o v e r 

A b s e n t e e i s m 

Beta t-value Significant 

Job Satisfaction -.25 -3 . 0 2 . 0 0 3 

Job Stress . 0 5 . 6 1 . 5 4 2 

Career Opportunities -.20 -2 . 4 7 . 0 1 5 

� N = 1 5 0 D e p e n d e n t V a r i a b l e = T u r n o v e r 

� R s q u a r e = . 1 4 ; A d j u s t e d R s q u a r e = . 1 2 

� F = 8 . 0 3 2 ; S i g n i f i c a n c e = . 0 0 0 

Table 3: Regression Analysis Absenteeism 

Beta t Significant 

Job satisfaction -.18 -2 . 0 9 . 0 3 8 

Job stress . 1 7 2 . 0 9 . 0 3 8 

Career opportunities -.01 -.08 . 9 3 8 

� N = 1 5 0 D e p e n d e n t V a r i a b l e = A b s e n t e e i s m 

� R s q u a r e = . 0 6 9 A d j u s t e d R s q u a r e = . 0 5 0 

� F = 3 . 6 0 1 ; S i g n i f i c a n c e = . 0 1 5 


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Modernization and the Alterations of the Malay 

Wedding Foodways in the Urban Area 

Mohd Salehuddin Mohd Zahari, Mohd Zain Kutut 

Faculty of Hotel and Tourism Management 

University Technology MARA, 40450, Shah Alam, Selangor, Malaysia 

Rabiatul Adawiyah, Norhayati Mohd Yusof 

Faculty of Hotel and Tourism Management 

University Technology MARA, Permatang Pauh, Penang, Malaysia 

Abstract 

Preparation and consumption of food has long been a central position and one of the most 

essential components in the Malay wedding. These wedding foodways practices are not 

only act as social event but as well catalyst the interrelationship, interaction and social 

bonding among the individuals in the community. Waves of modernization however are 

believed to perceptually alter the Malays wedding foodways. This study empirically 

investigates factor moderating the alteration, level of changes and the impact of the 

alteration of Malay wedding foodways in the urban area through the waves of 

modernization. Using self reported questionnaire survey among the Malay community 

some meaningful insights was revealed. Modernization through the changes in socioeconomics, 

lifestyle and community culture moderates the alteration not only in the 

preparation, cooking but also the serving and eating decorum of Malay wedding in the 

urban area. This alteration is further support with the local regulation, limited space, the 

emergence of modern equipments and the urban living. Results of this study also show 

that though the adoption the modern aspects in the Malay wedding foodways giving a lot 

of advantages, the alteration somehow reduced cohesiveness, social bonding and 

interaction among the individual of Malay society in the urban area. The functions 

foodways as mechanism to knit the bond between people in a society is perpetually 

faded. 

Key words: Modernization, Alteration, Malay, Wedding, Foodways, Urban Area 

1. Intoduction 

Wedding is one of the most important social cultures practices for almost all nations in 

the world. It is a ceremony in which two individual (male and female) are united in 

institution called marriage. It encompasses an elaborate customs and traditions in every 

step of the processes from planning stage to the actual wedding day. Abdullah (2009) and 

Fukutomi (2002) argued that weddings are influences by both culture and religion and 

vary greatly between ethnic groups, countries and social classes. For muslim ‗Akad 

Nikah‘ for instance is the laws which solemnize the marriage while the reception is the 

cultural and customs practices. For Buddhists, Hindus and Christian, the process of tying 

the wedding knot for is first withheld in the temples, chapels or churches. The reception 

is then held either in the bride or the groom‘s house, community halls, banquet halls, 

restaurants, hotels, or anywhere else. Most of wedding ceremonies involve an exchange 

of wedding vows, presentation of a gift offering, ring, symbolic items, flowers and 

money. Yassin (1999) however posits for whatever reasons, the wedding ceremony 


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cannot be successfully organized without the presence of food. Food since the earlier 

days in fact plays an important role and act as one the most essential components of 

wedding and became a tradition and norms for most of the ethnics of the world 

(Fukutomi, 2002; Mohamed, 2008; Abdullah, 2009). Some contend no wedding without 

the presence of food (Sani 1999; Fukutomi, 2002; Bayan, 2007). 

Not to exaggerate much effort have been given to the wedding food preparation whereby 

in some ethnic groups, the whole community get involved into it. In Malaysia, it can 

clearly be seen in the Malays, Indian, Chinese and other ethnic groups. Despite different 

in the form of preparation the wedding food particularly the Malays have long been 

practicing as ―kenduri or gotong royong‖ which refer to food prepare by the 

neighborhoods and community to be served on the day of occasion. The preparation and 

consumption of food this special occasion is known as wedding foodways (Camp, 2009). 

In short, wedding foodways is significant to Malays as communal affair when everybody 

chipped in and put up their shoulders to help. On the very day, the whole neighborhood 

regardless of age, gender and social status are heavily involved in preparing and cooking 

of food to be served to the guests. The combination this religion and social practices have 

proven to be successfully draw community togetherness and integration. Sani (1999) 

contends wedding foodways has long been recognized as the integrative force that 

enhances solidarity and alliances between individuals and kin groups. It also acts as a 

bonding mechanism not only among the family but also the community (Abdullah, 2009). 

The old practices of Malay wedding foodways nevertheless are believed to have 

perpetually altered due to the waves of modernization. From sociological perspective, 

modernization symbolizes advancement, the evolution of a community and society 

(Chandamrong, 1999; Kashyap, 2004; Moon, 2009). Moon (2009) argues modernization 

involve societies which innovate and utilize the present and old knowledge, patterns, 

techniques and resources in all area of activities. In this sense, the preparation and 

cooking of Malays wedding food which are normally done in ―gotong royong‖ 

(togetherness manner) are believed to be gradually altered or being outsourcing to the 

caterer (Abdullah, 2009). Wedding foods are now being served in the buffet-style by 

arranging food in the chafing dishes on a long table or sideboard in which guests help 

themselves. In addition, instead of wedding host house, town community and hotel 

banquet halls are also becoming option to hold the wedding reception. These 

transformations of practices in actual fact are uncontrolled and unavoidable as it provides 

conveniences and practicality to the host as workload considerably reduced and fast. Not 

too harsh to say that these practices are rapidly altered in the urban area. Inglehart & 

Wayne (2000) noted there are so many benefits obtained from modernization however as 

people embraces modernity, it some way destructs some of the good elements in the 

society. In this sense, it is conjecture that due to the complexity of the society and others 

related matters customary practices of wedding foodways which symbolizes the Malays 

commonality and social bond among the individuals be faded in the urban compare to the 

rural area. With that this study is to uncover the issues by looking at; 1) factor moderating 

the alteration of Malay wedding foodways in the urban area; 2) level of changes on the 

Malay wedding foodways and 3) the impact of the alteration on social perspectives 


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2.1 Foodways 

Merriam-Webster dictionary defines foodways as eating habits and culinary practices of 

people, region or historical periods. Welch & Scarry (1995) refer this term as an act of 

consuming food and behaviors which involved the preparation, presentation and 

consumption of it. According to Camp (2009) foodways is a combination and intersection 

of food and culture while Powell (2007) posit foodways is mean to identify the identity of 

a community, age, ethnicity, gender, locale, occupation and religion. Some argue 

foodways closely related to cultural of foods, the tools, techniques and ingredients for 

which food is prepared and it customs (Verbeke & Lopez, 2005; Vu, 2009; Thomas, 

2004) and one of the best ways to understand a culture and ethnic identity (Scholliers 

(2001). Despites these, the most acceptable terms and suit to the context of this study is 

that foodways are the production and consumption of food that are characterized by 

individuals and society (Gutierrez, 1999; Freeman, 2002; Cusak, 2003; Gold, 2007; 

Williams-Forson, 2007). All these scholars in fact argue it is not only refer to food and 

cooking, but also to all food-related activities, concepts and beliefs shared by a particular 

group of people and give a meaning to their identity. The Irish for instance are being 

identified as ―potato people‖ by the English and Sicilians as ―macaroni eaters‖ by the 

Northern Italians (Scholliers, 2001). The consumption and production of Hong Kong 

poonchoi (an ethnic cuisine) is another closest example of how foodways associated to 

identity and lineage as well as sociality and commensality among the community (Shing, 

2007). 

The elements of foodways which refers to preparation and consumption as explained by 

Gutierrez (1999) are mostly being passed down from generation to generation and 

informally transmitted through oral and demonstration. New England Clambake is one 

of the examples of the foodways practices which have long been the tradition of family 

and community of New England. The practices were passed down from the Natives 

Americans to the colonist and further to its descendents. As the process of preparing and 

cooking of this baking product took at least two or three days to complete therefore it 

gives the opportunity to the community in sharing stories and connect with each other. 

Neustadt (1999) contend social relations are reinforced in this matter as individuals, 

families and community exchange foods or shared meals to create and strengthen social 

bonds within the community culture. 

Gutierrez (1999) on the other hand posited that food and foodways are important element 

in any celebrations and occasions. This is also in line with argument given by Murphy 

(2000) that certain foodways during feasts or celebrations symbolize values and 

important meaning in specific religions, cultures and ethnicity. Food and dishes served 

during festivities, weddings and other occasions often reflect the host ethnicity, locality 

and religion despites the preparation and presentation of meals or cuisines are varied 

depending on communities/ethnic and occasions (Vu, 2006). Some ethnics have 

structured their foodways in handling certain occasions with their religion such as 

Hindus, Buddhist and Jews (Vo, 2006). Hindus prepared Laddu for their festival of light. 

The Laddu symbolize their gratitude to god for their happiness, knowledge, peace and 


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wealth whereas Buddhist prepared cut vegetables and spices or known as Pibimbap for 

their ritual during Buddha‘s Birthday. During Hanukah or light festivals, Jewish eat 

latkes or known as potato pancake (Shing, 2007). Shing (2007) expressed that foodways 

in any feast also carried social messages. He gave Chinese community as an example, 

honor and respect are showed by the host using his own chopstick to serve the guests. On 

the other hand, long noodles which means ―May you live long‖ is served during birthday 

and sharkfin soup are served in weddings as well as lotus Rhizomes for prosperity. 

Similar goes to the practice of eating together which means solidarity, sharing and 

participation not only to the Chinese but also to the other ethnic communities. 

2.2 Foodways and the Malay Wedding 

According Zaferi (2002) marriage and wedding in the Malay society involve religion 

(Akad Nikah), cultural and customs aspect (reception). Malay wedding as noted by Quah 

(2008) engage various pertinent parties including parents, families, relatives and 

community and the presence of them in the ceremony is to maintain the close fraternity 

among them. Quah‘s further argue being much imbued with religion, traditions and 

customs, the marriage process encompasses four main stages from planning, prewedding, 

to the wedding day and the post wedding. These four main stages are important 

in making sure the marriage and wedding are the successful one. Nevertheless, it is 

undeniable that food is virtually ever present in every stage of the processes and the bulk 

of food preparation, cooking and consumption of it or known as foodways are occurs on 

the wedding stage. 

Abdullah (2009) denotes that foodways are the most remarkable feature of the Malay 

tradition in which not only a family but it involved the community with the extensive 

social networks. Malay wedding foodways depicted the ‗tightly knit‘ or dense social 

networks with everyone interacting with each other (Thompson, 2007). In the olden days, 

one week before the wedding, the community usually works together erecting sheds in 

the courtyard and a special warehouse or Bangsal Penanggah is built for the preparation, 

cooking and other task on the wedding day (Kasimin, 2002). Location for washing, 

dishing out the dishes and eating depot are also set up. Preparation of food for the Malay 

wedding as part of foodways normally begins in the afternoon prior to the wedding day 

(Kasimin, 2002). The main ingredients like meat cutting, chickens are cut by the men and 

ladies with preparation of herbs and spices like garlic, shallots, gingers, lemon grass and 

other supporting ingredients for the wedding dishes. Cooking process is then undertaken 

in the midnight till sunrise with couples of local men who are the wedding cooking 

experts or the tukang masak kenduri together with few assistants will cook the wedding 

dishes. The dishes usually consist of rice or Nasi Minyak, meat and chicken dish, 

vegetables, sweet pickles and fruits (Susanto (2007). On the consumption, the invited 

guests who are among the distant relatives, friends and acquaintance from around the 

country are welcomed by wedding host, close relatives and friends. As the guests sat, 

they are invited to eat the wedding dishes which are placed on the table. On this occasion 

the young boys are normally involved in placing the dishes on the table, cleaning and 

washing the dishes whereby the young girls be given a task in giving token with bunga 

telur or decorated hardboiled egg to the guests (Yassin, 1999). As the wedding end the 

community again getting together in clearing up the wedding facilities. Thompson (2007) 


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however asserted that the length of wedding event in the modern days is becoming 

shorter. Abdullah (2009) contend that numerous changes are apparent in the Malay 

wedding nowadays. This is related to timing, duration, cost, economics and social 

dynamics and all of these changes closely associated with the modernization (Thompson, 

2007; Weichart, 2007; Abdullah, 2009). The preparation of wedding that typically takes 

over a week now are can be settled within one day or two days. 

2.3 Modernization, Transformations and Social Changes 

Modernization is a broad term encompassed the ideas of progress and being adaptive. 

The adaptive usually means the ability of being able to adjust or reconfigure to new 

environment (Lerner, 1958). A common sense meaning of modern as argued by Leamson 

(2007) is ―whenever the new is embraced over the old ways‖. Most scholars however 

referred modernization to the transition between traditional society and to a modern 

society which involved change as well as transformations (Char & Andreas, 2003; 

Engerman (2003 and Cusak, 2003). The processes includes any transforming of social 

activities like trades, markets, education, health services, mass media (Char & Andreas, 

2003) and complementary changes in the demographic, economic, political and cultural 

sectors of the society (Leamson, 2007). Inglehart (2005) on the other hand noted that 

production and technological development and changes in the consumption of food were 

extensively shaped by modernization (Sobal, 2000). Societies are continuously changing 

and the social changes are reflected food and eating practices (Micheal, 2000) and 

Cwiertka (2000) found that industrialization, urbanization and modernization has major 

impact on the production and consumption of traditional food in Japan which strongly 

link to social changes. Sobal (2000) use the term social dynamics as large scale of social 

changes and asserted food, eating, and nutrition practices and patterns of a society of such 

examples. Gillette (2005) further added that some of the social changes are occurring in 

the preparation and consumption of food whereby some of the traditional way of 

preparing food has reduced and this largely associated with modernization not only on 

daily food practices, but also in the traditional event, celebration and ceremonies. 

3. Methods 

A self reported experienced through questionnaire survey was chosen as mean of 

information gathering. This is to ensure that the information obtained from the 

respondents would be based upon their actual experiences. As lack of empirical 

investigation or publication on the Malay wedding foodways in Malaysia and to provide 

a fundamental basis of such study, using one contextual setting for the data collection is 

considered sufficient and justified. In line with this Shah Alam city and its vicinity was 

chosen for data collection as it major populations are among the Malays who came from 

different backgrounds of upbringing (village and urban) and socio demographic (MBSA, 

2008). 

On research instrument, five major sections were created with each section addressing 

variables to suit the research objectives. Section A is focusing on respondent‘s 

demographic profile with six variables includes gender, age, marital status, locality and 

occupation of the respondents. A simple question to assess the respondent‘s knowledge 


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on Malay wedding is also included. Nine questions were used in Section B in identifying 

factors moderate the transformation while eleven item were used in measuring the level 

of transformation of the Malay wedding foodways in Section C. Section D was created 

with the intention to assess the impact of the transformation to community togetherness. 

These three sections are composed in close questions using five point likert scales. In 

further discovering opinions or true thoughts of the respondents five open-ended 

questions were constructed in section E and this is also used to validate the previous 

sections. 

Correspond with normal practices, a pre-testing of the research instrument was conducted 

prior the actual data gathering. Thirty respondents among Faculty of Hotel and Tourism 

Management‘s master students and researchers‘ close friends were selected for checking 

proper use of terms, meaning and most importantly to ensure the clarity of the questions. 

Comments and recommendations were noted and given consideration in the final draft of 

the research instrument. The surveys were then conducted over four weekends in the 

month by the researchers. This mean that eight days were spent in data collection process. 

It is worth noting that the respondents were approached after they had finished shopping 

at the three of the popular shopping complexes in Shah Alam city. A simple screening 

question is then asked. If their answer is within the intended age group or generation, a 

set of questionnaire is then preceded. Each customer was briefed about the study through 

the information sheet which was attached to the questionnaire. This information sheet 

provided details about the researchers, the aim of the study and the purpose of the survey 

conducted. It also stated that participation was voluntary and respondents were free not to 

complete or answer any questions in the questionnaire. In addition, the information 

provided by the respondents was strictly confidential and no respondents would be 

identified. In light of positive feedback and the absence of any obvious problems with 

either the instrument or the process, good responses were obtained although on certain 

occasions some are reluctant to participate. A total of 228 questionnaires were collected. 

The data were then coded and keyed in Social Statistical Package (SPSS) Version 16. 

Subsequently, the reliability test (Cronbach‘s alpha) was undertaken on Section B, C and 

D separately and result showed that the instrument and items used were reliable with 

coefficient alpha value at 0.839 for section B, 0.885 for section C and 0.784 for section 

D. 

4. Results and Discussion 

4.1 Characteristics of the Sample 

Out of 228 respondents, 55.3 percent (n=126) were females against 44.7 percent (n=102) 

males. The higher percentage of females‘ respondent is due to their willingness to 

participate during data collection process. There is no obvious difference between the age 

group of the respondents. 43.0 percent (n=98) were between 25-34 years followed by 

28.1 percent (n=64) who were between 45-54 years as opposed to 15.4 percent (n=35) in 

the range of 35-44 years and 13.6 percent (n=31) were over 55 years old. 64.5 percent 

(n=147) of respondents were married compared to 30.3 percent (n=69) were single and 

5.3 percent claimed as others. 46.9 percent (n=107) of respondents were originally from 

rural area compared to 36.0 percent (n=82) from urban area and 17.1 percent (n=39) from 

sub-urban area. The highest proportion of the respondents were among the government 


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servant (60.5 percent, n=138) than (15.8 percent, n=36) whose working in private sector 

and (23.7 percent, n=54) were others. The others probably were among self employed, 

students of higher institution, pensioners and housewives. Besides demographic, one 

question was probed to instigate respondents‘ agreement on the transformation of the 

Malay wedding. Majority of the respondents (93.4 percent, n=213) agreed that there were 

transformation occurred in the Malay wedding. 

4.2 Factor Moderating the Alterations of the Malay Wedding Foodways 

From descriptive statistic in Table 1, the magnitude of mean scores indicate that majority 

of the respondents strongly agreed that modernization moderate the way of Malays 

handling their wedding ceremony (M=3.67, S.D. 1.15, item 1). They were also in 

agreement that socio- economic factors (M= 3.67, S.D. 3.67, item 2), busy life styles (M= 

3.47, S.D. 1.27, item 3), locality (M= 3.45, S.D. 1.26, item 4), culture of the community 

(M= 3.55, S.D. 1.12 item 5) moderates the alteration. Despite these the most interesting 

part is difficulties in practicing contribute to the alteration of the Malay wedding 

foodways (M=3.63, S.D. 1.35, item 6). This is evident when respondents strongly agreed 

that local regulation (M= 4.08, S.D. 1.52, items 7), limited space (M= 3.60, S.D. 1.27, 

item 8) restrict the practice. In addition, the emergence of modern equipments (M=3.30, 

S.D. 1.12, item 9) and catering services (M= 33.5, S.D. 1.12, item 10) influence the way 

Malay community handles wedding foodways (preparation and consumption). This 

transformation and alteration of Malays wedding ceremony including it foodways could 

hold true. This result support Yassin (2000) which noted that modernization not only 

involved changes in the demographic, economic, education but also modified or altered 

cultures of the community. 

4.3 Level of Alteration of Malays Wedding Foodways 

Analysis looking at the levels of alteration of Malays wedding foodways slightly received 

a lower mean among the respondents (Table 2). As such, respondents peceived that 

modernization slightly altered the unique identity of the traditional Malay wedding 

foodways (M=2.30, S.D. 1.42, item 1). Respondents believed the urban living and life 

style slightly altered the way Malays practices the wedding foodways (M= 2.48, S.D. 

124, item 2). They also perceived the urban living slightly altered the way wedding foods 

are served (M=2.48, S.D. 1.40, item 3) and the eating decorum (M=2.60, S.D. 1.57, item 

4). It is also interesting to note that the respondents believed that local regulation (M= 

2.2, S.D.1.52, item 5), catering services (M=2.25, S.D. 1.01, item 6), limited space 

(M=2.75, S.D.1.35, item 7) and modern equipments (M= 2.75, S.D. 1.35, item 8) slightly 

altered the Malays wedding foodways in the urban area. With that feelings it is therefore 

not surprising to see that the respondents believed the modernization slightly altered 

Malay community togetherness which normally developed through wedding foodways 

(M=2.36, S.D. 1.33, item 9). These results are in line with Abdullah (2009) which noted 

that many of the Malay wedding food preparations are gradually being overtaken, 

changing and adapting to the current demands and situation. 

4.4 The Impact of the Alterations of Wedding Foodways on Social Perspective 

It argues that wedding foodways through it preparation and consumption besides fulfill 

the social events and families obligation catalyst the community social bonding as well. 

Analysis looking at the impact of the alteration through modernization on the social 


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perspectives in Table 3 revealed that the respondents agreed that the alteration in Malay 

wedding foodways reduced the community spirit and identity (M=4.40, S.D. 1,29, item 

1), community togetherness (M= 4.47, S.D. 1.14, item 2) and loosen the generation ties ( 

M= 4.05, S.D.1.42, item3). In addition, they agreed that outsourcing the wedding food 

preparation reduced the Malay community harmony (M= 4.42, S.D.1.15, item 4) and 

alteration in wedding food serving style reduced the cooperation and interaction within 

the community (M= 4.36, S.D. 4.35, item 5). The higher mean scores above 4.0 perhaps 

best explain the respondents‘ feelings. With that notion, it is unsurprising that 

respondents perceived the alteration of Malay wedding foodways make individual less 

dependent on the community in handling the event (M= 4.15, S.D. 1.51, item 6) and 

community is becoming more individualistic (M= 4.25, S.D.1.39, item7). It is also 

interesting to note respondents agreed despite the alterations some traditional elements of 

wedding foodways are still practice (M= 4.25, S.D. 1.39, item 8). Together, this 

indicates that although alteration of Malay wedding foodways caused by modernization 

has given significant impact to social and community some tradition elements like 

greetings, visiting and congratulating the host, communal eating and a token of 

appreciation in the form of sweets or others means are still practiced. This could hold 

true as some practices of Malay wedding such as communal eating and the act of visiting 

are still being practiced (Ismail, 1996; Zaferi, 2002; Abdullah, 2009). 

4.5 Open-ended Analysis 

In strengthening and validate the quantitative findings and provide greater insights into 

the respondents view, four open-ended questions used in the instrument are analyzed. The 

first question asked ' In your opinion, is there any alteration occurs in Malay wedding 

food preparation and in what way do you believe the alteration occurred? Through the 

aggregation of the answers, substantial number of the respondents (96.7 percent, n= 209) 

answering ―yes‖ compared to a very small number (3.2 percent, n=7) who said ‗no‘ and 

believed alteration involved in the style of preparation, serving style and place of holding 

the wedding event. Their answers corroborated well with the quantitative analysis. 

Quoted are some of popular remarks given by the respondents: 

� Hardly see community cook the wedding food through community effort or 

gotong royong in the urban 

� The preparation of food is slightly overtaken by the caterer 

� Buffet style of serving wedding food is so popular in the present days 

� Town halls are the popular place of holding the wedding reception 

� Catering is the most significant changes 

In the second question, respondents were asked “What are the factors moderates the 

alteration of Malay wedding foodways (preparation, consumption)? From ranges of 

answers it is apparent that significant proportion of respondents expressed their opinions 

that busy and modern life style, higher disposal income and constraints moderates the 

alteration. Among the comments given were; 

� Small space in the residents area limit the preparation of Malay wedding food 

� Local authorities restrict the preparation of Malay wedding food in the residents 

area 


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� Not many people‘s willing to cook the wedding food due to their busy life styles 

� Peoples have money now to hire the caterer 

The last open question asking respondent “what is the impact of the alteration of Malay 

wedding foodways (preparation, consumption) to community? From the pattern of 

answers respondents perceived alteration of preparation and consumption of Malay 

wedding food have lead the spirit, togetherness, cooperation and interaction among 

Malay community in the urban are slightly reduced. Simplified from various answers 

received were: 

� Reduced togetherness 

� Reduced community spirit and identity 

� Lack of interaction and socialization 

� Lack of harmony and understanding among the community 

� Community becoming individualistic 

5. Study Implication and Conclusion 

Results of this study clearly demonstrate that alterations occur in the Malay wedding 

foodways practices through the waves of modernization. Modernization through the 

changes in socio-economics, lifestyle and community culture moderates the alteration not 

only in the preparation, cooking but also the serving and eating decorum of Malay 

wedding in the urban area. This alteration is further support with the local regulation, 

limited space, the emergence of modern equipments and the urban living. This alteration 

in actual fact is unavoidable and embracing as modernization is proven not only improve 

other facets of life but ease the heavy burden the preparation and techniques of the 

wedding foodways practices. Outsourcing the wedding food to the caterer, holding the 

wedding in hall and other wedding related amenities have makes the activities becoming 

faster, effective and efficient particularly in the urban area. 

Despite that, it is interesting to note results of this study also show that although the 

adoption of the modern aspects in the Malay wedding foodways provides a lot of 

advantages, the alteration somehow reduced cohesiveness, social bonding and interaction 

among the individual of Malay society in the urban area. The integrative force, solidarity 

and alliances that long been practiced by the community for Malay wedding foodways 

slowly getting faded. Individuals are no longer keen on practicing the traditions, less 

dependent on the community in holding their wedding. In other words, the functions the 

wedding foodways as mechanism to knit the bond between people in a society is 

perpetually faded. If this continuously being ignore without any efforts to maintain or 

resurrect, the individuals in the community will become self-centered and individualistic 

thus the next Malay generation will not know their hereditary treasures the practice will 

totally disappeared. To reduce this, some necessary action must be taken by the 

individuals, community as well as the government as a whole. 


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As individuals, they should incorporate some of the traditional elements in the Malay 

wedding foodways among the family members by involving their young sons and 

daughters and also relatives such as giving token to the guests, ushering the guests. For 

the community leaders or headman, they should have initiative to engage neighbors and 

surrounding community to help the wedding host in preparing whatever important prior 

and after wedding ceremonies. The young generations should be invited to participate in 

the society activities in order to give exposure to the wedding foodways tradition. Not 

only that, the community could come together in cheering the events by helping the host 

although some main elements like food are being outsourcing. 

In the government context, the formation of Ministry of Culture, Arts and Heritage 

showed that the government besides others matters are concern or serious in preserving 

Malaysian ethnic‘s cultures (Malays, Chinese, Indians and other ethnics) including the 

Malay wedding foodways and related matters. Due to the important of these matters, the 

efforts undertaken by the ministry of urging each ethnic in conserving their culture 

traditions despite continuous waves of modernization is really worth. In addition, the 

ministry and it sub–division should play their in important role in disseminating the 

information on the importance of preserving especially the good ethnic culture so at least 

the generations understand of how their old generations practice the traditions. Lastly, 

the efforts from all levels of the community/society and the government are required in 

conserving the Malay wedding foodways and other hereditary practices as long as it do 

not contradict with religious practices or beyond normal practices. 


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Annexure 

Table 1: Mean Scores and Standard Deviation for Factors Moderating the 

Alterations 

No. Items 

n mean SD 

1. Modernization moderate the way Malays handling wedding 

ceremony 

228 3.67 1.151 

2. Socio – economic factors moderates the alteration in the Malay 

wedding foodways 

228 3.67 1.143 

3. Busy life style influence the way Malay community handles 


228 3.47 1.278 

4. Locality influence the way Malay community handles 


228 3.45 1.267 

5. Culture of the community influence the way community 

handles the wedding foodways 

228 3.55 1.127 

6. Difficulty in practicing contribute to the alteration of Malay 


228 3.63 1.353 

7. Local regulation restrict the traditional practices of Malay 


228 4.08 1.527 

8. Limited space contribute to the transformation of preparation 

and cooking method for Malay wedding 

228 3.60 1.257 

9. The emergence of modern equipments influence the way 

Malay community handles wedding foodways (preparation and 

consumption) 

228 3.30 1.123 

10. Catering services reduced the practices of wedding 

foodways 

226 3.35 1.125 

Scales: 1= Totally disagree, 2= Disagree, 3= Slightly agree, 4= Agree, 5= Totally agree 

Table 2: Mean Scores and Standard Deviation for Level of the Alterations 

No. Items n Mean SD 

1. Modernization alter the unique identity of traditional Malay 

wedding foodways in the urban area 

228 2.30 1.433 

2. Urban living and life style altered the way Malays practices the 


228 2.48 1.247 

3. Urban living alter the way food served in Malay wedding 228 2.53 1.479 

4. Urban living alter the Malay wedding eating decorum 228 2.60 1.573 

5. Local regulation in urban area altered the way Malays carry 

out their wedding foodways 

228 2.21 1.520 

6. Catering services alter the way Malays carry out their 

wedding food preparation and cooking 

228 2.25 1.011 

7. Limited space alter Malay wedding food preparation and 

cooking 

228 2.75 1.351 

8. Modern equipments alter the way Malays prepares and cook 

the wedding food 

228 2.73 1.151 

9. Modernization alter Malay community togetherness in the 228 2.36 1.338 


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preparation of the wedding food 

Scales: 1= Totally no alteration, 2= Slightly altered, 3= Moderately altered 4= Extremely altered, 

5= Totally altered 

Table 3: Mean and Standard Deviation for the Impact of the Alterations 

No. Items n mean SD 

1. The alteration in Malay wedding foodways reduced the 

community spirit and identity 

228 4.40 1.295 

2. Alteration in Malays wedding foodways reduced community 

togetherness 

228 4.47 1.142 

3. Alteration in Malay wedding foodways loosen the generation 

ties 

228 4.05 1.424 

4. Outsourcing the wedding food preparation reduced the Malay 

community harmony 

228 4.42 1.153 

5. Alteration in wedding food serving style reduced the 

cooperation and interaction within the community 

228 4.36 1.285 

6. Alteration of Malay wedding foodways make individual less 

dependent on the community in handling the event 

228 4.15 1.517 

7. Community are becoming individualistic due to the alteration 

of Malay wedding foodways 

228 4.25 1.396 

8. Despite alteration some traditional elements of wedding 

foodways are still practice 

228 4.25 1.396 

Scales: 1= Totally disagree, 2= Disagree, 3= Slightly agree, 4= Agree, 5= Totally agree 


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The Relationship between Extrinsic and Intrinsic Attributes 

of Product Quality with Brand Loyalty on Malaysia 

National Brand Motorcycle/Scooter, MODENAS 

Mohd Rizaimy Shaharudin (Corresponding author) 

Faculty of Business Management, Universiti Teknologi MARA, P.O Box 187, 08400 Merbok, Kedah, 

Malaysia 

Anita Abu Hassan 

Faculty of Business Management, Universiti Teknologi MARA, P.O Box 187, 08400 Merbok, Kedah, 

Malaysia 

Musdiana Mohamad Salleh 

Faculty of Business Management , Universiti Teknologi MARA,P.O Box 187, 08400 Merbok Kedah, 

Malaysia 

Siti Meriam Ali 

Faculty of Business Management , Universiti Teknologi MARA,P.O Box 187, 08400 Merbok Kedah, 

Malaysia 

Etty Harniza Harun 

Faculty of Business Management , Universiti Teknologi MARA, P.O Box 187, 08400 Merbok Kedah, 

Malaysia 

Muna Abdul Jalil 

Faculty of Business Management , Universiti Teknologi MARA, P.O Box 187, 08400 Merbok Kedah, 

Malaysia 

Nurazila Abdul Aziz 

Language Academy , Universiti Teknologi MARA, P.O Box 187, 08400 Merbok, Kedah, Malaysia 

Abstract 

This study is about the discoveries on the relationship between intrinsic and extrinsic 

attributes of product quality with brand loyalty. It helps to extend the understanding on 

the perceptions of product quality of Malaysia national brand motorcycle/scooter, 

MODENAS and its influence towards brand loyalty, an important element in determining 

the customer re-purchase buying behavior. Results indicated that although from the 

earlier literature concluded product quality generally has significant influences towards 

the brand loyalty but in the case of motorcycle/scooter products, only product quality 

based on the perceived quality (extrinsic attribute) was found to have significant 

influence on the brand loyalty instead of objective quality (intrinsic attributes). These 

perceptions are not fixed and can be changed if the product has high level of customer 

awareness, good image from marketing activities such as advertising, sales promotion 

and etc. Future research should focus on the similar study to MODENAS‘s competitors in 

the market. 

Keywords: Product Quality, Brand Loyalty, Intrinsic Attributes, Extrinsic Attributes, 

Perceived Quality. 


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In today‘s intense competitive market, only the competitive advantage product will be 

able to survive and continuously gain the demand from the consumers. From the 

marketing point of view, competitive advantage can be achieved through a series of 

intermediate objectives such as perceived quality, achieving satisfaction, greater 

commitment and confidence on the part of customers, as well as a final objective, which 

may be to enhance loyalty. Loyalty towards product brand can be derived in many ways. 

According to Aaker, 1991, a brand can be defined as distinguishing name or symbol 

intended to identify both goods and services. Aaker and Keller, 1990 believe that loyalty 

is closely associated with various factors, one of the main ones being the experience of 

use. 

Customers may be loyal owing to high switching barriers related to technical, economical 

or psychological factors which make it costly or difficult for the customer to change. In 

another point of view, customers may also be loyal because they are satisfied with the 

supplier or product brand, and thus want to continue the relationship (Fornell, 1992). 

Research on quality in the automotive industry has started as early in the year 1980s by 

the practitioners and academicians. It was evidenced in the past that there was an effect of 

product quality and after sale service on a consumer‘s intentions to repurchase vehicles 

from the original dealer. Furthermore, these two factors discovered in the marketing and 

operations management literature are the key determinants of consumers‘ purchase 

intentions (Taylor and Baker, 1994 and Archer and Wesolowsky, 1996). Thus, consumer 

perceptions are essential to the definition of the concept of quality. It should be taken into 

account that the dynamic of this concept means it will vary depending on these 

perceptions, on additional information, on increasing competition for the product type 

and on changes in the expectations of consumers (Zeithaml, 1988; Bello and Gomex, 

1996). 

According to marketing literature, these cues can be classified as extrinsic and intrinsic 

(Szybillo and Jacoby, 1974; Zeithaml, 1988). Extrinsic cues are lower level cues that can 

be changed without changing the product (e.g. price, packaging, brand name, country of 

origin), while intrinsic cues are higher-level cues directly related to the product. One 

specific use of some extrinsic cues, such as price, brand name, store name, and country of 

origin, is as risk reduction information when purchasing products (Teas and Agarwal, 

2000) According to Fandos and Carlos, 2006, the level of perceived quality associated 

with intrinsic attributes (e.g. aroma, flavour, texture, natural and carefully prepared 

products, etc.) and extrinsic attributes (symbolic factors such as the image of the product, 

the region of origin and so on) will have a positive influence on loyalty and product 

buying intentions. 

Motosikal Dan Enjin Nasional Sdn. Bhd. (MODENAS) has been in existence of more 

than 12 years since the year 1996 to manufacture motorcycles and scooters. MODENAS 

was created under the national automotive project, which undertook the responsibility to 

acquire the technology to manufacture and produce national motorized two wheelers 

namely motorcycle and scooter, and small multi-application engines. As until today, 


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MODENAS has produced 23 models of scooters and motorcycles for the sale in local 

market. MODENAS‘s product has also penetrated overseas market such as Indonesia, 

Brunei, Singapore, Iran and Greece. In September 2007, MODENAS has achieved its 

1,000,000 units production and had since trying to gear up to increase the local and 

overseas sales volume. 

Nevertheless, MODENAS has lost its top ranking position to its competitors when its 

biggest market share of 43% in the year 2000 has shrinking to only 11% in 2009. The 

continuous declining in MODENAS sales is possibly causes by the aggressive effort 

taken by MODENAS‘s competitor to introduce new competitive models with excellent 

marketing strategy. MODENAS‘s close competitors namely Honda and Yamaha have 

been in the Malaysian market for more than 30 years and received favorable brand 

acceptance and loyalty by the customer. 

Since the product brand creates an image and become the basic motive for the 

consumers‘ choice of a particular product, it is essential for MODENAS to determine 

how serious of its product quality perception and brand loyalty which could lead to the 

impairment of the sales volume. Apart from that, there is also a need to find out of any 

relationship, link or effect exist between the product quality and the brand loyalty to the 

motorcycle industry in Malaysia. 

This outcome has created the interest to study the possibility of the effect in the 

Malaysian market environment especially to Malaysia‘s national brand 

motorcycle/scooter, MODENAS. The objective of the study is to determine the 

relationship between the product quality and the brand loyalty and its influence to the 

customer re-purchase buying behavior of similar brand in their future purchase. 

1.1 Relationship between Product Quality and Brand Loyalty 

A good quality product creates customer delight. In turn, delighted customers remain 

loyal and talk favorably to others about the company and its product. Studies show big 

differences in the loyalty of customers who are less satisfied, somewhat satisfied and 

completely satisfied. Even a slight drop from complete satisfaction can create an 

enormous drop in loyalty (Kotler and Armstrong, 2010). 

Several researches have been done and it was noted that there are positive relationship 

between performance quality and customer satisfaction. However the correlation differs 

between one product and services to another. According to a research constructed by 

Croanin and Taylor (1992) who examined for businesses, found strong correlation 

between satisfaction and loyalty for fast food and dry cleaning. However it was also 

noted that relationship between satisfaction and loyalty is to be dependent on the 

characteristics of the focal products and services itself. 

It was also discovered that brand reputation do have a strong effect on loyalty. The effect 

of customer satisfaction on loyalty appears to be contingent and it was suggested that 

satisfaction will only have a direct effect on loyalty when customers are able to evaluate 

product quality through their experience with the product and services itself. 


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As stated and mentioned by Rust and Oliver (1994) suggest that customer satisfaction or 

dissatisfaction – a ―cognitive or affective reaction‖ – emerges as a response to a single or 

prolonged set of service encounters. It is also mentioned that satisfaction is ―post 

consumption‖ experience which compares perceived quality with expected quality, 

whereas service quality refers to a global evaluation of a firm‘s service delivery system 

(Anderson and Fornell, 1994; Parasuraman et al., 1985). Iacobucci et al. (1995) 

discovered that the key difference between service quality and customer satisfaction is 

that quality relates to managerial delivery of the service while satisfaction reflects 

customers‘ experiences with that service. 

The main issue discussed and discovered was that quality improvements are not based on 

customer needs will not lead to improved customer satisfaction. However Zeitham (1988) 

and Shapiro (1983) suggested that perceived quality of a particular product is related to 

the reputation associated with the brand name and brand reputation is measurable at the 

product level for example Pepsi, Avis and Federal Express. 

However in other situation, customers identify a group of products and services with a 

brand name; Philips, IBM and Citibank It is noted that brand appears to be often 

connected to the reputation of the company rather than individual products or services 

itself 

The results of the empirical study by Fandos and Carlos (2006) in the food industry 

reveal the existence of a positive and significant relationship between the extrinsic 

attributes of the product and the loyalty expressed by consumers. The results suggest that 

the information transmitted by the PDO via images that are associated with the product 

but do not form a part of it, such as the image of a traditional product, the region of origin 

and so forth, improve consumers‘ feelings and affects toward PDO products, positively 

and significantly improving consumer loyalty. However, the outcome of the study did not 

support the relationship between the intrinsic attributes of the product with the consumer 

loyalty. 

From the review of literature, Figure 1 depicted the proposed theoretical framework of 

the study. 

2. Research Methodology 

2.1 Hypothesis Development 

Given the preceding discussion, the following hypotheses are proposed : 

H1. There is a significant difference between the perception of product quality from its 

intrinsic attributes and the brand loyalty towards MODENAS motorcycle/scooter. 

H2. There is a significant difference between the perception of product quality from its 

extrinsic attributes and the brand loyalty towards MODENAS motorcycle/scooter. 


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2.2 Research Design 

This research is a quantitative research where sources of information are gathered from 

questionnaires. The instrument utilized was through the self-administered questionnaire 

containing closed-ended and scales to matrix questions. This study is interested in 

describing the characteristics of a population or phenomenon, thus the study is a 

descriptive study. This study also used hypotheses testing to determine the influence of 

the extrinsic and intrinsic attributes of product quality towards the brand loyalty. The type 

of sampling is stratified random sampling with data collected among MODENAS 

motorcycle/scooter users and owners living at ten towns representing the six segregating 

districts in Kedah state. The sample of this study totaled 350 MODENAS 

motorcycle/scooter users was taken on a basis of sampling formula of 5,000 MODENAS 

users and owners proposed by Krejcie & Morgan (1970). The sample size fits the rule of 

thumb as proposed by Roscoe (1975), for which sample sizes larger than 30 and less than 

500 are appropriate for most research. The scale was piloted amongst a sample of twenty 

(20) private workers and university students. 

2.3 Data Analysis Method 

For the purpose of this study, the researcher used the Statistical Software Package for 

Social Sciences (SPSS) Version 17 to compute all the data gathered from the 

questionnaire. The techniques of analysis used in this study were descriptive (mean, 

standard deviation) and inferential analysis (regression) to sum up the data collected. The 

questionnaires of Product Quality will be based on the eight dimensions of product 

quality developed by Garvin, 1984. The dimensions are divided into the characteristics of 

the intrinsic and extrinsic attributes. The intrinsic attributes of product quality are based 

on dimensions of performance, reliability, durability, serviceability, aesthetics, 

conformance to specification and special features. On the other hand, the extrinsic 

attributes are based on the single dimension of perceived quality such as the brand name 

and the brand image. Pre-Testing of the questionnaire was made during the pilot study. 

3. Results and Discussions 

This section presents the findings of this study. The data is interpreted using the mean, 

factor analysis and regression methods of SPSS. 

3.1. Pilot Study 

Improvement has been made based on the feedback by reducing the questionnaire Likert 

scale rating from 1-7 to 1-5 in order to ease respondents‘ understanding and interpretation 

of each question. 

3.2 Response Rate 

In this study, 100 responses were received. According to Hussey & Hussey (1997), for 

mail distribution method, in order to avoid sample bias, response rate should be more 

than 10 percent. In this relation, the response rate for this study of 28.57 percent means 


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that the sample bias was avoided and the responses received represent the population 

adequately and appropriate. 

3.3 Reliability Analysis 

From the reliability analysis result as shown in Table 1, all factors including independent 

and dependent variables were found to be good reliability with all the Cronbach's Alpha 

result are of above 0.6. These results were compatible with a rule of thumb of 0.6 as the 

lower level of acceptability as suggested by Jones, LoPresti, Naphtali and Whitney 

(1999). 

3.4 Factor Analysis 

Based on KMO measure of sampling adequacy test in Table 2, it was found that the 

factor analysis data was appropriate with the value of 0.822, which falls between the 

ranges of being great and appropriate of factor analysis data. Bartlett‘s Test was utilized 

with the result indicating a highly significant result with p=0.000 (p



perceptions of product quality from extrinsic attributes will develop a brand loyalty due 

to the feelings and affections formed as a result of the perception of quality. As such, if a 

person perceives that the outcome from performing a behavior is positive, he/she will 

have a positive attitude toward performing that behavior. People consider the 

implications of their actions before they decide to engage or not engage in a given 

behavior (Ajzen, 1980). These perceptions are not fixed and can be changed if the 

product has high level of awareness, good image from marketing activities such as 

advertising, sales promotion and etc. 

On the other hand, the intrinsic attributes are specific to each product, disappear when it 

is consumed and cannot be altered without changing the nature of the product itself 

(Olson and Jacoby, 1972). In the present competitive motorcycle/scooter market, every 

manufacturer is introducing new models at a frequent basis. This has created confusion to 

the customers in differentiating each model to each brand. Sometimes customers may be 

unaware of the existence of certain new models of motorcycle/scooter in the market. To 

the customer the overall product design tend to look similar regardless of each individual 

brand differences. What is extremely important is the symbolic factors such as the image 

of the product, the region of origin and so on. A powerful brand has high brand equity. A 

brand has positive brand equity when consumers react more favorably to it than to a 

generic or unbranded version of the same product (Kotler & Armstrong, 2010). Hence, 

the extrinsic attribute of product quality is more important than intrinsic in such intense 

competitive market environment. 

4. Conclusion 

Product quality helps the firm to deliver goods that can satisfy the needs and wants of the 

customer. It will also guarantee for a continuous demand if the value of the product 

exceed the expectation and satisfaction of the customer. The results of this study have 

shown that the image of the product itself is more important to the customer than the 

physical quality of the product itself in deciding to repurchase of similar brand in the 

future. The customer relationship marketing programs actually help to enhance the brand 

equity to the customer. For example through marketing and advertising program, sales 

promotion, public relations, customer relationship management (CRM) and sponsorship 

marketing. Although the investment cost is slightly higher, the impact is enormous in 

creating a long term profitable customer relationship. This is due to the fact that cost of 

inducing new customer is expensive from five to ten times higher than to maintain the 

present customer. 

A good customer relationship management creates customer delight. The delighted 

customers in turn will remain loyal and always have a positive impression towards the 

company and its product. Studies have resulted that there were big differences in loyalty 

between customers who are less satisfied, somewhat satisfied and completely satisfied. 

The implication of a slight drop from complete satisfaction can cause an enormous drop 

in the customer loyalty. That is why a good customer relationship is crucial in the 

customer re-purchase attitude and behavior. 

The main reason why MODENAS need to build the positive brand awareness to the 

consumer is to lessen the competitor‘s popular brand which already built long time before 

the existence of MODENAS product in the market. Honda which is more than 50 years 

and Yamaha over 30 years existence in Malaysia as compared to MODENAS may have 


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competitive advantage in terms of their credibility and capability in long serving 

customers living either in town, sub-urban or villages. Honda is known for its reliable and 

fuel saving product whereas Yamaha is popular with its high performance and sporty 

look motorcycle which has performed outstanding performance in local motorcycle 

racing championships. In this context, MODENAS should choose a position (either to 

follow the competitors or build a new one in between) and take strong steps to deliver 

and communicate the desired position to target customers. 

In relation to Theory of Planned Behavior developed by Ajzen & Fishbein, 1980, product 

that could satisfy the attitudes, subjective norms and behavioral beliefs should have a 

better result. Although MODENAS has been perceived well in some extrinsic quality 

dimensions, it still does not sufficient enough to create a positive behavioral intent (brand 

loyalty). Sometimes the ―actual need‖ is rarely fully known or understood by the 

customer. There are different objectives and priorities, the situation which has generated 

the ―need‖ is not completely known, and the effects of any change are not totally 

predictable. 

Nevertheless, relentless effort should be given in producing the high quality product to 

the customer. Such product with a good design, improved performance, reliable and 

durable will always be the deciding factor in choosing the right product especially in 

present intense competitive market environment. 

As for recommendations, below are some suggestions in order to strengthen the brand 

loyalty of MODENAS brand in the market: 

i. It is important that the company to carry out effective customer relationship 

marketing by implementing programs that will help to enhance the brand equity of its 

brand in the market. This can be done by carrying out effective marketing and 

advertising program, sales promotion, public relations, customer relationship 

management (CRM) and sponsorship marketing.Product awareness is another crucial 

factor in shaping up the perceptions of customer towards the particular brand in the 

market. Brands with high product awareness are usually the brand leaders in their 

market. In relation to this, the firm should carry out effective product awareness 

program such as trade shows, road tour, exhibition and advertisement on regular 

basis. 

ii. Advertising has been always considered as a strategic process of building brand value 

over the longer term. In reducing the burden of the advertising cost, it is suggested 

that the firm collaboratively joined with the established vendors. The firm also will 

gain advantage with such association with vendors which are known of its quality 

superiority in the market. 

iii. Continuous improvement is required through integrated functional activities in order 

to produce high quality product which in turn can lead to customer high satisfaction 

and well positioning in the market. From Marketing, Finance, Operations and Human 

Resource, all must work together to achieve the targeted objectives. 

iv. All the company‘s marketing efforts must support the positioning strategy in 

delivering and communicating the desired position to target consumers. In this way, 

the company will be able to build a position on better quality and service, distribute 

through high-quality dealers, advertize in high-quality media. The company also must 


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closely monitor and adapt the position over time to match changes in consumer needs 

and competitor‘s strategies. 

v. Finally, continuous improvement is required through integrated functional activities 

in order to produce high quality product which in turn can lead to customer high 

satisfaction and well positioning in the market. From Marketing, Finance, Operations 

and Human Resource, all must work together to achieve the mission, vision and 

objectives. 

5. Recommendations for Future Research 

Future research should focus on the similar study of product quality and brand loyalty to 

the Yamaha and Honda brand for being the closest competitor to MODENAS in the 

market. It is expected that, from the findings of the study of both brands, it could lead to a 

clear picture on relationship that exist between the product quality and brand loyalty from 

its intrinsic and extrinsic attributes. Eventually, a comparison can be made between the 

findings of the three brands so that such constructible findings and conclusions can be 

made to the study. 

For the next research, it is important to extend the scope of the study to a wider location, 

either to Northern, Central, Southern, Eastern and also Sabah and Sarawak so that the 

result will be more accurate with the increased in scope, sampling size and population of 

the study. With such a complete research, it is hoped that the findings could be used as a 

reference and benchmark to the motorcycle industry in Malaysia. 

6. Implication of the Study 

6.1 For practice 

The first managerial implication concerns the findings has always become the interest of 

the management, employees as well as stakeholders for the only national motorcycle 

project in Malaysia. The domination of the competitors‘ market share has caused a 

serious implication to MODENAS revenue and profit. There must be a reason for the low 

demanded for a brand used to be a market leader in the past. Hence, such information 

would enable the company to develop effective strategies to regain customers support and 

place the sales direction on the right track. 

6.2 For knowledge 

Academically, the finding of the research adds new understanding to the literature 

particularly in the product quality and its relationship with the brand loyalty in Malaysia 

motorcycle/scooter market environment. With the data presented in this study, it can be 

expected that future research can benefit by giving a new source of ideas and 

information. Furthermore, some statistics in this research can be used by the instructor 

for teaching in the classroom to enhance learning to get utmost benefits of the research 

outcome. 


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Thirteen Edition, New Jersey, NJ, 259-262. 

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Parasuraman, A., Zeithaml, V.A.and Berry, L.L. (1985). A Conceptual Model of Service 

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Szybillo, G.J. and Jacoby, J., (1974). Intrinsic versus extrinsic cues as determinants of 

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Annexure 

Figure 1 : Proposed Theoretical Framework 

Product Quality 

Intrinsic 

Attributes 

Product Quality 

Extrinsic 

Attributes 

Table 1 : Reliability Statistics 

Factor No of Indicators 

Cronbach's Alpha 

Result 

Performance 5 .809 

Reliability 3 .834 

Durability 3 .736 

Serviceability 3 .745 

Aesthetics 10 .919 

Special Feature 3 .648 

Conformance to Specification 7 .846 

Perceived Quality 4 .652 

Table 2 : KMO and Bartlett's Test 

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .822 

Bartlett's Test of Sphericity Approx. Chi-Square 2831.939 

df 903 

Sig. .000 

BRAND 

LOYALTY 


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Table 3 : Rotated Component Matrix 

Unique in design and 

identity 

Colour suitable with the 

motorcycle design 

Attractive and energize 

colour of stickers 

Component 

1 2 3 4 5 6 7 8 9 10 

.864 .206 .016 .121 


- 

.090 

.029 -.113 .006 .032 -.162 

.787 .201 .167 .057 .047 .027 .027 .033 -.069 -.239 

.784 .046 .136 -.036 .084 .157 .070 .076 -.110 .329 

Has a function that is 

always needed by the user .732 .139 .328 .066 .045 

Design fulfill the needs and 

lifestyle 

Devises installed are 

complete with 

sophisticated functions 

Plastic parts are weather 

resistant (difficult to fade 

away) 

Attractive accessories that 

are accepted by most of the 

users 

Unique and practical 

function of components 

A brand make with high 

reputation 

Signal light lights as per 

direction of user 

Fulfill the basic need of a 

motorcycle 

High availability of parts 

and accessories 

Overall effective, 

responsive and safety 

braking system 

Suitable and effective 

Hi/Low beam 

Sufficient number of 

reflector 

Easy and acceptable for 

servicing from any shop or 

service centre 

Appropriate response while 

taking sharp bend 

-7.76E- 

005 

.276 .102 .207 .096 

.721 .090 .057 .198 .077 .063 -.018 .219 -.077 .064 

.669 .099 .142 .041 .269 .058 .351 .085 .229 .170 

.641 -.039 .081 .079 .061 .445 .079 .120 -.045 -.224 

.625 .187 .129 -.081 .301 .171 .124 .014 .229 .091 

.593 .086 .309 .044 .235 .098 .246 .117 .268 .154 

.520 .203 .382 .025 

- 

.167 

.085 .208 -.024 .057 .311 

.072 .746 .274 -.024 .197 .057 .096 .022 .011 .081 

.146 .687 .131 .260 

.135 .650 

.287 .613 

- 

.124 

- 

.021 

- 

.012 

-.009 .113 .027 .287 .180 

.051 .359 -.008 .201 .063 -.088 -.240 

.354 

.128 .592 .504 .108 

- 

.079 

- 

.014 

.203 .022 .229 .194 .055 

.115 .098 .167 .081 -.021 

.290 .553 .227 .167 .117 .343 -.134 .213 -.234 .228 

.196 .550 

- 

.077 

.370 .414 .111 .012 

.096 .322 -.094 -.044 .147 -.250 -.349 

- 

.016 

.192 .112 .399 .188 -.295 

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High pick up during 

overtaking vehicle 

No vibration at top speed 

travelling 

Effective electronic devise 

when being applied 

Easy handling in town or 

congested road 

Effective suspension 

system 

Easy to kick start in the 

morning 

.230 .089 .709 .388 .038 .123 .016 .027 .027 .013 

.219 .128 .697 -.060 .156 .118 .110 .349 .046 .100 

.042 .130 .591 .369 .182 -.070 .183 -.304 .027 .133 

.380 .195 .564 .006 .104 .270 -.046 .203 -.029 -.015 

.370 .103 .505 .060 


- 

.041 

.183 .234 .256 .351 -.001 

.354 .055 .484 .138 .017 .109 .208 .336 -.445 .122 

Long engine life .093 .108 .080 .885 .078 .080 -.052 -.070 .038 .075 

Long lasting eventhough 

warranty expires 

Less maintenance or repair 

High trade in value 

Reasonable spare part price 

Short time during servicing 

Easy modification and 

installed with many 

accessories 

The lamp bulb seldom 

blows up 

Nut and bolt are rusty 

resistance 

Plastic parts are not easily 

broken 

Not required to fasten 

tappet for each servicing 

Petrol saving 

Popular brand known to 

many 

.059 .100 .238 .782 .071 .120 .080 .064 .170 -.063 

-.057 .053 .053 .718 .118 .080 .212 .357 -.115 .049 

.419 .045 

- 

.025 

.427 .283 .114 .165 .048 .390 .129 

.028 .076 .067 .115 .853 .078 .034 .064 .068 -.059 

.093 .118 .174 -.018 .759 .146 -.014 .047 .055 .327 

.307 .151 .088 .301 .600 .091 .021 -.038 -.092 -.218 

.102 .099 .199 .285 .141 .770 .033 -.069 .031 .117 

.309 .182 .066 -.031 .016 .708 .211 .222 -.053 .067 

.042 .018 .544 .109 .328 .551 .081 -.131 .199 -.036 

.337 .089 .166 .123 .100 .124 .610 .145 -.070 .157 

.053 .299 .015 .478 

.029 .486 .193 -.078 

- 

.041 

- 

.157 

.086 .547 -.117 .155 -.261 

.082 .529 -.087 -.018 .041 

Long battery life .157 -.022 .165 .229 .261 .481 .519 .221 -.065 -.130 

Fuel saving especially for 

long distance travelling 

.221 .397 

- 

.004 

.417 .046 .104 .425 .265 .175 .121 

Easy to change gear .188 .199 .167 .130 .067 .040 .038 .719 .074 -.015 

Effective braking system 

for immediate stoppage 

.286 .356 .172 .204 .084 .092 .181 .401 .333 .140 

Power to climb hill area .163 .148 .230 .432 .072 -.073 -.080 .247 .645 -.004 

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Competence and at par 

with the Japanese brand 

Table 4 : Result of R Square and Durbin-Watson Test 

Model R Square Dutbin-Watson 

1 0.559 1.508 

Table 5 : Result of Annova Test 

Model F Sig. 

1 10.930 0.000 

Table 6 : Result of Coefficients 

Variable Quality 

Attribute 

.332 .125 .295 .327 .138 .163 .122 .022 .032 .502 

Standardized 

Coefficients 

Collinearity 

Statistics 

Beta Sig. VIF 

Performance Intrinsic .221 .059 2.213 

Reliability Intrinsic .141 .135 1.452 

Durability Intrinsic .165 .101 1.640 

Serviceability Intrinsic -.145 .108 1.333 

Aesthetics Intrinsic .275 .054 2.024 

Special Feature Intrinsic .085 .448 2.084 

Conformance to Spec. Intrinsic .089 .361 1.557 

Perceived Quality Extrinsic .534 .000 1.000 


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How Service Quality affects Performance of 

Conventional Banks in Pakistan 

Dr. Ashfaq Ahmad 

Assistant Professor, Department of Business Administration, 

University of Sargodha 

Dr. Muhammad Bashir 

Chairman, Board of Intermediate and Secondary Education, Multan 

Sultan Mubariz 

PhD Scholar, University of Sargodha 

Abstract 

This study examines the relationship between service quality and performance of 

conventional banks operating in Pakistan. The researcher collected data from 864 

respondents of 72 branches of selected banks. The data were collected by a structured 

questionnaire developed in the light of existing literature. The responses were analyzed 

through SPSS 15.0 Version. The relationship between service quality and performance of 

conventional banks was assessed by Pearson‘s correlation and regression analysis. The 

results indicate that there is a weak positive relationship between service quality and 

performance of conventional banks. Bankers should improve their services by blending 

of traditional facilities and modern technology to meet customers‘ expectation for better 

performance in future. Similarly, bank managers should take quality initiatives to 

improve their products by considering demographic characteristics of the customers to 

retain them as satisfied customers for better performance. It is also suggested that bankers 

should introduce new, diversified and marketable products to meet requirements of 

different segments. 

Key Words: Performance, Service Quality, Conventional bank, Pakistan 


Services sector became the major contributor to the GDP of any country. Service firms 

are very active in the recent age of borderless market as compared to previous decades. 

The increased number of service organization created competition to provide customer 

oriented products to exist in the market. Banking sector is one of the major components 

of services sector. It aims to provide financial and consultancy services according 

specific prevailing environment. Banks are primarily work as financial intermediary to 

bridge up the savors and borrowers in the economy. It accepts deposits from general 

public and provides funds to deficient units for productive ventures. It also develops 

marketable products according to customers‘ specific needs by meeting quality standards. 

So, service quality is an essential feature for the better performance of banking sector 

especially in this age of globalization. Pakistani banking sector with 63 years of unique 

experiences (from nationalization to privatization) providing a wide range of 

products/services since its independence. The inception of 21 st century came with new 


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challenges for the banks due to introduction of Islamic banking practices in Pakistan. The 

conventional banking system based to traditional interest based mechanism is deep rooted 

in the industry to cope with the challenges. The impressive progress of banking sector in 

Pakistan requires a study to assess the influence of service quality offered by 

conventional banks on its performance. It is reported that Pakistani banking sector 

experience an expansion in its branch network and banking assets due to conducive 

environment during the last few years (Economic Survey of Pakistan, 2007-08). 


conventional banks in Pakistan. It also attempts to estimate the magnitude of relationship 

among selected variables in the local settings. There are a number of studies regarding 

different aspects of banks across the globe but there is an acute shortage of literature 

regarding Pakistani banking sector. This study is an effort to fill this gap address the 

perception of service quality among bank customers and performance of selected banks 

in Pakistan. Similarly, existence of Islamic banks in Pakistan also necessitated assessing 

the performance of conventional banks on the basis of service quality. It is found that 

Pakistani banks had shown better performance due to banking reforms especially due to 

financial liberalization and deregulation of banking sector (Farooq et al., 2010). 

However, it is found that Islamic banks have performed better as compared to 

conventional banks in Pakistan. (Ahmad, Rehman & Saif, 2010). 


Banks are actively supporting the business and trade activities especially after the 

industrial revolution. Its importance is getting popularity with the passage of time. 

Everyone is striving to realize greater profits by delivering quality services to exist in the 

market. The service quality offered by banks is an important element for customers to 

quit or remain with a specific bank. Similarly, performance evaluation of banks could be 

beneficial for the successful survival in the industry. Service quality in banking sector is 

frequently investigated across the globe (Gronoos, 1982; Parasuraman et al. 1985, 1988, 

1991; Sureshchander et al. 2002; Lopez et al., 2006; Ahmad et al., 2010). It could be 

linked with market orientation, organizational learning, human resource productivity, 

quality improvement or any other component (Day, 1994; Banker & Sinkula, 1999; 

Santos-Vijande et al., 2005). 

Morre (1987) found that service quality could enhance the competitive position of the 

organization for long term benefits. It is reported that service quality is considered very 

important indicator towards customer satisfaction (Spreng & Machoy, 1996). Similarly, it 

is suggested that service quality could help to gain competitive advantage to maintain 

long-term relationship with customers (Zeithmal et al. 2000). This study investigates the 

effect of service quality on performance of conventional banks in Pakistan. Banks 

provide financial inter-mediation, consultancy and agency services that are diversified 

with the passage of time. Services are different from goods because they are intangible as 

they cannot be seen, touched or felt; perishable as we are unable to store them; 

inseparable because they are attached with a service provider, and insubstantial due to 

heterogeneity (Parasuraman et al. 1985; Hoffman & Bateson, 2002). 

In today's global, dynamic and competitive environment banks should improve and 

diversify their products and services to enhance their performance for successful survival. 

Performance measurement became indispensable for the successful survival banks due to 

stiff competition and customers' awareness of service quality. It is reported that Pakistani 


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banking sector has shown good performance by attracting a large number of customers 

due to the provision of quality services (Arby, 2003). Banks have realized the importance 

of service quality for successful survival in today's global and highly competitive 

environment (Wang et al. 2003). Similarly, it is reported that two principle paths could 

improve the financial performance of banks i.e. by improving operational efficiency or 

improvement in customer services (Duncan & Elliott, 2004). However, it is found that 

performance evaluation provides sufficient information to take better and informed 

business decisions. Better decisions results more profitability and improved performance 

for the institution and its shareholders (Crider, 2007). On the basis of existing literature it 

is hypothesized that there is positive relationship between service quality and bank 

performance. 

H1: There is a significant positive relationship between service quality and performance 

of the conventional banks in Pakistan. 


This study investigates how service affects the performance of conventional banks in 

Pakistan. The data was collected from 864 respondents of 72 branches of National Bank 

of Pakistan, Bank Alfalah Ltd., Habib Bank of Pakistan, Muslim Commercial Bank, 

United Bank and Askari Bank operating in Pakistan. The data was collected through 

simple random sampling to gather the responses from the 12 most populous cities of 

Pakistan from four provinces and capital territory. Service quality is measured by a 

modified version of SERVQUAL developed by Parasuraman et al. (1991). While bank 

performance was recorded by a modified version of an eight-item research instrument 

developed by Quinn & Rohrbaugh, (1983). The responses were recorded regarding 

service quality and bank performance by considering different aspects. Data was 

collected by self administrative questionnaire through personal contact approach. Every 

respondent was asked to rank a number of aspects regarding service quality and 

performance of conventional banks in Pakistan. 


The study examines the influence of service quality on performance of conventional 

banks in Pakistan by collecting responses from a sample of 864 respondents of 72 

branches of selected banks. Data was analyzed by SPSS 15.0 version by application of 

Pearson‘s correlation and regression model. The relationship between service quality and 

bank performance is assessed by Pearson‘ correlation while the magnitude of the 

relationship was assessed by regression analysis. The results show that male customers 

are greater than female customers that were using products/services of selected banks 

working in Pakistan. It supported the literature as bank customers could be differentiated 

due to social, cultural, and religious factors. It is evident that male customers perform 

more banking activities than female customers (Obbe, 1980; Woldie & Adersua, 2004). 

{Insert Table 1} 


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Table 1 indicates a weak positive relationship between service quality and bank 

performance. The results are in line with the hypothesis as there is a positive relationship 

between service quality and performance of conventional banks working in Pakistan. 

However, the magnitude of the relationship is assessed by regression model. The results 

of regression are presented in table 2. 


Table 2 depicts the output of service quality and bank performance model. The 

coefficient of determination is 0.001, p-value (0.776) and F-statistics (0.229). It reflects 

variation (influence) of service quality on the performance of conventional banks in 

Pakistan. The estimated regression model is Performance of conventional bank = 3.760 + 

0.028 service quality. It indicates that although service quality has a positive influence on 

performance of conventional band but the magnitude of influence is not strong enough. It 

could be reported that service quality has no significant (p=0.776) impact on performance 

of conventional banks in Pakistan. 

Hoffman & Bateson (2002) reported that perception of service quality is very important 

for researchers and managers to compete in the market. Customers‘ Perception of service 

quality strongly depends on customer‘s values and beliefs that may vary from one culture 

to another (Furer et al., 2002). The study revealed that service quality is positively related 

to bank performance. It is found that there is weak positive relationship between service 

quality and performance of conventional banks. The results are consistent with the 

literature as positive relationship between service quality and organizational performance 

parameters is reported (Chapman et al., 1997). However, a direct and positive 

relationship is found between service quality and performance (Zahorik & Rust, 1992; 

Heskett et al., 1994; Rust et al., 1995). Similarly, it is found that there is a significant 

relationship between service quality and financial performance of banks (Duncan & 

Elliot, 2002). In another study, findings showed that service quality has a positive impact 

on the bank performance (Akroush, 2008). 

5. Conclusion 


conventional banks operating in Pakistan. The researcher collected data from 864 

respondents of 72 branches of selected banks. The data were collected by a structured 

questionnaire developed in the light of existing literature. The responses were analyzed 

through SPSS 15.0 Version. The relationship between service quality and performance of 

conventional banks was assessed by Pearson‘s correlation and regression analysis. The 

results indicate that there is a weak positive relationship between service quality and 

performance of conventional banks. Bankers should improve their services by blending 

of traditional facilities and modern technology to meet customers‘ expectation for better 

performance in future. Similarly, bank managers should take quality initiatives to 

improve their products by considering demographic characteristics of the customers to 

retain them as satisfied customers for better performance. It is also suggested that bankers 

should introduce new, diversified and marketable products to meet requirements of 

different segments. 


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Annexure 

Table 1: Summary of Correlation between Service Quality and Performance of 

Conventional Banks 

Variables Pearson Correlation Sig. (2-tailed) 

Service Quality and Bank Performance 0.034 0.776 

Table 2: Summary of the Service Quality and Bank Performance Linear Regression 

Model (Coefficients, Standard Error in Parenthesis, t-values in Brackets and pvalues 

in italics) 

Constant IBSQL R 2 F-Statistics 

3.760 0.028 0.001 0.229 

(0.502) (0.098) 

[7.490] [0.286] 

0.000 0.776 

0.776 

Predictor (Constant), Service Quality 

Dependent Variable: Performance of Conventional bank 


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1999-2010 – Eventful Years of Advancements in Economic 

and Military Bilateral Relations of Pakistan & China 

Professor Muhammad Abdul Malik 

Social Work Department, Federal Urdu University Science, Arts & Technology, Karachi 

Naveed ur Rehman 

Lecturer, Faculty of Management & Social Sciences, Institute of Business & Technology, 

BIZTEK, Karachi 

Arsalan Mujahid Ghouri (Corresponding Author) 

PHD Candidate, Institute of Business & Technology BIZTEK, Karachi 

Abstract 

The economic and military bilateral relation between Pakistan-China bilateral relations 

have been given more importance in past and its going smooth also in Zardargi‘s regime. 

Both administrators make emphasis on economic development in Pakistan resulted in 

more economic and military cooperation with China. The Chinese government always 

responded positively by show their state to do more business with Pakistan in the wake of 

its political and strategic interests in Pakistan and encouraging private sector in same 

direction. So last ten-twelve years observed significant increase in bilateral economic 

relation reciprocated by political and strategic relations. The article studies the 

agreements signed during 1999-2010 and their nature, moreover, volume of trade and 

investment between these two countries. The paper concludes that the China playing a 

reliable economic and military ally for Pakistan which is working as life blood in the its 

developing economy as a source of high technology and direct foreign investment. 

Kwywords: Years , Advancements , Economic , Bilateral Relations , Pakistan , China 


China is one of the oldest friends of Pakistan and strategic partner supporting to stabilize 

its economic and military facets of Pakistan. Both countries tied through historical bonds 

of relationship and time tested friends. Now China is one of the leading business partners 

of Pakistan. They are sharing common borders, mountains and rivers and have settled 

their disputes amicably through give and process. Pakistan was the first country which 

gives recognition to the people republic of China on 4 th January 1950. 

Both the countries have always been sympathizing, understanding and supporting each 

other in domestic and international affairs. As President Zaradari said about relations 

between Pakistan and China in China in meeting with President Hu Jintao in July 2010, 

that ―it is our belief that Pakistan can act as a force multiplier for China and we will 

continue to work towards this end.‖ Pakistan‘s stand for china of issues like sovereignty 

of china, human rights, Taiwan and Tibet are respected by Chinese 

government(Wolfgang, 1975). Pakistan also acknowledges the support of China on the 

matters of East Pakistan, Kashmir and Indo Pak wars. China provided Pakistan a credible 

assistance in different sectors of the economy while Pakistan facilitated China‘s opening 

towards the western counties and the United States and also towards the Muslim counties 

which are valuable clients of china trade and commerce today. Pakistan is China's second 


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largest trading partner in south Asia, while China is Pakistan's fourth largest trading 

partner, second largest source of imports and seventh largest exporting market (Free 

Press Release, 2010). Political relationship between the two countries has extended to 

economic and business fields and working for further expansion in the prospective area 

of corporation. Pakistan President Asif Ali Zardari (2009) wrote in a op-ed ―no 

relationship between two sovereign states is a unique and durable as that between 

Pakistan and China‖. 

Trade between China and Pakistan had generally been conducted under 1963 trade 

agreement, which conferred the Most Favored Nation (MFN) status to each other 

countries. Initially, Pakistan had multi-model trade with China i.e. barter trade and cash 

trade. However, trade with China is conducted almost entirely on cash basis in 

convertible currency. There has been a steady increase in Pak-China trade in the previous 

years (Rehman, 2008). Since Pakistan needed high tech items for its developing 

economy, major imports from China are consisted of machinery, spare parts, iron and 

steel products, sugar, chemical, medical and pharmaceuticals. The main exports from 

Pakistan to China are cotton fabrics, cotton yarn, petroleum and its products, fish and its 

preparation, leather, fruits and vegetables (Mohuddin, 2007). The range of products 

Pakistani exported to China is a limited one which lack diversity while both the countries 

are competitors in the textile sector exports. Adding variety to Pakistani exports other 

than non traditional items could lead to reduce the trade imbalance. Chinese products are 

more economical so businessmen are inclined to buy more from China which results in a 

huge trade deficit for Pakistan. China is not simply an export market for Pakistan but it is 

reliable source of import of capital food and industrial raw materials(Rehman, 2007). 

Pakistan and China, expressing determination to further elevate their all-weather 

friendship(Embassy of China, 2007). 

2. Pak-China Trade Ties 

The economic and military bilateral relation between Pakistan-China bilateral relations 

have been given more importance since former President Musharraf assumed powers in 

1999 and its going smooth also in Zardargi‘s regime. Both administrators make emphasis 

on economic development in Pakistan resulted in more economic and military 

cooperation with China. The Chinese government always responded positively by show 

their state to do more business with Pakistan in the wake of its political and strategic 

interests in Pakistan and encouraging private sector in same direction. So last ten-twelve 

years observed significant increase in bilateral economic relation reciprocated by political 

and strategic relations. The article studies the agreements signed during 1999-2010 and 

their nature, moreover, volume of trade and investment between these two countries. 

Given the potential for the growth of the trade and economic cooperation between the 

two countries, China has become the largest trading partner of Pakistan. Mr Ma Yue, the 

Chairman of China‘s council for the promotion of international trade agreed to expand 

bilateral trade and economic cooperation between the two nations during his visit to 

Islamabad in April 2000. China also agreed to transfer technology for improving the 

performance of Pakistani industries working with obsolete machinery like Pakistan Steel, 

Railways etc. 

Chinese Prime Minister Zhu Rougji‘s official visit to Pakistan in May 2001, the volume 

of bilateral trade continued to grow from US $ 1.4 billion in 2001 to US $ 3 billion in 

2004, which further raised to $ 4.25 billion in 2005 to $ 5 billion in 2006(Khan, 2006), 


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6.5 billion in 2007 and almost 7 billion in 2008(MOFCOM, 2009). Pakistan‘s main 

exports to China include cotton yarn, grey fabric and sea foods. Pakistan‘s imports are 

machinery, chemicals, medicine, silk and toys(Shaikh, 2001). 

Former President Musharraf underlined the objectives of his first visit to China in 

2000(Sumita, 2007), said that ―his visit was aimed at raising the level of economic 

cooperation between the two countries to make it compatible with excellent diplomatic 

and political relations. The Chinese Prime Minister Zhu Ronghi visited Pakistan in May 

2001 and expressed his desire to ―boost cooperation in agriculture, infrastructure, 

information technology and other fields under the principle of reciprocity and mutual 

benefit for achieving common prosperity‖. The Chinese President Hu Jinato visited 

Pakistan was a landmark visit as some 34 agreements were signed in public and private 

sectors, 18 agreements and MOUs included: Free Trade Agreement, Five year 

Development Program of Trade and Economic Cooperation Agreement, MOU for 

Financial Support for Up Gradation-Rehabilitation of Karakorum Highway, Construction 

of Schools and Hospitals in Earthquake hit areas of Pakistan Agreement, Establishment 

of Pakistani Consulate in Ching Do Agreement, Sino-Pak Executive Cultural Program 

Agreement and Cooperation in Technical and Economic Fields Agreement, 

Establishment of Pak-China Friendship Centre Islamabad Agreement, Security and 

Finance Agreement, Handover of One Phase of Gwadar Port Agreement, Rehabilitation 

of Karakorum Highway Agreement, Agreement between Heavy Industry Taxila and 

Northern Industries China, Expansion of GSM Network Agreement, Exploration of Oil 

and Gas Agreement, Cooperation in Oil Sector Agreement and Cooperation in President 

Rozgar (Employment) Scheme Agreement, Syndic Coal Agreement, MOU of 

establishment of Pak-China Investment Company were included in 18 signed MOUs and 

agreements (Pak Tribune, 2006). 

In private sector 16 agreements were signed for joint ventures including ‗Hostels, 

Housing, Industrial Parks, Cement, Fertilizer, Transport and Pesticide sectors‘. 

Representatives from leading Chinese and Pakistani companies signed on behalf of their 

respective companies. An umbrella MOU was also signed to ensure the implementation 

of these projects within next five years (Pak Tribune, 2006). 

China provided $ 198 million while Pakistani contribution has been $ 50 million, for the 

first phase of the project which was completed in 2005. Second phase was undertaken by 

private sector at an estimated cost of $ 600 million completed now. Gwadar port has 

ability to conduct trans-shipment and cargo handling service more efficiently to the 

countries of the region and beyond . 

The Chinese investment in the Gwadar port and the Saindak Copper project is 

about $ 230 million. It is almost more than 50 percent of their total investment in 

Pakistan. China has built a coastal highway connecting Gwadar port with Karachi with an 

expense of $ 200 million. 

The landmark visit of Chinese Prime Minister, Wen Jiabao in April 2005 was 

very productive since both sides signed 21 agreements of cooperation in economics, 

defense, energy, infrastructure, social sector, health, higher education, housing and other 

areas. They also signed a Treaty of friendship, Cooperation and Good neighborly 

regulations and an agreement on Early Harvest Program (EHP), which has become 

operational since January 1 st , 2006. The first step towards establishing a Free Trade Area 

(FTA) between the two countries was taken when China has virtually ended all tariffs on 


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767 items. With roughly ten thousand Chinese workers engaged in 120 projects in 

Pakistan, total Chinese investment--which includes heavy engineering, power generation, 

mining, and telecommunications--was valued at $4 billion in 2007 (Afridi, 2010). Both 

countries have signed seven agreements in bilateral trade, energy sector and the 

communication during the state visit of Pakistani Prime Minister Shukar Aziz in 2007, 

Pakistan announced a free market economy status for China. Chinese government agreed 

to provide a preferential credit of $ 500 million for investment in Pakistan through 

Chinese companies. A significant part of it i.e. $ 150 million was to be spent on Chasma 

nuclear power plant (phase two). The establishment of Sino-Pak (Free Trade Agreement) 

was considered to be significant in terms of security and strengthening of the relationship 

between both trading partners. It was decided in the meeting held in Beijing on 6 th 

February 2005, that the China would also support Pakistan to join the Asia Pacific Trade 

Agreement. One of the major China oil company has signed an exploration contract with 

the Pakistan government. It plans to invest in drilling three wells on the Basca and 

Bahawapul blocks (Xinhua Financial Network, 2007) . . In the first visit of President 

Zardari after assume office in 2008, hold talks with his Chinese counter parts and after 

that both witnessed the signing of ‗eleven agreements ranging from agriculture, mining 

and environmental protection to space technology‘(Yang, 2008). The key agreements 

were; Agreement on economic and technical cooperation; Amending protocol to Free 

Trade Agreement; Framework agreement to set up $300 million National Electronics 

Complex in Pakistan; Framework agreement on mineral cooperation; MoU on 

cooperation in petroleum and natural resources; Agreement on environmental protection; 

Framework agreement for cooperation in the field of radio and television; Paksat-IR 

Satellite procurement contract; MoU on scientific collaboration in agricultural research 

and technical cooperation, and MoU on cooperation between China‘s Cricket Association 

and the Pakistan Cricket Board (The Dawn, 2008). In another trip to Shanghai and Hubei 

province of China visited various sites. Large scale construction and Shanghai‘s urban 

development were the areas of his interest. The purpose of this visit to China was to study 

the ‗Chinese model of power generation‘. He also wanted to study the developments in 

agriculture sector of China and identified the new areas of cooperation between the two 

countries in hybrid seed, agriculture technology, water management, efficient irrigation 

and water pumping through the use of solar technology. 

Since Pakistan is facing a serious electricity crisis of 4500 MW expected to 

continue the near future. Through signing the agreement in Hydel power generation 

system, Pakistan hopes to benefit the expertise of China which has developed in this field 

with an installed capacity of 171.52 GW. China has over 50 percent of the world‘s small 

Hydro units. The mutual cooperation in Hydel power generation would help Pakistan in 

dealing with the power crisis in country. The level of cooperation was extended by 

signing agreements on provincial level of cooperation in number of field like agriculture 

between the Government of Sindh, Province of Pakistan and Government of Hubei 

province of China for the development of a new high yield rice hybrid seed and 

germplasm technology transfer to protect that seed. Banking, finance, construction and 

management of Gwadar port were other sectors in which MOUs and agreement were 

signed. 

President Zardari declaring himself the first businessmen President of Paksitan 

directly interacted with the Chinese business community. He met with number 


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businessmen Chinese industries like finance, infrastructure, energy and 

telecommunication. In the field of science and technology Pakistan gave a contract to 

China Great Wall Industrial Corporation (CGWIC), a space industry service provider ‗to 

launch a telecommunication satellite for Pakistan in 2011 from the Xiching Satellite 

launch centre in Sichuan' (Yang, 2008). 

On technological background for enhancement the economical and military strengths, 

China- Pak signed an agreement in 2009 to develop a new satellite, PAKSAT-1R 

(Xinhua, 2009). A senior Chinese trade official said in July 2010 that trade between 

China and Pakistan could double within five years to hit 15 billion U.S. dollars in 2015 

(Free Press Release, 2010). Chinese Minister of Commerce Chen Deming made the 

remarks in China-Pakistan Economic Cooperation Forum, called on companies of the two 

countries to learn more about and give full play to the existing free-trade agreement, 

expand investment and bilateral trade, he also urged the two sides to make full use of 

bilateral cooperation mechanisms and make them serve the two countries' trade and 

economic cooperation and China‘s investment in Pakistan as expended from resources, 

home appliances to communication and finance (Free Press Release, 2010). In 2010, the 

China Three Gorges Corporation announced a $100,000 million agreement with Pakistan. 

The investment will be utilized to develop two hydro power projects to be located in 

Pakistan. On completion, the projects will add 8,200 MW of capacity to the county (Free 

Press Release, 2010). The current Pakistan government undertakes more than five-dozen 

new projects and nearly 40 MoUs signed (Sabir, 2010). Chinese firms have signed 

agreements to buy 2,000 tonnes of Cotan beige and two grades of Mastung beige quality 

marble, found in Balochsitan (Sabir, 2010). Another Chinese firm will invest $50 billion 

in Punjab during the next 10 years. The investment will be done to build a state-of-art 

industrial city, along with an industrial estate on 100,000 acres (Sabir, 2010). 

Furthermore, these two states signed an agreement to establish a joint venture company in 

the private sector to promote sale of certified hybrid seeds and other varieties of seeds, 

which are to be developed according to the soil conditions and environment of Pakistan 

(Sabir, 2010). President Zardari stressed on to set up railway line and a pipeline to 

Pakistan to China (Sabir, 2010). MoUs were also signed in the fields of health and 

Geological Survey of Pakistan and China. An MoU was also signed for cooperation 

between Pakistan Broadcasting Corporation and China Radio International for Urdu 

service broadcasts in selected Pakistani cities on FM channel with the China Radio 

International (CRI). China has promised a 50 million yuan grant for new projects to be 

set up in Pakistan (Sabir, 2010). The Chinese PM said his country appreciated Pakistan‘s 

policy of ―One China‖ and assured Zardari that China would continue supporting 

Pakistan at the UN and multilateral forums, including SAARC and ECO (Sabir, 2010). 

Pakistan and China signed here on Wednesday 12 agreements, memorandums of 

understanding and protocols to enhance cooperation on a sound footing in various 

sectors, including infrastructure, information technology, energy, telecommunication, 

agriculture, industry, minerals, trade, disaster relief and space technology(The Nation, 

2010). The Chinese policies support in public and private sector to actively invest in 

Pakistan based projects. China‘s public and private sector is collaborating in some 250 

projects in ‗mega to small and from strategic and regular business‘(Government of 

Pakistan, 2008). Over 60 Chinese Companies are already established their permanent 

offices in Pakistan. China national Petroleum Corporation, China state construction 


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Engineering Corporation, Dong Fang Electric Corporation, China Ocean Shipping 

Corporation and Air China are making good profits. The profit gains of existing projects 

by the Chinese private sector companies in Pakistan would ensure the enhanced level of 

investment from the Chinese private sector. In February 2006, private sector companies 

of both countries signed agreements, at Pakistan China investment forum of worth $ 500 

million to conduct joint ventures in different areas like real estate development, Karachi 

mass transit communication network, chemical, fertilizers, automobile and agro based 

industries. The estimated time of completion of these projects was four to five years. 

National Bank of Pakistan and China Development Bank also signed an agreement for 

providing joint financing to the joint ventures (Government of Pakistan, 2008). In wake 

of the political will from both sides for promoting economic cooperation, volume of 

Chinese business in Pakistan is appreciating. These are surly enormous potential for the 

future growth. 

Ministry of Finance, Government of Pakistan and the Investment Division and 

Board of Investment (ID&BOI) jointly organized Pak-China investment Forum in 

Islamabad on 26 th February, 2008 in order to provide an interactive platform to the 

recently launched Pak-China Investment Company (PCICL) and to help it in devising its 

‗business plan and expand its clientele‘ (Association Press of Pakistan, 2010). PCICL 

would perform investment banking business on commercial basis to carry out activities in 

the finance, infrastructure, services, mining, industrial manufacturing and non 

manufacturing sectors of Pakistan. The Ministry of Privatization & Investment, the 

Government of Pakistan, Mr. Shazada Alma Manoo acknowledged in his welcome 

remarks the strength of bilateral relations between the two countries which is deeply 

rooted in the ethos, minds and hearts of both the nations. He further added that China and 

Pakistan are strategic partners and have been cooperating in many gigantic projects 

including upgrading of the Pakistan Railways. The establishment of Pak-China 

Investment Company is another important milestone in economic relations as the 

company shall play the role in unleashing the potential of Pakistan. Mr. Iqbal Ashraf, MD 

PCICL, highlighted the objectives of this company said that Pak-China investment 

company is ‗established not only to promote economic cooperation between the corporate 

sectors of both countries but they also intend to redefine the role of Development Finance 

Institution (DFI) in underdeveloped countries‘. Mr. Chen Jianbo, the CEO PCICL also 

echoed the same feelings and pledged the same goals to carry out. He informed the 

participants of the meeting that PCICL is part of the five year economic development 

program between Pakistan and China. It would provide assistance to business sectors of 

Pakistan looking for Chinese investment with the largest paid capital of $ 200 millions 

(Association Press of Pakistan, 2010). 

Over the years China emerged Pakistan‘s largest defense supplier. Military 

cooperation between the two has deepened with joint projects producing armaments 

ranging from fighter jets to guided missile frigates (Pant, 2010). China is a steady source 

of military hardware to the resource deficient Pakistan Army (Pant, 2010). It has not only 

given technology assistance to Pakistan but has also helped Pakistan to set up mass 

weapons production factories (Pant, 2010). Pak-China defense collaboration witnessed 

another landmark in the September 2003 when jet fighter JF-17 thunder made its maiden 

flight in China. It is a lightweight all weather aircraft which can perform multi-role with a 

capability to fly at a speed of 1.6 mach and a high thrust to weight ratio. It was completed 


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as a joint venture of both countries. Expert supposed that Shaheen missile series is the 

modification of Chinese Imports (Afridi, 2010). In 2008, China vows to help Pakistan in 

civil nuclear technology by building and helping in the Khusab Nuclear Program 

providing technology to Pakistan for better maintained of civil nuclear plants. In same 

year F-22 (advance model of Chinese Navy frigate), comes into service with the Pakistan 

Navy (Defense Forum, 2009). A spokesman for the Chinese foreign ministry said its plan 

to provide Pakistan with two new reactors was in line with international obligations 

(British Broadcasting Corporation 2010). 

3. Conclusion 

The increasing volume of trade and investment shows the strengthening of bilateral 

economic and military relations. The continuous exchanges at the highest level search for 

new avenues of cooperation and signing of agreements work as the life blood in the body 

of relationship. Former President Musharraf and President Zardari gave a new 

momentum to the existing ties and this cooperation is continued in administration of 

Zardari. In his official first visit to China, energy, telecom, agriculture, food and food 

processing facilities, real estate, new materials and infrastructure development as some of 

the areas where Chinese investors could concentrate. The economic cooperation between 

the two countries strengthened their strategic partnership. USA formally launched 

objection on the Chinese proposal to build two new nuclear reactors in Pakistan. But 

China continues supporting Pakistan to strengthen its internal and external security 

measures. 

The security threats in the two of its western provinces of Pakistan Khyber 

Pakhtoonkhwa and Balocistan especially and other areas of Pakistan generally are the 

main hurdle in attracting Chinese private sector investment. The rise of Taliban in 

Pakistan by the extremist elements disillusioned Chinese government. The Chinese paid 

heavy price for investing in Balocistan. Even three Chinese engineers were assassinated 

in 2004, in an act of terrorism in Gwadar. Two more Chinese engineers lost their life in 

an act of terrorism in the Hub area of Balcoistan province. But they did not hand over and 

continued the process of mutual cooperation. The reason is certainly the Chinese national 

interest which lies in strong ties with Pakistan. Pakistan is looking for more FDI to create 

job opportunities for its people. The Chinese companies involved in manufacturing sector 

are performing only assembling function in Pakistan. They are importing spare parts from 

China to enjoy a tax break. Such screwdriver industries in auto mobile, home appliance 

etc. are not creating jobs but using their investment for opening Pakistan market. There is 

a need to use Chinese investment for expanding manufacturing base and ensuring 

technology transfers, so that such investment could be equally beneficial for Pakistan 

also. The Chinese domestic market offers attractive opportunities for Pakistani exporters, 

in the area of agricultural items like fruits, fishery and leather products. Implementation 

of zero tariffs on Pak-China trade, Pakistani fruits would be at advantage terms of quality 

and price compared to those grown in Southern China. This study concludes that the 

Pakistan needed a reliable economic and strategic ally to improve its developing 

economy as a source of high technology and FDI, while China needs a good economic 

partner ready to sere as a strategic partner by helping its access to Indian Ocean and the 

Gulf countries to increase its political and economical area of influence. It is a sort of 

mutual interdependence between two countries keeping them engages continuously and 

Pakistan and China is the joint cornerstone of stability in South Asia. 


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Refrences 

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http://www.cfr.org/publication/10070/chinapakistan_relations.html (accessed July 

19, 2010). 

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&task= view&id=29910 (accessed April 11, 2010). 

British Broadcasting Corporation. (2010). China says Pakistan nuclear deal 'peaceful, 

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http://www.defence.pk/forums/china-defence/24338-future-china-pakistanrelations.html 

(accessed June 25, 2010). 

Embassy of China. (2007). Pakistan, China to Further Deepen Strategic Ties: Joint 

Statement, http://pk.china-embassy.org/eng/zbgx/t313472.htm (accessed April 20, 

2010). 

Free Press Release, (2010). Dowgecn.com reports China says trade with Pakistan could 

double within five years, http://www.prlog.org/10798717-dowgecncom-reportschina-says-trade-with-pakistan-could-double-within-five-years.html 

(accessed 

july 18, 2010). 

Government of Pakistan. (2008) 

Pak China Investment Forum, Investment Division & Board of Investment, Media 

Release, 

http://www.pakboi.gov.pk/Press/PDF/February,%202008/Pak%20China%20Inves 

tment%20Forum%20at%20ID&BOI.pdf (accessed March 22, 2010). 

Khan, M. H. (2006). New Height of Pak China Ties, 

http://usa.mediamonitors.net/content/view/full/27754 (accessed April 05, 2010). 

MOFCOM. (2009). China Pakistan Bilateral Trade Statistics from 1993-2008, 

http://pk2.mofcom.gov.cn/aarticle/bilateralcooperation/labourlawhost/200905/200 

90506266956.html (accessed April 13, 2010). 

Mohuddin, A. (2007). China and Pakistan’s Textile Sector, Dawn Business and 

Economic Review, 3 September - 6 October, p. 5. 

Pak Tribune. (2006). Pak China sign 34 Agreements, MOUs in Private, Public 

Sector,http://www.paktribune.com/news/index.shtml?161061 (accessed July 26, 

2010). 

Pant, H. (2010). China-Pakistan Nuclear Deal: Why the Surprise, Rediff News, 

http://news.rediff.com/column/2010/jun/22/china-pakistan-nuclear-deal-why-thesurprise.htm 

(23 July, 2010). 

Rehman, F. (2007). Pakistan Evolving Relations with China, Russia and Central Asia, 

Acta Slavica Iaponica No. 16, Slavic Research Center (SRC), pp. 211-212, 

Sapporo , Japan. 

http://www.google.com/url?sa=t&source=web&cd=1&ved=0CBIQFjAA&url=htt 

p%3A%2F%2Fsrch.slav.hokudai.ac.jp%2Fcoe21%2Fpublish%2Fno16_1_ses%2F11 

_rahman.pdf&rct=j&q=Pakistan%27s%20Evolving%20Relations%20with%20Ch 

ina%2C%20Russia%20and%20Central%20Asia%20rehman&ei=pauYTIimDo6A 


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OJfRlZYP&usg=AFQjCNFJfF4jBuVSK0NdOfCxil4Teon21Q&sig2=fnHm4vI8e 

4ETOiJWxF3Xpw&cad=rja (accessed April 13, 2010). 

Rehman, F. (2008). Pakistan-China Economic Relations: Opportunity and Challenges, 

http://www.issi.org.pk (accessed June 12, 2010). 

Sabir, I. (2010). Pakistan and China’s economic cooperation, Daily Times, 

http://www.dailytimes.com.pk/default.asp?page=2010\07\20\story_20-7- 

2010_pg5_15 (accessed July 15, 2010). 

Shaikh, M. A. (2001). Pak China Economic Relations during the period from 1991-92- 

2000-01, Asia Pacific, 20, pp. 66-67. 

Sumita, K. (2007). The China-Pakistan Strategic Relationship: Trade, Investment, 

Energy and Infrastructure, Strategic Analysis, 31(5), pp. 757-790. 

The Dawn. (2008). Pakistan, China sign 12 agreements, protocols: Beijing offers to 

boost economic cooperation, supports Islamabad’s efforts to safeguard 

sovereignty, http://www.dawn.com/2008/10/16/top1.htm (accessed July 02, 

2010). 

The Nation. (2010). Pakistan, China ink six agreements, 

http://www.nation.com.pk/pakistan-news-newspaper-daily-englishonline/International/07-Jul-2010/Pakistan-China-ink-six-agreements 

(accessed 

July 17, 2010). 

Wolfgang, B. (1975). China's Economic Aid, London, Hurst, 1975. pp. 215. 

[20] Xinhua, (2009). Pakistan, China agree to develop new satellite, China Daily, 

http://www2.chinadaily.com.cn/china/2009-09/18/content_8710746.htm 

(accessed June 04, 2010). 

Xinhua Financial Network, (2007). China’s Zhenhua Oil Wins Oil and Gas Exploration 

Rights in Pakistan, 

http://www.uofaweb.ualberta.ca/CMS/printpage.cfm?ID=58757 (accessed April 

30, 2010). 

Yang, X. (2008). Zardari’s Visit Cements All Weather Partnership, China Daily, 

http://www.chinadaily.com.cn/china/2008-10/16/content_7110177.htm (accessed 

April 20, 2010). 

Zardari, A, A. (2009) Sino-Pakistan Relations Higher than Himalayas, China Daily, 

http://www.chinadaily.cn/opinion/2009-02/23/content_7501699.htm (accessed 

June 02, 2010). 


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Annexure 

Table:1 China Pakistan Bilateral Trade Statistics from 1993-2008 

Value in US $ Million 

Total China Export China Import Balance 

Yea 

Valu 

Val Chan 

r 

199 

Value Change e Change ue ge Value Change 

9 971 0 581 0 390 0 191 0 

200 

25.60 

0 1,162 19.60% 670 15.50% 492 % 178 -6.80% 

200 

18.80 

1 1,397 20.40% 815 21.60% 582 % 

- 

233 31.10% 

200 

1,24 

4.20 

193.50 

2 1,800 28.80% 2 52.40% 558 % 684 % 

200 

3.00 

3 2,430 35.00% 1855 49.40% 575 % 1,280 86.90% 

200 

2,46 

3.50 

4 3,061 26.00% 6 32.90% 595 % 1,871 46.20% 

200 

3,43 

40.00 

5 4,260 39.00% 0 39.00% 830 % 2,600 39.00% 

200 

4,24 

1,00 20.90 

6 5,247 23.10% 0 23.70% 7 % 3,233 24.30% 

200 

5,43 

1,10 9.70 

7 6,539 24.60% 3 28.20% 5 % 

- 

4,328 33.90% 

200 

5,97 

1,00 8.90 

8 6,981 1.30% 5 3.20% 6 % 4,969 6.10% 

Source: China Ministry of Commerce, and China Customs 


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An Empirical Study of Impact of Job Satisfaction on 

job Performance in the Public Sector Organizations 

Dr. Muhammad Safdar Rehman 

General Manager, Human Resources, 

PEMRA, Islamabad, Pakistan. 

Ajmal Waheed, PhD (Corresponding Author) 

Assistant Professor, 

Department of Administrative Sciences, 

Quaid-e-Azam University, Islamabad 

Note: This piece of research has been conducted as part of PhD research of the first 

author (Rehman, 2010). 

Abstract 

The job satisfaction of employees is the most imperative factor in public sector regulatory 

authorities in Pakistan. To enhance the productivity and effectiveness of the employees 

one needs to examine what factors influences the job satisfaction. The purpose of this 

descriptive-correlational study was to test link between job satisfaction, job retention and 

job performance. Sample of 568 employees from public sector regulatory authorities was 

selected for this study. Employing a descriptive-correlative survey method data was 

collected through questionnaire. The employees were generally satisfied with their jobs. 

This study has explored a relationships showing large effect size correlations (r = 0.52) 

between job performance and job satisfaction. 

Keywords: Public Sector Regulatory Authorities, Job Satisfaction, Job performance, Job 

Retention, Job Analysis, Public Sector Employees. 


The topic of job satisfaction of an employee has received considerable attention of 

researchers and managers equally (Gautam, Mandal & Dalal, 2006). The most important 

information in an organization regarding an employee is a validated measure of his / her 

level of job satisfaction (Roznowski & Hulin, 1992). The most-used research definition 

of job satisfaction is by Locke (1976), who defined it as ―a pleasurable or positive 

emotional state resulting from the appraisal of one‘s job or job experiences‖ (p. 1304). 

Implicit in Locke‘s definition is the importance of both affect, or feeling, and cognition, 

or thinking. When we think, we have feelings about what we think. Conversely, when we 

have feelings, we think about what we feel. Cognition and affect are thus inextricably 

linked, in psychology and even in biology. Thus, when evaluating our jobs, as when we 

assess most anything important to us, both thinking and feeling are involved. 


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Of all the major job satisfaction areas, satisfaction with the nature of the job itself which 

includes job challenge, autonomy, variety, and scope, best predicts overall job 

satisfaction, as well as other important outcomes like employee retention (Fried & Ferris, 

1987; Parisi & Weiner, 1999; Weiner, 2000). Thus, to understand what causes people to 

be satisfied with their jobs, the nature of the job itself is one of the first places for 

practitioners to focus on. There has been an increasing interest among human resource 

management (HRM) academics and practitioners in the degree to which employees are 

satisfied with their jobs, and more generally in well-being at job. A number of recent 

studies have reported a positive link between employees‘ well-being and productivity 

(Marks, 2006). This interest in employee well-being has been mirrored in other fields, 

most notably within the new ‗economics of happiness‘ literature (Layard, 2005). 

In order to find out the relationship between HRM practices and job satisfaction, there 

has been widespread debate in the literature over the effects of HRM on job satisfaction. 

In some studies, job satisfaction has been identified as a key variable mediating any 

positive relationship between HRM practices and organizational performance (Guest, 

2002). In contrast, others have suggested that in Britain, the implementation of HRM 

practices has been associated with higher levels of job intensity, and thus lower levels of 

job satisfaction (Green, 2006). Others note that HRM practices adopted as part of a ‗highperformance 

work system‘ are not primarily designed to increase job satisfaction: in 

practice, they may or may not have such an effect (Appelbaum, 2002). It may be the case 

that HRM practices impact on individual facets of job satisfaction such as satisfaction 

with sense of achievement or satisfaction with pay. Thus, further research is required to 

assess the actual effects of HRM practices on individual aspects of job satisfaction and 

overall job satisfaction. 

What is the likely impact of HRM practices on job satisfaction? It might be expected that 

these practices will have a positive impact on particular aspects of job satisfaction. Some 

have pointed to the critical role of HRM policies, such as participatory job practices, on 

employee‘s ability to derive a sense of meaning from job and to achieve satisfaction with 

job itself (Cartwright & Holmes, 2006). If HRM practices such as team working, upward 

communication systems and problem-solving groups provide employees with greater 

autonomy and greater opportunities to contribute to decision making, then this might be 

expected to have a positive impact on other aspects of job satisfaction, particularly 

satisfaction with influence. However, Marchington and Wilkinson (2005) argue that the 

degree of influence provided by participatory work practices under the umbrella of HRM 

is often overstated and that these initiatives result instead in job intensification and higher 

levels of stress. Other studies (Boselie et al., 2005) have found that ‗bundles‘ of HRM 

practices, implemented together as a ‗high involvement‘ approach to management, can be 

associated with higher levels of job satisfaction. 

Social Sciences and behavioral research suggests that job satisfaction and job 

performance are positively correlated (Bowran & Todd, 1999). The study of the 

relationship between job satisfaction and job performance has a controversial history. The 

Hawthorne studies, conducted in the 1930s, are often credited with making researchers 


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aware of the effects of employee attitudes on performance. Shortly after the Hawthorne 

studies, researchers began taking a critical look at the notion that a ―happy worker is a 

productive worker.‖ Most of the earlier reviews of the literature suggested a weak and 

somewhat inconsistent relationship between job satisfaction and performance. 

A review of the literature in 1985 suggested that the statistical correlation between job 

satisfaction and performance was about 0.17 (Iaffaldano & Muchinsky, 1985). Thus, 

these authors concluded that the presumed relationship between job satisfaction and 

performance was a ―management fad‖ and ―illusory.‖ This study had an important impact 

on researchers, and in some cases on organizations, with some managers and HR 

practitioners concluding that the relationship between job satisfaction and performance 

was trivial. 

However, further research does not agree with this conclusion. Organ (1988) suggests 

that the failure to find a strong relationship between job satisfaction and performance is 

due to the narrow means often used to define job performance. Organ argued that when 

performance is defined to include important behaviors not generally reflected in 

performance appraisals, such as organizational citizenship behaviors, its relationship with 

job satisfaction improves. Research tends to support Organ‘s proposition in that job 

satisfaction correlates with organizational citizenship behaviors (Organ & Ryan, 1995). 

In addition, in a more recent and comprehensive review of 301 studies, Judge, Thoresen, 

Bono, and Patton (2001) found that when the correlations are appropriately corrected (for 

sampling and measurement errors); the average correlation between job satisfaction and 

job performance is a higher 0.30. In addition, the relationship between job satisfaction 

and performance was found to be even higher for complex (e.g., professional) jobs than 

for less complex jobs. Thus, contrary to earlier reviews, it does appear that job 

satisfaction is, in fact, predictive of performance, and the relationship is even stronger for 

professional jobs. 

A better appreciative of job satisfaction and factors linked with it helps managers guide 

employees' activities in a desired direction. The confidence of employees is a deciding 

factor in the organization's efficiency (Chaudhary & Banerjee, 2004). Thus, it is 

rewarding to say that managers, supervisors, human resource specialists, employees, and 

societies in general are concerned with ways of improving job satisfaction (Cranny et al., 

1992).Various researchers have investigated the concept of job satisfaction and factors 

that explain how satisfied employees are with their positions. Much of the job satisfaction 

research has focused on employees in the private sector (Niehouse, 1986; Lawler & 

Porter, 1968; Herzberg et al., 1958). These researchers have found that a variety of 

factors influence the job satisfaction of employees. 

The motivation to probe the degree of job satisfaction arises from the fact that a better 

understanding of employee satisfaction is desirable to achieve a higher level of 


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motivation which is directly associated with their achievements. Recently, the appraisal 

of employees‘ attitude such as job satisfaction has become a common activity in 

organizations in which top management is concerned with the physical and psychological 

well being of people (Spector, 1997). 

Beadles et al (2000) found that job retention was positively correlated with organizational 

performance. Unavoidable turnover is typically viewed as unfavorable to an organization 

(Campion, 1991). Most research supports the notion that turnover decreases 

organizational performance. Mobley (1982) suggested that turnover might disrupt job 

performance when an employee who intends to leave becomes less efficient, when an 

experienced employee leaves, or when time is lost in an attempt to secure a replacement. 

Empirical research has shown that voluntary turnover is related to lower organizational 

performance (Shaw, Gupta, & Delery, 2002). Other research suggests that turnover can 

actually improve performance. One potential benefit of turnover is the elimination of 

poor performing employees (Price, 1989). Additionally, Staw et al (1986) proposed that 

turnover can increase performance if most of the turnover is by employees with very long 

or very short tenure. 

Turnover is a persistent problem in organizations (Abbasi & Hollman, 2000; Price, 

1989). It is prevalent in every type and size of organization and at every organizational 

level (Abbasi & Hollman, 2000; Beadles, Lowery, Petty, & Ezell, 2000). Abbasi and 

Hollman (2000) go so far as to state that turnover is ‗‗one of the most significant causes 

of declining productivity and sagging morale in both the public and private sectors‘‘ (p. 

333). Turnover is also very costly for organizations. It is estimated that American 

industries incur a cost of $11 billion annually as a result of voluntary and involuntary 

turnover. This cost is due to termination, advertising, recruitment, selection, and hiring 

(Abbasi & Hollman, 2000; Mobley, 1982). Turnover also produces intangible costs, such 

as declining morale (Abbasi & Hollman, 2000), and the disruption of social and 

communication patterns (Mobley, 1982). Because of this, the study of turnover is a wellresearched 

area and is of major interest in organizational behavior (Beadles et al., 2000). 

Research by Allen and Griffeth (2001), Allen et al (2003), and Chiu and Francesco 

(2003) shows that job satisfaction is a strong predictor of turnover intentions. 

Elangovan‘s (2001) extensive research shows that job satisfaction predicts both 

commitment and turnover intentions, and commitment predicts only turnover intentions. 

It is instructive to note that, according to Jaros et al (1993) and Wasti (2003), 

organizational commitment depicts the strongest negative relationship with turnover 

intentions. 

According to Hellman (1997), increasing dissatisfaction in employees results in a higher 

chance of considering other employment opportunities Seccombe and Smith (1997) 

found that the factors given by employees as reasons for leaving were centered on issues 

known to affect job satisfaction such as ineffective supervisory relationships and poor 


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opportunities for professional development, rather than external environment of which 

managers would justifiably feel unable to control. 

Mounting evidence from the literature suggests that organizational tenure influences job 

attitudes and turnover intentions (Abbott, White, and Charles, 2005; Van Breukelen, Van 

der Vlist, and Steensma, 2004). For instance, Steers (1977) strongly agues that tenure is 

the single best predictor of turnover because it represents an employee‘s past behavior 

and summarizes his or her relationship with the organization. The attraction selection 

attrition hypothesis (Schneider and Reichers, 1983) suggests that individuals are attracted 

to and selected by organizations that satisfy their needs and goals. In those cases where 

there is a good fit, we expect low levels of attrition and, hence, longer tenure. In cases of 

mismatches, however, we should expect high attrition rates and, hence, shorter tenure, 

provided that other job opportunities are readily available. Thus, tenure is expected to 

correlate with climate perceptions, job satisfaction, organizational commitment, and 

turnover intentions. 

2. Purpose and Objectives 

The purpose of this descriptive-co-relational study was to examine impact of job 

satisfaction on job performance of public sector regulatory authorities. In addition, this 

study sought to determine the relation between job retention and job performance and job 

satisfaction- job retention. To guide this study the following research objectives were 

formulated. 

� Describe selected demographic characteristics of employees; 

� Describe the employee‘s level of job satisfaction with the job performance; 

� Describe relationships between job satisfaction and job performance; 

� Describe relationships between job retention and job performance; 

� Describe the relationships between job satisfaction and job retention; and, 

� Describe the relationships between job satisfaction, job retention and job 

performance. 

The sample for this study was employees of public sector regulatory authorities (N = 

568). Employing a descriptive-correlative survey method and data were collected through 

questionnaire. 


The research design was descriptive-correlative survey method and data were collected 

through a questionnaire that was developed for this particular research. The section one 

of the questionnaire consisted of questions pertaining to the demographic characteristics. 

Section two of the questionnaire consisted of the employee job Satisfaction, job 

performance and job retention. This Section consisted of an 18-item five-point Likert 

type scale with responses varying from 1 (strongly disagree) to 5 (strongly agree). 


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Content and face validity were established by a panel of human resources and statistical 

experts. A pilot test was conducted with 45 employees not included in the sample. 

Questionnaire reliability was estimated by calculating Cronbach‘s alpha. Reliability for 

the overall instrument is placed under Appendix - A. 

4. Results 

Respondents consisted of 71.1% male and 25.9% female employees. The age of 47% 

respondents was between 25-35 years and 21% respondents were below 25 years. Most 

of the employees (66.4%) had attained a master degree. Almost 44.9% of the respondents 

were from middle management, 23.2% supervisory level, 26.9% non-managerial and 

4.9% top management. Number of years in present organization was from 3-5 years of 

32.9% and 1-2 years of 26.1%. The majority of the respondents (64.6%) are permanently 

employed. The contractual employees comprise (31%) respondents. Almost 47.5% of the 

respondents were from managerial / Administrative category and 28.7% from technical 

category. Majority of the respondents (67.6%) were directly recruited whereas 28.2% 

respondents were promoted. 

Based on a five point Likert type scale with responses ranging from strongly disagree (1) 

to strongly agree (5), the overall level of job satisfaction was 3.71 (SD = 0.57). In terms 

of Table 1 the results indicate that there is a slight mean difference in the levels of job 

satisfaction with job performance (Mean = 3.68, SD = 0.65) and job satisfaction with job 

retention (Mean = 3.16, SD = 0.60). 

Variables 

Table: 1. Descriptive Statistics of all Variables 

Minimum Maximum Mean Std. Deviation 

Job Performance 1.00 5.00 3.68 0.65 

Job Satisfaction 2.17 5.00 3.71 0.57 

Job Retention 1.67 4.83 3.16 0.60 

Valid N 568 568 568 568 

Correlation coefficients were calculated to describe the relationships between job 

satisfaction and job performance, job retention and job performance, job satisfaction and 

job retention (Table 2). Correlation coefficients were as follows: Job satisfaction, r = 

0.52; Job Retention, r = 0.23; and Job satisfaction-Job Retention, r = 0.34. Relations 

between job satisfaction and job performance were found highly significant whereas 

other relations were found significant also. 

Table: 2. Relationships between Job Performance (JP), Job satisfaction (JS) and Job 

Retention (JR) 

VARIABLES JP JS JR 

Job Performance ( JP ) 


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Job Satisfaction ( JS ) 0.518(**) 

Job Retention ( JR ) 0.230(**) 0.340(**) 

N= 568 

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

Regression results have shown that job satisfaction correlates positively with Job 

performance (Table 3). Adjusted R-squared value was found 0.974 which explained 97.4 

percent of the total variance for dependent variable job performance relating to job 

satisfaction. B value for job satisfaction was 0.985 with standard error of 0.007. P-level 

of job satisfaction was 0.000 and t value 145.67. All the values were positive t value with 

a ‗b‘ value is significant; hence, predictor job satisfaction is making a highly significant 

contribution to the study. The smaller the value of significance 0.000 and the larger the 

value of t = 145.67 is also showing the greater contribution of job satisfaction. Beta value 

for job satisfaction was 0.987 which provided a better insight into the importance of job 

satisfaction in the study. 

Table: 3. Regression summary of job performance relating to job satisfaction 

ANALYSIS OF VARIANCE 

Correlation ( R ) 0.987 

R- squared 0.974 

Adjusted R- squared 0.974 

Standard Error of Estimates 0.604 

F ( 21220.972 ) p = .000 

Intercept 

BETA B STD. 

ERROR 

t P-VALUE 

Job satisfaction ( JS ) 0.987 0.985 0.007 145.67 0.000 

Regression results have also shown that job retention correlates positively with Job 

performance (Table 4). Adjusted R-squared value was found 0.951 which explained 95.1 

percent of the total variance for dependent variable job performance relating to job 

retention. B value for job retention was 1.132 with standard error of 0.011. P-level of job 

retention was 0.000 and t value 104.46. All the values were positive t value with a ‗b‘ 

value is significant hence predictor job retention is making a highly significant 

contribution to the model. The smaller the value of significance 0.000 and the larger the 

value of t = 104.46 is also showing the greater contribution of job retention. Beta value 

for job retention was 0.975 which provided a better insight into the importance of job 

retention in the study. 

Table: 4. Regression Summary of Job Performance Relating to Job Retention 

ANALYSIS OF VARIANCE 

Correlation ( R ) 0.975 

R- squared 0.951 

Adjusted R- squared 0.951 

Standard Error of Estimates 0.832 

F ( 10912.766 ) p = .000 


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BETA B STD. 

ERROR 

T p-VALUE 

Intercept 

Job retention ( JR ) 0.975 1.132 .011 104.46 0.000 

Regression Analysis for Jon satisfaction and job retention together with Job performance 

(Table 5) revealed that adjusted R- squared was found 0.975 which is a high effect size. It 

explained 97.5 percent of the total variance. The overall p-value is



which does not support to the previous findings. This study had an important impact on 

researchers, and in some cases on organizations, with some managers and HR 

practitioners concluding that the relationship between job satisfaction and performance 

was trivial. 

In addition, in a comprehensive review of 301 studies, Judge, Thoresen, Bono, and Patton 

(2001) found that when the correlations are appropriately corrected (for sampling and 

measurement errors); the average correlation between job satisfaction and job 

performance is a higher 0.30. This finding is supportive of current study sampling and 

measurement as results of job satisfaction and job performance (0.52) is a higher than 

0.30 Thus, contrary to earlier reviews, it does appear that job satisfaction is, in fact, 

predictive of job performance and the relationship is stronger. 

Previous work of Fried & Ferris (1987); Parisi & Weiner (1999); and Weiner (2000) 

envisaged that major job satisfaction areas includes, satisfaction with the nature of the job 

itself, including job challenge, autonomy, skill variety and scope, best predicts overall job 

satisfaction, as well as other important outcomes like job retention. Correlation between 

job satisfaction and job retention in this study is (r = 0.34) which is statistically significant. 

Hence these finding support the work of Fried and Ferris (1987); Parisi and Weiner 

(1999); and Weiner (2000). 

Job satisfaction, which shows organization‘s interest in the compensation and career 

growth of the employee, has a direct influence on an employee‘s commitment to the 

organization, which in turn affects employee retention and employee productivity and 

finally results in increased job performance. This is in conformity with the finding of 

Igbaria and Greenhaus (1992). Since most of the professionals in the organizations were 

in their mid career, they look for career growth. More than pay, prime value is given to 

growth opportunities. If there is scope for career growth in the organization, employees 

feel attached to the organization and remain longer and contribute towards organizational 

success. The influence of organizational commitment on employee retention and 

productivity is very much in consistency with previous studies (Becker, 1960; Allen & 

Meyer, 1996; Mowday et al., 1979). Organizations that are interested in a long-term 

relationship with employees reap the rewards in financial terms through increased 

productivity and long term affinity of the employee with the organization. It is really 

inspiring to observe that expenditure on employees is not an overhead, but a long-term 

investment for greater long-term returns. 

Although salary package is a major cost in the public sector regulatory authorities, good 

compensation packages have a direct positive impact on job satisfaction and job retention 

for highly qualified and trained manpower to enhance the productivity of the 

organization. This is in agreement with the Harvard approach that all HRM practices 

should lead to cost effectiveness (Beer et al., 1984). This reveals that a well-designed 

compensation system can reduce operating costs. It might be through enhancing the 

commitment of employees to contribute more to the organization. Higher pay may not 

always increase operating costs if it is used to enhance overall productivity of the 

organization. Many previous studies found compensation and rewards to be the major 

factor deciding the organizational commitment of employees (Steers, 1977; Mowday et 

al., 1982; Angle, 1983; Mottaz, 1988). Compensation might be a major criterion for 


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choosing an organization, but, once they are part of the organization, employees look for 

vertical and horizontal growth in the organization. 

This is not to say that high compensations are unimportant, rather, it is that much can be 

done to influence job satisfaction by ensuring job succession planning. On the other hand, 

there has been an increasing interest among human resource management (HRM) 

academics and practitioners in the degree to which employees are satisfied with their 

jobs, and more generally in well-being at job. A number of recent studies have reported a 

positive link between employee‘s well-being and productivity (Marks, 2006). Results of 

present study also support the findings of Marks. The results showed that the job 

satisfaction have a highly significant influence on job performance. Particularly, the more 

satisfied a job holder is with his / her job, the more important he / she regards the 

organizational skills and cognitive skills as in the job, and the higher level of 

technological skills, organizational skills and cognitive skills he / she displays at job. 

The vast majority of literature examines turnover as the dependent variable and focuses 

on factors that predict turnover (Campion, 1991). Though, it is also important to consider 

turnover as the independent variable, a topic that is studied only infrequently. One 

important issue is the effect of turnover on subsequent job performance in the 

organization. Another important issue is what moderates the turnover-performance 

relationship (Staw, 1980). The positive correlations of job retention was found with job 

performance r = 0.23 in this study. 

Research by Allen and Griffeth (2001), Allen et al (2003), and Chiu and Francesco 

(2003) have shown that job satisfaction is a strong predictor of turnover intentions. The 

present study has shown a positive significant correlation between job retention and job 

satisfaction r = 0.34 This reflect that due to satisfaction with the current job is an 

indicators to predict employee turnover in the organizations may be low in finding 

another job due to a positive experience with their organization‘s policies. 

The empirical data has suggested that the most significant retention predictors were 

associated with job succession planning and job security rather than compensations and 

other monetary rewards. Correlations between job retention and job succession planning 

was found r = 0.37 and job retention with job security was r = 41 whereas correlation 

between job retention and job evaluation was r = 0.28 which is relatively low as compare 

to job succession planning and job security. These results were consistent across the 

board among all age groups, gender, educational level and job status, as no statistically 

significant differences were found. 

This study has explored a relationships showing large effect size correlations between job 

performance and job satisfaction (r = 0.52). This highly positive significant relationship is 

an addition to the literature on Human Resource Management particularly in the context of 

Pakistan a non-western country. The findings reported in this study make a valuable 

contribution to the awareness of understanding the concept of job satisfaction and the 

impact of job satisfaction and job retention on job performance. However, additional 

research is needed to further investigate the potential relationship and effect these 

variables and other variables have on job satisfaction. It is hoped that the relationships to 

the employees job performance are found in this research can contribute to a great extent 


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to improve the level of employees job satisfaction and job retention in public sector 

regulatory authorities. 

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Appendix - A 

Variable items with Alpha 

Job Performance 

My present job gives me the opportunity to enhance my performance on job 

My present job has a direct impact on achieving the organizational objectives 

My job performance outcomes are consistent with the goals of the organization 

My good performance on job is rewarded financial terms 

My good performance on job is given formal appreciation by the higher ups 

The job performance evaluation system is objective 

Job Satisfaction 

My present job gives me internal satisfaction 

I am respected because of my job 

My job gives me a sense of fulfillment 

I can seek my peers help regarding my job 

I will recommend this job to a friend if it is advertised /announced 

I feel cared for by my organization 

Job Retention 

I will continue in my present job even if I am paid less 

Had my job met my expectations I would have given it my best. 

I like my job because it is totally monotonous in nature 

I joined this job because I had no other options 

I can consider changing my job in the next 12 months 

I would like to reach my superannuation in my present organization 

Alpha 

0.77 

( 6 items ) 

0.72 

( 6 items ) 

0.57 

( 6 items ) 


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How Customer Satisfaction affects Performance of 

Islamic Banks in Pakistan 

Dr. Ashfaq Ahmad 

Assistant Professor, Department of Business Administration, 

University of Sargodha 

Asad Afzal Humayoun 

PhD Scholar, (FUIEMS), Foundation University, Islamabad 

Muhammad Mussarat Nawaz 

Lecturer, Hailey College of Commerce, 

University of the Punjab, Lahore 

Dr. Muhammad Bashir 

Chairman, Board of Intermediate and Secondary Education, Multan 

Abstract 

Islamic banks entered in Pakistani banking industry at the inception of 21 st century and 

proved a successful experience due to remarkable progress. This study investigates the 

relationship between customer satisfaction and performance of Islamic banks in Pakistan. 

The researcher collected data from 864 respondents of 72 branches of selected Islamic 

banks. The data were collected by a structured questionnaire developed in the light of 

existing literature. The responses were analyzed through SPSS 15.0 Version to assess the 

influence of customer satisfaction on bank performance. The results indicate that there is 

a weak negative relationship between customer satisfaction and performance of Islamic 

banks. Bankers should introduce new, diversified and marketable products to meet the 

requirements of the different segments of the economy on the basis of gender, age, 

qualification etc. This study attempts to enhance the understanding regarding customer 

satisfaction and performance of Islamic banks in Pakistan. 

Key Words: Bank Performance, Customer Satisfaction, Islamic bank, Pakistan 


Bank promotes savings and investment ventures within the economy. It intermediates 

between saver and borrower to accept surplus funds and lend money to deficient units. It 

is an important contributor towards the economic prosperity and well being of any 

society. In today‘s global and borderless market, banking sector is the central tenet of the 

sound economy. Pakistani banking sector faced a number of challenges since its 

independence due to prevailing socio-economic and political conditions. The 

establishment of State Bank of Pakistan (SBP) proved a blessing for the banking sector to 

promote banking activities within the country. It facilitates the banking sector as a keen 

observer being the regulatory authority. Similarly, SBP played an important role for the 

inception of Islamic banking practices in Pakistan. Its untiring effort enables the 

establishment of first full fledged Islamic bank in 2002. Similarly, a number of full 

fledged Islamic banks got registered to offer a wide range of products according to 

customer‘s expectations. Currently, there are six full fledged Islamic banks operating in 

Pakistan to meet customer needs to retain them as satisfied. A remarkable increase in the 


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branch network and total assets of the banking system is documented during the last year 

(Economic Survey of Pakistan, 2007-08). 

This study examines the relationship between customer satisfaction and performance of 

Islamic banks in Pakistan. Customer satisfaction is the key for the successful survival of 

the commercial banks. The increased number of foreign, local and specialized banks 

enhanced the competition among banks to attract new customers as well as to retain 

existing customers as satisfied. Customers‟ feeling of satisfaction or dissatisfaction is an 

important element that decides the fate of any bank. In Pakistan, existence of two banking 

systems i.e. Islamic banks and conventional banks created stiff competition to have 

greater customers. There are number of studies in the existing literature that investigated 

the different aspects of banks. But there is an acute shortage of literature regarding 

Islamic banks especially in Pakistan. This study attempts to investigate the impact of 

customer satisfaction on performance of Islamic banks in Pakistan. It addresses the gap in 

the exiting literature to conduct empirical investigation based primary data collected from 

the 12 major cities of Pakistan. This study is also important for bankers, policy makers 

and academicians to assess the influence of customer satisfaction on performance of 

Islamic banks. It is reported that banking reforms in Pakistan has increased the 

performance of banking sector (Farooq et al. 2010). Similarly, it is reported that Islamic 

banks have shown better performance as compared to conventional banks in Pakistan 

(Ahmad, Rehman & Saif, 2010). 


Islamic banks have documented a success story in Pakistan. Pakistani banking sector 

reveals a growing and upward trend even in the era of recession and deep crises. 

Currently, Islamic and conventional banks are providing a wide range of products to meet 

the customers‘ expectation. Customers‘ feeling of satisfaction is considered an essential 

component towards success of modern banking. So every bank is trying its best to 

capture the greater number of customers for long term benefits. Similarly, Islamic banks 

have no exception from this challenge. Financial services sector is getting importance due 

to leading contributor towards economic growth and prosperity. It is documented that 

banking industry is indispensible for the today‘s customer oriented society. Because 

banking industry is the integral part of services industry (Mishkin, 2001). 

Customer satisfaction is an important aspect for the successful survival of banks due to 

increased competition (Haron et al. 1994). Satisfaction is a post purchase evaluative 

judgment associated with a specific purchase decision (Churchil & Suprenant, 1992). The 

customer satisfaction is indispensable for the successful survival of any organization. 

Continuous measurement of satisfaction level is necessary in a systematic manner 

(Chakravarty et al. 1996; Chitwood, 1996; Romano & Sanfillipo, 1996). Financial 

liberalization and deregulation has increased the competition among banks to attract 

potential customers. Every banker tries to provide superior services to keep satisfied 

customers. In Pakistan, emergence and growing popularity of Islamic banking products 

raises competition among Islamic banks. Islamic banks have to face numerous challenges 

in the recent age. Firstly, they are competing with their peers and secondly they have to 

cope with the conventional banks. Customer satisfaction is a set of feelings or outcome 

attached with customer's experience towards any product/service (Solomon, 1996). 

Customer satisfaction is the central tenet to compete in the market successfully. It is 

prerequisite to retain customers to generate economic benefits. Customer satisfaction is 


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crucial to realize greater profitability, larger market share and more returns on 

investments etc. (Hackl & Westlund, 2000). Customer satisfaction is a multidimensional 

construct that requires multi-item scale for its measurement. Researchers agree with the 

multidimensional nature of customer satisfaction and measured it accordingly (Bitner & 

Hubert, 1994; Shemwell et al., 1998; Sureshchander et al., 2002). It is reported that 

Islamic banks have shown an excellent performance. They suggest that Islamic banks 

should diversify their products/services according to principles of Sharia‘h (Ebrahim & 

Joo, 2001). So it is concluded that superior delivery of services results into superior 

profitability (Kotler, 2003). It is recommended that profit and loss sharing option is very 

attractive for the bank. It helps the bank to reduce risk and monitoring costs (Ghannadian 

& Goswami, 2004). Similarly, Islamic banks are providing better service quality as 

compared to conventional banks in Pakistan according to customers‘ perception (Ahmad 

et al., 2010). On the basis of existing literature it is hypothesized that there is positive 

relationship between customer satisfaction and bank performance. 

H1: There is a positive relationship between customer satisfaction and performance of 

Islamic banks in Pakistan. 


This study investigates how customer satisfaction affects the performance of Islamic 

banks in Pakistan. The data was collected from 864 respondents of 72 branches of six full 

fledged Islamic banks operating in Pakistan. The researchers used simple random 

sampling technique to gather data from respondents of 12 major cities of Pakistan. 

Customer satisfaction was assessed by a modified version of research instrument 

developed by Sureshchander et al. (2002). It contains 29 items to record respondents‘ 

feelings of satisfaction or dissatisfaction. Similarly, bank performance was documented 

by a modified version of an eight-item research instrument used by Quinn & Rohrbaugh, 

(1983). The responses were recorded regarding customer satisfaction and bank 

performance by considering different aspects. Data was collected by self administrative 

questionnaire through personal contact approach. Every respondent was asked to rank a 

number of aspects regarding customer satisfaction and performance of Islamic banks in 

Pakistan. 


The study examines how customer satisfaction affects the performance banks in Pakistan. 

by collecting data from 864 respondents of 72 branches of selected Islamic banks. The 

responses were arranged and entered into SPSS 15.0 for data analysis. The relationship 

between customer satisfaction and bank performance is assessed by Pearson‘ correlation 

while the magnitude of the relationship was investigated by regression analysis. The 

demographic profile of the respondents reveals that that male segment is greater than 

female respondents. It is consistent with literature as men and women customers using 

bank products/services could be differentiated due to social, cultural, and religious 

factors. It is evident that male customers perform more banking activities than female 

customers (Woldie & Adersua, 2004). Similarly, the most of the customers fall in the age 

group of 25-34 years in case of IB and 18-24 year in case of CB. It is in line with 

literature, it is reported that the most of the bank customers dealing with Islamic banks 

fall in the group of 25-35 years besides education level and income group (Khan et al., 

2008). The relationship between customer satisfaction and bank performance is 

presented in Table 1. 


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Table 1 shows correlation between customer satisfaction and performance of Islamic 

banks in Pakistan. It reflects a weak negative relationship between customer satisfaction 

and performance of Islamic banks, as results are contradictory to hypothesis and it rejects 

the null hypothesis. However, the magnitude of the relationship is assessed by regression 

model. The results of regression are presented in table 2. 


Table 2 reflects the results of IBCS-IBPRF model. The coefficient of determination is 

0.001, p-value (0.775) and F-statistics (0.102). It is reported that customer satisfaction 

has no significant (p=0.775) impact on the performance of Islamic banks in Pakistan. It 

reflects variation (influence) of customer satisfaction on the performance of Islamic 

banks in Pakistan. It was hypothesized that customer satisfaction is positively related to 

bank performance. Interestingly, it is found that there is weak negative relationship 

between customer satisfaction and performance of the Islamic banks. It identified the gap 

prevailing in the Pakistani banking sector due to lack of customer orientation and 

awareness among bank customers. The findings are in line with the literature as it is 

reported that customers of Islamic banks have awareness but showed dissatisfaction 

regarding some of the products of Islamic banks (Naseer, Jamal & Al-Khatib, 1999). 

However, the results are contradictory to the exiting literature as it is found that customer 

satisfaction helps to increase the bank performance due to greater profitability, increased 

market share and more return on investments. Similarly, customer satisfaction generates 

positive outcomes for long-term profitability (Baker & Sinkula, 1999). A positive link 

between customer satisfaction and bank performance is reported by a number of 

researchers (Swan & Combs, 1976; Hallwell, 1996; Gritti & Foss, 2007). 

5. Conclusion 

Islamic banks entered in Pakistani banking industry at the inception of 21 st century and 

proved a successful experience due to remarkable progress. This study investigates the 

relationship between customer satisfaction and performance of Islamic banks in Pakistan. 

The researcher collected data from 864 respondents of 72 branches of selected Islamic 

banks. The data were collected by a structured questionnaire developed in the light of 

existing literature. The responses were analyzed through SPSS 15.0 Version to assess the 

influence of customer satisfaction on bank performance. The results indicate that there is 

a weak negative relationship between customer satisfaction and performance of Islamic 

banks. Islamic banks should focus on customer orientation to have satisfied customers to 

reduce the gap between customer satisfaction and bank performance. It is suggested that 

Islamic banks should create awareness among bank customers by attractive advertising 

tactics to attract greater number of customers. There is lack of customer orientation as 

well as lack of awareness about customer rights. Bankers are required to implement an 

effective mechanism to measure the customer satisfaction for corrective action. Bankers 

should introduce new, diversified and marketable products to meet the requirements of 

the different segments of the economy on the basis of gender, age, qualification etc. This 

study attempts to enhance the understanding regarding customer satisfaction and 

performance of Islamic banks in Pakistan. 


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Addison-Wesley, Reading, M.A. 


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Naser, K., Jamal, A., & Al-Khatib, K. (1999). Islamic Banking: a study of customer 

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78-93. 


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Annexure 

Table 1: Summary of Correlation between Customer Satisfaction and Performance 

of Islamic Banks 

Variables Pearson Correlation Sig. (2-tailed) 

Customer Satisfaction and Bank Performance -0.034 0.775 

Table 2: Summary of the Customer Satisfaction and Bank Performance Linear 

Regression Model 

(Coefficients, Standard Error in Parenthesis, t-values in Brackets and p-values in italics) 

Constant IBCS R 2 F-Statistics 

4.082 -0.021 0.001 0.1102 

(0.385) (0.073) 

[10.600] [-0.287] 

0.000 0.775 

Predictor (Constant), Customer Satisfaction 

Dependent Variable: Performance of Islamic bank 

0.775 


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ROLE OF INTEGRATED SECONDARY SCHOOL MATHEMATICS 

ON LEARNING BUSINESS MATHEMATICS 

Shahinshah Babar Khan 

Pakistan Atomic Energy Commission Model College, Islamabad. 

Shaheen Ashraf Taherkheli 

Research Associate, Allama Iqbal Open University, Islamabad. 

Abstract 

The main purpose of teaching Mathematics at secondary level is to prepare such students 

who can think critically and should able to utilize it in different fields of life. On one 

hand, it is a common perception that mathematics is very important subject an on the 

other hand, students think why they learn mathematics at secondary level?, because to 

them, at this level, mathematics is abstract in nature and is the name of just putting values 

in formulas and nothing more. In Pakistan, two decades ago, there was general 

mathematics for the students of humanities and the main purpose of teaching general 

mathematics was to provide base foundation to the students who would join fields like 

humanities and business education in future. General mathematics was consisting on such 

topics, which have been seen in action in day-to-day life. In addition, there was a portion 

of geometry, it is a fact that everything in nature is formed on the principles of geometry 

but understanding of geometry is a little bit difficult so it always remain a horrible thing 

to the humanities‘ students. Currently, Integrated mathematics is compulsory for both 

science and humanities‘ students. Broadly, integrated mathematics of secondary level 

consists of three parts, i.e sets and numbers, algebra ,geometry and trigonometry. In 

Pakistan, business education is one of the favorite fields for young generation. The 

present study tried to find out whether integrated mathematics is helpful in business 

education. The sample for the study was the students of M.Com and MBA. A 

questionnaire was developed on five point Likert scale. Each Statement was checked by 

using chi-square technique. 

Kwywords: Role , Integrated Secondary School Mathematics , Learning Business 

Mathematics 


In Pakistan, the aim of teaching mathematics at school level is to prepare such students 

who think logically and play their role in the development of society. At primary stage, 

students learn four basic operations, used in mathematics, i.e addition, subtraction, 

division and multiplication, commonly known as arithmetic.. At this stage, students also 

learn basic definitions of geometry, i.e. circle, rectangle etc, though primary level 

students are not so mature to understand these basic ideas of geometry. In addition, they 

come across to the basic Mathematical shapes that they saw around them in the real 

world. When these students join elementary level, on very first day in grade 6, they met 

the concept of sets, teacher tell them that ―set is a collection of well-defined and distinct 

objects‖. Students very comfortably understand this, and then they learn the definition of 

null set or empty set. Teacher says, ―The set which has no element is known as null set‖. 

This definition confused the students, they ask, if there is no element, how it would be a 

set and this confusion remains with majority of the students even after completing their 


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school education. In grade 6, after some months, the students met a new branch of 

mathematics, i.e. algebra. Algebra is perceived as difficult (MacGregor, 2004). It is said 

that algebra and arithmetic are two sides of a coin but it is difficult for school-teachers to 

prove this statement logically. In algebra, students again and again learn ―a‖ and ―b‖, ―a 

square (a 2 )‖ and ―b square (b 2 )‖, ―(a+b) 2 ‖ and ―(a-b) 2 ‖ etc. Students often asked teachers 

where is the use of ―(a+b) 2 ‖ or ―(a-b) 2 ‖. The next thing is geometry, the way as 

geometry taught, is another problem for students. Until elementary level, students dealt 

with three branches of mathematics i.e arithmetic, algebra and geometry and as a teacher 

of mathematics I found most favorite branch among the students is arithmetic. In 

arithmetic, they learn to calculate zakat, income tax, and solve such problems that exist in 

the world around them. On entering into secondary level, students are offered mainly two 

streams of subjects, named science group and humanities group. It is a common concept 

that, as we are living in the technological era so learning of science subjects is more 

important than humanities. It is also a common view of teachers that science group is 

comparatively difficult and the students who have no taste of science subjects or slow 

learners may not adopt science group. But it is very strange that both the groups learn 

same mathematics as a compulsory subject. Secondary level mathematics consists on 

sets, System of real numbers, logarithms, algebra, geometry, trigonometry and theorems. 

Learning these topics is not easy for humanities‘ students. Majority of the Humanities‘ 

students learn mathematics without conceptual understanding. Research suggests that 

students who develop conceptual understanding early perform best on procedural 

knowledge later. Students with good conceptual understanding are able to perform 

successfully on near-transfer tasks and to develop procedures and skills they have not 

been taught (Grouws, & Cebulla, 2000). After completing matriculation, students of 

humanities join arts subjects or the group of subjects in which mathematics is not 

compulsory. Currently, business education is very popular among the young generation 

and with the passage of time, its importance is increasing. In Business Education , once 

again, students met business mathematics in the business education. The question arose, 

is there any relationship between secondary mathematics and the business mathematics?. 

No doubt, understanding of mathematics is very important for understanding of other 

subjects, but secondary mathematics consist on algebra and geometry which are 

considered hard to understand, whereas business mathematics deals with the day to day 

life problems and provide ways to solve problems appeared in daily life situation. 


Mathematics always occupied a crucial position in the human history and with the 

passage of time its importance grew more and more. Mathematics is playing very 

imperative role in the development of technology. Mathematics has now entered into the 

field of studies, which were thought to be non-mathematics in the past. Mathematics is 

now been seen as the pivot on which all other subjects revolve (Adetunde, 2009). 

National Curriculum of Mathematics Grades I-XII (2006, p.1) states that 

Mathematical structures, operations and processes provide students with a 

framework and tools for reasoning, justifying conclusions and expressing ideas 

clearly. As students identify relationships between mathematical concepts and 

everyday situations and make connections between mathematics and other 


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subjects, they develop the ability to use mathematics to extend and apply their 

knowledge in other fields. 

In school curriculum, mathematics is a compulsory subject and taught with a spirit to 

increase the critical thinking, logical reasoning and should provide ease for the real 

world life. The ability to see mathematics in the world that surrounds and shapes us, and 

to recognize the power of mathematics to critically investigate and act on that world, are 

key components of critical perspectives on teaching and learning mathematics (Turner, 

Gutiérrez, Simic-Muller, and Díez-Palomar, 2009). 

Researches (Maccini and Hughes, 2000; Quinn and Spencer, 2001; Owen and Fuchs, 

2002;) documented that many secondary school and college students have learning 

difficulties and show poor performance in mathematics. 

Currently, the students of Humanities group and Science group learn same book of 

Mathematics. 

Before 1994, there was General Mathematics for Humanities group and Elective 

Mathematics for Science group. Punjab Textbook Board (1993, p.i) advocated the 

General Mathematics in the following words: 

General Mathematics is for those students who would not study mathematics in 

next classes. They may discontinue their study after matriculation or will study 

social sciences subjects at college level. The aim of teaching General 

Mathematics is to trained students to use mathematics in practical life and will be 

able to use mathematical rules for learning social sciences‘ subjects…. As the 

students of General Mathematics do not learn advanced mathematics so they do 

not need to learn inductive and deductive reasoning. 

In 1992, the idea emerged to combine the two types of mathematics into one. The 

General Mathematics and Elective Mathematics were emerged together and new course 

of integrated mathematics was introduced in 1994 (Punjab Textbook Board, 1994). 

Integrated Mathematics mainly Consist on such topics which are not useful for business 

Mathematics , because these topics are not related with business applications. Students of 

Humanities Group remain puzzle while dealing with these topics because they think 

algebra and theorems are abstract things. Many students come to the study of early 

algebra with poor understandings of arithmetic (Thompson & Fleming, 2003). Sfard 

(1994) discussed algebra as ―generalized arithmetic‖ consisting of the ―operational‖ and 

―structural‖ phases‖. Algebra is perceived as uninteresting and based upon symbolic 

manipulation with limited meaning and little relevance to every day life (Boaler, 2000; 

Kaput, 1995; MacGregor, 2004; Stacey & Chick, 2004). 

Usmani et al. (2007) made analysis of the Secondary Mathematics and concluded that: 

We noted that there were too many formulas and theorems given in the 

textbooks—which the students would be forced to rote memorize in order to 

succeed in the exams. Making students memorize dozens of formulas is not 

desirable. We are of the view that the students should have at least a basic 

understanding of how the formulas that they are dealing with were derived and in 

what sort of situations they can be useful. We would recommend that more focus 


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is put on the quality of teaching rather than on the quantity of material stuffed in 

(which may or may not be useful for the students). 


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In 2000, Ministry of Education undertook a revision for basic sciences subjects and in 

2002 for social sciences subjects. Once again, it was decided that there should be General 

Mathematics for Humanities group. National curriculum of Mathematics Grades I-XII 

was introduced in 2006 and National curriculum of general mathematics in 2007. 

Ministry of Education announced that the new curriculum will be implemented in the 

academic year 2010-2011, but until now, it is not implemented. 

National curriculum of general mathematics (2007) documented the following 

characteristics of General Mathematics 

� Recognize mathematics as integral to the development cultures and civilizations of 

the society. 

� Gain and understanding of financial instruments and terminology used in business 

finance. 

� Compare the services offered by a variety of financial institutions. 

� Familiarize him/her self with the partnership, foreign exchange, leasing/financing and 

life and vehicle insurance. 

� Apply problem-solving strategies to solve problems encountered by consumers i.e., 

computation of personal income and utility bills. 

� Understand real-life situations where calculation of Zakat, Ushr and various taxes is 

required. 

Table 1: Comparison of Content of General Mathematics (2007) and Content of 

Integrated Mathematics 

Content of General Mathematics (2007) Content of Integrated Mathematics(Currently in 

Practice) 

Chapter Chapter Name Remarks Chapter 

Chapter Name 

No. 

No. 

1 Percentage, Ratio and 

Proportion 

1 Sets 

2 Zakat, Ushr and 

Inheritance 

2 System of Real Numbers 

3 Business 

Mathematics 

3 Logarithms 

4 Financial 

Mathematics 

4 Algebraic Expression 

5 Consumer 

5 Factorization, H.C.F, L.C.M 

Mathematics 

Simplification and Square Root 

6 Exponents and 

Logarithms 

6 Matrices and Determinants 

7 Arithmetic and 

Geometric Sequences 

7 Fundamental concepts of Geometry 

8 Sets and Functions 8 Demonstrative Geometry 

9 Linear Graphs 9 Practical Geometry 

Until now Not Implemented




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10 Basic Statistics 10 Algebraic Sentences 

11 Algebraic Formulas 

and Applications 

11 Elimination 

12 Factorization 12 Variation 

13 Algebraic 

Manipulation 

13 Information Handling 

14 Linear Equations and 

Inequalities 

14 Fundamental Concept of Geometry 

15 Quadratic Equations 15 Circle 

16 Matrices and 

Determinants 

16 Practical Geometry 

17 Fundamentals of 

Geometry 

17 Trigonometry 

18 Practical Geometry 

19 Areas and Volumes 

20 Introduction to 

Coordinate Geometry 

If we look on the above table, it is clear that first five chapters of General Mathematics 

are different form integrated Mathematics. The concepts of Percentage, Ratio, Proportion, 

Zakat, Ushr and Inheritance are taught in grades 6, 7 and 8. Business Mathematics, 

Financial Mathematics and Consumer Mathematics are introduced first time at secondary 

level National curriculum of general mathematics (2007), which is not implemented, yet. 

All the above chapters of National curriculum of general mathematics (2007) are taught 

in business Mathematics with some advanced forms. 

3. Objectives of the Study 

It is a fact that concepts learnt at school level affects the future education. School 

education provides base line for future learning. School curriculum is designed by 

keeping in view the needs of future education and with the aim to prepare students who 

can play active role in society as well as on international level. The objectives of the 

present study were to find out: 

� The opinion of the students about secondary Mathematics and Business 

Mathematics. 

� Problems of the students in Secondary School Mathematics 

4. Population and Sample 

The population for the study was the students of MBA and M.Com from Islamia 

University Bahawal Pur, Peshawar University and Allama Iqbal Open University. A total 

of 150 students were randomly selected as sample for the study. 


The study was descriptive in nature. Opinions tell about the reality and provide paths to 

right direction. Opinion also highlights the advantages and disadvantages of the product. 

A questionnaire was developed on five point Likert scale (Strongly Agree= SA, 

Agree=A, Uncertain=UNC, Disagree= DA and Strongly Disagree= SDA) to know the 

opinion of students about secondary Mathematics and Business Mathematics. Before 

developing the questionnaire, a discussion was made with the students of Business 

Education. During discussion, they highlighted the problems they faced while solving



questions in Business Mathematics. The important points of discussion were noted and 

questionnaire was developed in the light of Literature and the points of discussion . The 

questionnaire was sent to the sample students of MBA and M.Com level through post 

mail. 

6. Analysis of Data 

After collecting the questionnaire, data was arranged. Each statement was checked by 

using chi-square technique at significant level 0.05. 

.Table 2: Data Analysis 

Item# Statement SA A UNC DA SDA χ 2 

Significant/Non 

1 The concepts of 

numbers taught in 

Secondary 

Mathematics were 

easy to understand. 

2 Practical geometry in 

Secondary 

Mathematics helps in 

understanding the 

formation of things 

around us. 

3 Mathematics at 

secondary level is not 

taught through 

4 

problem solving. 

Arithmetic helps in 

learning of algebra. 

5 Secondary 

Mathematics 

increases the power 

of cognitive domains. 

6 Theorems in 

secondary 

Mathematics increase 

the power of 

reasoning. 

7 The concepts learnt in 

Secondary 

Mathematics provide 

help in understanding 

business 

mathematics. 

8 Inductive and 

deductive reasoning 

are not necessary for 

learning Business 

52 62 29 6 1 

Significant 

97.5 Significant 

26 24 38 30 32 4.0 Non Significant 

37 25 45 38 5 32.9 Significant 

28 65 39 8 10 73.1 Significant 

38 36 24 26 26 5.6 Non Significant 

38 

27 21 30 34 5.7 Non Significant 

48 42 10 35 15 37.3 Significant 

45 52 3 32 18 52.9 Significant 


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Mathematics. 

9 Algebraic formulae 

provide ease while 

dealing numbers in 

the real life situations. 

10 Information handling 

is useful for business 

Mathematics. 

27 

38 35 32 18 8.2 Non Significant 

25 48 8 42 27 32.9 Significant 

Df=4 Table value of χ2 at 0.05= 9.488 

7. Discussion 

Secondary level Mathematics consisted on algebra, geometry and theorems. Initially, 

students learn sets and numbers related concepts that they have already learnt in grade 8. 

While dealing with algebra, one question always remains in minds of the students, that is, 

where is the use of Mathematics that they learn except arithmetic. They often asked this 

question by teachers and teachers at this stage remain unable to answer. Dealing with 

numbers is a consoling for them and algebra is only the game of ―a‖ and ―b‖. Majority of 

the students rote the formulae and even the whole questions and reprint in the 

examination without any understanding. The respondents confirm that concepts of 

numbers were easy to understand. The reason is that they can easily understand the 

different uses of numbers as used these concepts in daily life. The aim of teaching 

practical geometry is to trained students to understand the geometrical shapes around 

them but the way in which practical geometry taught, is not understandable for the 

students. Students learn geometry only for passing examination; even they think to leave 

the question related to practical geometry. The respondents of the study confirm it. 

Problem solving technique emphasizes to think about the statement and define different 

methods for solving it, but in our system, Mathematics is the name of drawing correct 

answers, even some students become puzzle if the answer does not match with the 

provided answers at the end of the book. The respondents agreed upon that Mathematics 

is not taught through problem solving method. Rules of arithmetic are valid for algebra 

and the respondents confirm it. The main aim of teaching Mathematics in school 

curriculum is to improve the thinking powers of the students, but Mathematics is not 

taught with its real spirit that is why students remain unable to understand the aim of 

teaching Mathematics. When the respondents were asked, ―Secondary Mathematics 

increases the power of cognitive domains‖, they disagreed with this statement. First time 

students met theorems in grade 9. The aim of teaching theorems is to provide them the 

concept of reasoning, and the respondents opposed this statement. In business education, 

students once again met the same curriculum with a small change. As in business 

education, there is no need of inductive-deductive, the participants validated this view. 

Students have a mind about algebra that it is an abstract thing so they remain unable to 

utilize it in the real life situation. Data and entities is the major part of business education 

and their graphical representation is a matter of interest for the students of business 

education. The respondents corroborate that ―Information handling is useful for business 

Mathematics‖. 


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8. Findings and Conclusion 

In Business Mathematics, students almost learn the same topics, they have learnt in 

secondary school mathematics. At secondary level, humanities‘ students remain unable to 

understand the logics behind the questions, especially in case of algebra and geometry. 

Students easily understand the questions related to numbers but algebra and practical 

geometry confer them tough time. It is needed that teachers should teach mathematics by 

relating algebraic concepts with the daily life situations. Mathematics is taught with the 

aim to enhance logical thinking but it does not produce required results due to teaching 

methodologies. Secondary level teachers emphasizes on solving question with the aim to 

obtain maximum marks because marks are the criteria for admission to next classes. It is 

found that Theorems and practical geometry are unnecessary for the Humanities‘ 

students. In New curriculum of General Mathematics (which is not implemented yet ), 

some chapters are added related to pure business education, however, other topics such as 

matrices, derivatives, algebraic manipulation etc, may be highlighted through business 

related examples. 


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References 

Adetunde, I. A. (2009). Improving the Teaching and Learning of Mathematics in Second 

Circle Institutions in Ghana: Paper II. New York Science Journal, 2009, 2(5), 

Boaler, J. (2000). Mathematics from another world: Traditional communities and the 

alienation of learners. Journal of Mathematical Behaviour, 18(4), 379-397. 

Government of Pakistan (2006). National Curriculum of Mathematics Grades I-XII. 

Islamabad: Ministry of Education. 

Government of Pakistan (2007). National Curriculum of Mathematics Grades IX-X 

(Humanities Group). Islamabad: Ministry of Education. 

Grouws, D. A &Cebulla, K.J (2000). Student achievement in mathematics. Geneva: 

International Academy of Education (IAE) 

Kaput, J. (1995, October). A research base supporting long term algebra reform? Paper 

presented at the Seventeenth Annual Meeting for the Psychology of Mathematics 

Education (North American Chapter). Office of Educational Research and 

Improvement, Washington, D.C. 

MacGregor, M, (2004). Goals and Content of an Algebra Curriculum for the Compulsory 

Years of Schooling. In K. Stacey., H. Chick, & M. Kendal (Eds.), The Future of 

Teaching and Learning of Algebra. The 12 th ICMI Study. (pp. 313-328). Boston: 

Kluwer. 

Maccini, P. and Hughes , C.A (2000). Effects of a Problem-Solving Strategy on the 

Introductory algebra Performance of Secondary Students with Learning 

Disabilities. Learning Disabilities Research and Practice, 15 (1), 10-21 

Owen, R.L and Fuchs, L. S (2002). Mathematical Problem-Solving Strategy Instruction 

for Third Grade Mathematical Problem-Solving Strategies. Remedial and 

Special Education, 23 (5), 268-278. 

Quinn, D.M and Spencer, S.J. (2001). The Interference of Stereotype threat with 

Women‘s generation of Mathematical Problem-Solving Strategies. Journal of 

Social Issues, 57 (1), 55- 71 

Punjab Text Book Board (1993). Mathematics for Class IX-X. Lahore. 

Punjab Text Book Board (1994). Mathematics for Class XI-XII. Lahore. 

Sfard, A. (1994). The gains and pitfalls of reification - the case of algebra. Educational 

Studies in Mathematics, 26, 191-228 

Stacey, K, & Chick, H. (2004). Solving the problem with algebra. In K. Stacey., H. 

Chick, & M. Kendal (Eds.), The Future of Teaching and Learning of Algebra. 

The 12th ICMI Study (pp. 1- 20). Boston: Kluwer. 

Thompson, S., & Fleming, N. (2003). Summing it up: Mathematics Achievement in 

Australian Schools, TIMSS 2002. Australian Council for Educational Research. 

Camberwell. Available online: 

http://www.timss.acer.edu.au/documents/TIMSS_02_Maths_ES.pdf. 

Turner, E.E ., Gutiérrez, M. V., Simic-Muller, K and Díez-Palomar, J (2009). Everything 

is Math in the Whole World: Integrating Critical and Community Knowledge 

Authentic Mathematical Investigations with Elementary Latina/o Students. 

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Secondary School Curricula and Textbooks. Lahore: Enlightened Pakistan 


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Determinants of Foreign Direct investment and its 

impact on GDP Growth in Pakistan 

Prof. Dr. Ch. Abdul Rehman 

Rector Superior University, Lahore 

Orangzab 

Mphil student. Superior University Lahore. 

Ali Raza 

Mphil Student. Superior University Lahore. 

Abstract 

The purpose of this article is to identify the determinants of Foreign Direct investment 

and its impact on GDP growth in Pakistan. In this research we will use secondary data 

about FDI and their Determinants. To investigate the impact of FDI on GDP & 

Determinants of FDI different statistical tests are applied on the data collected over the 

period of 1975-2008. This study present positive and significant impact of Foreign Direct 

investment on GDP of Pakistan. Furthermore, the results indicate that market size, trade 

openness / access to international market and Quality of labor are the major determinants 

that have significant affect on the FDI inflow. The study found no affect of market 

potential and communication facility on the attraction of FDI inflow in Pakistan.There 

are some other determinants which may have significant impact on inflow of FDI but we 

not consider that determinants because of unavailability of data and results shows that 

Access to international Market have negative impact on FDI inflow in Pakistan so 

additional research is needed to explore this negative impact. 

Keywords: Foreign Direct Investment, Determinants, Growth, Pakistan. 


Foreign Direct investment play very important role in Economic development of both 

developed and developing countries. Through FDI not only Technology but also skilled 

management transferred to the host country. FDI help to increase the productivity by 

using latest technology which also helps to increase the export of the country. New job 

opportunities are created which help to reduce the poverty, and also bring financial 

development in the recipient country. That‘s why every country makes changes in their 

economic policies and tries to attract FDI inflow in their country. 

The objective of this study is to identify major determinants of FDI and the impact of FDI 

on economic growth. We use Market size, market potential, Access to international 

market, quality of labor and communication facilities as independent variables to identify 

which variable has significant impact on the attraction of FDI inflow. 

The remaining paper is organized as follows. Section 2 describe the literature review, 

section 3 present the research questions who‘s answers are identify in this paper, section 

4 discuss the data source and methodology and also present the model which is used in 

this paper, empirical results are discussed in section 5 and conclusion in section 6. 


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There are lots of studies that have determined the major factors that affect on inflow of 

Foreign Direct Investment and the impact of Foreign Direct Investment on economic 

growth. Better infrastructure facilities, Market potentials and Market size positively effect 

Foreign Direct investment inflow. On the other hand high cost of start-up business and 

unfriendly business environment discourage FDI inflow in the developing countries 

(Mottaleb at el. 2008). Market size, Labor costs and exchange rate factors are important 

variables in determining location choices of direct investors (O‘Sulliva. 1985, Pan-long 

Tsai. 1994). Democratic Government as a very important determinant of FDI Democratic 

government attract high level of investment because in democratic country there is low 

country risk and Debt risk also which encourage the investor to invest in that country. 

The country where there is Democratic government attracts 70% more FDI then 

authoritarian regimes (Jensen, N. M. 2003). 

Political instability is also an important determinant of FDI. If we consider only political 

instability it offer distorted picture of reality so other factors such as income inequality, 

social welfare, history, location, experience with democracy, the relationship with 

superpowers, the countries' infrastructure, membership in World institutions such as 

International Monetary Fund, and other related factors should be carefully examine. 

Return on investment is also very important determinant when there is political risk the 

investors may not decrease or withdraw their funds because of the expected return on 

investment. Keeping this in mind, the investigation of the relationship between political 

risk and the flow of FDI without accounting for the return on investment would be 

incomplete. Therefore, expected or actual rate of return on investment should be 

somehow incorporated into the analysis (Fatehi-Sedeh at el.1989). In the presence of 

financial and political corruption FDI develop the financial markets which bring financial 

development in developing countries (Kholdy at el. 2008). 

Weather a country is following the import substituting (IS) or Export promoting (EP) 

strategies the volume and efficiency of FDI inward also vary accordingly. FDI is likely to 

be much more efficient in promoting growth in Export promotion (EP) countries because 

it is operating in suitable environment. So FDI is more growth enhancing factor in EP 

countries then IS countries (Balasubramanyam et al. 1996). 

Beside the local conditions and policies of the country the sector in which Foreign Direct 

Investment is invested is also very important. Flow of FDI into different sector likely 

(services, primary and manufacturing) produces different effect on economic growth. 

Flow of FDI into service sector has ambiguous effect. It has negative effect on growth if 

it is invested into primary sector, where as the effect is positive if it is invested into 

manufacturing sector (Laura, A. 2003). 

Developed countries attract more FDI as compared to developing countries. According to 

UNCTAD (2007) there was total 945.8 billion USD flow of FDI in the world in 2005. 

Out of which, only amounted 314.3 billion US$ which was remained only 38.6 % of 

entire Foreign Direct investment received by developing countries whereas 590.3 billion 

US$ received by developed countries which is 62.4 % of total Foreign Direct Investment 

in the same year. According to the UNCTAD (2007) report low-Middle income 


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countries who‘s GNI per capita lies between 755 US $ to 2995 US $ are successful 

attracting FDI, but Low-income countries who‘s GNI per capita less then 755 USD 

attract less FDI as compared to middle income countries (Mottaleb, at el 2008). 

Foreign Direct Investment has positive effect on economic growth but instability of 

Foreign Direct Investment does not have positive effect on growth. A first possibility is 

that by reducing the cost of research and Development FDI positively effect the 

economic growth of the host country. Costs of research and development are uncertain if 

FDI inflows are uncertain which negatively affect the innovation. So instability of FDI 

weaken the investment thus it has negative effect on growth. 

A 2 nd possibility is that political or economic uncertainty is also responsible by the 

instability of FDI inflow. Economic uncertainty indirectly reduces income and growth. 

So we can say that instability of FDI inflow can have different effect on economy 

(Lensink at el. 2001). 

FDI play very important role for the transfer of technology it not only transfer technology 

but also transfers the skills to the host country. FDI play very important role for higher 

productivity only when there is entrance stock of human capital available in the host 

country. There is strong and positive relation between Foreign Direct investment and the 

level of educational attainment. Thus FDI have substantial effect on economic growth 

only when there is skills and capacity to deal with that technology available in the host 

country (Borenstein, et al 1997). When the country has educated workforce in that 

country foreign direct investment has positive effect on growth. Inflow of Foreign Direct 

Investment itself have no independent impact on economic growth other factors are also 

responsible for it like stable and sound economic policies encourage both FDI and 

growth. Results show that Foreign Direct Investment has positive impact on growth but 

it‘s not independently responsible for this impact (Carkoviec at el. 2002). 

Inward FDI and outward FDI both play very important roll in the international diffusion 

of technology. But the research conducted by (Pottelsberghe at el. 2001) show that 

outward FDI flow and import flow are two important channels through which technology 

spills over and benefits host countries while inward FDI does not have such technology 

transfer effect from home country to host country. The explanation of this is that when a 

company establish its subsidiaries abroad normally do not share their own technological 

advantages towards the host country‘s domestic firms that‘s why it consider weak 

potential diffusion technology in the host economy. Another research which is conducted 

by (Javorcik. 2004) which shows that FDI become more productive when there is joint 

investment of foreign and domestic ownership but not from fully owned foreign affiliates 

because foreign firms do not want to share their technology otherwise they lose their 

competitive advantages. 

If we talk about the Pakistan we see that Pakistan facing lots of problem for attracting 

FDI. Now a days Pakistan facing terrorism and shortage of electricity problem beside this 

its still a favorable place for investment due to low labor cost and easy access to different 

countries like Middle East etc.(Khan, S.2009). In Pakistan there is also a problem of child 

labor research show that FDI is found to lower responsible for child labor as compared to 

trade openness. Pakistan is not attracting a high inflow of FDI due to high incidence of 

child labor and low labor standards (Iran at el. 2008). 


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3. Research Questions: 

Following are the main research questions of this paper. 

Q1. What are the main determinants of FDI in Pakistan? 

Q2. What is the impact of FDI on GDP in Pakistan? 

4. Data source and Methodology 

4.1 Data source 

A sample period of 43 years has been selected for this study for the period of 1975-2008 

with annual frequency. Data on all the variables have been collected from World 

Development Indicators. Six variables have been selected for this study. 

4.2 Methodology 

The objective of this study is to identify the major determinants of Foreign Direct 

Investment and its impact on economic growth in Pakistan. For research question 1 

Foreign Direct Investment is used as dependent variable where as Market size, market 

potential, access to international market, quality of labor and communication facilities are 

used as independent variables. For these variables proxy variables are used which are 

shown in table 1. For research question 1 following regression equation is used. 

FDIt = �0 + �1GDPt + �2GGDPt + �3EXPt + �4IVDt + �5TELt + Ut 

Where 

FDI = Foreign Direct investment 

GDP = Gross Domestic Product 

GGDP = Annual Growth rate of Gross Domestic Product 

EXP = Export of Goods and Services (% of GDP) 

IVD = Industrial Value added (% of GDP) 

TEL = Telephone Mainline per 1000 

For research question 2 GDP Growth used as dependent variable and FDI inflow used as 

independent variable and following simple linear regression equation is used. 

GDPt = �0 + �1FDIt + Ut 

To get the results different statistical tests are applied which include Descriptive 

statistics, correlation, simple linear and multiple regressions, T-test and F-test. 

4. Empirical Results 

Table 2 shows the summary statistics of the variables used in the study. These summary 

statistics reflect the overall picture of the variables. 34 observations are taken no variable 

has any missing value only telephone mainline per 1000 has only 2 missing values which 

is adjusted in the statistical tests. All the variables have the positive growth rates on 

average. Only export of goods and services shows the negative skewness. All of the 


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other variables are slightly positively skewed. We cannot compare std. Deviation because 

the variables have different unit of measures. 

Table 3 represents table of correlations. This table represent three variables GDP US$, 

industrial value added and telephone mainline are positively correlated with FDI (r = 

.897, p= 000, r = .751, p = 000, and r = .735, p = 000 respectively) which shows strong 

and significant relationship between these three independent variables with FDI. The 

relationship between GDP growth and export of goods and services with FDI are not 

statistically significant. In the case of these correlations the null hypothesis of no 

correlation can‘t be rejected as the P-values are much greater than 0.05. 

Table 4 presents the results of the regression analysis. The results show that all of the 

independent variables except GDP growth and telephone mainline effect FDI as shown 

by the values of the t-statistic and the corresponding P-values. T-test is used to test the 

significance of the individual partial regression coefficients. Null hypothesis in this test is 

set as the partial regression coefficient is zero. This test shows that the coefficients of all 

the predictors except GDP growth and telephone mainline are statistically significant at 

less than five percent level of significance. Yet the effect of export of goods and services 

on FDI is found to be negative but and statistically significant. 

In table 5 the value of adjusted coefficient of Determination (Adj. R 2 ) is .859 which show 

that 85% variation in Dependent variable (FDI) is due to independent variables which are 

consider in this study. The value of F-statistic is statistically significant which means that 

all the independent variables are jointly affect the Dependent variable which is FDI. 

Table 3 Represent that FDI is positively correlated with GDP (r = .897, p =000) which 

represent that there is strong positive and significant relationship between both variables. 

In table 6 the value of adjusted coefficient of Determination (Adj. R 2 ) is .798 which 

shows that 79% variation in GDP growth is due to Foreign Direct investment. In F-Test 

and in T-Test in table 7 P-values are also significant which means that FDI has 

significant affect on GDP growth. 

6. Conclusion 

After studying the empirical results we come to know that : (1) Market size, Trade 

openness / Access to international market and Quality of labor are the major determinants 

that have significant impact on Foreign Direct investment (FDI) inflow in Pakistan. (2) 

Trade openness / Access to international market have significant but negative impact on 

Foreign Direct investment (FDI) inflow. (3) Market potential and communication 

facilities have no significant impact on Foreign Direct investment (FDI) inflow. (4) There 

is a strong and positive impact of Foreign Direct investment (FDI) on GPD growth of 

Pakistan. 


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References 

Alfaro. L, (2003). ―Foreign Direct investment and Growth: Does the sector matter?‖, 

Harward Business School. Morgan 263. 

Balasubramanyam, V. N., Salisu, M., and Sapsford, D. (1996). “Foreign Direct 

investment and Growth in EP and IS countries”, The Economic Journal, Vol. 106, 

No. 434, pp. 92-105.Stable URL: http://www.jstor.org/stable/2234933 Accessed: 

31/05/2010 07:13 

Borensztein. E, Gregorio. J. D, and Lee. J-w, (1997), “How does foreign Direct 

investment affect Economic Growth”, Journal of international Economies, Vol. 

45, pp. 115-135. 

Carkovic, M. and Levine, R. (2002), “Does foreign direct investment Accelerate 

Economic growth”, JEL Classification number: F3, O4, O16. 

Fatehi-Sedeh, K. And Safizadeh, M.H. (1989). “The association between political 

instability and flow of foreign direct investment”. Management International 

Review, Vol. 29, No. 4, pp.4-13.Stable URL: 

http://www.jstor.org/stable/40227943 Accessed: 31/05/2010 08:29 

Irem, U. and Fatima, A. (2008), “International trade, foreign direct investment and the 

phenomenon of child labor”, International Journal of Social Economics, Vol.35, 

No. 11, pp. 809-822. 

Javorcik, T. B. (2004), “Does foreign direct investment increase the productivity of 

Domestic firms. In search of spillovers through backward linkages”, The 

American Economic Review, Vol. 94, No. 3, pp. 605-627.Stable URL: 

http://www.jstor.org/stable/3592945 Accessed: 31/05/2010 08:06 

Jensen, N. M. (2003) “Democratic Government and Multinational Corporation: Political 

regimes and inflow of Foreign Direct investment”, International Organization, 

Vol. 57, No. 3, pp. 587-616.Stable URL: http://www.jstor.org/stable/3594838 

Accessed: 31/05/2010 07:21 

Khan, S. (2009), “Foreign Direct Investment in Pakistan in the shadow of war on terror” 

4 th inernation conference on Business and Management Research Bali, Indonesia, 

22-24 Nov 2009. Working Paper. 

Kholdy, S. Sohrabian, A. (2008). “Foreign Direct Investment, Financial Markets and 

Political corruption”. Journal of Economic Studies. Vol. 35, No. 6, pp. 486- 

500.Stable URL: www.emeraldinsight.com/0144-3585.htm Accessed: 31/05/2010 

Lensink. L, and Morrissey. O, (2001). “Foreign Direct investment: Flows, Volatility and 

Growth”. DESG. Working Paper. 

Mottaleb, and Khondoker. A, (2008). ―Determinants of Foreign Direct Investment and its 

impact on Economic Growth in Developing countries‖. Munich Personal Repec 

Archive. Paper No. 9454 

O‘Sullivan. P, (1985). ―Determinants and impact of private Foreign Direct Investment in 

host country‖. Management International Review. Vol.25, No 4, pp.28-35 Stable 

URL: http://www.jstor.org/stable/40227769 Accessed: 31/05/2010 07:03 

Pan-Long Tsai, (1994), ―Determinants of FDI and its impact on economic growth‖, 

Journal of Economic Development, Vol. 19, No. 1, pp. 137-163. 

Pottelsberghe, B. V. and Lichtenberg, F. (2001). ―Does Foreign Direct investment 

transfer technology across boarder‖, The Review of Economics and Statistics, 


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Vol. 83, No. 3, pp. 490-497.Stable URL: http://www.jstor.org/stable/3211549 

Accessed: 31/05/2010 06:33 

Annexure 

Table 1 

Variables Proxy variables 

Market size GDP US$ 

Market potential GDP Growth in % 

Access to international Market / Trade openness Export of goods and services % of GDP 

Quality of labor Industrial value added in % of GDP 

Communication facility Telephone mainline per 1000 

Foreign Direct 

investment GDP US$ 

Table 2: Descriptive Statistics 

GDP 

Growth in 

% 

Export of 

goods and 

services in % 

Industrial 

value added 

in % 

Telephone 

mainline per 

1000 

No of Valid 34 34 34 34 34 32 

observations 

Missing 0 0 0 0 0 2 

Mean 7.9064E8 5.5426E10 5.1731 13.8154 23.9907 12.9807 

Median 2.8321E8 4.7044E10 5.0121 14.0416 23.7994 8.9442 

Std. Deviation 1.43718E9 3.71650E10 2.10642 2.51517 1.29377 9.90993 

Variance 2.065E18 1.381E21 4.437 6.326 1.674 98.207 

Skewness 2.708 1.345 .099 -.329 .796 .694 

Std. Error of 

Skewness 

.403 .403 .403 .403 .403 .414 

Range 5.58E9 1.53E11 9.20 8.12 4.83 30.95 

Minimum 8220530.17 1.13E10 1.01 9.24 22.07 2.93 

Maximum 5.59E9 1.65E11 10.22 17.36 26.90 33.88 


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Foreign 

Direct 

investment 

Foreign 

Direct 

investment 

Table 3: Correlations 

GDP 

US$ 

GDP 

Growth 


Export of goods 

and services in 

% 

Industrial 

value added 


Telephone 

mainline per 

1000 

Pearson 

Correlation 1 .897 ** -.112 .189 .751 ** .735 ** 

Sig. (2tailed) 

**. Correlation is significant at the 0.01 

level (2-tailed). 

Model 

.000 .527 .284 .000 .000 

N 34 34 34 34 34 32 

Table 4 : Coefficients 

Unstandardized 

Coefficients 

Standardized 

Coefficients 

B Std. Error Beta 

t Sig. 

1 (Constant) -5.711E9 1.406E9 -4.062 .000 

GDP US$ .042 .010 1.438 4.182 .000 

GDP Growth in % -3.035E7 3.263E7 -.078 -.930 .361 

Export of goods and 

services in % 

Industrial value 

added in % 

Telephone mainline 

per 1000 

-1.537E8 3.439E7 -.486 -4.468 .000 

2.923E8 6.874E7 .392 4.253 .000 

-3.997E7 2.862E7 -.484 -1.396 .174 

a. Dependent Variable: Foreign Direct investment 

Table 5 

Coefficient of 

Determination (R 2 Adjusted Coefficient of 

) 

Determination (Adj. R 2 F-Statistic Sig. (F-Stat) 

) 

.882 

Table 6 

.859 38.861 .000 

Coefficient of 

Adjusted Coefficient of F-Statistic Sig. (F-Stat) 

Determination (R 2 ) 

Determination (Adj. R 2 ) 

.804 .798 131.308 .000 

Model 

Table 7:Coefficients 

Unstandardized Coefficients Standardized Coefficients 


t Sig. 

1 (Constant) 3.709E10 3.282E9 11.303 .000 

FDI inflow 23.188 2.024 .897 11.459 .000 

a. Dependent Variable: GDP current in US$ 


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Abstract 

Entrepreneurial Intentions among the Business Students 

of Higher Education Institutes of Punjab 

Muhammad Jawad Hasan Qureshi 

University of Management and Technology, Lahore, Pakistan 

Naveed Ahmed 


M. Sarfraz Khan 


Entrepreneurship is considered as the mean of wealth creation and personal fulfillment 

(Ma and Tan, 2005). This study attempts to find the entrepreneurial intentions among the 

business students of higher education institutes of Punjab. The data is collected from 300 

students and the results indicate that males and people having families with business 

exposure are more inclined to start their own business enterprise than females and 

students not having family business exposure. In addition, environmental factors do not 

significantly affect the entrepreneurial intentions among the business students of higher 

education institutes of Punjab. 

Keywords: Entrepreneurship, Education Institutes, Punjab. 


Entrepreneurship is said to be a perspective, the unique way to look at the world, a 

particular mindset to leverage on the creativity to achieve some specific results (Ma & 

Tan, 2005) that might be profits or some other motives. Entrepreneurs include wide range 

of people as the business founders, owners, managers and university researchers (Gartner, 

1989). 

The role of entrepreneurs in the economic prosperity is widely discussed topic in the 

literature and many countries like China and India are reaping the fruits on the 

entrepreneurship. Minniti and Lévesque (2008) provide the support for the benefits that 

entrepreneurial activities provide for an economy. They argue that these activities can be 

used as a tool to economic growth besides the research and developmental expenses. 

Moreover, entrepreneurship is also considered as the mean of wealth creation and 

personal fulfillment (Ma and Tan, 2005). In developed countries entrepreneurial activities 

contribute more than 80% of their industrial production (Otsuki, 2002) and 60% to 90% 

of the business of the world is done by SMEs (Al-Mohafi, 2008). The entrepreneurial 

activities are not only meaningful in economic context by creating employment 

opportunities and business opportunities but also are important in social context by 


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uplifting the standard of living of individuals which ultimately leads towards the uplift of 

society as a whole. 

Many countries take different initiatives to support such intentions and develop the pool 

for successful entrepreneurs. Examples of such initiatives are different programs 

supported by international, national and private agencies like UNCTAD EMPRETEC 

program which was started in 1988 in association with UNDP to promote 

entrepreneurship in developing nations. In addition, there are many education centers, 

funding institutions, competitions for business plans (Bajaba, 2009) to boost the 

entrepreneurial intentions and mitigate the barriers in the way of entrepreneurship. 

In Pakistan government has taken some initiatives to boost up the entrepreneurship such 

as setting up Small and Medium Enterprise Development Authority (SMEDA) in 1988 

which was entrusted with the responsibility to encourage the development of small and 

medium enterprise by facilitating the SMEs in securing finance and providing the 

business ideas and support information. Moreover, SMEDA is also responsible for 

conducting researches in the relevant field to identify the opportunities and to develop a 

data base useful for entrepreneurs of Pakistan. There are 3.2 million business enterprises 

in Pakistan which contribute 30% to GDP and Rs. 140 billion to overall exports of 

Pakistan (SMEDA, 2009) shows an impressive progress of entrepreneurial development 

in Pakistan. 

The main focus of this study is to consider the environmental factors that contribute 

towards the entrepreneurial intentions of business students in Pakistan. This study focuses 

that whether the favorable environmental factors lead the students to start their own 

venture and that some unfavorable environmental factors may harm student‘s 

entrepreneurial intentions. We have chosen business students because they know what 

business is really is? How it is started? How it would be managed? What factors 

contribute towards the success or failure of the business? What environmental perquisites 

are necessary for starting up a new business venture? (Gelderen et al., 2009) 


The role of entrepreneurs in the economic prosperity is widely discussed topic in the 

literature. The determinants of entrepreneurial intension have explored in various studies. 

Some researcher adopted the personality approach to study this phenomenon who 

advocates that there intensions are developed by personality traits. Raijman, (2001) and 

Segal et al. (2005) found a positive relationship between risk taking behavior and 

entrepreneurial intentions. Townsend at el. (2008), found that self confidence trait leads 

towards the starting up a new venture by providing confidence in ones action and future 

outcomes of the ventures. Zampetakis (2008) discussed the impact of perceived 

desirability to become entrepreneur on relationship of creativity, proactivity and 

entrepreneurial intention and provided support for significant affects and also 

demonstrated the importance of creativity in entrepreneurial process. Luthje and Franke 

(2003) also found the strong positive affect of personality traits on entrepreneurial 

attitude. Gelderen et al. (2006) found that two traits i.e. sensitivity to business 

opportunities and perceived importance of financial security are most important 

explanations of entrepreneurial intentions and interest. Some other researchers seek to 

explain the phenomena through demographical differences as Zhang et al. (2001) found 

that females have a strong genetic influence while males have zero genetic influence on 


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their tendency to become entrepreneurs. Yordanova and Tarrazon (2002) also provided 

empirical evidence that male have higher entrepreneurial intentions then females have 

and that entrepreneurship related education, presence of entrepreneurial role model and 

prestigious perception about entrepreneurial ship as occupation affect entrepreneurial 

intentions positively. Moreover, Wilson et al. (2007) found that males have more self 

efficiency (confidence) and intention to start their own venture than females. They also 

found that entrepreneurial education increased the self efficiency of the female students 

with comparison to the male students. Athayde (2009) provided ethnical explanation by 

finding that in US young black people have stronger entrepreneurial intentions than white 

or Asian young pupils. Many other explanations such as family business exposure were 

also brought forward by researchers as determinates of entrepreneurial intentions. Carr 

and Sequeira (2007), Raijman (2001) and Athayde (2009) found that family business 

exposure and household economic resources also play a role to build entrepreneurial 

intentions. Environmental explanations are also provided by some researchers as Bajaba 

(2009) found that society‘s positive perceptions and trade connection have a significant 

positive relationship with entrepreneurial intentions while access to capital was found to 

be a significant barrier. Zhang et al. (2001) provided that males have strong shared 

environmental influence on their entrepreneurial intention while females showed zero 

shared environmental influence. Luthje and Franke (2003) also provided the support for 

the affect of environmental factors and perceived contextual barriers on the 

entrepreneurial intentions. 


3.1 Method 

This study used survey questionnaire for the collection of data which contained three 

sections. Section one consists of personal demographic, intentions about starting the 

business and respondent‘s personal and family business exposure. Section two provides 

five questions on the support factors that might contribute towards the entrepreneurial 

intentions of the student in a positive way. Section three provides four questions about 

the perceived barriers. The questions of section two and section three are measured on 5 

point Likert scale. 

3.2 Sample 

We distributed a total of 350 questionnaires out of which 313 questionnaires received 

back having response 89.42%. The questionnaires were distributed to the business 

students of different universities of Punjab. We choose business students because they are 

perceived to be the well aware of the business process and the requirement to start a new 

enterprise. Moreover, the students are the youth which is supposed to be common pool 

for the future entrepreneurs (Bajaba, 2009). 

3.3 Hypothesis 

The hypotheses of this study are as follows: 

H1: There is positive relationship between support factors and entrepreneurial intentions 

of business students. 

H2: There is negative relationship between barriers and entrepreneurial intentions of 

business students. 

H3: There is positive relationship between personal business experience and 

entrepreneurial intentions of business students. 


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H4: There is positive relationship between family exposure and entrepreneurial intentions 

of business students. 

H5: The entrepreneurial intention would be more among male students than female 

students. 

4. Statistical Results 

4.1 Descriptive Statistics 

Table 4.1 (See Appendix 1) 

Table 4.1 provides the overview of the data collected that shows that out of 313 

respondents 168 were males and 142 were females and reaming three did not provide 

their gender. Out of these 310, 237 were intended to start their own venture after 

completion of their study and 73 did not show such intention. 69 were having personal 

business experience of some kind and 242 students were inexperienced with regard to 

any business. 210 students were having families with business exposure and 100 were 

from families which were not having business exposure. 


The percentages presented in Table 4.2 show that on the whole the male showed more 

inclination to start their own venture with a percentage of 78 while only 74% female 

students showed their inclination to start their own venture. Thus, the study confirms the 

H5 that the entrepreneurial intention would be more among male students than female 

students. The difference of percentage with regard to the personal business experience is 

not significant thus we reject H3 that there is positive relationship between personal 

business experience and entrepreneurial intentions of business students. Table 4.2 clearly 

indicates that family business exposure may play its part in building entrepreneurial 

intentions among the students as 78.1% of students having family business exposure 

show their intention to start their own venture while this percentage is 72.55% among 

students who do not have families with business exposure so we accept H4 that there is 

positive relationship between entrepreneurial intention and family business exposure. 

This finding is in accordance with the findings of Crant (1996) that student having family 

business exposure show more inclination towards starting their own venture. 


The descriptive show that mean for entrepreneurial intention is .7682 which shows that 

more students are inclined to start their venture after completion of their study. That is 

about 77% of the students in our sample show their agreeableness that they would prefer 

to start their own business. The mean score of overall support factors that is the average 

of the individual support factor show that overall students somewhat agree that these 

factors support their entrepreneurial intentions but this mean score is not that strong as it 

is below the score of 4 which was marked as agree in the questionnaire. The variability in 

overall score of support factors as measured by standard deviation is quite low from the 

individual factor that shows overall reliability of the average score is better. The 

maximum mean in individual factors is of Education Environment which is near to 4. The 


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next higher mean is for Social connections that is 3.8285 and the inter response 

variability is also bit lower than that of Education Environment. 


The overall results of the barriers as indicated by Table 4.4 are also same as the results of 

support factors are. The mean for Difficulty of Finding Creative Business Idea and 

Difficulty of Obtaining Information seem to be having neutral effect as they are very near 

to score 3 which is marked as don‘t know in the questionnaire. Political Instability mean 

show that business students agree that Political instability causes the spoilage of 

entrepreneurial potential in the country. The variable of Difficulty of Obtaining the Initial 

Capital Investment also have a score more than 3 that show that this barrier is significant 

to the students as for as the mean is concerned. There also is variability of responses in 

barriers as indicated by the standard deviation. On the average as indicated by average 

barrier score the mean value is 3.3565 which show that on the average students somewhat 

agree that these barriers affect their entrepreneurial intentions to some extent. The inter 

score variability for the average of barriers is also much lower. 

4.2. Correlation Statistics 


The correlation results in Table 4.5 show that there is no significant relationship between 

Entrepreneurial intentions and any of the support factors along with their average. Thus 

we reject H1 that there exist a positive relationship between support factors and 

entrepreneurial intentions of business students. However, all support factors seem to 

correlate with each other, at significance level 0.01. The relationships seem to be weak as 

indicated by the on average 0.3 score of the correlations. The correlation results for 

barriers and entrepreneurial intentions are as follows: 


Entrepreneurial intention, as was the case with support factors do not correlate with any 

of the barriers significantly. Thus we reject H2 that there is negative relationship between 

barriers and entrepreneurial intentions of business students. But some of the barriers seem 

to correlate with each other as Variable of Difficulty of Finding Business Idea 

significantly correlates with Difficulty of Finding Information and Difficulty of 

Obtaining Initial Capital investment. Moreover, the variable of Difficulty of Finding 

Information is weakly correlated with Difficulty of Obtaining Initial Capital investment 

with a correlation score of .214. A somewhat moderate but significant relationship can 

also be observed between variables of Difficulty of Obtaining Initial Capital investment 

and Political Instability. 

4.3. T Statistics 



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On the whole the mean values for all the factors show that there is not much difference 

between the perceptions of the students with regard to gender as indicated by the table 

4.7. The significance which is to be determined by T-test is as follows: 


T-test shows that at the 0.05 level of significance there exist gender differences in 

perceptions with regard Average of Barriers. The difference in average of barriers is 

significant at 0.002 and the mean value of male students for this factor is 3.3160 which is 

less than the mean value of female students for the same factor i.e. 3.4167 and that 

indicate that females are expected to be more affected by the barriers on the whole as for 

as their entrepreneurial intention is concerned.The results for the differences in the 

perception with regard to students having business experience or not are as follows: 


Table 4.9 presents the group statistics for the personal business experience. On the whole 

the mean values show that students having no personal business experience seem to 

consider support factors more favorable towards their entrepreneurial intentions in 

comparison with the students who were having the personal business experience. Not 

much variability of perceptions with regard to mean values was found for barriers. 


The T-test Table 4.10 for these group shows that the significant differences exist between 

the group having some sort of personal business experience and group do not having such 

experience with regard to average of support factors at the 0.05 level of significance. The 

students do not have business experience seem to perceive higher effects of support 

factors on their entrepreneurial intentions. The mean value for students do not have 

personal business experience was 3.7531 for average of support factors while the mean 

value is 3.4609 for the group having some sort of business experience that clearly 

indicate the disparity of perceptions with in groups for support factors.The results for the 

differences in the perception with regard to students having family with business 

exposure or not are as follows: 


Table 4.11 provides the group statistics of family business exposure with regard to 

average of support factors and barriers. These groups are constituted by 102 students in 

group do not have business exposure and 210 students whose family have some sort of 

business exposure. There is not much variability among these groups with regard to the 

support factors or barriers although on the average students having families with some 

business exposure seem to be have more effect with regard to the support factors and 

barriers. The T-test to determine the significance is as follows: 


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No significance of differences was found for family business experience groups with 

regard to the support factors and barriers. 

5. Conclusion 

This study provides the perceptions of the business students of Pakistan with regard to 

entrepreneurial intentions. On the whole we conclude that environmental factors may 

motivate an individual to become entrepreneur but we have not found any significant 

relationship between environmental factors and entrepreneurial intentions among the 

business students of higher education institutes of Punjab. This study also found the 

positive relationship between family business exposure and entrepreneurial intention of 

the business students (Crant 1996). The male student‘s intentions to start their own 

venture are also found to be stronger than female students. These results are also 

consistent with (Yordanova and Tarrazon; Zhang at el 2009). 

This study contributes in the existing body of knowledge and provides the insight into 

entrepreneurial behavior of business students in Punjab and lays the foundation for 

further research on different perspectives as to provide the determinants of 

entrepreneurial intentions of youth of Pakistan. 


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Appendix 1 

Table 4.1: Data Descriptive (Demographic) 

Entrepreneurial 

Intention 

Personal 


Experience 

Family 


Exposure 

Yes No Yes No Yes No 

Males 131 37 57 112 121 48 168 

Females 106 36 12 130 90 52 142 

Total 237 73 69 242 210 100 310 

Total 

Table 4.2: Demographic explanation of entrepreneurial intentions 

Category Groups Entrepreneurial potential 

(%) 

Gender Male 78% 

Female 74% 

Personal Business Have Experience 75.36% 

Experience 

Don‘t have Experience 76.67% 

Family Business Exposure Family has business 

Exposure 

78.1% 

Family don‘t have 72.55% 

Table 4.3: Descriptive (Support Factors) 

Mean Std. Deviation 

EntInt .7628 .42604 

SocietyImg 3.6109 1.02221 

EduEnv 3.9457 1.17680 

InfoAvil 3.6250 1.17466 

SocialConn 3.8285 1.05976 

GovtSupp 3.4217 1.38019 

SuppFctrz 3.6885 .79963 

(EntInt = Entrepreneurial Intentions, SocietyImg = Society Image of Entrepreneurs, 

EduEnv = Education Environment, InfoAvil = Information Availability, SocialConn = 

Social Connections, GovtSupp = Government Support, SuppFctrz = Mean average of all 

Support Factors) 


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Table 4.4: Descriptive (Barriers) 

Mean Std. Deviation 

EntInt .7628 .42604 

DiffBzIdea 2.7532 1.26542 

DiffObtInfo 3.0256 1.17831 

DiffObtCap 3.5566 1.12564 

PolInstb 4.0962 1.25408 

Barriers 3.3565 .73191 

EntInt 

(EntInt = Entrepreneurial Intentions, DiffBzIdea = Difficulty of Finding Creative 

Business Idea, DiffObtInfo = Difficulty of Finding Information, DiffObtCap = Difficulty 

of Obtaining Initial Capital, PolInstb = Political Instability, Barriers = Mean Average of 

all Barriers) 

Table 4.5: Correlation (Support Factors) 

EntInt SocietyImg EduEnv InfoAvil SocialConn GovtSupp SuppFctrz 

Pearson 

Correlation 


SocietyImg Pearson 

Correlation 

.068 


.231 

EduEnv Pearson 

Correlation 

.048 .312(**) 


.399 .000 

InfoAvil Pearson 

Correlation 

.048 .295(**) .342(**) 


.403 .000 .000 

SocialConn Pearson 

Correlation 

.082 .390(**) .396(**) .389(**) 


.149 .000 .000 .000 

GovtSupp Pearson 

Correlation 

.021 .194(**) .300(**) .400(**) .380(**) 


.712 .001 .000 .000 .000 

SuppFctrz Pearson 

.075 .605(**) .684(**) .712(**) .728(**) .703(**) 

Correlation 


.184 .000 .000 .000 .000 .000 

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



EntInt Pearson 

Correlation 


DiffBzIdea Pearson 

Correlation 


DiffObtInfo Pearson 

Correlation 


DiffObtCap Pearson 

Correlation 


PolInstb Pearson 

Correlation 


Barriers Pearson 

Correlation 



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Table 4.6: Correlation (Barriers) 

EntInt DiffBzIdea DiffObtInfo DiffObtCap PolInstb Barriers 

-.029 

.610 

-.010 .291(**) 

.855 .000 

.095 .149(**) .214(**) 

.095 .009 .000 

.072 -.085 .014 .383(**) 

.207 .135 .812 .000 

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

.046 .572(**) .618(**) .700(**) .546(**) 

.417 .000 .000 .000 .000 

Table 4.7: Group Statistics (Gender) 

Gender Mean Std. Deviation 

Std. Error 

Mean 

SuppFctrz Male 3.7074 .82521 .06367 

Female 3.6813 .76433 .06414 

Barriers Male 3.3160 .80396 .06184 

Female 3.4167 .62053 .05207



SuppFctrz Equal 

variances 

assumed 

Equal 

variances 

not 

assumed 

Barriers Equal 

variances 

assumed 

Equal 

variances 

not 

assumed 

Table 4.8: T-tset (Gender) 

Levene's 

Test for 

Equality of 

Variances t-test for Equality of Means 

F Sig. T df 

Sig. 

(2tailed) 

Mean 

Difference 

Std. Error 

Difference 

.554 .457 .287 308 .774 .02610 .09096 

9.996 .002 

.289 305.405 .773 .02610 .09037 

- 

1.218 

- 

1.245 

309 .224 -.10065 .08265 

306.876 .214 -.10065 .08085 

Table 4.9: Group statistics(Personal Business Experience) 

Std. Std. Error 

PerBzExp Mean Deviation Mean 

SuppFctrz No Personal Business 

Experience 

3.7531 .69941 .04487 

Some Personal 

Business Experience 

3.4609 1.05638 .12717 

Barriers No Personal Business 

Experience 

3.3967 .71526 .04588 

Some Personal 

Business Experience 

3.2167 .77620 .09277 


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95% 

Confidence 

Interval of the 

Difference 

Lower Upper 

- 

.15288 

- 

.15173 

- 

.26328 

- 

.25974 

.20508 

.20394 

.06197 

.05843



variances 


assumed 

Equal 

variances 

not 

assumed 


variances 

assumed 

Equal 

variances 

not 

assumed 

Table 4.10: T-test (Personal Business Experience) 

Levene's 

Test for 

Equality of 


F Sig. T df 

Sig. 

(2tailed) 

Mean 

Difference 

Std. Error 

Difference 


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95% 

Confidence 


Difference 

Lower Upper 

11.914 .001 2.706 310 .007 .29222 .10799 .07974 .50469 

2.167 85.609 .033 .29222 .13486 .02411 .56032 

.332 .565 1.820 311 .070 .18003 .09892 

1.739 105.092 .085 .18003 .10350 

- 

.01460 

- 

.02518 

Table 4.11: Group statistics (Family Business Exposure) 

Std. Error 

FamBzExp Mean Std. Deviation Mean 

SuppFctrz No Family Business 

Exposure 

3.6681 .73282 .07256 

Some Family 

Business Exposure 

3.6983 .83165 .05739 

Barriers No Family Business 

Exposure 

3.2762 .75049 .07431 

Some Family 

Business Exposure 

3.3953 .72136 .04966 

.37467 

.38525




variances 

assumed 

Equal 

variances 

not 

assumed 


variances 

assumed 

Equal 

variances 

not 

assumed 

Table 4.12: T-test (Family Business Exposure) 

Levene's 

Test for 

Equality 

of 


F Sig. T df 

Sig. 

(2tailed) 

Mean 

Difference 

Std. Error 

Difference 

.129 .720 -.312 310 .755 -.03020 .09665 

.334 .564 

-.326 224.443 .744 -.03020 .09251 

- 

1.351 

- 

1.333 

311 .178 -.11913 .08815 

192.860 .184 -.11913 .08938 


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95% 

Confidence 


Difference 

Lower Upper 

- 

.22036 

- 

.21250 

- 

.29258 

- 

.29541 

.15997 

.15211 

.05431 

.05715



EXCHANGE RATE DEPRECIATION AND IMPORT 

DEMAND IN NIGERIA (1986 – 2008) 

Dr Imimole, Benedict (Ph.D) 

Department of Economics, Ambrose Alli University 

Ekpoma, Nigeria. 

Abstract 

This paper has examined the direction and extent of exchange rate impact on import 

demand for the different groups of products in Nigeria for the period 1986 -2008, using 

the traditional polynomial distributed lag model. The empirical result shows that the 

demand for these product groups was import inelastic, and that apart from the one 

product group – manufactured goods, – exchange rate depreciation made appreciable 

impact on import demand for the period covered by the investigation. Depreciation of 

exchange rate was also found to have increased the volume of imports of these product 

groups. It was however suggested that with more commitment on the part of government, 

the high import content currently being experienced, could be explored to bring about the 

needed transformation the economy requires. 

Keywords: Exchange Rate Depreciation, Import Demand, Polynomial Distributed Lag 


1.1 Background and Problem Statement 

The importance of foreign trade as a vital catalyst for economic development has gained 

attention in recent times. For developing countries the contribution of trade to overall 

economic development is enormous owing largely to the obvious fact that most of the 

essential elements for development such as capital goods, raw materials and technical 

know-how, are almost entirely imported because of inadequate domestic supply. Since 

the currencies of this group of countries are not convertible foreign exchange has to be 

earned through exports to be able to pay for imports. Thus, increased domestic demand 

obviously requires a corresponding expansion in export. However, to enhance export 

capacity, improved technology is required. Since this is not obtainable in the domestic 

economy, the need for it further pushes up the demand for imports. This cycle of 

activities has the tendency of pushing imports far ahead of exports and in consequence 

exerts an undue pressure on balance of payment. 

Mora (1989) realizing the vital role played by imports in foreign trade developed 

and estimated two models that explained the import behaviour under a foreign exchange 

constraint, arguing that such models are more appropriate representation of import 

behaviour in less developed countries (LDCs). The study therefore emphasise the role of 

foreign exchange availability in foreign trade and development. This may have prompted 

several authors to be pre-occupied with the determination of imports in developing 

countries with the result that a number of functional specifications have been employed. 

Available evidence generally suggests that most developing countries registered 

persistent decline in their foreign exchange earning from the early 1980s. This is 


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attributable largely to the collapse of commodity prices in the world market. One possible 

explanation for this is that both imports and exports in developing countries are subject to 

periodic fluctuation in the world market. 

This paper examines the role of exchange rate depreciation in explaining import 

behaviour in Nigeria. The period covered by the investigation is 1986 – 2008 when 

market deregulation was formally applied as a tool of economic reconstruction. It is 

worthy of note that Nigeria experienced large-scale depreciation of the naira during this 

period as table 1 in the appendix has shown. 

Given the vital role played by imports in foreign trade and economic development 

it is unfortunate that in Nigeria very few empirical evidence exists to determine the role 

played by changes in exchange rate in explaining import behaviour. Also, traditional 

trade models with imports, defined at the aggregated level have been employed in 

literature to gather evidence in support of the view that depreciation in currency would 

lead to a reduction in the volume of imports notwithstanding the existence of such 

evidence, questions have often been raised about the use of aggregated definition of 

products, since it does not allow for proper identification of product specific effect. This 

paper therefore examines at the micro level of product definition, the impact of exchange 

rate depreciation on demand for imports in Nigeria from 1986 to 2008. 

1.2 Objectives of the Study 

This paper is expected to achieve the following objectives. 

i. To examine empirically the behaviour of import demand under a deregulated 

exchange rate regime in Nigeria. 

ii. To estimate the current and lagged exchange rate impact on imports in Nigeria. 

iii. To draw policy implication for imports from the empirical findings. 

The layout of this paper therefore is as follows. Section 1 is introduction. Section 2 

provides the review of literature. Section 3 presents a profile of Nigeria‘s trade and 

exchange rate development before and during Structural Adjustment Programme (SAP). 

Section 4 is methodology of the study, which highlights data sources, estimation 

procedure and model specification. Section 5 is discussion of empirical results, and 

section 6 is conclusion. 


Imports have continually been given considerable amount of attention in economic 

literature both in relation to macroeconomic adjustment and within the broader context of 

international trade. Closely related to this is the exchange rate variable, which has equally 

attracted a great deal of attention possibly because of its presumed role in explaining 

import behaviour. The current study examines the relationship between these two 

variables within the context of the Nigerian economy. 

One of the arguments often put forward in economic theory for the adoption of currency 

devaluation (depreciation) is that depreciation will make import dearer, bringing about a 

subsequent reduction in imports while at the same time making export of the devaluing 

country cheaper. Several authorities including Dwivedi (1998) are in support of this view. 

The same view was expressed by Kandil and Mirzaie (2003) when they said that a 

depreciation (or devaluation) of currency may stimulate economic activity through the 

initial increase in the price of foreign goods relative to home made goods. Aligning with 


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Kandil etal, Xiaoqin (2002) noted that exchange rate depreciation can make a country‘s 

export cheaper and imports more expensive. To him, boosting a country‘s exports and 

curbing its imports ultimately results in an improvement in her trade balances with the 

rest countries of the world. Begg etal (1984) are also indifferent in this respect but noted 

that imports respond more quickly to changes in domestic income than to changes in real 

exchange rate. A major factor that can complicate this general relationship was expressed 

by Dwivedi (1998) in the popular Marshall-Learner condition which states that a 

devaluation/depreciation will improve the trade balance only if the sum of foreign price 

elasticity of demand for exports and the home country‘s price elasticity of demand for 

imports is greater than unity as illustrated in Guitian (1976) and Dornbusch (1988) who 

stressed that the success of currency depreciation in promoting trade balance largely 

depends on switching demand in proper direction and amount as well as on the capacity 

of the home economy to meet the additional demand by supplying more goods (Mendoza, 

1992). 

Some empirical studies confirm that exchange rate depreciation improves trade balance. 

Available statistics have proved this to be true in developed industrialized nations 

(Scammel, 1975 and Samuelson, 1987). Abdulahi (1987) however noted that this success 

was achieved because the Marshall-Learner condition of at least a unit elasticity of 

imports had been attained. Toffler (1981) attributed the success recorded by these nations 

to economic autarky, excess capacity and under-consumption and low unit cost of 

production, which were among conditions prevailing then. A study of nine developing 

Asian economics from 1973 to 1991 indicates that real devaluation improves trade 

balance in most of these countries (Arize, 1994). Abdulahi and Suleiman (2008) have 

examined the behaviour of Nigeria‘s imports for the period 1970 to 2004 and identified 

GDP and measure of openness as significant determinants of imports, and exchange rates 

and foreign exchange reserves as insignificant determinants. 

The practice of fixed exchange rate as embedded in the Bretton Woods Agreement of 

1944 was a regular feature among developing economies as long as the IMF could 

provide sufficient reserves to mitigate the short-term fluctuation in the balance of 

payments while maintaining the fixed exchange rate system. When the IMF could no 

longer sustain this arrangement, the currencies of many countries especially the reserve 

currencies were subject to frequent devaluation in the early 1970‘s. This raised doubts 

about the continuation of the Bretton Wood System and also about the viability of the 

fixed exchange rate system. 

In Nigeria, before the adoption of the market based system, the main objective of 

exchange rate policy was to operate an independently managed exchange rate system that 

would influence real economic variables in the economy and bring down the rate of 

inflation. Consequently, a policy of progressive appreciation of the naira was pursued 

over the period and was aided by the oil boom that occurred at the same period. The 

sudden switch to market based system was engineered by a wide practice of foreign 

exchange management (Scammel, 1975, Killick, 1981) especially among western 

countries pre-occupied with balance of payments problems (Shanks, 1973). The 

International Monetary Fund inspired the choice that it must be floating exchange rate. 

This was why it was made part of the conditionalities for rescheduling our external debt 

(Bagura, in Longe and Moruku, 1998). Besides, Japan, USA and other industrialized 


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countries of Western Europe employed it to solve problems of excess capacity (Krein, 

Cited in Ndebbio, 1987) and to reach balance of payment equilibrium (Shanks, 1973). 

3. A Profile of Nigeria‟s Trade and Exchange Rate Development 

Between 1960 and 1967, the Nigerian currency was adjusted in relation to the British 

pound in a one to one relationship between them. Between 1967 and 1974, another fixed 

parity was maintained with the American Dollar. This system was abandoned between 

1974 and 1976, when an independent exchange rate management policy that pegged the 

naira to either the US dollar or the British pound sterling was put in place. The main 

objective of exchange rate policy during this phase was to operate an independently 

managed exchange rate system that would influence real economic variables in the 

economy and bring down the rate of inflation. Consequently, a policy of gradual 

appreciation of the naira was pursued over the period and was aided by the oil boom that 

occurred at the same period. Nigeria persistently ran appreciable external surpluses in the 

balance of payments, which supported the appreciation of the naira. The exchange rate 

over-valuation that followed helped to cheapen imports of competing food items as well 

as agro-based and industrial raw materials. As a result, there was rapid expansion in the 

importation of these goods to the detriment of local production of similar goods. When it 

became obvious that aggregate import demand had outstripped total foreign exchange 

available for imports, trade restriction through import licensing scheme was introduced. 

Towards the later part of 1976, arising from the changing fortunes of Nigeria‘s economic 

circumstances, a policy reversal was effected in the management of the naira exchange 

rate. There was a deliberate policy to depreciate the naira, though this was not systematic. 

However, a major policy reversal was affected in September 1986 when the fixed 

exchange rate regime had to be discarded and the flexible exchange rate regime was put 

in place following the adoption of the structural adjustment programme (SAP). With the 

adoption of SAP, foreign exchange allocation and import licensing procedures were 

abolished and transactions in foreign exchange were subjected to market forces under an 

auction system. This new exchange rate policy helped to remove the over-valuation 

problem to the extent that the naira now became under-valued. As noted by Adubi and 

Okunmadewa (1999), exchange rate depreciation had since resulted in the dramatic 

increase in the naira price of imports and this is expected to discourage importation, and 

the naira cost of imported items have also risen astronomically. Table 1 in the appendix 

shows that the very year SAP commenced, exchange rate stood at N2.02:US$1.00 but 

depreciated to an average of N4.02, N8.04 and N9.91 to US$1.00 in 1987, 1990, and 

1991 respectively. It further depreciated to N17.30 and N22.05:US$1.00 in 1992 and 

1993 respectively. Following the persistent depreciation of the exchange rate, it became 

necessary for the exchange rate policy to be completely reversed in 1994 with the reintroduction 

of a fixed exchange rate regime. By this new arrangement, the exchange rate 

of the naira was pegged at N21.8861 = US$1.00. The dismal performance of the 

economy at the end of that year compelled the authorities to re-introduce the marketbased 

approach under the autonomous foreign exchange market (AFEM) from January 

1995 till October 1999. The exchange rate which depreciated from the fixed rate of 

N21.8881:US$1.00 in 1994 to an all height of N81.02.US$1.00 in 1995, barely one year 

after it was fixed, depreciated further to N84.00:US$1.00 and N92.69:$1.00 in 1998 and 


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1999 respectively. It further depreciated to N128.99 between 2002 and 2005, and later 

appreciated to 126.30 between 2005 and 2008. 

4. Methodology of the Study 

4.1 Data Sources 

The data employed in this investigation were obtained mainly from the following 

sources. 

(i) Central Bank of Nigeria Statistical Bulletin, Golden Jubilee Edition, 2008. 

(ii) Central Bank of Nigeria Annual Reports and Statement of Accounts for 

various years. 

4.2 Method of Data Analysis 

The empirical analysis is based on the traditional polynomial distributed lag model that 

estimates the delayed effects of exchange rate changes over the period 1986 – 2008. In 

using this model, the current and lagged exchange rate impact was estimated by 

employing time series data sets on the exchange rate and the imports of Nine Nigerian 

product groups at the level of Standard International Trade Classification (SITC). The list 

of these produce groups is provided in table 2 in the appendix. 

4.3 Model Specification 

The model chosen for the empirical examination of the impact of exchange rate changes 

is a polynomial distributed lagged model that defines imports as a function of lagged 

exchange rates. The model takes the following specific form. 

IMP t – a0 + �bi EXCRt-i + �T + Ut ………………….. (1) 

n 

i=o 

Where IMPt is the import demand for the different groups of products at time t, ao is a 

constant, bi‘s are the lagged coefficients of the nominal exchange rate distributed over 

zero to n years, EXCRt-i defines the real exchange variable lagged by t-i years, � 

represents the trend related coefficient, T is the time trend, and Ut is the stochastic term. 

The apriori expectation is that depreciation in the value of the domestic currency will 

dampen demand for import by making these importable relatively more expensive for the 

domestic buyers. 

The model chosen for the study has two specific advantages. 

(i) By providing information on the slop of the distributed lag, this model 

represents an improvement over the linear regression. The shape of the 

distributed lag facilitates identification of the pattern, if any, in the time 

related effects of the exchange rate 


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(ii) In addition to measuring the overall import of exchange rate it permits the 

capturing of product specific effects through analysis of import demand on the 

level of the individual product group in the country. 

The model will be estimated with foreign trade data sets on exchange rates and 

imports for the Nigerian economy. The data for the study would be compiled from 

data on various issues of CBN Annual Report and statement off accounts and CBN 

Statistical Bulletin, Golden Jubilee Edition for 2008. 

5. Discussion of Empirical Results 

In this paper, we have modeled the exchange rate behaviour of the Nigerian import sector 

with four distributed lags. The appropriate form of equation (1) for this economy is given 

as: 

IMPt = a0 + b0EXCR1 + b1EXCRt-1 + b2EXCRt-2 + b3EXCRt-3 +b4EXCRt-4 + �T + Ut 

…… (2) 

Equation 2 was estimated separately for each of the nine major import product groups 

selected for the study by employing appropriate time series on imports and exchange 

rates for the Nigerian economy. The results of these estimations are presented in tables 4 

to 6. 

As reported in the tables, the range of R-square values is in the high region of 0.96 – 

0.99. This high range indicates that the explanatory power of the regression equations is 

quite high. The Durbin Watson statistics for all the equations are indicative of absence of 

serial autocorrelation. 

An examination of the T-statistics reveals that quite a few of the coefficients are 

statistically significant. With the exception of manufactured goods, currency depreciation 

exerts definite (current and/or delayed) impact on Nigeria‘s import sector. As tables 4-6 

have shown, exchange rate for the current period (EXCRt) is significant at 1percent level 

for all the product groups excluding manufactured goods import where exchange rate was 

not significant at all. 

In going from product group to product group, one observes the following interesting 

differences in the nature of their import growth and the strength and direction of their 

association with exchange rates. 

i. For all the product groups, import growth is reflecting a definite trend; the trend 

related coefficient is significant for the nine product groups studied. For these 

product groups, the growth path is linear and the trend of their import is positive. 

This is not in line with apriori expectation. 

ii. For the period of currency depreciation, it is observed that exchange rate 

produced significant effect on imports of eight of the product groups. For the 

remaining product group (manufactured goods), exchange rate failed to produce 

significant result. For the eight product groups including food and live animals, 

exchange rate is found to produce unexpected impact on its import as importation 

of these product groups are found to be on the increase. A possible explanation is 

that the ones produced locally are inadequate in meeting domestic demand for 

these products due possibly to the abandonment of the agricultural sector for oil 

prospecting, and other possible impediments to domestic supply of products like 


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chemicals and crude minerals indelible, and machinery and transport equipments. 

However, import of machinery and transport equipment, chemicals and 

miscellaneous transactions responded to the lagged value of exchange rate 

depreciation as expected, as could be seen in the coefficient of exchange rate in 

the immediate past period (EXCrt-1) for MTE and CM, and period 3 (EXCRt-3) 

for MTS. 

iii. The coefficients of all the explanatory variables have also shown that import 

demand for these product groups being investigated is inelastic. 

6. Conclusion 

The analysis has focused on the effect of exchange rate depreciation on import demand in 

Nigeria. By using a model reflective of the lagged effect of currency depreciation, the 

paper has examined the direction and extent of exchange rate impact on import demand 

for nine different groups of products in the country. The empirical results produced the 

following important conclusions. 

i. Growth in Nigeria‘s import products has a definite trend which has been found to 

be positive. 

ii. With the exception of one product group – Manufactured goods, Exchange rate 

depreciation made appreciable impact on import demand within the period being 

investigated, by increasing the imports of these product groups. The demand for 

these import groups was found to be inelastic as the coefficients of all the 

explanatory variables have shown. 

A possible explanation could be that the Nigerian economy is highly import-dependent 

for both consumption and producer goods. As identified by Mordi (2006), virtually all the 

major industrial raw materials are sourced from abroad while the country depend wholly 

on foreign supply of intermediate and capital goods. It is either that the growth in imports 

is politically motivated and as such, cannot address the real economic issue or that the 

commitment on the part of government, to bail the country out of this import – dependent 

predicament is not yet there. However, with greater commitment on the part of 

government, this high import content can be reduced. Effort should be made too to 

intensify the diversification of the production and export base, through incentives that 

will promote export of manufactured and semi-manufactured goods. 


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Longe, J. B. and Moruku, R. K. (1998): “Bank Liquidity and Deregulated Foreign 

Exchange Rate in Nigeria.” The Nigeria, Journal of Economic and Management 

Studies, Vol. 3, Nos. 1 and 2, pp. 82 -90. 

Mendoza, E.G. (1992): “The Effect of Macroeconomic stocks in a basic Equilibrium 

Framework,” IMF Staff Papers, Vol. 39, No. 4, pp. 885-89. 

Moran, C. (1989): “Import Under a Foreign Exchange Constraint” The World Bank 

Economic Review, Vol. 3, No. 2 

Ndebbio, J. E. U. (1987): “The second-tier foreign Exchange Market: Capital Flows, 

Investment and General Price Level in Nigeria” in J. Attah, M. Kwanashe, and O. 

Ojowu (eds): The Nigerian Economy Under SFEM; Zaria: Ahmadu Bello 

University. 

Samuelson, P. A. (1976): Economics, Tokyo: McGrew-Hill Kogaksha Ltd. 

Scammell, W. M. (1975): Internal Monetary policy: Bretton Wood and After, London 

and Basingstoke; Macmillan Press Ltd. 


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Shanks, M. (1973): The Quest for Growth. London and Basingstoke: The Macmillan 

press Ltd. 

Toffler, A. (1981): Third Wave. London: Pan Books LTd. 

Xiaoqin, E. F. (2002): Implications of US Dollar Depreciation for Asian Developing 

Countries. ERD Policy Brief Series, No. 11, Asian Development Bank. 

http://www.adb.org. 


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Appendix 

Table 1: Naira Exchange Rate Movements in the Official FE Markets. 

Official FEM 

Year 

Rate (N:$) (1) Depreciation/Appreciation (%) (2) 

1986 2.02 55.9 

1987 4.02 49.8 

1988 4.54 11.5 

1989 7.39 38.6 

1990 8.04 9.3 

1991 9.91 18.9 

1992 17.30 42.7 

1993 22.05 21.5 

1994 21.89 -0.7 

1995 81.02 73.0 

1996 81.25 0.3 

1997 82.00 1.0 

1998 84.00 2.4 

1999 92.69 9.4 

2000 102.11 9.2 

2001 111.94 8.8 

2002 120.97 7.5 

2003 129.36 6.4 

2004 133.5 3.1 

2005 132.15 -1.0 

2006 128.65 -2.75 

2007 125.83 -2.2 

2008 118.57 -6.1 

Note: In columns 2(-) shows appreciation of the naira while (+) is depreciation. 

Source: Central Bank of Nigeria Annual Reports (various years). 


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Table 2: List of Major Import Product Groups 

Note: MTS is the sum total of Miscellaneous Manufactured Good and Miscellaneous 

Transactions. 

Source: Central Bank of Nigeria Statistical Bulletin, Vol. 16, 2005. 

. 

Product Group Variable Name 

1 Food and live animals FLA 

2 Beverages and tobacco BT 

3 Crude minerals indelible CMI 

4 Mineral fuels MF 

5 Animal and vegetable oils and fat AVOF 

6 Chemicals CM 

7 Manufactured goods MG 

8 Machinery and transport equipment MTE 

9 Miscellaneous transactions. MTS 


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Table 3: Exchange Rate and Value of Major Imports SITC Section (1986 - 2008) 



1995 

1994 

1993 

1992 

1991 

1990 

1989 

1988 

1987 

1986 

81.0200 

21.8900 

22.0500 

17.3000 

9.9100 

8.0400 

7.3900 

4.5400 

4.0200 

2.0200 

88349.9 

13837.0 

13952.4 

12840.2 

3045.7 

3474.5 

2108.9 

1891.6 

1873.8 

801.9000 

3020.5 

488.4000 

498.3000 

729.6000 

261.1000 

228.7000 

136.3000 

85.7000 

30.7000 

14.5000 

31715.4 

5046.5 

1328.8 

3939.6 

1566.4 

1417.2 

1080.7 

591.5000 

799.6000 

193.9000 


9061.5 

1139.5 

830.5000 

875.5000 

261.1000 

274.2000 

258.8000 

206.8000 

76.5000 

32.0000 

8306.4 

1306.4 

1328.8 

1459.1 

261.1000 

228.7000 

69.9000 

122.3000 

65.7000 

124.9000 

199353.7 

46394.8 

24749.0 

23199.9 

9311.2 

9006.4 

7041.9 

4127.2 

3016.5 

1039.0 

175944.8 

40046.0 

42023.4 

35310.6 

51951.1 

10240.8 

6541.4 

4547.4 

4484.9 

1237.1 

206905.0 

46232.0 

74579.1 

62158.3 

17926.2 

18515.8 

12362.7 

8900.6 

6827.7 

2277.8 

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VOL 2, NO 9 

32470.5 

8302.3 

6810.1 

5398.6 

2436.3 

2331.6 

1259.3 

972.6 

686.3 

262.5



Year 

2008 

2007 

2006 

2005 

2004 

2003 

2002 

2001 

2000 

1999 

1998 

EXCR (N/$) 

118.5700 

125.8300 

128.6500 

132.1500 

133.5000 

129.3600 

120.9700 

111.9400 

102.1100 

92.6900 

84.0000 

FLA (N‟M) 

355287.0 

272679.7 

235440.0 

193259.1 

178747.4 

201648.3 

144297.6 

160209.1 

113630.5 

103489.8 

102165.1 

BT (N‟M) 

59214.5 

43819.3 

34121.8 

28008.6 

21846.7 

18830.1 

13670.8 

9503.9 

6740.8 

4312.1 

3349.7 

CMI (N‟M) 

325679.7 

262915.8 

201318.4 

165250.5 

101970.4 

105211.6 

75763.3 

62454.3 

44296.6 

38808.7 

37683.9 


MF (N‟M) 

88821.8 

78874.7 

64831.4 

56017.1 

26709.9 

28924.7 

21112.7 

17650.2 

12518.6 

12073.8 

11723.9 

148036.2 

96402.5 

85304.4 

70021.4 

39307.6 

34185.8 

21279.4 

20365.6 

14444.6 

12073.8 

10886.4 

AVOF 

((N‟M) 

CM (N‟M) 

1480362 

1060427 

822334.6 

677807.2 

451618.4 

422165.2 

298318.1 

294970.0 

228594.2 

1966630.6 

192606.3 

MG (N‟M) 

1954078 

1437273 

1102133 

899074.9 

584645.4 

650365.2 

473478.8 

406734.1 

289261.3 

253550.0 

248713.4 

MTE (N‟M) 

1302719 

990316.2 

747266.7 

613387.5 

458917.1 

498815.9 

378826.5 

327206.7 

234075.8 

204392.3 

195956.0 

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VOL 2, NO 9 

MTS (N‟M) 

207250.8 

140221.7 

119426.2 

98030.0 

123282.2 

120088.6 

85948.2 

59086.5 

41460.0 

37184.6 

34334.0 

Source: CBN Statistical Bulletin, Golden Jubilee Edition, 2008.



1997 

1996 

82.0000 

81.2500 

100728.3 

75392.0 

5033.8 

2250.5 

38084.6 

26443.5 

Table 4: Polynomial Distributed Lag Coefficients of Exchange Rates and Trends on 

Nigeria‟s Imports by Product Group (1986-2008) 

Explanatory 

Variable 

Intercept 

EXCRt 

EXCRt-1 

EXCRt-2 

EXCRt-3 

EXCRt-4 

Trend 

Log Likelihood 

R-Squared 

D.W. Statistic 


10933.5 

8439.4 

11779.2 

7314.1 

192187.3 

132779.9 

246963.6 

156410.2 

202964.9 

129404.1 

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Food and Live Animals Beverages and Crude Mineral 

(FLA) 

Tobacco (BT) Indelible (CMI) 

6.9195 

3.8652 

5.4645 

(9.1810) 

(10.9931) 

(8.5304) 

0.0277** 

0.0190** 

0.0253** 

(4.0439) 

(4.4888) 

(3.2919) 

-0.0083 

-0.0102 

-0.0089 

(-1.0946) 

(-1.8718) 

(-0.8983) 

0.00211 

0.0082 

0.0028 

(-0.2722) 

(1.5041) 

(0.2835) 

-0.0067 

-0.0106 

-0.0046 

(-0.8638) 

(-1.9426) 

(-0.4628) 

-0.0114 

-0.0018 

-0.0132 

(1.4775) 

(-0.3694) 

(-1.5042) 

0.2705* 

0.2848** 

0.3071** 

(2..583) 

(5.1028) 

(3.0207) 

3.6029 5.6334 -5.7644 

0.96306 0.98913 0.96406 

1.9014 2.1026 1.9438 

** Significant at one percent level; * Significant at five percent level; T-statistics of the 

coefficients are provided within the parentheses. 

37041.4 

24192.9






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Explanatory Mineral Fuel Animal and Vegetable Oil & Chemicals (CM) 

Variable (MF) 

Fat (AVOF) 

3.8899 

3.3623 

7.4191 

Intercept 

(5.7300) 

(5.8913) 

(14.3005) 

EXCRt 

0.0276** 

0.0208** 

0.0174** 

(4.2728) 

(3.0365) 

(4.6562) 

EXCRt-1 

-0.0080 

-0.0099 

-0.0129 

(-1.0908) 

(-1.1215) 

(-3.2603) 

EXCRt-2 

-0.0019 

0.1290 

0.2409 

(-0.2620) 

(0.0146) 

(0.0585) 

EXCRt-3 

-0.0045 

-0.0084 

-0.0071 

(-0.5957) 

(-0.9413) 

(-1.6835) 

EXCRt-4 

-0.0119) 

-0.0159 

-0.0080 

(-1.6402) 

(-2.0350) 

(-1.9189) 

Trend 0.3287** 

0.4529** 

0.3608** 

(3.0559) 

(5.0000) 

(4.4948) 


-1.1775 -3.5702 8.8184 

R-Squared 


0.97971 0.97510 0.98966 

1.8608 1.7023 2.0229 


coefficients are provided within the parentheses.






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Explanatory Manufactured Machinery and Transport Miscellaneous 

Variable goods (MG) Equipments (MTE) Transactions (MTS) 

8.2915 

8.3027 

6.3697 

Intercept 

(156243) 

(20.5988) 

(23.2143) 

EXCrt 

0.0134 

0.0154** 

0.0216** 

(2.0957) 

(3.1850) 

(6.5476) 

EXCrt-1 

-0.0078 

-0.0135** 

-0.0087 

(-0.9461) 

(-2.1663) 

(-2.0364) 

EXCrT-2 

6.0036 

0.0011 

0.0020 

(0.4362) 

(0.1795) 

(0.4698) 

EXCrt-3 

-0.0051 

-0.0055 

-0.0068 

(-0.6151) 

(-0.8803) 

(-1.5941) 

EXCrt-4 

-0.0090 

-0.0095 

-0.0103* 

(-1.2370) 

(-1.7266) 

(-2.7487) 

Trend 0.2958** 

0.3222** 

0.2712** 

(3.5119) 

(5.0362) 

(6.2279) 


-2.1880 3.0380 10.3448 

R-Squared 


0.96183 0.97053 0.98919 

2.0796 2.0972 1.6244 


coefficients are provided within the parentheses.



Does market size affect FDI? The Case of Pakistan 

Muhammad Muazzam Mughal 

Assistant Professor, Hailey College of Commerce 


Muhammad Akram (Corresponding Author) 

Lecturer, Hailey College of Commerce 


Abstract 

Market size normally remains a vital determinant for FDI inflows and it is endorsing the 

emergence of regionalization. The aim of this study is to investigate the impact of market 

size along with exchange rate and corporate tax rate on FDI inflows in a low income 

country like Pakistan. ARDL approach to cointegration and an error correction model 

based on ARDL is used to estimate relationships among variables. Time series data from 

1984 to 2008 is used in this study. This study observes market size as the most important 

factor that affects FDI inflows. This work provides a better understanding about the role 

of market size in attracting FDI inflows to a developing country. On the other hand, it 

highlights the importance of regionalization for the purpose of increased market size for 

availing higher FDI inflows along with other supplementary benefits. 

Key words: Market size, Corporate tax rate, ARDL, FDI, Pakistan. 


Foreign direct investment (FDI) is deemed as a blessing in developing countries as it 

results in enhancement of exchange reserves, increase in productivity, increase in 

employment level, rise in exports and indeed, increased pace of transfer of technology. 

The contribution of FDI as key participant in economic growth in developing countries 

has been widely acknowledged. In developing countries, it is regarded as most important 

source of external resources and make significant addition in capital formation even the 

share of developing countries in world distribution of FDI remain small or sometimes 

declining (Kumar,1997 and Pardhan, 2001) The traditional benefits of FDI are also 

important in uplifting the economic growth pace of a developing country like usage of 

local raw material, introduction of new techniques of management and marketing, 

increase in quality of labour through on job training facilities and no generation of 

repayment of principal and interests (as opposed to external debt) (Bhagwati, 1994). 

There are a lot of determinants of FDI like labour cost, real interest rate, openness, 

corporate tax rate, real exchange rate and infrastructure. Besides these traditional factors, 

market size has gained relative vital place in literature on FDI for developing and 

emerging economies. 

Few among of a lot, who acknowledged the role of market size in attracting FDI inflows 

are Bander & White (1968), Schmitz & Bier (1972), Wheeler & Mody (1992), Pistoresi 

(2000). And among recent literature, Asiedu (2006), Mlambo (2006) and Zhang (2008) 

explored the pivotal importance of market size in attracting FDI inflows. These authors 


JANUARY 2011 

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argued that increased market size is a motivational factor for foreign investor. As far as 

literature on Pakistan about FDI is concerned, Aqeel & Nishat (2004) conforms to 

significant association between market size and FDI inflows. 

This study attempts to supplement the literature on the determinants of FDI by posing 

special focus on the vital role of market size. The study uses time series data from 1984 

to 2008 and Autoregressive Distributed Lag Model (ARDL) for empirical estimations. 

This is a unique study conducted with special focus on market size with ARDL with 

bounds testing approach to conintegration in case of Pakistan. 

The rest of the discussion is organized as follows: Section 2 deals with the review of 

literature, Section 3 describes econometric modeling, data and variables, section 4 

presents the empirical findings and last section 5 concludes the study with some policy 

recommendations. 


Asiedu (2006) well recognizes the market size benefit of regionalism. The study suggests 

that there are three reasons of FDI enhancement due to regional economic cooperation. 

First is that regionalism can promote political stability by restricting membership only to 

elect democratic government. Second, coordination of policies among member countries 

which reveals curbing corruption, implementing sound, stable macro economic policies 

and investor friendly framework. Third, it expands the size of market, which makes 

region more attractive for foreign direct investment. The study also highlights the 

importance of regionalism to those countries which are small in size and in income. 

Small countries can also attract FDI in better manner as they join coalition in order to 

achieve large market size. Though, regionalism provides opportunity to enhance FDI, 

but policy coordination among member nations of bloc remains major issue to be 

addressed. 

The regional distribution in huge market size may also have regionalized FDI 

determinants. Zhang (2008) narrates that regional distribution factors effecting FDI are 

incentives, historical and cultural linkages with foreign investor along with other location 

factors. Mlambo (2006) asserts the importance of regional infrastructure projects which 

serve the objectives of regional cooperation, integration and enhance of FDI. The study 

also recognizes regional power pool market which ensures sufficient availability of 

reliable and low cost energy supplies, integrated transportation, communications and 

other necessary elements. 

Market size may not be influencing factor in countries having FDI in export oriented 

industries. Coleman & Tetty (2008) persuade that the size of market may not play active 

role in the effecting FDI inflows, probably that most of the investors invest in sectors 

which are export oriented. The study also examines the exchange rate as one of the 

dominating factors for FDI inflows and reports the real exchange rate volatility 

significant negative impact on FDI inflows. 

Bandera & White (1968), Lunn (1980), Dunning (1980), Culem (1988), Wheeler & 

Mody (1982), Tsai (1994) and Pistoresi (2000) observed positive impact on FDI. Among 

recent literature, Kok and Ersoy (2009) examined 24 developing countries with panel 

data including Pakistan and found positive role of market size on FDI. Aqeel & Nishat 

(2004) observed market size, along with other determinants, affect on FDI as positive in 

case of Pakistan. 


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The review of the above literature suggests the role of market size in attracting FDI 

inflows, yet studies ignored exclusive work on market size for a low income country like 

Pakistan. This study seeks to fill the gap in literature in this context. 

3. Data and Methodology 

3.1 Data and variables 

This study uses four variables – foreign direct investment (FDI), market size (MS), 

exchange rate (ER) and corporate tax rate (CT) along with their theoretical and empirical 

explanation as given below. The Government of Pakistan prescribes different corporate 

tax rates for banking company, public company and all other companies. We calculated 

average of these three corporate tax rates for our estimation. The data for this variable is 

collected from various finance bills of the Government of Pakistan for the period 1984 to 

2008. The data of FDI, ER and MS is obtained from World Development Indicators, 

Mark 2010 online from the official website of World Bank with the frequency on annual 

basis from 1984 to 2008. 

3.1.1 Market Size 

Market size generally remains the most dynamic and vital determinant for locating FDI, 

that is why countries try to avail the benefits of regionalization as it expands market size 

which results in more attraction for foreign investor in the region (Asiedu 2006). 

Investors pay more attention to market size factor among other variables as it results in 

economies of scales, reduction in tariff, more market to penetrate and much more 

incentives. Wheeler & Mody (1992), Asiedu (2006) and Kok & Ersoy (2009) found 

positive significant impact in attracting FDI. Gross domestic product current US$ is used 

as proxy for market size (MS) and we expect positive impact of market size on FDI. 

3.1.2 Exchange Rate 

Fluctuations in exchange rate can matter in FDI decision making. Currencies subject to 

higher depreciation have threat to foreign investor as their investment declines over 

periods. Zheng (2009) and Blonigen (1997) presented negative impact of exchange rate 

on FDI inflows. Official exchange rate of local currency units per US$ is incorporated in 

the model as proxy for exchange rate (ER). We expect negative sign ER coefficient. 

3.1.3 Corporate Tax Rate 

Corporate tax rate directly hits the earnings of companies. It is generally believed that 

higher the tax rate, lower the FDI inflows. But in some studies, corporate tax rate finds 

insignificant effect on FDI (Wheeler & Mody, 1992 and Porcano & Price, 1996). In 

Pakistan, the government specifies three different corporate tax rates for three different 

categories of companies. The categories are public company, banking company and all 

other companies. For the purpose of this study, we use these three corporate tax rates by 

averaging them, and data is collected from various finance bills by the Government of 

Pakistan. We hope a negative coefficient sign in case of corporate tax rate. 

For dependent variable, we use per capita FDI in USD to measure the FDI inflows. 


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3.2 Econometric Model 

As the aim of this study to analyze the role of market size in attracting FDI, the 

hypothesis is that increased market size of a low income country like Pakistan, more it is 

attractive for foreign firms. An appropriate proxy in reduced form specification is used 

for market size. We specify the following model in the form of equation to investigate 

the impact of market size on FDI along with exchange rate and corporate tax rate. 

ln(FDIt) = β0 + β1ln(MSt) + β2ln(ERt) + β3(CTt) + Ut 3.1 

Where, FDIt, MSt, ERt and CTt denote foreign direct investment, market size, exchange 

rate and corporate tax rate respectively. β1, β2 and β3 are the parameters for long run 

elasticity of FDI with respect to MS, ER and CT respectively. Johansen-Juselius (1990) 

and Engle & Granger (1987) are mostly applied for examine long equilibrium 

relationship among variables. It is necessary that all variables must be stationary at first 

difference I(1) for application of these tests. Moreover, in case of small sample size, 

these tests are not fit to apply (Chaudhry and Chaudhry, 2006). Theses limitations can be 

avoided by applying autoregressive distributed lag (ARDL) approach to cointegration. 

The development of ARDL goes to Pesaran, Shin & Smith (1996) and later on Pesaran et 

al. (2001) made it famous. ARDL has recognized various econometric merits over other 

approaches as this approach does not required all the variables to be integrated at same 

order i.e. I(1). This approach is indifferently applicable in case of variables are stationary 

at I(0) and I(1). Moreover, it produces consistent output even in case of small sample 

size. 

Following model is specified after considering the merits of ARDL. 

Denotes first difference operator and q is the optimal lag length. Short run dynamics are 

represented by β1, β2 , β3 and β4 whereas, long run relationships are denoted by β5, β6, β7 

and β8. As ARDL approach is not applicable in case of I(2), we test the level of 

integration of all variables by using Phillips-Perron (PP) and Augmented Dickey-Fuller 

(ADF) test statistic. Bounds test of the equation 3.1 has been conducted by suing Fstatistic 

with lower bound and upper bound in order to find out long run relationship . No 

cointegration is assumed for null hypothesis and null hypothesis is rejected in case the 

value of F-statistic is greater than the upper bound. If the value of F-statistic remains 

between lower and upper bound then it is termed as test is inconclusive. Akaike 

Information Criterion (AIC) is used for selection of optimal lag length of variables after 

testing cointegration test. An error correction version of equation 3.2 is given below 


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Where, q1, q2, q3 and q4 denotes optimal lag length, גּ is the speed of adjustment 

parameter and EC expresses error correction term derived from long run relationship as 

given in equation 3.2. 

4. Empirical Findings 

Unit roots for all variables tested before applying ARDL approach to cointegration. 

Table 1 represents the results of Phillips-Perron test and Augmented Dickey Fuller test at 

level form and at first difference. According to results of both tests stated in table 1, 

ln(FDI), ln(MS) and CT are stationary at first difference at one percent significance level 

whereas, ln(ER) is significant at one percent in Augmented Dickey Fuller test and at five 

percent in Phillips-Perron test. ARDL approach to cointegration can be applied in this 

situation. 

-------Table 1 here------- 

Long run relatitonship results are closely sensitive to lag length selection in the model 

(Bahmani-Oskooee and Bohal, 2000). Table 2 represents the computed value of Fstatistic 

to select best lag length in the model. With the lag length equal to three, lower 

and upper bond values at 99% significance level are 4.29 and 5.61 respectively (Pesaran 

et al., 2001). The computed value of F-statistic is 6.84 which is greater than the upper 

bond value of F-statistic which evidences against null hypothesis of no level effect. 

Hence, we conclude that there exists long run relationship among the variables. 

-------Table 2 here------- 

Akaike Information Criterion (AIC) has been used to select optimal lag length of the 

variables used in the model. Table 3 indicates the long run relationship among variables 

of the selected ARDL mode (3,1,1,2) using AIC. 

-------Table 3 here------- 

Table 3 presents that MS is the most significant factor of foreign direct investment of 

Pakistan. The positive effect of MS on FDI is significant at one percent. This result is in 

consistent with the findings of Root & Ahmad (1979), Wheeler & Moody (1992) & 

Pistoresi (2000) The coefficient (5.60) indicates that one percent increase in MS directs 

5.60 percent rise in foreign direct investment in long run. Exchange rate is another 

negatively significant variable of foreign direct investment. This result supports the 

studies of Caves (1988), Froot & Stein (1991) and Blonigen & Fenstra (1996). The 

coefficient of ln(ER) is (-3.42) shows that one percent increase in exchange rate 


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deteriorates foreign direct investment by 3.42% in the long run in Pakistan. Corporate 

tax rate, however, not effects foreign direct investment in long in Pakistan. This result is 

in accordant with the findings of Wheeller & Mody (1992), Jackson & Markowski (1995) 

and Porcano & Price (1996). These results provide guidelines to concerned authorities 

interested in uplifting foreign direct investment level in Pakistan. 

-------Table 4 here------- 

Error correction representation of the selected ARDL model has been made in Table 4. 

Coefficients with ∆ sign of the variables show short run elasticity. Results indicate that 

market size is insignificant factor of foreign direct investment in short run in case of 

Pakistan, whereas, the most significant variable in short run is ∆ln(ER) with coefficient (- 

4.77) which reveals that one percent change in exchange rate pulls foreign direct 

investment down by 4.77%. ∆ CT effects negatively to foreign direct investment with 

coefficient (-0.02) which indicates that rise of CT by one percent decrease foreign direct 

investment by 0.02%. Both factors, ∆ ln(ER) and CT, are significant at one percent level. 

The coefficient of error correction term (ECM(-1) = -0.64) is significant at one percent 

level. Existence of long run relationship among factors has been reinforced by highly 

significance of error correction term. The coefficient (-0.64) depicts that the speed of 

adjustment from previous year‘s disequilibrium in foreign direct investment to current 

year‘s equilibrium is 64%. The value of R 2 is 0.82 which reflects that 82% variations in 

the dependent variable are explained by the independent variables. The value of adjusted 

R 2 is 0.70. F-statistic value is 9.42 is significant at less than 0.1% which indicates that 

the model is a good fit. 

-------Figure 1 & 2 here------- 

Cumulative sum of recursive residuals (CUSUM) and cumulative sum of squares of 

recursive residuals (CUSUMSQ) are used to investigate the stability ARDL selected error 

correction model. This stability technique was presented by Brown et al. (1975). It is 

concluded that the model is structurally stable as CUSUM and CUSUMSQ plots remain 

within critical bond at 5% level of significance as show in figure1 and figure 2. 

5. Conclusions 

The objective of this work was to investigate empirically the impact of market size on 

FDI inflows into a developing country like Pakistan. This was motivated by the fact that 

market size is considered as a significant determinant of FDI inflows and we deemed it 

important to undertake this work as no exclusively empirical work has been carried out 

by using ARDL approach to cointegration in case of Pakistan. The study estimated 

market size impact on FDI inflows along with exchange rate and corporate tax rate in 

Pakistan from 1984 to 2008. The study finds that market size as the most dominating 

positive impact factor to attract FDI inflows in long run and there by confirming other 

studies that market size tends to enhance FDI inflows into any country, whereas no 

influence of market size on FDI inflows in short run can be found. The study also found 

exchange rate as significant negative impact determinant in long run and as well as in 


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short run. As far as corporate tax rate impact is concerned, we could not find any 

influence on FDI in long run. Thus market size has positive association whereas 

exchange rate and corporate tax have negative relationship on FDI inflows in case of 

Pakistan. These findings are consistent with our expectations. 


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Asiedu, E. (2006). Foreign direct investment in Africa: the role of government policy, 

institutions and political instability. World Economy, 29(1), 63-77. 

Bahmani-Oskooee, M. and Bohl, M. (2000), German monetary unification and the 

stability of German M3 money demand function. Economic Letters, 66: 203-208. 

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Markets in Europe, Economia Internazionale. 21, 117–133. 

Bhagwati, J.N. (1994), Free trade: Old and new challenges, Economic Journal, 104, 231- 

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Blonigen, B. A. (1997). Firm-specific Assets and the Link Between Exchange Rates and 

Foreign Di-rect Investment, American Economic Review. 87, 447– 465. 

Blonigen, B. A., & Feenstra, R. C. (1996). Effects of U. S. Trade Protection and 

Promotion Policies, National Bureau of Economic Research (Cambridge, M. A.) 

Working Paper No. 5285. 

Brown, R. L., Durbin, J., & Evans, J. (1975). Techniques for Testing the Constancy of 

Regression Relations over Time. Journal of the Royal Statistical Society, 37, 149- 

163 

Chaudhry, M. A., & Choudhary, M. A. S. (2006). Why the State Bank of Pakistan 

should not adopt inflation targeting. SBP-Research Bulletin 2(1). 

Culem, C. G. (1988). The Locational Determinants of Direct Investments Among 

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Froot, K. A., & Stein, J. C. (1991). Exchange Rates and Foreign Direct Investment: An 

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Jackson, S. and S. Markowski (1995). The Attractiveness of Countries to Foreign Direct 

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Internationalization: Issues and Policies for Developing Countries, Routledge and 

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Kyereboah-Coleman, A., & Agyire-Tettey, F., K. (2008). Effect of exchange-rate 

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Mlambo, K. (2006). Reviving Foreign Direct Investments in Southern Africa: Constraints 

and Policies. African Development Review, 17(3), 552-579. 

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Annexure 

Variables 

Augmented Dickey 

Fuller Test Statistic 

(At Level) 

Table 1: Unit Root Test 

Augmented Dickey 

Fuller Test Statistic 

(At First Difference) 

Phillips-Perron Test 

Statistic (at level) 


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Phillips-Perron Test 

Statistic 

(at first difference) 

lnFDI -0.71 -5.00* -0.73 -5.00* 

lnMS 1.84 -3.84* 1.94 -3.81* 

lnER -1.49 -3.86* -1.43 -3.60** 

CT -0.27 -4.27* -0.31 -4.28* 

Note: *and ** show significance level at 1% and 5% respectively 

Table 2: F-Statistic for Testing the Existence of Long-Run Relationship 

Order of Lag F-Statistics 

3 6.84 

Note: The lower and upper bound values 4.29 and 5.61 at 99%) for F-Statistics are taken from Table CI(iii) case III: 

Unrestricted intercept and no trend given in Pesaran et al. (2001) 

Table 3: Long Run Results of ARDL (3,1,1,2) Model 

Dependent Variable “ln(FDI)” 

Regressor Coefficient Standard Error t-Ratio p-value 

Constant -123.56 29.26 -4.22 0.001 

ln(MS) 5.60 1.28 4.36 0.001 

ln(ER) -3.42 1.03 -3.32 0.005 

CT -0.02 0.04 -0.44 0.670 

Table 4: Error Correction Representation of the Selected ARDL (3,1,1,2) Model 

Dependent Variable “∆ln(FDI)” 

Regressor Coefficient Standard Error t-Ratio p-value 

∆ ln(MS) -0.56 0.84 -0.67 0.513 

∆ ln(ER) -4.77 1.28 -3.73 0.002 

∆ CT -0.02 0.01 -3.37 0.004 

ECM(-1) -0.64 0.16 -3.93 0.001 

R 2 = 0.82 , Adj. R 2 = 0.70, F(7,17)=9.42(0.000), D.W.Statistic=1.92

1.5 

1.0 

0.5 

0.0 

15 

10 

5 

0 

-5 

-10 



Plot of Cumulative Sum of Recursive Residuals 

Figure 1 

-15 

1984 1989 1994 1999 2004 2008 

The straight lines represent critical bounds at 5% significance level 

Figure 2 

Plot of Cumulative Sum of Squares of Recursive Residuals 

-0.5 

1984 1989 1994 1999 2004 2008 

The straight lines represent critical bounds at 5% significance level 


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Value, Size and Market Risk Premium in Karachi Stock 

Exchange (Pakistan) during Bull, Neutral and Bear Market Trends 

Abstract 

Nadia Asghar 

Lecturer 

FUIEMS, Foundation University, Islamabad 

Maria Tahir 

Management Trainee 

Pakistan Telecommunication Limited 

Anam Ejaz Ahmad Sheikh 

Research Asistant , Bahria University Islamabad 

Dr. Muhammad Iqbal Saif 

HOD, Foundation University Islamabad 

The past is a good source of guidance on how securities markets might perform in the 

future. Investors face critical choices about which method to use when extrapolating from 

the past. Fama-French Three Factor Model attempts to explain the stock returns by using 

more than one risk factor (market risk factor). The current study evaluates the 

performance of Fama and French Three Factor model in Karachi Stock Exchange (KSE), 

by considering KSE-100 index companies as the sample representative of the overall 

Karachi stock exchange market. Twenty stocks were selected from Karachi Stock 

Exchange. Sample contains monthly stock returns of four years. The annualized six 

month Pakistan‘s T Bill rate was used as risk free rate to determine the excess returns. 

These excess returns were then divided in to bull, neutral and bear time periods and were 

regressed on market, size and value factors. T- Test and F- Test statistics were employed 

in order to test the validity of Fama and French three factor model. The results have 

supported the validity of three factor model during bullish time period in the sample, as 

the intercept is insignificant and market, size and value premium factors are significant. 

Keywords: Bull, Bear, Neutral, Return, Fama and French model 


Financial economics as a discipline revolves around a rational investor aiming for 

maximum returns by assuming minimum possible risk. However, according to the 

efficient market hypothesis, it is not possible to consistently outperform the market as all 

the information is already reflected in prices. Therefore, the only way to get higher 

returns is to take higher levels of risk. This phenomenon has been extensively discussed 

in the financial theory as well as practice. Fama-French Three Factor Model has been the 


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most successful among multifactor models in explaining the factors that affect the return 

of an asset. Financial analysts and stock market analyst used to categorize the underlying 

trend in stock prices into bull and bear markets. Durations of bull and bear markets are 

key components of the risk and return characteristics of stock returns so it is clearly 

important to understand their determinants. This study will analyze the beta return, firm 

size and book to market return relationships in aggregate market to determine which of 

these explanatory variables is a better measure of overall market risk and to determine in 

which types of markets the premium on each variable is realized. 

1.1 Problem Statement 

Does Fama French three factor model perform equally well in determining returns during 

bull, neutral and bear market conditions in KSE-100 in Pakistan? 

1.2 Significance of study 

The purpose of this research is to study the power of FF three factors model to explain 

the returns of KSE traded stocks in both bearish and bullish market conditions. Previous 

studies on FF on KSE were done in bullish conditions but the aim of this study would be 

to find out whether market condition (bullish or bearish) have an impact on the 

performance of KSE or not. The outcome of research will provide an insight about the 

validity of FF three factors model to explain the risk return relationship in an emerging 

market in different market conditions. 

1.3 Rational of Study 

The specific objective of the study is to answer the following questions: 

The discrepancies in CAPM model have led researchers to find alternative models like 

Fama French model, Arbitrage Pricing Theory etc. Fama French model was previously 

observed to be valid in emerging markets so this study would test whether FF model can 

explain risk return relationship in emerging market of KSE. 

Previous studies on FF model in KSE were done in bullish conditions only so this study 

would go a step ahead and investigate whether markets conditions (bullish, neutral and 

bearish) have an effect on its performance or not. 

This study would find out whether there is a relation between market conditions and 

performance of FF model. 


Markowitz 1952 The first modern portfolio theory was developed by 

Lintner, Mossin 1965, 

1966 

Markowitz. 

Continued the work of Markowitz and presented the initial 

Capital Asset Pricing Model: CAPM, which shows how to 

relate the average return of stock and market risk factors. 


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Mirza, N. (2008) studied validity of Fama French model and found that B/M 

Effect is essentially associated with bullish market 

characteristics 

Connor and Sehgal (2001) Empirically examined the Fama-French three factor model of 

stock returns for India. these results were tested under bullish 

market conditions. 

Naranjo, 

Nimalendran and 

(1998) 

(1999) 

The approach presented by Fama French has gained 

considerable popularity as a framework for investigating a



Ryngaert 

Heston, 

Rouwenhorst and 

Wessels 

Fama and French (1992, 

1993, 

1996) 

Pare ; Kuhn and 

Seals McDonald 

(1995); and Tully 

(1998)]. 


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variety of asset pricing and market efficiency issues (Fama and 

French (1996); Naranjo, Nimalendran and Ryngaert (1998); 

Heston, Rouwenhorst and Wessels (1999)]. 

Found that beta has little or no ability in explaining crosssectional 

variation in equity returns, but that variables such as 

size and the book-to-market value of equity do. Their studies 

concluded that book-to-market ratio effect exists and it is even 

stronger than the size effect in its relation to stock returns but 

these results were valid for bullish market trends. 

(1992) Fama and French three factor model has emerged as an 

alternative explanation for the ongoing argument on the asset 

pricing. 

Fama and French [1992] Demonstrate that the relation between beta and average return 

has been neutral over the past few decades. They found a 

positive relation between beta and returns only in extreme upmarkets. 


3.1 Development of Hypothesis 

The multiple regression model was applied for testing the validity of Fama and French 

three factors model. The excess return on each security were regressed on three factors 

namely market risk premium, size premium and valve premium. The model is 

R - Rf = b1 x (Km - Rf) + b2 x SMB + b3 x HML + alpha 

Since this is a multivariate regression model, the following hypothesis (alternative) 

will be tested separately for bull, neutral and bear periods: 

H1: alpha = 0 

H2: b1 � 0 

H3: b2 � 0 

H4: b3 � 0 

� Where alpha represents regression intercept and b1, b2 and b3 represent risk 

sensitivities of securities returns. The three factors model will hold if the intercept is 

not significant (statistically zero) and the three coefficients are significant i.e. not 

equal to zero.



3.2 Theoretical Framework 

Market risk Premium 

Size Premium 

Value Premium 

3.3 Data Collection 

This study aims to test the performance of Fama and French three factors model in KSE. 

The sample consists of 20 companies from different sectors of economy and listed on the 

stock exchange and the data of monthly stock returns is collected for the period of June 

2004 to December 2008. 

3.4 Data Analysis 

Bull Bear 

& Neutral 

period 

This study evaluates the ability of Fama French three-factor model to predict the returns 

of companies listed in the Karachi Stock Exchange (KSE). The first part of the study 

divides the four and a half year sample period of KSE into three categories namely, bull, 

neutral and bear. These categories indicate the market condition prevalent in KSE in a 

particular month. In the second part of the study, a sample of 20 companies from 

different sectors of KSE were selected and combined to make a portfolio. Over a period 

of four and a half years (June 2004- Dec 2008), the returns of the portfolio were 

compared with the returns of KSE 100 index, which was assumed to represent market 

returns in general. 

In the next step, the selected portfolio was sorted according to company size and then 

returns of smaller companies were compared with returns of bigger companies and 

checked if it conformed to the claims of Fama French Model. The selected portfolio was 

sorted according to the third factor of Fama French Model, which is book to market ratio. 

Here again the returns of companies with high book to market ratio were compared with 

returns of companies having low book to market ratio. 

All the three factors were applied separately on the bull market period, neutral period and 

bear period. 

Mathematically, the FF model can be represented as: 

Return 

on KSE 

Stocks 

E[Rit ] ��R ft ��(E[Rmt ] ��R f )��i,1 ��(SMBt )��i,2 ��(HMLt )��i,3 

Here E[Rit ] is the portfolio's return rate, 

R ft is the risk-free return rate 

E[Rit ] ��R f gives excess return on a security, 

E[Rmt ] is the return of the KSE 100 index 

E[Rmt ] – R f gives the risk premium 

SMBt stands for "small [cap] minus big", it measures the historic excess returns of 

small caps over big cap companies. 


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HMLt stands for "high [book/price] minus low"; it measures the historic excess 

returns of "value" stocks over the market as a whole. 

To test the FF three-factor model, the traditional multivariate regression framework 

and transform the above equation into a simple time series model represented as 

follows: 

Where 

ERit ��i ��RPt��i,1 ��(SMBt )��i,2 ��(HMLt )��i,e ��eit 

��i (alpha) is the intercept of the regression equation representing a non market 

return component, 

eit represents a random return component due to unexpected events related to a 

particular stock. 

If the model holds, alpha will prove non significant. The same equation holds for a 

portfolio by replacing security i with a portfolio of stocks P, the three-factor model 

can be expressed as follows: 

ERPt ��P ��RPt�i,1 ��(SMBt )��i,2 ��(HML)��i,3 ��eit 

4. Results & Discussion 

� For bullish market trend the results have supported null hypothesis and all the 

conditions were true, intercept (α) is insignificant (0.009) and market risk 

premium is significant (0.339) with (t=1.44), Size premium is also significant 

(0.107) with (t= 0.431), and finally value premium measured by HML is also 

significant (-0.137) with (t= -0.554). The over all test for bullish time period is 

significant because the value of F-test is (1.286). The existence of market risk 

premium along with size and value premium is supported by the test (stocks) 

with adjusted R 2 of 0.048. Table 1 and 1.1 

� For neutral market trend the results from t -test have not supported null 

hypothesis even though market risk premium is significant (0.742) with 

(t=3.671) and Size premium is also significant (0.428) with (t= 1.572), and 

value premium measured by HML is also significant (0.385) with (t= 1.382) but 

as most researchers conclude the null hypothesis is false if the probability value 

i.e. level of significance is less than 0.01 and in our case it is significant at (- 

0.012). Similarly the P value is also not significant for neutral time period when 

F-test is applied. Table 2 and 2.2 

� For bearish market trend the results have not supported null hypothesis as all 

the conditions were true i.e. market risk premium is significant (0.867) with 

(t=8.174), Size premium measured by SMB is also significant (-0.476) with (t= 

-2.542), and value premium is also significant (0.882) with (t= 8.761) except 

the intercept (α) which is significant at -0.038 and therefore leads to the 

rejection of null hypothesis. Similarly the F test value also show that results are 

not significant for bullish market trend as the probability value is less than 0.01 

therefore we will reject null hypothesis and conclude that the existence of 

market risk premium along with size and value premium is not supported by the 

F test. Table 3 and 3.3 


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� Given these regression results it can be deduced that only results during bull 

time period favor the Fama and French three factor model in Karachi Stock 

Exchange. 

5. Conclusion 

The results have supported the validity of three factor model during bullish time period in the 

sample, as the intercept is insignificant and market, size and value premium factors are 

significant. The empirical evidence and the findings drawn from the regression analysis suggest 

that FF three factors model is valid for KSE only during bullish market trend. 

6. Recommendations 

Future research can be extended on the basis of data collected for more then four years. A 

large sample size could provide more convincing results for the bearish and neutral 

market trends. KSE-100 index is taken as a proxy of the whole market might be a biased 

indicator as big cap companies account for most of the fluctuations in KSE 100 index. 

Table 1: Pooled Regression Coefficient Estimates and Adjusted 

R 2 during bull period 

Α β1 Β2 β3 R 2 

ERit 0.009 0.339 0.107 -0.137 0.048 

Table 1.1 : T-statistics 

*Significant at 95% 

t(β1) t(β2) t(β3) 

1.44 0.431 -0.554 

Table 2 : Pooled Regression Coefficient Estimates and Adjusted R 2 during 

neutral time period 

Α β1 β2 β3 R 2 

ERit -0.012 0.742 0.428 0.385 0.715 

Table 2.1: T-statistics 

t(β1) t(β2) t(β3) 

3.671 1.572 1.382 


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Table 3: Pooled Regression Coefficient Estimates and Adjusted R 2 for 

bearish period 

Α Β1 β2 β3 R 2 

ERit -0.038 0.867 -0.476 0.882 0.849 

Table 3.1: T-statistics 

t(β1) t(β2) t(β3) 

8.174 -2.542 8.761 


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Exploring the Paradox of Organizational Learning 

and Learning Organization 

Dr. Naveed Akhtar (Corresponding Author) 

Ph.D (Management Sciences) 

Visiting Faculty Member, Bahria University, Shangrilla Road, Islamabad 

Dr. Rashid Ahmad Khan 

Dean Management Sciences, National University of Modern Languages, Islamabad 

Abstract 

Organizational learning was and still is the area of interest for academicians, 

organizational development experts, and researchers because of its inherent ability to 

generate competitive advantage. Organizations need to build core competencies to 

outperform their rivals and for that they need organizations that are proactive, futuristic, 

strategic in thinking, and are capable of adaptability and are flexible to acquire new 

learnings. The concept of learning organization has a wide spread acceptance, and is 

equally important and applicable in educational, business; private or public organizations. 

Scholars present different views about the organizational learning. But the recent upsurge 

prescribes few contextual factors that facilitate or hinder learning in organizations. 

Therefore, views of different authors are presented with their contextual factors or 

components of a learning organization. At the end commonalities from the framework are 

chosen and recommended for any future empirical study. 

Keywords: Exploring , Paradox , Organizational Learning , Learning Organization 


The concept of learning organization (LO) is gaining importance in academicians, 

scholars, and practitioners as the competition is increasing. The learning organization 

notion has insights, applications from different businesses and organizations: private or 

public. The concept of LO can be applied to educational institutions. Neefe (2001) work 

is an ample example of research work on identification of the universities as a learning 

organization. Moreover she determined few contextual factors that are necessary for the 

universities to be and become a learning organization. 

Managers are in dire need of improving the competitiveness through meeting the 

customer demands, innovating new products, adopting new technology. Organizations 

want to capitalize on present competencies and identify, and develop new such that they 

become ahead of competitors improving productivity and organizational performance. 

Therefore, the requirement of the present era is a more flexible, adaptable, and even 

proactive organizations. For all that the requirement is to learn faster than the competitors 

(De Geus, 1988). It is theoretically claimed that the learning organization is the 

organization that is capable of achieving competitive advantage (Goh, 2003; Senge, 

1990). Garvin (1993) defines a leaning organization is an organization that is skilled at 

creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect 

new knowledge and insights. Scholars have different views while describing the learning 

in organizations. Few argue it is a process that is aimed at changing cognitive and 

behavioural aspect of the organization to make organization adaptable and flexible. Few 


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others prescribe contextual factors that facilitate or hinder learning and create competitive 

advantage. 

2. Aims and objectives 

This article exploratory in nature is focused at defining the concept of a learning 

organization, discussing frameworks of the concept, designing an integrative method that 

enable the researcher to identify the most common and important factors. Moreover, 

extracting few dimensions or factors that facilitate the learning in organization which can 

be recommended and undertaken in future for empirical findings about the concept under 

discussion. 

3. Defining Organizational Learning and Learning Organization 

The objective of this section is to explore and define the concepts of organizational 

learning and learning organization. Theories and frameworks pertaining to these concepts 

will be discussed to identify the most important characteristics. 

The learning Organization term sounds attractive to the practitioners of 

organizational Developments and business managers. The terms organizational leaning 

and the learning organizations are used interchangeably (Tsang, 1997). The activities 

taking place in organizations can be termed as organizational learning while a learning 

organization can be differentiated as the organization that is involve in deliberate efforts 

to improve learning in the organization. Put simply, the relationship between the two can 

be described as a learning organization is one which is good at organizational learning 

(Tsang, 1997). The concept of learning in organizations was taken as practice because of 

its explicit impact on organizational performance improvement. The concept under 

discussion is linked with and has contributions from the literature of strategy, 

management science, and organizational development etc. (Easterby-Smith, 1997). 

Table 1 summarizes different concepts and approaches to organizational learning 

and learning organization. The table 1 clearly depicts the paradigm shift in styles and 

approaches to learning in organization. Especially in and after the Senge (1990) who 

proposed the concept of a learning organization and presented few disciplines that were 

declared necessary conditions for learning to occur. Many others like McGill and Slocum 

(1992), Goh (1998), Gephart and Marsick (1997) etc. also gave similar prescriptions for 

learning in the organizations and identified and presented contextual factors that are 

responsible for learning to occur. Coming paragraphs are dedicated to the discussion on 

the frameworks of a learning organization. A table will be formed which will help the 

researcher to extract the most important and common factors that can be called as 

facilitating factors that cause learning to occur. 

Learning organization is an HRD effort, and is considered an intervention for 

organizational transformation within the domain of organizational development 

(Desimone, Werner, & Harris, 2002). 

Senge (2006) defines a learning organization as ―…organization that will truly 

excel in the future will be the organization that discover how to tap people‘s commitment 

and capacity to learn at all levels in an organization‖ (p.4). Senge (1990) declares that the 

learning organization is the vehicle to maintain competitiveness in the 21 st century. These 


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insights underpin the strategic role of organizational learning and signify its effective role 

in the organizational performance and competitive advantage. 

Cyert and March (1963) can be referred as the pioneers to the concept of 

organizational learning (OL). They viewed organizations in the context of behavior and 

called organizations as adaptive systems. This adaptive behavior is based in routines and 

routines include the form, rules, procedures, conventions, strategies and technologies 

around which organizations are constructed and through which they operate (Levitt & 

March, 1988). It is known that ―routines‖ are rules, procedures, conventions, strategies 

(Levitt & March, 1988). Congellosi and Dill (1965) accepted this view of Cyert and 

March (1963) regarding organizations as adaptive systems and organizational behavior 

but argued their aspect of OL because it does not account the interaction between 

individual or subgroup learning and learning by the total system. They recommend ― a 

need for attention between individual and organizational learning‖. 

Fiol and Lyles (1985) identified four contextual factors: corporate culture 

conducive to learning; strategy that allows flexibility; an organizational structure that 

allows both innovativeness and new insights; and the environment that facilitate learning. 

Culture is comprised of shared beliefs, the ideologies, and the norms that influence 

organizational action-taking. These shared beliefs direct the strategy and organizational 

change/or learning in organizations which often involves a restructuring of those broad 

norms and belief systems. Organizational structure is a result of learning and can be 

designed to encourage learning and reflective action-taking. They recommend an 

environment that balances the change in status quo and continuity of policies because 

learning occurs when a tension between the constancy and change is created. 

Learning should be aimed at identifying and analyzing appropriate processes 

detect anomalies and provide directions to realign the present policies to maintain the 

effectiveness. Single-loop (1996) learning occurs when the mismatch is corrected by 

identifying performance gap, and changing the action but it is argued that merely 

adaptability does not facilitate creativity (Senge, 1990) and it is found that the double 

loop learning (Argyris, 1978) or generative learning (Senge, 2006) is required that fosters 

the learning in organization. Generative learning challenges the underlying governing 

values. Master programs are changed which, in turn, leads to changes in action (Argyris 

& Schon, 1978). 

According to Goh (1998), ―organizational learning is a long-term activity that will 

build competitive advantage over time and requires sustained management attention, 

commitment, and effort‖. Organizations preserve knowledge and share information 

across functions. Interpretation gives meanings to information, translates events and 

develops shared understanding. According to Dixon (1997) organizations construct 

meaning through learning from information gathered across sections. These meanings are 

called private meanings if not accessible to other organizational members. Individual 

continuously learns from the new encounters / experiences and ideas but it does not 

essentially mean that organization too is learning. According to Senge (1990) learning 

takes place by observing data, using individuals‘ experience, selecting, giving meaning, 

sketching assumptions, concluding, adapting beliefs and then taking actions ensuing 

these beliefs. Organizations learn only through individuals and without them no 

organizational learning occurs (Senge, 1990). 


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De Geus (1988) viewed learning as planning and states that the aim of effective 

planning is not to make plans but to change the mental models that these decision makers 

- as empowered people, carry in their heads. He, like Argyris & Schon (1978) says that 

institutional learning can be accelerated by ‗changing the rule‘ or ‗suspending them‘ and 

that upon sharing the individual knowledge and mental models a common language is 

developed which he called as ―institutional learning‖ and how much and how fast this 

model changes will depend on the culture and structure of the organization. De Geus 

(1988) believes that teams build shared models and that ―… [t]he best learning takes 

place in teams that accept that the whole is larger than the sum of the parts, that there is a 

good that transcends the individual (p.74)‖. 

4. Frameworks of Organizational Learning and Learning Organization 

Garvin, Edmondson and Gino (2008) suggested three building blocks for organizational 

learning and adaptability to take place: a supportive learning environment; concrete 

learning processes and practices; and leadership behavior that provides reinforcement. 

First, a supportive learning environment is explained through three subsumers i.e. 

psychological safety, appreciation of differences, openness to new ideas, and time for 

reflection. Psychological safety means employees must feel comfortable while 

confronting the ideas of colleagues and seniors, and expressing their thoughts about the 

work. Appreciation of differences means taking care of others‘ opinions. Openness to 

new ideas means encouraging employee to take risk and apply their own ideas. Time for 

reflection means managers are encouraged to think creatively. 

Second, concrete learning processes and practices involve the generation, 

collection, interpretation, and dissemination of information and experimenting with new 

ideas. Knowledge should be shared systematically and in a clearly defined way among 

individuals, groups or whole organizations, and should be disseminated laterally or 

vertically within organizations. 

Concreted learning processes and practices are further divided into five subcomponents: 

experimenting, information collection, analysis, education and training, 

information transfer. 

Third, organizational learning is strongly influenced by the behavior of leaders. 

People feel encouraged to learn when leaders provide opportunities to speak and facilitate 

the promulgation of ‗dialogue and debate‘. 

These three building blocks of organizational learning reinforce one another, and 

to promote learning, in addition to leadership a cultural aspect must be given importance 

when striving for improvement in organizational learning. 

Senge (2006) gave five core disciplines that foster learning in organization. 

First discipline is related with the personal growth and learning and is called as personal 

mastery. Personal mastery is the discipline of ―continually clarifying and deepening our 

personal vision, of focusing our energies, of developing patience, and of seeing reality 

objectively‖ (2006, p.7). Second, mental models are ―deeply ingrained assumptions, 

generalizations, or even pictures and images that influence how we understand the world 

and how we take action‖ (Senge 2006, p.8). Mental models are concerned with bringing 

and challenging key assumptions about important business. Thirdly, teams are integral 

part of an organization and is viewed as ―the process of aligning and developing the 


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capacity of a team to create the results its members truly desire‖ (Senge, 2006, p. 218). 

Fourth, shared vision provides the focus and energy for learning, and foster risk taking 

and experimentation, and people strive for a common aspiration when they truly share a 

vision (Senge, 2006). Fifth, systems thinking is the discipline of taking the holistic view 

and enables to see relationships rather than things and help see patterns of change rather 

than static ―snapshots‖. Moreover, this is an ensemble of all other four disciplines fusing 

them into a coherent body of theory and practice. Senge‘s (2006) view about the leader of 

a learning organization is different from the traditional view of leaders which is based on 

people‘s powerlessness, their lack of personal vision and inability to master the forces of 

change, deficits which can be remedied only by a few great leaders. Leader of a learning 

organization is a special person who sets the direction, makes key decisions and energizes 

the individuals, and is a designer, a stewards, and a teacher. 

According to Parek (2003) organizational learning is defined as ―the process by 

which an organization acquires, retains, and uses inputs for its development, and the 

process results in an enhanced capacity for continued self-learning and self-renewal‖ (p. 

657). He suggested eight components that are necessary for organizational learning to 

occur. First, taking a systemic view (holistic frame) of organizational issues and enables 

members to see beyond the immediate and present, and brings root causes to the surface 

instead of working simply on symptoms. Second, strategic thinking views the strategic 

impact of each activity on an organization and enables managers to think of 

consequences and implication of those actions. Third, a shared vision must be developed 

by the top management and be communicated throughout the organization. Fourth is the 

empowerment. In a learning organization people should be given appropriate authority, 

direction, and support to accomplish their task. Fifth, there must be a free flow of critical 

information at all levels, and even the negative information should be passed on 

willingly. Sixth is Emotional Maturity that includes optimism, self-discipline, 

commitment, and moderate risk taking. Seventh is ‗Learning‘ that deals with creating 

conducive climate for learning that encourages dialogue and discussion. Selfdevelopment 

is valued. Eighth is Synergy which emphasizes collaboration and team work 

where people suspend their assumptions and think together. Cross-functional teams are 

used, and people generally like coordinated action. 

Lei et al. (1999) suggested seven areas that foster learning in organizations: 

organizational design, organizational structure, decision-making processes, crossfunctional 

teams, reward systems, management development, and corporate culture. 

First, organizational Design facilitate the knowledge diffusion and open communication 

throughout the organization. Second, Organizational structure changes because of 

competencies and learning occurred. Senior management decides about the 

organizational structure. Open communication and knowledge sharing is more fast and 

easier in the smaller divisions. Third, Decision making processes are important element 

which help to balance the three knowledge drivers; innovation, initiative, and competence 

building and help manager to coordinate activities with strategies and allocate resources 

more appropriately on the basis of the clear understanding of the decision making 

process. Fourth, cross-functional teams collect the knowledge from different areas of the 

organization and facilitate the cross-functional learning. Fifth, reward systems should 

base on non-quantitative criteria to evaluate managers and promote learning and risktaking 

behavior that is partly based on the inter-division cooperation, developing the key 


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people across globe. Sixth, management development or executive practices entail a 

relationship of managers of different functions that facilitates the groundwork for 

creativity and learning. Better working relationship between departments help to use 

common technical facilities and resources. Seven, the corporate culture encourages 

managers to search for continuous improvements and develop a corporate-wide 

perspective on how best to create value and reduce costs. Learning driven goals and 

objectives, and reward systems are single important step to build a learning-driven 

corporate culture. Lei et al (1999) also signify the role of senior leadership to create and 

develop an environment for internal change that results into organizational learning. 

They mentioned importance of corporate vision and mission to establish the corporate 

learning culture that entails the flexibility and responsiveness. 

Goh (1998) has given five core strategic building blocks of a learning 

organization. First, mission/vision gives people a direction, makes them responsible to 

apply creative energies, and provides empowerment for decision making and innovation. 

Second, Goh views leaders as coaches and facilitators who empower employees. 

Leadership should encourage employees to take calculated risks, to deal with uncertainty, 

and to innovate. Third, experimentation enables to create new knowledge that is essential 

in a learning organization and new is capitalized on new opportunities. A culture must be 

nurtured that rewards the experimentation and questions the status quo. Fourth, Transfer 

of knowledge must be done freely to the concerned employee, and to all parts of the 

organization to solve problems and energize creative ideas which includes learning from 

past experience, discussing successful practices with staff members, and learning 

successful practices from competitors. Fifth, Teamwork and Cooperation means sharing 

ideas in teams and innovative ideas are generated in cross functional teams. 

DiBella (1997) identified ten facilitating factors or processes that promote 

learning. The more these factors are present, the easier it will be for a team or 

organization to learn. These are; scanning imperative, performance gap, concern for 

measurement, organizational curiosity, climate of openness, continuous education, 

operational variety, multiple advocates, involved leadership, systems perspective. \ 

Dixon‘s (1997) introduced metaphor of ―Hallways‖ to discuss organizational 

learning and identified six critical elements that facilitate collective meaning i.e. reliance 

on discussion, not speeches egalitarian participation, encouragement of multipleperspectives, 

non-expert-based dialogue, use of a participant-generated database, the 

creating of a shared experience. According to Dixon, Hallways (collective learning), is 

more than a source of new ideas. It is also a shared experience of interacting in new 

ways. Hallways are temporary formation in which organizational members act in equal 

status to solve organizational problems. Dixon (1997) recommends collective learning 

will be more generative and useful if individuals meet more frequently in their equal 

status. 

Goh and Richards (1997) proposed a model for identifying and measuring the 

essential organizational characteristics and management practices that promote 

organizational learning. These are five key conditions essential for learning to take place 

in an organization: First, clarity of purpose and mission demands understanding of 

organizational mission throughout the organization, and each employee should know his 

contribution towards the attainment of the mission. Second, leadership commitment and 

empowerment demands a commitment to the organizational goals and the goals of 


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learning. A climate of trust and equality is created where failures are a part of the 

learning process and leaders help employees to identify performance gaps. Third, 

experimenting with the new ideas must be encouraged, risk-taking should be rewarded, 

and problems are taken as opportunities for experimentation in a learning organization. 

Fourth, information related with organizational problems should be passed onto each unit 

and function with clearly and fast. Fifth, teams help employees share their knowledge and 

become aware of needs of others, and nature of work in different parts of the 

organization. Teams should have the ability to work cross-functionally. 

Gephart and Marsick (1996) define a learning organization is the organization that 

has an enhanced capacity to learn, adapt, and change. They identified six essential 

features of a learning organization. First, continuous learning at the systems level means 

that individuals share their learning in ways that enable an organization to learn by 

transferring knowledge across it and by integrating learning into organizational routines 

and actions. Secondly, emphasis is placed on creating, capturing, and moving knowledge 

rapidly and easily so that people the people who need it can access and use it quickly. 

Third, critical systemic thinking means that people are encouraged to think creatively and 

systemically in order to see link and feedback loops, and to identify assumptions. Fourth, 

a culture of learning should be built in which learning and creativity are rewarded, and 

supported. Fifth, a spirit of flexibility and experimentation demands that people are free 

to take risks, experiment, innovate, explore new ideas, and perform their in a new way. 

Sixth, a caring community that nurtures, values, and supports the well-being, 

development, and learning of every individual should be nurtured, which is called as 

people centered. They favored the concept of a shared leadership in a learning 

organization. Leaders and managers provide support to the learning and development of 

individuals and teams by providing resources to get the commitment to organizational 

objectives and new learnings and ensure dissemination of knowledge. 

Bennet & O‘Brien (1994) state that a learning organization facilitates the change 

and improves business and the individual employee as well. They gave twelve key factors 

that influence an organizations ability to learn and change: strategy/vision; executive 

practices; managerial practices; climate; organization/job structure; information flow; 

individual and team practices work processes; performance goals/feedback; 

training/education; individual/team development; and rewards/recognition (cited in 

Neefe, 2001). 

In similar vein Garvin‘s (1993) states five activities of a learning organization. 

First is concerned with the systematic problem-solving which demands that the problems 

must be explored scientifically rather than relying on assumptions. Second, 

experimentation is motivated by opportunities and expanding horizons, and not by 

current difficulties. Third, organization should learn from the past experience and history 

and lessons must be recorded in a form that employees find open and accessible. Fourth, 

learning only from self-analysis is insufficient therefore; one should look outside one‘s 

immediate environment to gain a new perspective which reveals best industry practices. 

Transfer of knowledge. Fifth, learning is not a local affair. Knowledge should be spread 

across functions immediately. 

McGill & Slocum (1993) have mentioned seven road blocks that hinder learning. 

First, a learning culture that features openness to experimentation, encourages risktaking, 

and accept responsibility of failures and learn form them must be instituted in 


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which active dialogue and reflective conversations are facilitated. Second, in a learning 

organization management is committed to continuous experimentation as a means of 

institutionalizing learning. Third, closeness, and openness between management, 

employees, and other stakeholders make possible to constantly monitor changing needs 

of the people and the organizational structure is taken as a process and is altered keeping 

in view the changing needs of organization and is based on learning needs, and is called 

Networking Intimacy. Fourth, information system must be effective, accurate, precise, 

clear and should reach the concerned employees without any change. Fifth, a reward 

system must be built to encourage failure, risk-taking which will result in continuous 

improvement. Sixth, in learning organization the concept of human resources is based on 

their capacity to learn instead of on their qualifications. Ability to learn has the prime 

importance. Seventh, leaders of a learning organization are busy to do the new things. 

The discussion draws few common characteristics that can be considered as 

representative characteristics of a learning organization. On the basis of detailed 

discussion a table of commonalities (Table 2) has been formulated for more elaboration 

and clarity which can be used for academic discussion, future empirical testing and to 

suggest further improvements. The idea of table of commonalities has been adopted from 

the work of Neefe (2001) with changes in frameworks of organizational learning and 

variables included. 


A learning organization is the organization that possesses high aspirations, and is 

proactive, futuristic, strategic, and is alive, adaptable, and flexible at accepting the 

changes, encourages experimentation, and provides equal opportunity to grow and learn. 

Different frameworks were found during the study. These frame work helped extract the 

components that are most important for a learning organization. The most common and 

important characteristics are: personal mastery; mental models; shared vision; team 

learning; systems thinking; leadership; knowledge/information flow. All these 

characteristics were extracted through a table (Table 1) and a model of organizational 

learning / learning organization (Figure 1) is also proposed. 

It is also concluded that the concept of learning organization can be applied to 

business organizations; profit or not for profit organizations, schools, colleges, and 

universities, and service organizations. 

6. Future Research Areas 

Characteristics of a learning organization chosen are recommended for any future 

research work that is aimed at empirical findings. Authors of learning organization 

theoretically claim that a learning organization achieves competitive advantage therefore 

it is recommended to conduct an extensive empirical study aimed at proving this claim. 


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from http://www.uwstout.edu/lib/thesis/2001/2001neefed.pdf courtesy of 

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Annexure 

Table 1: Learning Organization/Organizational Learning - Concepts and 

Frameworks 

Author (s) Learning levels as 

described by 

Author (s) 

Argyris (1996) Individual, group, 

inter-group, 

organizational 

Argyris and Individual, 

Schon (1978) 

McGill & 

Slocum Jr. 

(1993) 

McGill, 

Slocum Jr., & 

Lei(1992) 

Cyert & March 

(1963) 

Congellosi & 

Dill (1965) 

Crossan, Herry 

& Roderick 

(1999) 

Chaharbaghi 

& Newman 

(1996) 

De Geus 

(1988) 

Process As 

perceived by 

Author (s) 

Contextual Factor/components/disciplines 

Key terms and Phrases 


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Process Singe-loop learning, double-loop learning, Model- 

I theories, Model-II theories 

Process Singe-loop learning, double-loop learning, 


deutero learning, espoused theory, theory in use 

Organizational Process Building blocks of LO: Learning culture, 

continuous experimentation, network intimacy, 

information system, reward system, HR-practices, 

leaser mandate 

Organizational Process Management practices in LO: Openness, systemic 

thinking, creativity, personal efficacy, empathy 

Individual, 


Individual, group, 


Individual, group, 


Individual, 


Individual, team, 

institutional(organ 

izational 

DiBella (1997) Individual, group, 


Dixon (1997) Individual, group, 


Process Behavioral Adaptation to changes experiences 

from environment 

Process 

Adaptations at individual or sub-group levels, 

(adaptive process) adaptations at organizational level, stresses of 

three types. 

Analytical process 4I‘s Framework of OL: intuiting, interpreting, 

integrating, institutionalizing, 

Process comprises 

of four learning 

cycles 

An integrated learning model for innovating 

organizations: transformational learning, 

developmental learning, behavioral learning, 

incremental learning, 

process Key terms: Planning as learning, learning through 

scenario, mental models, changing,/suspending 

the rules 

Process Facilitating factors to creating a LO: scanning 

imperative, performance gap, concern for 

measurement, organizational curiosity, climate of 

openness, continuous education, operational 

variety, multiple advocacy, involved leadership, 

and system perspective 

Process Characteristics of Hallway: reliance of discussion, 

egalitarian participation, multiple perspective, 

non-expert based dialogue, participant generated 

database, the creating of shared experience. 

Fiol & Lyles Individual, Process Four contextual factors: culture, strategy, 

(1985) organizational 

structure, environment 

Garvin (1993) Organizational Process Building blocks: systematic problem solving, 

experimentation, learning form experience and 

Gephart & 

Marsick 

(1996) 

history, and transfer of knowledge. 

Organizational Process Essence of a LO: continuous learning at the 

systems level, knowledge generation and sharing, 

critical systematic thinking, a culture of learning, 

a spirit of flexibility and experimentation, people 

centered 

Goh (1998) Organizational Process Strategic building block: mission/vision,



Author (s) Learning levels as 

described by 

Author (s) 

Senge (1990) Individual, 


Nystrom & 

starbuck 

(1984) 

Levitt & 

March (1988) 

Process As 

perceived by 

Author (s) 

Contextual Factor/components/disciplines 

Key terms and Phrases 


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Process 

leadership, experimentation, transfer of 

knowledge, team-work and cooperation 

Five Disciplines: Personal mastery, mental 

models, team-learning, shared vision, systems 

thinking. 

Organizational Process Key Terms: unlearning the organization, learning 

from crises, reorienting by changing cognitive 

structures, unlearning continuously, and 

experimentation. 

Organizational Process Key terms: Routines, history dependent 

processing of information on the basis of 

experimentation and history, organizational 

memory



Table 2: Frameworks of Organizational Learning/Learning Organizations and 

Comparison of their Characteristics 

Garvin (2008) 

Senge (2006) 

Parek (2003) 


Lei et al. (1999) 

Goh (1998) 

DiBella (1997) 

Goh & Richards (1997) 

Gephart & Marsik 

(1996) 

Bennet & O‟Brien 

(1994) 

Garvin (1993) 

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Personal Mastery/ self-development * * * * * 

Mental Models/Culture/ 

Climate/Environment 

* * * * * * * * * * * 

Shared Vision/Mission * * * * * * 

Team learning * * * * * * * * 

Systems Thinking * * * * * * * 

Leadership * * * * * * * * 

Knowledge/Information Flow * * * * * * * * 

Information/scanning imperative * * * * * 

Experimentation/Experimental 

Learning 

* * * * 

Training * * * 

Management/Executive Practices * * * 

Structure/Network Intimacy * * * * 

Rewards & Recognition * * * * 

Performance Management * * 

Learning form experience * 

Learning from others * 

Operational variety * 

Concern for measurement * 

Multiple Advocates * 

Work Processes * 

McGill & Slocum (1993) 

McGill et al. (1992)

Figure 1 



Systems 

Thinking 

Mental 

Models 

Shared 

Vision 

Leadership 

Knowledge/ 

Information Flow 

Personal 

Mastery 

Team Learning/ 

Team Work 


Learning/Learning 

Organization 

Figure 1 depicts the independent variables extracted for the proposed model of 

organizational learning/ Learning organization. These variables are the most discussed 

and frequently recommended variables of organizational learning as evidenced through 

literature review. 


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Comparison among opinions of teachers by designation, Age, 

Experience and qualification regarding the role of heads of teaching 

departments in the promotion of communication at postgraduate level 

Rahmat Ullah Shah, Umar Ali Khan, Javed Iqbal & Zafar Khan 

Institute of Education & Research, Gomal University 

Dera Ismail Khan, Khyber Pakhtunkhwa 

Abstract 

The purpose of the study was to compare the views of teachers by designation, age, 

experience and qualification regarding the role of heads of teaching departments in the 

promotion of communication in universities and postgraduate colleges. The population of 

the study consisted of all teachers in universities and postgraduate colleges in Khyber 

Pakhtunkhwa. For this purpose, eight universities and eight postgraduate colleges were 

randomly selected by the researcher as a sample. The sample consisted of 293 teachers. A 

questionnaire consisted of 27 items was utilized for data collection. One-Way ANOVA 

was used for data analysis. No significant difference was found among the views of 

teachers by designation, age, experience and qualification regarding the role of heads in 

the promotion of communication. This insignificant difference among the views of 

teachers by designation, age, experience and qualification reflects that heads promotes 

communication in all its aspects. 

Keywords: Views, Teachers, Heads, Role, Communication, Postgraduate level. 


Teachers are the builders of a nation. They prepare our young ones for practical life. 

They not only transmit cultural heritage to our young ones but also develop their moral 

character. In Pakistan teachers are classified into three groups, i-e, school teachers, 

college teachers and university teachers. As this study is concerned with university and 

postgraduate college teachers‟ views, therefore, selected variables of these teachers have 

been discussed regarding the role of heads of teaching departments in the promotion of 

communication on the campus. Comparison has been made in the views of teachers by 

designation, age, experience and qualification about the role of heads of teaching 

departments in the promotion of communication. 

Broadly speaking, nobody can ignore the fact that communication plays a very important 

role not only in the management of an educational institution, but also in the management 

of every organization. These organizations range from a small home to a multinational 

company. For the smooth running of an educational institution, particularly a university, 

sharing of a great deal of information is necessary between heads and teachers.. 

Cooperation between heads and teachers is essential for proper management of an 

educational institution. This cooperation may be acquired through proper sharing of 

information between heads and teachers within a university or postgraduate college. For 

the coordination of various activities of an institute, effective communication is necessary 

between superordinates and subordinates. To get work done by employees, their job 

satisfaction should be increased. Effective communication enhances job satisfaction of 

the employees. As Alexander (1996) indicated that strong relationship existed between 


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Listed in ULRICH



communication climate and job satisfaction of academic department chairs, and the 

communication climate activities were characterized by mutual influence, openness and 

free flow of information. Significant relationships exist between aspects of organizational 

communication and facets of job satisfaction as perceived by staff in Catholic primary 

schools (De Nobile &Mc Cormick, 2008). 

As heads and teachers exchange information with each other, but how to make this 

sharing an effective one, is an important matter. Effective communication between heads 

and teachers may result in organizational commitment. However, lack of communication 

between heads and teachers negatively affects organizational commitment. As Gorden & 

Infante (1991) revealed that, less perceived freedom of speech in the workplace resulted 

in less employees‟ organizational commitment and satisfaction with their work and 

supervisor. They further stated that employees wished more freedom of speech in the 

workplace than they had. The head of teaching department as a communicator 

communicates in three directions, i-e, downward, upward, and horizontal. These 

directions of communication affect level of commitment of employees within the 

institution. Strong relationship exists between vertical communication and the levels of 

commitment at both organizational and unit level as compare to horizontal 

communication (Postmes & de Wit 2001). 

The perceptions of employees also affect credibility of information within an 

organization. As Unzicker et al (2000) revealed that positive relationship existed between 

effective internal communication and perceptions of employees in the firm. Effective 

communication among employees increases not only their commitment, but also may 

enhance the output of an organization. As Clampitt & Downs (1993) indicated that 

communication was considered to had impact on productivity that varied both in kind and 

magnitude. Moreover, a number of intriguing differences emerged between these two 

companies. The findings suggest that the link between communication and productivity 

is more complex than previously assumed. 

Sometimes barriers may emerge which halt the process of communication. These barriers 

may negatively affect the output of an organization. For the avoidance or elimination of 

these barriers, trust among employees is essential. Chhuon et al (2008) identified eight 

facets of trust, i-e, openness, reliability, respect, integrity, risk, communication, 

benevolence and competence. Transparency in information sharing is necessary for the 

development of trust among employees. An atmosphere of trust can eliminate or 

minimize communication barriers, i-e, context-related barriers and content-related 

barriers within an organization (Phelps & Dufrene, 1989). Athanassiades (1973) found 

dynamic relationships and interactions between downward and upward distortions, and 

the organizational climate. Effective communication not only develops trust but may also 

be helpful in the incorporation of innovations. Proper exchange of information between 

heads and teachers may be helpful in incorporation of these innovations. Monge et al 

(1992) indicated that communication variables, i-e, level of information and group 

communication were the causes of organizational innovation. Johnson et al (2001) 

revealed that communication variables: quality of communication, interpersonal 

communication and mediated communication had both direct and indirect effects on 

perceived innovativeness. They further stated that mediated channels could play a critical 

role in the implementation of management-initiated innovations. Effective 

communication is helpful not only in the incorporation of innovations, but may also 


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develop identification of all stakeholders with their institution. Smidts et al (2001) 

revealed that employees‟ communication supplemented perceived external prestige and 

explanation of organizational identification. They further stated that communication 

climate played a central role in arbitrating the impact on organizational identification of 

the content of communication. Establishing an effective communication system is 

considered as one of basic responsibilites of a head of department. The school principals 

perceived establishing an effective system of communication as the primary duty of a 

successful candidate for the position of superintendency (Newton, 2006). 

As nobody can deny the contributions of communication in the management of an 

institution of higher education, but the lack of communication among stakeholders may 

results in so many problems. such as lack of coordination, lack of cooperation, lack of 

self-confidence, lack of identification with the institution, mistrust, inefficiency, decrease 

in output and misunderstanding. 

Postgraduate level institutions are those where education beyond bachelor degree 

program is imparted. In Khyber Pakhtunkhwa, Pakistan, postgraduate level institutions 

are postgraduate colleges and universities. 

2. Objectives 

i. To highlight difference among views of teachers by designation about the role of 

heads of teaching departments in the promotion of communication. 

ii. To know difference among opinions of teachers by age regarding the role of 


iii. To explore difference among views of teachers by experience about the role of 


iv. To highlight difference among views of teachers by qualification about the role of 


3. Hypotheses 

v. There is no significant difference among the views of teachers by designation 

about the role of heads in the promotion of communication. 

vi. There is no significant difference among the opinions of teachers by age about the 

role of heads in the promotion of communication. 

vii. There is no significant difference among the views of teachers by experience 


viii. There is no significant difference among the opinions of teachers by qualification 



The population of the study consisted of all teachers of universities and postgraduate 

colleges in Khyber Pakhtunkhwa, Pakistan. The sample of the study consisted of teachers 

of eight universities and eight postgraduate colleges in Khyber Pakhtunkhwa, Pakistan. 

The questionnaire was filled by two teachers from each teaching department of the 

selected universities and postgraduate colleges. To get the questionnaire filled, the 

selection of teachers was done randomly. The sample consisted of 293 respondents. The 

researcher estimated the sample size to be based on the suggestions of Stevens (1996), 

who recommended 15 research participants per variable. Cohen (1988) suggested a 


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minimum of 60 research subjects per group to get approximate power of 80 with a 

medium effect size. 

A two-part questionnaire was administered by the researcher to the subjects. Part-1 of the 

questionnaire consisted of eight independent variables as demographic characteristics viz: 

Nature of institute, nature of department, designation, age, sex, qualification, total length 

of service in the present department and experience. Part- II of the questionnaire 

consisted of 27 Likert-type items, responded on a 5 point scale from "Always to Never", 

carrying a value of 5 to 1 respectively. Items designated positively are scored by 5, 4, 3, 2 

and 1 respectively. Items designated negatively are scored in the reverse manner. Omitted 

or invalid responses are given a score of 3.The questionnaire was developed by the 

researcher himself. Twenty-Seven items of the questionnaire were the communicative 

behaviors of a chairperson which make his/her role as a communicator. The questionnaire 

was personally administered by the researcher to measure the role of heads of teaching 

departments in the promotion of communication in universities and postgraduate colleges 

in the light of teachers‟ views. The scale reflects amount of involvement of heads of 

teaching departments in the process of communication. 

For the purpose of reliability of the scale, a random sample of 40 teachers and 20 heads 

was selected for the pilot study. This number was excluded from the final sample. 

Cronbach‟s coefficient Alpha formula was used in estimating the internal consistency of 

the scale. Obtained Cronbach‟s Alpha was 0.937 for the scale Cronbach‟s alpha 

reliability coefficient usually ranges between 0 and 1. There is no really lower limit to the 

coefficient. The nearer the reliability coefficient is to 1.0, the better the internal 

consistency of the item in the scale. In general the reliabilities less than 0.6 are 

considered to be poor, those in the 0.70 range are acceptable, and those over 0.8 are 

considered good (Sekaran, 1999). George and Mallery (2003) gave these rules of thumb: 

“≥.9 =Excellent, ≥ .8 = Good, ≥ .7 = Acceptable, ≥.6 = Questionable, ≥ .5 = Poor, and 

≤ .5 = Unacceptable” (cited in Gliem and Gliem, 2003). The scale was developed by the 

researcher himself, so its Cronbach‟s Alpha could not be compared to any other scale in 

the literature. 

The content validity of the scale was checked with the help of researcher‟ Ph.D research 

supervisor and experts in social sciences. 

One-Way ANOVA was utilized to find out Means difference among opinions of teachers 

by designation, age, experience and qualification in the present department. The SPSS 

statistical software package, version 11.0, was used to analyze the data. 

5. Results 

Table 1: Comparison among teachers‟ views by designation regarding the role of heads 

of teaching departments in the promotion of communication 

Between 

Groups 

Among Groups 

Sum of 

Squares 

1378.613 

96485.155 

Df 

3 

289 

Mean Squares 

459.538 

333.859 


F 

1.376 

Sig 

.256 

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The above table shows that F (3, 289) = 1.376, p= 0.256, since p= 0.256 > α= 0.05, 

means that null hypothesis of no significant difference among opinions of teachers by 

designation about the role of heads of teaching departments in the promotion of 

communication in universities and postgraduate colleges is accepted. This reflects that 

designation of teachers does not make difference in their opinions regarding the role of 


Table 2: Comparison among opinions of teachers by age 

Between 

Groups 

Among Groups 


Squares 

1110.432 

9670.432 

Df 

2 

290 

Mean Squares 

555.216 

333.632 


F 

1.664 

Table 2 illustrates that F (2, 290) =1.664, p= 0.191, since p= 0.191 > α =0.05, means that 

null hypothesis of no significant difference among teachers‘ opinions by age about the 

role of heads of teaching departments of teaching departments in the promotion of 

communication at postgraduate level is accepted. This Means that age of teachers does 

not make difference in their opinions regarding the role of heads of teaching departments 

in the the promotion of communication. 

Table 3: Comparison among opinions of teachers by experience about the role of 

heads of teaching departments in the promotion of communication 

Between 

Groups 

Among Groups 


Squares 

1812.695 

96051.073 

Df 

2 

290 

Mean Squares 

906.348 

331.211 

F 

2.736 

The above table indicates that F (2, 289)= 2.736, p= 0.066, since p=0.066 > α= 0.05, 

denotes that null hypothesis of no significant difference among teachers‘ opinions by 

experience regarding the role of heads of teaching departments in the promotion of 

communication is accepted. This is concluded that experience does not make difference 

in the views of teachers about the role of heads of teaching departments in the promotion 

of communication. 

Table 4: Comparison among opinions of teachers by qualification about the 

communicative role of heads of teaching departments 


Mean Squares 

Squares 

Df 

Between 346.323 2 173.182 

F 

Sig 

.191 

Sig 

.066 

Sig 

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Groups 

Among Groups 

97517.445 

290 

336.267 

0.515 

0.598 

The above table shows that F (2, 290) = 0.515, p= 0. 598, since p = 0.598 > α= 0.05, 

illustrates that null hypothesis of no significant difference among views of teachers by 

qualification regarding the role of heads of teaching departments in the promotion of 

communication at postgraduate level is accepted. This means that qualification does not 

prove to be a strong variable to affect the views of teachers about the role of heads of 

teaching departments in the promotion of communication in universities and postgraduate 

colleges. 

6. Discussion 

Insignificant difference was found among teachers‘ views by designation. The head of a 

teaching department is called chairperson. By designation there are four categories of 

teachers in the institutions of higher education in Pakistan. These categories of 

designation are lecturer, assistant professor, associate professor and professor. The 

insignificant difference among the opinions of teachers reflects the positive role of heads 

of teaching departments in the promotion of communication. 

The age of the teachers did not make difference in their views about communicative role 

of heads of teaching departments. Age-wise teachers were classified into three groups, ie, 

30 or less than 30 years, 31-50 years, and above 50 years. The findings of this study 

contradict findings of the study of Zenger & Lawrence (1989). They revealed that age 

and tenure distribution had relationship with frequency of technical communication. 

McCann & Giles (2007) revealed that young workers experienced more difficulty in 

communicating with old workers as compared to their same age workers. People of 

different ages communicate differently (McCann et al, 2005). This means that age 

determines the patterns of communication. Minimum age is 18 years for the appointment 

of a government servant and 60 years for official retirement in Pakistan. The same rule of 

age is also applied to teachers. After retirement, a Ph.D degree holder can serve for the 

period of five years on contract basis in a university. 

Experience of the teachers did not differentiate them in their opinions about the 

communicative role of heads of teaching departments. Experience-wise teachers were 

classified into three groups, i-e, 10 or less than 10 years, 11-20 years, and more than 20 

years. Comparison among opinions of teachers was done regarding the role of heads of 

teaching departments in the promotion of communication. Insignificant difference among 

opinions of teachers reflects that the heads of teaching departments is fully involved in 

the promotion of communication.. . 

Qualification of the teachers did not prove to be a strong variable in producing change in 

the views of the three groups of teachers about the role of heads of teaching departments 

in the promotion of communication. Qualification-wise teachers were classified into three 

groups, i-e, Ph.D, M.Phil and Master. For becoming a teacher minimum qualification is 

Master degree. The teachers get promotion on the basis of higher qualification in the 

institutions of higher education in Pakistani context. The insignificant difference among 

opinions of teachers by qualification implies that heads of teaching departments promote 

communication in all its dimensions. 


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7. Conclusion 

On the whole, the role of heads of teaching departments is positive in all aspects of 

communication at postgraduate level. The variables age, designation, qualification and 

experiences of the teachers do not make difference in their views about the 

communicative role of heads of teaching departments. The teachers think that the role of 

heads of teaching departments is positive in the promotion of communication. 

8. Direction for Future Research 

The conclusions drawn from the study indicate that the role of heads of teaching 

departments of teaching departments is positive in the promotion of communication in 

universities and postgraduate colleges, in Khyber Pakhtunkhwa, Pakistan. There are other 

areas which can be studied for further findings: 

1. To generalize these results across Pakistan, this study may be replicated in other 

provinces viz; Punjab, Sindh and Baluchistan. 

2. Keeping in view the importance of communication in the management of 

educational institutions, the communicative role of secondary schools‘ heads of 

teaching may be investigated. 

3. This study should be supplemented with inclusion of other variables include 

teachers‘ job performance and job satisfaction. The communicative role of heads 

of teaching departments and its relationship with teachers‘ job performance and 

job satisfaction may be explored. Other demographic variables such as marital 

status, socio-economic status, monthly salary and the number of children may be 

included in the study. 

4. This study may be replicated by using other instruments for data collection such 

as interview. 


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References 

Alexander, K. E. (1996). The relationship between communication climate and job 

satisfaction as reported by Florida‘ community college department chairs. (Doctor 

Dissertation, University of Florida, 1996). Dissertation Abstract International, 

AAT 9800137. 

Athanassiades, J. C. (1973). The sounds and silences of employee communication. 

Journal of Business Communication, 10(4), 43-50. 

Chuuon, C., Gilkey, E. M., Gonzalez, M., Daly, A. J., & Chrispeels, J. H. (2008). The 

little district that could: The process of building district-school trust. Educational 

Administration Quarterly, 44(2), 227-281. 

Clampitt, P. G., & Downs, C. W. (1993). Employees‘ perceptions of the relationship 

between communication and productivity: A field study. Journal of Business 

Communication, 30 (1), 5-28. 

Cohen, J. (1988). Statistical power analysis for the behavioural sciences. Hill‘s dale, NJ, 

Erlbaum. 

De Nobile, J, J., & Mc Cormick (2008). Organizational communication and job 

satisfaction in Austrailian Catholic primary schools. Educational Management, 

Administration and Leadership, 3(64), 101-122. 

Gliem, J. A., and Gliem, R. R. (2003). Calculating, interpreting and reporting Cronbach‘s 

alpha reliability coefficient for Likert type scales. Paper presented at 2003 

Midwest Research to Practice Conference in Adult, Continuing, and Community 

Education. 

Gorden, W1., & Infante, D. A. (1991). Test of a communication model of organizational 

commitment. Communication Quarterly, 39(2), 144-155. 

Johnson, J. D., Donohue, W. A., Atkin, C. K., & Johnson, S. (2001). Communication, 

involvement, and perceived innovativeness: Tests of a model with two contrasting 

innovations. Group and Organization Management, 26(1), 24-52. 

McCann, M. R., & Giles, H. (2007). Age-differentiated communication in organizations: 

Perspectives from Thailand and the United States. Communication Research 

Reports, 24(1), 1-112. 

McCann, M. R., Dailey, M. R., Giles, H., & Ota, H. (2005). Beliefs about 

intergenerational communication across the life span: Middle age and the roles of 

age stereotyping and respect norms. Communication Studies, 56(4), 293-311. 

Monge, P. R., Cozzens, M. D., & Contractor, N. S. (1993). Communication and 

motivational predictors of the dynamics of organizational innovation. 

Organization Science, 3(2), 250-274. 

Newton, R. M. (2006). Does recruitment message content normalize the superintendency 

as male? Educational Administration Quarterly, 42(4), 551-557. 

Postmes, T., Tanis, M., & de Wit, B. (2001). Communication and commitment in 

organizations: A social identity approach. Group Processes and Intergroup 

Relations, 4(3), 227-246. 

Phelps, L. D., & Dufrene, D. D. (1989). Improving organizational communication 

through trust. Journal of Technical Writing and Communication, 19(3), 267-276. 

Smidts, A., Pruyn, A. H., & Van-Riel, C. M. (2001). The impact of employee 

communication and perceived external prestige on organizational identification. 

The Academy of Management Journal, 44(5), 1051-1062. 


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Sekaran, U. (1999). Research methods for business: A skill building approach. Southern 

III notes, University of Carbondale. 

Stevens, J. P. (1996). Applied multivariate statistics for the social sciences (3 rd ed.). 

Mahwah, NJ: Lawrence Erlbaum Associates, Publishers. 

Unzicker, D,. Clow, K. E., & Babakus, E. (2000).The role of organizational 

communication on employee perceptions of a firm. Journal of Professional 

Services Marketing, 21(2), 87-103. 

Zenger, T. R., & Lawrence, B. S. (1989). Organizational demography: The differential 

effects of age and tenure distributions on technical communication. The Academy 

of Management Journal, 32 (2), 353-376. 

. 


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ATTITUDE AND AWARENESS OF BANNU COMMUNITY 

TOWARDS REPRODUCTIVE HEALTH EDUCATION 

Rukhsana Aziz, Rahmatullah Shah. Zafar Khan 

Institute of Education and Research, Gomal University 

Dera Ismail Khan, Khyber Pakhtunkhwa, Pakistan 

Abstract 

The paper investigates the attitude and awareness of the members of Bannu community 

towards reproductive health education. The objectives of the study were to find out the 

extent of attitude, and level of awareness of members of Bannu community towards 

reproductive health education. For fulfillment of these objectives, two research questions 

were formulated. For data collection, questionnaire and structured interview were used. 

The sample consisted of 300 respondents, was randomly selected from different 

categories of Bannu community. After collection of the data from the sources concerned, 

it was analyzed through statistical program SPSS. Mean was used as statistical technique 

for data analysis. The main findings of the study were as follows: the religious scholars of 

rural, labour men of both rural and urban, illiterate of rural and urban have negative 

attitude towards reproductive health education, where as religious scholars of urban, 

doctors‘ rural, literate rural and affected rural respondents have moderate attitude 

regarding reproductive health education in Bannu. While doctors of urban, literate of 

urban and affected of urban respondents have positive attitude towards reproductive 

health education. 

Keywords: Community, reproduction, health, attitude 


The World Health Organization (1998) defined reproductive health as ―A state of 

complete physical, mental and social well being and merely the absence of disease or 

infirmity.‖ Reproductive health deals with the reproductive processes, functions and 

system at all stages of life. Reproductive health education is considered a key strategy for 

promoting safe sexual behavior among teenagers (Lindberg et al, 2000). ―People‘s ability 

to reproduce (have children) and regulate their fertility. A state in which women are able 

to go through pregnancy and child birth safely; outcome of pregnancy is successful in 

terms of maternal and infant survival and well being; and couples are able to have sexual 

relations free of the fear of contracting diseases (Fathallah, 1998)‖. .Majority of people is 

unaware about reproductive health. Reproductive health concept become central as a 

result of advocacy activities in the international arena, by the feminist movement and 

women‘s health advocates (McIntosh & Finkle,1995). 

In Islamic world the successful examples of national family planning programs are those 

of Iran, Indonesia, Bangladesh and Egypt, where Muslim scholars have not only endorsed 

but also provided support in accelerating contraceptive prevalence in these countries (Ali, 

1998). Kridli & Libbus, 2001) found that men believe Islam forbidden family planning 

and that God should decide family size. Hoodfar&Assadpour (2000) also highlighted the 

importance of involving religious scholar in population control programs. 


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The high birth rate in Pakistan is responsible for low income, illiteracy and religious 

sentiments (Hakim et al., 2000). In this research study even the literates from the rural 

areas have negative attitudes. 

They need proper guidance and counseling in this area. Female are particularly kept 

unaware about this aspect. On one side there are cultural constraints and on the other side 

there is lack of education that keeps them ignorant of such knowledge. Even in educated 

communities a very small number of people know something about reproductive health 

education. The reason may be that there is no curriculum of reproductive health education 

at school level in Pakistan. 

2. Objectives of the Study 

i. To find out and investigate the extent of attitude of Bannu community towards 

reproductive health education. 

ii. To know the level of awareness of Bannu community regarding reproductive health 

education. 

3. Research Questions 

i. What is the extent of attitude of Bannu community towards reproductive health 

education? 

ii. What is the level of awareness of people of Bannu community regarding reproductive 

health education? 

4. Methodology of the study 

It was a descriptive study. The population of the study constituted all the members of 

Bannu community, Khyber Pakhtunkhwa. The researcher selected 300 respondents from 

Bannu community (50 doctors, 50 labor man, 50 literate, 50 illiterate, 50 religious 

scholar, 50 affected families) as a sample. 

The researcher developed a 30 items questionnaire for data collection. The researcher 

studied relevant literature for the development of the questionnaire. Experts in social 

sciences were consulted for validation of the scale. For reliability, a dry run of the scale 

was conducted. Cronbach‘ Alpha was achieved as high as 0.861. Questionnaire was 

personally administered by the researcher at local level and mailed to outstation 

respondents. The researcher also interviewed doctors & affected families seeking their 

views about reproductive health education. Mean was utilized as a statistical technique 

for data analysis. 

5. Results 

Table 1 

Variables 

Religious 

Scholar 

Doctors 

Demography 

Mean Std 

Rural Urban N Rural Urban Rural Urban 

25 

25 50 

25 25 50 


1.36 

2.00 

.70 .912 

2.28 2.84 .842 .472 

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Labor man 25 25 50 

Literate 25 25 50 

Illiterate 25 25 50 

Affected 

peoples 

25 25 

1.6 1.62 .866 .866 

2.26 2.84 .768 .553 

1.400 1.6 .816 .816 


50 

2.0 2.64 1.00 .869 

Note: For data analysis Mean has been categorized (1—1.69, 1.70—2.39, 2.40—3.00). 

1—1.69 = Negative attitude 

1.70—2.39 = Moderate attitude 

2.40—3.00 = Positive attitude 

The above table shows that the religious scholars rural, labour men rural and urban, 

illiterate rural and urban have negative attitude towards reproductive health education 

where as religious scholars urban, doctors‘ rural, literate rural and affected rural have 

neutral attitude regarding reproductive health education in Bannu. While doctors of 

urban, literate of urban, and affected families of urban area have positive attitude towards 

reproductive health education in Bannu District. 

6. Findings of Interview 

According to doctors reproductive health education enables the people to understand their 

own bodies and the systems working therein. They are well equipped with the 

information necessary for the maintenance of good health not only of themselves but also 

of their children. Similarly, being the direct victims of the harmful effects of the lack of 

awareness of reproductive health education, the affected families too, in their interviews, 

admitted the significance of awareness as, according to them such information can avert 

the deals of the families and can make life worth living. 

7. Discussion 

Reproductive health education is a very important area of education, but in Pakistan due 

importance has not been given to this area. In rural area of Bannu, the attitude towards 

reproductive health education is mostly negative. The reason may be lack of awareness & 

the influence of religious scholars, who are also unaware about the consequences &the 

actual teaching of Islam about reproductive health. The affected families in rural areas 

have mostly moderate attitudes because this seems to be kept unaware about reproductive 

health. The cultural constraints do not allow these peoples even to talk about reproductive 

health. The illiterates in both rural & urban areas have almost negative attitude because 

they have neither discussed the consequences of the problem nor they have read or gone 

through any kind of literature. In this research study, doctors & educated people have 

positive attitudes, because they are well aware about the significance of reproductive 

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health education. They know the far-flung effects of this type of education on family and 

children. The results of the study indicate that there is a need of proper awareness about 

reproductive health education at every level. The researcher has tried to recommend the 

possible efforts to be done for awareness of the people about reproductive health 

education. The researcher has also suggested some problems to be solved by the future 

researchers in this regard. The parents have to take a lot of care as the parents & in 

families the children have to face a lot of problems leading towards miserable life. 

Therefore, there is a need to take necessary steps regarding awareness about reproductive 

health education in masses. In some countries like Iran the gap between rural and urban 

areas regarding reproductive health is minimized because Mehryar (2007) described that 

the long standing urban–rural gap in contraceptive prevalence rates has been reduced to 

about 10 percent, which is mainly the result of better-educated urban couples‘ continued 

practice of withdrawal. The religious scholars may have a great influence on reproductive 

health education but unfortunately they have negative attitude towards this education. 

Saleem and Bobak (2005) indicated that women's decision autonomy is significantly 

associated with contraceptive use but it does not appear to mediate the link between 

woman's education & contraception. There is no provision of the contents of reproductive 

health education at any level in educational ladder. Therefore, even the literates have no 

proper awareness about reproductive health. 


Following conclusions were drawn from the findings of the study: 

i. The people from the rural areas have negative and moderate attitudes, and there 

are positive attitudes towards reproductive education in urban areas. There is a 

lack of awareness in rural areas in particular and in urban areas in general. 

ii. The doctors working in the hospitals have positive attitudes towards reproductive 

health education because they are well aware about the harmful consequences 

regarding ignorance about reproductive health education. 

iii. The majority of religious scholars and illiterate in rural areas have negative 

attitudes towards reproductive health education. They have no awareness about 

reproductive health. In urban areas, the literate and religious scholars have 

moderate or positive attitudes towards reproductive health education because 

there is some awareness about this regards. 


i. Efforts can be made to provide sufficient opportunities of health education to the 

females in particularly and males in general. 

ii. Improvement in curriculum may be made and reproductive health education may 

be supplement to it at secondary and college level. Separate course of 

reproductive education may be introduced at university level in the relevant 

deportments. 

iii. To attract females towards education in general and reproductive health education 

in particular, proper incentives should be given to them. 

iv. Training opportunities may be provided to educators and health workers in 

promoting reproductive health education. 

v. Culturally sensitive and anti-racist curriculum may be introduced into education 

of school level including knowledge about RHE and women body and health, 

sexuality. 


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vi. To promote family health and awareness about RHE materials and proper support 

may be given to the physician involved in RHE and family planning counseling. 

vii. The knowledge about healthy family living and reproductive health education 

may be disseminated through religious scholars. . 

viii. The rights of female may be propagated through religious institutions, so that the 

cultural male dominance may be minimized. 

ix. Awareness and attitudes may be developed through the lady health workers and 

health technicians in rural areas of different communities, especially in females. 


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References 

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Fathallah, M. (1998). Issues in reproductive health: Health and being a woman. Expert 

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Kridli, S. A. & Libbus, K. (2001). Contraception in Jordan: A cultural and religious 

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Lindberg, L. D., Ku, L., & Sonenstien, F., (2000). Adolescents reports of reproductive 

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Mehryar, Ahmad-Nia, H. A., Shirin, kazemipour, & Shala.(2007). Reproductive health in 

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Macintosh, A., & Finkle, J. (1995).The Cairo conference on population and development: 

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Saleem, S., & Bobak, M. (2005). Women‘s autonomy, education and contraception use in 

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2009, from http://www.reproductive-health-journal.com/content/2/1/8. 

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Effect of Leadership on Employees Performance in 

Multinational Pharmaceutical Companies in Pakistan 

Bilal Durrani 

Institute of Business and Management Sciences, Agricultural University,Peshawar 

Obaid Ullah 

Institute of business and management sciences, Agricultural University,Peshawar 

Sabeeh Ullah(Corresponding Author) 

Institute of business and management sciences, Agricultural University, Peshawar 

Abstract 

The study was conducted to examine the effect of leadership on employee‘s performance 

in multinational pharmaceutical companies in Pakistan. The leadership behaviors were 

assessed with respect to 5 factors (motivation, promoting challenging standards, visibility 

and availability, championing excellence and team working). Data was collected from 50 

leaders through questionnaire by selecting 10 leaders from each 5 multinational 

pharmaceutical companies. The results were presented in terms of counts and percentages 

by reflecting their views regarding different opinions about mentioned factors and 

employees performance. Effective leadership behavior in motivational factor showed, 

90% leaders apply different motivational techniques for employee satisfaction. While for 

visibility and availability factor more than 32% leaders at pharmaceutical companies 

lacking to approach their employees. It was reported by 85% respondents that promoting 

challenging standards, championing excellence and team working improves the 

performance of employees. Results showed that effective leadership developed 

significant (p < 0.05) relationship with employee‘s performance. 

Keywords: Leadership, Employee‘s performance, Motivation, Chi-square. 


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The world at present is experiencing a new economic paradigm characterized by speed and 

profit, which make organizations more challenging, flexible, creative and customer oriented. 

The concept of leadership is relevant to any aspect of ensuring effectiveness in organizations 

and in managing change. The effective leadership depends upon leaders, followers and 

situational environment. Without understanding leadership process nothing can be done to 

assure employees and organization performance. 

Early organization with authoritarian leaders who believed employees were intrinsically lazy 

transitioned into way to make work environments more conducive to increased productivity 

rates. According to human resource management employees are assets of organization and 

need to maintain and developed. Therefore the contemporary organizations are demanding 

charismatic leadership to empower, encourage and motivate employees to bring efficiency and 

effectiveness to increase productivity in organization. 

Leadership is the process of influencing others to understand and agree about what is to be 

done and how it can be done effectively and the process of facilitating individual and 

collective efforts to accomplish the shared objectives (Yukl, 2002). It was not until the early 

19th century that leadership as a concept first appeared as a word in the English language 

(Davis & Cushing 1999). Effective leadership is about enabling ordinary people to produce 

extraordinary things in the face of challenge and change and to constantly turn in superior 

performance to the long-term benefit of all concerned (Charlton 2000). Effective leadership, 

workplace, learning & continuous improvement are now considered essential for an 

organization to remain competitive, (Sales & Cannon- Bowers 2001). The more recent 

definitions conceive leadership in terms of influence relationships, power differentials, 

persuasion, influence on goal achievement, role differentiation, reinforcement, initiation of 

structure, and perceived attributions of behavior (Bass, 1990). Leadership brings people, of all 

backgrounds, interests, values and cultural environments together, and provides them with 

opportunities in order to realize potential and goal optimization (Hesselbein et al.1996). 

Organizational culture has been argued as one of the most powerful and stable forces 

operating in organizations and can influence a firm's leadership, decision making, 

performance, internal development, and, strategic development (Howard, 1998). Leaders are 

able to define a goal, persuade others to assist in achieving that goal, and lead their teams to 

victory. Leadership is crucial to managers in the business world, but it also plays an important 

role for coaches, teachers, and parents. 

Understanding relationship between organizational leadership and employee‘s performance in 

shaping work attitude and organization development are challenges for contemporary 

organizations. In multinational pharmaceutical the following leadership problems are evident 

including customer focus, sales targets , communication and conflicts, process improvement, 

invention and innovation, employee involvement, lack of motivation among sales workforce 

(Iliyas, 2003) The mentioned effects of employees are therefore result in decreased 

commitment and subsequently job performance (Daft, 2003). Therefore, to resolve these 

problems and to create opportunities there is a need of smart people and smart organizations 

that will built their own future by introducing creative leadership process which include 

leader, followers and situation to introduce new ideas, innovation and adopting continuous 

change. The conceptual framework for this study taken from (Smith, 2001) who shows five 

key behaviors of a change agent i.e motivation, promoting tough standards, visible and 

COPY RIGHT © 2011 Institute of Interdisciplinary Business Research 287



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available, championing excellence, Team working. It is proposed that these factors effect and 

contribute to the dominant leadership behavior, which are then translated into dominant styles 

of leadership, which can effectively bring improvement in employee‘s performance in 

multinational pharmaceutical companies based at Peshawar, Pakistan. 

Organizations in Pakistan are contemplating the issue of low performance, poor productivity 

and decreased job satisfaction. Attempts in this regard have usually been focused around the 

processes, procedures, structures and resources to make organizations more productive. Scope 

of this study is restricted only to pharmaceutical companies with specific focus on the five 

factors such as, Motivation, Promoting standards, Visibility and Availability, Championing 

excellence & Team working. These five factors will be considered in analyzing the effect of 

leadership on employee‘s performance by introducing innovative culture, planned strategy, 

Improve work relationships, enhance quality and performance, humanistic, scientific and 

systematic approach and employee learning for effective and healthy organization. 

This study will provide useful insight to pharmaceutical companies, in particular, and other 

organizations, in general, into the effect of leadership on employees and organization 

performance, and the problem areas on which to focus in future for improvement. It will be 

particularly useful in making a assessment of the views and perceptions of the different 

leaders of the pharmaceutical companies on the subject of the study, and as such the findings 

would help in effective leadership behaviors for organizational development. The utility of the 

study is not confined to the pharmaceutical companies alone. The other organizations can 

benefit from it, as well. And finally this study would provide yet one more set of practical data 

and analysis on which to build more of such studies in the context of Pakistan as well as other 

developing countries. 

2. Previous studies 

The concept of leadership is very important and studied in many organizations for their 

subsequent relationship with different variables that may ultimately contribute towards more 

productive and satisfied employees firms continue to pursue regional and global diversity This 

trend places a demand on research to aid business to development and new competitive 

advantages, because leaders are the ones who make things happen. Therefore, determining and 

explaining the effects of leadership on employee‘s performance is timely and important. 

2.1 Leadership 

Bass (2000) identified the essence of leadership and pointed out that it has existed for as long 

as people have interacted, and it is present in all cultures no matter what their economic or 

social makeup. Leadership is not only a human quality; it is found in primitive forms in many 

animal species, from low-level vertebrates such as chickens to higher-level primates such as 

gorillas and whales. Through observation and experimentation, especially conducted in the 

animal‘s own natural setting, it can be deduced that there exists a clear hierarchy or "pecking 

order" of leadership and that leadership grants privileges to those who have it. Bass (2000) 

suggested that leaders must promote change by creating vision. Theories of transformational 

leadership and organizational change emphasize that change is accomplished through the 

leader's implementation of a unique vision of the organization through powerful persuasive 

personal characteristics and actions designed to change internal organizational cultural forms 

and substance. 




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Bass and Avolio (1994) suggest that, when facing significant change, ‗Leadership is the art of 

mobilizing others to want to struggle for shared aspirations‘. Leaders therefore must be skilled 

in change management processes if they are to act successfully as agents of change and 

motivate others to follow (Van Knippenberg and Hogg, 2003). 

Stogdill (2000) said that although leadership is an age-old concept, it remains a complex term 

that researchers and scholars grapple with continuously. One of the main reasons is the 

extensive number of definitions for this term. It is commonly quipped that there are nearly as 

many definitions of leadership as there are researchers and commentators. 

Blake and Mouton (2000) some researchers and commentators rely on narrow definitions for 

ease of communication (e.g., leadership is the act of getting other people to do what they 

would not otherwise willingly do) especially common in the 1960s was the idea that 

leadership is some combination of task- and people-oriented behaviors). However, the 

definitions of most researchers have become somewhat more sophisticated and have expanded 

over time. 

Nadler and Thies (2001) suggested that change management strategies and the effects of 

shifts in organizational culture are examined as moderating variables, suggest that changing an 

organization boils down to directing energy and effort towards four identifiable aspects of 

organizational life that are (1) the behavior of institutional leaders; (2) the selection and 

execution of appropriate management strategies (particularly change management strategies) 

(3) an understanding of the organization's basic structure, systems, and formal processes 

(culture); and (4) actions taken by leaders affecting acceptance of change by individuals who 

play key roles in both formal and informal systems. 

Kotter (2001) suggests that leadership sets a direction and develops a vision for the future. 

However, management is more concerned with planning which is deductive and orderly, not a 

process of producing change. Planning should complement direction setting. One of the most 

frequent mistakes that overmanaged and underled corporations make is to embrace long-term 

planning as a panacea for their lack of direction and inability to adapt to an increasingly 

competitive and dynamic business environment. He proposes that organizations cannot wait 

for leaders to emerge, but must seek them out and develop their potential. Therefore, formal 

leadership education and training should be of great importance to organizations. Leadership 

education and training Just as we need more people to provide leadership in the complex 

organizations that dominate our world today, we also need more people to develop the culture 

that will create that leadership. 

Berquist (2002) contemporary researchers interested in the broad view of leadership and who 

develop operational definitions. Acquisitions, mergers and change have been an ongoing part 

of the operational strategy of many organizations for years, and have proven to be a 

significant and popular means for achieving corporate diversity, growth and rationalization. In 

this post-modern era, organizations have to deal with as much chaos as order and change is a 

constant dynamic. 

Yukl (2002) The organizational culture literature reminds us that a wide range of factors affect 

organizational change, and that those leaders hoping to initiate organizational change and 

generate follower acceptance face a daunting task. The challenge is to select a set of actions 

that are achievable within the capacity of the organization to absorb change and resource 

constraints. Early research building upon the ‗great man‘ theory of leadership Judge found 




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that the situation also plays a vital role in determining leader effectiveness and that, to be 

effective, leaders must behave differently in different situations. 

Grint (2002) argues that there would be no leaders without followers, and the relationship 

between the two requires a sense of community. Successful leadership requires a clear 

strategic vision that resonates with the community. Goleman (2002) research suggests that 

leaders who achieve the best results do not rely on one leadership style, but incorporate 

multiple styles seamlessly depending upon the situation. Leaders can achieve this by building 

a team with members who employ the styles that the leader lacks, or by expanding one‘s own 

style repertoire. Leaders must notice changes in external conditions, reflect on them and 

respond appropriately. 

Empey (2002) propose that effective leadership should incorporate various elements relating 

to knowledge, skills and competencies and personal characteristics and behaviors. He 

proposes that personal characteristics are a more important indicator of successful leadership 

than n actual job description. Personal traits, such as commitment to an issue and an ability to 

develop linkages between perspectives and objectives, have considerable influence on the 

effectiveness of a leader. He also proposes that personality is not necessarily an indicator of 

successful leadership. Management and leadership are diverse roles which require different 

characteristics and functions. Although the roles are often contradictory, they are 

complementary one cannot function without the other. Managers typically promote stability 

while leaders promote change. 

Yukl (2002) pointed out that most leadership training programmes are designed to increase 

generic skills and behaviors necessary for effectiveness and advancement. Effective training 

should involve clear learning objectives, clear and meaningful content, appropriate sequencing 

of content, appropriate mix of training methods, opportunity for active practice, relevant and 

timely feedback, enhancement of trainee self-confidence and appropriate follow-up activities. 

Many leadership training programs utilize particular techniques such as, behavior role 

modeling (demonstration and role playing in order to enhance interpersonal skills), case 

discussion, business games and simulation (analysis of complex problems and decisionmaking). 

He argued that the most essential leadership skills are learn from experience, rather than 

through formal training programs. However, learning from experience is affected by the 

amount of challenge, the variety of tasks or assignments, and the quality of feedback. It has 

been suggested that the term ―training‖ should not be used when referring to leadership 

education. ―Training‖ implies the idea of receiving knowledge while a focus on 

―development‖ or ―learning‖ demonstrates the autonomy of the leadership role. 

3. Data and Research Methodology 

In the present study, keeping in view the time and financial constraints, the study will focus on 

5 out of 15 multinational pharmaceutical companies that are (Abbott pharmaceutical 

company, Novartis pharmaceutical company, Servier pharmaceutical company, Glaxo Smith 

Kline pharmaceutical company, Pfizer pharmaceutical company), based at Peshawar, were 

selected to meet the required objectives. 

Since this research has many variables under study, and the population size is not large, 

therefore, for determining the sample size, 50 managers of 1st, middle and top level i.e 10 




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managers from each company. Utilizing this sample size of 50 managers, generalized 

scientific guidelines will be developed. By doing so, 50 questionnaires were distributed and 

collected in completed form. This constitutes a sample of size 50 respondents, which was used 

for establishing the relationship between the leadership and employees performance. 

3.1 Data 

Data are obtained from primary and secondary sources. Primary data refer to information 

obtained first hand by the researcher on the variables of interest for the specific purpose of the 

study. It may include individuals, focus groups, panels of respondents and some obtrusive 

sources (Sekaran, 2003). In this study, individuals are the main source of primary data, since 

questionnaires were distributed among the respondents of 5 pharmaceutical companies as 

mentioned earlier. A questionnaire to this effect had been developed and given in the 

Appendix-A). 

Besides primary data, secondary data was also collected to reinforce the study, secondary data 

refers to information gathered from already existing sources. It includes university records, 

publications of the faculty members, websites, internet, journals, books etc. These sources 

provide valuable information about the variables themselves and their relationships. This 

information is also important since that helps to discuss and argue any particular result that 

may or may not develop relationship among the variables. 

3.2 Hypothesis 

The hypothesis, being a testable statement of the relationship among the variables— 

leadership and employees performance can be developed as a non-directional hypothesis in 

the following format: 

These hypotheses can be expressed statistically as: 

H : There is no association between leadership and employees performance. 

0 

H : There is association between leadership and employees performance. 

1 

3.3 Measuring the Responses 

Measurement of the responses is very important since it helps to determine appropriate results. 

The portion of this instrument consisted of 25 Likert-styled items (e.g. 1= v.poor, 2=poor, 

3=some problem, 4=good and 5=v.good) 

It has long been recognized that the precision (reliability) and the accuracy (validity) of verbal 

instruments are determined to a large degree by the design and construction of scales 

(Thurstone, 1928). Likert himself in his original paper, did not consider the number of choices 

to be an important issue (Likert 1932) stating only that ―if five alternatives are used, it is 

necessary to assign values from one to five with the three assigned to be the undecided 

position. ―It is implied that the actual number of choices may be left to the tastes of individual 

researchers‖. In practices the researchers often do assign the number of choices arbitrarily 

according to personal tastes or paste convention. (Schirmer et al., 2005) assessed the 

communication competence of Physicians on a 5 point Likert scale while dealing with 

disastrous patients and a study that has checked four habits of doctors having twenty two 

content areas while dealing with affected patients. 




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Statistical Package for Social Sciences (SPSS) for windows was applied in the process of data 

input and compilation Data collected through questionnaire were analyzed using appropriate 

test statistics. But only Likert Scale (Nachmias and Nachmias, 1996) was used in the present 

study in collecting the required information. All the results were presented in counts and 

percentages in different tabular form under the sections. In order to test that association 

between leadership and employees performance, and other variables of interest a Chi-square 

test was applied at appropriate level of significance. Generally, a 5% level of significance was 

used throughout the dissertation. For convenience, Chi-square test is defined as: 

r c 

2 

( O ) 

2 

ij � eij 

� � �� e 

Where 

i�1 j�1 ij 

ij o = Observed frequencies in the kth cell. 

e ij = Expected frequencies in the cell 

r = number of rows in the table. 

c = number of columns in the table. 

4. Results 

Table 4.1 reflects the information that how the respondents express there views and feelings in 

the 1 st statement as 0%, 0%, 2.8%, 7.2% and 10% for very poor, poor, some problem, good 

and very good respectively. While the results expressed in 2 nd statement, 0%, 1.2%, 4.8%, 

12%, and 2%. Similarly the results given in 3 rd statement like 0%, 0%, 4%, 12% and 4%. The 

results stated in 4 th statement are 0%, 0%, 4%, 11.2%, and 4.8%. While the out come of the 5 th 

statement were 0%, 0%, 0%, 8% and 12% respectively. 

A chi-square value for the above table is 56.045 with p-value 0.000 was recorded to test the 

association between various categories of responses regarding the following statements and 

that of responses, that is, very poor, poor, some problem, good and very good. It is evident 

that p-value is less than 5% (i.e. p-value=0.000 < α-value=0.05) indicating that the null 

hypothesis of no association between the two attributes regarding the stated hypothesis is 

rejected i.e. there is no relationship between the leadership and the employees performance. It 

is therefore, concluded that there is the relationship between the leadership and the employees 

performance. These results are in agreement with Chiang (2008) who indicated intrinsic and 

extrinsic motivation factors for hotel employees are needed for effective performance, 

suggesting that hotel managers need to focus more on intrinsic and extrinsic factors to better 

motivate employees. 


the 1 st statement as 0%, 0%, 8%, 10% and 2% very poor, poor, some problem, good and very 

good respectively. While the results expressed in 2 nd statement, 0%, 0%, 0%, 12%, and 8%. 

Similarly the results given in 3 rd statement like 0%, 0%, 4%, 12% and 4%. The results stated 

in 4 th statement are 0%, 0%, 0%, 12%, and 8%. While the out come of the 5 th statement were 

0%, 0%, 2%, 14% and 4% respectively. 






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that p-value is less than 5% level of probability (i.e. p-value=0.000 < α-value=0.05) indicating 

that the null hypothesis of no association between the two attributes regarding the stated 

hypothesis is rejected i.e. there is no relationship between the leadership and the employees 

performance. It is therefore, concluded that there is the relationship between the leadership 

and the employees performance. 

It was also revealed that leaders are ideally involves in establishing specific, measurable, 

attainable, realistic and time-targeted objectives in pharmaceutical companies. This tendency 

of high average score reflects that challenging objectives can serve as an effective tool for 

making progress by ensuring that participants have a clear awareness of what they must do to 

achieve. On a personal level, the process of setting goals allows people to specify and then 

work towards their own objectives. 

Those results are in agreement with Netherlands (2001) which shows that healthy 

organizations need to take leadership roles, Challenging standards, responsibilities, 

competencies, strategic and integrated approach to the development of core values such as 

quality, trust, ethics and social responsibility and effective organization performance. 




Similarly the results given in 3 rd statement like 0%, 2%, 8%, 8% and 2%. The results stated in 

4 th statement are 0%, 4%, 8.8%, 6%, and 1.2%. While the out come of the 5 th statement were 








performance. 

It is therefore, concluded that there is the relationship between the leadership and the 

employee‘s performance and reveals that better communication, co-ordination and 

collaboration result in effective leadership for better performance. It shows that organization 

culture for employee involvement is essential for organization development. This shows that 

effective verbal and non- verbal communication, influencing tactics, emotion-provoking 

words, employee involvement, suggestion system, supportive communication, contribute to 

leadership effectiveness. Creative leaders always pay special attention to employee creativity 

and involvement by designing creative organization culture. 

The result taken from visibility and availability relatively similar to work of Westa et al. 

(2003) who described that employees in many jobs encounter novel, ill-defined problems, low 

morale, altercative and less participative leadership, and finding creative solutions to these 

problems may be the critical factor that allows their organization to maintain a competitive 

advantage. Solving problems creatively requires extensive, approachable and effortful 

cognitive of leader. 




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and the employees performance that result in efficiency of employees. 

The results are in proximity with Westa et al. (2003) stated that universal theory of leadership 

contends that certain personal characteristics and skills contribute to leadership effectiveness 

in many situations. General personality traits associated with effective leadership are, Self 

confidence, trustworthiness, dominance, self awareness, high tolerance for frustration, 

initiative, flexibility and adaptability, courage, internal locus of control are the quality of 

leaders that lead to excellent performance for improvement and effectiveness of organization. 














and the employees performance. This tendency reflects that effective leadership facilitates, 

build trust, inspire, and coach team members for improvement of organization performance. 

Results are in agreement to Day et al. (2004) who stated that organizations need leaders who 

are knowledgeable, in the team process and who can help interpersonal demands of teams. 

Leaders helps them to, build trust and inspiring teamwork, Coaching Team members, 

Facilitating and supporting decisions of team, Expanding‘s team capability, Creating team 

Identity, Anticipating and Influence Change, Enabling and Empowering group members, 

Encouraging team members to eliminate low value work. 




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5.Conclusion 

It was concluded that in motivational factor, employee involvement, delegation, proper 

remuneration, employee development and meeting requirements of internal customers had 

positive impact on employee‘s performance. It was also revealed that leaders were involved in 

establishing specific measurable, attainable, realistic and time-targeted objectives. 

More than 32% leaders were lacking to approach, their employees for better communication, 

visibility and availability.The personality traits associated with effective leadership such as, 

self-confidence, flexibility and adoptability, open mind ness were present for improvement 

and development in championing excellence. 

In team working leaders supported to build employee morale, confidence to produce synergy 

in pharmaceutical companies. 




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Annexure 

Table 4.1. Motivation 

Statements Row 

1 I make the performance level attainable by the 

employees being motivated 

2 I regularly spend time agreeing requirements with 

my internal customers 

3 I view development of group members as a major job 

function 

4 I believe that proper remuneration, job satisfaction, 

improve organization culture are necessary for a 

motivated employee 

5 I use employee satisfaction as a key measure in all 

my decisions 

Total 

Very 

poor 

0 

(0) 

0 

(0) 

Column 

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0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

Poor 

0 

(0) 

3 

(1.2) 

0 

(0) 

0 

(0) 

0 

(0) 

3 

(1.2) 

Some 

problem 

7 

(2.8) 

12 

(4.8) 

10 

(4) 

10 

(4) 

0 

(0) 

39 

(15.6) 

Chi-square = 56.045, P-value = .000; α-value = 0.05, values in parenthesis are the percentages. 

Table 4.2. Promoting Challenging Standards 


1 I have measures that tell me how I am doing 

2 I insist that outputs from my area match customer 

requirements 

3 I put effort into preventing rather than correcting 

errors 

4 I set clear expectations on the standards I want 

5 I coach my team to adopt high personal standards 

and behaviors 

Total 

Very 

poor 

0 

(0) 

Poor 

Column 

Some 

problem 

20 

(8) 


Table 4.3 Being Visible and Available 


1 I spend time with people at their work place 

2 I encourage people to approach me when they need 

to 

3 I am able to pick up early warning signals of 

problems 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

Very 

poor 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

Poor 

0 

(0) 

10 

(4) 

0 

(0) 

5 

(2) 

35 

(14) 

Column 

Some 

problem 

25 

(10) 

Good 

18 

(7.2) 

30 

(12) 

30 

(12) 

28 

(11.2) 

20 

(8) 

126 

(50) 

Good 

25 

(10) 

30 

(12) 

30 

(12) 

30 

(12) 

35 

(14) 

Very 

good 

25 

(10) 

5 

(2) 

10 

(4) 

12 

(4.8) 

30 

(12) 

82 

(32.8) 

4 I am accessible, people can see me when they need 0 10 22 15 03 50 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

05 

(2) 

20 

(8) 

20 

(8) 

150 

(60) 

Good 

20 

(8) 

20 

(8) 

20 

(8) 

Very 

good 

5 

(2) 

20 

(8) 

10 

(4) 

20 

(8) 

10 

(4) 

65 

(26) 

Very 

good 

05 

(2) 

10 

(4) 

05 

(2) 

Total 

50 

(20) 

50 

(20) 

50 

(20) 

50 

(20) 

50 

(20) 

250 

(100) 

Total 

50 

(20) 

50 

(20) 

50 

(20) 

50 

(20) 

50 

(20) 

250 

(100) 

Total 

50 

(20) 

50 

(20) 

50 

(20)



to 

5 I know what is important to my people 

Total 

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VOL 2, NO 9 

(0) (4) (8.8) (6) (1.2) (20) 


0 

(0) 

0 

(0) 

0 

(0) 

15 

(6) 

0 

(0) 

87 

(34.8) 

15 

(6) 

90 

(36.0) 

35 

(14) 

58 

(23.2) 

Chi-square = 112.356, P-value = .000; α-value = 0.05, values in parenthesis are the 

percentage. 

Table 4.4 Championing Excellence 


1 I invest in activities to improve performance 

2 I use problem-solving tools whenever possible 

3 I hold regular meetings with my staff to stimulate 

improvement activity 

4 I am open about my mistakes and learn from them 

5 I treat errors as opportunities for improvement 

Total 

Very 

poor 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

Poor 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

Column 

Some 

problem 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 


Table 4.5 Team Working 


1 I seek all views and give everyone their say 

2 I respect and work together with my peers 

3 I agree clear goals, targets and standards with my 

team 

4 I invest time developing my team to work more 

effectively together 

5 I encourage my team regularly to review our 

performance 

Total 

Very 

poor 

0 

(0) 

0 

(0) 

Poor 

0 

(0) 

0 

(0) 

0 

(0) 

Column 

Some 

problem 

5 

(2) 

0 

(0) 

Chi-square = 28.085, P-value = .000; α-value = 0.05, values in parenthesis are the 

percentages. 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

0 

(0) 

5 

(2) 

0 

(0) 

10 

(4) 

Good 

30 

(12) 

15 

(6) 

25 

(10) 

20 

(8) 

15 

(6) 

105 

(42) 

Good 

15 

(6) 

20 

(8) 

15 

(6) 

15 

(6) 

30 

(12) 

95 

(38) 

Very 

good 

20 

(8) 

35 

(14) 

25 

(10) 

30 

(12) 

35 

(14) 

145 

(58) 

Very 

good 

30 

(12) 

30 

(12) 

35 

(14) 

30 

(12) 

20 

(8) 

145 

(58) 

50 

(20) 

250 

(100) 

Total 

50 

(20) 

50 

(20) 

50 

(20) 

50 

(20) 

50 

(20) 

250 

(100) 

Total 

50 

(20) 

50 

(20) 

50 

(20) 

50 

(20) 

50 

(20) 

250 

(100)



EVALUATION OF MEMBER SERVICE QUALITY; 

A CASE STUDY OF ROYAL PALM GOLF & COUNTRY CLUB 

Nasir Mehmood 

Independent researcher Islamabad Pakistan 

Muhammad Zia-ur-Rehman 

PhD Scholar, NUML Islamabad Pakistan 

Majed Rashid 

Professor of Management Sciences, AIOU Islamabad 

Abstract 

The study focused on problems the current employees of the organization are facing due to 

which it is not gaining work force competitive advantage in the market. The researchers used 

questionnaire method to acquire information from the employees of the company so that a 

detailed understanding of the problems of the employees could be established. The researcher 

distributed about 120 questionnaires from which one hundred are select as final for the build 

up of results. With the help of collected information it could easily be established that the 

employees are not satisfied with their pay and allowances. From the results it is also clear that 

several employees are not satisfied with the attitude of their respective supervisors and most 

of the employees are fully satisfied with the performance of their respective managers. As the 

said department is served as back bone to any organization and it is solely the responsibility of 

the department to satisfy the employees accordingly because with the help of great work force 

team the newly established organizations like Royal Palm Golf & Country Club can have 

competitive advantage among other organizations. The study will be helpful for the 

organization to attain satisfied employees and with the help of these satisfied employees the 

organization can have better market position. 

Key words: Work force competitive advantage, Pay and allowance, Royal Palm Golf & 

Country Club, Employees‘ satisfaction,, Better market position 


On a bright spring morning in 1912, a man stood upon the high railway embankment near the 

Mayo Road (now called Shahrah-e-Allama Iqbal) Level Crossing and gazed upon the 

TRIANGLE - the area formed by the forked (Lahore-Karachi and Lahore-Delhi) railway 

tracks and the Canal - wondering whether it could be done, for his mind had conceived the 

idea of constructing a golf course on this broken ground covered with a wild tangle of bushes 

and Pampas grass (sirkanda) where jackals, hares, partridges and snakes abounded and where 

huge area of saltpeter dust would have to be subjugated into ‗fairways‘. This bold enthusiast 

was one Mr. S.N. Nulty, Permanent Way Inspector of the then North Western Railway. 


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The course originally consisted of four holes only, but more variety was packed into these 

four than, perhaps, could be found anywhere else. Apart from the terrain, the bushes, elephant 

grass and somewhat too natural configuration for the ‗fairways‘, at least one snake could be 

encountered on to hiss at the wrong moment and ruin a shot. By 1914, the course had been 

further cleared of jungle and extended to nine holes, but the War years saw a stoppage of 

activities at the Club and it was not till 1928 that it awoke to full life and began to attain the 

dignity and status of possessing a standard full length 18 hole course, measuring 5,930 yards, 

with a total par of 70. The creation of Pakistan in 1947 brought in its wake numerous 

problems for the club also. The non-Muslim members having left, the membership dropped 

considerably. The position of finances was therefore bad; maintenance of the course was 

consequently not up to the desired standard; and the over-all picture was rather gloomy. 

At this critical juncture, a band of zealous golfers stepped in and took the affairs of the Club in 

hand. Gradually, they organized the finances and started paying attention to the proper 

maintenance of the course. Due to their untiring efforts, things began looking up. The Club 

Pavilion was renovated and improvement of the course re-started. The barren patches and the 

areas on the course affected by saltpeter were gradually eliminated through concerted efforts 

over a number of years. During this period not only was the course redesigned but its sand 

‗browns‘ were, also converted into ‗greens‘ for which a pipe-line was laid all over the course. 

In addition, a large number of saplings were planted on both sides of the fairways and at 

strategic points. Its length too was increased to over 6,000 yards and the total par to 71. 1955 

was a memorable year in the history of the Club. A new club -house was constructed at a new 

site on the mound located somewhat in the centre of the course. A number of additions and 

alterations were carried out to the Clubhouse in order to provide requisite facilities to the 

golfers. The Club also boasted of a standard-size swimming pool for its members and their 

families. In 1987 on the directions of the late President of Pakistan, General Muhammad Ziaul 

Haq major reconstruction of the club house and the course was undertaken by the Railways 

department. It hosts some of the major tournaments in the country until 2000 when it was 

decided to construct an art of a golf course on the existing flat and wide fairways. 

The Royal Palm Golf & Country Club (Royal Palm) is located on the site of the former 

Pakistan Railways Golf Club which was founded in 1927. Today completely remodeled and 

landscaped, the Royal Palm bears little resemblance to its past. Widely regarded as one of the 

subcontinent‘s best golf courses, the Club itself has set a new benchmark for others in the 

region to attempt to emulate both in concept and execution. The Pakistan Railways leased this 

property in September 2001 to the consortium now named Mainland Husnain Pakistan 

Limited (MHPL). Spread over 140 acres of land and just a few minutes away from Shahrah-e- 

Quaid-e-Azam, this expanse of rolling greens and stately old trees offers a serene backdrop for 

the pursuit of playing, pleasure, business and social interaction. Every aspect of this 

prestigious club has been designed by experts in the field, making it the most exciting country 

club in Pakistan. 

2. Significance of Study 

Now a day‘s competition in every industry is increasing day by day. This competition is not 

only good service providing by the organizations but also elite class presentation and member 




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services are provided to the customers. There is need to explore this industry through specific 

researches as the hospitality industry of any country can make a lot for the country in sense of 

repute among other countries, visitor and money for the country. That is the reason the 

researcher choose this topic so that to have broader view of the hospitality industry providing 

services in Pakistan. 

This research will indicate the problems which the employees of the organization are facing. 

The problems may be of several kind and nature therefore, according to the nature some 

recommendation will be suggested to the organization after having complete overview of the 

problems at the end of the research. These recommendations will not only helpful to attain 

greater satisfaction level of the employees but also other companies in competition will 

change there strategy to compete with the other organizations by having strong team and 

workforce. As a result companies will get progress in the market and growth of the economy 

of Pakistan will also rise. 


The Lahore Gymkhana Golf club is considered to be one of the oldest Golf Clubs in Pakistan 

and is believed to have been founded in the late years of 19th century some time after the 

1857 War of independence. The first organization golf tournament played over its course was 

most probably the Champion Medal (Roe Medal) held in January 1895, the first being one Mr. 

F.A. Robertson. In its early days, the Club experienced great financial difficulties and it was 

only the members through who‘s personal efforts it kept going Ironically, the financial 

problems increased with the passage of time and in MARCH 1940 the golf committee 

approached the LAHORE & MIANMIR INSTITUTE (re-named in January 1906, as the 

LAHORE GYMKHANA CLUB) to take over the management of the golf Club under its 

administrative control. This proposal was agreed to and the golf Club became a part of the 

LAHORE & MIANMIR 1904, this eased the financial difficulties of the Club to some extent 

because the INSTITUTE not only helped the golf Club financially but also the sanctioned 

some staff for the golf course. The Club had to face yet another problem. The land on gold 

Road, near the Race Course, occupied by the club for its Gold course actually belongs to the 

Govt. which needed it for its own use. After a lot of efforts, however this problem too found a 

satisfactory solution when Nazul Land, belonging to the Zamindars of village Mianmir, 

measuring 167 acres, was leased out by Govt. to the gymkhana Club on 1st April, 1921. 

The golf membership up to the independence in 1947 consisted mainly of foreigners, it was 

only in the year 1949 the golf started becoming popular amongst the Pakistani Members of the 

Gymkhana Club. During this period, considerable improvements were made to the course. 

Originally the course had only 15 holes, the first and the last two holes, being played again, 

from different tees, to make a total of 18 holes. The present 13th, 14th and 15th holes, in the 

triangular area, were later constructed to have a proper 18-hole course. 

Major General Said Ghawas who became the President of the Club in 1961 was another golfer 

who effected more improvements to the course. The Course hitherto had sand 'browns; and the 

irrigation of the course depended on water supply from canal which was inadequate. He got 

the sand 'browns' covered with local grass and installed an electric water pump for watering 

the course and the flat 'greens'. More improvements were brought about during the years 1962, 

1963 and 1964 when Maj. Gen. Khawaja Wasiullah was elected as President of the Golf Club. 




JANURAY 2011 

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He not only re-designed the course but also converted the existing sub-standard 'green' into 

properly shaped and regular 'green' for which specially-cultured grass was imported from 

Delhi. In this task, he was assisted by (late) Mr. A.R. Ansar and Ch. Nasurallah Khan. 

Honorary Secretaries of the club during 1962-63 and 1963-64 and underground pipelines to 

irrigate the course for water supply were installed. In addition, a large number of trees were 

planted all over the course which added considerably to its beauty. A beauty club house was 

made in 2004 with the underground parking facility for 80 cars. In addition to this modern 

double story lighted driving range was added in 2006 with 18 bays on each floor. The Course 

is now 6554 yards par 72. The layout was been changed over the years the most significant of 

the changes being done by Mr. Tulu Rana. He changed the par 5 11th hole which is now 

475yards long into a replica of the 13th hole at august. The par 3 17th was replicated as the 

signature par 3 at pebble beach. The finishing hole is a beautiful par 4 404 yards long with 

water in play all along from the tee shot right through to the green on the left side and rough 

on the right. 

In recent times, any discussion on the hotel industry only veers around the falling occupancy 

rates and average room rates and the trying times that the Pakistani hotel industry is going 

through. Also, room supply in the five-star segment has grown by only 3 per cent over the last 

five years and consequently this has not been an area of concern in the past as new capacity 

additions in the five-star segment in the metro cities have been slow. It is expected that in the 

metro cities, after three to four years, the hotel industry is expected to face major problems on 

the supply side. However, we would regard these as a long-term concern. The slow growth in 

room supply in the past can be attributed to the high land costs, long gestation periods, license 

problems and the scarcity of good locations. 

The hotel sector boomed from 1992 to 1996. Led by the lure of easy money and missed 

perception that hotels can be a simple business, profitable (especially the five-star segment) 

and is easy to get a foreign tie-up prompted many companies in the construction and real 

estate business to enter the arena. For past two years, almost all major hotel chains have 

unveiled plans to expand into the three- and four-star segments in smaller towns. As the 

growth in metro cities is getting saturated, hotel chains are looking on to this segment for 

future growth. 


In this specific project the researcher is finding out the reasons for the un-satisfaction among 

employees working at lower level in the organization with the help of accumulated secondary 

and primary data. And provide the organization with the solution or recommendations so that 

to control the situation and can produce motivated work force. 

The rationale for adopting a study consists of two phases ranging from general to specific 

reinforced the view that a multistage methodology would be most efficient in addressing the 

stated aims and objective. Two main techniques for collecting the necessary data are used in 

this research. These techniques are as under 

i. Primary data 

ii. Secondary data 

The data is collected through personal visits and drop off and pick up of the questionnaire. 

Some of the employees filled the questionnaire by themselves and great number in these 




JANURAY 2011 

VOL 2, NO 9 

employees are of supervisory or manager level. Several lower level employees also filled 

some of the questionnaires but most of the questionnaires are filled by the researcher by 

asking the questions from the staff. The main respondents for this research are the employees 

working with the organization presently. In which employees from every levels of the 

company are included i.e. Manager Level, Supervisory level and Lower level staff. 

Salary 

Table 1 

Parameters Frequency Percentage 

Very Satisfied 15 12.5 

Somewhat Satisfied 25 20.8 

Neutral 40 33.3 

Somewhat Dissatisfied 30 25.0 

Very Dissatisfied 10 8.3 

N/A 0 0.0 

Total 120 100.0 

From the above results it is clear that most of the people are satisfied with the salaries they are 

getting from the company but 25 percent of them are somewhat dissatisfied and only 8.3 

percent of them are strongly dissatisfied with their salaries. 

Benefits 

Table 2 







N/A 0 0.0 

Total 120 100.0 




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VOL 2, NO 9 

Most of the employees of the company are satisfied with the benefits they are getting as 

compared to their services. It is clear that ratio of satisfied employees is higher than the ration 

of dissatisfied employees and it means company is providing most of the employees with the 

facilities according to their capabilities. 

Bonuses 

Table 3 







N/A 0 0.0 

Total 120 100.0 

The 8.3 percent of the employees are strongly satisfied with the company bounces, 20.8 

percent are satisfied, 33.3 percent are neutral, 25 percent are dissatisfied and 12.5 are strongly 

dissatisfied with the company policy regarding bounces. So in this regard there is room for 

improvement for the company. 

Pay and Performance 

Table 4 







N/A 0 0.0 

Total 120 100.0 

It is clear from the result that satisfied and dissatisfied employees of the company are 

approximately equal in percentage. As some of the employees are agreed / satisfied with the 




JANURAY 2011 

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pay they are getting according the their work performance and other are not satisfied at all 

with their pay and work 

Security / Pension Plan 

Table 5 







N/A 0 0.0 

Total 120 100.0 

Most of the employees are not satisfied with the policies of the company about pension plan 

and security regarding job which is clear from the above mention results. And 29.2 percent 

employees are neutral in this specific case. 

Workload 

Table 6 







N/A 0 0.0 

Total 120 100.0 

It is clear from the results that 15 percent of the employees are strongly satisfied with the 

workload, 20.8 percent are satisfied, 35.8 are neutral, 24.2 percent are dissatisfied and 4.2 

percent are strongly dissatisfied. 




Work Hour Flexibility 

Table 7 







N/A 0 0.0 

Total 120 100.0 

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Work hour flexibility is available which is clear from the results. Most of the employees are 

satisfied according the accumulated results as compared to the employees which are 

dissatisfied from the working hour flexibility. 

Table 8 

Physical Working Environment 







N/A 0 0.0 

Total 120 100.0 

Physical work environment is also relaxed for the employees. 20.8 percent of the employees 

are strongly satisfied, 25 percent are satisfied, 29.2 are neutral, 20.8 are dissatisfied and only 

4.2 percent are strongly dissatisfied. 




Advancement Opportunity 

Table 9 







N/A 0 0.0 

Total 120 100.0 

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In the advancement opportunity the satisfied and dissatisfied employees of the company are 

equal in percentage according the results as shown above in the Table 9 and Figure 9 as well. 

Job Security 

Table 10 







N/A 0 0.0 

Total 120 100.0 

Job security is not available with in the company as the employees of the company do not feel 

their job secure while working with the company. It seems that they are not sure about their 

job and they can be asked to leave the job any time. 




Decision Influence 

Table 11 







N/A 0 0.0 

Total 120 100.0 

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VOL 2, NO 9 

According to the accumulated results it is clear that most of the employees have the abilities 

and can influence the decision which are being taken against their interests or the decisions 

which are not favorable for most of the employees. 

Success Influence 

Table 12 







N/A 0 0.0 

Total 120 100.0 

It is clear from the above results that most of the employees have the abilities to influence day 

to day company success as 10 percent are strongly satisfied, 27.5 percent satisfied, 30.8 

percent neutral, 24.2 percent dissatisfied and 7.5 percent are strongly dissatisfied. 




New Technologies 

Table 13 







N/A 0 0.0 

Total 120 100.0 

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VOL 2, NO 9 

Opportunities for the usage of new technologies are very bright and available within the 

company for most of the employees and that is why most of the employees are satisfied with 

the availability of these opportunities. 

Table 14 

Interesting Projects 







N/A 0 0.0 

Total 120 100.0 

Opportunities for new and interesting projects are also available in the company to some 

extents as the percentage of satisfied and dissatisfied employees in this specific case is 

approximately equal. 




Table 15 

Recognition from Supervisor 







N/A 0 0.0 

Total 120 100.0 

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VOL 2, NO 9 

It is clear from the results that most of the employees are dissatisfied with the recognition they 

received from their respective supervisor. The percentage of satisfied employees is less than 

the percentage of dissatisfied employees of the company. 

Supervisor Capabilities 

Table 16 







N/A 0 0.0 

Total 120 100.0 

Most of the employees are satisfied with the capabilities of their respective supervisors. As 

14.2 percent of employees are strongly satisfied, 20.8 percent are satisfied, 33.3 percent are 

neutral, 20.8 percent are dissatisfied and 10.8 percent are strongly dissatisfied with the 

capabilities of their supervisors. 




Supervisor Involvement 

Table 17 







N/A 0 0.0 

Total 120 100.0 

JANURAY 2011 

VOL 2, NO 9 

Most of the employees are not satisfied with the involvement of their respective supervisor for 

the career development of the employees. As the percentage of the dissatisfied employees is 

greater than the employees which are satisfied that their supervisors are doing their best for 

the employee‘s development. 

Table 18 

Relationship with Supervisor 







N/A 0 0.0 

Total 120 100.0 

It is clear from the results that most of the employees do not have good relations with 

their respective supervisors as the percentage of the employees that are not satisfied is greater 

than the percentage of the employees which are satisfied with the relationship with their 

supervisors. 




Table 19 

Relationship with Colleagues 







N/A 0 0.0 

Total 120 100.0 

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VOL 2, NO 9 

The percentage of the employees having good relationships with their colleagues is 

approximately equal to the percentage of the employees which are not maintaining good 

relationships with their colleagues. 

Table 20 

Relationship with Members 







N/A 0 0.0 

Total 120 100.0 

Most of the employees are maintaining good relationships with the members of the company 

as the members can make complain against the employees. Few of them do not have good 

relationship with the members due to their job nature. 




Business Understanding 

Table 21 







N/A 0 0.0 

Total 120 100.0 

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VOL 2, NO 9 

Most of the employees have knowledge about the business in which they are working as the 

results are indicating that the percentage of employees having business knowledge is greater 

than those employees who have less knowledge about the business core values. 

Table 22 

Satisfaction with Company 







N/A 0 0.0 

Total 120 100.0 

The employees satisfied with the company are approximately equal in percentage as compare 

to employees not satisfied with the company. But it is clear from result that the percentage of 

strongly satisfied employees is greater than the percentage of dissatisfied employees of the 

company. 




Table 23 

Satisfaction with Job 







N/A 0 0.0 

Total 120 100.0 

JANURAY 2011 

VOL 2, NO 9 

The same case is here as in the satisfaction with the company. The percentage of satisfied and 

dissatisfied employees is equal but the strongly satisfied employees are greater in number as 

compare to the dissatisfied employees. 

Table 24 

Manager Effectiveness 


Strongly Agree 30 25.0 

Agree 35 29.2 


Disagree 15 12.5 

Strongly Disagree 5 4.2 

N/A 0 0.0 

Total 120 100.0 

According to results it is clear that most of the employees are agreed with the effectiveness of 

their respective manager. The percentage of the agreed employees is comparatively very high 

than the employees which are disagree. 




Table 25 

Manager Communication 



Agree 40 33.3 




N/A 0 0.0 

Total 120 100.0 

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VOL 2, NO 9 

Most of the employees of the view that their respective managers are flexible in 

communication with their staff and it can easily be understandable through the accumulated 

results. The percentage of the agreed employees is very high. 

Table 26 

Manager Work Recognition 



Agree 35 29.2 




N/A 0 0.0 

Total 120 100.0 

It is clear from the results that managers are working closely with their subordinates and pay 

them attention. They recognize good work of their employees and encourage them to keep it 

up. 




Table 27 

Manager Leadership Qualities 



Agree 35 29.2 




N/A 0 0.0 

Total 120 100.0 

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VOL 2, NO 9 

The managers of the company have leadership qualities and abilities according to the data 

received from the employees of the company. The percentage of agreed employees in this 

specific case is also very high. 

5. Conclusion and Recommendations 

According to the accumulated data it is concluded that most of the employees of the Club are 

neutral about their earnings, benefits and bonuses they are getting from the company. Whereas 

the work load and flexibility is concerned most of the employees are also neutral in this 

specific case. In these results it can easily concluded that most of the employees feel secure 

while working with the Club as well as pension / security plan is also attractive for the 

employees. Decision influence and success influence is also have great role among the staff of 

Royal Palm Golf & Country Club. The Club is using new technologies and also starts 

interesting projects with advancement opportunities for the employees. Most of the staff is 

agreed with the strengths of their managers. They accept that their managers have leadership 

qualities, what to do and how to do, effectively communicate and coordinate with 

subordinates. 

Employees of the Club are not fully satisfied with the role of their supervisors. According to 

the results the supervisors are not fully involved them with their subordinates during their 

completion of work. The same is the case about the relationship of the employees with their 

respective supervisors as most of the employees are strongly dissatisfied about this 

relationship. Most of the employees are satisfied with the performance of their supervisors as 

they posse‘s capabilities to supervise them but employees are strongly dissatisfied with their 

supervisors as they do not get recognition from them upon good work accordingly. 

Now a day‘s most of the organization is spending a big portion of their budgets for the 

development of the employees. And it is also necessary for every organization to develop their 

Human Resource department to compete with the other organization working in the industry 

by having a strong and intelligent team so that to have better market share and strong position 

in the industry. 




JANURAY 2011 

VOL 2, NO 9 

Managers should take the responsibility for the strong relationship within the employees of 

their respective departments. Management should work hard on developing a good HR system 

to compete with their competitors. Management should pay deep attention to the supervisors 

by providing them necessary trainings and educate them to how they can get work from their 

subordinates with motivation. By doing this willing workers can be produced. The 

communication gap between the employees and the Chief Executive should be minimized by 

making monthly meetings in which they should discuss the company‘s problems. They should 

meet the employees facing the problem for their better solution. To reduce high turnover rate 

RPGCC should improve their salary package, bonuses and other fringe benefits. 

Management should provide the employees with friendly work environment, more flexible 

working hours and with appropriate work load. To maintain the record of 550 employees 

properly more people should be hired in HR office. After being successful in Golf club the 

management should make their name in Hotel Industry. 




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JANURAY 2011 

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Effect of Organizational culture on Success of Knowledge 

Management system's implementation 

(Case Study: Saderat bank in Isfahan province) 

Seyed Mohsen Allame 

Assistant Professor and Member of Scientific Board of Management Team in Isfahan 

University. 

Bagher Asgarnejad Nouri 

PhD Student in Business Management Major (Marketing Trend) Isfahan University 

Seyed Yasin Tavakoli 

M.A Student in Business Management Major (Financial Trend), Isfahan University 


MA of Industrial Management from Imam Sadeq University 

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Abstract 

The purpose of this research is to test intermediatory effect of organizational culture model in 

relation between knowledge management and organizational benefits and also to study the 

positive relation between knowledge management and organizational benefits. This subject is 

related to strategic issues of the organization like sharing of knowledge and creating of new 

capacities for taking action through learning process. Organizational culture has been 

recognized as one of the main factors in knowledge management success and is the original 

source of competitive benefit for the organization, so it could gain its purposes through this 

way. The newest substantial change in business shows that managers should have cooperation 

and information sharing instead of knowledge saving. The model's changing of direction 

towards knowledge management has guided many organizations to the direction to resort to 

knowledge management as a competitive benefit in order to gain their purposes. The required 

data has been collected by distributing of questionnaires among ninety-eight (98) employees 

from various branches of Saderat bank in Isfahan province who have been selected by simple 

random sampling method. We have used two questionnaires in this research: organizational 

culture assessment instrument (OCAI) of Cameron and Quinn (1999) that measures four types 

of organizational culture (clan, adhocracy, market and hierarchy) and Lawson's knowledge 

management assessment instrument (KMAI) (2002) which measures knowledge management 

(creating, acquiring, organizing, saving, disseminating and implementing of knowledge) and 

organizational benefits (growth, innovation and competitive benefit). Obtained results of this 

research demonstrate that knowledge management and organizational benefits have a high 

positive mutual correlation with each other. Also we have reached to the conclusion that 

organizational culture does not have an intermediatory effect on the relation between 

knowledge management and organizational benefits. 

Key words: Organizational Culture, Knowledge Management, Organizational Benefits, 

Organizational Culture Assessment Instrument of Cameron and Quinn, Lawson's knowledge 

Management Assessment Instrument. 





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Concept of organizational culture has been recognized as a key variable in success or failure 

of knowledge management for managers. According to Schein (1985) "a deeper understanding 

of cultural issues in organizations is necessary not only for decoding of what will happen in 

the organizations but more important for identifying of preferable issues for managers and 

leadership". Recent researches show that some of the organizations will encounter with 

problems in implementing and executing of knowledge systems, since some individuals 

perceive their knowledge and proficiency as a tool for protecting of their profession (Cabrera, 

Bonache, 1999; De Long and Fahey, 2000). Such intellectual mentality has relation with 

organizational culture and knowledge management for saving of knowledge. This superficial 

viewpoint has been converted to a major problem in knowledge management projects. 

Because it substitutes individual purposes (knowledge saving= job security) for purposes of 

the organization (knowledge sharing= strategic benefit or advantages). Berry (2000) believes 

that effective knowledge management helps managers in elimination of obstacles between 

"those who know" and "those who don't know". Some individuals believe that saving of 

knowledge will be leaded to become powerful in the organization and this is one of the main 

obstacles for effective knowledge management. But under ideal conditions knowledge must 

be shared freely in order to establish added value for the organization. Today, managers and 

leaders have specified that organizational culture could be a major obstacle against knowledge 

influence. Therefore, understanding of the manner of interaction of organizational culture with 

its application in order to achieve coordination between culture and knowledge is essential in 

each organization. Culture affects management style, relations model and behavior in the 

organization. If organizational culture is based on hostility, the organization will probably fail 

in achieving potential benefits of effective knowledge management system. Some of the 

prevalent organizational successes or failures are the result of disproportionality of 

organizational culture and strategy. Many researchers have put emphasis on importance of 

competitive situation through strategic cultural development for knowledge management 

(Bardick, 1998; Cabrera, Bonache, 1999; Schein, 1996). As a result, effective knowledge 

management involves being a part of general strategy of the organization. It is only in this 

state that knowledge management could help knowledge influence in the organization with 

more efficiency and effectiveness. This research studies the relation between knowledge 

management and organizational benefits (competitive benefit, growth and innovation) and 

intermediatory effect of organizational culture on this relation. 

2. Basis and Framework of Organizational Culture 

Culture is a model of norms, values, beliefs and attitudes which affects organizational 

behavior. Schein (1984, 1992, and 1999) has analyzed organizational culture on three levels: 

i. Artifacts that are defined as observable organizational structure and processes and 

precise identification of them is difficult. 

ii. Espoused values including strategies, purposes and general principles. 

iii. Basic underlying assumptions including beliefs, perceptions, thoughts and feelings. 

Performed researches confirm that culture is shaped by senior executive managers and other 

beneficiaries in the organization during time. Lanegan – Fox & Tan (1997) state: 

organizational culture is a subject that has attracted management units' attention to itself, so 

that organizations have adopted strategies based on culture like comprehensive quality 

management or customer service in order to not to be deferred in the competitive 




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environment. As we proceed towards the 21 century paying attention to the class of major 

characteristics of organizational culture which supports decision making in the best manner 

will be more important. Concept of organizational culture refers to general characteristics of 

an organization; characteristics that include psychological and structural elements and affect 

employees' perception and behavior (Fletcher & Jones, 1992). 

In many research studies special attention is attracted towards field of organizational culture 

and it is recognized as an important independent variable in understanding of employee's 

performance (Atkinson, 2000; Cabrera, Bonache, 1999; Cronan, 2001; Denison, 1996; Hatch, 

1993). Greetz (1973) is the first who has done research about the subject of organizational 

culture. He defines culture as "a system of symbols and signs that members of the 

organization apply in order to perceive their feeling from their experiences". De Long and 

Fahey (2000) have shown that culture judges which knowledge belongs to the organization. 

Barlow and Battean (2000) have proved that culture is disseminated across the organization 

and is regulated and reformed through daily decisions of each individual in business. Feldman 

(1999) has stated that culture is in hierarchical order, since it creates a system of meaning in 

which values have the principal importance and other dimensions will have secondary or 

marginal importance. 

Strong culture could be an important factor in achieving of competitive benefit. Cabrera and 

Bonache (1999) state that defining of culture as a method is possible through which related 

affairs are performed in various organizations. Ritchie (2000) refers to findings from different 

researches and all of them show that organizational culture affects results such as productivity, 

performance, commitment, self-confidence and moral behavior. Obtained results of this 

researcher reveal that organizational culture has a positive effect on attitude and manner of 

thinking of employees. He claims management must perceive the relation between a strong 

culture and positive organizational results. 

Cabrera and Bonache (1999) have reported that if this is the most suitable method for 

performing of affairs in order to obtain success in the competitive environment of the 

organization, then culture will be a property for the organization. On the other hand, if culture 

can't encourage behaviors that are necessary for successful organizational competition, then 

culture is considered as a debt for the organization. 

De Long and Fahay (2000) believe that managers need a framework to identify the manner of 

culture's impact on capability of their organizational unit for creating and implementing of 

knowledge in order to achieve a proportion among the present organization and purposes of 

knowledge management. They can design strategies to adapt themselves with appropriate 

culture or reshape the present culture along with supporting from knowledge management 

purposes of the organization just after doing of this action. Thus CVM which has been 

designed by Quinn & McGrath (1985) will be the main focal point of this research. This 

theoretical model provides a useful conceptual tool for understanding of organizational culture 

and therefore studying of the relation between culture and knowledge management. 

3. Competing Values framework 

Initially framework of competing values was originated from a research that had been 

performed about main indexes of influential organizations. Major questions were asked in this 

research including: what are the main standards to determine whether an organization is 

influential or not? Which of the key factors define effectiveness of the organization? Which 

indexes rule over individuals' mind when their judgment judges the organization's 




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effectiveness? John Camphell et al (1974) have prepared a list of thirty-nine indexes and have 

claimed that it is a comprehensive collection of all possible standards for organizational 

effectiveness. Because of excessiveness of these thirty-nine indexes a statistical analysis has 

been performed in relation to such standards. Its result has been two major dimensions that 

classify indexes in to four principal groups. One dimension differentiates among effective 

standards focused on flexibility, freedom of action, dynamism and mobility and those focused 

on stability, law and order and control. It means that some organizations are effective if they 

are changeable, adaptable and organized. Other organizations will be effective in case being 

stable, predictable and mechanical. This spectrum is spread from organizational adaptability 

and flexibility on one side to organizational stability and durability on the other side. The 

other dimension differentiates among standards focused on internal or intrinsic orientation, 

cohesion and integration, unity and compatibility and that group of standards which 

emphasize upon external or extrinsic orientation, separation and competition. That means 

some organizations are effective if they have coordinated and proportional internal 

characteristics. Other organizations are effective if they are focused on mutual interaction or 

competition with others outside of their boundaries or limits. Such spectrum is spreading from 

organizational connection and coordination from one side to separation (divergence), 

independence and freedom of action on the other side. Figure 1 shows the relation between 

these two dimensions with each other. Influential standards show what they value about 

performance of an organization. These standards define things that are considered good, 

correct and appropriate. In other words, these four groups of standards determine basic values 

that individuals' judgment about each organization is based on them. 

Flexibility and freedom of action 

clan 

Stability and control 

Adhocracy 

Hierarchy Market 

Figure 1: Competing Values framework (Cameron and Quinn, 2006) 




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What is interesting about these four classes of basic values is that they show opposite or 

conflicting hypotheses. Each spectrum specifies basic values which is the opposite of another 

basic value on the other side of the spectrum, for instance flexibility against stability and 

internal against external. 

4. Major types of culture 

4.1 Hierarchy culture 

The first method for organizing in the modern era is based on activity of Max Weber, a 

German psychologist who has studied government organizations at the beginning of the 

1900's. Production of goods and services in an efficient manner for a society with increasing 

complexity was the major challenge that organizations were encountered at the end of 

twentieth century. To do this Weber (1974) has proposed seven characteristics that today are 

recognized as classic signs of bureaucracy: rules and regulations, professionalism, elitism, 

hierarchy, isolated and independent ownership, being impersonal and accountability. Such 

characteristics were very effective in achieving to purposes and were adopted extensively by 

organizations whose main challenge was establishing of an efficient, confidential, perfect and 

predictable output. Indeed until the 1960's every book about management and organizational 

studies asserted that bureaucracy hierarchy was a desirable and ideal shape of the 

organization, since it was resulted to stable, efficient and very firm products and services. 

While the environment was relatively stable, duties and functions could have been integrated 

and coordinated and steadiness in products and services was preservable and workers and jobs 

were under control. Clear lines of decision making authority, rules and regulations, 

standardized procedures, controlling mechanisms and accountability are considered as the 

main keys of success. Organizational culture is described as compatible with this shape which 

is a formal and systematic place for working. Procedures control what individuals do and 

effective managers are appropriate coordinators and organizers. Preserving of an organization 

that works well and perfectly is important. Long-term concern of the organization includes 

stability, predictability and efficiency. Formal rules and regulations and policies lead to 

cohesion and integration in the organization. 

Organizations from fast food restaurants (like Mac Donald) and major productive groups (like 

general motors company) to governmental agencies (like ministry of justice) have hierarchy 

cultures. 

4.2 Market culture 

It is another shape of organizing that was prevalent at the end of the 1960's when 

organizations were encountered with new competitive challenges. This shape is originally 

based on a different collection with assumptions of hierarchy culture and is highly according 

to activities of Oliver Williamson (1975), Bill Ouchi (1998) and their associates. These 

organizational researchers specified another collection of activities which acts as the effective 

foundation and basis of the organization based on their argument. Transactional expense is the 

most important of them. 

The new design refers to the organization's market. The term "market" is not synonymous 

with marketing duty or consumers in the market; rather it points to a kind of organization that 

acts as a market. Such organization is inclined towards external environment instead of 

internal affairs and is focused on transactions with main external customers such as providers, 

customers, contractors, licensees, unions and law makers. Contrary to hierarchy culture, 




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internal control is preserved by aid of rules and regulations. Professional jobs and decisions 

are concentrated. Market culture is initially acted through economical market's mechanisms 

and mainly through money dispute, that is, the main concentration is on performing of 

transactions (disputes, sales and contracts) with other customers for creating of competitive 

benefit. Productivity, power and capability in market's situation, extensive purposes and being 

confident about customers' support are among the main purposes of the organization. 

Competition and productivity are basic values that signalize organizations of the market type. 

Competition and productivity are facilitated through strategic emphasis on stabilizing of 

situation and external control in market organizations. For example missing of market share in 

Philip Electronics in Europe has been resulted to innovation and initiation in the company in 

order to improve competitive situation of the company. The world organization has 

established a process called Centurion under the leadership of a new director general. A 

common and collective attempt has been done based on it to change culture of the 

organization from a relatively self-satisfied, arrogant and hierarchical culture which has been 

created through concentration upon the customer, surplus output of properties and better 

corporate competition. From the beginning of the 1990's to the middle of this decade 

movement towards market culture has been performed. Main hypotheses in market culture are 

that external environment is not perfect, rather it is enemy; consumers are selectors and 

interested in being respected; the organization is doing business and improves its competitive 

situation and the main task of management is to stimulate the organization towards 

productivity, results, benefit and profits. General George Patton (1994) says "market 

organizations are not interested in keeping of their situation. Let the enemy to do this. Such 

organizations are in progress at any time; they defeat enemies and are always proceeding 

towards the purpose". 

Market culture is a result-oriented working place. Leaders are producers and competitors who 

are working very hard and are obstinate and importune. Putting emphasis on victory is leaded 

to cohesion of the organization. Long term attention is focused on competitive actions and 

having access to extensive purposes. Success is defined in terms of market share and power of 

influence and it is important to proceed in the market and market leadership. 

4.3 Clan Culture 

The third type of organization is shown in the above square on left side in figure 1. This shape 

of the organization is called clan because of its resemblance to a family – type organization. 

Some researchers observed basic differences among types of market and hierarchy of the 

organization in America and clan type of the organizations in Japan after studying of Japanese 

companies at the end of the 1960's and beginning of the 1970's. Common purposes and values, 

connection and cohesion, partnership, independent or inseparable existence and feeling of 

"we" are penetrating in clan type organizations. Such organizations are more similar to 

extensive families rather than economic firms. Special characteristics of clan organizations are 

team working, employee's partnership programs and commitment of the organization with 

regard to employees instead of rules and regulations and hierarchical ceremonies or center of 

the market's competitive benefit. Semi-autonomous working teams that receive reward based 

on team's progress (and not the individual) and employ and expel their members themselves, 

quality circles that encourage and stimulate workers to state recommendations about the 




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manner of their work improvement, performance of the company and the environment in 

which employees have authority and power could be evidences of such characteristics. 

Some of the main assumptions in clan culture include these issues: the environment could be 

managed through team working and progress of the employee in the best manner, customers 

are considered as the best partners, the organization is responsible for developing of a human 

working environment and giving authority to employees and facilitating of partnership, 

commitment, honesty and sense of duty are the main tasks of management. 

Clan culture is a sample of a friendly and familiar place for working (where people share a lot 

of themselves). This culture is similar to a large family. Leaders are considered as instructors 

and preceptors (mentor i.e. guide) and perhaps as parent figures. Cohesion and connection of 

the organization is resulted from honesty, sense of duty, common law and tradition. There is a 

high level of commitment and the organization puts emphasis upon long-term benefit of 

individual development and progress. Cohesion and unity are high and employees' spirit is 

significant. Success is defined based on internal conditions and atmosphere and giving 

importance to human individuals. The organization values team working, partnership, 

agreement and public congregation. 

4.4 Adhocracy Culture 

When the developed world moved from the industrial era towards the information era four 

types of organizing appeared simultaneously. This kind of organizing is an organizational 

shape that shows the most rapid reaction against too much distraction and agitation and 

conditions which are always getting faster and increasingly demonstrates 21 century. New 

assumptions have been developed by rapid reduction of products and services' benefit life and 

are completely different from assumptions of three other forms of the organization. These 

assumptions include the fact that innovation and creativity lead to success, organizations are 

initially entered in to business and developing of new products and services and preparation 

for the future. And the main task of management is to accelerate entrepreneurship, creativity 

and activity based on the latest scientific methods. It is assumed that adaptation with 

environmental conditions and innovation and initiation will be leaded to new resources and 

productivity. Therefore more emphasis has been on creating of a kind of insight towards 

future, organized disorder and analysis of law and order. 

The term adhocracy comes from the adho root which points to a transitional and temporary, 

professional and dynamic thing. Most people perform their duty in an ad hoc task force or 

committee and this will be broke up as soon as mission of this group with special task is 

finished. Similarly adhocracy is temporary. It is described as "tent instead of palace", in terms 

of the fact that adhocracy can form a new shape in case of establishing of new conditions. One 

of the main purposes of adhocracy is to give recognition to adaptability, flexibility and 

creativity when lack of confidence, ambiguity and repeated use of information is common. 

Producing of innovative products and services and rapid adaptation to new opportunities is 

one of the significant challenges of adhocracy organizations. Adhocracy does not concentrate 

power or relations' authority unlike market or hierarchy culture. Rather power is flown from 

one person to another person or from one commission team to another one, depending on what 

issue or difficulty is considered at that time. 

Individual identity and personality, risk acceptation and prediction of future are emphasized 

highly, so that each person in an adhocracy organization is involved with production, 




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customers, research and development and other important issues. For instance, every 

customer's demand in a counseling company is treated as an independent project and a 

temporary organizational design is set up for performing of this mission. The structure will be 

broken up while the project is completed. 

Briefly, adhocracy culture is specified with a dynamic, entrepreneurial and creative working 

environment. People stick their necks out and take risks. Commitment to operational 

experiment and experience and innovation create cohesion and integration in the organization. 

Emphasis is highly put on being on the first line of knowledge and new products and services. 

Preparation for change and accepting of new challenges are significant. Long-term emphasis 

of the company is on fast growing and obtaining of new resources. Success means producing 

of unique and new products and services. 

Type of culture: clan 

Orientation: participatory 

Type of leader: facilitative, instructor 

and preceptor (mentor i.e. guide), 

builder or architect of team 

Value incentives: commitment, 

relation, development and progress 

Theory of effectiveness: human 

development and participation leads to 

effectiveness. 

Type of culture: Hierarchy 

Orientation: control 

Type of leader: coordinator, 

supervisor, organizer or founder 

Value incentives: efficiency, 

appropriateness, stability and 

steadiness 

Theory of effectiveness: control and 

efficiency with efficient processes 

lead to effectiveness. 

Flexibility and freedom of action 

Stability and control 

Figure 2: Competing values of leadership, effectiveness and organizational theory 

(Cameron and Quinn, 2006) 

Type of culture: Adhocracy 

Orientation: creative 

Type of leader: innovative, 

entrepreneur, fancier or imaginary 

Value incentives: innovative output, 

metamorphism, agileness 

Theory of effectiveness: innovation, 

insight and new resources lead to 


Type of culture: market 

Orientation: competitive 

Type of leader: hard driver, competitor, 

generator 

Value incentives: market share, 

achieving purpose, productivity 

Effectiveness theory: competition 

along with aggressive aspect and 

focusing on customer lead to 





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5. Organizational learning and knowledge management 

Organizations like human beings won't probably be successful unless they could learn from 

previous events of their environment, transfer such knowledge across the organization and 

regulate their behavior as it is required in reaction with regard to the acquired knowledge 

(Goh, 1998). According to Peterson & Hicks (2000) organizations need to operate learning 

process in order to establish learning culture and indulge talent and genius. Organizational 

learning has attracted too much attention to itself in organizational literature (Argris & Schon, 

1978; Hall, 2001; Quinn & Cameron, 1099; Schein, 1993; Sange, 1990). 

Kolb's model describes learning in the form of a four-phase cycle which is started from 

experiencing and moves with thinking and reflection and conceptualization and then it reaches 

to experimentation and is accompanied with re-starting of the cycle. As the world changes 

organizations must learn to change for life continuation and faster growing. The most essential 

priority of learning is how to learn rapidly. Organizations must know that learning is a 

necessity not a choice (Schein, 1993). 

Sange (1998) states that sharing of knowledge is happened when individuals are sincerely 

interested in helping each other in creating of new capabilities for taking action and activity. 

Sharing of knowledge has relation with learning process creation. Popper and Lipshitza (1998) 

have represented a two-level approach (structural and cultural) for organizational learning. 

Structural level is focused on mechanisms of organizational learning. These mechanisms are 

institutionalized structural and procedural arrangements that allow organizations to perform 

collecting, analyzing, saving, disseminating and applying of information related to 

performance of the organization systematically. Cultural level is focused on shared values 

without which learning mechanisms will probably have ceremonial aspect instead of being a 

method for identification and modification of mistakes. Sange (2990) states a clear reason for 

being converted to a learner organization. He has summarized the process of achieving to a 

learner organization and core of the learner organizations in system theory. Garvin (1993) 

says: "a learner organization is the one that is skillful in creating, acquiring and transmitting of 

knowledge and regulating of its behavior in order to reflect new knowledge and insight." 

Purpose of the learner organization is to implement change in organizational culture that has 

relation with environmental encouragement for strategic change for effective knowledge 

management. Melander (2001) recommends that knowledge management innovation could 

not be durable or successful in any environment in which suitable conditions have initially 

been provided for learning. 

Model of learner systems is constituted of three main elements- focus, will and capability 

(Drew and Smith, 1995). 

i. Focus means clear and obvious understanding of path and insight and is resulted from 

strategic thinking, knowledge and recognition of key decision making groups. 

Probably it has been symbolized with separated and obvious parts in strategic 

programs. 

ii. Will is the power of strategic purpose. Having tendency towards determining of 

extensive purposes and encountering with various challenges is the feature of groups 

and organizations with a high level of will. Will needs emotional commitment and 

high levels of energy which could be the result of nervous state and stress caused by 

disatistisfaction from the present situation. 




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iii. Capability is in relation with a limited number of learned skills that are limited to the 

organization at a certain time. It is a feature of high ranking decision-making teams, 

organizational history and its culture. Capability includes ability and freedom with 

regard to taking action. 

Drew and Smith (1995) believe that this three-phase cycle (focus, will, and capability) has 

simplicity and elegance advantages in perception and conceptualization. This structure is very 

useful as a tool in simulation, discussion and negotiation about subjects related to fundamental 

change. History shows that results of failure in distinguishing and understanding of change 

could be destructive. According to Sange (1990) responding to change is vital, because change 

is inevitable and accepting of it is converted to inseparable part of the process and therefore, 

the organization could continue its life. 

Goh (1998) has specified five strategic elements that are considered as key factors in the 

model of the learner organization. These five elements include: 

i. Mission and insight- clarification and support of employees from mission, strategy and 

values of the organization. 

ii. Leadership- it means giving of freedom of action to employees, fostering of 

experiment and experience culture and showing of a strong commitment towards the 

organization. 

iii. Experiment and experience- experiment and experience culture that is admirable in all 

levels of the organization and is supported. 

iv. Transmission of knowledge- capability of an organization for transmission of 

knowledge inside and outside of the organization and learning from failures. 

v. Team working and cooperation- putting emphasis on team working and group problem 

solving as a working method and creating of innovative ideas. 

Goh (1998) suggests that establishing of powerful learning capability is too vital for 

corporations that are active in a very competitive environment. Although these five elements 

are explained as separated dimensions but in fact they act dependently in a learner 

organization and enjoy mutual support of each other. As it has been mentioned "a learner 

organization is an organization in which employees are allowed to act through familiarity with 

priorities of the organization and based on obtained knowledge and the related skills". 

Sange (1990) has offered a systematic model of thinking and action that if it is followed 

correctly, it could be applied as a basis in creating of a learner organization. Sange believes 

the process should be started by specifying of a thing which he called "seven learning 

disabilities" for changing of what exists now. These seven items are (Kathun, 2000): 

i. I am my job 

ii. The enemy is outside there 

iii. An absurd notion, accepting of responsibility 

iv. Focusing on results 

v. Story of a boiled frog 

vi. Hallucination of learning from experience 

vii. Myth of management team 

I am my job; generally individuals are trained in a way to be loyal to their profession and job. 

Such loyalty to job takes root in some people that their job is converted to a part of their 

identity. The enemy is outside there; when the individual just pays attention to himself and 

can't see beyond of his actions. While a problem occurs, the external source is in fault. An 




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absurd notion, accepting of responsibility; when an organization is encountered with a 

problem this feeling is existed and it is necessary for the management to act activistically. 

Focusing on results; learning could not be permanent in an organization in which individuals 

are focused on short-term growing or a single result. Story of boiled frog; an organization that 

returns from its daily dazzling speed in order to witness gradual changes in a process is 

necessary for learning and (pay attention to subtle as well as the sudden). Hallucination of 

learning from experience; the most powerful learning is the result of direct experience. We 

can learn from experience in the best manner but we can never experience many results of 

important decisions directly. Myth of management team; most individuals who live with 

micro-management theory and are controlled are the best examples of skilled and experienced 

inefficiency. Such people act very offensively in trying for control and have no general 

understanding and meaning from the process in which special tasks are occurred. 

Sange has introduced five rules in order to be able to convert change to the learner 

organization. These are: 

i. Personal excellence 

ii. Mental model 

iii. Common insight 

iv. Team learning 

v. System thinking 

i. Personal excellence refers to capabilities and skills. It means developing of an 

individual's life as a creative adventure. When personal excellence is converted to a 

rule, an active part of his daily life (takes on two strong movements). The first is to 

shed light on issues that are important and this action is done permanently and 

continuously and the second one is permanent learning of the manner of observation 

and perceiving of the present fact. 

ii. Mental models: what managers know is that many of the best ideas are never inserted 

in the operation and application phase. Especially new insights are not accepted, 

because they are in contrast with too deep internal or mental imaginations which 

restrict the individual with familiar methods for thinking and action. Mental models 

are very strong in affecting individual's action, since they could affect the manner of 

observation and understanding of individuals. It is because that mental model 

management in relation to mental picture is a significant and fundamental step for 

creating of learner organizations. 

iii. Common insight is not an opinion, rather it is a force in person's mind; a power. 

Insight is common when more than one person has similar perception with another 

person and also they should commitment towards having such opinion. Common 

insight is important for learner organizations, because it creates concentration and 

energy for learning. 

iv. Team learning is the process of cooperation and creation of a team for establishing of 

results that members of the team want it really. It is founded based on rules of common 

insight and personal excellence. Team learning has three important scopes: the need 

for wisely thinking about subjects, the need for innovative and coordinated actions and 

role of team members in other teams. Team learning needs action and exercise. 




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v. System thinking correlates other rules with each other and plays a vital role, so that it 

causes durability and life continuation of the learner organization as a whole. System 

thinking has a key role in moving of "I" mentality to "we" mentality. 

Pemberton and Stone (2000) state that organizational learning field or conditions is 

constituted from three factors: 

i. Organizational culture 

ii. Structure 

iii. Substructure 

Moreover, they believe that these factors are a tool through which the organization could 

improve effectiveness and efficiency of learning process and system and knowledge 

management permanently. The first factor, i.e. culture is the most important element of the 

learner organization. Culture of the learner organization is a major emphasis on learning and 

knowledge and creates an atmosphere of confidence in which individuals feel they are allowed 

to test and experience new approaches in business that are often resulted to establishment and 

development of core competences. Pemberton and Stone (2000) call the following cases as 

elements of learner culture: 

� Obvious and clear organizational insight 

� Leaders who are designers, instructors and supervisors 

� Tendency to permanent progress 

� Regarding knowledge as a valuable thing 

� Encouraging of curiosity spirit, asking questions, testing and experiencing through 

giving of freedom of action to individuals 

� Creativity, risk acceptation and tolerating of mistakes 

� Establishing of confidence in order to encourage knowledge sharing inside of the 

organization and with selected friends 

� Putting emphasis on having permanent and good relations 

� Encouraging of socialization and establishing and creating of social concept 

� Practical learning of implicit knowledge 

� External insight with regard to learning from an environment in which the organization 

has activity 

The second element, i.e. structuring for learning and knowledge management requires flat 

organizations along with reducing of interfunctional boundaries. Organizational knowledge 

should be holistic to create this confidence that professional knowledge is completed perfectly 

from related grounds. Having a matrix structure is a method for fostering of a holistic 

viewpoint from knowledge. Quinn (1992) states that finally network organizational structures 

are perhaps the most suitable structures to support a learner culture, since such structures have 

little hierarchical features and have different forms. Also Stone and Pemberton (2000) have 

said although there is no single structure to support learning uniquely but it appears that giving 

freedom of action and authority to individuals along with a flat network structure could help 

knowledge management facilitation. These structures could increase interfunctional relations 

and decrease task obstacles. 

The third element, i.e. substructure and communications are the integral part for creating of a 

learner organization. Information developments especially in the scope of information and 

communications technology (ICT) play a vital role in providing of the required substructure in 

order to support from network structures and organizational learning. According to Stone and 




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Pemberton (2000) information and communications technology causes to alteration and 

transformation of individuals and organizations' capability in order to increase their intelligent 

and awareness through accelerated learning. Information and communications technology has 

been resulted to increasing potential possibility of knowledge sharing among the learner 

organizations too. Saving and exchanging of knowledge has a fundamental role for the 

organization in its knowledge basis application method. Explicit Saving and exchanging of 

knowledge has been simplified by aid of effective media and press. But imperceptible nature 

of knowledge has converted it to a difficult issue. 

Indeed, in addition to systems and substructures that technology supports, instruction plays a 

significant role in knowledge dissemination process. At last, a learner organization can 

achieve a stable competitive benefit if it performs knowledge acceleration. Accelerating of 

knowledge could help creating of a superior thinking and knowledge which creates unique and 

durable talents and capabilities. 

6. Knowledge Management 

Recently concept of knowledge management has become important because of increasingly 

awareness from mental capital in business. Erickson and Rothberg (2000) state that mental 

capital is generally considered as saved knowledge that the organization owns it. Saved 

knowledge means how information is deduced and concluded for solving of problems and 

how information is applied in order to predict customer's behavior. Turban, MaLean and 

Wetherbe (2001) believe that knowledge which is created for solving of problems in the 

organization should be retrieved and re-used whenever the organization is faced with similar 

or same problems. They point out that this simple thinking is a basis for a challenging concept 

and is called knowledge management. Raisinghani (2000) says knowledge management 

concept is about establishing of a structure to be able to combine the most developed elements 

of essential human response and decision making with technical and input resources. 

According to Castle and Sir (2001) knowledge is one of the primary and major resources in 

today economy, in other words learning from previous experiences and applying of 

knowledge in new conditions is the improving basis of future value creation for customers. 

Swanson and Banna (2002) have said "knowledge and knowledge management have been 

converted to a tool to achieve strategic competitive benefit". 

Lee (2000) writes that the last revolution has been focused on capability of an organization in 

intelligent application of knowledge that has now in itself and also the new mental capital 

which is established every day. This writer has also said that collaboration and sharing will 

replace knowledge saving in this new model, interested societies will provide a tool that is 

necessary for permanent progress and technology will be established in order to secure 

efficient transmission of knowledge. For example, purpose of knowledge management is to 

improve organizational performance through designing, implementing and applying of tools, 

processes, systems, structures and culture which is leaded to enhancement of creating, sharing 

and using of each of the three kinds of knowledge necessary for decision making. 

As Berry (2000) claims "managers are able to remove obstacles between those who know and 

those who don't know with effective knowledge management." He states this is not an easy 

task because one of the main obstacles of successful knowledge management is changing of 

the belief "knowledge is power" and we should hoard it instead of sharing it freely. De Long 

and Fahey (2000) say that managers and leaders are increasingly aware that organizational 




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culture could be a major obstacle for application of mental capitals. Understanding of culture's 

impact on knowledge and applying of it in finding a proportion between culture and 

knowledge is essential in each organization. Culture affects the manner of decision making, 

management style and behavior models in the organization. 

Eisenhart (2001) states that successful collection and sharing of knowledge could not occur in 

an environment that is depended on opposition or hostility. Individuals are competing in such 

environment against each other and feel they will endanger their situation and security by 

transferring of their knowledge to others. He recommends that general strategy of a company's 

knowledge management includes managers who encourage knowledge sharing behavior 

inside and across the organization actively, so that various specialists will be inclined to share 

what they know. Ma Dermott (1999) introduces basic conditions for sharing of knowledge. 

Knowledge is different from information, thus sharing of it requires a different collection of 

concepts and tools. He suggests us to specify a society interested in a subject instead of 

identifying of needs and informational tools and then increase capability of this society for 

thinking with each other. Especially for sharing of knowledge the organization must be 

focused on a society which owns knowledge and those who use this knowledge. In other 

words, no attention must only be paid to knowledge. De Long and Fahey (2000) discuss about 

three related topics that are vital in observing of culture as a magnifier in order to perceive 

knowledge dissemination that is, (who controls it, what knowledge and where they are 

located). Elliot and O Dell (1999) introduce four enablers which are important and vital for 

success of knowledge management (culture, technology, substructure and measurement). 

They emphasize that each of these four cases is necessary to achieve a permanent success. Lee 

(2000) writes that: "inclusion of human's collaboration and help is the factor that distinguishes 

knowledge from corresponding data and information with it and this adds more value to the 

individual to whom knowledge is transferred". The new business model of knowledge 

management is differentiated with a historical viewpoint that is the closeness of knowledge to 

request for using of it. Kliala (2000) writes knowledge management is related with 

programming for change, re-evaluation of job and changing of job evaluation method. He also 

states that change will be created as the result of such conversion in working method and 

leadership definition. Knowledge management exists when executive managers obtain 

necessary insight for controlling of their business and how they formalize such insight. Gupta, 

Lyer and Aronson (2000) mention "knowledge management is a process in which creating, 

saving, retrieving and disseminating of information and specialty in an organization have to 

do with supporting and improving of its commercial operation". Nonanka and Takeuchi 

(1995) have offered four phases that are usually applied for knowledge management in 

organizations: 

i. Socialization: sharing of experiences through observation, imitation and exercise. 

Socialization is usually occurred by aid of holding of educational workshops, 

seminars, conferences and training. 

ii. Capture: converting of implicit knowledge (i.e. what has been learnt in an educational 

workshop) to explicit knowledge (i.e. written report). 

iii. Dissemination: copying and disseminating of explicit knowledge. 

iv. Internalization: process of experiencing knowledge by aid of an explicit resource, it 

means a person who can mix the experience of educational workshop' studying with 

previous experience. 




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By advent of knowledge management and mental capital as new concepts, more 

researches have been performed in order to study knowledge management. Knowledge 

management is appearing as a significant concept and is usually recalled as innovation 

introduction (Caneiro, 2000; Dove, 1999; Nonanka and Takeuchi, 1995). Although the 

need for effective knowledge management is widely accepted, it is still a hard-learned 

concept. And most performed researches are still looking for studying and exploring of the 

subject. It is difficult to evaluate knowledge management and distinguish its impact on 

results such as innovation, growth, performance of the organization and competitive 

benefit, unless there is a definition from knowledge management which is accepted and 

confirmed widely. 

Ribiere (2000) has represented two major approaches that individuals usually use for 

knowledge management (i.e. sharing of knowledge): codification versus personalization. 

Codification approach is considered for collecting, compiling and disseminating of 

information. Such approach for explicit knowledge management is highly depended on 

information technology, while personalization approach is concentrated on creating and 

extending of networks for establishing of relations among the individuals, so it is possible 

to share implicit knowledge. Ribiere' study about characteristics of personalization 

approach is summarized in the table below: 

Table 1: Knowledge-personalization approach (Hansen, Nohria and Tierney (1999)) 

Competitive strategy Offering efficient, creative and precise recommendations about high 

level strategic issues through transferring of skill and personal 

specialty 

Economic model Demanding of high ---- for tailor made solutions about special 

Knowledge 

management strategy 

Information 

technology 

issues. Using of small equipments with low proportion of 

association and correlation for members. Concentration on marginal 

preserving of high profit. 

Person to person: creating of networks for establishment of relation 

among individuals in order to share knowledge 

Competitive strategy provides efficient, creative and precise 

recommendations about high level strategic issues through 

transferring of skill and personal specialty 

Human resources Employing of senior experts of business management who interact 

with problem solving and can tolerate ambiguity. Educate 

individuals with leadership and instructorship in the form of person 

to person. Reward individuals because of direct sharing of their 

knowledge with others. 




7. Standards of Successful Knowledge Management 

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It will be advantageous if someone is able to measure mental capital, especially at present 

that economy is moving forward because of changing technology, increasing globalization 

and speed of business style and growing importance of the conversion. Probably amount 

of error in measuring of it is very high with due attention to unobservable nature of mental 

capital. Melander (2001) states that "if you want to manage knowledge, you should 

measure mental capital or classify unobservable possessions". Dove (1998) believes that 

knowledge is what core competency talks totally about it and competition is related to it 

completely. Measurement of knowledge is considered as an aspect of management as a 

whole that has a minimum progress. Elliot and Edell (1999) state "measurement or 

assessment is a dimension of knowledge management with minimum progress because 

measuring of unobservable things is difficult". Several definitions have been represented 

for mental capital of an organization. Also there are many convincing documents and 

evidences with regard to the need for understanding and measuring of mental capital. 

Therefore, the fair conclusion is to say that it is still soon to predict effective combination 

of a system with financial reporting and current management for successful measurement 

of knowledge. 

8. Organizational Benefits 

Bennett et al (1994) mention many organizational researchers (Denson, 1984; Camere and 

Vaspalian, 1988; Wilkinson and Ouchi, 1993) have clearly understood that common 

values, attitudes, commitments and beliefs and generally meditation and thinking models 

which are created socially among the members of an organization have a remarkable 

impact on long-term effectiveness and performance of the organization. It also will 

impress a suitable organizational culture along business improvement and health. 

Melander (2001) says that ability of a manager in transforming of a company in order to 

encounter with future challenges of market depends on his ability in attracting of human's 

soul and spirit, i.e. capturing of individuals' heart and mind in a way to accept change and 

embrace it and perform appropriate actions to improve business performance in their daily 

profession. Concept of knowledge management is appearing as one of the main and 

important issues in today business, so that executive managers have perceived more than 

ever that applying of it is the distinct factor of success from failure. Acquiring of 

knowledge is the integral feature of cultural and learning environment, so it exists inside 

of learner organizations and helps to satisfy global business demands in the twenty-first 

(21) century. Schwarzwalder (1999) says "companies seek for knowledge management 

because they have perceived that it has potential capability to help them in a more 

intelligent and faster activity and in gaining more money by using of what they knew 

previously and what they don't know. Essence of idea of knowledge management is to 

create an environment to share information in it that is accepted freely". He believes that 

organizational culture is the main obstacle in creating of such environment. 

9. Competitive Benefit 

Strategic programming of knowledge management provides a structure and field for 

knowledge cohesion in order to be able to gain a competitive benefit. According to 




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Ordonez and Pablos (2003) knowledge-based resources in an economy with a dynamic 

and complex competitive environment as the main characteristic of it show real source of 

secure competitive benefit for the company. Detienne and Jackson (2001) wrote that: 

"knowledge and knowledge management have been converted to the last strategy in 

increasing of organizational competition". Also, Allred (2001) has stressed that 

"knowledge is the heart of innovation and competition". 

10. Growth 

Strategy of a corporation for its growth, development, capability and skill could have a 

considerable importance in relation with future value for the corporation. Today 

innovation must be the main priority in the corporation more than any thing else and it 

should be converted to a living procedure and thus it would be possible to predict 

successful growth. 

11. Innovation 

Knowledge management in present market has a major role in innovation. Senior 

management of the organization supports innovation as the first priority for long term 

growth. Barbara Simpson (2001) wrote: "perhaps permanent management of innovation is 

the most major separate work of the executive manager in the present business 

environment". A corporation could be successful in accelerating of innovation through 

organizational learning process; it first gains knowledge of the corporation and then shares 

it with other members of the organization in a way to be accessible for all. 

This research makes a relation between knowledge management and incremental and 

radical innovation, thus helps more improvement of our understanding from organizational 

benefits of effective knowledge management for competitive benefit and growth. 

According to Twomey (22002) "as corporations design and implement strategies and 

structures in order to gain access to competitive benefit and preserving and keeping of it, 

capabilities and abilities of these corporations must be considered". 

12. Research methodology and statistical analysis 

Studying of the relation between knowledge management and organizational benefits and 

intermediatory effect of organizational culture on this relation is the purpose of this 

research. Conceptual model of this research is shown in figure 3 which is formed from the 

relation of two models with each other. Model of competing values of Quinn and 

McGragh (1985) provides a framework for organizational culture assessment and 

Lawson's research (2002) is focused on knowledge management innovation and 

organizational benefits and designed meters for measuring of them. This model relates 

organizational culture (four dimensions of Quinn and Rohrbaugh) with knowledge 

management and benefits of knowledge management as have been used by Lawson 

(2002). 




Clan 

Knowledge 

management 

Organizational culture 

Hierarchy 

یبم 

Market 

Adhocracy 

Figure 3: Theoretical model of research (Quinn and Rohrbaugh, 1983; Lawson, 2002) 

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benefits 

Competitive 

benefit 

Innovation 

Growth 

Research questions are in a way that three first questions study the relation of knowledge 

management with organizational benefits (competitive benefit, innovation and growth). The 

fourth question studies intermediatory role of organizational culture in the relation between 

knowledge management and organizational benefits: 

i. Is there a relation between knowledge management and competitive benefit? 

ii. Is there a relation between knowledge management and innovation? 

iii. Is there a relation between knowledge management and growth? 

iv. Does organizational culture have an intermediatory role in the relation between 

knowledge management and organizational benefits? 

Research hypotheses are: 

Hypothesis 1: there is a positive correlation between knowledge management and competitive 

benefit. 

Hypothesis 2: there is a positive correlation between knowledge management and innovation. 

Hypothesis 3: there is a positive correlation between knowledge management and growth. 

Hypothesis 4: organizational culture has an intermediatory role in the relation between 

knowledge management and organizational culture. 

Statistical population of this research consists of employees of all branches of Saderat bank in 

Isfahan province. Ninety-one (91) employees have been selected as the research sample with 




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simple random sampling method and all questionnaires have been applied for statistical 

analysis. Tables 2 to 4 show demographic characteristics respectively in terms of gender, age 

and education level: 

Table 2: distribution of sample in terms of gender 

Gender Frequency Absolute Accumulated 

frequency frequency 

Male 71 78.02 78.02 

Female 20 21.97 100 

Total 91 100 100 

Table 3: Distribution of sample in terms of age 

Age Frequency Absolute Accumulated 


Below 30 52 57.14 57.14 

31 to 40 25 27.7 84.61 

41 to 50 13 14.28 98.89 

51 and older 1 1.1 100 

Total 91 100 100 

Table 4: Distribution of sample in terms of education level 

Age Frequency Absolute Accumulated 


Diploma and 

lower 

16 17.58 17.58 

Associates 22 24.17 41.97 

B.A 45 49.45 91.42 

M.A and higher 8 8.8 100 

Total 91 100 100 

Two questionnaires are used in this research: 1- organizational culture assessment instrument 

of Cameron and Quinn (1999) and 2- Lawson's knowledge management assessment 

instrument (2002). We have used content validity in order to ensure questionnaires' validity. 

So, validity of questionnaires has been confirmed by related professors. Assessment 

instrument of organizational culture measures six dimensions of organizational culture: 

prominent characteristics, organizational leadership, employees' management, cohesion of the 

organization, strategic emphasis and success standard. Four questions have been considered 

for each of these six dimensions and each question is corresponding with one of the four types 

of organizational culture (clan, adhocracy, market and hierarchy). Therefore, each type of 

organizational culture is measured with a six-item standard. Lawson's knowledge management 

assessment instrument (2002) is used to measures knowledge management and three types of 




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organizational benefits. Knowledge management will have six dimensions: creating of 

knowledge, acquiring of knowledge, organizing of knowledge, saving of knowledge, 

disseminating of knowledge and applying of knowledge. In this research knowledge 

management is measured with a standard which is totally composed of twenty-four (24) items. 

Three dependent variables are organizational benefits including growth, innovation and 

having access to competitive benefit for the corporation. The collected data has been analyzed 

by SPSS software to obtain descriptive statistics and correlation and LISREL software is used 

to study intermediatory role of organizational culture in the relation between knowledge 

management and organizational benefits. 

Table 5: Distributing of mean, standard deviation, minimum and maximum of 

components of organizational culture 

Minimum Maximum Mean Standard 

deviation 

Clan culture 12 30 20.45 3.59 

Adhocracy 

culture 

12 29 20.61 3.94 

Market culture 11 29 21.06 3.66 

Hierarchy 

culture 

11 29 22.19 3.65 

Based on findings of table 5, scores' range of market culture and hierarchy culture are 

fluctuating between 11 and 29. Scores' ranges of adhocracy and clan cultures are fluctuating 

between 12 and 29 and between 12 and 30 respectively. The highest mean of responses' score 

is related to hierarchy culture with 22.19 and the lowest is related to clan culture. 

Table 6: Distributing of mean, standard deviation, minimum and maximum of 

components of organizational benefits 

Minimum Maximum Mean Standard 

Competitive 

benefit 

deviation 

7 19 13.10 2.71 

Growth 2 10 6.50 1.66 

Innovation 2 10 6.67 1.81 




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Based on findings of table 6, scores' range of competitive benefit is fluctuating between 7 and 

19, and growth and innovation are fluctuating between 2 and 10. Mean of score of competitive 

benefit, growth and innovation are 13.10, 6.50 and 6.67 respectively. 

Table 7: Comparison of distribution of research variables' scores with normal 

distribution 

k-s-z P 

Organizational culture 0.638 0.810 

Organizational benefits 0.990 0.281 

knowledge management 0.688 0.731 

Based on findings of table 7, circumstantial evidence k-s-z is not significant on the level of 

p≤0.5. Therefore, distributing of research variables' scores is according to normal distribution. 

Pierson correlation coefficient has been used to test three first hypotheses about correlation of 

knowledge management with each of the organizational benefits. Pierson correlation 

coefficient shows the amount of linear relation between two intended variables and determines 

degree of linear relation among them. 

Table 8: Correlation coefficient between knowledge management and competitive 

benefit 

correlation coefficient competitive benefit 

r p n 

knowledge management 0.520 0.001 91 

According to results of table 8, correlation coefficient between knowledge management and 

competitive benefit is significant on the level of p≤0.5. Thus, there is a significant relation 

between knowledge management and competitive benefit, in other words the first hypothesis 

is confirmed on significant level of 99%. 

Table 9: Correlation coefficient between knowledge management and growth 

correlation coefficient growth 

r p n 



growth is significant on the level of p≤0.5. Thus, there is a significant relation between 

knowledge management and growth, in other words the second hypothesis is confirmed on 

significant level of 99%. 

Table 10: Correlation coefficient between knowledge management and innovation 

correlation coefficient innovation 

r p n 





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innovation is significant on the level of p≤0.5. Thus, there is a significant relation between 

knowledge management and innovation, in other words the third hypothesis is confirmed on 

significant level of 99%. 

Four steps must be done in order to test intermediatory role of organizational culture: 

Step 1: By means of regression we illustrate that knowledge management predicts 

organizational benefits. 

Step 2: By means of regression we illustrate that knowledge management predicts 

organizational culture. 

Step 3: We show when knowledge management is controlled, organizational culture predicts 

organizational benefits. 

Step 4: If organizational culture is a perfect intermediatory variable between knowledge 

management and organizational benefits, effect of knowledge management should be zero 

while controlling organizational culture. But if three is only one semi- intermediatory variable, 

this effect is reduced to some extent but it is not eliminated. 

Step 1: organizational benefits and knowledge management variables are considered as 

evidence variable and predicting variable respectively. Results reveal that beta coefficient 

between the two variables is equal to 0.639 which has been significant on the level of p≤0.5. 

Step 2: in this step organizational culture and knowledge management variables are 

considered as evidence variable and predicting variable respectively. Results reveal that beta 

coefficient between the two variables is equal to 0.621 which has been significant on the level 

of p≤0.5. 

Step 3: organizational benefits are considered as evidence variable and organizational culture 

and knowledge management are considered as predicting variables. Results reveal that beta 

coefficient between the two variables of knowledge management and organizational benefits 

is equal to 0.445 and between organizational culture and knowledge management is equal to 

0.313, both of which are significant on the level of p≤0.5. 

Step 4: with due attention to the significant relation between organizational culture and 

knowledge management, we can not conclude that organizational culture is a perfect 

intermediatory variable between knowledge management and organizational benefits. 

Intermediatory amount of organizational culture is equal to 0.639-0.445=0.194 

Table 11: Step 1: predicting of organizational benefits based on knowledge management 

B Beta t Sig 

Human benefits 1.88 0.639 7.84 0.001 

Beta coefficient between organizational benefits and knowledge management is equal to 0.639 

based on findings of table 11 that is significant on the level of p≤0.5. 

Table 12- Step 2: Predicting of organizational culture based on knowledge management 


culture 

B Beta t Sig 

0.772 0.621 7.47 0.001 




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Beta coefficient between organizational culture and knowledge management is equal to 0.621 

based on findings of table 12 that is significant on the level of p≤0.5. 

Table 13: Step 3: predicting of organizational benefits based on knowledge management 

and organizational culture 

Knowledge 

management 


culture 

B Beta t Sig 

0.151 0.445 4.48 0.001 

0.132 0.313 3.15 0.001 

Beta coefficient between knowledge management and organizational benefits is equal to 0.445 

and between organizational culture and organizational benefits is equal to 0.313 based on 

findings of table 13 that are significant on the level of p≤0.5. 

13. Conclusion and recommendations 

With due attention to the obtained results, hypotheses one to three that are related to the 

significant relation between knowledge management and organizational benefits (growth, 

innovation and competitive benefit) are confirmed. Also, the fourth hypothesis about the 

effect of organizational culture on the relation between knowledge management and 

organizational benefits is rejected based of these results. So we can not claim that 

organizational culture is the regulator variable for the relation between knowledge 

management and organizational benefits. It is noteworthy that the intermediatory effect of 

organizational culture on the relation between knowledge management and organizational 

benefits has not been studied in previous researches. Perhaps the most important reason for 

not having access to a firm result about regulative role of organizational culture is the role of 

intervening and regulatory factors like emotional intelligence and etc. Thus performing of 

more researches with regard to the relation between these variables is essential. 

With regard to limitations of research we can say sample size is one of such limitations. 

Analysis includes only ninety-one (91) participants among all employees of Saderat bank 

branches in Isfahan province. Therefore, participants have just been selected from banking 

industry. Another limitation of this research is that results are not generalizable to all 

organizations. 

By paying attention to obtained results from this research we can offer the following 

recommendations: 

� With due attention to confirmation of hypotheses 1 to 3 it is recommended that 

managers put holistic implementing and supporting from knowledge management 

system in organizations in the first priority of their tasks in order to obtain 

organizational purposes such as growth, innovation and competitive benefit. 

� Today competitive benefits of strategic attempts along with knowledge management 

have relatively been recognized among all industries across the world. Research results 

give firm evidences and documents about this point that organizational culture has a 

positive relation with knowledge management and organizational benefits programs. 




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Therefore, it is suggested to determine and recognize different types of organizational 

culture with the highest amount of effect on major behaviors with regard to knowledge 

management. 

� It is recommended that future researches focus on human resources to obtain a better 

insight about human factors involved in knowledge management. For example it is 

recommended that future researches include participants from organizations with 

various kinds of culture. These researches must be performed on the organizational 

level as well as individual units inside of the organization. Other researches could 

study existence of mutual positive significant correlation between organizational 

culture and knowledge management and also examine whether the applied standards in 

this research measure dimensions which have overlapping with each other or not. 




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Verespej, M. (1999). Knowledge Management: System or Culture? Industry Week, 248(15) 

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Zammuto, R.F., & O‘Connor, E. J. (1992). Gaining Advanced Manufacturing Technologies‘ 

Benefits: The Roles of Organization Design and Culture. Academy of Management. 

The Academy of Management Review, 17, 4, 701. 




Studying of the relation between emotional intelligence 

and job satisfaction with due regard to regulative role of 

organizational learning capability 

(Case Study: Saderat Bank in Isfahan province) 

Seyed Mohsen Allameh 

Assistant Professor of Management Group in Isfahan University 

Bagher Asgarnejad Nouri 

PhD student in Business Management Major (Marketing Trend) Isfahan University 

Seysd Yasin Tavakoli 

M.A student in Business Management Major (Financial Trend), Isfahan University, 


M.A of Industrial Management, Imam Sadiq University 

JANURAY 2011 

VOL 2, NO 9 

Abstract 

Concepts of emotional intelligence, job satisfaction and organizational learning capability are 

the most important concepts in the field of organizational behavior and human resources. 

Correct understanding of these concepts and appropriate applying of related findings could be 

a competitive benefit for organizations. With due attention to importance of such concepts 

theoretically and experimentally, the purpose of this research is to study and analyze relations 

between emotional intelligence and job satisfaction regarding organizational learning 

capability. The necessary data has been utilized from ninety-five (95) questionnaires that have 

been distributed among employees and managers of branches of Saderat bank in Isfahan 

province in order to study these relations. Data analysis reveals there is a significant positive 

relation between organizational learning capability and job satisfaction and also between 

organizational learning capability and emotional intelligence. But no reliable and significant 

results have been found about the impact of organizational learning capability on the relation 

between emotional intelligence and job satisfaction. 

Key words: Emotional Intelligence, Job Satisfaction, Organizational Learning Capability. 


During the last decade many experts, managers and researchers have paid attention to the 

subject of emotional intelligence. Also capability of emotional intelligence improvement has 

been leaded to holding of various educational programs by organizations in order to enhance 

employees' emotional intelligence level. According to Goleman (2001) emotional intelligence 

is generally applied to abilities for identifying and regulating of emotions and feelings in 

ourselves and in others. Salovy and Mayer (1990) have considered emotional intelligence as 

the ability for supervising our abilities and others' abilities, differentiation among them and 

using of information to guide individual's meditation and action. Writings of Salovy and 

Mayer (1990) and Goleman (2001) show the beginning of emotional intelligence scope in 

academic and operational fields. Establishment of emotional intelligence has attracted an 

increasing attention to itself in scopes of related literature such as competency management 





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(Capaldo et al, 2006). Following such viewpoint, emotional intelligence may be considered as 

a group of individual competencies that are necessary for organizational performance. 

Emotional intelligence can affect an individual's success in an organization (Goleman, 2001). 

Emotional intelligence increases performance and productivity based on the common opinion 

and obtained evidences from working place (Lam and Kirby, 2002). Although literature 

related to emotional intelligence denote expert opinions, unpublished articles and studies too 

much (Ziedner et al, 2004) it has been tried in this article to stress on experimental evidences 

and importance of emotional intelligence in the working environment. 

Ziedner et al (2004) state that emotional intelligence could be extremely sensitive to possible 

factors and contrary to common capabilities it has probably both positive and negative relation 

with performance depending on field factors. Bar-On's (1997) research is the only research 

which has reported a moderate relation between sum of emotional intelligence scores and job 

satisfaction. This direct positive impact could be due to a sample that is collected from 

individuals at the highest job levels. Abraham (2000) has understood that though emotional 

intelligence is related to job satisfaction but this relation is regulated by an environmental 

factor. Therefore we can not consider emotional intelligence as the only criterion for 

employees' option since the environment should provide independence in decision-making for 

employees for progress and success in work. Totally it could be said that some individuals 

with high emotional intelligence are satisfied through their job while some other may not 

achieve feeling of satisfaction. Such dissatisfaction could be due to some of the intermediate 

organizational variables. 

A specific environmental characteristic i.e. organizational learning has been considered in this 

research as the regulative variable of the relation between job satisfaction and emotional 

intelligence. Concept of organizational learning has been extremely developed in the field of 

research and also among the factors during recent years. One of the main reasons for this 

increasing growth is the importance that organizational learning has in new characteristics of 

business environment (Dodgson, 1993; Easterby-Smith et al, 1998). Concept of organizational 

learning capability puts emphasis on the importance of facilitative factors of organizational 

learning. Goh and Richards (1997) define this issue as organizational and managerial 

characteristics that facilitate organizational learning or provide the possibility of learning for 

an organization. Chiva et al (2007) have represented five facilitative factors for explaining of 

organizational learning capability that are: experiment, risk acceptation, interaction with 

external environment, conversation and communications and participatory decision making. 

Purpose of this research is to analyze this issue whether individuals with high emotional 

intelligence have tendency towards more satisfaction from their job or not with due regard to 

some of the working conditions that facilitate organizational learning. Understanding of these 

conditions under which emotional intelligence affects job satisfaction will help to determine 

its potential importance for organizations especially through modern literature related to 

competency management. In other words, these new and significant concepts will make 

competency management and organizational learning difficult. Thus, first theoretical 

background of emotional intelligence, job satisfaction and organizational learning capability 

concepts are stated and then experimental background of them is mentioned. Finally, 

experimental analysis and studying of the above mentioned variables are represented. 




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VOL 2, NO 9 

2. Conceptual Background of Research 

2.1 Emotional intelligence 

Emotional intelligence is not a single capability; rather it is a collection of capabilities that 

include understanding, evaluation and perceiving of our emotions and others' emotions. 

Relatively emotional intelligence is considered as a collection of capabilities in all definitions. 

It is a necessary and a relative new and growing research subject for several fields such as 

business and management. Salovy and Mayer have represented primary theories about 

emotional intelligence in 1990. Theoreticians have offered many definitions about this 

concept during the next decades. 

Goleman (1995) believes that emotional intelligence includes both internal and external 

elements. Internal elements include amount of self-awareness, self-image, feeling of 

independence, self-realization capacity and decisiveness. External elements include interindividual 

relations, easiness in sympathy and feeling of responsibility. Also emotional 

intelligence contains individual's capacity for accepting of facts, flexibility, ability to solve 

emotional problems, ability to solve and confront with stress and impulses. Goleman has 

separated emotional intelligence from IQ and he believes that emotional intelligence forms a 

better method for using IQ through self-control, enthusiasm, perseverance and self-motivation. 

He places concept of emotional intelligence in five scopes. In 1998 Goleman represented 

another definition from emotional intelligence. According to this definition, emotional 

intelligence is the ability of emotional skills of the individual, perceiving of the most private 

feelings of others and deliberate behavior in human relations (Ekrami, 2002). 

The following definitions have been mentioned about emotional intelligence: 

i. Being informed of feelings and what to do about them. 

ii. Being aware of good and bad emotions and the manner of obtaining them. 

iii. Being aware of emotions and controlling of them towards increasing of durability and 

happiness. 

iv. Realistic understanding of our emotions as they are occurred. 

v. Identifying of thoughts and feelings and stating of them in a clear and direct way. 

vi. Ability of sympathy and feeling of condolence in order to pacify them. 

vii. Ability of wise decision making and creating of balance between thoughts and 

emotions and finding out that neither mind nor emotion is suitable singularly. Rather 

establishing of equilibrium between mind and feelings is the best state. 

viii. Ability to control emotions and be responsible against them (Dr. Steven, 1997; quoted 

by Ekrami). 

Based on a literature analysis Ziedner et al (2004) state there are two models for emotional 

intelligence: mental capabilities models and synthetic models. Mental capabilities models 

focus on inherent talent and tendency for emotional information processing as a collection 

related to understanding of capabilities of emotional information processing and regulating of 

feelings in an adaptative manner. In this respect emotional intelligence is defined as the ability 

to control one's ability and others' ability, differentiation among them and applying of 

information in order to guide thinking and action of the individuals. Those who view 

emotional intelligence as a collection of skills for processing of feelings (Mayer et al, 1990) 

try to evaluate emotional intelligence with objective performance tests such as solving of 

problems and difficulties through recognition of feelings from pictures. 




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Synthetic models consider emotional intelligence as a various structure including aspects of 

personality like ability of perception, simulation, adaptation, understanding and managing of 

feelings. These models contain motivational factors and emotional states. Bar-On (1997) 

describes emotional intelligence as a spectrum of unintellectual capabilities, competencies and 

skills which affect the individual's abilities in order to succeed in comparison with 

environmental demands and pressures. By these descriptions we can say that emotional 

intelligence is specified with four components: self-awareness from one's emotions and 

feelings, social awareness or awareness from others' feelings, management of feelings in 

ourself and management of feelings in others. 

Emotional intelligence is a characteristic that is diverse in different persons. It has been 

observed in this regard that individuals with high emotional intelligence establish relations 

with better quality. So it is possible to consider emotional intelligence weakness in individuals 

as a reason for not establishment of effective relations and take action to improve it. The 

existing weakness in this field is resulted to feeling of dissatisfaction from one's current job 

and position. 

2.2 Capability of organizational learning 

Capability of organizational learning is defined as organizational and managerial 

characteristics or factors that facilitate process of organizational learning or makes learning 

for an organization possible. 

Importance of factors that facilitate organizational learning deals significantly with literature 

of the learner organization which is generally focused on developing of normal models in 

order to create a learner organization. This literature offers a variety of facilitative factors for 

organizational learning by itself (Easterby-Smith and Araju, 1999) although performed 

researches in the scope of learner organizations and organizational learning represent factors 

that facilitate learning (Chiva, 2004). Chiva et al (2007) have identified five facilitative factors 

of organizational learning after a comprehensive review of the related literature in this field: 

experience and experiment, risk acceptation, interaction with external environment, 

conversation and communications, participatory decision making. 

Experience and experiment could be defined as the level of offering of new ideas and 

recommendations which has the highest amount of support in organizational learning 

literature. (Hedberg, 1981; Nevis et al, 1995; Tannenbaum; 1997; Weick and Westly, 1996; 

Ulrich et al, 1993; Goh and Richards, 1997; Pedler et al, 1997) state that experiment contains 

testing of new ideas, being curious about the manner of operation of objects or executing of 

changes in working process. 

Risk acceptation could be perceived as a range of changes from ambiguity, uncertainty and 

mistakes. Sitkin (1996) proceeds to a level that he says failure is an essential need for effective 

organizational learning and finally he studies advantages and disadvantages of success and 

mistakes. 

Interaction with external environment is defined as the limit of relations with external 

environment. External environment of an organization is specified as factors which are 

beyond direct control of the organization. Environmental features play a main role in learning 

and some researchers have studied their impact on organizational learning (Bapuji and 

Crossan, 2004). 

Conversation is defined as a supportive collective studying and investigating in processes, 

hypotheses and confidences that adds an experience every day (Isaacs, 1993). Some 




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researchers (Isaacs, 1993; Schein, 1993 and Dixon, 1997) have perceived that conversation is 

a vital and important factor for organizational learning. Although conversation is often 

considered as a process through which individual and organizational learning are related to 

each other, but Oswick et al (2000) have proved that conversation creates both individual 

learning and organizational learning. 

Participatory decision making is applied to influence level that employees have in the process 

of decision making (Cotton et al, 1998). Organizations use participatory decision making in 

order to enjoy effects of increasing of employees' participation attitude, job satisfaction and 

organizational commitment (Daniel and Billy, 1999; Latham et al, 1994; Witt et al, 2000, 

Scott-Ladd and Chan, 2004). 

We can perceive that organizational learning is an inter-organizational process but the learner 

organization is recalled as a volumetric identity and according to Marcot it is an organization 

that changes permanently and collectively with power in a way in order to be able to change 

with the purpose. 

Considering the above cases, we can perceive that organizational learning is an essential and 

basic concept that is leaded to creating and preserving of the learner organization. 

Main backgrounds for governing of learning reflection in different organizations are other 

important topics in organizational learning that we can point to the following factors: 

i. Severe tendency towards variation in the organization 

ii. Dissatisfaction from traditional management 

iii. Accepting of this fact that knowledge improvement in the organization is a competitive 

benefit. 

iv. Change in recognition on behalf of human force's importance in comparison with stable 

capital in production process 

v. Increasing of customers' demands level and intensifying of competition in the market. 

2.3 Job satisfaction 

Job satisfaction is normally defined as the emotional reaction of an employee to a job based 

on comparison of ideal results and real results (Karani et al). Totally, job satisfaction is a 

degree or amount in which individuals like their job (Spector, 1997). There are many reasons 

about why we should worry about job satisfaction. One of the most important reasons is that 

job satisfaction could be leaded to appearing of behaviors from employees and affects 

organizational performance and efficiency (Rawden, 2002). In this positional approach with 

regard to job satisfaction (Halkman and Oldman, 1980; Herzberg, 1966) it is perceived that 

job satisfaction is largely affected by organizational and working conditions. 

Job satisfaction could be considered both as a collection related to various ways of thinking 

about different job aspects or dimensions and procedures and as a global feeling about job 

(Spector, 1997). First, procedural approach has been used to discover what creates job 

elements of satisfaction or dissatisfaction. This issue could be useful for organizations that 

intend to identify dissatisfaction aspects for improvement. Second, the global approach will be 

used to evaluate total job satisfaction in relation with other variables of interests and priorities. 

Generally, a single criterion is used to evaluate total job satisfaction (Venus et al, 1997). 

Although using of a single criterion is often dubious, it is not resulted to abusing of reliability 

and validity (Venus and Richers, 1996; Venus et al, 1997; Ganzach, 1998). 




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4. Experimental Background of Research 

A summary of results of some of the performed studies about the relation between three 

variables of emotional intelligence, job satisfaction and organizational learning are explained 

in the following. 

Quantitative studies have studied the relation between emotional intelligence and job 

satisfaction. Bar-On (1997) has identified a weak relation between sum of scores of emotional 

intelligence and job satisfaction. Abraham (2000) finds out that although emotional 

intelligence has relation with job satisfaction but it is regulated by an environmental 

characteristic and it is difficult to control it. In this regard Ganzach (1998) has represented a 

model of relations among wisdom-oriented intelligence (rational), job complication and job 

satisfaction. Wisdom-oriented intelligence in this study has a direct negative effect and an 

indirect positive effect on job satisfaction that is regulated by job complication. Ziedner et al 

(2004) confirm that all qualities of compatibility such as sympathy, altruism and interindividual 

sensitivities are the main center of emotional intelligence concepts. But such 

compatibility against effective performance is reduced in jobs requiring severity and hardheartedness. 

Chiva and Alegre (2008) have identified a positive relation between emotional 

intelligence and job satisfaction with regulative role of organizational learning. With due 

attention to the performed researches in this field emotional intelligence may have both 

positive and negative relation with performance depended on background characteristics. So 

the first hypothesis of research is shaped according to this. 

Most researches have analyzed the effect of job characteristics on job satisfaction. Performed 

researches show that job satisfaction is determined by organizational culture and structure as 

an output related to work (Ogan et al, 2004; Fraser et al, 2002). Wagner and LePine (1999) 

have done a meta-analysis approach and have found important impacts of job participation 

and working performance on job satisfaction. Daniels and Billy (1999) have concluded that 

participatory decision making increases job satisfaction level. Gaertner (2000) states that 

leadership behaviors related to team working obligation, challenging of customs and 

empowering of others have important effects on job satisfaction. Griffin et al (2001) have 

stated that team working is related directly to understandings of job independence which 

affect job satisfaction. As it is observed effects of some dimensions of organizational learning 

capability on job satisfaction has been examined in these studies. Therefore we can expect that 

there is a positive relation between organizational learning capability and job satisfaction. 

Thus the second hypothesis of research is formed. 

We can refer to the following studies about the relation between emotional intelligence and 

organizational learning capability, although relation of these two variables has not been 

directly studied in them. 

Emotional intelligence affects several working behaviors such as employees' commitment, 

team working, standard development, innovation, quality of services and customers' loyalty 

(Ziedner et al, 2004). According to Cooper (1997) performed researches reveal that 

individuals with high levels of emotional intelligence experience more successful job route, 

establish stronger individual relations and are directed more effectively. Ziedner et al (2004) 

have explained in this regard that individuals with high emotional intelligence may act 

successfully in expressing of their interesting ideas, aims and interests. Also emotional 

intelligence may be related with social skills needed for team working. Secondly, 

organizational leaders having higher emotional intelligence may affect existing relations in the 




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working environment that have impact on individual and group emotional intelligence and 

organizational commitment. And at last emotional intelligence that affects the individual's 

capability for success in compatibility with environmental needs and pressures is obviously a 

main collection of behaviors in order to halter and control pressure-creating working 

conditions. 

In spite of the above represented analyses, no research has studied this subject whether 

emotional intelligence affects a complete group of dimensions of organizational learning 

capability or not. In addition, organizational learning literature (Capolo and Gabriel, 2001; 

Scherer and Tran, 2001; Vince et al, 2002; Fineman, 2006) have supported the relation 

between emotional intelligence and learning process theoretically. So the third hypothesis of 

research is formed based on this. 

5. Research methodology 

5.1 Selecting of the Studying Sample and Manner of Data Collection 

With due attention to the research purpose and applied variables in it, the studying society 

must have extensive global characteristics and be based on the modern knowledge in which 

new methods of information technology and the related technology are utilized. Banking 

industry has been selected as the studying industry by paying attention to these points and 

employed managers and employees in branches of Saderat bank in Isfahan province are 

considered as the statistical population. 

To do this research that has been performed from October to December 2010 one-hundred and 

five (105) questionnaires were distributed among employed managers and employees in 

branches of Saderat bank in Isfahan province. Members of the studying sample were selected 

randomly. Finally ninety-five questionnaires were collected that was equal to ninety percent of 

distributed questionnaires. It is an acceptable rate for the research. 

Questionnaire is the tool of data collection in this research. So two questionnaires were used, 

the first one includes thirty-one (31) questions and measures individuals' emotional 

intelligence level. This questionnaire is resulted from Scott et al's (1998) emotional 

intelligence scale and respondents rank their feelings in the framework of the proposed 

questions according to seven-point likert's scale from totally disagree to totally agree. Sum of 

scores of all questions forms the total score of the scale which could be in fluctuation from 31 

to 217. This one-factor scale has been used successfully in many researches, for instance we 

can refer to researches of Abraham (2000), Scott et al (2001), Carmeli (2003), Chiva and 

Alegre (2008). The questionnaire used in this research has an acceptable reliability too. 

Carmeli (2003), Chiva and Alegre (2008) have calculated cronbach alpha coefficient of 90% 

and 89% for it respectively which shows high reliability of the questionnaire. Reliability of 

this research had been tested and confirmed by experienced academic professors in order to be 

sure about the high reliability and validity of the translated questionnaire. Validity of the 

questionnaire has been tested and its cronbach alpha coefficient is equal to 87%. 

The second questionnaire contains fourteen questions (14) which measures organizational 

learning capability. In order to measure it, organizational learning capability tool of Chiva et 

al (2007) has been used which has ideal reliability and validity. However, reliability and 

validity of this questionnaire has been re-studied for more confidence. 

The measurement criterion for job satisfaction is this question: "how much do you like your 

job and are satisfied?" which has been ranked on seven-point likert's scale from "I hate it very 




JANURAY 2011 

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much" to" I like it very much". Maybe it appears that relying on a single question is not 

correct to measure a variable. But this issue offers a high reliable structure than a multiquestion 

criterion based on opinion of Venus and Richard (1996), Venus et al (1997), Chiva 

and Alegre (2008) and no shortage occurs in its reliability. 

5.2 Research Hypotheses 

According to subjects of emotional intelligence, organizational learning capability and job 

satisfaction that have been explained in the previous section, this research seeks to find out 

whether organizational learning capability plays an important role in determining of effects of 

emotional intelligence on job satisfaction or not. Three hypotheses with regard to relation 

among these three important organizational and individual variables have been studied with 

due attention to this point specified in figure 1. 

i. Any change in organizational learning capability regulates the relation between 

emotional intelligence and job satisfaction. 

ii. There is a positive relation between organizational learning capability and job 

satisfaction. 

iii. Emotional intelligence has a positive relation with organizational learning capability. 

Participatory 

decision making 

Emotional 

intelligence 

Figure 1: Conceptual Model of Research 

6. Data Analysis 

Organizational learning capability 

Communications Interaction with Risk acceptation Experience and 

the environment 

testing 

Job satisfaction 

As it has been pointed, ninety-five (95) questionnaires were returned from one-hundred and 

five (105) distributed questionnaires among employed managers and employees in branches of 

Saderat bank in Isfahan province. The basis of performed analyses in this research is the 

ninety-five (95) collected questionnaires. Tables 1 to 4 show demographic characteristics of 

the sample in terms of gender, age, education level and working experience respectively: 




Table 1: Distribution of Employees in Terms of Gender 

Gender 

Male 

Female 

Total 

Frequency 

88 

7 

95 

Percentage 

92.6 

7.4 

100 

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VOL 2, NO 9 

As findings of table 1 shows, 92.6 % of employees are men and 7.4 % are women. The main 

reason for the drastic difference between number of men and women in the selected sample 

could be due to gender combination of employed population in Iran and also presence of 

managers and assistant-directors of bank branches in the selected sample that most of the 

managers in Iran are men. 

Table 2: Distribution of employees in terms of age 

Age 

Under 30 

31-40 years 

41-50 years 

Over 51 

Total 

Frequency 

20 

45 

28 

2 

95 

Percentage 

21.1 

47.4 

29.5 

2.1 

100 

Based on findings of table 2, 21.1% of employees are in the age group below 30 years, 47.4% 

are in the age group of 31-40 years, 29.5% are in the age group of 41-50 years and 2.1% are in 

the age group of 51 and older. These findings reveal that more than 65% of respondents are in 

age average below 40 years. 

Table 3: Distribution of employees in terms of education level 

Education level 

Diploma and lower 

Associates 

B.A 

M.A and higher 

Total 

Frequency 

Percentage 

42.1 

18.9 

35.8 

3.2 

100 

Based on findings of table 3, 42.1% of employees have diploma license and lower, 18.9% 

have associates, 35.8% have B.A and 3.2% have M.A and higher licenses. 


40 

18 

34 

3 

95



Table 4: Distribution of employees in terms of working experience 

Work experience 

1-10 years 

11-20 years 

Over 21 years 

Total 

Frequency 

23 

51 

21 

95 

Percentage 

24.2 

53.7 

22.1 

100 

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Based on findings of table 4, 24.2% of employees have working experience of 1-10 years, 

53.7% have working experience between 11-20 years and 22.1% have more than 21 years of 

working experience. These findings reveal that more than half of the members of the selected 

sample are in their mid-period of working experience. 

In table 5, mean, standard deviation, minimum and maximum of the studying variables are 

shown. It is perceived from these findings that range of emotional intelligence scores is 

fluctuating between 95 and 200. Range of organizational learning capability scores is 

fluctuating between 21 and 87. The highest mean is related to conversation and 

communications component (16.23) and the lowest mean is related to risk acceptation (7.30) 

among the five criteria for organizational learning capability. Other information related to the 

studied components is shown in table 5. 

Table 5: Distribution of mean, standard deviation, maximum and minimum of research 

hypotheses 

Studying variables Minimum Maximum Mean Standard 

deviation 

Job satisfaction 1 5 3.29 0.921 

Emotional intelligence 95 200 155.53 23.31 

Unknown experiences 2 14 8.12 2.80 

Risk acceptation 2 14 7.30 2.67 

Interaction with the environment 5 20 11.83 3.59 

Conversation and 

communications 

6 26 16.23 5.06 

Participatory decision-making 3 21 9.70 4.95 

organizational learning 

capability 

21 87 53.20 15.37 




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In the following we are going to study research hypotheses with due attention to the purpose 

of the research that is studying of effect of organizational learning capability on the relation 

between emotional intelligence and organizational learning capability. 

Hypothesis 1: relation of emotional intelligence and job satisfaction are regulated by 

organizational learning capability. 

In order to study this relation correlation coefficient between emotional intelligence and job 

satisfaction based on low organizational learning capability and high organizational learning 

capability has been examined. Tables 6 and 7 and figures 1 and 2 show results of studying of 

the first hypothesis. 

Correlation coefficient between emotional intelligence and job satisfaction is not significant 

on the level of p≤0.5 based on results of table 6. Therefore, there is no significant relation 

between emotional intelligence and job satisfaction in terms of low organizational learning 

capability. Figure 1 indicates this issue too. 

Table 6: Correlation coefficient between emotional intelligence and job satisfaction in 

terms of low organizational learning capability 

correlation 

coefficient 

emotional 


R 

0.211 

job satisfaction 

p 

0.150 

According to results of table 7, correlation coefficient between emotional intelligence and job 

satisfaction is not significant on the level of p≤0.5. Thus, there is no significant relation 

between emotional intelligence and job satisfaction in terms of high organizational learning 

capability. Figure 2 indicates this issue too. 

Table 7: Correlation coefficient between emotional intelligence and job satisfaction in 

terms of high organizational learning capability 

Correlation 

coefficient 

Emotional 


R 

0.185 


p 

0.212 


n 

48 

n 

47



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Figure 1: Relation between emotional intelligence and job satisfaction with 

regulativeness of organizational learning capability 




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Figure 2: Relation between emotional intelligence and job satisfaction with 

regulativeness of organizational learning capability 

Therefore, the first hypothesis about the effect of organizational learning capability on the relation 

between emotional intelligence and job satisfaction is rejected according to the obtained results. And 

so we can not claim that organizational learning capability is a regulative variable for the relation 

between emotional intelligence and job satisfaction. This result does not support research results of 

Chiva and Alegre (2008), since they obtained a strong relation about the effectiveness of 

organizational learning capability on the relation between emotional intelligence and job satisfaction. 

Hypothesis 2: there is a positive relation between organizational learning capability and job 

satisfaction. 

Pierson correlation coefficient has been used to test this hypothesis. Obtained results demonstrate that 

correlation coefficient between organizational learning capability and job satisfaction is significant on 

the level p≤0.5 based on results of table 8. Therefore, there is a positive significant relation between 

organizational learning capability and job satisfaction. Findings of this research is compatible with 

research results of Wagner and LePine (1999), Gartner (2000), Griffin et al (2001), Chiva and Alegre 

(2008) who have identified a positive relation between organizational learning capability or some 




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components of organizational learning and job satisfaction. Statistical results related to testing of the 

second hypothesis and amount of positive correlation between two variables are shown in table 8. 

Table 8: Correlation coefficient between organizational learning capability and job 

satisfaction 

correlation 

coefficient 


R 

0.523 


p 

0.001 

Hypothesis 3: Emotional intelligence has a positive relation with organizational learning capability. 

Obtained results related to testing of the third hypothesis reveal that correlation coefficient between 

emotional intelligence and organizational learning capability is significant on the level p≤0.5. 

Therefore, there is a positive significant relation between emotional intelligence and organizational 

learning capability. Findings of this research are compatible with research results of Ziedner et al 

(2004), Cooper (1997), Chiva and Alegre (2008) who have identified a positive relation between 

emotional intelligence and organizational learning capability. Amount of positive correlation 

coefficient between emotional intelligence and organizational learning capability is shown in table 9. 

Table 9: Correlation coefficient between emotional intelligence and organizational 

learning capability 

correlation 

coefficient 

R 


p 

emotional 0.374 0.001 95 


Generally, obtained results of this research show that there is a positive significant relation between 

emotional intelligence and organizational learning capability and also between organizational 

learning capability and job satisfaction. But no serious and reliable results that show the regulative 

impact of organizational learning capability on the relation between emotional intelligence and job 

satisfaction has been obtained. 

7. Discussion and conclusion 

The first hypothesis about the effect of organizational learning capability on the relation between 

emotional intelligence and job satisfaction is rejected with due attention to the obtained results. So we 

can not claim that organizational learning capability is the regulative variable of the relation between 

emotional intelligence and job satisfaction. This result does not support research results of Chiva and 

Alegre (2008), since they have obtained a strong relation with regard to effectiveness of 

organizational learning capability on the relation between emotional intelligence and job satisfaction. 

Perhaps the most important reason for not obtaining a serious result about this role is the role of 

intervening and regulative factors like organizational culture and etc. So, it seems necessary to do 

more researches about the relation between these variables. 

Obtained results demonstrate that there is a positive significant relation between organizational 

learning capability and job satisfaction. Findings of this research is compatible with research results 

of Wagner and LePine (1999), Gartner (2000), Griffin et al (2001), Chiva and Alegre (2008) who 


n 

95 

n



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have identified a positive relation between organizational learning capability or some components of 

organizational learning and job satisfaction. 

A positive significant relation has also been obtained between emotional intelligence and 

organizational learning capability. Obtained results about the relation of these two variables are 

compatible with research results of Ziedner et al (2004), Cooper (1997), Chiva and Alegre (2008) 

who have identified a positive relation between emotional intelligence and organizational learning 

capability. 

We can propose the following recommendations with due attention to the obtained results of this 

research: 

� Paying attention to all dimensions of emotional intelligence and organizational learning 

capability and enhancement of them along each other in the organizations: generally 

emotional intelligence has a positive and significant impact on individuals' attitude and 

aspects of organizational learning capability as results of this research show. 

� Implementation of programs in order to improve individuals' emotional intelligence: more 

favorable conditions are created to improve organizational learning capability among 

employees and managers through increasing and enhancing of individuals' emotional 

intelligence level. 

� Helping to individuals in order to improve their ability to control their emotions: controlling 

of emotions as the dimensional component of emotional intelligence helps individuals to 

know their emotions and change different working conditions on behalf of themselves. 

� Qualitative and quantitative enhancement of individuals' communications: manner of 

individuals' communications with others has a significant role in doing of activities. Kind of 

communications of individuals with each other has a high importance in the working 

environment with due attention to the need they have to each other in order to perform their 

works and also by paying attention to their social nature. We can assist individuals in better 

performing of their activities and as a result to obtain the intended organizational purposes 

through training of them about the manner of optimal communications' establishment and 

helping them. 

� Establishment of necessary grounds in order to increase learning capability among the 

employees: paying attention to these dimensions increase innovation and creativity among 

employees and enhances their job satisfaction in the long-term. 




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The Impact of Accounting Information Systems on 

Effectiveness of Internal Control in Jordanian Commercial 

Banks "Field Study" 

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Gassan Mustafa Ahmed Al-Qudah 

Al-Balqa'a Applied University 

Abstract 

The purpose of the present study is to identify impact of Accounting Information Systems 

(AIS) on effectiveness of internal control in Jordanian commercial banks by exploring impact 

on both management control and internal check .To collect data, the author used questionnaire 

judged by professors both private and public universities. The instrument was administered to 

population consisting of employees at the Control Department in Jordanian commercial banks. 

Out of eighty questionnaires administered seventy returned back. Data collected were 

analyzed using the SPSS and other statistical methods including means, standard deviations 

and T-test .The study concluded with a number of findings including that Accounting 

Information Systems (AIS) impacted effectiveness of accounting control in Jordanian 

commercial banks. Out of eighty questionnaires administered by the researcher, seventy 

returned back. Data collected were analyzed using the Statistical Program for Social Sciences 

(SPSS), and other statistical methods including means, standard deviations and T-test .This 

study concluded with a number of findings including that Accounting Information Systems 

(AIS) have an impact on effectiveness of accounting control in Jordanian Commercial Banks 

in that they help generate accurate, update, comprehensive, and comparable data. Further, they 

help periodical reporting about various processes and transactions undertaken by a bank and 

help maintain bank's assets. In addition, there is a perceived positive effect of Accounting 

Information Systems (AIS) on effectiveness of management control at Jordanian commercial 

banks in that data produced will help make operational and strategic decisions. The data 

generated by the Accounting Information Systems (AIS) perform paramount function of 

ensuring compliance with established managerial policies, rules, and procedures and help best 

achievement of goals, identifying responsibilities and power lines for individual employees 

depending on their job descriptions. A positive effect was noticed Accounting Information 

Systems (AIS) on effectiveness of internal control at Jordan commercial banks in that the data 

they produce help early detection and identification of any fraud, embezzlement or deviation 

ensure ongoing monitoring of performance development. In light of early findings, this study 

suggests a set of recommendations including to upgrade the Accounting System applied at 

Jordanian commercial banks to meet the need for information of various parties involved in 

the monitoring process. Bank departmental managers should work coordinately and 

cooperatively with the Internal Control Department, particularly when a bank process that has 

a significant financial effect is involved. Cooperation and coordination among different 

accounting system professionals need to be consolidated to overcome emerging problems that 

might arise when auditors seek accurate information. As a result of such cooperation, the 

whole internal control process will be improved on all internal and external operations and 

activities achieved by a bank. 

Keywords: Accounting Information Systems (AIS), Internal Control, Effectiveness 





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The current information revolution witnessed globally strengthened the position of 

information besides human and material resources in running business organizations and 

preserving available resources . 

Providing information has become one of major fields that attract much interest of 

researchers. Keeping in mind the information revolution worldwide, banking sectors has 

widely developed and banking operations greatly widened and ramified to the degree that 

necessitated greater attention to be given to Accounting Information Systems (AIS), which 

motivate internal control mechanisms a bank. Basically, three kinds of control are practiced on 

banking operations, namely: internal control initiated by bank administrators; external control 

practiced by the central bank, known and bank of banks, and outside audit bureaus . 

Internal control in a bank is recognized as an early alarm device for accounting and 

management audit. From this perspective, an accounting system has a significant part to take 

in control, basically internal control that as a core goal, maintenance bank assets could not be 

achieved without proper accounting reports generated by the accounting system . 

It is necessary, therefore, to consider the effect of Accounting Information Systems (AIS) on 

the effectiveness of internal control at Jordanian banks through such mechanisms as 

accounting control, management control and internal check. Taking supervision on 

commercial banks, the Central Bank of Jordan issued various regulations pertaining banking 

control and organization including Electronic Banking regulations no. (8/2001), Banking 

Risks regulations since 1980 through 1996, Preparation of Financial Data at Banks 

regulations, Application of International Accounting Criteria, Banking Security regulations 

since 1975 through 2000, Internal Control & Check Systems regulation since 1980 through 

2002, in addition to Banking Act no. 28 of (2000) (Jordan Central Bank, 2003), and in 2004 

the Jordan Central Bank also issued the Corporate Governance Guide for Jordanian 

commercial banks. 

2. Study Objectives 

The primary purpose of this study is to identify effect of Accounting Information System 

(AIS) on effectiveness of internal control in Jordanian commercial banks. This major 

objective will be accomplished by researching the following sub-goals: 

Demonstrating the effect of Accounting Information Systems (AIS) on effectiveness of the 

accounting control in Jordanian commercial banks 


management control in Jordanian commercial banks 


internal control in Jordanian commercial banks 

3. Limitations 

Sometimes it was very difficult to access to detailed accurate information 

Higher confidentiality in banks and lack of disclosure regarding some kinds of information. 

Voluminous banking operations and workload limits time available for auditors and staffers at 

Internal Auditing Dept. respond properly to the questionnaires . 

Some staffers at Internal Auditing Dept. refused respond to questionnaires without approval 

from their bosses . 




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For banks, information is valuable and worthwhile, and disclosure of past faults and 

embezzlements would have an adverse effect on their reputation. 

4. Study Hypotheses 

Nihilism main hypothesis: does not affect the systems of accounting information on the 

effectiveness of internal control in commercial banks in Jordan. 

The first sub-hypothesis: There is no statistically significant effect of the accounting 

information systems on the effectiveness of accounting controls in Jordanian commercial 

banks. 

Second sub-hypothesis: There is no statistically significant effect of the accounting 

information systems on the effectiveness of management control in commercial banks in 

Jordan. 

The third sub-hypothesis: There is no impact of the accounting information systems on the 

effectiveness of internal control in commercial banks in Jordan. 

5. Study Model 

To achieve the objectives of the study and in the light of hypotheses earlier, the study model 

consists of dependent variables (financial auditing, which is to protect the assets of banks and 

the accuracy of accounting data, administrative control and is in efficiency, productivity, 

organizational plan and abide by the rules and laws and policies, internal cheek and is in the 

discovery of errors and distortions, fraud, continuous improvement in the performance of 

work) and the independent variable is accounting information systems . Figure (1) 

6. Study Framework 

6.1 Accounting Information Systems AIS 

Generally, economic, state of the art, and managerial developments influenced the managerial 

process in organization. As a profession, accounting has developed from merely bookkeeping 

function that depends on traditional approach of personal experience into being an integrated 

information system that is fed by various accounting disciplines (for instance, cost accounting, 

financial accounting, management accounting, international accounting, etc.). On the other 

hand, an interdisciplinary interaction is noticed between accounting and other disciplines such 

as statistics, economics, and management, which consolidated the process of accounting 

measurement and communication with various stakeholders (investors, government agencies, 

owners, creditors, etc.) inside or outside the organization . 

The output of an Accounting Information System is financial reports and statements that 

enhance its effective role in managerial policymaking and figuring out future plans. The 

financial reports and statements require an organizational structure that defines responsibility 

and power lines for different organizational units, achieves determined goals, and supports 

interdepartmental relations to achieve the strategic goals of the organization. Throughout the 

communication process, financial reports and statements creates interdepartmental integration 

and connectivity during the implementation and control phases . 




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As a term, Accounting Information System can be defined as an essential part of the 

management information system in an entity that collects and aggregates financial data from 

various resources whether inside or outside of the economic entity and transform the collected 

financial data into meaningful financial information for users inside and outside of the entity 

(Hussein, 2004) . 

Another definition is that an Accounting Information System is one of computer-based 

information systems in a business organization aiming at collecting, processing and storing 

accounting information (Al-Hifnawi, 2001). Functions of Accounting Information Systems 

(AIS): 

Typically, Accounting Information Systems achieve various functions (Al-Meliji, 2003), most 

importantly : 

Aggregation of accounting data 

Accounting data review, entry, storage to the Accounting Information System 

Accounting data processing to be usable serving objectives of the entity 

Storage of the accounting information 

Display in summary the quantitative data as diagrams or periodical reports as demanded 

Components of Accounting Information Systems (AIS): 

As a system Accounting Information System (AIS) consists of a set of components in order to 

be able perform the purpose for which it was designed (Qasem, 2004), including -: 

- Documents and other evidential papers supporting financial processes take place in the entity 

- Databases on which financial data pertaining financial processes are stored . 

- Computer software programs used to process and transform stored data into suitable and 

meaningful information . 

- Accounting procedures that are predetermined and designed for the seriated financial 

processes in the entity . 

- People dealing with one or more of the Accounting Information System (AIS) components . 

- Electronic and communication technological means employed in the Accounting 

Information System (AIS ( . 

The most influential factor in the Accounting Information System (AIS) is people who 

undertake such system and gather, process and store data and make related decisions, in 

addition to devices and means used to accomplish the specific objective an Accounting 

Information System (AIS), tat is to generate decision-supporting accounting data. 

Characteristics of Accounting Information Systems (AIS( 

Information systems are characterized with a number of characteristics that make it functions 

a vital role in the entity and achieves its objective . 

Characteristics that shall be available in order for an Accounting Information System (AIS) to 

work properly include : 

- The Accounting Information System (AIS) should be highly accurate and rapid when 

processing financial data to change them into meaningful accounting information . 

- The ability to provide managers with timely accounting information they need to decide on 

an alternative 

- Provide managers with information necessary to control and evaluate activities of the entity . 

- Provide managers with information helpful in performing basic managerial functions of 

planning for the entity on the short, mid and long run . 




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- The system should retrieve quantity and descriptive data stored on a database rapidly and 

accurately when needed . 

- The system shall be sufficiently elastic and easily developed and upgraded to fit with 

changes occurring to the entity (Al-Dahrawi, 2000 ( . 

Enablers of Accounting Information Systems (AIS ( : 

It is worth to note that there are many basic aspects "enablers" that should be considered by 

system analysts to be able design and develop an efficient and effective accounting systems. 

The enablers that form cornerstone of an Accounting Information System (AIS) include : 

- Identify data preparation cycle in an Accounting Information System (AIS) 

- Stating goals and objectives of an Accounting Information System (AIS) 

- Familiarity with the environment of an Accounting Information System (AIS) 

- Identify communication network of the Accounting Information System (AIS) 

- Identify components of the Accounting Information System (AIS) 

- Identify control mechanisms of the Accounting Information System (AIS) (Hajar, 2001). 

The earlier discussion indicates that Accounting Information Systems (AIS) analysts and 

designers need to have sufficient background knowledge on how to prepare and manage 

preliminary data and transform them into meaningful information to accomplish system 

objectives. It is necessary first to set goals of the bank to be able identify goals of the 

accounting system, which in turn leads to design an effective and efficient accounting system 

that is capable to produce information meet the needs of different stakeholders whether inside 

or outside the bank . 

As an open system, every enterprise or bank should have communication with the 

environment in which it is found. The communication with environment of an Accounting 

Information System has two levels; internal and external that ensures effective deal with 

various variables and sustainability of activities. The communication networks provide the 

system with inputs, whereas assign outputs to differing stakeholders . 

Accounting Information Systems (AIS) could not undertake its activities and functions easily 

without involving their material and immaterial components that combine together to 

accomplish the intended goals. Further, to protect data dealt with by the bank, the control 

department should be familiarized with Accounting Information Systems (AIS). Major 

processes that need to be under strict control include protection of bank assets, using available 

resources effectively and efficiently, and recording events sequentially. 

7. Objectives of the Accounting System at Commercial Banks 

Objectives of accounting systems at commercial banks include (Karaja, 2001):- 

� Performing jobs accurately 

� Proper achievement and accuracy 

� Cost-effectiveness if bank's accounting system was flexible enough and easily 

operated to fit with computer-related technologies. 

� Applying the principle of internal control 

� Achievement of financial reports and statements that are required for the bank and 

Central Bank. 

8. Internal Control 

8.1 Meaning of Internal Control 

Internal Control is referred to as a set of systems, procedures and methods followed by 

administrators to protect enterprise assets and to ensure accuracy or financial data, increase 




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dependability, improve operational efficiency, and ensure adherence to established 

management policies (Al-Matarneh, 2006 ( . 

The Auditing Methods Committee of the American Institute of Certified Public Accountants 

(AICPA)defined the internal control as being involve the organizational plan, coordination 

methods, measures followed to protect the assts, checking, and reviewing accounting data 

check their accuracy, dependability, increase productive efficiency, and encourage employee's 

adoption of established management policies (Abdallah, 2004 ( . 

The Criteria Newsletter No. (55) published 1988 by the American Institute of Certified Public 

Accountants (AICPA) defined internal control as policies and procedures designed to reach a 

reasonable assurance that certain objectives of the organization can be achieved. This 

definition did not state in detail objectives of the internal control, which instead was left to 

administration. The statement "to reach a reasonable assurance that certain objectives of the 

organization can be achieved" implies a limitation of the internal control, a reasonable but not 

absolute possibility of reaching objectives (Mills, 1995 ( . 

The essential goals of internal control that can be deduced from the earlier definitions 

include -: 

First: Organizational structure that outlines authorities, powers and responsibilities inside a 

bank . 

The existence of a clear organizational structure in the bank is recognized as very essential in 

achieving internal control (management and accounting) that is supported by an integrated 

organizational structure in the bank. 

Second: Providing protection of bank's assets from embezzlement and fraudulent 

manipulations while keeping equity of a third party. 

Bank's assets can be reserved in different ways, but most often integrated protection measures 

would be applied to preclude loss, damage, steal, or waste . 

Third: Ensure presenting accurate accounting information based on which bank decision and 

policymakers can depend . 

Performance of bank operations results in a set of financial or non-financial processes that 

subject to internal control. Fourth: Raise productive efficiency level of banking operations and 

processes . 

As its major goal, every bank has to raise, develop, and maintain productivity efficiency level, 

make optimum use of its resources, and keep resources available to the bank from loss and 

misuse by applying a number of methods including estimated budgets, standard costs, and 

time-motion studies. To be effectively used, such methods should depend on reliable and 

periodical reporting system ensuring steady flow of information through different 

management levels. This, of course, requires providing employees training on how to achieve 

their duties and improve their performance levels (Al-Sahen, 2004 ( . 

Fourth: Encouraging compliance with policies, regulations, and administrative instructions in 

effect at the bank . 

No doubt, that different banking processes and activities depends on a set of rules, regulations 

and policies abide to which need by a target for the internal control process. 

8.2 Internal Control Departments at Jordanian Commercial Banks 

� Internal Accounting Control 

� Internal Administrative Control 

� Internal Check 




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8.2.1 Internal Accounting Control 

Internal accounting control is protective in nature in that its procedures, measures, and 

controls prelude occurrence of errors and mistakes in accounting data and procedures. Internal 

accounting control was defined by Standard Audit Association No1 (SAS NO1) as 

organizational plan and related procedures and methods aiming at assets protection and 

checking accuracy of accounting data used in the accounting books (Al-Saban, 1996). 

8.2.2 Internal Administrative Control 

The organizational plan includes coordinating methods and procedures aiming at accomplish 

greatest level of productive efficiency, encourage compliance with administrative policies and 

decisions. Statistical statements, time-motion studies, performance reports, quality control, 

estimated budgets, standard costing, using graphical charts and various training programs are 

some of the methods used to achieve goals of internal administrative control. However, 

internal administrative control indirectly relates to both accounting and financial records 

(Jum'ah, 2005). 

8.2.3 Internal Check 

Internal check includes the organizational plan and different coordinating measures and 

procedures aiming at keep safe of enterprise assets from embezzlement, loss, or misuse. To be 

effective, internal check depends on division of labor with self-control where the job done by 

each employee is checked by workmate who is involved in performing the job; and also 

depends on identification of authorities, powers and responsibilities (Boockholdt, J. & Li, 

David). 

9. Development Aspects of Internal Control at Jordanian Commercial Banks: 

The concept of internal control has developed with the development of accounting systems. 

With the growth in size of economic entities, mass production, proliferation in number of 

bank owners, increased numbers of employees and introduction of modern machines in an 

entity there appeared a need to establish effective internal control on employees, machines and 

processes ensuring best practice and compliance with clearly defined business rules and 

guidelines . 

The aspects of development in internal control field (Christopher, 1999) include -: 

Control environment i.e. policies, procedures and attitudes of senior managers, members of 

Board of Directors, and owners of entity regarding significance of the control . 

Risk anticipation i.e. identifying and analyzing risks involved in financial statement 

preparation process based on established accounting principles . 

Control activities, policies and procedures adopted by the management to achieve the intended 

goals from financial reporting, reasonable separation among duties, proper licensing of 

financial processes, activities, records, and documents, and eventual control on assets, books, 

and independence check on performance . 

Information and delivery i.e. methods used to identify, collect, classify, record, and reporting 

financial processes of entity while take responsibility on its assets. This means accomplishing 

goals associating with review of the financial processes in terms of existence, accuracy, 

classification, timing, posting, and summation . 

Monitoring, which means ongoing estimation by managers of quality of internal control 

performed and identify whether control was implemented as planned or if were deviation is 

there a need to modify internal control . 




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10. Methods 

To measure effect of the Accounting Information System (AIS) on the effectiveness of the 

internal control at Jordanian banks, in this study, the analytical descriptive approach was 

adopted where primary and secondary data were gathered to achieve study objectives. 

11. Data Collection Methods 

11.1 Secondary Data 

11.1.1 Literature Review 

This part of the study covers the theoretical aspect of the study. Arabic and international 

books, journals were reviewed to develop the theoretical framework of the study. 

11.2 Primary Data 

The empirical study formed the practical part of the study where the author designed a 

questionnaire to measure the effect of the Accounting Information System (AIS) on 

effectiveness of the internal control at Jordanian Commercial Banks. The variables measured 

included (accounting control, management control and internal check). 

Hypotheses previously demonstrated were tested using the Statistical Program for Social 

Sciences (SPSS). 

12. Instruments 

The questionnaires collected primary data from participants. 

The developed questionnaire was designed based on the theoretical framework of the study 

and literature review of prior studies related to Accounting Information Systems (AIS), and 

internal control. The questionnaire consisted of two parts : 

Part one: Measured the demographic characteristics (gender, age, education, vocational 

degree, job title, and years of experience) of respondents . 

Part two: Consisted of 50-items mainly measure the following three domains : 

First domain (1-25 items) measures the effect of Accounting Information System (AIS) on 

effectiveness of accounting control at Jordanian commercial banks . 

Second domain (26-41 items) measures effect of Accounting Information Systems (AIS) on 

management control at Jordanian commercial banks . 

Third domain (42-50 items) measures effect of Accounting Information Systems (AIS) on 

effectiveness of internal check at Jordanian commercial banks . 

13. Statistical Treatment 

Data collected were analyzed using the Statistical Program for Social Sciences (SPSS). Means 

and standard deviations were computed for responses from respondents, whereas as T-test was 

used to test for hypotheses. 

Reliability Chronbach Alpha coefficient was used to validate responses to questionnaire items. 

13.1 Reliability Test-Chronbach Alpha: 

In it preliminary version, the questionnaire was tested to ensure appropriateness to measure 

study goals, and items wording, and intelligibility for respondents. 

The questionnaire was also shown to a panel of specialized college professors and their 

comments and remarks on the questionnaire items were taken into account in the final version 

of the questionnaire . 

Chronbach alpha reliability coefficient was used to validate response to questionnaire items. 




JANURAY 2011 

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Typically, Chronbach alpha coefficient is used to measure internal consistency of 

questionnaire items because of its ability to generate consistent results of subject responses to 

questionnaire items. 

For this study, Chronbach alpha ranging from (0-1) were decided as statistically acceptable if 

were greater than (60%) at which level instrument reliability will be good enough to 

generalize results. For the overall instrument Chronbach alpha level was (0.8741) indicating 

greater reliability degree and thus generalize ability of results. Sample and Population : 

Population consisted of commercial banks (N=15) operating in Jordan. 

The sample consisted of employees working at the Internal Control departments, Internal 

Control Directors, Chair of Internal Control departments, Internal Auditors, and Controllers. 

Out of eighty questionnaires sent, seventy returned back and were usable for analysis. Data 

Analysis : 

To measure the effect of Accounting Information Systems (AIS) on the effectiveness of 

internal control at Jordanian commercial banks, primary data collected by the questionnaires 

were tabulated and analyzed to find out views of the participants working at the Internal 

Control departments at Jordanian commercial banks. In the current study, Likert 5-point Scale 

is used to measure participant responses to each of questionnaire items; and the median is 

hypothesized at (3.5). It is decided that if mean responses of participants was (M



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regarding generating information about bank assets and property had mean value of (M=3.36) 

with moderate significance . 

- The accounting system generates meaningful information for all stakeholders; provides 

information on how to completely record processes; provide information regarding 

compliance with accounting criteria; provide information help evaluating internal policies and 

procedures of the bank. Mean values of such items ranged from (3.73) and (3.31) with 

moderate significance . 

- The ability of the system to provide information about predictable profits was of weak 

significance (M=2.38) . 

- There was positive statistical effect of Accounting Information Systems (AIS) on the 

effectiveness of management control at Jordanian commercial banks. 

- Accounting Information System (AIS) was found to provide economic information, and was 

of predicting ability and providing timely information helpful to make management, 

operating, and strategic decisions. 

- The information generated by Accounting Information Systems (AIS) are helpful in control 

compliance with management policies including rules and procedures to accomplish 

established goals, outline responsibilities and authorities for all employees through a clear job 

description, and also by generating information that assist establish interdepartmental relations 

allowing existence of acting and controlling departments to ensure effective management 

process at Jordanian commercial banks. - Mean values of these items ranged from (3.56) and 

(4.40) with high significance level . 

- The ability of Accounting Information System (AIS) to generate information help reduce 

deviations from regulations and instructions had mean value of (3.43) with moderate 

significance level . 

- There was a positive effect of Accounting Information Systems (AIS) on the effectiveness of 

internal check at Jordanian commercial banks in that the system provides information help 

motivate self-control; provide information about different coordination means and procedures 

aiming at enhancement of self-control mechanism; produce information about coordination 

means and procedures aiming at protecting bank assets from loss and damage; generate 

information help early detection of any fraud and embezzlement; produce information on 

which to assign duties and responsibilities for each employee; and monitoring the overall 

development in job performance levels all of which further strengthens internal check and thus 

internal control. Mean values of respective items ranged from (3.68) and (4.21) with high 

significant level . 

- The system produces information that help control departments early detection of errors and 

deviations at a moderate significant level with mean values ranging from (3.31) and (2.58 ( . 

15.Conclusion 

Results from the current study confirm the significant part of an Accounting Information 

System (AIS) in increasing effectiveness and capability of internal control at Jordanian 

commercial banks in terms of meeting needs of stakeholders both insiders and outsiders. 

Recognizing their importance, banks provide their Internal Control departments every interest 

and support they need to perform effectively. From this point, Jordanian commercial banks 

should upgrade their internal control systems so that to be compatible with international 




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orientations, particularly as suggested by Committee of Social Organizations (COSO). 

Further, Jordanian commercial banks are encouraged develop elaborated guide of their 

internal control items. This study recommends Central Bank of Jordan develop the Corporate 

Governance Guide issued 2004 to include internal control mechanisms in the Information 

Technology (IT) environment. In addition, Jordanian Securities Corporation is called to 

develop a Governance Corporate Guide that emphasizes on internal control and internal check 

mechanisms at banks active in the Bourse . 




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References 

Abdelhaleem Mahmoud Karajeh, (2001), Bank Accounting, 1st Ed., Safa Publishing & 

Distribution House, Amman-Jordan 

Abdelmalik Ismail Hajar, (2001), Accounting Information Systems, 3rd Ed., Dar Al-Feker, 

Damascus-Syria. 

Abdelrazaq Mohmmad Qasem, (2004), Design & Analysis of Accounting Information 

Systems, 1st Ed., Culture Publishing & Distribution House. 

Ahmad Daher, Dawood Aledgham, (2000), Evaluation of Internal Audit System and Direct 

Facilitation in Jordanian Commercial Banks: Empirical Study, Management Sciences 

Journal, Vol. 27, Iss. 2 

Ahmad Helmi Juma'h, (2005). Introductory to Modern Audit, Safa' Publishing & Distributing 

House, Amman. 

Ahmad Hussein Ali Hussein, (2004. Accounting Information Systems: Theoretical and 

Practical Frames. University House, Alexandria. 

Bookholdt, J. & Li. David, (1991), Accounting Information Systems, Transaction Pransaction 

Processing IRWN. Poston . 

Central Bank of Jordan, (2003) . 

Christopher, Jill & Eller Ringelman, (1999). Te Effect of Event-based Accounting System 

Usage on the Organizational Design of Accounting Control Systems. Cleveland State 

University. DBA 

Fuad Assayed Almeliji; Mohammad Assayed Saraya, (2003), Special Accounting Systems, 

New University Publishing House. 

Kamaliddin Mustafa Al-Dahrawi & Sameer Kamel Mohammad (2000), Accounting 

Information Systems, New University Publishing House. 

Khaled Amin Abdallah , (2004), Auditing from Theoretical and Practical Aspects, 2nd Ed., 

Wael Publishing & Distribution House, Amman-Jordan . 

Mills, Patti A, (1995) Milinaw University: An Instructional Case in Internal Control and 

Ethics. Issues in Accounting Education. Vol. 10, Issue 2. P. 384 

Mohammad Sameer Assaban et. al (2002-2003), Intermediate Accounting: Theoretical and 

Practical Frameworks of Accounting as Information System, University House 

Mohammad Yousef Al-Hifnawi, (2001), Accounting Information Systems, 1st Ed., Wael 

Publishing & Distributing House, Amman-Jordan. 

Nail Hasan Adas; Abdelnaser Noor, (2005), Computer-Based Internal Audit, Banks Journal, 

Iss. 9, Vol. 24 . 




Appendixes 

Independent variable 

Accounting Information Systems 

Figure 1: Study Model 

Effectiveness of internal control 

Effectiveness of accounting 

controls 

-Protect the assets of 

banks 

- Accuracy of accounting 

data 

Effectiveness of 

administrative control 

Production efficiency 

Organizational plan 

Compliance with 

policies and rules 

Effectiveness of internal 

cheek 

Discovery of errors 

and distortions, fraud 

Continuous 

improvement in work 

performance 

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Dependent variables 




Impact of HR Practices on Employee Engagement in 

Banking Sector of Pakistan 

Saima Sardar 

Area Head, KASB Bank Limited, Lahore,Pakistan 

Dr. Ch. Abdul Rehman 

CEO- Superior University, Raiwind,Pakistan 

Usman yousaf 

Hailey College of Banking & Finance, University of the Punjab, Lahore 

Asad Aijaz 

Hailey College of Banking & Finance, University of the Punjab, Lahore 

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Abstract 

Considerable attention has been given to the identification of key drivers of Employee 

Engagement and its linkage to the financial results. For this purpose following study is an 

endeavor to investigate the impact of HR practices on employee engagement in banking sector 

of Pakistan. It is based on the proposition of Social Exchange Theory. A quantitative approach 

based survey in form of close ended structured Five Point Likert-scale questionnaires was 

designed and used to implore the response. The data collected from 250 employees of four 

major private commercial banks of Pakistan was analyzed through structural Equation 

Modeling and independent sample t-tests using SPSS software. Outcome epitomizes that 

following HR Practices / factors influence the employee engagement,decision making / coordination, 

employee performance appraisals, performance reward systems, employee 

involvement and training &career development. The results show that there is significant 

relationship among employee engagement and decision making / co-ordination, performance 

reward systems and employee involvement whereastraining and career development and 

employee performance appraisals are insignificantly related. The study needs to be extended 

to foreign as well as public sectors banks with a larger sample size of employees in the light of 

other variables such as motivation, non-monetary benefits, work environment, unionism, etc. 

Key Words: Employee Engagement, Human Resource Practices, Decision Making / Coordination 

Training and Career Development, Employee Performance Appraisals, 

Performance Reward Systems and Employee Involvement. 


Employee engagement is the key focus of both business entrepreneurs and academic 

researchers and is blistering issue of modern business environment. Every organization wants 

to gain competitive advantages over others and employee engagement is the best tool for it. In 

fact, employee engagement is considered to be the most powerful factor to measure 

company‘s vigor (Baumruk, R. 2004). Engagement is creating prospect for human resources 

to attach with their managers, colleagues and organization. It‗s concern is to shape a milieu 

where employees are motivated and connected with their job in real caring manner to do a 

high-quality job. Engagement is a perception that places continuous improvement, change and 





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flexibility at the empathy of what it means. So an employee as well as an employer must 

understand the twenty-first-century workplace requirements. [Chartered Institute for Personnel 

& Development (CIPD), 2009]. (Cindy, 2008) states that, engagement is the capacity of 

employee‘s work endeavor, obligation and aspiration enduring in a business, engagement is a 

condition of intellectual and emotional pledge to a group or an organization creating conduct 

that will assist accomplish an organization‘s promise to customer to ensure the improvement 

in business results. Decision making / co-ordination is an important variable bearing an 

influencing role and creating effect on employee engagement (Konrad, Alison M. 2006). 

Training and career development is another important dimension in the process of engaging 

employees and this calls for the dying need of formulating diversity & conflict management 

policies. Coaching the line managers not only to pin point the problems at initial stage for 

their appropriate resolution and training them to develop their communication skills & deal 

with the difficult conversations would help to reduce or tackle the conflicts (Gist, 1989). 

Performance of engaged employees leads the company towards customer satisfaction which 

ultimately direct an organization towards profitability or business outcomes. There is an 

association among employee performance engagement and organizations end product. It is 

also discovered that different organizations define engagement differently, but there are some 

common themes as well (Schaufeli & Bakker, 2008). They further argue that modern business 

anticipates their employees should be positive and take responsibility for developing their 

expertise.Employeesare expected to be devoted to excellent performance appraisal standards. 

Organizations require employees who are active, committed and enthralled to their job. (Ruth 

& Ruth, 1998) promulgates that the management efficiently involve their employees in their 

works and receive high performance among employees. This can be done through right 

selection of candidates, proper training, power sharing, work-information sharing, knowledge 

or employee skills and performance reward systems. (Konard, 2006) claims in his study that 

how high-involvement work practices can contribute in effective employee engagement. High 

involvement work practices are the techniques used by the management to efficiently involve 

their employees in their work and receive high performance among employees. If a company 

is caring more for its customer contentment and is focused on customer then it can also drive 

employees to get more engaged. If there is no career progression or limited career 

advancement opportunities, then employees will definitely be disengaged at certain level and 

shall not remain committed with an organization. Organization‘s repute as a good employer, 

availability of resources needed to perform job in high quality and communication of clear 

vision for long term success by the higher management are also critical factors in building 

employee engagement. (Andrew Paradise, 2008). Few studies have been carried to date in 

Pakistani banking circles to find out the significance and impact of varied dynamics 

influencing the employee engagement. The consequences of this study surely append to the 

literature and assist the policy makers to draft policies workable at institutional level as well as 

national level on the whole. This study indicates different elements which persuade any 

employee towards engagement and categorize them under HR practices & policies. Having 

review of literature, one comes to know that there are three types of employees; engaged, not 

engaged and actively disengaged. Some authors further categorize them, but the main theme 

remains the same. There are very few engaged employees in any organization as compared to 

disengaged or non-engaged employees. That‘s why, HR department of many organizations are 

working to develop effective employee engagement because they believe that employee 




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engagement is the foundation of competitive advantage. Performance of engaged employees 

leads the company towards customer satisfaction which ultimately directs an organization 

towards profitability or business outcomes. The purpose of study is to establish the impact of 

HR policies & practice on employee engagement in banking sector of Pakistan. 


Most frequently Employee engagement is the combination of unique attributes contained by 

the employees in shape of developing emotional relations with the cerebral commitment to the 

organization. It is the amounts of optional endeavor demonstrated by employees in a particular 

profession (Frank et al 2004). (Saks, 2006) states that it is a approach for employees to pay 

back through their level of engagement to their organization. As suggested by (Kahn, 1990) 

workers prefer to engage into different levels of commitments in reply to the income they 

accept from the respective organization. People show their engagement by way y of devoting 

their more energy in shape of more time and effort. This is a way the employees are observed 

as fully engaged in the organizations‘ work. The degree to which employees are engaged is 

observed by the motivational level which the employees add to organizational achievement 

through their optional willingness with respect to effort, time, intelligence and 

accomplishment of organizational (Baumruk, 2004). According to (Richman, 2006), when 

employees are open and without any organizational pressure render their service voluntarily in 

terms of extra time and put extra effort and energy into their job is called engagement. (Khan, 

1990) further states about engagement, when staff considers themselves indebted and they put 

more profound effort in their job as compare to payment as what they receive from their 

organization to bring themselves more indulged into their jobs. It means that if an 

organization provides necessary resources essential by employees to efficiently perform their 

jobs, they really performed well, and keep themselves engaged. But if an organization fails to 

do so, the result will be vice versa. When an organization anytime is unable to meet the 

requirements of the employees, the staff also in response withdraws its energies from the job 

engagement. They change their role with respect to their physical and emotional attachments 

(Frank, 2004). The engagement is the level of commitment and involvement focused work 

efforts, passion, enthusiasm and energy, an employee has towards the organization, results in 

high performance and superior business results. This level of commitment can be nurtured by 

an organization only if an organization can win the rational commitment and emotional 

commitments of their employees in ways that lead extraordinary efforts to compete today 

(Miller, 2002). 

In modern world, HRM is the solution of several of the problem which influences the 

capability of work to provide for individual growth. HR managers are in charge for staffing, 

selection, orientation, training and development, performance appraisal and safety matters. As 

clear for employee engagement, HRM is a subject of activity where numerous essential issues 

dealing with employees and employers arise and solved (Purcell and Boxall 2003). (Paradise, 

2008) states that employees highly praise their companies for retaining high-quality workers 

and also agree that performance evaluations were fair and rated their job training as favorable. 

According to him some employees stated that there are few opportunities for advancement and 

what was required to move up. Most of workers believed that their companies took a real 

concern in employee‘s welfare. Organizations use language of a soft approach when talking of 

training, commitment and development. 




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According to (Storey, 1995), HRM in more detailedlogic as it involves top management and 

line management in practicing the principle which makes business personnel capable and 

committed to endow with a competitive advantage. Theory of HR verdict as being of 

commercial and strategic significance and encourages growth of an organizational flexibility, 

commitment, and culture of consensus. Keeping in view this explicit notion of HRM, a careful 

differentiation is propounded by (Storey, 1995) which is a hard and soft a description of 

HRM. Soft HRM culture is in which employees are considered as a resource of ingenious 

vigor and all the employees in the organization take full part in decision making keeping in 

view profitability on long-term basis. Whereas a hard HRM culture is in which importance is 

on arrangement of the structure and strategy is more unambiguously focused on organizational 

control, carefulness, and profitability (Lafferty& Pinnington 2003). As the HRM practices are 

been given more importance and implemented, the more there is extent for direct involvement 

of employees through schemes of employee engagement. The workers will have more 

understanding and optimistic emancipation in the sense that they experience more 

opportunities to contribute in implementation and manipulation over company‘s pertinent 

verdict (Guest 2001). Human resources are the important variable for the sustainability and 

growth of any organization. The process starts the recruitment of good quality employees and 

selection of the precise people for the precise jobs. Employee‘s engagement is directly related 

on the selection of right people for right jobs (Hunter & Schmidt, 1983). When the employees 

are accepted in the decisions making process in dealing routine matters it has a successful 

impact on the organizations. If these actions and decisions are predisposed by their individual 

inner drives and enthusiasm it is assumed that employees are fully engaged and are working in 

positive direction (Iaffaldano& Muchinsky, 1985). 

Training and development still an important factor for the Human Resource Management for 

employee engagement (Andrew, 2008). Training and development is imperative for all 

service processes as these are subject to errors and are no different. Training improves service 

inaccuracy and it can at once impact service performance and employee engagement 

(Keaveney, 1995). For employees engagement training has usually been established by 

management to develop a particular range of brain thinking, developing skills, logical 

reasoning and problem solving. Training is essential for all future as well as present managers 

to acquire fast changing technologies, system based thinking and on time logical decision 

making abilities. All such abilities can only be possible by careful designing of training 

programs. Training is an important variable for the organizations to keep the employees 

engaged (Ohayun, 2002). 

(Denison, 1990) reports that organizations in which employees were participative in decisionmaking 

practices at higher levels have showed more employee engagement and their financial 

performance relative to their opponents organizations gradually increased. Financial assets of 

any company have always engaged central importance whenever it has come to management 

decisions; world‘s recent financial crisis has raised the significance of decision making to 

critical level. This has directly affected the financial sector specially banks. As the 

organizations cannot control external environment in period of recession, more direct 

importance has been put on management of internal environment in decision making and 

coordination at all levels of hierarchy (Huselid, 1995). This not only increases the employee‘s 

value but also employee‘s engagement. He further states that HR should not be neglected 

because it can bring competitive advantage to organization. Therefore HR should be managed 




JANURAY 2011 

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with equal importance with other functions of the business (Ganzach, 2002). (Cascio, 1997) 

promulgates that employee most of the time through involvement in decision making give 

back their organization in shape of engagement. Employees prefer to fit into place in the 

organization as they are paid. Response of an Individual‘s to an organization‘s action depicts 

one‘s full role and involvement in the decision making towards organization‘s physical 

resources. 

It is complex for workers to diverge from concentration of work performance, as performance 

appraisal is used as the source for reward and additional managerial assessments. Therefore, it 

is expected from employees to swap their engagement for benefits and resources make 

available by the business (Brainin, 2002). 

Financial reward as (Herman & Gioia, 2000) implies that profit and compensation are a key 

issues considered by employees. Therefore they anticipated that financial rewards are critical 

elements of success. Pay alone cannot consider as the sole aspect for engaging employees 

rather employees must believe their package is market-related in order to acquire utmost 

employee engagement. (Victor, 1964) states that member of staff stimulation is linked with 

rewards. Employees are positively motivated with positive rewards and negatively motivated 

with negative actions. A lot more consideration is essential on the element of the H.R, as it 

motivates employees and to execute at their finest. Physical and psychological rewards to 

employees are critical. It is a continuing process and investment of time to move forward in 

the process is a key to success. Employees must be assured that they are reasonably rewarded 

for the work they do. Reward is most impressively delivered through a combination of pay, 

bonuses and other financial rewards and also through nonfinancial rewards like extra holiday, 

voucher schemes. Employees also need to feel cherished in an appropriate and timely 

feedback and must be given due acceptance of employee‘s contribution by the employer to 

keep the employees happy for a longer time in employee engagement (Betts, 2002). Delivery 

of enhanced employment practice to employees, HR departments and organizations 

exclusively have to play a significant role in providing best to the staff, which are the most 

important part in the organization. To enhance employee engagement material and financial 

rewards sometimes mislay the capability to persuade the employees to a certain level. So 

organizations must to adopt and develop and varied strategies to connect the emotional and 

intellectual resources among the employees to satisfy the growing demands employees in 

order to remain intact with the organization (Hymowitz & Murray, 1999). (Rose 2003) states 

that to get employees engagement, extrinsic indicator of satisfaction, such as satisfaction with 

pay are significant while deeming to appraise the impact of HRM practice on job satisfaction. 


A quantitative approach based survey is designed in form of Five point Likert-scale close 

ended structured questionnaires for the proposed study. Data is collected from 250 employees 

i.e. below 30 years, above 30 years but below 40 and above 40 years working in branches of 

four major Private commercial banks of Pakistan in Lahore. The data is analyzed through 

structural equation modeling using SPSS software to substantiate the research hypothesis. To 

find out the relationship between the following variable a research model is proposed to 

observe the impacts of decision making / co-ordination, training and development, 


Employee 

Engagement 

Employee 

involvement 



JANURAY 2011 

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performance appraisal, performance rewards with dependent variable employeeengagement 

among four major commercial banks. 

Table 1: Correlation 

Training and Career 

Development 

Performance 

Reward Systems 

Decision Making / Coordination 

Employee Performance 

Appraisals 

Pearson 

Correlation 

Employee 

Engagement 

Employee 

involvement 

Training and 

Career 

Development 

Performance 

Reward 

Systems 

Decision 

Making / Coordination 

Employee 

Performance 

Appraisals 

1 .262 ** -.055 .209 ** .179 ** .103 

Sig. (2-tailed) .000 .390 .001 .005 .103 

N 250 250 250 250 250 250 

Pearson 

Correlation 

.262 ** 1 -.248 ** .858 ** .721 ** .639 ** 

Sig. (2-tailed) .000 .000 .000 .000 .000 

N 250 250 250 250 250 250 

Pearson 

Correlation 

-.055 -.248 ** 1 -.219 ** -.263 ** -.153 * 

Sig. (2-tailed) .390 .000 .000 .000 .015 

N 250 250 251 250 250 250 

Pearson 

Correlation 

.209 ** .858 ** -.219 ** 1 .668 ** .679 ** 

Sig. (2-tailed) .001 .000 .000 .000 .000 

N 250 250 250 250 250 250 

Pearson 

Correlation 

.179 ** .721 ** -.263 ** .668 ** 1 .619 ** 

Sig. (2-tailed) .005 .000 .000 .000 .000 

N 250 250 250 250 250 250 

Pearson 

Correlation 

.103 .639 ** -.153 * .679 ** .619 ** 1 

Sig. (2-tailed) .103 .000 .015 .000 .000 

N 250 250 250 250 250 250 

Table 1 is correlation matrix, which reveals that there is positive correlation between 

Employee Engagement (dependent variable) and Employee involvement , Decision Making / 

Co-ordination and Performance Reward Systems (all independent variables) showing the 

values of . 262, .209 and .179and are significant at 5 % level of significance, respectively. The 

above table also shows that there is insignificant correlation between Employee Performance 

Appraisals and Training and Career Development. 


Model 



Table 2: Coefficients 

Unstandardized Coefficients 

Standardized 

Coefficients 


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t Sig. 

1 (Constant) 2.133 .110 19.470 .000 


Development 

-.276 .064 -.263 -4.295 .000 

a. Dependent Variable: Decision Making / Co-ordination 

Table2.shows the positive and significant relation between Training and Career Development 

with Decision Making / Co-ordination with beta value .263 and its significance level is 5%. 

Model 



Standardized 

Coefficients 


1 (Constant) .544 .078 

t Sig. 

6.966 .000 

Performance Reward Systems .664 .046 .679 14.570 .000 

a. Dependent Variable: Employee Performance Appraisals 

Table 3.shows the positive and significant relation betweenPerformance Reward Systems 

with Employee Performance Appraisals beta value .679 and its significance level is 5%. 

Model 



Standardized 

Coefficients 


t Sig. 

1 (Constant) 1.926 .111 17.372 .000 


Appraisals 

a. Dependent Variable: Training and Career Development 

-.160 .065 -.153 -2.442 .015 

Table 4.depicts the fitness of the model showing the significant relationship 

betweenEmployee Performance Appraisals and Training and Career Development value of 

.153, which is significant at level of 5%. 


Model 





Standardized 

Coefficients 


t Sig. 

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1 (Constant) .245 .056 4.395 .000 

Employee involvement .857 .033 .858 26.303 .000 

a. Dependent Variable: Performance Reward Systems 

Table 5.expresses the positive and significant relation between Employee involvement and 

Performance Reward Systems with beta values .858 and the significance level is 5%. 

4. Research Model 

From the analysis of the responses of our employees it can be presumed that their employee 

engagement depend upon Decision Making / Co-ordination Training and Career 

Development, Employee Performance Appraisals, Performance Reward Systems and 

Employee Involvement. 

Human 

Resource 

Practices 

Figure 1: Research Model 

Decision Making / Co-ordination 


Development 


Appraisals 

Performance Reward Systems 

Employee Involvement 

Employee 

Engagement 




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5. Findings and Recommendations 

It is observed in broad-spectrum that the employees working in various banks have a positive 

approach toward employee‘s engagement. Most of the employees viewed that employee 

engagement adds to the profitability and services improvement in respective banks. Employee 

engagement inclination differs from department to department on employee to employee basis 

and employee‘s mind-set toward employee engagement is also different. Employees are 

inclined towards engagement if they are given proper rewards system, involvement in major 

organizational activities with an active participation in decision making. These finding are 

also supported by the literature and as well as our statistical results. Whereas, training 

development and performance appraisals do not have a significant impact in engaging the 

employee. 

The study is an endeavor to create an impact in the body of knowledge as these variables have 

not been studied in different and complex environment of Pakistani banking system. The 

findings of the study can help banks‘ management to learn effective application of HR 

Practices which makes employee more engaged and also the human resource department to 

formulate strategies for the organization which encourage employee engagement to drive 

optimal performance level. This study can provide help to higher management while drafting 

strategic decision relating to HR policies. 

Based on the above study, the results cannot be generalized owing to small sample size, thus 

the study still needs to be expanded at broader dimension engulfing more employees in the 

survey and increasing the number of banks both local as well as foreign banks.. Moreover, 

study is limited only to branch banking segment of four major private commercial banks of 

Pakistan. It should go out to other segments of banks. Furthermore, there are numerous other 

variables like work environment, employee respect, unionism, non-monetary benefits and 

motivation which directly and indirectly may influence the employee engagement. 




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Abstract 

Does Correlation Exist Between Inflation and Corruption: 

Comparison of Pakistan with India 

Dr. Saqib Gulzar 

Department of Management Sciences 

COMSATS Institute of Information Technology, CIIT, Quaid Avenue Wah Cantt 

Khuram Shafi 

Department of Management Sciences 

COMSATS Institute of Information Technology, CIIT, Quaid Avenue Wah Cantt 

Muhammad Faisal Siddiqui 

Assistant Professor 

Department of Business Administration 

Air University Pakistan 

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Corruption is the reality that affects so many aspects of the country‘s economic growth 

including foreign direct investment, gross domestic products, exchange rate and inflation etc. 

Corruption and inflation relationship is an important subject in business economics in this 

present decade. The topic ―relationship between corruption and inflation‖ has a lot of 

significance because if some body talks about the inflation the other person quickly perceives 

that corruption might be that factor that has caused inflation. Corruption is the factor that has 

the force to get involved in the system and put an impact on the financial success of a nation. 

Inflation is the factor that can affect the purchasing power of the citizen of a nation, means 

getting minimum quantity by offering much money. This research study has been conducted 

to see the relationship between inflation and corruption in Pakistani and Indian framework. 

The result from this study shows that there is little relationship between inflation and 

corruption in Pakistan. But result is opposite in Indian context which shows that there is 

positive relationship between corruption and inflation. It means that in India when corruption 

is high then inflation is high as well. 

Key words; Inflation, Corruption, Correlation Analysis. 


The word corruption refers to the impurity in the moral of a person which tends a person to 

change his attitude from the best model. Inflation is the fact that is not ignorable when 

somebody talks about the economic conditions of a country. This research has been 

conducted to find out the relationship between inflation and corruption. Inflation is the 

becoming popular word in the world especially in Pakistan but our neighboring country India 

is not safe form this factor. So this study has been conducted to see the relationship between 

the corruption and inflation in Pakistani and Indian context. 

In previous studies the researchers has provided mix results about the correlation among the 

inflation and corruption. (Fahim 2000; Miguel 2000; Haizhou et al, 2003) argued that there is 





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some sort of correlation among the inflation and corruption. (John et al, 2003) investigated 

that real growth objectives set by the policy makers and national election are the important 

factors that can begin the inflation period. 

Miguel et al, (2000) investigated that too much variance in the inflation causes more 

corruption in equilibrium. They also investigated that variance in the inflation tends to 

increase the cost of investment due to corruption; this process can cause the lower growth as 

well. 

Carsten (2009) has developed a model that clearly considers the connection between fiscal 

policy and monetary policy if corruption and other leakages from fiscal revenue are important. 

It has shown that a tight peg to a low inflation currency can improve the institutional quality in 

a country. 

Martin (2002) argued that corruption reduces when economic conditions change from poor to 

rich but the period of the high inflation tends to increase corruption. Inflation is partly a result 

of the economic system, and since countries within the same cultural area often have similar 

economic systems, the effect of inflation interacts with the cultural areas. He also concluded 

that country having freedom in the economy face high corruption. 

Fahim (2000) investigated that corruption is the thing that have negative penalty and it is 

highly responsible for the high inflation. The correlation among the corruption and inflation 

becomes stronger when other determinants of inflation like degree of central bank 

independence, and political unstable condition involves. 

Haizhou et al, (2003) examined the impact of corruption and fiscal policy on the inflation. It 

was suggested in the research that pegged exchange rate regime, currency board, or 

dollarization may not become believable and also can become unsuccessful in countries facing 

serious corruption. It is concluded that low inflation target and currency board can be used as 

instrument for the government to fight against the corruption. 

John et al, (2003) investigated that real growth objectives set by the policy makers and 

national election are the important factors that can begin the inflation period. Policy makers 

focus on the short-term benefits of inspiring real growth while avoiding the cost of ending 

incipient inflation. The date collected by the research does not support other factors of 

inflation including increase in rate of unemployment, oil price fluctuation, and change in 

political course of government and debt policy of government. 

Ernesto et al, (2007) investigated that there is a strong relationship between corruption and 

firm inefficiency in terms of utilizing more input to get a given level of output. Most of the 

corrupt countries use more labor to get a given level of production. This type of attitude is 

happening in public companies instead of private companies. It is also argued that inflation 

and scarcity in the law and order have an impact on inefficiency but their insertion has no 

impact on corruption. 

James et al, (2003) investigated that corruption has the adverse affect on economic success. 

This negative affect is present in those nations which are rated high in corruption. Corruption 

in these countries can be defined as the high level of power distance, uncertainty avoidance 

and maleness. 

Tavares (2003) investigated that foreign aid can help to reduce the corruption in the country. 

His study proved it by providing some views that it can reduce the corruption if rules and 

conditions of foreign aid have the ability to eliminate the prudence of receiver country‘s 




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officials. It can reduce the corruption if foreign aid helps to improve the shortages of revenues 

and increase in the salaries of public employees. 

Axel et al, (2005) investigated that corruption has a negative impact on the level of GDP, 

economic growth, investment activity, international trade and price stability. By the cross 

sectional study it was found that the cost of being more corrupt is really large. 

Bryan (1999) investigated that three cultural variables; high uncertainty avoidance, high 

masculinity means maleness, and high power distance are positively correlated with 

corruption. It was also found that government size has no relationship with corruption but the 

correlation seems between government size and corruption might be due to power distance 

variable. It was not found any evidence of relationship between unequal distribution of 

income and corruption. 

Andrei et al, (1993) argued that corruption is costly to economic development because of the 

failure of the government to control its agencies and departments form corruption. This 

happens when agencies have freedom to enter in regulations. The second reason is the 

misrepresentation of privacy of corruption. The requirement of confidentially can shift the 

countries investment from the highest value projects to useless projects. 

Kwabena (2002) argued that corruption is the factor that affects the economic growth and 

income distribution that affect the poor more than rich. It is also investigated that corruption 

has an impact on the economic growth through the reduction in investment. 

Carlos (2003) investigated that long run rate of inflation and long run growth rate are 

adversely correlated with each other in a country; the correlation among these twos can be 

scanned by using the supernatural scrutiny, non structural, and low frequency of view point. 

Shang (2000) investigated that whether there is the increase in the tax rate or the corruption 

level, foreign direct investment will be effected. If there is the increase in the tax rate on the 

multinational firm then the investor will avoid investing in that country. Similarly the case 

with corruption rate, when the corruption rate is high in a country where investor is just 

looking for foreign direct investment, he will switch his decision towards that country that will 

offer low tax rate 

Mohsen et al, (2005) investigate that there is an impact of corruption on exchange rate. It was 

argued that corruption can increase both the demand and supply of the foreign exchange in the 

black market; corruption has an impact on black market in terms of positive and negative. If 

there is the increase in demand for foreign currencies then premium will increase. 

Jakob (2005) investigated that the long-established methods to improve the governance 

system have not much ability to battle with the corruption. It was argued that trialing of new 

apparatus and assessment of new apparatus to improve the answerability should be the priority 

of a researcher to become a rock in front of the corruption. 

Philip (1997) investigated that the process of linking the happiness possessions of financial 

revolutions to sincerity have no impact on the trade terms of the country but the relation can 

be due to imperfect competition and nominal price inflexibility in the non-traded sector. 

Paolo (2004) found the affects of corruption by investigating the answers of two questions that 

were; why countries trapped in nasty loop of general corruption and low economic growth? If 

the cost of corruption is high then why many countries do not struggle to make institutions 

effective? Against these questions it is found that individuals do no have the inducement to 

fight with corruption. 




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William et al, (2001) investigated that poor are more than rich who like to discuss the inflation 

as a major issue at national level. It was also found that change in the share of poor in national 

income, percentage turn down in poverty, and percentage change in the real minimum wage 

are negatively associated with inflation. 


2.1 Inflation 

The overall general upward price movement of goods and services in an economy, usually as 

measured by the Consumer Price Index and the Producer Price Index 1 . 

2.2 Corruption 

Giving or obtaining advantage through means which are illegitimate, immoral, and/or 

inconsistent with one's duty or the rights of others. Corruption often results from patronage 1 . 

In previous studies Miguel et al, (2000) investigated that too much variance in the inflation 

causes more corruption in equilibrium. Martin (2002) argued that corruption reduces when 

economic conditions change from poor to rich but the period of the high inflation tends to 

increase corruption. 

3. Hypothesis 

Ho: There exist correlation between inflation and corruption. 

H1: There does not exist correlation between inflation and corruption. 

4. Data collection 

The data has been collected from the Transparency International web sites regarding 

corruption in Pakistan and India (FY1999-2009). The data related to inflation has been 

collected from the Asian Development bank, Federal Bureau of Statistics and the web page 2 . 

Years 

Inflation in 

Pakistan 

Inflation in 

India 

Corruption in India 

Corruption in 

Pakistan 

1999 3.58 0.00 2.9 2.2 

2000 4.41 3.23 2.8 2.2 

2001 3.54 5.21 2.7 2.3 

2002 3.5 3.96 2.7 2.6 

2003 3.1 2.86 2.8 2.5 

2004 4.6 4.63 2.8 2.1 

2005 9.3 5.31 2.9 2.1 

1 (http://www.investorwords.com & http://www.businessdictionary.com). 

2 (http://www.tradingeconimics.com). 




2006 7.9 6.72 3.3 2.2 

2007 7.6 5.51 3.5 2.4 

2008 12.3 9.70 3.4 2.5 

2009 18.4 11.49 3.4 2.4 

corruption in Pakistan 

Table 1: Inflation and corruption in Pakistan and India from 1999- 2000 

corruption in India 

2.6 

2.5 

2.4 

2.3 

2.2 

2.1 

Year 

3.5 

3.4 

3.3 

3.2 

3.1 

3.0 

2.9 

2.8 

2.7 

Year 

19992000200120022003200420052006200720082009 

Figure 1: Corruption in Pakistan form 1999 to 2009 

19992000200120022003200420052006200720082009 

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In figure 1 the corruption trend of Pakistan shows the upward and downward movements. 

Year 2004 and 2005 were the best ones in last 11 years. In year 2009 corruption is 2.4 which 

is better as compared to year 2008. 

Figure 2: Corruption in India from 1999 to 2009 




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In figure 2 it can be seen that in India corruption is just climbing from last 11 years only two 

years are the best ones like 2001 and 2002. The corruption rate in India is same in last two 

years 2008 & 2009. 

inflation in Pakistan 

Inflation in India 

19 

14 

9 

4 

Year 

10 

5 

0 

Year 

19992000200120022003200420052006200720082009 

Figure 3: Inflation in Pakistan from 1999 to 2009 

Figure 3 shows that form year 2007 inflation has taken a sudden rise, in year 2003 the 

inflation rate was low so that 2003 can be considered the best year in last 11 years. 

19992000200120022003200420052006200720082009 

Figure 4: Inflation in India from 1999 to 2009 

Figure 4 also shows the same pattern in inflation of India but the rise is not as big as compared 

to inflation in Pakistan. 




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5. Data Analysis and Interpretation 

In this study the ―(Pearson) correlation analysis‖ test has been applied to check the 

relationship between corruption and inflation in Pakistan and India 4 . Degree and type of 

relationship between any two or more variables in which they vary together over a period is 

known as (Pearson) correlation and denoted by ―r‖. A positive correlation exists where the 

high values of one variable are associated with the high values of the other variable(s). A 

negative correlation means association of high values of one with the low values of the 

other(s). Correlation can vary from +1 to -1. 

To analyze the relationship between inflation and corruption ―Minitab windows Release 11.12 

32 Bit‖ is used in this study. 

The test applied to see the association among corruption and inflation in Pakistan has given 

the result of r = 0.114 which shows that there is weak association among corruption and 

inflation in Pakistan. In the other case (in India) the result is r = 0.683, which shows that there 

is strong positive relationship between corruption and inflation in India, which shows that 

both inflation and corruption tend to move in same direction, if one increases then other also 

increases and vice versa. 3 

6. Results and conclusion 

This research has been conducted to see the relationship of corruption with inflation in 

Pakistani and Indian context. The data regarding inflation in Pakistan and India is collected 

from ―Asian Development Bank‖ and ―Federal Bureau of Statistics‖. The data regarding 

corruption is collected from the Transparency International. To find out the correlation the 

―Minitab Release 11.12‖ is used. The results from this test show that there is little relationship 

between inflation and corruption in Pakistan means that whether there is increase in inflation 

then corruption will increase a little bit. But result is opposite in Indian context which shows 

that there is positive relationship between corruption and inflation, it means that when there is 

increase in the corruption; inflation will also increase. So, it can be concluded that higher 

corruption will tend to higher inflation in India. 

3 (http://www.businessdictionary.com) 




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References 

Andrei Shleifer and Robert W. Vishny (1993), ―Corruption‖, Journal of Economics, Vol. 108, 

pp. 599-617 

Axel Dreher and Thomas Herzfeld (2005), ―The Economic Costs of Corruption: A Survey and 

New Evidence‖, pp: 01-33 

Bryan W. Husted (1999), ―Wealth, Culture, and Corruption‖, Journal of International 

Business Studies, Vol. 30, pp. 339-359 

Carlos G. (2003), ―Inflation and economic growth in the long run‖, Journal of economic 

letters, vol. 80, pp: 167-173 

Carsten Hefeker(2009), ―Taxation, corruption and the exchange rate regime‖, Journal of 

macroeconomics, pp 01-09 

Ernesto Dal and Martín A. Rossi (2007), ―Corruption and inefficiency: Theory and evidence 

from electric utilities‖, Journal of Public Economics, Vol. 91, pp: 939–962 

Fahim A. Al-Marhubi (2000), ―Corruption and inflation‖, Journal of Economics Letters, Vol. 

66, pp: 199–202 

Haizhou Huang and Shang-Jin Wei (2003), ―Monetary Policies for Developing Countries: The 

Role of Corruption‖, Journal of Working Paper, pp: 01-27. 

J. Tavares(2003), ―Does foreign aid corrupt?‖, Journal of Economics Letters, Vol. 79, pp: 99– 

106 

Jakob Svensson (2005), ―Eight Questions about Corruption‖, The Journal of Economic 

Perspectives, Vol. 19, pp. 19-42 

James H. Davis and John A. Ruhe (2003), ―Perceptions of Country Corruption: Antecedents 

and Outcomes‖, Journal of Business Ethics, Vol. 43, pp. 275-288 

John F. Boschen and Charles L. Weise (2003), ‖ What Starts Inflation: Evidence from the 

OECD Countries‖, Journal of Money, Credit and Banking, Vol. 35, pp. 323-349 

Kwabena Gyimah-Brempong (2002), ―Corruption, economic growth, and income inequality 

in Africa‖, Economics of Governance, vol.3, pp: 183-209 

Martin Paldam (2002), ―The cross-country pattern of corruption: economics, culture and the 

seesaw dynamics‖, European Journal of Political Economy, Vol. 18, pp:215–240 

Miguel Braun1 And Rafael Di Tella (2000), ―Inflation and Corruption‖, pp: 01-28 

Mohsen Bahmani-Oskooee and Gour G. Goswami (2005), ―The Impact of Corruption on the 

Black Market Premium‖, Southern Economic Journal, Vol. 71, pp. 483-493 

Paolo Mauro (2004), ―The Persistence of Corruption and Slow Economic Growth, IMF Staff 

Papers, Vol. 51, pp. 1-18 

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vol.42, pp: 327-347. 

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of Economics and Statistics, Vol. 82, pp. 1-11. 

William Easterly and Stanley Fischer (2001), ―Inflation and the poor‖, Journal of Money, 

Credit and Banking, Vol. 33, pp. 160-17. 




Trust Models in e-Business; Analytical-Compare Approach 

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Nour mohammad Yaghoubi 

University of Sistan and Baluchestan, School of management and accounting , Department of 

Management, Zahedan, Iran 

Razieh Yekkeh khani 

Masters Student of IT Management, University of Sistan and Baluchestan, Zahedan, Iran 

Mohammad javad Esmaeali 

Masters Student of IT Management, University of Sistan and Baluchestan, Zahedan, Iran 

Abstract 

In recent decades, different Electronic Trust (e-trust) models have been introduced. In this 

study, an attempt has been made to introduce 10 e-trust models for e-commerce, e-banking, 

and e-government. These models have provided a basis for much research, as e-trust literature 

has demonstrated. The aim of this paper is survey on models of e-trust by analytical-compare 

analysis. We begin by shortly introducing models of e-trust, then we discuss and explain 

About these models. In respect with the evolutionary nature of e-trust models, the aforesaid 

models have been compared to each other analytically based on different dimensions of Kim 

et al. (2005) e-trust model. 

Key Words: Electronic Trust, Trust Models, Trust dimensions. 


Today, e-business is not only a choice, but also an inevitable principle for maintaining 

competitive advantage on the part of organizations and institutions which operate in a 

dynamic environment. e-business has brought about an increase in the quality, dynamics, and 

speed of access to the customers and the market. By contrast, it has brought about a decrease 

in the prices, implementation time, and time duration of access to the market. Therefore, it is 

to note that to be pioneer in e-business is not an easy task at all (hosseini et al., 1385, p.1). 

Trust is appealing to many. Why are many organizations and even many countries more 

efficient than others? Why do some countries have a stronger conviction about, a higher 

integrity with, the social development than others? The answers lie in the relation of trust and 

development. There is a strong positive connection between understanding the value of trust 

in a society and its economic growth. Public trust is not based on the previous co-operations, 

but on trust between strangers. They trust most people. Also, trust provides a basis for all sorts 

of new social and commercial relationships. New forms of business are created only based on 

trust between people and organizations (Grudzewski et al., 2008, p.17). 

Zand holds that the concept of trust is generally complex. A comprehensive definition would 

be: ―a tendency towards an increase in the people‘s vulnerability to the uncontrolable 

behaviour of some person, and an exploitation of such a vulnerability, of which the poteancial 

benefit is much less than the poteancial loss‖ (Zand, 1997, p.91). There is no general 

consensus over the definition of trust in the literature, both online and offline, on trust. It is so 

because the term is multideminsional and difficult to define. This difficulty arises partly from 

the fact that we normally use different words to denote the same concept such as 

trustworthiness and trust or trusting and having ensurance (akhaviZadgan, 2008, p. 66). 

Luhmann (1982) believes that such a lack of consensus over the concept of trust is because of 

the fact that trust is an integral part of the human nature, and such a lack of consensus over it 





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meaning deepens with different understandings resulting from individuals‘ different 

experiences. Therefore, the meaning of trust can vary according to individuals‘ different 

experiences (Song et al., 2007, p.5). Although an online trust is similar to an offline one, but 

there are significant differences between some of the requirements and special results of an 

online trust. Indeed, while trust is developed between persons or organizations in the 

traditional environment, the lack of a physical relationship in the virtual environment supposes 

that trust be developed between people, on the one hand, and technology and the company‘s 

website, on the other hand (Castaldo, 2007, p. 203). 

2. D. Harrison McKnight , Vivek Choudhury and Charles Kacmar‟s Research 

McKnight et al (2002) develop a model for trust that includes two sets of antecedents— 

structural assurance of the web and two vendor-specific factors (perceived site quality and 

perceived reputation)—influence a user‘s trusting beliefs in (perceptions of the attributes of a 

specific web vendor) and trusting intention towards a web-based vendor. Trusting beliefs, 

trusting intention, and perceived web risk, in turn, influence consumer intentions to engage in 

three specific behaviours: follow vendor advice, share information with the vendor, and 

purchase from the site. While trusting beliefs and trusting intention—willingness to depend 

form the essence of cognitive-emotional trust in the vendor, the behavioural intentions are 

outcomes resulting from that trust. Direct links are also posited between trusting beliefs and 

willingness to depend, as discussed in greater detail below (McKnight et al.,2002, p. 300). 

Antecedent Factors 

Trust Building Levers 

Perceived 

Vendor 

Reputation 

Perceived Site 

Quality 

Institutional/Structural Factors 

Antecedent 

Factor 

Structural 

Assurance of 

the web 

Perceived Web 

Risk 

Trust in Vendor 

Trusting 

Intention 

Willingness to 

Depend on Web 

Vendor 

Trusting Beliefs 

in Web Vendor 

Figure 1: TBM-Trust Building Model 

The relationships from Perceived Web Risk are proposed to be negative; all others are 

proposed to be positive. Source: D. Harrison McKnight et al., 2002, p. 301 

Intention to 

Follow Vendor 

Advice 

Intention to 

Share Personal 

Information 

With Web 

Vendor 

Intention to 

Purchase from 

Site 


Trust 

Behavioral Intentions



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3- Kaplan & Nieschwietz‟s Research 

The proposed relationships among Web assurance services, trust, and outcomes are presented 

in Fig. 2. This model of trust is based on those developed by McKnight et al. (1998) and 

Mayer et al. (1995). Consistent with McKnight et al.‘s model, institutional based trust 

positively influences both trusting beliefs (or trust) and trusting intentions (or outcomes). In 

Fig. 2, the seal-type variable represents the source of institutional-based trust, and as shown, is 

related to both trust and outcomes. Building on the work of Mayer et al. (1995), Fig. 2 shows 

trust influencing outcomes (Kaplan & Nieschwietz, 2003, pp. 99-100). 

The measurement model is shown in Fig. 2. Four latent variables are used. The first latent 

variable, outcomes, consists of three measures: willingness to purchase, quality, and risk. The 

second latent variable, trust, consists of seven measures: two measures for each of 

predictability, dependability, and faith, along with one measure of overall trust. The third 

latent variable, assurance, consists of four measures: privacy, security, business practices and 

transaction integrity, and availability. And the fourth latent variable, provider, has six 

measures: confidentiality, objectivity, integrity, experience, expertise, and technical 

knowledge (Kaplan & Nieschwietz, 2003, p.106). 

Assurance 

Measures 

Seal type Trust Outcomes 

Web Seal 

Provider 

Attributes 

Figure 2. Model of trust including assurance measures and provider attributes. 

Source: S.E. Kaplan, R.J. Nieschwietz, 2003, p.100 

4- Jaeki Song and Fatemeh “Mariam” Zahedi‟s research 

In the actor-network theory (ANT), design is a process of ―translation‖ of user‘s and other 

stakeholder‘s needs into specific categories of needs, and later to a general set of needs. These 

general needs are then ―inscribed‖ into a uniform solution (the design). Inscription in this 

context means that the IT artifact reflects and embodies the needs and use patterns of its users. 

In the context of health infomediaries, the design of a health infomediary is the result of 

inscription of various needs into the network (the health infomediary and its users and other 

stakeholders). Alignment is defined as ―the extent to which the agendas and interests 

inscribing into the practice, institutions, and strategies of the network pull in the same 

direction, and serve the same purpose‖. When the system is running, the alignment of the 

network‘s constitutive parts – including users' beliefs and experiences – will determine the 

patterns of use. In conceptual model presented in Fig. 3 researchers discuss how the 

constitutive parts of the network – including user‘s beliefs and experiences as well as the 

contents of the health infomediary and the environmental factors – will determine the pattern 




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of intention to use in the information provided by the health infomediaries. In ANT, one of the 

major constituents of a network is the perceptions of its users. Trust beliefs are critical in the 

network to which the health infomediary belongs (Song, J., and Zahedi, F.M., 2007, p. 393). 

Information Quality of HI 

Understandability 

Relevance 

Usefulness 

Reliability 

Adequacy 

System Quality of HI 

Ease of Use 

Interactivity 

HI‘s Trust Signs 

Trust beliefs/Properties 

HI Environment 

* HI = health infomediary 

Figure 3: The Conceptual Model for Trust in Health Infomediaries. 

Source: J. Song, F“M.” Zahedi, 2007, p. 393 

5- Belanger, F. & Carter, L.‟s research 

Grazioli and Jarvenpaa (2000) in their study focuses on user‘s initial trust in an e-government 

service. Initial trust refers to trust in an unfamiliar trustee. McKnight et al. (2002) said that 

Initial trust is required in a relationship in which the citizen does not yet have credible or 

meaningful information about the e-service provider. In initial relationships people use 

whatever information they have, such as perceptions of the website or the government agency, 

to assess the trustworthiness of the trustee. During initial encounters, trust is largely based on 

characteristics of the trustor (their disposition to trust), assumptions made about the traits of 

the trustee (trust of the government), and institutional factors (trust of the Internet). 

5.1. Trust of the Internet and trust of the government 

Tan and Theon (2001) has been suggested that there are two targets of trust: the entity 

providing the service (party trust) and the mechanism through which it is provided (control 

trust). Carter and Be´langer (2005) and Pavlou (2003) implied that Trust in e-government is 

therefore composed of the traditional view of trust in a specific entity (trust of the 

government) as well as trust in the reliability of the enabling technology (trust of the Internet). 

Carter and Be´langer (2005), McKnight et al. (2002), Pavlou (2003), Warkentin et al. (2002) 


Ability 

Benevolence 

Integrity 

Risk belief 

Web User‘s Propensity to 

Trust 

HI‘s Favorable 

reputation (Rep) 

Previous pos. 

experience with 

infomediaries (Exp) 

Structural assurance of 

the web (Assure) 

Intention to Use HI in Health 

Decisions



JANURAY 2011 

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and Welch et al. (2005) consider Trust of the Internet (TOI) is consistently identified as a key 

predictor of e-service adoption. This type of trust is frequently labeled institution-based trust. 

McKnight et al. (2002) said that Institution-based trust refers to an individual‘s perceptions of 

the institutional environment, including the structures and regulations that make an 

environment feel safe. Zucker (1986) suggests that institution-based trust is one of the most 

important forms of trust in impersonal financial environments where the sense of a community 

with shared values is lacking. According to Shapiro (1987) institution-based trust is basically 

trust in the Internet: trust in the security measures, safetynets and performance structures of 

this electronic channel. E-government adoption is contingent upon citizens‘ belief that the 

Internet is a dependable medium, capable of providing accurate information and secure 

transactions. Trust of the government (TOG) refers to one‘s perceptions regarding the 

integrity and ability of the agency providing the service ,this statement are adopt from 

following outhors :Becerra and Gupta, 1999; Ganesan and Hess, 1997; Jarvenpaa et al., 1998; 

Lee and Turban, 2001; Mayer et al., 1995; McKnight et al., 2002. 

5.2. Disposition to Trust 

Disposition to trust is defined as one‘s general propensity to trust others. It is composed of two 

concepts:Faith in humanity and trusting stance. McKnight et al.(2002) said that Faith in 

humanity assumes others are good-natured and dependable. Trusting stance assumes better 

outcomes result from dealing with people as if they are well meaning and reliable. 

5.3. Perceived Risk 

Risk is typically defined in terms of the trustor‘s belief about the likelihood of gains and 

losses, this statement are adopt from following outhors: Mayer et al., 1995; Pavlou, 2003; 

Warkentin et al., 2002. Pavlou (2003) found trust to be a significant antecedent of perceived 

risk ( Belanger, F., Carter, L., 2008, pp. 166-168). 

Disposition 

to Trust 

Trust of the 

Internet 

Trust of the 

Government 

Figure 4: Trust and risk in e-government adoption. 

Source: Belanger, F., Carter, L., 2008, P. 168 

Perceived 

Risk 

Intention 

to 

Use 

6. Zhang Wei, Liu Lu and Zhu Yanchun‟s research 

This study explores factors of trust decision in a triple framework. The baseline hypothesis is 

‗in the inter- organizational setting, team trust is a function of triple essential components: the 

trustor, the trustee and surroundings.‘‘ It is the complex mutual movement of the three parts 

that leads to trust, and evolves trust. 




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6.1. Disposition to Trust from the Trustors 

As for the trustor, the extent to which one is willing to trust others is affected by propensity to 

trust. It demonstrates a consistent tendency to be willing to depend on others across a broad 

spectrum of situations. There exist two types of disposition to trust: (1) faith in humanity and 

(2) trusting stance. Disposition-related trust had a statistically significant effect on people‘s 

trust. The initial trust to new partners is activated by firm‘s propensity. 

6.2. Trustworthiness of the trustees 

Trust also arises from one‘s cognitive assessment of the attributes associated with the trustees, 

or the trustee‘s trustworthiness. This character is thought determined by history transactions, 

as well as the perception of trustees based on reputation, bids and organizational structure. 

There are two main components of trustworthiness, which allow the trustor to dynamically 

form an opinion about another entity. The first is ability. Previous research on firm‘s 

reliability has commonly focused on their core competency. The other is perceptibility of 

behaviours, which can be found in interpersonal trust as sincerity and benevolence, the above 

statement are adopt from following outhors: McKnight, Cummings, & Chervany, 1998; 

Meyerson & Kramer, 1996; McKnight et al., 1998 ; Lewicki & Bunker, 1995. 

6.3. Obligation in the Surroundings 

Trust requires certain conditions to be met to appear and develop. First, the institution enables 

one to believe that the individuals in the situation are trustworthy. The institutions in the 

situation reflect the actions of the people involved, which involve a properly ordered setting 

that appears likely to facilitate a successful interaction. Therefore, beliefs about the 

institutions will help form faith about partners. Second, the prediction of behaviours is 

possible primarily through the exchange of task-related information. In short, Costa (2003) 

said that high interdependence makes it increasingly dangerous for partners to engage in 

opportunistic behaviour or negative tactics. Therefore, working in high interdependent task 

partners is more motivated to build trust ( Zhang Wei & et al, 2008 :1586-1588). 

Realizability 

Ability 

Willingness 

SURROUNDINGS 

Dependence 

TRUSTEE‟s 

Trustworthiness 

Persistence 

Will do 

Figure 5: The Triple Framework of Inter-Organizational Trust. 

Source: Z. Wei et al., 2008, p. 1587 

Disposition 

to trust 

Trustor 

TRUSTOR 

Inter- 


Trust 




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7- Ritu Lohtia , Daniel C. Bello and Constance Elise Porter‟s research 

Cultural sensitivity is defined as a firm's awareness of differences between domestic and 

foreign market business practices and its willingness to address and manage these differences. 

Given the many fundamental differences between the cultures of Japan and the United States, 

it is crucial for US sellers in Japan to be sensitive to the unique set of cultural forces 

influencing the behaviour of Japanese buyers. Such sensitivity is critical to gaining legitimacy 

in Japan and reflects a foreign seller's intention to engage in culturally effective exchange with 

local buyers. In this way, sensitivity to local cultural practices validates the foreign seller's 

benevolent motivations and demonstrates its underlying concern for the Japanese buyer. As 

LaBahn and Harich (1997) illustrate, buyers are more ―critical and sensitive to culturally 

inappropriate behaviour‖ compared to sellers. We hypothesize that certain drivers of trust (e.g. 

long-term orientation, relationship building, etc.) establish and enhance the perception that US 

seller's are culturally-sensitive and, in doing so, foster trust with Japanese managers. our 

model also suggests that while cultural sensitivity is an important antecedent of trust, it is not 

the only pathway and not a requirement for trust-building with Japanese buyers. The 

capability- based process focuses on trust building through the delivery of key aspects of the 

marketing mix that satisfy exchange requirements. Indeed, theory underlying our model 

suggests that other variables can directly build trust by signaling capability to deliver on key 

aspects of the marketing mix (e.g. product differentiation, after-sale services, etc.). Because 

technical competence is task-centered and focuses on the instrumental purpose of transactions, 

capability-based trust development functions separately from the social and cultural facets of 

exchange, the above statement are adopt from following outhors: Holzmuller & Stottinger, 

2001; LaBahn & Harich, 1997; Rice & O'Donohue, 2002; Grewal & Dharwadkar, 2002; 

Morgan & Morgan, 1991; Doney & Cannon, 1997 (Ritu Lohtia et al., 2009, pp. 241-242). 

Intentionality-based Antecedent 

Long-term 

orientation 

Relationship 

building 

Investments in 

Japan 

Capability- based Antecedent 

Product 

Differentiation 

Product 

Modification 

Channel 

Support 

After-sales 

Service 

Fig 6. Theoretical Model 

Source: R. Lohtia et al., 2009, p. 240 

Cultural 

Sensitivity 


Trust



8- Jari Salo and Heikki Karjaluoto‟s research 

JANURAY 2011 

VOL 2, NO 9 

Jari Salo and Heikki Karjaluoto (2007) have proposed a model for electronic trust that 

encompass Six constituent elements of trust. To examine how trust elements can affect enduser‘s 

behaviour, McKnight and Chervany (1996) analyzed six constructs of trust: 

i. Trusting beliefs; 

ii. Trusting intention; 

iii. Trusting behaviour; 

iv. System trust; 

v. Dispositional trust; and 

vi. Situational decision to trust. 

They defined trust in relation to three main categories. Firstly, trust is always described as 

expectancies and beliefs. Secondly, it can also be defined as behavior and thirdly, it also 

consists of affective or cognitive/affective aspects. 

8.1 Trusting Beliefs 

Trusting beliefs occur when a person thinks that the trustee is dependable in a specific 

situation. Trusting beliefs consist of four elements, namely benevolence, honesty, competence 

and predictability. Benevolence means that the trustee takes his or her truster‘s benefit into 

consideration when using or making a decision concerning the truster‘s information. Honesty 

means that the trustees make reliable decisions and honour the terms that they guaranteed. 

Competence refers to the trustee‘s ability to achieve the expected result and, finally, 

predictability means that the trustee‘s actions in given circumstances can be predicted from his 

or her past behaviour. 

8.2 Trusting Intentions 

Trusting intention means one party‘s willingness to rely on another party in specific situations. 

McKnight and Chervany (2002) illustrated the five important components included in trusting 

intention. These elements include potential negative consequences, dependence, feelings of 

security, situation-specific context, and lack of reliance on control. 

8.3 Trusting Behaviour 

Trusting behaviour refers to people giving another party power over them or feeling safe to 

depend on another party even when there are risks in that specific situation. Several trust 

indicators have been found in the literature. For instance, people may allow some kind of a 

sacrifice to be made, such as allowing the trustees to make use of their property or information 

on behalf of them, or disclosing their details to the trustees. 




8.4 System Trust 

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System trust is an impersonal structure that supports trusting intentions. There are two main 

types of impersonal structures in system trust, namely structural assurances and situational 

normality. Issues like policies or contracts are included in structural assurances, and issues 

like the roles of trustee and truster in a particular situation belong to situational normality. 

System trust may also be seen as a belief relied upon by the truster. 

8.5. Dispositional trust 

Dispositional trust is a situational construct generally expected by the truster. In other words, 

it means this kind of trust can occur when a person has a general preference to trust, which 

encompasses a broad spectrum of situations and persons. Like system trust, dispositional trust 

also contains two categories: belief-in-people and trusting stance. Belief-in-people refers to 

the truster‘s assumptions that people are trustworthy, whereas trusting stance refers to the 

truster‘s belief that better results will follow if he or she relies on a specific party. 

8.6. Situational decision to trust 

Situational decision to trust means that people are willing to trust other people to a similar 

extent in a specific situation. In other words, when people are faced with a particular situation, 

they already have the intention to trust the other party, even if the other party is not 

specifically labelled by the truster . 

8.7.Trust in the online environment 

Though there are still many uncertainties in computer-mediated commerce, studies have found 

that many people are nevertheless willing to spend time and money in online transactions. One 

of the reasons for the end-user‘s willingness to purchase goods online is that they trust the 

online companie‘s ability to deliver the products or services in good quality. Literature is 

consistent in claiming that trust is a very important element in successful web-based 

business . It has been noted that trust does not only play a main role between truster and 

trustee, but also in the context of information systems, in the use of third-parties and in 

privacy protection, and thereby trust has a great influence on end-users when they decide 

whether to participate in e-commerce or not. the above statement are adopt from following 

outhors: Lee and Turban, 2001; Siau and Shen, 2003; Gambetta, 2000; McKnight and 

Chervany, 2002; Ba et al., 2003; Hoffman et al., 1999; Keat and Mohan, 2004; Kim and 

Benbasat, 2003; Lee et al., 2006; Chopra and Wallace, 2003; Kini and Choobineh, 1998; 

Kong and Hung, 2006; Briggs et al., 2004; Cranor, 1998; Durkan et al., 2003; Yang et al., 

2005; Pavlou, 2003; Tavani, 1999; Walters, 2001 (Salo, J., & Karjaluoto, H., 2007, pp. 606- 

609). 




Trustor‘s 

Motivation 

ELM 

PROCESSING 

Trustor‘s 

Ability 

Peripheral Route 

Reputation 

Disposition to trust 

Situational normality 

Structural assurance 

Web Site Quality 

Central Route 

Ability 

Benevolence 

Integrity 

Web Site Quality 

Trust attitude 

Behavioural Trust 

Intentions 

Figure 7 Proposed model of online trust. Source: Salo, J., Karjaluoto, H., 2007, P. 610 

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Perceived Risk 

Based on analysis of the literature, a conceptual model of the factors that influence end-user‘s 

trusting beliefs is now proposed in Figure 8. The model separates influential factors under 

external and internal factors. External factors include consumer characteristics, the nature 

of the product and service, the development of the market, culture and countries, the user‘s 

perception of risk, and any other experience that the customer has had dealing with sales and 

marketers. The factors included in the internal category are the end-user‘s prior experience 

with web vendors, the web vendor‘s trustworthiness and reputation, the quality of the 

Website, the acceptance of the information system, third party trust, and the company‘s online 

privacy policy (ibid, p.614). 

Outcomes 




External 

factors 

Consumer Characteristics 

Product/Service 

Characteristics 

Different Markets/ 

Cultures/Countries 

Perception of Risk 

Past Experience 

Trusting Beliefs 

Intention to Visit the 

Website 

Actual Outcome/ Relationship 

Development 

Web Vendor 

Information System 

Third Party 

Privacy 

Protection 

Figure 8. Developed research model for investigating online trust. Source: ibid, P. 616 

9. Mukherjee, A., Nath, P.‟s research 

In this research, Mukherjee and Nath identified three main antecedents to trust: 

i. Shared value; 

ii. Communication; and 

iii. Opportunistic behaviour. 

Legislation 

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Internal factors 

Past experience 

Trust Worthiness: 

Ability 

Benevolence 

Integrity 

Website quality 

Reputation 

Perceived 

Usefulness 

Perceived Ease of 

Use Training 

Trusted Seal 

Experts 

Peers 

Non-Government 

Association 

9.1.Shared value 

Morgan and Hunt (1994) express that Shared value is the extent to which partners have beliefs 

in common about what behaviours, goals and policies are important or unimportant, 

appropriate or inappropriate, and right or wrong. In this research, shared value has been treated 

as a multidimensional construct. In the online banking context, shared value symbolises the 

extent to which the bank and the customers share common beliefs on critical values like ethics, 

security, and privacy. 

9.2.Communication 

Anderson and Narus (1990) said that Communication can be defined as ―the formal as well as 

informal sharing of meaningful and timely information‘‘. Moorman et al. (1993) express that 




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Communication, especially timely communication, fosters trust by assisting in resolving 

disputes and ambiguities, and Etgar (1979) imply that aligning perceptions and expectations. 

Anderson and Narus (1990) and Morgan and Hunt (1994) have used past communication as an 

antecedent of trust. In this research, communication is considered as a multidimensional 

construct. The variables that constitute communication are openness, speed of response, and 

quality of information. Trust is negotiated through openness in communication and is specific 

to the individual customers involved and their relationship with the bank. 

9.3.Opportunistic behaviour 

Opportunistic behaviour has its roots in the transaction cost literature, and is defined as ―Selfinterest 

seeking with guile‘‘. In this research, opportunistic behaviour has been conceptualised 

as regulatory control and information asymmetry.The integrity of the online banks and 

adherence to expected roles and obligations depend on the extent of regulatory control, which 

is a major determinant of customer trust in online banking. When customers use online 

banking, they assess the level of confidence in regulatory control mechanisms in cyberspace. 

Due to the higher risk of opportunistic behavior by online banks owing to nascent and poorlydeveloped 

rules and regulations, customers frequently have low levels of trust in online 

banking. Websites can be counterfeited, online identities can be forged and electronic 

documents can be falsified. The lack of adequate regulatory control also leads to the 

customer‘s perception that their personal information may be used without their knowledge 

during or after navigation. Therefore, the customers‘ level of trust would be partly based on 

whether they believe that the bank would fulfil its obligations. Klang (2001) pointed out that 

customers tend to assess the bank‘s interests and then make a judgment about its integrity. 

Sultan et al. said that customers would also determine whether a degree of trust based on prior 

knowledge of the bank -either online or brick-and-mortar – exists, the above statement are 

adopt from following outhors: Williamson, 1975; Lee and Turban, 2001; Clay and Strauss, 

2000; Ba, 2001; Novak et al., 1999; Li et al., 2001; Bailey and Bakos, 1997; Ackerman et al., 

1999 (Mukherjee, A., Nath, P., 2003, pp. 6-9). 

Shared value 

Communication 

Opportunistic 

Behaviour 

Figure 9: Proposed model. 

Source: Mukherjee, A., Nath, P., 2003, p. 9 

Trust Commitment 




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10. Grudzewski, Wieslaw M. Hejduk, Irenak and Sankowsha, Anna‟s research 

In their model, they consider propensity to trust (trustor‘s propensity). It is a stable factor 

indicating what the probability of trusting the other party is. People are characterized by 

different aptitudes to trust. This facet is relative to such factors as their personality types, 

practical experiences, cultural backgrounds, and environments in which they were raised and 

live abilities as the first factor that contributes to the reliability that leads to trust. These 

abilities are a group of definite skills, talents, or characteristics within a specific field. They 

always should be considered with reference to some given task that needs to be done. Often, 

abilities are qualified as competences. Another component of trust is benevolence, which is the 

extent to which a trustee is believed to want good for the trustor. It shows the relationship 

between trusting parties. In third place is integrity, which refers to obeying accepted principles 

by all parties. (Grudzewski et al., 2008, p. 68). 

Trust 

Propensity 

Personality 

Social background 

Life experience 

.................... 

+ 

+ 

Ability 

Benevolence 

Integrity 

OUTCOMES 

Generalized 

TRUST 

Situational 

context 

Risk taking in 

Relationships 

TRUST 

(Particular 

Trust) 

Figure 10. Model of trust of Partly adapted from Mayer, R. C., Davis, J. H., and 

Schoorman, F. D. 1995 

Source: Wiesław M., Grudzewski et al., 2008, p. 69 

11- Fazlollahi‟s research 

This research synthesizes the diverse literature on trust in order to develop an integral research 

model of consumer trust in Internet shopping (CTIS). According to Hardin (1992), trust is a 

three-party relation involving properties of a trustor, attributes of a trustee, and a specific 

context in which trust is conferred. As depicted in Figure 11, trust in Internet shopping is 

affected by: a consumer‘s propensity to trust; the trustworthiness of an Internet vendor; and 

relevant external environmental factors impacting Internet shopping transactions. The essence 

of risk is uncertainty about the future. Thus, the formation of trust, in turn, reduces consumers‘ 

perceived risk of Internet shopping. 

11.1 Trustworthiness of Internet Vendor 

Perceived Security Control (PSC): perceived security control refers to the Internet user‘s 

perception on the Internet vendor‘s ability to fulfill security requirements, such as 

authentication, integrity, encryption, and non-repudiation. 

Perceived Privacy Control (PPC): perceived privacy control is conceived as the Internet 

user‘s perception on the ability of Internet vendors in protecting consumer‘s personal 

information collected from its electronic transactions from unauthorized use or disclosure. 


st)



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Perceived Integrity (PI): perceived integrity refers to the perception of Internet users on the 

honesty of Internet vendors. 

Perceived Competence (PC): Perceived competency, in this study, is defined as the Internet 

consumer‘s perception on the skills, abilities, and expertise of Internet vendors. 

11.2. External Environment 

Third Party Recognition (TPR): third party recognition refers to the assurance of the 

trustworthiness of Internet vendors by third party recognition bodies. 

Legal Framework (LF): legal framework refers to the law and code of practice established to 

protect Internet shoppers during electronic transactions. 

11.3. Propensity to Trust (PTT) 

Hofstede (1980) express that Propensity to trust is a stable, within-party factor that affects the 

likelihood that a party will trust another party. People with different cultural backgrounds, 

personality types, and developmental experiences vary in their propensity to trust. 

11.4. Consequence of Trust: Perceived Risk (PR) 

In this study, perceived risk refers to the Internet users‘ perception on the possibility of 

yielding unexpected outcomes with undesirable consequences. Many prior studies from Dion 

et al., 1995; Doney & Cannon, 1997; Morgan & Hunt, 1994; have discovered a strong relation 

between risk and the concept of trust. As suggested by Selnes (1998), perceived risk in a 

buyer-seller relationship is reduced by trust. (Fazlollahi, b., 2002, pp. 128-132). 

Trustworthiness of Internet Vendor 

Perceived Security Control 

Perceived Privacy Control 

External Perceived Environment Integrity 

Perceived Competence 

Third Party Recognition 

Legal Framework 

Cultural 

Environment 

Trust in 

Internet 

Shopping 

Propensity to 

Trust 

Experience 

Perceived 

Risk 

Figure 11. A conceptual model of trust in Internet shopping. 

Source: Fazlollahi, B., 2002, P. 129 

With regard to the importance of trust in e-business, various studies have been done 

concerning e-commerce e-banking, and e-government. Table 1 summarizes e-trust models. 


Resource 

McKnight 

et al (2002) 

Kaplan & 

Nieschwietz, 

(2003) 

Song & 

Zahedi 

(2007) 

Belanger & 

Carter 

(2008) 

Wei et al 

(2008) 

Lohtia et al 

(2009) 



Table 1: Summary of E-Trust Models 

sample 

1403person 

225 customer 

494 

participant 

214 citizens 

Temporal 

organizations 

and virtual 

economic 

enterprises 

249 b2b 

American 

company in 

Japan , at least 

181 sample 

are usable 

Framework of 

research 

Trust building 

model )TBM) 

A Web assurance 

services model of 

trust for B2C ecommerce 

The conceptual 

model for trust in 

health 

infomediaries 

Trust and risk in egovernment 

adoption 

Model of trust 

inter- organization 

in virtual economic 

enterprises 

Theorical model of 

e- commerce B2B 

Trust measure proposed 

1-Perceived Vendor Reputation 

2-Perceived Site Quality 

3-Structural Assurance of the 

web 

Seal type: 

self-reported, 

BBB Online, 

Truste, 

Web Trust, 

Big 5 

Assurance measures: 

privacy, 

business practices and 

transaction 

integrity 

security 

availability 

Web seal provider: 

Attributes 

Confidentiality 

Objectivity 

Integrity 

Experience 

Expertise 

Technical knowledge. 

Information Quality of 

Understandability 

Relevance 

Usefulness 

Reliability 

Adequacy 

System Quality of 

Ease of Use 

Interactivity 

Internal propensity to trust 

1-trust to the internet 

2- trust to government 

Surroundings: 

Dependence 

Realizability 

TRUSTEE‘s Trustworthiness 

Ability 

willingness 

Persistence 

Trustor: 

Disposition to trust 

-Capability-based antecedent: 

Product Differentiation 

Product Modification 

Channel Support 

After-sales Service 

-Cultural Sensitivity 

-Intentionality-based Antecedent: 

outcomes 

JANURAY 2011 

VOL 2, NO 9 

The results greatly support the proposed TBM. To 

believe in trust and tend to trust, which are closely 

associated with each other, greatly influence the 

special behavioural intentions (intend to accept the 

opinion of the vendor, share one‘s own personal 

information with the online vendor, intend to buy 

online). The Vendor Reputation and the Site Quality 

are of great import for creating a trust. Because it 

concerns the vendor/website, while the Structural 

Assurance of the web concerns the general 

environment. 

The results of the analysis have shown that the 

Assurance measures and Web seal provider affect 

trust criteria positively. 

The empirical evidence have shown that different 

factors like website content, website environment and 

users‘s beliefs about the website influence the users‘s 

purposeful behaviour towards the website. Moreover, 

the results indicated that the user‘s trust in the ability 

and benevolence of the website influence their 

behaviour more highly, while trust in risk and 

integrity beliefs, however important, influence the 

user‘s behavioural intentions less highly. 

The government should invest more money for 

implementing such innovations. This increases trust in 

the government. Moreover, it should allocate a budget 

for the technical, software staff and civil servants to 

support their financial plans for developing trust. 

Studies have shown that the three way relationship in 

the inter-organizational factors, has been successful in 

relation to the virtual businesses. 

In the case of the global marketing relations between 

American and Japanese companies, the process of 

trust development was investigated. In this study, 

cultural sensitivity was a significant intermediate 

variable. As a result, a combination of Intentionalitybased 

Antecedent (Long-term orientation, 

Relationship building, Investments in Japan) and 


Salo & 

Karjaluoto 

(2007) 

Mukherjee 

& Nath 

(2003) 

Grudzewski 

et al (2008) 

Fazlollah 

(2002( 



12 paper 

about trust in 

online 

markets, 

online 

purchase and 

e- commerce 

510 users of 

internet in 

India 

- 

40person 

A proposed model 

of online trust 

A model of trust in 

online relationship 

banking 

A model of trust 

A conceptual 

model of trust in 

Internet shopping 

(CTIS) 

Long-term orientation 

Relationship building 

Investments in Japan 

-Consumer Characteristics 

-Product/Service Characteristics 

-Different Markets/ 

Cultures/Countries 

-Perception of Risk 

-Past Experience 

- Web Vendor: 

1. experience 

2. Trust Worthiness 

- Information System: 

1. Perceived Usefulness 

2.Perceived Ease of Use Training 

- Third Party: 

1.Trusted Seal 

2.Experts 

3.Peers 

-Privacy Protection 

Communication 

Shared value 

Opportunistic Behaviour 

1- Disposition to trust: 

- Personality 

- background 

- experience 

2- Ability 

3- Benevolence 

4- Integrity 

Trust worthiness of internet 

vendor: 

Perceived Security Control 

Perceived Privacy Control 

Perceived Integrity 

Perceived Competence 

External Environment: 

Third Party Recognition 

Legal Framework 

internal propensity to trust 

cultural environment 

experience 

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Capability-based antecedent (Product Differentiation, 

Product Modification,Channel Support, After-sales 

Service) was used to develop trust between Japanese 

buyers and American sellers. 

The factors which affect online trust have been 

investigated. Authors have argued that trust 

development methods should really result in the 

expansion of the customer‘s longer trust relations. 

Shared values affect trust the significantly most. Then, 

communication are influential. Opportunist behavior 

affects trust negatively. 

Customers trust will increase with a view to all these 

dimensions and indices in the customer transactions in 

the virtual environment. This model can be applied 

not only to B2C but also to many kinds of 

relationships between partners. 

All cases have been approved, and finally led to 

customer trust development. 

12. Models Compared 

As it was said before, different models have been introduced for studying the relevant factors 

in customers‘ trust in e-business. Each of these models includes different structures. These etrust 

models in e-business overlap in some cases and include common structures. However, 

each of them has been introduced by a different researcher, about a different research subject, 

and at a different time. In order to illustrate the main differences between the e-trust models in 

e-business, there has been an attempt, in this study, to compare them based on the six 

dimensional e-trust model of Kim et al., (2005), which seems to be a comprehensive model. 

These dimensions are as follows: 

i. Customer‘s behavioral dimension; 

ii. Institutional dimension; 

iii. Information content dimension; 

iv. Product dimension; 

v. Transaction dimension; and 

vi. Technology dimension (Kim et al., 2005, p.148(. 




In table 2, we compare the models in various dimensions of electronic trust. 

Table 2: Comparing models of trust in e-business based on model of kim et al. (2005) 

Models of trust 

Dimensions of e-trust 

Customer‘s 

behavioral 

dimension 

Institutional 

dimension 

Information 

content 

dimension 

Product 

dimension 

Transaction 

dimension 

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Technology 

dimension 

TBM-Trust building model 

(McKnight & et al) * * * * * 

Model of trust including 

assurance measures and 

provider attributes 

(Kaplan & Nieschwietz) 

The conceptual model for trust 

in health infomediaries 

(Song & Zahedi) 

Trust and risk in e-government 

adoption 

(Belanger & Carter) 

The triple framework of interorganizational 

trust 

(Wei et al) 

Theoretical model of 

e- commerce B2B 

) Lohtia et al( 

Developed research model for 

investigating online trust 

(Salo & Karjaluoto) 

A model of trust in online 

relationship banking 

(Mukherjee & Nath) 

Model of trust to relationship 

among people in virtual 

environment 

(Grudzewski et al) 

A conceptual model of trust in 

Internet shopping, 

model) 

CTIS( 

) Fazlollahi( 

* * * * 

* * * 

* 

* * 

* * * 

* * * 

* 

* * * * 

* * * 

13. Conclusion 

The results of the comparisons of models based on the dimensions of e-trust (table 2) shows 

that the Trust Development Model introduced by McKnight et al., includes all the dimensions 

of e-trust other than the product dimension. The Web Guarantee Service Model for B2C ebusiness 

introduced by Kaplan and Nieschwietz considers the most important dimensions of 

Trust Development for e-banking, customer‘s behaviour dimension, institutional dimension, 

interaction dimension, and technology dimension. The Conceptual e-trust Model in the Health 

infomediary introduced by Song and Zahedi emphasizes customer‘s behaviour dimension, 

information content dimension, and technology dimension. Belanger and Carter‘s Egovernment 

Model, and McHerchi and Nass‘s e-trust Model for online relationships 

emphasize customer‘s behaviour dimension.Th Inter-organizational e-trust Model for virtual 

businesses considers customer‘s behaviour dimension, and institutional dimension. The 

theoretical B2B e-business e-trust Model of Lohtia, et al, emphasizes customer‘s behaviour 

dimension, product dimension, and interaction dimension. Salo and Karjaluoto‘s Online e- 




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trust Model emphasizes customer‘s behaviour dimension, institutional dimension, and 

technology dimension. The Inter-personal Virtual e-trust Model introduced by Grudzewski, et 

al. emphasizes customer‘s behaviour dimension, institutional dimension, information content 

dimension, and technology dimension. The conceptual Online Purchase e-trust Model (CTIS), 

emphasizes customer‘s behaviour dimension, institutional dimension, and technology 

dimension. 

If we adopt a multidimensional approach to the concept of Trust in e-business, and develop 

some clear-cut initiatives for management and e-business researchers, it would seem that we 

need to develop a multidimensional model taking into account the kind of research and its 

nature to provide a basis for practical and fundamental research. 




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References 

Akhvizadegan, L., Amiri , T. (1998),‖ survey on various dimensions of trust in e- 

commerce‖special monthly the age of information technology ,volume 36 pp 64-77. 

Belanger, F., Carter, L. (2008), “Trust and risk in e-government adoption” International 

Journal of Strategic Information Systems, No. 17, PP. 165–176. 

Castaldo, S. (2007),“Trust in Market Relationships”, Edward Elgar Publishing Limited, Great 

Britain. 

Fazlollahi, B. (2002), ‖ Strategies for ecommerce success”, IRM press, United States of 

America. 

Grudzewski, W.M., Hejduk, I., Sankowsha, A. (2008), ‖Trust management in virtual work 

environments: A human factors perspective” (Ergonomics Design & management 

theory & applications), CRC Press. 

Hosseini, kh., Azizi, Sh. (2006), Mirhosseini, hossein,‖e- business and e- commerce: 

managerial approach‖ Tehran, the organization for researching and composing 

university textbooks in the humanities (samt). 

Kaplan, S.E., Nieschwietz, R.J. (2003), ―A Web assurance services model of trust for B2C ecommerce”, 

International Journal of Accounting Information Systems, No. 4, PP. 95– 

114. 

Kim, Dan J. Song, Yong I. Braynov, S.B. Rao, H.R. (2005), ‖A multidimensional trust 

formation model in B-to-C e-commerce: a conceptual framework and content analyses 

of academia/practitioner perspectives”, Decision support systems, No. 40, p.p 143- 

165. 

Lohtia, R., C. Bello, D., Elise Porter, C. (2009), ―Building trust in US–Japanese business 

relationships: Mediating role of cultural sensitivity”, International Journal of 

Industrial Marketing Management, No. 38, PP. 239–252. 

McKnight, D.H., Choudhury, V., Kacmar, C. (2002), ―The impact of initial consumer trust on 

intentions to transact with a Website: a trust building model”, International Journal of 

Strategic Information Systems, No. 11, PP. 297–323. 

Mukherjee, A., Nath, P. (2003), ―A model of trust in online relationship banking‖, 

International Journal of Bank Marketing, Vol. 21, No. 1, PP. 5-15. 

Salo, J., Karjaluoto, H. (2007), “A conceptual model of trust in the online environment”, 

Online Information Review, Vol. 31, No. 5, PP. 604-621. 

Song, J., Zahedi, F.M. (2007), “Trust in health infomediaries”, International Journal of 

Decision Support Systems, No. 43, PP. 390–407. 

Song, R., Kobra, L., Yee, G. (2007), “Trust in e-services”, Idea Group Publishing, United 

States of America. 

Wei, Z., Lu, L., Yanchun, Z. (2008), “Using fuzzy cognitive time maps for modeling and 

evaluating trust dynamics in the virtual enterprises”, International Journal of Expert 

Systems With Applications, No. 11, PP. 1583- 1592. 

Zand, D.E. (1997), “The Leadership Triad; knowledge, trust, and power”, Oxford University 

Press, Inc. 




Muslim Response to Modernity and a new 

strategy of peace in the world 

Rana Zamin Abbas 

Research Associate SBE UMT 

Dr. Muhammad Amin 

Chairman Department of Islamic Sciences & Civilization UMT 

Dr.Zulfqar Ahmad (Corresponding Author) 

University of the Punjab 

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Abstract 

Muslim countries gained political independence from mid 40s onwards. However, during the 

colonial rule, Western powers tried to replace the Muslim thought, culture and institutions 

with the Western thought and culture through all possible means. Muslim reaction to Western 

thought and civilization after liberation ranged from complete acceptance to resistance and 

total indifference. The dominating approach was of reconciliation which resulted in 

Westernization of the Muslim societies by the second half of 20 th century. However, it seems 

necessary to review the Muslims strategy at this stage. This article is a review and proposes a 

new approach in this direction. 

Key Words: Modernity, Islam, Response, Acceptance, Resistance, Reconciliation, 

Indifference, media, education 


The political downfall of the Muslim Ummah after providing leadership to the world in 

every sphere for a millennium, was primarily due to two main factors 

Muzaffar,iqbal(2003), First, weakening of its commitment to its world view and noncompliance 

of Islamic injunctions, and secondly, the colonial policies of the Western 

nations which not only contributed to the downfall of Muslim Ummah but also 

occupied Muslim lands. The colonial powers destroyed Muslim institutions and values 

by force and thrust the Western thought, culture and institutions upon them in order to keep 

the Muslims under their thumb. 

Referring to the imperial powers' attitude, John L Esposito writes: 

―Europe came not only with its armies of bureaucrats and soldiers but also with its Christian 

missionaries. The double threat of colonialism was that of the crown and the cross. The 

mutual relationship between the clergy and the government and military was proclaimed by 

France‘s Marshal Bugeaud, who praised their ‗grand rapports‘, commenting that the clergy 

―gain for us the hearts of the Arabs whom we have subjected to force of arms.‖ The preachers 

and missionary institutions (churches, schools, hospitals, and building houses) were regarded 

by many Muslims as an arm of imperialism, one aspect of a policy that displaced indigenous 

institutions, supplanted local languages and history with Western curricula, and seduced souls 

through schools and social welfare.‖John. L, Esposito (1992), 





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However, within a century or two, the Muslims were able to rid themselves of the colonial 

rule of the West in the true Islamic spirit (Quran), that cant tolerate alien subjugation. Their 

commitment to Islamic worldview was no doubt weakened but had not died out. 

Historically, the religious leadership played a leading role not only in the freedom movements 

of Muslim lands but also in framing Muslim response to modernity in the newly independent 

Muslim states. According to some orientalists, the Muslim reaction to modernity in the Sub- 

Continent varied from "blind and self defeating 

hostility" to "reasonable cooperation" John.L,Esposito(1992), However, in the broader sense, 

this response can be divided into four categories: 1) complete acceptance, 2) reconciliation, 3) 

strong resistance and 4) total indifference. 

We would discuss these strategies one by one and our views are largely based on the behavior 

of the Muslims in the Indo-Pakistan sub-continent but the same is true generally for most of 

the Muslim countries. 

2. Total Acceptance 

Some Muslim rulers after the First World War specially Mustafa Kamal Ataturk in Turkey 

and Raza Shah Pehlvi in Iran blindly accepted the Western thought and worldview and tried to 

enforce the Western culture through the state power. The religious leadership and the public at 

large in these countries, however, rejected this Westernization and subsequent uprising in 

favor of Islam and pro-Islamic governments in Turkey and Iran perhaps is the reaction of this 

Westernization in the past. John.L,Esposito(1992), 

3. Policy of Reconciliation 

The Western colonial powers had demolished the social system of Muslim lands and managed 

to transfer power to the social groups brought up in the Western-style. Accordingly, most of 

Muslim rulers in the new born Muslim states readily accepted Western life style and 

institutions. However, the religious leadership in most of the Muslim countries had also 

organized itself by this time and many Islamic groups resisted the government policies. They 

were, however, unsuccessful mainly because of the brutal use of state power by the 

governments (mostly run by military and civil dictators or monarchs) to silence the Islamic 

organizations with the political support of the West. This state of affairs gradually led to a 

situation where several Islamic groups accepted Western political institutions with a blend of 

certain basic Islamic concepts. The existing political structure of Muslim countries is, perhaps, 

the best example of this reconciliation. 

In Pakistan for example, the rulers from Muslim League were in favour of Western 

democracy. And the religious parties despite their belief that Western democracy was un 

Islamic, Charles J, Adams (1983), did not find any other wayout except to accept Western 

democracy after certain basic Islamic principles, such as Sovereignty for Allah and legislation 

to be in line with the Islamic injunctions etc,Dr. Safdar, Mehmood(1975), were incorporated 

and the adoption of the ‗Objectives Resolution‘ by the Constituent Assembly. They agreed to 

take part in elections with the intention to mould the state structure according to Islamic 

teachings through popular vote. Mawdudi, 




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Now, that half a century has passed, it seems appropriate to study the net result of this 

experiment. Apparently, the politicians who had opted politics as ‗profession‘ or ‗career‘ for 

personal ambitions, have been able to adjust themselves in the existing political set up but the 

religious groups and religio-political parties who had a declared agenda of Islamization of 

state and society, have failed. No doubt they made mistakes but it is also a fact that the 

Western nations engineered their failure with the help of local governments. The state power 

was used to ensure that religious parties did not win the elections. Pakistan, Indonesia, 

Malaysia, Nigeria, Egypt, Syria, Jordan, Libya and Tunisia are perhaps the best examples of 

this Western strategy.Karen, Armstrong, On the other hand, in the countries where Islamic 

groups managed to come to power despite all obstacles, such as Iran and Turkey, enormous 

pressure was being built to make them a failure. 

3.1 Results of Reconciliation Policy 

Many religious parties or groups such as Ikhwan-ul-Muslimoon (Muslim Brotherhood) in the 

Middle East, Jamat-i-Islami in Pakistan and other Islamic movements besides some of the 

Ulema, still support the reconciliation policy in spite of their failure in politics. An analysis 

would show that notwithstanding their significant role in promoting the Islamic cause in the 

Muslim communities, their Reconciliatory approach in politics has been instrumental in 

secularization of the Muslim political thought on the whole. Islamic political concepts 

introduced by the Islamist groups in Western polity have almost been merged into the Western 

liberal democracy and thus lost their identity. The defeat of the Islamic groups on the political 

front has also led to the domination of the Western thought and behavior in other spheres of 

life such as economics, education, law, culture and social life. Consequently, the Muslim 

societies are becoming westernized speedily and the religio-political parties/movements are 

unable to check this trend ; what to speak of Islamization of society and 

state.Karen,Armstrong, 

3.2 Schools of Reconciliation 

It is somewhat natural in the case of large organizations and movements to have many shades 

of opinion under the central theme, some of which are at the center while others move on in 

the right or the left of the centre. Similarly, among the followers of the Reconciliation policy, 

some are close to ‗Resistance‘ strategy whereas some are on the borders of ‗Acceptance‘. The 

latter group having been fascinated by Western thought and culture, tends to reinterpret Islam 

making it compatible with the Western thought. Scholars of this type are found in almost all 

Muslim societies although these are small in number and not popular among masses. Sir Syed 

Ahmad Khan, Amir Ali, Charagh Ali, Mazheruddin,Siddiqui(1993), and in the recent past, 

Ghulam Ahmad Parvez, Dr. Fazlur Rahman, Ghulam Jilani Barq and in today‘s Pakistan, 

Javaid Ahmad Ghamdi and Dr. Javaid Iqbal fall in this group. 

4. Policy of „Resistance‟ 

Some religious groups of the Muslim society on the other hand, rejected the reconciliatory 

approach. Their argument was that the Western thought and the world view upon which it is 

based, not only differ from Islam but are contradictory to it, therefore all Western institutions 

deserve to be rejected. They want to create awareness among the Muslim masses and elite to 

resist Western thought so that new institutions in the Muslim societies develop purely in the 




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light of Quran and Sunnah. This viewpoint appeared academically sound and close to Islamic 

tenets but practically the followers of this philosophy emerged as extremists and clashed not 

only with Westernized Muslim rulers but also with Muslim organizations in areas where they 

were able to muster suppport– even at the cost of their own existence. Al Takfir wa all Hijra, 

Sohail,mehmood(1995), of Egypt , Hizb al-Tehrir, Suha Taji,Farouki(2003), and Pakistani 

Taliban, Musa Khan,Jalal Zai 1999), can perhaps be taken as representatives of this viewpoint. 

And Al-Qaeda can also be listed among these because it decided to clash with the US which 

currently leads the Western thought and civilization. It accepted the responsibility of 

9/11attacks and tried to justify these as a reaction to US/Western oppression and brutalities in 

Muslim lands; in Palestine, Bosnia, Kashmir, Chechnya … etc.Rohan,Gunaratna (2002), 

This Resistance policy of some Muslim groups has irritated the West particularly the US 

where a fundamentalist Neo-Cons Republican Party has been in power for two terms and has 

framed a strong anti Islamic agenda with religious zeal. Opponents of the US maintain that the 

US, as the colonial power of 21 st century, Rohan,Gunaratna (2002), has started a war against 

Islam and the Muslims under the cover of ―war on terror‖ and crushed Afghanistan and Iraq. 

Although Europe does not endorse US hegemony and resists US claim as the sole super power 

of the world, yet it fully supports US designs against Islam and the Muslims. 

4.1 Outcome of Resistance Policy 

The Resistance policy, in our view, has somewhat weakened the present Muslim society 

because the Resistance groups are not strong enough to defeat the US and the West, and are 

compelled to fight a guerilla war or make suicide attacks. However, they claim they would be 

able to weaken and defeat the US in the long run. And although the Muslim masses do not 

support the resistance groups in principle during peace times, yet they approve their activities 

against the forces occupying Muslim lands such as Afghanistan, Iraq, Palestine, Kashmir, 

Chechnya considering it a holy war or Jihad. 

Even if we don't debate the rationale of the Resistance strategy from the view point of Islamic 

law, a question arises whether the Muslims are going to gain anything out of the decline of the 

US. In the near past, the Muslims (of Afghanistan and Pakistan with active support of the 

Middle Eastern Arab countries besides the US and Europe), have defeated the USSR. 

However, did the Muslim world gain any thing out of that? With the downfall of the Soviet 

Union, the USA emerged as the sole super power of the world. Next, the USA abandoned 

Afghanistan and Pakistan to their fate. The Afghan were driven into a civil war, cutting each 

other‘s throat while Pakistan was pushed into political instability, deteriorating law & order 

and recent US air attacks on its northern border. 

The question is, if at all, the Muslims are able to defeat or weaken the USA; it would 

be the European Union or China that would emerge stronger and not the Muslims. There is no 

systematic, planned and organized effort of Muslims advancement in research, education, 

trade & industry, science & technology, political & economic stability…etc. On the other 

hand, the Resistance policy is weakening Muslim society as the Resistant Groups are not only 

fighting against the US and its allies but also against the ‗impious‘ Muslim rulers supporting 

the West, willingly or otherwise. This internal war has led to chaos and anarchy in the Muslim 

society and created distances between the rulers and the people, resulting in political 




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instability and economic decline besides deterioration of law & order. Therefore, it is not sure 

that the struggle or Jihad of Muslim Resistance Groups would end up in the downfall of the 

West and rise of Muslim Ummah. 

5. Attitude of Complete Indifference 

Next is a group of Muslims which is totally indifferet to the threat from the Western thought 

and civilization. This group is active in preaching of Islam and endeavours to bring the 

believers closer to Islamic beliefs. However, it confines itself to rituals, morals and individual 

behavior and has no agenda for political and socio-economic reforms. The Jam‟at al-Tabligh 

falls in this group. The Tableeghi Jamaat is perhaps the largest religious movement all over 

the world and holds huge gatherings in different countries from time to time. It is a worldwide 

movement and its members keep on moving from place to place and from country to country 

throughout the year inviting their Muslim Brethren to practice fundamentals of Islam. They 

have instructions from their leaders to avoid discussion on politics, socio-economic conditions 

of the Muslim countries as also the designs of the West towards Islam and 

Muslims.Yogindar,Skiand(2002), 

The members of this Movement, in spite of their commitment and sincerity, have a very 

narrow concept of Islam, confining it only to rituals and morals and deliberately ignoring the 

Islamic injunctions concerning political and social and economic aspects of life. They are 

indifferent to the onslaught of the Western ideology and culture on the Muslim society, an 

attitude that can hardly be justified. That is why many Muslim scholars and Ulema do not 

approve this approach and consider it harmful for the Muslim Ummah, 

Yogindar,Skiand(2002), 

6. Need for a New Strategy 

So far, we have discussed Muslim response to modernity and arrived at the conclusion that the 

policies of Acceptance, Reconciliation, Resistance and Indifference followed by the Muslim 

political and religious leadership have limited scope; hence the need to evolve a new strategy. 

However, before proposing one, we deem it necessary to discuss in brief the attitude of West 

towards Islam and the Muslims. 

7. West's Attitude towards Islam and Muslims 

The attitude of the West towards Islam has been based on bias and even hatred throughout as 

was manifest in the Crusades, Muhammad,Asad(1991), following the rise of the Islamic 

civilization. In addition to it the Orientalists also contributed greatly to distort the image of 

Islam. Islam was presented as decaying civilization, a backward and irrational religion 

through the works of orientalists and was popularized through Hollywood movies, 

Ibrahirm,kalin(2004), West has created the image of Muslims and Islam from the so called 

intellectual works of its paid writers and intellectuals. During the 19th century, the Western 

powers destabilized Muslim countries and occupied most of their lands. They tried to prolong 

their hold on the Muslim lands through every possible means, destroyed their state structure 

and institutions, replacing them with their own based on the Western world view. However, 

the Western imperialism was compelled to liberate Muslim lands due to the Muslims' freedom 




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movements and the wars amongst Western nations (World War I & II). While liberating the 

Muslim states in mid twentieth century; Western powers tried to transfer power to such 

factions of the Muslim society as had been educated and trained in Western style and were 

enchanted by the Western thought and life style. Even afterwards, the West continued its 

conspiracies to destabilize Muslim countries under the garb of economic assistance, quality 

education, and social reforms.etc. 

In spite of all that, some Muslim countries (such as Iraq, Iran, Pakistan and Turkey) were able 

to hold ground and attempted to devise their own policies ignoring Western pressure. This was 

however not acceptable to the West. In the 1979 USSR invaded Afghanistan and the local 

Muslim population began a resistance movement. This gave the West an opportunity to defeat 

Communism and USSR with the help of Muslim world. The cold war came to an end and 

USA emerged as the sole Super Power of the world. The West tried to avail this opportunity 

for its dominance over the whole world and universalization of its thought and culture. At this 

point of time, Western thinkers like Bernard,lewis(1990), and Samuel P,Huntington(1993), 

introduced the concept of ‗Clash of Civilizations‘ indirectly implying that there was no room 

for an ideology or civilization that challenged the supremacy of Western thought and 

civilization. However, they noticed Islam as a great ideological force that taught its believers 

not to accept any other ideology or power. The Muslims were the fore most to stick to their 

ideology and reject the Western hegemony, something not acceptable to the West. Therefore, 

the 9/11 tragedy was engineered to provide the US an excuse to launch so-called ‗war on 

terror‘ and attack the Muslim countries, Tariq,majeed(2006) The US compelled the UN and 

the European countries to support her plans and they did it; and if some were reluctant, it did 

not care. It attacked the Muslim territory with its huge, most modern and destructive fighting 

power. Afghanistan and Iraq have been devastated, Pakistan is under fire and Iran is next in 

line. 

It is in this scenario that we feel the Muslims need to devise a new strategy with reference to 

the West. The new strategy, in our humble opinion, should have the following characteristics: 

7.1 Peaceful Strategy 

In the prevailing conditions, an armed conflict with the West and the US is not in the interest 

of the Muslim Ummah. The Muslims should realize that they are not strong enough to defeat 

the US and the West with their present resources nor can they get a period of peace that could 

ensure their rapid and smooth progress. The policy of confrontation would continue to irritate 

the Western powers and give them an excuse to ignite the flames of hatred in the hearts of 

Western public against Islam and Muslims. Therefore, the Muslims should adopt the policy of 

peace in general. However, any aggression by the West against a Muslim state should be 

resisted with full force and the entire Muslim world should support the victim in line with the 

UN charter and the universal law that guarantees religious freedom and the right of selfdefense. 

7.2. Greater emphasis on Education and Media 

All Muslim states, socio-religious movements and their NGOs should focus on education and 

media. Education plays primary role in character building and personality development. 

Muslim organizations and NGOs would get full public support in this task. In fact, thousands 




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of schools in private sector are already functioning in the country and there is need to do this 

job at grass root level through community mobilization. Curriculum and personality 

development in these schools should be strictly in the light of the Islamic injunctions and 

values although the Western experiments in the field of education should also be studied if 

these do not clash with the Islamic viewpoint and every possible good be derived from those. 

Since education of science and technology involves heavy expenditure which can be borne 

only by the states, the private institutions should focus on social sciences and humanities. The 

establishment of model educational institutions in large numbers in the Muslim world in the 

private sector would definitely be helpful in bringing up young practicing Muslims which 

would ultimately strengthen Muslim institutions and society at large. 

Print and electronic media are a great source of informal education and have important role in 

personality development and changing individuals' thought and behavior. However, the media 

in the Muslim countries can play its role in conformity with the Islamic injunctions and 

Muslims interests only if it is independent; independent in the sense that it is not enchanted by 

the Western thought and life style. Such independent Muslim media can initiate a useful 

dialogue between West and Islam can help in removing misconceptions and misgivings about 

Islam and Muslims usually stemming out of ignorance and lack of communication. 

7.3 Focus on Individuals 

Most of Islamic organizations and religio-political parties of Muslim countries are engaged in 

efforts to change the society through state power through the political process and elections. It 

is now proposed that they shift their focus and concentrate on individual instead of the system. 

The society is composed of individuals; therefore if the thinking and attitudes of individuals is 

changed, a change would automatically occur in the society. No doubt it is a slow process but 

it can produce better results. Moreover, this policy is nearer to Islamic principle of 

reformation which suggests that ‗change should begin from home‘; implying that reformation 

should flow from down to upward, from individual to family, relatives and immediate 

surroundings (Streets, counties), from municipalities to Districts, Divisions, to provinces and 

federal government and not from up to downward. According to Quran this has been the 

policy of all the Apostles of Allah.(Quran) 

7.4 Not Always at the Receiving End 

Not that the Muslims should only be at the receiving end. No doubt, they are much behind the 

West in science & technology, and military might but there are certain fields wherein the 

Muslims are stronger than the West. For example, the Muslim family system is intact to a 

great extent.(Quran) The Muslim society has inherited religious values, traditions and rituals. 

In spite of their poor living conditions, most of the Muslims lead peaceful lives. Over and 

above that, the original sources of Islam (Quran and Sunnah) are with them completely safe 

and unhampered, injunctions whereof are based on logic and reason, hence appealing to 

modern man who is spiritually sick, forlorn and bewildered in spite of rapid advancement in 

science and technology. 




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This means that Muslims are spiritually richer and ideologically stronger than the people in 

the West and they need not always to be at the receiving end. In other words, they are in a 

position to deliver their ideology and spiritual experiences to the West and the Muslim 

thinkers, intellectuals and writers need not be apologetic about Islam. This approach would 

not only give Muslims (especially to the younger generations) a feeling of strength and a 

direction to march ahead but a sense of pride in their heritage and values. And it is in this 

spirit, that they can carry the ever-living and ever-fresh message of Islam to the West, and by 

using modern means and technology, they can win the hearts and minds of the Western people 

who are in search of peace of mind and heart. 

7.5 Speedy Development 

The Muslim society also needs to avoid an armed conflict with the West and instead adopt 

effective steps for speedy development in a peaceful environment. ‗Development‘ here means 

‗development in Islamic perspective‘ as had been achieved in the period of the early Muslim 

caliphs implying poverty alleviation, high literacy rate, political stability, economic 

independence, strong societal structure and above all moral development. The basis of all this 

should be commitment to the Islamic worldview through proper and effective use of 

education, training (Tarbiya) and media. 

7.6 Leadership 

A question may arise, where the leadership to implement this strategy is? In our view, the 

people committed to the Islamic worldview and well educated in modern disciplines, are 

better suited for this task than the traditional Ulema. Also, the younger generation should be 

educated, trained and motivated to work for this strategy for bringing about a real change in 

the Muslim society. 

It is hoped that if the Ummah adopts this strategy, main features of which have been identified 

above, it would not only save the Muslim society from the storm of westernization but also 

provide it an alternate paradigm for rapid development and help her overcome its weaknesses. 

8. Conclusion 

To conclude, it is our considered opinion that the strategies being followed by Muslims 

against the Western hegemony at present and to regain their lost glory are ineffective, and 

cannot produce the desired results; and it is high time for the Muslim thinkers and intellectuals 

to adopt a new approach. The suggestions above are a humble attempt in this direction and 

may invoke a meaningful discussion. 




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References 

Bernard Lewis,(1990),―The Roots of Muslim Rage”, the Atlantic Online, September,. 

www.theatlantic.com/doc/199009/muslim-rage, 

Bernard Lewis in his article presented the idea of clash of civilization. We are facing a mood 

and a movement far transcending the level of issues and policies and the governments that 

pursue them. This is no less than a clash of civilization--- the perhaps irrational but surely 

historic reaction of an ancient rival against our Judeo- Christian heritage, our secular 

present and the world-wide expansion of both. 

Charles J. Adams.( 1983), ―Mawdudi and the Islamic State‖ in Voices of Resurgent Islam, ed. 

John L Esposito,103. New York, Oxford University Press,. 

(Mawdudi believed that Democracy is the kind of government in which the majority of rule 

whether its views be right or wrong, and in which a minority may hope to have a voice in 

affairs only by transforming itself into the majority. No guarantees of rights or other 

safeguards that might be built into a democratic constitution could truly protect a minority in 

democratic polity. Democracy, when reduced to its bare bones, amounts only to the tyranny of 

the majority. 

Dr Safdar Mehmood (1975), The Constitutional Foundations of Pakistan, (Publishers United 

Limited:), 16-21, 775. 

These points were included in the Objective Resolution which now has become the part of the 

1973 Constitution of Pakistan in vogue at present. 

Ibrahim Kalin, ―Roots of Misconception: Euro-American Perceptions of Islam Before and 

After September 11‖,(ed.) 

Joseph E.B Lumbard,( 2004), in Islam, Fundamentalism and the Betrayal of Tradition, 

(Bloomington: World Wisdom, Inc.,), p. 163. 

Writer has included numerous examples of the orientalists who through their work build up 

the negative image of Islam and Muslims and presently working on it. 

John. L. Esposito, (1992),The Islamic Threat: Myth or Reality, (New York: Oxford University 

Press,), p.52. 


Press,), p.53. 


Press,), p.54 

Karen Armstrong, Islam: A Short History, p.154-156 

Karen Armstrong, Islam: A Short History, p.122-125 

Mawdudi declared that Pakistani state has pronounced Islam when Objective Resolution was 

passed by the constituent Assembly 

Mazheruddin Siddiqui,( 1993), Modern Reformist Thought in The Muslim World, Delhi: 

Adam Publishers,) the book describes the ideas of Muslim modernists in particularly 

of Sub- Continent., Also see Aziz Ahmad, Islamic Modernism in India and 

Pakistan1857-1964, (London: Oxford University Press, 1967) ideas of Sir Sayyed 

Ahmad Khan and other modernists are being discussed in it. 

Muhammad Asad,( 1991), Islam at the Crossroads, (Lahore: sheikh Muhammad Ashraf,), p. 

34,35, 38. 




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It was crusades, first and foremost, that decided the European attitude towards Islam for 

many centuries to come. The crusades were decisive because they fell in the period of 

Europe‟s childhood, a period when its peculiar cultural traits were asserting themselves for 

the first time and were still in process of molding… Crusades produced one of the deepest and 

most permanent impressions on Europe‟s mass psychology. .. Modern Europe was born out of 

the crusades. The spirit of the crusades --- in a much diluted form, to be sure--- still lingers 

over Europe, and the attitude of its civilization towards the Muslim world bears distinct traces 

of that die-hard ghost. 

Muzaffar,Iqbal, (2003), ―Challenges to Islam and Muslims: What is to be done‖, Islamic 

Studies 42,:595. 

Musa Khan Jalal Zai,( 1999), Taliban and the Great Game in Afghanistan, (Karachi:Vanguard 

Books Limited,),110-113. 

Quran:3:85, 9:29, As is know that concept of ‗Religion‘ in Islam differs from that of the West; 

and in Muslim tradition ‘Islam‘ is a creed, a world view and a complete code of life 

which precedes the society and the state. 

Quran 74:4, 26:214, 6:92 

Quran .13:28, According to Qur‘an peaceful living depends upon ‗Remembrance of Allah‘ 

which leads to practicing Islamic injunctions as ordered in Allah‘s divine guidance. 

Quran 15:9 Allah guarantees that it would remain safe for ever. 

Rohan Gunaratna,( 2002) ,Inside Al Qaeda Global Network of Terror,(Karachi: Vanguard 

Books Ltd.,) 

Rohan Gunaratna,( 2002) p. 88 

Al Qaeda believes that until US troops are ejected from Saudi Arabia, Muslim society will be 

„living a life of sin‟. As one fighter put it, „Until the US troops are removed from all lands of 

the Muslims; no Muslim is absolved from sin except the Mujahidin. To mobilize the Muslim 

masses, Osama is likely to make the same argument regarding US troops in Afghanistan and 

Pakistan. 

Samuel P. Huntington, (1993), ―The Clash of Civilization‖, Foreign Affairs 3: 39, 

The next world war, if there is one, will be a war between civilizations. 

Sohail Mahmood,( 1995) ,Islamic Fundamentalism in Pakistan, Egypt and Iran, (Karachi: 

Vanguard Books Ltd,), p.223 

The JTWH was formed by Shukri Ahmad Mustafa in 1971. JTWH was one among many other 

similar underground circles that had been established by activists of the Muslim Brotherhood 

who had been incarcerated and tortured during Nasser‟s stifling of the movement in the late 

1960s. 

Suha Taji Farouki, (2003),―Islamists and the threat of Jihad: Hizb Al- Tahrir and al- 

Muhajiroun on Israel and Jews‖, in Islam: Critical Concepts in Sociology, ed. Bryan S. 

Turner, Hizb al Tahrir was established in Jerusalem by Taqi al- Din Nabhani an 

Azhari Alim and Faqih from Ijzim in northern Palestine.(New York, Routledge,), 237 

Tariq Majeed,( 2006), Masterminds of Air Massacres of August 17 in Pakistan, September 11 

in America, (Lahore: Bait-ul-Hikmah,), 514-518. 

Air Commodore Tariq Majeed has quoted many examples from International magazines that 

Sep 11 attack was planned by American agencies and many independent studies in USA & 

Europe support this view point. 




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Yogindar Sikand, (2002),The Origins and Development of the Tablighi Jama‟at (1920-2000), 

(Hyderabad: Orient Longman Private Limited,) 

Yogindar Sikand, (2002), The Origins and Development of the Tablighi Jama‟at (1920- 

2000), (Hyderabad: Orient Longman Private Limited,) 

Writer in this book has mentioned the critiques of Brelwi, Ahl-e-Hadith and Jamat e Islami on 

Tableeghi Jamat in detail. 




Sustainable Aspects of Short Sea Shipping: 

A Case Study of Europe 

Samsul Islam 

University of Auckland, New Zealand 

12 Grafton Road, School of Business, University of Auckland 

Paul Leinberg 

University of Gothenborg, Sweden 

Viktoriagatan 13, Goteborg, Sweden 

Rezbin Nahar 

Southeast University, Bangladesh 

House# 64, Road# 18, Block # B, Banani, Dhaka, Bangladesh 

JANURAY 2011 

VOL 2, NO 9 

Abstract 

There is a gradual growth and participation of containers in the world-wide trade, both in the 

USA and the EU, which created some sort of capacity problems in the major ports. Moreover, 

the truck-dominated transportation system caused a worse-situation on the important EU‘s 

transportation corridors. But short sea shipping (SSS) can provide the best alternative using 

the inland and coastal waterways. Moreover, SSS can provide many extra helps for the 

environment, the economy and the society as a whole. European Commission actively 

supports SSS as an alternative, environmentally friendly mode of transportation among the 

others. But there are obstacles, administrative barriers, and challenges that should be 

addressed and solved immediately. The commercial benefits of SSS should be presented to the 

shippers and ship-owners to attract them to this beneficial mode of transportation. This paper 

reviews the strengths, weakness, opportunities and threats (SWOT analysis) of SSS in the 

context of EU. Similarly, it figures out the numerical benefits derived from adopting the EU as 

an alternative of road transportation. Finally, it proposes unique advantages for the growth of 

SSS in EU than USA. 

Key Words: Short Sea Shipping, Sustainability, European Union, Emission 






1.1 Background 

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During the last decades of the 20 th century, it is agreed that we are carrying out our economic 

activities in such a way that is harmful for the natural environment. It is also recognized that 

the methods being used can be less harmful and more sustainable. New concepts came in 

existence like ―Sustainable Forestry‖, ―Sustainable Manufacturing‖, ―Sustainable 

Agriculture‖, ―Sustainable Tourism‖ and ―Sustainable Transport‖. ―Sustainable Transport‖ 

concept is important because most of the vehicles use ―Petroleum‖ rather than other types of 

energy. The major question at this point is: What is the future demand for this fuel and will the 

planet be able to supply it? The vessels and vehicles that move freight today are powered by 

petroleum; this is true for 95% of the freight movements. So, transport systems are nonsustainable 

because of ―Fuel‖ that is finite and nonrenewable (Leinbach and Capineri, 2007). 

Moreover, current transport system is placing emissions in the atmosphere that will eventually 

have impacts on the global climate. The impacts have already begun. The negative impacts of 

these emissions, mainly on the human body, must be viewed as a significant problem that 

can‘t be allowed. Transport system is becoming more non-sustainable (Leinbach and Capineri, 

2007). 

Additionally, it is true that a transport system that kills users is not sustainable. It is found that 

world‘s motor vehicle fleet is responsible for nearly a million fatalities each year and almost 

70 million injuries. Forecast of future fatalities for the next years are beyond comprehension. 

Policy makers don‘t want to include these dimensions as indicators (Leinbach and Capineri, 

2007). 

Energy consumed is equivalent to fuel consumed and emission are a function of fuel 

consumed (it also depends on speed and type of vehicle), it is apparent that from an air quality 

and global climate views motor carriers should be used in the least cases in comparison with 

waterborne and rail transport. Moreover, in this case, in addition to the emissions, we have 

accidents, excessive fuel use and congestion. The port-to-port moves are perhaps the most 

suitable because waterborne modes tend to pollute the environment the least (Leinbach and 

Capineri, 2007). 

As the below table shows that short sea shipping tends to emit the smallest grams of emissions 

for most of the pollutants of interest today. The exception is the sulfur dioxide (SO2) which is 

higher in such vessels because of high sulfur content of the fuel used for that mode. But, if we 

use other modes to move the freight, they would pollute more (Leinbach and Capineri, 2007). 

Mode CO HC PM NOx SO2 CO2 

Road .479 .227 .078 .978 .031 98.301 

Rail .196 .098 .027 .472 .036 28.338 

Short-sea Shipping .036 .012 .006 .311 .290 15.450 

Ocean Shipping .048 .016 .0483 .499 N.A. N.A. 

Table 1: Emissions (in grams/ton kilometer) for freight modes 

Source: Commission of the European Communities (1999), US Maritime Administration Cited By 

Leinbach and Capineri (2007) 




1.1.1 Definition of Sustainability 

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According to the International Institute for Sustainable Development (IISD), ―Adopting 

business strategies and activities that meet the needs of the enterprise and its stakeholders 

today while protecting, sustaining and enhancing the human and natural resources that will be 

needed in the future‖ (Blackburn, 2007). ―Sustainable development is development that meets 

the needs of the present without compromising the ability of future generations to their own 

needs‖ by WCED (1987) as cited by Young and Burton (1992). 

1.1.2 Definition of Short-sea Shipping 

Short-sea Shipping can be defined as maritime transportation of relatively short distances 

where no ocean will be crossed. Moreover, based on Europe, the European Commission 

defines short-sea shipping as the carriage of goods by ships among the ports located in the 

geography of Europe or among these ports placed in non-European countries having a 

coastline on the enclosed seas around Europe (Leinbach and Capineri, 2007). 

According to the author Stopford (2009), short-sea shipping provides transport within regions, 

for example: It distributes the cargo delivered to regional centers such as Rotterdam by deep 

sea vessels, and provides a port-to-port service. Ships are generally smaller than their 

counterparts in the deep-sea shipping, ranging in size from 400 dwt to 6,000 dwt, but there are 

no firm rules about the sizes. In the short-sea shipping, designs are much concentrated on the 

cargo flexibility. 

According to Confavreux, Report CEMT/CS/Comb(99) as cited by the ECMT (2001), shortsea 

shipping means maritime transport between ports in mainland Europe, including (1) 

national coastal shipping, between two ports of the same country; (2) intra-European 

international shipping whose ports of origin and destination are European ports; (3) the 

European leg of inter-ocean trades. According to ECMT (2002), short-sea shipping is defined 

as transport involving a sea or ocean leg without an ocean crossing. According to the 

Chlomoudis (2002) based on the definition adopted at the Community level, refers to 

maritime transport along the EU coastline, and between the continental ports of Europe and 

those situated in the European islands. In other words, it includes all seagoing transport that 

doesn‘t require ocean crossings. 

1.1.3 Ships and Cargos in Short-sea Shipping 

Short-sea cargoes include grain, fertilizer, coal, lumber, steel, clay, aggregates, containers, 

wheeled vehicles (Stopford, 2009). Ships used in the short-sea are generally smaller versions 

of the ships trading in deep-sea. Small tankers, bulk carriers, ferries, container-ships, gas 

tankers and vehicle carriers can be found in most of the region of short-haul routes (Stopford, 

2009). Combined transport with this mode is not necessarily limited to Ro-Ro carriage of 

goods vehicles or semi-trailers; it is also used to ship goods in containers (ECMT, 2002). 

1.1.4 Locations in Europe 

Short-sea shipping in Europe involves an area that stretches from northern Norway, across 

Baltic, down past the British Isles to the Iberian Peninsula and thence to the Mediterranean 

and Black Sea (Leinbach and Capineri, 2007). 




1.1.5 Barriers of short-sea Shipping Development 

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Firstly, many commercial shippers think that it is an old-fashioned, slow and complex mode 

of transport. Secondly, short-sea shipping has not still received full integration in the 

intermodal door-to-door. Thirdly, short-sea shipping is still surrounded by complex 

administrative procedure. Fourthly, short-sea shipping needs short-sea friendly ports that can 

offer quicker turnaround times, procedures and good hinterland connections (Leinbach and 

Capineri, 2007). 

1.2 Research Topic 

1.2.1 Purpose 

Our purpose with this report is to describe Short Sea Shipping and its development within 

Europe and how it could be used as a sustainable and competitive alternative to move freight. 

This includes a deeper analysis regarding the short sea shipping transport network and its 

connected ports and the SSS potential regarding emission savings. 

1.2.2 Research Questions 

� What are the competitive advantages for SSS in Europe compared to the USA? 

� What effects will the usage of short sea shipping instead of road transports have on 

emission savings? 

� What are the weaknesses / limitations of short sea shipping in the European Union? 

1.2.3 Boundaries 

� We will focus on Europe as our geographical area the ports which are included in our 

studies are within the 27 member state of the European Union. 

� The emissions that we include are those that occur when freight are being moved. 

Emissions not included are which due to port handling, construction or maintenance. 

� We are only calculating with C02 emission. All other are excluded from this report. 

� When we are performing emission calculations we are not qualifying the raw material 

which is being used. We have instead decided to focus on the active emissions which 

are does released when performing the process, for example running a truck, these 

which are being quantified. 

� We have chosen to use NTM‘s average figures for our Road calculations with a known 

fact that other similar figures exists. 

� Our road calculations are based on figures from 2003 which are documented in 

Appendix 2. If there is a lack in data from 2003 we have used latest figures. 

� For our SSS calculations we used figures from GBR and Chalmers University of Tec. 

2. Theoretical Framework 

2.1 Intermodal Markets in Europe 

In Europe, three modes are used for non-road transport in intermodal transport: Rail 

Transport, Inland Shipping and Short-sea Shipping. Rail transport has a strong position on 

North-South routes but is also used for transport of maritime containers in Eastern Europe. 

Inland shipping has a strong position in hinterland connections from Rotterdam and Antwerp. 




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Short-sea shipping has strong positions in feeders from and to the bigger container ports like 

Rotterdam, Antwerp, Felixstowe and Hamburg (Leinbach and Capineri, 2007). 

However, according to Ecmt (2002), it is difficult to estimate the share of combined transport 

in short-sea shipping, it must be increasing with the use of containers, which are now 

beginning to be used for ―Break-bulk‖ consignments. For example, as an indication, short-sea 

shipping accounts for 38% of the business of European ports. Obviously, the smaller the port 

the proportionately greater share of short-sea shipping. In Belgium, SSS accounts for 40% of 

Antwerp‘s traffic, 38% of Ghent‘s (quite specialized), 60% of Zeebrugge‘s and 100% 

Ostend‘s. 

Short-sea 

Shipping 

Rail 

Inland 

Shipping 

Pre/end haulage of 

Maritime 

Strong position in feeders from/to bigger ports 

Strong position on North-South axis (especially across 

Alps) and domestic, especially in bigger countries 

Strong position in Rhine delta Antwerp-Rotterdam 

Intra-EU transport 

Continental load units and RoRo on Channel, 

Mediterranean, Baltic 

Domestic (for example, in Germany, France, Italy) 

and Alp-crossing swap-bodies, RoRo and trailers 

Negligible (some RoRo on Danube) 

Table 2: Existing Intermodal Markets in Europe 

Source: Bogers and Henstra (2003) as Cited By Leinbach and Capineri (2007) 

2.2 Growth in Short-Sea Shipping in Europe 

At the EU-27 level, road transport increased by 42.1% in 1995 to 45.6% in 2006. The growth in rail transport 

was only 12.6% in the same period and therefore this mode saw its stake reduced from 12.6% in 1995 to 10.5% 

in 2006. Pipeline plays a little role because of market share of almost 3%. Short-sea shipping carries 37.3% of 

goods traffic with the EU-27 and noticed an average annual growth of 2.7% during last decade. 

1995-06 

2005-06 

Road Railway Inland waters Pipelines Short Sea Shipping Air Total 

+3.5 

+4.9 

+1.1 

+5.2 

+1.2 

0.0 

Table 3: Average Annual Growth (in %) in the freight transport of the EU-27 

Source: Leinbach and Capineri (2007) 

Graph 1: Freight Transport Growth within the EU-15 (Billion Tone-km) 

Source: European Commission (2004) as Cited By Leinbach and Capineri (2007) 


+1.5 

-O.7 

+2.7 

+1.0 

+3.8 

+3.4 

+2.8 

+3.1



2.3 European Policy of Short Sea Shipping 

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In June 2006 the European Council updated their environmental policy for a sustainable 

development and identified seven key areas (DAHLSTRÖM and SUNDBOM, 2008): 

i. Climate changes and clean energy 

ii. Sustainable consumption and production 

iii. Protection and managing of nature resources 

iv. Human health and social integration 

v. Demography and migration 

vi. Poverty and sustainable development 

vii. Sustainable transportations 

In the EU, road transport has increased and represents today 44 percent of the gods transport 

market. This has resulted that the capacity of the infrastructure for roads is not enough to 

cover the demand and this leads to congestion. Road transport is today connected to emissions 

which are harmful to the environment and human accidents. The European Council has 

discussed several approaches to deal with the issue of road transports. One line of action is to 

reduce the unbalance between the transport modes which today are is dominated by road. The 

method to create a more smooth balance would be to move cargo to other transport modes 

such as rail, inland waterways and SSS. This would reduce the heavy congestion (European 

Commission). 

The capacity for short sea shipping within Europe is not maximized and this was the incentive 

to why the European Commission came up with the ―master plan‖ to establish ―sea motor 

ways‖. This will require well developed modernized ports which have support for intermodal 

transports and are well connected to rail- and inland waterway transport networks. Short sea 

shipping could be the solution to bypass bottleneck points such as the Alps and the Pyrenees. 

2.4 Motorways of the Sea 

―Motor Ways of The Sea‖ was a term that first was mentioned in the White paper European 

transport policy for 2010. This concept purpose is to promote short sea shipping as a 

competitive alternative the road transport (HARALAMBOUS). Maritime policy is today 

focused at three areas; Reduce externalities, Promote trade and Create maritime business. This 

means that masseurs are done to make the externalities which are related to transport activities 

decrease. Integration and competiveness are promoted by improving transport services. 

Taxable income and Employment are being generated to create maritime business (BAIRD, 

2005). 

According to the European commission are there four sea-corridors which have been chosen 

to form the ―motorways of the sea‖ in Europe. As you could see from the figure below, these 

are according to European Commission: 

� Motorway of the Baltic Sea (linking the Baltic Sea Member States with Member States 

in Central and Western Europe, including the route through the North Sea/Baltic Sea 

canal). 

� Motorway of the Sea of western Europe (leading from Portugal and Spain via the 

Atlantic Arc to the North Sea and the Irish Sea) 




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� Motorway of the Sea of south-east Europe (connecting the Adriatic Sea to the Ionian 

Sea and the Eastern Mediterranean, including Cyprus) 

� Motorway of the Sea of south-west Europe (western Mediterranean, connecting Spain, 

France, Italy and including Malta and linking with the Motorway of the Sea of southeast 

Europe and including links to the Black Sea) 

Map 1: Motorways of the Sea 

Source: European Commission (2009) 




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All of these corridors are going to be implemented and be used as ―infrastructure at sea‖ in 

2010 (EUROPEAN COMMISSION, 2009). 

The Vice-President of the European Commission, Commissioner for Transport and Energy, 

PALACIO (2004) describes the quality factors that ―the motorways of the sea‖ need to have in 

order to be an alternative to road transport: 

� Good hinterland connections 

� Safety and security 

� Effective traffic management 

� Track & Tracing information systems 

� Administrative efficiency 

� Efficient ports with best service practices. 

2.5 Emission Calculations 

Calculating air emissions is done by first qualifying the emissions. This is simply the 

identifying what material that are being used to make a truck running or make a ship go 

forward, includes: 

• Identifying inventory of raw material used in the process. 

• Determining the chemical, physical or biological changes that occur to raw materials. 

• Finding which of the raw materials pass through unchanged and have the potential to 

be emitted to the atmosphere. 

• Locating what by-products are produced as a result of the process and have the 

potential to be emitted to the atmosphere. 

• Sampling the raw materials and by-products for an overall list of the type of emissions 

which could be released from the source and process. 

Secondly one that has a purpose of calculating emissions must quantify the emissions. This in 

order to determine how much of a chemical that are being released in to the atmosphere. For 

these calculations one must quantify the emissions by unit, weight or time, for example 

g/ton/km. The first table below is giving a quantifying description of how many grams of C02 

one liter of average Diesel quality within Europe contains (DEPARTMENT OF 

ENVIRONMENTAL QUALITY, 2002). The second table is describing the emissions which 

the shipping sector is contributing with to the environment (GBR, 2000). 

Fuel Types CO 2 / liter (Combustion) CO 2 –equ (Fuel Production) CO 2 / liter (Fuel Production) 

Petrol Sweden 2360 168 166 

Petrol EU Average 2360 465 465 

Diesel Sweden 2540 125 123 

Diesel EU Average 2600 366 366 

RME 0 1033 298 

Table 4: CO2 amount for different fuel qualities 

Source: NTM2(2007) 




Kustsjofart Hogsjofart Tanker 

Energi MJ/tonkm .47 0.18 0.11 

SO2 g/tonkm .60 0.23 0.14 

NOx g/tonkm 1.18 0.45 0.28 

CO g/tonkm 0.10 0.04 0.02 

CO2 g/tonkm 34 13 7.9 

HC g/tonkm 0.028 0.011 0.007 

Stoft g/tonkm 0.05 0.02 0.01 

Table 5: Grams/ton-km of CO2 for shipping 

Source: GBR (2000) 

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NTM, The Network for Transport and Environment is an organization including leading 

logistic companies within northern Europe. These have together constructed a useful method 

to calculate emissions. The figures which are displayed in their tables are averages. The one 

below is showing the most common constellations of trucks, lorries and its average fuel 

consumption. This consumption differs due to environment and trucks utilization level 

(NTM, 2007). 

Table 6: Truck constilations, diesel quality and fuel consumption 

Source: NTM3 




3. Empirical Data 

3.1 Share of Short Sea Shipping in EU 15 

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Short Sea Shipping (SSS) is accountable for 63% of the entire amount of goods transported by 

sea in the EU-15 in the year of 2003, equivalent to 1.6 billion tones. The UK and Italy was 

responsible for the largest share of cargo handled in Short Sea Shipping, equivalent to 342 and 

302 million tons respectively. Total amount of Short Sea Shipping varied widely from one 

country to another. Short Sea Shipping faced an upturn in all the EU-15 Member States from 

2002 to 2003, but not in the United Kingdom. The Mediterranean and the North Sea had the 

largest share of SSS, with 30% (491 million tones handled), and 27% (448 million tones 

handled) respectively (XENELLIS, 2005). 

Graph 1: SSS in total annual turnover of tonnage -million tones, 2003 

Source: XENELLIS (2005) 

The majority of sea shipping which took place in 2003 for each of the EU-15 countries and 

Norway (above graph) was Short Sea Shipping. The share of SSS in the total seaborne 

transport is particularly good in Finland (92%), Greece (86%), Denmark (83%) and Ireland 

(80%). However, it is important to remember that these countries handle some of the largest 

shares of national and international intra-EU-15 transport. In 2003 the United Kingdom 

handled 342 million tons of cargo in Short Sea Shipping, responsible for 18% of total SSS in 

the EU-15. It was followed by Italy and the Netherlands with 16% and 12% shares, 

respectively (XENELLIS, 2005). 

The amount of cargo handled by SSS transported from EU-15 ports to Mediterranean ports 

amounted to 491 million tones, i.e. 30% of total SSS declared by the EU-15. The North Sea 

followed close behind, with its ports handling 448 million tones. In contrast, the amount of 

cargo handled by SSS in the Baltic Sea, together with cargo intended for or leaving ports in 

the North Sea, accounted for almost half of the total assets declared by the EU-15 (47%). The 

Black Sea accounted for only 5% of the EU-15 total SSS (XENELLIS, 2005). 

A considerable share of the cargo handled by Mediterranean ports (42%) – 217 million tones – 

was loaded or unloaded in Italian ports. In 2003, Italian ports also handled more goods loaded 




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or unloaded in the Black Sea ports (44%) than any other EU-15 ports. In the Atlantic Ocean 

and the North Sea, SSS largely came from or was destined for British ports (30% and 39% 

respectively). Short Sea Shipping in the Baltic Sea from or to EU-15 ports was mainly 

intended for or came from four Member States: Germany, Sweden, the Netherlands and 

Finland, which accounted for 63%. Graph above also shows us that, with the exception of 

Portugal, the Netherlands and Belgium, all the countries carry out the majority of their Short 

Sea Shipping with partner ports located on seas on which both have a coastline (XENELLIS, 

2005). 

Graph 2: Breakdown of SSS in the EU-15 by sea region, % of tones, 2003 


Table 7: SSS by reporting country and by sea Region, 1000 tones, 2003 





Map 2: EU-15 SSS by sea region and SSS by reporting country, million tones, 2003 


4. Analysis 

4.1 SWOT Analysis of SSS. 

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Chart 1: SWOT Analysis with including strategies 

Source: Author‟s design and content 




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As one can see, the SWOT analysis is dealing with strengths, weaknesses, opportunities and 

threats for the SSS sector within the EU. This is a very promising sector for the future logistic 

challenges in Europe and it has some major strengths which the EU is supporting and 

promoting. The CO2 emission level per ton-km is in direct relation to the fuel consumption, 

which is much lower per ton-km when it comes to SSS compared to road transport (15.450 gton-km 

compared to 98.301 g-ton-km). The geographical environment in the EU, the 

economies of scale factor and the accessibility to ports are three reasons why SSS today and in 

the future can be a competitive alternative to road transport. This in line with the EU‘s 

intensive to move freight from the roads to rail and SSS in purpose to decrease the congestion 

problem which today is a scenario at many European highways. To move freight on sea 

infrastructure is a cheaper alternative than building highways and it could result in that 

bottleneck points, such as the Alps, could be avoided. 

The most specific weaknesses when it comes to SSS are the port handling costs, the long 

transit time to load and unload a ship, and the long active lead time due to the slow speed of 

the vessel. We believe that these weaknesses are decreasing when the technology 

development is increasing. Much has already happen when it comes to the ships speed and the 

port efficiency and we think that these could be why the ―Motorway of the sea‖ concept has 

managed to move freight to the SSS transport network. 

Both the opportunities and the threats are analyzed based on an environmental focus. The 

future opportunities for SSS in Europe could be seen from two angles; the first one is that the 

negative trends for road traffics future development increases the demand for SSS and the 

second one is that the changes in world trade and logistic innovations has made it possible for 

SSS to have positive growth. 

The strategies in the middle of the chart are combining these four previous mentioned 

components and are fields that describe the sustainable relevancy and future challenges which 

SSS is facing. 

4.2 Potential emission savings of switching mode from Road to SSS 

In this part of the analysis, we intend to answer, what effects the usage of short sea shipping 

instead of road transports will have on emission savings. As this is one of our research 

questions we are to answer this question based on the data set in Appendix 2 regarding road 

ton-km, the potential for projects such as motorways of the sea and the information regarding 

trucks weight and CO2 levels. In this analysis we consider all member states (EU-27). 

When we are calculating the grams of CO2 per ton-km we use NTM‘s figures. We are 

assuming that an average truck is consuming 0.45 liters/km. The average CO2 level for diesel 

within the EU is 2600 grams/liter. We presume that each truck in our calculation carry 40 ton 

cargo. This means that the Road sector contributes with 30 grams/ton-km. ((0.45*2600)/40) 

The SSS sector differs from the Road segment and makes the C02 calculations more complex. 

This is much due to the fact that SSS containing many different cargo carriers in different 

sizes. To assume an average vessel capacity would be too inaccurate. Therefore we trust to the 




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table in chapter one where it states that commercial shipping counts for 13 grams/ton-km of 

CO2. 

With the bold figures we previous mentioned in mind, we can perform an analysis of what 

potential SSS have within the EU-25 and EU-27. The table sheet below is displaying the input 

data in our calculations to finally reach a total amount of C02 saved by switching mode from 

road to SSS. 

ROAD SECTOR (2003) EU-15 EU-25 EU-27 SSS SECTOR 

million ton-km (1000) ton-km 

Austria 18141 Liquid Bulk 853710 

Belgium 50539 Dry Bulk 300775 

Denmark 23009 Containers 158462 

Finland 30924 RORO 8474360 (211859 units x 40 ton) 

France 189615 Other cargo 117973 

Germany 

290918 

Ireland 15898 TOTAL 9905.28 (million ton) 

Italy 

192678 

Luxembourg 

9142 

the Netherlands 80075 Potential modal shift from road to SSS (through sea motorways) 

Portugal 

23187 

Spain 184545 (3.11% savings on the total ton-km for Road) 

Sweden 

36603 

United Kingdom 167297 EU-15 Data missing 

Greece 18360 EU-25 1521398x0.0311 = 47315.38 (million ton-km) 

Cyprus 1401 EU-27 1561749x0.0311 = 48570.39 (million ton-km) 

Czech 

46564 

Estonia 

3974 

Potential C02 savings from shift from road to SSS 

Hungary 18199 (CO2 levels; Sea 13grams/ton-km, Road 30grams/ton-km) 

Latvia 

6808 

Lithuania 

Poland 

11462 

78160 

Slovakia 

16859 

Slovenia 

7040 

Bulgaria 

9497 

Romania 

30854 

TOTAL (million ton-km) 1330931 1521398 1561749 

EU-25 ((47315.38*30) - (47315.38*13)) * 100000 = 804.36 million kg CO2 

EU27 ((48570.39*30) - (48570.39*13)) * 100000 = 825.70 million kg CO2 

Table 8: Potential CO2 savings from SS instead of Road transport 

Source: Own design and content 




JANURAY 2011 

VOL 2, NO 9 

As one can see, the table above is not including ton-km for SSS in the EU. This is not needed 

because we already have the CO2 level/ton-km based on the table from chapter one. The final 

calculation is showing a massive annual saving of kg CO2 by just switching 3.11 percent of 

the ton-km from Road to SSS. 

4.3 Competitive advantages for SSS in Europe compared to the USA 

It is clear in section 3.0 (Empirical Data) that SSS transported 1.6 billion tons in 2003 in the 

EU-15 which is equals to 63%. On other hand, deep sea shipping has a market share of 37%. 

70% of the products transported by the SSS are bulk products (52% of liquid bulk and 18% 

solid bulk), 13% RORO, 10% are containers and 7% traditional. The data shows the healthy 

picture of the SSS in the EU regions. It is informing us that EU has really a good potentiality 

for more growth. Moreover, EU-15 assessed the average annual rate of growth in SSS at 2.2% 

for 2000-2003. Furthermore EU has other unique advantages as cited by Paixao and Marlow 

(2002), in below: 

� EU has a coastline of more than 67,000 kilometers. 

� 60% & 70% of EU‘s industrial & production centers are located within 150-200 km of 

coast. 

� EU has a network of inland waterways of 25,000 km of which 12,000 km are part of the 

combined transport road network. 

Such unique benefits give SSS with a geographical advantage over other modes of transport, 

especially for the door-to-door transport of certain types of cargoes by coastal and sea-river 

vessels. This geographical advantage can provide heavy economic impacts as SSS can 

contribute to the economic development of the regions of the EU. So, EU has unique benefits 

for SSS. 

As a summary, it is possible to explain that there are some distinct differences between the 

European and the US freight transportation networks. For example, rail mode is perceived 

mostly as passenger transportation mode in the EU. On the other hand, US cargo trains have 

almost 30% market share of the freight transportation in ton-miles. Moreover, roads in Europe 

are considered to be more congested (refers to the following diagram) and in some cases, road 

expansion is extremely difficult. Furthermore, EU strongly supports SSS by financing projects 

that can help initiating modal shift from to sea mode for high external costs of truck 

transportation (PERAKIS and DENISIS, 2008). As we can see in the following diagram that 

EU-15 has more percentage of SSS in the modal split than the USA because of the above 

causes. 


Short Sea Shipping has many benefits. Because, it helps to reduce congestion on the major 

trading places, helps to reduce the amount of road accidents, get better air quality in the urban 

areas. Moreover, it can assist in improving efficiency problems at the major EU ports. 

Additionally, SSS produces less carbon dioxide (CO2) than other modes of transport which 

can contribute to meet the target level of carbon monoxide (CO) and hydrocarbon (HC) as 

established by the Kyoto Environmental Protocol. Similarly, it generates less nitrogen oxide 




JANURAY 2011 

VOL 2, NO 9 

(NOx) and sulphur dioxide (SO2) than other modes of transport, especially road 

transportation. 

But there are some administrative and operational problems to implement SSS in the full 

swing in the EU countries. This study has gone through the problems and listed some common 

challenges. The bad sides of freight transportation should be identified, measured with 

national level policies to promote transportation mode‘s attitudes and behaviors to more 

sustainable mode of transportation. Moreover, transportation decisions should be based on the 

perfect pricing arrangements to avoid social costs and include external costs. With these 

purposes, short sea shipping is the best alternative available that is currently becoming popular 

in the EU region. Although it is difficult to measure the external costs of the transportation 

modes, SSS can testimony that it is a sustainable mode of freight transportation in the shorthaul 

and long-haul. 

To get the full benefits of the SSS, it should be fully integrated with the intermodal 

transportation. Co-operation with the truck companies and port authorities can help 

significantly to become fully integrated. To attract shippers and ship owners, SSS must 

provide that it is commercially viable and will be successful. Future researches on cost-benefit 

analysis can help to identify the future potential benefits in order to establish successful SSS 

operations. To facilitate the full benefits of the modal shift changes from road to the SSS, the 

national Governments should support and financial benefits to the ship owners of the SSS. 




JANURAY 2011 

VOL 2, NO 9 

References 

BAIRD, A. 2005. EU Motorways of the sea policy. Head Maritime Research Group, Napier 

University Transport Research Institute, European Conference on Sustainable Goods 

and Passenger Transport. Kristiansand. 

BLACKBURN, W. R. 2007. The Sustainability Handbook: The Complete Management Guide 

to Achieving Social, Economic and Environmental Responsibility, Earthscan 

Publications Ltd. 

CHLOMOUDIS, C. 2002. European Union Port Policy: The Movement towards a Long-Term 

Strategy (Transport Economics, Management, and Policy.), Edward Elgar Publishing. 

DAHLSTRÖM, L. & SUNDBOM, P.-A. 2008. Miljökrav I offentlig upphandling. The 

Swedish Competition Authority. 

DEPARTMENT OF ENVIRONMENTAL QUALITY. 2002. Environmental Calculations 

[Online]. Available: http://www.deq.state.mi.us/documents/deq-ess-caapairpermittechmanual-Tab05.PDF 

[Accessed]. 

ECMT 2001. Short Sea Shipping in Europe, European Conference of Ministers of Transport. 

ECMT 2002. Key Issues for Transport Beyond 2000: Introductory Reports and Summary of 

Discussions: 15th International Symposium on Theory and Practice in Transport, 

European Conference of Ministers of Transport. 

EUROPEAN COMMISSION. Year. European transport policy for 2010: time to decide. In.: L 

2985, Luxemburg. 

EUROPEAN COMMISSION. 2009. Maritime Transport, Motorways of the Sea [Online]. 

Available: 

http://ec.europa.eu/transport/maritime/motorways_sea/motorways_sea_en.htm 

[Accessed]. 

GBR, B. 2000. Energiåtgång och miljöpåverkan vid transporter [Online]. Cooperation with 

Chalmers University of Technology. Available: 

http://www.kahrs.com/SiteCollectionDocuments/Byggvaru-bilaga2.pdf [Accessed]. 

HARALAMBOUS, G. The contribution of the “Sea Motorways” to the European Transport 

Policy, Hellenic Institute of Transport. 

LEINBACH, T. R. & CAPINERI, C. 2007. Globalized Freight Transport: Intermodality, Ecommerce, 

Logistics, And Sustainability (Transport Economics, Management and 

Policy.), Edward Elgar Publishing. 

NTM2. 2007. THE NETWORK FOR TRANSPORT AND ENVIRONMENT [Online]. 

Available: 




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http://www.ntm.a.se/member/resor/Berakning_av_personbilars_miljoprestanda080121 

.pdf [Accessed]. 

NTM. 2007. THE NETWORK FOR TRANSPORT AND ENVIRONMENT [Online]. Available: 

http://www.ntm.a.se/english/eng-index.asp [Accessed]. 

PAIXAO, A. C. & MARLOW, P. B. 2002. Strengths and weaknesses of short sea shipping. 

Marine Policy, 26, 167–178. 

PALACIO, L. D. 2004. European sea ports in a dynamic market – ports and the EU agenda. 

European Sea Ports Conference. Rotterdam. 

PERAKIS, A. N. & DENISIS, A. 2008. A survey of short sea shipping and its prospects in the 

USA. MARIT. POL. MGMT., 35. 

STOPFORD, M. 2009. Maritime Economics, Routledge. 

XENELLIS, G. 2005. Short Sea Shipping 2000-2003. Statistics in Focus (Transport). 

YOUNG, T. & BURTON, M. P. 1992. Agricultural Sustainability: Definition and 

Implications for Agricultural Trade Policy (Economic & Social Development Papers), 

Unipub. 




Abstract 

Short and Long Run Dynamics of Export Composition 

and Economic Growth: Empirical Evidence from Pakistan 

Asim Iqbal 

Ph.D Scholar at GCU,Lahore 

M.Wasif Siddiqi 

Associate Professor, Economics Department.GCU,Lahore 

M.Afzal Tabassum 

Faculty Benett International College,London 

JANURAY 2011 

VOL 2, NO 9 

The study attempts to empirically investigate that which component of total exports 

(manufacturing, semi-manufacturing and primary exports) is essential for boosting economic 

growth in Pakistan for the time period of 1972-2005. The empirical analysis was based on 

Johanson Cointegration, Error Correction Model (ECM) and Granger causality based on Toda 

and Yamamoto (1995) procedure. In the production function framework, the total factor 

productivity was assumed to be a function of composition of total exports and capital imports. 

The Johansen cointegration suggests that semi-manufactured exports and manufactured 

exports have long run and contemporaneous effects on the economic growth. However, the 

results of ECM reveals that in short run manufactured exports is more responsible to boosting 

economic growth for Pakistan. 

Key Words: Components of Exports, Economic Growth, Cointegration, Pakistan 


The argument concerning the role of exports as one of the main deterministic factors of 

economic growth is not new. In 1817, David Ricardo proposed that trade enables a country to 

specialize in the production of a commodity in which it has a comparative advantage. The 

specialization of production can increase the efficiency of resource utilization by increasing 

the rate of capital formation and improving the growth rate of total factor productivity 

(Khalafalla and Webb, 2001). 

The income generated from exports of goods and services is one of the most key factors of 

foreign exchange earnings that relieves the pressure on the balance of payments, increases the 

investment and generates employment opportunities. The strategy of export led growth (ELG) 

gives incentives to domestic as well foreign producers. ELG strategy increases the potential to 

compete in the international market by producing high quality products. Moreover, exports 

increase intra-industry trade which helps the country to integrate and trim down the impact of 

external shocks on the domestic economy. 





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In early years, Pakistan was producing and exporting only primary products, mainly 

dependent on climatic conditions. In 1948-49, 99% of Pakistan‘s export earnings were made 

up of just five primary commodities: raw jute, raw cotton, raw wool, hides, and tea. A change 

began to occur as Pakistan‘s economic policies shifted towards an emphasis on 

industrialization. By 1951-52, the five main primary commodities contributed 93% of export 

earnings, which by 1958-59 had fallen to 75%. Pakistan‘s composition of exports and imports 

has changed drastically. Primary commodities, which were 99% of exports in 1948-49, fell to 

45% in 1971-72, and were a mere 11% in 1994-95. Similarly, manufactured goods contribute 

as much as 89% of Pakistan‘s exports. 

The basic aim of this paper is to investigate the role of the component of total exports 

(manufacturing, semi manufacturing and primary exports) in boosting up economic growth 

during 1972 to 2005. The rest of the paper is organized as follows. The paper is organized as 

follows: section 2 reviews the relevant literature. Section 3 explains specification of 

econometric model, variables and data sources for empirical analysis. Section 4 deals the 

methodological issues for longitudinal data. Section 5 reports the empirical results for short 

and long run equilibrium alongwith granger causality based on Toda and Yamamoto (1995) 

procedure. Last section concludes and suggests some policy recommendations based on 

empirical results. 


Given the enormous literature on ELG, we limited literature review by referring some highly 

significant studies that provide a useful framework for the analysis of the ELG paradigm, 

followed by some studies carried out for Pakistan. Segerstrom et al. (1990), Grossman and 

Helpman (1990), Rivera-Batiz and Romer (1991) provide a useful framework for analyzing 

the relationship between exports and economic growth. These studies emphasized that exports 

enhance total factor productivity which increase economies of scale, technology, workers and 

managerial skills, ability for utilization of resources as well as productive capacity of the 

economy. 

Exports promote thresholds effects due to economies of scale, increased capacity utilization, 

productivity gains, and greater product variety (see Balassa, 1978 and 1985, Jung and 

Marshall, 1985, Ram, 1985 and 1987, Bahmani et al., 1991, Khalifa Al-Youssif, 1997, and 

Levin and Raut, 1997). These studies analyzed the role of exports in the economic growth 

particularly for developing countries. Most of these studies concluded that there is a positive 

relationship between exports and economic growth. 

There are cross-country studies in the literature, of which key contributions are: Michaely 

(1977), Feder (1983), Ram (1985), Sheehey (1990), Lopez (1991) and Edwards (1992). These 

studies were aimed to see the role of exports for developing countries and argued in favor of 

trade openness. Yet, there are some doubts concerning the importance of trade openness and 

economic growth. Sheehey (1992) analyzed 53 non-oil developing countries, and found that 

the positive impact of exports is only important for the industrialized economies. However, 

Gunter et al. (2005) concluded that any gains from trade are often associated with external 

effects that are dynamic in nature. 




JANURAY 2011 

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Fosu (1990), Greenaway at al. (1999) and Crespo et al. (2003) investigated the important issue 

of export composition and economic growth. They argued that exports of manufacturing 

products are less sensitive to the cyclical changes in the international market compare to 

exports of raw and intermediate goods. Most of the less developed countries export 

intermediate and primary products therefore the changes in the international market can 

decline their exports which then affect the economic performance. 

Sharma and Panagiotidis (2005) pointed out that the econometric methods used in most of the 

empirical investigations are dominated by the work of Granger (1969, 1988), Sims (1972), 

Engle and Granger (1987), Johansen (1988) and Johansen and Juselius (1990). The study by 

Akbar and Naqvi (2000) was aimed to find out relationship and causality between export 

diversification and economic growth in Pakistan from 1972-1998. They found a significant 

positive relationship between export diversification and economic growth. However, the 

direction of causation ran from economic growth to export diversification. 

There are also some studies related to the economy of Pakistan. Khan and Saqib (1993) found 

strong relationship between exports and economic growth using simultaneous equation model. 

Mutairi (1993) found no support of exports for economic growth. Ahmad, et al. (2000) 

investigated the relationship between economic growth, exports and foreign debt for Asian 

countries including Pakistan using tri-variate causality framework. They rejected the export 

led growth hypothesis for all countries included in the sample except Bangladesh. Kemal. et 

al. (2002) investigated the relationship between exports and economic growth for five South 

Asian countries including Pakistan. They found no evidence of causality for Pakistan between 

exports and economic growth in short run. But they found unidirectional causality from export 

to GDP in the long run 1 . While Khan, et al. (1995) found strong evidence of bi-directional 

causality between exports and economic growth for Pakistan. 

Ruiz-Napoles (2001) argued that even in the cases where we have a positive effect of 

increasing exports on production expansion, such effect might be limited and offset by 

increasing manufacturing imports displacing domestic production. Time series evidence fails 

to provide a conclusive support to ELG hypotheses whereas wide ranges of cross sectional 

studies support the positive and strong association between exports and growth. In other 

words, time series studies find less conclusive association between exports and growth 

whereas; cross section researches appear to support the positive relationship. 

3. Specification of Econometric Model and Data Sources 

3.1 Econometric Models 

Most of the times, empirical studies of economic growth begin with the neoclassical model, 

originally proposed by Solow (1956, 1957) and extended by Mankiw, Romer, and Weil 

(1992) to include human capital. This model appears in the general form as: 

� � 1�� 

�� 

� A K H L � …………………...…………………….(1) 

Yt t t t t 1t 

1 Cited from Shirazi N.S., and T.A.B. Manap (2004) 




JANURAY 2011 

VOL 2, NO 9 

Where t is time period, Yt is aggregate production of the economy, At is total factor 

productivity, Kt is real capital stock, Lt is employed labour force, Ht is human capital stock 

and ε1t is usual error term and independent and identically distributed (IID). This study aims to 

investigate if and how the different categories of exports affect economic growth via increases 

in productivity, following Herzer et al. (2006), we assume that total factor productivity can be 

expressed as a function of exports and other exogenous factors Ct: 

A � f CM , MX , SMX , PX , C, 

� ) ………………………. (2) 

t 

( t t t t 2t 

� � � � 

t , t t t t 2t 

A � CM MX , SMX , PX , C , � ) ……….…………..….(3) 

t 

Where CMt refers to capital goods import and ε2t is usual error term and IID. CMt is 

also considered to offer potential to boost productivity. So, the omission of this variable can 

result in spurious conclusions. We combine equation (3) with equation (1) and obtain: 

� 

t 

� � 

t t 

� 

t 

� 

t 

Y � C K H L CM MX SMX PX � ) …..……....………(4) 

t 

t 

� 

t 

� 

t 

Where α, β, γ, δ, η, ρ and λ are elasticities of production with respect to Kt , Ht , Lt , 

CMt, MXt , SMXt and PXt respectively. ε3t is usual error term and IID. Taking natural logs (Ln) 

on both sides of equation (4) gives an estimable linear function: 

LnY 

t 

� C 

t 

��LnK 

t 

� �LnH 

t 

� �LnL 

� �LnSMX 

t 

t 


3t 

��LnCM 

� �LnPX 

t 

��LnMX 

t 

� 

� 

4t 

t 

…(5) 

Where all coefficients are constant elasticities, C1t =Ln Ct is a constant parameter, ε4t is usual 

error term and IID, which reflects the influence of all other factors on LnYt. The estimates of 

δ, η, ρ, and λ may serve to measure the productivity effects of capital imports, manufacturing 

exports, semi-manufacturing exports and primary exports on economic growth. The categories 

of exports are themselves the components of national income. A positive and statistically 

significant correlation between exports and aggregate output is therefore almost inevitable, 

even if there are no productivity effects. To remove this problem, it is necessary to separate 

the economic influence of exports on output from the influence included into the growth 

accounting relationship. Following Ghatak et al. (1997) and Greenaway and Sapsford (1994), 

we deal with this problem by using the aggregate output, net of exports, NYt (NYt = Yt – MXt – 

SMXt – PXt), instead of total output, Yt. By replacing Yt with NYt, we finally obtain: 

LnNY 

t 

� C 

t 

��LnK 

t 

� �LnH 

t 

� �LnL 

� �LnSMX 

t 

��LnCM 

t 

� �LnPX 

t 

t 

��LnMX 

� 

� 

5t 

t 

…(7) 

Where ε5t is usual error term and IID, which reflects the influence of all other factors on lnNYt. 

This equation estimates to determine the impact of MXt, SMXt, and PXt on economic growth 

via increases in productivity. However, when estimating equation (6), we must take into



JANURAY 2011 

VOL 2, NO 9 

consideration that higher rates of capital formation, human capital, labor force growth and 

increased capital goods imports may all be consequences of economic growth. 

3.2 Data Sources 

The data for the study are time series data covering the time period 1972-2005. They were 

gathered from the Pakistan Economic Survey (various issues). The variables Kt, Xt, CMt, MXt, 

SMXt and PXt represent gross fixed capital formation (proxy variable for capital), real total 

exports, real imports of capital goods, real exports of manufactured goods, real exports of 

semi manufactured goods and real exports of primary goods respectively. The non-export 

output, NYt, is measured by real GDP net of total real exports. Non-export GDP, real total 

exports, gross fixed capital formation, capital goods imports, exports of manufactured 

products, semi manufactured exports and primary exports are evaluated in Pakistani rupees at 

constant year 2000 prices. The labor force (Lt) represents the total number of employed people 

each year. 

This study has taken weighted average of enrolments at different schooling levels from 

unpublished MPhil (Applied Economics) thesis by Iqbal (2007) to use it as a proxy variable 

for human capital stock (Ht). Iqbal (2007) adopted slightly different method from Wang and 

Yao (2003) in the construction of human capital index for Pakistan. He has taken the number 

of enrolled students at different levels of schooling years instead of completed education due 

to some constraints in the availability of data. 


To find out the long and short run dynamics between exports components and economic 

growth, this study employs time series econometrics, such as cointegration and Vector Error 

Correction Mechanism (VECM). These techniques are widely used in a Vector 

Autoregressive (VAR) framework. 

4.1 Johanson Cointegration and Error Correction Mechanism (ECM) 

Johansen (1988), and Johansen and Juselius (1990) have developed a maximum likelihood 

testing procedure on the number of cointegrating vectors within the VAR framework, which 

also include testing procedures for linear restrictions on the cointegrating parameters, for any 

set of variables. In our modeling we follow the general-to-specific approach advocated in 

Hendry (1995). In particular, we start with general unrestricted VAR model with k lags: 

� � A Z � � A Z � ………..…….....…….(8) 

Zt � t t�1 

... k t�k 

� 6t 

Where Zt is (n x 1) vector, � denotes the constant term, At…At-k are (n x n) matrices of 

parameters and �6t is usual error term and IID. We test for cointegration and subsequently 

impose the implied reduced rank restrictions on the unrestricted VAR model. Then we test for 

the long-run exogeneity of the system variables. We use the results of the weak exogeneity 

tests in order to build a parsimonious Error Correction Model (ECM) for the output that passes 

all diagnostic tests, displays constant coefficients and possesses remarkable forecasting 

properties. According to Granger (1986), the ECMs produce better short-run forecasts and 

provide the short-run dynamics necessary to obtain long-run equilibrium. 




JANURAY 2011 

VOL 2, NO 9 

The general VAR model (8) can be reformulated alternatively in the following form of ECM: 

p�1 

�Z t � � � � �i 

�Z 

t�i 

� �Z 

t�1 

� � 7t 

i�1 

……..………………....(9) 

where Zt is an (n x 1) column vector of p variables, � is an (n x 1) vector of constant terms, � 

and � represent coefficient matrices, � is a difference operator and �7t is usual error term and 

IID. The coefficient matrix � is known as the impact matrix, and it contains information about 

the long-run relationships. To identify the number of cointegrating vectors, Johansen‘s 

methodology uses two different test statistics namely the trace test statistic and the maximum 

eigenvalue test statistic. The trace statistic tests the null hypothesis that the number of distinct 

cointegrating relationships is less than or equal to ‗r‘ against the alternative hypothesis of 

more than ‗r‘ cointegrating relationships, and is defined as: 

p 

� ( r) 

� �T 

�ln( 

1� 

� j) 

…………………….………..……..(10) 

trace 

j�r 

�1 

� 

where λj are the eigenvalues and T represents total number of observations. The maximum 

likelihood ratio or the maximum eigenvalue statistic, for testing the null hypothesis of at most 

‗r‟ cointegrating vectors against the alternative hypothesis of ‗r+1‟ cointegrating vectors, is 

given by: 

� 

max( 

� r�1 

� r, r 1) 

� �T 

ln( 1� 

� ) …………………….…..………..(11) 

Johansen (1988) argues that, λtrace and λmax statistics have non-standard distributions 

under the null hypothesis, and provides approximate critical values for the statistic, generated 

by Monte Carlo methods. 

4.2 Granger Causality based on Toda-Yamamoto Procedure 

The usual Granger (1969) causality test for inferring leads in spurious regression 

results, and the F-test is not valid except the variables in levels are cointegrated. The error 

correction model proposed by Engle and Granger (1987) offers an alternative method for 

testing of non-causality between economic time series. Toda and Yamamoto (1995) showed 

that these tests are cumbersome and sensitive to the values of the nuisance parameters in finite 

samples and therefore their results are unreliable. 

Toda and Yamamoto (1995) proposed a method for causal inference based on 

augmented level VAR with integrated and cointegrated processes. The benefit of using this 

procedure is that it is not essential to pretest the variables for the integration and cointegration 

properties. Toda and Yamamoto (1995) procedure uses a Modified Wald (MWALD) test for 

restrictions on the parameters of the VAR (k) model. This test has an asymptotic chi-squared 

distribution when a VAR (k+dmax) is estimated (where k is the lag order of VAR and dmax is 

the maximal order of integration for the series in the system). 




JANURAY 2011 

VOL 2, NO 9 

Two steps are involved to implementing this procedure. In the first step optimum lag 

length (k) of VAR and the maximum order of integration (dmax) of the variables in the system 

is determined. Then a level VAR is estimated with a total of k+dmax lags. In the second step a 

standard Wald tests is applied to the first k VAR coefficient matrix to make Granger causal 

inference. In order to test for Toda and Yamamoto (1995) based Granger causality between 

core variables (LnNYt, LnHt, LnMXt, LnSMXt and LnPXt) we estimate the following 

VAR(k+dmax) model: 

� LnNYt 

� �C1 

� 

� � � � 

� 

LnHt 

� � 

C2� 

� LnMX t � � �C3 

� � 

� � � � 

�LnSMX 

t � �C4 

� 

� 

� LnPX � 

� 

� 

� 

� 

t C5 

� 

k �d 

max 

� 

i�1 

��1i 

� 

� 

�2i 

��3i 

� 

�� 

4i 

� 

��5i 

� 

� 

� 

� 

� 

1i 

2i 

3i 

4i 

5i 

� 

� 

� 

� 

� 

1i 

2i 

3i 

4i 

5i 

� 

� 

� 

� 

� 

1i 

2i 

3i 

4i 

5i 

�1i 

� � LnNYt 

�i 

� �� 

8t 

� 

� 

� � � � � 

2i 

� � 

LnHt 

�i 

� � 

�9t 

� …… (12) 

�3i 

� � LnMX t �i 

� � ��10t 

� 

� � � � � 

�4i 

� �LnSMX 

t �i 

� ��11t 

� 

� � 

� 

� 

� 

� 

� 

� 

� 

� 

5i 

LnPX t �i 

�12t 

� 

where C‘s are the intercepts. θ‘s, β‘s, η‘s, ρ‘s and λ‘s are the coefficients of LnNYt, 

LnHt, LnMXt, LnSMXt and LnPXt respectively. �‟s are error terms that are assumed to be 

white noise. Having estimated above system of equations, usual Wald tests are then applied to 

the first k coefficient matrices using the standard χ 2 -statistics. The hypothesis can be drawn as 

LnNYt ―Granger-causes‖ LnHt if β1i ≠ 0, LnMXt if η1i ≠ 0, LnSMXt if ρ1i ≠ 0 and LnPXt if λ1i ≠ 

0. Similarly, other hypothesis can be drawn for unidirectional and bidirectional causality 

among rest of the under investigating variables. 

5. Empirical Results 

Before testing for cointegration for the analysis of short and long run dynamics, the 

unit root test is used in order to investigate the stationarity properties of data and all variables 

are found stationary at first difference. After investigating the order of integration, the study 

proceeds for cointegration, parsimonious ECM Model and Granger causality test. For the 

investigation of dynamic behavior of all variables, impulse response function and variance 

decomposition is also carried out. 

5.1 Order of Integration 

ADF unit root test is employed to test for the stationarity in logarithmic form of NYt, Kt, Lt, Ht, 

Xt, MXt, SMXt, PXt and CMt at level and then first difference of each series. The results of the 

ADF test at level and first difference are reported in Table 1, by taking into consideration 

trend variable and without trend variable in the regression. Based on Table 1 at level, the tstatistics 

for all series from ADF test are statistically insignificant to reject the null hypothesis 

of non-stationary at 5% significance level. This indicates that these series are non-stationary at 

their level form. Therefore, these variables have a unit root problem or they share common 

stochastic movements. 




Table 1: Dickey-Fuller (DF)/Augmented Dickey-Fuller (ADF) Test for Unit Root 

JANURAY 2011 

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Augmented Dickey-Fuller (ADF) Test 

Variables at Level Variables at 1 st Difference 

Without Trend & Without Trend & 

Trend (k) Intercept (k) Trend (k) Intercept (k) 

Ln NYt -1.619 (0) -2.202 (0) -4.554* (1) -5.375* (1) 

Ln CFt -1.679 (0) -1.736 (0) -4.542* (1) -5.535* (1) 

Ln ELFt -0.502 (0) -2.407 (0) -6.037* (0) -5.987* (0) 

Ln HCt -0.129 (0) -1.692 (0) -4.627* (0) -4.572* (0) 

Ln MXt -1.9015(0) -2.057 (0) -5.348* (0) -5.879* (0) 

Ln SMXt -1.997 (0) -2.382 (0) -5.525* (0) -5.575* (0) 

Ln PXt -1.889 (0) -2.231 (0) -5.777* (1) -5.683* (1) 

Ln CMt -1.156 (0) -2.042 (0) -5.558* (0) -5.836* (0) 

Notes: The null hypothesis is that the series is non-stationary, or contains a unit root. The rejection of null 

hypothesis for ADF test is based on the MacKinnon critical values and numbers in parentheses indicate number 

of lags (k) based on Schwarz Information Criterion (SIC). 

* Indicates the rejection of the null hypothesis of non-stationary at 5% significance level. 

When the ADF test is conducted at first difference of each variable, the null hypothesis 

of non-stationary is easily rejected at 5% significance level as shown in Table 1. This is 

consistent with some previous studies 4 which demonstrated that most of the macroeconomics 

and financial series are expected to contain unit root and thus integrated of order one, I(1). 

Therefore, variables are integrated of order one, and a higher order of differencing is not 

required to perform. Since the variables are integrated of same order, I(1) , so, multivariate 

cointegration test for long run analysis could be conducted. 

5.2 Empirical Results for Short and Long Run Dynamics 

5.2.1 Long Run Dynamics 

The results of the Johansen‘s cointegration test for Net Income, Physical Capital, 

Labor, Human Capital and components of total Exports (Manufacturing exports, semimanufacturing 

exports and primary exports) using both the �trace and the � max statistics are 

given in Table 2. Starting with the � max test results reported in Table 2, the null hypotheses r = 

0 and r � 1 (no cointegration) can be rejected in favor of r = 1 and r = 2 respectively, indicates 

the presence of two cointegrating relationships between NYt, Kt, Lt, Ht, CMt, MXt, SMXt, and 

PXt. For the trace test results, the null hypotheses r = 0, r � 1, r � 2, and r � 3 can be rejected in 

favor of r � 1, r � 2, r � 3 and r � 4 implies that there are at least four cointegrating vectors 

between NYt, Kt, Lt, Ht, CMt, MXt, SMXt, and PXt at 5% level of significance. 

4 See for example Ahmad et al. (2004), Akbar .M and Z. F.Naqvi (2000), Ahmad at al. (2000) 




Table 2: Johanson Cointegration 

Rank Test (Maximum Eigenvalue) Rank Test (Trace) 

H0 Ha � max 

test 

� max 

H0 Ha Trace 

test 

Trace 

r = 0* r = 1 72.492 52.363 r = 0* r � 1 233.035 159.530 

r � 1* r = 2 48.859 46.231 r � 1* r � 2 160.542 125.615 

r � 2 r = 3 33.508 40.078 r � 2* r � 3 111.683 95.754 

r � 3 r = 4 31.720 33.877 r � 3* r � 4 78.174 69.819 

r � 4 r = 5 25.797 27.584 r � 4 r � 5 46.454 47.856 

r � 5 r = 6 12.822 21.132 r � 5 r � 6 20.658 29.797 

r � 6 r = 7 6.259 14.265 r � 6 r � 7 7.836 15.495 

r � 7 r = 8 1.576 3.841 r � 7 r � 8 1.576 3.841 

Note: * denotes rejection of the hypothesis at the 0.05 level 

LnNYt = 5.042 + 0.948LnKt + 2.085LnLt + 0.317LnHt - 0.297LnCMt + 

T-statistics (4.416) (2.740) (1.861) (2.049) 

1.198LnMXt - 0.028LnSMXt + 0.313LnPXt ……..……………..(13) 

(7.381) (0.262) 1.163) 

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The normalized cointegrated vector is reported in equation (13). The estimates represent the 

long run elasticities of NYt with respect to Kt, Lt, Ht, MXt, SMXt, PXt. This vector is a stable 

equilibrium relationship to which the variables have a tendency to return in the long run. The 

positive coefficients of Kt, Lt, Ht MXt, and PXt indicate that these variables move in the same 

direction except CMt and SPXt in long run. With significant and positive coefficients of Kt, Lt, 

Ht, and MXt, indicate that on average, 1 percent rise in Kt, Lt, Ht, and MXt show 0.95, 2.09, 

0.32 and 1.19 percent increase in economic growth. We found very interesting results that 

CMt in significant and has negative relationship with economic growth and on average 1 

percent rise in capital imports leads to decrease economic growth by 0.297 percent while 

SMXt and PXt are not significant for economic growth in long run. These results are consistent 

with the view that high manufacturing exports and human capital stock are significant for 

increasing economic growth in long run. 

5.2.2 Short Run Dynamics 

For short run dynamics the OLS is estimated under the specification of ECM. The 

study uses general to specific approach (Hendry, 1995) at arriving at a parsimonious model. 

Initially, the equation is regressed with difference of log income as the dependent variable 

against contemporaneous as well as lagged differences of log physical capital, log labor, log 

human capital, log capital imports, log manufacturing exports, log semi-manufacturing 

exports, log primary exports and 1 lag of residual from cointegrating regression was included 




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in ECM. A 2-lags structure is employed, as apposed to a 4-lag structure commonly used by 

other researchers, due to the limited sample period. Subsequently, the insignificant variables 

were dropped in order to get a parsimonious model. The results of the preferred parsimonious 

model are presented in Table 3. 

In the parsimonious ECM specification, several features of the regression results stand 

out. The coefficient of ECTt-1 is significant and carries the correct sign (negative). The 

coefficient of ECTt-1 indicates the speed of adjustment and in this case the high significant 

coefficient of ECTt-1 implies a fast adjustment towards the long run equilibrium. The 

significant coefficient of ECTt-1 suggests that, on average, there is a 54 percent adjustment in 

the current period (t) to the disequilibrium in the previous period (t-1). Growth rate of the 

economic adjusts 54 percent due to changes in short run variables when they are certain that 

the changes in the variables are permanent in the next period (after a year). 

Table 3: Results of ECM for Short Run Dynamics 

Dependent Variable �NYt 

Independent 

Variable Coefficient t-Statistic Prob. 

C 0.0924 6.1535 0.0000 

�NYt-1 -0.1584 -1.8597 0.0770 

�Kt 0.4650 8.4041 0.0000 

�Lt 0.5493 1.9359 0.0665 

�Ht-1 0.2147 1.8924 0.0736 

�CMt -0.0712 -2.3748 0.0272 

�MXt 0.1645 1.7482 0.0816 

�MXt-1 0.0034 0.0741 0.9416 

�SMXt -0.0658 -3.0607 0.0059 

�PXt-1 0.0032 0.1753 0.8625 

ECTt-1 -0.5430 -4.4595 0.0002 

R 2 0.871 

Adjusted R 2 0.818 

F-statistic 

14.4804 

0.0000 

The physical capital has a positive contemporaneous effect on economic growth. On average, 

a 1 percent increase in physical capital leads to a 0.465 percent increase in economic growth 

within one year. The labor variable is significant and appears to have a positive 

contemporaneous effect on economic growth and on average 1 percent increase in labor shows 

0.549 percent increase in economic growth. 

On average, a 1 percent rise in one year lagged human capital leads to a 0.21 percent 

increase in economic growth within a year. However, the results of parsimonious ECM also 

indicate that capital imports have negative significant impact on economic growth. The 

current year manufacturing exports are significant and have positive effect in explaining 




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economic growth and on average, a 1 percent rise in manufacturing exports leads to a 0.165 

percent increase in economic growth within a year while one year lagged manufacturing 

exports are not significant. The negative significant coefficient of semi-manufacturing exports 

in short run explores very interesting results in explaining economic growth, on average, a 1 

percent rise in semi-manufacturing exports leads to a 0.066 percent decline in economic 

growth within a year. However primary exports are not significant for economic growth. 

The results of short run dynamic ECM specification suggest that human capital is 

significant in enhancing economic growth while all components of total exports are not led to 

increase economic growth except manufacturing exports. Overall, the results of short run 

dynamic ECM model suggest that both human capital and manufacturing exports are the 

engine of economic growth for Pakistan. 

5.3 Diagnostic Tests 

To ensure that the estimated parsimonious short run model is consistent with the standard 

assumptions of OLS, the results are reported in Table 4. 

a) Normality Test (Jarque-Bera) 

The results of JB test statistics for normality is not significant, so JB test does not reject the 

normality hypothesis of errors, indicating that the residuals are normally distributed. 

b) Serial Correlation 

Breusch–Godfrey test for serial correlation in residuals was performed up to fourth lag order. 

There is no significant evidence of the serial correlation in the residuals, so the null hypothesis 

of no serial correlation in the residuals cannot be rejected up to fourth order, suggesting that 

lag structure used in this parsimonious model is appropriate. 

c) ARCH Test 

F and χ 2 -statistics are used to test for null hypothesis of no Heteroskedasticity in the 

residuals, the ARCH test is carried out up to fourth lag order, first, third and fourth lag order 

ARCH test results suggest that the residuals are not Heteroskedastic. 

d) White Heteroskedasticity Test 

White‘s Heteroskedasticity test is carried out for null hypothesis of no 

Heteroskedasticity in residuals, and χ 2 and F-statistics showing that there is no evidence of 

Heteroskedasticity in residuals. 

e) Model Specification Test 

Ramsey‘s RESET test was applied for the model specification. The test fails to reject the null 

hypothesis of linearity in the parameters, indicating evidence of linearity in the model 

specification. The RESET test is also a general test for omitted variables and incorrect 

functional form. The results of Ramsey‘s RESET test suggest that the model specification is 

appropriate and the parameters of the model are stable. 




Table 4: Diagnostic Tests 

Probability 

Normality Test 

(Jarque-Bera Statistic) Jarque-Bera Statistic 4.5083 0.1050 

Serial Correlation First-Order F-Statistic 0.0544 0.8180 

� 

(Breusch-Godfrey 

Serial Correlation LM 

Test) 

2 -Statistic 0.0868 0.7683 

Second-Order F-Statistic 0.0259 0.9744 

� 2 -Statistic 0.0873 0.9573 

Third-Order F-Statistic 0.0777 0.9712 

� 2 -Statistic 0.4094 0.9383 

ARCH Test 

(Autoregressive 

Conditional 

Heteroskedasticity 

Test) 

White 

Heteroskedasticity 

Test 

Model Specification 

Test 

(Ramsey RESET Test) 

Fourth-Order F-Statistic 0.2837 0.8844 

� 2 -Statistic 2.0025 0.7353 

First-Order F-Statistic 0.8832 0.3551 

� 2 -Statistic 0.9162 0.3385 

Second-Order F-Statistic 3.7147 0.0376 

� 2 -Statistic 6.4736 0.0393 

Third-Order F-Statistic 0.0777 0.9712 

� 2 -Statistic 0.4094 0.9383 

Fourth-Order F-Statistic 1.8218 0.1590 

� 2 -Statistic 6.7369 0.1505 

F-Statistic 0.6186 0.8311 

� 2 -Statistic 16.939 0.6569 

F-Statistic 0.6857 0.4174 

Log likelihood 1.0787 0.2990 

Ratio 

5.4 Granger Causality Based on Toda and Yamamoto Procedure 

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The Granger causality between core variables (LnNYt, LnHt LnMXt, LnSMXt and 

LnPXt) based on Toda and Yamamoto (1995) is reported in Table 5. We found evidence of 

cointegrating between these variables. The causality between under investigated variables 

must exist either unidirectional or bi-directional because Engle and Granger (1987) and 

Granger (1988) have shown that if two series are integrated of order 1 I(1), then Granger 

causality must exist at least in one direction. 

The optimum lag length of VAR is 2 based on AIC, FPE, HQ, and likelihood ratio 

criteria. However, all variables are stationary at first difference. This means that dmax = 1 in 

our case. So, we estimate a system of VAR at levels with a total of k + dmax = 2 + 1 = 3 lags. 

The results in table 5 suggest that there is unidirectional causality running from manufacturing 

exports to net income, net income to human capital, semi-manufacturing exports to human 

capital, semi-manufacturing exports to primary exports and net income to primary exports. 

And no evidence of bi-directional causality is found between LnNYt, LnHt LnMXt, LnSMXt and 

LnPXt. 




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Table 5: Granger causality test results between LnNYt, LnHt LnMXt, LnSMXt and LnPXt 

based on the Toda- Yamamoto procedure 

Dependent Modified Wald-Statistics 

Variable LnNYt LnHt LnMXt LnSMXt LnPXt 

LnNYt --- 10.3451 5.5750 3.0248 2.8738 

(0.0158) (0.0601) (0.3878) (0.4115) 

LnHt 

7.0123 --- 1.7577 13.5052 1.8696 

(0.0715) 

(0.6224) (0.0037) (0.5999) 

LnMXt 2.1783 1.6956 --- 7.2124 3.4090 

(0.5362) (0.6379) 

(0.654) (0.3328) 

LnSMXt 1.4631 1.1236 1.3278 --- 1.9615 

(0.6908) (0.7714) (0.7225) 

(0.5804) 

LnPXt 8.4713 4.4001 2.3941 13.7113 --- 

(0.0372) (0.2214) (0.4947) (0.0033) 

Note: Probability values are given in parentheses. 

6. Summery and Conclusion 

The study has attempted to provide empirical evidence concerning the relationship 

between composition of exports, human capital and economic growth. The empirical analysis 

was based on Johanson‘s cointegration, parsimonious ECM and causality based on Toda and 

Yamamoto (1995) procedure for Pakistani time series data from 1972 to 2005. In the 

production function framework, total factor productivity was assumed to be a function of 

manufactured, semi-manufactured, primary exports and capital goods imports. The output 

variable of the function was defined net of exports to separate the influence of exports on 

output that incorporated into the national income identity. 

The findings can be summarized as follows: 

i. ADF test indicates that all variables are non-stationary at their level form and become 

stationary at their first difference. 

ii. Johanson‟s cointegration test indicates that there exists a long-run relationship 

between Economic Growth, Physical Capital, Labor, Human Capital, Manufacturing 

exports, semi-manufacturing exports and primary exports. 

iii. The results of short run dynamic ECM parsimonious model suggest that human capital 

is significant in enhancing economic growth while all components of total exports are 

not led to increase economic growth except manufacturing exports. The results of short 

run dynamic ECM model suggest that both human capital and manufacturing exports 

are the engine of economic growth for Pakistan. 

iv. Granger Causality test based on Toda and Yamamoto procedure indicates that there is 

unidirectional causality running from manufacturing exports to net income, net income 

to human capital, semi-manufacturing exports to human capital, semi-manufacturing 

exports to primary exports and net income to primary exports. And no evidence of bi- 




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directional causality found between these variables in Toda and Yamamoto based 

Granger causality test. 

We conclude that manufacturing exports are crucial for Pakistan‘s long-term economic growth 

and development. The following policies need to be taken for improving boosting 

manufacturing exports and economic growth: 

i. Government‘s emphasis must be on globally competitive industrialization to open the 

way for stronger competitiveness and greater export diversification. So, priority must 

be given to a quantum increase in manufactured exports as a part of economic 

planning. And a new breed of exporters should be developed through human resource 

development efforts. 

ii. Industrial policy and trade policy should aim at promoting manufacturing exports. 

iii. Textile, sports goods and surgical goods sector is the main exporting sector of 

Pakistan, which is experiencing high cost of production because of high mark-up rates. 

So, in order to increase these manufacturing exports and economic growth, 

Government should reduce high mark-up rates. 

iv. Rising costs of energy (gas, electricity and petrol), tariffs, cost of finance and wages 

have increased the cost of production and made manufacturing exports uncompetitive 

compared with other close competitors. So, there is a need to take initiatives to reduce 

these costs. 

v. It is important to direct resources to industries, where they are used most efficiently (as 

successfully developing East Asian countries have shown). These industries can be 

identified first as being outward oriented (export) industries and second as being 

technology intensive in their use of inputs. 

vi. There is a need to establish and promote new technology-intensive industries to 

increase exports which also requires private and public funds. 




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Developing a User‟s Feedback Index to Improve the 

Design and Construction Phase of Private Housing 

in Developing Metropolitan 

Afaq Hyder Chohan 

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Lecturer - Department of Architecture, Mehran University of Engineering and Technology, 

Jamshoro, Pakistan. A professional registered architect in Pakistan, 

Currently - Student of doctoral programme in Universiti Kebangsaan Malaysia. 

Abdul Waheed Memon 

Lecturer - Department of Architecture, Mehran University of Engineering and Technology, 

Jamshoro, Pakistan. A professional registered architect in Pakistan 

Naveed Agro 

Lecturer - Department of City and Regional Planning, Mehran University of Engineering and 

Technology, Jamshoro, Pakistan. 

Currently . Postgraduate student in University of Sydney Australia. 

Dr. Adi Irfan Che-Ani 

Senior Lecturer in the Department of Architecture, Faculty of Engineering and Built 

Environment, Universiti Kebangsaan Malaysia (National University of Malaysia). 

Registered building surveyor - Malaysia. His research interests are building performance 

evaluation, rainwater harvesting, building maintenance management and high-rise residential 

management. Corporate building engineer (United Kingdom). 

Nor Haniza Ishak 

Senior Lecturer in Department of Building Surveying, University Malaya Kuala Lumpur, 

Malaysia and currently she is a student of doctoral programme in Universiti Kebangsaan 

Malaysia. Registered building surveyor in Malaysia. 

Abstract 

It has been observed that designers are not always fully aware of consequences of their design 

solution, only through post occupational survey the designer usually realizes that what 

mistakes or bad decisions have been taken during the design process. It is a common 

conception that present day buildings are more vulnerable to design faults and resulting 

maintenance as compare to older counter parts. Despite the technological advancement of 

contemporary time prevention of building from unplanned maintenance is still an unsolved 

riddle. It is factual to mention that building still suffers from the various faults' causes from 

design and construction stages, which subsequently cause dissatisfaction in users. The key 

purpose of this research is to comprehend the causes of construction faults and their effects on 

residential buildings, through perception of users at post occupational stage. Unfortunately, 

unforeseen construction faults and resulting maintenance conditions are the part of daily life 

of the end user in developing regions. These problems affect the users through unplanned 

maintenance to major repairs leading to danger of collapse. In order to evaluate the effects of 

deficient design and construction on buildings, a case study was conducted in housing stock 

of metropolitan areas of the Karachi Pakistan. The data was collected through site visits, 





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unstructured interviews and questionnaire survey and analysed through SPSS computer 

software. And it is interpreted to understand the far reaching effects and implications of 

construction faults in low rise medium cost housing stocks of the study area. Eventually, an 

index of construction faults and their implication has been prepared. 

Keywords: Construction faults, Building maintenance and Users satisfaction 


In under developing countries, which normally have an unplanned growth, the development 

and law transient in almost all walks of life, particularly in urban centres. Alarming rate of 

population growth is another problem faced by these countries which ultimately creates the 

demand for the increased number of housing facilities. A modern day house is a basic icon of 

shelter where people can plan to live and work under a protected environment. Housing design 

has remained subject of research and discussion on the number of reputable plat forms. 

Around the globe, the importance of quality housing has increased many folds, and it is still 

growing with every day pass. House is an enclosure presents the perception of peaceful and 

protecting environment. A house is supposed to be an enclosed space which should be capable 

enough to accommodate ideas of living and work. There is considerable evidence to suggest 

the physical conditions and quality of the house environment impact both physical and mental 

health of its users (Evans et.al 2000; Thompson et.al. , 2002). 

Mean has argued that good quality housing is the foundation of community care programs 

(Means, 1991). Conceivably, the study of Means suggests that a stock of quality housing 

provides base for promising future of neighborhood and eventually for society. The 

importance of good housing design is pronounced by Chowdhury (1985), as design of the 

house is one of the most difficult tasks in the field of architecture. A proper understanding of 

the nature of human needs is of crucial importance in the formulation of houses and space 

standards. Chowdhury further stressed that, a quality space of the house provides people with 

functional, social and spiritual needs. The life of an individual and family unfolds in the space 

within this space. Conceivably, it can be declared that any attempt at formulating housing and 

space standards should start from by recognizing the quality of space and social aspects of 

society or individual to avoid the design deficiency at post occupational stage. 

Towards the need to improve the housing quality and its design in under developed world is 

highlighted by renowned architect, Correa (1980) as the wonderful thing about third world is 

that there is no shortage of housing. What is in short supply, of course is the urban context. 

The real task and responsibility the third world architect is to help generate this urban context. 

The study of Correa reveals that urban amenities are missing in the housing sector of 

underdeveloped regions. These amenities should be considered and properly planned at design 

stage to facilitate the user and to avoid nuisance of reworks or redesigns at later stage. 

Simply providing housing units does not measure the success of housing programs in either 

developed or developing countries. The suitability of the living environment to the needs of 

residents is essential for housing programs to be judged successful (Weidemann et al., 1982). 

Whereas Kaitilla, (1993) mentioned that building features (doors, windows, building 

protection elements, façade materials, etc.) are strongly related to housing satisfaction. 

Conceivably, the study of Katila suggests that admiration of beauty is natural phenomena 

among human and users feel content when they have a gorgeous housing. 

Study of Garling (1990) has developed the interrelation between housing design and 

residential satisfaction with children‘s accident risk and narrated that ambiguities in housing 




JANURAY 2011 

VOL 2, NO 9 

design are responsible for children accident. Whereas, research of (Bonnes .et.al. 1991; Shaly 

1985) has identified user‘s satisfaction in the context of spatial density, crowding and 

neighbourhood characteristics in housing design. 

Research out come of (Amerigo and Aragones 1990; Galster and Hesser, 1981; Marans and 

Rodger, 1975) suggested that, the residential satisfaction is considered as a criterion of 

residential quality. Perhaps the studies insist that residential satisfaction is a true standard for 

evaluating housing quality. Studies of (Awotona, 1991; Vrbka and Combs, 1991) state that, 

the facilities and services quality available in a housing unit are vital in determining 

satisfaction with the housing units. The study further adds that the housing satisfaction is 

influenced by variables such as users' characteristics, dwelling unit characteristics, 

management, and environmental and location factors. 

Whereas Morris and Winter's has presents the Theory of Residential Adaptation and 

Adjustment presented housing norms appropriate to the United States for examining residents' 

satisfaction with their housing and their desire to make adjustments (Morris and Winter, 

1978). Areas of housing norms include structure type, space (building features), quality 

(housing conditions), neighborhood facilities, expenditures, and tenure. This theory provides 

an appropriate framework for examining research related to housing satisfaction. 

2. THE ISSUES OF HOUSING DESIGN AND FAULTY DESIGN: A REVIEW OF 

HOUSING CONDITION 

According to Weidemann et al. (1982) suggest that, the failure of many public housing 

projects to meet users' needs illustrates a lack of knowledge about the physical aspects of 

housing quality and design criteria that would satisfy residents. Residents' satisfaction is not 

absolute, and housing conditions are not static, thus, the housing condition or residents' 

satisfaction with these conditions at any given time can be measured only in relative terms. 

Moreover, poor housing conditions are generated by problems posed by design inadequacy of 

internal facilities (Ozo, 1986). These internal facilities (kitchen, bath, and toilet), when shared 

by residents, exacerbate the problems of privacy inconvenience and maintenance (Muoghalu, 

1984). 

Housing in the developing country is précised as; the larger faction of population living in the 

third world has a little access of quality housing. In the housing sector of developing world it 

is worth mentioning that unlike other parts of the world, private sector is much more efficient 

than the public sector in providing housing to residents (Okpala, 1992). 

According to report on housing conditions in Pakistan published by Human Right 

Commission of Pakistan (HRCP) (2005), it is mentioned that the estimation suggests more 

than half a million housing units are required in Pakistan. In other words, a small city is 

required annually to meet the severe housing shortage in the country and the increasingly 

dilapidated state of existing housing presented new threats. 

Reviewing the history of housing and it related issues in Pakistan, Syed (1996) describes it as; 

Pakistan has faced formidable housing problems from its very birth in August 1947, as an 

independent nation; in the wake of the mass influx of millions who migrated to the country 

from India. The situation has not changed much almost 50 years after independence due to 

various factors, particularly concerning the biggest metropolis of the country namely 

Karachi. 




JANURAY 2011 

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The supply and demand of housing scenario in Karachi is told by Hassan (1998) as the 

Karachi city requires 79,000 housing units per year. However, an average of about 26,000 

housing units per year has been produced through formal processes over the last five years. 

The rest of the demand has been met through informal and illegal subdivision of state land or 

through densification of existing homes and settlements. 

Celebrated intellectual, newspaper columnist and writer from Pakistan, Cowasjee (2003), 

enlightened the housing/built environment problems and its business as; the people of Karachi 

should know that all the commercial and residential high-rises are unsafe and dangerous to 

live in. Most of the builders and contractors, their attorneys or the entity they have established 

to construct a particular building, disappear from the scene as soon as a building is semicomplete 

and all spaces sold. The Cowasjee work is incomparable to the issues of built 

environment. Cowasjee also criticized the role of professionals and development authority in 

multiplying the problems of housing in Karachi. The study addressed the problems of built 

environment ranging from faulty design to defects emerged during construction phase of 

buildings in Karachi. Cowasjee describes the status of buildings and its trade in Karachi as an 

environmental nightmare. Here Cowasjee‘s report presents the clear picture of continuing 

severe deterioration in different phases of housing/commercial building design and 

construction activity in Karachi, Pakistan. 

Account of above suggest that the lack of housing is not only mounting pressure on available 

housing but ever growing housing demand in these regions have paved the track for improper 

and faulty design and construction. The studies above further suggested that the situation gets 

more aggravated when the role of developing and building control authorities become dubious 

thus make housing design and construction more vulnerable to faults and maintenance. 

However, the proportion of the maintenance is highly controlled and governed by the quality 

of design. In fact, these two characters of building are inversely proportional to each other, i.e. 

higher the quality of design lower the maintenance and lower the quality of design higher the 

maintenance. It is well phrased by CIOB (1982) as; it is at the design stage that the 

maintenance burden can be positively influenced for better or for worse. Hence it could be 

concluded as that skilful design can reduce the amount of maintenance work and increase the 

rate of user‘s satisfaction. 

In this perspective, Seeley (1987) adds that design team frequently neglects the consideration 

of maintenance aspects and there is a great need to reduce the gap between design and 

maintenance. Seeley identified the problem of design and maintenance as the communication 

divide between design and maintenance. Conceivably, Seeley stress that maintenance is the 

important issue to be consider right from the design stage to prevent its unplanned 

reappearance at post occupational stage of building and to ascertain the higher rate of user 

satisfaction. This could be more implicating and affecting on the building. 

Whereas the gap could be reduced through understanding design, maintenance of explanation 

given by RICS (2000), according to which the building design should be considered as a 




JANURAY 2011 

VOL 2, NO 9 

design of the automobile. The automobiles are usually provided with the schedule of planned 

and emergency manual, thus it could be recommended that one way to reduce the gap between 

the design, maintenance and users satisfaction is to provide the residents with manual of 

house/building design and product used in that design. This would facilitate the end users to 

get familiarity with the design outlines and type of periodic maintenance required in housing 

for proper functioning. 

Discussion above reveals that mostly the researchers are agreed on importance of emerging 

issue of faulty design, maintenance and users satisfaction. Through their work, they 

highlighted the various issues and aspects of design faults and their effects on building 

maintenance and users satisfaction. 

2.1 Conceptual Model 

The discussion of housing design, construction faults and user satisfaction indicates that each 

normative perception is comprised of various design and construction factors. Design faults, 

construction faults and users satisfaction with housing satisfaction become a multifaceted 

analysis to fit between a range of housing features and personal and family characteristics. 

This paper has examined the factors that comprise the features related to design and 

construction deficiencies towards housing satisfaction in Karachi. Furthermore this study 

explains the relationships between usres satisfactions with these specific design and 

construction features. 

The conceptual model in Figure 1 is developed through site visits, participation and review of 

literature; it proposes the correlation of the independent variables (single-item measures of 

design/construction inaccuracies and the multiple-item measures of the specific features of the 

house design/construction characteristics) and the dependent variable (overall housing 

satisfaction). The model indicates that overall housing satisfaction is directly affected by 

satisfaction with house design/construction factors (single-item measures) and indirectly 

affected by the specific features of the design/construction factors (multiple-item measures). 

Whereas the multiple-item measures indirectly influence the single-item measures of housing 

satisfaction. 




Lack of top supervision 

by designer 

t 

Inadequate 

waterproofing / slope 

design 

Supervision 

management Rule 

Internal surface 

deterioration 

Condition of plaster 

surface 

DPC failure 

Quality of adhesion 

between materials 

Communication gap 

between contractor 

and designer 

Inaccuracies of 

Construction Phase 

Inaccuracies of 

Design Stage 

Users Satisfaction 

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Figure 1: Conceptual Model of Design and Construction Faults 


Drainage layout 

Quality of plumbing 

works 

Material used for 

doors & windows 

Performance of 

exterior material to 

climate 

Availability of 

Ventilation ducts 

Staircase and 

passages etc 

Joints between 

finished faces



2.2 OBJECTIVES OF STUDY 

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VOL 2, NO 9 

In addition to explore the precedent research works on core issues, the main objectives of this 

study are as under; 

i. To identify the implication of construction faults and its possible causes 

ii. To workout the users satisfaction towards construction phase 

In order to get query from users the housing construction quality determinants have been 

assembled in form of questionnaire. The function of questionnaire survey was to determine 

the user‘s satisfaction and significance of issues related to construction faults and housing 

maintenance in their respective housing stock. The questionnaire has addressed the issues of 

design consideration and their implications on housing in general. Residents and people from 

different income groups (low to medium) living in housing location served as the respondents 

of this survey. Respondents were asked to answer all the questions regardless of their status 

and sections of questionnaire. A whole questionnaire was consist of nine section related to 

building design and construction but here in this paper only “construction faults ” would be 

taken into consideration. 

3. Methodology and Analysis 

3.1 Methodology 

In order to carry out the questionnaire survey in existing residential built forms, a group of 60 

buildings have been identified in targeted area of research. Questionnaire survey has been 

conducted among users represented by (owner-tenant), the users of selected buildings. 

The study has adopted the distinctive and reliable pattern of research which is consist of site 

visits, unstructured interview, photography and questionnaire survey. This study has been 

carried out in three distinctive stages. At first stage, sites had been visited by the researcher 

and issues of building defects and maintenance have been identified through coordination of 

literature review. In second stage surveying tool has been designed and verified through 

unstructured interviews and at later stage the survey was conducted among 60 housing stocks 

in Sadder town of Karachi Pakistan. At third stage data obtained from questionnaire survey 

has been analysed and summarise in form of findings and finally condensed in conclusion. 

The research path has been illustrated in Figure 2 




HOUSING 

POSTOCCUPATIONAL 

EVALUATION (POE) 

DESIGN AND 

CONSTRUCTION FAULTS 

SENSITIVITY INDEX 

(Users Perception) 

Figure 2. Research Path 

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VOL 2, NO 9 

The data obtained through survey tool and was analyzed on SPSS computational resource 

(version 12.00). The section of construction faults is consisting of 08 determinants related to 

architectural design faults. As some of the factors are more implicating as compare to others 

thus severity of influence was formulated for each question. Hence each question is provided 

with 5 rank Likert (interval) scale denoted with; 1= does not implicate, 2= slight implicate, 

3= not sure, 4= fair implication and 5= strong implication. 

3.2 Analysis and Findings 

Analysis of data is carried out in domain of architectural faults causing maintenance in 

housing and following protocol has been adopted for analysis of data. 

3.2.1 Profile of Respondents 

In the conduct of the survey a total of 127 respondents were interviewed and the data were 

collected using a specially designed survey tool. The category of the users respondents 

comprised of the tenant and owner constituting of 46 (36.22%) of the total collected data, as 

shown in Table 1 below. 

Table 1: Category of Respondent 

RESPONDENTS 

(USERS) 

OWNERS 

AND TENANTS 

Category Frequency 

Percent 

(%) 

Tenants 21 16.54 

Owners 

25 

19.69 

Total 46 36.22 




3.2.2 Internal Consistency of Scale 

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In any survey work high quality of the data obtained is crucial in the decision making process. 

Low quality data may lead to wrong or biased conclusion. Incidentally, the quality of the data 

collected is strongly related to how the instrument used to collect the data was constructed and 

handled. In this survey the instrument is basically the questionnaire used. Hence, to 

determine whether the outcome of this study is highly reliable, therefore, it is pertinent that the 

quality of the data collected be assessed. For this purpose, the Alpha‘s coefficients were 

calculated for each of the attributes, related to design and construction faults, being 

investigated. The results are presented in Table 2 below. From the results obtained, the 

values of Alpha coefficients calculated were found to float at about 0.7. Thus, we can 

conclude that the data obtained have some amount of consistency of the scale; Table 2 is 

showing the aspects of faults occur during design and construction phase. 

Table 2: Reliability Coefficients 

Design Faults 

Number of 

Items 

Alpha’s 

Coefficient 

1. Architectural Design 07 0.780 

2. Construction phase 08 0.740 

3.2.3 Data Analysis of Design Faults 

As shown in Table 2 seven major types of design faults were identified. Within each of these 

seven major design faults several sub-attributes were listed. The respondents were then asked 

to rank these sub-attributes from 1 to 5 according to their perceptions on the implication of 

these sub-attributes to the maintenance of the building. The value of 5 indicates ‗strong 

implication‟ and the value of ‗1‘ indicated ‗no implication‟. This means that the higher the 

value of the mean score the stronger would be the implication level and vice-versa. 

3.2.4 Architectural Design Faults 

Table 3 provides the information pertaining to the scores obtained for the ‗architectural 

faults‘. There were 07 types of ‗architectural faults‟ being investigated. The mean scores 

registered ranged from 4.60 for „absence of conventional protective elements‟ between owner 

and designer‟ to 4.67 for ‗improper plumbing/sanitary layout‟. The two ‗architectural faults‟ 

perceived to have a high implications on the maintenance and users satisfaction were 

‗improper drainage layout‟ with mean of 4.67 and ‗improper plumbing/sanitary layout‟ which 

recorded a mean of 4.6. 




Table 3: Mean Score of Perceptions towards Architectural Faults 

Architectural Faults 

Tenant Owner 

Overall 

mean score 

Overall 

mean score 

1. Drainage layout 4.71 4.56 4.67 

2. Quality of plumbing/sanitary work 4.38 4.72 4.64 

3. Material selection for doors & 

windows 

4. Exterior material selection to 

climate 

4.38 4.64 4.33 

3.67 4.68 4.32 

5. Ventilation ducts 4.33 4.60 4.29 

6. Size of Staircase and passages etc 4.10 4.68 4.15 

7. Use of conventional protective 

building elements 

3.86 4.48 4.06 

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3.2.5 INVESTIGATION OF SIGNIFICANT DIFFERENCE OF RESPONDENTS 

PERCEPTION TOWARDS DESIGN FAULTS BETWEEEN CATEGORIES. 

In this study, an investigation was also made to determine if there is any difference between 

the perceptions of the two groups of user‘s respondents, i.e. tenants and the owners on each of 

the seven main architectural design fault designs (Table 4). 

Towards this end null hypothesis test using the analysis of variance method (ANOVA) were 

conducted with the assumption that there is no difference in the mean perception between the 

two categories of respondents. The results of these tests are presented in Table 4. 

The results of the tests show that overall there is no significance difference in the opinion 

among two groups of user respondent results. Both owners and tenants are agreeing that on 

the existence of architectural faults at their respective locations. However, a slight difference 

is visible in means perception levels of two architectural design fault designs, which indicate 

that one group of user‘s respondents considers these factors having a slight implications on 

housing. 




Architectural Design Faults 

Table 4: Results of One-Way ANOVA 

Mean score 

users perception 

Tenant Owner 

1. drainage layout 4.71 4.56 

2. plumbing/sanitary works 4.38 4.72 

3. material selection for doors 

& windows 

4. exterior material selection 

to climatic consideration 

4.38 4.64 

3.67 4.68 

5. ventilation ducts 4.33 4.60 

6. staircase and passages etc 

4.10 4.68 

7. protective building 

elements 3.86 4.48 

3.2.6 Results and Discussion 

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df 

ss 

ms 

f 

p-value 

1 0.613 0.613 9.3226 0.1836 

The findings of this research has furnished with high implicating factors, which are recorded 

as under; 

i. Improper drainage layout is also among design defects that have secured the 

uppermost significance among the implicative factors. This shows that designer are 

quite reluctant in handling the drainage lay out of the building, in fact, the wet spaces 

are most important spaces of the building which could cause the irreparable loss to 

building, for example, leaks, nuisance of venting, spread of contagious diseases, etc. 

ii. In addition to drainage the design fault of the improper plumbing and sanitary works 

has also held the attention of the respondents, and it has been identified as the 

implicative factor of the construction phase. This factor could arise from poor deficient 

design, incomplete specification, poor workman ship and material selection. 

iii. The research reveals that designers do not consider the thermal properties of material, 

propose to use in interconnection to each other. This factor results in several types of 

defects ranging from hair line cracks to wide gaps, surface deterioration and material 

decay, which appears at post occupational stage. 

iv. Ignorance of material properties and negligence of physical environment has also 

gained the rank of the high implicative factor of building maintenance. This aspect 

shows that designers are not fully aware of properties of material, or they propose the 

materials without considering their performance at later years of the building. In



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addition non consideration of physical environment for material application has results 

dampness and condensation on exterior and internal surfaces of buildings. This 

moisture movement implicated in numerous ways i.e. starting from peeling of paint to 

decay of plaster surface. 

v. It has been frequently observed that housing have not been provided with essential 

ventilation required for kitchens and other wet areas of the house. Absence of 

ventilation ducts in housing with only fan ventilation or nominal ventilation can create 

moist and stale environments, which have been associated with numerous adverse 

physical health conditions, including respiratory disease, aches and pains, allergies, 

asthma, headaches and fever (Howden-Chapman, 2004; Matte & Jacobs, 2000). The 

ventilation factor is vital for hot and humid physical condition of Karachi city and 

ranking of this factor marked buy users is evident that housing is not properly designed 

in terms of ventilation. 

vi. Narrow staircase and passages, etc. where the housing stock includes narrow stairs, 

narrow doorways, inaccessible toilets and bathrooms, or rooms too small or hot to be 

used, people whose mobility is diminished by illness, accident or people will find 

themselves disabled by their homes (Heywood, 2004). The ignorance of this factor is 

also evident through ranking marked by users at various housing stocks. This factor is 

also consistent with ventilation. Therefore, almost same equal ranking has been 

marked by users for both factors. 

vii. Improper joints between finished faces are correlated with factor of improper material 

selection. Users have identified the presence of both factors in their respective housing 

and marked this factor within fair implication range. The implication results in the 

form of rain penetration, loss of adhesion, diagonal cracking at vertex, etc. 

The user‘s sensitivity index as shown in Table 5 results from higher value of mean marked for 

each factor of architectural design faults, mentioned in the questionnaire. The resultant 

sensitivity index assimilated from the user's response it reveals that most of the faults occur 

through the effects of external factors and agencies on building materials. In a broader 

spectrum, these factors and agencies can be integrated in four principal components such as. 

i. Lack of knowledge about materials properties. 

ii. Deficient design of wet areas 

iii. Poor workmanship. 

iv. Non awareness of regional physical conditions 




Architectural Design 


1. Drainage layout 

2. Plumbing/sanitary 

works 

3. Material selection for 

doors & 

windows 

4. Exterior material 

selection to 

climatic conditions 

5. Ventilation ducts √ 

6. Size of staircase and 

passages etc 

7. Protective building 

elements 

√ 

Nuisance of 

venting 

√ 

√ 

Leaks 

√ 

Seal /joint 

failure 

Defects Caused 

JANURAY 2011 

VOL 2, NO 9 

Table 5: Users Feedback Index (Design Faults) 


√ 

√ 

√ 

√ 

√ 

Dampness 

Water 

penetration 

√ 

√ 

√ 

√ 

Paint decay 

Poor 

accessibility 

–emergency 

√ 

handling 

Water 

ponding 

√ 

√ 

√ 

√ 

Thermal 

Expansion 

√ 

√ 

Cracks 

Poor 

function 

√ 

√ 

√ 

√ 

Moist and 

stale 

environment



3.2.7 Data Analysis of Construction Faults 

JANURAY 2011 

VOL 2, NO 9 

As shown in Table 2 eight major types of construction faults were identified. Within each of 

these eight major construction faults several sub-attributes were listed. The respondents were 

then asked to rank these sub-attributes from 1 to 5 according to their perceptions on the 

implication of these sub-attributes to the maintenance of the building. The value of 5 

indicates ‗strong implication‟ and the value of ‗1‘ indicated ‗no implication‟. This means that 

the higher the value of the mean score the stronger would be the implication level and viceversa. 

3.2.8 Faults at Construction Phase 

The respondents perceived ten (08) types of faults could be present during the construction 

phase. These faults are listed in Table 6 below. Among these, the fault due to „Lack of top 

supervision by designer‟ was highly perceived to contribute to the maintenance problem with 

an average mean implication score of 4.70. On the second spot with highly perception of 

implication on the maintenance is ‗Inadequate waterproofing and slope design‘ which 

registered a mean of 4.65. Lack of communication was not found to develop significant 

perception since the fault ‘Lack of communication between contractor and designer‟ only 

registered a mean of 4.05. 

Table 6: Mean Score of Users Perceptions towards Faults at Construction Phase 

Faults at Construction Phase 

Mean score Overall 

Tenant Owner 

Mean Score 

1. Supervision by designer 4.90 4.88 4.70 

2. Waterproofing and slope design 4.76 4.52 4.65 

3. Supervision management Rule 4.71 4.64 4.55 

4. Conditions of painted surfaces 4.57 4.64 4.50 

5. Condition of plaster surface 

4.05 4.48 4.44 

6. DPC at various surfaces 3.86 4.24 4.33 

7. Loss of adhesion between materials 

3.48 3.64 4.07 

8. Communication between contractor and designer 

3.86 4.64 4.05 

3.2.9 INVESTIGATION OF SIGNIFICANT DIFFERENCE OF RESPONDENTS 

PERCEPTION TOWARDS DESIGN FAULTS BETWEEEN CATEGORIES. 

In this study an investigation was also made to determine if there is any difference between 

the perceptions of the two groups of user‘s respondents, i.e. tenants and the owners on each of 

the seven main architectural design fault designs (Table 4). 

Towards this end null hypothesis tests using the analysis of variance method (ANOVA) were 

conducted with the assumption that there is no difference in the mean perception between the 

two categories of respondents. The results of these tests are presented in Table 7. 

The results of the tests shows that overall there is no significance difference in opinion among 

two groups of users respondents results. Both owners and tenants are agreeing that on 




JANURAY 2011 

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existence of construction phase faults at their respective locations. However a slight difference 

is visible in means perception levels of two construction phase fault (determinants 5 and 9) 

which indicate that one group of user‘s respondents consider these factors having slight 

implication on housing. 

Table 7: Results of One-Way ANOVA (Construction Faults) 

Construction Faults 

1. Supervision by designer 

2. Waterproofing and slope design 

3.Condition of Painted surface 

4. Supervisor management rule in work 

execution 

5. DPC at various surfaces 

6. Condition of plaster surface 

7. Quality of adhesion between 

materials 

8.Communication between contractor 

and designer 

3.2.10 Results and Discussion 

Mean score 

users perception 

Tenant Owner 

4.90 4.88 

4.76 4.52 

4.57 4.64 

4.71 4.64 

3.86 4.24 

4.05 4.48 

3.48 3.64 

3.86 4.64 


df 

ss 

ms 

f 

p-value 

1 0.022 0.022 0.0944 0.9638 

The findings of this research has furnished with high implicating factors, which are recorded 

as under; 

i. There are various construction defects, which are caused because of lack of top 

supervision, for example, leaks in sanitary and plumbing installations, insufficient 

concrete cover over reinforcement, misalignment of sliding windows and doors, etc. 

This construction factor has secured uppermost significance among the implicative 

factors. This shows that designer is quite reluctant in management of this issue and 

because of less or no supervision the defects in wet spaces cause the irreparable loss to 

housing at the site and caused dissatisfaction among users. 

ii. Because of improper slope design and construction the users were complaining about 

water ponding at both roof tops and ground surfaces. This has caused dampness and 

paint decay in ceilings and disturb function of paved surfaces. In few houses, this fault 

also causes scalping in reinforcement and attrition in plaster. This construction fault 

also holds the attention of the respondents, and it has been identified as the implicative 

factor of the construction phase. This factor could arise from poor workmanship, 

construction and incomplete details drawings.



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iii. Users at most housing sites were not satisfied about paint quality and prepared 

surfaces. Query into a matter revealed that surfaces subjected to paint were not fully 

prepared, for example, plaster ramming marks were visible to various wall surfaces 

and dampness marks in ceiling (not under rooftops) were visible, which is evident that 

trapped moisture from material has been surfaced and caused paint decay. The material 

has not been allowed to dry out completely, conceivably this factor is aggravated by 

speedy construction. 

iv. Users were not satisfied about a price hike and higher expectations of contractor and 

developer, during unstructured interviews owners complained that even after regular 

payment possession of their respective house was delayed. The phenomenon of delay 

in construction shows the weakness of supervising management. This factor causes 

anxiety and frustration among users and therefore, gained higher means from 

respondents. 

v. Dampness at various surfaces was one of major cause of dissatisfaction among users; 

the cause of dampness was identified as improper DPC material use and DPC failure. 

Rising dampness in housing external walls were due to DPC failure at the plinth level, 

whereas dampness in floors was caused by inferior quality membrane or non 

application of DPM. 

vi. The factor of cracks has caused doubts among users about overall construction quality 

and stability of their respective hosing. During housing inspection cracks at various 

plastered surfaces has been noted, ranges from hairline to 1 mm cracks. Mostly, these 

cracks were visible either in straight line along the window sill and soffit line or 

randomly short run spread. This pattern of cracks suggests that these cracks were 

caused either because of thermal expansion of two different material used to gather 

without matching their expansion properties. For example, aluminum window fixed in 

cement block, Iron hold fast used to fix door frames, use of low quality PVC conduits 

(concealed) caused expansion under plaster surface, etc. In addition to this another 

reason of random cracks at the floor surface suggest that curing process was not 

sufficient during floor construction, therefore caused material shrinking and random 

cracking at the floor surface. 

vii. Loss of adhesion in materials was noted in vertical surfaces (ceramic tile) of wet areas 

and wooden veneering in the kitchens. This factor was major concern for users 

because this construction fault has directly affected the aesthetic values of the house 

interior, for example, tossing of ceramic tile at the vertical surface in bath and toilets, 

raising of veneer surfaces in wooden cabinets. This failure pattern perhaps caused by 

lack of supervision, poor workmanship and use of expired or near to expire in adhesive 

materials in pasting and fixing of materials. 

viii. During interviews the factor of a communication gap between designer and contractor 

is mostly identified by owners of the house. This determinant is also correlated to 

factor of lack of supervision by designer. Therefore, implications of a factor are similar 




JANURAY 2011 

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in nature. However, an important aspect about this factor was identified by users as, 

that communication gap among both designer and contractor set the contractor to use 

and propose the materials and techniques as per its experience, which is not always 

well tested. The housing under the effect of this factor noted with the problem of door 

and window fixtures, problems with door locks, failure of electric switches and 

fixtures, etc. 

Base on the above analysis this research has produced the index of user‘s sensitivity in the 

context of construction faults, which shows the state of design and construction practice and 

vulnerability of users to such awesome housing conditions. This index as shown in Table 8 

illustrates the severity of each factor and its implication on housing maintenance. 




Construction Faults 


8. 

9. 

10. 

11. 

12. 

13. 

14. 

15. 

Lack of top supervision by 

designer 

Inadequate waterproofing 

slope design 

Conditions of Painted 

surfaces 

Supervisor management 

rule in work execution 

DPC at various surfaces 

Condition of plastered 

surface 

Quality of adhesive 

material 

Communication gap 

between contractor and 

architect 

Leaks in 

pipes work 

√ 

√ 

√ 

√ 

√ 

√ 

JANURAY 2011 

VOL 2, NO 9 

Table 8: Users Feedbak Index (Construction Faults) 

Seal /joint 

failure in 

pipes work 

Dampness 

in walls and 

floor 

√ 

√ 

√ 

√ 

Index of Defects and Maintenance in Housing Stock 


Water 

penetration 

√ 

√ 

√ 

√ 

√ 

Paint decay 

√ 

√ 

√ 

Failure of 

electric & 

door fixtures 

, 

Water 

ponding 

√ 

Thermal 

Expansion 

of conduits 

& holdfast 

√ 

√ 

√ 

Loss of joint 

in ceramic & 

wooden 

surfaces 

√ 

√ 

√ 

√ 

√ 

Cracks in 

plaster 

surfaces 

Poor 

function of 

oriels 

√ 

√ 

√ 

Cost 

inflation 

√ 

√ 

√



4. Conclusion 

The malfunctions in design and construction stages help to create an awareness of the 

need to understand the determinants of satisfaction with the residential environment. 

Attention has been directed to the concept of 'user satisfaction' as a subjective indicator of 

success in housing in developed countries (Morris and Winter, 1978; Onibokun, 1976). 

Liu (1999) suggests that, the study of residential satisfaction may serve as one 

component of a broader quality and productivity improvement programme in the client‘s 

organisation. Base on the above analysis this research has concluded with the user‘s 

sensitivity indexes in a context of architectural design and construction faults, which 

shows the state of design practice and vulnerability of users to such awesome housing 

conditions. The indexes as shown in Table 5 and 8 illustrate the severity of each factor 

(design and construction) and its implication on housing maintenance. These indexes are 

well supported by the findings discussed in section 3.2.5 and 3.2.10. These sensitivity 

indexes are an important tool for analysing the housing situation in Karachi city. In order 

to improve the design quality of housing the design and construction professionals can 

refer these indexes as the benchmark for quality assurance in housing design. The 

continuous feedbacks in architectural and construction aspect are necessary for long-term 

performance of housing. These aspects has been identified, as housing components, 

internal surfaces, ventilation, spatial movement, management and maintenance of the 

housing etc. This feedback can be used to document deficiencies as part of the 

justification of new construction or remodeling projects. The out come of this study 

could even be used by Housing Authorities of Karachi, which utilizes a number of 

standard designs for residential blocks. The proper utilization of research results may also 

enhance the private developer‘s competitive standing in the marketplace and improve the 

company‘s public image and reputation. 

The study also revealed that housing districts in Karachi have different design and 

economic backgrounds that control the value of land and quality of homes. However, the 

housing provision and existing conditions of housing stock presents a depressed picture. 

Housing finance is not available to most of the people thus making the population 

incapable to have a quality house. Some families in this study have made very small 

design moves to create very liveable and pleasant environments. Others have made 

drastic renovations that show the extent of how inappropriate some of these housing 

projects were. It has also been revealed that low rise housing is experiencing defects 

caused from design, in addition to lack of maintenance consideration in their respective 

design. It shows that design professionals do not bother to improve their practice in 

radiance of post occupational surveys. It could also be concluded that except the luxury 

to have a house in down town, residents of medium cost apartment are facing the similar 

problems, which perhaps can be associated with low cost housing blocks. 

COPY RIGHT © 2011 Institute of Interdisciplinary Business Research 

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Kaitilla, S. (1993) Satisfaction with public housing in Papua, New Guinea: the case of 

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Liu, A.M.M. (1999 ) Residential satisfaction in housing estates: a Hong Kong 

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Syed, A. M.(1996). Karachi Low Income Housing. Pakistan: Pakistan Economist, Aug 

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Environment And Behavior 14 (1982) 95–724. 


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A STUDY TO EXPLORE TASK AND ROLE OF 

EDUCATIONAL MANAGERS IN EDUCATIONAL 

ORGANIZATIONS OF NWFP 

Dr Muhammad Naseer Ud Din 

Assistant Professor, Institute of Education and Research, 

Kohat University of Science and Technology 

Mr. Faridullah Khan 

Lecturer, Institute of Education and Research, 


Dr. Ali Murtaza 

Assistant Professor, Faculty of Education , Preston University, Islamabad 

Abstract 

The purpose of this descriptive survey was to explore task and role of educational 

managers in educational organizations such as academic institutions of secondary and 

higher secondary schools of NWFP. Out of 24 districts of the province 8 were included in 

study. 256 educational managers were included in the sample through random sampling 

techniques. The objectives of the study were, (1) to determine the role and function of 

acceptable behavior of educational managers (2) to investigate the style of decision 

making of education managers. For the data collection, a questionnaire was developed 

on 5-point Likert‘s scale. Forty two items were included in each questionnaire. A 

questionnaire was for educational managers in which include all the important elements 

of organizational behaviour were covered in the questionnaires. The researcher 

administered the questionnaire personally and collected full data through strenuous 

efforts. For analysis chi-square was used as statistical instrument. After analysis 

following findings was drawn (1) The managers and teachers were not properly trained in 

motivation, communication and decision – making skills (2) The educational managers 

did not model their behaviour that they wanted others to adopt. (3) Latest instructional 

technology was used in the classes. On the basis of the finding following 

recommendations were made (i) Educational budget should be doubled.(ii) 

Accountability system should be strengthened.(iii)Organizational environment should be 

made open democratic and familiar (iv) Educational managers and teachers should be 

trained in motivation, leadership, communication, interpersonal relations and decisionmaking. 

Keywords: Educational Manager, Teachers, Organizational Behaviour, Management. 


Education plays an important role in human resource development. It raises the 

productivity, efficiency of individuals and produce skilled manpower that is capable of 

leading the economic development. Importance of Education for human resource 

development does not need any justification and clarification. The developed countries 

attach highest priority to education; same is the case with the developing countries. The 


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constitution of Pakistan accepts education as one of the fundamental rights of a citizen as 

well as constitutional commitment of the government accepts to provide access to 

education to every citizen (Govt. of Pakistan, 2000) 

Education can play its role effectively if it is managed properly. Because a school is a 

world in which people live and work. Like any other social organization the world of the 

school has power, structure, logic and values, which combine to exert strong influence on 

the ways in which individuals perceive the world, interpret it and respond to it. So the 

behaviour of people at work in an educational organization, individually as well as a 

group is not merely a reflection of their idiosyncratic personalities but is influenced, if 

not defined by the social norms and expectations of the culture that prevail in the 

organization. This interplay between individuals and the social environment of their 

world of work is powerful in giving rise to organization behaviour, which means the 

behaviour of people in the school organization. It has become the dire need for society 

that everyone must has a specialization in every field of life due to rapid expansion of 

knowledge. Education modifies that behaviour of a person, thus education can perform 

this duty well if the system of education runs effectively. For making the education 

system workable successful organization and management, which leads to organizational 

behaviour must be focused. People (working in organization) are the key for running the 

organization. 

The educational mangers are the responsible of educational organizations. In fact the 

education leadership is the key to open the door of educational development. After all, 

leadership and administration as well, means working with the through other people to 

achieve organizational goals. The educational mangers there who are appointed as 

teacher, principals, executive education officers and DEO are though to be especially 

effective for enhancing the organization‘s performance. The educational leadership, who 

engage in laborious work, must know the organizational behaviour, which provides the 

indispensable foundation of knowledge that is absolutely essential for achieving the 

success in their assignments. The organization behaviour of the manager counts much in 

the uplift of standards of output, updated skills and abilities can ensure high level of 

productivity. More education and training is essential if the mangers of the future are to 

constantly seek to add value to their stock of human capital and to strive for improved 

performance. 

2. Review of Literature 

Education is the foundation of civilized society and every society seems to be engaged in 

various educational activities. Its aim is to provide and promote education to the masses 

so that well disciplined and mentally sound individuals can be prepared who ultimately 

contribute in the development and prosperity of progressive society. Education system is 

devised to inculcate the philosophy, social norms and skills for economic activities. We 

also are rapidly shifting into a new era in the history of humans on this planet, which is 

called the technological era. And education is the primary source of all technological 

advances, innovations and human comforts and that we need development, which is only 

possible through quality education. 

Education is a powerful catalyzing agent, which provides mental, physical, 

ideological and moral training to individuals, so as to enable them to have full 

consciousness of their mission, of their purpose in life and to equip them to achieve that 


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purpose. It is an instrument for the spiritual development as well as the material 

fulfillments of human beings (Govt. of Pakistan, 1998). 

2.1 Organization 

Organizations permeate all levels of our lives. We come into contact with many of them 

daily. In fact most of us probably spend most of our lives in or affected by organizations. 

We expend sizeable amounts of our time as members of work, social, civic, and church 

organizations. Or we involved as employees, students, clients, patients, and citizens of 

organization. 

Organizations are essential to the way our society operates. In industry, education, 

health care, and defense, organizations have created impressive gains for our standard of 

living and our worldwide image. The size of the organizations with which you deal daily 

should illustrate the tremendous political, economic and social powers they separately 

possess. 

Before exploring the successful organization and management, better to 

conceptualize the key elements of existing study, i.e. organization, behaviour and 

managers. Organization, a group of people working together to attained common goals 

which may be called organizational goals. According to Jerald and Robert, 2000, highlighted 

that organization is a structured social system consisting of groups and individuals 

working together to meet some agreed on objectives. In other words, organizations 

consist of structured social units, such as people or work groups that strike to attain a 

common goal, such as to produce and sell a product at a profit. 

An organization is a collection of people working together in a Division of labour 

to achieve a common purpose. This definition fits a wide variety of fraternal groups, 

clubs, voluntary organizations and religious bodies, as well as entities such as schools, 

hospitals and government agencies. The insights and applications of organizational 

behaviour apply to all of these groups. Here, we will be most interested in work 

organizations- those organizations to which people belong as employees (Wood, et al 

1998). 

Organizational behaviour is a discipline that seeks to describe understand and 

predict human behaviour in the environment of formal organization. A distinctive 

contribution and characteristic of organizational behaviour as discipline is the explicit 

recognition that (1) organizations create internal contextual setting or environments, that 

have great influence on the behaviour of people in them and (2) to some extent the 

internal environment of an organization is influenced by the large context in which the 

organization itself exists (for example, the social, political, economic and technological 

systems that support the organization). Moreover, the internal environment or context of 

the organization (which is so influential in eliciting and shaping human behaviour) is not 

merely physical and tangible but also includes the social and psychological 

characteristics of the living human system (Owens, R.G. 1998). 

Organization behaviour is the field that seeks knowledge about the behaviours in 

organizational setting by systematically studying individual, group and organizational 

processes. Thus knowledge is used both as an end in itself by scientists interested in basic 

human behavior and by practitioners interested in enhancing organizational effectiveness 

and individual well being (Jerald and Robert, 2000). 


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Organizations do not succeed or fail people do. Organizations are intimately 

associated with people who are living and changing; therefore human behaviours must be 

considered and understood within the dynamics of the formal organization (Ahuja, 1990). 

Hence the filed of organizational behaviour helps managers both deal with learn 

from their workplace experiences. Managers who understand organizational behaviour 

are better prepared to know what to look for in work situations, to understand what they 

find, and to take or help others to take the required action. This is a process for which 

physicians are carefully trained. When giving a physical exam, a doctor systematically 

asks questions and is quick to note where one condition (such as a recurrent facial sore 

may be symptomatic of a problem that requires further medical attention (treatment for a 

small skin cancer). Instead of sores and headaches, managers, action indicators typically 

deal with the performance accomplishments of people at work, their attitudes and 

behaviours, and events that occur in the work unit, in the organization a hole, and event 

in the external environment. Good management is able both to recognize the significance 

of these indicators (for example, an increase in turnover among employees) and to take 

constructive action to improve things as a result of this insight (such as updating benefits 

and incentive pay schemes). Good managers add value to an organization. However, 

good managers must be able to identify, manage and modify the behaviour of other 

member of the organization is this added value from managerial activities is to be 

realized (Baron, 1986). 

Fundamentally, however, any manager should seek two key results for a work 

unit or work team. The first is task performance, the quality and quantity of the work 

produced or the service provided by the work unit as a whole. The second is human 

resources maintenance, the attraction and continuation of a capable work force over time. 

This later notion, while to often neglected, is extremely important. It is not enough for a 

work unit to achieve this high performance on any given day: a work unity must be able 

to achieve this high performance every day, both now and in the future (Christensen, 

1994). 

Indeed, the two results can be seen as the criteria of an effective manager that is, a 

manager whose work unit team achieves high levels of task accomplishment and 

maintains itself as a capable workforce over time. This concept of the ‗effective 

Manager‘ is an important framework for understanding the insights of OB and for 

developing your personal managerial skills. 

Organizations are changing now, and they will continue to change in order to 

survive and prosper in a complex environment. We see organizations downsizing, 

forming alliances, creating new structures, going global, engaging in joint ventures and 

employing every more sophisticated technologies and they attempt to deal with 

competitive pressures. We see organization pursuing productivity gains, empowering 

workers, pressing for innovation, and trying to adapt them to best fit changing times 

(Dolan, 1994). 

There is no doubt about it; the directions are clear; the future is there. But in 

order to succeed, managers must be willing to step forward and make the personal and 

organizational changes necessary to secure it. Indeed, some consultants and authors are 

questioning the very term manager. They believe that the changing nature of 

organizations in the new work place may make the term coordinator, or perhaps coach or 

facilitator, a more apt description of the role. However, regardless of the term used, the 


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message is clear. The successful 21 st century manager will have to make the behavioral 

and attitudinal adjustment necessary to succeed in very dynamic time (Flippo, 1998). 

2.2 Management 

Management is a key factor in both firm successes and firm failure (Whetten and 

Cameron, 1995). Management is the process of reaching organizational goals by working 

with the through people and other organizational resources. The term management can 

also refer to the individuals who guide and direct organizations or to a career devoted to 

the task of guiding and directing organization. (Certo, 2003) 

Management refers to the process of coordinating ad integrating work activities so 

that they are completed efficiently and effectively with the through other people (Robbins 

and Coulter, 1999). Successful management is totally dependent on the human element. 

Heads don not get the job performed by themselves, regardless of their individual talents 

or drive. They must work with the through other to achieve organizational goals and 

objectives (Kraus and Curts, 1986). 

Management of School means setting realistic goals and drawing up plans to 

achieve them. Those plans involve distinct phases, setting objectives, allocating 

resources, delivering results, evaluating the impact, and resetting objectives in the light of 

evaluation (Thomas and Martin, 1993). The goal of educational management at the 

institutional level is to achieve the social and system goals of education plus any 

additional objectives peculiar to the specific institution, to do this the managers will need 

to understand more completely the existing motivation of their fellow administrators, 

teachers, and pupils (Kemmerer and Windham, 1997). 

The working role of administrator is likewise manger. The need for manger has 

well increased with the development of more complex organization. Rapid growth of 

knowledge that is useful to management will demand a higher quality of mangers. The 

word ―management‖ identifies a special group of people whose job is to direct the effort 

and activities of other personnel towards common objectives, therefore management ―get 

things done through other people‖ (Massie, 1992). 

Mescon et al. (1988) considered the Ducker to be the world‘s leading thinker or 

management and organization, defines management as ―a specific practice and converts a 

mob into an effective, purposeful and productive group‖. They offered a classical three 

fold concepts for emphasizing a broad scope for the viewpoint of management. They 

observe management as (1) an economic resource (2) a system of authority, and (3) a 

class or elite. 

Therefore, successful management is totally dependent upon the human element. 

Heads do not get the job performed by themselves, regardless of their individual talent or 

drive. They must work with the through others to achieve organizational goals and 

objectives (Kraus and Curts, 1986). 

2.3 Educational Management 

―Education‖ and ―Management‖ are large and complex concepts. Many 

definitions may be found in the international literature available for students in these 

fields of study. It is clear that no single definition in any field commands the acceptance 


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of all. Undoubtedly, they provide a base for thinking about the management of a school 

as an organization and the education of young people which schools are intended to 

provide. Education is the learning process by which values, attitudes, information and 

skills are acquired and integrated. Management Education is the process of learning 

values, attitudes, information and skills to achieve desired relations between resources 

and objectives. (Choudhury, 2001) 

Management of educational organization means setting realistic goals and 

drawing up plans to achieve them. Those plans involve distinct phase, setting objectives, 

allocating resources, delivering results, evaluation the impact, and resetting objectives in 

the light of evaluation (Thomas and Martin, 1996). Good management may be 

summarized in the cycle as: 

Planning 

Evaluating Organizing 

Monitoring Providing 

Maintaining 

Figure 1: The Cycle of Good Management 

Source: Brighouse and Woods (1999) 

The goal of educational management at the institutional level is to achieve the 

social and system goals of education plus any additional objectives peculiar to the 

specific institution, to do this the manager will need to understand more completely the 

existing motivation of their fellow administrators, teachers and pupils (Kemmerer and 

Windham, 1997). Sharing of management tasks and ownership of the need for them is 

crucial to successful school. 

Cyert and March (1992) argues the, an organization is developed to achieve 

certain goals or objectives by group activity. The centrality of the goal orientation of 

schools and colleges is common to most of the different theoretical approaches to the 

subject. There is disagreement, though, about the value of formal statements or purpose, 

about ―Whose‖ purposes may become the objectives of the organization and about ―how‖ 

the institution‘s goals are determined. 

. 

2.4 Statement of the Problem 

It is an established theory that proper organizational behaviour ensures the full utilization 

of available educational facilities and resources for the development of the organization. 

Hence the study was focused on Role of Educational Managers in Educational 

Organizations of NWFP. 


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2.5 Importance of the Study 

Organizational behaviour is the yardstick which measures the climate of organization. If 

the climate is suitable for optimum utilization of worker‘s potential, energy and 

capability the organization grows and ensures high quality product. The educational 

managers are the backbone of educative process. They are the policy makers, planners, 

implementers, administrators and change agent in education. Any positive and fruitful 

change in society is difficult without education. 


The present study was conducted to explore task and role of educational managers in 

educational organizations such as academic institutions of secondary and higher 

secondary schools of NWFP having following objectives: 

i. To determine the role and function of acceptable behavior of educational 

managers. 

ii. To investigate the style of decision making of education mangers. 

3. Procedure of the Study 

This was the descriptive/survey type of study. Following procedure was adopted for its 

completion:- 

3.1 Population 

All the educational managers working in the different educational organizations of 

NWFP were included in the population of the study. 

3.2 Sample 

Random sampling technique was used for the selection of sample. Eight heads of 

secondary schools Eight heads of higher secondary from each institution were included in 

the study. Eight Executive District Officers and eight District Education Officers were 

also taken in the sample. The sample was taken from eight district of NWFP namely; 

Kohat, Peshawar, Bannu,, D.I..Khan, Mardan, Swabi, Abbotabad, and Manshera . 

3.3 Research Instruments 

A questionnaire was developed; one for 256 educational managers. The 

questionnaire was developed on Likert‘s 5-point scale. The questionnaire covered all the 

important elements of organizational behavior of Educational Managers. 


Data were collected by the researcher personally. Firstly questionnaires were 

mailed to the sampled target of respondents. The researcher personally visited the 

institutions for collection of data. Keeping in view the time factor, services of some 

representatives were also utilized who were made orientated in filling the questionnaires. 


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The Data collected through questionnaires were tabulated, analyzed and 

interpreted by using suitable statistical tool of Chi-square. Findings were drawn and 

recommendations were made for the improvement of organizational behavior of 

educational managers in NWFP. 

Statement of items Responses SA A UD DA SDA Total � 2 

Educational managers are aware 

of the concept of organizational 

behaviour or climate 

Educational managers are 

satisfied with the quality of 

teachers. 

Educational managers involve 

the teachers in decision making 


trained is decision making 

techniques 


trained is communication 

They are fair in dealing with 

others 

They believe in merit and 

transparency 

Educational managers 

recommend incentives for good 

teachers 


competent in management skills 

Educational managers stress on 

the use of latest instructional 

technology 

* Significant 

Table 1: Data Analysis 

Responses 37 112 0 89 18 256 

Percentage 14 44 0 35 7 100 

Responses 16 51 0 182 7 256 

Percentage 6 20 0 71 3 100 

Responses 8 85 0 127 36 256 

Percentage 3 33 0 50 14 100 

Responses 21 79 0 119 37 256 

Percentage 8 31 0 47 14 100 

Responses 39 152 0 47 18 256 

Percentage 15 60 0 18 7 100 

Responses 51 132 0 57 16 256 

Percentage 20 52 0 22 6 100 

Responses 61 148 0 46 1 256 

Percentage 24 58 0 18 0 100 

Responses 42 129 0 56 29 256 

Percentage 17 50 0 22 11 100 

Responses 17 51 0 157 31 256 

Percentage 7 20 0 61 12 100 

Responses 12 47 0 156 41 256 

Percentage 5 18 0 61 16 100 


df= 4 table value of � 2 at 0.05 = 9.488 

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176.75* 

447.7* 

226.68* 

114.07* 

274.41* 

203.56* 

285.81* 

181.13* 

300.62* 

289.6* 

491



The above table 1 shows that value at 4 degree of freedom the � 2 value at 0.05 = 

9.488 which is greater than the table value the chi square (� 2 ) value. The table indicate 

that the calculated value of � 2 (176.75*, 447.4*, 226.28*, 114.07*, 274.41*, 203.56*, 

285.81*, 181.13*, 300.62* and 289.6*) is greater than the table value of � 2 (9.4888), 

therefore there is significant difference in the responses of the respondents. Some 

responses are positively accepted the category of ―agree‖ so it is concluded that the 

respondents feel that educational managers are aware of the concept of organizational 

behaviour or climate, they are trained is communication, they are fair in dealing with 

others and they recommend incentives for good teachers. on the other side there a some 

responses which are in favour of negatively accepted They are satisfied with the quality 

of teachers‖ is negatively accepted. It is concluded that quality of teachers need 

improvement, they involve the teachers in decision making thus the situation needs 

improvement and educational manager are trained is decision making techniques is 

negatively accepted. It means educational managers need training which should be 

arranged properly. 

4. Discussion 

The organizational behaviour is positively correlated with the qualitative outcome 

of educative process. When we understand existing organizations all over the world, 

some are highly successful, some are striving hard for success, and some are 

unsuccessful. There are certain factors influencing their success. Managers in their 

organizations perform the functions of planning, organizing, staffing, directing, leading 

and controlling for success. 

Management is a key factor for the success of any organized activity, and is an 

essential accompaniment of all social organizations. Management is a discipline and 

culture. It is the life-giving and dynamic organ of any institution it manages. 

Management refers to the series of functions, and also to the people who discharge it. 

Today, management refers to managing: changes and challenges; crises; 

complexities; confidence; culture and credibility; to succeed and to accomplish. 

Management is the art of getting things done through or by people. It is a vital means by 

which all endeavors can be achieved, and is a directing and unifying force in all group 

efforts. It is to plan, organize, integrate and inter-relates organizational activities and 

resources for the purpose of accomplishing common objectives. 

Management principles are universal in character. Management is essential for all 

types of organized life. Public/private and joint sector industries, capitalist, communist 

and mixed economies, government departments, defense organizations, hospitals hotels, 

educational institutions and all kinds of business enterprise3s require management for 

their survival, growth, expansion and excellence. 

Management principles are universal in character. Management is essential for all 

types of organized life. Public/private and joint sector industries, capitalist, communist 

and mixed economies, government departments, defense organizations, hospitals hostels, 

educational institutions and all kinds of business enterprises require management for their 

survival, growth, expansion and excellence. 

In fact management is managing people and other resources in the organization 

and outside the organization for achieving the mission and objectives of the organization. 


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It is nothing but managing people with tact; managing people for achieving targets. It is 

based on the process approach and is equally significant as it implies the ongoing and 

increasing cyclical operations in the form of management. A process also indicates the 

dynamic nature of management. Management implies managing change also 


The following conclusions were drawn out after analysis of responses. 

i. Concept of organizational behavior was clear to 58% of the managers and majority 

of the teachers were not clear about this concept. Hence they were not 

participating willingly and voluntarily to improve it. 

ii. Educational Managers. Not satisfied with the quality of the teachers. Through in 

their opinions they involved teachers in group participation. They were also of 

the opinion that they involved teachers in decision-making. But the teachers 

were not trained in decision-making techniques. The teachers responded that the 

managers did not use democratic style of leadership. 

iii. Educational Managers opined that they were trained in social and commutation 

skills. They distributed load work curiously and they encouraged questions for 

clarification. They stressed the character building of teachers and students. 

iv. The majority of the educational managers responded that they could not ensure 

sufficient resources for each task and service. The majority of the teachers stated 

that organizational climate was not suitable for better performance. They did not 

feel comfortable. The workplace and principle of right man for right job was not 

maintained. 

v. The majority of Educational Managers opined that they did not model the 

behaviour personally that they would others to adopt. They further stated that 

they were not fair in using funds. The majority of the teachers stated that their 

salaries were not sufficient to live comfortably. The E.M did not take interest in 

solving personal problem of the teachers. The majority of the teachers also said 

that shortage of funds was felt badly and system of accountability was weak and 

funds were misused. 

vi. The majority of the Educational Managers stated that they did not stress on the use 

of latest instructional technology in the classes due to its shortage. The majority 

of the teachers also verified that they did not use instructional technology in the 

classes they also did not use different motivation techniques in the classrooms. 


The following recommendations were made in the light of the findings and objectives of 

the study. 

i. It was reported by both categories of the respondents that shortage of funds was 

felt badly. Pakistan was providing finances to the tune of 2.1% of GDP to 

education which was very small for improving the system and organizational 

needs. It is strongly recommended that at least the budget for education should 

be doubled. 


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ii. Categories of respondents, the educational managers and teachers stated that 

system of accountability is weak. It is an established principle that only proper 

accountability mechanisms can enhance improvement of performance hence it 

was recommended that proper efficient and effective accountability system 

should be introduced from top to bottom in the district administration of 

education. For this purpose special training should be arranged for educational 

mangers and teachers at reachable centers. 

iii. Majority of both the categories of respondents replied that they were not trained in 

motivation, social, communication and decision-making skills. It was 

recommended that periodic training should be assigned for educational managers 

and teacher for their training in motivation leadership, communication 

interpersonal relations, teacher students‘ relations, and decision making 

techniques. This type of training should be arranged with the help of experts of 

relevant fields. The new information and instructional technology should be 

utilized properly. The teachers should be trained in academics for professional 

development and every teacher should be given the equal chance to participate in 

in-service training under certain cyclic order. 

iv. The majority of the respondents reported that there was an acute shortage of 

educational facilities like books, internet, computer, equipment, sports material 

and transport etc. The researcher felt that such situation was due to shortage of 

funds and to some extent due to the negligence of the heads. It was 

recommended that chemical and equipment for laboratories, books, computers 

and internet facility for libraries, sports materials for games, and furniture should 

be provided to all the secondary and higher secondary schools on priority basis. 

The help of community and local government can be solicited. 

v. The majority of the respondents replied that there was a political interference in 

educational organizations which led to disturb the organizational behavior. It 

was recommended that assurance should be got from the political parties by the 

government, not to interrupt the educational environment. Moreover, working of 

political groups through student unions should be banned in the institutions. 


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References 

Ahuja, K.K, (1990), Organizational Behavior, New Delhi, Kalyani Publishers 

Baron, R.A. 1986. Behaviour in Organizations. 2nd ed. Allyn and Bacon, Boston, USA. 

P.45, 78 

Brighouse, T. And D. Woods. 1999. How To Improve Yor School. Routlege, New York. 

P. 7-42. 

Certo, S.C. 2003. Modern Management: Adding Digital Focus. Prentice Hall of India 

Private Limited. New York. P. 6-8. 

Christensen, G. 1994. The Role of the Principal in Transforming Accelerated Schools. 

Ph.D Thesis. Stanford University 

Choudhury, N.R. 2001. Management in Education. A.P.H. Publishing Corporation, New 

Delhi. Pp. 3-17 

Cyert, R.M and J. G. March. 1992. A behavioral theory of the firms. 2nd ed. Blackwell, 

Oxford. Pp.11-16. 

Dolan, P. 1994. Restructuring Our Schools. System & Organizations, Kansas P. 60. 

Flippo, E., (1970) Management: A Behavioural Approach, Boston: Allyn and Bacon. 

Govt. of Pakistan. 1998. National Education Policy (1998-2010).: Ministry of Education, 

Islamabad. P. 5, 39-41, 108-110. 

Govt. of Pakistan. 2000. Economic Survey of Pakistan 1999-2000. Economic Advisor‘s 

Wing, Finance Division, Islamabad. P. 117, 139. 

Jerald Greeberg, Robert A. Baron (2000) Behavior in Organizations, New Jersey: 

Prentice-Hall, Inc. Upper Saddle River, USA 

Karus, R. G. and J. E. Curts. 1986. Creative management. In: Recreation, Parks, and 

leisure services. McGraw-Hill, Boston, p.28. 

Kemmerer, F. N. and D.. Windham. 1997. Incentives Analysis and Individual Decision 

Making in the Planning of Education. IIEP, UNESCO. P47,49. 

Massie, J.L. 1992. Essentials of Management. Prentice-Hall of India Pvt. Ltd., New 

Delhi. Pp. 1-7, 50-54,131-132. 

Mescon, M. H., Michael, A. and K. Franklin. 1988. Harper and Row Publisher, New 

York. P.16. 

Owens, R. G. 1998. Organizational Behaviour in Education. 6th ed. Prentice Hall, Allyn 

and Bacon, Boston, USA. P119 

Thomas, S. R. and M. Martin. 1996. Management Resources for school improvement. 

Routledge, London. P. 23. 

Whetten, D.A. and K. S. Cameron. 1995. Developing management Skills. Harper Collins 

College publishers, New York. Pp. 7—17. 

Wood, Walpace, Zeffane Schermerhorn, Qsborn, (1989) Organizational Behaviour, 

Brisbane: John Wiley & Sons. 


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A Snap Shot on Business Ethic and Ethic in Business 

Hassan Danaee Fard 

Public Management, PhD 

Associate Professor, Faculty of Economics and Management, 

Tarbiat Modarres University, Tehran, Iran 

Mohammad Reza Noruzi 

EMBA, PhD in progress (Corresponding Author) 

Public Sector Policy Making 



Abstract 

An ethical issue in business is increasing and it is being focused on by the business 

markets, customers and communities. It was important from the beginning and is 

important also now as well. And every company or organization for being survival and 

comparative should pay much more attention to this important. This paper aims to study 

the ethic and some of related issues around it. 

Keywords: Ethic, Opportunities, Challenges, Business 


Multi National Companies, MNEs and local countries are commonly thought to share 

four universal ethical values viz. integrity, justice, competence and utility -values 

described elsewhere as international ethics standards for business, respect and trust in 

locals, environmental protection and respect, and observation of human and 

environmental protective legislation (C.-F. Wu, 2001, 222). Although in other countries 

and other nationalities there will be other factors added or omitted from the mentioned 

values for examples in Islamic countries because they have Islamic based values then 

Islam will effects their trade and management values. 

This paper first discusses ethic and environment and then business ethic and different 

business approaches comes as well. At the end the some recommendations to improve the 

business ethic discusses in detail. 

2. Ethic and Environment 

One common view of ethics is the study of right and wrong conduct within a defined 

environment i.e. Environment defines the ethic and ethical roles. 

―Environmental ethics‖ presents and defends a systematic and comprehensive account of 

the moral relations between human beings and their natural environment (Des Jardins, 

2001, p. 13). It is the discipline that studies the moral relationship between human beings 

and nature and also the value and moral status of the environment. 

Thus, the context in which ethics is applied serves to establish limitations, boundaries, 

definitions and points-of-view. As examples, the issue of Hallal and Haram is an ethical 

issue which should be considered and countries which trade with Iran should note and 

consider this. This is caused by environment because this is role in Islamic countries and 

not in other non-Islamic ones. 

Business ethics is restricted by neo-classical economics within for-profit firms while 

feminist ethics helps us understand right and wrong within a feminine point of view. 


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While the diversity of approaches to ethics can provide choices when professionals are 

faced with decisions about values, the choice of ethics can also limit the practical as well 

as (Hatcher, 2004, p. 357) 

3. Business Ethic 

Business ethics is the behavior that a business adheres to in its daily dealings with the 

world. The ethics of a particular business can be diverse. They apply not only to how the 

business interacts with the world at large, but also to their one-on-one dealings with a 

single customer. 

Many businesses have gained a bad reputation just by being in business. To some people, 

businesses are interested in making money, and that is the bottom line. It could be called 

capitalism in its purest form. Making money is not wrong in itself. It is the manner in 

which some businesses conduct themselves that brings up the question of ethical behavior 

(Wise Geek, 2011). According to Fieser, (2010) when business people speak about 

―business ethics‖ they usually mean one of three things which can be called three (A) s: 

i. Avoid breaking the criminal law in one‘s work-related activity 

ii. Avoid action that may result in civil law suits against the company 

iii. Avoid actions that are bad for the company image. 

Some companies translate the ethic to the benefit which mean that if they consider that 

doing things will bring them benefit then they do that and do not think that is it ethical or 

not then they balance ethic with benefit. 

4. Different Business Ethic Approaches 

According to Fiser, (2010) there are mainly three business ethic approaches which can be 

considered workable among different public and private sectors: 

4.1. Deriving Business Ethics from the Profit Motive 

This states that there is a symbiotic relation between ethics and business in which ethics 

naturally emerges from a profit-oriented business. The weak version is often expressed in 

the dictum that good ethics results in good business, which simply means that moral 

businesses practices are profitable. 

4.2 Business Ethics Restricted to Following the Law 

This second approach states that business ethics is that moral obligations in business are 

restricted to what the law requires. 

4.3 Deriving Business Ethics from General Moral Obligations 

The third approach to business ethics is that morality must be introduced as a factor that 

is external from both the profit motive and the law. This is the approach taken by most 

philosophers who write on business ethics (Fiser, 2010). 

5. Some resources for helping to be ethical 

There are some texts, videos and websites helps people, managers and employees to learn 

what is ethic and how they can improve it. Some are listed below: 

Business Ethics Links Library 

The Business Ethics Links Library (BELL) from the University of Colorado at Boulder is 

a comprehensive starting point for research in corporate ethics and social responsibility. 

The database provides access to codes of ethics for U.S. companies and trade and 


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professional associations, ethics sites at college and university business programs, 

industry information resources, and company promotion of social responsibility (Enter 

web, 2005). 

ECS2000 

The Ethics Compliance Management System Standard (ECS2000) is a guideline for 

corporations and other organizations which are endeavoring to conduct business in an 

equitable and responsible manner. This is Very useful document for any organization 

which aims to establish, apply, maintain and consistently improve an ethical-legal 

compliance management system (Enter web, 2005). 

5.3 Complete Guide to Ethics Management 

This guide is a straightforward and highly practical tool designed to help leaders and 

managers implement comprehensive ethics management systems in their workplaces in 

order to deal with the complex, ethical issues that can occur in the day-to-day realities of 

leading and managing an organization. It provides guidelines for managing ethics, 

identifies key roles and responsibilities, and provides instructions for setting up a code of 

ethics and a code of conduct (Enter web, 2005). 

5.4 EUROPA Corporate Social Responsibility 

This extremely rich site from the European Commission leads to all the works undertaken 

by the commission in the area of corporate social responsibility. 

� ABC of CSR instruments 

� CSR particularly the one from the DG Enterprise which includes a brochure on 

responsible entrepreneurship for SMEs (Enter web, 2005). 

6. Improving Business ethic 

According to Michael R, (1991 ) survey conducted on Improving American business 

ethics. There are mainly three fold approach for improving business ethic and these 

results lead to the premise that long-term improvement of America's business ethics lies 

in a three-fold approach these can be find here: 

First, in both public and private companies it is necessary for employees to understand 

that expectations for ethical behavior in an organization begin at the top and that senior 

management expects all employees to act accordingly. 

Second, the best method of indicating this top-down attitude and the bureaucratic 

commanding system is adoption and explicit, unconditional support of a corporate code 

of conduct and the hierarchal systems. 

Third, continuous learning is one of the inherent characteristic of an ethical company or 

organization so specific training sessions are necessary to prepare managers to consider 

ethical implications of all business decisions. 

But the other step can be added here is creating the culture of ethic in the company or 

organization. Employees should believe themselves the behavior of ethic. 


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7. Discussion and Conclusion 

There are a lot of factors which determine the ethical company or help the company to be 

ethical in the area of management and marketing. Especially in the area of international 

trade the ethical rolls will be internationally ones as well. Companies which work in the 

international area they should obey from the other globalized and international trade 

organizations which force companies to obey from them. 

Also companies in their local or global trades should try to be ethical they should obey ad 

respect to the ethical issues because companies which do not obey and respect for the 

ethical rules will be fined and other companies try not to communicate and trade with 

them. And customers will not buy more things from them as well. 

Business Ethic should be considered as one of the most important factor in every business 

a company which has 1 billion incomes per a month but does not have business ethic then 

will not have the ability to survive in this turbulent environment. 

Other issue should be addressed here is that companies should be monitored about doing 

correct business ethic because some big companies may be proud themselves that they 

obey from the ethical issues and write some slogan on their colorful brands but they do 

not obey anything about the ethical issues. And it is just as a slogan on brands. 

Also we should not think that just companies have ethic and should obey from that. Ethic 

and ethical issue is as a process for example in a paper company ethic is from the cutting 

tree until the company and the stationary who sell this paper. 


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References 

Chen-Fong, Wu (2001), The study of global business ethics in East Asia: Taiwanese 

enterprises in Indonesia as targets, Omega 29 (2001) 221–231 

Des Jardins, J. R. (2001). Environmental ethics: an introduction to environmental 

philosophy (3rd ed). Belmont, CA: Wadsworth/Thomson Learning. 

Fieser, James (2010),Business Ethic, available online at: 

http://www.utm.edu/staff/jfieser/vita/research/Busbook.htm 

Hatcher, Tim (2004), Environmental ethics as an alternative for evaluation theory in forprofit 

business contexts, Evaluation and Program Planning 27 (2004) 357–363 

Michael R., Lane (1991), Improving American business ethics in three steps. The CPA 

Journal Online, February 1991 issue. Available online at: http://www.nysscpa.org/ 

Wise Geek, (2011), what is Business Ethics? Available online at: 

http://www.wisegeek.com/what-is-business-ethics.htm 


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EXPLORING MOTIVATIONAL FACTORS IN THE PROFESSIONAL 

DEVELOPMENT CAREER CHOICE OF A TEACHER 

Dr Muhammad Naseer Ud Din 

Assistant Professor, Institute of Education and Research, 


Mr. Faridullah Khan 

Lecturer, Institute of Education and Research, 


Dr. Ali Murtaza 

Assistant Professor, Faculty of Education ,Preston University, Islamabad 

Abstract 

The purpose of this study was to explore the role of motivational factors in the 

professional development career choice of teacher in the academic institutions of 

Rawalpindi. Motivation can be defined as the process of activating, maintaining and 

directing behaviour toward a particular goal. The main objectives of the study were (a) to 

identify the motivational factors in selecting teaching professional as career choice of 

teachers (b) To identify the importance of selecting teaching profession. The population 

of the study was considered all the secondary school of district Rawalpindi Random 

sampling technique was used for the selection of the sample. In this way 30 secondary 

schools of District Rawalpindi were selected as a sample of the study. Questionnaires 

were used as research instruments for collection of data. The data were collected through 

the questionnaires about various aspect of the study are presented in percentages in 

tabular form and applied Chi-square test for identify the testing of significance value. 

Conclusions were made at the end of the research. On the basis of analysis it was 

concluded that the opinions of majority teachers to adopt teaching as profession career 

first due to interest in attractive job, prestige profession, reward, incentive, expressing 

expectations, achievement, advancement, recognition, status, performance opportunity 

and good conducive working environment, 

Keywords: Motivational Factors, Profession, Job, Reward, Incentives, Recognition, 


Motivation is the desire or drive within a person to achieve some goal, within is the 

operative word here, for motivation is an internal condition based on a person‘s values, 

perceptions, and needs (Rick et al; 1995). The term motivation derives from the Latin 

movers, ―to move‖. It is virtually impossible to determine a person‘s motivation until that 

person behaves of literally moves (Mifflin, 1995). 

Humans are motivated by many things--psychological needs, physiological drives, 

survival, urges, emotions, hurts, impulses, fears, threats, rewards (money, friendship, 

status), possessions, wishes, intentions, values, mastery, freedom, intrinsic satisfaction, 

self-satisfaction, interests, pleasure, dislikes, established habits, goals, ambitions and so 

on. 


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Human resources are the most important and usually the most expensive asset that any 

organization can possess. In higher educational institutions it is largely the work of the 

teacher that determines the degree of success or failure in the institution's efforts to 

achieve its goal of integrating faith and learning. It is the teacher who gives the institution 

its credibility and determines its character. Most college students are, whether aware of it 

or not, endeavoring to develop their own worldview and the teacher is very often the 

major role model in this process. A motivated and committed College teacher has the 

opportunity to significantly influence the student in building a worldview that rests on a 

faith commitment. 

Motivation is one of the constructs psychologists have propounded in their quest for 

understanding the individual. Motivation is an elusive concept including both the 

directing and energizing of behaviour. While controlling People‘s behaviour can produce 

quick and dramatic results, the desired behaviour tends to vanish when external controls 

fade away. Motivations are the process of arousing, directing and maintaining behavior 

towards a goal. The act of arousing is related to the desire and vigor to produce. Directing 

is the election of behavior, and maintenance is the inclination to behave a certain manner 

until the desired outcome is met (Greenberg 1999). 

2. Review of Literature 

Motivation is an important tool that is often under-utilized by heads of institutions in 

today‘s workplace. Heads use motivation techniques in the workplace to inspire teachers 

to work, both individually and in groups, to produce the best results for education in the 

most efficient and effective manner. It was assumed that motivation had to be generated 

from the outside, but it is now understood that each individual has his or her own set of 

motivating forces. It is the duty of the heads of institutions to carefully identify and 

address these motivating forces. 

Teachers have both intrinsic and extrinsic needs. A teacher who is intrinsically motivated 

may be observed to undertake a task for its own sake, for the satisfaction it provides or 

for the feeling of accomplishment and self-actualization. On the other hand, an 

extrinsically motivated teacher may perform the activity/duty in order to obtain some 

reward such as salary. Extrinsic motivation plays an important part in people's life. It is 

very important too strong in influencing a person's behaviour. Therefore, the aim of the 

organization should be to build on and enhance the intrinsic motivation for teachers to 

teach effectively and at the same time, to supply some extrinsic motivation along the way 

for college improvement (Kerlinger, 1993). 

There are many factors that determine people's behaviours and motivate them. These are 

psychological needs, physiological drives, survival, urges, emotions, hurts, impulses, 

fears, threats, rewards (money, friendship, status), possessions, wishes, intentions, values, 

mastery, freedom, intrinsic satisfaction, self-satisfaction, interests, pleasure, dislikes, 

established habits, goals, ambitions and so on. 

The choice of rewards, recognition, reprimands or punishments to motivate personnel 

help to project the leadership style of the administrator (Knezevich, 1984). The 

principal's leadership roles (responder and manager) contribute to teachers' morale either 

by fostering a rough atmosphere or by supporting and collaborating with them (Hall, 

1980). The aim of the organization should be to build on and enhance the intrinsic 


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motivation for teachers to teach effectively and at the same time, to supply some extrinsic 

motivation along the way for college improvement (Kerlinger, 1993). 

Carlisle (1982) states: ―Motivation is largely the responsibility of the educational 

administrators/managers. Motivation includes the internal state plus all the other internal 

and external factors that determine the amount of energy and enthusiasm an individual 

puts into a job.‖ 

According to Mullins (1996), motivation required for a person to high level of 

performance is satisfaction with the job. A person with a high level of job satisfaction 

holds positive attitudes toward the jobs. Peters (1992) heads need to provide the right 

organizational climate to ensure that their teachers can see that by working towards the 

organizational / institutional goals they are also achieving some of their own goals. 

There are two types of motivation theories: content and process. The content 

theories are based on the basic need and drives. The other theories focus on the process 

by which people are motivated. Content theories of motivation explain the dynamics of 

employee needs, such as why people have different needs at different times. The Content 

theories of motivation depend on the stress the analysis of underlying human needs (Daft, 

1997). 

The content theories of motivation approaches that have led to our understanding 

of motivation are Maslow's need-hierarchy theory, Herzberg's two-factor theory, Alderfer 

ERG theory and McClelland‘s achievement theory. The process theories focus on how 

behavior originates and operates. These theories actually deal with approaches that can 

aid a manager/ heads to motivate an employee. These are Vroom‘s theory, Adams' Equity 

and Goal Setting theory. 

Reeve (2001) states: ―Motivation can come from two sources, the extrinsic and 

intrinsic. People may be motivated by factors in the external environment such as pay, 

supervision, benefits and job perks. This is referred to as extrinsic motivation. They may 

also be motivated by the relationship between worker and the task. This type of 

motivation is called intrinsic motivation. These factors often simultaneously, but we will 

distinguish between them as they relate to specific levels of motivation.‖ 

An organization‘s reward system consists of the formal and informal mechanisms 

by which employee performance is defined, evaluated and rewarded (Moorhead and 

Griffin, 1995). Extrinsic rewards are administered by external sources such as coworkers, 

supervisors, or the organization. Financial compensation is clearly the most popular form 

of extrinsic rewards, including wages, salaries, bonuses, profit sharing and incentive 

plans. Intrinsic rewards are associated with the job itself and refer to the positive feelings 

individuals derive from the work they do (Gibson et al., 1985). 

Incentive proposed that behavior is motivated by the pull of external goals, such 

as rewards, money, or recognition. Such incentives motivate workers effectively. They 

satisfy the needs of the subordinates and boost the morale of the workers, resulting in the 

increase in productivity. More over it creates a favourable image for the institution 

(Cenzo and Robbins1998). 


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Money is a generalized secondary reinforce because its affects can be generalized 

to numerous behaviors (Lewis, 1998). Recognition is one of the most important and 

effective incentives for improved performance. Recognition could include public praise, 

expansion of a job appraisal or special attention. Its effectiveness to motivation depends 

upon the person (teacher) as to what value and position he gives to the recognition of the 

head (Ricks et al., 1995). 

Job security is one of the most intense motives particularly in a fast paced, highly 

technological society. Job security is one of the top goals that motivate employees. Heads 

need to communicate and clarify organization policy and discuss job security to their 

employees (Luthans, 1995). 

Teacher motivation naturally has to do with teachers' attitude to work. It has to do 

with teachers desire to participate in the pedagogical processes within the college 

environment. It has to do with teachers' interest in student discipline and control 

particularly in the classroom. Therefore, it could underlie their involvement or noninvolvement 

in academic and non-academic activities, which operate in college. The 

teacher is the one that translates educational philosophy and objective into knowledge 

and skill and transfers them to students in the classroom. Classroom climate is important 

in teacher motivation. If a teacher experiences the classroom as a safe, healthy, happy 

place with supportive resources and facilities for teaching for optimal learning, he/she 

tends to participate more than expected in the process of management, administration and 

the overall improvement of the college. The teacher commands and transmits the image 

of one who improves knowledge and the physical conditions of the classroom through 

orderliness, discipline and control. He makes diagnosis of student's feelings and attitudes 

inferred by their behaviour and response in the classroom environment (Kerlinger, 1993). 

Motivation refers to a state that directs the behaviour of the individual towards 

certain goals. Motivation has been defined as: the psychological process that gives 

behavior purpose and direction (Kreitner, 1995). Teachers motivate learners through a 

variety of strategies based on understanding of the learners‘ growth and development 

patterns, individual ability differences, and through internal and external factors that may 

arouse and sustain the desire to learn more. 

2.1 Statement of Problem 

The study was designed to explore motivational factors in the professional development 

career choice of a teacher as perceived by the trained graduate teachers of Rawalpindi 

District. 

2.2 Significance of the Study 

The focus of study was upon the identification of the motivational factors responsible for 

selecting teaching profession by the teachers. The research is of diagnostic value and 

identification of factors is considered to be beneficial in a number of ways to all those 

who are involved in teaching profession. The identification of these factors will help to 


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remove flaws, in teaching profession for the real and rapid progress of the country. It will 

also be and addition in the existing educational research repertoire. 


The objectives of the study were: 


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i. To identify the motivational factors in selecting teaching professional as career choice 

of teachers 

ii. To identify the importance of selecting teaching profession. 

2.4 Research Hypothesis 

On the basis of the pervious research studies and insight into general literature, 

the following hypotheses were drawn to be tested by the present study: There is no 

significant difference to explore the role of motivational factors in the professional 

development career choice of teacher in the academic institutions of Rawalpindi. There 

is no significance difference in the status professional development career choice of 

teacher in the academic institutions of Rawalpindi in rural as well as urban areas. 

3. Procedure of the Study 

The main purpose of this study was to explore the role of motivational factors in 

the professional development career choice of teacher in the academic institutions of 

Rawalpindi. For this, survey was conducted to get the opinions of the respondents. Hence 

the nature of study was descriptive type. 

3.1 Population 

The population of this study consists of secondary and higher secondary school 

teachers from district Rawalpindi. At least B.A/B.Sc and B.Ed qualification was the basic 

criteria for the population. 

3.2 Sampling Procedure 

For selecting the sample, the populations were identified on the basis of its 

characteristics and function. A random sample technique was used for the selection of the 

sample consisting of 30 secondary schools of district Rawalpindi as the sample. The 

selecting and size of the sample of 15 urban and 15 rural schools were selected out of 30 

secondary schools as a sample of the study. Three working teachers from the each school 

were taken under the study. So, in this way 90 teachers were selected among the 30 

schools. 

3.3 Research Instruments 

For gathering data questionnaire was selected as a method because observation and 

measurement could not serve the purpose as the purpose of the study reported to the 

identification and analysis of the perception of teachers. 

A structured questionnaire was developed on the basis of teachers mentioned earlier. 

The questionnaire was revised on the basis of expert opinion. Against each statement, 

505




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responses in the form of agreed, disagreed or undeliverable were provided for the respondent 

to indicate their opinion. 


The researcher visited most of the secondary schools of district Rawalpindi personally. 

Hundred percent data from sampled colleges were collected properly. In this way the data 

were collected from the entire sample Schools. 


The data received from the respondents were collected, tabulated and analyzed in the 

light of the objectives of the study. Data collected on the above mentioned three point 

questionnaire were analyzed by using the statistical techniques of percentage and Chi 

Square was used. 

For statistical treatment chi-square was applied using the following formula: 

�fo fe� 

2 

= � � 

fe 

(Garrett, 1997) 

On the basis of the analysis and interpretation of data, conclusions were drawn 

and recommendations were made. 


This section deals with the analysis and interpretation of data. The data collected 

through research instruments were tabulated, analyzed, and interpreted in the light of the 

objectives of the study by using chi-square. 

Table 1: Distribution of respondents according to academic and professional 

Qualification 

S.No Academic & Professional 

Qualification 

No. of 

Teachers 

Percentage 

1 B.A, B.Ed 30 33.33% 

2 BSc , BEd 18 20.00% 

3 M.A , BEd 20 22.22% 

4 MSc, BEd 2 2.22% 

5 M.A , M.Ed 4 4.44% 

6 BSc, MA, B.Ed 5 5.56% 

7 B.S.Ed 4 4.44% 

8 M.A Edu 3 3.33% 

9 B.A B.Ed, M.Ed 2 2.22% 

10 BSc, B.Ed, M.Ed 2 2.22% 

TOTAL 90 100.00% 

506



4.1 Interpretation of Table: 

In the table 1 showed that 33.33 percent of the teachers were B.A, B.Ed. The second 

largest group was with 22.22 percent of the teacher were M.A, B.Ed. The other group of 

teachers at Sr. No. 4, 9,10 were just 2.22% each having the qualification of MSc, B.Ed, 

BS, B.Ed, MA Education, BA, BEd, MEd, and BSc, BEd, M.Ed, respectively. 

4.2 Testing Of Null Hypothesis Using Formula (Chi-square) 

H0 1: There is no significant difference to explore the role of motivational factors in the 

professional development career choice of teacher in the academic institutions of 

Rawalpindi. 

H0 2: There is no significance difference in the status professional development career 

choice of teacher in the academic institutions of Rawalpindi in rural as well as 

urban areas. 

Table 2: Questionnaire for Teachers 

Frequency distribution of Teachers 

Opinion about adopted teaching as profession because………….. 

S.No 


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Items Statement A DA UN Total x 2 

1 This is an easy going profession 47 38 5 90 32.6 

2 It is my family profession. 40 44 6 90 29.1 

3 I can serve better my nation through this profession. 66 23 1 90 72.9 

4 Due to unavailability of any other attractive job. 42 45 3 90 36.6 

5 At the suggestion of my friends. 39 48 3 90 37.8 

6 To earn reputation with the help of my pupils. 36 47 7 90 28.5 

7 As a stepping stone to some other profession. 38 49 3 90 38.5 

8 To earn money by means of private tuitions. 30 58 2 90 52.3 

9 I can better propagate my views through it. 50 39 1 90 44.1 

10 I want to enhance the prestige of this profession. 55 35 0 90 51.7 

11 I would like that adopt my blood relationship 43 41 6 90 28.9 

12 I would like my children to become a teacher. 43 40 7 90 26.6 

13 affords an opportunity to satisfy one‘s 35 53 2 90 44.6 

14 I feel pleasure working with children. 47 43 0 90 45.3 

15 Affords an opportunity to continue one‘s studies. 56 34 0 90 53.1 

16 To earn money through the business of books. 30 58 2 90 52.3 

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17 there are long vacations every year in it 40 47 3 90 37.3 

18 I could not afford the expenses of studies 31 57 2 90 50.5 

19 Society respects the teacher very much. 37 52 1 90 45.8 

20 I think that I am really satisfied in this profession. 48 40 2 90 40.3 

21 following the example of (Holy Prophet, PBUH) 55 34 1 90 49.4 

22 To prepare a generation for the progress of society. 54 36 0 90 50.4 

23 To develop pat riotous in the young generation. 56 30 4 90 45.1 

24 To provide vocational guidance to youth 48 37 5 90 33.3 

25 It is based upon principal of honesty. 56 33 1 90 50.9 

26 To up lift the existing status of teachers. 44 42 4 90 33.9 

27 It was necessary to me to get a suitable life partner. 36 52 2 90 43.5 

28 One grade above in other department, I shall avail it. 48 39 3 90 37.8 

29 Present grade in another department of my choice 46 43 1 90 42.2 

30 one grade below in a department of my choice, 30 59 1 90 56.1 

Total of x 2 = 1326 1296 78 1326 1291 

Average of x 2 = 43 

* Significant df= 2 Table value of � 2 at 0.05 = 

5.991 

In the above table No: 2 indicated that from item 1 to item 30. It is revealed that the 

Average of x 2 value is (43.02) is greater than the table value of x 2 (0.05) at P (0.05), so 

that the opinion is different among the teachers. Therefore both null hypothesis H0 1 and 

H0 2 were rejected. Hence it means that there is significant difference to explore the role 

of motivational factors in the professional development career choice of teacher in the 

academic institutions of Rawalpindi. Similarly there is also significance difference in the 

status professional development career choice of teacher in the academic institutions of 

Rawalpindi in rural as well as urban areas. 

5. Conclusion 

In the light of the finding the following conclusions were made: 

i. Majority of teachers opined that these are key factor of motivation such as status of 

attractive job, prestige profession, reward, incentive, expressing expectations, 

achievement, advancement, recognition, status, good working environment interest 

to adopted teaching as profession career and first choice of every teacher. 

ii. Majority of teachers adopted teaching as first profession choice due to prestige of this 

noble profession. 

508



iii. More than 60% teachers responded that they joined the teaching profession to enhance 

the prestige, public relation and social interaction with society. 

iv. Teaching is a task of give and take. In this way the teachers got real satisfaction by 

enhancement of knowledge and continue their studies and professional development 

growth keeping in view that it is profession of Prophethood as well as development 

of the Islamic society. 

v. Under-employment is brain drain and a big problem in our country. Due to 

unemployment there are number of teacher‘s under-employment and looking for 

attractive and charming situation. 


The researchers now make the following recommendations in the light of findings of the 

study for making the teaching profession more attractive for the prospective teachers. 

i. The study results revealed that there was lack of chances for teacher‘s professional 

growth. Therefore, it is recommended that heads may provide ample chance for 

professional growth. Heads should allow the teachers to attend seminar debates and 

study tours. Seminar debates and study tours can be arranged with the help of 

different departments and organizations. Further funds may be generated through 

research work for professional growth. 

ii. Mostly the talented persons do not want to join the teaching profession because there 

is too little pay and low social status in it. If these two things are removed, the 

attitude of those who dislike teaching may be changed for the better people as well. 

iii. Salary scales for teachers should be revised according their performance in curricular 

as well as co-curricular activities, co-operation with staff and keeping in view the 

annual reports (ACRs) of the teachers. 

iv. The teachers should make efforts to organize a teacher association at all levels which 

should set professional standard and professional Ethical code in our country and to 

fulfill their rights and duties accordingly. 

v. Teacher is a role model and they should not be impatient but should keep directing 

and guiding him/her with affection and interest as their attention could yield 

remarkable result. 

vi. Teachers play an important role in the personality development of the students. So 

teachers should give fully attention to the students to raise in them the constant 

desire. 

vii. It was found that motivated teachers fulfill their responsibilities by exerting 

maximally. Therefore, it is recommended that motivation techniques may be 

included in detail in training course of teachers and a special training course may be 

arranged for educational managers, administrators and supervisors for achieving 

their competency to use motivation techniques appropriately. 


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References 

Carlisle, H.M. 1982. Management: concepts, Methods, and Applications. 2nd ed. 

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Cenzo, D.D and S.R. Robbins.1998. Human Resource Management. 5th ed. John Wiley 

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New York, USA. PP.19. 

Garrett, H.E.1997. Statistics in Psychology and Research in Education, 6th ed.Combine 

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Gibson,J.L., J.M.Ivancevich and J.H.Donnelly.1985. Organizations Behaviour Structure 

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Greenberg, J. 1999. Managing Behavior in Organizational. 2nd ed. Prentice Hall, New 

Jersey, USA. P.74, 136. 

Hall, Gene E. 1980. The Principal's Role in Setting School Climate. Harper Publishing, 

New York, USA. P.239. 

Kerlinger, F.N. 1993. Foundations of Behavioural Research, New York; Holt Rinehard 

and Winston Inc. New York, USA. p. 187. 

Knezevich, S. J. 1984. Administration of Public Education. 4th ed. Harper and Row 

Publishers, New York, USA. pp. 87-110. 

Kreitner, R.1995. Management. 6th ed. Houghton Mifflin Company, New York, USA. 

Lewis, V.P.1998. Managing Human Relations. Kent Publish Company, Boston, 

Massachusetts.pp.188-204. 

Luthans, F. 1995. Organizational Behaviour. 7th ed. McGraw-Hill, Inc. New York, USA. 

pp. 141-165. 

Mifflin, 1995. Management and Organization. South-Western Publishing Co, New York, 

USA. P.122, 167. 

Moorhead.G and R.W.Griffin. 1995. Organizational Behaviour. Houghton Mifflin Co, 

Boston, USA. pp.65-89, 

Mullins, L. 1996. Management and Organizational Behaviour, London: Pitman 

Publishing, London. UK. P.154. 

Peters, T. 1992. Liberation Management. Pan Books Publisher Ltd, London, UK. P. 86 

Reeve, J. (2001). Understanding Motivation and Emotion. 3rd ed. Harcourt College 

Publishers. New York, USA.P.95. 

Ricks, B.R., M.L.Glinn and A.S.Daughtrey. 1995. Contemporary supervision, Managing 

People and technology, McGraw- Hill, Inc. New York, USA. P.169,182, 


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The influence of personal factors on the perceived Organizational 

climate: Evidence from the Pakistani Industrial Organizations 

Abstract 

Adnan Iqbal 

College Of Business Administration 

Prince Sultan University P. O. Box No. 66833 

Riyadh 11673, Kingdom of Saudi Arabia 

Organizational climate is perception of members about their work environment and it is 

greatly influenced by individual attributes. This study explores the relationship of 

organizational climate perceptions according to employees' demographic (age, and 

education, tenure and Job Ranks) background patterns. In order to achieve this goal, selfadministered 

questionnaires were distributed to 500 subjects in Pakistani industrial 

organizations. Usable answers were obtained from 353 subjects. The results of the study 

showed that the personal factors of the employees were found to account for significant 

differences in the perception of several dimensions of climate. Specifically in attempting 

to build a positive creative climate, Pakistani industrial organizations must consider not 

only the size, ownership and existing structures of the organizations, but must also 

consider the job tenure, training experience, length of service, education level and age of 

the employees(sonority at workplace). Policies based on organizational factors only may 

have no effect on improving the organizational climate, and may not make effective use 

of the organization‘s resources. 

Keywords: Personal Factors, Organizational Climate, culture, Creativity and Innovation, 

Pakistani industry, Situational Outlook Questionnaire, Training, Pakistani Industrial 

organizations 


The concept of organizational climate was developed in the late 1930s by the social 

scientists (Lewin, Lippitt, and White, 1939). They used social climate term to describe 

subjective feelings or atmosphere they encountered in their studies of organizations. They 

found that different groups had distinctively different social climates. They have also 

established a linkage between the climate and factors such as motivation, playfulness, 

aggression, productivity and sharing (Isaksen, Lauer, Murdock, Dorval, and Puccio, 

1995). Organizational climate gained acceptance as describing the perceived social 

environment in which an individual‘s and organization‘s expectations are met. 

Since 1980s the concept of climate has seemed to have lost its appeal to organizational 

researchers (Isaksen et al, 1995). In its place organizational culture, which came from the 

field of anthropology, was introduced. Ekvall (1996) noted that the organizational climate 

literature contained two main contradictions. One relates to ontological issues, which 

include theories of organizational climate (Guion, 1973; Ekvall, 1996; Altman, 2000) and 

the other on values, norms and belief system (Schneider and Brief, 1996). According to 

Ekvall (1996), this demarcation runs between theorists who conceive ‗climate‘ as a 


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common perception arising from interaction among members of an organization, and 

those who perceive ‗climate‘ as an objective property of an organization. 

1.1 Definitions of Organizational Climate 

Tagiuri and Litwin (1968:25) defined climate as 

The relatively enduring quality of the total [organizational] environment that a) is 

experienced by the occupants b) influence their behavior, and c) can be described in 

terms of the values of a particular set of characteristics (or attribute) of the environment. 

Schneider (1975) narrated climate as molar perceptions people have of their work setting. 

These molar perceptions have a psychological unity, being based on actual events, 

practices and procedures that occur in their daily life. . Ekvall (1983) explained it as an 

attribute of the organization, composed of behaviors, attitudes and feelings which are 

characteristic of the organization‘. 

Early researchers assumed organizational climate on the basis of perception of their work 

environment. For example, Moran and Volkwein (1992) defined organizational climate 

as a dynamic process that involves group member interactions and environmental impact. 

Similarly, Altman (2000) explained that the climate is an employee‘s perception of their 

work environment. This definition of organizational climate represents the holistic view 

of organizational setup and best described in all contexts. 

1.2 Organizational Climate and Organizational Culture 

Several researchers have attempted to compare organizational climate and organizational 

culture and explore the commonalities (Denison, 1996). Ekvall (1983) distinguished 

organizational climate from organizational culture. He suggested an organization‘s 

culture was made of the beliefs, traditions, and values of the people within the 

organization. In contrast, climate refers to feelings, attitude, and recurring behaviour 

pattern which characterized daily life within the organization (Isaksen et al, 1995). 

Glick (1985) distinguishes between climate and culture based on methodological 

preferences. Schein (1985) explains the differences on the base of epistemology. 

According to him, climate research is usually nomothetic and comparative and is 

measured by using quantitative techniques, whereas culture research tends to be 

idiographic and contextualized and is usually measured by using qualitative methods. 

Denison (1996) differentiated between climate and culture on methods of study. 

―If researchers carried field notes, quotes, or stories and presented qualitative data 

to support their ideas, then they were studying culture. If researchers carried 

computer printouts and questionnaires and presented quantitative analysis to 

support their ideas, then they were studying climate‖ (p. 621) 

Organizational climate researchers place greater emphasis on organizational members‘ 

perception. .Thus, it is temporal subjective and often subject to direct manipulation by 

people with power and influence (Guion, 1973; Denison, 1996). Other factors also helped 

to distinguish these two topics in literatures. Culture researchers were more concerned 

with evolution of social systems over time (Denison, 1996). In contrast, climate 


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researchers generally less concerned with evolution but more concerned with the impact 

that organizational system have on groups and individuals (Koys and DeCotiis, 1991). 

Altman (2000) notes that organizational climate refers to employee perceptions of their 

work environment. According to Glisson and James (2002) organizational culture 

includes norms and expectations regarding how people behave and how things are done 

in an organization, on the other hand, climate reflects workers‘ perception of and 

emotional responses to their work environment (Glisson and James, 2002). 

Generally speaking, organizational climate is perception of members about their work 

environment and it is greatly influenced by individual attributes. Evans (2006) noted that 

if the employees believe that their skills and competence as well as their individual 

backgrounds are recognized, they feel motivated both to contribute and to learn from 

their workplace environment. This can encourage continuous positive interactions 

between employees and their workplace environments where employees‘ dispositions 

and personal factors contribute to the shaping and reshaping of their workplace 

environments. Furthermore, organizational climate is affected by many factors – 

managerial style, mutual relations, organizational structure, demographic variables and it 

is dimensioned by diver numbers of dimensions. A group of researchers analyzed and 

suggested a significant relationship between demographic variables (age, education, 

tenure) and climate dimensions (Forte & Hansvick, 1999; Sveiby & Simons, 2002; 

Johnstone & Johnston, 2005; Hicks-Clarke & Iles, 2000; Karen, Clint & Sherry, 2002). 

Therefore, the relationship between individual factors and organizational climate in 

Pakistani industrial organizations is expected. 

The remainder of this paper presents significance of the study and data which allow an 

examination of the relationship discussed above. 

2. Significance of The Study 

As noted earlier, individual perceptions of organizational climate depend both upon 

factors which influence the real nature of the climate and upon factors which affect the 

individual's perceptions of it. When attention is focused on the individual level of 

analysis individual differences in the perception of climate within organizations are likely 

to be important in the understanding and prediction of individual behavior (Payne and 

Mansfield, 1978), in terms of employees turnover. The consequences of high turnover are 

both financial and non-financial. High turnover can be a serious hurdle to productivity, 

quality, and profitability at firms of all sizes. For the smallest of companies, a high 

turnover rate can mean that simply having enough staff to fulfill daily functions is a 

challenge, even beyond the issue of how well the work is done when staff is available 

(Iqbal, 2010). 

Furthermore, there is a sufficient studies on organizational climate in the US or Western 

contexts, rarely has this concept been examined in the context of developing countries 

such as Pakistan. This study is an attempt to fill this gap in literature. 

3. Purpose of the Study and Research Question 

This study attempts to address the above mentioned gap in the current literature by 

examining perceptions of organizational climate by the Pakistani industrial employees. 

Therefore, the study assumed the following key research question: 


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What is relationship between personal factors (age, length of service, education, and job 

category) and the organizational climate in Pakistani industrial organizations? 

This study, however, will also attempt to determine how individual personal factors (Age, 

Education level, job ranks and Tenure) influence the perceptions of organizational 

climate. 

3.1 Research Hypotheses: 

With the above research question, the following hypotheses have been formulated: 

H1: There is no relationship between personal factors and organizational climate in 

the Pakistani industrial organizations 

H2: There is no relationship between personal factors and organizational climate 

dimensions in the Pakistani industrial organizations 

H3: There is no influence of personal factors (Age, Educational level, Job ranks and 

Tenure) on organizational climate in the Pakistani industrial organizations 


The present study is a relationship based research in that it attempts to establish a 

correlation between personal factors (such as Age, Job ranks, Length of service, 

qualification and university Status) and organizational climate in Pakistani industrial 

organizations. 

4.1.1 Instrument of the study 

The data was collected using a structured questionnaire. A two part questionnaire was 

administered, of which the first section relates to personal factors (Age, Education level, 

Job ranks and Tenure), the second section contains the Situational Outlook questionnaire 

(SOQ). The SOQ examines several aspects of the work environment commonly referred 

to as ‗organizational climate‘. The SOQ helps to study the organization in view of 

current work environment and how it supports or limits the release and productive use of 

creativity, innovation and change. 

4.1.2 Reliability of construct 

[Table 1 Here] 

The SOQ provides four alternative responses (0 = not at all applicable, 1 = applicable to 

some extent, 2 = fairly applicable, and 3 = applicable to a high extent). In this study the 

internal consistency (Cronbach's Alpha) of SOQ is 0.840. 

4.2 Sample Size 

The population of the study was constituted of the employees of the knitwear sector. Of 

the 500 questionnaires distributed to the 100 knitwear organizations located in Lahore 

and Faisalabad, Pakistan, 415 questionnaires were returned. 62 questionnaires were 

incomplete and could not be used; this gives a total of 353 usable responses. The 

response rate is thus approximately 70%. 

4.3 Limitation of the study 

The potential limitation of this study includes the scope of the research. This study aims 

to explore the relationship between personal factors and organizational climate. Future 


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research needs to explore the effects of sub-variables, such as Job ranks (Managers, 

Supervisors and workers), Age groups, education categories) on Organizational climate 

sub-dimensions, that were not explored fully in the current study, which can also directly 

or indirectly influence the said relationship in Pakistani industrial organizations. This 

study, however, may serve as a foundation for future studies on larger scales with same 

variables, which in turn could generate strategies to improve the working environment 

and to reduce the employees‘ turnover. 

5. Results and Analysis 

The purpose of this study was to determine if there were significant relationship between 

Individual factors and perceived organizational climate. This section is a presentation and 

analysis of the data collected to evaluate the relationship between personal factor and 

perceived organizational climate Pakistani industrial sector. 

Three steps of data analysis have been conducted for this study 1) Descriptive Statistics 

2) Correlation analysis and 3) determination of significant independent variables through 

regression analysis. 

5.1 Personal Factors 


Section I of the survey yielded demographic information on the sample being studied. Of 

the N=353 respondents 117(33%) managers, 142 (40%) supervisors and 94(27%) 

workers (see Table 2), which shows a good representation of staff. 


According to Table 3, respondent were quite evenly spread across the age groups. 60% 

respondents were below 30 years. 26% of supervisors were under the age of 30. But with 

only 3.2% falling in the 50-59, and 60+ years age categories. The age ranges from 18 to 

65 years. 


Table 4 shows the data on education level and job category. 26% of the respondents had 

university degrees and of that 26%, 21 % were managers. Above 50% employees sample 

have Matric (O-levels) qualification. 


Table 5 shows the data of length of service of respondents. 66% employees have less than 

5 year tenure in the organizations. In general 87% workers have less than ten years 

working experience. 

5.2 Correlation Tests for H1 and H2 


One of the hypotheses of this study was that there was no relationship between personal 

factors and organizational climate in the Pakistani industrial organizations (hypothesis 1). 

As can be seen in Table 6 above, there was a relationship between Age (r = .12; p




The second hypothesis states that, there is no relationship between personal factors and 

organizational climate dimensions in the Pakistani industrial organizations (Hypothesis 

2). In order to test this hypothesis a detailed correlation test was conducted (Table 7) 

using the four personal factors (Such as Age, Job ranks, Education and length of service) 

and nine organizational climate dimensions (Challenge and involvement, Freedom, Idea 

support, Playfulness and humor, Debate, Trust and Openness, Idea time, Risk taking, and 

Conflict). It can be seen from the Table 7, there was a significant but negative 

relationship between Job Category and organizational climate dimension freedom [r=- 

.11, p



climate. Therefore, the aim of the study was to investigate the relationship between 

personal factors and organizational climate in Pakistani industrial organizations. The 

personal factors include age, length of service, education and job category. Therefore, the 

study postulated the following research question: 

What is relationship between personal factors (age, length of service, education, and job 

category) and the organizational climate in Pakistani industrial organizations? 

In order to address the above mentioned research question, the study presented a detailed 

literature on the relationship between personal factors and organizational climate. This 

review led to the development of three main hypotheses that were tested in this study. 

The study used several statistical tests such as descriptive statistics, correlations and 

regression analysis, to test the hypotheses. 

6.1 Personal Factors and Organizational climate 

The personal factors used in this study include age, length of service, education and job 

category. The findings of the study showed that age and length of service have a 

significant relationship with Organizational climate while no relationship was found 

between education, job category and organizational climate. The following discussion 

explains the possible reasons for the relationship between these variables and 

organizational climate. 

6.1.1 Age 

Age was significantly correlated with overall organizational climate. This study is 

consistent to the previous studies, such as Forte & Hansvick, 1999; Sveiby & Simons, 

2002; Karen, Clint & Sherry, 2002). Though very few researches revealed the same 

relationship between age and organizational climate variables but it is quite evident that 

older employees express more moderate opinions about actions in organizations as 

compare to the young workers. 

Age showed, in Table 7, significantly associated with the Organizational climate 

dimensions, freedom [r= .12, p



taken without fear of reprisals and ridicule in case of failure. The communication is open 

and straightforward. 

Another interesting finding of this study reveals that there is statistical significant but 

negative relationship between education level and organizational climate dimension 

freedom. Ekvall (1996) explains that a certain level of freedom has to exist to provide 

innovation. However, high values in freedom point to a situation in which subordinates 

are able to work independently without permanent observations. It has been observed 

that more integrated factory environments can affect workplace freedom and autonomy, 

regardless of managerial intent to empower or control workers and education levels in 

Pakistani industrial organizations. Generally, goals are set by management, work related 

relationships are maintained and tasks are defined by top management. It is assumed that 

management controls the working environment which leads to lack of freedom in the 

workplace. This view was also supported by Jones and Blunt (1997): 

This is consistent with the higher levels of power distance which characterize most East 

Asian societies (Hofstede, 1980) with patrimonial family structures and such cultural 

features as filial piety. All of these factors contribute to the wide social distance 

separating leaders from followers. Goals, and means for their attainment, are decided by 

leaders and are carefully and humanely imposed. There is little involvement of followers 

and little expectation on their part that this will occur. The power and authority of the 

leader are accepted as right and proper. Hierarchy is viewed as the natural way to order 

social relations. There is ―conformity to the ‗natural‘ order of power relations‖. 

6.1.3 Length of Service 

Length of service was found significantly correlated with organizational climate (r = .17; 

p



p



Ideas and different experience or knowledge) and Idea Time (The amount of time people 

use to elaborate ideas). If there are discrepancies in relative policies then policies can be 

revised or improved. 

Specifically in attempting to build a positive creative climate, Pakistani industrial 

organizations must consider not only the size, ownership and existing structures of the 

organizations, but must also consider the retention policies, training experience, length of 

service, education level and age of the employees (seniority of the workers). Policies 

based on organizational factors only may have no effect on improving the organizational 

climate, and may not make effective use of the organization‘s resources. The most 

effective recommendations are: Greater importance of non-financial recognition and 

appreciation effective training needs (Iqbal, 2010), adjustments in work content and 

physical work environment (Ilmarinen, 2001). Management has to be aware of these agerelated 

changes and has to provide a work environment that recognizes and 

accommodates the unique needs and capabilities of all workers to keep them active and 

motivated (Walker and Taylor, 2000). 


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Annexure 

Table 1: Ekvall‟s Creative Climate Dimensions 

Freedom 

The independence in behavior exerted by the people in the Organization. 

Challenge 

The emotional involvement of the members of the organization in its operations and goals. 

Trust / Openness 

The emotional safety in relationship. 

Idea Time 

The amount of time people use to elaborate ideas. 

Conflict 

The presence of personal and emotional tensions in The organization. 

Playfulness / Humor 

The spontaneity and ease that is displayed in the organization. 

Debate 

The occurrence of encounters and clashes between viewpoints, Ideas and different experience or 

knowledge. 

Idea Support 

The extent to which new ideas are treated constructively. 

Risk Taking 

The promptness of response to emerging opportunities. 

Source: Situational Outlook Questionnaire Dimensions (Ekvall, 1983) 


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Table 2: Respondent Job category 

Frequency Valid Percent 

Manager 117 33.1 

Supervisor 142 40.2 

Worker 94 26.6 

Total 353 100.0 

Table 3: Age and Job category 

Age of 

Respondent 

(Banded) 

Respondent job category Total 

Manager Supervisor Worker % 



Table 5: Tenure and Job category 

Tenure 

(Banded) 

Respondent job category Total 

Manager Supervisor Worker % 

Respondent 

job category 


Respondent 

Length of 

service 

Education 

level 

Total 

Challenge and 

Involvement 



Table 7: Correlations between Personal factors and Organizational Climate Dimensions 

Responde 

nt job 

category 

1 


Respond 

ent 

-.438 ** 1 

.000 

Length 

of 

service 

-.249 ** .673 ** 1 

.000 .000 

Education 

level 

.665 ** -.288 ** -.103 1 

.000 .000 .053 

Total 

Challenge and 

Involvement 

.051 .035 .122 * .077 1 

.341 .512 .023 .148 

Total 

Freedom 

Total Freedom -.110 * .117 * .123 * -.118 * .264 ** 1 

Total Idea 

Support 

Total 

Playfulness 

and Humor 

.039 .029 .022 .027 .000 

Total Idea 

Support 

-.045 .082 .071 -.076 .401 ** .531 ** 1 

.397 .126 .186 .157 .000 .000 


Total 

Playfulness 

and Humor 

-.074 .132 * .190 ** -.028 .533 ** .326 ** .279 ** 1 

.164 .014 .000 .596 .000 .000 .000 

Total Debate -.123 * .148 ** .138 ** -.092 -.007 .530 ** .337 ** .219 ** 1 

Total Trust 

and Openness 

Total Idea 

time 

Total Risk 

taking 

.021 .006 .010 .085 .903 .000 .000 .000 

Total 

Debate 

Total Trust 

and 

Openness 

.125 * -.135 * .000 .182 ** .501 ** .012 .129 * .302 ** -.054 1 

.018 .012 .998 .001 .000 .816 .015 .000 .308 

-.075 .075 .126 * .001 .130 * .524 ** .495 ** .316 ** .535 ** .007 1 

.157 .163 .018 .988 .014 .000 .000 .000 .000 .897 

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Total Idea 

time 

.024 -.002 .039 .015 -.053 .555 ** .407 ** .107 * .533 ** -.079 .437 ** 1 

.650 .971 .472 .783 .323 .000 .000 .044 .000 .138 .000 

Total conflict .053 .041 .024 .067 .387 ** -.273 ** .025 .069 -.443 ** .243 ** -.233 ** -.438 ** 1 

.324 .442 .651 .208 .000 .000 .645 .194 .000 .000 .000 .000 

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

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

526 

Total 

Risk 

taking 

Total 

conflict



Table 8: ANOVA b 

Model Sum of Squares df Mean Square F Sig. 

1 Regression 2242.684 4 560.671 2.741 .029 a 

Residual 69950.936 342 204.535 

Total 72193.620 346 

R= .18 

R 2 = .031 

Adjusted R 2 = .020 


Model 



Standardized 

Coefficients 


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t Sig. 

1 (Constant) 85.552 5.221 16.385 .000 

Respondent job category -.880 2.192 -.030 -.402 .688 

Age of Respondent -.004 .141 -.002 -.027 .979 

Education level .216 .507 .031 .427 .670 

Length of service .508 .215 .171 2.363 .019 

a. Dependent Variable: Total Climate 

527



Improved Hidden Markov Model in DNA Sequence Alignment 

Naila Rozi 

Sir Syed University of Engineering & Technology,Karachi 

Nasiruddin Khan 

University Of Karachi 

Abstract 

We present an improved hidden-Markov-Model ( HMM) based method for performing 

global alignment of non-coding DNA sequences. The method uses an explicit model of 

length frequency distribution which can be specified, and allows any time reversible 

model of nucleotide substitution. The method uses a deterministic global optimiser to 

find the alignment with the highest posterior probability. We test in simulations, and 

compare it to a previous Monte Carlo based method , that performed very well in a 

previous simulation study. We show that the pair HMM methods have excellent 

performance for all combinations of parameter values we have considered an accurate 

explicit model than heuristic methods, but is computationally slower. The advent of 

automated DNA sequencing methods has resulted in an enormous growth in the volume 

of sequence data deposited in public databases. The increasing availability of genome 

sequence data for many related organisms offers great opportunities to study gene 

function and genome evolution, but it also presents new challenges for DNA sequence 

analysis, especially for non-coding DNA sequences .A useful alignment method must 

produce biologically meaningful and accurate alignments, and also must do so quickly. 

There is a trade-off because the most biologically realistic scoring functions are difficult 

to optimize. 

Keywords: DNA sequences, HMM model, Monte Carlo method, Sequence Alignment 


In gene identification, we want to label nucleotides as exons, introns, or intergenic 

sequence. In sequence alignment, we want to associate residues in a query sequence with 

homologous residues in a target database sequence. We can always write an ad hoc 

program for any given problem, but the same frustrating issues will always recur. One is 

that we want to incorporate heterogeneous sources of information. A genefinder, for 

instance, ought to combine splice-site consensus, codon bias, exon/ intron length 

preferences and open reading frame analysis into one scoring system. 

Hidden Markov models (HMMs) are a formal foundation for making probabilistic 

models of linear sequence They provide a conceptual toolkit for building complex models 

just by drawing an intuitive picture. They are at the heart of a diverse range of programs, 

including genefinding, profile searches, multiple sequence alignment and regulatory site 

identification. HMMs are the Legos of computational sequence an 

As a simple example, imagine the following caricature of a 5' splice-site recognition 

problem. Assume we are given a DNA sequence that begins in an exon, contains one 5' 


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splice site and ends in an intron. The problem is to identify where the switch from exon to 

intron occurred—where the 5' splice site (5'SS) is. 

For us to guess intelligently, the sequences of exons, splice sites and introns must have 

different statistical properties. Let's imagine some simple differences: say that exons have 

a uniform base composition on average (25% each base), introns are A/T rich (say, 40% 

each for A/T, 10% each for C/G), and the 5'SS consensus nucleotide is almost always a G 

(say, 95% G and 5% A). 

The HMM invokes three states, one for each of the three labels we might assign to a 

nucleotide: E (exon), 5 (5'SS) and I (intron). Each state has its own emission probabilities 

(shown above the states), which model the base composition of exons, introns and the 

consensus G at the 5'SS. Each state also has transition probabilities (arrows), the 

probabilities of moving from this state to a new state. The transition probabilities describe 

the linear order in which we expect the states to occur: one or more Es, one 5, one or 

more Is. 

The underlying assumption of most phylogenetic tree reconstruction methods is that there 

is one set of hierarchical relationships among the taxa. While this is a reasonable 

approach when applied to most DNA sequence alignments, it can be violated in certain 

bacteria and viruses due to sporadic recombination. The resulting transfer or exchange of 

DNA subsequences can lead to a change of the branching order (topology) in the affected 

region, which results in conflicting phylogenetic information from different regions of the 

alignment. If undetected, the presence of these so-called mosaic sequences can lead to 

systematic errors in phylogenetic tree estimation. Their detection, therefore, is a crucial 

prerequisite for consistently inferring the evolutionary history of a set of DNA sequences. 

In the last few years, a plethora of methods for detecting recombination have been 

developed and it is beyond the scope of this article to present a comprehensive overview. 

Many detection methods for identifying the nature and the breakpoints of the resulting 

mosaic structure are based on moving a window along the sequence alignment and 

computing a phylogenetic divergence score for each position. 

PLATO (Grassly and Holsor in 1987) estimates a phylogenetic tree from the whole DNA 

sequence alignment, and then systematically looks for subsets with a low likelihood under 

this model by computing the statistic 

where Lt denotes the log likelihood of the tth column of the alignment, W is the size of the 

subset, and N is the length of the alignment ). This measure is calculated for all possible 

positions b along the sequence alignment and for varying subset sizes, typically 5 W 

N/2. Parametric bootstrapping is applied to generate the null distribution of the 

maximized Q value under the null hypothesis of no recombination. If the reference 

model, from which the log likelihoods are computed, were the true tree (meaning the tree 

one would get if no recombination event had happened), significantly large Q values 

would be a reliable indication for recombinant regions. However, the true tree is not 

known, and is approximated by a tree estimated from the whole sequence alignment. This 


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alignment includes the recombinant regions, which perturb the parameter estimation for 

the reference tree (see fig. 1, bottom). Consequently, the method becomes increasingly 

unreliable as the recombinant regions grow in length. 

TOPAL (McGuire, Wright, and Prentice 1997);McGuire and Wright 2000), illustrated , 

replaces the global by a local reference tree. A window of typically 200–500 bases is slid 

along the DNA sequence alignment. The reference tree is estimated from the left half of 

the window, and used to computed a goodness-of-fit score for both parts of the window. 

The difference between these goodness-of-fit scores, the so-called DSS statistic, is likely 

to be small within a homogeneous part of the alignment, but large as the window is 

moved into a recombinant region. Parametric bootstrapping is applied to compute a 

distribution of DSS peaks under the null hypothesis of no recombination, and 

significantly large DSS peaks are indicators of putative recombinant breakpoints. While 

this method overcomes the principled shortcoming of PLATO, the spatial resolution for 

the identification of the breakpoints is typically of the order of the window size and, 

consequently, rather poor. 

This article discusses a different approach, which follows up on earlier work by Hein 

(1993). The idea is to introduce a hidden state that represents the tree topology at a given 

site. A state transition from one topology into another corresponds to a recombination 

event. To introduce correlations between adjacent sites, a site graph is introduced, 

representing which nucleotides interact in determining the tree topology. Thus, the 

standard model of a phylogenetic tree is generalized by the combination of two graphical 

models: (1) a taxon graph (phylogenetic tree) representing the relationships between the 

taxa, and (2) a site graph representing interactions between different sites in the DNA 

sequence alignments. To keep the mathematical model tractable and the computational 

costs limited, the latter are reduced to nearest-neighbor interactions. Breakpoints of 

mosaic segments are predicted by state transitions in the site graph. While this method 

can only deal with a small number of sequences simultaneously, it has, in principle, the 

potential to predict the locations and breakpoints of recombinant regions more accurately 

than what can be achieved with most existing techniques. 

The article is organized as follows: the next section, Method: Background and Earlier 

Approaches, introduces the mathematical method and discusses the shortcomings of 

existing parameter estimation techniques. Then, under Method: A Bayesian Approach, we 

discuss how earlier approaches can be improved with a Bayesian approach using Markov 

chain Monte Carlo. In the section titled Data we describe various synthetic and realworld 

DNA sequence alignments on which the proposed scheme was tested. We next 

present the simulation study itself and discuss the results. The article ends with a 

conclusion and recommendations for future work. 

Consider an alignment of m DNA sequences, N nucleotides long. Let each column in 

the alignment be represented by yt, where the subscript t represents the site, 1 t N. 

Hence yt is an m-dimensional column vector containing the nucleotides at the tth site of 

the alignment, and = (y1,..., yN). Attached to each site is a hidden state variable St, which 


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represents the tree topology at site t. For m taxa, there are K = (2m - 5)!! distinct unrooted 

topologies (where !! denotes double factorial), hence St {1,..., K}. If a recombination 

event has occurred, then there will be a change in topology in this region, corresponding 

to a transition into another hidden state at the breakpoint of this region. Our objective is to 

predict the "optimal" sequence of hidden states 

given the sequence alignment and some optimality criterion to be discussed below. 

Obviously, this optimization problem is, in general, intractable. First, the number of 

possible topologies at a given site, K, increases super-exponentially with the number of 

sequences m. Second, there are K N different state sequences, which prevents an 

exhaustive search even for small values of K. Consequently, the introduction of 

approximations and restrictions is inevitable. 

To deal with the second source of computational complexity, interactions between sites 

are limited to nearest-neighbor interactions. This allows the application of a dynamic 

programing scheme which reduces the computational complexity to (K 2 N), that is, to an 

expression linear in N. To deal with the first source of complexity, the scheme has to be 

restricted to alignments with small numbers of sequences. In the current work, we restrict 

our approach to alignments with only m = 4 taxa. In the Discussion we describe how this 

restriction can be relaxed. 

Hein (1993)defined optimality in a parsimony sense. algorithm, searches for the most 

parsimonious state sequence S, that is, the one that minimizes a given parsimony cost 

function E(S). 

2. Detecting Recombination with Hidden Markov Models 

Adopting a statistical approach to phylogenetics, illustrated in figure 3 the probabilistic 

equivalent to RECPARS is a hidden Markov model (HMM), whose application to the 

detection of recombination was first suggested by McGuire, Wright, and 

Prenticle(2000)Figure 4left, shows the corresponding probabilistic graphical model. 

White nodes represent hidden states, St, which have direct interactions only with the 

states at adjacent sites, St-1 and St+1. Black nodes represent columns in the DNA sequence 

alignment, yt. The joint probability of the DNA sequence alignment, , and the sequences 

of hidden states, S, factorizes: 


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Figure 1 

In Figure 1 Statistical approach to phylogenetics and modeling recombination. For a 

given column yt in the alignment, a probability P(yt|St, w,θ) can be computed, which 

depends on the tree topology, St, the vector of branch lengths, w, and the parameters of 

the nucleotide substitution model, θ. In the presence of recombination, the tree topology 

can change and thus becomes a random variable that depends on the site label t. For four 

taxa, there are three different tree topologies. The vectors w and θ are accumulated 

vectors, as defined in the paragraph above equation (6) 

Figure 2 


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Figure 2. Modeling recombination with hidden Markov models. Positions in the model, 

labeled by the subscript t, correspond to sites in the DNA sequence alignment. Black 

nodes represent observed random variables; these are the columns in the DNA sequence 

alignment. White nodes represent hidden states; these are the different tree topologies, 

shown (for four sequences) in figure 3. Arcs represent conditional dependencies. Squares 

represent parameters of the model. The probability for observing a column vector yt at 

position t in the DNA sequence alignment depends on the tree topology St, the vector of 

branch lengths w, and the parameters of the nucleotide substitution model θ. The tree 

topology at position t depends on the topologies at the adjacent sites, St-1 and St+1, and the 

recombination parameter v 

. Left: In the older approaches of McGuire, Wright, and Prentice (2000)and Husmeier and 

Wright (2001), v, w, and θ are parameters that have to be estimated. Right: In the 

Bayesian approach, v, w, and θ are random variables. The prior distribution for v is a beta 

distribution with hyperparameters α and ß. The prior distributions for the remaining 

parameters are discussed under Method: A Bayesian Approach and depend on some 

hyperparameters Ώ. The parameters v, w, and θ are sampled from the posterior 

distribution with Markov chain Monte Carlo 

While, in general, this problem would be intractable because of the exponential increase 

in the number of state sequences (see above), the reduction to nearest-neighbor 

interactions between hidden states and the resulting factorization (3) allows the 

application of a dynamic programing technique, the so-called Viterbi algorithm (Rabiner 

1989, to find the mode Ŝ with computational complexity O(N). The factorization (3) 

contains three terms: P(yt|St), P(St|St-1), and P(S1). The transition probabilities P(St|St-1) 

correspond to recombination events (if St ≠ St-1). Let v denote the probability that the tree 

topology remains unchanged as we move from a given site in the alignment, t, to an 

adjacent site, t + 1 or t - 1. We then obtain for the state transition probabilities: 


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In Figure. 4. Transition probabilities. The hidden states of the HMM represent different 

tree topologies, and state transitions correspond to recombination events. The transition 

probability v is the probability that on moving from a site in the DNA sequence 

alignment to an adjacent site, no topology change occurs. If a topology change does 

occur, we assume that, a priori, all transitions are equally likely 

The parameters w, θ, and v need to be estimated. 

3. Heuristic Parameter Estimation: HMM-Heuristic 

McGuire, Wright, and Prentice (2000) estimated the branch lengths w for each tree 

topology separately with maximum likelihood. This approach is suboptimal. For a proper 

estimation of the branch lengths of a recombinant tree, one would have to restrict the 

parameter estimation to the recombinant region. The location of this region, however, is 

not known in advance. Estimating the branch lengths from the whole DNA sequence 

alignment leads to seriously distorted values, as demonstrated by Husmeier and Wright 

(2001) because the estimation includes regions of the alignment for which the tree 

topology is incorrect. A heuristic way to address this problem, suggested by McGuire, 

Wright, and Prentice (2000), is to estimate the branch lengths from a subregion of the 

alignment. The length of this region should be matched to the length of the recombinant 

region, which, however, is not known in advance. Also, this approach does not offer a 

way to estimate the recombination parameter v. 


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4. Parameter Estimation with Maximum Likelihood: HMM-ML 

A solution to this problem, proposed by Husmeier and Wright (2001) is a proper 

maximum likelihood estimation of the parameters so as to maximize 

with respect to the vector of branch lengths w, the parameters of the nucleotide 

substitution model θ, and the recombination parameter v. This requires a summation over 

all state sequences S = (S1,..., SN), that is, over K N terms, and seems to be intractable for 

all but very short sequence lengths N. However, Husmeier and Wright (2001)showed that 

by applying the expectation maximization (EM) algorithm (Dempster, Laird, and Rubin 

1977, the sparseness of the connectivity in the HMM could be exploited to reduce the 

computational complexity to the order of K separate tree optimizations. While the 

application of this scheme outperformed the heuristic approach of McGuire, Wright, and 

Prentice (2000)it suffers from the shortcoming that the predicted state sequence does not 

only depend on the data, argmax P(S/D), but also on the parameters, argmax P(S|D,w, 

θ,v).The fact that these parameters are estimated from the data itself with maximum 

likelihood renders the approach susceptible to over-fitting. This calls for an independent 

hypothesis test with parametric bootstrapping, which, however, incurs prohibitively high 

computational costs, as demonstrated by Larget and Simon (1999) 

To rephrase this problem, note that hidden Markov models and phylogenetic trees have 

many similarities with neural networks; in fact, all three models are instances of the more 

general class of graphical models (Heckermann 1999. Studies on neural networks and 

graphical models have shown that, for sparse data, maximum likelihood is susceptible to 

over-fitting, and that the generalization performance is significantly improved with the 

Bayesian approach. A detailed investigation of this approach can be found in Neal (1996). 

In a nutshell, maximum likelihood gives only a point estimate of the parameters, which 

ignores the more detailed information contained in the curvature and (possibly) 

multimodality of the likelihood landscape. By sampling rather than optimizing 

parameters, the Bayesian approach captures more information about this landscape, and 

consequently gives improved and more reliable predictions. 

A Bayesian approach to phylogenetics without recombination was proposed and tested by 

Yang and Rannala (1997), Mau, Newton, and Larget (1999) and Larget and Simon 

(1999). Generalizing this scheme to the presence of recombination requires replacing the 

single topology-indicating variable by the state sequence S, as discussed in the previous 

section. The prediction of this state sequence should be based on the posterior probability 

P(S|D), which requires integrating out the remaining parameters: 


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In principle this avoids the over-fitting scenario mentioned above and removes the need 

for a separate hypothesis test. The difficulty, however, is that the integral in (eq. 8) is 

analytically intractable, which calls for the application of a numerical approximation, 

using Markov chain Monte Carlo (MCMC). The practical viability of the Bayesian 

framework thus hinges on the performance of this scheme. In the subsections below, we 

will discuss the following issues: (1) the choice of prior probabilities; (2) the chosen 

Markov chain Monte Carlo method, which has the form of a Metropolis-Hastings and 

Gibbs-within-Gibbs sampling scheme; (3) methods for accelerating the convergence of 

the Markov chain; (4) the prediction resulting from this scheme; and (5) a software 

implementation. We will then test this approach on various DNA sequence alignments. 

5. Prior Probabilities 

Inherent in the Bayesian framework is the choice of prior probabilities for all model 

parameters, as illustrated in figure 4, right. We make the usual assumption of parameter 

independence, P(v, w, θ) = P(v)P(w)P(θ), and choose rather vague priors to reflect the 

absence of true prior knowledge. The prior probabilities will either be conjugate, where 

possible, or uniform, but proper (that is, restricted to a finite interval). 

The recombination parameter v is a binomial random variable, for which the conjugate 

prior is a beta distribution, 


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6. Markov Chain Monte Carlo (MCMC) Sampling 

Ultimately, we are interested in the marginal posterior probability of the state sequences, 

P(S|D), which requires a marginalization over the model parameters according to (eq. 8). 

7. Conclusion 

We applied both HMM-Bayes and RECPARS to the synthetic DNA sequence 

alignmentThe objective of this simulation study was to test the performance of both 

methods on different (a priori known) mosaic structures and for varying levels of 

difficulty of the detection problem (which is related to the tree height, also discussed 

When the tree height is sufficiently large (0.3, 0.2), HMM-Bayes predict the true mosaic 

structure, but with two important differences. First sequence gives only an accurate 

prediction if the recombination and substitute t, have been set "appropriately." Note that 

these parameters can not be inferred from the data, but rather have to be chosen in 

advance. It was suggested by Wiuf, Christensen, and Hein that a ratio of the 

recombination and substitution costs works fine quite generally. However, this was not 

confirmed in our simulations, where for the largest tree height of 0.3 the predictions with 

this ratio were wrong, leading to a mosaic structure that is over-tessellated. Because 

HMM-Bayes infers all the parameters from the data, it does not suffer from this 

shortcoming . Second, even when predicts the nature of the mosaic structure correctly, it 

is less accurate than HMM-Bayes in locating the breakpoints:it can be seen that the 

breakpoints predicted with are typically misplaced by 20–30 nucleotides. This is a 

consequence of the fact that uses only the topology-defining sites, and thus discards a 

considerable proportion of sites in the DNA sequence alignment. 

When the tree height is decreased to 0.1, not HMM-Bayes predicts the mosaic structure 

of the alignment correctly.finds only one recombinant region, which for the first 

alignment is even badly misplaced (fig. 3bottom right). HMM-Bayes detects both 

recombinant regions and even locates them rather accurately, but it misclassifies the 

topology change for one of these regions (fig. 4 bottom right; fig. 1 bottom right). This is 

most likely a consequence of the fact that for small tree heights, the number of mutations 

and, consequently, the number of polymorphic sites is small. Thus, there is less 

information in the data, and any inference is inevitably less accurate. 

For a more quantitative comparison between and HMM-Bayes, recall that the detection of 

recombination is basically a classification problem: Each site in the sequence alignment is 

assigned to one of the three possible tree topologies. this is done directly. For HMM- 

Bayes, it is done by assigning each site to the mode of the posterior probability. We use 

two criteria to rate the performance of the methods: The sensitivity, which is the 

percentage of correctly classified recombinant sites, and the specificity, which measures 

the percentage of correctly classified non-recombinant sites. Comparing the performance 

of RECPARS and HMM-Bayes across all simulations, shown in figure 2 we found that 

HMM-Bayes gives a consistent and significant improvement on sequence the accuracy of 

locating and classifying the recombinant regions, as indicated by a systematically 

increased sensitivity score. 


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compares the predictions of DNA and HMM-Bayes on the real-world DNA sequence 

alignments. First, it can be seen that the predictions with depend sensitively on the 

recombination-mutation cost ratio . The best predictions show a qualitative agreement 

with the predictions from the literature, but note that selecting the best value of in this 

way, with the benefit of hindsight, is not possible in real applications where the location 

of the recombinant regions is not known beforehand. 


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Refernces 

Brown, P. O. and N. R. Cozzarelli. 1979. A sign inversion mechanism for enzymatic 

supercoiling of DNA. Science 206:1081-1083. 

Stasiak, A., V. Katritch, J. Bednar, D. Michoud, and J. Dubochet. 1996. Electrophoretic 

mobility of DNA knots. Nature 384:122. 

Wasserman, S. A. and N. R. Cozzarelli. 1986. Biochemical topology: Applications to 

DNA recombination and replication. Science 232:951-960. 

Ralf Metzler and Andreas Hanke. Knots, bubbles, untying, and breathing: probing the 

topology of DNA and other biomolecules. 2004 

Jeremy Narby. The Cosmic Serpent: DNA and the Origins of Knowledge. New York, 

Jeremy P. Tarcher/Putnam, 1999 

Rensselaer Polytechnic Institute. DNA Structure and Topology. 

N Patrick Higgins. Chromosome Structure 

Naila Rozi and Nasir Uddin khan A Mathematical Approach to study DNA.proceeding 

35 th all Pakistan science conference2008 

Naila Rozi and Nasir Uddin khan, design of DNA origami,Proceeding 5 th International 

conference of statittical science Lahore VOL17,279-284 131,2009 

Naila Rozi and Nasir Uddin khan2 ND ABRC CONFERNCE 13-14NOV,2009,COMSAT 

INSTITUTE LAHORE,PAKISTAN VOL 3, A HMM REPRESENTATION IN 

DNA 

Naila Rozi and Nasir Uddin khan Proceeding AN EVALUATION OF 

CONTERMPORARY HMM GENEFINDER WITH PREDICTED EXON 

TAXONOMY 

ICCS-X CAIRO EGYPT,2009 

Naila Rozi and Nasir Uddin khan,.EXTRACTION OF HMM REPRESENTATION IN 

DNA SEQUENCE ICCS-X CAIRO,EGYPT,2009 

Naila Rozi and Nasir Uddin khan, 2ND ICECS CONFERENCE ON 28-30DEC,2009 

,DUBAI,U.A.E 

NUMBER PATTERN &GEOMETRIC REPRESENTATION OF DNA, ISBN978-7695- 

3937-9 PG#343-344 


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Policy and Policy Making in Iran; Issues and Process 

Hassan Danaee Fard 

Public Management, PhD 

Associate Professor, Faculty of Economics and Management, 

Tarbiat Modarres University, Tehran, Iran 

Mohammad Reza Noruzi 

EMBA, PhD in progress (Corresponding Author) 

Public Sector Policy Making 



Abstract 

Policy and policy making are continuous and complex task that crosses all levels of the 

country's organizations in public and private. It is an inherent role of government and 

company want to be survive and competitive in this chaotic area. Policy making is kind 

of mapping which maps the road of a country to get its goals. This paper aims to study 

the policy and policy making with concentration on Iran 

Keywords: Policy, Policy Making, Iran, Challenges, Issues 


Islamic republic of Iran is an Islamic country which has a good and comprehensive policy 

making system with its base and foundation on holy Quran and Islamic roles. 

Evidence suggesting that policy and policy making is one of the fundamental parts of any 

government. And there are different types of policy making process in different countries, 

for example some countries having democratic and some have dictatorship policy making 

process. 

This paper first discusses the policy making definition and effective policy making 

advantages. Also some guides for effective policy making will be discussed. Then some 

proposals for effective policy making in Iran come. At the end characteristics of good 

policy ad policy making in Iran come in detail. 

2. What is Policy Making? 

According to Effective Policy Making (2003), Policy making is the process by which the 

administration translates its vision into actions to achieve desired outcomes. Good policy 

making is therefore essential if government is to achieve its aims and deliver real change 

and benefits (Hernandez & Noruzi, 2010). 

3. Effective Policy making advantages 

According to the Strategic Policy Making Team Cabinet Office (1999), an effective 

policy making has lots of competencies for organizations below are some of them: 

� Creating the map of success and forward looking – takes a long term view, based 

on statistical trends and information 

� Finding future opportunities 


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� Finding the failures 

� Overall and outward looking– takes account of factors in the national, European 

and international situation and communicates policy effectively 

� Evaluating the process road and Predictions, of the likely impact of policy and 

builds systematic evaluation of early outcomes into the policy process 

� Mapping creativity in the organization and Innovative and creative – questions 

established ways of dealing with things and encourages new ideas; open to 

comments and suggestions of others 

� Finding and evaluating different forces, public, private and political forces 

� Minimizing the policy failure 

� Using evidence – uses best available evidence from a wide range of sources and 

involves key stakeholders at an early stage 

� Inclusive – takes account of the impact on the needs of all those directly or 

indirectly affected by the policy 

� Coalition and Joined up – looks beyond institutional boundaries to the 

Government‘s strategic objectives; establishes the ethical and legal base for policy 

� Evaluating feedback – keeps established policy under review to ensure it 

continues to deal with the problems it was designed to tackle, taking account of 

associated effects elsewhere 

� Learning lessons – learns from experience of what works and what doesn‘t 

(Noruzi &, Hernandez 2010) 

4. Guidance Steps in an Effective policy making 

According to Effective Policy Making (2003), for making an effective policy or 

identifying problems of policy it should be considered some steps as come below. 

� Searching the problem 

� Finding the problem 

� Analyzing the problem, is it really a problem? Or not 

� Why is it a problem? What is the main cause of this? 

� Who will effect on the problem formal or informal groups? 

� Identifying the informal and political groups 

� Who within the administration has decision making authority on the issue? 

� Creating a map of policy 

� How does the issue relate to the firms strategic vision and mission? Will 

addressing the issue contribute to the realization of strategic objectives? 

� What policy instruments could be utilized to address the issue? Can the resource 

requirements be estimated? 

� Is there a case for government intervention? 

� What impact assessments may be required? 

� What are the outcomes of doing this process? 


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The above steps should be considered for an every country wants to make an effective 

policy 

5. Proposals for improving policy making in Iran 

Iran and any other country in the world should try to implement strategies to develop 

policy making process in it. Here are some examples; 

� Creating networks for policy making among NGOs and other groups. 

� Conducting different researches on policy making influential role in public 

policymaking (see, e.g., Heinrich, 2007; Sanderson, 2002; Warren, 2002) 

� Participating citizens and interested people in policy making process. 

� Learning citizens about policy and policy making process and its role on success. 

� Holding classes from government to learn staff and citizens the policy. 

6. Characteristics of good policy 

Policy and policy making has some good benefits some of benefits of good policy are 

included here in below (DECS, 2005): 

� Good policy is trustful 

� Good policy is beneficial 

� Good policy is necessary. 

� Good policy has an end in mind. 

� Good policy aligns with the goals of the government and the department 

� Good policy is well informed, concise and rigorous 

� Good policy is ethical 

� Good policy is transparent 

� Good policy is intelligible 

� Good policy is open to change and improvement 

� Good policy is on time 

� Good policy can be enacted 

7. Policy making in Iran 

In Iran because it is an Islamic country so its laws and policies are in Islamic base. In 

different countries there are different levels of policy making but in Iran there are just 

three level of management in Iran includes: 

� Political management, 

� Public management and 

� Private management 

And policy has been formulated in the two above ones. Political management and 

political manager called "Rahbar" refers to the leader and its professional consulting 

group that make Meta policies and the can be considered as vision in strategic 

management and other sub- policy systems obey and look for it and it is as the tip of the 

mountain that policy makers want to get it. According to the different conducted 

researches about policy making in Iran and the related text about policy making system in 

Iran, supreme leader is responsible for making Meta policies of I. R. Iran and this is 

formulated after consultation with the Expediency Council. Expediency Council is the 

specialized consulting group for supreme leader. In the second level public policies are 

made by triple forces including: 

� Legislative, 


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� Executive 

� Judicial 

And in the third level public and private organizations create strategies instead of 

policies. Therefore, the process of policy making process in Iran is a systematic and 

comprehensive, clear, easy to understand and specialized also (Danaee fard, and et al, 

2010, p. 185). 

8. Conclusion 

Iranian government as other countries should take some steps to strength the policy 

making process i.e. these steps will strength the policy making process in organizations. 

Although Iran in its' fifth development program has prepared a brief and comprehensive 

program to be cleared and easy to understand to everyone who is engaged in 

organizational programs and this is a good action but other important factors are listed 

below: 

� Providing complete information 

� Providing objective information 

� Providing clear information 

� Providing reliable information 

� Providing easy to understand information 

� Bringing specialized consultants 

� Using and engaging citizens in policy making process 

� Holding some programs to learn the policy making process for citizens and others 

who are interested in the process of policy making because citizens can sometimes 

offer good tips (OECD, 2005). 


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References 

Danaee fard, Hassan, Ehsan Rahbar, Mihammad Safari, (2010), Investigation the role of 

Political Marketing in Public Policy Making in Iran, European Journal of 

Economics, Finance and Administrative Sciences, ISSN 1450-2275 Issue 21 

(2010), pp. 180-194 

DECS, 2005, An international guide to policy making, POLICY, PLANNING AND 

PERFORMANCE STRATEGY AND POLICY UNIT 

EFFECTIVE POLICY-MAKING, (2003), Directorate- General for Health and 

Consumers, , CONSUMER BEHAVIOUR: THE ROAD TO EFFECTIVE 

POLICY-MAKING 

Effective Policy Making, (2003), Workbook One: Justification and Set Up, Policy 

Innovation Unit, available at: A Practical Guide to Policy Making in Northern 

Ireland. 

Heinrich, C. J. (2007). Evidence-based policy and performance m management: 

Challenges and prospects in two parallel movements. American Review of Public 

Administration, 37, 255 - 277. 

Noruzi, Mohammad Reza, Jose G Vargas Hernandez, (2010), A Short Note on the 

Effective Policy Making Strategies in the Public Sector Organizations, 

interdisciplinary journal of contemporary research in business, August, Vol. 2. 

No. 4 (2010), ISSN: 2073-7122 pp. 382-387 

OECD, (2005) Engaging citizens in policy making, available online at: www.oecd.org 

Sanderson, I. (2002). Evaluation, policy learning and evidence-based policy making. 

Public Administration, 80(1), 1 -22. 

Strategic Policy Making Team Cabinet Office (1999), PROFESSIONAL POLICY 

MAKING FOR THE TWENTY FIRST CENTURY 

Warren, E. (2002). The market for data: The changing role of social sciences in shaping 

the law. Wisconsin Law Review, 2002, 1- 43. 


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Impact of Emotional Intelligence on Team Effectiveness, Job 

Satisfaction and Job Performance 

Dr. Mohammad Majid Mahmood Bagram 

Assistant Professor, Department of Business Administration 

Faculty of Social Sciences & Humanities 

Allama Iqbal Open University, Islamabad – Pakistan 

bagram@hotmail.com 

Umad-Ud-Din 

Sidra Aslam Chaudhry 

Mohsin Altaf 

Lecturer, Department of Commerce, University of Sargodha, Pakistan 

Abstract 

This correlational and explanatory study has been conducted in order to examine the 

impact of emotional intelligence on team effectiveness, job satisfaction and job 

performance. In our research model, emotional intelligence is a predicting or 

independent variable and team effectiveness, job satisfaction and job performance are 

dependent or response variables. We did convenience sampling and applied parametric 

tests on the primary data that we collected in order to assess the significance level and 

impact of predicting variable on response variables and these results indicated that 

there is a highly significance level and positive correlation of emotional intelligence 

with team effectiveness, job satisfaction and job performance. 

Keywords: Emotional intelligence, Motivating emotions, Empathy, Self awareness, Job 

satisfaction, Job performance, Team effectiveness 


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Introduction 

Emotional Intelligence is the ability of governing not only our emotions, but the emotions 

of others as well as the emotions of a group of different people. EI has been considered to 

contribute extensive range of work outcomes associated with appraisal, management, as 

well as use of emotions in one‘s own self and others too. Over the past decade, emotional 

intelligence or EI get popularity in both academic and accepted media (e.g., Cooper & 

Sawaf, 1996; Davies, Stankov & Roberts, 1998; Goleman, 1995, 1998; Mayer, 1999). 

For practical as well as scientific rationales, further concern about emotional intelligence 

as a base to make decisions calls for sufficient substantiation that such development has 

worth to pursue. 

In order to fill the gap between actual facts and theoretical inferences about importance of 

EI in workplace environment, this paper is assessing the impact of emotional intelligence 

on job satisfaction, job performance and team effectiveness in workplace environment. 

We have focused on emotional intelligent facets and either they are useful in making 

predictions or not? 

Recently different papers have examined how EI is making contribution to job 

performance and in understanding of workplace behavior. George (2000) has presented 

foundations for EI performance and its relationship in leadership too. Ashkanasy and 

Daus (2002) has presented several mechanisms and linked EI to job performance. 

Similarly vein, Tett and Meyer‘s (1993) did meta-analysis that shows job satisfaction 

levels have been strongly associated with withdrawal cognitions that may have inferences 

for productivity and efficiency in organizations and we have gauged direct relationship 

between job satisfaction and emotional intelligence. We have gauged the relationship 

with team effectiveness as well, since level of emotional intelligence of team leaders as 

well as individual members promotes and fosters effectiveness of team. 


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Literature Review 

For organizational research, emotional intelligence has relatively recent history to be 

considered as variable while conducting research. An emotional intelligent person knows 

how to stay motivated and determined under conditions of stress, encourages and 

motivates other people, knows how to manage interpersonal relationships, and 

contributes in building teams in order to accomplish better results (Goleman, 2005). In 

1997 Mayer and Salovey presented a model of emotional intelligence that has inter- 

related abilities including perception, integration or assimilation, management of one‘s 

own and emotional intelligence of others and understanding. 

This model gives emphasis to emotional intelligence as being an element that has been 

based on a linkage between emotion as well as cognition. According to them, emotional 

intelligence should be assessed as traditional intelligence tests along with test of ability. 

Researchers have provided is a variant that showed consent with Mayer and Salovey but 

they argued that a self report test can also measure this ability. Emotional intelligence is 

considered as a kind of personality variable. Recently emotional intelligence review of 

constructs, Cherniss (2010) explains that emphasis in resolving differing emotional 

intelligence models and now most of the researchers acknowledge the contribution and 

importance of Mayer and Salovey (1997) model, since it has laid foundation for academia 

research regarding emotional intelligence. Jordan et al. (2010) has also agreed and gave 

importance to context while measuring emotional intelligence. While assessing use of 

emotional intelligence at workplace, Jordan et al. (2002) has argued that employees who 

are emotionally intelligent exhibit practical abilities. By making use of the definition 

given by Mayer and Salovey (1997) they argued that effective employees should be 

aware of not only their own emotions but also about other‘s emotions at workplace. 

Moreover they should manage their emotions along with emotions of others. Jordan and 

Lawrence (2009) has adopted a definition of individual emotional intelligence having 

four dimensions for conducting their business research that had a reflection of emotional 

intelligence model given by Mayer and Salovey (1997). 


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This is a simplified model for emotional intelligence and it complements various other 

similar frameworks in business settings as well (Law et al., 2004). Mayer and Salovey 

(1997) have argued that emotional intelligence abilities contribute to improvement in 

relationships in the work settings. Many authors including Cherniss (2001) agreed with 

their observations, who explained that emotional intelligence has a role in organizational 

effectiveness through improvement in teamwork of employees. Furthermore, Lopes et al. 

(2005) has found positive association between emotional intelligence and interpersonal 

sensitivity as well as pro-social propensities in teams, whilst in 2004 Jordan and Troth 

have found that emotional intelligence has significant impact on performance of team. 

Emotional intelligence plays important role in ameliorating workplace relationships, 

which is an important element in effective leadership as well (Graen and Uhl-Bien, 

1995). 

Emotional intelligence has following dimensions: 

Self-awareness: Ability of understanding our feelings, strengths and weaknesses. 

Self-management: Ability of management of our feelings. 

Motivation emotions: Ability to motivate and encourage ourselves. 

Empathy: Ability to get awareness regarding feelings of others and to comprehend 

other‘s feelings. 

Social skills: Ability of handling a group of people and to manage conflicts too. 

In our research model we have selected following three dimensions: 

Motivating Emotions: According to Salovey and Mayer's (1990), last applications of 

emotional intelligence refers to motivation in chase of one's objectives and goals, 

confining characteristics of drive, determination, initiative, aspiration and aim. 

Individual who is self motivated is a self-starter, challenges work, and seeks to surmount 

hurdles in order to achieve goal. 


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Empathy: Ability of being aware of others' feelings; understanding of others‘ emotions 

by linking them to one's personal experiences. Empathy has been considered as an 

important part of emotional intelligence since; it not only helps in understanding of 

others' feelings but of one's own. Moreover, it facilitates dynamic social relationships on 

the job tasks, particularly where colleagues have more interdependency and reliance on 

mutual assistance. 

Self Awareness: Those individual who are emotionally intelligent are well aware of the 

manner they behave and regarding labels, which are placed on them. Self aware 

individuals understand their role that has been assigned to them and they perform their 

roles within the established norms (Averill, 1980). Moreover, self aware individuals set 

their priorities and if individual maintain self awareness while interacting in a team, and 

then there are more chances to address important issues. Such individuals have ability to 

guide interactions in order to accomplish goals. (Miller & Leary, 1992) 

A system to gather people in a company or organization or in any institution in order to 

work collectively and effectively is considered as team effectiveness. Group of people 

who work together in a team can achieve comparatively much more than if members of 

team have to work separately. 

Emotional intelligence has been related to enhanced workplace behavior and particularly 

team behavior and performance of team. (Jordan, Peter, Lawrence & Sandra, 2009). 

Recently, research has found that team performance has been surely and significantly 

influenced in case when team has ability of recognizing emotions of colleagues working 

in team (Stough, Saklofske & Parker, 2009). 

In theory association between abilities of emotional intelligence and effectiveness of 

team has been established that has recognized many behaviors thought to strengthen 

processes of team. Emotional intelligence might be anticipated to support individuals 

within their teams. Awareness of emotions of team member assists individuals in 

understanding needs of each other‘s and it develops bonding in the team. Consequently, 

close interpersonal relationships lead towards building trust, resolving conflicts and 

promoting cooperation. Those team members who are better in managing and controlling 


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emotions of their own as well as of others are also considered as better members and can 

motivate others and can assist in improving conflict management. 

Jordan and Troth (2004), have investigated association between team emotional 

intelligence and team performance. They have found that those teams who had 

comparatively higher levels of average emotional intelligence out performed and their 

performance was better as compare to those with lower levels. Moreover, they explained 

some positive linkage between emotional intelligence team and the usage of conflict 

resolution approaches, i.e. competing or collaborative within different teams. 

In order to comprehend the emotional intelligence and team effectiveness relationship, 

we have assessed it through our current research. 

An individual‘s feelings regarding his or her job task is known as job satisfaction, as said 

by Robbins (2005). Review that has been conducted by Rad as well as 

Yarmohammadian in 2006 has declared that various factors have an impact on job 

satisfaction of employees. In 1918, Thorndike performed research into job satisfaction 

and began as early as (Berry, 1997, as quoted by Rowden and Conine, 2005) and is 

extensively explored already. 

Emotional intelligence contributes towards organizational effectiveness and has central 

role in success of work (Goleman, 1998). Some substantiation has reflected that 

emotional intelligence has an influence on attitudes at workplace environment (Carmeli, 

2003; Wong and Law, 2002). If we look at the impact that emotional intelligence has on 

an employee‘s work experiences, then research work proves that emotional intelligence 

contributes towards higher levels of satisfaction in job tasks. Work by Wong and Law‘s 

(2002) has showed that emotional intelligence promotes and encourages job satisfaction 

of employee. Likewise, Sy et al. (2006) has found a linkage between job satisfaction and 

emotional intelligence of managers. Sy et al. has argued that managers having high 

emotional intelligence are capable in managing emotions to buffer against certain events 

that may lead to decrease in job satisfaction level. Our research is focusing an employees‘ 


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emotional intelligence and we have argued that employees having higher levels of 

emotional intelligence will result in developing higher quality of relationships (Lopes et 

al., 2003). Consequently, this will also be associated with higher job satisfaction levels 

because of the more supportive work environment (Griffin et al., 2001). 

Job performance is a term that has been frequently used in an organizational setup and 

deals with the workplace. Job performance implies whether a person is performing well 

in his or her job tasks or not? It has been considered as an extremely important criterion 

since it has direct association with organizational success and growth. 

In 2002, Ashkanasy and Daus have offered several related instruments though which 

emotional intelligence might be associated with job performance. For instance, those 

individuals who are high in emotional intelligence are more likely to instigate, motivate 

and inspire others in making team efforts and offer support and help to their colleagues 

when they are in need of it, communicate comparatively more effectively via self- 

expression and by recognizing emotions of others, and by managing others' feelings 

regarding increasing job satisfaction as well as commitment and dedication. Emotional 

intelligence contributes to an extensive range of work outcomes in several ways 

regarding the assessment, management, and deployment of emotions in the personality 

and others too. In this study we have assessed the relationship between role of emotional 

intelligence in the workplace and its impact on job performance. 

Am- ong has contributed significant works in this area that has been reflected in the 

preceding review (e.g. Abraham, 1999; Ashkanasy & Dous, 2002; George, 2000) and 

presented emotional intelligence hierarchical conceptualization suited to aims. 

Salovey and Mayer (1990) have defined emotional intelligence and their model 

incorporates facets or dimensions of EI corresponding to all key constituents of their 

definition and EI have significant contribution to predict and understand job performance. 


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Theoretical Framework 

The objective of this research is to find the relationship of emotional intelligence and its 

dimensions with team effectiveness, job satisfaction and job performance. The symmetric 

diagram of the above discussion is: 

On the basis of the above literature review and former studies, the following hypotheses 

anticipated to test the reliability and relationship between the variables as shown in 

(Figure 1) 

H1: Emotional intelligence has a significant impact on team effectiveness 

H2: Higher the Emotional intelligence, higher the job performance. 

H3: Emotional intelligence is positively correlated with job satisfaction. 

H4: Motivating emotions directly and positively influence team effectiveness. 

H5: There would be a positive correlation between Empathy and team effectiveness. 

H6: Self awareness is positively correlated with team effectiveness. 

H7: Motivating emotions was anticipated to be positively associated with job 

performance. 

H8: Empathy has a significant impact on job performance. 


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H9: There is a significant relationship between the self awareness and job performance. 

H10: Motivating emotions was expected to be positively associated with job satisfaction. 

H11: Empathy has a significant impact on job satisfaction. 

Hypothesis 12: Self awareness has significant impact job satisfaction. 

Methodology 

From the population of 850 we distribute our questionnaire to 320 employees out of 

which 170 questionnaires were completed and returned back to test the emotional 

intelligence and its dimensions relation with other variables i.e., job satisfaction, job 

performance and team effectiveness. We did non probability convenience sampling. We 

distribute our questionnaire to different service and private sectors including: Ufone 

telecommunication, Islamabad, Pakistan; Kenwood, Islamabad, Pakistan; Wi-tribe, 

Rawalpindi, Pakistan; Huawei technologies, Islamabad Pakistan and DAWN media 

group, Islamabad, Pakistan. The supervisor of every department of the company helped 

us in filling out the questionnaires. 

For the entry of data and results we adopted statistical software SPSS and questionnaire 

as an instrument to measure the validity, reliability of the instrument and to find the 

regression and correlation among variables. We have used Likert scale (1= strongly 

disagree; 5= strongly agree) in our questionnaire enclose with 33 questions. Among these 

15 questions was on emotional intelligence from which 5 items were on motivating 

emotions, 5 items was on empathy and 5 were on self awareness, the rest of the 18 

questions was on team effectiveness, job satisfaction and job performance 6 each. Our 

research is pure and explanatory in nature. We have performed correlational study in a 

non contrived setting. This is a relationship study so we did parametric testing. 


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Results and Data Analysis 

First of all, to measure goodness of instrument we found value of Cronbach‘s alpha and 

internal consistency reliabilities were evaluated for each instrument. The values of 

Cronbach‘s alpha are as follow: 

Reliability Statistics 

Variables Cronbach‟s Alpha Reliability Items 

Emotional intelligence 0.93 15 

� Motivating emotions 0.83 5 

� Empathy 0.81 5 

� Self awareness 0.76 5 

Team effectiveness 0.88 6 

Job satisfaction 0.63 6 

Job performance 0.86 6 

(Table 1) 

Since value of cronbach‘s alpha for all the instruments to assess response and predicting 

variable is above 0.6, so it substantiates that we used reliable instrument to gauge the 

impact of emotional intelligence on team effectiveness, job satisfaction and job 

performance as shown in the Table 1. After collecting and checking the reliability of all 

the primary data through SPSS statistical software, we did regression analysis and then 

measured correlation between variables. 

In order to measure the relationship between the independent i.e., emotional intelligence 

and its three constructs including: motivating emotions, empathy self awareness and 

dependent variables i.e., team effectiveness, job satisfaction and job performance; that 

how much the dependent variables is contributing to the change in independent variable 

and assessed either they are significant in relation or not. The results have been evaluated 

by using R-square, adjusted R-square and ANOVA, these results are as follow: 


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Findings of the Relationship between Emotional Intelligence and Team 

Effectiveness 

Now a day‘s emotional intelligence and team effectiveness is the most common and 

famous area for the researchers. 


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(Table 2) 

R Square Adjusted R Square F Sig. βeta 

.398 .394 111.006 .000 a .631 

In the findings of Table 2 it has been assessed that 39.8% of the variation in dependent 

variable i.e. team effectiveness is contributing to the change in independent variable i.e. 

emotional intelligence. Since value of adjusted R square does not examine the impact of 

intercolinearity of independent or predictor variables, therefore it is more refined value in 

comparison to R square. The value of adjusted R-square for the given data is 39.4 % 

which is decrease of 0.4%. So, 0.4% is the loss of predictive power or shrinkage is when 

we apply the model on the population is that shows our model is a well predictive model. 

In Table 2 by seeing the value of adjusted R-square and the level of significance among 

variables is also high i.e., F=111.006; p= 0.00. Since the value of p



organization to organization but job satisfaction matters for all employees of every 

organization. In Table 3 it is stated that the contribution of job satisfaction is 67.4 % in 

the change in emotional intelligence and value of adjusted R-square for the given data is 

67.2 % which is decrease of 0.2% with the minor loss in the predictive model and the 

level of significance is high i.e., F=347.333; p=0.000 (



Inter-correlation Matrix 

(Table 5) 

Emotional 

Intelligence 

Team 

Effectiveness 

Job 

satisfaction 

Job 

performance 

E.I T.E J.S J.P Motivating 

Emotions 


Empathy Self 

Awareness 

1 .631*** .821*** .693*** .838*** .835*** .950*** 

.631*** 1 .501** .669** .485** .443** .536** 

.821** .501** 1 .634** .454** .487** .845** 

.693** .669** .634** 1 .507** .472** .628** 

In the Table 5 inter-correlation matrix is showing the Pearson correlation between the 

independent and independent variable and their level of significance and number of 

respondents who filled the questionnaires. Pearson correlation value between emotional 

intelligence and its dimensions (motivating emotions, empathy and self awareness) is 

high, i.e 83 to 95 percent and it should be high since these are facets of emotional 

intelligence. While value of Pearson correlation between independent and dependent 

variable is less since, these variables differ. The correlation between every group of 

independent and dependent variables is higher than 45%; which is showing positive 

correlation. Hence, all the independent variables found to be significant and positively 

correlated with dependent variables. So, the entire null hypothesis rejected in this case 

too and alterative hypothesis accepted. 

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Discussions 

In our present study, we have assessed the impact of independent variable emotional 

intelligence on dependent variables including team effectiveness, job satisfaction and job 

performance. We have focused on three dimensions of emotional intelligence including 

motivating emotions, empathy and self awareness. From the previous studies, literature 

review and above results it is proved that emotional intelligence has a positive and 

significant impact on team effectiveness, job satisfaction and job performance. Moreover, 

the result of inter-correlation revealed that employee‘s emotional intelligence and its 

dimensions in an organization is highly significantly related with team effectiveness, job 

satisfaction and job performance. The emotional intelligence motivates employees 

individually to work hard if they want to perform better and give outstanding output to 

the organization. 

Conclusion and Recommendations 

The private sector of Pakistan is growing quickly. This study intended to find out the 

relationship of emotional intelligence and its constructs with team effectiveness, job 

satisfaction and job performance. After having the statistical results of these findings and 

discussion it is concluded that emotional intelligence is playing significant role in order 

to enhance the job satisfaction, team effectiveness and job performance. In former studies 

it is also concluded that employees utilize their skills and knowledge to job satisfaction, 

team effectiveness and job performance to achieve their and organizational goals and 

objectives. In general all the respondents of the organizations are highly emotionally 

competent in their team effectiveness, job satisfaction and job performance. 

We have certain recommendations for future researchers in relation to emotional 

intelligence in accordance with the team effectiveness, job satisfaction and job 

performance. 

Emotional intelligence could be enhanced by providing the subsequent circumstances: 

� Every individual employee should have given rights to participate in decision 

making; 


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� Employees input and output is required for making the team effectiveness; 

� Give employees training programs and workshops on emotional intelligence to 

tell them how to improve the job satisfaction and job performance. 

� The emotional intelligence in the Pakistan studies is a little push, the 

organizations should have to clear the mindsets of the employees towards the 

emotional intelligence, the organization can increase the job commitment, job 

involvement and decision making and of employees more effective and growth of 

organization. 

It is the responsibly of the managers of all firms to make all possible efforts and know 

how the emotional intelligence of employees increase therefore to increase the team 

effectiveness, job satisfaction and job performance of employees. 

Limitations 

The findings of the study lead to certain limitations i.e. 

� We took a small sample size and did non probability convenience sampling. 

� We used only questionnaire method for collection of data that is a limited scope 

of research. 

� We did not focus those factors that play role of moderating variable between 

emotional intelligence of employees and team effectiveness, job satisfaction and 

job performance of employees. 


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