Contemporary Research on Business and Management: Proceedings of the International Seminar of Contemporary Research on Business and Management (ISCRBM 2019), 27-29 November, 2019, Jakarta, Indonesia 9780367471668, 9781003035985


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Table of contents :
Cover
Half Title
Title Page
Copyright Page
Table of contents
Preface
Conference committee
Warehouse selection using center-of-gravity method in minimizing transportation cost
Marketing strategy in postgraduate Tangerang Muhammadiyah University to improve human resources in Tangerang city
Examining apsychological sense of brand community in iPhone users
Factors contributing to employee performance
Service-quality enhancement of the good willie barber shop using importance-performance analysis and business model re-modelling
Exploring big data adoption by Indonesian start-ups
Analyzing the effect of job satisfaction and work-life enrichment as factors toward employee turnover intention: acase in PT XYZ
SBH strategic planning of new business development
Creating financial statements for performance evaluation at the MSME ENF
Effect of work autonomy on innovative work behavior in the application and game developer sector: Psychological flow as mediator
Physical evidence development of SME woven coffee through business coaching
Increasing revenue using amarketing plan on ageotracker product based on the business coaching method
The effect of fun at work on turnover intention and organizational citizenship behavior with affective commitment as amediating variable among millennial employees in the digital creative industry
The effect of role overload on organizational citizenship behavior of national standardization agency employees mediated by employee exhaustion and moderated by supervisor autonomy support
Strategies to increase liquidity and productivity in divisi tanaman semusim PTPN IX: Acase study
The restructuring of state-owned enterprises: Acase study in an Indonesian trading company
Analysis of the role of work–family balance mediation in the relationship between social support and job satisfaction of offshore workers in the oil and gas industry
The impact of push, pull, and mooring factors toward customer switching intention on internet service providers in Indonesia
The employment relationship, turnover, and organizational performance in garment factories: Aconceptual paper
Analysis of the effect of servicescape and coffee quality on customer satisfaction using an experiential marketing and brand identity approach in Anomali Coffee, Senopati Jakarta as acase study
The influence of school climate, social-emotional learning, and proactive personality on job satisfaction of PAUD teachers mediated by teaching efficacy in Depok, West Java, Indonesia
The impact of working capital management on acompany’s performance: Evidence from manufacturers in ASEAN-5
The influence of self-efficacy on reduced audit quality practice with burnout as amediator on public auditors
The influence of ownership and board size on the performance of state-owned enterprises listed on the Indonesia stock exchange during the period 2013–2018
The role of individual and situational factors to whistleblowing in public sectors
Japanese cultural festival behavioral intention based on attendees’ co-creation, perceived value, and satisfaction
Commitment and identification in the Millennial employee: The perceptions of organizational and supervisor support
The influence of entrepreneurial & marketing orientation to strategic learning capability and SME performance automotive industry in Indonesia - aconceptual framework
The effect of human resource management practices on turnover intention of the auditor in XYZ institution in Indonesia: The mediating role of burnout
Determinant of financial inclusion in Indonesia
Factors influencing customers’ continued mobile app use intention from the internet service provider perspective: Information adoption model
The effect of fun at work and social support towards organizational citizenship behavior with work engagement as amediation variable at PT Telkom Indonesia (regional II)
Continuance usage intention in mobile payment services
Influence of healthy lifestyle, health concerns, environmental concern, and product quality toward intention to purchase organic coffee
Halal tourist destination: An Indonesian muslims’ perspective
Consumer intention to adopt PayLater: An empirical study
Promotional media development of MSMEs Bakmie Pulau Seribu
Improvement of dredging project planning with maturity model of lean project planning and control approach
The influence of destination image on tourist satisfaction and tourist loyalty: Acase study of urban tourism in Semarang, Indonesia
The liquidity contagion in the ASEAN-5
The development of marketing channels through social media, e-commerce and instagram promotion standard operating procedures of SMEs X
The expansion of marketing channel and creating company profile for awedding photography SME
The effect of online promotion and travel motivation on intention to travel to ecotourism destinations in Indonesia: The role of destination image as amediating variable
Forming afinancial statement of aconstruction company PT DMP
Can negative news moderate your intention to vote?
Use case points integrated to scrum framework for software development cost and effort estimations
Impact of functional and nonfunctional values in adoption intention of Gesits electric motorcycle in Indonesia
Optimization of Instagram promotion and distribution using e-commerce platform for MSME Atkey
Competition in banking financial technology: The perspective of the demand side
Liquidity and credit risk in Indonesian Islamic banks
Oil price and cost of hajj: The evidence from Indonesia
Corporate social responsibility performance and banking soundness in Indonesia: Should the industry be more socially responsible?
Oil price and airline company financial soundness
Quality of channel integration, perceived fluency, and omnichannel service usage in the fashion industry moderating the role of gender
Financial feasibility analysis for outlet expansion of Masalalu café based on business coaching method
The influence of non-interest income towards credit risk and loan spread in ASEAN-5
Credit growth and financial fragility in the ASEAN region
The effect of corporate governance and financial factors on dividend payment
Determinants of Mekaar’s ultramicro credit default probability
Developing abusiness strategic model using the Quantitative Strategic Planning Matrix (QSPM) approach for afintech lending start-up based on lean start-up methodology
The influence of social media and social media advertising engagements on purchase intention in fashion product
Market reaction toward mandatory stock split in damascus security exchange
The effect of Social Media Marketing Activities (SMMA) on brand awareness and customer response
The role of mediation attitude towards using in perceived usefulness relationship in behavioral intention
Effect of consumption value on behavioral intention through perceived beneficial image as amediator
Improvement of website and hotel exterior design based on business coaching method
Understanding banking ecosystem: Acase study of national bank in Timor-Leste
The effect of perceived value and service quality on customer satisfaction program Jaminan Hari Tua (JHT) at BPJS Ketenagakerjaan Palembang branch office (Case study on salary recipient category participants)
The effect of price and “free shipping throughout Indonesia” tagline on buying interest in Shopee app for undergraduate students at Palembang campus, Sriwijaya University
The effect of price and promotion of induction stores on improving electricity sales in PT. PLN (PERSERO) UP3 Bangka in Celagen Island
Priority scale of the corporate culture of PT Krakatau Daya Listrik
An assessment of Melaka Halal hotel customer satisfaction using the SERVQUAL model
Credit growth and bank soundness in the ASEAN region
The impact of asset growth rate on future stock return of listed companies in the Indonesia Stock Exchange (IDX)
Improving consumer satisfaction through the application of the lean hospital concept
The effect of destination images of tourist facilities and experiential marketing on loyalty of visitors to Taman Pintar Yogyakarta
Corruption perception index and locally generated revenue: Have they gotten better or worse? Acase study in ten major cities in Indonesia
The effects of brand value on brand loyalty toward cosmetics and skin care products: Proactive and reactive reactions to sustainability
Does the volatility of oil prices influence the transportation sector in ASEAN countries?
The effect of service quality, price, and brand images on Grab Food customers loyalty in Palembang
The influence of brand image, price, and quality of products on cement purchasing decisions at Semen Baturaja (Persero), Ltd.
The effect of corporate social responsibility on corporate value with profitability as avariable moderation among coal mining subsector manufacturing companies listed in the Indonesia stock exchange
Digital promotion media for small medium enterprises
Good corporate governance and agency cost in Indonesia
Author index
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Contemporary Research on Business and Management: Proceedings of the International Seminar of Contemporary Research on Business and Management (ISCRBM 2019), 27-29 November, 2019, Jakarta, Indonesia
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CONTEMPORARY RESEARCH ON BUSINESS AND MANAGEMENT Edited by Siska Noviaristanti

CONTEMPORARY RESEARCH ON BUSINESS AND MANAGEMENT

PROCEEDINGS OF THE INTERNATIONAL SEMINAR OF CONTEMPORARY RESEARCH ON BUSINESS AND MANAGEMENT (ISCRBM 2019), 27–29 NOVEMBER, 2019, JAKARTA, INDONESIA

Contemporary Research on

Business and Management

Edited by Siska Noviaristanti School of Economic and Business/Telkom University, Bandung, Indonesia

CRC Press/Balkema is an imprint of the Taylor & Francis Group, an informa business © 2021 Taylor & Francis Group, London, UK Typeset by Integra Software Services Pvt. Ltd., Pondicherry, India All rights reserved. No part of this publication or the information contained herein may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, by photocopying, recording or otherwise, without written prior permission from the publisher. Although all care is taken to ensure integrity and the quality of this publication and the information herein, no responsibility is assumed by the publishers nor the author for any damage to the property or persons as a result of operation or use of this publication and/or the information contained herein. Library of Congress Cataloging-in-Publication Data Applied for Published by: CRC Press/Balkema Schipholweg 107C, 2316XC Leiden, The Netherlands e-mail: [email protected] www.routledge.com – www.taylorandfrancis.com ISBN: 978-0-367-47166-8 (Hbk) ISBN: 978-1-003-03598-5 (eBook) DOI: 10.1201/9781003035985 https://doi.org/10.1201/9781003035985

Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Table of contents

Preface

xi

Conference committee

xiii

Scientific committee

xiii

Advisory board

xiii

Warehouse selection using center-of-gravity method in minimizing transportation cost C. Lukardi & M. Hamsal Marketing strategy in postgraduate Tangerang Muhammadiyah University to improve human resources in Tangerang city P. Susilo, C. Kurniastuti & D. Hadiwijaya

1

6

Examining a psychological sense of brand community in iPhone users O.O. Sitepu & N. Sobari

11

Factors contributing to employee performance E.W. Silitonga & J. Sadeli

15

Service-quality enhancement of the good willie barber shop using importance-performance analysis and business model re-modelling R.H. Putri & A.A. Cholil Exploring big data adoption by Indonesian start-ups D. Riswantini, U.S. Putro & M. Siallagan Analyzing the effect of job satisfaction and work-life enrichment as factors toward employee turnover intention: A case in PT XYZ M. Raynaldi & A. Satrya

19 23

28

SBH strategic planning of new business development A.A. Adyana & A.D. Hanani

32

Creating financial statements for performance evaluation at the MSME ENF P. Kusumapratiwi & L. Sudhartio

36

Effect of work autonomy on innovative work behavior in the application and game developer sector: Psychological flow as mediator P.D. Lestari & A. Satrya

40

Physical evidence development of SME woven coffee through business coaching D.D. Sindudipoera & S.K. Widhaningrat Increasing revenue using a marketing plan on a geotracker product based on the business coaching method J. Haryanto & H. Suhaimi

v

44

48

The effect of fun at work on turnover intention and organizational citizenship behavior with affective commitment as a mediating variable among millennial employees in the digital creative industry S.G. Oktariza & P.M. Desiana The effect of role overload on organizational citizenship behavior of national standardization agency employees mediated by employee exhaustion and moderated by supervisor autonomy support D.N. Sari & P.M. Desiana Strategies to increase liquidity and productivity in divisi tanaman semusim PTPN IX: A case study E.R. Tholib & A.D. Hanani The restructuring of state-owned enterprises: A case study in an Indonesian trading company O. Laura A. & R. Rokhim

52

57

62 66

Analysis of the role of work–family balance mediation in the relationship between social support and job satisfaction of offshore workers in the oil and gas industry I.O. Simanjuntak & P.M. Desiana

70

The impact of push, pull, and mooring factors toward customer switching intention on internet service providers in Indonesia T. Kusumastiti & T.E. Balqiah

74

The employment relationship, turnover, and organizational performance in garment factories: A conceptual paper L. Damaryanti & P. Wulandari

79

Analysis of the effect of servicescape and coffee quality on customer satisfaction using an experiential marketing and brand identity approach in Anomali Coffee, Senopati Jakarta as a case study A.L. Larasati & A.Z. Afiff

83

The influence of school climate, social-emotional learning, and proactive personality on job satisfaction of PAUD teachers mediated by teaching efficacy in Depok, West Java, Indonesia F.A. Fanhandaya & A. Satrya

87

The impact of working capital management on a company’s performance: Evidence from manufacturers in ASEAN-5 R.U. Hutapea & M. Ulpah

92

The influence of self-efficacy on reduced audit quality practice with burnout as a mediator on public auditors D.R. Angraini & A. Satrya

96

The influence of ownership and board size on the performance of state-owned enterprises listed on the Indonesia stock exchange during the period 2013–2018 S.A. Sutomo & J. Jahja The role of individual and situational factors to whistleblowing in public sectors D.C. Budiutami & A. Aprilianti

100 106

Japanese cultural festival behavioral intention based on attendees’ co-creation, perceived value, and satisfaction M. Larasati & T.E. Balqiah

110

Commitment and identification in the Millennial employee: The perceptions of organizational and supervisor support Innayatussolihah & E.S. Pusparini

114

vi

The influence of entrepreneurial & marketing orientation to strategic learning capability and SME performance automotive industry in Indonesia - A conceptual framework M.Z. Azizi & L. Sudhartio

118

The effect of human resource management practices on turnover intention of the auditor in XYZ institution in Indonesia: The mediating role of burnout A.W. Pratiwi & A. Satrya

123

Determinant of financial inclusion in Indonesia C. Azzahra & R.A. Kasri

127

Factors influencing customers’ continued mobile app use intention from the internet service provider perspective: Information adoption model Y. Pitasari & S. Rahayu H.H.

132

The effect of fun at work and social support towards organizational citizenship behavior with work engagement as a mediation variable at PT Telkom Indonesia (regional II) D.C. Ginbreta & P.M. Desiana

136

Continuance usage intention in mobile payment services N. Fitria & N. Sobari Influence of healthy lifestyle, health concerns, environmental concern, and product quality toward intention to purchase organic coffee R Puspitasari & T.E. Balqiah

140

144

Halal tourist destination: An Indonesian muslims’ perspective M. Fakhri & N. Sobari

149

Consumer intention to adopt PayLater: An empirical study A.S. Rachmawati & R.D. Astuti

154

Promotional media development of MSMEs Bakmie Pulau Seribu A.R. Lubis & S.K. Widhaningrat

158

Improvement of dredging project planning with maturity model of lean project planning and control approach K.N.P. Nugroho & M.L. Singgih

162

The influence of destination image on tourist satisfaction and tourist loyalty: A case study of urban tourism in Semarang, Indonesia G.P.M. Agung, S. Wijaya & D.C. Widjaja

166

The liquidity contagion in the ASEAN-5 F.A. Pratiwi & Z. Ananto

170

The development of marketing channels through social media, e-commerce and instagram promotion standard operating procedures of SMEs X E.K. Prasetyo & S.K. Widhaningrat

173

The expansion of marketing channel and creating company profile for a wedding photography SME N. Wiridyadewi & H. Suhaimi

177

The effect of online promotion and travel motivation on intention to travel to ecotourism destinations in Indonesia: The role of destination image as a mediating variable S.F. Mulianto, H. Semuel & S. Wijaya

181

Forming a financial statement of a construction company PT DMP D.A. Rachma & F. Ismaeni

186

vii

Can negative news moderate your intention to vote? A. Humairoh & N. Sobari

189

Use case points integrated to scrum framework for software development cost and effort estimations L.N. Safitri & M.I. Irawan

194

Impact of functional and nonfunctional values in adoption intention of Gesits electric motorcycle in Indonesia F. Habibie & M.G. Alif

199

Optimization of Instagram promotion and distribution using e-commerce platform for MSME Atkey P. Nabila & S. Hasnul

203

Competition in banking financial technology: The perspective of the demand side I. Sadalia, F.N. Nasution & A. Fauzi

207

Liquidity and credit risk in Indonesian Islamic banks A. Salahuddin, W.A. Perdana & N.D. Hendranastiti

212

Oil price and cost of hajj: The evidence from Indonesia A. Salahuddin, W.A. Perdana & N.D. Hendranastiti

217

Corporate social responsibility performance and banking soundness in Indonesia: Should the industry be more socially responsible? R. Rokhim, W.A. Perdana & M.R. Astrini

221

Oil price and airline company financial soundness R. Rokhim, W.A. Perdana & M. Robbani

226

Quality of channel integration, perceived fluency, and omnichannel service usage in the fashion industry moderating the role of gender J.A. Nasir & T.E. Balqiah

231

Financial feasibility analysis for outlet expansion of Masalalu café based on business coaching method M. Sugiarto & H. Suhaimi

235

The influence of non-interest income towards credit risk and loan spread in ASEAN-5 N.D. Novianti & R. Rokhim

239

Credit growth and financial fragility in the ASEAN region C.J. Hakim, R. Rokhim & M. Aulia

243

The effect of corporate governance and financial factors on dividend payment F. Asali, W.R. Murhadi & B.S. Sutejo

248

Determinants of Mekaar’s ultramicro credit default probability N. Nurusshafa & R. Rokhim

253

Developing a business strategic model using the Quantitative Strategic Planning Matrix (QSPM) approach for a fintech lending start-up based on lean start-up methodology I. Gibranata & M.L. Singgih

258

The influence of social media and social media advertising engagements on purchase intention in fashion product H. Ulya & Y. Alversia

263

Market reaction toward mandatory stock split in damascus security exchange B. Kabouk & I.A. Ekaputra

viii

267

The effect of Social Media Marketing Activities (SMMA) on brand awareness and customer response D.F. Esma & Nuryakin

272

The role of mediation attitude towards using in perceived usefulness relationship in behavioral intention R. Rifa’i & Nuryakin

276

Effect of consumption value on behavioral intention through perceived beneficial image as a mediator S. Dianto & Nuryakin

280

Improvement of website and hotel exterior design based on business coaching method K. Nurfajri & H. Suhaimi

284

Understanding banking ecosystem: A case study of national bank in Timor-Leste S. Noviaristanti & F. Belo

288

The effect of perceived value and service quality on customer satisfaction program Jaminan Hari Tua (JHT) at BPJS Ketenagakerjaan Palembang branch office (Case study on salary recipient category participants) V.A. Riefriani, Z. Wahab, M. Widiyanti & M.S. Shihab

293

The effect of price and “free shipping throughout indonesia” tagline on buying interest in shopee app for undergraduate students at palembang campus, sriwijaya university N. Maria, Z. Wahab, M. Widiyanti & M. Adam

297

The effect of price and promotion of induction stores on improving electricity sales in PT. PLN (PERSERO) UP3 Bangka in Celagen Island Kgs.M.A. Amrullah, Z. Wahab, M. Widiyanti & M.S. Shihab

301

Priority scale of the corporate culture of PT Krakatau Daya Listrik Daenulhay

304

An assessment of Melaka Halal hotel customer satisfaction using the SERVQUAL model W.P. Yin, N. Rashid, N. Ismail, M.S.M. Saad & M.F. Kamarudin

308

Credit growth and bank soundness in the ASEAN region C.J. Hakim, R. Rokhim & F.R. Humaira

312

The impact of asset growth rate on future stock return of listed companies in the Indonesia Stock Exchange (IDX) D.S. Pramasti & E. Rizkianto Improving consumer satisfaction through the application of the lean hospital concept M. Isa, D. Handoyo & I.S. Adji

317 321

The effect of destination images of tourist facilities and experiential marketing on loyalty of visitors to Taman Pintar Yogyakarta B.W. Setyawibowo, Wiyadi & Soepatini

325

Corruption perception index and locally generated revenue: Have they gotten better or worse? A case study in ten major cities in Indonesia R. Rokhim, R.E.F. Nasution, A. Muchtar & W. Thohary

328

The effects of brand value on brand loyalty toward cosmetics and skin care products: Proactive and reactive reactions to sustainability N. Kinanti & Y. Alversia

332

Does the volatility of oil prices influence the transportation sector in ASEAN countries? R. Rokhim, F.G. Tolangga & M.R. Astrini

ix

337

The effect of service quality, price, and brand images on Grab Food customers loyalty in Palembang A.F. Imanu, Z. Wahab, I. Andriana & M. Widiyanti

342

The influence of brand image, price, and quality of products on cement purchasing decisions at Semen Baturaja (Persero), Ltd. T. Ibrahim, Z. Wahab, M. Widiyanti & M.S. Shihab

346

The effect of corporate social responsibility on corporate value with profitability as a variable moderation among coal mining subsector manufacturing companies listed in the Indonesia stock exchange M. Widiyanti & P. Wahyuni

350

Digital promotion media for small medium enterprises D.W. Soewardikoen & B. Prabawa

354

Good corporate governance and agency cost in Indonesia A.P.K. Hadi, W.R. Murhadi & B.S. Sutejo

358

Author index

362

x

Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Preface

We are pleased to introduce the proceedings of the Third International Seminar of Contem­ porary Research on Business and Management (ISCRBM). This is an annual event of the Indonesian Master of Management Program Alliance (APMMI), held in the Master of Man­ agement Program, Indonesia University, Jakarta on November 27-29, 2019. Building Indones­ ian Talent Management was the conference theme, and three distinguished speakers were invited from professional and academic circles to share their knowledge and experience. The major goal of this event is as an opportunity to meet and develop networking between APMMI’s members also to increase the quality and quantity of research publication in the management and business area. Over 136 papers were presented during the conference and 84 selected papers were published in these proceedings. Papers were mostly authored by APMMI students and faculty members on various topics in operation management, marketing management, human resource man­ agement, finance, strategic management, and entrepreneurship. Another 7 authors came from outside Indonesia: Malaysia, Taiwan, Timor Leste, The Netherlands, and Switzerland. Finally, we would like to record our thanks to the conference committee for their work, APMMI members who actively contributed to this event, and the Master of Management Program Indonesia University that nicely hosted this year conference. Without their support, the conference could not have been the success that it was. We also acknowledge the authors for their contribution. Hopefully, the success of the conference will continue next year when it is to be held in Surabaya. Rofikoh Rohim, Ph.D

xi

Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Conference committee Chair: Rofikoh Rokhim, SE, SIP., DEA., Ph.D | Indonesia University Co-Chair: Dr. Nuryakin, SE., MM | Muhammadiyah University of Malang Siska Noviaristanti, S.Si., M.T., Ph.D | Telkom University Members: Dr. Gancar Candra Premananto, SE., M.Si | Airlangga University Dr. Werner Ria Murhadi S.E., M.M., CSA. | Surabaya University Dr. Ahyar Yuniawan, S.E., M.Si | Diponegoro University Ratna Wardani, MM | Indonesia University Mohammad Tyas Pawitra | Telkom University

Scientific committee Prof. Dr. Nuran Acur | Indonesia University of Glasgow, UK Prof. Dr. John Vong | National University of Singapore Mohd. Shamsuri Md Saat, Ph.D | University Teknikal Malaysia Malaka Dr. Darwis Khudori | University of Le Havre, France Prof. Fumio Itoh | President of ABEST21 Rofikoh Rokhim, SE, SIP., DEA., Ph.D | Indonesia University Dr. Ahyar Yuniawan, S.E., M.Si | Diponegoro University Dr. Dra. Kusuma Ratnawati , MM.,CFP | Brawijaya University Marlina Widiyanti, SE, MM., Ph.D | Sriwijaya University Dony Abdul Chalid, S.E., M.M., Ph.D | Indonesia University Dr. Nuryakin, SE., MM | Muhammadiyah University of Malang Dr. Gancar Candra Premananto, SE., M.Si | Airlangga University Dr. Werner Ria Murhadi S.E., M.M., CSA. | Surabaya University Nora Sri Hendriyeni, MM., Ph.D | PPM School of Management Siska Noviaristanti, S.Si., M.T., Ph.D | Telkom University

Advisory board Prof. Ari Kuncoro, S.E., M.A., Ph.D | Indonesia University Ir. Dodie Tricahyono, M.M., Ph.D | Telkom University Prof. Dr. Dian Agustia, S.E., M.Si., Ak | Airlangga University Dr. Suharnomo, S.E., M.Si | Diponegoro University Rizal Yaya, S.E., M.Sc., Ph.D., Ak, CA | Muhammadiyah University of Malang Dony Abdul Chalid, S.E., M.M., Ph.D | Indonesia University Dr. Putu Anom Mahadwartha, SE, M.M., CSA. | Surabaya University

xiii

Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Warehouse selection using center-of-gravity method in minimizing transportation cost C. Lukardi Master of Management, University of Indonesia, Jakarta, Indonesia

M. Hamsal Management Department, BINUS Business School Doctor of Research in Management, Bina Nusantara University, Jakarta, Indonesia

ABSTRACT: Warehouse selection is a key part of the distribution business, as it is related directly to the company’s service level and cost of operations. The failure to choose a good warehouse will impact the company’s ability to meet customers’ expectations and its financial position if the expenditures do not meet the expected return. Consequently, it is important to put proper considerations in place before selecting a warehouse. By involving the Indonesia branch of a global chemical distributor company as the research subject, this research aimed to minimize transportation cost in selecting a warehouse. In achieving the objective, center-of­ gravity, which is also widely known as the centroid method, is particularly used, assisting loca­ tion decisions by exploring the spatial distribution of delivery destinations (customers). In addition, the weight to each destination is also an integral part of the consideration, with the goal of serving more small-to-medium customers. The goal of minimizing transportation costs is translated as minimizing distance to customers because of the directly proportionate nature between distance and transportation costs. As the answer to the research objective, this study will generate a set of coordinate points showing the exact location where total distances to customers are the least.

1 INTRODUCTION From a distributor’s point of view, one of the critical components of costs lies within those associated with logistics. The level of logistics costs in proportion to country gross domestic product (GDP) is often measured to highlight the economic development of a country. Within Association of Southeast Asian Nations (ASEAN) nations, logistics costs were measured to be as low as 8% to as high as 24% of the GDP (Jayani, 2019). Developed countries do, in fact, have much lower logistics costs in proportion to GDP than developing countries, known as the logistics costs funnel phenomenon, defined as a situation in which as the economy of a country grows, the logistics costs will diminish. With the shift in focus to logistics costs, there are several components that contribute to these. Transportation costs are the highest contributor, at 50.3% based on the data from the Geography of Transport System (Rodrigue, Comtois, & Slack, 2017). Therefore, Minimizing transportation costs becomes rather strategic. Simply put, reducing transportation costs will significantly affect the logistics costs in general. In assisting single-location decisions that minimize transportation costs, the main goal is also to minimize the distance to the destination, as transportation cost is directly proportional to distance traveled. In doing so, the center-of-gravity method is chosen as a robust and empirically sound means of assisting the decision making. This method has been widely used in solving location problems in various logistics cases such as in the humanitarian supply chain (Gutierrez & Mutuc, 2018), distribution hubs and facilities (Khosravi & Jokar, 2017), and oilfield warehouse location (Guo, Pan, Liu, Li, & Zeng, 2016). 1

The subject of this research is a chemical distributor in Jakarta that currently faces a decreasing margin due to high transportation cost. Recently, this company engaged with several principals selling chemical commodities that are relatively low in terms of value and highly price sensitive. Most of the time, this company is either not able to compete with the competitors’ price due to its high transportation cost or has to sacri­ fice its margin, to the point of losing, to win business by matching competitors’ prices. This is the result of the nature of transportation rates, which are justified mainly based on distance, weight, and accessibility to the destination regardless of the kinds of goods transported (Hummels, 2007).

2 LITERATURE REVIEW Center-of-gravity has been widely utilized to assist location decision especially related to single location model (Guo et al., 2016). This model is developed from the Newtonian phys­ ics equation explaining the law of universal gravitation that is modified into a reduced form of the spatial general equilibrium model with iceberg transportation costs, monopolistic competition, and increasing return to scale (Ivanova, 2014). The main idea of this method is to minimize the transportation cost by minimizing the distance between the point of origin to the destination point, which is known to be directly proportional to the cost (Esnaf & Küçükdeniz, 2009). The importance of deciding the type of distance to be used in center-of-gravity lies in how the distance will be calculated. Let’s assume that the distribution warehouse is located at coordinates P (a, b), with a and b representing the latitude and longitude points of the ware­ house location respectively. The destination point is represented by location of customer i at Ai (xi, yi), where i = 1, 2, 3, . . ., n and xi and yi is the latitude and longitude point of the corres­ ponding customer respectively. The distance from the distribution warehouse to customer address can be calculated as follows:

Particularly in this research, Euclidean distance will be used in measuring origin-to­ destination distance. In principle, Equation (1) can be used for both Euclidean and rec­ tilinear distances; the value of p = 1 is used for rectilinear distance while the value of p = 2 is used for Euclidean distance. This interchangeable value of p occurs from the fact that Euclidean and rectilinear distances together create a right triangle, explainable by the Pythagorean theorem. In fact, Equation (1) is just a simple Pythagorean formula. To define the warehouse location P (a, b), Equations (2) and (3) are used to calcu­ lated the latitude and longitude points. The new variable wi is introduced at this stage, depicting the weight of transported products associated with customer Ai. The value of weight can be anything that is proportional to the transportation cost, depending on the objectives to be achieved such as volume of products, kilograms of products, value of products, etc.

2

3 METHODOLOGIES 3.1 Data collection The data collected for this research were obtained from the Business Intelligent (BI) report of the research subject, involving sales transactions for 2019 (8 months) from Jan­ uary to August with details of volume and value of each transaction and the delivery address of each transaction. However, as the focus of the research is on customers located in Banten, West Java, DKI Jakarta, and Central Java only, customers located outside those areas were omitted from the list. 3.2 Converting address to location The list of customers’ addresses obtained was converted into latitude and longitude positions with the assistance of the Google Earth application with the decimal as the unit of measure­ ment. The converted location is then plotted into the map with the assistance of the Map Maker website (https://maps.co/) for accordance review. This step was conducted to ensure that all locations have been correctly converted and consistent throughout various mapping applications. 3.3 Data processing As the weights and coordinates have been determined, the data can be further processed in center- of-gravity calculation. An Excel spreadsheet is utilized for this calculation (Onella, 2015). The steps to conduct the calculation are: Step 1: Generate location P (a, b) using Equations (2) and (3), assuming that all di = 1. The result is assigned as a0 and b0. Step 2: From the P (a0, b0) obtained, calculate the real di for each destination by using Equation (1). Step 3: Put the di obtained into Equations (2) and (3) to generate amended P (a, b). Step 4: Recalculate di using the amended P (a, b). Step 5: Generate new coordinates of P (a, b) from the new di. To minimize the di, several iterations have to be conducted by repeating steps 4 and 5 to the point where changes between P (a, b) are no longer significant. In this research, 15 iterations were run to obtain the final P (a, b).

4 ANALYSIS The first step, assuming that all di = 1, generated a P (a0, b0) location in Subang, West Java. The second iteration was conducted by using P (a0, b0) generated from the first step and the result of new P (a,b) shifts to the left side, getting closer to the Jakarta area. To have a better idea on how significant the pinpoint location change is throughout iterations, Table 1 shows the coordinates and addresses based on postal code of the location. The first four iterations generate locations that are significantly far from the successive iteration, from Subang to Karawang, Karawang to Cikarang, and Cikarang to Rawalumbu. Starting from the fifth iteration, changes of location started to be less distant compared to the first four iterations. The fifth iteration generated a location within the same city from the fourth iteration. Iteration 6, however, generated another change from Bekasi to East Jakarta. The changes in terms of distance may not be significant but the locations are still in two differ­ ent cities, so the iteration continued up to the 15th iteration. The 10th to 15th iterations exhibit no significant changes in terms of cities, municipal as well as postal code. Therefore, it

3

Table 1. Details of center-of-gravity iterations results. Iteration

Latitude

Longitude

Address

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

−6.507 −6.420 −6.328 −6.287 −6.269 −6.256 −6.247 −6.243 −6.240 −6.239 −6.238 −6.237 −6.237 −6.237 −6.237

107.859 107.260 107.056 106.986 106.941 106.912 106.895 106.885 106.880 106.876 106.874 106.873 106.872 106.871 106.871

Kec. Cipunagara, Subang, Jawa Barat 41257 Kec. Pangkalan, Karawang, Jawa Barat Kec. Cikarang Barat, Bekasi, Jawa Barat Kec. Rawalumbu, Bekasi, Jawa Barat 17116 Kec. Jatiasih, Bekasi, Jawa Barat 17421 Kec. Makasar, Kota Jakarta Timur 13620 Kec. Makasar, Kota Jakarta Timur 13610 Kec. Makasar, Kota Jakarta Timur 13610 Kec. Makasar, Kota Jakarta Timur 13620 Kec. Jatinegara, Kota Jakarta Timur 13340 Kec. Jatinegara, Kota Jakarta Timur 13340 Kec. Jatinegara, Kota Jakarta Timur 13340 Kec. Jatinegara, Kota Jakarta Timur 13340 Kec. Jatinegara, Kota Jakarta Timur 13340 Kec. Jatinegara, Kota Jakarta Timur 13340

can be concluded that the iteration has arrived on its minimum total distance location, which is in Jatinegara, East Jakarta.

5 CONCLUSIONS The importance of proper location decisions for the distribution warehouse lies in the funda­ mental relationship between distance and transportation cost. Center-of-gravity is a robust and empirically sound method that can be utilized in solving the single-location decision prob­ lem. In the case of the research subject, it turned out that the optimum location for the distri­ bution warehouse was in the East Jakarta area. Compared to the existing distribution warehouse, which is located in the Cikarang area, the proposed location is approximately 40 km closer to the majority of customers. This implies that, by implementing the changes, the research subject can save 40 km of cost for every delivery transaction. REFERENCES Church, R. L., & Murray, A. T. (2009). Business site selection, location analysis, and GIS. Hoboken, NJ: John Wiley & Sons. Esnaf, S., & Küçükdeniz, T. (2009). A fuzzy clustering-based hybrid method for a multi-facility location problem. Journal of International Manufacturing, 259–265. Guo, H., Pan, W., Liu, X., Li, Y., & Zeng, B. (2016). Combining a continuous location model and heur­ istic techniques to determine oilfield warehouse locations under future oil well location uncertainty. Soft Computing, 823–837. Gutierrez, M. E., & Mutuc, J. E. (2018). A model for humanitarian supply chain: an operation research approach. Procedia Engineering, 212, 659–666. Hummels, D. (2007). Transportation costs and international trade in the second era of globalization. Journal of Economic Perspectives, 131–154. Ivanova, O. (2014). Modelling inter-regional freight demand with input-output, gravity and SCGE meth­ odologies. In L. Tavasszy, & G. d. Jong, eds.), Modelling freight transport (pp. 13–42). Philadelphia: Elsevier. Jayani, D. H. (2019, June 12). Databoks.Retrieved from Databoks Katadata: https://databoks.katadata. co.id/datapublish/2019/06/12/biaya-logistik-indonesia- tertinggi-di-asia Khosravi, S., & Jokar, M. R. (2017). Facility and hub location model based on gravity rule. Computer & Industrial Engineering, 28–38.

4

Mwemezi, J., & Huang, Y. (2011). Optimal facility location on spherical surfaces: algorithm and application. New York Science Journal, 21–28. Onella, N. (2015). Determining the optimal distribution center location. Tampere: Tampere University of Technology. Rodrigue, J.-P., Comtois, C., & Slack, B. (2017). The geography of transport systems. Retrieved from Transport Geography: https://transportgeography.org/?page_id=6517.

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Marketing strategy in postgraduate Tangerang Muhammadiyah University to improve human resources in Tangerang city P. Susilo, C. Kurniastuti & D. Hadiwijaya Magister Management, University of Muhammadiyah, Tangerang, Indonesia

ABSTRACT: As an educational institution, the University of Muhammadiyah Tangerang has a commitment to carry out quality education and research and development of science and community service that can improve human welfare; promote cooperation with other par­ ties that is mutually beneficial in the development of science and technology; and develop Islamic life according to Muhammadiyah understanding to produce graduates who believe, have the authority to master science and technology, and are able to be independent toward the realization of a society that has the character of Karimah. Based on the IFAS matrix ana­ lysis, the IFAS Matrix IE compiling stage 2 obtained several alternative strategies, namely Market Penetration Strategy and Market Development Strategy. The strategy priority was then selected by tabulating strategic priorities, with Market Penetration Strategy showing a Total Attractiveness Score of 7.07 and Market Development strategy showing a Total Attractiveness Score of 5.48. This means that the most suitable marketing strategy to be implemented is the Market Penetration Strategy.

1 INTRODUCTION Realizing the importance of its role in developing Tangerang City has led the University of Muhammadiyah Tangerang (UMT) to always improve the quality of education by providing postgraduate programs with a vision of achieving Postgraduate Program Excellence in the development of Science, Technology and Arts in 2035. So that UMT can continue to improve human resources in the city of Tangerang, a strategy is needed in managing all educational, research, and community service programs, including strategies in marketing development. Strategy in marketing is needed with consideration of the number of postgraduate students, who experience fluctuations every year. Every good organization definitely wants to increase the achievement of its organizational goals by using various strategies, one of which is a marketing strategy. Marketing strategy contributed to carrying out management in educational institutions. Based on these chal­ lenges, the authors are interested in analyzing the strengths, weaknesses, opportunities, and threats contained in UMT postgraduate internal and external environmental factors and pro­ ceed with determining the position and then finding alternative marketing strategies. In deter­ mining the marketing strategy for the Postgraduate Program the authors use the Quantitative Strategies Planning Matrix (QSPM), a tool that enables strategists to evaluate alternative strategies objectively, based on critical factors for external and internal success that were pre­ viously recognized. The main expectation of the authors after obtaining a suitable marketing strategy will be to increase the number of UMT postgraduate students and produce graduates who are nationalism oriented and have competencies in the management field based on Islamic values.

6

2 LITERATURE REVIEW 2.1 Marketing strategy Marketing strategy is a component of situation analysis, which in this case can be divided into two important parts: environmental analysis and resource analysis. The analysis can assess strengths, weaknesses, opportunities, and threats. In the field of marketing strategy there are four variables that can be simulated to win the competition: market segmentation, marketing mix, marketing budget, and timeliness. 2.2 QSPM The QSPM matrix is used to evaluate and choose the strategy that is best suited to the internal and external environments of a company. Alternative strategies that have the greatest total value in the QSPM matrix are the best strategies to be applied to organizations or companies. QSPM analysis is the final stage of analysis used in determining the priority choice of marketing strategies.

3 RESEARCH METHODS Analysis of the data of this study includes quantitative descriptive analysis and qualitative descriptive analysis. Data collection techniques in this study include observation, interview, questionnaire, documentation and combination/triangulation, and focus group discussion. Interviews were conducted using research instruments to capture nonphysical potential and for in-depth interviews. Analysis of the internal and external environments at the UMT Post­ graduate Program was conducted based on the results of interviews and focus group discus­ sions with five informant UMT postgraduate internal parties, which consisted of professors of Muhammadiyah University of Tangerang (Prof. Dr. H. Aris Gumilar, MM), permanent lec­ turers of postgraduate programs (Prof. Dr. Capt. HM Thamrin, MM), postgraduate director (Dr. H. Priyo Susilo, MM), postgraduate staff (Rima Oktaviani, S.Pdi), and postgraduate stu­ dents (Fahmi. S, SE) in order to obtain strategic environmental factors in determining market­ ing strategies include strengths and weaknesses as well as opportunities and threats.

4 RESEARCH RESULTS 4.1 Evaluation of internal and external factors The total weighted score result from the IFAS matrix is 2.77. This number indicates that the UMT Postgraduate Program has strong internal capabilities and flexibility to innovate with its internal resources. The strategic factor of the highest internal strength possessed by the UMT Postgraduate Program is the affordable education costs, with a strength score of 0.57, while the highest score of weakness of the weighting factor of 0.34 is in the less extensive promotion network. This can be overcome by conducting promotions and publications about the advantages possessed by the UMT Postgraduate Program. The result score from the EFE matrix in Table 1 is 2.84. This number indicates that the UMT Postgraduate Program responded well to opportunities and threats in education—in other words, able to take advantage of the opportunities available and minimize the potential negative influence of external threats. The highest strength weight score from external stra­ tegic factors is the availability of senior PTN-PTS lecturers who can be partners for the devel­ opment of young lecturers, with a total score of 0.60.

7

Table 1. QSPM (Quantitative Strategies Planning Matrix). Market penetration

Market development

Weight

AS

TAS

AS

TAS

Availability of PTN-PTS senior lecturers who can be partners for the development of young lecturers There is an MOU with several related agencies Research funding is available from the rector Career development in government and pri­ vate institutions around the campus Availability of funding for advanced scholarships/study and research assignments from the government and rector

0.20

4

0.80

3

0.60

0.10

4

0.40

3

0.30

0.06 0.09

4 3

0.24 0.27

2 2

0.12 0.18

0.14

3

0.42

3

0.42

The same study program managed by PTN­ PTS with better facilities and competitive study fees Ability of other PTN-PTS in providing educa­ tional facilities and infrastructure Policies for tertiary institutions at the national level are rapidly changing Postgraduate Human Resources at other PTN-PTS that are more professional The entry of foreign universities in Indonesia

0.10

3

0.30

3

0.30

0.10

3

0.30

3

0.30

0.06

4

0.24

2

0.12

0.09

3

0.30

3

0.30

0.05

3

0.15

3

0.15

0.12

4

0.48

2

0.24

0.19

4

0.76

2

0.38

0.08 0.05

4 4

0.32 0.20

3 2

0.24 0.10

0.07

3

0.21

3

0.21

0.17 0.10 0.09

4 3 2

0.68 0.30 0.18

4 2 2

0.68 0.20 0.18

0.06

4

0.24

3

0.18

0.07

4

0.28

4

0.28

Opportunities 1.

2. 3. 4. 5.

Threats 1.

2. 3. 4. 5. Strengths 1.

2. 3. 4. 5.

The availability of PTN-PTS senior lecturers who can be partners for the development of young lecturers There is an MOU with several related agencies Research funding is available from the rector Career development in government and pri­ vate institutions around the campus Availability of funding for advanced scholar­ ships/study and research assignments from the government and rector.

Weaknesses 1. 2. 3. 4. 5.

A less extensive promotion network Weak Human Resources researchers Limited public service facilities for guests, lec­ turers, and students Lecturers’ positions/ranks in general are inadequate Limited cooperation with PTN-PTS and the industrial world

TOTALS

7.07

8

5.48

4.2 Internal and external matrix The IE matrix is based on two key dimensions, namely the total EFI value that is weighted on the x-axis and the total EFE value that is weighted on the y-axis. On the IE x-axis matrix, the total value of EFI obtained is 2.98 so it is considered moderate, while on the y-axis, the total EFE value obtained is 2.77. The IE matrix obtained enters into the V cell division called inten­ sive Hold and Maintain Strategy (market penetration, market development, and product devel­ opment) or integrative (backward integration, forward integration, and horizontal integration). 4.3 SWOT analysis The SWOT analysis diagram is based on the IFA and EFA matrix scores to determine the position of the UMT Postgraduate Program. According to the results of the IFA and EFA matrix scores obtained, x-axis coordinates = Strength score − Weakness score (1.6 − 1.07 = 0.53) and y-axis coordinates = Chance score − Threat score (1.87 − 0.97 = 1.04). The coordin­ ates in the SWOT analysis diagram are therefore (0.53, 1.0.4). SWOT analysis shows the position is in quadrant I, which is a very favorable situation, with opportunities and strengths that can be utilized. The strategy that must be applied in this con­ dition is to support an aggressive growth policy (Growth-Oriented Strategy). 4.4 QSPM The strategy priority selected with a Total Attractiveness Score of 7.07 is Market Penetration.

5 CONCLUSION 1. The score from the EFE matrix is 2.98. This number indicates that the UMT Postgraduate Program responded well to opportunities and threats in education; in other words, able to take advantage of the opportunities available and minimize the potential negative influence of external threats. 2. The total weighted score from the IFAS matrix in is 2.77. This number indicates that the UMT Postgraduate Program has strong internal capabilities and flexibility to innovate with its internal resources. 3. The SWOT analysis diagram shows the position is in quadrant I, which is a very favorable situation with opportunities and strengths that can be utilized. 4. The IE matrix obtained enters into the V cell division called the intensive Hold and Main­ tain Strategy. 5. Priority strategies chosen by tabulating strategic priorities are a Market Penetration Strat­ egy with a Total Attractiveness Score of 7.07 and a Market Development strategy with a Total Attractiveness Score of 5.48. This means that the most suitable marketing strategy to be implemented is the Market Penetration Strategy. Theoretical implications of this research are used to develop knowledge in the field of mar­ keting, especially in determining marketing strategies. The practical implications of this research are used to implement marketing strategies with the hope of increasing the number of students in postgraduate studies. REFERENCES David, F. (2009). Strategy management (translation). Jakarta: Salemba Empat.

David, F. R. (2015). Strategic management concepts and cases (15th ed.). London: Pearson Education.

Fandy, T. (2008). Marketing strategy (3rd ed.). Yogyakarta: Andi.

Fandy, Tjiptono, & Chandra, Gregorius. (2012). Strategic marketing: analyzing strategic marketing,

branding strategy, customer satisfaction, competitive strategy. te-Marketing, 2. Yogyakarta: Andi.

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Rangkuti, F. (2014). SWOT analysis: techniques for dissecting business cases. Jakarta: PT Gramedia Pustaka Utama. Schermerhorn, J. R. (2013). Introduction to management (12th ed.). John Wiley & Sons (Asia) Pte. Ltd. Strategic Plan for Postgraduate Program, Muhamamdiyah University, Tangerang. Sugiyono. (2014). Educational research methods: quantitative, qualitative, and R&D approaches. Bandung: Alfabeta. Vera Nora Indra Astuti, Development Strategy for the Special Implementation Program at the Post­ graduate Program, Masters Program in Higher Education Management, Bogor Agricultural Univer­ sity. https://tangerangkota.go.id/.

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Examining a psychological sense of brand community in iPhone users O.O. Sitepu & N. Sobari Faculty of Economics and Business, University of Indonesia, Depok, Indonesia

ABSTRACT: Recent theory and research efforts have demonstrated the efficacy of brand communities at establishing long-term relationships with their customers (Carl­ son, Suter, & Brown, 2008). Therefore, marketers are becoming more aware and increasingly interested in creating brand communities. However, the psychological underpinnings of customer perceptions about the community with other brand users are less explored. The theory used in this study is social identity theory by examining new antecedents and consequences of psychological sense of brand community (PSBC) within the context of iPhone users. An online survey was conducted during 1 week in October 2019 with 160 usable responses collected. The measurements were adapted from previous related studies. Structural equation modeling (SEM) was used to assess the hypothesized relationships. The findings showed that PSBC positively contributes to iPhone users’ commitment and loyalty regardless of the presence of their social interaction with one another.

1

INTRODUCTION

Brand is not just a product identity or differentiator from the competing products because now brands can create emotional bonds between consumers and producers. In addition, recent theory and research efforts have demonstrated the efficacy of brand communities at establishing long-term relationships with their customers (Carlson, Suter, & Brown, 2008). Swimberghe, Darrat, Beal, and Astakhova (2018) illustrated that “the brand, not commu­ nal relations or shared consciousness, is the impetus behind their sense of community.” Carl­ son (2005) found that a sense of brand community is not an outcome of social interactions between brand users. Instead, the appearance of a sense of brand community is driven by two psychological factors: identification with the brand and/or identification with the group. To emphasize this psychological nature of a sense of brand community, Carlson et al. (2008) proposed another terminology for this perceived feeling: psychological sense of brand community (PSBC). PSBC is defined as “the degree to which an individual perceives relational bonds with other brand users.” PSBC is a perceived affiliation with other brand users that is rooted in the brand and not based on any form of communication or interaction (Carlson et al., 2008). However, for many years, examination of a sense of brand community has been restricted to bound brand communities with some levels of social interaction, and little research has con­ sidered the psychological aspect. Therefore, this research explored in greater depth the psycho­ logical aspects of a sense of brand community. Today, one of the competitions among brands that is hotly discussed is that in the cellular phone market. The competition between Samsung and Apple with the iPhone product is increasingly visible. Both have their respective advantages. Although iPhone is always priced more expensively, buyers are always convinced to make the purchase. As noted by Brand Finance Global 500, February 2018 and January 2019, Apple is always ahead of Samsung. 11

This research was conducted to find out if the psychological sense of brand community has a positive effect on brand commitment and brand loyalty so that customers will still buy an iPhone even though it is quite expensive.

2 THEORETICAL BACKGROUND AND HYPOTHESES In this research, the author applied Social Identity Theory, which refers to Consumer Brand Identification (CBI). CBI can be defined as “a consumer’s psychological state of perceiving, feeling, and valuing his or her level of belonging with a brand” (Lam et al., 2013), and identification with an organization is regarded as the foundation of “deep, committed, and meaningful relationships” (Bhattacharya & Sen, 2003). CBI that derived from Social Identity Theory is in line with Psychological Sense of Brand Community (Carlson et al., 2008). The Psychological Sense of Brand Community antecedents tested in this study were brand attitude, brand personality, and brand prestige. Brand attitude refers to amount of positive or negative psychological value that a consumer assigns to a particular brand (Park, Shenoy, & Salvendy, 2008). The research results of Augusto and Torres (2018) showed that brand atti­ tude would positively impact CBI. CBI is in line with Psychological Sense of Brand Commu­ nity (Carlson et al., 2008). H1: Brand Attitudes has a positive effect on Psychological Sense of Brand Community (PSBC). Brand personality is the set of human personality traits that are both applicable to and rele­ vant for brands (Azoulay & Kapferer, 2003). The research of Cheung and Lau (2001) indicated a high level of relationship between self-concept and brand personality, followed by Kazár (2016) research, which showed that self-concept has a positive and significant effect on PSBC. H2: Brand Personality has a positive effect on Psychological Sense of Brand Community (PSBC). Brand prestige is a positive evaluative judgment about the high status of a brand that is accompanied by feelings of esteem and admiration as a result of internalization of the object­ ive and symbolic realities of the brand (Baek et al., 2010; Prince & Davies, 2009). The research of Tuškej and Podnar (2018) revealed that brand prestige has a positive and significant effect on CBI. As mentioned earlier, CBI is in line with Psychological Sense of Brand Community (Carlson et al., 2008). H3: Brand Prestige has a positive effect on Psychological Sense of Brand Community (PSBC). Brand commitment is the extent of psychological attachment that influences a person’s will­ ingness to exert extra effort toward getting the brand (Burmann & Zeplin, 2005). The research of Carlson, Suter, and Brown (2008) indicated that the greater the PSBC, the greater the com­ mitment to the focal brand around which the community—social or psychological—is formed. H4: Psychological Sense of Brand Community (PSBC) has a positive effect on Brand Commitment. Brand loyalty is a real commitment from customers to buy a brand repeatedly (Peter & Olson, 2005). The research of Duong (2017) found that PSBC has a positive effect on brand loyalty. The greater the PSBC, the greater the loyalty that is created. H5: Psychological Sense of Brand Community (PSBC) has a positive effect on Brand Loyalty.

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3 METHOD

Figure 1.

Hypothesized model.

An online survey was conducted during 1 week in October 2019 with 160 usable responses collected. The respondents comprised 70.6% women and 29.4% men. The majority of iPhone users are 26–30 years old with an income level Rp 3.500.000–Rp 7.000.000. The author analyzed the data using Structural Equation Modeling (SEM). SEM is divided into two parts, namely the measurement model analysis and structural model analysis. Meas­ urement model analysis shows how well the measured questions represent a construct (Hair, Black, Babin, & Anderson, 2010). This analysis consists of the validity, reliability, and com­ patibility test. Finally, structural model analysis is carried out to determine the suitability of data with the measured model (Wijanto, 2015).

4 RESULTS 4.1 Measurement model The analysis was conducted using LISREL 8.7. RMSEA = 0.080, NFI = 0.94, NNFI = 0.96, CFI = 0.97, IFI = 0.97, and RFI = 0.92 revealed good fit. 4.2 Structural model and hypothesis tests The structural model displayed in Table 1 was estimated using LISREL 8.7. NFI = 0.93, NNFI = 0.95, CFI = 0.96, IFI = 0.96, and RFI = 0.91 revealed good fit. The results indicate that brand attitude has a positive effect on PSBC (t = 5.43), thus supporting H1. But brand personality has a negative effect on PSBC (t = −3.93), and thus H2 is not supported. As pre­ dicted, brand prestige has a positive effect on PSBC (t = 7.84), providing support for H3. Results also indicate PSBC has a positive effect on brand commitment (t = 7.74) and brand loyalty (t = 6.00), confirming H4 and H5.

5 DISCUSSION This research shows that brand attitudes and brand prestige have positive effects on Psycho­ logical Sense of Brand Community (PSBC), while brand personality has a negative effect on PSBC. This is contrary to previous research that showed brand personality has a high level of relationship with self-concept; the research of Kazár (2016) showed that self-concept has a positive and significant effect on PSBC. On the other hand, our research is supported by the research of Helgeson and Supphellen (2004), in which self-concept and brand personality are different constructs that have discriminant validity. Therefore, brand personality is not posi­ tively associated with a PSBC.

13

Table 1. T-value and coeficient structural model. Relationship between constructs Brand attitudes – Psychological Sense Of brand community (PSBC) Brand personality – PSBC Brand prestige – PSBC PSBC – Brand commitment PSBC – Brand Loyalty

t-valeu*

Coefficient

5.43

0.49

-3.93 7.84 7.74 6.00

-0.30 0.57 1.13 0.51

Result Significant Not significant Significant Significant Significant

The results also suggest that striving to create a sense of community among brand users may help create a consumer base that is committed and loyal to the brand.

6 CONCLUSION These findings suggest that examining Psychological Sense of Brand Community (PSBC) may be beneficial for marketers hoping to capitalize on the favorable outcomes. Creating PSBC among new and potential customers may be an effective method for attracting customers to a brand. PSBC may require substantially less effort and financial resources to create and maintain than social brand communities. REFERENCES Bhattacharya, C. B. & Sen, S. (2003). Consumer-company identification: a framework for understanding consumers’ relationships with companies. Journal of Marketing, 67, 76–88. Carlson, B. D. (2005). Brand-based community: the role of identification in developing a sense of com­ munity among brand users. Doctoral dissertation, Oklahoma State University. Carlson, B. D., Suter, T. A., & Brown, T. J. (2008). Social versus psychological brand community: the role of psychological sense of brand community. Journal of Business Research, 61, 284–291. Lam, S. K., Ahearne, M., Mullins, R., Hayati, B., & Schillewaert, N. (2013). Exploring the dynamics of antecedents to consumer–brand identification with a new brand. Journal of Academic Marketing Sci­ ence, 41, 234–252. Park, T., Shenoy, R., & Salvendy, G. (2008). Effective advertising on mobile phones: a literature review and presentation of results from 53 case studies. Behavior and Information Technology, 27(5), 355–373. Peter, J. P., & Olson, J. C. (2005). Consumer behaviour and marketing strategy. New York: McGraw-Hill. Swimberghe, K., Darrat, M. A., Beal, B. D., & Astakhova, M. (2018). Examining a psychological sense of brand community in elderly consumers. Journal of Business Research, 82, 171–178.

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Factors contributing to employee performance E.W. Silitonga & J. Sadeli University of Indonesia, Jakarta, Indonesia

ABSTRACT: Several factors that can affect the performance of civil servants are motivation, the role of leaders, and work engagement. This study used public service motivation variables to measure the motivation of civil servants, while the role of leaders is seen based on the authentic leadership style. This research used a quantitative approach. The survey instrument was a structured questionnaire of a 6-point Likert scale. The sample consisted of 276 civil servants in one of the central government agencies. This study found that public service motivation, authen­ tic leadership, and work engagement directly influence employee performance, and work engage­ ment mediates the relationship between public service motivation and authentic leadership with employee performance. It is concluded that to produce better employee performance, govern­ ment institutions need to encourage the formation of employee motivation in work, improve leadership skills, and build a work environment that enhances engagement with work.

1 INTRODUCTION Performance of civil servants is the public service issue most frequently highlighted by the popu­ lation. The performance of civil servants is considered as reflecting the performance of govern­ ment agencies. When the performance of civil servants is good, the image of the organization is also considered good. One of the factors that can affect employee performance is motivation. In the public sector, this motivation is known as public service motivation (PSM). Perry and Wise (1990) concluded that PSM can help public organizations improve public service performance. Based on research by Wright and Grant (2010), high levels of PSM will motivate employees to work more effectively, especially in work that has values of compassion and self-sacrifice related to civil service and policymaking. The role of leaders is important to encourage improvement in employee performance. According to Silva and Torres (2010, in Semedo, Coelho, & Ribeiro, 2016), leadership in organizations is considered as a key to success and is a distinguishing factor with a strong impact on achieving goals through the transmission of motivation to employees. However, because of the large number of moral and financial scandals related to unscrupulous leaders from companies that have had a good reputation, it is necessary to develop new theories such as authentic leadership. Authentic leadership is a leadership style that is based on the moral character of the leader, concern for others, and compatibility between ethical values and actions (Shahid, 2010). Work engagement is one element that can affect employee performance. According to Baker et al. (2008), engaged workers showed an energetic attitude and high enthu­ siasm in their work. This is in line with what was shown by Kahn (1990), who concluded that engaged workers will perform better. Further research by Saks (2006) showed the impact on work output, stating that work engagement influences worker productivity, organizational com­ mitment, organizational citizenship behavior, and customer satisfaction.

2 LITERATURE REVIEW Public service motivation is defined as public service motivation that is characterized by the atti­ tude of someone who has a strong motivation to work in public services. Public service motivation 15

can be measured by assessing a person’s motivation to serve the community using four dimensions of public service motivation: attraction to policymaking, commitment to public interest, compas­ sion, and self-sacrifice (Perry & Wise, 1990). Authentic leadership is defined as a process drawn from positive psychological capacity and a highly developed organizational context, which results in greater self-awareness and positive behavior and positive self-development. There are four dimensions of authentic leadership: self-awareness, relational transparency (balance processing), and internal moral perspective (internal moral perspective) (Avolio, Gardner, & Walumbwa, 2008). Work engagement is a positive and satisfying working condition that is marked by the pres­ ence of vigor, dedication, and absorption in work. Employees who feel engaged in working will demonstrate industriousness and enthusiasm in their work. Work engagement is measured by assessing its three dimensions: vigor, dedication, and absorption. Employee performance is defined as the attitudes and behaviors shown by employees in contributing to the achievement of organizational goals (Williams & Anderson, 1991).

3 METHOD Based on the explanations from the literature review and previous research, the following hypothesis of this research were developed: H1: Public service motivation has a positive effect on work engagement. H2: Authentic leadership has a positive effect on work engagement. H3: Public service motivation has a positive effect on employee performance. H4: Authentic leadership has a positive effect on employee performance. H5: Work engagement positively influences employee performance. H6: Work engagement mediates the relationship between public service motivation and employee performance. H7: Work engagement provides the relationship between authentic leadership and employee performance. The questionnaire used was in the form of a 6-point Likert scale, with intervals of strongly disagreeing to strongly agreeing. The population consisted of 1,331 employees. Determination of the sample used a purposive sampling technique. The number of samples was calculated using the Slovin formula so that the total sample size was 308 people, but the number of valid questionnaires collected was 276. Data obtained from respondents were then interpreted and processed by SPSS and StructuraliEquationiModeling (SEM)i LISREL.

4 RESULTS AND DISCUSSION There is a significant influence of public service motivation on work engagement so that H1can be accepted. This is in accordance with previous studies examining the relationship between public service motivation and work engagement among employees in government institutions that show that employees with high levels of public service motivation show higher work engagement because they feel they are compatible with the jobs and organizations where they work (Gross, Thaler, & Winter, 2019). A high level of PSM is correlated with a high level of work engagement. One possible explanation for this result is that motivation in public service, making a person feel that his or her work is providing services to the community, can increase dedication, enthusiasm, and pride for his or her work (Simone, Cicotto, Pinna, & Giustiniano, 2016). For H2, authentic leadership has a significant influence on work engagement, so that H2 can be accepted. The indicator that has the highest value is an indicator of how a leader makes decisions by considering the values he or she has. This is in accordance with the dimen­ sions of authentic leadership, namely balance processing, whereby a leader makes a decision by analyzing all relevant information objectively (Walumbwa et al., 2008). The influence of authentic leadership has been proven to create a better social climate in the work environment 16

and better relations between leaders and employees (Avolio et al., 2004). Authentic leadership that makes decisions by weighing values can reduce pressure from groups, organizations, or communities (Avolio et al., 2004; Walumbwa et al., 2008). The public service motivation vari­ able has a significant effect on employee performance so that H3 can be accepted. Research by Belle (2013) showed that employees with higher public service motivation scores will pro­ vide better performance. Based on research by Wright and Grant (2010), a high level of PSM will motivate employees to work more effectively, especially those who have values of compas­ sion and self-sacrifice associated with civic duty and policymaking. The results of previous studies are consistent with the results shown by this study, that motivation to serve the public can affect employee performance, so that this can be a consideration for organizational man­ agement to include an assessment of one’s motivation when wanting to work as a civil servant. Then, authentic leadership has a significant effect on employee performance. This concludes that H4 is accepted. The indicator that has the highest average value is the statement about “Direct superiors trying to get information (feedback) from people to improve work relations between them.” This good working relationship will affect employee performance because employees feel comfortable with their work (Salanova & Agut, 2005). Ilies, Morgeson, and Nahrgang, (2005) state that leaders with relational authenticity will seek to build open and honest relationships with their followers. For H5, there is a significant influence of the work engagement variable on employee per­ formance so that H5 is accepted. The indicator that has the highest value is the indicator with the statement “My work inspires me.” A study by Chughtai and Buckley (2011) that used work engagement as a mediating variable between trust and employee performance found that work engagement can affect employee performance in the form of in-role performance and innovative work behavior directly or through mediating learning goal orientation. Some effects of work engagement are also related to more general performance indicators, such as better employees, productivity, financial performance, organizational commitment, organiza­ tional citizenship behavior, and customer satisfaction (Saks, 2006). Employees who are engaged have high energy levels, are enthusiastic, and are fully immersed in their work (Macey & Schneider, 2008). For the last two hypotheses on the mediating role of work engagement, the results show there is a mediating effect by work engagement on the relationship between public service motivation and employee performance, with a complementary mediation type of mediation. Research by Borst, Kruyen, and Lako (2017) that examined work engagement in government organizations concluded that public service motivation has a significant effect on work engagement. Research by Wong and Cumming (2010) that examined the effect of authentic leadership in health services found that work engagement mediated the relationship between authentic leadership and nurse performance.

5 CONCLUSION This study was slightly different from previous studies because it used authentic leadership style and work engagement mediating variables that mediate the relationship between public service motivation and authentic leadership and employee performance. This study found that public service motivation has a significant effect on the performance of government employ­ ees, which is in line with previous research on the impact of public service motivation on the performance of government employees. This study thus enriches the references to research related to public service motivation in the public sector, especially government agencies. Authentic leadership style provides a significant influence on employee performance. Elements such as the moral character of the leader, concern for others, and ethical values possessed by a leader have been proven to affect the performance of employees in government institutions. This result can be a new reference for leadership theory in relation to employee performance. While work engagement is proven to have a significant effect on employee performance, this study concludes that workers who have enthusiasm, dedication, and physical and emotional involvement in their work will perform better. These results are consistent with several 17

previous studies on the effect of work engagement on employee performance. The results can expand the importance of the role of work engagement to improve employee performance not only in private sectors but also in government institutions. In addition, work engagement can be used as a mediation in the relationship between public service motivation and authentic leadership in employee performance. These results contribute to research on the mediating role of work engagement variables that are still very limited. This study encourages organiza­ tions to carry out activities that revive employee motivation to work so that employees are aware of their job responsibilities, to conduct training related to authentic leadership skills, and to create a conducive work environment. REFERENCES Avolio, B. J., Gardner, W. L., Walumbwa, F. O., Luthans, F., & May, D. R. (2004). Unlocking the mask: a look at the process by which authentic leaders impact follower attitudes and behaviors. The Leadership Quarterly, 15(6), 801–823. Bakker, A. B., & Demerouti, E. (2008). Towards a model of work engagement: career development international. Journal of Occupational Psychology, 13, 209–223. Belle, N. (2013). Leading to make a difference: a field experiment on the performance effects of trans­ formational leadership, perceived social impact, and public service motivation. Journal of Public Administration Research and Theory, 24, 109–136. Chughtai, A. A., & Buckley, F. (2011). Work engagement antecedents, the mediating role of learning goal orientation and job performance. Career Development International, 684–705. Gross, H. P., Thaler, J., & Winter, V. (2019). Integrating public service motivation in the job-demands­ resources model: an empirical analysis to explain employees’ performance, absenteeism, and presenteeism. International Public Management Journal, 176–206. Ilies, R., Morgeson, F. P., & Nahrgang, J. D. (2005). Authentic leadership and eudaemonic well-being: understanding leader–follower outcomes. The Leadership Quarterly, 16, 373–394. Kahn, W. A. (1990). Psychological conditions of personal engagement and disengagement at work. Acad­ emy of Management Journal, 33, 692–724. Macey, W. H. & Schneider, B. (2008). The meaning of employee engagement. Industrial and Organiza­ tional Psychology, 1(2008), 3–30. Perry, J. L., & Wise, L. R. (1990). The motivational bases of public service. Public Administration Review, 50, 367–373. Saks, A. M. (2006). Antecedents and consequences of employee engagement. Journal of Managerial Psychology, 21, 600–619. Salanova, M., Agut, S., & Peiro, J. M. (2005). Linking organizational resources and work engagement to employee performance and customer loyalty: The mediation of service climate. Journal of Applied Psychology, 90(6), 1217–1227. Semedo, A. S., Coelho, A., & Ribeiro, N. (2016). Effects of authentic leadership, affective commitment and job resourcefulness on employee’s creativity and individual performance. Leadership and Organ­ ization Development Journal, 37(8), 1038–1055. Shahid, N. K. (2010). Impact of authentic leaders on organization performance. International Journal of Business and Management, 5(12), 167–172. Simone, S. D., Cicotto, G., Pinna, R., & Giustiniano, L. (2016). Engaging public servants: public service motivation, work engagement and work-related stress. Management Decision, 1569–1594. Walumbwa, F., Avolio, B. J., Gardner, W., Wernsing, T., & Peterson, S. (2008). Authentic leadership: development and validation of a theory based measure. Journal of Management, 34(1), 89–126. Williams, L. J., & Anderson, S. E. (1991). Job satisfaction and organizational commitment as predictors of organizational citizenship and in-role behaviors. Journal of Management, 17, 601. Wright, B. E., & Grant, A. M. (2010). Unanswered questions about public service motivation: designing research to address key issues of emergence and effects. Public Administration Review, 10, 56–70. Wong, C. A., & Cummings, G. G. (2010). The influence of authentic leadership behaviours on trust and work outcomes of health care staff. Journal of Leadership Studies, 3(2), 6–23.

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Service-quality enhancement of the good willie barber shop using importance-performance analysis and business model re-modelling R.H. Putri & A.A. Cholil Master of Management, Faculty of Economics and Business, Universitas Indonesia, Indonesia

ABSTRACT: Based on data from Euromonitor, men’s grooming has high potential as a business opportunity, but the growth of channel distribution in men’s grooming from 2013 to 2018 has only been 0.1%. A barbershop is one channel of distribution in the men’s grooming industry. This study presents the analysis of the needs of barbershop customers from three aspects of customer equity: value, brand, and relationship and compares these aspects regarding the services that have been provided by the Good Willie Barber Shop. The result of the comparison is analyzed using an importanceperformance analysis (IPA) and is used to recommend improvements at the Good Willie Barber Shop. In addition to the IPA, the following methods are used to determine the business problem and recommend improvements for the barbershop: the business model canvas, strengths, weaknesses, opportunities, and threats (SWOT) analysis, and internal and external analyses. This study is conducted using qualitative and quantitative methods based on the owner interview and business and customer observations. Good Willie Barber Shop requires improvement in value equity. To determine the necessary improvement, this study used a service-quality analysis to scan the actual needs of the barbershop’s customers. The results of the service-quality observations are used to com­ pare the shop’s position in the value hierarchy and to determine which values need to improve.

1

INTRODUCTION

The sales performance of the beauty and personal care industry in Indonesia from 2014 to 2017 decreased, but from 2017 to 2018, it increased by 10.4%. It is predicted to continue to increase until 2023. Men’s grooming is one of the categories in the beauty and personal care industry. The data from Euromonitor show that men’s grooming has a value index above other categories in fast-moving consumer goods (FMCG) industries based on the FMCG index. It shows that the demands for men’s grooming have been increasing every year. Although the data on the growth of the non-retail channel distribution of men’s grooming shows only 0.1%, the competition in the modern barbershop business is high. In this business, the owner of the barbershop needs to improve the service level and marketing strategy to pro­ vide high-quality services. Barbershop service is a people-oriented process in which customer satisfaction is important. The service quality is the main variable that affects customer satisfaction. In this study, the owner of the barbershop does not have an indicator to measure customer satisfaction with the barber. It is the main reason this study is conducted on the Good Willie Barber Shop (GWBS). The results of the IPA indicate that GWBS needs improvement in value equity. To gain improvement, this study used a service-quality analysis to scan the actual needs of GWBS customers. The results of the service-quality observations are used to compare the GWBS’s position in the barbershop value hierarchy and to determine which values must improve. 19

Table 1. Importance-performance analysis (IPA) based on customer equity factors. No.1

Customer Equity Factors Affecting Customer Satisfaction

I2

P3

GAP Quadrant4

Value-Related Drivers 1. 2. 3.

Good quality barbershop Competitive price Always available when needed

4.92 4.00 0.92 Q4. High Priority 4.76 4.00 0.76 Q4. High Priority 4.85 6.00 -1.14 Q1. Keep up the good work

Brand-Related Drivers 4. 5. 6. 7. 8.

Understand barbershop advertising Understand barbershop information Famous as a good barbershop Ethics standards on appreciating customers and staff Barbershop image is suitable to customers’ personality

3.88 4.29 4.13 4.90

5.00 5.00 5.00 5.00

-1.12 -0.71 -0.87 -0.1

Q3. Low Priority Q3. Low Priority Q3. Low Priority Q4. High Priority

4.32 6.00 -1.68 Q2. Overkill

Relationship-Related Drivers 9.

Loyal customers

10.

Being loyal customers to obtain a promotional discount Understand barbershop service procedure Familiar with all barbers Loyal because of one barber High trust in the barbershop

11. 12. 13. 14.

4.56 6.00 -1.44 Q1. Keep up the good work 2.86 5.00 -2.14 Q3. Low Priority 4.44 3.87 3.88 4.62

5.00 6.00 4.00 6.00

-0.56 -2.13 -0.12 -1.38

Q3. Low Priority Q2. Overkill Q3. Low Priority Q1. Keep up the good work

1

The numbers in the quadrants are shown in Figure 1.

I (Importance) is an objective assessment of important factors by barbershop customers.

3 P (Performance) is a subjective assessment of the performance of GWBS by the owner.

4 Quadrant, the explanation of the quadrant numbers.

2

Figure 1. Importance-performance analysis (IPA) matrix with important factors for customers and GWBS performance.

2 LITERATURE REVIEW Peter Reason and Hilary Bradbury defined action research as an activity that brings together action and reflection, and theory and practice to pursue practical solutions to an issue (2001, p. 1). This action research searches for a solution to an issue for the GWBS. An IPA of

20

customer equity was used to analyse the factors concerning running the barbershop. Service quality was used to indicate which factor is the reason for customer satisfaction. Customer equity is the total discounted lifetime value for every customer or potential customer (Segarra-Moliner & Moliner-Tena, 2016). Value equity, brand equity, and relationship equity are three variables of customer equity. Segarra-Moliner and Moliner-Tena stated that customer equity can be measured based on the customer lifetime value in order to measure future value. Service quality has been used in banks, hospitals, internet marketing, and assurance busi­ nesses. This measurement is related to customer satisfaction with the products or services pro­ vided by the company. This customer satisfaction generally affects the loyalty of customers. Seven indicators exist in service and quality measurement: tangibility, reliability, responsive­ ness, assurance, empathy, customer satisfaction, and customer loyalty. The company should offer the products or services to customers that they need through five stages of products, adding more customer value. Together, the five stages constitute a customer-value hierarchy (Kotler & Keller, 2016).

3 METHODOLOGY This action research was conducted in an East Jakarta barbershop, the GWBS, which has been in operation for 6 years. This research was conducted using qualitative and quantitative methods based on the owner interview and business and customer observations. The method­ ology used in this research to determine the problem and solution include the importanceperformance analysis (IPA) to compare the customer needs subject to customer equity and the business model canvas, strengths, weaknesses, opportunities, and threats (SWOT) analysis, and internal and external analyses. This study was conducted to solve a problem within the GWBS, and to determine the spe­ cific problem, this study used a mixed-method analysis. The primary data were obtained using in-depth interviews, observations, and a survey. Interviews were conducted several times. The highlighted methods in this study are IPA with a customer equity approach, assessing the ser­ vice quality and customer-value hierarchy to determine the right product strategies for the barbershop. The findings from the three analyses are used as the basis to implement and redesign the business model of the GWBS.

4 RESULTS To determine customer satisfaction, IPA was conducted to analyse the comparison of import­ ant factors of barbershop service from the customer viewpoint and the performance factors of GWBS from the customer perspective. From the descriptive analysis shown in Table 1, every quadrant in this IPA matrix has a specific meaning. Quadrant 1 (Q1) comprises the factors in which the performance is high quality and important to the customers. Quadrant 2 (Q2) com­ prises the factors in which the barbershop offers the customers too much when the customers do not value the extra service. Quadrant 3 (Q3) comprises the factors in which the barbershop provides good service to the customers, which is potentially important to the customers. Finally, Quadrant 4 (Q4) comprises the factors in which the barbershop provides poor service to the customers, which the customers consider important. This research was conducted with 151 respondents to measure the objective, important factors of barbershop service, and the performance was also measured by the owner subjectively. The results of the comparison are shown in Figure 1. The IPA matrix shows that quality and price are in the high-priority quad­ rant. Both factors should be the focus of additional analyses. From this IPA, the next method used to determine the problem in quality that affects cus­ tomer satisfaction is the service-quality analysis. In this study, the analyses are conducted using a GWBS customer questionnaire concerning five service-quality variables (tangible, reli­ ability, responsiveness, empathy, and assurance). The results of this analysis are that the 21

GWBS should improve in the tangible variable, which is in the waiting-area facilities, whereas the GWBS has provided good assurance to their customers. To improve the waiting-area facilities, in this study, the researcher used the customer-value hierarchy to map the product stage in the GWBS to improve the waiting-area facilities. The results of the customer-value hierarchy can be seen in Exhibit 1. The five stages illustrate that GWBS has fulfilled the core stage but has not fulfilled the other stages. The products to improve that are related to the service quality are add-on products, which include magazines, soft drinks, Wi-Fi, and music for the customers, and other potential products or services, which include packages for potential customers and a partnership with a coffee shop.

5 CONCLUSION Customer satisfaction in the service industry is key, and the biggest driver of customer satis­ faction is service quality. Based on the IPA, the GWBS needs to improve in value equity, which includes quality and price. Using qualitative methods, this study was conducted using the business coaching process based on the product strategy customer-value hierarchy shown in Exhibit 1. Discussions with the owner of GWBS regarding this study were concerning the possible improvements in their add-on and potential products to provide a better waiting-area facility and evaluation channel. Other improvements following the change in value propos­ ition concern activities, key partners, key resources, and the cost structure. The table of the new business model is shown in Exhibit 2. The service blueprint that supports the key activ­ ities is in Exhibit 3. The satisfaction of the customers regarding service is based on the core service benefit and the support service, which is the customer-value hierarchy. REFERENCES Kotler, P. (2012). Marketing management (2nd ed.). Harlow, England: Pearson. Lovelock, C., & Wirtz, J. (2018). Essentials of services marketing (3rd ed.). Edinburg: Pearson Education Limited. Meesala, A., & Paul, J. (2018). Service quality, consumer satisfaction and loyalty in hospitals: Thinking for the future. Journal of Retailing and Consumer Services, 40, 261–269. doi: 10.1016/j. jretconser.2016.10.011 Osterwalder, A., Pigneur, Y., & Clark, T. (2010). Business model generation: A handbook for visionaries, game changers, and challengers. Hoboken, NJ: Wiley. Segarra-Moliner, J. R., & Moliner-Tena, M. Á. (2016). Customer equity and CLV in Spanish telecommu­ nication services. Journal of Business Research, 69(10), 4694–4705. doi: 10.1016/j.jbusres.2016.04.017 Wang, H., Kim, K. H., Ko, E., & Liu, H. (2016). Relationship between service quality and customer equity in traditional markets. Journal of Business Research, 69(9), 3827–3834. doi: 10.1016/j. jbusres.2016.04.007 Wirtz, J., Chew, P., & Lovelock, C. H. (2012). Essentials of services marketing (2nd ed.). Singapore: Pear­ son Education South Asia Pte Ltd.

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Exploring big data adoption by Indonesian start-ups D. Riswantini, U.S. Putro & M. Siallagan Bandung Institute of Technology (ITB), School of Business and Management, Bandung, Indonesia

ABSTRACT: Big data technology is being implemented successfully in organizations and sciences. The magnitude of benefits of the technology in business and management encourage companies not to be left behind in implementing it to overcome the competition. The study aimed to investigate the adoption capability of big data analytics in the context of Indonesian start-ups. Applying the research strategy of case studies, in-depth interviews were designed to evaluate the adoption capability. The study revealed some novel insights and developed a model for assessing the technology adoption. The model mapped the adoption factors, including the awareness and the readiness toward the companies’ business orientation. The study evaluated the relationship between the adoption capability and sustainability strategies taken by start-ups. The higher the adoption capability, the more likely companies would choose the value-driven business. Start-ups with a higher adoption capability of big data ana­ lytics tend to choose proactive innovation and diversification strategies.

1 INTRODUCTION In the past two decades, there was a significant increase in data usage in the fields of manage­ ment and business. The development of the Internet has made it possible for companies to collect data from various resources and utilize them to support decision making. Studies in data-driven management have shown that the approach with this technology has made major changes in organizational activities such as finance, operations, marketing, decision making, and other activities (Sejahtera, Wang, Indulska, & Sadiq, 2019). In the era of big data, data have become an asset for companies in business competition. Data can be used to find out the patterns, trends, preferences, and habits of customers as well as competitors’ movements. The results of big data analysis can support management in devel­ oping marketing strategies and decision making (Erevelles, Fukawa, & Swayne, 2016; Ogbuo­ kiri, Udanor & Agu, 2015). The study was intended to investigate the capability of Indonesia start-ups in adopting big data technology. The study addressed the following research ques­ tions: (1) To what extent are Indonesian start-ups aware of and ready to adopt big data tech­ nology regarding the characteristics of the firms? (2)What is the relationship of this adoption capability with the innovation and growth strategy?

2 LITERATURE REVIEW Big data has been implemented successfully in the private sectors as well as sciences. Previous studies have been conducted to investigate the acceptance level of this technology by many different companies. Assessment frameworks were proposed to evaluate acceptance of this technology in terms of business alignment and compatibility, maturity, capability, complexity, and relative advantage. The results of the assessment showed that many organizations recog­ nize the opportunities of big data for organizational improvement but they seem uncertain about adopting the technology, even if they are capable of using big data (Klievink, Romijn, Cunningham, & de Bruijn, 2017; Saltz, 2017; Verma, Bhattacharyya, & Kumar, 2018). Many 23

factors can influence the effective use of big data in the organization. Big data analytics should not be perceived as a solely technical challenge but rather as an organizational system that requires integration with the firm’s business strategy (Mikalef, Boura, Lekakos, & Krogstie, 2019; Verma & Chaurasia, 2019). Studies regarding big data implementation in small and medium enterprises (SMEs) showed that some big data analytics could enhance SME growth. Implementation of big data can pro­ vide better decision making and policy creation in markets and business models. Big data value represents an extraordinarily strategic and profitable opportunity for SMEs (Ogbuokiri et al., 2015). Big data provides businesses an opportunity to enhance brand awareness, improve customer service, and increase sales. The opportunity could turn into a capability shortage for small businesses that have constrained resources for adopting big data (He, Wang, Chen, & Zha, 2017). Research on big data adoption has appeared in several disciplines and businesses, but the study in the context of start-ups is still limited and lacks attention.

3 RESEARCH DESIGN AND METHODS The research was conducted using a qualitative case study strategy. The study focused on understanding the dynamics precedence within the context and proposed to build a theory by exploring a small sample of a few cases within a bounded system (Eisenhardt & Graebner, 2007; Yin, 2009). Face-to-face in-depth interviews were conducted to collect primary data. Additional data were gained from the literature review and cross-checking of social media and official websites. The interview was semistructured, in which interviewees were asked ques­ tions in slightly formal conversations that follow a predefined interview guide. A total of six Indonesian start-ups were interviewed; the subjects are engaged in different business industry types, including retail, home services, price comparison shop-bot, SaaS (Software as a Service), social media analytics, and education. Some of them are still under the supervision of business incubators. All the interviewees have background knowledge of information tech­ nology. The data from interviews were analyzed to identify (1) the leadership skill in terms of the knowledge and vision of technology; (2) the business model, orientation, and strategy for future growth; (3) the way that the start-ups gain benefit from the transformative technology for their business; and (4) the characteristics of start-ups based on their willingness and cap­ ability in absorbing technology.

4 RESULTS AND DISCUSSION The analysis started with the concern of business orientation. Start-ups can be categorized into value-driven and profit-driven businesses. The next concern was the technological leader­ ship, which was distinguished into two levels: low and high levels. Two factors of awareness and readiness were complemented to the analysis to build matrix typologies of this technology adoption related to the innovation and growth strategy. 4.1 Business orientation The basic concept of the value-driven business is that creating customer value is fundamental for securing a niche in a competitive environment (Huber, Herrmann, & Morgan, 2001). The value-driven start-ups offer value and experience to their users and partners through a onestop platform that enables simplifying the way people share. They claimed that simplicity, flexibility, and best quality are their offered values. The start-ups provide mobile applications and Internet-based applications for communication among actors in the platform system. Technology enablers such as social media and messenger application are also used to comple­ ment the system. In the case of the shop-bot start-up, the company delivers value satisfaction to customers by providing recommendations on the best deals on products before they buy 24

Figure 1.

Product development process.

through a comparison price engine. The process of product development can be constructed from the interviews as shown in Figure 1. Other than value-driven firms mentioned previously, two interviewed start-ups primarily focus on gaining profit. These profit-driven firms pursue money from selling the product and compete for the price with their competitors. Even though these firms embed services with product sales, making a sale of the product is the priority of the business. 4.2 Technological leadership The technology leader has a deep, intense, and almost intuitive feel for the technology, exploit­ ing technology to make something happen, causing technology to be used productively or causing things to occur using productive technology (Yukl & Yukl, 2008). From the inter­ views, it can be assessed how technological leadership can influence the organization. The ana­ lysis shows that the start-ups can be divided into four types based on the awareness and readiness level, as shown in Figure 2a. The figure shows a matrix that maps the typology of big data technology adoption, reflecting the propensity of the start-ups to adopt this technology. It is well recognized that technological innovations have emerged as an essential source of competitiveness. Technological capabilities drive innovations, enhancing the competitiveness of firms (Tirupati, 2008). The study examined the characteristic of innovations and the strat­ egy of future growth of the start-ups related to the proposed typology matrix. The start-ups were categorized into proactive, active, reactive, and passive innovations based on the innov­ ation strategy introduced by Dodgson, Gann, and Salter (2013). Applying the Ansoff model,

Figure 2.

Typology matrix of big data adoption.

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the study proposed the innovation and growth strategy matrix, as shown in Figure 2b. Com­ pleting the model, the growth strategy was differentiated into four basic strategies: diversifica­ tion of products or services, market development, product development, and market penetration (Baker, 2010).

5 CONCLUSION A framework for assessing acceptance of the technology has been proposed. The model ana­ lyzed the firms based on the adoption, innovation strategy, and strategy of future growth. The study shows that the higher the adoption capability, the more likely companies choose the value-driven business. Start-ups with a higher adoption capability of big data technology tend to choose proactive innovation and diversification or market development strategies. Techno­ logical leadership has a substantial effect on the organizational intention in adopting big data techniques in business analysis. The model provides practical insights and suggestions to gain insights into big data adoption in start-up businesses. The findings of the study can be con­ sidered by start-up incubators to include knowledge of big data technology in their coaching program. A limited number of cases leads to the possibility that the findings cover only a context boundary. Therefore, the generalization for a broader context needs further investi­ gation. Further, how big data can support start-ups in creating innovation and underpin com­ panies’ sustainability needs to be explored in further research. REFERENCES Baker, M. J. (2010). Growth strategy. In Wiley International Encyclopedia of Marketing. Dodgson, M., Gann, D., & Salter, A. (2013). The management of technological innovation: strategy and practice. Oxford: Oxford University Press. https://doi.org/10.1017/CBO9781107415324.004. Eisenhardt, K. M., & Graebner, M. E. (2007). Theory building from cases: opportunities and challenges. Academy of Management Journal, 50(1), 25–32. https://doi.org/10.5465/AMJ.2007.24160888 Erevelles, S., Fukawa, N., & Swayne, L. (2016). Big data consumer analytics and the transform­ ation of marketing. Journal of Business Research, 69(2), 897–904. https://doi.org/10.1016/j. jbusres.2015.07.001 He, W., Wang, F. K., Chen, Y., & Zha, S. (2017). An exploratory investigation of social media adoption by small businesses. Information Technology and Management, 18(2), 149–160. https://doi.org/10.1007/ s10799-015-0243-3 Huber, F., Herrmann, A., & Morgan, R. E. (2001). Gaining competitive advantage through customer value oriented management. Journal of Consumer Marketing, 18(1), 41–53. https://doi.org/10.1108/ 07363760110365796 Klievink, B., Romijn, B. J., Cunningham, S., & de Bruijn, H. (2017). Big data in the public sector: Uncer­ tainties and readiness. Information Systems Frontiers, 19(2), 267–283. https://doi.org/10.1007/s10796­ 016-9686-2 Mikalef, P., Boura, M., Lekakos, G., & Krogstie, J. (2019). Big data analytics and firm performance: findings from a mixed-method approach. Journal of Business Research, 98(January), 261–276. https:// doi.org/10.1016/j.jbusres.2019.01.044 Ogbuokiri, Udanor C. N., & Agu, M. N. (2015). Implementing bigdata analytics for small and medium enterprise (SME) regional growth. IOSR Journal of Computer Engineering Ver. IV, 17(6), 2278–2661. https://doi.org/10.9790/0661-17643543 Saltz, J. S. (2017). Acceptance factors for using a big data capability and maturity model. Proceedings of the 25th European Conference on Information Systems, ECIS 2017, 2017, 2602–2612. Sejahtera, F. P., Wang, W., Indulska, M., & Sadiq, S. (2019). Factors influencing effective use of big data: a research framework. Information & Management, (February), 103146. https://doi.org/10.1016/j. im.2019.02.001 Tirupati, D. (2008). Role of Technological innovations for competitiveness and entrepreneurship. The Journal of Entrepreneurship, 17(2), 103–115. https://doi.org/10.1177/097135570801700201 Verma, S., Bhattacharyya, S. S., & Kumar, S. (2018). An extension of the technology acceptance model in the big data analytics system implementation environment. Information Processing and Manage­ ment, 54(5), 791–806. https://doi.org/10.1016/j.ipm.2018.01.004

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Verma, S., & Chaurasia, S. (2019). Understanding the determinants of big data analytics adoption. Infor­ mation Resources Management Journal, 32(3), 1–26. https://doi.org/10.4018/IRMJ.2019070101 Yin, R. K. (2009). Case study research: design and methods. Thousand Oaks, CA: SAGE. Yukl, G. A., & Yukl, G. (2008). Leadership in organizations (7th ed.). Upper Saddle River, NJ: Pearson Prentice Hall. https://doi.org/10.1017/CBO9781107415324.004

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Analyzing the effect of job satisfaction and work-life enrichment as factors toward employee turnover intention: a case in PT XYZ M. Raynaldi & A. Satrya Master of Management University of Indonesia, DKI Jakarta, Indonesia

ABSTRACT: The industrial challenge regarding manpower turnover is still unavoidable to this date, especially in the manufacturing sector, which mostly employs temporary workers. As many related factors had been brought up to analyze the root cause of intentional turnover issues, this study examined the effect of job satisfaction and employee turnover intention using work-life enrichment as the mediating variable in PT XYZ. Under limited scope and manufac­ turing circumstances, local survey data on 293 production operators as respondents were col­ lected to test the proposed conceptual model and included only the casting, machining, and finishing departments. More importantly, results were delivered to test the hypothesis in the pro­ posed conceptual model using structural equation modeling. According to the study’s findings, job satisfaction contributes around 48% toward turnover intentions, while work–life enrichment contributes around 37%. Finally, the article also discusses theoretical analysis, practical implica­ tions, and management recommendations. It also adds recommendations for further study.

1 INTRODUCTION PT XYZ, a company in the manufacturing industry in Indonesia that supplies wheels, provides an an interesting example of the significance of controlling workforce turnover. The company is currently dealing with a major challenge in global competition as it recently attempted to implement the concept of lean manufacture to promote effectiveness and efficiency. Its object­ ives range from limiting the rate of product defects to maintaining workforce efficiency. There are several fresh installments on new machines and expansion in the plant area. Pure develop­ ment caused a shift in turnover in the workforce over the period. Even though the numbers were steadily decreasing from 2017 to 2018, they were still considered relatively high. Furthermore, it would also be crucial for the company to analyze more deeplythe cause of turnover and also establish a strategy to reduce its growth rate. There are a variety of aspects to analyze in determining the cause and indication of an employee’s voluntary turnover intentions; however, in PT XYZ’s case, the research focused on finding the influence of two contributing factors: job satisfaction and work–life enrichment. The core of this research problem regards turnover intentions, while retaining valuable employees is the core fundamental of business suc­ cess. As referred to in the previous paragraph, a company needs to control its workforce turn­ over so that it may save on the related budgetary costs. The study of Li, Zhang, Xiao, Chen, and Lu (2019) suggested that enhancing job satisfaction may lead to a reduction of employees’ turnover intentions. Finally, turnover intention is also affected by work–life enrichment. The study of Jiang and Shen (2018) in public relations confirmed that work–life enrichment signifi­ cantly affects an employee’s intention to leave the company permanently.

2 STUDY LITERATURE Turnover, as the main topic of this research, has become an interesting issue in corporations. Many scholars have analyzed turnover and intention to leave a company according to many 28

definitions. Cascio (1995) defined turnover as any permanent departure or leave beyond organ­ izational boundaries. In a simple word, turnover means a condition where the employee leaves the company permanently for any reason (Aksu, 1996). On the other hand, turnover intention is related to an employee’s consciousness and his or her own desire to leave the organization and search for a new job (Akgunduz & Eryilmaz, 2018, as cited in Avcı & Küçükusta, 2009). Job satisfaction is negatively correlated with turnover intention, while job performance has no significant relationship to turnover intention in three professional groups of employees (Carmeli & Weisberg, 2006). The statement indicates that the most influential aspect in determining fac­ tors related to turnover intention is strongly correlated with job satisfaction. Chung, Jung, and Sohn (2017) have found that the effect of job satisfaction in mediating the relationship between job stress and turnover intention turned out to be significant. They also found that the influence of job stress on turnover intention is still relatively significant although mediator-job satisfac­ tion is kept under control. In other words, it is insufficient to merely increase job satisfaction, as it would also require reducing job stress. In addition, there is other research that also has identi­ fied the relationship between job satisfaction and turnover intention. In light of the comparison among the aforementioned theories, the hypothesis of this research is stated as follows: H1: Job satisfaction negatively affects employee voluntary turnover intention. Work–life enrichment is a unique variable that powerfully describes the impact of work on family-life performance. The research of Wayne, Randel, and Stevens (2006) found that work­ to-family enrichment is positively predicted on organizational commitment, while family-to­ work enrichment is negatively predicted on turnover intentions. Their research was conducted in the southeastern United States, with insurance companies comprising the majority of sub­ jects and women accounting for most of the respondents. On the contrary, other research involving 220 working adults found that work-to-family enrichment mediates a positive rela­ tionship between flexible work arrangement and job satisfaction. At the same time, it also mediates a negative relation to turnover intention (McNall, Masuda, & Nicklin, 2009). Both results, in comparison, indicate that the correlation between work–life enrichment to turnover intention varies based on respondents’ behavior, location, and the industry in which they are working. One certainty is that both variables in most research studies are put in a negative correlation. Thus, the following hypothesis would be taken: H2: Work–life enrichment negatively affects employee voluntary turnover intention. As many studies are available to correlate work–life enrichment with turnover intention, it would be a different story for work–life enrichment to analyze its effect on job satisfaction. According to the study of Jaga and Bagraim (2011) on 336 employees of a national retail chain, job satisfaction was a significant output of work–family enrichment compared to career satisfaction. According to its positive correlation, the higher the work–family enrichment effect, the higher the job satisfaction is. The direction of the measured item was both from work to family-life and vice versa. A second study was conducted by Carlson, Hunter, Fer­ guson, and Whitten (2014). Their basic model of the research was to figure out if psycho­ logical distress and positive mood contribute as a mediator connection between work–life enrichment and job satisfaction. One of their study results in that work-to-family enrichment was directly related to or affected job satisfaction. Thus, based on both studies, this research aimed to determine the connection between job satisfaction that affects work–life enrichment. In this case, the next hypothesis follows a positive but opposite direction: H3: Job satisfaction positively affects work-life enrichment.

3 RESEARCH METHODOLOGY The methodology of this research was adapted from the research model of Jiang and Shen (2018) in public relations in which the original model was analyzed on the correlation between supportive organizational environment, work–life enrichment, and trust toward the turnover intention. As it 29

Figure 1.

Final analysis result.

was modified (see Figure 1), the model was constructed to replace a supportive organizational cul­ ture with job satisfaction. Data analysis was conducted through a questionnaire as the intrument and quantitative methodology. The design of the questionnaire applies a quantitative method using a Likert scale. The form of the question is related to the consistency of respondents and stat­ istical correlation among three variables based on the model in Figure 1. The scale option is for­ mulated from the range level of 1 (strongly disagree) to level 6 (strongly agree) (Cooper, Schindler, & Sun, 2014). Respondents were required to fill in the scale level according to their tendency. The questionnaire was distributed to casting, machining, and finishing operator depart­ ments. The data were collected at a sequential period, without any manipulation and interfer­ ence in research settings such as environment and respondent activities. Furthermore, the 293 total samples were collected during this research, while the estimated standard of error was assumed to be 5%. The data collection method is purposive convenience sampling, nonprob­ ability distribution. In the initial process, data analysis was conducted to test its validity and reliability. The entirety of effects and correlations is then analyzed by using Structural Equa­ tion Modeling. The complete results are given in the next section.

4 RESEARCH ANALYSIS In the first section, this article discussed the importance of how voluntary workforce turnover needs to be controlled, as this problem is still unavoidable to this date, especially in the manu­ facturing industry, which employs mostly temporary workers. PT XYZ needs to put more consideration in controlling voluntary turnover, as the effects are increasing employment costs; a waste in time, effort, money; a decrease in the level of social relations; and negatively effects in learning levels of the organization (Aksu, 1996). To simplify the results, when PT XYZ operators are satisfied with their current jobs, espe­ cially enjoying the nature of their jobs, their intention to leave the company permanently will be reduced. Enhancing the opportunity for operators to spend more time with family and encourage more trust in management decisions that affect personal preference would also help reduce employee intention to leave. An interesting fact based on this finding is that turnover intentions do not seem to reflect the number of actual turnovers ultimately. This finding is parallel and consistent with the study of Jung (2010) in the U.S. federal government.

5 CONCLUSION AND MANAGERIAL IMPLICATIONS Job satisfaction and work–life enrichment are negatively affected by employee voluntary turn­ over intentions. The higher the value of job satisfaction and work–life enrichment perceived by the employees, their intention to leave the company permanently will be reduced as well. This finding is parallel and consistent with the study of Carmeli and Weisberg (2006) on the 30

effect of job satisfaction and the study of McNall, Masuda, and Nicklin (2009) on the effect of work–life enrichment on turnover intention. Moreover, it was found that job satisfaction posi­ tively and significantly affects work–life enrichment. There is a condition that when job satis­ faction is fulfilled, work–life enrichment will also be perceived. In PT XYZ, the employees tend to value their jobs more when the case that the jobs can enrich their family life. It is recommended that PT XYZ initially conduct workload analysis (WLA) and measure the Employee Stress Index to verify and review the working area conditions. Furthermore, it is suggested that the company provide information related to the overtime weekly schedule on the information board so that employees may figure out when they should plan to spend qual­ ity time with family, especially on the weekend.

6 LIMITATIONS AND RECOMMENDATIONS FOR FUTURE RESEARCH Owing to the limited time in data collection, there were several limitations to deal with during research. First, this research did not represent the data from all shifts in each corresponding department. Second, the sampling methodology used purposive sampling and convenient nonprobability distribution, which, in comparison to probability sampling, would provide more objective results. Third, primary data that were collected from open question cannot be classi­ fied into a general or specific group. Thus, some problems are still left unexplored. Turnover intentions in this research measured only the operator level (hard skills). Future research may include staff and upper levels. Finally, the future research should create a grouping section for the open question to help researchers tabulate the results. Further study should consider com­ paring the gap between actual turnover with turnover intentions. REFERENCES Akgunduz, Y., & Eryilmaz, G. (2018). Does turnover intention mediate the effects of job insecurity and co-worker support on social loafing? International Journal of Hospitality Management, 68, 41–49. Aksu, A. (1996). Employee turnover: calculation of turnover. Handbook of hospitality human resources management, 195. Oxford: Butterworth-Heinemann. Avcı, N., & Küçükusta, D. (2009). The analysis of the relationship among organizational learning, organ­ izational commitment and tends to leave in hotels. Anatolia: J.ournal of Tourism Research, 20(1), 33–44. Carlson, D. S., Hunter, E. M., Ferguson, M., & Whitten, D. (2014). Work–family enrichment and satis­ faction: Mediating processes and relative impact of originating and receiving domains. Journal of Management, 40(3), 845–865. Carmeli, A., & Weisberg, J. (2006). Exploring turnover intentions among three professional groups of employees. Human Resource Development International, 9(2), 191–206. Cascio, W. (1995). Managing human resource: productivity, quality of work life and profit, .(3rd ed.). New York: McCraw-Hill. Chung, E. K., Jung, Y., & Sohn, Y. W. (2017). A moderated mediation model of job stress, job satisfac­ tion, and turnover intention for airport security screeners. Safety Science, 98, 89–97. Cooper, D. R., Schindler, P. S., & Sun, J. (2014). Business research methods (12th ed. Vol. 9). New York: McGraw-Hill Irwin. Jaga, A., & Bagraim, J. (2011). The relationship between work-family enrichment and work-family satis­ faction outcomes. South African Journal of Psychology, 41(1), 52–62. Jiang, H., & Shen, H. (2018). Supportive organizational environment, work-life enrichment, trust and turnover intention: a national survey of PRSA membership. Public Relations Review, 44(5), 681–689. Jung, C. S. (2010). Predicting organizational actual turnover rates in the US federal government. Inter­ national Public Management Journal, 13(3), 297–317. Li, N., Zhang, L., Xiao, G., Chen, J., & Lu, Q. (2019). The relationship between workplace violence, job satisfaction and turnover intention in emergency nurses. International Emergency Nursing. McNall, L. A., Masuda, A. D., & Nicklin, J. M. (2009). Flexible work arrangements, job satisfaction, and turnover intentions: the mediating role of work-to-family enrichment. The Journal of Psychology, 144(1), 61–81. Wayne, J. H., Randel, A. E., & Stevens, J. (2006). The role of identity and work–family support in work– family enrichment and its work-related consequences. Journal of Vocational Behavior, 69(3), 445–461.

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

SBH strategic planning of new business development A.A. Adyana & A.D. Hanani Master of Management, University of Indonesia, Indonesia

ABSTRACT: SBH, as the holding company, is in charge of seven subsidiaries engaged in various industries. In 2018, CSL was established to run businesses in the essential oil (EO) industry for SBH, which already had a contract agreement with an exporter. The company is currently trying to generate a follow-up strategy for more sustainable business. The purpose of this study was to develop a business plan for CSL to start an EO industry. Based on the analysis, the EO industry is a challenging one. Therefore in order to survive, the company must prepare a different strategy than other companies. Based on cash flow projections, the company’s business will get positive net present value and internal rate of return in pessimistic, most likely, and optimistic scenarios. SBH also has to prepare alternative plans so that the company is always prepared for several possibilities.

1 INTRODUCTION As a parent company of seven subsidiaries, SBH is facing a dilemma occurring at CSL, one of its subsidiaries engaged in a bio-based industry. In 2017, SBH together with STM, another SBH subsidiary, established CSL based on a cooperation contract obtained with an exporter of essential oils (EOs). Theoretically, establishment of the company should take place after the company formulates its overall strategy. However, the company still has not completely defined CSL as a business (PT Sentra Bangun Harmoni, 2017).

2 LITERATURE REVIEW 2.1 EOs in Indonesia EOs continuously experience growing demand. Of 160–200 plants producing EOs, only about 40 plants are cultivated on the scales of small and medium-sized enterprises (SMEs). More­ over, the number translated to only 14 plants developed for an industrial scale (Kementerian Pertanian, 2011). EOs are types of plants whose leaves, flowers, wood, seeds, and even pistil can produce oils with distinctive fragrances. Three of the world’s ten most needed EOs—cit­ ronella oils, clove oils, and patchouli oils—are produced in Indonesia (Tekriwal, 2017). Com­ petitively, the export value of citronella oil and clove-leaf oil experienced a fairly high increase from 2000 to 2016 (Badan Pusat Statistik, 2017). In terms of patchouli oil export statistics, Indonesia supplied 90% of the world’s patchouli oil needs (Kementerian Perindustrian, 2009). 2.2 Analysis tools Three tools were used in this study: PESTEL analysis, Porter’s Five Forces, and VRIO ana­ lysis. PESTLE analysis is a technique that is used to look at business/environmental factors that influence a company. These factors include political, economic, social, technology, legal, and environmental areas. Concepts of the industrial environment were formulated in Porter’s Five Force Framework to determine the profitability of an industry because these forces affect price, costs, and investment needs to run a business (Porter, 1985). The VRIO 32

framework is useful for evaluating company resources because it answers questions about what resources support the company’s competitive advantage. For resources to be the basis of a company’s competitive advantage, they must be Valuable, Rare, Costly to Imitate, and Organized. 2.3 Entrant’s strategy There are three types of entrant’s strategy for a company to enter an industry: pioneer, fol­ lower, and late entrant. Of all the three, both pioneer and follower strategies need high capital in order to survive in the market. Thus, late entrant strategy could be considered an alterna­ tive. Some late entrants can gain substantial profits by avoiding direct confrontations with competitors that have dominated the market by targeting peripheral markets (Mullins & Lar­ reche, 2013; Shankar, Carpenter, & Krishnamurthi, 1998).

3 RESEARCH METHODS 3.1 Types and data sources This study is a practice-oriented case study (Dul & Hak, 2007). A practice-oriented study is a type of case study research with an orientation to contribute knowledge to specific practi­ tioners (or nonspecific practitioners in general). The data were obtained using secondary data from SBH and STM internal resources. In addition, we also conducted research through survey and observation at two agriculture areas. 3.2 Data analysis CSL was first analyzed using external and internal analysis. We used PESTEL, Porter’s Five Forces, and VRIO analysis tools before generating the idea strategy for the company. The survey and observation were conducted to complete a thorough analysis in two agricultural areas.

4 RESULTS 4.1 External analysis EOs are imported raw materials. Eighty percent of raw materials for perfume and flavoring raw materials are still imported. The government has released a road map for the development of the EO industry cluster through the Regulation of the Minister of Industry No. 136/ M-IND/PER/10/2009 (Kementerian Perindustrian, 2008, 2015). It is classified at small and medium industry clusters. Economically, the growth of EO exports increased by 14% per year (Herlinawati, 2019). At the farmer’s level, an advancement is starting from the construction of distillations, storage of raw materials, and refining process which are still not developed (Yuhono & Suhirman, 2006). Socially, nilai tukar petani—farmer exchange rates for EOs—are less than 100, meaning the farmers are still poor. EO industries are not completely attractive.

Table 1. Valuation. Scenario

Pessimistic

Most-likely

Optimistic

NPV IRR Discounted payback Period (year)

Rp 2,043,614,534.93 74% 1.68

Rp 8,091,494,340.29 117% 0.88

Rp 14,098,181,848.30 155% 0.72

33

Of the five Porter analysis aspects, the only one with low power is the bargaining power of suppliers (Badan Pusat Statistik, 2019). 4.2 Company internal analysis Through VRIO (Rothaermel, 2019), we define seven internal resources owned by a company that are suitable for CSL business. Thus, even though the industry attractiveness is low, as long as the company has suitable resources, this could help the company survive. Resources that meet the criteria will help company to reach its sustainable competitive advantage. 4.3 Entry strategy Although CSL was originally established on the basis of a contractual cooperation agreement with the exporter, the company needs to make efforts to increase its bargaining power by increas­ ing and maximizing its internal capabilities and developing the EO market for CSL. The only entrant strategy that is suitable for the company is a late entrant strategy. Thus, CSL can success­ fully enter the industry only if the company can avoid direct confrontations with more established competitors by pursuing peripheral markets. Another is by offering products made specifically for smaller niche markets and support them with high-level services (Shankar et al., 1998). 4.4 Generating strategy We try to connect all resources of the company to generate a strategy for CSL to run the EOs industry. SBH as the parent company will be responsible for providing resources in the form of capital and human resources. STM as one part of the business organization will supply refined and extraction machines. CSL will act as an agent for STM to sell distillers and extrac­ tion machines. Based on company policy, CSL will also provide dividends to SBH and STM, which is 40% of the company’s net profit. Farmer partnerships will be bound in two types of contracts, which are subcontracts and plasma. Through subcontracting agreements, CSL will receive profits from sales of EO for three main commodities: patchouli, clove, and serai wangi. To provide continuous partnerships with farmers, CSL will create a fixed-price agreement to reduce the impact of price fluctuations faced by farmers and refiners. Second, CSL will create an agreement of inti plasma with landowners around Central Java to grow EO commodities. A large amount of land in Java is unproductive, so CSL’s offer can provide added value to landowners who do not want to sell their assets. In cooperation with both subcontracts and plasma, CSL will educate the farmers and refiners primarily in cultivation and refining practices. Those trainings have been carried out through the Indonesian EOs Council and Educational and Research Institutions (Balittro), yet their approach has not been able to cover all EO farmers. The next party is the exporter. A CSL exporter has a contract to buy goods produced by CSL. The company demands that through CSL, new EO commodities can be developed. 4.5 Valuation Analysis of valuation (Table 1) would be based on net present value (NPV), internal rate of return (IRR), and discounted payback period (Ross, Westerfield, Jaffe, & Jordan, 2015). Starting the industry as a small trader, the company would assume the valuation with three scenarios. The pessimistic one assumes the company would be able to provide only 30 tons of EOs on each com­ modity. Most likely and optimistic scenarios respectively allow the company provide 40 and 50 tons yearly. We adjust the time projected in 10 years based on the machine age. The discount rate based on calculated weighted average cost of capital (WACC) was found to be 26.05%.

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5 CONCLUSIONS AND SUGGESTIONS Based on the external analysis, the industry brings opportunity even though its attractiveness is low and it would not be an easy industry. However, as long as the company has internal resources suitable for the criteria, the company would have a chance to survive. Based on cash flow projections, company’s business will get positive NPV and IRR in all scenarios. SBH also has to prepare alternative plans that need to be carried out if the industry fails. This step is important so that the company is always prepared to handle any possibilities. REFERENCES Badan Pusat Statistik. (2017). Harga Perdagangan Besar Beberapa Hasil Pertanian dan Bahan Ekspor Utama di Jakarta (Rupiah per Kuintal), 2000–2016. Badan Pusat Statistik. Badan Pusat Statistik. (2019). Statistik Ekonomi dan Keuangan Indonesia (SEKI). (September 2019). Retrieved from https://www.bi.go.id/id/statistik/metadata/seki/Contents/Default.aspx Dul, J., & Hak, T. (2007). Case study methodology in business research. London: Routledge. Herlinawati, M. (2019). LIPI: Indonesia berpotensi jadi pemain utama bisnis minyak atsiri. Retrieved from https://www.antaranews.com/berita/1021960/lipi-indonesia-berpotensi-jadi-pemain-utama-bisnis­ minyak-atsiri Kementerian Perindustrian. (2008). Perpres No. 28 Tahun 2008 tentang Kebijakan Industri Nasional. Kementerian Perindustrian. Retrieved from http://kemenperin.go.id/download/6001/Perpres-No.-28­ Tahun-2008-tentang-Kebijakan-Industri-Nasional Kementerian Perindustrian. (2009). Pemasok 90% Bahan Baku Dunia, Tapi RI Masih Impor Parfum. Kemenperin.go.id. Retrieved from http://www.kemenperin.go.id/artikel/1921/pemasok-90-bahan­ baku-dunia,-Tapi-RI Kementerian Perindustrian. (2015). Rencana Induk Pembangunan Industri Nasional 2015–2035. Jakarta (ID): Kemenperin. Kementerian Pertanian. (2011). Pengetahuan Bahan Agroindustri. Mullins, J. W., & Larreche, B. (2013). Marketing strategy: a decision-focused approach. McGraw-Hill Education-Europe. Porter, M. E. (1985). Competitive advantage: creating and sustaining superior performance. New York: Free Press. PT Sentra Bangun Harmoni. (2017). Company profile PT Sentra Bangun Harmoni. Ross, S., Westerfield, R., Jaffe, J., & Jordan, B. (2015). Corporate finance (11th ed.). New York: McGraw-Hill. Rothaermel, F. T. (2019). Strategic management. New York: McGraw-Hill Education. Shankar, V., Carpenter, G. S., & Krishnamurthi, L. (1998). Late mover advantage: how innovative late entrants outsell pioneers. Journal of Marketing Research, 35(1), 54–70. Tekriwal, S. (2017). Pasar Global Atsiri. Paper presented at the Konferensi Minyak Atsiri Indonesia, Malang. Yuhono, J., & Suhirman, S. (2006). Status Pengusahaan Minyak Atsiri da Faktor-Faktor Teknologi Pasca Panen yang menyebabkan Rendahnya Rendemen Minyak. Bul. Littro Vol. XVII No 2, 79–90.

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Creating financial statements for performance evaluation at the MSME ENF P. Kusumapratiwi & L. Sudhartio Master of Management, Universitas Indonesia, Indonesia

ABSTRACT: This article delineates the implementation of a business coaching program con­ ducted in an Indonesian micro-, small, and medium enterprise (MSMEs), named ENF, in the food and beverage industry. This study aimed to explore the potentials and challenges of MSMEs, analyze their problems, and provide solutions. This study used a qualitative method by gathering data through interviews, observations, and written documentations, and using five external and internal analysis tools, namely (1) Porter’s Five Forces, (2) Business Process, (3) Business Model Canvas, (4) Marketing Mix, and (5) Strength Weakness Opportunity and Threat (SWOT). The analysis shows that ENF was facing financial issues in preparing finan­ cial statements. For the financial issues, we recommend the use of an Android-based mobile financial application called Akuntansi UKM to record financial information systematically and accurately. The application generates financial reports to improve the MSME’s performance.

1 INTRODUCTION The food and beverage industry in Indonesia has grown significantly. Kemenperin (2019) found the growth of the food and beverage industry is around 9.5% each year. Data retrieved from Kemenperin (2019) also show that this industry has the most significant contribution to Indonesia GDP, of 35.87%. Technology development is one of the triggers of this industry growth. The phenomenon of online selling is reinforced by the number of Internet and active social media users. Nowadays, the Internet is utilized not only for information searching and communication but also for trading transactions and shopping through e-commerce or social media platforms (Azis & Rusland, 2009). In this digital era, a large number of MSMEs successfully run their business based on online selling. A financial statement is important because it is considered useful for decision making to implement the next strategy for the business and to evaluate the business perform­ ance. This article focuses on analyzing the problems of MSMEs in the food and beverage industry, solving the problems, and providing solutions. Conducting a business coaching pro­ gram and a set of analyses of MSMEs and the findings focused on financial statement prepar­ ation, thus, affecting businesses confronted with the difficulty of measuring their performance.

2 LITERATURE REVIEW A financial statement is a firm’s report of its financial condition over a certain period. There­ fore, a firm could monitor its business development through its financial statement. It is now understood that a firm’s financial statement plays an important role in building the basis of financial management of the company. Ross et al. (2010) apparently defined financial man­ agement as an essential aspect to organize to maintain business sustainability, avoid financial distress or bankruptcy, compete with competitors, increase sales or market share, minimize cost, maximize profit, and maintain revenue growth. 36

Horngren et al. (in Carraher & van Auken, 2013) stated that the objective of a financial statement is closely related to the strategic goals of the company. Decision making has to take note of the financial information to ensure the company focus is on the correct pathway. The requirement of financial statement preparation between large firms and MSMEs is not exactly similar (Ploybut, 2012). Ploybut (2012) stated that unlike large firms that require complex financial reporting, there is an agreement to simplify financial reporting for MSMEs. In the same way, Indonesia has a regulation of accounting standards to guide MSMEs’ financial reporting on the exposure draft of Standar Akuntansi Keuangan Entitas Mikro, Kecil dan Menengah/ED SAK EMKM (IAI, 2016). Azis and Rusland (2009) stated that lack of technical expertise to prepare financial state­ ments is one of the MSMEs’ problems. Likewise, MSMEs have less comprehension in under­ standing financial statements effectively, although the MSMEs’ owners should be able to interpret and apply the financial information to recognize business performance and manage better (van Auken, 2005). Wahyuni, Marsdenia, and Soenarto (2018) argued that a satisfactory business performance is influenced by the implementation of an accounting information system. Thus, the financial information will be organized by the accounting infor­ mation system to generate an accurate, punctual, and reliable financial statement.

3 RESEARCH METHODS 3.1 Types and data sources The study used qualitative research and collected the data through unstructured interview, observation, and written documentation. The research was conducted for 8 months from April 2019 to November 2019. Interviews were conducted several times with the owners, employees, and customers. The interview was recorded and transcribed to collect information and clarify potential issues. Another data collection was observation, which monitored the condition in the MSME’s place and competitors. Meanwhile, written documentation was gathered from the MSME about revenue and costs. 3.2 Data analysis All data collected were analyzed through several tools and assessed by gap analysis and Pareto analysis. Gap analysis compacted the data from Porter’s Five Forces, Business Process, Business Model Canvas (BMC), Marketing Mix, and Strength Weakness Opportunity and Threat (SWOT). The problems within an MSME were analyzed through those analysis tools and evaluated more deeply by comparing the ideal and actual conditions and then trying to find the gap. As an illustration, the gap analysis is shown in Table 1. The finding from gap analysis highlights that there were four major issues found in MSMEs: financial reporting, product pricing, human resource, and marketing channel. Mean­ while, Pareto analysis recapitulates the gap analysis summary. Based on the results, the top issue defined as the core problem of the MSME was financial reporting. The MSME did not have sufficient financial reporting because it merely recorded the income transactions.

4 RESULTS The most essential problem within an MSME concerns creating a financial statement. The owner could decide the future strategy based on the financial information. The MSME could also evaluate the business performance regarding its financial statement. Along the business journey, the owner could never identify whether the business generates profit or loss. Hence, the authors recommend using an Android mobile-based financial application to solve the MSME problem. The application aligns with the MSME financial guidance in Indo­ nesia, ED SAK EMKM. Akuntansi UKM is developed to support the MSME’s business 37

Table 1. Gap analysis. Analysis tools Porter’s Five Forces

Actual condition

Ideal condition

Gap

Codification

MSME needs to compete in the industry by advancing its competitive advantage and offering accurate pricing to its customer.

MSME has to be competi­ tive among competitors by presenting accurate prod­ uct price setting.

The need to Product evaluate product pricing pricing

MSME needs to develop the business but does not have information from financial reporting.

MSME has financial infor­ No information mation from financial from financial reporting. reporting

Financial reporting

Business Process

MSME does not have finan­ MSME has financial func­ cial function to prepare finan­ tion to prepare financial statement. cial statement.

No financial function to pre­ pare financial statement

Financial reporting

Business Model Canvas

MSME does not have an activity to record financial statement.

MSME has an activity to record and prepare finan­ cial statement.

MSME needs to have a financial reporting system

Financial reporting

MSME never recognizes the price offered by competitors.

MSME is necessary to evaluate pricing periodically.

MSME has to Product evaluate product pricing pricing

MSME only uses social media for the marketing channel.

MSME gains benefits through other marketing channels.

Maximizing mar­ Marketing keting channel channel

Owner has double roles as banker and administrative staff.

There should be dedicated administrative staff.

No administra­ tive staff

Human resource

Marketing Price is reachable but the pri­ Mix cing strategy needs to be evaluated.

MSME recognizes the pri­ cing position among competitors.

Identifying and evaluating the pricing position

Product pricing

Promotion media utilizes social media and word of mouth. Number of human resources become a problem.

Promotion should use other marketing channels such as e-commerce. MSME should have a dedicated administrative staff.

Optimizing mar­ keting channel alternative Lack of human resource for handling an administrative job

Marketing channel

Product position does not include the evaluation of product pricing.

Price should be considered Does not have on positioning the product. product pricing evaluation

Financial reporting is not maximized; income is recorded only manually.

The financial reporting process must justify the minimum standard.

SWOT

Human resource

Product pricing

Has financial Financial reporting activity reporting

performance, especially to standardize financial reporting accurately and systematically. The application was chosen with some consideration of the MSME’s financial condition, the appli­ cation’s various features, and it can be used anywhere and anytime. The workflow of creating a financial statement from the application has aligned with the accounting cycle. The workflow of the application is described in Figure 1. 38

Figure 1.

Akuntansi UKM application workflow.

In general, recording an MSME’s income and its expense are the most important activities to create a financial statement. Every transaction needs to be input on a daily operational basis and is adjusted to the related account of income and expense transactions. Several forms of expense transactions are for material cost, promotion, salary, electricity, etc., while income transactions include inventory and sales. After all transactions are recorded, the application provides several reports that could be generated. The financial statement presents financial information for an MSME to evaluate its performance and to develop the business as the basis for a decision on its future strategies.

5 CONCLUSIONS The study was conducted through a business coaching process and it found that MSMEs faced problems in creating financial statements to evaluate their business performance. The output generates a financial statement by using the Android mobile-based financial applica­ tion, called Akuntansi UKM. The study helps owners understand the importance of financial reporting and create and implement financial statements by using Akuntansi UKM to evaluate the MSME’s performance. REFERENCES Anthony, R. N., Hawkins, D. F., & Merchant, K. A. (2012). Accounting: text and cases (13th ed.). New York: McGraw-Hill. Azis, A., & Rusland, A. H. (2009). Peranan Bank Indonesia di Dalam Mendukung Pengembangan Usaha Mikro, Kecil, dan Menengah. Carraher, S., & van Auken, H. (2013). The use of financial statements for decision making by small firms. Journal of Small Business and Entrepreneurship, 26(3), 323–336. https://doi.org/10.1080/ 08276331.2013.803676. IAI. (2016). Exposure draft Standar Akuntansi Keuangan Entitas Mikro, Kecil dan Menengah. (Septem­ ber). Retrieved from http://iaiglobal.or.id/v03/files/draft_ed_sak_emkm_kompilasi.pdf. Kemenperin. (2019, February 18). Industri Makanan dan Minuman Jadi Sektor Kampiun. Retrieved from https://kemenperin.go.id/artikel/20298/Industri-Makanan-dan-Minuman-Jadi-Sektor-Kampiun-. Ploybut, S. (2012). Financial reporting by small and medium enterprises in Thailand. (July). Ross, S., Westerfield R., & Jordan, B. D. (2010). Fundamentals of corporate finance (9th ed.). New York: McGraw-Hill. van Auken, H. E. (2005). A model of small firm capital acquisition decisions. The International Entrepre­ neurship and Management Journal, 1(3), 335–352. https://doi.org/10.1007/s11365-005-2599-z. Wahyuni, T., Marsdenia, M., & Soenarto, I. (2018). Analisis Pengaruh Penerapan Sistem Informasi Akuntansi Terhadap Pengukuran Kinerja UMKM di Wilayah Depok. Jurnal Vokasi Indonesia, 4(2). https://doi.org/10.7454/jvi.v4i2.97.

39

Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Effect of work autonomy on innovative work behavior in the application and game developer sector: Psychological flow as mediator P.D. Lestari & A. Satrya Universitas Indonesia, Jakarta, Indonesia

ABSTRACT: Innovative work behavior is a critical factor that determines successful work performance in organizations, particularly in creative industries. According to previous research, innovative work behavior can be influenced by several factors. The primary objective of this research is to investigate the mediating effect of psychological flow on the relationship between work autonomy and innovative work behavior. The research adopted a quantitative approach to address the research objectives. The participants in this research were workers (n = 263) in the application and game developer sector of the creative industry in Indonesia. The results revealed that work autonomy and psychological flow statistically had a positive correlation with innovative work behavior. In addition, psychological flow is known to have a role as a mediator in the connection between work autonomy and innovative work behavior.

1 INTRODUCTION The creative economy provides positive prospects to Indonesia’s gross domestic product (GDP) and employment. In 2017, the creative industry contributed one thousand and nine trillion rupiahs of GDP and absorbed labor at 17.43% (Hamdani, 2019). One part of the cre­ ative industries is the application and game developer sector, which is proliferating in the digitalization era. The escalating growth of this sector has made competitions even more intense, thus pushing all the workers in the application and game developer sector of the cre­ ative industry to further maximize their product qualities for competing in domestic and inter­ national markets. Creativity, ideas, and innovation are required to improve product quality. Innovative work behavior has a positive impact on the company so that existing limitations can be seen as growth opportunities (Mahemba & De Bruijn, 2003). The applications and game developer sector in Indonesia has experienced excessive working hours. Excessive working hours are the total of working hours exceeding the amount stated by the International Labour Organization (ILO), which is 48 hours per week (BeKraf, 2016). High-intensity and demanding jobs may negatively impact creative behavior that is a part of innovative work behavior (Amabile & Hennessey, 2010). The provision of work autonomy is considered to be one of the ways management can provide to give employees control over their work. Giving employees autonomy to take control of their work is also known as work autonomy, which is identified as being able to improve psychological flow or optimal experi­ ence (Demerouti, 2006). Innovative work behavior can be influenced by psychological flow (Cameron et al., 2011). Psychological flow is an individual action that has control and har­ mony with the action, which consequently achieves a condition of full involvement and full optimization in that activity (Maeran & Cangiano, 2013). Innovative work behavior, psychological flow, and work autonomy have a role in the indi­ vidual’s productivity and performance, especially among employees who work in the applica­ tion and game developer sector, to make innovation a key to improve company performance. 40

The main objective of the research was to investigate the effect of work autonomy on innova­ tive work behavior. More specifically, this research aimed at determining (1) the effect of work autonomy on innovative work behavior, (2) the effect of work autonomy on psycho­ logical flow, and (3) the mediating effect of psychological flow on the relationship between work autonomy and innovative work behavior.

2 THEORETICAL BACKGROUND AND RESEARCH MODEL Krause (2004) defined innovative work behavior as all intentional actions that bring perceived changes within the organization. Innovative work behavior has two aspects: the generation and testing of ideas and implementation. One of the external factors that improve innovative work behavior in the workplace is work autonomy. Providing high control to employees in carrying out their work effectively can encourage them to develop new and innovative ideas (De Spiegelaere et al., 2014). The research results proved that each type of autonomy has a positive effect on innovative work behavior. Moreover, based on innovative work behavior theory and previous research, the hypothesis is as follows: H1: There is a positive relationship between work autonomy and innovative work behavior Breaugh (1985) defines work autonomy as the degree of freedom and authority of an individual in carrying out the work. Based on previous research, work autonomy is considered to be able to promote psychological flow (Demerouti, 2006). According to Sia and Appu (2015), the provision of work autonomy can make individuals feel more relaxed at work. Positive feelings in individuals can encourage psychological flow. There­ fore, the following hypothesis states: H2: There is a positive relationship between work autonomy and psychological flow. Csiks­ zentmihalyi (2013) explains that psychological flow is a metaphor, which is used to describe feelings in carrying out an activity without much effort when an individual is at the optimum level. Bakker (2008) defines psychological flow as an optimum short-term situation of an indi­ vidual at work, which is characterized by absorption, enjoyment, and intrinsic motivation. Psychological flow provides a positive effect on the individual, such as productivity, positive mood and emotions, and so on (Mihelič & Aleksić, 2017). Maqbool et al. (2019) and Kamal and Zubair (2015) explained that psychological flow is one of the foundations of innovative work behavior. Therefore, this hypothesis states: H3: Psychological flow has a mediating effect on the relationship between work autonomy and innovative work behavior.

3 METHODS The research employed a quantitative method with a survey. The study was conducted by dis­ tributing questionnaires online. Questionnaires were distributed using a snowball sampling technique by asking existing population members. Participation was entirely voluntary. The participants in this research were employees who work in the application and game develop­ ment sector. A total of 263 employees filled out and returned the questionnaire. The constructs and the corresponding measure items of work autonomy, psychological flow, and innovative work behavior were adapted from the previous literature. Specifically, the items measuring work autonomy were adapted from Breaugh (1985) with nine items. This instrument measured three work autonomy characteristics including work method autonomy, work schedule autonomy, and work criteria autonomy. The items measuring psychological flow were adapted from Bakker (2008) with 13 items. This instrument meas­ ured absorption, work enjoyment, and intrinsic motivation. The items measured innovative work behavior adapted from Krause (2004) with eight items. Respondents were instructed to report the extent to which they agreed with the statements that described their perceived work autonomy, psychological flow, and innovative work behavior. Every item was assessed on a 5-point Likert scale (5 = strongly agree, 1 = strongly disagree), and for psychological 41

flow (5 = always, 1 = never). All of the measures were originally developed in English and translated into Bahasa.

4 DATA ANALYSIS AND RESULTS The statistical analysis was assisted with LISREL 8.8 and Statistical Package for Social Sci­ ences (SPSS) program. LISREL 8.8 was used to verify the measurements and theoretical model because LISREL is a component-based structural equation modeling technique. Before testing the hypotheses, the measurement validity was initially assessed. The result showed that there were two invalid items, which were in accordance with the standard loading factor of less than 0.5 in innovative work behavior, especially the generation and testing ideas dimen­ sion so that the items from the questionnaire were reduced. Table 1 shows the average vari­ ance extracted (AVE) and composite reliability (CR). All the values of CR and AVE were greater than the suggestion; thus all variables were reliable and valid. Table 2 shows the correl­ ation between constructs and coefficient beta. According to the implications of Tables 1 and 2, the results revealed that work autonomy and psychological flow had a significant effect on employees’ innovative work behaviors. Among the components of work autonomy, work criteria autonomy had the highest contribu­ tion (SLF = 0.76) toward employee innovative work behavior. Meanwhile, work enjoyment (SLF = 0.91) had the highest contribution among the components of psychological flow. The results also indicated that there was complementary mediation in the relationship between work autonomy and innovative work behavior with psychological flow as the mediator.

5 DISCUSSION AND LIMITATIONS The purpose of this research was to examine the effect of work autonomy on innovative work behavior with psychological flow as the mediator in the application and game developer sector. The results of the research had supported all the hypotheses, there was a significant positive relationship between work autonomy and innovative work behavior, and there was a significant mediating effect of psychological flow in the relationship between work auton­ omy and innovative work behavior. The work criteria autonomy as a dimension of work autonomy and work enjoyment as a dimension of psychological flow had the highest loading factors. This showed that employees who enjoy their work and have the flexibility to modify job objectives are able to promote innovative work behavior. The findings can be utilized by

Table 1.

Overview of the measurement model.

Construct

No. of items

CR

AVE

Work autonomy Psychological flow Innovative work behavior

9 13 6

0.95 0.90 0.85

0.60 0.65 0.50

Table 2.

Summary results of the structural equation model. 1

Construct

Innovative work behavior Psychological flow Work autonomy

2

t-Values

Beta

t-Values

Beta

— 4.32 3.43

0.52 0.35

— — 4.78

0.45

42

the Human Resources department of the organization to improve employees’ innovative work behavior. Establishing a suitable job design such as work autonomy can stimulate employees to show optimal performance and to generate innovative work behavior. Nevertheless, there are limitations to this research. The limitations are the unavailability of data on the population, as only 263 participants were involved in this research and the sample size may have caused the insignificant results. Therefore, further research is recommended to increase the sample size of participants, including employees from diverse subsectors in cre­ ative digital industries. This is expected to enhance the generalization of research findings on the entire population. REFERENCES Amabile, T. M., & Hennessey, B. (2010). Creativity. Annual Review of Psychology, 61, 569–598.

Bakker, A. B. (2008). The work-related flow inventory: construction and initial validation of the WOLF,

72, 400–414. https://doi.org/10.1016/j.jvb.2007.11.007. BeKraf. (2016). Tenaga kerja ekonomi kreatif 2011–2016. Retrieved from www.bekraf.go.id. Breaugh, J. A. (1985). The measurement of work autonomy. Human Relations, 38(6), 551–570. https:// doi.org/10.1177/001872678503800604. Cameron, K., Carlos, M., Trevor, L., & Calarco, M. (2011). Effects of positive practices on organiza­ tional effectiveness. The Journal of Applied Behavioral Science, 47, 266–308. Csikszentmihalyi, M. (2013). Finding flow: the psychology of engagement with everyday life. Choice Reviews Online, 35(03), 35-1828-35–1828. https://doi.org/10.5860/choice.35-1828. Demerouti, E. (2006). Job characteristics, flow, and performance: the moderating role of conscientiousness. Journal of Occupational Health Psychology, 11(3), 266–280. https://doi.org/10.1037/ 1076-8998.11.3.266. De Spiegelaere, S., Van Gyes, G., De Witte, H., Niesen, W., & Van Hootegem, G. (2014). On the relation of job insecurity, job autonomy, innovative work behaviour and the mediating effect of work engagement. Creativity and Innovation Management, 23(3), 318–330. https://doi.org/10.1111/ caim.12079. Hamdani, T. (2019). KEIN siapkan peta jalan industri kreatif 2045. Detik Finance. Retrieved from https://finance.detik.com/berita-ekonomi-bisnis/d-4593721/kein-siapkan-peta-jalan- industri-kreatif­ untuk–2045. Krause, D. E. (2004). Influence-based leadership as a determinant of the inclination to innovate and of innovation-related behaviors: an empirical investigation. Leadership Quarterly, 15(1), 79–102. https:// doi.org/10.1016/j.leaqua.2003.12.006. Maeran, R., & Cangiano, F. (2013). Flow experience and job characteristics: analyzing the role of flow in job satisfaction. TPM – Testing, Psychometrics, Methodology in Applied Psychology, 20(1), 13–26. https://doi.org/10.4473/TPM20.1.2. Mahemba, C. M., & De Bruijn, E. (2003). Innovation activities by small and medium-sized manufactur­ ing enterprises in Tanzania. Creativity and Innovation Management, 12(3), 162–173. Mihelič, K. K., & Aleksić, D. (2017). “Dear employer, let me introduce myself”: flow, satisfaction with work–life balance and millennials’ creativity. Creativity Research Journal, 29(4), 397–408. https://doi. org/10.1080/10400419.2017.1376503. Sia, S. K., & Appu, A. V. (2015). Work autonomy and workplace creativity: moderating role of task complexity. Global Business Review, 16(5), 772–784. https://doi.org/10.1177/0972150915591435.

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Physical evidence development of SME woven coffee through business coaching D.D. Sindudipoera & S.K. Widhaningrat Master of Management, Universitas Indonesia, Indonesia

ABSTRACT: Coffee shops are spreading widely today, especially in Jakarta. To com­ pete in this industry, small and medium-sized enterprises (SMEs) should go the extra mile to survive. Woven Coffee is one of the SMEs trying to survive in this industry. They need to provide a signature product, superb service, or even a fancy space. This research aimed to develop physical evidence of Woven Coffee to provide a comfortable ambience and attract more customers. This study used a qualitative method, and the data were obtained by conducting observations, surveys, as well as in-depth interviews. We used seven analytical tools to achieve the targeted results, namely Business Model Canvas (BMC), Porter’s Five Forces, PESTEL analysis, Service Marketing Mix, SWOT analysis, TOWS analysis, and GAP analysis. These analyses were used as a base to gen­ erate the results of this study, i.e., developing the physical evidence of Woven Coffee and applying the standard time of food production accordingly.

1 INTRODUCTION Indonesia is the fourth most populated country in the world. In 2010, Indonesia had a population of 237,641,326 people, with Java as the densest area according to the Central Bureau of Statistic’s data. Based on BEKRAF statistics, among 16 creative economic subsectors, the culinary sector is the favorite one, at 41%, including coffee shops. International Coffee Organization data in 2019 revealed that Indonesia is the second largest coffee producer in the world. Woven Coffee is one of the 41% businesses in the culinary field. Woven Coffee is a micro, small, to medium-sized enterprise (MSME) that runs a coffee shop and was the main subject of this research. This article focuses on analyzing Woven Coffee’s problems as an MSME and providing solutions to them. Today, coffee shops sell not only their product, but also the space inside or outside the coffee shop. Some say those spaces are Instagram-able. Results of a survey with 130 respond­ ents, in this case coffee consumers in Jakarta, showed that 86.41% respondents agreed that physical ambience is the most important aspect of a coffee shop. The research used a qualitative method and primary data were obtained by observations, surveys, and also in-depth interviews. All data were compiled and generated to provide solu­ tions for Woven Coffee. The main result of this research provides Woven Coffee an improve­ ment on their physical evidence to provide a comfortable ambience and attract more consumers. The results of Pareto analysis were obtained from the discussion with Woven Coffee’s owner, who thought that Woven Coffee needs physical evidence development to gain more consumers. Woven Coffee intended to improve its exterior appearance, repaint the walls, and rearrange the store layout. Exterior appearance renovation and wall repaint were intended to attract more customers to come in and enjoy a comfortable space. In addition, the store layout rearrangement was intended to ease consumer activities inside the coffee shop. 44

Table 1. Pareto analysis result. No Codification

Distribution Value Portion Contribution (%)

Accumulation (%)

1

8

10

80

57.55

57.55

5 4 4

7 4 2

35 16 8

25.18 11.51 5.76

82.73 94.24 100

2 3 4

Physical Evidence Development Production Standard Time SOP Implementation Sales Promotion Total

139

2 LITERATURE REVIEW Products can be divided into goods and services, each of which has a different marketing mix. Kotler and Keller (2009) define marketing mix as a combination of marketing activities for several goods or services in several markets and periods. Marketing mix could also be inter­ preted as a combination of variables or activities serving as the core of a marketing system. Those variables can encourage a company to influence the consumers (Assauri, 2013). Today, outlets in the food and beverage industry, especially coffee shops, are getting fan­ cier. They not only sell their products, but also provide better service to customers. Thus, some stores are trying to provide a competitive advantage by developing their stores using sev­ eral stimuli to attract and comfort their customers. Physical evidence is a physical condition of a place where service is provided (Khan, 2014). Physical evidence includes furniture, color, layout, and sound level. Moreover, cleanliness and ambience, toilets, praying room, and even a parking lot can be the elements of physical evi­ dence (Kukanja, Omerzel, & Kodrič, 2016). To create a place for consumers, a store needs a store atmosphere, an attribute that enhances a store’s ambience through a combination of several elements such as lighting, music, colors, and the scent of the store (Levy & Weitz, 2008). A store atmosphere is crucial because it can stimulate consumer behavior cognitively, emotionally, and psychologically. Meanwhile, the purpose of building such an atmosphere is to stimulate consumer emotions that lead to a consumer’s intention to return to the store. Therefore, a research question for this study becomes, “How can an effective physical evi­ dence be developed for MSMEs?”

3 RESEARCH METHODS This research used a qualitative method through business coaching. The research was con­ ducted for 8 months from April 2019 to November 2019. The primary data were obtained through in-depth interviews, observations, surveys, and focus group discussions. Interviews were conducted several times to find the main problem. Observation data were obtained with structured observations. This research used a time motion study to observe an MSME’s aver­ age speed of processing food, especially that on the fried rice menu. Other data were collected from a survey by using consumer comment cards to discover the existing problems in the MSME. The survey was distributed to 52 of the SME’s consumers. Meanwhile, a group discussion was conducted among seven customers who had not visited the MSME. The reason for selecting seven new customers who had never come to the MSME was to generate an objective result. After all the data were collected, they were analyzed through seven analytical tools, namely Business Model Canvas (BMC), Service Marketing Mix, SWOT Analysis, TOWS Analysis, and compiled into a GAP analysis table. Using Pareto analysis, this research provides a solution for the MSME. 45

Table 2. GAP analysis result. Analytical tools

Actual condition

Ideal condition

Gap

BMC

Most consumers are workers.

Consumers can be workers, teenagers, and young adults.

Teenagers and young adults Sales barely came to the shop. promotion

Service Marketing Mix and SWOT

Interior and exterior condition were less comfortable.

Interior and exterior condition must provide comfort to the customer.

Physical EviInterior and exterior that were less comfortable made dence Development customers reluctant to linger.

Service Marketing Mix and SWOT

Exterior conditions Exterior condition of have not been able to the shop must attract captivate consumers. visitors to come in.

Exterior conditions need to be maximized in order to lure consumers to come in.

Physical Evidence Development

Service Marketing Mix

Food-producing time Improve foodwas slow. producing time.

Slow preparation made food production slow.

Production Standard Time

Business Process

Barista forgot about the order.

Service Marketing Mix

The barista must not forget the order.

Lack of discipline of point of sale input made the barista forget the requested order. Store layout needs to be Store layout hindered Store layout does not customer circulation. interfere with customer enhanced to ease customer circulation. circulation.

Codification

SOP Application

Physical Evidence Development

4 RESULTS A mini research comprising 52 respondents was conducted through a survey to identify con­ sumer perspectives regarding the MSME service marketing mix. After calculating the response from customers, 48.08% respondents were not satisfied with the MSME process and 30.13% respondents were not satisfied with MSME physical evidence. Meanwhile, results from focus group discussion showed the same results. They were not satisfied mostly with the store’s uncomfortable physical evidence and they were concerned about food-producing time.

Figure 1.

MSME third-quarter sales.

46

Table 3. MSME sales increase. Time

Q2 total sales

Q3 total sales

Margin (%)

Morning (8 am-12 pm) Afternoon (12 pm-2 pm) Evening (2 pm-6 pm) Night (6pm-10pm)

IDR1,385,457 IDR1,640,929 IDR4,302,414 IDR6,027,979

IDR3,046,929 IDR3,098,686 IDR6,079,143 IDR6,877,314

120% 89% 41% 14%

Based on customer surveys, reviews, and focus group discussions, the MSME started to improve its physical evidence. Some of the respondents stated that MSME needed to improve its exterior, such as adding greener accent and hanging plants, adding more seats, and rearran­ ging lighting placement. They also stated that store layout needed to be improved to ease cus­ tomer flow and adding more spaces for seats and tables. After 3 months, the consumer improvement was analyzed using the store’s point of sales record. From the sales in the third quarter of 2019, it can be seen that sales were increasing. The biggest sales improvement can be found in the morning, with a 120% margin (Table 3). It could be assumed that the revenue increase was a result of physical evidence development, as the MSME did not implement any improvement from another 7Ps category.

5 CONCLUSIONS The results of this research show that the MSME store’s physical evidence development has generated great results. Exterior renovation and wall repaint attracted more consumers to come in and provided a more comfortable ambience. The new store layout facilitated custom­ ers’ ability to move freely and was comforting at the same time. The MSME’s revenue increased significantly after it added improvements to its physical evidence. It can be assumed that the revenue increase was an effect of physical evidence development, as the MSME did not make any changes to the other 7Ps. REFERENCES Assauri, S. (2013). Manajemen Pemasaran. Jakarta: RajaGrafindo Persada.

Khan, M. T. (2014). The concept of marketing mix and its elements (a conceptual review). International

Journal of Information, Business and Management, 95–107. Kotler, P., & Keller, K. L. (2009). Marketing management. Upper Saddle River, NJ: Pearson. Kukanja, M., Omerzel, D. G., & Kodrič, B. (2016). Ensuring restaurant quality and guests’ loyalty: An integrative model based on marketing (7P) approach. Total Quality Management & Business Excel­ lence, 1–17. Levy, M., & Weitz, B. A. (2008). Retailing management. Boston: McGraw-Hill. Payne, A. (2008). The essence of service marketing. Jakarta: Salemba Empat. Singh, M. (2012). Marketing mix of 4P’S for competitive advantage. IOSR Journal of Business and Management, 40–45.

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Increasing revenue using a marketing plan on a geotracker product based on the business coaching method J. Haryanto & H. Suhaimi Department of Economic and Business, University of Indonesia, Indonesia

ABSTRACT: One of the most powerful economic drivers in Indonesia is micro, small, and medium-sized enterprises (MSMEs). Unfortunately, many MSMEs are still not appropriately managed. In this research, we applied some business coaching methods to one of the MSMEs, RF Variasi Mobil. Its core business focuses on selling variation products and car upholstery patent services. Using business coaching instruments, we col­ lected qualitative data for mapping the MSME’s condition and problem, and then took corrective action for improvement. The Pareto analysis for showing gaps reveals that the marketing plan for the Geotracker is still a concern. Thus, we set a marketing plan for the Geotracker product. We started examination from competitive analysis, STP (segmen­ tation, targeting, and positioning) analysis, price setting, discrimination price, promotion, and marketing communication strategy. This study helped RF Variasi manage marketing activities to amplify the Geotracker brand.

1 INTRODUCTION One of the most practical reasons to choose product launching is to get a high compound annual growth rate (CAGR) on product selling, e.g., the GPS tracker. Based on marketand­ markets.com (2019), CAGR of the GPS tracker was estimated at about 12.9% in 2016–2023. Meanwhile, other car upholstery patent services was predicted at just about 2.51%. Conse­ quently, the GPS tracker was considered to be launched. In recent months, RF Variasi has launched a GPS tracker called Geotracker and it relied on only YouTube and websites for Geotracker promotion. Not having an optimization channel and promotion, RF Variasi must make a systematic marketing plan. The marketing plan eligibility study is strengthened by the results of a survey that shows there is no Geotracker brand awareness in consumers’ perspective.

2 LITERATURE REVIEW We adopted Belsch and Belsch’s marketing plan model in 2003 as our framework. Based on their model, we constructed the research from competitive analysis; segmentation, targeting, and positioning analysis (STP); price setting strategy; differentiation/discrimination pricing; promotion; and marketing communication strategy (Belch & Belch, 2004). Then, we conducted a survey of any GPS tracker product on several offline and online com­ petitors for mapping the competitive condition. Kumar (2010) stated that it is necessary to segment the market, target the potential customer, and position the product in our marketing strategy. Instead of choosing a strategy pricing first, we started from the calculation of product pricing. It helped us estimate the real cost of goods sold based on the full cost method, so that profit margin percentage will be set clearly. After the cost of goods sold was set, we could set the price by considering some pricing strategies from Kotler (2013) and Noble and Gruca (1999) in 48

Ingenbleek (2015). In the result, the final price would align into the theory of signaling rationale, meaning high price, high quality (Schmidbauer & Stock, 2018). According to Kotler and Armstrong (2013), there are five types of segmenting pricing: namely customer segment pricing, product form pricing, image pricing, location pricing, and time pricing. After deciding on one of them, we adopted the discrimination price model of Homburg, Lauer, and Vomberg (2019). Homburg et al. stated that offline price premium can be marked up to 2% from online pricing without affecting the perceived value fairness and purchase intention. We extracted the promotion selling model from Roll and Pfeiffer (2017). According to them, a high involvement product or hedonic product is associated with a high degree of var­ iety seeking, so this type of customer prefers a nonmonetary promotion such as a free gift. Based on the consumer’s decision journey model (Pellemans, 1971), the Geotracker brand has low awareness. To determine the kind of channel, the marketing communication strategy was chosen and some models and concepts by many researchers were summarized. They are response hierarchy (Belch & Belch, 2004), touchpoint experience (Dunn & Davis, 2004), the driver of awareness (Ruaõ, Marinho, Balonas, Melo, & Lopes, 2016), and frequency of touchpoint (Baxendale, Macdonald, & Wilson, 2015). We extracted all of them to be applied on the IMC model (Belch & Belch, 2004). After that, brand advertising media through banners, social media (e.g., Facebook and Instagram), and the physical store were chosen.

3 METHODOLOGY There are numerous tools that can be used to map MSME conditions. To collect data, we conducted an observation, interview, and documentation method based on a qualitative approach. In addition, we applied some data analysis methods such as data reduction, display of data, and verification and conclusion data. We analyzed the external and internal environ­ ments, so we started from the Business Model Canvas (BMC), business process algorithm, PESTEL analysis, Porter’s Five Forces, STP analysis, Porter value chain, and ended with mar­ keting mix 7P tools. These results would be filtered using SWOT analysis and then TOWS analysis. After that, we performed Pareto analysis and GAP analysis based on the results of analysis of each tool. We ended this business coaching by providing some improvements in a new BMC.

4 RESULTS AND DISCUSSION Based on the results of interview and analysis, RF Variasi faced six problems: marketing plan, capital, supplier, cost of goods sold, and working contract. The problem with the biggest impact was the marketing plan that was required for new product launching in order to amp­ lify brand awareness. The first survey was conducted to provide better STP analysis based on Kumar (2010). Table 1 shows the different market targets and market potentials. As MSMEs had set differentiation of the GPS product as we can see in Table 2, we could only recommend the total price of each packet type. MSMEs have applied a product form strategy so we tried to examine every type of GPS variation based on the full cost method. Having set the selling price, we conformed percentage of margin profit with the suitable strat­ egy pricing using the going rate (Kotler, 2013) and leader pricing strategy (Noble & Gruca, 1999 in Ingenbleek, 2015) (Table 3). Those strategies allow us to close a competitor’s or market leader’s price. Overall, our strategies were aligned with signaling rationale through time (Schmidbauer & Stock, 2018). After setting the pricing strategy, we separated consumers into two types based on what kind of channel they came from, called discrimination pricing. If they came from online chan­ nels, they would get the normal price. The offline price would be marked up by 2% from the normal price (Homburg, Lauer, & Vomberg, 2019). 49

Table 1. Segmentation and targeting the GPS consumer. Type

Market target

Market potency

Behavioral

Based on GPS function, as a response to monitoring the vehicle’s security, social control, and performance machine control

Based on GPS function, as a response to monitoring vehicle’s security, social control, and performance machine control

Demography

All religion, race, gender, age 22–60 years old, and middle social class with expend­ iture 2 billion to >3 billion rupiah

All religion, race, gender, age 17-50 years old, expenditure >3 million (Upper II– Upper I), and with employee, student, and entrepreneur occupations

Psychography High mobility and often parking vehicle in public places, modern lifestyle, and digital personality with high vigilance toward criminality and adult or couple promiscuity

High mobility and often parking vehicle in public places, modern lifestyle, and digital personality with high vigilance toward criminality and adult or couple promiscuity

Table 2. Differentiation of GPS product. Packet type

Lifetime server

Bonus credit Warranty

Total price

Server

Hardware feature

Bronze

1 year

3 months

2 years

1.05 billion

Tracksolid

Silver Gold Platinum Diamond

1 year 1 year 1 year Lifetime

3 months 6 months one year 6 months

2 years 2 years 2 years 2 years

1.2 billion 1.5 billion 1.8 billion 2 billion

Tracksolid Tracksolid Tracksolid Tracksolid

Without sound tapping tool Standard Standard Standard Standard

Table 3. Recommendation for selling price of each packet type. Element cost

Bronze

Silver

Gold

Platinum

Diamond

COGS + SGA % margin profit Total Recommendation selling price

780.356 35% 1.053.481 1.050.000

840.356 70% 1.428.605 1.425.000

915.356 70% 1.556.105 1.550.000

1.065.356 70% 1.811.105 1.800.000

980.356 110% 2.058.748 2.050.000

As we know that the Geotracker is categorized as a high involvement product (Roll & Pfeif­ fer, 2017), it is associated with high variety seeking. Therefore, we used free product offers as a promotion: buy two get one. But this promotion was valid only for the diamond packet. For the calculation, only 10% discounts from the normal price were offered for the first and second products, but the third product featured a 50% discount from the normal percent­ age profit margin. We can accumulate all these prices (Table 4).

Table 4. Promotion strategy for the Geotracker product. Promo type

Diamond packet price (2 units) (IDR)

Promo 1 (free bronze packet) Promo 2 (free silver packet) Promo 3 (free gold packet) Promo 4 (free platinum packet) Promo 5 (free diamond packet)

4.590.000 4.790.000 4.890.000 5.070.000 5.160.000

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We used a banner as brand advertising of the Geotracker product. We distributed seven horizontal banners in strategic locations, mainly public facilities such as mosques, gas stations, residence entrances, and public halls. The physical store would be an effective channel to increase brand awareness, as it is confidently viewed as affecting the customer from awareness to purchase intention (Ruaõ et al., 2016) in the customer’s journey decision (Pellemans, 1971). Based on Geotracker’s 17–50 years old demographic, we made an emotional appeal video to increase brand awareness and uploaded it on Facebook to reach potential customers. The results show that a purchase intention was found in four customers in one month after the implementation program. Two of them found the information from the banner, one from physical store, and the last from word of mouth.

5 CONCLUSIONS AND RECOMMENDATIONS The results of this study show that the product launch had a low brand awareness. Therefore, we should make a proper marketing plan of the product starting with competitive analysis, pricing strategy, discrimination price, promotion, and marketing communication based on a theory or model. The results show that there were four purchases. Customers stated that they purchased the product because they found the information from the banners, physical store, and word of mouth. It is expected that RF Variasi Mobil must evaluate the contents of websites and emotional appeal videos because no customer bought GPS after watching the video. REFERENCES Baxendale, S., Macdonald, E. K., & Wilson, H. N. (2015). The impact of different touchpoints on brand consideration. Journal of Retailing, 91(2), 235–253. https://doi.org/10.1016/j.jretai.2014.12.008 Belch, G. E., & Belch, M. A. (2004). Advertising and promotion: An integrated marketing communications perspective (6th ed.). New York: McGraw-Hill. Dunn, M., & Davis, S. (2004). Creating the brand-driven business: It’s the CEO who must lead the way. Handbook of Business Strategy, 5(1), 243–248. GPS tracking device market by type, deployment type, industry and geography: Global forecast to 2023. (2019). Retrieved on December 26, 2019 from https://www.marketsandmarkets.com/Market-Reports/ global-GPS-market-and-its-applications-142.html. Homburg, C., Lauer, K., & Vomberg, A. (2019). The multichannel pricing dilemma: Do consumers accept higher offline than online prices? International Journal of Research in Marketing. https://doi. org/10.1016/j.ijresmar.2019.01.006 Ingenbleek, P. T. M. (2015). Price strategies for sustainable food products. British Food Journal, 117(2), 915–928. Kotler, P., & Armstrong, G. (2013). Principles of marketing (16th global ed.). Harlow: Pearson. Pellemans, P. A. (1971). The consumer decision-making process. European Journal of Marketing, 5(2), 8–21. https://doi.org/10.1108/EUM0000000005155 Roll, O., & Pfeiffer, E. (2017). Are your consumers variety seekers? The moderating impact on the effect­ iveness of free gift promotions vs. price discounts. International Review of Retail, Distribution and Con­ sumer Research, 27(4), 352–368. https://doi.org/10.1080/09593969.2017.1299781 Ruaõ, T., Marinho, S., Balonas, S., Melo, A. D., & Lopes, A. I. (2016). Brand management at a local scale: A case of “ghost awareness.” Corporate Reputation Review (Vol. 19). https://doi.org/10.1057/ crr.2016.7 Schmidbauer, E., & Stock, A. (2018). Quality signaling via strikethrough prices. International Journal of Research in Marketing, 35(3), 524–532. https://doi.org/10.1016/j.ijresmar.2018.03.005

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

The effect of fun at work on turnover intention and organizational citizenship behavior with affective commitment as a mediating variable among millennial employees in the digital creative industry S.G. Oktariza & P.M. Desiana Universitas Indonesia, Jakarta, DKI Jakarta, Indonesia

ABSTRACT: Millennials will dominate the productive age population in the demographic bonus era. Organizations should consider introducing fun at work to retain millennial employ­ ees and increase their organizational citizenship behavior (OCB), which contributes to organ­ izational effectiveness. This study examined how fun at work could influence turnover intention and OCB with affective commitment as a mediating variable. This study was con­ ducted on 316 millennial employees in the digital creative industry. The respondents com­ pleted a questionnaire to assess elements of fun at work, turnover intention, OCB, and affective commitment. Structural Equation Modeling (SEM) analysis was used to show the causal relationships between these variables. We found that fun at work was directly and negatively related to turnover intention and positively related to OCB. Having fun at work was also more likely to increase millennials’ affective commitment, and consequently produce a more significant effect on reducing turnover intention and increasing OCB.

1 INTRODUCTION Indonesia will experience a demographic bonus in the period between 2020 and 2030. At that time, the productive age population of the labor force would have reached around 70%. The millennial generation dominates the productive age population in this era (BPS, 2018). The core values of the millennial generation make it necessary for organizations to consider intro­ ducing fun at work to retain employees. One of the reasons companies should focus on turn­ over is that it can result in significant expenditure that forces companies to incur direct and indirect costs (Becker, 2012). The millennial generation has a unique personality, lifestyle, and workplace characteristic (Bejtkovsky, 2016). The core values adopted by millennials are extreme fun, sociality, realism, and self-confidence (Bejtkovsky, 2016). Companies must pay attention to millennials by pro­ viding a lively work environment that can provide fun, responsibility, and stimulation (Lowe et al., 2008). Fun at work was proved to have a positive effect on the employee’s affective commitment and a negative effect on turnover intention (McDowell, 2004). Fluegge (2014) and Gin Choi et al. (2013) found that fun at work has a positive effect on organizational citizenship behavior (OCB). Smith et al. (1983) concluded in their research that a successful organization is required to have employees that are proactive to carry out more than formal standards that have been determined in their work. Facts show that companies that have these kinds of employees would have better performance than other companies (Robbins & Judge, 2017). In this research, we focused on the effect of fun at work on turnover intention and OCB among millennial employees in digital creative industries. In additon, we also examined the mediating effect of affective commitment on both relationships.

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2 LITERATURE REVIEW Fun at work involves all interpersonal, work, and social activities that are fun and provide entertainment, pleasure, or enjoyment to employees (Fluegge, 2014). Fun at work has been found to be a strategy to reduce turnover intention (McDowell, 2004). Turnover intention is a cognizant desire to find alternative employment in other organizations (Tett and Meyer, 1993). Organizations that foster a culture of fun at work are more likely to retain millennial employees (Tews et al., 2012). Thus, in this study, the first hypothesis is: H1: Fun at work has a negative and significant effect on turnover intention. In their research, Fluegge (2014) and Gin Choi et al. (2013) proved that fun at work had a positive effect on OCB. OCB is described as an individual voluntary behavior that is not directly related to the wage system but contributes to the effectiveness of the organization (Organ & Ryan, 1995). Combining social exchange theory with reciprocal norms shows that people direct positive behavior back to the organization (Coyle-Shapiro et al., 2004). Thus, the second hypothesis is: H2: Fun at work has a positive and significant effect on OCB. Organizations consider fun at work as one of the strategies in growing employees’ affective commitment (Tews et al., 2013). Affective commitment is defined as strong trust in and acceptance of organizational goals and values, a willingness to exert efforts on behalf of the organization, and a desire to remain with the company (Mowday et al., 2013). Fun at work is used as a deliberate strategy to create commitment and retention of workers in various sectors of the organization (Baldry & Hallier, 2009). Quantitative studies conducted by McDowell (2004) and Ford et al. (2003) have proven the positive relationship between fun at work and increased affective commitment. Thus, the third hypothesis is: H3: Fun at work has a positive and significant effect on affective commitment. Employees with affective commitment are more likely to be dedicated to the organization, thereby reducing turnover rates (Fleming, 2016). Other research also found a relationship between affective commitment and turnover, where the affective commitment was found to be the most significant antecedent of reducing turnover (Meyer & Allen, 1997; Mowday et al., 2013). Thus, the fourth hypothesis of this study is:H4: Affective commitment has a negative and significant effect on turnover intention.Organ and Ryan (1995) and Podsakoff et al. (2000) proved that organizational commitment has a positive influence on OCB. Foote and Li-Ping Tang (2008) also found that the relationship between team commitment and OCB is significant. Thus, the fifth hypothesis is: H5: Affective commitment has a positive and significant effect on OCB. In this study, we intended to examine the mediating effect of affective commitment on the relationship between fun at work and turnover intention. We also intended to examine the mediating effect of affective commitment on the relationship between fun at work and OCB. Thus, the sixth and seventh hypotheses in this study are: H6: Affective commitment mediates the relationship of fun at work and turnover intention. H7: Affective commitment mediates the relationship of fun at work and OCB.

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3 METHODOLOGY The respondents of this study were 316 millennial employees in the digital creative industry. To meet the sample requirements, participants had to be millennial employees, born in the years 1982–2000 (Howe & Strauss, 2000), who work in the digital creative industry with per­ manent employment status. Of the respondents, 54.75% were male, 81.33% completed a bachelor’s degree as their latest education, 70.89% have been working for more than 3 years in their current organizations, 80.70% work in headquarters, 68.04% have staff positions, and 68.67% are single. Data collection was carried out by distributing online questionnaires. The respondents were asked to rate the degree to which each of the fun at work indicator items occurs in their work­ place. They also rated the degree to which they agreed with each of the statements of affective commitment, turnover intention, and OCB. Fun at work was measured using the 19-item scale of Becker (2012). The affective commitment scale in this research refers to the eight-item scale of Allen and Meyer (1990). The turnover intention was measured using the five-item ver­ sion of Bozeman and Perrewé (2001). OCB was measured using the nine-item version of Paillé (2013). We used Structural Equation Modeling (SEM) analysis to show the causal relation­ ships between variables.

4 RESULTS H1 and H4, which propose that fun at work and affective commitment would be negatively related to turnover intention, were supported. Fun at work (β = −.56, p < .05) and affective commitment (β =−.45, p < .05) were significant and negatively related to turnover intention. H2 and H5, which proposed that fun at work and affective commitment would be positively related to OCB, were supported. Fun at work (β = .48, p < .05) and affective commitment (β =.54, p < .05) were significant and positively related to OCB. H3, which proposed that fun at work would be positively related to affective commitment, was supported. Fun at work (β = .60, p < .05) was significant and positively related to affective commitment. H6 and H7, which proposed that affective commitment mediates the relationship between fun at work and turnover intention, and affective commitment mediates the relationship between fun at work and OCB, were supported. Affective commitment partially mediates fun at work and turnover intention with a total effect of −0.83, which is larger than the direct effect, and also partially mediates fun at work and OCB with total effect −0.81, which is larger than the direct effect. All hypotheses were supported. Table 1 shows the SEM analysis results.

Table 1. SEM analysis result. Turnover Intention Variable Fun at work Affective commitment

Affective commitment *

Indirect

Direct

Indirect

Direct

−0.27

−0.56 −0.45*

−0.32

0.48* 0.54*

*

0.60

OCB

*

*

*p < 0.05.

5 DISCUSSION AND CONCLUSION This study found that fun at work was negatively and directly related to turnover intention and was positively and directly related to OCB. In addition, fun at work is also more likely to increase the millennial generation’s affective commitment in the organization, and 54

consequently, have a more significant effect on reducing turnover intention and increasing OCB. This study provides evidence that implementing fun at work can help organizations manage millennial employees turnover rates. Creating a pleasant and comfortable work envir­ onment can also encourage them to give their best performance through OCB. Management in the organization is advised to be observant in seeing the emotional needs of millennials who will dominate in the bonus demographics era and have an essential role in the digital era. Management should adopt a communication style that is open and not hierarch­ ical; millennials like a relaxed work environment and intense communication. A pleasant work environment makes millennial employees feel emotionally attached to the organization, givingthem a sense of belonging and a feeling ofbeing part of the “family” in the organization. Growing employees’ affective commitment can have a beneficial impact on the organization. Fun at work is a good retention strategy for millennials, and also able to increase the OCB of employees to respond to positive measures provided by the organization. Organizations can provide pleasurable experiences in the work environment by holding regular social meetings outside the workplace, holding joint celebrations on work perform­ ance, supporting employees to socialize at work, and stressing the importance of friendly treatment between employees. Management also needs to encourage managers to care about employees who want to have fun by showing a flexible attitude and bringing a pleasant work­ ing atmosphere without ignoring the responsibilities of each employee. REFERENCES Allen, N. J., & Meyer, J. P. (1990). The measurement and antecedents of affective, continuance and nor­ mative commitment to the organization. Journal of Occupational Psychology, 63, 1–18. Baldry, C., & Hallier, J. (2009). Welcome to the house of fun: Work space and social identity. Economic and Industrial Democracy, 31, 150–172. Becker, F. W. (2012). The impact of fun in the workplace on experienced fun, work engagement, con­ stituent attachment, and turnover among entry-level service employees. Bejtkovsky, J. (2016). The employees of baby boomers generation, generation X, generation Y and gener­ ation Z in selected Czech corporations as conceivers of development and competitiveness in their corporation. Journal of Competitiveness, 8, 105–123. Bozeman, D. P., & Perrewé, P. L. (2001). The effect of item content overlap on organizational commit­ ment questionnaire-turnover cognitions relationships. Journal of Applied Psychology, 86, 161–173. BPS (2018). Statistik gender tematik: Profil generasi milenial Indonesia. Kementerian Pemberdayaan Per­ empuan Dan Perlindungan Anak. Coyle-Shapiro, J. A. M., Kessler, I., & Purcell, J. (2004). Exploring organizationally directed citizenship behaviour: Reciprocity or ‘it’s my job’? Journal of Management Studies, 41, 85–106. Fleming, P. (2016). Workers’ playtime? The Journal of Applied Behavioral Science, 41, 285–303. Fluegge, E. R. (2014). Play hard, work hard. Management Research Review, 37, 682–705. Foote, D. A., & Li-Ping Tang, T. (2008). Job satisfaction and organizational citizenship behavior (OCB). Management Decision, 46, 933–947. Ford, R. C., McLaughlin, F. S., & Newstrom, J. W. (2003). Questions and answers about fun at work. Human Resource Planning, 26. Gin Choi, Y., Kwon, J., & Kim, W. (2013). Effects of attitudes vs experience of workplace fun on employee behaviors. International Journal of Contemporary Hospitality Management, 25, 410–427. Howe, N., & Strauss, W. (2000). Millennials rising: The next great generation. New York: Vintage. Lowe, D., Levitt, K. J., & Wilson, T. (2008). Solutions for retaining generation Y employees in the workplace. Business Renaissance Quarterly, 3. McDowell, T. (2004). Fun at work: Scale development, confirmatory factor analysis, and links to organiza­ tional outcomes. Alliant International University, San Diego. Meyer, J. P., & Allen, N. J. (1997). Commitment in the workplace: Theory, research, and application. Thousand Oaks, CA: SAGE. Mowday, R. T., Porter, L. W., & Steers, R. M. (2013). Employee—organization linkages: The psychology of commitment, absenteeism, and turnover. San Diego: Academic Press. Organ, D. W., & Ryan, K. (1995). A meta-analytic review of attitudinal and dispositional predictors of organizational citizenship behavior. Personnel Psychology, 48, 775–802.

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Paillé, P. (2013). Organizational citizenship behaviour and employee retention: How important are turn­ over cognitions? The International Journal of Human Resource Management, 24, 768–790. Podsakoff, P. M., MacKenzie, S. B., Paine, J. B., & Bachrach, D. G. (2000). Organizational citizenship behaviors: A critical review of the theoretical and empirical literature and suggestions for future research. Journal of Management, 26, 513–563. Robbins, S. P., & Judge, T. A. (2017). Organizational behavior (17th ed.). Upper Saddle River, NJ: Pear­ son Education. Smith, C., Organ, D. W., & Near, J. P. (1983). Organizational citizenship behavior: Its nature and antecedents. Journal of Applied Psychology, 68, 653. Tett, R. P., & Meyer, J. P. (1993). Job satisfaction, organizational commitment, turnover intention, and turnover: path analyses based on meta-analytic findings. Personnel Psychology, 46, 259–293. Tews, M. J., Michel, J. W., & Bartlett, A. (2012). The fundamental role of workplace fun in applicant attraction. Journal of Leadership & Organizational Studies, 19, 105–114. Tews, M. J., Michel, J. W., & Stafford, K. (2013). Does fun pay? The impact of workplace fun on employee turnover and performance. Cornell Hospitality Quarterly, 54, 370–382.

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

The effect of role overload on organizational citizenship behavior of national standardization agency employees mediated by employee exhaustion and moderated by supervisor autonomy support D.N. Sari & P.M. Desiana Universitas Indonesia, Jakarta, DKI Jakarta, Indonesia

ABSTRACT: The objective of this research is to examine the effect of role overload on organizational citizenship behavior (OCB) of the National Standardization Agency (BSN) employees, mediated by emotional exhaustion and moderated by supervisor autonomy support. The proposed model is based on the Conservation of Resource theory and the theory of Self-Determination. All data were collected from 212 perman­ ent employees of BSN using an online survey and analyzed using SEM-PLS. Based on the analysis, role overload was found to have an indirect and negative effect on OCB through emotional exhaustion. Additionally, supervisor autonomy support was found to buffer the negative relationship between role overload and emotional exhaustion. These findings help us understand the intervening variable that explains the negative relationship between OCB and role stressors. Furthermore, the finding provides infor­ mation about managerial practices at government agencies to reduce the negative effects of excessive workloads.

1 INTRODUCTION One of the implications of the Technical Barriers to Trade (TBT) agreements for Indo­ nesia is the country’s readiness to use instruments other than tariffs in limiting trade traffic between countries. The instrument that allows such restrictions is the application of national standards. National Standardization Agency (BSN), as a government agency in Indonesia, is responsible for standardization and conformity assessment activities. To carry out its functions and tasks, BSN requires competent human resources to support the achievement of BSN performance goals. The performance of BSN is basically influenced by the level of performance of its employees. In 2017, BSN prepared an action plan to evaluate its human resource management program to improve employee performance and competence. To support the program, BSN employees are required to not only work under specified standards but also work beyond the requirement of the task. Likewise, BSN employees are required to behave by organizational expectations, not only based on their job description (in-role) but also on OCB (Sloat 1999). The factor that affects OCB is role overload. While the number of human resources is less than the need of the institution, many BSN employees work beyond regular work hours i.e. 8 hours a day. This fact indicates that there is excessive workload experienced by BSN employees due to a lack of available resources in completing their work. The Conservation of Resource Theory (Hobfoll 2002) suggests that to protect the loss of resources, individuals must invest resources to ensure and improve the process of resource acquisition. Related previous research also reports that high workloads will

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make employees more vulnerable to the loss of resources (i.e. time and energy). In fact, the resources are needed to maintain discretionary behavior and the loss of resource may leads to increased emotional exhaustion and ultimately reduces OCB (Gorgievski & Hobfoll 2008). In addition, based on the Self-Determination Theory, if the employees receive broad autonomy supports from supervisors, they will get a buffer against the depletion effect of resources from role overload (Montani & Dagenais-Desmarais 2018). Thus the employees will be protected from emotional exhaustion and further OCB. Based on the problem mentioned earlier, this research aims to provide information on the effect of role overload on organizational citizenship behavior of BSN employees both directly, and indirectly mediated by emotional exhaustion and moderated by super­ visor autonomy support.

2 LITERATUR REVIEW Organizational Citizenship Behavior (OCB) refers to an individual discretionary behavior that is indirectly or explicitly approved by the formal appraisal system, but in aggre­ gately or overall encouragement to the organizational functions effectively (Organ 1988). Role overload refers to a dimension of role stressor, which illustrates a situation of incompatibility between work volume and time provision to accomplish work (Lambert & Lambert 2001). Meanwhile, emotional exhaustion is considered one of the three burn­ out components. It is defined as a condition where the emotion and motivation on related resources are restricted and regarded as a significant signal of employee burnout (Halbesleben & Buckley 2004). The Conservation of Resources Theory asserts that the perception of overload work responsibility or role overload would waste time and indi­ vidual energy resources (Montani & Dagenais-Desmarais 2018). Thus, it can increase the possibility of exhaustion reaction which in turn, will prevent the employee from resource investment to perform OCB. The theory of Self-Determination identifies three basic requirements that are important to the individual psychological welfare: autonomy, competence, and relatedness (Ryan & Deci 2000). According to this theory, the supervisor is regarded as capable of supporting autonomy and motivating the subordinates to engage in all activities and behaviors, which can reflect self-determination (Grant & Ashford 2008). The employee who has autonomy support from the supervisor will tend to set completion strategies actively that can develop employee capacity to actively overcome the impacts of role overload (Ito & Brotheridge 2003).

3 METHOD 3.1 Participants and procedure The data in this study were collected from BSN through an online survey between September and October 2019. The respondents who took part in this research permanent employees of BSN. After eliminating 25 incomplete responses, the final sample comprised of 212 participants. 3.2 Measures The questionnaire used in this research was taken and adapted from previous research for OCB (Podsakoff et al. 1990), role overload and emotional exhaustion (Cho et al. 2014), and super­ visor autonomy support from the Work Climate Questionnaire (Rochester 2014). The measure­ ment scale used a six-point Likert scale. The data were then analyzed by using the structural equation technique or Structural Equation Modeling-Partial Least Square (SEM-PLS).

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3.3 Hypothesis There are 3 hypotheses in this study: Hypotheses 1 (H1): role overload will be directly nega­ tively related to OCB. Hypotheses 2 (H2): role overload will be indirectly negatively related to OCB mediated by emotional exhaustion. Hypotheses 3 (H3): supervisor autonomy support will be indirectly negatively moderated the relationship between role overload and OCB medi­ ated through emotional exhaustion. Hence the indirect relationship will be weaker when the supervisor’s autonomy support is higher.

4 RESULTS The results of the PLS Structural Equation Modeling suggested that the hypothesized model fit the observed data adequately, covering APC = 0.230, p < 0.001, ARS = 0.168, p = 0.003, AARS = 0.160, p = 0.004, and AVIF = 1.053, thus the values were acceptable. Table 1 pre­ sents the results of SEM analyses. The structural modeling result in Table 2 supports all of the hypothesized relation­ ships except Hypotheses 1, in which role overload was directly and negatively related to OCB (β ¼ 0:032 and p = 0.32). The effect of role overload on emotional exhaustion at high and low levels of supervisor autonomy support (SAS) is illustrated in Figure 1 Based on the figure, the relationship between role overload and emotional exhaustion is positive and significant when supervisor autonomy support is low. However, the signifi­ cance of the relationship decreases when the moderator is high. The data therefore, is support Hypotheses 3.

Table 1.

SEM analysis result. OCB

Variable

Emotional Exhaustion

Indirect

Role Overload Role Overload x SAS Emotional Exhaustion Total R2

0.41** – 0.12*

– 0.148**

0.032

0.21*

0.13**

–0.36** 0.13

Direct

*p0.50). 4.2 Structural model Contrary to our expectation, the impact of push factors is modest, rejecting H1 (t=-0.33). In comparison, pull factors have significant positive effects on switching intention, accepting H2 (t=8.18). Mooring factors also have positive impacts on switching intention, accepting H3 (t=-4.34). Mooring factors have moderating effects on the relationship between push fac­ tors and switching intention with negative impacts, accepting H4 (t=-2.17). However, mooring factors have no effect on the relationship between pull factors and switching intention, reject­ ing H5 (t=-0.52), as shown in Figure 1. 5 DISCUSSION Push factors (service quality, price, and value) have no influence on consumers’ switching intention in cable Internet services. Service quality, which refers to the assessment of responsiveness, assurance, empathy, tangible, and reliability, does not have any signifi­ cant impact because Internet service providers have limited interaction with customers and front liners. Internet service providers are currently offering bundled Internet services in combination with other services so that the quality assessment is on not only the Internet but also other factors from pull and mooring categories. Pull factors have an influence on switching intention, consistent with the research results by Sun et al. (2017)

Figure 1.

Research model and result.

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that the availability of alternative service providers that are more attractive and subject­ ive norms can strengthen costumer switching intention. Mooring factors have an influ­ ence on switching intention. These results are also in line with Sun et al. (2017) which found that inertia and commitment can weaken costumer switching intention. Inertia and commitment can be influential because the majority of respondents in this research had been using Internet services for more than a year. Mooring factors as a moderation have a significant value affecting the relationship between push factors and switching intention. Nonetheless, mooring factors have no influence on the relationship between pull factors and switching intention. This is caused by the alternative attractiveness from each provider with regards to its respective com­ petitive advantages so that consumers can easily choose the service that is most appropri­ ate for their needs. 5.1 Practical implications Concerning the pull and mooring factors, to minimize consumer switching intention in fixed Internet services, companies must be able to create innovations in providing Internet services that are in accordance with consumers’ needs. Innovation can be a competitive advantage for cable Internet providers when compared to other service providers. Innovation can be in the form of services with the latest technology, easier ways to pay bills, and new marketing strat­ egies. Companies also need to increase integrated marketing communication activities by carrying out campaigns which promote the advantages of their product compared to competi­ tors. Companies can do it digitally to make it easier for consumers to obtain information more fully, transparently, and reliably, such as on the companies’ official social media and by improving SEO (Search Engine Optimizer). Other than that, doing pop-up advertising on social media with a target market in regional locations that have been reached by the service can be an alternative digital marketing. 5.2 Limitation and future research This study aims to analyze costumer switching intention in Internet services as an individual service, while there is a possibility that the services widely used by respondents is the Internet bundling with other services (telephone, TV channels, online streaming movie accounts, etc.). Future research can examine bundled products as a whole because each kind of service has different benefits for different respondents. REFERENCES Ajzen, I. (1991). The theory of planned behavior. Organizational Behavior and Human Decision Pro­ cesses, 50(2). doi: https://doi.org/10.1016/0749-5978(91)90020-T Bansal, H. S. (2005). “Migrating” to New Service Providers: Toward a Unifying Framework of Con­ sumers’ Switching Behaviors. Journal of the Academy of Marketing Science, 33(1), 96–115. doi: 10.1177/0092070304267928 Barnes, W., Gartland, M., & Stack, M. (2004). Old Habits Die Hard:Path Dependency and Behavioral Lock-in. Journal of Economic Issues, 38(2), 371–377. doi: http://dx.doi.org/10.1080/ 00213624.2004.11506696 Beneke, J., & Zimmerman, N. (2014). Beyond private label panache: the effect of store image and per­ ceived price on brand prestige. Journal of Consumer Marketing, 31(4). doi:https://doi.org/10.1108/ JCM-12-2013-0801 Chang, H. H., Wang, K. H., & Li, S. Y. (2017). Applying Push-Pull-Mooring to Investigate Channel Switching Behaviors: M- shopping Self-Efficacy and Switching Costs as Moderators. Electronic Com­ merce Research and Applications. doi: http://dx.doi.org/10.1016/j.elerap.2017.06.002 Chen, Y.-H., & Keng, C.-J. (2019). Utilizing the Push-Pull-Mooring-Habit framework to explore users’ intention to switch from offline to online real-person English learning platform. Internet Research, 29(1), 167–193. doi: 10.1108/intr-09-2017-0343

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Hashim, K. F., & B.Tan, F. (2015). The mediating role of trust and commitment on members’ continu­ ous knowledge sharing intention: A commitment-trust theory perspective. International Journal of Information Management, 35(2). doi: https://doi.org/10.1016/j.ijinfomgt.2014.11.001 Jung, J., Han, H., & Oh, M. (2017). Travelers’ switching behavior in the airline industry from the per­ spec-tive of the push-pull-mooring framework. Tourism Management, 59. doi: https://doi.org/10.1016/ j.tourman.2016.07.018 Lin, K.-Y., Wang, Y.-T., Hsuan-Yu, & Hsu, S. (2017). Why do people switch mobile platforms? The moderating role of habit. Internet Research, 27(5). doi:https://doi.org/10.1108/IntR-04-2016-0087 Malhotra, N. K. (2010). Marketing Research. Moon, B. (1995). Paradigms in migration research: exploring ‘moorings’ as a schema. Progress in Human Geography, 19(4), 504–524. doi: 10.1177/030913259501900404 Sun, Y., Liu, D., Chen, S., Wu, X., Shen, X.-L., & Zhang, X. (2017). Understanding users’ switching behavior of mobile instant messaging applications: An empirical study from the perspective of pushpull-mooring framework. Computers in Human Behavior. doi: http://dx.doi.org/10.1016/j. chb.2017.06.014 Zeithaml, V. A. (1988). Consumer Perceptions of Price, Quality, and Value: A Means-End Model and Synthesis of Evidence. Journal of Marketing, 52(3).

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The employment relationship, turnover, and organizational performance in garment factories: A conceptual paper L. Damaryanti & P. Wulandari University of Indonesia, Depok, West Java, Indonesia

ABSTRACT: The objective of this study was to explore and identify important constructs and develop propositions of the employment relationship, turnover, and organizational performance in garment factories context. The apparel revenue of garment and textile industries in Indonesia achieved was approximately USD 16 billion in 2018. However, a study showed that the industry is weakened by poor working conditions and abusive practices. Those poor working conditions give rise to costs for the company in the form of accidents, injuries, absenteeism, lower productivity, and high employee turnover. Employee turnover has been an important issue to study the antecedents and consequences of organizational performance. We summarize the employment relationship, turnover, and organizational performance as a system that is divided into antecedents, processes, and outcomes. Propositions are provided on potential antecedents of turnover and possibly associated with organizational performance.

1 INTRODUCTION Mordor Intelligence states that from 2019 through 2024 (prediction period), the Indonesian textiles industry is expected to achieve 5.74% of the compound annual growth rate (CAGR). All textile exports increased 8% on a year-on-year basis in 2018 as reported by the Indonesian Textile Association (API). Mordor Intelligence also reports that garment segments contributed 22.23% by volume and 38.13% by revenue in 2018. The apparel revenue of the garment and textiles industry in Indonesia achieved was approximately USD 16 billion in 2018.1 In the first quarter of 2019, textile and clothing industries successfully grow 18.98%. This achievement is much better than the achievement in the first quarter of 2018, of about 7.46%. It even exceeds the achievement in 2018 of 8.73%.2 The Bulletin of Indonesian Garment and Footwear Sectors reported that Garment, Textile, and Footwear (GTF) in 2016 have offered employment to 4.2 million workers in 2016. A large number, 35.3%, are women.3 In a Better Work Program, Tufts’ research team has collected data of survey from 15,000 garment workers and 2,000 factory managers in Haiti, Indonesia, Jordan, Nicaragua, and Vietnam. The purpose is to provide evidence on how the program will impact factory working conditions, performance, and global supply chain competitiveness. However, an early study showed that the industry is disturbed by poor working conditions, such as long working hours, low wages, and insufficient occupational safety and health standards as well as abusive practices such as verbal and sexual harassment. Those poor working conditions give rise to

1. https://www.mordorintelligence.com/industry-reports/indonesia-textiles-industry 2. https://katadata.co.id/berita/2019/05/12/sepanjang-kuartal-i-2019-industri-tekstil-dan-pakaian-melonjak­ 1898 3. https://www.ilo.org/wcmsp5/groups/public/asia/ro-bangkok/ilojakarta/documents/publication/wcms_625195. pdf

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costs for the company in the form of accidents, injuries, absence, lower productivity, and high employee turnover.4 Workers are well known as the assets in twentieth-century management, as they represent the company’s values and control their workplaces as well as attain strategic business prior­ ities. The company should invest in people as a high priority. It is a contradiction if a company defines an asset as something that can produce service value in the future, can be owned or controlled, and valued in terms of money. But indeed, the workers perform the ser­ vices that create financial value. The new term human capital do not consider workers as human capital but rather as human capital’s owners and investors (Davenport, 1999). A study conducted by Boston Consulting Group in “Creating People Advantage 2014–2015: How to Set Up Great HR Functions” concludes that HR capability is related to economic performance where the companies having such strong capabilities on HR topics such as talent and leadership, engagement, behavior and management, HR culture, and strat­ egy in planning and analysis increase their financial performance more significantly than weak companies in those areas. Scholars have advised on a well-designed strategic approach that is in line with HR practices that will ensure better organizational effectiveness and performance (Jayaraman, Talib, & Khan, 2018). Employee turnover has been an important issue to study the antecedents and consequences of organizational performance (Hausknecht & Trevor, 2010). A conceptual paper explores, identifies important constructs, and develops propositions for the employment relationship, turnover, and organizational performance in the context of garment factories. A conceptual paper or nonempirical study is different from an empirical study. It has three types of object­ ives: first as a theoretical article that is familiar with its model and proposes a new conceptual model; second, as a summary of existing literature or well known as a substantive reviewi art­ icle; and third is as a critique confirming which area of study is going in the wrong direction (Gilson & Goldberg, 2015; Cropanzano, 2009; Kozar, 2009).

2 LITERATURE REVIEW The traditional paradigm in HR function with a mission as a business partner helps to achieve the company’s goals by providing excellent services to help manage the assets of the company, namely its people. The focus has extended to supportive decisions depending on or impacting people to achieve a successful organization. The decisions made by organizations are driven by one of four approaches (Bodreau & Ramstad, 2007). A previous study showed that high-commitment HR practices were positively related to job satisfaction on the mediating effect of psychological contracts and job securities. Highcommitment HR practices were positively related to employee performance on the mediating effect of perceived organizational support (Latorre, Gracia, & Guest, 2016). Resilience was known as a phenomenon that had a positive psychological capacity that was positively related to job satisfaction (Siu et al., 2009; Youssef & Luthans, 2007). Empowerment was positively related to job satisfaction (Kirkman & Rosen, 2010). Job sat­ isfaction was negatively related to turnover intention and positively related to employee per­ formance (Allen, Shore, & Griffeth, 2003; Latorre, Gracia, & Guest, 2016). The effect of turnover level on organizational performance varies on context or systems in which it occurs (Arthur, 2015). Turnover is negatively significantly related to organizational performance. Quality and safety mediate the relationship between turnover and financial performance (Hancock et al., 2013). A previous empirical study of the Indonesian garment industry showed that the dimension of working conditions (compensation, giving birth, work safety, supervisory relationship, company’s rules, promotion) and the individual dimension (the objective of working, future

4. https://betterwork.org/dev/wp-content/uploads/2016/09/BW-Progress-and-Potential_Web-final.pdf

80

achievement, and having more time at home) were much better in the Better Work Programs in Indonesia factories compared to the Indonesia factories not involved in such Better Work Programs (Satrya et al., 2017). Another study indicated that gender moderated the influence between psychological condition and the physical health of workers (Nandini & Wahyuni, 2019). Then we can see the influence of empowerment and workload on turnover intention on the mediation of emotional exhaustion, where empowerment is negatively related to turn­ over intention and there is no significant relationship of the workload to turnover inten­ tion. It also showed that emotional exhaustion fully mediated the relationship between the workload and turnover intention (Pradita & Satrya, 2019). The other studies showed that employee development had a positive impact on empowerment as well as job security through a growth mindset that finally minimized an emergence of turnover intention (Ayu & Wahyuni, 2019). We summarize the employment relationship, turnover, and organizational performance as a system that is divided into antecedents, processes, and outcomes. The conceptual framework is described in Figure 1.

3 PROPOSITIONS AND MODEL PROPOSED From the conceptual framework described the employment relationship, turnover, and organ­ izational performance propositions on potential antecedents of turnover are:

P1a. Use of high commitment HR practices is associated with lower collective turnover.

P1b. Certain collective attitudes and perceptions are negatively related to collective turnover.

Propositions on turnover and organizational performance are:

P2a. Quality and safety mediate the relationship between turnover and financial performance.

P2b. Turnover is negatively significantly related to organizational performance.

Figure 1.

Conceptual framework.

81

4 CONCLUSION The objective of this study was to explores and identify important constructs and to develop propositions for the employment relationship, turnover, and organizational performance in the context of garment factories. We summarized the employment relationship, turnover, and organizational performance into antecedents, processes, and outcomes. Our contributions here are the propositions on potential antecedents of turnover and possibly associated with organizational performance. REFERENCES Allen, D. G., Shore, L. M., & Griffeth, R. W. (2003). The role of perceived organizational support and supportive Human Resource practices in the turnover process. Journal of Management, 29(1), 99–118. https://doi.org/https://doi.org/10.1177/014920630302900107. Arthur, J. B. (1994). Effects of Human Resource systems on manufacturing performance and turnover. Academy of Management, 37(3), 670–687.https://doi.org/http://dx.doi.org/10.2307/256705. Ayu, K. S., & Wahyuni, S. (2019). Minimizing the turnover intention by employee development in gar­ ment companies. Journal of Applied Management, 17(30), 171–178. https://doi.org/10.21776/ub. jam.2019.017.01.19. Cropanzano, R. (2009). Writing nonempirical articles for Journal of Management: General thoughts and suggestions. Journal of Management, 35(6), 1304–1311. https://doi.org/10.1177/0149206309344118. Davenport, T. O. (1999). Human capital: What it is and why people invest it. New York: John Wiley & Sons Inc. Retrieved from https://www.wiley.com. Gilson, L. L., & Goldberg, C. B. (2015). Editors’ comment: So, what is a conceptual paper? Group & Organization Management, 40(2), 127–130. https://doi.org/10.1177/1059601115576425. Hancock, J. I., Allen, D. G., Bosco, F. A., McDaniel, K. R., & Pierce, C. A. (2013). Meta-analytic review of employee turnover as a predictor of firm performance. Journal of Management, 39(3), 573–603. https://doi.org/10.1177/0149206311424943. Hausknecht, J. P., & Trevor, C. O. (2010). Collective turnover at the group, unit, and organizational levels: Evidence, issues, and implications. Journal of Management, 37(1), 352–388. https://doi.org/ 10.1177/0149206310383910. Jayaraman, S., Talib, P., & Khan, A. F. (2018). Integrated talent management scale: Construction and initial validation. SAGE Open, (44), 1–12. https://doi.org/10.1177/2158244018780965. Kirkman, B. L., & Rosen, B. (1999). Beyond self-management: Antecedents and consequences of team empowerment. Academy of Management, 42(1), 58–74. Retrieved from http://www.jstor.org/stable/256874. Kozar, J. M., & Connell, K. Y. H. (2015). Sustainability in the apparel and textiles industry: A conceptual paper addressing previous findings and areas of future research. In L. Robinson, Jr. (ed.), Marketing dynamism & sustainability: Things change, things stay the same. (pp. 229–237). Devel­ opments in Marketing Science: Proceedings of the Academy of Marketing Science. Cham, Switzer­ land: Springer. https://doi.org/https://doi.org/10.1007/978-3-319-10912-1_76. Latorre, F., Gracia, F. J., & Guest, D. (2016). High commitment HR practices, the employment relation­ ship and job performance: A test of a mediation model. European Management Journal, 34, 328–337. https://doi.org/10.1016/j.emj.2016.05.005. Nandini, W., & Wahyuni, S. (2019). Analisa Gender dan Pentingnya Kondisi psychological wellbeing Buruh di Tempat Kerja. Jurnal Riset Manajemen Sains Indonesia (JRMSI), 10(1), 71–95. https://doi. org/doi.org/10.21009/JRMSI.010.1.04. Pradita, N. N., & Satrya, A. (2019). The influence of empowerment and workload on turnover intention through the mediation of emotional exhaustion on Indonesian garment workers. International Journal of Scientific & Engineering Research, 10(1), 82–87. Satrya, A., Wulandari, P., Pramesti, M., Wahyuni, S., & Zuhdi, M. (2017). Working condition and qual­ ity of life for female workers in garment factories in Indonesia. Advances in Economics, Business and Management Research, 36, 335–346. Siu, O., Hui, C. H., Phillips, D. R., Lin, L., Wong, T., & Shi, K. (2009). A study of resiliency among Chinese health care workers: Capacity to cope with workplace stress. Journal of Research in Personal­ ity, 43(5), 770–776. https://doi.org/10.1016/j.jrp.2009.06.008. Youssef, C. M., & Luthans, F. (2007). Positive organizational behavior in the workplace: The impact of hope, optimism, and resilience. Journal of Management, 33(5), 774–800. https://doi.org/10.1177/ 0149206307305562.

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Analysis of the effect of servicescape and coffee quality on customer satisfaction using an experiential marketing and brand identity approach in Anomali Coffee, Senopati Jakarta as a case study A.L. Larasati & A.Z. Afiff University of Indonesia, Jakarta, Indonesia

ABSTRACT: Brand identity as an intangible existence has a robust perception in the mind of customers, which in this case focuses on the food and beverages (F&B) industry. The phys­ ical evidence of servicescape plays a major role in delivering brands by creating a concept that lies within what? This concept has a very close relationship with space in architecture. The way of space is built by concept with its elements; it creates identity through spatial concept as well as the marketing way of telling stories through experience. The objective of this study is to examine experience through experiential marketing in servicescape of three well-design cafes by renowned architects in Java, Indonesia. The components of the research are focused on the experiencing process by customers towards experiential value that leads to customer satisfac­ tion. The research method consists of in-depth interviews with all of the object’s architects and owners to match the brands’ identity and their spatial concept that will be the basis of twelve hypotheses of customer experience. Furthermore, marketing will not be enough to be told only from customer orientation but also the sense of space that creates an intertwined story. 1 INTRODUCTION Coffee drinking has become a trend that has changed urban lifestyles quite drastically. A lot of coffee shops, especially in Jakarta, Indonesia, have rapidly grown into massive businesses, and their number has risen by above 50% each year. The third-wave phenomenon has an impact on the red ocean strategu in the coffee shop market. Marketers are striving to find their competitive advantage in the service industry to compete and deliver their servicescape, from the uniqueness of the service intangibility to the tangible elements. The needs to lure consumers to come and buy a paper cup of coffee is the goal of service industry. The multi-attributes of the decision making process by consumers consist a bundle of attitudes that will lead consumer preferences to the chosen coffee shop. Their behavior as utilitarian buyers who are entering into hedonic consumption can be caused by the tangible elements, one of which is physical evidence. The choice between one coffee shop and another determines each of the coffee shops’ brand identity. In this study, a cross-examination was conducted on two different fields, namely marketing and architecture, which are undoubtedly related in establishing a comprehensive brand iden­ tity which derives from spatial concept. The concept will be the main idea of finding the com­ petitive advantage between coffee shops. 2 LITERATURE Space is considered an essential factor in any reflections on architecture (Alvirevic, 2016). Space is not only a place of belonging. It has a deeper meaning for enhancing an imperceptible 83

sensation that works beyond just senses. Furuyama (1996) stated that space is architecture’s private expressive territory. It means a true fascination of architecture and also the fascination of space. The concept in both the art-related space and marketing exists to deliver the most essential value. Lovelock (2016) stated that designing a service environment is an art that involves a lot of time and effort and is undeniably expensive. The intangible factors that will be difficult to pre­ sent to the customers can be delivered by means of spatial feeling that is created from space. The design itself is a crucial point of brand identity to shape customers’ perception and raise their awareness. To deliver services, service industries need to achieve their 7Ps and find their value creation. Thematic cafes and other retailers try to compete with each other to find their character and identity. This is similar to an architect who makes a creation through a design process to brand his/her identity. To ensure the identification of the brand with which customers has associations in their mind, each of the elements needs to be an awareness that is formed into attributes in charge. Servicescape is a physical form of the environment that is formed as a container of service delivery. Thus, physical evidence is evaluated by the customers and can create satisfaction through experience during and after the service occurs. It is concluded that servicescape and physical evidence work to create experiences of a customer that are then derived into a value of experiencing process. This value will lead into a feeling of satisfaction.

3 METHODOLOGY The study was conducted in three cafes in Jakarta and Tangerang. The perspective of this study is Anomali Cafe in Senopati, South Jakarta. The respondents of this study were 164 customers of Anomali Coffee Senopati who had visited the cafe in the past six months and consumed drinks served in Anomali Coffee. The cronbach alpha and item-total correlation were used to check the reliability for the questionnaire items. After that, an exploratory factor analysis (EFA) was employed to explore the dimensions of each construct. Subsequently, a confirmation factor analysis (CFA) was used to confirm the measurement model. This research used a structural equation modeling (SEM) to test the theoretical model.

4 HYPOTHESES TESTING RESULT H1a: Sense Perception does not have any positive relationship with Functional Value H1b: Sense Perception has a positive relationship with Emotional Value H1c: Sense Perception does not have any positive relationship with Novelty Value H2a: Feel Perception does not have any positive relationship with Functional Value H2b: Feel Perception has a positive relationship with Emotional Value H2c: Feel Perception has a positive relationship with Novelty Value H3a: Think Perception does not have any positive relationship with Functional Value H3b: Think Perception does not have any positive relationship with Emotional Value H3c: Think Perception has a positive relationship with Novelty Value H4a: Coffee Quality has a positive relationship with Functional Value H4b: Coffee Quality has a positive relationship with Emotional Value H4c: Coffee Quality has a positive relationship with Novelty Value H5: Functional Value has a positive relationship with Customer Satisfaction H6: Emotional Value has a positive relationship with Customer Satisfaction H7: Novelty Value has a positive relationship with Customer Satisfaction The results of the hypotheses testing in Anomali Coffee Senopati show that: 1) sense per­ ception affects customer satisfaction through emotional value; 2) feel perception affects 84

Table 1. Construct measurement scales. Construct

Definition

Sense

The message that comes from the human sense

Feel

Think

Coffee Quality

Functional Value

Emotional Value

Novelty Value

Customer Satisfaction

Measurement

Color Material Light Smell Music Taste The emotional feeling through Friendliness experience Sincerity Reliability The curiosity that comes from Surprise experience Curiosity Comfortable The perception of coffee beverage Quality products served to the customers Taste Aroma The value that customers get from Satisfactory the money they give price Convenience Satisfactory services The emotional feeling that customers Good feeling get from the brand they choose Relaxation Memory experience The attractiveness and curiosity Authentication towards things Strangeness and difference Challenge desire for knowledge Satisfaction value that comes from Satisfactory all of the experience sequences ambience Satisfactory coffee Satisfactory staffs Good choice

Reference Schmitt (1997)

Schmitt (1997)

Schmitt (1997)

Hoffman (2014)

Sweeney & Soutar (2001),

Nadiri & Gunay (2013)

Sweeney & Soutar (2001), Nadiri & Gunay (2013)

Pham & Huang (2015)

Parasuraman (1988)

customer satisfaction through emotional and novelty value; 3) think perception affects cus­ tomer satisfaction through novelty value; and, 4) coffee quality affects customer satisfaction through customer experiential values.

5 DISCUSSION AND IMPLICATION 5.1 Discussion This study explored experiential marketing by examining the servicescape of Anomali Coffee through its brand identity. The customer experience components of experiencing processes are correlated with customer satisfaction in the cafe through experiential values, including the functional, emotional, novelty values in the F&B industry pertaining to coffee beverages. The main significance of this research result is the importance of a well-design servi­ cescape. The concept of ideas is derived from each of the brand identity that forms Anomali’s coffee brand essence. The importance of the concept through servicescape 85

can be a distinctive physical evidence that leads customers’ preference for Anomali’s coffee. 5.2 Implication This study has limitations due to the selection of objects, data collection techniques, and the number of respondents. If this research was carried out using different objects and sampling techniques with a different number of respondents, it would produce a dissimilar hypothesis effect. Suggestions proposed to Anomali Cafe is to improve its servicescape through support­ ing elements, such as air conditioning, exhaust, and a strong coffee aroma to enhance the atmosphere of the cafe. Increasing consumers’ convenience needs to be done to improve func­ tional and novelty values through adequate servicescape. REFERENCES Avirevic et al. (2016). Interpretations of Space Within Space Concept in Contemporary Open-Plan Architecture. Research Gate. Furuyama, Masao. (1996) Tadao Ando / Masao Furuyama. Boston: Studiopaperback. Lovelock, Christopher H. Wirtz, Jochen. (2016). Services Marketing: people, technology, strategy. New Jersey: World Scientific.

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The influence of school climate, social-emotional learning, and proactive personality on job satisfaction of PAUD teachers mediated by teaching efficacy in Depok, West Java, Indonesia F.A. Fanhandaya & A. Satrya Faculty of Economics and Business, Universitas Indonesia, Indonesia

ABSTRACT: Early childhood education is an investment because, at that age, around 50 percent of intelligence is developed. PAUD is known as early childhood education in Indo­ nesia. Depok is a city that borders directly with the capital city of Indonesia and currently facing various urban problems, especially in education. Teachers as educators are important for the PAUD education system to work. The teachers should be highly qualified in teaching, and have abundant knowledge of child development and the PAUD education system. It can be seen from the level of teaching efficacy and job satisfaction of teachers. Variables that can increase job satisfaction are school climate, social-emotional learning (SEL), and proactive personality mediated by teaching efficacy. This research aims at examining the influence of school climate, SEL, and proactive personality on job satisfaction mediated by teaching effi­ cacy. This research employed a quantitative research method with a questionnaire to collect data. The sample was 222 PAUD teachers in Depok. The structural equation model is used to prove the stated hypotheses. The result showed that the school climate and proactive person­ ality had a direct effect on job satisfaction and teaching efficacy mediated effect on job satis­ faction. There was no mediating and direct effect between SEL and job satisfaction.

1 INTRODUCTION Job satisfaction is one of the most widely researched topics but research related to early child­ hood educators is relatively little (Kusma, Groneberg, Nienhaus, & Mache, 2012). Teacher’s job satisfaction is important to be examined because it can prevent a teacher from fatigue and friction (Veldman, van Tartwijk, Brekelmans, & Wubbels, 2013), because teachers are the lar­ gest capital or resource for a school. Teachers who are satisfied with their job will tend to sur­ vive in their profession, have a positive attitude towards teaching, and maintain a positive relationship with their colleagues (Crossman & Harris, 2006). Job satisfaction and teacher excellence will increase if they are in a healthy work environment (Ghavifekr & Pillai, 2016). Research in Malaysia shown that a positive and healthy school climate will increase not only teachers’ job satisfaction but also improve the school productivity (Veldman et al., 2013). Moreover, teachers’ job satisfaction is not only related to the school climate, but also the ability to apply social-emotional learning (SEL) and teacher proactive personality. Three inde­ pendent variables used in this research can have a direct effect on job satisfaction and indirect effect through teaching efficacy. Peng and Mao (2015) explained that individuals with high self-efficacy will be more confident in handling the tasks faced or given. Therefore, job satis­ faction will be more easily obtained. Klassen and Chiu (2010) found a direct relationship between teaching efficacy and job satisfaction. Indonesia has an early childhood education system which is known as PAUD. Depok is a city that borders directly with the capital city of Indonesia and attracts a lot of attention, especially in the field of education. Every year, the number of PAUD units, students, and edu­ cators in Depok is always increasing. This major issue must be considered by the government 87

to improve the quality of PAUD, especially the quality of educators. One can assume a direct causal relationship between job satisfaction of educator and their productivity at work. The low job satisfaction level of the teachers is one of the factors that influence the intention of the teachers to quit their job. Another research showed that turnover is more common in early childhood educators than in other teaching environments. This is difficult to tolerate because it is associated with the development of children and low-quality education services (Kusma et al., 2012). Therefore, the purpose of this research is to examine the influence of school cli­ mate, social-emotional learning, and proactive personality on job satisfaction on PAUD teachers mediated by teaching efficacy.

2 LITERATURE REVIEW Job satisfaction refers to a sense of fulfillment that is achieved, or gratification to the work completed (Locke, 1969). Since teachers constitute the greatest cost and human capital resource of a school, improving teachers’ sense of job satisfaction can help to reduce costs associated with high levels of teacher stress, including teacher absenteeism (Billingsley & Cross, 1992). Based on the teachers’ perspective, job satisfaction is obtained from the nature of day-to-day classroom activities, for instance acknowledging students’ progress, working with children, working with colleagues, and overall school climate. Another research has shown that teachers are generally satisfied with the aspects of their job related to their teach­ ing, but dissatisfied with the aspects that surround their job, including interpersonal relations, working conditions, and salary (Butt et al., 2005; Crossman & Harris, 2006; Dinham & Scott, 1998). In addition, teaching efficacy is a determinant of teachers’ job satisfaction (Caprara, Barbaranelli, Borgogni, & Steca 2003). H1. Teaching efficacy has a direct and significant positive influence on job satisfaction. Teaching efficacy is the assessment of teacher’s ability to produce the desired results of involvement of students in learning, and it even includes the involvement of students who may be difficult or unmotivated (Tschannen-Moran & Hoy, 2001). According to Hosford and O’Sullivan (2015), teaching efficacy is proven to be related to teachers’ perceptions of the school climate. If the school climate is worse, then it will decrease the sense of teaching effi­ cacy in the school. The school climate includes relationships between individuals at school, the teaching and learning process, the collaboration between teachers and administrative staff, and the support at school (Cohen, McCabe, Michelli, & Pickeral, 2009). Teaching efficacy can also be influenced by SEL. If a teacher does not believe that the teacher is competent in

Figure 1.

Path analysis.

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teaching SEL, this will have an impact on their teaching efficacy (Collie, Shapka, & Perry, 2012). Besides external influences and teaching process, the teacher’s personality also influ­ ences teaching efficacy. According to Li et al. (2017), teachers who have a proactive personal­ ity can trigger high self-efficacy. Thus, this proactive personality has a positive effect on teaching efficacy. H2. School climate has a direct and significant positive influence on teaching efficacy. H3. SEL has a direct and significant positive influence on teaching efficacy. H4. Proactive personality has a direct and significant positive influence on teaching efficacy. In addition to affecting teaching efficacy variables, school climate, SEL, and proactive per­ sonality variables also can directly affect job satisfaction variables. Klassen and Chiu (2010) suggested that the school climate will affect the work of teachers in schools. Teacher’s work supported by a positive school climate will have a positive influence on the teachers’ job satis­ faction. Similar to the school climate, teachers’ beliefs about SEL are related to their stressful feelings, teaching efficacy, and job satisfaction (Collie et al., 2012). Teachers with proactive personalities are relatively unconstrained by situational forces. They can identify opportunities that exist, act on them, and show initiative until meaningful change occurs (Crant, 2000). Thus, a proactive personality can foster individual job satisfaction. H5. School climate has a direct and significant positive influence on job satisfaction. H6. SEL has a direct and significant positive influence on job satisfaction. H7. Proactive personality has a direct and significant positive influence on job satisfaction. H8. Teaching efficacy mediates the influence of school climate on job satisfaction. H9. Teaching efficacy mediates the influence of SEL on job satisfaction. H10. Teaching efficacy mediates the influence of proactive personality on job satisfaction.

3 RESEARCH METHOD This research was quantitative research using primary data (questionnaire) and secondary data (database from Depok Education Office). The data were collected from 222 PAUD teachers who teach in Depok. All items in the questionnaire were measured using a 6-point Likert scale ranging from 1 (strongly disagree) to 6 (strongly agree) (Hills & Argyle, 2002). The respondents were comprised of 97.7% female and 2.3% male. The results were examined using structural equation model (SEM).

4 RESULT AND DISCUSSION This research used the Structural Equation Model (SEM) to examine the relationship between school climate, SEL, proactive personality, teaching efficacy, and job satisfaction. This research is one-tailed research in which the hypothesis will be accepted if t-value ≥ 1.64. Figure 1 showed that hypothesis 1 was supported (t-value = 7.69). It showed that the teach­ ing efficacy of PAUD teachers in Depok will significantly increase the level of job satisfac­ tion. If the teaching efficacy increases, the teacher will be more satisfied with their work. Hypothesis 2 (t value = 2.88), 3 (t-value = 2.17), and 4 (t-value = 8.26) were also supported. It indicated that supporting the school climate for the PAUD teacher, believing them in applying SEL on students, and having a proactive personality will increase the teaching effi­ cacy of the teachers. Hypothesis 5 (t-value = 6.48) and hypothesis 7 (t-value = 2.93) were supported. A positive school climate would also have a positive influence on teachers and students (Collie et al., 2012). Teachers who have proactive personalities are positively related to individual creativity, and they tend to update their knowledge and skills and can identify new work processes than passive individuals. Moreover, this is related to job satisfaction (Kim, Hon, & Crant, 2009; Kim, Hon, & Lee, 2010). The more supportive the condition of the school climate and the proactive personality of a teacher, the higher their job satisfaction will be. Hypothesis 6 was rejected (t-value = 0.49) because it is possible that not all teachers have identical SEL beliefs. 89

Beliefs may differ depending on the support, training, and experience they have about SEL. Teachers who work in schools that support SEL well and have experience related to SEL implementation will feel more positive about SEL compared to teachers who work in schools with less support of SEL, and teachers who lack confidence in the importance of SEL. There­ fore, teachers will not feel satisfied with SEL related to their job. Hypothesis 8 and 10 were supported. It indicated that school climate and proactive personality can influence job satis­ faction variables when they feel efficacy in teaching. However, hypothesis 9 was rejected because hypothesis 9 had insignificant value on the SEL variable on job satisfaction, so there was no mediating effect.

5 CONCLUSION In this research, school climate and proactive personality had a positive, significant, direct, and indirect influence on job satisfaction of PAUD teachers in Depok. Teachers who have a proactive personality will tend to feel satisfied in their work because they renew individual creativity, knowledge, and skills, and they can also identify new work processes compared with passive individuals. The school climate also has a positive significant influence on teacher’s job satisfaction. When the school climate conditions are supportive, the teacher will feel satisfied with their job. Indirect influence is also obtained through mediating variables of teaching efficacy. A teacher with a supportive school climate and has a proactive personality tends to feel efficacy in their teaching profession. However, the SEL variable only affects teaching efficacy, which will ultimately affect job satisfaction. There is no direct effect and mediating effect between SEL and job satisfaction. REFERENCES Billingsley, B. S., & Cross, L. H. (1992). Predictors of commitment, job satisfaction, and intent to stay in teaching: A comparison of general and special educators. The Journal of Special Education, 25(4), 453–471. Butt, G., Lance, A., Fielding, A., Gunter, H., Rayner, S., & Thomas, H. (2005). Teacher job satisfaction: Lessons from the TSW pathfinder project. School Leadership and Management, 25(5), 455–471 Caprara, G. V., Barbaranelli, C., Borgogni, L., & Steca, P. (2003). Efficacy beliefs as determinants of teachers’ job satisfaction. Journal of Educational Psychology, 95(4), 821–832. Cohen, J., McCabe, E. M., Michelli, N. M., & Pickeral, T. (2009). School climate: Research, policy, prac­ tice, and teacher education. Teachers College Record, 111(1), 180–213. Collie, R. J., Shapka, J. D., & Perry, N. E. (2012). School climate and social-emotional learning: Predict­ ing teacher stress, job satisfaction, and teaching efficacy. Journal of Educational Psychology, 104(4), 1189–1204. Crant, J. M. (2000). Proactive behavior in organizations. Journal of Management, 26(3), 435–462. Crossman, A., & Harris, P. (2006). Job satisfaction of secondary school teachers. Educational Manage­ ment Administration & Leadership, 34(1), 29–46. Dinham, S., & Scott, C. (1998). A three-domain model of teacher and school executive career satisfaction. Journal of Educational Administration, 36(4), 362–378. Ghavifekr, S., & Pillai, N. S. (2016). The relationship between school’s organizational climate and teacher’s job satisfaction: Malaysian experience. Asia Pacific Education Review, 17(1), 87–106. Hills, P., & Argyle, M. (2002). The Oxford happiness questionnaire: a compact scale for the measurement of psychological well-being. Personality and Individual Differences, 33, 1073–1082. Hosford, S., & O’Sullivan, S. (2015). A climate for self-efficacy: The relationship between school climate and teacher efficacy for inclusion. International Journal of Inclusive Education, 20(6), 604–621. Kim, T. Y., Hon, A. H. Y., & Crant, J. M. (2009). Proactive personality, employee creativity, and new­ comer outcomes: A longitudinal study. Journal of Business and Psychology, 24, 93–103. Kim, T. Y., Hon, A. H. Y., & Lee, D. R. (2010). Proactive personality and employee creativity: The effects of job creativity requirement and supervisor support for creativity. Creativity Research Journal, 22(1), 37–45. Klassen, R. M., & Chiu, M. M. (2010). Effects on teachers’ self-efficacy and job satisfaction: Teacher gender, years of experience, and job stress. Journal of Educational Psychology, 102(3), 741–756.

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Kusma, B., Groneberg, D. A., Nienhaus, A., & Mache, S. (2012). Determinants of day care teachers’ job satisfaction. Central European Journal of Public Health, 20(3), 191–198. Li, M., Wang, Z., Gao, J., & You, X. (2017). Proactive personality and job satisfaction: The mediating effects of self-efficacy and work engagement in teachers. Current Psychology, 36(1), 48–55. Locke, E. A. (1969). What is job satisfaction? Organizational Behavior and Human Performance, 4(4), 309–336. Peng, Y., & Mao, C. (2015). The impact of person–job fit on job satisfaction: The mediator role of self efficacy. Social Indicators Research, 121(3), 805–813. Tschannen-Moran, M., & Hoy, A. W. (2001). Teacher efficacy: Capturing an elusive construct. Teaching and Teacher Education, 17(7), 783–805. Veldman, I., van Tartwijk, J., Brekelmans, M., & Wubbels, T. (2013). Job satisfaction and teacher-student relationships across the teaching career: Four case studies. Teaching and Teacher Edu­ cation, 32, 55–65.

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

The impact of working capital management on a company’s performance: Evidence from manufacturers in ASEAN-5 R.U. Hutapea & M. Ulpah Department of Economic and Business, Universitas Indonesia, Indonesia

ABSTRACT: This article considers the linkage of working capital management and firm financial performance of 269 manufacturers in ASEAN-5 (Indonesia, Malaysia, Thailand, Philippines, and Singapore). The optimum working capital investment is sensitive to financial constraints, whose relation shows an inverted U-shape. In other words, investment in working capital can be profitable, but at a certain point, more investment in working capital can lower a company’s performance. Such a turning point is called the optimum level. Companies with financial constraints have a lower optimum level because they bear higher financial costs and additional financial expense; therefore, management’s consideration in increasing working capital is very strict. This article aims to help management in deciding the optimal investment level on working capital and maximizing the company’s value and performance. This study also looks at the relationship between company performance and macroeconomic factors, which leads this study to examine the effect of financial development index (published by the World Bank) on a company’s performance.

1 INTRODUCTION The trade war between China and the United States has made investors worried about China’s economic stability. Many companies have moved their production chain from China to avoid macroeconomic risks resulting from the trade war (Endo, 2018). In addition, the increase of labor costs in the main manufacturing centers in China has caused the value chain of “Factory Asia” to move from China to Southeast Asia (Vermeulen, 2015). ASEAN-5, which is made up of Indonesia, Malaysia, Thailand, the Philippines, and Singapore, has become an attractive region to establish manufactures due to its strategic location and costcompetitiveness. Since manufacturers produce goods, investment in working capital is an important decision in order to make effective and efficient operation. Therefore, this article examines the impact of working capital management on a company’s performance in ASEAN-5.

2 LITERATURE REVIEW Working capital is the difference between current assets and current liabilities (Ross, Wester­ field, & Jordan, 2016). A company has a positive net working capital when its current assets exceed its current liabilities. Current assets consist of account receivables, inventories, and cash and marketable securities. Current liabilities consist of account payables and short-term borrowings. In managing working capital, a company should consider the cost and benefit in working capital investment. For example, the costs of holding inventory are opportunity cost, storage cost, insurance cost, and risk of spoilage (Brealey, Myers, & Marcus, 2015). Such costs are called the carrying costs and they will encourage a company to hold current assets to a minimum. However, a low level of current assets causes the company to face shortage costs. For example, if a company holds a small finished goods inventory, it may be unable to fill 92

many orders promptly. Therefore, a company should find the most optimum level of working capital investment so that it can minimize the trade-off between its carrying cost and shortage cost. Among many research studies on working capital management, Deloof (2003) stated that a higher working capital level will increase the company’s sales and value. However, a higher working capital requires higher financing. Additional financing expenses for increasing work­ ing capital may increase the company’s probability of bankruptcy (Kiesnick & LaPlante, 2011). Alternatively, Caballero et. al. (2014) proved that the relationship between investment in working capital and a company’s performance is nonlinear and forms an inverted U-shape. Considering such a contradiction in the aforementioned previous research, this article will examine the impact of working capital on a company’s performance and find an optimum level in managing working capital.

3 MODEL AND METHODOLOGY The dependent variable is a company’s performance, which is measured by Tobin’s Q ((Market Value of Equity + Book Value of Debt)/Book Value of Assets). The independent variable is working capital management, which is measured by the Net Trade Cycle with the formula (Accounts Receivables/Sales) × 365 + (Inventory/Sales) × 365 − (Account Payable/ Sales) × 365. In addition, the control variables are Size (ln Sales), Leverage Ratio (Total Debt/ Total Assets), Growth Opportunity (Sales/Total Assets), and Return on Assets (EBIT/Total Assets). The hypothesis is that the relationship between working capital and a company’s per­ formance is nonlinear, forming an inverted U-shape. The hypothesis is tested using panel data methodology. A two-step generalized method of moments (GMM) is used to avoid bias by endogeneity. Based on Caballero (2014), the model used to examine the relationship between working capital and company’s performance is:

To see the relationship of working capital management to a company’s performance in con­ strained companies, the data are divided into two groups, more financially constrained and unconstrained companies. The grouping is based on grouping variables: dividend, size, tangi­ bility ratio, Z-score, and SA Index. DFC is a dummy variable that takes a value of 1 for more financially constrained companies and 0 otherwise. The formula used is:

The Financial Development Index is a set of macroeconomic indicators made by the World Bank for examining the development of countries around the world. The Financial Develop­ ment Index used in this paper is Market Capitalization of the listed company (% GDP).

4 RESULTS AND DISCUSSION The data are taken from the Eikon–Reuters data stream. The samples are financial statements from 269 manufacturers in ASEAN-5 in the observation period of 2009–2018. 93

Table 1 shows that the Net Trade Cycle’s mean is 109.80. This implies that on average, manufacturers in ASEAN-5 need 109.8 days or 3 to 4 months to cash their business process. The average debt finance is 26.44% of the total assets. Since the coefficient of Net Trade Cycle (NTC) variable is positive and its square (NTC2) is negative, the findings indicate that there is a nonlinear relationship. An increase in NTC will have a positive effect on a company’s performance to a certain point, and after that the rela­ tionship will reverse to negative. Such a turning point is called the optimum level of working capital, and the graph shall take the form of an inverted U-shape. The optimum level can be calculated by −β1/2β2 (Caballero, Teruel, & Solano, 2014). The optimum level for manufac­ turers in ASEAN-5 is −1.5983/(2 × −0.1161) = 6.883 or 68.83 days. From the regression result in Table 2, it is clear that working capital influences a company’s performance. To test whether more financially constrained companies have a lower or higher optimum level than the unconstrained companies, regression with GMM lag 1 is performed using the second model. Based on Caballero et al. (2014) the optimum level can be calculated by −(β1 + d1)/2(β2 + d2). The optimum level for constrained companies based on dividend grouping is 4.80, tangibil­ ity ratio grouping is 2.92, Z-score grouping is 2.32, SA Index grouping is 0.12, and size group­ ing is 1.02. All optimum levels are below 6.883, indicating that more constrained companies have a lower optimum level. This may be mainly because of higher financing costs so that the companies will have very tight considerations if they want to increase working capital invest­ ment (Caballero, Teruel, & Solano, 2014). The lower the investment in working capital, the lower the need for external financing is. In contrast, the unconstrained companies have a higher optimum level because higher working capital can increase sales and discounts for early payment (Deloof, 2003). Investment in working capital can be obtained from external financing, such as issuing shares. From Table 3, it is clear that market capitalization has a negatively significant rela­ tionship to a manufacturer’s performance. The proportion of manufacturers in ASEAN-5

Table 1. Descriptive statistics.

Mean Median Maximum Minimum Std. dev. Observation

Q

NTC

SIZE

LEV

GROWTH

ROA

1.0116 0.7445 9.9660 0.1040 0.9322 2690

109.8051 91.0610 723.6320 0.1950 76.0221 2690

18.6889 18.4765 24.5400 13.7550 1.6552 2690

0.2644 0.2275 4.7470 0.00002 0.2888 2690

1.0243 0.9315 8.4290 0.0460 0.5761 2690

0.0381 0.0370 0.6080 –0.6520 0.0873 2690

Table 2. Regression result of net trade cycle on a company’s performance.

NTC NTC2 SIZE LEV GROWTH ROA Observation

Coefficient

t-statistic

1.5983*** −0.1161* 1.1683* 2.9318* 0.8486 2.7713** 2152

2.7384 −1.7138 1.6660 1.8800 1.2116 2.0934 2152

*** Significant at 1%. ** Significant at 5%. * Significant at 10%.

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Table 3. Regression of market capitalization index (FDI Index World Bank).

NTC NTC2 SIZE LEV GROWTH ROA MARKETCAP Observation

Coefficient

t-statistic

1.7264*** −0.0747 1.2372 2.8941 1.3151 2.5516* −0.0284** 2152

2.5735 −0.9181 1.4874 1.4217 1.4651 1.8854 −2.2561 2152

*** Significant at 1%.

** Significant at 5%.

* Significant at 10%.

countries is 18.7%–39.6% of the total public companies listed on each country’s stock exchange. Therefore, the movement direction may not align with manufacturers because vari­ ous industries are included in such a market capitalization index. In addition, the fundamental condition will have a larger impact on a company’s performance. This can be seen from ROA and NTC, which have a larger coefficient than Market Capitalization.

5 CONCLUSION The relation between working capital management and company performance forms an inverted U-shape. The optimum level of the Net Trade Cycle is 68.83 days. Financially con­ strained companies have a lower optimum level due to higher financing costs and severe con­ sideration in increasing their working capital investment. Management can increase investment in working capital to its optimum level, so it can maximize the company’s profit and value. However, investing in working capital beyond the optimum level may decrease the company’s performance. REFERENCES Brealey, R. A., Myers, S. C., & Marcus, A. J. (2015). Fundamentals of corporate finance. New York: McGraw-Hill Education. Caballero, B., Teruel, G., & Solano, M. (2014). Working capital management, corporate performance and financial constraints. Journal of Business Research, 332–338. Deloof, M. (2003). Does working capital management affect profitability of Belgian firms? Journal of Business Finance & Accounting, 573–578. Endo, J. (2018, September 20). Southeast Asia’s production gains speed as China slows. Retrieved from Nikkei Asian Review: https://asia.nikkei.com/Economy/Southeast-Asia-s-production-gains-speed-as­ China-slows. Kiesnick, R., & LaPlante, M. &. (2011). Working capital management and shareholder wealth. Work-ing Paper. Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2016). Fundamentals of corporate finance. Singapore: McGraw-Hill.

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

The influence of self-efficacy on reduced audit quality practice with burnout as a mediator on public auditors D.R. Angraini & A. Satrya University of Indonesia, Indonesia

ABSTRACT: This study examined the relationship between self-efficacy and reduced audit quality practices (RAQP), including the moderating effect of burnout. Based on prior research, self-efficacy has the potential to, directly and indirectly, reduce RAQP, and burnout may enhance the possibility of RAQP. A questionnaire consisting of 24 items using a 7-point Likert scale was deployed to public auditors in Indonesia. The Structural Equation Modeling (SEM) was used to run the data from 236 samples gathered. The findings provide support for the supposition that auditors’ burnout is correlated to RAQP, and self-efficacy reduces burn­ out and RAQP. Based on these findings, we suggest future research to investigate possible intervention strategies designed to counteract the effects of burnout on audit quality by strengthening the auditors’ self-efficacy that manifests in negative consequences to the individ­ ual and the firm. 1 INTRODUCTION Audit Quality (AQ) is a sensitive issue to discuss, either for researchers or practitioners, due to the complexity in defining its context. Some researchers argued that AQ could be assured only by an auditor’s reputation and trust. Owing to the rising numbers of financial scandals lately, the pressure on an audit firm to produce a higher AQ has also increased (Broberg et al., 2016). Aligned with their main duty, public auditors’ working scope is to conduct examinations of financial reports from various governmental departments and ministries, and to face chal­ lenges to ensure their examination results have the highest AQ possible (BPK-RI, 2019). It needs to be ensured that the AQ become an important approach to leverage values from the resources that had been used and to stimulate economic growth. Government AQ holds a major role in driving administrative efficiency. The effect of self-efficacy on social and cognitive aspects of judgment has been known, but up until now, a study to examine the effect of auditors’ self-efficacy on audit judgment per­ formance is limited (Sanusi et al., 2018). Burnout is also said to have a significant contribution and is able to provide descriptions of working behaviors of high-stress level jobs such as audi­ tors. Prior research has shown that burnout could be associated with various negative results, individually or in an organizational context, including absenteeism, poor job performance, reduced citizenship behavior, and an increase of turnover intention (Herda & Lavelle, 2012). To be able to justify the function, role, and value, this article examines the effect of selfefficacy on burnout as a mediator on reduced AQ practices.

2 THEORETICAL FRAMEWORK 2.1 Reduced AQ practices, self-efficacy, and burnout Audit Quality (AQ) is a concept that exists in auditing. It can be defined as a possibility that an auditor will reveal, report, and diminish any misstatement, that from the scale of content is 96

significant in the company’s client financial reports (DeAngelo, 1981). AQ is viewed as a desired result from an audit process, and any auditor behavior becomes a central input in the process (Broberg et al., 2016). AQ is often discussed as reduced AQ, which is a low AQ and more specifically, the behavior that triggered reduced AU (Coram et al., 2008). Broberg et al. (2016) defined reduced AQ as an action that intentionally and inappropriately diminishes the effort of collecting audit proofs. Reduced Audit Quality Practices (RAPQ) is an intended action that influences the AQ through a reduced quality or the scope of proving to collect, thus increasing the risk of mis­ statement (Coram et al., 2008). From Bandura’s social-cognitive theory, self-efficacy is thought to be one core aspect of its construct (Bandura, 1994). Bandura (1994) hypothesized that expectations coming from self-efficacy will determine whether instrumental actions will start, how much effort needs to be done, and how long it will survive facing challenges. Selfefficacy makes it possible for someone to think, feel, and act differently. Depression, anxiety, helplessness, and low self-esteem, according to research, are results of a low level of selfefficacy (Schwarzer & Hallum, 2008). Self-efficacy is related to how a person takes action due to its correlation to self-related cognition, which is one of the main ingredients of the motiv­ ation process. A difficult task is chosen by people with a high level of self-efficacy (Bandura, 1994; Schwarzer & Jerusalem, 1995). General self-efficacy has a role in various personal competences to handle different kinds of difficult situations. General self-efficacy is correlated to predicting a broader outcome from well-being, adaptation, health, and quality of life, and a General Self-Efficacy (GSE) scale can be used to measure them (Schwarzer & Hallum, 2008). From the explanation, we suggest these hypotheses. H1: Self-efficacy has negative effects on reduced audit quality practices. H2: Self-efficacy has negative effects on burnout. Burnout can be defined as a negative psychological response to work demands and interper­ sonal stressors (Cordes & Dougherty, 1993) and is thought to manifest as a result of repeated or prolonged exposure to a stressor (Herda & Lavelle, 2012). This prolonged stressor can defeat someone’s coping ability (Smith & Emerson, 2017). Burnout consists of three dimensions: (1) emotional exhaustion, which is defined as the feel­ ing of a lack of energy, and the declining emotional resources; (2) depersonalization, which is a tendency to treat others separately; and (3) reduced personal accomplishment, which is char­ acterized by low self-esteem, low motivation, inability to finish a job properly, and tendency to evaluate others negatively. Prior studies suggested that burnout is correlated to absenteeism, poor performance, reduced citizenship behavior, and increase of turnover intention. Burnout has also received much attention in the accounting literature (Herda & Lavelle, 2012). H3: Burnout has a positive effect on reduced audit quality practices. 3 RESEARCH METHODS 3.1 Data collection and survey participants The data used for this research were collected from public auditors who worked for the gov­ ernment during September 2019. An online survey questionnaire consisting of 24 question items using a 7-point Likert scale was deployed to obtain the primary data about the level of auditors’ self-efficacy (10 question items adopted from the General Self-Efficacy Scale of Schwarzer & Jerusalem, 1995), burnout (9 question items adopted from Smith, Emerson, & Boster, 2018), and reduced audit quality practices (5 question items are adopted from Smith et al., 2018). In total, this research surveyed 250 sample respondents from the population of 3,526 public auditors. Only 236 sample data could proceed to data analysis. The demographic data collected from the questionnaire consisted of (1) gender [men (64%), women (36%)]; (2) age [under 30 years (13%), 31–40 years (68%), 41–50 years (17%), above 50 years (2%)]; (3) marital status [single (18%), married (82%)]; (4) educational level [bachelor’s degree (66%), 97

master’s degree (34%)]; (5) working positions [junior auditors (37%), young auditors (57%) middle auditors (6%)]. All questionnaires for the main test were tested for validity and reliability using SPSS. Kaiser–Meyer–Olkin (KMO) values for self-efficacy, burnout, and reduced audit quality prac­ tices are 0.851, 0.761, 0.779, and Cronbach’s alpha values for variables of self-efficacy, burn­ out, and reduced audit quality practices are 0.813, 0.810, and 0.761. From the component matrix measurement, the GSE1, GSE2, GSE6, and RAP1 indicators are known to have a low result (0.405, 0.417, 0.449, and 0.37). Therefore, those indicators are not included in the main measurements. 3.2 Data analysis The data in this research were analyzed using Structural Equation Modeling (SEM) with LISREL 8.8 software. The significance of each hypothesis was measured after the research model passed a good fit measurement. Each hypothesis is said to have a significant relation­ ship if the tcount value ≥1.65 (Hair et al., 2014). 4 RESULTS 4.1 Structural equation model evaluation By using LISREL, the model measurement revealed a satisfactory fit to our sample data. Each indicator measurement for standardized loading factor, composite reliability, and aver­ age variance extracted shows good results. The final output of the SEM model analysis shows that the absolute fit measurement (GFI = 0.82, AGFI = 0.75, RMR = 0.11, RMSEA = 0.000, NFI = 1.00, NNFI = 1.05, CFI = 1.00) indicates that the structural model has met the stand­ ardized measurement. Therefore, the sample data collected fit the research. Self- efficacy had a significant and negative effect on reduced AQ practices (β = −0.26, t-value = −3.34). Selfefficacy also had a significant and negative effect on burnout (β = −0.21, t-value = −2.95). Burnout had a significant and positive effect on reduced AQ practices (β = 0.28; t-value = 3.84). The mediating effect was counted according to Zhao, Lynch, and Chen (2010). The β count from self-efficacy-burnout-reduced AQ practices (a × c) is ≤0.0546 from the β count of selfefficacy to reduced AQ practices (b), which is 0.28. Therefore the mediating effect of burnout is complementary mediation (partial mediation).

5 DISCUSSION The purpose of this study was to examine the relationship among self-efficacy, burnout, and reduced AQ practices. SEM was used to analyze the estimations. Self-efficacy (β = −0.21, t-value = −2.95) was found to influence burnout and support H1. As suggested in H2, selfefficacy also influenced reduced AQ practices (β = −0.26, t-value = −3.34). Reduced AQ prac­ tices were also found to be influenced by self-efficacy (β = 0.28, t-value = 3.38), as predicted in H3. It was found that self-efficacy and reduced AQ practices have a negative correlation, which leads to the conclusion that if the levels of self-efficacy are high, it can minimize the occurrence of reduced AQ practices. Burnout and reduced AQ practices have a positive correl­ ation. A high level of burnout leads to a higher level of reduced AQ practices. Therefore, selfefficacy and burnout affect reduced AQ practices. This research found that most respondents believed that when they are facing difficulties, they are able to overcome and find various ways to handle them. Auditors believe their ability is due to how they are always given various assignments that differ in complexity and type of audit. Lee et al. (2016) suggest that authorities need to give auditors proper training and knowledge prior to an audit task, so the auditors can perform better if they are facing 98

difficulties in their jobs. The authorities need to develop a proper way to help the auditors to transfer their knowledge to others and develop up-to-date knowledge about auditing. It was also found that auditors feel burnout mostly because of the pressure they feel from their supervisors. Auditors always work in a team, each led by a team leader, and the team leader has a supervisor to report to, until the highest rank of supervisor. This makes the audi­ tors always work under a policy made by their team leaders or supervisors. Unfair job distri­ bution and job overload become their deepest concerns. Smith et al. (2018) suggest that authorities need to monitor the level of auditors’ burnout and implement strategic interven­ tions when needed. Britt and Jex (2015) state that employees can be trained so they can view the work environment in a constructive and adaptive manner, and employees should be able to use available resources to overcome stress.

6 CONCLUSIONS From this research, we have found that self-efficacy has a negative effect on burnout. Burnout has a positive effect on reduced AQ practices. Therefore authorities should implement inter­ ventions directed to improving the levels of auditors’ self-efficacy. A higher level of selfefficacy can reduce the level of burnout that auditors feel and eventually minimize reduced AQ practices, which means leveraging the AQ produced by auditors. REFERENCES Bandura, A. (1994). Self-Efficacy. In V. S. Ramachaudran (ed.), Encyclopedia of Human Behaviour, 4, 71–81. Bpk-Ri. (2019). Pemeriksaan BPK Harus Mengikuti Prosedur untuk Menjamin Kualitas Hasil Pemerik­ saan [Online]. Jakarta: Badan Pemeriksa Keuangan Republik Indonesia. Available at: http://www. bpk.go.id/news/pemeriksaan-bpk-harus-mengikuti-prosedur-untuk-menjamin-kualitas-hasil­ pemeriksaan. Britt, T. W., & Jex, S. M. (2015). Thriving under stress: Harnessing demands in the workplace. New York: Oxford University Press. Broberg, P., Tagesson, T., Argento, D., Gyllengahm, N., & Mårtensson, O. (2016). Explaining the influ­ ence of time budget pressure on audit quality in Sweden. Journal of Management & Governance, 21, 331–350. Coram, P., Glavovic, A., Ng, J., & Woodliff, D. R. (2008). The moral intensity of reduced audit quality acts. Auditing: A Journal of Practice & Theory, 27, 127–149. Cordes, C. L., & Dougherty, T. W. (1993). A review and an integration of research on job burnout. Acad­ emy of Management Review, 18, 621–656. Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2014). Multivariate data analysis. Essex, UK: Pearson Education. Herda, D. N., & Lavelle, J. J. (2012). The auditor-audit firm relationship and its effect on burnout and turnover intention. Accounting Horizons, 26, 707–723. Lee, S. C., Su, J. M., Tsai, S. B., Lu, T. L., & Dong, W. (2016). A comprehensive survey of government auditors’ self-efficacy and professional development for improving audit quality. Springerplus, 5, 1263. Sanusi, Z. M., Iskandar, T. M., Monroe, G. S., & Saleh, N. M. (2018). Effects of goal orientation, self-efficacy and task complexity on the audit judgement performance of Malaysian auditors. Account­ ing, Auditing & Accountability Journal, 31, 75–95. Schwarzer, R., & Hallum, S. (2008). Perceived teacher self-efficacy as a predictor of job stress and burn­ out: Mediation analyses. Applied Psychology, 57, 152–171. Schwarzer, R., & Jerusalem, M. (1995). Measures in health psychology: A user’s portfolio. Causal and Control Beliefs, 1, 35–37. Smith, K. J., & Emerson, D. J. (2017). An analysis of the relation between resilience and reduced audit quality within the role stress paradigm. Advances in Accounting, 37, 1–14. Smith, K. J., Emerson, D. J., & Boster, C. R. (2018). An examination of reduced audit quality practices within the beyond the role stress model. Managerial Auditing Journal, 33, 736–759. Zhao, X., Lynch, J. G., & Chen, Q. (2010). Reconsidering Baron and Kenny: Myths and truths about mediation analysis. Journal of Consumer Research, 37, 197–206.

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The influence of ownership and board size on the performance of state-owned enterprises listed on the Indonesia stock exchange during the period 2013–2018 S.A. Sutomo & J. Jahja Faculty of Economics & Business, University of Indonesia, Jakarta, Indonesia

ABSTRACT: Indonesian state-owned enterprises (SOEs) still have challenges in implement­ ing corporate governance mechanisms due to weak institutional arrangements. The purpose of this study was to provide an in-depth analysis of the relationship of ownership concentra­ tion, institutional ownership, foreign ownership, and board size to the performance of SOEs. The subjects of this research were public SOEs listed on the Indonesia Stock Exchange for the period 2013–2018, which produced a total of 120 observations. Panel data regression was con­ ducted to test the research hypothesis and the results found evidence that ownership concen­ tration, institutional ownership, foreign ownership, and board size has mixed results on firm performance. This research contributes to the corporate governance literature by adding SOEs as a research subject.

1 INTRODUCTION It is widely known that many companies in Indonesia had been carrying out unfavorable corporate governance practices that were the cause of Indonesia’s financial crisis in 1998 (Santoso, 2016). Many researchers have proven that companies owned by the state have unfavorable efficiency because bureaucrats have a primary goal that is different from the goal of maximizing shareholder profit (Boycko, Shleifer, & Vishny, 1996; Shleifer & Vishny, 1994). Bureaucrats are more concerned with their political and economic goals than with shareholder goals. In addition, Meggison (2015) in He, Chiu, and Zhang (2015) stated that unfavorable or detrimental incentives to improve company efficiency are the reasons state-owned enterprise (SOE) managers cannot benefit from increased rev­ enue but they are the ones who bear the responsibility if there is a state loss. The SOE phenomenon that has occurred in Indonesia consists of various corruption cases related to fictitious budgets, bribes, gratification projects, and procurement of goods. SOE man­ agement is too intervened by the political bureaucracy so that SOEs have difficulty in developing. This can occur due to three conditions: (1) the election of directors who are political rather than oriented toward business development and public services; (2) SOEs’ lack of competitiveness with private companies, which fosters a culture of bribery and gratification of projects; and (3) SOE privileges in the monopoly of certain goods and services so that people will still consume SOE goods or services even though SOEs are dragged down by various problems. Based on existing research, the majority of research subjects are non-SOE companies, so this research contributes to the literature with the research subject of SOE company perform­ ance in Indonesia. This research is limited to SOEs listed on IDX from 2013 to 2018 due to the Ministerial Regulation PER-01/MBU/2011 concerning the implementation of good cor­ porate governance in SOEs and how the implementation affects the SOEs’ performance. The implication of this research is that the mechanism of corporate governance influences the per­ formance of SOEs so that SOEs can strengthen mechanisms that have proven to have 100

a positive effect and improve mechanisms that do not affect performance or add other govern­ ance mechanisms that can improve SOE performance.

2 THEORETICAL BACKGROUND AND HYPOTHESIS 2.1 Ownership concentration The concentration of ownership can increase the control of principals over agents because of the nondispersed nature of the ownership. Some studies suggest that ownership concentration has a positive effect on company performance, such as research from Nguyen, Locke, and Reddy (2014, 2015) and Ciftci et al. (2019). Nguyen et al. (2015), in his research, found that ownership concentration has a significant positive effect on company performance because ownership concentration is an efficient corporate governance mechanism that can replace weak corporate governance quality. Agency Theory states that a more concentrated company ownership affects better agent monitoring; as a result, it can reduce conflicts between principal agents. The con­ centration of ownership (ownership concentration) is associated with other parties such as government ownership, family ownership, and other parties who have a stronger con­ nection network so that the company’s performance can be optimized. The concentration of ownership is one good corporate governance arrangement; thus the following hypoth­ esis is postulated: H1: There is a positive relationship between the concentration of ownership and company performance. 2.2 Institutional ownership Significant developing economic growth shows that institutional investors can be the center of the transformation of corporate governance in the future (Clarke, 2008). Lestari (2017), in her research, proved that institutional ownership has a significant positive effect on company per­ formance. It implies that institutional ownership can increase the supervision of agents (man­ agers) so that agents try to improve company performance following company goals. Alfaraih, Alanezi, and Almujamed (2012) also stated that the positive relationship between institutional investors and company performance is due to the active role and influence of institutional investors as an effective corporate governance mechanism. From an institutional perspective, institutional ownership with institutions that have close relations can create effective coordination because of the possibility of sharing knowledge and capabilities across industries, developing sectoral skills and supporting the long-term investor agenda (Peng & Jiang, 2010). Based on the argument above, the following hypothesis is posited: H2: There is a positive relationship between the share of institutional ownership and firm performance. 2.3 Foreign ownership In general, the presence of foreign investors in a company has a positive impact on company performance, especially in developing countries (Shrivastav & Kalsie, 2017). Also, according to Brewster, Wood, and Brookes (2008), the presence of foreign investors can promote the adoption of best practices from abroad because foreign investors are better prepared to face systemic changes and have different experiences in different contexts. Research from Aydin, Sayim, and Yalama (2007) proves that companies with foreign ownership generate better com­ pany performance compared to companies with domestic ownership. Demirbag, Tatoglu, and Glaister (2007) state that increasing foreign ownership through investment can provide a network to the external environment and reduce resource dependency along with the inter­ action of local and foreign board members who can improve company performance. Foreign 101

investors can bring the latest changes, experience, and knowledge so that they can provide more profound knowledge toward working in the company. Based on the argument above, the following hypothesis is posited: H3: There is a positive relationship between the share of foreign ownership and firm performance. 2.4 Board size The board of directors plays an essential role in a company. The board of directors is intern­ ally responsible for leading and guiding the company and is externally responsible to investors and stakeholders. One crucial factor in the corporate governance mechanism is the existence of a board of directors having the task of overseeing the company’s operations to be active and efficient. The board of directors has a crucial role in reducing company failure (Chan­ charat, Krishnamurti, & Tian, 2012). The size of the board of directors itself is determined by the characteristics of the company, the type of company, and the level of difficulty of the com­ pany’s business to achieve optimal size. Therefore, the following hypothesis is posited: H4: There is a positive relationship between the size of the board of directors and company performance.

3 RESEARCH METHOD 3.1 Sample data Our sampling included the SOEs listed on IDX. As of January 2019, the number of firms listed on IDX was 622. After excluding the firms that did not meet the requirements, which are the SOES listed from 2013 to 2013, we obtained 20 samples of SOEs with 120 observa­ tions. The secondary data about these SOEs over the period 2013–2018 were obtained from various reliable sources such as (1) annual reports of firms, (2) financial reports of firms, and (3) corporate web pages of firms and government. 3.2 Variables The dependent variables used in this research were Tobin’s Q and ROA. Tobin’s Q (TOBINSQ) is measured as the market value of a firm divided by total assets; Return on Assets (ROA) is measured as the net income divided by total assets. The independent variables are ownership concentration (CONCEN), measured as a percentage of shares owned by at least 5% or more; institution ownership (COWN), meas­ ured by the percentage of institutional shareholders to total shares; foreign ownership (FOWN), measured using a percentage of foreign investor shares of total shares; and board size (BSIZE), measured by the number of directors appointed on the board of directors. The control variables we used are women board membership (BWMN), assessed by the per­ centage of female directors of the total number of directors; independent directors (BIND), assessed by the percentage of independent directors of the total number of directors; index CG (CGIND), measured by a dummy variable, where 1 indicates that the company has assessed the implementation of corporate governance and 0 if it does not conduct an assess­ ment; and leverage (LEV), measured by the sum of short-term debt and long-term debt div­ ided by total assets. 3.3 Research model To measure the influence of the corporate governance mechanism on firm performance, the following research model is defined:

102

4 RESULTS Based on the multiple regression results that were conducted for both models (Tobin’s Q and ROA) using STATA 15, the results for model 1 (Tobin’s Q) and model 2 (ROA) are shown in Table 1. There is partial support for H1 that the coefficient of CONCEN is positively significant for model 1 (p < 0.05) and negatively significant for model 2. The significant positive result is con­ sistent with research conducted by Ciftci et al. (2019), Nguyen et al. (2015), Ehikioya (2009), Singh and Gaur (2009), and Thomsen and Pedersen (2000). Hillman and Dalziel (2003) stated that the more concentrated the ownership, the less likely the company’s management would be pulled in different directions by various groups of shareholders who have different agendas. Ownership concentration has a negative effect on company performance, according to Vasilic (2019), Veprauskaite and Adams (2013), and Bektas and Kaymak’s (2009) research. There is also partial support for H2; the coefficient of COWN is positively significant toward model 1 (p < 0.05) and negatively significant for model 2. Significantly positive results are consistent with the results of research conducted by Khamis (2015); Lestari (2017); and Alfaraih, Alanezi, and Almujamed (2012). Lestari (2017) stated that institutional ownership could increase the supervision of managers so that managers can improve company perform­ ance, while Sarac (2002) stated that ownership that comes from outside (external) tends to have better supervision in disciplining managers. There is support for H3, where the coefficient for FOWN is positive but not significant for model 1 and significantly positive for model 2 (p < 0.1). These results are consistent with research from Aydin et al. (2007); Ciftci et al. (2019); and Demirbag, Tatoglu, and Glaister (2007). The presence of foreign ownership can provide opportunities for the transfer of know­ ledge in the form of technology and other types to save on the company’s operational costs. The coefficient of BSIZE partially supports H4, where the coefficient is negatively signifi­ cant for model 1 and positively significant for model 2 (p < 0.05). The existence of a large

Table 1. Regression results in terms of different models. Dependent variables: Tobin’s Q

Dependent variables: ROA

Independent variables

coef.

P > |z|

coef.

z

P > |z|

CONCEN COWN FOWN BSIZE BIND BWMN CGIND LEV R2 Prob > χ2 Regression model

5.0724 10.2195 0.5363 –0.3264 –0.3025 –3.5139 2.0317 1.7020

0.045** 0.016** 0.4560 0.019** 0.3500 0.0420 0.0015 0.1150

–0.1017 –0.1743 0.0666 0.0044 0.0051 –0.0658 –0.0047 –0.1679

–1.99 –1.62 1.35 2.05 0.29 –1.67 -0.34 –6.65 0.4132 0.0000 FEM

0.0235** 0.0530* 0.0885* 0.0200** 0.3860 0.0475 0.3655 0.0000

z 1.70 2.15 0.11 –2.08 –0.39 –1.73 3.01 1.20 0.1837 0.0005 REM

R2 Prob > χ2 Regression model

* p < 0.1; **p < 0.05; ***p < 0.01. Source: Results of statistical data using STATA 15.

103

board size can optimize the work of agents by effectively giving advice, guidance, disciplining, and monitoring the performance of agents. Board size has a positive and significant effect on ROA, consistent with the results of research by Ciftci et al. (2019), Shrivastav and Kalsie (2017), and Jurnali (2015).

5 CONCLUSION Based on the results presented and explained in the previous sections, the concentrated owner­ ship of Indonesian SOEs is beneficial for a company because it can utilize various resources owned by the state and give a positive signal to the capital market and investors, but the state has the potential for mismanagement of the company because it is disturbed by other object­ ives such as political intentions that are inconsistent with wealth maximization purposes. Insti­ tutional ownership has a positive influence on Tobin’s Q because the existence of institutional owners can be an additional control in overseeing managers so that company performance can improve. Also, extra supervision provided by institutional owners can have a positive effect on investors by affecting the company’s stock price. Foreign ownership has a positive effect on ROA because foreign investors can provide access to certain assets such as technol­ ogy, managerial capabilities, foreign markets, corporate governance techniques, and other intangible benefits so that these benefits can improve company efficiency and performance. Board size has a negative effect on Tobin’s Q that can be caused by poor communication and coordination of the board of directors so that it can provide a negative perception for the cap­ ital market, while board size has a positive effect on ROA because it can optimize the work of agents (in this case managers) and effectively provide advice and guidance and discipline and monitor agent performance. REFERENCES Alfaraih, M., Alanezi, F., & Almujamed, H. (2012). The influence of institutional and government own­ ership on firm performance : Evidence from Kuwait. International Business Research, 5(10), 192–200. https://doi.org/10.5539/ibr.v5n10p192 Aydin, N., Sayim, M., & Yalama, A. (2007). Foreign ownership and firm performance : Evidence from Turkey. 11(11). Bektas, E., & Kaymak, T. (2009). Governance mechanisms and ownership in an emerging market : The case of governance mechanisms and ownership in an emerging market: The case of Turkish banks (May 2014), 20–22. https://doi.org/10.2753/REE1540-496X450602 Boycko, M., Shleifer, A., & Vishny, R. W. (1996). A theory of privatisation. 106(March). Brewster, C., Wood, G., & Brookes, M. (2008). Similarity, isomorphism, or duality? Recent survey evi­ dence on the HRM policies of MNCs. Chancharat, N., Krishnamurti, C., & Tian, G. (2012). Board structure and survival of new economy IPO firms. Corporate Governance: An International Review, 20(2), 144–163. https://doi.org/10.1111/j.1467­ 8683.2011.00906.x Ciftci, I., Tatoglu, E., Wood, G., Demirbag, M., & Zaim, S. (2019). Corporate governance and firm per­ formance in emerging markets: Evidence from Turkey. International Business Review, 28(1), 90–103. https://doi.org/10.1016/j.ibusrev.2018.08.004 Clarke, T. (2008). International corporate governance: A comparative approach. Corporate Governance: An International Review, 16. https://doi.org/10.1111/j.1467-8683.2008.00687.x Demirbag, M., Tatoglu, E., & Glaister, K. W. (2007). Factors influencing perceptions of performance: The case of western FDI in an emerging market. International Business Review, 16, 310–336. https:// doi.org/10.1016/j.ibusrev.2007.02.002 Ehikioya, B. I. (2009). Corporate governance structure and firm performance in developing economies: Evidence from Nigeria. Corporate Governance: The International Journal of Business in Society, 9(3), 231–243. He, Y., Chiu, Y., & Zhang, B. (2015). The impact of corporate governance on state-owned and non-state -owned firms’ efficiency in China. North American Journal of Economics and Finance, 33, 252–277. https://doi.org/10.1016/j.najef.2015.06.001

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Hillman, A. J., & Dalziel, T. (2003). Boards of directors and firm performance: Integrating agency and resource dependence perspectives. Academy of Management Review, 28(3), 383–396. Jurnali, T. (2015). Analisis Pengaruh Tata Kelola Perusahaan Terhadap Kinerja Perusahaan. Khamis, R. (2015). The relationship between ownership structure dimensions and corporate perform­ ance : Evidence from Bahrain, 9(4), 38–56. Australasian Accounting, Business and Finance Journal, https://doi.org/10.14453/aabfj.v9i4.4 Lestari, N. P. (2017). Pengaruh Dimensi Struktur Kepemilikan Terhadap Kinerja Perusahaan Manufak­ tur, 6, 1–10. Nguyen, T., Locke, S., & Reddy, K. (2015). International review of financial analysis ownership concen­ tration and corporate performance from a dynamic perspective: Does national governance quality matter? International Review of Financial Analysis, 41, 148–161. https://doi.org/10.1016/j. irfa.2015.06.005 Peng, M. W., & Jiang, Y. (2010). Institutions behind family ownership and control in large Firms. Jour­ nal of Management Studies. Santoso, D. (2016). Kegagalan Penerapan good corporate governance Pada Perusahaan Publik Di Indonesia. Jurnal Hukum IUS QUIA IUSTUM, 15(2), 182–205. https://doi.org/10.20885/iustum.vol8. iss2.art5 Sarac, M. (2002). An empirical analysis of corporate ownership structure in the Turkish manufacturing sector. Shleifer, A., & Vishny, R. (1994). Politicians and firms. Shrivastav, S. M., & Kalsie, A. (2017). The relationship between foreign ownership and firm performance in India: An empirical analysis of the relationship between foreign ownership and firm performance in India: An empirical analysis. Artha Vijnana: Journal of the Gokhale Institute of Politics and Economics, 59(2), 152–162. https://doi.org/10.21648/arthavij/2017/v59/i2/164448 Singh, S., Tabassum, N., Darwish, T. K., & Batsakis, G. (2018). Corporate governance and Tobin’s Q as a measure of organizational performance. British Journal of Management, 29, 171–190. Thomsen, S., & Pedersen, T. (2000). Ownership structure and economic performance in the largest Euro­ pean companies 1. Vasilic, N. (2019). Ownership concentration impact on financial performance: Evidence from Serbia. Veprauskaite, E., & Adams, M. (2013). Do powerful chief executives influence the financial performance of UK firms? British Accounting Review, 45(3), 229–241. https://doi.org/10.1016/j.bar.2013.06.004

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The role of individual and situational factors to whistleblowing in public sectors D.C. Budiutami & A. Aprilianti University of Indonesia, Jakarta, Indonesia

ABSTRACT: Whistleblowing has an important role as a social control mechanism to reduce misconduct in the workplace. To prevent violations and abuse of authority on adminis­ trative and financial practices in government agencies, a good whistleblowing system needs to be developed. The results from a sample of 200 public-sector employees shows that ethical leadership does not affect whistleblowing intention. Yet, ethical leadership is discovered to have a direct effect on moral courage and moral courage has a direct effect on whistleblowing intention. The results of this study are expected to provide input on improving the whistleblowing system in public sectors.

1 INTRODUCTION Unethical behavior (e.g., corruption) is rampant in Indonesia, especially in government institu­ tions. A large number of corruption cases are alleged as a result of observers who prefer silence rather than reporting such unethical behavior. Research on whistleblowing in the field has iden­ tified factors that cause employees to be reluctant to report violations, including fear of retali­ ation (Cassematis & Wortley, 2012) and fear of being fired (Callahan & Collins, 1992). In the context of the public sector in Indonesia, these two factors are doubtful as a cause of unwilling­ ness to report violations. Organizational factors such as leadership and individual factors such as moral courage are thought to play a role in determining intention of reporting violations. An undeveloped whistleblowing system can be a cause of unwillingness to report unethical behavior. Therefore, it is necessary to identify what factors develop a whistleblowing system in a government institution. The results of previous studies indicate individual factors that have strong ethical connotations such as moral courage (Culiberg & Mihelič, 2016) and situ­ ational factors such as ethical leadership (Bhal & Dadhich, 2011; Previtali & Cerchiello, 2017) have positive effects on whistleblowing. In centralistic organizations, ethical leadership is needed to guide the ethical behavior of subordinates. However, ethical leadership will not impact the desire to report violations if the subordinates do not have the courage to act that according to their conscience. The purpose of this study is to examine the factors that determine whistleblowing intentions that can later be used as suggestions for developing a whistleblowing system in government institutions. The article is organized into four main sections. First, a review of the literature on ethical lead­ ership, moral courage, and whistleblowing intention is presented, and then the hypotheses were developed. Second, the research methodology is given. Afterward, the results of the study, strengths, and weaknesses, research implications, and future research recommendations are mentioned.

2 THEORY AND HYPOTHESES Near and Miceli (1985) defined whistleblowing as ‘‘disclosure by members of an organization (previous or current) illegal, immoral, or illegitimate practices under the control of their 106

employer, to people or organizations that can influence the actions.” Culiberg and Mihelič (2016) call whistleblowing a complex phenomenon that can be seen from three perspectives of social actors: (1) wrongdoer(s), who commit violations; (2) whistleblower(s), who observe a wrongdoing; and (3) recipients, who receive the report of the wrongdoings (Near & Miceli, 1995). There are two choices of reporting channels: internal and external. Miceli and Near (2002) found that almost all whistleblowers were initially being asked to report through internal channels before using external channels. Regarding the whistleblower’s preference for one of the two channel choices, Jeon (2017) found that fair treatment, fear of retaliation, and organizational education about internal complaints related to relations involving the govern­ ment related to internal reporters. Brown, Treviño, and Harrison (2005) defined ethical leadership as the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforce­ ment, and decision-making. It has two dimensions, namely, moral person and moral manager. Moral person refers to traits such as honesty and trustworthiness held by a leader. Moral manager refers to real behaviors from leaders such as communicating ethical messages and holding followers accountable for ethical behavior. Cheng, Bai, and Yang (2017) found the effect of ethical leadership on internal whistleblowing involves the process of social learning, social exchange, and the role of ethical leaders in reducing whistleblowing risk by providing anonymous reporting channels. Referring to the results of previous studies related to the influence of ethical leadership on internal whistleblowing, Hypothesis 1 can be formulated as follows: H1: Ethical leadership is positively related to whistleblowing intention. Moral courage believed to be an important factor in determining whether individuals will step in and act according to their judgment and beliefs (Hannah, Avolio, & May, 2011). During this time, moral judgment, which is the second stage of the underlying process of behavior, shows a weak relationship with actual ethical behavior (Blasi, 1980; Trevino & Youngblood, 1990). Overcoming this, moral conation represented by moral courage will help explain why some people will step up and act while others who have arrived at ethical judgments in the same situation will stop and fail to act. Based on the description above, this study uses moral courage as a moderating variable that moderates the influence of ethical leadership on whistleblowing intentions. Hypotheses 2,3, and 4 can be formulated as follows. H2: Ethical leadership is positively related to moral courage.

H3: Moral courage is positively related to whistleblowing intention.

H4: The relationship between ethical leadership and whistleblowing intention is mediated by

moral courage.

3 METHODS Participants of this study were 200 employees of the agency that provides public transport in Indonesia. Ethical leadership was measured using the Ethical Leadership Scale (ELS) from Brown, Treviño, and Harrison (2005) which consists of ten items. One of those items is “My department manager listens to what department employees would say.” Meanwhile, moral courage was measured using a four-item questionnaire developed by May, Luth, and Schwoerer (2013) with, as an example statement, “I would stand up for a just or rightful cause, even if the cause is unpopular and it would mean criticizing important others.” Lastly, whistleblowing intention was measured using 14 questionnaire items from Park, Rehg, and Lee (2005) with one of the statements, “If I found wrong­ doing in my workplace, I would report it to my immediate supervisor.” The collected data will be analyzed using structural equation modeling (SEM) with the help of LISREL 8.80 software. 107

4 RESULTS, LIMITATION AND FUTURE RESEARCH Before testing the hypotheses, we conducted a measurement model test to investigate the evi­ dence for the discriminant validity and reliability of the three measures: ethical leadership, moral courage, and whistleblowing intention. The confirmatory factor analysis (CFA) path diagram shows that 10 indicators of ethical leadership, 4 indicators of moral morality, and 12 indicators of whistleblowing intention are valid because the standardized loading factors are more than 0.5 (Hair, Black, & Babin, 2010). Hypothesis testing is conducted by considering the coefficient and t-value of the relation­ ship. The relationship between ethical leadership and whistleblowing intention has a positive coefficient (0.07) and t-value (1.26≤1.965) so that the effect of ethical leadership on whistleblowing intention is not significant and H1 is not supported. Meanwhile, the relationship between ethical leadership has a positive coefficient (0.41) and t-value (4.96≥1.965) which means the effect is significant and H2 is supported. H3 is also supported because the relation­ ship between moral courage has a positive coefficient (0.88) and t-value (9.22≥1.965). Further, there is a partial mediating effect of moral courage on the relationship between ethical leader­ ship and whistleblowing intention so that H4 is supported. If in previous studies, ethical leadership was found to influence employee outcomes such as follower ethical decision-making (+) and follower pro-social behavior (Brown & Treviño, 2005, the findings of this study confirm that, in certain behaviors or in extraordinary ethical behavior such as whistleblowing, the influence of ethical leadership can vary depending on what values or norms are dominant in the organization. In the public sector in Indonesia, external whistleblowing is considered to violate organizational norms (leaking confidential organization information) although it is consistent with community norms. Meanwhile, internal whistleblowing, even though it is consistent with organizational norms and inconsist­ ent with community norms, is also not done much because it is considered to overstep the authority of the leaders. Moral courage in this study proved to be influenced by ethical leadership. This is in line with Hannah, Avolio, and May (2011) who state that moral courage is not a static trait but that situational factors influence the psychological process of the actor. Moral courage, which is known as the final motivation of the decision to do or not do something, is found to have a positive effect on whistleblowing intention in this study. This is a new thing because, in pre­ vious studies such as Cheng et al. (2017), the direct effect of moral courage on whistleblowing has not been tested but only seen as a moderating variable. The limitation of this study is that the results cannot be generalized to similar agencies or organizations either domestically and abroad because every organization has different attributes of ethical leadership and whistleblowing system. Future research related to whistleblowing inten­ tion in the public sector can compare employee reporting intentions in agencies whose whistleblowing system is in the work unit with those in the compliance section or internal auditors. REFERENCES Bhal, K. T., & Dadhich, A. (2011). Impact of ethical leadership and leader–member exchange on whistle blowing: The moderating impact of the moral intensity of the issue. Journal of Business Ethics, 103(3), 485–496. Blasi. (1980). Bridging moral cognition and moral action: A critical review of the literature. Brown, M. E., Treviño, L. K., & Harrison, D. A. (2005). Ethical leadership: A social learning perspective for construct development and testing. Organizational Behavior and Human Decision Processes, 97(2), 117–134. doi:10.1016/j.obhdp.2005.03.002 Cassematis, P. G., & Wortley, R. (2012). Prediction of whistleblowing or non-reporting observation: The role of personal and situational factors. Journal of Business Ethics, 1–20. Callahan, E.S. and J. Collins 1992. ‘Employee Attitudes Toward Whistleblowing: Management and Public Policy Implinactions’ Journal of Business Ethics (December) 11(12): 939–48 Cheng, J., Bai, H., & Yang, X. (2017). Ethical leadership and internal whistleblowing: A mediated mod­ eration model. Journal of Business Ethics, 155(1), 115–130. doi: 10.1007/s10551-017-3517-3

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Culiberg, B., & Mihelič, K. K. (2016). The evolution of whistleblowing studies: A critical review and research agenda. Journal of Business Ethics, 146(4), 787–803. doi: 10.1007/s10551-016-3237-0 Hair, J., Black, W., & Babin, B., & Anderson, R. E. (2010). Multivariate data analysis. New Jersey: Pear­ son Prentice Hall. Hannah, S. T., Avolio, B. J., & May, D. R. (2011). Moral maturation and moral conation: A capacity approach to explaining moral thought and action. Academy of Management Review, 36(4), 663–685. doi: 10.5465/amr.2010.0128 Jeon, S. H. (2017). Where to report wrongdoings? Exploring the determinants of internal versus external whistleblowing. International Review of Public Administration, 22(2), 153–171. doi: 10.1080/ 12294659.2017.1315235 May, D. R., Luth, M. T., & Schwoerer, C. E. (2013). The Influence of business ethics education on moral efficacy, moral meaningfulness, and moral courage: A quasi-experimental study. Journal of Business Ethics, 124(1), 67–80. doi: 10.1007/s10551-013-1860-6 Miceli, M. P., & Near, J. P. (2002). What makes whistle-blowers effective? Three field studies. Near, J. P., & Miceli, M. P. (1995). Effective Whistleblowing. Park, H., Rehg, M. T., & Lee, D. (2005). The influence of Confucian ethics and collectivism on whistleblowing intentions: A study of South Korean public employees. Journal of Business Ethics, 58(4), 387–403. doi: 10.1007/s10551-004-5366-0 Previtali, P., & Cerchiello, P. (2017). The determinants of whistleblowing in public administrations: an analysis conducted in Italian health organizations, universities, and municipalities. Public Manage­ ment, 1–19. Trevino, L. K., & Youngblood, S. A. (1990). Bad apples in bad barrels: A causal analysis of ethical decision-making behavior.

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Japanese cultural festival behavioral intention based on attendees’ co-creation, perceived value, and satisfaction M. Larasati & T.E. Balqiah Universitas Indonesia, DKI Jakarta, Indonesia

ABSTRACT: Events or festival can be used by a brand or an institution to create experi­ ences. This article examines how attendee satisfaction and future behavioral intentions are based on customer-to-customer logic. An analytical framework was developed to analyze embedded relationships within festival attendees’ co-creation experience and perceived value. The article analyzed the behavioral intentions of Japanese cultural festival attendees in Jakarta, employing a survey of 205 Indonesians who had participated in some Japanese cul­ tural festival in the past year. The findings have statistically validated these attributes and explored the impact of each attribute on the perceived value, satisfaction, and behavioral intentions of festivalgoers.

1 INTRODUCTION Festival research has received growing attention in academic research, gaining autonomy in marketing theories as a specific subfield of event studies (Getz, Andersson, & Carlsen, 2010). Previous studies have shown that quality, value, and satisfaction should be examined to understand tourists’ behavioral intention (Baker & Crompton, 2000). Perceived value can be defined as “consumers’ overall assessment of what is received and what is mediated between destination performance and given” (Zeithaml, 1988). Behavioral intention, in this study, is described as a stated likelihood to return to the festival, to comment on the festival positively, and to recommend the festival to family, friends, and others in the future, which is imperative to festival organizers. The consumers’ role in marketing and tourism research is changing from passive receiver to active actor in the role of co-creation. Service-dominant logic (S-D logic) highlights the joint role of service provider in value co-creation (Vargo & Lusch, 2004). However, in festival experiences, the S-D logic approach co-creation does not apply. Experiential festival value outcomes cannot be predesigned or predelivered, and exploring value co-creation between providers and consumers cannot yield a complete picture of the value derived from festival tourism (Rihova, 2013). Thus, customer-dominant logic (C-D logic) highlighting the importance of customers’ shared consumption in value creation, is arguably more suited to understanding the co-creation process, especially in festival tour­ ism, and recognizing the role of customers as co-creators of the festival experience (Getz et al., 2010; Rihova, 2013). Japan is one of the countries with a very diverse cultural festival. Japan and Indonesia have historical records dating to colonial times. The fact that the cultural festival was not spared was one of Japan’s efforts to introduce its culture to the people of Indonesia. In the past decade there have been three major Japanese cultural festivals taking place in Jakarta, namely Ennichisai, Jak Japan Matsuri, and Gelar Jepang Universitas Indonesia. The purpose of this research is to understand and examine a conceptual model of the relationship between value co-creation and perceived value of the festival with satisfaction, festival attachment, and its effect on future festival behavioral intention.

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2 LITERATURE REVIEW Together with a variety of other special events, festivals and public celebrations are increas­ ingly seen as unique tourist attractions and as destination image makers (Getz et al., 2010). Based on Kruger & Saayman (2017), events, local activities, and festivals not only can attract tourists, but also serve as the most direct and specific promotional channels of local culture, and explicitly demonstrate cultural characteristics. Marketing through an event or event mar­ keting appears as a promotional catalyst in traditional marketing communication tools (Gupta, 2003). With different degrees of interaction between tourists and others, there are three major cat­ egories in value theory that explain value co-creation in service marketing including tourism: “goods-dominant” (G-D) logic, service-dominant (S-D) logic (Vargo & Lusch, 2004), and cus­ tomer-dominant (C–D) logic (Heinonen & Strandvik, 2015). Customer-dominant logic (CDL) is a perspective on business and marketing based on the primacy of the customer (Heinonen & Strandvik, 2015). CDL plays a crucial role in festivals. Among all types of tourism experi­ ences, the festival experience has been strongly associated with the idea that experiential value is co-constructed (Zhang, Fong, & Li, 2019). Some studies have found that festival satisfaction largely depends on the dominant customer interactions, that is, those between festival attend­ ees and service providers (Rihova et al., 2015). H1: Satisfaction with the co-creation experience is positively associated with festival attachment. H2: Satisfaction with the co-creation experience is positively associated with festival satisfaction. Perceived value has been defined as consumers overall assessment of a product or service based on their perceptions of what is received and what is given (H. Lee, Hwang, & Shim, 2019). Correspondingly, perceived value has been recognized as one of the most critical factors and measures for gaining a competitive edge for business success and one of the most import­ ant indicators of repurchasing intentions (Castillo Canalejo & Jimber del Río, 2018). H3: The higher the value festival visitors perceive, the higher the level of festival satisfaction they have. H4: Satisfaction with perceived value is positively associated with festival behavioral intention. H5: Festival satisfaction is positively associated with festival attachment. Cakici, Akgunduz, & Yildirim (2019) stated that the concept of behavioral intention embodies some behavior that the consumer exhibits as a result of the post-sale evaluation and whose effects are quite important for the businesses. Positive behavioral intentions include writing positive comments about the business (Kim et al., 2010; J. S. Lee, Lee, & Choi, 2011). H6: Festival satisfaction is positively associated with festival behavioral intention. H7: Festival attachment is positively associated with festival behavioral intention. 3 METHODS Based on previous research conducted in the tourism research area, a model has been tested in the context of music and cultural festival (Saha & Nath, 2017; Zhang et al., 2019). In this study, “Jak Japan Matsuri,” “Little Tokyo Ennichisai Blok M,” and “Gelar Jepang Universi­ tas Indonesia” were chosen as the study sites. To verify the research hypothesis, an online quantitative questionnaire was conducted, specifically to the Japanese-event visitor commu­ nity. The questionnaire contained 41 items and a 5-point Likert scale (ranging from 1: strongly disagree to 5: strongly agree) was deployed to measure the items. A pilot test was conducted among 30 respondents for their comments on any language ambiguities in the questionnaire. The total target of the main test was 205 respondents who have experience visiting one or more of the Japanese festivals in Jakarta. The analysis was conducted with SPSS 11.0 and LISREL 8.8. The structural equation modeling (SEM) was utilized to test the hypotheses. 111

4 ANALYSIS AND RESULTS Satisfaction with the co-creation experience in terms of attachment has a t-value of more than 1.96 (H1 accepted); in other words, festival visitor satisfaction with the co-creation experience both between visitors and staff or visitors and visitors has a positive effect on the attachment of visitors to the festival. This is in accordance with previous research that visitors play a role in co-creation during the festival (Rihova, 2013; Zhang et al., 2019). Satisfaction with the co­ creation experience in terms of satisfaction with the festival has a t-value of more than 1.96 (H2 accepted); in other words, the higher the satisfaction of festival visitors to the co-creation experience with fellow visitors, the higher the level of satisfaction with the entire festival. Vis­ itor satisfaction with value creation from the point of view of consumers will affect the satis­ faction of the festival (Zhang et al., 2019). Perceived value of festival satisfaction has a t-value of more than 1.96 (H3 accepted), mean­ ing that the higher the perceived value obtained by visitors during the festival in the form of functional value, emotional value, and social value, the higher the level of visitor satisfaction with the festival. Visitors’ perceived value when the festival takes place will have a positive impact on festival satisfaction (Saha & Nath, 2017). Perceived value of behavioral intention to revisit the festival has a t-value of more than 1.96 (H4 accepted) so that the higher the per­ ceived value as seen by visitors during the festival in the form of functional value, emotional value, and social value, the higher the intention to behave positively toward future festivals. Besides having a positive effect on festival satisfaction, the role of perceived value also directly affects the behavioral intention of festival visitors (Saha & Nath, 2017). Festival satisfaction in terms of festival attachment has a t-value of more than 1.96 (H5 accepted), which means that the higher the satisfaction of visitors to the festival, the higher the attachment of visitors to the festival. Festival satisfaction in terms of festival behavioral intention has a t-value of more than 1.96 (H6 accepted), so the higher the satisfaction of visit­ ors to the festival, the higher the intention to positively behave in future visits. This is directly proportional to the research of Zhang et al. (2019), namely, a positive evaluation of the overall experience of the festival contributes to developing the intention to revisit the festival and psy­ chological ties with the festival. The positive behavior of visitors to the festival with the high­ est value is recommending the festival to others, while the lowest is the willingness to pay more in the future. Festival attachment to festival behavioral intention has a t-value of less than 1.96 (H7 rejected), meaning that the attachment of visitors to the festival does not significantly influ­ ence their intention to attend in the future. The sense of attachment to the festival does not affect the festival in the future, perhaps because themes and performers are different each year so that the visitors’ behavioral intention. The choice of venue for the festival will create func­ tional and social spaces so that festival visitors can feel connected to where the festival takes place (Brown & Raymond, 2007). Individuals who are connected to a place that specifically facilitates them to attend a festival have a tendency to resynchronize with the festival (Zhang et al., 2019). This might explain the insignificant relationship between attachment festival and festival behavioral intention.

5 CONCLUSION Based on the results of research and analysis presented in the previous sections, the conclu­ sions of this study are as follows. The higher the festival visitors’ level of satisfaction with the co-creation experience between visitors and staff or visitors and visitors, the higher the posi­ tive effect on visitors’ attachment to the festival. Visitors can actively create value by interact­ ing with the performers, staff, and other visitors. In addition to influencing engagement with the festival, festival visitors’ satisfaction also affects the overall satisfaction of the festival. Per­ ceived value obtained by visitors also contributes to the level of visitor satisfaction with the festival. The values obtained by visitors can be functional values, emotional values, or social values. Festival organizers as service providers play a greater role in the existence of the 112

perceived value. Moreover, the perceived value also has a significant effect on visitor actions in the future. Overall satisfaction with the festival influences engagement with the festival and also the intention to attend the next festival. Actions of visitors in the future can be either positive or negative. Positive visitor actions expected when visitors are satisfied with the festi­ val include coming back to the festival next year, recommending the festival to others, com­ menting positively on the festival, paying more for the upcoming festival, and inviting others to attend the upcoming festival. REFERENCES Baker, D. A., & Crompton, J. L. (2000). Quality, satisfaction and behavioral intentions. Annals of Tour­ ism Research, 27(3), 785–804. https://doi.org/10.1016/S0160-7383(99)00108-5. Brown, G., & Raymond, C. (2007). The relationship between place attachment and landscape values: Toward mapping place attachment. Applied Geography, 27(2), 89–111. https://doi.org/10.1016/j. apgeog.2006.11.002. Cakici, A. C., Akgunduz, Y., & Yildirim, O. (2019). The impact of perceived price justice and satisfaction on loyalty: The mediating effect of revisit intention. Tourism Review, 74(3), 443–462. https://doi.org/ 10.1108/TR-02-2018-0025. Castillo Canalejo, A. M., & Jimber del Río, J. A. (2018). Quality, satisfaction and loyalty indices. Journal of Place Management and Development, 11(4), 428–446. https://doi.org/10.1108/JPMD-05-2017-0040 Getz, D., Andersson, T., & Carlsen, J. (2010). Festival management studies: Developing a framework and priorities for comparative and cross-cultural research. In International Journal of Event and Festi­ val Management (Vol. 1). Gupta, S. (2003). Event Marketing : Issues and Challenges. IIMB Management Review, (June), 87–97. Heinonen, K., & Strandvik, T. (2015). Customer-dominant logic: foundations and implications. Journal of Services Marketing, 29(6–7), 472–484. https://doi.org/10.1108/JSM-02-2015-0096. Kim, Y. H., Kim, M., Ruetzler, T., & Taylor, J. (2010). An examination of festival attendees’ behavior using SEM. International Journal of Event and Festival Management, 1(1), 86–95. https://doi.org/ 10.1108/17852951011029324. Kruger, M., & Saayman, M. (2017). Segmenting beyond behavioural intentions: Fine tuning music festival visitors’ music appreciation. International Journal of Event and Festival Management, 8(2), 204–223. Lee, H., Hwang, H., & Shim, C. (2019). Experiential festival attributes, perceived value, satisfaction, and behavioral intention for Korean festivalgoers. Tourism and Hospitality Research, 19(2), 199–212. https://doi.org/10.1177/1467358417738308. Lee, J. S., Lee, C. K., & Choi, Y. (2011). Examining the role of emotional and functional values in festi­ val evaluation. Journal of Travel Research, 50(6), 685–696. https://doi.org/10.1177/0047287510385465. Rihova, I. (2013). Customer-to-customer co-creation of value in the context of festivals. (September), 1–323. http://eprints.bournemouth.ac.uk/21072/1/Rihova,Ivana_PhD_2013.pdf. Saha, P., & Nath, A. (2017). A conceptual framework of festival visitors’ behavioral intentions. Manage­ ment International Conference, 275–284. Vargo, S. L., & Lusch, R. F. (2004). Evolving to a new dominant logic for marketing. Journal of Market­ ing, 68(1), 1–17. https://doi.org/10.1509/jmkg.68.1.1.24036. Yoon, Y. S., Lee, J. S., & Lee, C. K. (2010). Measuring festival quality and value affecting visitors’ satis­ faction and loyalty using a structural approach. International Journal of Hospitality Management, 29(2), 335–342. Zeithaml, V. A. (1988). Consumer perceptions of price, quality, and value: A means-end model and syn­ thesis of evidence. Journal of Marketing, 52(3), 2. https://doi.org/10.2307/1251446. Zhang, C. X., Fong, L. H. N., & Li, S. N. (2019). Co-creation experience and place attachment: Festival evaluation. International Journal of Hospitality Management, 81(April), 193–204. https://doi.org/ 10.1016/j.ijhm.2019.04.013.

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Commitment and identification in the Millennial employee: The perceptions of organizational and supervisor support Innayatussolihah & E.S. Pusparini University of Indonesia, Indonesia

ABSTRACT: Employee’s commitment is the core of a company’s sustainability, and their relationship influences the contributions of employees' performance. This research examines the influence of organizational and supervisor supports on the affective commitment and organizational identification of millennial employees. Data were collected from a sample of 330 millennial employees via online and offline surveys, then analyzed using structural equa­ tion modeling. Organizational and supervisor supports were established to influence affective commitment of employees both directly and indirectly via organizational identification. Fur­ thermore, organizational identification was found to partially mediate the relationship between the organization supervisor support and affective commitment. The results are in-line with the hypothesis of organizational sustainability in which organization supervisor support can be considered as a primary preventive intervention that increases employee's belongingness and encourages them to commit to the company.

1 INTRODUCTION Managers that are successful in getting employees’ commitment have better chances to decrease resistance. This approach indicates that sustainability and sustainable development concern is not only the ecological and socio- economic environment but also the psychological one. While the traditional approach to sustainability is based on using a small number of resources, the psychological one is focused on regenerating resources and the well-being of the person, the environment, and the person in the environment, which further means the well­ being of persons within their organizations (Fabio, 2017). Since healthy organizations are con­ sidered to be able to run successful businesses, the psychology of sustainability suggests that increasing the resources and strengths of employees is useful for regenerating their belongingness to the company, and at the same time, achieving a healthy and more effective workplace. In the present research, organization and supervisor support were considered as an expression of the support and interest that organizations have towards their employees, and supervisor support may contribute to increasing the relationship between the employees and their organ­ ization (Salvatore, Tuscano, and Alfio, 2019). During the past decade, organizational commit­ ment (OC) is concerned for increasing importance in industrial/organizational psychology. In fact, employees who are strongly committed to their organization are less likely to leave. In addition, the understanding of employee withdrawal behaviors has been increased by the emergence of multidimensional conceptualizations of commitment.. This model research has been used to find out direct and indirect the relationships of affective commitment and per­ ceived organization and supervisor support mediated by organizational identification.

2 METHODS Data were collected through anonymous self-report questionnaires via offline and online surveys. The sample was 330 millennials employees in various industries. The average age of employees 114

was 25 years, and the population was predominately female (88.5%). Their experience in the organization ranged from five months to 15 years with an average of 3.5 years.The measuring instruments for AC, OID, and POS comprised seven-point Likert scales ranging from ‘Strongly Agree’ to ‘Strongly Disagree.’ The AC scale was adapted from Meyer and Allen’s (1997) wellestablished four- item scale of AC. The five-item OID scale was adapted from Mael and Ashforth (1992). A nine-item scale for the POS and a fifteen-item scale for PSS were adapted from Eisen­ berger (1992). According to Schumacker and Lomax (2010), it is prudent to first test the measure­ ment model for each latent variable. This two-step approach was adopted in this research. The structural model was estimated only once and each of the individual measurement models was considered reasonable with confirmatory factor analysis conducted on each construct in turn.

3 RESULTS The means for AC, OID, and POS were considered high (neutral = 4, maximum score = 7). POS and AC were particularly low with a relatively large standard deviation, while PSS and OID were high with low standard deviation. As shown in Table 2, AC was positively correlated to OID (r = 0.677, p < 0.01), to POS (r = 0.671, p < 0.01), and to PSS (r = 0.671, p < 0.01). In addition, OID was positively correlated to POS (r = 0.526, p < 0.01), and to PSS (r = 0.525, p < 0.01). 3.1 Structural model assessment Table 3 shows the model-fit results of the structural model assessment. The Chi-Square test was significant, meaning that the null hypothesis of the exact fit was rejected. The RMSEA was below the cut-off of 0.08 and it was recommended for an acceptable fit. The CFI and TLI were marginally above the 0.90 thresholds and the SRMR was somewhat higher than the 0.5 cut-off. Therefore, the model fit was deemed at best mediocre but considered adequate. The structural model showing the standardized path coefficients is presented in Figure 1. 3.2 Direct effects Supporting the initial theorizing of Hypothesis 1, OID was significantly and positively related to AC (γ = 0.52; p < 0.05). Also, in support of Hypothesis 2 and 3 respectively, POS was found to be significantly and positively related to AC (γ = 0.23; p ≤ 0.05), and similarly to Table 2. Shows the means, standard deviation, and bivariate correlation among the four variables. Variables

Means

SD

AC

POS

PSS

OID

AC POS PSS OID

4.52 4.97 5.09 5.42

1.528 1.543 1.438 1.288

1 0.671** 0.671** 0.677**

1 0.810** 0.526**

1 0.525*

1

Notes: AC (Affective Commitment); OID (Organizational Identification); POS (Perceived Organizational Sup­ port); PSS (Perceived Supervisor Support). n = 330; **p < 0.01.

Table 3. Model fit indices: structural model. Model fit criterion

Results

Chi-square test of model fit RMSEA CFI RFI SRMR

χ2 (491) =3971.23; p < 0.05 0.16 0.93 0.92 0.10

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Figure 1.

Structural model path diagram.

OID (γ = 0.36; p ≤ 0.05). Meanwhile, to the initial theorizing (Hypothesis 5), a significant rela­ tionship was also found between PSS and AC (γ = 0.36; p > 0.05). Likewise, PER was found not to be related to OID (γ = 0.28; p > 0.05), contradicting Hypothesis 6. 3.3 Indirect effects The relationship between POS and AC was found to be partially mediated by OID (γ = 0.29 p ≤ 0.05), supporting Hypothesis 4. Thus, to Hypothesis 7, OID also partially mediated the relationship between PSS and AC (γ = 0.62; p > 0.05).

4 DISCUSSION Empirical support found in the seven hypotheses suggested that POS and PSS play a more important role in both the identification and commitment of millennial employees. OID had a significant and positive influence on AC. With affective commitment, the individual is emotion­ ally attached to the organization yet they remain separate entities which the results of this research suggested that millennial employees have an emotional attachment, identification, and involve­ ment in the organization. In line with literature on the social exchange theory, organizational sup­ port was found to be positively and significantly related to affective commitment. In this research, organizational support may enhance the commitment of employees. This research found that POS was positively and significantly related to OID. While employee thrives on autonomy (Clegg, 2008; Black-more and Kandiko, 2011), it appears that there is nonetheless a need for support. It is also possible that being given autonomy by the organization may represent a form of organiza­ tional support. This research found that PSS was positively and significantly related to affective commit­ ment. The support of supervisors provided by taking care and providing employees adequate supervision and training is indicative of the benevolent orientation of the supervisor (and of the organization) towards the employees. Supervisor support may satisfy employees’ socio­ emotional needs, create a sense of purpose and meaning for the work activities and a sense of obligation to reciprocate the attention showed by the supervisor (Rhoades & Eisenberger, 2002; Salvatore et al., 2019). This research suggested that employees can voluntarily carry out various actions for the benefit of the organization when they receive positive support that makes them identify themselves as the organization’s employee. The findings of this research suggested that organizational identification plays a mediating role in the relationship between organizational and supervisor support and affective commitment. Organizational identification represents a step towards the forming of an emotional attachment to the organization. Organizational support increased identification, which in turn led to an increase in affective commitment. Furthermore, it is likely that AC may develop. It is proposed that an organization should build up a bond with the employees through the process of organizational support. 116

5 CONCLUSION This research enriched the existing scientific literature, and showed that supervisor and organ­ ization support have a direct and indirect influence on affective commitment and the compo­ nents of it through the mediating effect of organizational identification. The results provided important practical implications that organizations may pursue two aims, which are to increase organizational performance and to promote organizational well-being and sustainability. When employees perceive support and help from their supervisor, their own organiza­ tional identification is increased, and these two aspects contribute to increasing employees’ commitment in order to support organizational goals. Employees who are more identified and more committed might also contribute to increasing organizational psychological well-being and organizational sustainability. REFERENCES Academics.” International Journal of Educational Management 20 Analytic Review.” Psychological Bul­ letin 141. Ashforth, B. E., and F. A. Mael. 1989. “Social Identity Theory and the Organization.” Academy of Man­ agement Review 14 (1): 20–39. Caesens, G., G. Marique, and F. Stinglhamber. 2014. “The Relationship Between Perceived Organiza­ tional Support and Affective Commitment: More Than Reciprocity, it is Also a Question of Organiza­ tional Identification.” Journal of Personnel Psychology. Caesens, G.; Marique, G.; Stinglhamber, F. The relationship between perceived organizational support and affective commitment. J. Pers. Psychol. 2014, 13, 167–173. Eisenberger, R., R. Huntington, S. Hutchison, and D. Sowa. 1986. “Perceived Organizational Support.” Journal of Applied Psychology 71. Eisenberger, R.; Stinglhamber, F.; Vandenberghe, C.; Sucharski, I.L.; Rhoades, L. Perceived supervisor support: Contributions to perceived organizational support and employee retention. J. Appl. Psychol. 2002, 87, 565–573. Fuller, J. B., L. Marler, K. Hester, L. Frey, and C. Relyea. 2006b. “Construed External Image and Organizational Identification: A Test of the Moderating Influence of Need for Self-Esteem.” The Jour­ nal of Social Psychology 146 (6): 701–16. Gok, S., Karatuna, I., & Karaca, P. O. (2015). The role of perceived supervisor support and organiza­ tional identification in job satisfaction. Procedia-Social and Behavioral Sciences, 177, 38–42. Herscovitch, L.; Meyer, J.P. Commitment to organizational change: Extension of a three-component model. J. Appl. Psychol. 2002, 87, 474–487. Hogg, M. A., and D. J. Terry. 2000. “Social Identity and Self-Categorization Processes in Organizational Contexts.” Academy of Management Review 25 (1): 121–40. Jaros, S. Commitment to organizational change: A critical review. J. Change Manag. 2010, 10, 79–108. Joiner,T. A., and S. Bakalis. 2006. “The Antecedents of Organizational Commitment: The Case of Aus­ tralian Casual Klein, H. J., J. C. Molloy, and J. T. Cooper. 2009. “Conceptual Foundations: Con­ struct Definitions and Theoretical Representations of Workplace Commitments.” In Commitment in Organizations: Accumulated Wisdom and new Directions, edited by H. J. Klein, T. E. Becker, and J. P. Meyer, 3–36. New York, NY: Routledge. Lee, E., T. Park, and B. Koo. 2015. “Identifying Organizational Identification as a Basis for Attitudes and Behaviors: A Meta-. Meyer, J. P., and N. J. Allen. 1997. Commitment in the. Rhoades, L., and R. Eisenberger. 2002. “Perceived Organizational Support: A Review of the Literature.” Journal of Applied of Industrial Psychology 40 Tyler, T. R., and S. L. Blader. 2003. “The Group Engagement Model: Procedural Justice, Social Identity, and Cooperative Behavior.” Personality and Social Psychology Review 7 (4): 349–61. Uzun, T. (2018). A Study of Correlations between Perceived Supervisor Support, Organizational Identifi­ cation, Organizational Citizenship Behavior, and Burnout at Schools. European Journal of Educa­ tional Research, 7(3), 501–511. Van Knippenberg, D., and E. Sleebos. 2006. “Organizational Identification Versus.

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The influence of entrepreneurial & marketing orientation to strategic learning capability and SME performance automotive industry in Indonesia - a conceptual framework M.Z. Azizi & L. Sudhartio Strategic Management, PPIM –Faculty of Economics and Business, University of Indonesia, Indonesia

ABSTRACT: The main purpose of this article is to provide a conceptual framework on the role of entrepreneurial orientation (EO) and marketing orientation (MO) in enhancing stra­ tegic learning capability (SLC) and firm performance (FP) in the context of small and medium enterprises (SMEs) in the automotive manufacturing industry in Indonesia. The data obtained will be analyzed using structural equation modeling (SEM).

1 BACKGROUND SMEs play an important role in economic growth and social inclusion in Indonesia. However, SMEs in face monumental challenges such as weak strategic orientations, poor infrastructure, inadequate capabilities, poor management, inadequate technological skills development, and lack of export market knowledge or experience. (Adegbite, 2007) SMEs as organizations must be extremely agile in the rapidly shifting global context of 21st century business. To do this, SMEs must approach strategy making from a learning approach and develop strategic learning capability – the capacity of an organization to retool rapidly to create and execute new strategies through learning at the individual and system levels in response to changes and uncertainties in complex environments. While the literature related to strategic learning has grown during the past decade, knowledge around strategic learning cap­ ability needs elaborating so that scholars and leaders can more deeply understand what it really is, how it works, and how best to facilitate it. (Moon & Lee, 2015) Strategic learning capability can be defined as a firm’s proficiency at deriving knowledge from past strategic actions and subsequently leveraging that knowledge to adjust firm strategy (Pieterson, 2002) (Thomas et al., 2001). Broadly speaking, strategic learning capability falls under the rubric of organizational learning, defined by Levitt and March (2011) as the acquisi­ tion of knowledge that precedes changes to key elements of an organizational system. The concept of strategic learning capability has garnered increased attention in the strategic man­ agement literature (Kuwada, 1998) (Voronov & Yorks, 2005) in part due to its centrality to the question of how firms develop and adapt strategically over time. While the broader con­ cept of strategic learning has been recognized in the scholarly literature for several decades (Mintzberg, 1985), researchers only recently have begun in-depth investigation of the con­ tributors to, and the contexts that enhance, strategic learning capability. (Barr, 1998) (Thomas et al., 2001). Slater and Narver (1995) recommended that both market orientation and entrepreneurial orientation can provide a change in firm organizational culture, in a way that organizations can obtain a higher apprenticeship so they have better opportunities of getting a higher level of business revenue and, consequently, increased additional value for their customers and con­ sumers. However, research conducted by Angelo (2013) said it is not possible to generalize about the relationship between entrepreneurial orientation and market orientation to SME firm performance, because it is essential to contextualize and analyze it in the light of specific 118

variables that may affect its nature. Entrepreneurial orientation does improve strategic learn­ ing capability. Entrepreneurial orientation may be insufficient to dramatically improve stra­ tegic learning capability however must align with the firm’s responding quickly to changing market conditions and defined planned strategy. Many of these researches focus on firms operating in developed markets and little is known about reconfiguring capability and stra­ tegic learning capability and their relationship with SME performance in transition or in response to a changing business environment. Anderson’s (2009) research concluded that an entrepreneurial orientation does improve strategic learning capability. However, and more importantly, entrepreneurial orientation may be insufficient to dramatically improve strategic learning capability. Based on this explanation, this conceptual article aims to examine the relationship between entrepreneurial orientation (EO) and marketing orientation (MO) in enhancing strategic learning capability (SLC) and firm performance (FP) in the context of small and medium enterprises (SMEs) in the automotive manufacturing industry in Central Java Indonesia.

2 PROBLEM IDENTIFICATION First, empirically, there are still inconsistent effects found in the contemporary literature con­ cerning the relationship between EO, MO, and SME performance (SP). Affendy (2015) stated that entrepreneurial orientation and marketing orientation had a positive influence on SME performance. Conflicting opinions expressed by previous authors consider this marketing as a way to achieve corporate entrepreneurship (Morris & Paul, 1987) or view entrepreneurial orientation as a necessary complement of market orientation (Slater & Narver, 1995). A study by Aliyu (2015) argued that EO has a significant and positive relationship with SME perform­ ance, however a negative relationship is reported between MO and SME performance (SP). Second, there are many studies on learning such as organizational learning (OL) and learn­ ing orientation (LO), which state the relationship between EO. (Baker & Sinkula, 1999) (Wales et al., 2013). But the learning context is still broad and is intended only for large com­ panies, even though the challenges of learning strategy are also faced by SME. One study con­ ducted by Wales (2013) proved a positive relationship between the absorptive capacity (AC) and the strategic orientation of the company, thus encouraging understanding of organiza­ tional learning. Research conducted by Siren et al. (2012) revealed that learning strategy has a positive influence on company performance. The ability to learn strategies based on experi­ ence and knowledge will result in strategic actions that encourage the creation of competitive advantage and performance improvement. (Anderson et al., 2009) (Sirén, 2012). Third, according to Elshourbagy and Dinana (2018), MO has a positive impact to SME performance. However Anderson (2009) states that MO has a positive influence to SLC toward SME Performance. Both of these variables are very important and required informa­ tion for SMEs to respond to the dynamic business environment. The importance of an adapt­ ing environment is highly recommended by academics to improve SME performance and to be able to survive in a dynamic environment. (Jiao et al., 2010) (Zahra et al., 2006). So this conceptual article generally shows that SME performance is simultaneously aligned with stra­ tegic learning capability when the firm increases entrepreneurial orientation and market orientation.

3 PURPOSE THE STUDY The aim of this study is to gain insight related to the influence of entrepreneurial orientation and marketing orientations to strategic learning capability (SLC) of SMEs’ performance in the automotive industry in Indonesia. Particularly this study aims to: 1. Study the influence of EO on the strategic learning capability (SLC) of SME 2. Study the effect of EO on SME performance 119

3. Study the effect of MO on the SLC of SME 4. Study the effect of SLC on SME performance

4 RESEARCH QUESTION Based on the main purpose of the problem, the research questions in this study are as follows: 1. 2. 3. 4.

How does EO influence the SLC of SMEs? How does EO influence SME performance? How does MO influence the SLC of SMEs? How does SLC effect SME performance?

5 LITERATURE REVIEW 5.1 Entrepreneurial orientation Entrepreneurial orientation (EO) is a firm-level strategic orientation that captures an organ­ ization’s strategy-making practices, managerial philosophies, and firm behaviors that are entrepreneurial in nature. Entrepreneurial orientation has become one of the most established and researched constructs in the entrepreneurship literature. A general commonality among past conceptualizations of EO is the inclusion of innovativeness, pro activeness, and risktaking as core defining aspects or dimensions of the orientation. EO has been shown to be a strong predictor of firm performance with a meta-analysis of past research indicating a correlation in magnitude roughly equivalent to the prescription of taking sleeping pills and getting better sleep. Still, some research has argued that EO does not enhance the performance for all firms. Instead, it can be argued that EO is not a simple performance-enhancing attri­ bute but rather is enhancing if applied under the right circumstances of the firm. In some cases, EO can even be disadvantageous for firms, if the situation of the firm does not fit with applying EO. Different situations can be the environment that the firm is situated within or internal situations such as structure and strategy. Entrepreneurial orientation has most frequently been assessed using a nine-item psychomet­ ric instrument developed by Covin (2011) this instrument captures the perspective of Danny Miller (2011) that EO is a “collective catchall” construct that represents what it means for a firm to be considered entrepreneurial across a wide range of contexts. Reviews of the entrepreneurial orientation literature indicate that the majority of prior stud­ ies have adopted Miller’s perspective of EO as the dimension combination of innovativeness, pro-activeness, and risk-taking. 5.2 Marketing orientation Market orientation (MO) perspectives include the decision-making perspective (Lafferty & Tomas M. Hult, 2001), market intelligence perspective (Kohli & Jaworski, 1990), culturally based behavioural perspective (Slater & Narver, 1995), strategic perspective (Lafferty & Tomas M. Hult, 2001) and customer orientation perspective (Moorman et al., 1993). The two most prominent conceptualizations of market orientation are those given by Kohli and Jaworski (1990) and Narver and Slater (1995). While Kohli and Jaworski (1990) consider market orientation as the implementation of the marketing concept, Narver and Slater (1995) consider it to be an organizational culture. Kohli and Jaworski (1990) defined market orientation as “the organization-wide generation of market intelligence, dissemination of the intelligence across departments and organizationwide responsiveness to it.” According to them, the marketing concept is a business philoso­ phy, whereas the term “market orientation” refers to the actual implementation of the 120

marketing concept. They added that “a market orientation appears to provide a unifying focus for the efforts and projects of individuals and departments within the organization.” On the other hand, Narver and Slater (1995) defined market orientation as “the organiza­ tion culture that most effectively and efficiently creates the necessary behaviours for the cre­ ation of superior value for buyers and, thus, continuous superior performance for the business.” As such, they consider market orientation to be an organizational culture consisting of three behavioral components or dimensions: (1) customer orientation, (2) competitor orien­ tation, and (3) inter-functional coordination. 5.3 Strategic learning capability The concept of strategic learning capability (SLC) has garnered increased attention in the stra­ tegic management literature (Voronov & Yorks, 2005), in part due to its centrality to the ques­ tion of how firms develop and adapt strategically over time. While the broader concept of strategic learning has been recognized in the scholarly literature for several decades (Min­ tzberg, 1985), researchers only recently have begun in-depth investigation of the contributors to, and the contexts that enhance, strategic learning capability (SLC). According to research from Hanna (2015), the dimensions of strategic learning capability (SLC) were identified: (1) external focus, (2) strategic dialogue, (3) strategic engagement, (4) customer-centric strategy, (5) disciplined imagination, (6) experiential learning, and (7) reflect­ ive responsiveness. 5.4 SME (Firm) performance Firm performance comprises the actual output or results of an organization as measured

against its intended outputs (or goals and objectives). According to Richard et al. (2009)

organizational performance encompasses three specific areas of firm outcomes: (a) financial

performance (profits, return on assets, return on investment, etc.); (b) product market per­ formance (sales, market share, etc.); and (c) shareholder return (total shareholder return, eco­ nomic value added, etc.).

6 CONCEPTUAL MODEL AND HYPOTHESIS

According the literature review and conceptual model, five hypotheses have been formulated:

H1: There is a significant relationship between EO and strategic learning capability of SME.

H2: There is a significant relationship between EO and SME performance.

H3: There is a significant relationship between EO and strategic learning capability of SME.

H4: There is a significant relationship between strategic learning capability (SLC) to SME

performance. REFERENCES Adegbite. (2007). Assessment of the capabilities for innovation by small and medium industry in Nigeria. African Journal of Business Management, 1(8). Affendy A.H., Asmat-Nizam, Abdul-Talib, F. M. (2015). Rev. Integr. Bus. Econ. Res. Vol 4(3) 259. This Paper Examines the Relationships between Entrepreneurial Orientation, Market Orientation, and Firm Performance. There Has Been Relatively Little Research That Examines the Relationship between Stra­ tegic Orientations, Such as Entrepreneurial Orientati, 4(3), 259–272. Aliyu, M. S. (2015). Linking Market Orientation To Performance in. 1(1), 61–67. Anderson, B. S., Covin, J. G., & Slevin, D. P. (2009). Understanding the relationship between entrepre­ neurial orientation and strategic learning capability: an empirical investigation. Strategic Entrepreneur­ ship Journal, 3(3), 218–240. https://doi.org/10.1002/sej.720.

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Baker, W. E., & Sinkula, J. M. (1999). The synergistic effect of market orientation and learning orienta­ tion on organizational performance. Journal of the Academy of Marketing Science, 27(4), 411–427. https://doi.org/10.1177/0092070399274002. Barr, P. S. (1998). Adapting to Unfamiliar Environmental Events: A Look at the Evolution of Interpret­ ation and Its Role in Strategic Change. Organization Science, 9(6), 644–669. https://doi.org/10.1287/ orsc.9.6.644. Covin, J. G., & Lumpkin, G. T. (2011). Entrepreneurial orientation theory and research: Reflections on a needed construct. Entrepreneurship: Theory and Practice, 35(5), 855–872. https://doi.org/10.1111/ j.1540-6520.2011.00482.x. Elshourbagy, H. M., & Dinana, H. O. (2018). The effect of entrepreneurial market orientation on firm performance: The case of SMEs in Egypt. ACM International Conference Proceeding Series, 2011, 102–107. https://doi.org/10.1145/3268891.3268893. Jiao, H., Wei, J., & Cui, Y. (2010). An empirical study on paths to develop dynamic capabilities: From the perspectives of entrepreneurial orientation and organizational learning. Frontiers of Business Research in China, 4(1), 47–72. https://doi.org/10.1007/s11782-010-0003-5. Kohli, A. K., & Jaworski, B. J. (1990). Market Orientation : The. 54(April), 1–18. Kuwada, K. (1998). Strategic Learning: The Continuous Side of Discontinuous Strategic Change. Organ­ ization Science, 9(6), 719–736. https://doi.org/10.1287/orsc.9.6.719. Lafferty, B. A., & Tomas M. Hult, G. (2001). A synthesis of contemporary market orientation perspectives. European Journal of Marketing, 35(1/2), 92–109. https://doi.org/10.1108/ 03090560110363364. Levitt, B. March, J. G. (2011). Levitt, B. and J. G. March (1988). Organizational learning. Annual Review of Sociology, 14(1988), 319–340. Miller, D. (2011). Miller (1983) revisited: A reflection on EO research and some suggestions for the future. Entrepreneurship: Theory and Practice, 35(5), 873–894. https://doi.org/10.1111/j.1540­ 6520.2011.00457.x. Mintzberg. (1985). Of Strategies, Deliberate and Emergent. Physics, 6(3), 1–2. https://doi.org/10.2307/ 2486186 Moon, H., & Lee, C. (2015). Strategic learning capability: through the lens of environmental jolts. Euro­ pean Journal of Training and Development, 39(7), 628–640. https://doi.org/10.1108/EJTD-07-2014­ 0055. Moorman, C., Deshpandé, R., & Zaltman, G. (1993). Factors Affecting Trust in Market Research Relationships. Journal of Marketing, 57(1), 81–101. https://doi.org/10.1177/002224299305700106. Morris, M. H., & Paul, G. W. (1987). The relationship between entrepreneurship and marketing in estab­ lished firms. Journal of Business Venturing, 2(3), 247–259. https://doi.org/10.1016/0883-9026(87) 90012-7. Pieterson. (2002). Reinventing strategies: In Creating a Scottish church. https://doi.org/10.2307/j.ctt1vwmffk.8. Riviezzo, A., Napolitano, M. R., & Garofano, A. (2013). Entrepreneurial orientation and market orien­ tation in SMEs: An explorative study. In Conceptual Richness and Methodological Diversity in Entre­ preneurship Research (Issue January 2017). https://doi.org/10.4337/9781782547310.00018. Sirén, C. A. (2012). Unmasking the capability of strategic learning: A validation study. Learning Organ­ ization, 19(6), 497–517. https://doi.org/10.1108/09696471211266983. Slater, S. F., & Narver, J. C. (1995). Market Orientation and the Learning Organization. Journal of Mar­ keting, 59(3), 63. https://doi.org/10.2307/1252120 Thomas, J. B., Sussman, S. W., & Henderson, J. C. (2001). Understanding “Strategic Learning”: Linking Organizational Learning, Knowledge Management, and Sensemaking. Organization Science, 12(3), 331–345. https://doi.org/10.1287/orsc.12.3.331.10105. Voronov, M., & Yorks, L. (2005). Taking power seriously in strategic organizational learning. The Learning Organization, 12(1), 9–25. https://doi.org/10.1108/09696470510574232. Wales, W. J., Patel, P. C., & Lumpkin, G. T. (2013). In pursuit of greatness: CEO narcissism, entrepre­ neurial orientation, and firm performance variance. Journal of Management Studies, 50(6), 1041–1069. https://doi.org/10.1111/joms.12034. Zahra, S. A., Sapienza, H. J., & Davidsson, P. (2006). Entrepreneurship and dynamic capabilities: A review, model and research agenda. Journal of Management Studies, 43(4), 917–955. https://doi.org/ 10.1111/j.1467-6486.2006.00616.x.

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The effect of human resource management practices on turnover intention of the auditor in XYZ institution in Indonesia: The mediating role of burnout A.W. Pratiwi & A. Satrya Universitas Indonesia, Indonesia

ABSTRACT: Turnover is a significant issue for organizations, including public sector organizations. The purpose of this study is to investigate the effect of human resource man­ agement (HRM) practices on turnover intention and to examine the mediating effect of burn­ out on the relationship between the human resource management practices and auditor turnover in XYZ institution. Prior HRM practices-employee turnover studies mostly have been from the HR manager’s point of view. This study takes a different approach and exam­ ines this relationship from an employee’s point of view. Internet-based questionnaires were used to collect the data from 200 auditors working in a government institution as external auditors. Data analysis was conducted on the Structural Equation Model (SEM) using path analysis and LISREL 8.8 application with the presence of the mediation effect. The study found not only that the HRM practices lower employee turnover intention, but the also-this relationship is partially mediated by burnout. The results of this study are not only supported that organizations should focus on employee perceptions of the organizations’ HRM practices but also indicated that human resources should go beyond establishing policies and proced­ ures to provide an employee-friendly work environment.

1 INTRODUCTION Many things must be handled by the company, both internally and externally. One prob­ lem that is often faced by organizations is employee turnover. This happens not only to private companies but also to public sector organizations. The direct impact of employee turnover is the financial costs associated with the loss of investment in human resources, recruitment, and additional training and adverse effects on company productivity (Weis­ berg dan Kirschenbaum, 1991). The results of a survey conducted by JobStreet.com on a total of 35,513 respondents regarding the employee happiness index in Asia in 2017 showed that employees in Indonesia had the highest level of happiness when compared to other Asian countries such as Hong Kong, Malaysia, the Philippines, Singapore, Thailand, and Vietnamese. Countries whose happiness levels increased compared to the previous year were Indonesia, Singapore, Malaysia, and Vietnam. While employees in three other countries, namely the Philippines, Thailand, and Hong Kong, experienced a decrease in the level of happiness. The location of the workplace, coworkers, and com­ pany reputation are the main factors that make employees happy for their work. Lack of career development, leadership, and lack of company training are factors that make these employees unhappy.

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2 LITERATUR REVIEW The concept of turnover intention underwent many diverse developments. However, in gen­ eral, the concept that is widely used in various studies is the concept of turnover intention that was coined by (Mobley, 1982). Turnover intention is the desire (intention) to leave the organ­ ization and become a dominant predictor that is positive for the occurrence of turnover. The same thing was said by (Tett dan Meyer, 2006). Research conducted by (Steel dan Ovalle, 1984) shows that turnover intention is not only a predictor that has a positive relationship with actual turnover but is also a better predictor than affective variables such as job satisfac­ tion or organizational commitment shows that turnover intention is a more predictor. (Firth, Mellor, Moore, dan Loquet, 2004) define employee turnover as individuals who are thinking of leaving work. Analysis of turnover intention is more important to study than the actual turnover itself because turnover intention is an employee’s initial decision to leave his job. (Noe, Hollenbeck, Gerhart, dan Wright, 2010) provide definitions of human resource man­ agement (HRM) are policies, practices, and systems that affect employee behaviour, attitudes, and performance include HR planning activities, recruitment, selection, training and develop­ ment, compensation, performance management, and employee relations. The same principle is also used by (Dessler, 2011) that describes human resource management as a process for obtaining, training, assessing, and compensating employees, and for managing their relationship personnel, their health and safety, as well as matters relating to justice. (Maslach, Jackson, Leiter, Schaufeli, dan Schwab, 1986) define burnout as a syndrome resulting from psychological and physical responses felt by someone at an already severe level due to prolonged stress and frustration at work. This psychological syndrome originates from several aspects, namely emotional exhaustion, depersonalization, and a reduction in personal achievement (reduced personal accomplishment). These three dimensions are sources in measuring burnout in the field of human service work compiled by Maslach. Then Maslach dan Goldberg (1998) also developed a burnout measurement tool that can be used for work in general. This is based on the development that the burnout began to emerge in work not only in the type of service/service, which is only identically related to humans or individuals. The dimensions in burnout develop into exhaus­ tion, cynicism, and self-efficacy.

3

METHODOLOGY

The target population and sample in this study are auditors who work in government agencies (XYZ Institution), who are the only external auditors of the government. Auditors who can take part in this research include auditors at the most junior level to the most senior level. A total of 200 respondents filled out the questionnaire within two weeks of the questionnaire being distributed. The data analysis method used in this study is the structural equation tech­ nique or Structural Equation Modeling (SEM)-Lisrel.

Figure 1. The proposed model of the relationships among variables. TOI = Turnover Intention; HRM = Human Resource Management; BOT = Burnout; TD = Training and Development; ES = Employee Staffing; JD = Job Design; ECR = Employee Compensation and Reward; EEMP = Employee Empowerment.

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4 RESULTS This study tested the relationships among human resource management practices, burnout and the turnover intentions of the respondents. Fit indices indicate that this model has a good fit to the data (NFI = 0,93, CFI = 0,96, Root Mean Square Error of Approximation [RMSEA] = 0,083). As shown in Table 1 the results of data processing and path analysis show a negative rela­ tionship between all HRM practices and turnover intention with a t-value of -4.44. Therefore, Hypothesis 1 is supported. However, of the five HRM practices, none were found to be sig­ nificant. Therefore, hypotheses 1a - 1e are rejected. Hypotheses 2, 3, and 4 were tested by analysis of mediating effects. To examine the effects of burnout mediation on the relationship between HRM practices and turnover intention. The mediating effect of burnout on the relationship between HRM practices and turnover intention is examined in four stages as suggested by (Baron dan Kenny, 1986).

5 DISCUSSION AND IMPLICATIONS Research on auditors at XYZ institutions shows that human resource practices will be more effective in reducing the desire to leave work if the auditor does not experience burnout. An auditor who is satisfied with the award given by the organization will not feel rigid in interact­ ing with others which in turn will help prevent the emergence of a desire to get out of this job immediately. The results indicate that when employees’ perception of the HRM practices is increased, turnover intention will decreased. The study also found that burnout partially mediated the relationship between the HRM practices and turnover intention. From the results of the analysis test conducted, it was found that HR practices had a significant and negative effect on turnover intention. According to many studies, HR prac­ tices in a company have an effect on employee turnover intentions. The auditor feels that the organization has appreciated their work well so that it can reduce the level of turnover inten­ tion. As stated by Ertas (2015) who support the results of this study where turnover intention will decrease when employees feel recognized by the organization. According to Guchait dan Cho (2010) HR practices will reduce employee turnover intentions. Other studies have found that compensation & benefit practices, performance management, and training have a significant negative relationship with turnover intentions (Long, Ajagbe, dan Kowang, 2014). Based on the results of the study, it is known that the auditor’s turnover intention at XYZ institution is influenced by several variables. In this study shows the results that the high level of burnout experienced is emotional feelings that are too heavy and draining resources, nega­ tive responses related to feelings towards others, and reduced feelings of competence and productivity in the workplace will increase auditor turnover intention. Management is advised to be able to carry out better human resource practices so as to reduce the fatigue felt by

Table 1. SEM analysis result. Model paths

Estimate

t-value

HRM→TOI TD→TOI ES→TOI JD→TOI ECR→TOI EEMP→TOI HRM→BOT BOT→TOI

-0,32 -0,03 -0,29 0,36 0,05 -0,55 -0,26 0,42

-4,44 -0,18 -1,45 1,72 0,06 -0,77 -3,33 5,58

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examiners. The better employee compensation & rewards received, the auditor will tend to survive in the organization. This study has several limitations. In this study, data were collected from only one public sector organization in Indonesia through easy sampling. Therefore, the findings may be limited to the sample studied. Future studies can carry out tests with different people, different places, and different times to deal with the problem of external validity (Kerlinger and Lee 2002). Therefore, this research opens the door for future studies to conduct cross-national HRM studies (Budhwar and Debrah 2001) and compares HRM systems in various organiza­ tions and countries around the world at organizational and individual levels. REFERENCES Baron, R. M., & Kenny, D. A. (1986). The Moderator-Mediator Variable Distinction in Social Psycho­ logical Research: Conceptual, Strategic, and Statistical Considerations. Journal of Personality and Social Psychology, 51 (6) 1173–1182. Dessler, G. (2011). Fundamentals of human resource management: Pearson Higher Ed. Ertas, N. (2015). Turnover Intentions and Work Motivations of Millennial Employees in Federal Service. Public Personnel Management, 44(3), 401–423. Firth, L., Mellor, D. J., Moore, K. A., & Loquet, C. (2004). How can managers reduce employee inten­ tion to quit? Journal of Managerial Psychology, 19(2), 170–187. Guchait, P., & Cho, S. (2010). The impact of human resource management practices on intention to leave of employees in the service industry in India: the mediating role of organizational commitment. The International Journal of Human Resource Management, 21(8), 1228–1247. Long, C. S., Ajagbe, M. A., & Kowang, T. O. (2014). Addressing the Issues on Employees’ Turnover Intention in the Perspective of HRM Practices in SME. Procedia - Social and Behavioral Sciences, 129, 99–104. Maslach, C., & Goldberg, J. (1998). Prevention of burnout: New perspectives. Applied and preventive psychology, 7(1), 63–74. Maslach, C., Jackson, S. E., Leiter, M. P., Schaufeli, W. B., & Schwab, R. L. (1986). Maslach burnout inventory (Vol. 21): Consulting psychologists press Palo Alto, CA. Mobley, W. H. (1982). Employee turnover: Causes, consequences, and control: Addison-Wesley. Noe, R., Hollenbeck, J., Gerhart, B., & Wright, P. (2010). Fundamentals of Human Resource Manage­ ment (4th Eds.). In: New York: McGraw-Hill/Irwin. Steel, R. P., & Ovalle, N. K. (1984). A Review and Meta-Analysis of Research on the Relationship Between Behavioral Intentions and Employee Turnover. Journal of Applied Psychology, 69(4). Tett, R. P., & Meyer, J. P. (2006). Job Satisfaction, organizational commitment, turnover intention, and turnover path analyses based on meta -analytic findings. Personnel Psychology, 46 (2), 259–293. Weisberg, J., & Kirschenbaum, A. (1991). Employee turnover intentions. The International Journal of Human Resource Management, 2(3), 359–375. doi: 10.1080/09585199100000073

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Determinant of financial inclusion in Indonesia C. Azzahra & R.A. Kasri Faculty of Economics and Business, University of Indonesia, Indonesia

ABSTRACT: Financial inclusion has become an interesting issue and an important public policy priority following the recent global financial crisis. In Indonesia, government, the bank­ ing sector and other related parties have focused on achieving higher rates of financial inclu­ sion through various ways. This article measures the index of financial inclusion in Indonesia covering three dimensions: accessibility, availability, and usage of banking services. To meas­ ure the index of financial inclusion, we use a methodology proposed by Sarma (2012). We also attempt to identify the factors – bank-specific variables and macroeconomic factors – that are significantly associated with financial inclusion in Indonesia. Among macroeconomic factors, as expected, income proxy by GDP per capita is positively associated with level of financial inclusion, while bank size and net interest margin also have positive significant effect on finan­ cial inclusion in Indonesia

1 INTRODUCTION Financial inclusion has become an interesting issue and an important public policy priority following the recent global financial crisis. Financial inclusion provides universal access to financial services, at a reasonable cost, for all levels of society especially the low-income category (Coordinating Ministry for Economic Affairs, 2018). However, in fact, financial inclusion is still difficult to reach even at the highest level for various reasons,, for example, price barriers and non-price barriers such as lack of necessary documentation, distance, and related individual issues (Sachindra, 2013). According to a study conducted by the Asian Development Bank (ADB) in the Asia-Pacific region, around 70–80% of adults in this region do not have access to the formal financial system and still depend on the informal financial system (Ayyagari, 2015). Indonesia as one of the largest countries in the Asian region, showed an increasing growth in financial inclusion: over the past 6 years it grew from 29% to 49% (World Bank, 2017). However, this value is still below average global financial inclusion. Furthermore, Kunt et al. (2015) mentioned that regulators in various countries believe that financial exclusion is the main factor that inhibits global economic growth, so expanding access to formal financial services is considered a powerful way for the government to achieve financial inclusion. Other empirical research proves that easy access to formal financial services can provide economic and social bene­ fits, such as increasing savings (Allen et al., 2016); reducing poverty and income inequality, and expanding investment opportunities for the private sector (Beck, 2007; Allen, 2012); increasing employment (Prasad, 2010; Bruhn, 2009); improving welfare and well-being (Karlan & Zinman, 2010); and enhancing household consumption and women’s empower­ ment (Ashraf, 2010). Nowadays, Indonesian government and regulator have focused on increasing the finan­ cial inclusion rate through the banking system, given the large share of banking institu­ tions, up to 77% in the financial system (Bank Indonesia, 2018). However, the rapid development of banking institutions is not accompanied by ease of access, and the infor­ mal financial sector is still a popular option for the poor to manage their daily financial needs (Collins et al., 2009). Husodo et al. (2015) also showed that formal financial 127

institutions have not been the main source of loans in funding deficit budgets, especially for low-income-category households. Therefore, replacing the informal financial service sector with the formal financial sector could increase the income and welfare of the poor. A well-designed financial policy and strong expansion of financial inclusion can create a win-win situation where the country can improve stability and economic growth (Dema, 2015; Rahman, 2014). Higher levels of financial inclusion can ultimately benefit financial stability and reduce excessive risk-taking (Hannig & Jansen, 2010; Han & Melecky, 2013; Morgan & Pon­ tines, 2014). This is in line with Diamond (1984), Khan (2011) and Cull et al.’s (2012) research which shows that countries that expand their banking service coverage, espe­ cially for savings and loan transactions, have an impact on diversifying banking assets and increasing stability (Diamond, 1984). Therefore, given the importance of financial inclusion in a country, it is necessary to further investigate what factors can influence the level of financial inclusion.

2 LITERATURE REVIEW 2.1 Financial inclusion Financial inclusion is the process of ensuring access to financial services including timely and adequate credit where is needed by vulnerable groups such as weaker sections and low-income groups at an affordable cost (The Reserve Bank of India, 2008). Meanwhile, according to Bank Indonesia, financial inclusion is a form of financial-service deepening aimed for the people at the bottom of the pyramid to utilize formal financial products and services such as savings, transfer, loans, and insurance (Bank Indonesia, 2016). Mitchel (2013) reveals that financial inclusion has no direct impact on economic growth but can contribute as a trigger factor of economic growth itself (Mitchell, 2003). This is supported by Allen et al., (2012), who found one of the factors influencing economic growth is easy access to credit services where investment needs will be quickly met compared to if people have to collect funds first which will take longer and eliminate investment opportunities (Allen, 2012). Various empirical studies try to calculate how index of financial inclusion (IFI) can be formed (Sarma, 2008, 2012; Gupte Rajani, 2012; Camara & Tuesta, 2014). Sarma and Pais (2011) examined what affects the IFI in terms of socioeconomic factors, infrastructure availability, and bank-specific factors. The results found a socioeconomic variable: GDP; and infrastructure factors: availability of access roads and the number of installed phones have a significant positive relationship on increasing a country’s financial inclusion. While bank-specific factors – non-performing assets (NPA), CAR, and share of foreign banks on total banking assets – have a significant negative effect on financial inclusion (Sarma & Pais, 2011). Van der Werff et al.’s research (2013) also looked at the relationship of coun­ try variables in OECD countries and proved that social factors are important in influen­ cing people to access banking services. A high level of trust in the government and formal financial institutions (using a corruption index proxy) will increase the financial level of the country. The conclusion states that non-financial factors can have a positive impact on financial inclusion (Van der Werff et al., 2013). 2.2 Hypothesis Based on a literature review and previous research, GDP (GDP per capita), corruption index, and Gini coefficient have a positive effect on financial inclusion while interest rate and unemployment rate have a negative effect on financial inclusion. Bank-specific factors used in this research are bank size, which has a positive impact, while net interest margin (NIM) and capital adequacy ratio (CAR) have a negative effect on financial inclusion.

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3 DATA AND METHODOLOGY The sample of this research is using Indonesian data from June 2015–June 2019. To measure the level of financial inclusion, we use the index of financial inclusion (IFI) proposed by Sarma (2008, 2012). Summary of the dimension’s IFI variable is presented in Table 1. IFI is computed using methodology proposed by Sarma (2012):

Because the IFI value is bounded to 0 and 1, fractional response regression is used. 4 RESULT This article examines the effect of macroeconomic and bank-specific factors on financial inclu­ sion in Indonesia. The result can be seen in Table 2: Seen from the Table 2, net interest margin (NIM) as a proxy of the inefficiency of banking system has a positive influence on the bank’s financial inclusion. This result differs from the literature review and previous studies showing that with increasing inefficiency (higher value of NIM), the bank tends not to be inclusive because of the high cost of intermediation causes transaction costs to be more expensive and difficult for the low-income category thus decreas­ ing the IFI (Camara & Tuesta, 2014). However, the fact is that the banking sector in Indo­ nesia has a high NIM value with an average value currently at 8.5% (Bank Indonesia, 2019) or maximum 5.6% during the research period. This value is quite high compared to the aver­ age NIM of Asian countries which is 2–3%. The banking sector in Indonesia still relies on interest-based income compared to non-interest income such as fee-based income. The compe­ tition is quite tight between banks in Indonesia, forcing banks to set a high margin in order to gain profits. This triggers a positive relationship between NIM and financial inclusion. The highest NIM tends to give banks more profit as well, but with a note that the bank conducts its operations very selectively.

Table 1. Dimension variable of IFI. Dimension

Variable

Unit

Availability (D1)

No. of Bank Branches per 100,000 adults No. of ATM per 100,000 adults No. of Bank Branches per per 1,000 sq.km No. of ATM per per 1,000 sq.km Total credit and deposit as % of GDP per Capita Minimum amount to open saving account in Bank

Unit Unit

Usage (D2) Ease of Transaction (D3)

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Unit Unit % %

Table 2. Estimation result. Dependent Variable: Index of Financial Inclusion

CAR NIM Bank Size Ln GDP per capita UR IR Corruption Gini Prob chi2 Pseudo R2 Log pseudolikelihood

Hypothesis

Coeff

(–) (–) (+) (+) (–) (–) (+) (+)

0.025 2.316* 7.987*** 15.673** –0.519 0.209 –0.131 183.355 0.00 0.069 –10.70

Margin (dy/dx) 0.005 0.509* 1.755*** 3.444** –0.114 0.045 –0.028 40.301

Note: ***significant at 1%, ** significant at 5% and * significant at 10%

The other bank-specific factor that had positive significant effect is bank size as a proxy of total bank assets. This shows that banks with high total assets tend to have high market power as well, so banks can diversify assets which will have an impact on increasing the range of services (Khan, 2011). Furthermore, GDP as a proxy of the country’s macroeconomic cycle had a positive impact on increasing financial inclusion. Reducing income inequality allows the society the opportunity to obtain more funds that can be used to save money or other finan­ cial transactions (Kunt, 2015). Therefore, increasing people’s income through GDP per capita has a positive correlation with financial inclusion (Beck, 2007; Sarma & Jesim, 2011). The remaining variables used in regression – capital adequacy ratio (CAR), unemployment rate, interest rate, corruption index, and Gini coefficient – had no significant influence on financial inclusion in Indonesia.

5 CONCLUSION Overall, within Indonesia’s unstable macroeconomic conditions (due to the influence of global macroeconomic and the trend of rising interest rates), the level of financial inclusion has tended to increase. The contribution of this study shows that bank health indicators and macroeconomic variables had a significant effect on financial inclusion in Indonesia. REFERENCES Allen, F. D. K. (2012). The foundation of financial inclusion: Understanding ownership and use of formal account. World Bamk Policy RWP. Ashraf, N. D. (2010). Female empowerment: Impact of a commitment savings product in the Philippines. Vol 38 No 3, 333-344. Ayyagari, M. T. (2015). Financial inclusion in Asia: An overview. Manila: ADB Economics WPS. Beck, T. A.-K. (2007). Reaching out: Access to and use of banking services across countries. Journal of Financial Economics. Bruhn., M. L. (2009). The economic impact of banking the unbanked: Evidence from Mexico. Policy Reasearch Working Paper 4981, The World Bank Group. Camara, N., & David, T. (2014). Measuring financial inclusion: A multidimensional index. BBVA Research Working Paper. Dermiguc Kunt, A. L. (2015). Measuring financial inclusion around the world. World Bank Policy Research Working Paper 7255. Hannig, A., & Jansen, S. (2010). Financial inclusion and financial stability: Current policy issues. ADBI.

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Khan, H. (2011). Financial inclusion and financial stability:Are they two sides of the same coin. The Indian Bankers Association and Indian Overseas Bank. Sachindra, S. G. (2013). Need for financial inclusion and challenges ahead: An Indian perspective. IOSR Journal of Business and Management (IOSR-JBM), 33–36. Sarma, M. (2012). Index of financial inclusion: A measure of financial sector inclusiveness. Berlin Working Papers on Money, Finance, Trade and Development. Sarma, M., & Jesim, P. (2011). Financial inclusion and development. Journal of International Development. Van der Werff A. D., Hogarth, J. M., & Peach, N. D. (2013). A cross-country analysis of financial inclu­ sion within the OECD. Consumer Interest Annual, 59.

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Factors influencing customers’ continued mobile app use intention from the internet service provider perspective: Information adoption model Y. Pitasari & S. Rahayu H.H. Faculty of Economic & Business, University of Indonesia, Indonesia

ABSTRACT: This study aims to develop an understanding of the key variables that enhance customers’ continued mobile app use from internet service providers. Almost all broadband internet access service providers have branded mobile applications as part of the company’s CRM. The service providers face a challenge of how to enhance customers’ continued mobile app use intention since there is high rate of mobile app uninstallation and a low adoption rate of mobile app use. This study takes the information adoption model (IAM) to examine the dual routes of communication for continued use behaviors. The sample consisted of 300 ques­ tionnaires and structural equation modelling was used as an analysis. The result shows that argument quality (a central route) and source credibility (a peripheral route) positively influ­ ence perceived usefulness and para-social interaction. In addition, expertise has positive mod­ erating effect on central route and negative moderating effect on peripheral route. Perceived usefulness was the strongest determinant that influenced continued mobile app use intention, along with para-social interaction and attitude.

1 INTRODUCTION Mobile applications (apps) continue to emerge as a powerful and ubiquitous service deliv­ ery channel enabling retailers to offer consumers a variety of products and services on the go (Garg & Telang, 2011). Indonesia’s population is listed as one of the most active mobile application users in the world, competing with countries such as China, India, Brazil, and South Korea (App Annie, 2017). Almost all broadband internet access service providers in Indonesia have mobile apps as their service channel and part of their cus­ tomer relationship management. However, customers do not automatically use branded app activities because it is in a “pull” format; meaning customers only engage with an app when they actually want to use it (Bellman et al., 2011). In Indonesia, rate of unin­ stallation for mobile apps after 30 days is 29.7% (Appsflyer, 2018). Understanding factors that influence customers’ continued mobile app use behavior is critical for the success of mobile marketing (Shankar & Balasubramanian, 2009). As a result, this study aims to develop an understanding of the key variables to enhance customers’ continued mobile app use from internet service providers.

2 LITERATURE REVIEW 2.1 Information adoption model The information adoption model is developed based on the technology acceptance model (TAM) (Davis, 1989), theory reasoned action (Fishbein & Ajzen, 1975), and the elaboration likelihood model (Petty & Cacioppo, 1986).

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2.1.1 Argument quality

Argument quality is based on customers’ rational and cognitive judgment (Bhattacherjee &

Sanford, 2017). Argument quality plays an important role in information technology since it

influences usefulness (Cheung & Ho, 2015). Previous studies showed that social media users’

motivations for using media positively influenced para-social interaction (Yuan, Kim, & Kim,

2016). Therefore, the hypotheses of this study are formulated as follows:

H1: Argument quality has positive effects on perceived usefulness.

H2: Argument quality has positive effects on para-social interaction.

2.1.2 Source credibility Source credibility explains whether users perceive an information source as believable, compe­ tent, and trustworthy (Gunawan & Huarng, 2015). Previous studies identified that source credibility influences perceived usefulness (Ayeh, 2015) and influences PSI (Yuan et al., 2016). Therefore, the hypotheses of this study are formulated as follows: H3: Source credibility has positive effects on perceived usefulness.

H4: Source credibility has positive effects on para-social interaction.

2.1.3 Expertise

Higher levels of knowledge and understanding (expertise) increase the effect of the central

route, due to the customers’ ability to understand the information obtained. Conversely,

greater expertise limits the effect of peripheral routes (Bhattacherjee & Sanford, 2006; Petty &

Cacioppo, 1986; Sussman & Siegal, 2003). Therefore, the hypotheses of this study are formu­ lated as follows:

H5a: Individual expertise has a positive moderating effect on the association between argu­ ment quality and the perceived usefulness of information. H5b: Individual expertise has a negative moderating effect on the association between source credibility and the perceived usefulness of information. 2.1.4 Perceived usefulness Perceived usefulness refers to whether potential users expect benefits when using an informa­ tion technology system for their task performance (Davis, 1989). TAM defines perceived use­ fulness as a factor that influences attitudes toward technology, and influences the intention to use. Therefore, hypothesizes of this study are formulated as follows: H7: Perceived usefulness positively influences attitude toward ISP’s mobile app.

H10: Perceived usefulness positively influences customers’ continued use intentions.

2.1.5 Para-social Interaction (PSI)

Para-social interaction (PSI) refers to a kind of psychological relationship experienced by an

audience in their mediated encounters with performers in the mass media (Horton & Wohl,

1956). Customers’ feeling of PSI positively influences their loyalty intentions (Labrecque,

2014) and equity drivers (Yuan et al., 2016).

H6: Para-social interaction positively influences perceived usefulness of ISP’s mobile app.

H8: Para-social interaction positively influences attitude toward mobile app.

H11: Para-social interaction positively influences continued mobile app use intentions.

2.1.6 Attitude

Attitude toward a behavior is the extent to which the performance of the behavior is valued

positively or negatively, which is determined by the total amount of confidence in a behavior,

and it relates the behavior to other attributes (Ajzen, 1991).

H9: Attitude positively influences continued mobile app use intentions.

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2.1.7 Continued use intention Behavioral intention refers to a person’s subjective probability of taking certain actions (Ajzen & Fishbein, 1980). Intention toward a behavior is influenced by perception of useful­ ness and by customer attitude (Robert & Henderson, 2000)

3 METHOD Argument quality was measured with four items, adopted from Sussman & Siegal (2003) and Bhattacherjee and Sanford (2006) and (2017). Source credibility was measured with three items adopted from Bhattacherjee and Sanford (2006). Perceived usefulness was measured with five item adopted from Gao, Rohm, Sultan, and Pagani (2013), while items of expertise were measured with three items adopted from Bansal and Voyer (2000). PSI items were measured with four items adopted from Labrecque (2014); items of attitude were measured with three items adopted from Koufaris (2002) and Davis and Wong (2007). In addition, items of continued mobile app use intention were measured with six items adopted from Ayeh (2015), Overby and Lee (2006), Jones et al. (2006), Ryu et al. (2010), Gao et al. (2013), Overby and Lee (2006), Ayeh (2015), and Labrec­ que (2014). The data collection technique used online and offline questionnaires with convenience sam­ pling. The study used Lisrel 8.80 for data analysis with confirmatory factor analysis (CFA) as the initial stage and path analysis as the latter stage.

4 RESULT There were 300 successful questionnaires. Of the respondents, 67% were females and 33% were males. Respondents had mobile app experiences with different brands, including Mytelk­ omsel (n = 152), Myindihome (n = 58), MyIM3 (n = 39), Bima+ (n = 18), MyXL (n = 9), Mysmartfren (n = 8), Maxstream (n = 7), MyXL Postpaid (n = 3), Axisnet (n = 2), UseeTVGo (n = 2), CloudMax (n = 1), Messi Challenge (n = 1). The CR for each construct was greater than 0.7, and the AVE for each construct was greater than 0.5. Goodness of fit indices for structural model present acceptable fit indices, with GFI = 0.87, RMSEA = 0.060, NFI = 0.99, CFI = 0.99, PGFI = 0.69.

5 DISCUSSION Interestingly, this study shows that para-social interactions were represented by four manifest variables: users of mobile apps felt comfortable, felt part of and connected with mobile apps, and had two-way communication with mobile apps. Therefore, it does not significantly affect customer perceptions of usefulness derived from mobile applications.

6 CONCLUSION This study revealed attitude, perceived usefulness, and para-social interaction were critical determinants that significantly influenced customer continued use intention of an ISP’s mobile app. Service organizations should strengthen customer attitude certainty by convincing cus­ tomers that using the mobile app is the right decision, and integrate with other communication channels and other value-added services, to enhance perceived usefulness and feeling of parasocial interaction.

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REFERENCES Ajzen, I. (2003). Constructing a TpB questionnaire: Conceptual and methodological considerations.

Ajzen, I., & Fishbein, M. (1980). Understanding attitudes and predicting social behavior. Englewood Cliffs,

N.J. : Prentice-Hall. Ayeh, J. K. (2015). Travellers’ acceptance of consumer-generated media: An integrated model of technol­ ogy acceptance and source credibility theories. Computers in Human Behavior. https://doi.org/10.1016/ j.chb.2014.12.049. Bellman, S., Potter, R. F., Treleaven-Hassard, S., Robinson, J. A., & Varan, D. (2011). The effectiveness of branded mobile phone apps. Journal of Interactive Marketing. https://doi.org/10.1016/j. intmar.2011.06.001. Bhattacherjee, & Sanford. (2017). Influence processes for information technology acceptance: An elabor­ ation likelihood model. MIS Quarterly. https://doi.org/10.2307/25148755. Davis, F. D. (1989). Perceived usefulness, perceived ease of use, and user acceptance of information technology. MIS Quarterly. https://doi.org/10.2307/249008. Fishbein, M., & Ajzen, I. (1975). Belief, attitude, intention and behaviour. In belief, attitude, intention, and behavior: An introduction to theory and research. Gao, T., Rohm, A. J., Sultan, F., & Pagani, M. (2013). Consumers un-tethered: A three-market empirical study of consumers’ mobile marketing acceptance. Journal of Business Research. https://doi.org/ 10.1016/j.jbusres.2013.05.046. Garg, R., & Telang, R. (2011). Inferring app demand from publicly available data. In SSRN. https://doi. org/10.2139/ssrn.1924044. Kim, M. J., Chung, N., Lee, C. K., & Preis, M. W. (2016). Dual-route of persuasive communications in mobile tourism shopping. Telematics and Informatics. https://doi.org/10.1016/j.tele.2015.08.009. Labrecque, L. I. (2014). Fostering consumer-brand relationships in social media environments: The role of parasocial interaction. Journal of Interactive Marketing. https://doi.org/10.1016/j.intmar. 2013.12.003. Lee, S.. (2018). Enhancing customers’ continued mobile app use in the service industry. Journal of Ser­ vices Marketing. https://doi.org/10.1108/JSM-01-2017-0015. Li, C. Y. (2013). Persuasive messages on information system acceptance: A theoretical extension of elab­ oration likelihood model and social influence theory. Computers in Human Behavior. https://doi.org/ 10.1016/j.chb.2012.09.003. Overby, J. W., & Lee, E. J. (2006). The effects of utilitarian and hedonic online shopping value on consumer preference and intentions. Journal of Business Research. https://doi.org/10.1016/j.jbusres. 2006.03.008. Petty, R. E., & Cacioppo, J. T. (1986). The elaboration likelihood model of persuasion. Advances in Experimental Social Psychology. https://doi.org/10.1016/S0065-2601(08)60214-2. Sussman, S. W., & Siegal, W. S. (2003). Informational influence in organizations: An integrated approach to knowledge adoption. Information Systems Research. https://doi.org/10.1287/isre.14.1.47.14767. Yuan, C. L., Kim, J., & Kim, S. J. (2016). Parasocial relationship effects on customer equity in the social media context. Journal of Business Research. https://doi.org/10.1016/j.jbusres.2015.12.071.

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The effect of fun at work and social support towards organizational citizenship behavior with work engagement as a mediation variable at PT Telkom Indonesia (regional II) D.C. Ginbreta & P.M. Desiana Universitas Indonesia, Indonesia

ABSTRACT: The purpose of this study is to examine the effect of fun at work and social support towards organizational citizenship behavior (OCB) of PT. Telkom Regional II employees, mediated by work engagement. This study involved employers of PT Telkom Indonesia Regional II as a sample. The sample was taken from 348 respondents by using a purposive sampling technique which was then analysed by using SPSS and SEM-LISREL. In general, the research findings revealed that fun at work and social support in the company were able to deliver positive and significant impacts on organizational citizenship behavior (OCB) and work engagement mediated the relations.

1 INTRODUCTION The telecommunication business has also undergone rapid and dynamic changes that require the companies in this industrial sector to keep improving their effectiveness, efficiency, and creativity. This change will encourage companies to create new innovations so they can deliver new products with better quality. One of the companies that are sensitive and responsive to this change is PT Telkom. Telkom has realized that currently, the company must carry out new strategies to keep their existence at the top of the telecommunication industry. Therefore, recently the company has decided to transform its image to become a digital telecommunica­ tion company. Up to now, PT. Telkom has successfully achieved many national and international appreci­ ations. For instance, Telkom was awarded the Indonesia Employers of Choice Award 2015. Moreover, Telkom has achieved appreciation from Business Media International as the Best Company to Work For in Asia three years in a row, from 2017 to 2019. The company has also achieved appreciation of employer Branding 2017 because this company was successfully posi­ tioned on the highest-ranking as a popular company that attracted many job applicants. Telkom was also crowned as the Best of the Best Stated-owned Corporation (BUMN) in 2018, and lately, Telkom has successfully achieved two appreciations directly from CNBC Indonesia Award 2019, as they are The Best Digital Human Capital Development and The Best Corporate Strategy. These appreciations illustrated that Telkom until today is still considered a promising com­ pany since it attracts many job seeker’s attention. The company has employees with quite high work engagement. Further, Telkom has a strategy to strengthen the company’s images among the job applicants by providing a comfortable work atmosphere, fun work environment, and quite flexible work hours. It is the same as a digital startup’s working atmosphere which pro­ motes a dynamic, flexible, and technology-friendly working rhythm. The facility availability and work convenience offered by Telkom is a concrete action to offer employee value propos­ ition (EVP) to either the employees or job applicants. Telkom started applying a culture of fun at work since 2015 which was initially proposed by the director of HCM Telkom in that period. The slogan was “Keep Calm and Working 136

Fun at Telkom Group”. The major reason was that working should be fun since, according to him, happiness could deliver extraordinary impacts. When the company has a happy employee, it would bring a Happy Customer and finally, lead to a Happy Company. The employee who has happy feelings and engagement with the company will always try giving the best to the company. This behavior is then termed as extra-role behavior or Organiza­ tional Citizenship Behavior (OCB). According to (Fluegge, 2008), a factor that may affect the rise of organizational citizenship behavior is through fun at work. Another aspect that could affect the rise of organizational citizenship behavior is social support owned by the employee. Particularly, the happy employee at work will certainly be followed by the leader and co-workers who always deliver positive support. The employee who feels cared for, gets positive feedback, and feels appreciated by the leader and co-workers, is perceived to be able to give a huge impact on the employee and company happiness (Pryce-Jones, 2011). Saks (2006) has also added that another supporting factor that could encourage the rise of organizational citizenship behavior. The factor is the work engagement of the employee towards the company. This work engagement has shown a positive relation to company performance (Baumruk, 2004).

2 LITERATURE REVIEW Robbins dan Judge (2015) highlight that organizational citizenship behavior (OCB) is an illus­ tration of the employee who works and performs beyond duties and responsibilities estab­ lished by the company. However, this behavior is regarded as the supporting aspect to run the organization effectively. The behavior of organizational citizenship behavior is indicated by helping co-workers, performing much work, and contributing to problem-solving in the company. (McDowell, 2004) defines fun at work in his research as an employee’s involvement within the social activity, interpersonal activity, and fun, entertaining, cheerful work. The definition of work engagement is the involvement, satisfaction, and enthusiasm of employees at work. In other concepts, work engagement is defined as motivation, work satis­ faction, and organization commitment (Saks, 2006). Meanwhile, social support is defined as a totality level of social interaction that happens among co-workers and leaders (Karasek, 1990). The social support given by the leader is a depiction of how he/she appreciates the employee’s contribution as well as to measure how far he/she concerns and cares about the employee’s performance and prosperity.

3 METHODOLOGY Data analyzed in this research were collected from PT Telkom Regional II by means of dis­ tributing online questionnaires on October 04, 2019. It should be noticed that the respondents who involved in this research must be a regular employee who worked at the office and for Regional II. The distribution of online questionnaires was carried out in three stages, namely the Wording test to 10 respondents, the Pilot test to 30 respondents, and the Main test to respondents 380. However, the number of respondents who returned the questionnaires in the Main test was about 378. In addition, 30 respondents did not complete the questionnaire resulting in the elimination of these respondents’ answers. Therefore, the total valid sample was 348 respondents because they fulfilled the conditions and completed the questionnaire. The questionnaires used a Likert scale 1-6 (1= strongly disagree, 2= disagree, 3= slightly dis­ agree, 4= slightly agree, 5 = agree, 6= strongly agree). The questionnaire was taken and adapted from previous research for OCB (Podsakoff, MacKenzie, Moorman, & Fetter, 1990), work engagement (Schaufeli & Bakker, 2004), fun at

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work (McDowell, 2004) and social support (Susskind, Kacmar, & Borchgrevink, 2003). The data were analyzed by using the structural equation technique or Structural Equation Model­ ing (SEM)-Lisrel. The hypotheses in this study are stated as follows: Hypotheses 1 (H1): Fun at work delivers positive and significant effects on organizational citizenship behavior. Hypotheses 2 (H2): Social support delivers positive and significant effects on organizational citizenship behavior. Hypotheses 3 (H3): Fun at work delivers positive and significant effects on work engagement. Hypotheses 4 (H4): Social support delivers positive and significant effects on work engagement. Hypotheses 5 (H5): Work engagement delivers positive and significant effects on organiza­ tional citizenship behavior. Hypotheses 6 (H6): Work engagement mediates fun at work effects on organizational citi­ zenship behavior. Hypotheses 7 (H7): Work engagement mediates social support effects on organizational citi­ zenship behavior.

4 RESULTS Based on the survey results which were distributed online from October to early Novem­ ber 2019, the total number of questionnaires received was 378 questionnaires. Of the 378 ques­ tionnaires, 348 questionnaires could be administered because 30 questionnaires did not meet the criteria of the respondents. Demographic data obtained from the sample of respondents consisted of gender [220 men (63%), 128 women (37%)], age [18-25 years (11%), 26-30 years (12%), 31 -35 years (13%), 41-45 years (9%), 46-50 years (21%), 51-55 years (20%), and above 55 years (5%)], educational background [D- 3 as many as 13 people (3%), bachelor degree as many as 308 people (89%), master degree as many as 27 people (8%)], work experience [1-3 years as many as 58 people (17%), 3-7 years as many as 81 people (23%), 7-10 years as many as 96 people (28%), over 10 years as many as 113 people (32%)]. Based on the results of the descriptive analysis, the mean of the OCB variable was 5.04. Meanwhile, the mean scores of other variables such as WE variable, SS variable, and FAW variable were 4.93, 4.69, and 4.71 respectively. Following this, the validity and reliability of the variables were calculated by using the Stand­ ardized Loading Factor (SLF) and tested through CFA Second Order. Reliability calculation was performed by calculating Construct Reliability (CR) and Average Variance Extracted (AVE) for each variable. Each variable shows a number that meets the reliability standard. Hair Jr (2014) reveal that a variable can be declared reliable if its Construct Reliability (CR) value is greater than or equal to 0.70 (≥ 0.70). However, measuring reliability does not only refers to the CR value but also through the Average Variance Extracted (AVE) whose value must be greater or equal to 0.50 (≥0.50) in order to be claimed reliable. The results of calculating the goodness of fit of the research model and found that this research model has fulfilled several good fit criteria. Therefore, it can be concluded that the research model meets the good-fit criteria for the measured data sample. Hypothesis testing results show that all hypotheses are acceptable because they show a significance value of t-value ≥ 1.65. Mediation testing found that work engagement mediates fun at work and social support towards organizational citizenship behavior partially mediated. In general, the results of this study, it gives a concise description of the research model and the relationship between its variables and the values that accompany each of these relationships.

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5 DISCUSSION AND IMPLICATIONS Fun at work and social support were reported effective to improve employee’s engagement at work and develop their organizational citizenship behavior. When the employee felt comfort­ able and united to their company, they would not intend to move and always perform the best work in the interest of the company. The key point in improving work engagement and organ­ izational citizenship behavior was a management strategy to always create an atmosphere of fun at work and improve social support among employees. However, there are 2 limitations of this research. First, the research only involved perman­ ent employees of Telkom Regional II as the respondents. Wider population data that are col­ lected in the other regional employees will be able to provide a better picture of this organization. Second, this study examined the social support on organizational citizenship behavior of Telkom Regional II employees. The research, then, recommends future research integrating organizational citizenship behavior with other independent variables. REFERENCES Baumruk, R. (2004). The missing link: the role of employee engagement in business success. In: Workspan. Fluegge, E. R. (2008). Who put the fun in functional? Fun at work and its effects on job performance: Uni­ versity of Florida. Hair Jr, J. (2014). on Multivariate Data Analysis Joseph F. Hair Jr. William C. Black. In: Edinburg: Pearson. Karasek, R. (1990). Healthy work. Stress, productivity, and the reconstruction of working life. McDowell, T. (2004). Fun at work: Scale development, confirmatory factor analysis, and links to organiza­ tional outcomes: Alliant International University, San Diego. Podsakoff, P. M., MacKenzie, S. B., Moorman, R. H., & Fetter, R. (1990). Transformational leader behaviors and their effects on followers’ trust in leader, satisfaction, and organizational citizenship behaviors. The leadership quarterly, 1(2), 107–142. Pryce-Jones, J. (2011). Happiness at work: Maximizing your psychological capital for success: John Wiley & Sons. Robbins, S. P., & Judge, T. A. (2015). Perilaku Organisasi (Organizational Behavior 16th edition). Jakarta: McGraw Hill dan Salemba Empat. Saks, A. M. (2006). Antecedents and consequences of employee engagement. Journal of Managerial Psychology, 21(7), 600–619. Schaufeli, W. B., & Bakker, A. B. (2004). Job demands, job resources, and their relationship with burn­ out and engagement: A multi-sample study. Journal of Organizational Behavior: The International Journal of Industrial, Occupational and Organizational Psychology and Behavior, 25(3), 293–315. Susskind, A. M., Kacmar, K. M., & Borchgrevink, C. P. (2003). Customer service providers’ attitudes relating to customer service and customer satisfaction in the customer-server exchange. Journal of Applied Psychology, 88(1), 179.

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Continuance usage intention in mobile payment services N. Fitria & N. Sobari University of Indonesia, Depok, Indonesia

ABSTRACT: Mobile payment services are becoming increasingly popular as mobile devices and internet usage increase in Indonesia. Acceptance of mobile payment depends on the con­ sumers continuing to use mobile payment. Although usage of mobile payment is growing, it still has some disadvantages. This study aims to empirically investigate consumers’ intention to con­ tinue to use mobile payment by using the technology acceptance model theory extended with satisfaction and continuance. Furthermore, this study also focuses on other factors that might impact the intention of continued usage. The model of this study was tested in an online survey with SEM. The target population in this study is Indonesian consumers who have been using mobile payment in their daily lives. The result finds that perceived ease of use and perceived usefulness of mobile payment positively influences continuance intention through satisfaction. Moreover, perceived risk negatively influences consumer attitude toward using mobile payment.

1

INTRODUCTION

Rapid growth of technology, the increased number of internet users, and the use of mobile devices especially smartphones, has changed consumer behaviour in several aspects, including buying and selling activities. Advanced technology and increased use of smartphones has facilitated purchase and payment transactions via mobile devices. This is known as mobile payment, and includes any payment in which a mobile device is used to pay for goods, ser­ vices, and bills (Au & Kauffman, 2008; Dahlberg et al., 2008). The use of mobile payment in Indonesia is increasing. One of the main drivers of this growth is the Internet, which has become an integral part of daily life, and the use of smartphones. About 50% of internet users in Indonesia are aged 18–34 years, followed by 30% of internet users aged 35–54 years. Around three-quarters of Indonesians have used smartphones. The dominance of smartphone usage has changed consumer behaviour in shopping. Many people now like to shop online (Euromonitor International, 2019). In recent years, many digital financial services have emerged in Indonesia, including mobile payment. Consumers think that mobile payment is beneficial because it reduces time and energy costs. They can make payments quickly without having to go to the place of purchase. Mobile payment is designed to allow users to make online payments for goods and services through mobile devices or use them in stores quickly and easily. Through the mobile payment service, users can also send and receive money from anywhere at anytime. Mobile payment service offers many benefits to individuals and business owners because of its efficiency. In addition, mobile payment offers incentives such as rewards, discounts, and points that can be exchanged for other products or services (Harper, 2018). However, like anything else in the world, mobile payment also has its weaknesses. One of the disadvantages is that, although they are widely accepted, they are not all accepted, mean­ ing that not all mobile payment is accepted in every store. In addition, we might face failure in the devices we use. For example, if our smartphone hangs suddenly or the battery runs out, or there is a bad signal when making a payment so it takes longer than expected. Some con­ sumers still show a lack of trust in mobile payment technology and in mobile service pro­ viders. They mostly worry about privacy, security, fraud, and payment transaction errors 140

(Feinstein, 2017; Boyce, 2019). Furthermore, some Indonesians admit that using cash for pay­ ment is an ingrained practice. To replace cash payments with mobile payments requires user willingness to use mobile payments instead of cash payments.

2 THEORETICAL BACKGROUND AND RESEARCH MODEL Many researches have focused on user acceptance in information technology. One theory that emerged was the technology acceptance model (TAM) which was first developed by Davis in 1989. Based on the theory, the user’s attitude toward the use of a given system is hypothesized to be the main determinant of whether they’d use it or not. Attitude to use is a function of two main beliefs: perceived usefulness and perceived ease of use. Perceived usefulness is defined as the extent to which a person believes that using a system will improve the performance of an activity. Perceived ease of use refers to the extent to which a person believes that using a system will be free from difficulties or effort. Satisfaction with a technology is likewise influ­ enced by perceived ease of use and perceived usefulness (Amoroso & Ackaradejruangsri, 2017). Therefore, the hypotheses are as follows: H1: Perceived ease of use positively influences perceived usefulness. H2: Perceived ease of use positively influences attitude toward using. H3: Perceived ease of use positively influences satisfaction. H4: Perceived usefulness positively influences attitude toward using. H5: Perceived usefulness positively influences satisfaction. However, the process of adopting information technology has been proven to create anxiety and discomfort for consumers. The use of the Internet also adds to the sense of uncertainty and potential danger because of elements that are not secure, which creates perceived risk (Featherman & Pavlou, 2003). In the context of online purchases, perceived risk is defined as consumer beliefs about potentially negative consequences of conducting online transactions. Many users who want to make online transactions become reluctant because of the risks that may occur (Kim, Ferrin, & Rao, 2008). H6: Perceived risk negatively influences attitude toward using. To overcome perceived risk, it is important for users to build trust, especially while develop­ ing relationships and increasing their continuance intention (Farivar et al., 2017). Consumers also tend to interact with others in order to reduce their anxiety or uncertainty about adopting an innovation, so social influence is important (Park et al., 2019). Meanwhile, attitude is con­ sidered important in deciding continuance intention of mobile payment (Park et al., 2019). In

Figure 1.

Research model.

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addition, satisfaction is considered an important factor in behaviour, especially continuance intention, as first raised by Bhattacherjee (2001). The framework was developed based on the expectation-confirmation theory by Oliver (1980). Hence, the hypotheses are as follows: H7: Attitude toward using positively influences continuance intention. H8: Satisfaction positively influences continuance intention. H9: Trust positively influences continuance intention. H10: Social influence positively influences continuance intention.

3 RESEARCH METHODOLOGY AND DATA COLLECTION This study adopted the quantitative method. Data were collected using an online question­ naire containing 32 measurement items. Purposive sampling was used, and 200 respondents were taken. All the items use a seven-point Likert scale, anchored between “strongly disagree” and “strongly agree.” The research model was tested against those collected data, with a structural equation mod­ eling (SEM) method using LISREL software. Out of 200 respondents, most of them are female (67%), most of them are aged 18–20 years old (61%), most of them have graduated high school (52%), most of them are currently a student (69%), and 57% of them still have no income.

4 RESULTS AND DISCUSSION I use confirmatory factor analysis (CFA) to analyze the measurement model, to make sure all items are valid and reliable: factor loading >0.5; average variance extracted >0.5; and construct reliability >0.7. To analyze the influence coefficient of variables and its significant level, t-value >1.96. The results show that all items are valid and reliable, and all hypotheses are supported. First, H1 is supported: perceived ease of use has a positive and significant direct effect on per­ ceived usefulness. As Davis (1986) states, if a user feels that a technology is easy to use, then the technology will be considered beneficial for the user. Furthermore, H2 and H4 are sup­ ported. Both perceived ease of use and perceived usefulness are important factors in determin­ ing the user’s attitude toward mobile payment. These findings are consistent with several previous studies, such as the acceptance of mobile payments in Germany (Schierz et al., 2010), in Japan (Amoroso & Magnier-Watanabe, 2012), and in Spain (Liébana-Cabanillas et al., 2014; DeLuna et al., 2018). Next, H3 and H5 are supported: perceived ease of use and per­ ceived usefulness affect user satisfaction. As Lee (2010) says, individuals who feel that mobile payment is easy to use and useful in daily life, are more likely to be satisfied with it than those who are not. However, mobile payments that rely on mobile networks and the Internet, have a perceived risk. The study found that perceived risk has a negative influence on user attitudes (H6 is supported). Previous studies have proven the negative impact of perceived risk on user behavior, including the use of the NFC mobile payment system in Canada (Cocosila & Tra­ belsi, 2016), the adoption of mobile payment in Brazil (Abrahão et al., 2016), in Spain (Kalinic et al., 2019), and in China (Wu et al., 2017). In overcoming perceived risk, it is important for customers to have a sense of trust. This study found that the effect of trust on continuance intention was positive and significant, so that although respondents perceived risk, their level of trust was higher (H9 is supported). This proves trust as an important factor that facilitates user behavior (Zhou, 2013). Afterwards, H7 and H8 are supported. Attitude means someone’s level of positive or negative views. In this study, it was found that users have a positive atti­ tude to mobile payment, making it likely they will continue using it. Satisfaction also plays an important role in shaping continuance intention. If someone feels satisfied, it is likely that they will use mobile payments continuously. A high level of satisfaction will reduce switching behavior (Deng et al., 2010; Yu et al., 2018). Lastly, H10 is supported: social influence has 142

a positive and significant influence on users’ continuance intention. Individual will tend to use mobile payment if people around them also use it, recommend it to them, or have a positive opinion about it. This is known as situational fit – defined as a condition when physical or social demands affect one’s behavior – making people continue to use currently available modern technology so that they remain accepted in their social environment (Venkatesh, 2016).

5 MANAGERIAL IMPLICATIONS It is important for mobile payment providers to be able to determine the main factors that make customers continue to use mobile payment. Companies or managers must understand how customers build attitudes and intentions toward continuance of mobile payment. That way, they can improve their mobile payment applications in order to retain customers. In add­ ition, mobile payment service providers can increase promotion or marketing strategies to increase the interest of potential customers. REFERENCES Amoroso, D., & Ackaradejruangsri, P. (2017). How consumer attitudes improve repurchase intention. International Journal of E-Services and Mobile Applications, 9(3): 38–61. Au, Y. A., & Kauffman, R. J. (2008). The economics of mobile payments: understanding stakeholder issues for an emerging financial technology application. Electronic Commerce Research and Applica­ tions, 7(2): 141–164. Bhattacherjee, Anol. (2001). Understanding information systems continuance: an expectation-confirmation model. MIS Quarterly, pp. 351–370. Dahlberg, T., Mallat, N., Ondrus, J., & Zmijewska, A. (2008). Past, present and future of mobile pay­ ments research: A literature review. Electronic Commerce Research and Applications, 7(2): 165–181. Davis, F. (1989). Perceived usefulness, perceived ease of use, and user acceptance of information technology. MIS Quarterly, 13(3): 319–340. Euromonitor International. (2019). Digital Consumer in Indonesia: Country Report. http://www.portal. euromonitor.com/portal/analysis/tab. Featherman, M. S., & Pavlou, P. A. (2003). Predicting e-services adoption: a perceived risk facets perspective. International Journal of Human-Computer Studies, 59(4): 451–474. Kim, D. J., Ferrin, D. L., & Rao, H. R. (2008). A trust-based consumer decision-making model in elec­ tronic commerce: the role of trust, perceived risk, and their antecedents. Decision Support Systems, 44(2): 544–564. Park, J., Ahn, J., Thavisay, T., & Ren, T. (2019). Examining the role of anxiety and social influence in multi-benefits of mobile payment service. Journal of Retailing and Consumer Services, 47: 140–149.

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Influence of healthy lifestyle, health concerns, environmental concern, and product quality toward intention to purchase organic coffee R Puspitasari & T.E. Balqiah Master of Management, Universitas Indonesia, Indonesia

ABSTRACT: The aim of this article is to determine how healthy lifestyle, health concerns, environmental concern, and product quality influence the intention to purchase organic coffee by expanding the theory of planned behavior (TPB). The samples were obtained from 205 respondents who never bought organic coffee using judgmental sampling method. Data were analyzed using structural equation modeling to test seven hypotheses connecting the eight constructs of the relationship between the constructs. The results of this study show that healthy lifestyle and product quality have a positive effect on attitudes to buying organic coffee. Therefore, to encourage higher intention to buy more organic coffee, the concerned institutions must promote and support consumers by strengthening the promotion of healthy lifestyle factors and product quality in relation to organic coffee. 1 INTRODUCTION In recent years, the world community has experienced climate change not only in terms of global warming, but also extreme weather cases, changing populations and wildlife habi­ tats, rising sea levels, and a series of other impacts (nationalgeographic.com, 2019). A lot of industries are present to help consumers in meeting their needs. One trending industry is the coffee industry. Based on the Chairman of the Specialty Coffee Association of Indo­ nesia (SCAI), Syarifudin (2019), coffee shops contribute to the domestic production of coffee, which has increased significantly reaching 25% – 30%. Moreover, coffee shop busi­ ness in Indonesia has continued to increase in recent years, especially in big cities. One of the biggest coffee-producing countries is Indonesia, ranked fourth after Brazil, Vietnam, and Colombia. At present, the demand for international coffee is seeing increasing growth, seemingly unaffected by the times and continuing to experience an upward trend. The coffee industry is also not affected by the condition of the world economy. However, at the moment, the price of coffee has decreased, so we can take this opportunity to offer different characteristics of coffee products and offer consumers organic coffee products. Organic coffee is environmen­ tally friendly has a purer and more delicious flavor than regular coffee. The company can take the opportunity to market organic coffee products. The company must have its own competitive advantage if they want to enter the coffee industry. The com­ pany should innovate to improve the quality of existing products and add value. Green mar­ keting is a concept that includes all marketing activities developed to stimulate and maintain environmentally friendly consumer behavior (Chen & Chang, 2013). It is expected that the company can win the competition in the coffee industry by using product differentiation; in this case, an organic product. The target of the company, especially the marketing department, is to increase sales by aiming at B2C with a green marketing strategy. The company can target the emotions of con­ sumers, especially in information about healthy lifestyle, health concerns, environmental con­ cern, and product quality. Thus, it is expected that information can be a motivating factor in 144

evaluating alternatives in terms of determining customer decision in purchase intention for organic coffee. Thus, the question of this study is whether healthy lifestyle, health concerns, environmental concern, and product quality will encourage the creation of positive attitudes toward purchas­ ing organic coffee and whether attitudes toward purchasing organic coffee, subjective norms, and perceived behavioral control will encourage increased intention to purchase organic coffee.

2 LITERATURE REVIEW 2.1 Healthy lifestyle Healthy lifestyle is one of the most important factors in purchasing food products. Consumers who have a healthy lifestyle tend to choose to buy organic products (Bagher et al., 2018). Mean­ while, attitude is the extent to which a person has an evaluation or assessment that is favorable or unfavorable to the behavior (Ajzen, 1991). Attitude focuses on behavior that affect consumer intention to buy organic products. Attitude determines the final decision in consumer buying behavior (Basha et al., 2015). Therefore, the hypothesis can be formulated as follows: H1: The stronger the healthy lifestyle, the more positive the attitude toward purchasing organic coffee. 2.2 Health concerns Health concerns refers to the extent to which people pay attention to health in their daily activities (Bagher et al., 2018). Bagher et al. (2018) stated that health factors have a positive and significant effect on attitudes toward purchasing organic product. Therefore, the hypoth­ esis can be formulated as follows: H2: The stronger the health concerns, the more positive attitude the toward purchasing organic coffee. 2.3 Environmental concern Environmental care refers to a level of awareness among individuals to solve environ­ mental problems and the individual’s concern is related to their positive relationship with nature (Bagher et al., 2018). Based on previous research, it is known that environ­ mental concern factors influence the purchase attitude for organic products (Basha et al., 2015). In addition, Bagher et al. (2018) stated that environmental concern factors influence the attitude factor for purchasing organic product. Therefore, the hypothesis can be formulated as follows: H3: The higher the level of environmental concern, the more positive attitude the toward purchasing organic coffee. 2.4 Product quality Product quality refers to value for money. In general, organic consumers are less price sensi­ tive and more concerned with quality (Basha et al., 2015). Product quality is the ability of a product to carry out its functions, and performance that can meet the needs and desires of consumers (Kotler & Armstrong, 2012). Basha et al. (2015) stated that the product quality factor has a positive effect on attitudes toward purchasing organic product. Therefore, it can be said that product quality can influence attitude toward purchasing organic product. Thus, the hypothesis can be formulated as follows: H4: The higher the product quality, the more positive attitude the toward purchasing organic coffee. 145

2.5 Attitude toward purchasing organic coffee Attitude is the extent to which a person has an evaluation or assessment that is beneficial or unfavorable to the behavior in question (Ajzen, 1991). The results of previous tests show that the factors that influence attitude in this study are healthy lifestyle, health concerns, environ­ mental concern, and product quality. They can have a positive effect on asking customers to buy organic coffee products (Basha et al., 2015). 2.6 Purchase intention for organic coffee The intention to buy a product can be considered as the best predictor of actual behavior (Ajzen, 1991). Intention to purchase organic coffee is a prediction that includes when, where, and how consumers act on a brand and is also influenced by environmental factors (Solomon, 2018). Pre­ vious studies show that attitude toward purchasing organic coffee have a positive influence on purchase intention for an organic product (Al-Swidi, 2014). Therefore, it will be tested whether the attitude affects purchase intention. Thus, the hypothesis can be formulated as follows: H5: The more positive the attitude toward purchasing organic coffee, the higher the inten­ tion to purchase organic coffee. 2.7 Subjective norms Theoretically, planned behavior is the most important thing in measuring purchase intention. Subjective norms also express individual beliefs about how they will be seen by their reference groups if they engage in certain behaviors (Ajzen, 1991). Subjective norms are one of the important factors that influence consumers to buy certain products. Previous studies show that subjective norms have a positive effect on purchase intention for organic product (Al-Swidi, 2014). Therefore, the hypothesis can be formulated as follows: H6: The higher the subjective norm factor, the higher the intention to purchase organic coffee. 2.8 Perceived behavioral control Perceived behavioral control is control of behavior considered to be under individual control (Azjen, 1991). The results of previous studies found that perceived behavioral control does not have a positive influence on buying intention toward organic coffee (Al-Swidi, 2014). Meanwhile, Bagher et al. (2018) stated that perceived behavioral control has a positive effect on intention to purchase organic coffee products. Therefore, the researcher will test whether the perceived behavioral control factor has an effect on the intention to purchase organic coffee products or not. Therefore, the hypothesis can be formulated as follows: H7: The stronger the perceived behavioral control, the higher the intention to purchase organic coffee.

3 RESEARCH METHODS 3.1 Study context and sample This research used a conclusive design method with a single cross-sectional design. Furthermore, sample selection was to use a non-probability sampling technique or method by means of judg­ ment sampling, meaning that the sample selection was taken based on certain criteria and assess­ ments from the researcher. The method of this study used a maximum likelihood in which the minimum number of respondents was 5 times the measurement indicator or 205 people. Selected respondents were those who have never bought organic coffee in Indonesia. Data collection con­ ducted to reach respondents in this study was carried out using an online questionnaire. 146

3.2 Measures In this study, in order to obtain valid respondents according to the criteria, the questionnaire submitted was preceded by a screening question followed by eight statement sections, namely the healthy lifestyle, health concern, environmental concern and attitude toward purchasing organic coffee adapted from (Bagher et al., 2018). Product quality was adapted from Chen and Chang (2013). Subjective norm, perceived behavioral control, and intention to purchase organic coffee were adapted from Al Swidi et al. (2014) and Bagher et al. (2018). Measurement of the indicators contained in the questionnaire used a five-point Likert scale. In addition, SEM with LISREL 8.70 software was used to analyze the collected data.

4 RESULT 4.1 Result of data analysis The results show that, from 205 respondents, 55.6% were female, 55.6% were aged between 20 and 30 years, 47.3% worked as private employees, 74.1% had their highest education level S1, and 35.1% had expenses > Rp.6 million. 4.2 Hypothesis testing using SEM Based on the results of the model compatibility test in this study, the RMSEA measurement results were 0.067, the RMR was 0.06, the Standardized RMR was 0.086, the GFI was 0.78, the NNFI was 0.96, and the Chisq/df was 1.91.

5 CONCLUSIONS AND MANAGERIAL IMPLICATION Based on the results of data processing and analysis submitted, it can be concluded from study comes that healthy lifestyle and product quality encourage the creation of a positive atti­ tude toward purchasing organic coffee. Health concerns and environmental concern do not encourage the creation of a positive attitude toward purchasing organic coffee. Attitude toward purchasing organic coffee, subjective norms, and perceived behavioral control drive an increase in intention to purchase organic coffee. The findings of this study show that respondents realize the most important elements of their attitude toward purchasing organic coffee were product quality and healthy lifestyle. In addition, respondents had the intention to buy organic coffee, and the level of purchase inten­ tion was quite high. The relationship between attitude toward, subjective norms, and per­ ceived behavioral control of the intention to buy organic coffee was tested using structural equation modeling. The results were significant. From the research results, to encourage higher intention to buy more organic coffee, the concerned institutions must promote and support consumers by strengthening the promotion of healthy lifestyle factors and product quality. It is expected that the organic industry will have sustainable strategic management to expand the organic market based on increasing customer demand, to increase the productivity of produ­ cers, and to reduce the use of chemicals during production for a better society, envir­ onment, and economy. REFERENCES Ajzen, I. (1991). The theory of planned behavior. Organizational Behavior and Human Decision Processes, 50(2), 179–211. Al-Swidi, A., Huque, Sheikh M., & Hafeez, Dr. M. H., & mohd shariff, mohd noor. (2014). The role of subjective norms in theory of planned behavior in the context of organic food consumption. British Food Journal. 116. 1561–1580. 10.1108/BFJ-05-2013-0105.

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Bagher, A. N., Salati, F., & Ghaffari, M. (2018). Factors affecting intention to purchase organic coffee products among Iranian consumers. Academy of Marketing Studies Journal, 22(3). Basha, M., Mason, C., & Shamsudin, M., Iqbal-Hussain, H., & Salem, M. (2015). Consumers attitude towards organic food. Procedia Economics and Finance, 31, 444–452. 10.1016/S2212-5671(15)01219-8. Chen, Y., & Chang, C. (2013). Towards green trust. Management Decision, 51(1), 63–82. https://doi.org/ 10.1108/00251741311291319.

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Halal tourist destination: An Indonesian muslims’ perspective M. Fakhri & N. Sobari Master of Management, Universitas Indonesia, Indonesia

ABSTRACT: Indonesia has a number of opportunities to meet the needs of Muslim tour­ ists. Indonesia is the number 1 halal tourist destination in the world with ten leading destin­ ations, namely Lombok, Aceh, Jakarta, West Sumatra, Yogyakarta, West Java, Riau Islands, Malang, Central Java, and Makassar. A large Muslim population has made the potential of halal tourism a good prospect for continued development, particularly of excellent attractions such as beaches, culture, and basic infrastructure. The government as the owner and manager of tourism is striving to improve the quality of halal tourist destinations, from the availability of halal food and drinks, the social environment in accordance with Islamic rules, halal facil­ ities, local residents and employees who understand the concept of halal, information, and halal clothes. The objective of this research to determine the effect of halal tourist destinations on perceived value, destination satisfaction, and destination trust in creating destination loy­ alty, from the perspective of local Muslim tourists. The model framework in this study is the structural equation model (SEM) with a sample size of 250 respondents who have visited halal tourist destinations.

1 INTRODUCTION The number of Muslims in the world continues to increase rapidly. It is estimated that one in four of the world’s population is Muslim, which will increase to 2.8 billion by 2050, making it one of the three people who practice Islam with the majority coming from the Asia Pacific region (GMTI, 2018). Indonesia has a total land area of 1,905,000 square kilometers with a total population of 261 million (as of 2017) and more than 700 regional languages. Indonesia is the largest archipelago in the world with around 17,000 islands stretching from the Pacific Ocean to the Indian Ocean. Exotic islands, a pure tropical climate, and cultural diversity make Indonesia a popular tourist destination for tourists around the world, especially those traveling to Southeast Asia. Indonesia also has 800,000 mosques making Indonesia the most popular halal tourist destination in the world. Indonesia is the fourth most populous country in the world and has the largest Muslim population in the world with an estimated 225 million people or 87% of the current Indonesian population (CrescentRating, 2019). Indonesia has established several main destinations in the context of developing halal tour­ ism in 2019, namely achieving 5 million international Muslim tourist visits, developing ten halal tourism destinations that are family-friendly, and ranking first on the 2019 Global Muslim Travel Index. The huge potential of halal tourism in Indonesia encourages very high confidence in achieving future targets. The participation and synergy of all stakeholders need to be maximized in order to achieve these goals (CrescentRating, 2019). The Indonesian government has determined that tourism is one of the important key sectors in the country. The Ministry of Tourism and Creative Economy of the Republic of Indonesia (formerly the Ministry of Tourism of the Republic of Indonesia) has developed ten familyfriendly halal tourism destinations in Aceh, Riau and the Riau Islands, West Sumatra, Jakarta, West Java, Central Java, Yogyakarta, East Java, South Sulawesi, and Lombok (West Nusa Tenggara). The development of the ten priority halal tourist destinations is aimed to create a unique and intensified focus among other tourist destinations in Indonesia. Indonesia 149

has the potential to become the main destination for halal tourism destinations in the world because of its tourism products (CrescentRating, 2019). There is a large potential for state revenue related to foreign exchange absorption from both local and foreign tourists visiting halal tourism destinations in Indonesia. Based on this explanation, the current study seeks to determine halal-friendly destination performance in terms of perceived value, destination satisfaction, and destination trust in creating destination loyalty in the halal tourism industry in Indonesia in the eyes of local Muslim tourists. 2 LITERATURE REVIEW 2.1 Halal tourism Halal tourism is “any tourist object or action permitted according to Islamic teachings to be used or involved by Muslims in the tourism industry” (Battour & Ismail, 2016, p. 2). Mohsin, Ramli, and Alkhu-layfi (2016, p. 138) argued that halal tourism is a type of tourism that adheres to Islamic values. Halal tourism is related to attractions or activities suitable for Muslim tourists. At present, many Muslim travelers care about halal products and services (Battour & Ismail, 2016). 2.2 Performance of halal-friendly destination A study by Han et al. (2019) identified five main halal-friendly attributes located in nonMuslim destinations, including the social environment, facilities, services, food and beverages, and local residents and employees, which formulated the overall image of Muslim tourist destin­ ations. In addition, experimental research by Olya and Al-ansi (2018) has shown that Muslim tourists are committed to consuming halal products and services due to health, quality, physical, and environmental considerations. The present study proposes the following hypothesis: H1: Halal-friendly products and services have a positive and significant influence on Muslim tourists’ perceived value. 2.3 Perceived value In the context of halal tourism, several studies have described the value of perceptions of Muslim tourists when traveling abroad, which shows different results between visiting OCI and non-OCI destinations. Battour, Ismail, Battour, and Awais (2017) pointed out the signifi­ cant value of the quality of Islamic environment established in Malaysia to attract Muslim tourists especially those from Middle Eastern countries, which have emerged as top choice destinations in recent years (GMTI, 2018). This study illustrated perceived value as Muslim tourists’ overall perception and awareness of halal products and the performance of services offered at these non-OCI destinations. 2.4 Destination satisfaction Eid and El-Gohary (2015) argued that tourist satisfaction can be classified into two types: trans­ action-specific satisfaction and overall satisfaction. Specific transaction satisfaction is related to the specific context or dimension. Overall satisfaction refers to satisfaction with all services. Fur­ thermore, Wu (2016) stated that satisfaction in hospitality management can be classified into sev­ eral categories: satisfaction with certain resorts, time-sharing, and travel agents. Grissemann and Stokburger-Sauer (2012) stated that satisfaction refers to the overall service of the company. Thus, satisfaction can be categorized in two ways: specific context and overall satisfaction. 2.5 Destination trust Destination trust is generally defined as a tourist’s confidence and certainty regarding a product or service provider at a tourism location/place as the result of a relationship between 150

two parties (Sirdeshmukh, Singh, & Sabol, 2002). The hospitality and tourism industry depends on the development and strengthening of partnerships between stakeholders (Kim, Chung, & Lee, 2011). 2.6 Destination loyalty Achieving the loyalty of Muslim tourists will be a core goal of the DMO to strengthen its global competitiveness. A number of scholars described the practice of halal tourism that leads to predictions of tourist/Muslim traveler loyalty by meeting the performance require­ ments of destination products and services (Battor, 2014; Henderson, 2016; Ryan, 2016).

3 RESEARCH METHOD 3.1 Data types and sources This study employed the quantitative method using primary data collected using a questionnaire with a convenience sampling method of 250 respondents with the target respondents visiting halal tourist destinations from 2017 to the present. 3.2 Data analysis In more detail, analysis using the SEM method requires two analytical approaches. The first approach is confirmatory factor analysis (CFA). This approach was carried out to determine whether the degree of validity of each factor used to measure can represent the variables in the existing construct. In short, this CFA seeks to provide an explanation and confirm whether the measured variable is a good reflection of latent variables. The output obtained from this analysis is the validity and reliability of the model created by the researcher.

4 RESULTS 4.1 Result of hypotheses The results of testing the hypotheses in this study can be seen in Table 1. In determining the significant relationship of the variables tested, the t-value is in a critically indicated acceptance of H0, which means there is no significant relationship between the variables tested. The critical area is at –1.96 < t-value < 1.96. Based on this, two latent variables can be proven to have a significant influence on the confidence level of 95% only if | t-value | > 1.96. 4.2 Structural model evaluation It can be seen from the results of the research that H1, which states the influence between halal-friendly destination performances on perceived value, has a positive and Table 1.

Hypotheses results.

Hypothesis

Impact

Relation

1 2 3 4 5 6 7

HFDP->PV PV->SAT PV->TRU PV->LOY SAT->TRU SAT->LOY TRU->LOY

Positive Positive Positive Positive Positive Positive Positive

151

significant relationship; H2, which states the effect between perceived value on destin­ ation satisfaction, has a positive and significant relationship; H3, which states the effect between perceived value of trust has a positive and significant relationship; H4, which states the effect of perceived value on loyalty, has a positive and significant relationship; H5, which states the effect of satisfaction on trust, has a positive and significant relation­ ship; H6, which states the effect between satisfaction on loyalty, has a positive and sig­ nificant relationship; and finally, H7, which states that the influence of trust on loyalty, has a positive and significant relationship.

5 CONCLUSIONS AND SUGGESTIONS This study provides an overview for marketers and developers of tourism destinations to find out how the performance create loyalty toward halal tourist destinations. Based on the results of this study, there are some managerial implications that can be considered by marketers and developers in the future, such as serving tourist needs when visiting tourist destinations and setting appropriate tourist rates. This research still has limitations in the process and scope. There are several suggestions that can be used as considerations for further research, such as developing this research using foreign respondents – namely foreign tourists visiting tourist destinations – because it can pro­ vide broader insights from the respondents’ point of view; time to visit tourist destinations can be specified again such as during Ramadan or the month of fasting; availability of clean and halal water can be considered to be included as an indicator of the performance of halal tour­ ism destinations and looking for other regions that have potential and can be developed into the next halal tourist destination. REFERENCES Al-Ansi, A., & Han, H. (2019). Role of halal-friendly destination performances, value, satisfaction, and trust in generating destination image and loyalty. Journal of Destination Marketing and Management, 13(December 2018), 51–60. https://doi.org/10.1016/j.jdmm.2019.05.007 Battour, M., Battor, M., & Bhatti, M. A. (2014). Islamic attributes of destination: Construct develop­ ment and measurement validation, and their impact on tourist satisfaction. International Journal of Tourism Research, 16(6), 556–564. Battour, M., & Ismail, M. N. (2016). Halal tourism: Concepts, practises, challenges and future. Tourism Management Perspectives, 19, 150–154. https://doi.org/10.1016/j.tmp.2015.12.008 Battour, M., Ismail, M. N., Battor, M., & Awais, M. (2017). Islamic tourism: an empirical examination of travel motivation and satisfaction in Malaysia. Current Issues in Tourism, 20(1), 50–67. https://doi. org/10.1080/13683500.2014.965665 CrescentRating. (2019). Indonesia Muslim Travel Index (IMTI) 2019. Senin 8 April 2019 Puku 19.16 Wib, (April), 2040696. https://lifestyle.okezone.com/read/2019/04/08/406/2040696/kalahkan-aceh­ lombok-jadi-destinasi- wisata-halal-nomor-satu-di-indonesia Eid, R., & El-Gohary, H. (2015). The role of Islamic religiosity on the relationship between perceived value and tourist satisfaction. Tourism Management, 46(Supplement C), 477–488. doi: 10.1016/j. tourman.2014.08.003 Grissemann, U. S., & Stokburger-Sauer, N. E. (2012). Customer co- creation of travel services: The role of company support and customer satisfaction with the co-creation performance. Tourism Manage­ ment, 33(6), 1483–1492. doi: 10.1016/j. tourman.2012.02.002 GMTI (2018). The global muslim travel index. Retrieved 11.04.18. from https://www.crescentrating.com/ reports/mastercard-crescentrating-global-muslim-travel-index-gmti-2018.html. Han, H., Al-Ansi, A., Olya, H. G., & Kim, W. (2019). Exploring halal-friendly destination attributes in South Korea: Perceptions and behaviors of Muslim travelers toward a non-Muslim destination. Tour­ ism Management, 71, 151–164. Henderson, J. C. (2016). Muslim travellers, tourism industry responses and the case of Japan. Tourism Recreation Research, 41(3), 339–347. Kim, M. J., Chung, N., & Lee, C. K. (2011). The effect of perceived trust on electronic commerce: Shop­ ping online for tourism products and services in South Korea. Tourism Management, 32(2), 256–265.

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Mohsin, A., Ramli, N. and Alkhulayfi, B.A. (2016), “Halal tourism: emerging opportunities”, Tourism Management Perspectives, Vol. 19 No. Part B, pp. 137–143. Olya, H. G., & Al-ansi, A. (2018). Risk assessment of halal products and services: Implication for tour­ ism industry. Tourism Management, 65, 279–291. Ryan, C. (2016). Halal tourism. Tourism Management Perspectives, 19, 121–123. Sirdeshmukh, D., Singh, J., & Sabol, B. (2002). Consumer trust, value, and loyalty in relational exchanges. Journal of Marketing, 66(1), 15–37. Wu, C.-W. (2016). Destination loyalty modeling of the global tourism. Journal of Business Research, 69(6), 2213–2219. doi:10.1016/j.jbusres.2015.12.032.

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Consumer intention to adopt PayLater: An empirical study A.S. Rachmawati & R.D. Astuti Faculty of Economics and Business, Universitas Indonesia, Depok, Indonesia

ABSTRACT: Due to the rapidly growing online market and the supply of mobile devices, the need for mobile fintech payment service that supports trust and ease-of­ payment options has increased. Payment options that are provided by the e-commerce platform influence customer purchase decision-making. Nowadays, credit has become an attractive way to buy rather than buying after saving. The purpose of this article is to examine the factors that influence consumer intention to use PayLater as one form of credit payment using a sample representative of Indonesian’s millennial users. The tech­ nology acceptance model (TAM) is used in this study. A nationwide primary survey was conducted using questionnaires. A convenience sampling was used to select the respond­ ents: in total, 271 respondents participated in the survey. LISREL-SEM was used to esti­ mate and test the hypothesized model. The results show that factors such as perceived ease of use (PEOU), perceived usefulness (PU), and trust, have a significant impact on the consumer’s intention to use PayLater. The findings of this study provide several important implications for PayLater adoption research and practice. 1 INTRODUCTION Indonesia is a country with a rapidly growing online population, with the millennial gen­ eration as its greatest number of users. The emergence of the e-commerce industry creates a great opportunity for payment systems that support ease of transaction. The advance­ ment of digital technology has made transactions more convenient (Phau & Woo, 2008). PayLater is a new innovation in mobile payment that allows its consumers to take out a loan. The technology acceptance model (TAM) has been a very popular model for IT adop­ tion studies since it was introduced by Davis, Bagozzi, and Warshaw (1989). The TAM consists of four permanent constructs: perceived ease of use (PEOU), perceived usefulness (PU), the attitude toward using, and intention to use (INT). PEOU could be a predictor for its PU as this relationship has been supported in several studies (King & He, 2006). A study about cognitive absorption has accepted the positive relationship between PEOU and INT (Saadé & Bahli, 2005). The researchers emphasize the importance of trust in e-commerce acceptance, especially when a system involves social risk and uncertainty, as in digital payment (Gefen, Karahanna, & Straub, 2003). There are many empirical studies about credit cards and a new technology acceptance, but in the Indonesian context, this study is peculiar in the sense that PayLater is a new comer in digital payments. It exam­ ines consumers’ intention toward PayLater adoption. Two research questions have gained researchers’ attention. First, the factors that influence users’ attitude and motivate them to adopt a new technology. Second, will TAM improve the explanation of factors concerning technology adoption? Various research models have been proposed to predict this phe­ nomenon (Chawla & Joshi, 2018). Due to its innovation in digital payments, we would like to identify factors that will improve the likelihood of increasing the adoption rate of PayLater. Thus, our study examines how per­ ceived ease of use, perceived usefulness, and trust will influence consumers intention to adopt PayLater using TAM. 154

2 LITERATURE REVIEW 2.1 PayLater PayLater is the digital payment equivalent of a credit card that enables online customers to make payments later. Slightly different from a credit card, PayLater could be used only in e-commerce and does not have a physical card. PayLater serves the function of making pre­ cautionary money easily available for customers to make a transaction. E-commerce is defined as a transaction of buying and selling that is held in electronic networks (Kotler, & Keller, 2009). 2.2 Technology Acceptance Model (TAM) The technology acceptance model (TAM) is regarded as the most parsimonious, influential, and robust model in innovations acceptance behavior (Davis, 1989). The TAM has been proven empirically successful in predicting about 40% of a systems’ use (Legris, Ingham, & Collerette, 2003). Based on its perceived ease of use (PEOU) and perceived usefulness (PU), TAM helps determine users’ intention to accept PayLater as a new system. TAM is preferred over the theory of planned behavior (TPB) (Hong, Thong, & Tam, 2006). PEOU and PU are deeply rooted in theory of reasoned action (TRA) by Fisbein and Ajzen. (Davis et al. 1989). TAM has been used to compare the intention of experienced users with those who are inexperienced, in terms of continued use (Hong et al., 2006). In addition to technology perceptions such as perceived usefulness, trust also has a significant effect on mobile payment user behavior. Many researchers extended TAM with trust to explore adop­ tion of m-payments in many countries.

3 METHODOLOGY As proposed by Davis (1989), we need future research to address how other variables affect ease of use, usefulness, and usage intention. As Agarwal, Rastogi, & Mehrotra (2009) noted, there is a need to integrate TAM that includes universal variables, such as trust. Accordingly, our research model incorporates perceived ease of use and perceived usefulness from TAM with trust. Thus, our conceptual model has perceived ease of use and perceived usefulness as independent variables and trust as a mediating variable, while usage intention is an dependent variable (Figure 1). People adopt a system primarily because of the functions it performs and the ease or difficulty associated with its performance. This body of research provides empirical sup­ port to show that perceived ease of use and usefulness play a critical role in determining technology adoption (Venkatesh, Morris, Davis, & Davis, 2003). In line with what Agar­ wal (2009) has mentioned, this research supports the idea of the importance of trust to integrate with TAM and indicates that trust has a critical influence on users’ willingness to engage in online exchanges including money and sensitive personal information. To

Figure 1.

Research framework.

155

investigate the relation between TAM and trust, we put forward the following three basic hypotheses: H1: Perceived ease of use positively influences perceived usefulness associated with PayLater. H2: Consumers’ perceived ease of use of PayLater payment will positively influence their trust in PayLater. H3: Consumers’ perceived usefulness of Paylater will positively affect their trust in PayLater. Perceived usefulness has become a major factor that has a direct effect on behavioral inten­ tion and mediating the effects of perceived ease of use on behavioral intention (Chen & Barnes, 2007). The importance of trust rises in intangible situations such as online service. A high level of trust comforts the partners to engage in innovative transactions. Chen & Barnes (2007) also considers that trust has a positive effect on users’ perceived usefulness and intentions toward technology adoption. Thus, it could be assumed that ease of use and useful­ ness have an impact on trust. Then, it is hypothesized that: H4: Consumers’ perceived usefulness will positively affect consumers intention toward PayLater adoption. H5: Consumers trust will positively affect their intention to adopt PayLater. Collecting quantitative data using the questionnaire was done via an online survey. The con­ venience and purposive sampling were used to select respondents for the pretest and main test. Both physical and online tests were used for a nationwide primary survey. A screening question identified respondents who were using PayLater. This questionnaire consists of three sections; first, the respondents were asked about their experience and knowledge of PayLater; second, using Likert scale the researchers measured some research questions about the variables of interest; and lastly, demographic questions about gender, birth year, income, and education were asked. Our study data was collected from the Indonesian millennial generation with the majority age group of 19–29 years old. The sample profile comprises 129 males and 142 females for a total of 271 respondents participating in the survey. A confirmatory factor analysis using SPSS was conducted to test the reliability and the validity of the measures. We used LISREL­ SEM to estimate and test the hypothesized model.

4 RESULT AND DISCUSSION The results of the hypothesized path coefficient indicate that all hypotheses were supported. As seen in Table 1, the first two – the influence of the perceived ease of use on the perceived usefulness and trust through PayLater – are supported. Perceived ease of use has a significant direct effect on perceived usefulness (Davis et al., 1989). Perceived ease of use is a very important construct in explaining perceived usefulness. Per­ ceived usefulness has a large effect size, whereas trust has a small effect on the endogenous construct trust. In accordance with the past research, the present study also observed that per­ ceived usefulness has positive and significant influences on trust and intention in respect of PayLater adoption. Table 1.

Summary of structural model result.

Hypotheses

Relationship

t-value

Supported/rejected

H1 H2 H3 H4 H5

PEOU → PU PEOU → TR PU → TR PU → INT TR → INT

9.56 4.90 3.65 6.78 4.88

Supported Supported Supported Supported Supported

156

5 CONCLUSION The results show that perceived ease of use (PEOU), perceived usefulness (PU), and trust (TR) have a significant impact on consumer intention to use PayLater. A conclusion could be drawn from the managerial implications for the industry, in which trust indicates that vendors should establish their users’ trust in PayLater by ensuring that their expectations of easiness and security have been fulfilled. Making the payment process easier is the highest indicator from perceived usefulness, whereas belief in easiness of getting help from the provider is the highest indicator from trust. The PayLater company should make PayLater applications easy to navigate and use. This could be achieved by developing reliable, robust, and transparent infrastructures for rendering PayLater services. Moreover, users need to be educated about the features and how to safely perform a transaction using PayLater. This study has a few limitations that provide future research opportunities. Although there is a good sample size, it had been obtained only for millennial generation, which limits our scope to interpret the results, which could be extended to other generations. The future research efforts should extend TAM by adding other concepts, since trust is only practiced and exercised between and toward individuals and parties (Hoecht, 2004). Integrating TAM with other models, like UTAUT, could make this concept more comprehensive and may improve the ability to predict technology adoption more accurately. REFERENCES Agarwal, R., Rastogi, S., & Mehrotra, A. (2009). Customers’ perspectives regarding e-banking in an emerging economy. Journal of Retailing and Consumer Services. https://doi.org/10.1016/j. jretconser.2009.03.002 Chawla, D., & Joshi, H. (2018). The moderating effect of demographic variables on mobile banking adoption: an empirical investigation. Global Business Review. https://doi.org/10.1177/ 0972150918757883 Chen, Y. H., & Barnes, S. (2007). Initial trust and online buyer behaviour. Industrial Management and Data Systems. https://doi.org/10.1108/02635570710719034 Davis, F. D., Bagozzi, R. P., & Warshaw, P. R. (1989). User acceptance of computer technology: a comparison of two theoretical models. Management Science. https://doi.org/10.1287/mnsc.35.8.982 Gefen, D., Karahanna, E., & Straub, D. W. (2003). Trust and TAM in online shopping: an integrated model. MIS Quarterly: Management Information Systems. https://doi.org/10.2307/30036519 Hoecht, A. (2004). Control in collaborative research and technology development: a case study in the chemical industry. Journal of Managerial Psychology. Hong, S. J., Thong, J. Y. L., & Tam, K. Y. (2006). Understanding continued information technology usage behavior: a comparison of three models in the context of mobile internet. Decision Support Sys­ tems. https://doi.org/10.1016/j.dss.2006.03.009 King, W. R., & He, J. (2006). A meta-analysis of the technology acceptance model. Information and Man­ agement. https://doi.org/10.1016/j.im.2006.05.003 Kotler, P., & Keller, K. L. (2009). Marketing Management. (13th ed., International ed. Philip Kotler and Kevin Lane Keller (eds.)). Upper Saddle River, NJ: Pearson Education. https://doi.org/10.1080/ 08911760903022556 Legris, P., Ingham, J., & Collerette, P. (2003). Why do people use information technology? A critical review of the technology acceptance model. Information and Management. https://doi.org/10.1016/ S0378-7206(01)00143-4 Phau, I., & Woo, C. (2008). Understanding compulsive buying tendencies among young Australians: the roles of money attitude and credit card usage. Marketing Intelligence and Planning. https://doi.org/ 10.1108/02634500810894307 Saadé, R., & Bahli, B. (2005). The impact of cognitive absorption on perceived usefulness and perceived ease of use in on-line learning: an extension of the technology acceptance model. Information and Management. https://doi.org/10.1016/j.im.2003.12.013 Venkatesh, V., Morris, M. G., Davis, G. B., & Davis, F. D. (2003). User acceptance of information tech­ nology: toward a unified view. MIS Quarterly: Management Information Systems.

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Promotional media development of MSMEs Bakmie Pulau Seribu A.R. Lubis & S.K. Widhaningrat Master of Management, Universitas Indonesia, Jakarta, DKI Jakarta, Indonesia

ABSTRACT: The increasing number of MSMEs (micro, small and medium enterprises) in Indonesia has made a positive contribution to the economy of Indonesia, but there are still many MSMEs that have not managed their businesses well, especially micro businesses. Bakmie Pulau Seribu is a micro business that sells halal noodles, located in Menteng Square in the city of Jakarta, Indonesia. This study is applied research in the form of business coach­ ing. The research is carried out by survey, observation, and in-depth interview methods, to map the conditions and problems of MSMEs, then to be resolved by taking corrective actions and implementing them as improvement solutions. This study uses GAP and Pareto analysis to summarize the problems. The results show that MSMEs do not have attractive promotional media to promote their business. The solution, therefore, is to develop promotional media to help Bakmie Pulau Seribu advertise their business and attract more consumers.

1 INTRODUCTION Micro, small and medium enterprises (MSMEs) have an important role in the Indonesian economy. Based on data from the Central Statistics Agency, in 2017, there were 59.2 million MSMEs in Indonesia, 1.4 million more than in 2013, when it was 57.8 million MSMEs. This development makes MSMEs one of the biggest contributors to GDP in Indonesia. But there are still many MSME owners who do not know how to run their business properly. Even though MSMEs have smaller operational resources and structures than large companies, MSMEs still have to do marketing for business growth (Gilmore, 2011). Based on BEKRAF statistics, among MSMEs, the culinary sector provides the greatest contribution (41%) to the Indonesian economy’s creative growth. Bakmie Pulau Seribu is an MSMEs engaged in the culinary industry in a form of a food kiosk that sells halal noodles. The purpose of this research is to identify the problems experienced by Bakmie Pulau Seribu and provide solutions to overcome them. This study is applied research using data obtained through surveys, observation, and indepth interviews. All data were analyzed using eight analytical tools to identify the problem. The result shows that Bakmie Pulau Seribu’s main problem is they do not use promotion to advertise their business. So the main objectives of this research is to help Bakmie Pulau Seribu develop their promotional media in order to advertise their business and attract more consumers.

2 LITERATURE REVIEW Marketing communication is used by companies to provide information, persuade, and remind consumers directly or indirectly about the products sold (Kotler & Keller, 2016). Belch and Belch (2018) explained that integrated marketing communication (IMC) is a strategic business process used to plan, develop, implement, and periodically evaluate a coordinated, measurable, persuasive brand communication program, targeting consumers, customers, prospects, employees, colleagues, and other relevant external and internal 158

audiences. The aim is to generate short-term financial returns and build long-term brand and shareholder value. In the practice of implementing IMC, there are some basic tools that can be used to achieve the communication objectives, namely visible marketing signs, advertising activities and special offers (Kukanja, 2017). Advertising is the most well-known and most talked about form of promotion because of its broad nature. Advertising is defined as any form of paid nonpersonal communication about an organization, product, service, or idea by an identified spon­ sor (Belch and Belch, 2018). Belch and Belch (2018) grouped advertising into three dis­ tinct groups: print advertising, TV advertising, and digital advertising. In this research, we looked at print advertising. As Belch and Belch (2018) explained, the basic components of print advertising are headlines, body copy, visuals or illustrations, and layout. Marketing communication using print advertising plays a very dynamic role in changing consumer buying behavior (Chaudrhy, 2017). In order to develop the promotional media of Bakmie Pulau Seribu, this research made and implemented the use of print advertising as promotional media to advertise the business and attract new consumers.

3 RESEARCH METHODS This research is a qualitative research in the form of applied research called business coaching. The research was conducted at Bakmie Pulau Seribu for nine months, from March to Novem­ ber. The data were collected through in-depth interviews, observations, and a survey. Inter­ views were conducted with MSME owners several times to identify the problems MSMEs faced. After that, data collection continued with direct observation of the business processes of the MSME Bakmie Pulau Seribu. And then, to obtain additional data, a survey was by distributing questionnaires to 60 customers. After all the data was collected, data analysis was performed to identify the problems experienced by MSMEs. Data analysis was performed using eight analytical tools, namely business model canvas (BMC), PESTEL analysis, Porter’s five-forces model, service market­ ing mix, SWOT and TOWS analysis, GAP analysis, and Pareto analysis. After GAP analysis, all problems were codified and analyzed by Pareto analysis to determine the main problem. Based on the results, solutions were provided and implemented.

4 RESULTS After in-depth interviews, observation, and surveys were done, BMC analysis showed that Bakmi Pulau Seribu only promote their products through word of mouth. PESTEL analysis shows that the fast-paced lifestyle trend in Jakarta is also a challenge that needs to be con­ sidered by MSMEs. Porter’s five-forces model shows that the attractiveness of the noodle shop industry is moderate to low. Because the industry alone is not attractive enough, MSME Bakmie Pulau Seribu needs to further improve the quality of service in order to provide more value to customers and increase its promotional activities to attract more customers. Service marketing mix analysis shows that Bakmie Pulau Seribu does no advertising to pro­ mote its business to attract new customers. This is also supported by survey data that shows that the majority of customers perceive the MSME’s promotional activity as low. Each avail­ able promotion variable in the questionnaires only get average mean value of 2. The first vari­ able, visible marketing sign, only gets 2.27 average mean value, while the advertisingactivities variable gets 2.32 average mean value, and the special offers variable is the lowest with 2.1 average mean value. Beside the promotions variable, only the process variable gets a mean value below 4, with mean value of 3. The mean values of other variables can be seen in Table 1. 159

Table 1. Service marketing mix survey results. Variable

Indicator (Mean Value)

Product Price Place Promotion

Menu variation (4.36) Bill accuracy (4.12) Accessibility (3.76) Visible marketing sign (2.27) Cleanliness (4.38)

Portion size (4.45) Value for money (4.45) Neat surrounding (4.03) Advertising activities (2.32)

Product taste (4.58) Price competitiveness (4.67) Accessible parking (4.14) Special offers (2.1)

Comfort (4.27)

Sense of security (4.34)

Hospitality (4.3)

Professional competencies (4.11) Restaurant working hours (3.02)

Sufficient number of staff (4.24) Waiting time (3.74)

Physical Evidence People Process

Staff responsiveness (3.97)

These results were compiled in the form of a SWOT analysis as a basis for creating a TOWS matrix in order to determine the appropriate solution. TOWS matrix analysis results provide many solutions, such as promoting product excellence through print and digital media, promoting through print ads, using attractive product packaging accompanied by addresses of MSME locations in the area, using packaging that attracts customer attention, and making new product variations. One of the most accessible solutions is to advertise using print media in the form of brochures to promote the MSME’s products. Furthermore, in the GAP analysis, a comparison was made between real conditions accord­ ing to the results of previous analyses and ideal conditions to be achieved. Then, every prob­ lem was codified. Based on GAP analysis, existing problems fall into five main categories: media promotion, service process, product packaging, geographic segmentation, and servicescape. After being codified, a Pareto analysis was performed to find out which problems are the most significant. The results of the Pareto analysis are shown in Table 2. Based on Table 2, among the various problems, the promotional media problem was the most pressing. So, the promotional media problem was the one that needed to be addressed. The solution to overcome the problem was to use print advertising as a promotional media. The print advertising used was a brochure created in accordance with Belch and Belch’s (2018) theory of creative advertising, which explained that in making print advertising, the company must pay attention to some basic components, namely headlines, body copy, visual elements, and layout. The brochure was then distributed personally to the rooms of the resi­ dents of the apartment where the Bakmie Pulau Seribu kiosk was located. After a month of distributing brochures, it can be seen that Bakmie Pulau Seribu’s sales have increased. The highest increase occurred in the first month after the distribution of bro­ chures, namely in September. In the following month, sales continued to increase, although not as much as in September (Figure 1).

Table 2. Pareto analysis results. No

Codification

Value

Significance

1 2 3 4 5

Promotional media Service process Packaging Geography segmentation Servicescape

9 8 8 4 6

8 8 5 4 2

Total

160

Contribution

Distribution

72 64 40 16 12

35% 31% 20% 14% 6%

206

100%

Accumulation 35% 66% 86% 94% 100%

Figure 1.

Bakmie Pulau Seribu average monthly sales.

5 CONCLUSIONS Based on these results, it can be concluded that the development of Bakmie Pulau Seribu’s promotional media using print advertising gives good results. A brochure providing informa­ tion about the product was distributed to the rooms of the residents of the apartment where the Bakmie Pulau Seribu kiosk is located, leading to increased sales in the following months as many new customers were interested in coming and buying Bakmie Pulau Seribu’s product. Therefore, it can be said that the use of print advertising can be the right solution to solve the problem experienced by MSME Bakmie Pulau Seribu. REFERENCES Badan Ekonomi Kreatif. (2018). Data Statistik dan Hasil Survei Ekonomi Kreatif. Jakarta: BEKRAF. Belch, E. G., & Belch, A. M. (2018). The Promotional Mix: Advertising and Promotion. New York: McGraw-Hill Education. Chaudhry, A. A., Awan, F. B., & Hussain, S. S. (2017). Impact of print advertising on brand image and consumer buying behaviour. Journal of Marketing and Consumer Research. Gilmore, A. (2011). Entrepreneurial and SME marketing. Journal of Research in Marketing and Entrepre­ neurship, Vol. 13. Kotler, P., & Keller, K. L. (2016). Marketing Management 15th Ed. USA: Pearson. Kukanja, M. (2017). Quality measurement in restaurant industry from the marketing perpective: A comparison of guests’ and managers’ quality perceptions, University of Primorska: Turistica.

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Improvement of dredging project planning with maturity model of lean project planning and control approach K.N.P. Nugroho & M.L. Singgih Department of Technology Management, Faculty of Business and Technology Management, Sepuluh Nopember Institute of Technology (ITS), Indonesia

ABSTRACT: Project planning has a high level of uncertainty in every process of execu­ tion, especially in a dredging project. Analyzing and measuring current business perform­ ance and then improving to the desired state is one solution to fix this problem. This research examines one case of a dredging project in Indonesia that occurred in 2019 and called it Project A. This research is a qualitative and quantitative study that using three methods: Maturity Model of Lean Project Planning and Control, Waste Assessment Model, and VALSAT. The researchers took a sample from primary data, distributed questionnaires, and observations. The purpose of this study is to identify the level of project planning maturity at the planning stage in project execution and then increase the maturity level through the elimination of waste activity in execution so the maturity level will rise and the dredging project be more efficient than before. The results show that Project A planning is now at maturity level 2.83 at Stage Standardized and has three waste activities: defect, motion, and overproduction. After eliminating waste activ­ ity, a new maturity level is obtained at 3.18 at Stage Defined. The dredging process improvements obtained are minimizing delay time and dredging operational costs and improving dredging performance.

1 INTRODUCTION Project planning has a high degree of uncertainty in its implementation, so it needs to be con- trolled and proper planning undertaken in each process, especially in dredging projects (Jünge et al 2019; Reddi & Moon, 2011). The development of project perform­ ance is critical to providing customer satisfaction, so it is necessary to analyze and meas­ ure business performance (projects) by comparing current conditions with desired conditions (Jünge et al., 2019). Maturity is a measure that allows companies to evaluate their abilities in relation to particular problem areas that refer to various types of com­ pany resources (de Bruin et al., 2005; Poeppelbuss et al., 2011). Maturity Model (MM) is an instrument used by companies to assess maturity level and choose appropriate cor­ rective steps to bring the element examined to a higher maturity level (Becker et al. 2010). Maturity level, in addition to being applied to the company, can also affect the organization and management system in project activities (Project Management Institute, 2008) and the organization will increase the maturity of its project management organ­ ization by eliminating identified waste (Moujib, 2007). The Capability Maturity Model for Software explains that the focus of the highest level is to eliminate waste at all levels of maturity, which results in system changes by overcoming the causes of inefficiency caused by waste (Paulk, Weber, & Chrissis, 2000). So it can be concluded that the less waste that exists at a level of maturity, the higher the level of organizational maturity. Eliminating waste is part of the Lean method (Jørgensen et al, 2007). Lean management offers the potential for significant improvements in cost and time; in practice, the pro­ cess of transitioning to this approach is complex (Jünge et al., 2019; Netland & Powell, 162

2013). One of the MM methods that analyzes the project planning process using lean, and explains the path to improvement is the Maturity Model of Lean Project Planning and Control (MMLPPC) (Jünge et al., 2019). MMLPPC specifies four levels in the maturity model planning process: Stage Initial, Stage Standardized, Stage Defined, and Stage Optimized. MMLPPC also has nine enablers to help define each of the plans in this MM (Jünge et al., 2019). One lean method that can be used to analyze waste activ­ ity is the Waste Assessment Model (WAM), which is a tool to measure the strength of a direct relationship between waste with the Waste Relationship Matrix (WRM) and the results of the calculation of Waste Assessment Questionnaire (WAQ) to determine the waste rating from the most dominant to the smallest (Rawabdeh, 2005). Value stream mapping (VSM) is a description of all the steps that have value-added and non–value­ added activity, from production to delivery to customers, and design flow from concept to launch (King, 2009). Value Stream Mapping Tool (VALSAT) has seven tools that can be applied to explain VSM flow in more detail (Hines & Rich, 1997). This research focuses on one of the dredging project cases by PT. AB in Indonesia in 2019. This study uses MMLPPC to measure MM levels in the dredging project planning stage and then eliminate waste activity using the WAM & VALSAT to increase the MM level of project planning to obtain improved performance and efficiency of the dredging project process.

2 RESEARCH DESIGN This research focuses on all project planning stages at the execution stage. It starts by measur­ ing the MMLPCL level at the current planning stage and raising the MMLPCL level at the next level by eliminating waste at the execution stage. The researcher hypothesizes that the planning stage and the execution stage are interconnected. An overview of the area in the pro­ ject cycle that is examined is explained in Figure 1. The research design was conducted in three phases, namely observation, data collection, and statistical risk analysis. Several stages were needed to complete each phase. 1. Observation Observation was carried out on one of the dredging projects (Project A) undertaken by a contractor of PT. AB, who was in Indonesia in 2019. We observed the dredging project planning process at the execution stage and determined the maturity level of the dredging project planning. In addition, observations were also made through questionnaires and interviews with experts directly involved in the project. Observation activities were carried out during June–July 2019.

Figure 1.

The research area in project cycle (Larson & Gray, 2011).

163

2. Data Collection Data collection was carried out in June and July 2019. Data was collected by direct field observations, dredging reports, interviews, and three questionnaires (MMLPPC, WAM, WAQ), which had been distributed to experts who dropped by in the field at the observa­ tion stage. 3. Risk of statistical analysis After the data was collected, it was processed in August–October 2019. First, the results of the MMLPPC questionnaire were averaged and rated according to the value per enabler, starting from the lowest to the highest enabler level. Then waste identification was done to determine the reason for the current level of maturity by processing WAM and WAQ questionnaire data to get the waste activity factor, ranked from high to low. From the ranking results, the VALSAT tools were selected and applied. After that, the process was improved by eliminating the causes of waste from the planning side in accordance with the planning enabler in MMLPPC. After these improvements, a new MM level shows an increase in performance and efficiency.

3 RESULT From the results of the MMLPPC questionnaire, ratings were obtained from each enabler plan that affected the level of MM project planning in MMLPPC, namely: Plan­ ning Commitment (3.87), Project Dedication (3.5), Planning Integrity (3.37), Impact Awareness (3.37), Planning Dedication (3.12), Learning Ability (2.37), Planning Partici­ pation (2.25), Planning Flexibility (2.12), and Re-Planning (1.5). The average calculation of these nine enablers showed that the MM level of project planning dredging is cur­ rently at level 2.83/Stage Standardized. Increasing the MM level required elimination of waste through data processing using WRM and WAQ.Tthe top three sources of waste were: defect, motion, and overproduction. Next, a selection of VALSAT detail mapping tools was obtained, and a process-activity map (PAM) was obtained. This led to nine results, including those that caused dredging activity delays and eight identified non– value-added activities that were mostly downtime due to vessel damage. After that, improvements were made by eliminating the causes of the three wastes and getting the latest results from the three lowest enablers, namely Planning Participation (3), Planning Flexibility (3), and Re-Planning (3). The latest MM level of the dredging project plan­ ning, if these improvements are made, is level 3.18/Stage Defined, as illustrated in Figure 2:

Figure 2. 2019).

MM level of project a planning if a waste activity is eliminated (Processed primary data.

164

4 DISCUSSION From the research results, it was found that if improvements were made, the MM level of the dredging project planning would increase some efficiency in the dredging process, namely: minimizing delay time due to waste activity so that the dredging work time could be used max­ imally; minimizing the operational costs of dredging due to waste activity so the benefits from dredging projects are greater; and improving the quality and performance of dredging pro­ jects. This is consistent with The Capability Maturity Model for Software explaination that the focus of the highest level is to eliminate waste at all levels of maturity, which results in system changes by addressing the causes of inefficiency caused by waste activity (Paulk et al., 2000), which, in this study, meant when the MM level was higher (level 3.18/Stage Defined) there was a process change that eliminated the waste and the process became more efficient. 5 CONCLUSION Through MMLPPC analysis, Project A is currently at the MM level, project planning at level 2.83 on the Standardized Stage with the bottom three enablers. After that, waste activity identi­ fication is carried out with WAM and VALSAT analysis, and then the three highest wastes are found: defect, motion, and overproduction. The elimination of the three wastes is done by elim­ inating the causes of waste from the aspect of the plan which makes an improvement at the lowest MM 3 MMLPPC enabler level in the current Project A. If Project A eliminates waste, an improvement will be made and MM level of Project A planning will increase at level 3.18 on Stage Defined. The advice that researchers can give to the dredging contractor is to eliminate the causes of waste activity by improving planning in accordance with the level of MMLPPC that you want to do, which in this case is level 3/Stage Defined. The next researcher can identify the risks that will arise. REFERENCES Becker, J., Niehaves, B., Poeppelbuss, J., & Simons, A. (2010). Maturity models in IS research. AIS Elec­ tronic Library, 29(27). de Bruin, T., Rosemann, M., Freeze, R., & Kulkarni, U. (2005). Understanding the main phases of devel­ oping a maturity assessment model. ACIS 2005 Proceedings – 16th Australasian Conference on Infor­ mation Systems, Sydney, Nov–Dec 2005. Hines, P., & Rich, N. (1997). The seven value stream mapping tools. International Journal of Operations & Production Management, 17(1), 46–64. Jørgensen, F., Matthiesen, R., Nielsen, J., & Johansen, J. (2007). Lean maturity, lean sustainability. IFIP International Federation for Information Processing, 246, 371–378. Jünge, G. H., Alfnes, E., Kjersem, K., & Andersen, B. (2019). Lean project planning and control: An empirical investigation of ETO projects. International Journal of Managing Projects in Business. King, P. L. (2009). Lean for the process industries. New York: Taylor & Francis Group. Larson, E. W., & Gray, C. F. (2011). Project management: The managerial process (5th ed.). New York: McGraw-Hill Irwin. Moujib, A. (2007). Lean project management. In Building Research and Information. Budapest, Hungary: Paper presented at PMI® Global Congress 2007– EMEA. Netland, T., and Powell, D. (2013). The Routledge Companion. In The Routledge Companion (pp.271–285). Paulk, M. C., Weber, C. V., & Chrissis, M. B. (2000). The Capability Maturity Model for Software. Poeppelbuss, J., Niehaves, B., Simons, A., & Becker, J. (2011). Maturity models in information systems research: Literature search and analysis. Communications of the Association for Information Systems, 29(1). Project Management Institute. (2008). A Guide to the project management body of knowledge. Pennsylva­ nia: Project Management Institute, Inc. Rawabdeh, I. A. (2005). A model for the assessment of waste in job shop environments. International Journal of Operations and Production Management, 25(8), 800–822. Reddi, K. R., & Moon, Y. B. (2011). System dynamics modelling of engineering change management in a collaborative environment. International Journal of Advanced Manufacturing Technology, 55(9–12), 1225–1239.

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The influence of destination image on tourist satisfaction and tourist loyalty: A case study of urban tourism in Semarang, Indonesia G.P.M. Agung, S. Wijaya & D.C. Widjaja Faculty of Business and Economics Petra Christian University, Surabaya, Indonesia

ABSTRACT: Urban tourism has gained its popularity as an alternative in cities offering various tourism experiences not only for visitors but also for city residents. Semarang has evolved as one of the major urban tourism destinations in Indonesia, showing increasing visitor arrival every year. The city has a wide range of potential tourist attractions includ­ ing heritage tourism, religious tourism, shopping tourism at traditional markets, and culin­ ary tourism. Despite its prospective growth and extensive efforts of the local government to promote the destination, the number of tourists who visit Semarang is still behind its neighbouring cities like Yogyakarta and Solo. This study aimed to identify the image of Semarang as a tourism destination and to examine whether both cognitive and affective images of the city affected tourist satisfaction and tourist loyalty. The survey was com­ pleted by 300 respondents who were domestic tourists not residing in Semarang and had visited the city at least within the past year. The results showed that destination image significantly and positively influenced tourist satisfaction and induced the intention of tourists to revisit Semarang, with cognitive image having a stronger effect than affective image. 1 INTRODUCTION In the past few decades, urban tourism has been growing dramatically in big cities in many countries, and it is seen as the socioeconomic phenomena in the modern era. Urban tourism is related to the increase of tourism activities in the urban areas that sig­ nificantly support the local economy (Selby, 2004). It ranges from shopping, culinary, sport, business activities, and culture-related events like art and music performance and exhibitions. The growth of urban tourism is linear with the increased urban population due to migration to the cities (Griffin & Dimanche, 2017). Urban tourism has been stra­ tegically promoted for tourism by neighbouring countries such as Singapore and Thai­ land. Indonesia, as an archipelagic country, has plenty of tourist destinations including cities with a close relationship with history and heritage. Semarang is one of the old cities in Indonesia with has many historical buildings that can attract tourists. Semarang is the capital city of Central Java province as well as the fifth-largest metropolitan city in Indonesia after Jakarta, Surabaya, Medan, and Bandung. Statistics Indonesia recorded that since 2014, the number of tourist arrivals in Semarang has increased sig­ nificantly to reach more than 4 million people. Literature has indicated the importance of destination image as a determinant of tour­ ists visiting to a city, which in turn, would lead to tourist satisfaction and loyalty. On this basis, this current empirical research was applied to investigate the image of Semar­ ang as a tourism destination. A preliminary survey studied 300 domestic tourists in Semarang to explore the image of the city as an urban destination, as well as to deter­ mine tourists’ impressions during a visit in Semarang. The result of the preliminary survey revealed that Semarang was perceived as a transit city only. According to Hanifa 166

(2012), changes are required to promote Semarang as a holiday destination. In fact, Semarang could become the leading tourism destination of Central Java province. This could be accomplished via a strategic plan to build the image of Semarang as a tourism destination in the minds of tourists who visit the city. In the long term, the image ana­ lysis of tourist destinations in Semarang would become one of the significant inputs for various tourism stakeholders, especially the government of Semarang. Resources and infrastructure have impacts on the image of a destination. The image of a destination is not just a photograph. It is an impression, perception, understanding, belief, and emotional thinking (Yeh, 2012). According to Beerli and Martin (2004), two factors affect the image of the destination: information sources and personal factors. Information sources are the most critical factors in influencing perception formation and evaluation. Tourists refer to the amount and variety of information obtained about a destination. Information sources are components in the cognitive image. The second factor is the tourists’ psychological and emotional impression of a place or destination, so it is important that people do not just visit but also have a positive impression. Per­ sonal factor is a component in the affective image. A higher level of satisfaction will have an impact on the level of tourist loyalty (Coban, 2012). When tourists are satisfied, they return, so loyalty is achieved. Loyalty must be maintained so that tourists provide recommendations to colleagues; loyalty can inform an image of a destination (Artuger et al., 2013).

2 LITERATURE Destination image is one crucial factor that can influence tourists in choosing a destination. The definition of the destination image focuses on a person’s perception of a region (Chiu, 2016). The image of a destination will also have a positive impact that affects tourist satisfaction and loyalty (Coban, 2012). According to Kotler and Keller (2009), the image of a destination is a number of beliefs, ideas, and impressions held by a person about an object. The image of a destination is not just a photograph; it is an impression, perception, understanding, belief, and emotional thinking (Yeh, 2012). The positive image of a destination will indirectly affect tourist satisfaction, and it is the basis for tourists to make a return visit. If each destination provides adequate accommodation and accessibility for travellers, it will also provide job opportunities and improve the economy of the area (Coban, 2012). Kotler and Keller (2009) state that the concept of satisfaction is generally defined as the feeling of satisfied or disheartened consumers that results from comparing the per­ ceived performance of a product (or outcome) with consumer expectations. In the con­ text of tourism, customer satisfaction is called tourist satisfaction. It can be regarded as a post-visit evaluation of a destination. Tourist satisfaction is an overall measure of tourist opinions of destination quality. Tourism satisfaction plays a vital role as a marketing tool to attract consumers and also make plans about what products and services are provided in the tourism market. The level of traveller satisfaction is evalu­ ated by the difference between past tourist experience and current conditions, as well as the comparison between current travel objectives with alternative destinations or other places visited in the past (Wang, 2017). Oliver (1999) states that loyalty is a firm commitment to repurchase or subscribe in the future to products/services that are consistently favored, resulting in the purchase of the same brand, regardless of experiments and marketing efforts that have the potential to cause switch­ ing behaviour. Consumer loyalty in the field of tourism is the loyalty of tourists who visit the area. Tourist loyalty is an essential aspect for marketers of a destination, as it is more attract­ ive and less expensive to retain existing tourists than to find new travellers (Chiu, 2016). Trav­ ellers with a high level of loyalty are an essential asset for the market segment of a destination. This is because, in general, return tourists will stay longer than first-time visitors and will tend to spread positive information by word of mouth (WOM) to family and colleagues. This will 167

be beneficial for marketers as it can reduce marketing costs compared to attracting visitors for the first time (Chiu, 2016). Based on the review of the literature, six hypotheses are being formulated as follows: H1: Cognitive image has a positive and significant effect on affective image. H2: Cognitive image has a positive and significant effect on tourist satisfaction. H3: Cognitive image has a positive and significant effect on tourist loyalty. H4: Affective image has a positive and significant effect on tourist satisfaction. H5: Affective image has a positive and significant effect on tourist loyalty. H6: Tourist satisfaction has a positive and significant effect on tourist loyalty.

3 METHODOLOGY A closed-ended questionnaire survey was completed utilising both online and offline to reach a minimum of 300 samples. The survey was completed by 300 respondents, but only 291 ques­ tionnaires were valid and could be analysed further.

4 RESULT 4.1 Respondents profiles There is a balanced percentage in terms of the participants. Half the participants were between 23 and 28 years old. In terms of the travel characteristics, the majority of participants often travel to Semarang for business purpose (52.7%), spending about three days in the city each time. This confirms the preliminary survey result that the image of Semarang was as a transit city. There are four variables: cognitive image, affective image, tourist satisfaction, and tourist loyalty. Cognitive image has 17 indicators, but only 14 were valid, affective image has two indicators, tourist satisfaction has three indicators, and tourist loyalty has four indicators. All indicators of affective image variable, tourist satisfaction, and tourist loyalty had outer load­ ing scores above 0.5 except cognitive image indicators. The indicators that had the lowest score are: CI-14 (diverse cuisine) score 0.542; CI-13 (accessibility) score 0.558; CI-17 (friendli­ ness of local residents) score 0.601; and CI-9 (city cleanliness for public spaces) score 0.637. 4.2 Hypothesis test Research hypothesis can be accepted if the value of t-statistics > t-table at the error rate (α) 5% is 1.96. Table 1 illustrates the coefficient values (original sample estimate) and the t-statis­ tics generated on the inner model. Table 1 shows that out of six hypotheses, five of them were acceptable, while only H5 was rejected. The results showed that cognitive image variables affect affective image. Cognitive image is the result of the evaluation of tourists who live in and visit the city of Semarang. The results of these evaluations will affect each tourist’s emotional

Table 1. Coefficient path result.

Cognitive -> Affective Cognitive -> Satisfaction Cognitive -> Loyalty Affective -> Satisfaction Affective -> Loyalty Satisfaction -> Loyalty

Original Sample Estimate

Mean of Subsamples

Standard Deviation

t-Statistic

Result

0.716 0.346 0.227 0.490 0.094 0.538

0.721 0.351 0.229 0.488 0.093 0.537

0.036 0.090 0.083 0.087 0.058 0.079

20.030 3.851 2.730 5.605 1.604 6.793

Accepted Accepted Accepted Accepted Rejected Accepted

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impression (affective image). The emotional impression that tourists have will have an impact on satisfaction. If the perceived experience exceeds expectations, then the tourists are satisfied. Conversely, if the perceived experience does not exceed expectations, then tourists are not satis­ fied. Such perceived satisfaction tends to affect the level of loyalty. Based on the research results, it can be seen that there are five accepted hypotheses, and one hypothesis rejected. The hypothesis rejected is the relationship between affective image with loyalty tourists. Affective image proved not to affect the loyalty of tourists. This finding is consistent with Coban (2012) and Prayag (2011) that travellers should be satisfied in advance and then reach the point of loyalty.

5 CONCLUSION AND SUGGESTIONS The findings of the current article confirm that cognitive image has a positive and significant impact on affective image. Cognitive image is an evaluation from a tourist. Tourists’ emo­ tional impression directly affects satisfaction level. If the experience is more than expected, satisfaction will be high. However, if the experience is less than expected, satisfaction will not be high. Tourists have indicated Semarang has tourism-related products and services that need to be maintained by the Government: accessibility, diverse cuisine, city cleanliness (public spaces), and friendliness of residents. If the city’s tourism offerings are already well maintained, it will make tourist come again in the future. The concept of urban tourism is still relatively new in Indonesia. Some cities have developed the concept of urban tourism, such as Bandung, Jakarta, and Surabaya, so the authors suggestion further research as the model and results in this study can be used as consideration to confirm the concept of urban tourism. REFERENCES Artuger, S., Cetinsoz, B.C., & Kilic, I. (2013). The effect of destination image on destination loyalty: an application in Alanya. European Journal of Business and Management, 5, (13), 124–136. Beerli, A., & Martin, J. (2004). Factors influencing destination image. Annals of Tourism Research, 31(3), 657–681. Chiu, W., Zeng S., & Cheng P. (2016). The influence of destination image and tourist satisfaction on tourist loyalty: a case study of Chinese tourists in Korea. International Journal of Culture, Tourism and Hospitality Research, 10(2), 223–234. Coban, S. (2012). The effects of the image of destination on tourist satisfaction and loyalty: The case of Cappadocia. European Journal of Social Sciences, (2) 222–232. Griffin, T., & Dimanche, F. (2017). Urban tourism: the growing role of VFR and immigration. Journal of Tourism Future. 3(2), 103–113. Hanifa, A. (2012). Mengubah kesan kota transit Semarang jadi kota wisata. http://www.republika.co.id/ berita/nasional/jawa-tengah-diy-nasional/12/04/20/m2rnm3-mengubah-kesan-kota-transit-semarang­ jadi-kota-wisata. Kotler, P., & Keller, K.L. (2009). Marketing management (13th ed.). New Jersey: Pearson Education Inc.

Oliver R. (1999). Whence consumer loyalty? Journal of Marketing, 63(4), 33–44.

Page, S.J., & Hall, C. M. (2003). Managing urban tourism. London: Pearson Education.

Prayag, G. (2011). Antecedents of tourist loyalty to Mauritius: the role and influence of destination image,

place attachment, personal involvement, and satisfaction. Journal of Travel Research, 20(10), 1–15. Selby, M. (2004). Understanding urban tourism: image, culture and experience. I.B. Tauris & Co. Ltd: New York. Wang, T. L., Tran, P. T. K., & Tran, V. T. (2017). Destination perceived quality, tourist satisfaction and word-of-mouth. Tourism Review, 72(4), 392–410. Wardhani, A. D. (2012). Evolusi aktual aktivitas urban tourism di kota Bandung dan dampaknya terhadap pembentukan tempat-tempat rekreasi. Jurnal Pembangunan Wilayah dan Kota. 8(4). 371–382. Yeh, S., Chen, C., & Liu Y., 2012. Nostalgic emotion, experiential value, destination image, and place attachment of cultural tourists. In Advances in Hospitality and Leisure, 8, 167–187. Yuksel, A., Yuksel, F., & Billim, Y. (2010). Destination attachment: effects on customer satisfaction and cognitive, affective and conative loyalty. Tourism Management, 31(2), 274–284.

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The liquidity contagion in the ASEAN-5 F.A. Pratiwi & Z. Ananto Universitas Indonesia, Depok, Indonesia

ABSTRACT: This article aimed to analyze the role of liquidity channels in the spread of external shock in ASEAN-5: Indonesia, Malaysia, Singapore, Thailand, and the Philippines. To see the linkage of market liquidity across countries, the authors used Granger causality. Data were divided into four sub-periods (pre-crisis period, crisis period, transition period, and post-crisis period), to implement the causality methodology. The crisis had and impact on the underlying microstructure foundation and can lead to the flight-to-quality phenomenon, where investors move their asset from the risky one to safe and liquid assets. The result showed that there was an increase of cross-market linkage in liquidity channels after the crisis period.

1 INTRODUCTION Financial crisis in various parts of the world can spread rapidly along the increasingly inte­ grated world economy. This is the manifestation of globalization in the financial markets. Globalization forms integrated financial markets where transactions can be done not only within one country but also between countries. In 2008, there was a subprime mortgage crisis in the United States. The impact of subprime mortgages is exacerbated by the long sequence of derivatives based on subprime mortgages, where derivative products are traded on the US financial market, which can also be bought by investors from other countries. This caused the financial crisis in the US to have a significant impact in many countries so that it became the Global Financial Crisis (GFC). The impact of this crisis on Southeast Asian countries that are members of ASEAN is inter­ esting to analyze because of the integration between their countries, especially in the field of trade and investment (Rasiah, Kee, & Doner, 2014). ASEAN was formed in 1967 with five initial members: Indonesia, Malaysia, the Philippines, Singapore and Thailand. The integra­ tion of ASEAN members has been carried out since then covering the fields of security, polit­ ics, and economics. In 1992, the head of ASEAN agreed to the establishment of a free trade area in ASEAN called the ASEAN Free Trade Area (AFTA), with the aim of increasing trade between member countries and also to attract more foreign direct investment (FDI). The strength of integration in financial markets has an important role in the occurrence of spill­ over from a financial shock in one country to another (Smimou & Khallouli, 2016). In addition to influencing the global macroeconomic and banking sector, the GFC also had an impact on the basics of microstructure and differences in liquidity between countries that supported the “wake-up call” hypothesis. This hypothesis states that a financial crisis in one region is a wake-up call for investors in other regions that encourages them to reassess and question the market fundamentals in their region (Goldstein, 1998). With the turmoil in the financial markets due to the crisis, a flight-to-quality effect occurs, in which investors move their capital from risky investments to safer or more liquid invest­ ments due to a large decrease in market liquidity in several related and unrelated markets (Smimou & Khallouli, 2016). Therefore, a decrease in liquidity in large markets can be a sign of a global economic crisis. In this study, the research question is: is there is an increase of cross-market linkage in liquidity channels in the ASEAN region due to the crisis? 170

2 LITERATURE REVIEW A lot of research has examined how the relationship between markets occurs when the transi­ tion is normal (tranquil) and during a crisis period. The 2008 subprime mortgage crisis in the USA had a profound impact on the global financial market, as has been revealed by many researchers. Hwang, In, and Kim (2010) discuss the contagion effect of the 2008 US crisis on international stock markets using the DCC-GARCH model in 38 countries: this study found contagion not only in developing markets, but also in developed countries. A similar thing was found by Boubaker, Jouini, and Lahiani (2016), when they examined the contagion effect between the US stock market and several developed and developing markets using the co-integration and Granger causality test. This research found that in the post-crisis period, instability was detected in developed and developing markets caused by movements in the US stock market. Lee, Tucker, Wang, and Pao (2014) examined how global market sentiment spreads between markets and how interdependence through propaganda changes during the crisis period using the bivariate GARCH model in eight major global markets. They found a long-term equilibrium relationship between market sentiment in the USA and other global markets during the crisis period, and linkages between all major global markets. The relationship between market liquidity and stock returns is explained by Amihud (2002), who shows that, over time, expected market illiquidity positively affects stock returns. This means that the expected return of shares partly represents illiquidity premiums. Friewald, Jankowitsch, and Subrahmanyam (2012) found the economic impact of liquidity to be signifi­ cantly greater in the crisis period for the bond market, especially at speculative grade. Smimou & Khallouli (2016) used liquidity to look at the direction of spillover on the Eurozone stock market during the 2008 global financial crisis, and found persistence of liquidity movements, which supports the argument that financial contagion on the Eurozone market is transmitted through liquidity channels. From the literature above, it can be seen that the US subprime mortgage crisis is a global financial crisis that has spread to all markets in the world. One way to analyze contagion is through liquidity channels.

3 DATA & RESULTS In this study the data used are liquidity ratio data from the five ASEAN countries’ stock mar­ kets. The data is downloaded from the Thomson-Reuters Datastream. The time period used was from August 7, 2005, to April 2, 2013, divided into four periods to document the integra­ tion between markets in ASEAN before the crisis, during the crisis period and the transition period, and after the crisis. The division of time periods is consistent with Wang’s research (2014), namely, the first period lasted from August 7, 2005 – April 2, 2007, which was a precrisis period; the crisis period began August 7, 2007, because at that time the US central bank began to intervene to provide liquidity to the capital market which began falling, and ended on April 2, 2009, when the G20 Summit was held and the global economy began to improve. The post-crisis period will be divided into two parts, namely the transitional period, from 3 April 2009 – 2 April 2011; and the actual post-crisis period, from April 3, 2011 – April 2, 2013. The liquidity ratios used are relative bid–ask spread (RS) and Amihud illiquidity ratio (ILLIQ) with two approaches for each ratio, namely the arithmetic average and the weighted average. In order to get these two ratios, it is necessary to get several data components, such as: ask price, bid price, closing price, and turnover by volume. In the bid–ask spread liquidity measurement with an arithmetic average, it can be seen that causal relationships between ASEAN countries are most evident in the crisis and transition periods and the number of causality relationships on the pre- crisis period is the least com­ pared to the other three periods. In the bid–ask spread liquidity measurement with a weighted average, it can be seen that causal relationships between ASEAN countries are most evident in the post crisis and crisis periods and the number of causality relationships on the pre-crisis period and transition period is least compared to the other three periods. 171

In the Amihud illiquidity measurement with an arithmetic average, it can be seen that causal relationships between ASEAN countries are most evident in the crisis period and the number of causality relationships on the pre-crisis period is least compared to the other three periods. Last, in the bid–ask spread, liquidity measurement with a weighted average, it can be seen that causal relationships between ASEAN countries are most evident in the crisis and transition periods and the number of causality relationships on the pre-crisis period is least compared to the other three periods.

4 CONCLUSION This article aimed to analyze the role of liquidity channels in the spread of external shock in ASEAN-5, namely, Indonesia, Malaysia, Singapore, Thailand, and Philippines. All measure­ ments state that causal relationships between countries in ASEAN-5 are most evident in the crisis period and least found in the pre-crisis period. The result showed that there was an increase of cross-market linkage in liquidity channels during the crisis period. REFERENCES Amihud, Y. (2002). Illiquidity and stock returns: cross-section and time-series effects. Journal of Financial Markets, 5, 31–56. Boubaker, S., Jouini, J., & Lahiani, A. (2016). Financial contagion between the US and selected devel­ oped and emerging countries: The case of the subprime crisis. The Quarterly Review of Economics and Finance, Elsevier, vol. 61(C), 14–28. Friewald, N., Jankowitsch, R., & Subrahmanyam, M.G. (2012). Illiquidity or credit deterioration: a study of liquidity in the US corporate bond market during financial crises. Journal of Financial Economics, 105(1), 18–36. Goldstein, M. (1998). The Asian financial crisis: causes, cures, and systematic implications. Washington DC: Institute for International Economics. Hwang, I., In, F. H., & Kim, T. S. (2010). Contagion effects of the U.S. Subprime Crisis on International Stock Markets. Finance and Corporate Governance Conference 2010 Paper. Lee, Y. H., Tucker, A. L., Wang, D. K., & Pao, H. T. (2014). Global contagion of market sentiment during the US subprime crisis. Global Finance Journal, Elsevier, 25(1), 17–26. Rasiah, R., Kee, C. C., & Doner, R. (2014). Southeast Asia and the Asian and Global Financial Crisis. Journal of Contemporary Asia. doi:10.1080/00472336.2014.933062. Smimou, K., & Khallouli, W. (2016). On the intensity of liquidity spillovers in the Eurozone. Inter­ national Review of Financial Analysis, 48, 388–405. Wang, L. (2014). Who moves East Asian stock markets? The role of the 2007–2009 global financial crisis. Journal of International Financial Markets, Institutions & Money, 28, 182–203.

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The development of marketing channels through social media, e-commerce and instagram promotion standard operating procedures of SMEs X E.K. Prasetyo & S.K. Widhaningrat Master of Management, Universitas Indonesia, Indonesia

ABSTRACT: The development of business strategies, especially in terms of marketing, must continue to be done in order to increase business growth and prevent stagnation. Every business must be able to adapt to the business environment, especially in the current digital era. Without exception, micro, small and medium enterprises (MSMEs) have to continue to develop business in the digital world. This thesis aims to develop marketing channels for MSMEs that have begun to move into the digital world, namely MSMEs X. Decision making and also business coaching research data were obtained through inter­ views, observations, focus group discussions, and mini-surveys to customers and noncustomers of MSMEs X. Through the method of data collection, it was concluded that MSMEs X needs to develop marketing channels through social media and e-commerce with the establishment of standard operating procedure (SOP) promotion on social media.

1 INTRODUCTION The Government of Indonesia has sought to improve the Indonesian people and their economy through the MSME programme (Supriyono, 2014). Law No. 20 of 2009 states that the empowerment of MSMEs aims to create a balanced and fair economy. BAPPE­ NAS (2016) also explained that every year there has been a significant increase; it was seen that MSMEs were able to absorb a workforce of 3.4 million to 9.3 million people from 2010 to 2014. According to BAPPENAS (2016), there are three priority scale MSMEs in Indonesia: scale 1, namely machinery, food and beverage and mining; scale 2, namely textile, wood and others; and scale 3, namely furniture, fabric, ready-made clothing, radio and others. The textile sector, included in the second sector, is classified as an MSME priority in Indo­ nesia, and this sector can be an opportunity for MSMEs engaged in the textile sector, one example of this sector is MSMEs X. MSMEs X is engaged in convection and sells embroidery sash products for graduations, seminars, competitions and other events that have been running for more than four years. As time goes by, the owners of MSMEs X feel that their sales are stagnant because they rely only on selling through the Shopee Marketplace. Based on the results of interviews with the owner of MSMEs X, the owner MSMEs X hopes that MSMEs X can catch up with the social media promotion from competitors outside Shopee. Not only that, the owner wants to develop the promotion of sustainability in other marketing channels through standard operating procedure (SOP) promotion in each new marketing channel. Therefore, this research through business coaching aims to develop SME X marketing channels along with the creation of SOP for the promotion of new marketing channels.

173

2 LITERATURE REVIEW According to Ryan and Jones (2009), several digital marketing tools useful for promotion are as follows: websites, search engine optimization (SEO), pay per click advertising, affili­ ate marketing and strategic partnerships, online public relations, social networking, e-mail marketing and customer relationship management. One form of digital marketing is the social media platform Instagram. According to Hamidi (2017), various features displayed on Instagram are (1) Post, (2) Followers and Following, (3) Response, (4) Explore and (5) Instagram Stories. Hollensen, Kotler and Opresnik (2017) explained that there are much things that can be optimized in terms of Instagram marketing: (1) Optimizing visual appearance such as place­ ment of logos, photos, graphics etc., (2) The composition of the content that appears on Insta­ gram must be harmonious; for example, the solid match of the dominant color, size and other elements, (3) Filter features and the like can be used by users for free to maximize the uploaded content so that it adds brand aesthetics to the content displayed, (4) Photo captions are located below the uploaded content and are able to describe a brand. The most important thing in using captions is the focus on the first three lines of information, (5) The hashtag fea­ ture helps users find similar content that they want to follow, and serves as a feature of con­ necting with new customers and increasing engagement with customers, (6) Marking the desired location is a feature contained in Instagram content, where users can provide informa­ tion about the location of the uploaded photos, images or video, and (7) Instagram has a feature to mark someone in the content, whose content will appear on the profile page that one marks, and which can be seen by followers. According to Austrade (2018), the development of e-commerce in Indonesia is divided into five types of websites, including (1) Online Marketplace B2C, where each seller usually needs a warehouse to store their products, the warehouse being a service of the marketplace, (2) Direct Sales Sites, payments when an item has been sold to end customers, (3) C2C Market­ places, which usually does not have an investment and is usually called a drop shipper, (4) The brand’s own website, which sells only one or a group of brands, and the number of these categories is very small in Indonesia, and (5) Flash sale sites, which has many discounts for users, and where the product does not match imported products. Tokopedia is one of the largest e-commerce platforms in Indonesia specifically for the C2C marketplace and the second-largest e-commerce site, where it receives funding from the Ali­ baba Group (Austrade, 2018). The population of Tokopedia users increases every year; for example, in 2019, it amounted to 90 million active users per month (LPEM FEB UI, 2019). SOPs are needed in promotion using digital marketing. Tambunan (2013) explains the bene­ fits of making SOPs: (1) Policies made will be well standardized, both internally and exter­ nally; for example, laws, (2) They become a standard guideline for companies to carry out operations, (3) They ensure standardization for the use and distribution of forms and docu­ ments, (4) They serve as a reference standardization of administrative systems, documentation and archives, (5) They validate that the established company activity flow will be well stand­ ardized, (6) They ensure the standardization of reporting, control, evaluation and organiza­ tional activities, and (7) They standardize services and external parties’ responses.

3 RESEARCH METHODS The data collection methodology uses qualitative methods through business coaching with pri­ mary data acquired by in-depth interviews, focus group discussion, mini-surveys and observa­ tions, and secondary data acquired by a literature review. The mini-survey is used to determine the selection of respondents to the selection of online marketing channels, and FGDs are carried out for the development of promotional SOPs, especially Instagram at SME X. The data analysis method uses six marketing tools starting from internal and external, busi­ ness model canvas, segmenting targeting positioning analysis, marketing mix analysis, external 174

analysis (namely, five force’s model analysis) and SWOT analysis. After all analysis tools are carried out, a conclusion is made of the problems that exist in each analysis tool for MSMEs, and fixing the problem is carried out as a part of the business coaching process. 4 RESULTS This mini-survey found that 165 respondents in total had passed the screening question, of which 39.6% or 65 people answered that they liked shopping using Tokopedia and 44.8% or 74 people liked shopping using Instagram. Based on the results of interviews and observations at MSMEs X, respondents were chosen to develop the marketing channel. The FGD was conducted to find out the requirements for promotion on both social media platforms. The results of the FGD stated that the promotional SOP is needed more for pro­ motional activities on Instagram. After all marketing analysis tools were used, the results of the Pareto problem were obtained in the Table 1 below: Based on the results of the Pareto analysis above, it can be seen that the development of marketing channels and SOP promotions needs improvement and additions. The development of marketing channels is developed through creating an Instagram account, registering an Instagram business account, registering an Instagram account, creating a Tokopedia account, registering a power merchant and Tokopedia affiliate marketing. To improve promotion through SOPs, this research created SOPs for uploading content on Instagram, an Instagram Editorial Calendar and an SOP for receiving orders and shipping. Table 1. Pareto analysis result of business coaching. No Codification

Value Bobot Contribution Distribution Accumulation

1 2 3 4 5 6 7

9 9 6 5 4 2 1

Development of Marketing Channel SOP Promotion HR Recruitment Product Differentiation Price Reduction SOP Shipping Registration of CV/PT

10 9 5 5 1 1 1

Total

90 81 30 25 4 2 1

38.6 34.8 12.9 10.7 1.7 0.9 0.4

38.6 73.4 86.3 97.0 98.7 99.6 100.0

233

100

1

5 CONCLUSION This business coaching research activity can conclude with the development of marketing channels through Instagram and Tokopedia starting from creating accounts and registering business accounts to promoting these two digital media platforms, as well as creating SOPs for MSMEs X promotion to increase sales and the exposure of MSMEs X itself. The increase in sales is clear evidence that this business coaching activity is able to improve the progress of MSMEs X. REFERENCES Austrade. (2018). E-commerce in Indonesia: A Guide for Australian Business. Australia: Australia Gov­ ernment & Australia Unlimited. BAPPENAS. (2016). Penguatan UMKM untuk Pertumbuhan Ekonomi yang Berkualitas. Jakarta: Warta KUMKM Volume 5-No.1–2016. Hamidi, Fadhlan. (2017). Pemanfaatan Sosial Media sebagai Upaya Meningkatkan Promosi Pada UMKM Bengkel Trijayaban 83. Jakarta. Tesis Universitas Indonesia Fakultas Ekonomi dan Bisnis.

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Hollensen, Kotler, & Opresnik. (2017). Social Media Marketing: A Practitioner Guide, 2nd Ed. Opresnik Management Guides. Ryan, D., & Jones, C. (2009). Understanding Digital Marketing: Marketing Strategies for Engaging the Digital Generation. London and Philadelphia: Kogan Page. Supriyono. (2014). Pemberdayaan Usaha Mikro, Kecil, dan Menengah Sebagai Upaya Peningkatan Pertumbuhan Ekonomi Pedesaan di Masyarakat Kecamatan Manyaran, Kabupaten Wonogiri. Surakarta: Tesis Universitas Sebelas Maret. Tambunan, Rudi. (2013). Standard Operating Procedures (SOP). Maiestas Publishing Jakarta Selatan. Undang-Undang Republik Indonesia. (2009). Usaha Mikro, Kecil, dan Menengah. UU Nomor 20 Tahun 2009.

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The expansion of marketing channel and creating company profile for a wedding photography SME N. Wiridyadewi & H. Suhaimi Department of Economic and Business, University of Indonesia, Indonesia

ABSTRACT: The research aims to increase sales of a wedding photography SME (small and medium-sized enterprise) by expanding its market. Based on the researchers’ observations of the wedding photography SME, the main problems are related to sales. Built in 2016, the wedding photography SME has not had any strategy in running the business, nor a company profile to introduce to customers. As marketing channel, they use word of mouth. The study relates the market development strategy theory based on the quality function deployment to create a wedding photography business with compatible competitive advantage. To gather the data, in-depth interviews and in-depth observations were performed for six months. The results of this study resulted in the expansion of marketing areas in the Jakarta and Depok regions using a company profile to improve business excellence regarding its value proposition.

1 INTRODUCTION One of the obstacles for wedding photography SMEs is the low level of domestic marketing (Kreatif, 2017). The wedding photography SME observed is Sukaseni.studio. In-depth inter­ views revealed that the SME did not have a marketing strategy. This is because the photog­ raphy business sector is fluctuating. Demand is unpredictable; sometimes there are no incoming orders. In addition, the absence of cooperation with other vendors can also explain low sales figures. This is probably caused by a lack of a marketing strategies, since the wed­ ding photography SME only depends on the promotion via Instagram or word of mouth (WOM).

2 LITERATURE REVIEW A company’s growth strategy can be categorized based on the level of company depend­ ence on existing products or new products, dimensions of existing customer targets or mar­ kets, and new targets (Keller, 2013). Market development strategy aims to ensure products currently owned by the company become better known by the new market segmentation by expanding product reach to geographically new areas (Kotler, 2008). Leonard Berry said market development strategy must also be accompanied by relationship marketing. Thus, a company must make an effort to attract new customers and retain them as the first step of the marketing process (Payne, 2000). Relationship marketing activities can include applying effective personal selling practices, namely presenting products to convince cus­ tomers (Antczak & Sypniewska, 2017), by listening to the customer’s voice describe the quality of products owned by an organization (Hwarng & Teo, 2001). This can be trans­ lated in the form of a company profile that serves as a description of the company to be shown to the public (Krisyantono, 2012). As an MSME in the creative field, it is good to show the fun and creative side of the company profile. In this case, Sukaseni.studio adopts three out of five dimensions of corporate visual identity (Elving, 2005), namely 177

distinctiveness, authenticity, and consistency. Sukaseni.studio has a contemporary out­ look: one significant feature of the phenomenon of contemporary art is the use of any aspect related to digital photography (Sabana, 2014).

3 METHODOLOGY This research is a qualitative descriptive study using primary data and in-depth interviews. Primary data is a data source directly taken from the first party and directly provided to the data collector (Sugiyono, 2014). A qualitative descriptive approach focuses on specific units of various phenomena, that enable it to be more than in-depth research, in which the main focus of research is the depth of data (Moleong, 2017). Data collection was performed by using in-depth interviews with informants, including the owner of the wedding photography SME; potential consumers; actual consumers; and promotion experts. Informants were selected using purposive sampling techniques according to their role and relationship to the object of the research. The validity of this research was verified through a triangulation technique carried out continuously during the data collection and analysis process, to the point where there were no more differences in informa­ tion that needed to be confirmed by the informants (Moleong, 2017).

4 RESULTS AND DISCUSSION It is important for Sukaseni.studio to establish cooperative relationships with wedding vendors whose value proposition is in line with the wedding photography SME’s, namely the outdoor concept. After the analysis, it is found there are wedding hall buildings with an out­ door concept located in Jakarta and Depok in accordance with the value proposition of the wedding photography business, as follows: Tabel 1. Marketing channel expansion of wedding photography. Num.

Location

Step 1

Step 2

1

Felfest UI, Depok

approach by meeting

2

Bumi Ka-El Andara, Depok Rumah Kabeda, Depok Taman Kajoe, Jakarta Selatan Griya Karang Tengah AW 100, Jakarta Selatan Buni Manten, Tangerang Selatan

approach by meeting

agreement on cooperation agreement with a revenue-share system (venue) 30:70 agreement on cooperation agreement with a revenue-share system (venue) 20:80

3 4 5 6

approach by email approach by email

The contents of the wedding photography SME company profile can be seen as follows: 1. Company Identity The front-page view of the company profile of Sukaseni.studio looks simple by displaying a picture of flowers and a bow tie to symbolize marriage. A wooden board as the base is placed on a bow tie and the flower symbolizes the tree as part of nature, to highlight the company’s values. 2. Company Vision On the first page of the company profile, there is a picture of a couple with the heads of horses. The vision of the company is on the right side. The horse-headed couple as the back­ ground illustrates the authentic and creative side of photography, taken by the company’s photographer. It shows that taking prewedding photos does not always have to show the 178

beauty of the couple’s face. Creativity can also show the uniqueness of the moment that can always be remembered by the couple, instead. Then, the company’s vision sentence points out that they can act as a one-stop solution for couples who want to capture their moments uniquely and differently; the company will be ready to help start from the process of extract­ ing ideas until the photoshoot takes place. 3. History, Philosophy, and Corporate Culture The second page summarizes the history, philosophy, and culture of the company on one page to avoid client boredom while reading. This page background of the image is a couple sitting opposite a parked Vespa motorbike. The photo shows a cement floor, giving clues that the photo was taken outdoors. In addition, the presence of a parked motorbike also strength­ ens the feeling of an outdoor area. An explanation of the company philosophy is made briefly and is placed on the right page. The company’s philosophy contains a brief history of the com­ pany and its readiness to compete with other photography vendors. The bottom of the page also displays the words “pre-wedding, wedding and post-wedding” which describes the services of photography services. 4. Description of Main Products and Services Offered In the contents, the company profile discusses their products, divided into pre-wedding and wedding photos. On pages 3 and 4, the company profile details their specialty: distinctiveness, consisting of providing pre-wedding, wedding and post-wedding photo services; competitive price; specializing in outdoor photos; taking fun photos; and having a modern end result. Page 5 displays the photos with the wedding theme and page 6 displays the results of prewedding photos. 5. Company Address On the back, the last page of the company profile displays a photo of a couple lying on the grass wrapped in colorful paint on the face to the body. Just like on the first page, this image shows the creative side and authenticity dimension where pre-wedding photo taking is not always fixed on beautiful faces. The most important point on this page is the contacts: What­ sApp numbers, company addresses, email addresses, and Instagram accounts. In the back­ ground, the contact info is white and placed on the left side of the page to make it easily read by customers.

5 CONCLUSION AND RECOMMENDATION As a tool for the marketing channel expansion strategy, an SME needs a company profile to represent their company in personal selling activities to promote their services to vendors and customers. Therefore, a company profile was prepared in accordance with the value propos­ ition of Sukaseni.studio SME, namely specialization in the outdoor area, fun photoshoots, and also creativity. The company profile was also based on the corporate visual identity, namely distinctiveness, authenticity, and consistency. The author’s recommendation for print­ ing the company profile was carried out with the following specifications: A4 paper, 150gr full color matte paper, and hard-copy printing. In addition, the contents of the company profile can be regularly updated, to add value for Sukaseni.studio through the company profile. REFERENCES Antczak, A., & Sypniewska, B. A. (2017). Personal selling in the service sector as one marketing promo­ tional tool. In Cross-Cultural Personal Selling (pp. 35–56): Springer. Elving, W. J. (2005). The role of communication in organisational change. Corporate Communications: An International Journal, 10(2), 129–138. Hwarng, H. B., & Teo, C. (2001). Translating customers’ voices into operations requirements: a QFD application in higher education. International Journal of Quality & Reliability Management. Keller, K. (2013). Strategic brand management: Global edition: Pearson Higher Ed. Kotler, P. (2008). Test Item File [to Accompany] Principles of Marketing, [by] Philip Kotler, Gary Armstrong: Pearson Prentice Hall.

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Kreatif, B. E. (2017). Data Statistik dan Hasil Survei Ekonomi Kreatif. Jakarta: Badan Ekonomi Kreatif. Krisyantono, R. (2012). Public relations & crisis management. Jakarta: Kencana prenada media group. Moleong, L. J. (2017). Metode Penelitian Kualitatif, cetakan ke-36, Bandung: PT. Remaja Rosdakarya Offset. Payne, A. (2000). The essence of service marketing Pemasaran Jasa. Penerbit Andi. Yogyakarta. Sabana, S. (2014). Perspektif seni. Penerbit Garasi. Sugiyono. (2014). Metode penelitian pendidikan:(pendekatan kuantitatif, kualitatif dan R & D): Alfabeta.

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The effect of online promotion and travel motivation on intention to travel to ecotourism destinations in Indonesia: The role of destination image as a mediating variable S.F. Mulianto, H. Semuel & S. Wijaya Faculty of Business and Economics, Petra Christian University, Surabaya, Indonesia

ABSTRACT: Ecotourism is special interest tourism that the Indonesian government has developed and promoted as a means to attract more responsible tourists to visit the country. Promotion strategy has been undertaken using offline and online platforms to enhance the image of Indonesia as a worth-taking eco-tourism destination in the world. This study aimed to examine the effect of online promotion through various digital platforms, which play as an external stimulus, and travel motivation as an internal tourist’s driver on tourists’ destination image and travel intention to eco-tourism destinations in Indonesia. A survey was completed to 319 respondents who would like to travel to any eco-tourism destinations in Indonesia. The results showed that both online promotion and travel motivation directly affect tourists’ inten­ tion to visit eco-tourism destinations in Indonesia. Meanwhile, the image held in tourists’ minds about the destination had played as a significant mediating variable of the roles of online promotion and motivation in influencing tourists’ travel intention. 1 INTRODUCTION In recent years, sustainability has become one of the major foci when developing tourism in destinations. According to Weaver (2001), sustainable tourism and eco-tourism concept is viewed as persevering the natural environment and community, increasing welfare, as well as providing education to local communities. Eco-tourism is a form of responsible travel to natural areas that conserves the environment, sustains the well-being of the local people, and incorporates interpretation and education (Lai, 2013). The change in tourism trends from general tourism to nature tourism can be used to educate tourist about the importance of protecting and respecting nature, as well as Indonesian culture. With its rich natural biodiversity, Indonesia has played an important role in the world’s environ­ mental conservation (Ramjdal, 2018). Eco-tourism, therefore, is special interest tourism that the Indonesian government has developed and promoted as a means to attract more responsible tourists to visit the country. Promotion strategy has been undertaken using both offline and online platforms to enhance the image of Indonesia as a worth-taking eco-tourism destination in the world. Indonesia’s tourism has been promoted online by the Indonesian government to overseas tourist with its website of Wonderful Indonesia since 2011 (Mandiri, 2016). Donohoe and Needham (2008) argue that online promotion is the most important marketing tool replacing traditional methods. Specifically, online promotion through social media can be seen through Instagram, Facebook, and other social networks (Chu & Luckanavani, 2018). The online promotion offers convenience to tourists for obtaining information before travel decision they would make (Lai & Vinh, 2013). Past studies have shown that destination image is often found to be an intermediary factor to explain the effect of using social media on the intention to travel (Baloglu, 2000). Besides the image of a destination that is held in the tourist mind, intention to travel can also be influenced by travel motivation (Chetthamrongchai, 2017; Chu & Luck­ anavani, 2018; Zhong, 2012). On this basis, this study aimed to determine the effect of online 181

promotion and travel motivation, both directly and through the mediation of the destination image and intention to travel to eco-tourism destinations in Indonesia. 2 LITERATURE Before tourists visit a destination, they would collect information about a destination from various sources of information, both offline and online (Chu & Luckanavani, 2018). Litera­ ture has consistently shown that online promotion has a significant influence on potential tourists’ destination preferences and travel intentions (Lai & Vinh, 2013; So & Morisson, 2003; Tsai et al., 2017). It offers a more convenient and more comfortable way for tourists to gather information needed by tourists about the destination they want to visit and influence travel intentions. Based on the above discussion, the following hypothesis was proposed: Hypothesis 1: online promotion has a positive and significant influence on the intention to travel Travel motivation is an essential factor that influences the intention to travel (Chu & Luckanavanich, 2018; Chetthamrongchai, 2017; Zhong, 2012). There are two classifica­ tions of travel motivation. First, social-psychological motivation is related to the psycho­ logical status of individuals. Second, cultural motivation is more directed to the destination (Baloglu, 2000). According to Crompton (1979), social-psychological motives items are escaping from a perceived mundane environment, exploration and evaluation of self, relaxation, prestige, regression, enhancement of kinship relationships, facilitation of social interaction. Cultural motives items are novelty and education. Previous research has revealed that travel motivation consistently had a significant effect on travel intentions (Chu & Luckanavanich, 2018; Jang et al., 2009; Zhong, 2012). On this basis, the second hypothesis is formulated: Hypothesis 2: travel motivation has a positive and significant influence on the intention to travel Destination image is someone’s belief, ideas, and impression about destination (Crompton, 1979). Destination image is an important element that influences intention to travel and is often seen as an intermediary between intention to travel with online promotion and travel motivation (Baloglu, 2000; Chen & Tsai, 2007). Destination image can be divided into two: cognitive image, that is viewed as a set of evaluation that someone remembers when thinking about a destination; and affective image, that is defined as feelings or emotions that is owned by someone about a destination (Agapito et al., 2013). Destination image is an important factor that drives travel intention. It is a tendency felt by tourist to visit a destination within a particular period (Woodside & Lysonski, 1989). Previous research has consistently shown a significant effect of travel motivation on travel intention through the mediation of the des­ tination image. Based on the preceding discussion, the following hypotheses are formulated as follows: Hypothesis 3: destination image mediates the effect of online promotion on the intention to travel Hypothesis 3a: cognitive image mediates the effect of online promotion on the intention to travel Hypothesis 3b: affective image mediates the effect of online promotion on the intention to travel Hypothesis 4: destination image mediates the effect of travel motivation on the intention to travel Hypothesis 4a: cognitive image mediates the effect of travel motivation on the intention to travel Hypothesis 4b: affective image mediates the effect of travel motivation on the intention to travel Hypothesis 5: destination image has a significant and positive effect on the intention to travel Hypothesis 5a: cognitive image has a significant and positive effect on the intention to travel Hypothesis 5b: affective image has a significant and positive effect on the intention to travel 182

3 METHODOLOGY A questionnaire-based survey was completed to tourists who would travel to any eco-tourism destinations in Indonesia. A pilot study was undertaken before the survey to ensure that all measurement items were valid and reliable. Applying a purposive sampling technique, a total of 348 questionnaires had been distributed, and out of the total, 319 questionnaires were used. Prior to data analysis employing the above-mentioned statistical techniques, the data-cleaning process was accomplished to test the normality and possible outliers.

4 RESULT 4.1 Findings of participants Among the 319 participants, 61.1% were female, and 38.9% were male. Half of the partici­ pants were between 22 and 26 years old (50.5%). Two major groups of university students and employees were dominating at about 62.7% of total participants. In terms of the travel charac­ teristics, the majority of participants often travel with their family (52.7%), spent 3 to 6 hours per day on the internet (49.5%). The most often online platform that is referred to for seeing the information was Instagram (43.3%), Youtube (21.3%), and Trip Advisor (15%). The top three popular eco-tourism destinations in Indonesia among respondents were Mount Bromo (East Java), Komodo National Park (NTT) and Nusa Penida Island (Bali). 4.2 Hypotheses finding and other findings In order to assess the research model and test the proposed hypotheses, PLS path analysis was employed. The PLS path model analysis illustrates that all measures met the commonly accepted threshold for assessing the reliability and validity of the constructs. Figure 1 demon­ strates the outcome of the structural model test. It shows that the intention to travel to eco­ tourism destination is determined by online promotion and destination image. Travel motiv­ ation also encourages tourists to have an intention to travel to eco-tourism destinations by being mediated by the image held in tourists’ minds about the destination they would like to visit. Based on the PLS bootstrap results, all hypotheses were accepted except hypothesis 2, that is, there is travel motivation did not have a significant influence on intention to travel to eco-tourism destination (t-values = 1.593 < t-table = 1.96).

Figure 1.

Path diagram of the research model.

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5 DISCUSSION AND SUGGESTIONS 5.1 Discussion This study revealed that the more online promotions that are carried out, the higher intention to travel that are owned by tourists because online promotion is the effective tool in driving tourists have the intention to travel to eco-tourism destinations. In addition, the more online promotion conducted by eco-tourism destinations will make tourists have a good destination image and increase the intention to travel. Positive destination image owned by tourists will encourage travel motivation. The most appealing result revealed in this study is that travel motivation does not affect the intention of traveling. That is, having the motivation to travel alone is not enough to push tourists having the intention of travelling to eco-tourism destin­ ations, especially when visiting eco-tourism destinations that are less popular among the tour­ ists. In this situation, tourists need a good image of the destination where the image of this destination can be obtained through online promotions carried out by eco-tourism destin­ ations in Indonesia. 5.2 Suggestions Government and relevant tourism authorities, both local and national need to enhance their efforts to promote eco-tourism destinations because there is a possibility that tourists are not familiar yet with eco-tourism destinations in Indonesia. Provision of information on the website and social media still needs to be improved, such as paying more attention to the informa­ tion provided to make it more accurate and complete. The examined variables in this current research can be adopted for future research in different types of special interest tourism devel­ oped in Indonesia or other geographical regions. Further study could be undertaken by including travel constraints and travel perceived risk variables in the measurement since these two variables could also determine travel intentions. REFERENCES Agapito, D., Valle, P., & Mendes, J. 2013. The cognitive-affective-conative model of destination image. Journal of Travel & Tourism Marketing 30(5), 471–481. Baloglu, S. 2000. A path analytic model of visitation intention involving information sources, socio-psychological motivations, and destination image. Journal of Travel & Tourism Marketing 8(3), 81–90. Chen, C. F., & Tsai, D. 2007. How destination image and evaluative factors affect behavioral intentions. Tourism Management, 28(4), 1115–1122. Chetthamrongchai, P. 2017. The influence of travel motivation, information sources and tourism crisis on tourists’ destination image. Journal of Tourism Hospitality, 6(2), 1–6. Chu, C. P., & Luckanavani, S. 2018. The influence of social media use and travel motivation on the per­ ceived destination image and travel intention to taiwan of the Thai people. International Journal of Arts and Commerce, 7(3), 22–36. Crompton, J. L. 1979. Motivations for pleasure vacations. Annals of Tourism Research 6(4): 408–424. Donohoe, H. M., & Needham, R. D. (2008). Internet-based eco-tourism marketing: Evaluating Canadian sensitivity to eco-tourism tenets. Journal of Ecotourism, 7(1), 15–43. Jang et al. 2009. Affect, travel motivation, and travel intention: A senior market. Journal of Hospitality & Tourism Research, 33(1), 51–73. Lai, W. H., & Vinh, N. Q. 2013. Online promotion and its influence on destination awareness and loyalty in the tourism industry. Journal Advances in Management & Applied Economics, 3(3), 15–30. Mandiri, A. (2016). Tourism promotion through Wonderful Indonesia. Retrieved March, 9th 2019 from https://www.suara.com/lifestyle/2016/04/02/194548/promosi-pariwisata-melalui-wonderful-indonesia. Ramdjal, M. 2018. Rural tourism and eco-tourism + community based tourism approach. Retrieved April, 19th 2019 from https://www.kompasiana.com/masrura/5bf337ae43322f231d185b93/desa-wisata­ pendekatan-pengembangan-berbasis-partisipasi-community-based-tourism?page=all# So, A. & Morrison, A. M. 2003. Destination marketing organizations’ website users and nonusers: A comparison of actual visits and revisit intentions. Journal Information Technology & Tourism, 6, 129–139.

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Tsai, Y. C., Chu, C. M., & Kobori, K. 2017. The influence of video clips on travel intention and destin­ ation image. International Journal of Arts and Commerce, 6(1), 37–55. Weaver D.B. 2001. Eco-tourism as mass tourism: Contradiction or reality? Cornell Hotel and Restaurant Administration Quarterly, 42(2), 104–112. Zhong. C. 2012. A structural analysis of the motivation, familiarity, constraints, image, and travel inten­ tion of Chinese non-visitors to Thailand. Retrieved March, 15th 2019 from http://www.assumptionjour nal.au.edu/index.php/AU-GSB/article/view/478

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Forming a financial statement of a construction company PT DMP D.A. Rachma & F. Ismaeni University of Indonesia, Jakarta, Indonesia

ABSTRACT: PT DMP is a small contractor in the transition phase to be a medium contrac­ tor. It has issues of cash- and organizational management which impact its capability to scale up to be a medium contractor. Therefore, based on an intensive interview with the business owner, and direct interaction with the company, the coach analyzes the company using internal and external business tools, mapping the existing, ideal, and GAP conditions of the company,and formulating solutions based on PARETO analysis. The business coaching pro­ cess will take 6–8 months. The goal of this coaching activity is to form a financial statement for this company.

1 INTRODUCTION The year 2018 has been interesting for the construction services industry in Indonesia. BPS recorded 0.06% increase on construction sector; that is, up to 451.3 billion rupiah worth of construction projects. On the other hand, GAPENSI (Association of Indonesian National Construction Executors) states, its membership has shrunk sharply, to 7,000 members from 35,000 members in 2018. This number represents small and medium contractors. Critical internal factors impacting contractor competitiveness in Indonesia are quality management systems (SMM), and cost measurement and controlling systems (Fansrullah, et al., 2008). PT DMP was founded by Mr. P in 2004. It was classified as a small contractor (K2) until 2015, when it took a big leap to be a medium contractor (M2), by completing its highest-value project of 60 billion IDR and followed by projects worth 40 billion IDR in 2016. These pro­ jects were undertaken with a partner contractor using a KSO contract – 50–50 capital, assets, and work responsibilities. Despite completing large-scale projects, the firm’s total assets didn’t increase significantly.

2 LITERATURE REVIEW 2.1 Accounting cycle The accounting cycle is a process of documenting financial transactiona, with a determined time period, which begins and ends with the same six steps systematically: analyze transaction, journalize original entries, post journal entries to ledger, adjust entries, close entries, and prepare financial statement (Anthony et al., 2012). 2.2 Financial statement A complete financial statement consists of five statements: Statement of Profit and Loss, Statement of Financial Position, Statement of Cashflow, Statement of Changes in Equity, and Notes of financial statement. These statements give a complete and actual picture of a company’s financial condition. Furthermore, the complete financial statement helps man­ agement make precise decisions for the company from a financial point of view (Ross et al., 2016). 186

3 RESEARCH METHODOLOGY Business coaching started with data collection, through an in-depth interview with the busi­ ness owner, and analysis of the company’s physical documents (company’s transaction jour­ nal, project contracts, and other supportive documents). Next, the coach analyzed the company’s condition using ten business tools: BMC, PESTEL, Porter’s 5 Forces, Business Process, STP, 7P Marketing Mix, VRIO, 7S Mc Kinsey, Porter’s Value Chain Analysis, and SWOT & TOWS. Further, the coach mapped the existing, ideal, and GAP conditions of the company, and formulated solutions based on PARETO analysis. The solutions were then implemented by the company for 5.5 months. The entire business-coaching process took up to effectively 8 months to complete.

4 RESULT 4.1 In-depth interview From the interview, the coach understoods the company’s history, gerenal condition, and the business owner’s vision for the company. Mr. P hoped that PT DMP could to participate in open tender without KSO contracts and wanted to see his company become sustainable and develope into one of Indonesia’s big-scale contractors (B1/B2). 4.2 Physical documents The coach found out that many essential documents are not yet standardized. This causes con­ fusion for the head office staff who are still inexperienced. The company transaction journal still uses simple MS Excel files that and not synchronized with each other. 4.3 PARETO & GAP analysis Using the business tools, the coach found that transaction records of the previous two big pro­ jects were only done by the contractor partner, which explained the reason PT DMP’s staff were still not accustomed to big-project transactions. The accounting and administrative staff in the head office only worked under Mr. P’s direct instructions, and only recording minor project transactions. Based on PARETO analysis, the coach suggested the company form an SOP for project transactions and producing the financial statement. The suggestion was approved by the company, however, this article will only discuss the financial statement.

5 IMPLICATION Until now, from six full cycles, PT DMP only has done two of the steps of the accounting cycle (journalling). Business coaching helped PT DMP to complete the accounting cycle, which is producing the financial statement. Forming a financial statement through business coaching was done in four steps: preparation, training, trial balancing, and producing the financial statement. Preparation started with a focused group discussion (FGD) with the accounting staff: which parts of the existing accounting practice needed to be improved? Next, coach and coa­ chee managed the administrative/supporting documents: standardizing, and making essential forms. Next, the coach chose the most suitable accounting application for the company (Quickbooks, Inc.). Lastly, the coach formed an accounting SOP for accounting staff. After the preparation was done, the coach trained the accounting staff, including training using accounting applications, working according to the SOP, and the whole accounting pro­ cess. The next important step was trial balancing, done to recheck whether the accounting 187

process really matches the actual balance of the company’s banks. Lastly, PT DMP account­ ing staff produced a proper statement of profit/loss, and a statement of financial position. At the last session of business coaching, the coach also explained a simple financial ratio to the business owner, and how to read the statement of profit/loss and the statement of financial position. This allows the business owner to perform simple cash- and financial management.

6 CONCLUSION Like SMEs in general, PT DMP initially does not have company financial statements. PT DMP records its transactions using simple MS Excel files, not synchronized with each other, and still mixed with the business owner’s personal expenses, making company profit unclear. Through business coaching, accounting staff of PT DMP were trained to complete the accounting cycle and produce a proper financial statement. By having a financial statement, PT DMP will be able to participate in an open tender without KSO contracts, and report the company’s tax without hiring a tax consultant. On top of that, business owner will be able to know the company’s real profit and the company can properly perform cash- and financial management. REFERENCES Anthony et al. (2012). Accounting: Text and Cases. United States: McGraw-Hill Companies, Inc. M Fanshurullah. (2009). Faktor-faktor kritis dalam Sistem Manajemen Mutu untuk Meningkatkan Prof­ itabilitas dan Daya Saing Jasa Konstruksi yang Memberikan Nilai Tambah pada Gross Domestic Product Sektor Konstruksi Indonesia. Disertasi. Fakultas Teknik Universitas Indonesia: Depok. Ross, Westerfield, Jaffe, & Jordan. (2016). Corporate Finance, 11th edition. New York: McGraw-Hill Education.

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Can negative news moderate your intention to vote? A. Humairoh & N. Sobari Magister Management, Universitas Indonesia, Indonesia

ABSTRACT: Negative media coverage can be the source of a negative campaign that can influence the public’s intention to vote. This study aims to examine the role of nega­ tive news in moderating party identification, political trust, political interest, and govern­ ment performance on intention to vote. This study’s subject is the impact of negative news toward incumbent governors on the election of the DKI Jakarta’s Governor in 2022. The method used for this study is the structural equation model (SEM) with mod­ eration variable. Results show that political interest doesn’t have any significant relation­ ship with intention to vote. On the other side, the other three variables proved to positively influence intention to vote. Meanwhile, negative news is proved to weaken the relationship between political trust and intention to vote incumbent but not in others. In conclusion, negative news is somehow still ineffective in weakening one’s intention to vote for incumbent.

1 INTRODUCTION On October 16, 2017, Anies Baswedan and Sandiaga Uno were officially inaugurated as governors of DKI Jakarta for the 2017–2022 period. The DKI Jakarta Election in 2017 is still remembered not only by citizens of DKI Jakarta but also by the people of Indo­ nesia. As of October 16, 2019, it’s been two years since Anies Baswedan led DKI Jakarta. During these two years in office, every policy he issued was a hot topic in the media. One factor that play an essential role in influencing perceptions and decisions in both eco­ nomic and political contexts is the media (Dewenter, Linder, & Thomas, 2018). However, Dewenter et al. (2018) explain that the media can never depict the real reality and only describe a small part of the phenomenon that exists. The inability of the media to be unbiased is called the media bias (Entman, 2007). Individuals do not always make rational choices. Sometimes intention to vote has already been influenced by other factors. The first factor can be someone’s party identi­ fication (a long-term affect), which then becomes part of one’s psychological identifica­ tion with one social party (Dalton, 2016). Another factor that can influence intention to vote is level of trust in the political system or commonly known as political trust. A person’s interest in politics can also be a factor that influences one’s intention to vote and is known as political interest. Satisfaction with what can be called government per­ formance can also be one of the factors that influence intention to vote (Fan & Lu, 2009). The current research focuses on the moderation of negative news in the relationship between party identification, political trust, political interest, and government performance and intention to vote. This research will combine several existing studies with the aim to pro­ duce a better model. The study was conducted by distributing online questionnaires to 211 people of DKI Jakarta. The study was conducted in the period after the 2017 DKI Jakarta governor election and before the 2022 DKI Jakarta governor election in hopes of describing the actual conditions that occurred. 189

2 LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT Party identification is an affective and long-term psychological identification with a social party (Dalton, 2016). These partisans already have a firm ideology and people who already identify with one party will tend to support candidates who come from the same party (Bank­ ert, Huddy, & Rosema, 2017). The positive relationship between party identification and intention to vote has been proven by research by Dassonneville (2012) and Voogd, van der Meer, & van der Brug (2019). H1: Party identification has a positive influence on intention to vote incumbent. Political trust is one’s expectation of how politicians and government should be fair, equal, honest, efficient, and responsive to the needs of the community (Listhaug, 1995). Political trust arises between principal and agent, where the agent is the politician chosen by the com­ munity (Levi & Stoker, 2000). Dassonneville (2012) and Voogd et al. (2019) have examined that these two variables have a positive relationship. H2: Political trust has a positive influence on intention to vote incumbent. Political interest is an intrinsic motivation that a person pay attention to and get involved in politics, not because of external causes but for personal fulfillment (Shehata & Amnå, 2019). Political interest is vital because it can be the most critical indicator to predict political behav­ ior that can drive a democratic system. The positive relationship between these two variables is proven by Dewenter et al. (2018) and Hillygus (2005). H3: Political interest has a positive influence on intention to vote incumbent. Government performance is voter satisfaction with government performance (Fan & Lu, 2009). When government performance is excellent, voter behaviour will be positively affected. The positive influence of government performance on intention to vote has been proven by research by Dewenter et al. (2018) and Ribes-Giner & Fuentes-Blasco (2014). H4: Government performance has a positive influence on intention to vote incumbent. One factor that plays an essential role in influencing perceptions and decisions in both eco­ nomic and political contexts is the media (Dewenter et al., 2018). Therefore, media coverage has the role of moderating the relationship of factors that influence intention to vote. Media coverage as a variable that moderates intention to vote has been proven in the research of Abdel Rahman Farrag & Shamma (2014), while the negative news context is evident from the study of Hamelin, Mandrekar, & Harcar (2019). H5a: Negative news will weaken the positive influence of party identification on intention to vote incumbent. H5b: Negative news will weaken the positive influence of political trust on intention to vote incumbent. H5c: Negative news will weaken the positive influence of political interest on intention to vote incumbent. H5d: Negative news will weaken the positive influence of government performance on the intention to vote incumbent. When discussing voting behaviour, the main question that arises is not who wins, but rather why do voters choose these politicians? (Smith & Clark, 2005). In the context of intention to vote incumbent, intention refers to a person’s future behavior in anticipating or planning to vote incumbent in the coming period (Morar, Venter, & Chuchu, 2015). 3 RESEARCH METHOD This study uses primary data, obtained via survey methods using an online questionnaire as a distribution tool. Data were collected in October to residents of DKI Jakarta KTP who had 190

the right to vote in the 2017 governor election. A total of 211 respondents were obtained through the distribution of this questionnaire. The model used in the study involved seven variables used to see the effect of party identification, political trust, political interest, and government performance on intention to vote incumbent using negative news as a moderation variable. This research model is an adaptation of four previous studies conducted by Dewenter et al. (2018); Voogd et al. (2019); Ribes-Giner & Fuentes-Blasco (2014); and Hamelin et al. (2019).

4 RESULTS Based on the results of data processing, it appears that the t-values in the direct rela­ tionship of variables have values above 1.645. It means that party identification, political trust, and government performance variables have a significant positive relationship with intention to vote incumbent (H1, H2, and H4 are accepted). However, the relationship between political interest with the intention to vote the incumbent is below the critical values of 1.645, which means H3 is rejected. For the moderating relationship with the weakening hypothesis, the critical values are below 1.645, which only happens in H5b. This means that negative news as a moderating variable only significantly weakens the relationship between political trust and intention to vote incumbent. H5a, H5c, and H5d have t-values above the critical values, so the hypotheses are rejected. This means that negative news is not proven to significantly weaken the relationship between party iden­ tification, political trust, and government performance variables with the intention to vote incumbent.

5 DISCUSSION DKI Jakarta 2017 governor election is an election that still has a big impact for the people of DKI Jakarta but also for Indonesia as a whole. As a result, after two years serving as gov­ ernor of DKI Jakarta, all the movements and policies that Anies Baswedan makes become hot topics in the media. Therefore, with the flow of news that often corners Anies, it is inter­ esting to study the intention to re-elect the incumbent governor if Anies returns to run for the Jakarta governor election in 2022. The intention to re-elect the incumbent, Anies Baswedan, can be triggered by various factors. Based on the results of the study, it is known that party identification, political trust, and government performance are factors that can encourage one’s intention to vote incumbent. The sense of pride that will emerge when returning Anies as DKI Jakarta governor in 2022 is a significant factor for people who want to re-elect Anies, while political interest cannot influence the intention to vote incumbent. In addition, research also found that negative news cannot affect the relationship of party identifica­ tion, political interest, and government performance with the intention to vote incum­ bent but can weaken the relationship of political trust with the intention to vote incumbent. The more significant party identification is for someone, the more it will lead to an increased sense of pride for having incumbent in 2022. This is because party identification is a factor that can encourage intention to vote incumbent. The existence of negative news that often corners Anies becomes something that incumbent does not need to worry is weakening this relationship. Another factor that must be considered as a factor that can encourage intention to vote incumbent is political trust: the influence of political trust weakens when negative news appears. Therefore, the incumbent governor needs to pay attention to the impact that might arise from negative news on the political trust factor. At a time when the election period is still far away, incumbent governors no need to worry about the impact of one’s political interest. In a period far from the electoral 191

period, the general public tends not to have an interest in political issues that can influ­ ence the intention to vote incumbent. Therefore, the impact of negative news on this rela­ tionship is also not shown. The last factor that has also been proven to influence intention to vote incumbent is the government’s performance. The public will reward a competent incumbent’s per­ formance in the form of re-election. But negative news has not been proven to weaken the relationship between government performance and intention to vote incumbent. This is because the policy that was reported negatively cannot be directly perceived by the people, so, it cannot be part of the performance appraisal of the incumbent gov­ ernor and cannot affect intention to vote for the incumbent.

6 CONCLUSION Based on the results of the study, it can be concluded that party identification, political trust, and government performance have a significant positive relationship on intention to vote incumbent, but the relationship of political interest with intention to vote incumbent has not been proven to be significant. Negative news is shown to weaken the relationship between pol­ itical trust with the intention to vote incumbent, but it has not been proven significant in weakening the relationship between party identification, political interest, and government performance with intention to vote incumbent. Therefore, if the challenger wants to use nega­ tive news as one of his campaign efforts, then the effective part to be attacked is the political trust of the citizen, decreasing the intention to vote incumbent. REFERENCES Abdel Rahman Farrag, D., & Shamma, H. (2014). Factors influencing voting intentions for Egyptian parliament elections 2011. Journal of Islamic Marketing, 5(1), 49–70. https://doi.org/10.1108/JIMA-01­ 2013-0003 Bankert, A., Huddy, L., & Rosema, M. (2017). Measuring partisanship as a social identity in multi-party systems. Political Behavior, 39(1), 103–132. https://doi.org/10.1007/s11109-016-9349-5 Dalton, R. J. (2016). Party identification and its implications. In Oxford Research Encyclopedia of Polit­ ics. Oxford University Press. https://doi.org/10.1093/acrefore/9780190228637.013.72 Dassonneville, R. (2012). Electoral volatility, political sophistication, trust and efficacy: A study on changes in voter preferences during the Belgian regional elections of 2009. Acta Politica, 47(1), 18–41. https://doi.org/10.1057/ap.2011.19 Dewenter, R., Linder, M., & Thomas, T. (2018). Can media drive the electorate? The impact of media coverage on voting intentions. European Journal of Political Economy, 58, 245–261. https://doi.org/ 10.1016/j.ejpoleco.2018.12.003 Entman, R. M. (2007). Framing bias: Media in the distribution of power. Journal of Communication, 57(1), 163–173. https://doi.org/10.1111/j.1460-2466.2006.00336.x Fan, W.-S., & Lu, C.-C. (2009). An exploratory study of the impact of campaign marketing strategy on voting behavior: A contingency approach. Journal of Information and Optimization Science, 30(3), 397–415. https://doi.org/10.1080/02522667.2009.10699886 Hamelin, N., Mandrekar, K., & Harcar, T. (2019). Negative marketing in political campaigns and its effect on the voting decision of the Indian Millennial. Eurasian Journal of Business and Economics, 12(23), 1–15. https://doi.org/10.17015/ejbe.2019.023.01 Hillygus, D. S. (2005). Campaign effects and the dynamics of turnout intention in election 2000. Journal of Politics, 67(1), 50–68. https://doi.org/10.1111/j.1468-2508.2005.00307.x Levi, M., & Stoker, L. (2000). Political trust and trustworthiness. Annual Review of Political Science, 3(1), 475–507. Listhaug, O. (1995). The dynamics of trust in politicians. In Citizens and the State (Klingemann, pp. 261–297). New York: Oxford University Press. https://doi.org/10.1093/ 0198294735.003.0009 Morar, A., Venter, M., & Chuchu, T. (2015). To vote or not to vote: Marketing factors Influencing the voting intention of University Students in Johannesburg. Journal of Economics and Behavioral Studies, 7(6), 81–93.

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Ribes-Giner, G., & Fuentes-Blasco, M. (2014). Influence of candidate qualities and previous president performance in voting intentions. International Journal of Computer Mathematics, 91(2), 261–268. https://doi.org/10.1080/00207160.2013.765949 Shehata, A., & Amnå, E. (2019). The development of political interest among adolescents: A communication mediation approach using five waves of panel data. Communication Research, 46(8), 1055–1077. https://doi.org/10.1177/0093650217714360 Smith, A. D., & Clark, J. S. (2005). Revolutionizing the voting process through online strategies. Online Information Review, 29(5), 513–530. Voogd, R., van der Meer, T., & van der Brug, W. (2019). Political trust as a determinant of volatile vote intentions: Separating within- from between-person effects. International Journal of Public Opinion Research. https://doi.org/10.1093/ijpor/edy029

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Use case points integrated to scrum framework for software development cost and effort estimations L.N. Safitri Department of Technology Management, Sepuluh Nopember Institute of Technology, Surabaya, Indonesia

M.I. Irawan Faculty of Mathematics, Computing and Data Science, Sepuluh Nopember Institute of Technology, Surabaya, Indonesia

ABSTRACT: Effort and cost management are important factors that determine the success of a software development project. Effort-based cost estimation has to be transparent and accountable. Use Case Points provides a method of measuring effort using object-oriented programming. In Indonesia, Agile-Scrum as development framework and object-oriented pro­ gramming as programming method have been widely used. Sometimes, projects have experi­ enced a setback due to the time extension of software development from the initial planned timeline. Use Case Points integrated with a Scrum framework has been used to calculate effort estimation. Use Case Points is not only about how many features or use cases should be in development, but also the size of the software and how it takes effect in terms of timeline, effort, and cost. Application of Use Case Points integrated with a Scrum framework to calcu­ late cost estimation is something new. This research demonstrates how Use Case Points inte­ grated with a Scrum framework can be used to calculate the cost estimation of software development. The results of this research have proven that the UCP can be applied in Scrum and be able to decrease the gap between expectation and reality cost of software development.

1 INTRODUCTION Every year, the amount spent for information technology is increasing. According to the Inter­ national Data Center (IDC) of Indonesia, expenses for information technology and communi­ cation (ITC) in 2016 was predicted to increase for 8.3% (about Rp 197.4 trillion) (Dewi, Prassida, Sholiq, & Subriadi, 2016). McKinsey also stated that reasons of information tech­ nology project failure, especially in the software development, are 66% caused by exceeded limit budget, 33% caused by overtime work, and 17% caused by the less usefulness of the pro­ ject itself (Dewi et al., 2016). Furthermore, project management has to consider three aspects; namely, scope, time, and cost, in order for the project to succeed (Schwalbe, 2014). Cost estimation is a process that predicts the effort needed to develop a software (Fan & Leung, 2009). For example, software development projects cam experience a setback due to the time extension of software develop­ ment from the initial planned timeline. Inadequate estimation of the time rewuired for project completion of software development is the problem. This timeline extension results in the significant increases of software development cost. Use Case Points (UCP) is a method that can be used as a measuring instrument for calculat­ ing software development effort. This calculation will be used for calculating the development cost. UCP becomes more popular for calculating cost and effort estimation of software devel­ opment, as proven by the good responses of many UCP studies. These studies include the facts that: (i) UCP is better than experts’ expectation, in which the UCP error (19%) is smaller than experts error (20%); (ii) UCP error is about 9% when it is tested on around 200 software 194

development projects; and (iii) UCP error is only 6.89% when tested on small to medium soft­ ware development projects (Dewi, Prassida, Sholiq, & Subriadi, 2016). According to Yuliansyah, Qudsiah, Zahrotun, & Arfiani (2018) and Kang, Choi, & Baik (2010), Use Case Points has been proven as an instrument of software development effort esti­ mation by the Agile-scrum framework using Story Point. Many estimation methods have been applied in Agile development, although most of these methods do not produce good pre­ dictive accuracy. However, Story Point and Use Case Points are techniques that approach software specification requirements such as User Stories and Use Cases. This specification is the most commonly used. Based on Yuliansyah et al. (2018), Story Point is a method that has been widely implemented in the scrum framework without Use Case Points. Therefore, the novelty of this study is how to apply the Use Case Points to the scrum framework. This is an improvement to utilize effort estimation as well as cost estimation in software development projects.

2 RESEARCH METHODOLOGY Based on Figure 1, this research begins with searching related literature, then the data. The data used here is qualitative data obtained from interviews needed for the process of making the User Story and Use Case. Meanwhile, the quantitative data is obtained from the technical questionnaire and environment complexity factor assessment sheet. The assessment sheet is distributed to respondents on the development team, namely, project manager/team leader, product owner/business analyst, back end developer, front end developer, system analyst and quality assurance. Next, in the analysis data section, Use Case Points are used. In the Use Case Points method, several components that are needed. The following is an explanation of each components: 1. Unadjusted Actor Weights (UAW). The actor types are classified into three categories, namely, Simple (interacts through API), Average (interacts through protocol) and Com­ plex (interacts through GUI or web).

Figure 1.

Research methodology.

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2. Unadjusted Use Case Weights (UUCW). Each Use Case is classified as the one of the fol­ lowing types, namely, Simple, Average, and Complex. Simple, Average, and Complex Use Cases contain the maximum of 3, 4 to 7, and 7 transactions, respctively. 3. Unadjusted Use Case Point (UUCP). UUCP is the sum of Unadjusted Actor Weights (UAW) and Undjusted Use Case Weights (UUCW). 4. Technical Complexity Factors (TCF). Factors for TCF calculation are Distributed System Required, Response Time, End User Efficiency, Complex Internal Processing Required, Reusable Code, Easy to Install, Easy to Use, Portable, Easy to Change, Concurrent, Security Features, Access for Third Parties, and Special Training Required. The formula for TFC is UUCP ¼ UAW þ UUCW

ð1Þ

5. Environment Complexity Factor (ECF). Factors for ECF calculation are Familiarity with the Project, Application Experience, OO Programming Experience, Lead Analyst Capabil­ ity, Motivation, Part Time Staff, Difficult Programming Language, and Stable Require­ ments. The formula for ECF is ECF ¼ 1:4 þ ð0; 03  EFÞ

ð2Þ

UCP ¼ UUCP  TCF  ECF

ð3Þ

6. Use Case Point (UCP)

In the Agile-scrum development model, the targets are settled in every weekly sprint. The result “hours of effort” will be used as a reference for the length of time needed to complete the construction, so the number of sprints needed will be obtained. By dividing the number of tasks/use cases by hours of effort, the minimum target task per weekly target will be obtained. The number of sprints will be multiplied by the sprint mandays rate so the software develop­ ment cost can be calculated. This research uses two software development projects from an IT consultant in Indonesia. The first is a human resource information system, and the second is a platform for the community.

3 RESULT AND DISCUSSIONS This is the summary of software development project that is used in this research (Table 1):

Table 1. Projects resume. Project

Actor

Use Cases

Reality Cost

Estimation Cost

Sprint Mandays Rate

Project 1 Project 2

6 3

216 177

Rp 320.869.565 Rp 219.130.435

Rp 267.391.304 Rp 187.826.087

Rp 8.913.043 Rp 7.826.087

From the definition of actor and use cases, the UAW and UUCW are obtained in Table 2 as follows:

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Table 2. Unadjusted actor weight and unadjusted use case weight. Unadjusted Actor Weight

Unadjusted Use Case Weight

Project 1

Project 1

Project 2

Project 2

Type

wg

cnt

rslt

wg

cnt

rslt

Wg

cnt

rslt

wg

cnt

rslt

Simple Average Complex

1 2 3

0 0 6

0 0 18

1 2 3

0 0 3

0 0 9

1 2 3

202 11 3

202 22 9

1 2 3

172 4 1

172 8 3

Total

18

9

233

183

* wg = weight, cnt = count, rslt = result

Table 3. Use case point result.

Project 1 Project 2

UUCP

TCF

ECF

UCP

Effort

Sprint

251 192

1.147 1.157

0.822 0.77

236.89 171.17

4737.97 3423.55

39 29

Table 4. Cost compared.

Project 1 Project 2

UCP Cost

Reality - UCP

%

Reality - Estimation

%

Rp 347.608.696 Rp 226.956.522

Rp 26.739.130 Rp 7.826.087

8% 4%

Rp 53.478.261 Rp 31.304.348

17% 14%

After UAW and UUCW are obtained, UUCP can be calculated by adding both. In Table 3, TCF and ECF are obtained from the average questionnaire scores of the factors, which are then transferred to the weights reference formula (1) and (2). After UUCP, TCF, and ECF are calcu­ lated, the results from UCP can be calculated by multiplying them with reference formula (3). To obtain Effort (hours of effort), UCP is multiplied with staff hours. Karner (1993) states that the value of 20 staff hours are required for each use case and assumption that p is staff hours per use case (Saleh, 2011). Table 4 shows the comparation of all types of cost with these gaps.

4 CONCLUSION Table 4 shows the gap between cost reality, estimation, and UCP. Based on the table, it can be seen that the Reality-UCP cost (UCP gap) has a smaller deviation value of 4–8% compared to the Reality-Estimation cost (Gap Estimation) with a deviation value of 14–17%. This proves that UCP can be used for cost estimation in the scrum development model. UCP reduces the deviations of inaccurate development costs using conventional estimation by 9–10%. The calculation results can be the basis of the project total cost that underlies the timeline and pro­ ject pricing. The smaller the deviation, the more accurate the development of cost estimation, and the better the management of the worked software project. Thus, project failures/losses can be minimized.

197

REFERENCES Dewi, R. S., Prassida, G. F., Sholiq, & Subriadi, A. P. (2016). UCPabc as an Integration Model for Software Cost Estimation. 2nd International Conference on Science in Information Technology (ICSITech). 187–192). Surabaya: IEEE. Fan, Z., & Leung, H. (2009). Software Cost Estimation. Hong Kong: The Hong Kong Polytechnic University. Kang, S., Choi, O., & Baik, J. (2010). Model-based dynamic cost estimation and tracking method for agile software development. 9th IEEE/ACIS International Conference on Computer and Information Science. 743–748. Taejon: IEEE. doi:10.1109/ICIS.2010.126. Saleh, K. (2011). Effort and cost allocation in medium to large software development projects. Inter­ national Journal of Computers, 74–79. Schwalbe, K. (2014). Information technology project management (7th edition). USA: Augburgs College. Yuliansyah, H., Qudsiah, S., Zahrotun, L., & Arfiani, I. (2018). Implementation of use case point as soft­ ware effort estimation in Scrum. International Conference on Engineering and Applied Technology (ICEAT). I. Yogyakarta: IOP Publishing. doi:10.1088/1757-899X/403/1/012085. Zahiroh, D. F., Saputra, M. C., & Herlambang, A. D. (2018). Perbandingan Evaluasi Biaya Pengemban­ gan Sistem Antrian RSUD Dr. Soetrasno Rembang Menggunakan Metode Use Case Point and Func­ tion Point (Studi Kasus: CV Pabrik Teknologi). Jurnal Pengembangan Teknologi Informasi dan Ilmu Komputer, 369–379. Retrieved from http://j-ptiik.ub.ac.id/index.php/j-ptiik.

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Impact of functional and nonfunctional values in adoption intention of Gesits electric motorcycle in Indonesia F. Habibie & M.G. Alif Department of Economic and Business, University of Indonesia, Indonesia

ABSTRACT: Electric vehicles (EVs) are the future of transportation. However, as a new technology, electric vehicles go through many obstacles. In this research, we used a consumer psychological approach toward new technology. Many researchers have analyzed barriers to motorcycle adoption related to technology readiness. This study examines both functional and nonfunctional variables toward attitude and adoption intention of Gesits electric motor­ cycles in Indonesia. This research used seven variables, such as monetary, performance, and convenience to measure functional value, and emotional, social identity, social responsibility, and epistemic value for measuring nonfunctional values. This research shows that moneary, performance, social identity, and attitude had a direct effect toward adoption intention, while emotional and social responsibility indirectly affected adoption intention reflected as a mediating variable.

1 INTRODUCTION To win in a very competitive market, it is very important for a company to understand con­ sumer needs and expectations. Customer needs are evolving and follow behavioral, demo­ graphic and psychographic shifts from time to time, including geographic and climate change. As the world is getting more populous and getting hotter due to rapidly growing societies and increasing air pollution especially from daily transportation activity, alternative technology is required to solve the pollution problem. Electric vehicle may offer many benefits, but the operational risk is still perceived as a frightening specter. Both benefit and risk become influ­ ential considerations for consumer to adopt this new technology. Gesits is the first Indonesian electric motorcycle, made in collaboration with many local stakeholders. Gesits was launched April 25, 2019, during the Indonesia international motor show (IIMS 2019). PT GTI received more than five thousand vehicle order letters throughout its first year. Government is targeting to reach two million electric motorcycles sold in 2025. The Indonesian government has started developing electric vehicle infrastructure and facilities such as charging stations since December 2018 and built another facility step-by-step in order to increase technology readiness. This study aims to get a better understanding of motorcycle consumers to accelerate the acceptance of electric motorcycles in Indonesia, especially in Jakarta. Therefore, this study evaluates functional and nonfunctional values to analyze factors that influence consumer feel­ ings and to figure out which factors have a direct or indirect effect on adoption intention.

2 LITERATURE REVIEW Consumer behavior is the main topic of this research. We examined factors that used as infor­ mation such as monetary, performance, and convenience value. According to the technology acceptance model (TAM) developed by Davis (1989), perceived usefulness and perceived ease of use positively affect consumer intention to use the product. Even further, Venkatesh and 199

Davis (2000) had developed the TAM2 model to examine external values or subjective norms. In this study, we used emotional, social identity, social responsibility, and epistemic values to measure nonfunctional values. These values are taken from the theory of consumption value by Sheth et al. (1991). Zeithaml (1988) said the value perceived by consumers can be regarded as a “consumer’s overall assessment of a product (or service) based on perceptions of what is received and what is given.” Sheth et al. (1969), in their theory of buyer behavior, explained the systematic cus­ tomer decision process from input to information processing: during the information process, there will be a feedback effect and the process can be influenced by any exogenous variable until there is finally an output from intention into purchase behavior. Gwinner et al. (1998) identified four relational values, namely psychological, social, eco­ nomic, and customization, and found these values are dominant factors for consumers making purchase decisions. Sheth (1983) regarded consumer choice as a set of multiple value dimensions and divided the values into five dimensions: functional, social, emotional, epistemic, and conditional. Wang et al. (2017) developed a model to analyze adoption intention on electric cars in China and divided seven values into functional and nonfunc­ tional values. 3 THEORETICAL FRAMEWORK AND RESEARCH HYPOTHESES 3.1 Functional values and EVs adoption intention Sheth (1983) identified functional values as the main cause for consumers’ choices. Eastlick and Feinberg (1999) stated that, for EVs, functional values represent the functionality, utility, or benefit that can be obtained from the EV. Schuitema et al. (2013) said that most of these values originate from the tangible characteristics or attributes of EVs. Wang et al. (2017) said that con­ sumers may not only obtain common functional values, such as the performance value, they can also obtain extra values when they adopt EVs, such as monetary and convenience values. Zhang et al. (2013) claimed performance attributes such as reliability, riding comfort, convenience of use or operability, driving range, and charging time have a significant influence on the acceptance of EVs. Therefore, the hypotheses of this study can be for­ mulated as follows: H1: Monetary value positively affects consumer attitude (H1a) and the adoption intention toward EVs (H1b). H2: Performance value positively affects consumer attitude (H2a) and the adoption inten­ tion toward EVs (H2b). H3: Convenience value positively affects consumer attitude (H3a) and the adoption inten­ tion toward EVs (H3b). 3.2 Nonfunctional values and EVs adoption intention Wang et al. (2017) stated that, for green vehicles, the intention to adopt EVs is not only influ­ enced by its functional values but also wanting to obtain certain nonfunctional values. These nonfunctional values represent the emotional experiences derived from consuming products and a sense of self or social identity that is reflected by the possession of products (Dittmar, 1992; Forsythe et al., 2006; Roehrich, 2004; Sheth, 1983). In the theory of consumption values (Sheth, 1991), these nonfunctional values include emotional, social, and epistemic values. Therefore, the hypotheses of this study can be formulated as follows: H4: Emotional value positively affects consumer attitude (H4a) and the adoption intention toward EVs (H4b) H5: Social identity value positively affects consumer attitude (H5a) and the adoption inten­ tion toward EVs (H5b) H6: Social responsibility positively affects consumer attitude (H6a) and the adoption inten­ tion toward EVs (H6b) 200

H7: Emotional value positively affects consumer attitude (H7a) and the adoption intention toward EVs (H7b) In the technology acceptance model, perceived usefulness and perceived ease of use are rep­ resented by performance and convenience values that positively affect attitude toward behav­ ior. The theory of planned behavior and the theory of reasoned action point out that consumers’ attitude toward certain behavior significantly affect the final adoption behavior (Ajzen, 1991). Consumers are more likely to adopt EVs when they have a positive attitude toward EVs. Therefore, the hypothesis of this study can be also formulated as follows: H8: Consumers attitude toward EVs positively affects the EVs adoption intention.

4 METHODOLOGY To test the hypotheses, a questionnaire using a five-point Likert scale was designed and imple­ mented. The questionnaire was adapted from the original research model conducted by Wang et al. (2017). The survey was conducted from November 5 to December 4, 2019, using Google Form for the respondents, who lived in Jakarta. There are two reasons to choose Jakarta as the target city. First, Jakarta needs alternative vehicles due to environmental concerns. Second, consumers in Jakarta have stronger buying power. After the data has been collected, we measured the reliability and validity using SPSS 26 and we used SmartPLS 3.0 to solve the structural equation modelling.

5 RESEARCH ANALYSIS SmartPLS results show that monetary, performance, and social identity functions had a direct impact on adoption intention, while emotional value and social responsibility indirectly affected adoption intention by first building consumer attitude. A vehicle is a highinvolvement product and cognitive benefit usually becomes the first consideration. However, in this research, emotional value was the most significant variable. This might be because con­ sumer behavior toward this experiential product began with affection. Lower operational cost and product warranty also significantly affected consumer adoption intention. Consumers who needed to show their social status perhaps consider buying an electric vehicle to acquire pro-environment status. 6 CONCLUSION & MANAGERIAL IMPLICATION Monetary and performance values significantly affected adoption intention. This implies that values related to money and performance should be presented to consumers as a functional consideration. Social identity also affected adoption intention directly, meaning that con­ sumers who need to show status could be potential consumers. Therefore, Gesits needs dis­ tinctive features to make it more noticeable. Emotional value as the most significant variable should be the main focus for PT GTI to make their products give a better user experience for consumers while driving. Social responsibility also affected consumer attitude, meaning that consumers supported products out of environmental concern. 7 LIMITATIONS & RECOMMENDATION FOR FUTURE RESEARCH Due to the limited time to collect data, there are several limitations faced during this study. First, this research does not represent data from the entire population in Jakarta. In this case, most of the consumers are 20 to 30 years old, with a bachelor degree and monthly expenses less than 10 million rupiah. The questionnaire was adapted from one source where the research object was an electric car, and where, from the Cronbach-alpha test, monetary and 201

convenience value were between 0.6 to 0.7. We suggest adapting another questionnaire which is specifically made for electric motorcycles to measure monetary and convenience value to increase its validity. REFERENCES Ajzen, I. (1991). The theory of planned behavior. Organ. Behav. Hum Decis. Process. 502179211 Ajzen. I., & Fishbein M. (1980). Understanding attitudes and predicting social behavior. Davis, F. (1989). Perceived usefulness, perceived ease of use, and user acceptance of information technology. MIS Quarterly, 13(3), 319–340. doi:10.2307/249008 Dittmar, H. (1992). The social psychology of material possessions: To have is to be. Wheatsheaf Books. Gwinner, K. P. Gremler, D. D., & Bitner, M. J. (1998). Relational benefits in services industries: The customer’s perspective. Acad. Mark. Sci. 262101114 Han, L., Wang, S., Zhao, D., & Li, J. The intention to adopt electric vehicles: Driven by functional and nonfunctional values. Transportation research. Part A, Policy and practice, 103, 185–197. doi: 10.1016/ j.tra.2017.05.033 Roehrich, G. (2004). Consumer innovativeness: concepts and measurements. J. Bus. Res. 57671677 Schuitema, G., Anable, J. Skippon, S., & Kinnear, N. (2013). The role of instrumental, hedonic and sym­ bolic attributes in the intention to adopt electric vehicles. Schulte, L., Hart, D., & Van der Vorst, R. (2004). Issues affecting the acceptance of hydrogen fuel. Int. J. Hydrogen Energy. 297677685 Sheth, J., Newman, B., & Gross, B. (1991). Why we buy what we buy: A theory of consumption values. Journal of Business Research, 22, 159–170. doi: 10.1016/0148-2963(91)90050-8 Sheth, J. (1981). An integrative theory of patronage preference and behavior. Venkatesh, V., & Davis, F. (2000). A theoretical extension of the technology acceptance model: Four longitudinal field studies. Management Science, 46(2), 186–204. www.jstor.org/stable/2634758 Wang, S., Fan. J., Zhao, D., Yang, S., & Fu, Y. (2016). Predicting consumers’ intention to adopt hybrid electric vehicles: Using an extended version of the theory of planned behavior model. Transportation, 43(1). Zeithaml, V. (1988). Consumer perceptions of price, quality and value: A means-end model and synthesis of evidence. J. Marker. 52(3), 2–22.

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Optimization of Instagram promotion and distribution using e-commerce platform for MSME Atkey P. Nabila & S. Hasnul University of Indonesia, Jakarta, Indonesia

ABSTRACT: Digital transformation requires companies to change their mindsets and innovate their business models. However, MSME (micro, small, and medium-sized enterprise) have limited time and resources to experiment with business models and implement new strat­ egies. Indonesia represents a trend similar to that of most other countries, where fashion is the most popular category for MSME. This research applied a business coaching method to the MSME Atkey in the online women’s fashion sector. Using business coaching instruments, we collected qualitative data, mapping the MSME’s condition and problems to improve their cir­ cumstances. The Pareto analysis showed Instagram-focused promotion strategy and e-com­ merce distribution channel is not optimal. We therefore employed research methods including business model canvas, competitive analysis, STP analysis, 4Ps marketing mix, SWOT, and TOWS analysis. This applied research helps Atkey develop its business and increase its profit.

1 INTRODUCTION As the largest economy in Southeast Asia, Indonesia has experienced a sustainable growth rate for the past ten years. MSME (micro, small, and medium-sized enterprise) is the main source of job creation and make a major contribution, especially to innovation and techno­ logical development (Eniola et al., 2018; OECD, 2018). Digital transformation requires com­ panies to change mindsets and innovate business models. However, Bouwman et al. (2019) explained that MSME have limited time and resources to experiment with business models and implement new strategies. Social media is changing the way it interacts with and provides services to customers and how it integrates with a company’s IT system. Loebbecke et al. (2015) state that digital trans­ formation optimizes internal processes and fundamentally changes the MSME business model. It is important to assess how the involvement of e-commerce, in the MSME business-to­ consumer relationship, influences the success of micro businesses in the Indonesian retail sector. Indonesia shows a trend similar to that of most other countries, in which fashion is the most popular category of the e-commerce market. Seeing this business opportunity, the MSME Atkey developed a business in online clothing retail for young adult women. Atkey has been established for seven years, and the prices of its products are considered to be com­ paratively cheap, with competitive quality. Atkey have sold their products through Instagram and already have supporting resources. However, the Instagram promotion strategy and dis­ tribution channel through e-commerce is considered not optimal. Therefore, this research attempts to optimize the Instagram promotion strategy and e-commerce platform distribution channels.

2 LITERATURE REVIEW Advertising and promotion are an integral part of the social and economic system (Belch & Belch, 2019). Advertising has developed into a vital communication system for consumers and 203

businesses. The so-called 4 Ps – product, price, place, and promotion – are elements of the marketing mix. The basic task of marketing is to incorporate these four elements into a marketing program to facilitate potential exchanges with consumers in the market. Along with the basic tools used to achieve organizational communication goals, these are often referred to as marketing mixes. Marketers often use digital marketing to reference various digital media, technologies, and platforms that are used to reach and interact with consumers and businesses (Chaffey & Smith, 2017). It is important for organizations to continue to develop and understand this relationship and manage it in such a way that the development of strategies are consistent and mutually sustainable. E-commerce refers to all types of electronic transactions, both those between organizations and and those with stakeholders, whether they are financial transac­ tions or the exchange of information or other services (Chaffey, 2014). The growing popular­ ity of social media is a major trend in digital business. As a platform based on visual aesthetics and filtered images, Instagram is a suitable ecosys­ tem for promoting beauty and lifestyle products (Jin et al., 2018). Given Instagram’s unique characteristics, fashion influencers on Instagram who convey positive attitudes toward brand endorsement earn a stronger social presence. This points to the power of social media as a source of information and inspiration for marketing planning. From a marketing planning perspective, findings now point to Instagram influencer marketing as an effective branding strategy. The main differences between traditional marketing and social media marketing are the aspects of control versus contribution. Compared to traditional marketing techniques, through social media, brands are able to spread their promotional campaigns to a wider range of potential customers, developing a type of marketing based on the engagement between brands and consumers while offering a service that allows social networking. Usually, brands directly contact popular users they are interested in to take advantage of their popularity and photographic skills (Serafinelli, 2018). The Internet is changing the way companies design and implement business and marketing strategies. Belch and Belch (2018) add that the Internet influences marketing communication programs. Today the Internet is used to conduct direct marketing, personal selling, and social activities more effectively and efficiently.

3 METHODOLOGY This research utilized a business coaching method, a framework of action research with extreme applications. It analyzed the external environment and the internal environment, using business model canvas, business process flowchart, Porter 5 Forces, Segmenting, Target­ ing and Positioning (STP) analysis, 4Ps Marketing Mix, SWOT, and TOWS analysis. To col­ lect data, the authors made observations using in-depth interviews and documentation. Each method will provide specific results in the gap analysis. Furthermore, we used Pareto analysis to reduce inequality based on the scale of priority of MSME. Then we conducted implementa­ tion based on the needs.

4 RESULT AND DISCUSSION Based on research, in-depth interviews, and analysis, Atkey faced several problems: for instance, it required better optimization of its Instagram promotion channel, optimization of distribution channel, operational strategy in production capacity, formal HR regulation, and financial report activity. The largest proportion of analysis needing to be solved based on Pareto analysis were Instagram promotion and distribution channels. Proposed improvements of Atkey’s Instagram promotion were begun based on survey results showing that 100% of Atkey’s target market are young adult women, most residing in Jakarta and around the island of Java, and most use Instagram (out of a total of 97 204

respondents). Kemp (2018) found Instagram ranks fourth among social media platforms with the most active users at 80%, with a total advertising audience on Instagram of 62 million per month. Of these, 49% are women, with the age profile of the young adult audience ranging from 18 to 34 years old. Quarter-on-quarter advertising audience growth reaches + 5.1%. Atkey adopted a celebrity endorsement strategy based on its target market and budget. Using “Celebgram” (Celebrity Instagram) for advertising came at an affordable price com­ pared to using conventional artists. Atkey has Instagram artist management contacts, which launches endorsements every day, to promote its products. In addition, Atkey drew on Celebgram for photo models to create content and add value from the customer’s point of view. It also implemented Belch and Belch (2019) Integrated Marketing Communication aspects that are related to Instagram, such as developing brand identity using a photographer and photo studio based on customer needs and preferences, as well as content and layout improvement. Secondly, it increased brand awareness by creating content using Instagram posts in an inter­ esting, orderly, and consistent manner. Atkey created video “teaser products,” packed with fun, created by professional videog­ raphers. Following this series of marketing promotion activities, Instagram Insight showed an increase in the number of “likes.” December showed with 209 “likes,” with 247 Instagram pro­ file visitors, and Instagram ad results reaching 16,440 Instagram users. At the end of the busi­ ness coaching period, however, “likes” had increased to 4,343, with 19,904 Instagram profile visitors Instagram ads reaching 201,916 Instagram users, who were exposed due to Instagram promotions. The series of Instagram promotional activities carried out by Atkey resulted in a 53% increase in the number of organic followers. This increase led to an increase in product sales on the Atkey e-commerce platform, using the link feature on the Instagram profile, so that Atkey Instagram visitors can make purchases through the link given. The link feature uses Linktree, allowing all content to be used to direct visitors. Atkey shared three links, including Shopee, Whatsapp, and Line. These links allow buyers to choose the buying platform they prefer. In the process of developing relationships by examining the needs and desires of consumers in developing products, Atkey optimized its distribution channels by making its products available via e-commerce platforms, using Tokopedia, supported by the promotional strat­ egies conducted through Instagram. The Promotion program through Instagram brings mutu­ ally beneficial results, leading to sales through Tokopedia. In addition, Atkey conducted a promotional program by applying discounts on purchases through Tokopedia to encourage purchases through this e-commerce platform. In May 2019, Atkey became a “Power Merchant” in the Tokopedia Seller category. The store’s reputation ranking has increased to three gold stars, and the number of products sold has doubled from the initial period, with a final total of 7,800 products sold. This supports research by LPEM FEB UI (2019) stating that 41.59% of vendors from Tokopedia felt that Tokopedia provided ease of business management the business by using existing management tools, as was felt by Atkey. Survey results also show Tokopedia sellers felt that Tokopedia increased their productivity by utilizing technology products. Atkey productivity was previously limited by their large pro­ duction capacity, quantity of goods, and product variations, leading to high levels of human error by Atkey employees. Using Tokopedia, human error is now reduced, and the complexity of Atkey’s business processes has become simpler. Besides providing the benefits of optimizing distribution channels, Tokopedia helped simplify Atkey’s business processes. After undergoing the process of optimizing its distribution channel through the e-commerce platform, however, Atkey encountered problems selling products through Tokopedia. The MSME owner tells that the problems experienced were materially detrimental and difficult for Atkey to resolve internally. Atkey overcome the problems faced by selling products through the Shopee e-commerce platform, a process which was quite easy. In an e-commerce ranking in Indonesia, Shopee held first position as top e-commerce company for ten consecutive quar­ ters based on its AppStore ranking (Jayani, 2019). This is supported by data presented by Yusra (2019) regarding e-commerce services that are most frequently used: the results of the 205

data show that Shopee is ranked top with a market share percentage of 33.63%, followed by Tokopedia at 28.11%, and, afterward, a number of other e-commerce platforms, namely Bukalapak, Lazada, Blibli, and other options. Shopee offers a range of sophisticated features specifically designed to manage stores via computer. One feature to directly benefit Atkey is the fact that data is presented in an easily understood format. Atkey applied promotional discounts to Shopee e-commerce in the first month, and interest from Atkey customers was quite good, increasing the overall sales results. The results of selling through Shopee received a store performance rating of “Very Good.” The percentage of chat messages replied to by Atkey on its profile was 94%, showing Atkey’s admin to be quite responsive in answering questions from potential customers. Atkey received a rating of 4.9 out of 5 stars based on 1,805 buyers who purchased its products. Overall, Atkey saw a boost in Total Visitors, Total Product Visits, Product Visited, and Total Sales (Orders Created). Furthermore, based on the ranking of the top products, there was an enhancement in the index of six out of ten products.

5 CONCLUSION AND RECOMMENDATION Evaluating solution implementation in Business Coaching Solutions, there is a total increase in achievement, with an average yield of 74.58%. Based on a series of strategies implemented related to optimization of the Atkey Instagram promotion channel during the business coach­ ing process, Atkey has an increasing number of followers and saw increased overall product sales through the e-commerce platform. Although the author encountered limitations during the research process, including difficul­ ties involving optimization of Atkey’s Instagram promotional channel, such optimization needs to be done continuously so that the company reaches all target markets, and Atkey requires a series of strategies to convince potential customers to make a purchase. Based on the limitations that have been described, suggestions and follow-up work that can be done for further development of MSME businesses include: marketing research related to the current trends; and optimization of distribution channels through e-commerce platforms. In this digital age, in terms of security, it is also important for Atkey to periodically change passwords. REFERENCES Belch, G. E., Belch, M. A., Kerr, G., Waller, D., & Powell, I. H. (2019). Advertising: An integrated mar­ keting communication perspective (4th ed.). North Ryde, Australia: McGraw-Hill Education Australia. Chaffey, D. (2014). Digital business and e-commerce management. New York: Pearson Higher Ed. Chaffey, D., & Smith, P. (2017). Digital marketing excellence: Planning, optimizing and integrating online marketing. Abingdon: Taylor & Francis. Eniola, A. A., Olorunleke, G. K., Akintimehin, O. O., Ojeka, J. D., & Oyetunji, B. (2019).The impact of organizational culture on total quality management in SMEs in Nigeria. Heliyon, 5(8), e02293. doi:10.1016/j.heliyon.2019.e02293. Jayani, D. H. (2019, September 3). Shopee Jadi E-Commerce Paling Top dari Masa ke Masa. Retrieved from https://databoks.katadata.co.id/datapublish/2019/09/03/shopee-jadi-e-commerce-paling-top-dari­ masa-ke-masa.. Jin, S. V., Muqaddam, A., & Ryu, E. (2019). Instafamous and social media influencer marketing. Marketing Intelligence & Planning, 37(5), 567–579. doi:10.1108/mip-09-2018-0375. LPEM FEB UI & Katadata.co.id. (2019). Dampak Tokopedia Terhadap Perekonomian Indonesia. LPEM FEB UI. OECD. SME and Entrepreneurship Policy in Indonesia 2018, OECD Studies on SMEs and Entrepreneur­ ship, OECD Publishing, Paris, 2018. https://doi.org/10.1787/9789264306264-en. Serafinelli, E. (2018). Visual media marketing. Digital Life on Instagram, 99–124. doi:10.1108/978­ 1-78756-495-420181004.

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Competition in banking financial technology: The perspective of the demand side I. Sadalia, F.N. Nasution & A. Fauzi Universitas Sumatera Utara, Medan, Sumatera Utara, Indonesia

ABSTRACT: In the industrial revolution 4.0, the financial industry must be able to imple­ ment digital-based technologies approved by the block chain and robo advisors. Likewise, in the trading sector, consumer payment devices need to be more advanced, such as online crowd payments and peer-to-peer loans. Disrupting innovations can help create new markets when they are launched. The company must provide various technologies for developing innovative business models to exploit old technology in favor of new, better ones. Dynamic financial technology must be able to innovate and be technology-driven in marketing its prod­ ucts. This study uses quantitative methods with a sample of 200 conventional and Islamic bank customers. The data that has been obtained is then processed using WarpPLS software. This research shows that, to improve product marketing in a company’s financial sector, it must consider the existence of disruptive innovations and financial technology for the com­ pany’s progress. It is hoped that the implications of this research can improve service satisfac­ tion in the banking sector. 1 INTRODUCTION With the increase in the number of technology-based financial services from year to year, startups, traditional financial institutions, and large companies alike face chal­ lenges in keeping up with tech-based development. Financial technology (“FinTech”) is the process of using technology in the financial system, where the technology produces products, services, and new business models that impact financial stability, security, effi­ ciency, and smoothness in the payment system. FinTech operates in various countries, including Indonesia, where in 2019 where FinTech lending statistical data showed that 71% of companies in the banking sector had used financial technology. Skan, Dickerson, and Masood (2015) state that financial technology using digitalization system that causes disruption to the scope of the financial system is referred to as financial technology. The banking sector must continue to innovate in order to always provide convenience and comfort for customers. Financial technology is able to improve strategies so that cus­ tomers can feel the ease of conducting transactions with the help of technology. This research was conducted so that entrepreneurs and investors who have focused their activities on services are able to consider FinTech to help reach productive market strat­ egies at the level of the banking industry in the city of Medan.

2 HYPOTHESIS DEVELOPMENT 2.1 Disruptive innovation strategy for disruptive innovation performance To improve a new product or service, it is necessary for a company to have an innovation strategy. In large businesses, especially in the field of financial services, the concept of disrup­ tive innovation must concentrate on improving customer products and services (Yu and Hang, 2010). The company’s strategy must be consistent with the mission, vision, and goals of 207

innovation. Mavondo (2000) explains that companies believe that, to survive in marketing a product, they must target a limited amount in order to be productive and efficient. “Defen­ tion” is the company’s defense, positioning itself in a safe manner so it is able to survive in the market (Akman, 2003). Based on customer evaluation criteria, customers can determine the company’s goals. The application of the Balanced Scorecard can determine the effect of finan­ cial innovation on company performance. The organizational structure, internal business pro­ cesses, and customer response process factors can increase the company’s growth in the long run. After determining the factors of customer satisfaction, it is necessary to maintain aspects of internal business processes that can lead managers to develop a good business. Therefore, it is hypothesized that: H1: Disruptive innovation strategy affects disruptive innovation performance. 2.2 Business model factors for disruptive innovation performance In business model factors, companies must provide a variety of new technologies, the selection of appropriate strategies, and the development of new business models in order to exploit old technology for the better. Financial innovations that have a product and value are based on the individual properties that may apply (Nightingale & Spears, 2010). Disruptive innovation can attack all business sectors and offer great opportunities to increase new profit growth (Hamel, 2003). Lettice and Thomond (2002) add that dis­ ruptive innovation is a product or service model that has been successfully utilized and that can change the demands of existing market needs. Gumbus (2005) describes a company’s strategy that focuses on customer satisfaction using a cause-and-effect rela­ tionship between four strategic objectives and performance measures in completing com­ pany missions. Therefore, it is hypothesized that: H2: Business model factors affects disruptive innovation performance. 2.3 Disruptive innovation characteristics for disruptive innovation performance Disruptive innovation characteristics are very different from continuous innovation (Christen­ sen, 2015). The definition of disruptive innovation characteristics includes the three pillars described by researchers in the field of disruptive innovation, but the more important disrup­ tive innovation characteristics are radical functions, discontinuous technical standards, and ownership of innovation. Nagy et al. (2016) explain that disruptive innovation characteristics discuss something that will emerge by itself. The possibility of disruptive innovation is deter­ mined by the characteristics that identify a company when comparing it with other companies in terms of which are maintaining their status as innovative companies. Nagy et al. (2016) also claim that some post hoc dilemmas have been resolved with these three characteristics of innovation. Therefore, the quality of innovation can be investigated and compared with the characteristics of new technologies. Disruptive innovation is able to change metric perform­ ance, achieve high expectations of consumers, create discontinuous technical standards, and lead to new forms of ownership. Therefore, disruptive innovation refers to introducing alter­ natives in established industries. The status quo disrupts industries by changing company characteristics such as prices or services around innovation (Nagy et al., 2016). Therefore, it is hypothesized that: H3: Disruptive innovation characteristics affects disruptive innovation performance.

3 RESEARCH METHOD This research was conducted with customers of conventional banks and Islamic banks in the city of Medan. Primary data were collected using random sampling through the distribution of questionnaires online and randomly to several respondents. The sample in this study uses 208

the Lemeshow formula because the population is unknown, and a sample of 200 customers was obtained. In this study the data analysis method used is structural equation modelingpartial least squares (SEM-PLS) using WarpPLS software.

4 DISCUSSION AND IMPLICATION In this study, respondents’ data is collected using an online-based questionnaire method. Respondent characteristics in this study include gender, education, occupation, and type of banking sector, as explained in Table 1. 4.1 Evaluation of measurement models In this study, convergent validity is part of the measurement model, which in SEM-PLS is usually referred to as the outer model. The results of the tests in Table 2 show that the validity test is based on average variance extracted (AVE) for all variables >0.5; the reliability test results are based on composite reli­ ability values >0.7; and the Cronbach’s alpha test shows that all variables are >0.6, which means that they meet the reliability requirements where the indicators used are good in terms of measuring the variable (Abdullah & Hartono, 2015). The R2 value in Disruptive Innovation Performance is 0.457; and the Disruptive Innovation Strategy, Business Model Factors and Disruptive Innovation Characteristics variables can influence the Disruptive Innovation Per­ formance of 45.7%. 4.2 Evaluation of structural model Based on the results in Table 3, the structural results of this model indicate that the direct influence in this study is positive and significant. This is contrary to research by Christensen et al. (2015), where disruptive innovation and corporate competition pose challenges to the

Table 1. Respondents by characteristic. Characteristic

Interval

Presentation (of 200)

Gender

Female Male Senior High School Diploma Undergraduate Postgraduate Pegawai Negeri Sipil Pegawai Swasta Student Conventional Islamic

89 111 6 15 127 52 39 146 15 105 95

Education

Occupation

Type of banking sector

Table 2. Measurement model overview. Construct

AVE

CR

CA

Disruptive Innovation Performance (DIP) Disruptive Innovation Strategy (DIS) Business Model Factors (BMF) Disruptive Innovation Characteristics (DIC)

0.687 0.728 0.737 0.699

0.988 0.970 0.973 0.954

0.978 0.966 0.970 0.946

209

R-Square 0.475

Table 3.

Structural Model Results.

Hypothesis

Path

Original Sample (O)

p-value

1 2 3

DIS → DIP BMF → DIP DIC → DIP

0.324 0.308 0.231

0.001 0.001 0.001

success of organizations in their projects. Competition is strong between startups and trad­ itional financial services providers, such as in the banking sector, and technology companies have entered a new phase in using technology-based applications, with implications for bank­ ing business development in the digital economy era. FinTech can provide opportunities in creating new services, business models, and traditional financial systems that can increase cus­ tomer trust and customer loyalty, as well as assist in financial regulation.

5 CONCLUSION This research has analyzed the impact of disruptive innovation on financial technology, where the development of FinTech in Indonesia has experienced rapid growth. The disruptive busi­ ness strategy model and financial technology products of the banking industry show that the disruptive innovation strategy has a positive and significant effect on disruptive innovation performance. The government can also develop the regulatory and supervisory functions needed to enable market Fintech. Fintech platforms such as peer-to-peer, the block chain, and robo advisors also offer a lot of online financing options. Bank Indonesia must increase know­ ledge of technological financial innovations to help with companies, especially in the banking industry, facilitate financial services so customers can conduct financial transactions anywhere. ACKNOWLEDGEMENT This research publication is supported by Universitas Sumatera Utara, which provides the TALENTA funding for 2019. REFERENCES Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is disruptive innovation? Harvard Business Review. Gumbus, A. (2005). Introducing the balanced scorecard: Creating metrics to measure performance. Jour­ nal of Management Education, 29(4), 617–630. Lindgardt, Z., Reeves, M., Stalk, G., & Deimler, M. S. (2009). Business model innovation. When the Game Gets Tough, Change the Game. Boston, MA: Boston Consulting Group. Leifer, R., O’Connor, G. C. and Rice, M. (2001). Implementing radical innovation in mature firms: the role of hubs. Academy of Management Executive, 15(3), 102–123. Lettice, F. and Thomond, P. (2002). Disruptive innovation explored. Paper presented at Ninth IPSE International Conference on Concurrent Engineering: Research and Applications. Mention, A. L., & Torkkeli, M. (2014). Innovation in financial services: a dual ambiguity. Newcastle upon Tyne: Cambridge Scholars Publishing. Nightingale, P., & Spears, T. (2010). The nature of financial innovation. Finance, Innovation & Growth, 8(1), 1–52. Skan J., Dickerson, J., & Masood, S. (2015). The future of fintech and banking: Digitally dis­ rupted or reimagined? Accenture. Retrieved from https://www.planet-fintech.com/downloads/ The-Future-of-Fintech-and-Banking-Digitally-Disrupted-or-Reimagined-Accenture-mars­ 2015_t18791.html.

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Poutanen, P., Soliman, W., & Ståhle, P. (2016). The complexity of innovation: An assessment and review of the complexity perspective. European Journal of Innovation Management 19(2), 189–213. Yu, D., & Hang, C. C. (2010). A reflective review of disruptive innovation theory. International Journal of Management Reviews, 12(4), 435–452. Zachary, J. (2011). The financial innovation process: Theory and application. Deleware Journal of Corporate Law, 36: 56–71.

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Liquidity and credit risk in Indonesian Islamic banks A. Salahuddin Faculty of Economics and Business, Universitas Islam Negeri Syarif Hidayatullah, Indonesia

W.A. Perdana Department Management, Faculty of Economics and Business, Universitas Indonesia, Indonesia

N.D. Hendranastiti Durham University Business School, Durham University, UK

ABSTRACT: This research investigates the impact of credit risk and liquidity risk on Islamic bank performance in Indonesia. Some previous studies have found that credit risk and liquidity risk have a significant impact on bank performance. Using data in Indonesia from 2008 to 2016, this study finds that credit risk has a negative impact on Islamic bank perform­ ance while liquidity risk has a negative impact on ROA (return on assests) and a positive impact on ROE (return on equity) of Islamic banks in Indonesia. This result is in line with previous studies conducted in developed and developing countries. 1 INTRODUCTION Financial institutions face risks in every operation, transaction, and decision. As one of the fastest-growing segments in global financial market, Islamic banks arealso exposed to large risks (Kabir et al., 2015). There are several types of risks that only occur in Islamic banks, due to their unique characteristics, such as risks of returns, investment risk, and risk of shariah compliance (Izhar, 2010; Wahyudi et al., 2015). As a country with the largest Muslim population in the world, Indonesia can be expected to have a good Islamic banking system, as a role model for other nations in the world. However, Islamic banks in Indonesia are seeing slow growth in terms of assets compared to conven­ tional banks. Islamic banks saw 37% lower growth compared to conventional banks from 2008 to 2017 (OJK, 2018). In addition, the level of nonperforming funding (NPF) in Islamic banks has reduced, from 3.95% in 2008 to 3.05% in 2017. The performance of the banks has been improving along with the decreasing number of NPL, as a bank can increase its revenue and assets while facing lower risk in credit. Previous empirical research by Miller and Noulas (1997) shows that the credit risk has nega­ tive impact on bank performance. Molyneux and Thornton (1992) and Acharaya and Nagvi (2010) found that excessive liquidity could lead to higher risk-taking behavior from banks that might also lead to a decline in bank performance if the bank does not have a good risk man­ agement system. It is explained by several studies (Khan et al., 2017; Nguyen & Boateng, 2015) that banks with higher deposit ratios tend to have higher risk levels in the next period, and involuntary excess reserves stimulated a more aggressive credit expansion in Chinese banks. Using the annual data from banks in Indonesia from 2008 to 2017, this study will examine the impact of credit risk and liquidity risk on Islamic bank performance in Indonesia. The implications of this research are expected to be relevant for academia, bankers, and regulators. This last group especially can be helped by an understanding of bank performance, particularly those influenced by credit risk and liquidity risk to develop better banking regula­ tory frameworks in controlling and disciplining banks. For the banking industry, this study is 212

expected to provide an overview of risks that are taken and faced by banks, especially those related to credit and liquidity risk to management and shareholders.

2 LITERATURE REVIEW The Basel Committee on Banking Supervision (2000) defines credit risk as “the potential that a bank’s borrower or counterparty will fail to meet its obligations in accordance with agreed terms.” As for its relations with bank profitability, Athanasoglou (2008) has pointed out that increase in credit risk is usually correlated with reduced bank profitability. However, there are several arguments, such as Figlewski, Frydman, and Liang (2012) and Lin, Chung, Hsieh, and Wu (2012), which state that banks willing to lend at high risk will get even greater margins as compensation for those risks. This is in line with de Blas and Russ (2013), who state that, due to higher volatility of macroeconomic conditions in developing countries, the spread of banks also increases. For this reason, credit risk is a crucial issue and needs careful management in the banking industry. As for liquidity risk, it can be defined as the possibility that the bank will not be able to meet its immediate obligations in a certain period of time in the future (Drehmann & Niko­ laou, 2009). This will affect a bank’s earnings and capital. Therefore, banks’ management make it a top priority to guarantee available funds sufficient to meet future demands of pro­ viders and borrowers. In addition, liquidity risk can affect a bank’s reputation (Jenkinson, 2008). The depositors may lose confidence and trust in the bank if funds are not provided to them in a timely manner. In order to examine banking performance, profitability is an important element, as it repre­ sents a bank’s value creation and is a critical step toward shareholders’ wealth maximization (Mendoza & Rivera, 2017). A study by Rasiah (2010) shows that ROA (return on assets) and bank profits have a positive relationship. However, this positive relationship may be biased due to off-balance sheet activities (Athanasoglou et al., 2005). Another proxy is ROE (return on equity), as it can be considered as a good indicator of the company’s ability to generate a return that is worth whatever risk the investment may entail (Berman, Knight, & Case, 2013).

3 DATA AND METHODOLOGY The sample used for this study is Islamic banks in Indonesia that have complete annual data and operated from 2008 to 2016. This sample size does not include Sharia window banks. Bank-specific variables are from banks’ annual reports; industry-specific variables are from the Financial Service Authority of Indonesia (OJK); and macroeconomic-specific variables are from Bank Indonesia. This study uses unbalanced panel data. To see the impact of risk and bank competition on bank profitability, the authors follow and expand on the specification proposed by Athanasoglou et al. (2008), which can be expressed as follows:

where i refers to year and t refers to an individual bank, πit represents the profitability indicator for the specific bank at a specific year, C is constant term, and πi,t−1 is oneperiod-lagged profitability. Xit are determinants of bank profitability. They are grouped into bank-specific determinants Xj; industry-specific determinants Xl; and macroeconomic determinants Xm. The unobserved bank-specific effect and the idiosyncratic error are rep­ resented by νit and μit, respectively. βj, βl, and βm are coefficients to be estimated, while ı represents the speed of adjustment to equilibrium. Its value ranges from 0 to 1 with a higher figure representing slower adjustment and a less competitive structure, while 213

a lower figure indicates a stronger competitive condition and higher speed of adjustment. This research uses a fixed effect model for the regression based on the Hausman Test result, which shows that the fixed effect model is preferable for this model rather than a random effect model.

4 EMPIRICAL RESULTS The average ROA of the sample is 0.52% with a standard deviation of 3.3. The average ROE of the sample is 5.2% with a standard deviation of 18.4. The average number of credit risk (non-performing loans) is 2.5% with a standard deviation of 2.2%. The liquidity risk average is 97.8% with a standard deviation of 38.6%. The estimation of ROA as dependent variable has an R2 value of 0.1929, which means that credit risk, liquidity risk, bank concentration ratio, bank size, bank sector development, GDP growth, and inflation can explain bank performance (ROA) of 19.29%, and the rest can be explained with other variables outside of this model. As for the estimation with ROE as dependent variable, it has an R2 value of 0.3753, which means that credit risk, liquidity risk, bank concentration ratio, bank size, bank sector development, GDP growth, and inflation can explain bank performance (ROE) of 37.53%, and the rest can be explained with other variables outside of this model. The result shows that credit risk has a negative and significant impact on the ROA of Islamic banks in Indonesia with a significant level of 99%; the result also shows that credit risk has negative and significant impact on the ROE of Islamic banks in Indonesia. However, the credit risk’s negative coefficient has a higher impact on ROE (–2.627) than on ROA (– 0.646), meaning that credit risk will decrease ROE more than ROA. This finding is in line with the findings of Almekhlafi et al. (2016), who show that nonperforming funds erode banks’ profitability and that bad loans are very costly to recover. Some banks’ management and regulatory controls have led to deterioration of assets quality, with a high cost of loan recovery associated with high-risk exposure. According to the IMF (2015), banks with high levels of NPL have a lower ability for lend­ ing. Lower lending ability may reduce bank performance. The danger of credit risk can easily be seen in Indonesia from the many cases of bank failure due to high NPF in Islamic banks. Cases like this do not happen only in Indonesia, of course, and can occur anywhere in the world. However, authorities already have very strict regulations that limit the NPF percentage to 5%. If a bank exceeds it, there will be a heavy warning from authorities to lower the per­ centage, and there will even be a penalty if a bank breaks this regulation. Liquidity risk shows a different impact on Islamic bank performance in Indonesia. Results show that liquidity risk has a positive impact on the ROA of Islamic banks in Indonesia. Bourke (1989) states that higher liquidity levels have higher profitability. While the result shows that liquidity risk has a negative impact on the ROE of Islamic banks in Indonesia, it does not have a significant impact on it. The result also shows that competition has a negative and significant impact on Islamic bank performance, both for ROA and ROE, in Indonesia. This is in line with the study from Claessens and Laeven (2004), who said that, when the banking industry has higher competi­ tion, it will lead to lower profit. As for bank size as a variable, this has a positive and signifi­ cant impact on Islamic bank performance in Indonesia. This finding is in line with the study from Medley (2016) and Tan et al. (2017) stating that bank size will have positive impact on bank performance. The positive impact of bank size on bank performance can be explained by the fact that, due to economies of scale, larger banks can reduce cost. This cost reduction leads to performance improvements for banks. Banking sector development also has a positive and significant impact on Islamic bank per­ formance in Indonesia in terms of both ROA and ROE regressions. This finding is in contrast with the results of Demirguc-Kunt and Huizinga (1999), who found that the growing financial sector indicated a high level of competition that ultimately suppressed the net interest margin 214

banks could gain. However, GDP growth has a positive but not significant impact on Islamic bank performance in Indonesia. On the other hand, inflation variable has a negative impact on the ROA of Islamic bank, though this is not significant.

5 CONCLUSION, LIMITATIONS, AND SUGGESTIONS This study investigates the impact of credit risk and liquidity risk on Islamic bank perform­ ance in Indonesia. Using the data from Indonesian banks from 2008 to 2016, this study shows that credit risk and liquidity risk have a negative impact on the ROA of Islamic banks in Indo­ nesia. However, while credit risk has a negative impact, liquidity risk has a positive impact on the ROE of Islamic banks in Indonesia. This provides an overview for owners and management of banks of the need to always pay attention to risks, especially credit risk, when they want to formulate strategies aimed at improving bank performance, as this risk can significantly affect per­ formance. Thus, banking practitioners can lower credit risk (NPF) to obtain better performance. The results of this study are also expected to provide meaningful input for regulators in Indonesia who want to provide better governance for banking. Regulators who function as supervisors of banking performance can implement policies to keep the bank from potential negative effects of banking risks. Thus, the government’s function as a regulator is expected to be more optimal in the event of a win–win solution for both the community and the banking industry. The limitation of this paper is that this paper has not paid attention to the type of loans, as there is an assumption that many Islamic banks do mudarabah and, rather than channeling the loan, Islamic banks usually put their money in the financial instrument only. REFERENCES Acharaya, V., & Nagvi, H. (2010). The Seeds of a Crisis: A Theory of Bank Liquidity and Risk-Taking Over the Business Cycle. NYU Working Paper No. 2451/29886. Almekhlafi, E., Almekhlafi, K., Kargbo, M., & Hu, X. (2016). A study of credit risk and commercial banks’ performance in Yemen: Panel evidence. Journal of Management Policies and Practices 4(1), 55–69. Athanasoglou, P., Brissimis, S., & Delis, M. (2008). Bank-specific, industry-specific and macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions, and Money 18, 121–136. Basel Committee on Banking Supervision. (2000). Principles for the management of credit risk. 1–26. Bourke, P. (1989). Concentration and other determinants of bank profitability in Europe, North America and Australia. Journal of Banking and Finance 13, 65–79. Claessens, S., & Laeven, L. (2003). What drives bank competition: Some international evidence. Journal of Money, Credit and Banking, 36(3), 563–583. De Blas, B. & Russ, K. N. (2013). All banks great, small, and global: Loan pricing and foreign competition, International Review of Economics and Finance, 26, 4–24. Demirgüç-Kunt, A., & Huizinga, H. (1999). Determinants of commercial bank interest margins and prof­ itability: Some international evidence. World Bank Economic Review, 13(2), 379–408. Drehmann, M., & Nikolaou, N. (2008). Funding Liquidity Risk: Definition and measurement. Retrieved from https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1024.pdf. Figlewski, S., Frydman, H., & Liang, W. (2012). Modelling the effect of macroeconomic factors on cor­ porate default and credit rating transitions. International Review of Economics and Finance, 21(1), 87–105. Izhar, H. (2010). Identifying operational risk exposures in Islamic banking. Kyoto Bulletin of Islamic Area Studies, 3(2), 17–53. Jenkinson, N. (2008). Strengthening regimes for controlling liquidity risk. Bank of England Quarterly Bulletin. Kabir, M. N., Worthington, A., & Gupta, R. (2015). Comparative credit risk in Islamic and conventional bank. Pacific-Basin Finance Journal, 34: 327–353.

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Khan, M. S., Scheule, H., & Wu., E. (2017). Funding liquidity and bank risk taking. Journal of Banking and Finance, 82: 203–216. Lin, J., Chung, H., Hsieh, M., & Wu, S. (2012). The determinants of interest margins and their effect on bank diversification: Evidence from Asian banks. Journal of Financial Stability, 8: 96–106. Medley, B. (2016). The relationship between bank size and profitability. Federal Reserve Bank of Kansas City. Retrieved from https://www.kansascityfed.org/publications/ten/articles/2016/fall/bank_size. Mendoza, R., & Rivera, J. P. (2017). The effect of credit risk and capital adequacy on the profitability of rural banks in the Philippines. Scientific Annuals of Economics and Business, 64(1), 83–96. Miller, S., & Noulas, A. (1997). Portfolio mix and large-bank profitability in the USA. Applied Econom­ ics, 29, 505–512. Molyneux, P., & Thornton, P. (1992). Determinants of European bank profitability: A note. Journal of Banking and Finance, 16(6), 1173–1178. Nguyen, V. H. T., & Boateng, A. (2015). An analysis of involuntary excess reserves, monetary policy, and risk-taking behaviour of Chinese banks. International Review of Financial Analysis, 37, 63–72. Rasiah, D. (2010). Theoretical framework of profitability as applied to commercial banks in Malaysia. European Journal of Economics, Finance and Administrative Sciences, 19, 74–97. Tan, Y., Floros, C., & Anchor, J. (2017). The profitability of Chinese banks impacts of risk, competition and efficiency. Review of Accounting and Finance, 16(1), 86–105. Wahyudi, I., Rosmanita, F., Prasetyo, M. B., & Putri, N. I. S. (2015). Risk management for Islamic banks: Recent developments from Asia and the Middle East. Hoboken, NJ: Wiley.

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Oil price and cost of hajj: The evidence from Indonesia A. Salahuddin Faculty of Economics and Business, Universitas Islam Negeri Syarif Hidayatullah, Indonesia

W.A. Perdana Department of Management, Faculty of Economics and Business, Universitas Indonesia, Indonesia

N.D. Hendranastiti Durham University Business School, Durham University, UK

ABSTRACT: This study investigates the impact of oil price on cost of hajj in Indonesia during period 1975–2018. Using the OPEC oil price as an indicator, this study found that the oil price has a positive impact on the cost of the hajj pilgrimage. As the oil price increases, the hajj cost may also increase. This is due to a major component of hajj cost being transporta­ tion, which is sensitive to oil price changes.

1 INTRODUCTION The hajj represents the highest point of spiritual preparation and planning for Muslims. The hajj is also the part of five pillars of Islam. It is mandatory for Muslims who are able and qualified to do hajj (Budiman & Kusuma, 2012). More than 2 million people globally take part in the hajj each year, including around 150,000 Indonesian (Gatrad & Sheikh, 2005). Regular hajj packages cost around 36 million rupiah during the years 2012–2018 (Indonesian Ministry of Religion, 2015). The cost of the hajj keeps increasing due to the rising cost of goods and services in Indonesia and Saudi Arabia. In the last ten years, the cost of a regular hajj package has increased more than 50%. Transportation is the biggest component of hajj costs. Air transport and land transport con­ stitute around 54% of the total cost of the pilgrimage. These costs cannot be separated from the oil price. Indeed, overall economic conditions cannot be separated from the fluctuation of oil prices (Federal Reserve of San Francisco, 2007). Oil prices affect the economy on micro and macro levels. Higher oil price make production more expensive for any business, thus making it more expensive for households to consume products as usual. The same goes for businesses which use fuel as a major necessity to keep their activities running, such as the air­ line industry. The effect of towering oil prices on economic activities comes from the purchasing power decrease that leads to downward pressures on economic growth (Narayan & Narayan, 2007; Zhang & Yao, 2016). An increase in oil price will cause production cost increases for busi­ nesses that lead to higher inflation and lower production (Montoro, 2012; Natal, 2012; Anto­ nakakis et al., 2014; Du & He, 2015). Financial sectors are expected to react negatively in such cases. For airlines companies, oil prices are the largest input cost for this industry (Macquarie, 2016). According to Kavussanos et al. (2002) and Kavussanos and Marcoulis (2001), the effects of various global macroeconomic factors – such as fluctuations in global exchange rates, inflation, production growth, oil prices, and credit risk – have significant influence on the performance of many industries. The cost of performing the hajj in Indonesia is known as the Cost of Hajj Organizing (BPIH). The value of the BPIH varies each year according to fluctuations in the exchange rate 217

and economic conditions in Indonesia and globally. Given that air transportation is the big­ gest component of BPIH, changes in this component affect the BPIH accordingly. This study aims to investigate the relationship between the cost of the hajj and flunctuation in the price of oil.

2 DATA AND METHODOLOGY This study uses cross-section data. The sample used for this study is Indonesian hajj. All hajjrelated data are from the Indonesian Ministry of Religion’s website; macroeconomic variables are from the World Bank’s website. The period of the study is 1975–2018 because the use of air transport began in 1975. To see the impact of oil price on airline company’s financial status, the authors follow and expand on the specification proposed by Lee and Lee (2018), with slight modifications by the authors, which can be expressed as follows:

where i = 1,   , N and t = 1,   , T denote the time period and the individual companies, respectively. The dependent variable Costit is an indicator of cost; term χt is oil price. The term yt comprises as a set of macroeconomic control variables, such as the GDP growth rate and inflation rate. Finally, ni is the country-specific effect, and εit is the error term. The dependent, independent, and control variables used in this study are shown in Table 1.

3 EMPIRICAL RESULTS Descriptive statistics for the data used in this study are shown in Table 2. The average hajj cost in is 16,100,000 rupiah with a standard deviation of 14,000,000. The lowest hajj cost was 590,000 rupiah during 1975, while the highest is 38,200,000 rupiah during 2014. The oil price average is 38.3215 with a standard deviation of 28.98301. The highest price was during 2012 period, while the lowest was during 1975 period. The jamaah average is 127,274 with a standard deviation of 68,915. The highest number of jamaah was 200,094 during 1998 while the lowest was 12770 during 1975. The exchange rate average is 5,595.33 with the standard deviation of 4,686.582. The highest exchange rate was 13,389 during 2018, while the lowest was 415 during 1975. The inflation rate average is 0.1241 with a standard deviation of 0.11542. The lowest inflation was 0.0225, during 1986, while the highest was 0.752 during 1998. The average interest rate is 0.1275705 with a standard deviation of 0.09086; the highest was 0.3215 during 1998, while the lowest was 0.1107 during 2011. Table 3 shows the estimated results comparing oil price to hajj cost. For the Oil Price vari­ able, the author uses one proxy, which is the OPEC Oil Price. The authors use the test to see how much value variations from the independent variable can explain the variation of the value of the dependent variable. The coefficient of determination of Table 1. List of variables. Variable Dependent Variable Hajj cost Independent Variable Oil price Jamaah Control Variable Exchange rate Inflation rate Interest rate

Indicator

Source

Regular hajj cost OPEC oil price The number of people went to hajj Dollar to rupiah Annual inflation rate Lending rate

Indonesian Ministry of Religion OPEC Indonesian Ministry of Religion World Bank World Bank World Bank

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Table 2. Descriptive statistics. Variable Dependent Variable Hajj cost Independent Variable Oil price Control variable Jamaah Exchange rate Inflation rate Interest rate

Mean

Std Deviation

Min

Max

Obs

16,100,000

14,000,000

590,000

38,200,000

44

38.3125

28.98301

10.43

109.45

44

127,274.3 5,595.33 0.124159 0.127571

68,915.47 4,686.582 0.1154267 0.0908652

12,770 415 0.002254 0.110733

221,000 13,840 0.752712 0.321542

44 44 44 44

Table 3. Regression result summary. Variable Dependent Variable: Hajj Cost Intercept

Interest rate

872,951 0.552 94,401 0.001** 1.88605 0.892 2,330.368 0.000*** -21400 0.000*** 7,565,953

Obs R2 Adjusted R2

0.317 44 0.9438 0.9364

Oil-Price Jamaah Exchange rate Inflation rate

Notes: *, **, and *** denote significance at 10%, 5%, and 1% levels, respectively.

each model can be seen in Table 3. The model has an R2 value of 0.9438, which means that the oil price, jamaah, exchange rate, inflation rate, and interest rate can explain the hajj cost by 94.38%, while the rest can be explained with other variables outside of this model. Table 3 shows that the price of oil a has positive and significant influence on hajj cost. The significant level of Oil Price is 95 percent. This means that Oil Price can determine the hajj cost. It also means that the higher the price of oil, the higher the hajj cost will get, and vice versa. This can also happen because the cost of goods and services in general increase as the oil price gets high. Oil prices impact production costs and transports cost for goods and ser­ vices, meaning that, in the end, households have to spend more for the same goods and ser­ vices. The price of oil has a negative impact on the overall performance of a transportation or logistics company. These results are also consistently in line with the findings of Kim et al. (2014) and Lai et al. (2004), in which oil prices affect the cost functions of transportation com­ panies such as airlines, because it is regarded as the biggest component in their cost structure. The exchange rate variable has a positive and significant impact on hajj cost. The significant level of this variable is 90%. As the rupiah suffers against the US dollar, the general cost of imported goods or services become more expensive. Since 2016, the cost of the hajj in Indo­ nesia is calculated in rupiah, due to Central Bank of Indonesia policy number 17/3/PBI/2015 219

concerning the obligation to use rupiah in the territory of the Republic of Indonesia. Mean­ while, Saudi Arabia uses the US dollar for the exchange rate basis related to hajj costs in their country. Inflation rates shows significant and negative impact on hajj cost. In 1998, when inflation was highest, the cost of the hajj decreased year-on-year due to the huge decrease in purchasing power for Indonesians: Indonesia suffered 75 percent inflation, and the jamaah number decreased heavily from 200,094 to 71,045, because many Indonesian could not afford to pay the cost. The hajj cost in 2000 decreased 35 percent from the previous year, in order to adapt to the purchasing power of Indonesians, and the impact could be seen right away as the jamaah increased more than 140 percent.

4 CONCLUSION Using data from the Indonesian Ministry of Religion from 1975 to 2018, this study shows changes in the oil price changes has a positive and significant impact on hajj cost. Oil price can affect cost functions of goods generally, because it is regarded as the biggest component in cost structure of most companies, which is consistent with our theoretical argument. When oil price increases, costs increase. This study shows the positive impact of oil prices on hajj costs. The government – in this case, the Ministry of Religion and those planning the management of hajj – should always pay attention to the fluctuation of oil prices when they want to formulate strat­ egies. The government should always prepare to mitigate the shock of price hikes due to oil price fluctuation. REFERENCES Antonakakis, N., Chatziantoniou, I., & Filis, G. (2014). Dynamic spillovers of oil price shocks and eco­ nomic policy uncertainty. Energy Economics, 44, 433–447. Budiman, M. A., & Kusuma, D. B. W. (2012). Analisis Faktor yang Mempengaruhi Biaya Penyelenggar­ aan Ibadah Haji di Indonesia. Aceh Development International Conference 2012. Du, L., & He, Y. (2015). Extreme risk spillovers between crude oil and stock markets. Energy Economics, 51, 455–465. Federal Reserve of San Francisco. (2007). What are the possible causes and consequences of higher oil price on the overall economy? Retrieved from https://www.frbsf.org/education/publications/doctor­ econ/2007/november/oil-prices-impact-economy/. Gatrad, A. R., & Sheikh, Aziz. (2005). Hajj: Journey of a lifetime. British Medical Journal, 330, 133. Kavussanos, M., Akoulis, A., & Marcoulis, S. (2002). Macroeconomic factors and international industry returns. Applied Financial Economics, 12(12), 923–931. Kavussanos, M., & Marcoulis, S. (2001). A Market Analysis of Risk and Return in the Water and Other Transportation Industries. Boston, MA: Kluwer. Kementerian Agama Republik Indonesia. (2015). Data statistic Jemaah haji Indonesia. Kim, W.J., Hammoudeh, S., Hyun, J. S., & Gupta, R. (2014). Oil price shocks and China’s economy: Reactions of the monetary policy to oil price shocks. University of Pretoria: Department of Economics Working Paper Series 81. Lai, K.-H., Ngai, E., & Cheng, T. (2004). An empirical study of supply chain performance in transport logistics. International Journal of Production Economics, 87(3), 321–331. Lee, Chi-Chuan., & Lee, Chien-Chiang. (2018). Oil price shocks and Chinese banking performance: Do country risks matter? Journal of Energy Economics, 77(C), 46–53. Montoro, C. (2012). Oil shocks and optimal monetary policy. Macroeconomic Dynamics 16(2), 240–277. Natal, J. (2012). Monetary policy response to oil price shocks. Journal of Money Credit, and Banking, 44(1), 53–101. Narayan, P. K., & Narayan, S. (2007). Modelling oil price volatility. Energy Policy 35: 6549–6553. Zhang, Y. J., & Yao, T. (2016). Interpreting the movement of oil prices: Driven by fundamentals or bubbles? Economic Modelling, 55, 226–240.

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Corporate social responsibility performance and banking soundness in Indonesia: Should the industry be more socially responsible? R. Rokhim & W.A. Perdana Department of Management, Faculty of Economics and Business, Universitas Indonesia, Indonesia

M.R. Astrini Tilburg School of Economics and Management, Univesity of Tilburg, Tiburg, The Netherlands

ABSTRACT: This study investigates the impact of corporate social responsibility (CSR) performance on banking soundness in Indonesian banking industries during the period 2008–2016. Using OECD standards as CSR scoring indicators, this study found that CSR per­ formance has a positive impact on banks’ soundness. CSR may affect both the cost and rev­ enue, although as costs increase, revenues increase even more. Therefore, banks in Indonesia have to improve CSR performance in order to increase financial performance and finally to reach banking soundness.

1 INTRODUCTION After the financial crisis in 2008, corporate social responsibility (CSR) began to be taken more seriously. The behavior of the banking industry is considered to be the main reason behind the economic and financial crisis in 2008 (Esteban-Sanchez et al., 2017). Transparency and accountability are now contested in the corporate world, as companies were forced to restruc­ ture their relationship with stakeholders. Big American banks such as Bank of America and J. P. Morgan released full sets of CSR reports in order to highlight their efforts to help eco­ nomic growth, strengthen the communities where the banks operate, give educational oppor­ tunities, and promote sustainable environment impact (Cornett et al., 2016). CSR implementation programs were meant to protect banks’ reputations (Soana, 2011). It was con­ sidered important to overcome the after-effects of the financial crisis that led t increased skep­ ticism and scrutiny toward commercial banks’ motives and actions. The European Commission (2001) defined CSR as a concept by which companies integrate social and environmental concerns into their business operations and into their stakeholder interactions on a voluntary basis. Nowadays, CSR is used as a tool for organizations to enhance competitiveness (Maqbool et al., 2018). CSR is considered to relate to a company’s financial performance (Waddock & Greaves, 1997). Wu and Shen (2013) found that corporate social responsibility showed a positive effect on the financial performance of banks.

2 LITERATURE REVIEW Buchholz (1991) in Schwartz (2011) concludes that there are five main elements found in many definitions of corporate social responsibility: (i) the company has a responsibility beyond that of the production of goods and services for profit; (ii) these responsibilities involve aid to address important social issues, particularly those they possibly caused; (iii) the company has a broader responsibility in addition to shareholders alone; (iv) the company has an impact in excess of a market transaction; (v) the company has a wider range that can be 221

achieved from the values held by humans, rather than just economic value alone. In other words, the definition of corporate social responsibility includes the notion that a company has an obligation to the community in excess of their economic responsibility to their shareholders (Schwartz, 2011). Waddock and Greaves (1997) said that CSR performance might improve profitability. Bank customers, becoming more aware of CSR issues, consider them to be very important (Polychronidou et al., 2014). Therefore, in order to attract more customers and to increase the trust from society, banks should improve CSR performance. That said, CSR per­ formance does not improve bank soundness directly. It is the effect of positive perceptions toward a bank with a good CSR performance, which tend to be more protected from risk (El Ghoul et al., 2011). CSR performance index is a measurement of a company’s CSR performance. In order to evaluate CSR performance, the authors used the OECD reference regarding corporate govern­ ance that are widely used as a basic reference internationally. Cheung et al. (2012) have trans­ lated the standard of OECD into a series of questions. Financial soundness is a term investors use in relation to a financial institution/business when determining its level of performance. For a bank, return on assets (ROA) is one indica­ tor of financial soundness (IMF, 2015). Rasiah (2010) said that, as the ROA ratio increases, so too do bank profits.

3 DATA AND METHODOLOGY This study examines the impact of CSR performance that has been calculated based on the proxy OECD standard translated by Cheung et al. (2012). The CSR index is then tested on aspects of financial performance replicating the model by Wu and Shen (2013). The Aauthors used banks in Indonesia, using years from 2008 to 2016. Bank-specific data sources are drawn from annual reports and Bankscope. Industry-specific variables are taken from the website of the Financial Service Authority of Indonesia (OJK), while macroeconomic-specific variables are from the website of the World Bank. Referring to a study conducted by Wu and Shen (2013), the research model used in this study is as follows:

CSRIndex is CSR Performance Index, used as an indicator of the company’s CSR Perform­ ance. TA is the natural logarithm of total assets as an indicator of the bank size. Leverage is equity to total assets; this variable explains the bank’s ability to repay long-term liabilities (solvency). LoanDep is loan to total deposits; it explains the ability of banks to provide loans based on available funds. CostInc is overhead cost to total income; it explains the noninterest expense to total revenue. CreditDGP is domestic credit to private sector per GDP; it serves as the macroeconomic indicators related to the sovereign debt. HHI is Herfindahl-Hirschman Index; it indicates the market share held by each bank. GDPGrowth is GDP growth, an indica­ tor of economic growth. GDPperCap is GDP per capita, an indicator of current economic conditions at that time. Finally, μ is the error variable. 4 EMPIRICAL RESULT The model has an R2 value of 0.5932, which means that CSR performance, coverage, bank size, leverage, loan to deposit, cost, HHI, domestic credit to GDP ratio, GDP growth, and GDP per capita can explain bank soundness (ROA) of 59.32%. The significant level of CSR is 99%, which shows that the CSR performance of a bank can determine the bank soundness. It 222

Table 1. Regression result summary. Dependent Variable: ROA 0.0583 0.057* 3.1963 0.000*** -0.0638 0.024** -0.0007 0.3390 -0.0006 0.001*** -0.0001 0.4100 -0.0002 0.000*** -0.0138 0.4810 -0.0459 -0.2750 -0.0231 0.8670 2.7401 0.6110 Yes 234 0.5932

Intercept CSR Index Coverage BankSize Leverage LDR CostInc HHI CreditGDP GDPGrowth GDPperCap Random Effects Obs R2

Note: *, **, and ***denote significance at 10%, 5%, and 1% levels, respectively.

also means that the higher the CSR performance level, the higher the bank soundness (ROA) will be. This is in line with the finding from Wu and Shen (2013), who found that a bank’s CSR performance has a positive impact on the ROA of a bank’s soundness. It is also in line with the notion that CSR performance improve performances (Shen & Chang, 2009; Simpson & Kohers, 2002; Scholtens & Dam, 2007; Scholtens, 2009; Harjoto & Jo, 2008). CSR may affect both cost and revenue functions, which is consistent with our theoretical argument. When a bank engages in CSR, although costs increase, revenues increase even more. The coverage variable indicates credit risk faced by banks has a negative impact on bank soundness in Indonesia. The table also shows that credit risk has a significant influence on bank soundness in Indonesian banks and that the higher the credit risk, the lower the bank soundness (and vice versa). This is in line with the research of Miller and Noulas (1997), who found a higher ratio suggests that the bank has higher risk, indicating that an increase in credit risk exposure leads to a decrease in bank profitability. The leverage variable that indicates solvency has a negative and significant impact on bank soundness in Indonesia. This finding is in line with the study from Tailab (2013), who found that solvency has a negative impact on American banks’ ROA. Cost variable also has a negative and significant impact on bank soundness. This is in line with research conducted by Athanasoglou (2008) and Goddard (2009) stating that the more efficient the banking operational expenditure, the higher the profits are that can be earned.

5 CONCLUSION This study shows that CSR performance has a positive and significant impact on bank soundness in Indonesia. CSR may affect both the cost and revenue functions, which is 223

consistent with our theoretical argument. When a bank engages in CSR, although costs increase, revenues increase even more. This gives an overview for bank owners and man­ agement to always pay attention to CSR index indicators when developing strategies to improve bank soundness. The results of this study are also expected to provide meaning­ ful input for regulators in Indonesia who want to provide a good environment for bank­ ing. As supervisors of banking performance, regulators can also implement policies that obligate the bank to improve its CSR performance every year. The limitation of this art­ icle is that it only uses the CSR index; therefore, we cannot see the kind of CSR that a bank already did. REFERENCES Adegbola, E. A. (2014). Corporate social responsibility as a marketing strategy for enhanced perform­ ance in the Nigerian banking industry: A Granger causality approach. Procedia - Social and Behavioral Sciences, 164, 141–149. Aebi, V., Sabato, G., & Schmid, M. (2012). Risk management, corporate governance, and bank sound­ ness in the financial crisis. Journal of Banking and Finance, 36, 3213–3226. Athanasoglou, P., Brissimis, S., and Delis, M. (2008). Bank-specific, industry-specific and macroeco­ nomic determinants of bank profitability. Journal of International Financial Markets, Institutions, and Money, 18, 121–136. Buchholz, R. A. (1991). Corporate responsibility and the good society: From economics to ecology. Busi­ ness Horizons, 34(4),19–31. Cheung, Y. L., Jiang, K., & Tan, W., 2012. “Doing-good” and “doing-well” in Chinese publicly listed firms. China Economic Review, 23, 776–785. Cornett, M. M., Erhemjamts, O., & Tehranian, H. (2016). Greed or good deeds: An examination of the relation between corporate social responsibility and the financial perform­ ance of U.S. commercial banks around the financial crisis. Journal of Banking and Finance, 70, 137–159. El Ghoul, S., Guedhami, O., Kwok, C. C. Y., & Mishra, D. R. (2011). Does corporate social responsibil­ ity affect the cost of capital? Journal of Banking and Finance, 35, 2388–2406. Esteban-Sanchez, P., de la Cuesta-Gonzalez, M., & Paredes-Gazquez, J.D. (2017). Corporate social per­ formance and its relation with corporate financial performance: International evidence in the banking industry. Journal of Cleaner Production, 162, 1102–1110. Grougious, V., Leventis, S., Dedoulis, E., & Ansah, S. O. (2014). Corporate social responsibility and earnings management in U.S. banks. Accounting Forum, 38, 155–169. Harjoto, M. A., & Jo, H., (2008). Corporate social responsibility and operating performance. Journal of Academy of Business and Economics, 18(1),59–71. Kirkpatrick, G. (2009). Corporate governance lessons from financial crisis. OECD Financial Market Trends, 2009(1). Maqbool, S., & Zameer, M. N. (2018). Corporate social responsibility and financial performance: An empirical analysis of Indian banks. Future Business Journal, 4, 84–93. Miller, S., & Noulas, A. (1997). Portfolio mix and large-bank profitability in the USA. Applied Econom­ ics, 29, 505–512. Polychronidou, P., Ioannidou, E., Kipouros, A., Tsourgiannis, L., & Simet, G. F. (2014). Corporate social responsibility in Greek banking sector: An empirical research. Procedia Economics and Finance, 9, 193–199. Schwartz, M. S. (2011). Corporate social responsibility: An ethical approach. Peterborough, ON: Broadview Press. Scholtens, B. (2009). Corporate social responsibility in the international banking industry. Journal of Business Ethics, 86(2),159–175. Scholtens, B., & Dam, L. (2007). Banking on the equator: Are banks that adopted the equator principles different from non-adopters? World Development, 35(8),1307–1328. Sen, S., & Bhattacharya, C. B. (2001). Does doing good always lead to doing better? Consumer reactions to corporate social responsibility. Journal of Marketing Research, 38(2),225–243. Shen, C. H., and Chang, Y. (2009). Ambition versus conscience: Does corporate social responsibility pay off? The application of matching methods. Journal of Business Ethics, 88(1),133–153. Simpson, W., & Kohers, T. (2002). The link between social and financial performance: Evidence from the banking industry. Journal of Business Ethics, 35, 97–109.

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Soana, M. G. (2011). The relationship between corporate social performance and corporate financial per­ formance in the banking sector. Journal of Business Ethics, 104, 133–148. Tailab, M. M. K. (2014). The effect of capital structure on profitability of energy American firms. Inter­ national Journal of Business and Management Invention, 3(12),54–61. Waddock, S. A., & Graves, S. B. (1997). The corporate social performance-financial link. Strategic Man­ agement Journal, 18, 303–319. Wu, M. W., & Chung H.-S. (2013). Corporate social responsibility in the banking industry: Motives and financial performance. Journal of Banking and Finance, 37, 3529–3547.

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Oil price and airline company financial soundness R. Rokhim & W.A. Perdana Faculty of Economics and Business, Department of Management, Universitas Indonesia, Indonesia

M. Robbani Tilburg School of Economica and Management, University of Tilburg, Tilburg, The Netherlands

ABSTRACT: This study investigates the impact of oil prices on the financial soundness of airline companies during the period 2006–2017. Using the OPEC oil price as an indica­ tor, this study found that a rise in oil prices has a negative impact on an airline com­ pany’s financial soundness. The price of oil price affect the cost function, because oil price is considered to be the biggest component in the cost structure of airlines. Therefore, air­ lines should always anticipate changes in oil prices in order to maintain their financial well-being. 1 INTRODUCTION Changes in supply and demand for oil, ceteris paribus, affect the balance of world oil prices (Nizar, 2002). The world economy is affected by petroleum prices through the transmission mechanism. An increasing price of oil will make goods on the market more expensive and thus will reduce the amount of money held by households or companies, especially in aggregate demand. The asymmetric effect of price shocks is the essence of this mechanism. Price rises reduce economic growth, and vice versa (Elder & Serlentis, 2010). Macroeconomic developments such as oil price shocks do not necessarily impact every aspect of financial performance in equal ways; some performance indicators are known to be more sensitive than others (Hofmann et al., 2018). Moreover, future per­ formance indicators are usually expected from stock prices (Alizadeh et al., 2015). How­ ever, it’s not always certain whether an economic shock such as a massive decrease in oil prices affects the revenue streams of a company before it negatively affects the stock price, or vice versa. Growth in demand for liquid fuel is driven by the sector that consumes the most, which is the transportation sector. This is due to an increasing population and rising incomes, which contribute to the rise in demand for travel. Furthermore, given the important role of oil as an input in production processes and transportation, if the oil price increases it will have a negative impact on the global economy (Narayan & Sharma, 2014; Narayan & Gupta, 2015). Oil is known to be very important in both eco­ nomic activities and financial markets (Bashar et al., 2013; Narayan & Sharma, 2014; Morana, 2017; Peng et al., 2017). Additionally, since Hamilton (1983), studies have looked at the impact of oil price shocks on macroeconomic aggregates such as invest­ ment expenditure, economic output, stock return, inflation rate, interest rate, and exchange rate (Narayan et al., 2008; Tang et al., 2010; Lee & Zeng, 2011; Narayan & Sharma, 2011; Ratti & Vespignani, 2013; Narayan & Gupta, 2015; Basher et al., 2016; Zhao et al., 2016; Salisu & Isah, 2017). This paper explores the research gaps and empirically assesses how the financial soundness of airline companies reacts to macroeconomic effects by using the annual data of airlines worldwide from 2006 to 2017. This research is expected to have implications for academia, owners, and regulators. 226

2 LITERATURE REVIEW The effect of towering oil prices on economic activities comes from the purchasing power decrease that leads to downward pressure on economic growth (Narayan & Nara­ yan, 2007; Zhang & Yao, 2016). The increase of oil price trends causes production cost increases that lead to higher inflation and lower production (Montoro, 2012; Natal, 2012; Antonakakis et al., 2014; Du & He, 2015). Financial sectors are expected to react negatively in such cases. Airline companies do really depend on oil prices, as price of oil is the largest input cost for this industry (Macquarie, 2016). The weakening of oil prices enhances profits, as it leads to lower airfares, stimulating demand for travel and pushing airlines to increase capacity. Moreover, margins usually increase along with higher eco­ nomic growth (Lee & Lee, 2018). On the other hand, inflation might raise production costs, thereby harming performance in most industries. According to Kavussanos et al. (2002) and Kavussanos and Marcoulis (2001), the effects of various global macroeco­ nomic factors, such as fluctuations in global exchange rates, inflation, production growth, oil prices, and credit risk, have significant influence on the performance of many industries, including airline transportation. In addition, financial soundness includes the ease with which investors can use a financial institution/business to determine the level of corporate performance. Financial soundness is a performance measurement of a company (IMF, 2015). According to IMF (2015), return on assets (ROA) is one indicator of financial soundness. Rasiah (2010) said that as ROA ratio grows higher, profits also rise. ROA is the ratio of operating profit to average total assets (Rushdi et al., 2003). ROA shows a company’s ability to generate profits from its assets, though it may be biased due to off-balance-sheet activities (Athanasoglou et al., 2005).

3 DATA AND METHODOLOGY This study uses unbalanced panel data. The sample used for this study is all airlines in Europe, Asia Pacific, and North America that are availaBle on Thomas Reuter. With regards to the data sources, the soundness variable is also from Thomas Reuter, while the macroeconomic variables are from the World Bank’s website. The period of the study is 2006–2017. To see the impact of oil price shocks on airlines financial performance, the authors follow and expand on the specification proposed by Lee and Lee (2018), which can be expressed as follows:

Here, i = 1,   , N and t = 1,   , T denote the time period and the individual companies, respectively. The dependent variable πit is an indicator of financial soundness; term χt is oil price. The term yt comprises a set of macroeconomic control variables, such as the GDP growth rate and inflation rate, while term zit comprises a set of company-specific control vari­ ables, including the company size and market share. Term α1 is the estimated persistence coef­ ficient of company’s financial soundness. Finally, ni is the country-specific effect, and εit is the error term. 4 EMPIRICAL RESULTS The table shows the estimated impact of oil price on airline financial soundness. For the “Oil Price” variable, the author uses one proxy, which is OPEC Oil Price. It can be seen in Table 1. The authors use the test to see to what extent the value variations from the independent variable can explain the variation of the value of the dependent variable.The model has an R2 value of 0.0385, which means that the oil price, company size, HHI, GDP growth, and 227

Table 1. Regression result summary of worldwide sample. Dependent Variable: ROA 0.0605 0.000**** -0.03656 0.012*** -3.7823 0.278 -0.000893 0.377 0.316543 0.01*** 0.07067 0.609 Yes 468 0.0385

Intercept Oil Price Size HHI GDP Growth Inflation Random Effects Obs R2

Notes: *, **, ***, and **** denote significance at 15%, 10%, 5 %, and 1% levels, respectively.

inflation rate can explain an airline company’s financial soundness (ROA) of 3.85 percent, and the rest can be explained with other variables outside of this model. The result shows that the price of oil has a negative and significant influence on an airline company’s financial soundness. The significant level of the variable Oil Price is 95 percent. This means that the price of oil can determine an airline’s financial soundness. It also means that the higher the price of oil, the lower the airline’s financial soundness (ROA), and vice versa. This finding is in line with the finding from Baumeister and Peersman (2013), who found that oil prices have a negative impact on the overall performance of a transportation or logistics company. These results are also consistently in line with the findings from Kim et al. (2014) and Lai et al. (2004). Oil price may affect cost functions of transportation companies such as airlines because it is regarded as the biggest component in cost structures of airlines. Size variable has a negative but not significant impact on an airline’s financial soundness. HHI or competition variable also does not have a significant impact on an airline’s financial soundness. Furthermore, inflation does not have a significant impact on the dependent vari­ able that the authors tested. GDP growth shows a positive and significant influence on an air­ line’s financial soundness, with a significance level of 95%. This means that GDP growth can determine an airline’s financial soundness. It also means that the higher the GDP growth, the higher an airline’s financial soundness (ROA), and vice versa. This is in line with the finding from Dietrich and Wanzenried (2011), who stated that higher economic growth boosts demand for travel and other services, thus increasing airline profitability.

5 CONCLUSION Using data from Indonesian banks from 2006 to 2017, this study shows changes in oil price have a negative and significant impact on airlines’ financial soundness. Oil prices may affect cost functions of transportation companies such as airlines because it is regarded as the big­ gest component in airlines’ cost structure, which is consistent with our theoretical argument. When oil prices increase, costs increase, and financial soundness decreases. Based on this study showing the negative impact of oil price increases on the financial soundness of airlines, owners and management of airlines should always pay attention to the fluctuations of oil prices when they want to formulate strategies. Airlines should always prepare hedge fund in 228

order to overcome the impact of oil price volatility, but they have to be very careful not to put away too much money for hedging. Hedge funds should be well calculated so they can become effective in mitigating uncertainty in oil prices. In addition to hedge funds, airlines should also consider advance purchase of oil as part of their strategy, as this could help miti­ gate oil price uncertainty. This research is limited by the fact that airlines usually take out an operational lease for their aircraft, which are their main tools for generating revenue. This research does not take into account operating leases due to time constraints, and it also does not include sales as a variable indicator in the research model. REFERENCES Alizadeh, A. H., Kappou, K., Tsouknidis, D., & Visvikis, I. (2015). Liquidity effects and FFA returns in the international shipping derivatives market. Transportation Research Part E: Logistics and Transpor­ tation Review, 76, 58–75. Antonakakis, N., Chatziantoniou, I., & Filis, G., 2014. Dynamic spillovers of oil price shocks and eco­ nomic policy uncertainty. Energy Economics, 44, 433–447. Athanasoglou, P., Brissimis, S., & Delis, M. (2008). Bank-specific, industry-specific and macroeconomic deter­ minants of bank profitability. Journal of International Financial Markets, Institutions, and Money, 18, 121–136. Basher, S. A., Haug, A. A., & Sadorsky, P., 2016. The impact of oil shocks on exchange rates: A Markov-switching approach. Energy Economics, 54, 11–23. Baumeister, C., & Peersman, G. (2013). Time-varying effects of oil supply shocks in the U.S. economy. American Economic Journal of Macroeconomics, 5(4), 1–28. Claessens, S., & Laeven, L. (2003). What drives bank competition: Some international evidence. The World Bank Financial Sector Operations and Policy Department. Dietrich, A, & Wanzenried, G. (2011). Determinants of bank profitability before and during the crisis: evidence from Switzerland. Journal of International Financial Markets, Institutions and Money, 21(3), 307–327. Du, L., & He, Y., 2015. Extreme risk spillovers between crude oil and stock markets. Energy Economics, 51, 455–465. Flamini, V., McDonald, C., & Schumacher, L. (2009). The determinants of commercial bank profitability in Sub-Saharan Africa. IMF Working Paper No. 09/15. Washington, DC: International Monetary Fund. Goddard J., Molyneux, P., & Wilson, J. O. S. (2004). The profitability of European banks: A cross-sectional and dynamic panel analysis, The Manchester School, 72(3), 363–381. Hamilton, J. D. (1983). Oil and the macroeconomy since World War II. Journal of Political Economics, 91(2), 228–248. Hofmann, E., Solakivi, T., Touli, J., & Zinn, M. (2018). Oil price shocks and the financial performance patterns of logistics service providers. Energy Economics, 72, 290–306. Idris, I. T., & Nayan, S. (2016). The moderating role of loan monitoring on the relationship between macroeconomic variables and non-performing loans in ASEAN countries. International Journal of Economics and Financial Issues, 6(2), 402–408. Kavussanos, M., Akoulis, A., & Marcoulis, S. (2002). Macroeconomic factors and international industry returns. Applied Financial Economics, 12(12), 923–931. Kavussanos, M., & Marcoulis, S. (2001). A Market Analysis of Risk and Return in the Water and Other Transportation Industries. Boston, MA: Kluwer. Kim, W. J., Hammoudeh, S., Hyun, J. S., & Gupta, R. (2014). Oil price shocks and China’s economy: Reactions of the monetary policy to oil price shocks. University of Pretoria: Department of Economics Working Paper Series 81. Lai, K.-H., Ngai, E., & Cheng, T. (2004). An empirical study of supply chain performance in transport logistics. International Journal of Production Economics, 87(3), 321–331. Lee, Chi-Chuan, & Lee, Chien-Chiang. (2018). Oil price shocks and Chinese banking performance: Do country risks matter? Journal of Energy Economics, 77. Medley, B. (2016). The relationship between bank size and profitability. Federal Reserve Bank of Kansas City. Retrieved from: https://www.kansascityfed.org/publications/ten/articles/2016/fall/ bank_size. Montoro, C. (2012). Oil shocks and optimal monetary policy. Macroeconomic Dynamics, 16(2), 240–277. Natal, J., 2012. Monetary policy response to oil price shocks. Journal of Money, Credit and Banking, 44 (1), 53–101.

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Narayan, P. K., & Narayan, S., 2007. Modelling oil price volatility. Energy Policy, 35, 6549–6553. Nizar, M. A. (2002). Kenaikanhargaminyak dunia danimplikasinyabagi Indonesia. Business News, (6779), 1C–4C. Peng, C., Zhu, H., Jia, X., & You, W. (2017). Stock price synchronicity to oil shocks across quantiles: evidence from Chinese oil firms. Economic Modelling, 61, 248–259. Ratti, R. A., & Vespignani, J. L. (2013). Liquidity and crude oil prices: China’s influence over 1996–2011. Economic Modelling, 33, 517–525 Salisu, A. A., & Isah, K. O. (2017). Revisiting the oil price and stock market nexus: A nonlinear panel ARDL approach. Economic Modelling, 66, 258–271. Sufian, F., & M. Habibullah (2009). Bank specific and macroeconomic determinants of bank profitabil­ ity: Empirical evidence from the China banking sector. Frontiers of Economics in China, 4, 274–291. Trujillo-Ponce, A. (2013). What determines the profitability of banks? Evidence from Spain. Accounting and Finance, 53, 561–586. Zhang, Y. J., & Yao, T. (2016). Interpreting the movement of oil prices: Driven by fundamentals or bubbles? Economic Modelling, 55, 226–240. Zhao, L., Zhang, X., Wang, S., & Xu, S. (2016). The effects of oil price shocks on output and inflation in China. Energy Economics, 53, 101–110.

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Quality of channel integration, perceived fluency, and omnichannel service usage in the fashion industry moderating the role of gender J.A. Nasir & T.E. Balqiah Master of Management, University of Indonesia, Indonesia

ABSTRACT: The rapid development of technology has influenced many changes in various sectors, including the retail sector and the fashion industry. Multichannel service is starting to shift to omnichannel. To better understand the arising phenomena, this study aims to analyze the potential factors when using omnichannel services in the fashion industry. This research develops a model based on object-based beliefs and behavioral beliefs to test its relationship with the level of omnichannel service usage. In addition, gender was hypothesized as moderat­ ing the effect of behavioral belief on omnichannel service usage behavior. Using an online survey of 248 omnichannel users, this study found that the quality of channel integration sig­ nificantly influenced the perceived fluency across different channels, which finally improved omnichannel services usage. The role of gender was also shown to have a moderating role: in this case, the effect of perceived fluency on the use of omnichannel services among women was higher than that among men.

1 INTRODUCTION The rapid development of technology, in this case the Internet, has made it a premiere neces­ sity, with internet users in the Asia Pacific region in 2018 reaching 2.21 billion people, and internet users in Indonesia continue to increase every year: 95.2 million in 2018 and predicted to reach 149.9 million by 2023. Indonesia’s consumer shopping habits have also changed. Online, consumers can more easily research what they want to buy, anywhere and anytime. Consumers now expect to be able to buy anything through any means, anywhere, and with the same brand experience (Lazaris et al., 2014). Research by McKinsey (2018) stated that 94% of consumers worldwide have used the inter­ net for shopping. In Indonesia alone, Statista (2018) showed that the growth of internet users continues each year. Statista (2018) also found that about 50% of consumers in Indonesia do online research before buying a product offline; 30% see and try out products in offline stores before buying them through online channels; and the remaining 20% buy directly. Retail businesses that rely more on physical shops are now increasingly disadvantaged because of changing shopping trends. In the fashion industry in 2017, many retail businesses showed a decline, leading to closures. On the other hand, the fashion sector remained strong, contributing around 18.01% or around 116 trillion. Omnichannel is among the emerging solu­ tions to the changing economy. It is a practice in which companies have more than one sales channel, and the channels are integrated with one another. These channels are also supported by technological developments to achieve coordinated services. In addition, omnichannel aims to integrate various types of fragmented technology channels, including the Internet, mobile phones, tablets, applications, and social media, as well as physical stores (Lazaris & Vrecho­ poulos, 2014). The extent to which these strategies can achieve the desired results is highly dependent on customer perceptions and their use of omnichannel services (Verhouf et al., 2015). The success of omnichannel is not only related to the extent to which various channels are integrated but also to the customer’s perception of the smoothness of switching across channels. For this 231

reason, theoretical investigations about the behavior of omnichannel use from the customer’s point of view clearly deserve more attention. It is therefore necessary to develop a research model based on the quality of cross-channel integration, channel choice breadth, channel ser­ vice transparency, content consistency, process consistency, and perceived fluency when using omnichannel services. This study added gender as a moderating variable. According to the World Health Organization (WHO) (2016), gender refers to socially constructed characteris­ tics (i.e. norms, roles, and relationships) of a person’s biological gender (i.e., male and female). Many studies have proposed gender as a moderating variable (e.g., Srivastava, 2015; Mithal & Kamakura, 2001; Saad & Gill, 2000). This argument is based on social role theory, which shows that different groups of people behave differently in different situations and take on different roles (Eagly, 1997). Thus, having a different social status (i.e., gender) will lead to different roles or behaviors that need further research.

2 LITERATURE REVIEW The quality of channel integration is defined as the ability to provide customers or users with a seamless service experience that is integrated in various sales channels (Sousa & Voss, 2006). Previous studies have shown that the quality of channel integration can significantly explain customer cognition and behavior in various channels (Wu & Yang, 2016). Wu and Chang (2016) found that the quality of channel integration increases the value of customer perception when shopping online. Therefore, the hypothesis is formulated as follows: H1: Channel choice breadth, channel service transparency, content, and process consistency are positively associated with perceived fluency. Fluency is the ability of services to support the smooth processing of information from user activities across sales channels (Reber et al., 2004). For example, if a user switches from activ­ ity on their PC to the sales channel service via a cell phone, fluency is the extent to which the service on the cell phone pick up where the user’s activity on the PC left off. Some research extends the concept of fluency to the context of omnichannel services and argues that fluency perception is associated with continuity of cross-platform transitions and migration of user activities. Therefore, it acts as an important factor for measuring cross-platform user experi­ ence (Majrashi & Hamilton, 2015). Therefore, the hypothesis can be formulated as follows: H2: Perceived fluency is positively associated with omnichannel service usage. There is a clear preference between women and men in shopping: women spend more time than men shopping, but men tend to spend more money than women in the context of com­ parable activities (Bakewell & Mitchell, 2004). Men think that looking around and browsing are wastes of time. However, men are less concerned about price; they prefer to give more values to time than money. Instead of spending time visiting many stores and comparing prices and products, men would rather pay a higher price to save time. On the contrary, exploring is very important in the process of shopping for women. Browsing is a way of gath­ ering information, and it also exposes the shopper to more items, generating wants and desires. Fun can also occur through browsing, whether or not a purchase is made (Campbell, 1997). Thus, the hypothesis can be formulated as follows: H3: The effect of perceived fluency on the use of omnichannel services will be higher in women than in men.

3 RESEARCH METHODS Data processing was conducted through conclusions, reliability, validity, and hypothesis test­ ing. The conclusion test contains a frequency distribution of information and images related to the profile of research respondents, including gender data, education level, monthly expend­ iture on fashion, and frequency of cross-channel service usage each month. In the reliability test, the validity test, and the hypothesis test, the researchers analyzed data received from the respondent. Analysis of research using SPSS software tested for validity and reliability, while 232

Figure 1.

Final analysis result.

WrapPLS software was used to test hypotheses with Partial Least Squares. Primary data through the distribution of questionnaires online was done in three stages: wording test to 10 respondents; pilot test to 30 respondents; main test to 248 respondents, with a minimum of 160 respondents because the research model consisted of 7 variables with a total of 32 indica­ tors (Hair et al., 2014). It used the Likert scale 1–5 (1 = strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree).

4 RESULTS AND DATA ANALYSIS The perception of fluency is the main determinant in the use of omnichannel services. When customers experience a smooth cross-channel experience in omnichannel services, they will have a positive attitude and feel a reduced sense of effort expended for channel transitions: thus, they will be more likely to continue to explore omnichannel services. Content consistency and service channel transparency become the main determinants in improving consumers’ flu­ ency perception. The effect of perceived fluency on the use of omnichannel services is greater in women com­ pared to men. The biggest factor considered by women is content consistency, while in men it is the consistent process between omnichannel service channels. This shows that different groups of people behave differently in different situations and take on different roles.

5 CONCLUSIONS AND SUGGESTIONS It is expected that omnichannel service providers must optimize their channel management to create a seamless cross-channel service experience for customers. Unlike multichannel, omni­ channel is about providing a smooth experience and helping customers complete transactions transactions using different channels. It is expected that omnichannel service providers must provide more channels for customers to access services and help customers understand how to use and integrate different channels to meet their consumption needs. Omnichannel service providers must also ensure that the information provided on different channels is consistent and that the service process on different channels is seamless and without problems. It is thus

Table 1. Multiple sample. Gender

Path

Path coefficient

Male Female

Perceived fluency to omnichannel service usage Perceived fluency to omnichannel service usage

0.27 0.39

233

recommended that omnichannel service providers create a feedback mechanism that is responsive.

6 LIMITATION AND FUTURE RESEARCH This research was conducted solely in Indonesia and merely focused on omnichannel service in the fashion retail industry. This research was collected using an online survey method, con­ ducted once. Although perceived perceptions of smoothness have explained most of the vari­ ation in the use of omnichannel services, several other important factors may play a role that cannot yet be included in this study. Future research can use the data collected and create more varied studies; data from different countries is highly recommended. Future studies can explore this problem further by taking into consideration other relevant factors. REFERENCES Lazaris, C., & Vrechopoulos, A. (2014). From multi-channel to ‘omnichannel’ retailing: Review of the literature and calls for research. 2nd International Conference on Contemporary Marketing Issues (ICCMI). Athens, Greece. Majrashi, K., & Hamilton, M. (2015). A cross-platform usability measurement model. LectNotes Softw. Eng., 3(2), 132–144. Melero, I., Sese, F. J., & Verhoef, P. C. (2016). Recasting the customer experience in today’s omnichannel environment. Universia Business Review, 13(2), 18–36. Reber, R., Schwarz, N., & Winkielman, P. (2004). Processing fluency and aesthetic pleasure: Is beauty in the perceiver’s processing experience? Personality and Social Psychology Review, 8(4), 364–382. Sousa, R., & Voss, C. A. (2006). Service quality in multichannel services employing virtual channels. Journal of Service Research, 8(4), 356–371. Wu, J. F., & Chang, Y. P. (2016). Multichannel integration quality, online perceived value and online purchase intention: A perspective of land-based retailers. Internet Research, 26(5) (2016): 1228–1248

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Financial feasibility analysis for outlet expansion of Masalalu café based on business coaching method M. Sugiarto & H. Suhaimi Department of Economic and Business, University of Indonesia, Indonesia

ABSTRACT: According to 2014 data, the sales of foodservice in Indonesia reached 36.81 billion dollars and expected to continue to grow with a Compounded Annual Growth Rate of 9% therefore in 2019, the number of sales will reach 56,29 billion dol­ lars. In the café or bar subsector, it accounted for 3.63 billion dollars in sales in 2014 and expected to experience a CAGR growth of 9.7% and expected to increase sales to 5.75 billion dollars in 2019. The Café or bar subsector is the second largest contributor to the foodservice industry in Indonesia. Masalalu Café is a café that operates in the foodservice industry with its mainstay product, Iced Coffee. With such a high growth rate, there are opportunities for Masalalu café to add more outlets. Masalalu Café eagers to find out the analysis of the investment that will be carried out in the expansion plan in Bintaro. In this study, researchers will analyze the investment using Net Present Value (NPV), Pay Back Period (PBP), and Internal rate of return (IRR). To find out the esti­ mated income from Masalalu, researchers will conduct a 7P marketing mix analysis of the Masalalu Café. According to Booms and Bitner (1981) 7P defines to be product, price, place, promotion, people, process, and physical evidence. The purpose of this study is to provide a Feasibility of the addition of Masalalu Café outlets in Bintaro area. Feasibility study will provide input regarding the addition of outlets that will be con­ ducted so Masalalu Café can think of strategies that will be used to enter new markets in South Jakarta.

1 INTRODUCTION After opening the first café in 2018, Masalalu Café plans to expand its outlet. Masa­ lalu Café has a sizeable income in the range of 200 million rupiahs to 500 million rupiahs per month. Another factor that supports the idea of expansion is the condition of the outlet of Masalalu Café, which is very crowded causing long queues in the cash­ ier area and also creates limitations on the parking area around the existing café area. Also, the increase in household consumption in spending on restaurants and hotels provides Masalalu Café with the opportunity to get customers who are looking for res­ taurants or cafes.

2 LITERATURE REVIEW According to Björnsdóttir (2010), Before an investment decision is made, it is necessary to determine whether or not the planned investment idea is feasible. The feasibility of investment must consider several different aspects to determine whether the investment should be realized or not. Financial feasibility analysis is usually performed during the planning process, and the results indicate how the project will perform under a specific set of assumptions regarding technology, market conditions, and financial aspects. The study is the first time in a project 235

development process that these assumptions are studied to see if together they create a technically and economically feasible concept. It also illustrates the sensitivity of the business to changes in these underlying assumptions (Matson, 2000). A feasibility study is conducted on the very first stages of project development before financing is secured and making a go/no-go decision. The purpose of the study is to reveal whether or not the project is viable from all aspects, such as financial, technological, market, and other factors. If the results of the study are positive, indi­ cating that the project will be successful, a business plan incorporates much of this information from the study. However, if the results are negative, there is no need to create a business plan (Matson, 2000). The results of a financial feasibility analysis are only as reliable as the data used as input for the analysis. Data must be collected from the project’s owners and outside sources, and often specialists within the field of the project are needed to make estimates and forecasts, in order to get an accurate assessment as possible. The degree of precision in the input depends on the specific situation, and it is often preferable to develop ranges of potential outcomes rather than precise answers. (Helfert, 2001). In evaluating the financial feasibility of an investment project, relevant measurement criteria need to be determined. According to Ross, Westerfield, and Jaffe (2010), there are several methods in capital budgeting that can be adopted to decide whether a project will go ahead or not. Those methods are Net Present Value, Internal Rate of Return, and Payback Period.

3 METHODOLOGY There are so many tools that we utilize for mapping the MSME conditions. In order to collect data, we conducted observation, interview, and documentation methods, as referred based on a qualitative approach. Besides that, we applied some of the analysis data methods such as data reduction, the array of data, and verification and conclusion data. We attempted to ana­ lyze from the external environment to the internal environment, so we started from business model canvas, business process algorithm, PESTEL analysis, VRIO analysis, five forces Porter, STP analysis, value chain Porter, ended in marketing mix 7P tools. SWOT analysis then filters these results and continued by TOWS analysis. Subsequently, we perform Pareto and gap analysis based on the results of the analysis of every tool. Finally, we can give some improvements to the new BMC.

4 RESULTS AND DISCUSSION Revenue projection gives several scenario analyses, i.e., realistic, optimistic, and pessimistic scenarios. Table 1 shows the optimistic scenario, realistic scenario, and pessimistic scenario of the customer of the café. Those scenarios are constructed based on the interview with the owner of the café and observation of several outlets of Masalalu Café. There are several assumptions used in this financial feasibility analysis. Those assumptions are that financial planning prepared is for the next five years. The capacity of the café is 150 people, where 50% of attending customers are assumed to spend Rp25,000 to buy drinks, 25%

Table 1.

Customers scenario.

Scenario

Weekdays

Weekend

Optimistic Realistic Pessimistic

159 119 87

247 195 150

236

of customers who come would spend Rp45,000 to buy drinks and snacks, and 25% of custom­ ers who come would spend Rp60,000 to buy drinks and heavy meal, assuming an increase in income is 9%. The figure follows research conducted by Euromonitor International. The assumed increase in COGS is 5 percent. This figure follows the amount of inflation on food­ stuffs that occurred in Indonesia in the last five years, and the assumed profit expectation is 15% based on interviews with Masalalu Café. Those scenarios are considered according to the observation of Masalalu Café outlet in Jakarta and Bekasi. The optimistic scenario is made according to observation during the school holidays. Most of the customers in the café are high school and university students near the café, and in school holidays, most of them used to hang out in café to meet their friends. The realistic scenario is made according to observation while the students are on the activities in their school or university. Furthermore, the pessimistic scenario is made according to observation during the rainy season. In determining the customer scenario researcher also use a questionnaire about the market­ ing mix of the café to the customer. According to Booms and Bitner (1981), the questionnaire uses a Likert scale from 1-6 with 1 means the customer is “very not satisfied,” and 6 shows the customer is “very satisfied.” The results are shown in the following Table 2. According to the survey conducted in Masalalu Café customers are pleased about the ser­ vice of Masalalu. Physical evidence of Masalalu Café is the highest score with 5.486, and the product becomes the lowest with 4.7889. Table 3 shows the operational costs for the outlet in the Bintaro. It consists of direct and indirect costs. As for the direct costs, it comprises of employee salary, material, and café sup­ plies. Meanwhile, indirect cost consists of rent cost, utility cost, and general café expenses. The difference in costs in the scenario is in the suppliers that Masalalu Café will use for its new outlet in Bintaro. The realistic option is to choose the existing Masalalu Café supplier to fulfill the material they need. Meanwhile, in the optimistic scenario, the supplier are rarely used by Masalalu because the capacity of the supplier cannot meet the needs of the material. Moreover, in the pessimistic scenario, the supplier is used in emergency conditions if the other supplier cannot meet the café demand for the material. Table 4 contains the results of calculation from the feasibility study conducted for Masalalu Café. The table shows that the expansion plan is accepted (feasible) in an optimistic and realis­ tic scenario, but in the pessimistic scenario, the investment plan is not feasible (rejected) because the NPV shows negative results.

Table 2. Masalalu café marketing mix score. Variable

Score

Product Price Promotion Place People Physical Evidence Process

4.788991 5.09633 4.848624 4.911315 5.30581 5.486239 5.150459

Table 3. Masalalu café operational cost. Scenario

Direct Costs

Indirect Costs

Optimistic Realistic Pessimistic

Rp 1.410.949.500 Rp 1.485.210.000 Rp 1.633.731.000

Rp 165,600,000.00 Rp 165,600,000.00 Rp 165,600,000.00

237

Table 4. Financial feasibility study. Year

Optimistic

Realistic

Pessimistic

0 1 2 3 4 5 NPV IRR PBP

(55.170.000) 1,057,072,995 1,213,001,485 1,386,052,318 1,577,923,895 1,790,475,520 5,743,004,827.36 246.676% 4,5 Month

(55.170.000) 342.744.358 384.011.134 424.142.128 463.168.598 501.120.946 2.515.627.164,31 90.9% 1 Year 1 Month

(55.170.000) (280,524,750) (251,792,048) (217,234,606) (176,133,871) (127,694,95) (1,245,246,095.59) >5 Year

5 CONCLUSION AND RECOMMENDATION Based on the investment analysis above in an optimistic and realistic scenario, the NPV value is positive so that the addition of new outlets is accepted. The NPV value in the optimistic scenario is 5,778,593,024.49 and the NPV value in the realistic scenario is 2,515,627,164.31. The IRR value in the optimistic scenario is 248,5%, while in the realistic scenario is 90.9%. In calculating PBP in an optimistic scenario, it is under one year which is 4.5 months, while a realistic scenario exists at 1 year 1 month. Meanwhile, in the pessimistic scenario, the NPV value is at a negative value (1,317,141,443.32). Whereas PBP values are above 5 years. There­ fore, in the pessimistic scenario, the addition of new outlets is rejected. The recommendation from the study is to conduct market research on target markets to find out custom behavior and mapping the strengths and weaknesses of competitors at the location where the outlet will be opened. REFERENCES Björnsdóttir, A.R (2010). Financial Feasibility Assessments Building and Using Assessment Models for Financial Feasibility Analysis of Investment Projects. Reykjavik: University of Iceland Euromonitor International. (2016). Cafes/Bars in Indonesia. https://mail.google.com/mail/u/0/? ui=2&ik=fdb313 3b08&view=at t&th=15b20b 8f4978ce73&attid=0 .3&disp=safe&realat tid=f_j0wsxdbn2&zw. Downloaded on 16 October 2019. Helfert, E.A. (2001). Financial analysis tools and techniques: a guide for managers. 1st{{/ sup}} ed. New York: McGraw-Hill.. Matson, J. (2000). Cooperative Feasibility Study Guide. [online] USA: United States Department of Agri­ culture. Rural Business-Cooperative Service. Report 58. Available from: http://www.rurdev.usda.gov/ rbs/pub/sr58.pdf [accessed on 15 October 2019]. Porter, M. E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press. Porter, M.E., 2008, “The five competitive forces that shape strategy,” USA: Harvard Business Review Warner, Jon. (2008). Using “Models” to Assist the Coaching Process. Quoted from http://www.od-center. org/warnerresultscoaching/resources/coachingmodels.pdf accessed on 4 June 2019,

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

The influence of non-interest income towards credit risk and loan spread in ASEAN-5 N.D. Novianti & R. Rokhim Department of Management, University of Indonesia, Indonesia

ABSTRACT: This study aims to analyse the effect of non-interest bank activities on credit risk and loan spreads. Credit risk is measured using two indicators, which are loan loss provi­ sions and non-performing loans. Through conventional banks in ASEAN-5, which consist of Indonesia, Malaysia, Singapore, Thailand, and the Philippines, the results show overall that non-interest income has an adverse effect towards credit risk and loan spread. The forty-nine bank samples are divided into two parts, which are large and small banks. In the large banks, it was found that most non-interest income activities can lower loan loss provision, nonperforming loan, and loan spread. Contrastingly, the results were the opposite with the small banks sample. Thus, higher involvement in non-interest income activities can result in greater credit risk and loan spread.

1 INTRODUCTION In the past few decades, there has been an increase in financial liberalisation and integration in the financial sector (Tanna et al., 2017). The integration of ASEAN countries is one such example. The consequence of this integration is that the banking sector is trying as hard as possible to operate efficiently. One of the ways to adapt accordingly is through diversification. In this paper, the effects of non-interest income activities on credit risk and bank loan spreads are analysed. This is based on several reasons. First, the benefits of efficiency that banks obtained from diversification are expected to reduce various types of banking risks, such as credit risk that considers indicators of improved management capabilities (Berger and DeYoung, 1997). Second, by expanding its scope of activities, banks can also develop or deepen their relationship with their customers. Furthermore, non-interest income activities generally have a short period of time. Moreover, customers only have to pay low expenses to be able to change into other financial services. This causes banks to grant more loans to noninterest income customers if only to strengthen the relationship between banks and customers (Abedifar et al., 2018). According to Lepetit et al. (2008), credit risk is often ignored when banks can get income from customers through non-interest income or fee-based activities.

2 LITERATURE REVIEW From the results of the main activities of the bank, there are risks whether borrowers can meet their obligations on time (Fatemi and Fooladi, 2006). Credit risk can be measured by loan loss provision and non-performing loans. Loan loss provisions are an allowance for losses on the decline in the economic value emerging from the loan portfolio and its funding. The higher the value of the reserve, the more it indicates that the credit risk faced by banks is get­ ting higher (Altunbas et al., 2007). Banks that have credit risk exposures that are too large must reserve greater losses for their credit (Apanga et al., 2016). Following the International Monetary Fund, the definition of non-performing loans are loans where interests are paid more than 90 days late, or interest has been refinanced, 239

capitalised, delayed by agreement, or anticipated late credit payments less than 90 days will not be paid. According to Apanga et al. (2016), assets that perform poorly are one of the determinants of the number of loss reserves set by the bank. When the loan credit is greater, which has a high collectability status, this indicates the assets are greater that do not perform well on the bank loan portfolio, which means the probability of borrowing defaults is higher. Banks in their role as intermediaries will pay and receive interest rates at a certain level. Mark-up or the difference between the interest rate that must be paid to the customer and what the bank gets from the borrower, is called the loan spread (Chen, 2013). The size of the bank illustrates the position of the bank’s strength towards the borrower. When a bank is bigger, it has a stronger position (Hao and Roberts, 2008). Therefore, a bank can charge a larger loan for the borrower. In terms of risk, banks with low liquidity risk tend to have lower loan spreads. Banks can also be involved in other activities that are not interest-based, but in the form of services. Amidu and Kuipo (2015) found that in African countries, banks that were involved in non-income activities of interest would have a low loan loss provision. Income from non-interest activities provides stability to the bank when bank credit is in trouble due to poor economic con­ ditions (Kohler, 2014). Previous studies did not always show the benefits provided by income diversification. DeYoung and Roland (1997) explained that the benefits of diversification could not be felt due to large fixed costs incurred. In this paper, non-interest income activities are defined into four activities, which are investments, fees and commissions, insurance, and sales on asset. Within banks in the United States as a sample, DeYoung and Roland (2001) stated that the source of a company’s income from investment activities is unstable and can pose a risk to banks. The fee amounts and commission income reflects the intensity of the relationship between the client or the customer and the bank. Once customer has trusted a bank, they will use the services offered by the bank again. Thus, it is hopeful that a good long-term relationship between banks and customers would be formed such that the funding obtained from banks through cus­ tomers becomes more stable (Abedifar et al., 2018). Insurance activities can also help banks manage their credit risk by increasing information about customers (Schmid and Walter, 2009). To enter the market for the sale of assets, banks must have a good reputation in managing loans and their obligations (Abedifar et al., 2018). Good supervision and screening of loan assets and their obligations is an important thing to do. Too much or too intense involvement in this activ­ ity could also endanger the bank’s position (Parlour and Plantin, 2008)

3 METHODS 3.1 Research samples and hypothesis The bank samples collected were 43 commercial banks in the regions of Indonesia, Malaysia, Singapore, Thailand, and the Philippines (ASEAN-5), In addition, the researchers also classify banks based on their size. This is intended to see whether there are differences in the influence on large and small banks. Many previous studies showed that income diversification per­ formed by banks would reduce risk. Lepetit et al. (2008) also suggests that it would also pro­ vide stability to banks when bank credit is in trouble (Kohler, 2014). Amidu and Kuipo (2015) specifically stated that loan loss provision would be lower along with increasing diversifica­ tion. Căpraru and Pintilie (2020) previously showed that revenue diversification would increase efficiency and tighter supervision. Banks that operate efficiently and are well super­ vised can reduce costs and reduce loan spreads (Chen, 2013). Then, three hypotheses are con­ structed that non-interest income would negatively affect Loan Loss Provision (LLP), NonPerforming Loan (NPL), and Loan Spread (LS). 3.2 Research model and method There are three research models to answer the problem statement set. In this model, the year dummy variable is included to capture the effect of time-series trends. The following are the specifications of the model used: 240

4 RESULTS The regression process is divided into three types of regression analyses: full sample regression, above the median sample regression, and below the median sample regression. At full sample regression, investment income, fee and commission, and insurance have a significant positive effect on LLP that is equal to 0.005, 0.006, and 0.006, respectively. For the NPL indicator, invest­ ment income and sales on asset have a significant negative effect with coefficients of -0.007 and -0.030, while fees and commission income have a significant positive effect with a coefficient of 0.002. In the loan spread model, fees and commission income have a significant positive effect of 0.010, as well as insurance income and sales on asset, but that did not have significance. These results indicate that an increase in non-interest income will lead to an increase in credit risk and loan spread. High fluctuations from investment and commission-based activities will pose a greater risk to the bank. One of the factors that contributed to this dynamic was the low liquid­ ity of capital markets in ASEAN, which can create market instability. In addition, the level of competition between each bank to obtain service revenues is considerably tight and requires large fixed costs. The problem that arises in insurance activities in ASEAN lies in their distribution. Lacking adequate officers to reach certain areas, and having officers who are not qualified, requires banks to spend more time to benefit from this type of activity Above the median sample, all types of non-interest income with fee and commission, insur­ ance, and sales on asset activities have significant negative effects on LLP of -0.103, 0.074, and 0.284. Investment income has a significant negative effect on the NPL of -0.005. In the loan spread model, investment income, fee and commissions income, and insurance income have a significant negative effect with coefficients of 0.029, 0.076, and 0.059, respectively. These results indicate that for bigger banks, an increase in non-interest income will lead to a decrease in credit risk and loan spread. This is because large banks tend to ably perform investment management, making their investment portfolio less risky. Large banks are believed to have a better understanding of these activities, experience, and the reputation to operate these activities successfully. In regards to the below median sample, fee and commission income and insurance income have a significant positive effect on LLP with a coefficient of 0.009 and 0.043. The same also occurs with the NPL indicator, but it was not significant. Whereas the sales on asset income had a significant negative effect on the coefficient of -0.446. In the loan spread model, the majority types of non-interest income has a positive influence on the loan spread, but it was not significant. Contrastingly, investment receipts have a significant negative effect on the loan spread with a coefficient of -0.011. This result shows that in small banks, an increase in non-interest income would cause an increase in credit risk and loan spread. Unlike large banks, small banks have smaller economies of scale. Small banks also have limited opportun­ ities to create synergies between traditional activities and their diversification activities. Bene­ fits of diversification cannot be enjoyed because these banks must bear large fixed costs. In addition, low switching costs between banks also resulted in high amounts of income fluctu­ ations. Small banks that are less relatively stable than large banks are affected unfavorably by non-traditional activities. 241

5 CONCLUSIONS The results of this study found that in the overall sample of banks, non-interest income activ­ ities most likely have an adverse effect towards both credit risk indicators. Large banks are believed to have a better understanding, experiences, and reputation to operate and undergo these non-interest income activities. Whereas small banks tend to experience the adverse effect of non-interest income activities due to the small scale of their economies and less opportunity to create synergy from these activities. REFERENCES Abedifar, P., Molyneux, P., & Tarazi, A. (2018). Non-interest income and bank lending. Journal of Bank­ ing & Finance 87, 411–426. Altunbas, Y., Carbo, S., Gardener, E. P., & Molyneux, P. (2007). Examining the Relationships between Capital, Risk, and Efficiency in European Banking. European Financial Management 13, 49–70. Amidu, M., & Kuipo, R. (2015). Earnings management, funding and diversification strategies of banks in Africa. Accounting Research Journal 28, 172–194. Apanga, M. A.-N., Appiah, K. O., & Arthur, J. (2016). Credit risk management of Ghanaian listed banks. International Journal of Law and Management 58, 162–178. Berger, A. N., & DeYoung, R. (1997). Problem Loans and Cost Efficiency in Commercial Banks. Journal of Banking and Finance 21, 849–870. Căpraru, B., Ihnatov, I., & Pintilie, N.-L. (2020). Competition and diversification in the European Banking Sector. Research in International Business and Finance 51, 1–10. Chen, J. (2013). Estimation of the Loan Spread Equation with Endogenous Bank-Firm Matching. Struc­ tural Econometric Models (Advances in Econometrics) 31, 251–289. DeYoung, R., & Roland, K. P. (2001). Product Mix and Earnings Volatility at Commercial Banks: Evidence from a Degree of Total Leverage Model. Journal of Financial Intermediation 10, 54–84. Fatemi, A., & Fooladi, I. (2006). Credit risk management: a survey of practices. Managerial Finance 32, 227–233. Hao, L., & Roberts, G. S. (2008). Lead lenders and loan pricing, in Andrew H. Chen (ed.). Research in Finance 24, 75–101. Köhler, M. (2014). Does non-interest income make banks more risky? Retail- versus investment-oriented banks. Review of Financial Economics 23, 182–293. Lepetit, L., Nys, E., Rous, P., & Tarazi, A. (2008). Bank income structure and risk: An empirical analysis of European banks. Journal of Banking & Finance 32, 1452–1467. Parlour, C. A., & Plantin, G. (2008). Loan Sales and Relationship Banking. The Journal of Finance 63, 1291–1313. Schmid, M. M., & Walter, I. (2009). Do financial conglomerates create or destroy economic value? Jour­ nal of Financial Intermediation 18, 193–216. Tanna, S., Luo, Y., & Vita, G. D. (2017). What is the net effect of financial liberalization on bank prod­ uctivity? A decomposition analysis of bank total factor productivity growth. Journal of Financial Sta­ bility 30, 67–78.

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Credit growth and financial fragility in the ASEAN region C.J. Hakim Graduate Program of Management, Faculty of Economics and Business, Universitas Indonesia, Indonesia

R. Rokhim Faculty of Economics and Business, Department of Management, Universitas Indonesia, Indonesia

M. Aulia Institute of Islamic BankingFinance, International Islamic Univeristy Malaysia, Indonesia

ABSTRACT: Credit growth can be likened to a double-edged sword that is able to illustrate the contradictions of its resulting impact. Sometimes credit growth leads into credit booms and in turn leads to major events, such as the debt crisis in the 1980s, the exchange rate crisis in 1992, sudden stops in the 1990s, and the global financial crisis in 2008. These events made its own dilemma: whether there was a policy of reducing credit that aims to prevent credit booms in developing countries that can hamper economic growth. This study aims to analyse the significance of the impact of the credit growth that occurred in the ASEAN region during 2013-2017 towards financial fragility. The result shows that credit growth in ASEAN has a significant effect on financial fragility. 1 INTRODUCTION Credit growth emerges as the single best predictor of financial instability (Jordà et al., 2011). The usefulness of credit is relevant in many ways with various types of lending programs offered by banks. Several factors can stimulate credit growth because credit is overall to the community, a commonly useful and beneficial financial product. However, Ghosh (2010) stated that rapidly growing credit has a number of factors in part trig­ gered by an increasing foreign bank entry, such as highly leveraged corporate aspects, the improvement of capital market access, and the introduction of new products and credit risk management methodologies. An expansion of credit growth also has brought beneficial important things, including assisting households and investors to channel sav­ ings and supporting the development of the financial sector and economic growth. Meanwhile, the prompt pace of credit expansion has also raised concerns about macro­ economic and prudential risks. Then, Ovi (2014) claimed that bank lending practices in ASEAN countries has traditionally relied on collateral rather than credit assessment and cash flow analysis. Our finding would be beneficial to any stakeholder to consider and adopt appropriate pol­ icies to enhance their prudential decisions in midst of pursuing their goals. Therefore, based on previous research and the description above, the authors will make an investigation about credit growth toward financial fragility in selected ASEAN countries. This paper contributes to the literature in various ways. Previous research that mostly covered a relatively small sample of listed banks in one country was studied. Meanwhile, ASEAN has a vision for finan­ cial sector integration in 2025, which encompasses three strategic objectives, namely financial integration, financial inclusion, and financial stability, even the regional economic integration is a dynamic, ongoing process as economies as well as domestic and external environments are constantly evolving. Therefore, ensuring the financial sector is inclusive and stable remains a key goal of regional economic integration. In order to keep up with the goals, financial 243

liberalization will be undertaken with greater regulatory cohesiveness, while remaining pru­ dent and sustained to help emphasize long term goals. The remainder of this paper is organised as follows: Section 2 discusses the theory of credit growth and financial fragility. Section 3 presents an empirical model and provides an overview of the data and methodology. Section 4 contains a discussion and analysis of results. Finally, Section 5 concludes.

2 LITERATURE REVIEW Credit is advantageous when gained if the resources can be distributed based on the useful­ ness. Dell’Ariccia et al. (2012) investigated that three often concurrently observed factors are frequently associated with the onset of credit booms. The first factor is financial reforms; These usually aim to foster financial deepening and are linked to sharp increases in credit aggregates. The second factor is surges in capital inflows, often in the aftermath of capital account liberalisations. These generally lead to a significant increase in the funds available to banks, which potentially relaxes credit constraints. Third, credit booms generally start during or after buoyant economic growth. More formally, lagged GDP growth is positively associ­ ated with the probability of a credit boom. Cucinelli (2016) investigated the behaviour of banks in loan allocation has a relationship with the economic cycle and the indication of a financial crisis. These statements were also confirmed by Borio (2014), which claimed that excessive credit is the main trigger to rising financial crises. Furthermore, Allen and Gale (2004) stated that financial fragility is interpreted as a condition where a little shock in the economy results in major crises. Alternatively stated, financial fragility is the main problem of excess sensitivity. Considering the important role of bank credit to increase economic capacity, additionally can also have a negative impact. This is indicated by the results of several previous studies showing that credit growth can affect the health of the banking system. Actually, the prospect of borrowers’ creditworthiness and collateral values becomes better when in an upturn condition. In that condition, banks generally respond with increasing credit supply and sometimes loosing lending policy stances. An increased availability of credit allocation allows for a greater investment, consumption, or higher collateral values. Nevertheless, in a downturn, the process is reversed (Lown and Morgan (2006); Ghosh (2010); Dell’Ariccia et al. (2016)). Moreover, the ratio of nonperforming loans (NPL) to gross loans can be used as a predictor of financial fragility. A higher level of NPL can be indicative of worsening bank credit management according to Gosh (2010) and Cucinelli (2016). Therefore, the following hypothesis is formed: H1: credit growth will have an effect towards NPL Therefore, the next section will be discussed more deeply about testing the research hypothesis.

3 METHODOLOGY This study uses empirical tests that utilise panel data analysis. According to the test, the authors followed several tests to find an appropriate estimation model that fulfils a classic assumption of the best linear unbiased estimation. This type of research used is a type of quantitative descriptive research. The sample used in this study are banks that actively operate and are listed in the stock exchange of each country in Southeast Asia that are incorporated in the ASEAN organisation. Rosen et al. (2005) stated that banks which ultimately go public grow faster, earn higher profits, employ more leverage, and invest more of their assets in loans. Furthermore, the results suggest that banks that go public are riskier than those that remain private. The sample data from this study is comprised from 103 banks in Indonesia, Malaysia, Singapore, Thailand, the Philippines, Vietnam, and Lao People’s Democratic 244

Table 2. Result test of credit growth toward financial fragility. Dependent Variable: NPL N: 515; R-sq: 0,0598 Var. GGL LTD BM BC GDP Size

Coef. -0,025*** 0,001 0,041** 0,048* -0,038 -0,004

Std. Error 0,0065 0,0011 0,0157 0,0219 0,1183 0,0021

z -3,89 0,42 2,61 2,20 -0,32 -1,87

Prob>|z| 0,000 0,676 0,009 0,028 0,750 0,062

Note: *p< 0,05; **p chi2

0.0000 -0.0151*** -0.7470*** 0.0097*** -0.9500** -0.8370** -1.3440*** 2.7040*** 949 0.0932 103.47 0.0000

Marginal effect (mfx) (0.0000) (0.0048) (0.2570) (0.0048) (0.3750) (0.3950) (0.3040) (0.7000)

*,**,*** denotes significance level at 10%, 5%, and 1%

255

0.0000 -0.0047*** -0.2348*** 0.0031*** -0.2021*** -0.1858** -0.4944***

(0.0000) (0.0015) (0.0802) (0.0015) (0.0456) (0.0536) (0.1038)

borrowed from the Mekaar. In this research, the observation loan cycle ranged from 1-4. In the results of the probit estimation above, the loan cycle has an influence in determining the probability of default on customers with a significance level of 1%. The loan cycle has a negative sign, which can be concluded that customers who borrow more frequently at Mekaar will be less likely to default. The customer loan cycle variable shows the results with the addition of one loan cycle to the customer, then the probability of default would decrease by 23.5%. In this study, it shows that age is a variable that is significant in influencing the probability of default on Mekaar customers. With a significance level of 5%, the age probit estimation results show a positive relationship where this can be interpreted that when age of customers is higher, there is a higher probability of defaulting. It can be assumed that younger borrowers are more independent and would be less likely to default. Age, the first demographic variable shows results when the age of a customer increases by 1 year, then the possibility of default will increase by 0.3%. This research confirms that marital status here is processed using dummy variables by making single as a reference group. This is because groups of single customers are the most different than those who are married, divorced or widowed. This is related to the level of responsibility individuals have, reliability, and also maturity. This is in line with other studies, where the customer’s marital status is grouped into single and mar­ ried status. From the results of probit estimates, widowed, divorced, and married groups are significant in the probability of default compared to the reference group or single group.

5 CONCLUSION The results of this study indicate the characteristics of loans that play a role in determining the probability of default are the duration of credit and loan cycle. Meanwhile, demographic data shows the variables used in this study, age and marital status indicate the relationship in determining the probability of customer default. The results show that a longer duration of credit and loan cycle will have a negative effect in determining default. Next, the widowed, divorced and married groups have a negative relationship with defaults compared to those who are single or have a lower risk than those who are single. Contrastingly, age has a positive relationship with the incidence of defaults or older customers might increase their risk of defaulting. REFERENCES Brown, K., & Moles, P. (2016). Credit Risk Management (4th ed.). Great Britain: Edinburgh Business School. Calcagnini, G., Farabullini, F. & Giombini, G. (2009), “Loans, Interest Rates and Guarantees: Is There a Link?”, available at: www.ecb.int/events/pdf/conferences/mir/Calcagnini FarabulliniGiom bini.pdf. D. Durand, Risk elements in consumer instalment financing, in: National Bureau of Economics, New York, 1941. Dinh, T. H. T. & S. Kleimeier (2007), ‘A Credit Scoring Model for Vietnam’s Retail Banking Market’, International Review of Financial Analysis, 16, No. 5, pp. 471–95. Kocˇ enda, E. & M. Vojtek (2009), ‘Default Predictors and Credit Scoring Models for Retail Banking’, Working Paper, CESIFO, Prague. Lassoued, N. (2017). What drives credit risk of microfinance institutions? International evidence. International Journal of Managerial Finance, 13(5), 541–559.doi:10.1108/ijmf-03­ 2017-0042. Lewis, E.M. (1992), An Introduction to Credit Scoring, 2nd ed., Fair, Isaac and Co., San Raph­ ael, CA. Maldonado, S., Peters, G., & Weber, R. (2018). Credit scoring using three-way decisions with probabilis­ tic rough sets. Information Sciences.doi:10.1016/j.ins.2018.08.001.

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Ojo, O. & Ighalo, J.I. (2008), “Factors affecting borrowers’ choice of housing loan package in Southwes­ tern Nigeria”, Housing Finance International, Vol. 23 No. 2, pp. 38–43. Schreiner, M. (2000). Credit scoring for microfinance: Can it work? Journal of Microfinance, 2, 105–118. Schreiner, M. (2004), ‘Scoring Arrears at a Microlender in Bolivia’, Journal of Microfinance, Vol. 6, No. 2, pp. x65–88. Vogelgesang U. 2003. Microfinance in times of crisis: the effects of competition, rising indebtness, and economic crisis on repayment behavior. World Development 31(12): 2085–2114. Wang, W. (2010), “The probability of Chinese mortgage loan default and credit scoring”, available at: http://researcharchive.lincoln.ac.nz/dspace/bitstream/10182/2346/3/wang_mcm.

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

Developing a business strategic model using the Quantitative Strategic Planning Matrix (QSPM) approach for a fintech lending start-up based on lean start-up methodology I. Gibranata & M.L. Singgih Management of Technology Departement, Institut Teknologi Sepuluh Nopember, Surabaya, Indonesia

ABSTRACT: Fintech lending start-ups have been developing in the financial industry in Indonesia since 2014, with up to 227 fintech lending start-up companies now established. To compete, these start-up companies must implement the right business strategies based on their conditions. Some of the methodologies can be implemented baesd on business strategy plan­ ning, like a lean start-up. This research is expected to analyze the internal and external envir­ onments that affect fintech lending start-ups and to develop a model of business strategies for one fintech lending start-up (PT FLS) to better compete in the market. Product specialization and quality emerge as the bigges factors in fintech lending sustainability, based on the PT FLS example. The right business strategy requires expanding networks to fisheries processing SMEs (small and medium enterprises) using validated learning methodology.

1 INTRODUCTION Many fintech lending startups have sprung up in Indonesia since 2014, with 227 fintech lend­ ing start-ups now established. However, the development of the fintech industry (Lee & Shin, 2018) has caused a large number of competitors to emerge from both start-ups and large established institutions. To compete, a start-up must implement the right business strategies based on their conditions. Incorrect implementation of a strategy will threaten business con­ tinuity. Statistics show that around 42% of start-ups in the financial sector fail. The lean start­ up method is one that can be implemented in business strategy planning to mitigate against market uncertainty and potential failures (Ries, 2011). This research aims to plan a successful business strategy to be implemented by a fintech lending start-up for SMEs (small and medium enterprises) in Indonesia (study case: PT FLS). PT FLS as a start-up is in the growth and development stage. The study also covers fintech lending start-ups with up to ten team members.

2 LITERATURE REVIEW 2.1 Financial technology start-up Financial technology refers to modern technology used for creating or modifying financial ser­ vices, such as internet banking, e-commerce, electronic payments, and business funding (Lar­ oslav, 2017). Two types of fintech affecting many people are peer-to-peer (P2P) lending and crowdfunding. In P2P lending and crowdfunding, three parties play a role in the business pro­ cesses: entrepreneurs or SMEs who need funds; investors who are interested in funding pro­ jects from SMEs; and organizations that gather together entrepreneurs and investors. Equity crowdfunding provides opportunities for SMEs looking to increase the need for capital ratios at the bank. SMEs using equity crowdfunding provide a portion of their business ownership in exchange for funding (Lee & Shin, 2018). 258

2.2 Stages of strategic planning Strategic management is an art and a science that studies the production, application, and evaluation of strategic decisions between functions in an organization, so that the organiza­ tions can achieve future goals. Critical techniques of strategy formulation break down into a three-stage framework (David, 2011). The input stage comprises a formulation framework of an IFE (internatal factor evaluation), an EFE (external factor evaluation), and a competitive profile matrix, which summarizes the basic information necessary for formula­ tion strategy. The matching stage focuses on efforts to produce alternative feasible strategies by combining internal and external factors. The decision stage uses quantitative strategic plan­ ning matrix (QSPM).

3 METHODS This study uses a qualitative research method. The results of this study (findings) obtained through the interview and discussion process with respondents of the start-up company PT FLS, a fintech lending start-up in Surabay, will be presented descriptively. The object of the research is to construct a development model of business strategy. In this study, the respond­ ents were the director and three managers of PT FLS. Figure 1 presents the steps of strategy formulation for this study. 3.1 Method of collecting data and data analysis methods The methods of collecting data in this study are discussion and questionnaire. There are four questionnaires in this study, and their purposes are: (1) to identify factors affecting the fintech lending industry; (2) to determine weight and start-up company response in an IFE-EEF matrix; (3) to determine the priorities of alternative business strategies; (4) to determine attractiveness scores for each possibe strategy. This research resulted in a model considered the optimum business strategy to be implemented by PT FLS, based on several analytical tools, such as (1) qualitative analysis; (2) Delphi method; (3) IFE and EFE matrix; (4) IE matrix; (5) SWOT matrix; (6) analytic network process; (7) QSPM.

4 RESULTS 4.1 Factors affecting fintech lending identification using Delphi method The Delphi method has been carried out in three rounds. In the first round, the Delphi ques­ tionnaire provided 52 sub-factors affecting the fintech lending industry, and respondents made an assessment based on their experience using a Likert scale, choosing their level of agreement or disagreement a statement of the identified factors. Of the original 52, 39 subfactors were approved and returned to respondents to assess their weight in the second round.

Figure 1.

Strategy formulation steps of this research.

259

The results of processing the Delphi questionnaire in round 3 will determine whether the results of the Delphi questionnaire reach consensus or not. Questionnaire process­ ing is performed by looking at the statistical results, namely the average value (mean) and the value of the standard deviation. The results are product specialization, and quality becomes the influential factor in fintech lending sustainability, with 5.47% weight. An assessment of internal factors results in an IFE matrix, which describes the strengths and weaknesses of PT FLS as a start-up. Results of IFE calculation are obtained by multiply­ ing the weight value from experts in the company with a rating obtained from the average results of four questionnaires distributed to the company. The result obtained from the calcu­ lation of the IFE matrix is 3.01. Meanwhile, the EFE matrix is obtained by the evaluation of external factors (i.e., the opportunities and threats facing PT FLS). The result obtained from the calculation of the EFE matrix is 2.77. See Table 1. Table 1. Strengths and weakness (IFE matrix).

S1 S2 S3 S4 S5 W1 W2 W3 W4 W5 W6

Strengths/weakness

Weight Rating

Weighted score

Implement lean start-up methods Competence of the workforce team in developing the platform Founder has experience in the financial industry Has a special segmentation of the aquaculture sector Has a website platform technology that connects investors with SME Measuring the level of customer satisfaction has not been implemented Limited working capital for operational activities and start-up development User ecosystems have not formed yet are related to the aquaculture business Permission from OJK has not yet been issued No standard pricing of products Lack of publication

0.2 0.15 0.1 0.08 0.08

4 3.2 4 4 4

0.8 0.48 0.4 0.32 0.32

0.08

2

0.16

0.1

1

0.1

0.08

1.7

0.13

0.08 0.05 0.05 1

1.2 1.7 2

0.1 0.1 0.1 3.01

Table 2 lists opportunities and threats facing PT FLS.

Table 2. Opportunities and threats (EFE matrix). Opportunities/threats O1 Increased rate of global economic growth O2 Government interest rates and other types of investment are lower than products O3 High level of consumption among Indonesian people O4 Increasing number of SMEs developing businesses O5 Advances in technology helped PT XYZ improve customer service T1 Unstable government regulations (OJK) related to fintech funding T2 Number of similar start-ups in the same sector T3 Level of public trust in fintech remains low T4 Rapid and changing technological developments T5 Other types of investment options are more guaranteed by the gov­ ernment (LPS)

Weight Rating

Weighted score

0.1 0.1

1.86 3.22

0.19 0.32

0.12 0.13 0.15 0.075 0.065 0.08 0.1 0.08

3.22 4 3 1.68 2 1.68 2.71 3

0.39 0.52 0.45 0.13 0.13 0.13 0.27 0.24

1

260

2.77

4.2 IE matrix and SWOT analysis The results of the IE matrix show that PT FLS in Surabaya is at quadrant IV, in a state of growth and development. Generally, a company in this position will pursue integrative or intensive strategies, such as product development, market development, and market penetra­ tion. On the other hand, if a start-up is in a state of holding, to defend their market position, they must pursue strategies such as retrenchment. A SWOT matrix is used to provide alterna­ tive strategies that can lead to more intensive or integrative strategies. Alternative strategies obtained at the matching stage will be evaluated using a QSPM. How­ ever, not all alternative strategies from the matching phase must be evaluated in QSPM. For that purpose, the weighting of alternative strategies is carried out by the ANP method. Based on ANP analysis conducted using Super Decision software, the alternative strategies with the highest weight are SO1 (0.24); WT1 (0.18); WO1 (0.15); ST2 (0.11). See Table 3.

Table 3. SWOT matrix. (S)

(W)

(O) SO strategies: development of new features, like a financial tracker for users market & product development for fisheries SMEs (T) ST strategies: enhancing technological performance to reduce competition increasing product promotion and brand awareness

WO Strategies: expansion of user ecosystems to expand product variation making a projection of potential customers based on behavior WT Strategies: performing ISO 27001 and focusing on OJK licensing making the standard requirement for project selection

4.3 QSPM analysis

Table 4. Quantitative strategic planning matrix.

No

Strategy

Code

TAS

1 2 3

Developing new markets & products for fisheries and processing SMEs Performing ISO 27001 and focusing on OJK licensing Increasing product promotion and brand awareness

SO2 WT1 ST3

5,53 4,75 4,95

As Table 4 shows, the order of business strategy priorities for PT FLS is as follows: (1) devel­ oping new markets and products for fisheries and processing SMEs; (2) increasing product promotion and brand awareness; and (3) performing ISO 27001 and focusing on OJK licensing. 5

CONCLUSIONS

Based on data processing and analysis, the most influential factor in the fintech lending industry is product specialization, and quality is the factor with the most noticeable impact on fintech lending sustainability by 5.47% weight. The order of business strategy priorities that PT FLS can apply is as follows: (1) developing new markets and products for fisheries and processing SMEs; (2) increasing product promotion and brand awareness; and (3) performing ISO 27001 and focusing on OJK licensing. To develop new markets and products, PT FLS must implement validated learning using lean start-up methodology that will reduce the cost of research. 261

REFERENCES Blank, S. G. (2006). The Four Steps to the Epiphany (1st ed.). Palo Alto, CA: K&S Ranch.

David, F. R. (2011). Strategic Management. Jakarta: Salemba Empat.

Frederiksen, D. L., & Brem, A. (2017). How do entrepreneurs think they create value? A scientific reflec­ tion of Eric Ries’ Lean Startup approach. International Entrepreneurship and Management Journal, 13, 169–189. Laroslav, K. (2017). Creating a business toolbox for a start-up: A case study of SnapSwap International. Thesis. Lee, I. & Shin, Y. J. (2018). Fintech: Ecosystem, business models, investment decisions, and challenges. Business Horizons, 61(1), 35–46. Ries, E. (2011). The Lean Startup (1st ed.). New York: Fletcher & Company.

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Contemporary Research on Business and Management – Noviaristanti (ed.) © 2021 Taylor & Francis Group, London, ISBN 978-0-367-47166-8

The influence of social media and social media advertising engagements on purchase intention in fashion product H. Ulya & Y. Alversia Master of Management, Faculty of Economics and Business, Universitas Indonesia, Indonesia

ABSTRACT: This study analyzes the relationship between social media and the social media advertising engagements and their effect on advertising evaluation and purchase intentions in the context of Instagram. The experience engagement framework was used to analyze social media engagement and social media advertising engagement. This research was conducted in social media Instagram with 183 respondents from Indonesia with inclu­ sive criteria of active Instagram users and having seen Instagram Ads of fashion product as research objects. The data were processed using Structural Equation Model. The results show that the social media engagement was proven to have an influence on the social media advertising engagement, but it was not proven to have an influence on the advertis­ ing evaluation. While social media advertising engagement has been proven to have an influence on advertising evaluations, besides that advertising evaluation have also been shown to have an influence on purchase intentions.

1

INTRODUCTION

The increasing use of social media in the community that triggers marketers to integrate their marketing activities on social media has been supported by advertising features launched by several social media. Several studies have been conducted to analyze effective­ ness of advertisements on social media based on the number of likes, comments, and shares (Voorveld, Noort, Muntinga, & Bronner, 2018). Some studies postulate that there are other important things that can affect social media advertising, such as the experiences received by the public in the use of social media and the experience felt when viewing social media ads (Bronner & Neijens, 2006). In this research, the experiences became part of the engagement variable to be examined. In the context of Instagram, there is also cur­ rently limited academic research that studies the effectiveness of Instagram Ads addressing the increasing trend of using Instagram Ads by the marketers beside the use of this social media for advertising programs. Several studies have shown the effect of engagement on media in advertising evalu­ ations. For example, the more involved consumers are in television programs, maga­ zines, or online newspapers, the more favorable the evaluation of advertisements is (Malthouse, Bobby J., & Tamhane, 2007). Therefore, it is likely similar relationships that can be applied in the context of social media. Another study examined the differ­ ences in engagement of social media and advertising on social media from 8 social media and its effect on evaluating advertising on each social media (Voorveld, Noort, Muntinga, & Bronner, 2018). There is also research that examined how smartphones advertising influences customer purchase intentions (Martins, Costa, Oliveira, Gonçalves, & Branco, 2019). From this background, this study aims to analyze the engagement of Instagram and Insta­ gram Ads in influencing the evaluation of advertisements as well as its influences on purchase intentions that might be triggered.

263

2 LITERATURE REVIEW Approaches to engagement are very diverse. This study refers to the understanding which states that engagement is a multilevel and multidimensional concept that arises from thoughts and feelings about one or more experiences involved in achieving personal goals (Calder, Mathew S, & Mathouse, 2016). Applying the approach to social media, engagement with social media and advertising on social media are the results of how media and advertising are experienced (based on experiences). Media engagement can be seen as an important context characteristic that drives a response to an advertisement (Calder, Malthouse, & Schaedel, 2009). Thus, the engagement with media could drive how people engage with the advertising embedded in particular media platform. H1: Social media engagement has an influence on social media advertising engagement. Social media platforms can be seen as a context for advertising where the social media platform provides an advertising environment. The study of media context provides strong evidence for the idea that the same source conveys the same message to the same audience on separate occasions. This produces different effects depending on the context in which the message appears (Norris & Colman, 1992). Therefore, engagement with the media can be seen as essential context character­ istics that encourage responses to an advertisement (Calder, Malthouse, and Schaedel, 2009). From the study, it was found that the more engaged someone in television programs, magazines, or online newspapers, the better the evaluation of the advertisements available in the media (Bronner & Neijens, 2006). The same thing is also obtained when social media is used as a medium for advertising (Voorveld, Noort, Muntinga, & Bronner, 2018). With the relationship between social media engagement and social media advertis­ ing engagement, the study examines the possibility that social media engagement can also influence the evaluation of advertisements on that social media (Voorveld, Noort, Muntinga, & Bronner, 2018). H2: Social media engagement has an influence on advertising evaluations. H3: Social media advertising engagement has an influence on advertising evaluation. Purchase intention shows the possibility that consumers will plan or want to buy certain prod­ ucts or services in the future (Wu, 2016). One of the goals of making an advertisement is to increase people’s desire to buy the advertised products. It has been proven that the increase in purchase intention reflects an increase in buying opportunities. Previous study has shown that there was a significant impact of social media advertising features on customer purchase intention. H4: Advertising evaluation has an influence on purchase intention.

Figure 1.

Conceptual model.

3 METHOD Data were obtained the questionnaire distributed on online media. There are two screening questions about the use of Instagram and Instagram Ads that are placed at the beginning of the questionnaire to prevent someone from being eliminated in the middle of filling out 264

the questionnaire. The average time needed to complete the questionnaire was around 10 minutes and 183 respondents participated in this study. Most of the respondents were female (77,6%), using Instagram more than 14 times per week with 15-30 minutes per access. Social media engagement variables used 10 experience dimensions consisting of the dimen­ sions of entertainment, negative emotion, pastime, stimulation, identification, practical use, social interaction, innovation/trendsetter, topicality, and empowerment. 36 questionnaire indi­ cators were formed with a 7-point scale (Voorveld, Noort, Muntinga, & Bronner, 2018). Social media advertising engagement was analyzed using an approach similar to social media engagement, the experience dimension that is still relevant to use. Thus, it consists of the same dimension except empowerment and innovation/trendsetter dimensions which then formed 26 questionnaire indicators with a 7-point scale (Voorveld, Noort, Muntinga, & Bronner, 2018). Advertising evaluations and purchase intention variables were measured using 5 indicators with a 7-point scale (Alalwan, 2018; Martins J., Costa, Oliveira, Gonçalves, & Branco, 2019; Voorveld, Noort, Muntinga, & Bronner, 2018) .

4 RESULTS To examine the causal relationships and estimate the conceptual model, this study used struc­ tured equation modeling (SEM). As for the main research hypotheses, except for H2 (Social media engagement to advertising evaluation) (C.R=-1,414, P-value = 0,157, SLF = - 0,079), the rest of the research hypotheses were supported. In detail, social media engagement was found to have significant impact to social media advertising engagement (C.R = 5,245, P-value