Technology and Business Model Innovation: Challenges and Opportunities: Proceedings of the International Conference on Business and Technology ... (Lecture Notes in Networks and Systems, 924) 3031539974, 9783031539978
This book proceedings addresses a crucial gap in understanding the impact of technology on Business Model Innovation (BM
104 90 17MB
English Pages 573 [571] Year 2024
Preface
Organization
Conference Title
Contents
The Level of Financial Resilience from Muslim Workers in South Jakarta During Pandemic COVID-19
1 Introduction
2 Literature Review
2.1 Financial Crisis
2.2 Financial Resilience
2.3 Demographic Characteristics
3 Methodology
3.1 Study Design
3.2 Subjects
3.3 The Methodology
4 Result and Discussion
4.1 Result
4.2 Discussion
5 Conclusion
References
How to Mitigate the SMEs Supply Chain Risk During the Pandemic in Indonesia with Failure Mode and Effect Analysis?
1 Introduction
2 Research Methods
3 Results
4 Discussion
5 Conclusion
References
Characterising the Islamic Financial Cycle in Indonesia Post-Pandemic Era: Markov Switching Approach
1 Introduction
2 Literature Review
2.1 Financial Cycle: An Overview
2.2 Previous Studies
3 Research Methodology
3.1 Data
3.2 Model Development
4 Empirical Results and Discussion
4.1 Preliminary Investigation
4.2 Islamic Financial Cycle
4.3 Determinant Indicators of Islamic Financial Cycle
4.4 Impulse Response Analysis
5 Conclusion and Recommendation
5.1 Conclusion
5.2 Recommendation
References
Evaluating the Impact of Diaspora Contributions to Economic Growth and Development in Nigeria: A Housing Finance and Infrastructure Perspective 1998–2023
1 Introduction
2 Methodology
2.1 Data Collection
2.2 Survey Sample Size
2.3 Statistical Relevance of Sample
2.4 Nigeria’s Housing Finance Dynamics
2.5 Diaspora Settlement Streams and Commitment to Financial Turn of Events and Housing
3 Findings
4 Recommendations and Conclusion
References
Factors Shaping the Entrepreneurial Intentions Among Hospitality Students in Jordan: The Mediating Role of Self-efficacy
1 Introduction
2 Research Background and Hypotheses Development
2.1 Entrepreneurial Intention and Self-efficacy
2.2 Factors Influencing SE
3 Methods
4 Results and Discussion
4.1 Profile of Respondents
4.2 Measurement Model Assessment
4.3 Structural Model Results and Discussion
5 Conclusion, Limitations, and Directions for Future Research
References
Minimalism in Agribusiness: Efficient Supply Chains and Sustainable Practices
1 Introduction
1.1 Flow of the Study
2 Review of Literature on the Concepts
2.1 Minimalism Practices
2.2 Sustainable Practices
2.3 Efficient Supply Chain
2.4 Statement of the Problem
2.5 Research Question
2.6 Hypotheses
3 Research Methodology
4 Data Analysis
5 Conclusion
5.1 Implication of the Study
References
A Study to Assess the Effectiveness of Advertisements Specifically Focusing on Soft Drinks in the City of Bengaluru
1 Introduction
2 Literature Review
3 Research Methodology
3.1 Objectives
3.2 Research Design
3.3 Sampling
3.4 Data Collection
3.5 Data Analysis
3.6 Ethical Considerations
3.7 Limitations
3.8 Implications
4 Analysis and Interpretation
4.1 Demographic Factors
4.2 Validity and Reliability
4.3 Descriptive Statistics
4.4 Correlation Analysis
4.5 Regression Analysis
4.6 Analysis of Variance Results
5 Discussion and Conclusion
5.1 Academic Contribution
5.2 Industry Contribution
5.3 Managerial Implication
5.4 Recommendations
5.5 Limitation
5.6 Scope for Further Research
5.7 Conclusion
References
The Impact of External Debt on the Indian Economy - An Analytical Study
1 Introduction
2 Review of Literature
3 Research Methodology
4 Formulation of Hypotheses
5 Analysis and Interpretation of Results
6 Test of Hypotheses
7 Conclusion
References
Minimalist Farm-To-Table Practices: Connecting Consumers with Local Agriculture
1 Introduction
2 Research Methodology
3 Hypotheses Test Results
4 Conclusion
References
Perception Towards Green Deposits Among Working Women
1 Introduction
2 Review of Literature
3 Statement of the Problem
4 Research Methodology
5 Results and Discussion
6 Conclusion
References
Stress at Work and the Ability of Older Employees to Continue Working in the Service Sector
1 Introduction
2 Review of the Literature
3 Methodology
4 Results
5 Discussion
6 Conclusions
References
Co-creation in Tourism Marketing Before and After the Advent of Social Media
1 Introduction
2 Literature Review
3 Author’s Illustration
4 Theoretical Contributions to Understanding the Co-creation in Tourism Marketing
4.1 Before Social Media
4.2 After Social Media
5 Discussion
6 Conclusion
References
A Study on Consumer’s Behaviour Towards Fast Moving Consumer Goods with Special Reference to Thanjavur District in the State of Tamil Nadu
1 Introduction
2 Review of Literature
2.1 Objectives of the Study
2.2 Need of the Study
2.3 Limitations of the Study
3 Research Methodology
3.1 Research Hypothesis
4 Data Analysis and Interpretation
4.1 Frequency Analysis of Demographical Factors of the Respondents Towards FMCGs in Thanjavur District in the State of Tamilnadu
4.2 Chi-Square Test Analysis of Gender of the Respondents and Behaviour Factors Towards FMCG
4.3 Chi –Square Test Analysis of the Age of the Respondents and Behaviour Factors Towards FMCG
4.4 Chi –Square Test Analysis of Education of the Respondents and Behaviour Factors Towards FMCG
4.5 Chi –Square Test Analysis of the Annual Income of the Respondents and Behaviour Factors Towards FMCG
4.6 Chi –Square Test Analysis of the Annual Income of the Respondents and Behaviour Factors Towards FMCG
5 Conclusion
6 Future Research
References
The Effectiveness of Leadership Style on Organisational Innovativeness in India
1 Introduction
2 Review of Literature
3 Objectives and Hypotheses
3.1 Objectives
3.2 Hypotheses
4 Method
5 Results and Discussion
6 Limitations and Implications
6.1 Limitations
6.2 Implications
7 Conclusion
References
Trade in Agro-Food Products Between Ukraine and African Countries
1 Formulation of the Problem
2 Literature Review and Methodology
3 Results of the Investigation
4 Conclusions and Discussions
References
A Review on Critical Success Factors for Sustainable Infrastructure Construction Project Portfolios
1 Introduction
2 Literature Review
2.1 Overview on Project and Project Management
2.2 Components of Project Constraints
2.3 Component of Project Success
2.4 Component of Human Factors
3 Methodology
3.1 Literatures Reviewed on Project and Project Management, Project Success, Project Constraints, Human Factors, and Strategic Alignment
4 Critical Factors for Sustainable Project Success
5 Conclusion
References
Tax Avoidance in State Owned and Family-Owned Enterprises: An Indonesian Study
1 Introduction
2 Theoretical Basis
2.1 Theory of Agency
2.2 Profitability
2.3 Leverage
2.4 Firm Scale
2.5 Company Risk
2.6 Fiscal Loss Compensation
2.7 Tax Avoidance
3 Methodology
4 Discussion
4.1 Profitability
4.2 Leverage
4.3 Firm Scale
4.4 Company Risk
4.5 Fiscal Loss Compensation
5 Conclusion
6 The Structure of the Paper:
References
Impact of Project Management Soft Skills Training on Employee Performance in the Oil and Gas Projects in Yemen
1 Introduction
2 Literature Review
2.1 Soft Skills
2.2 Employee Performance
3 Conceptual Framework and Hypothesis Testing
4 Methodology
5 Data Analysis and Results
6 Hypotheses Results
7 Limitations and Future Research
8 Recommendations
9 Conclusion
References
Which One Has a Greater Impact on Marketing Agility: Organizational Learning or Organizational Innovation?
1 Introduction
2 Literature Review
2.1 Express Delivery Service
2.2 Organizational Innovation
2.3 Organizational Learning
2.4 Marketing Agility
2.5 Dynamic Capability Theory
2.6 The Impact of Organizational Innovation on Marketing Agility
2.7 The Impact of Organizational Learning on Marketing Agility
2.8 Measuring Marketing Agility Within the Framework of Organizational Learning and Organizational Innovation
3 Research Methodology
4 Conclusion
References
A Framework for Environmental Performance: Integrating Stakeholder Theory and Natural Resource-Based View
1 Introduction
2 Literature Review
2.1 Stakeholder Theory
2.2 Natural Resource-Based View
2.3 Social Context Theory
2.4 Proposition
3 Methodology
4 Discussion and Implication
5 Conclusion
References
The Effect of Intellectual Capital, Capital Structure and Company Size on Company Value: Study in State Owned Companies in Indonesia
1 Introduction
2 Literature Review and Hypothesis
3 Methods
3.1 Variable Measurement
4 Results
4.1 Statistic Descriptive
4.2 Assumption Test
4.3 Hypothesis Test
5 Conclusions
6 Recommendation
References
The Impact of Visitor Experience on Community Loyalty in Borneo Convention Centre Kuching
1 Introduction
1.1 Study Background
1.2 Problem Statement
1.3 Hypothesis
2 Literature Review
2.1 Customer Loyalty Theory
2.2 Visitor Experience (VX)
2.3 Customer Engagement (CE)
2.4 Customer Experience (CX)
2.5 Brand Experience (BX)
3 Methodology
4 Data Analysis
5 Discussion, Suggestions, and Conclusion
5.1 Value-Proposition (Obj. 1)
5.2 Customer Engagement (Obj.2)
5.3 Visitor Experience (Obj.3)
5.4 Discussion
5.5 Suggestion
5.6 Conclusion
References
A Closer Look at Regional Government Expenditure Changes in Indonesia
1 Introduction
2 Theoretical Framework and Hypotheses
2.1 Agency Theory and Budget Changes
2.2 Revenue Variance
2.3 Expenditure Variance
2.4 Fiscal Stress
3 Research Methods
3.1 Population and Sample
3.2 Variable Measurements
3.3 Multiple Linear Regression Analysis
4 Findings and Discussion
4.1 Descriptive Statistics
4.2 Multiple Linear Regression Analysis
4.3 Discussion
5 Conclusion
References
Budget Deficit in the Early Islamic History: A Review of the Literature and Examination of the Historical Evidence
1 Introduction
2 Literature Review
3 Budgeting in the Early days of Islam
4 Budget Deficit in the Prophet’s and Khulafa Ar Rashidin’s Era
5 Methods of Financing the Deficit
5.1 Public Loans
5.2 Altawzif (Taxes)
5.3 Paying Zakah Before It is Due
5.4 Reserve Funds
6 Conclusion
References:
What Do Employees Really Want? A Comparative Analysis of Available and Important Job Satisfiers
1 Background of the Study
2 Literature Review
2.1 Job Satisfaction and Its Significance
2.2 Job Satisfaction in Saudi Arabian Large Companies
2.3 Factors Contributing to Job Satisfaction
3 Methodology
3.1 Demographic Information
3.2 Employee Perceptions of Job Satisfiers
3.3 Importance of Job Satisfiers to Employees at Zamil
3.4 Comparisons
4 Discussion
4.1 Implications
4.2 Limitations and Future Research
References
An Analysis of Inventory Management Practices in the Polymer Packaging Industry
1 Introduction
2 Literature Review
3 Research Methodology
4 Findings
4.1 Inventory Policy
4.2 Cycle Service Level
4.3 Pipeline Inventory and Inventory Holding Cost
4.4 Lead Time
5 Discussion and Conclusion
5.1 Discussion
5.2 Conclusion
5.3 Recommendation for Future Research
References
Behavioral Finance in Psycho-Social Approaches: A Literature Review
1 Introduction
2 Methodology
3 Mapping Result
3.1 Articles Mapping Based on Publication Year
3.2 Articles Mapping Based on Subject Area
3.3 Articles Mapping Based on Country and Author Contribution
4 Discussion
4.1 Framework Theory of Previous Research Based on Analysis of Criteria And Types of Publications
4.2 Framework Theory of Previous Research Based on Word Frequency
4.3 Framework Theory of Previous Research Based on Cluster Analysis
5 Conclusion
6 Research Limitation
References
The Influence of Mixue's Price and Product Quality on Millennial Generation Consumer Buying Interest
1 Introduction
2 Methodology
3 Results and Discussion
3.1 Validity Test
3.2 Reliability Test
3.3 Normality Test- Classic Assumption Test
3.4 Multicollinearity Test – Classic Assumption Test
3.5 Homoscedasticity Test – Classic Assumption Test
3.6 Autocorrelation Test – Classic Assumption Test
3.7 Data Analysis – Correlation and Determination Coefficients
3.8 T-Test Analysis
3.9 F-Test Analysis
4 Discussion
5 Conclusion
References
Enhancing Organizational Performance Through Accelerated Knowledge Creation, with Innovation Quality and Speed as Mediating Variables: A Second-Order Analysis
1 Introduction
2 Methodology
2.1 Measurement of the Research Variables
2.2 Data Collection
3 Results
3.1 Evaluation of the Outer Model.
3.2 Structural Model Testing
3.3 Mediation Effect Testing
3.4 Discussion
4 Conclusion
References
Profitability and Liquidity to Increase Company Value Through Dividend Policy: A Case Study on an Infrastructure Company Listed on the Indonesia Stock Exchange for the 2019–2021 Period
1 Introduction
2 Methodology
2.1 Data Types and Sources
3 Results
4 Discussion
5 Conclusion
References
The Effect of Financial Knowledge, Financial Behavior, and Financial Attitude on Culinary SMEs Financial Performance in Denpasar City
1 Introduction
2 Research Methods
3 Results and Discussion
3.1 Characteristics of Respondent
3.2 Normality Test
3.3 Multicollinearity Test
3.4 Heteroscedasticity Test
3.5 Multiple Regression Analysis Test
4 Conclusion
References
Enhancing the Business Growth of Micro and Small Enterprises (MSEs) via Innovation and Competency in Strategy
1 Introduction
2 Methodology
3 Results and Discussion
3.1 Construct Validation
3.2 Reliability
3.3 Path Analysis
3.4 Discussion
4 Conclusion
References
Leveraging Social Media Marketing and Brand Awareness for Enhancing Purchase Intention in the Food and Beverage Industry Post-COVID-19
1 Introduction
2 Methodology
3 Results and Discussion
4 Conclusion
References
Investigation of Product Experience and Brand Trust on Customer Loyalty Based in Bali, Indonesia (The Case Study of Frozen Food Brands in Pandemic Covid-19)
1 Introduction
2 Methodology
3 Results and Discussion
4 Conclusion
References
Zero-Waste Store Development and Consumer Behavior in Bali, Indonesia: An Analysis of Environmental Consciousness and Purchase Decision Factors
1 Introduction
2 Methodology
3 Results and Discussion
3.1 Total Variance Explained
4 Discussion
4.1 Social Factor
4.2 Promotion and Product Factor
4.3 Quality Factor
4.4 Place Factor
4.5 Economic Circumstance Factor
5 Conclusion
References
Determining Factors of Firm Value: Legitimacy Theory Perspective
1 Introduction
2 Theoretical and Literature Review
3 Research Methodology
4 Result and Discussion
5 Discussion
6 Conclusion
References
The Effect of Employee Engagement, Job Satisfaction, and Superior-Subordinate Relationships on the Desire to Change Jobs and Its Implications in Employee Resignation
1 Introduction
2 Research Methodology
3 Results and Discussion
3.1 Outer Model Testing
3.2 Inner Model Testing
3.3 Direct Influence of Structural Model
3.4 The Indirect Influence of Structural Model
3.5 The Total Effect of Structural Model
3.6 Hypothesis Testing
4 Discussion
4.1 The Influence of Work Engagement on the Desire to Change Jobs
4.2 The Effect of Job Satisfaction on the Desire to Change Job
4.3 The Effect of Superiors and Subordinates Relationships on the Desire to Change Jobs
4.4 The Influence of the Desire to Change Job on Employee Resignation
4.5 The Effect of Work Engagement on Employee Resignation
4.6 Effect of Job Satisfaction on Employee Resignation
4.7 The Effect of Superiors and Subordinates Relationships on Employee Resignations
5 Conclusion
References
Marketing Content Strategy in Building Brand Equity to Increase Consumer Interest Buying in Tiktok Shop
1 Introduction
1.1 Brand Equity Theory
1.2 Content Marketing
1.3 Purchase Intention
2 Research Methodology
3 Results and Discussion
3.1 Discussions
4 Conclusion
References
Profitability and Liquidity on Hedging Decision During Covid-19 Pandemic
1 Introduction
2 Research Method
2.1 Variable Operational Definitions
3 Result
4 Logistic Regression Tests
5 Discussion
6 Conclusion
References
Income, Financial Literacy and Financial Inclusion Increase Investment Interest in Gianyar
1 Introduction
2 Methodology
3 Results and Discussion
3.1 Multiple Linear Regression Analysis
3.2 Partial Regression Coefficient Significant Test (t-Test)
3.3 Model Feasibility Test Results (Test F)
3.4 Test Results of Coefficient of Determination (R2)
4 Discussion
4.1 The Effect of Income on People’s Investment Interest in Gianyar
4.2 The Influence of Financial Literacy on People’s Investment Interest in Gianyar
4.3 The Influence of Financial Inclusion on the Investment Interest of the Community in Gianyar
5 Conclusion
References
The Influence of Authenticity and Product Innovation on Quality Perceptions and Interest in Buying Silver Crafts as Souvenirs at the Celuk Silver Village
1 Introduction
2 Methodology
3 Results and Discussion
3.1 Confirmatory Factor Analysis
3.2 Direct Effect Analysis
3.3 Indirect Effect Analysis
3.4 Total Effect Analysis
3.5 Discussion
4 Conclusion and Recommendations
References
The Effect of New Work Policies During Covid-19 on Employee Performance and Loyalty in Jepun Kuta Bali Hotel
1 Introduction
2 Methodology
3 Result and Discussions
4 Conclusion and Recommendations
4.1 Conclusion
4.2 Recommendations
References
The Fundamental of Work Attitude in Consequence of Work Family Conflict, Ostracism, and Emotional Exhaustion for Female Employees in Bali
1 Introduction
2 Theoretical Background and Hypotheses Development
2.1 Work-Family Conflict
2.2 Ostracism
2.3 Emotional Exhaustion
2.4 Work Attitude
3 Methodology
3.1 Measurement
4 Results
5 Discussion, Implications and Limitations
References
The Affirmation of Financial Literacy as the Moderating Influence on Financial Inclusion and SMEs Growth: Culinary Sector in Sanur
1 Introduction
2 Research Framework
3 Methodology
3.1 Research Design
3.2 Sampling Technique
3.3 Research Instrument
4 Results
4.1 The Influence of Financial Inclusion on SMEs Growth
4.2 The Influence of Financial Literacy on the Relationship Between Financial Inclusion and SMEs Growth
5 Conclusion
References
Exploring the Factors Leading to the Failure of Millennial Entrepreneurs: Challenges in Green Business
1 Introduction
2 Theoretical Framework and Hypotheses
3 Methodology
4 Results and Discussion
5 Conclusion, Implication and Recommendations
5.1 Conclusion
5.2 Implications
5.3 Recommendations
References
Auditors Ability in Detecting Fraud: Evidence from External Auditor in Bali
1 Introduction
2 Research Methodology
3 Results and Discussion
3.1 Multiple Regression Analysis Hypothesis Testing
3.2 Moderated Regression Analysis Hypothesis Testing
4 Conclusion
References
Legalizing Village-Owned Enterprises (BUMDES) Through Dialectics of Strengthening
1 Introduction
2 Methodology
3 Results and Discussion
3.1 The Urgency of Changing the Position of BUMDes to Become a Legal Entity
3.2 Consequences on the Position of BUMDes Becoming a Legal Entity
4 Conclusion
References
Collaborative Governance as the Form of Corporate Social Responsibility (CSR) and Community Empowerment
1 Introduction
2 Methodology
3 Results and Discussion
3.1 Collaborative Governance
3.2 Supporting Factors Collaborative Governance
3.3 Obstacle Factor Collaborative Governance
4 Conclusion
References
A Comparison of Restaurant Services at the Rural, Seaside and Urban Tourist Destinations in Bali
1 Introduction
2 Methodology
2.1 Research Variable
3 Findings and Discussion
3.1 Characteristics of Denpasar City Restaurants in Urban Destination
3.2 Characteristics of Restaurants in Canggu-Berawa Area, Badung in Seaside Destination
3.3 Characteristics of Restaurants in Ubud Tourism Area, Gianyar in Rural Destination
3.4 Restaurant Operational Strategy During the Covid-19 Pandemic
4 Conclusion
5 Research Limitation and Recommendation
References
Slum Tourism in Indonesia - the Phenomena of Slum Destination in Kampung Akuarium, Jakarta
1 Introduction
2 Methodology
3 Slum Tourism at Kampung Aquarium Jakarta
3.1 Study Club
3.2 Social Interaction
3.3 Sharing Staple Food and Donations
3.4 Touring the Village
4 Conclusion
References
Author Index
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Citation preview
Lecture Notes in Networks and Systems 924
Bahaaeddin Alareeni Allam Hamdan Editors
Technology and Business Model Innovation: Challenges and Opportunities Proceedings of the International Conference on Business and Technology (ICBT2023) Volume 2
Lecture Notes in Networks and Systems
924
Series Editor Janusz Kacprzyk , Systems Research Institute, Polish Academy of Sciences, Warsaw, Poland
Advisory Editors Fernando Gomide, Department of Computer Engineering and Automation—DCA, School of Electrical and Computer Engineering—FEEC, University of Campinas— UNICAMP, São Paulo, Brazil Okyay Kaynak, Department of Electrical and Electronic Engineering, Bogazici University, Istanbul, Türkiye Derong Liu, Department of Electrical and Computer Engineering, University of Illinois at Chicago, Chicago, USA Institute of Automation, Chinese Academy of Sciences, Beijing, China Witold Pedrycz, Department of Electrical and Computer Engineering, University of Alberta, Alberta, Canada Systems Research Institute, Polish Academy of Sciences, Warsaw, Poland Marios M. Polycarpou, Department of Electrical and Computer Engineering, KIOS Research Center for Intelligent Systems and Networks, University of Cyprus, Nicosia, Cyprus Imre J. Rudas, Óbuda University, Budapest, Hungary Jun Wang, Department of Computer Science, City University of Hong Kong, Kowloon, Hong Kong
The series “Lecture Notes in Networks and Systems” publishes the latest developments in Networks and Systems—quickly, informally and with high quality. Original research reported in proceedings and post-proceedings represents the core of LNNS. Volumes published in LNNS embrace all aspects and subfields of, as well as new challenges in, Networks and Systems. The series contains proceedings and edited volumes in systems and networks, spanning the areas of Cyber-Physical Systems, Autonomous Systems, Sensor Networks, Control Systems, Energy Systems, Automotive Systems, Biological Systems, Vehicular Networking and Connected Vehicles, Aerospace Systems, Automation, Manufacturing, Smart Grids, Nonlinear Systems, Power Systems, Robotics, Social Systems, Economic Systems and other. Of particular value to both the contributors and the readership are the short publication timeframe and the worldwide distribution and exposure which enable both a wide and rapid dissemination of research output. The series covers the theory, applications, and perspectives on the state of the art and future developments relevant to systems and networks, decision making, control, complex processes and related areas, as embedded in the fields of interdisciplinary and applied sciences, engineering, computer science, physics, economics, social, and life sciences, as well as the paradigms and methodologies behind them. Indexed by SCOPUS, INSPEC, WTI Frankfurt eG, zbMATH, SCImago. All books published in the series are submitted for consideration in Web of Science. For proposals from Asia please contact Aninda Bose ([email protected]).
Bahaaeddin Alareeni · Allam Hamdan Editors
Technology and Business Model Innovation: Challenges and Opportunities Proceedings of the International Conference on Business and Technology (ICBT2023) Volume 2
Editors Bahaaeddin Alareeni Middle East Technical University, Northern Cyprus Campus Güzelyurt, Kallanli, KKTC, Türkiye
Allam Hamdan College of Business of Finance Ahlia University Manama, Bahrain
ISSN 2367-3370 ISSN 2367-3389 (electronic) Lecture Notes in Networks and Systems ISBN 978-3-031-53997-8 ISBN 978-3-031-53998-5 (eBook) https://doi.org/10.1007/978-3-031-53998-5 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland Paper in this product is recyclable.
Preface
In an age defined by rapid technological advancements and a growing awareness of environmental and societal challenges, the convergence of technology and business sustainability emerges as a pivotal theme. This book, aptly titled “Technology: Toward Business Sustainability,” endeavors to unravel the intricate relationship between technology and the pursuit of sustainable business practices. The genesis of this book lies in the recognition that technology, when harnessed judiciously, has the potential to act as a catalyst for fostering sustainability across diverse industries. From renewable energy solutions and eco-friendly manufacturing processes to the integration of artificial intelligence for more efficient resource management, the possibilities are vast and transformative. As we embark on this exploration, the contributors to this volume, a diverse assembly of thought leaders and experts, present a collection of insights, analyses, and case studies that illuminate the intersection of technology and business sustainability. The goal is not only to comprehend the current landscape but also to envision the future trajectory of businesses operating in harmony with the principles of environmental and social responsibility. The book welcomes a range of perspectives, from theoretical frameworks that underpin the conceptual foundations to practical applications that demonstrate the tangible impact of technology on sustainable business practices. Whether you are an academic seeking a deeper understanding, a business professional navigating the complexities of sustainability, or a policymaker shaping the agenda for responsible business practices, the content within these pages aims to provide valuable insights and provoke thoughtful consideration. The chapters within this book traverse a broad spectrum of industries and technologies, reflecting the diverse ways in which innovation can contribute to a more sustainable future. By delving into topics such as circular economy models, green technology adoption, and the role of big data in sustainability initiatives, the contributors contribute to a holistic understanding of the multifaceted challenges and opportunities at the intersection of technology and business sustainability. May this book serve as a source of inspiration for those seeking to integrate technology seamlessly into their sustainability efforts. It is our hope that the collective wisdom contained herein will not only enhance awareness but also catalyze action, encouraging businesses to embark on a path of sustainable practices driven by the transformative power of technology. Bahaaeddin Alareeni Allam Hamdan
Organization
EuroMid Academy of Business & Technology (EMABT) Vision There is an ever-increasing need for high-quality research in most if not all aspects of twenty-first-century society. Universities are the primary providers of quality research education. Quality research education requires the participation of both established faculty, newly appointed staff, and research students. There is also the requirement for the academic to reach out to the general society as comprehensively as possible. As the university sector becomes increasingly focused on research excellence, there is a need to provide more fora, primarily in the form of peer-reviewed conferences, for academics to exchange ideas, questions, problems, and achievements concerning their personal research activities. These fora provide opportunities to exchange ideas, experience critiques, and obtain some recognition for individuals’ progress toward research excellence. The more international the fora the more effective it is. Although publishing in highly rated indexed academic journals is still the most prized form of academic communication, the conference has become a significant outlet for research findings as well as an important facilitator to achieving this goal. Mission To facilitate the creation of global academic research communities by providing all the administrative and management functions required to deliver a comprehensive academic conference experience. This is supported by the provision of seminars, workshops, and the publishing of suitable books, monographs, and proceedings. It is also supported by four academic journals some of which are Scopus and Web of Science indexed (English and Arabic). EMABT’s Conference Activities EuroMid Academy of Business & Technology (EMABT) aims to support the Academic Community in Europe, the Middle East, and other countries Worldwide. EMABT aims to manage a range of Conferences Worldwide as well as offer an online Academic Bookshop, Publishing, and Dissertation Service. Our focus is entirely on business, entrepreneurship, and technology but over the next years, we will broaden these areas to others. Global reach is one of the dimensions that differentiates us in the marketplace. At any given conference, there are well-known
viii
Organization
speakers/experts from many countries. Some of the conferences will have with them master classes in their associated field which will be run on the day before the conference. Details of this event are contained on our website at http://www.embta.com/.
Conference Title
The International Conference on Business and Technology (ICBT2023) Overview The 4th International Conference on Business and Technology (ICBT’2023) is organized by EuroMid Academy of Business and Technology, Istanbul, turkey. It will be held on November 01-02, 2023 at Hilton Istanbul Bomonti Hotel, Turkey. The main objective of the ICBT’2023 Conference is to gather leading academicians, scholars, and researchers to share their knowledge and new ideas as well as to discuss current development in the fields of business, education, society, and technology. The ICBT’2023 aims to achieve other objectives as the following: – Highlighting business and technology problems that are faced by institutions in a scientific way, in addition to finding the possible practical solutions for them. – Encouraging scientific research in business and technology areas which may contribute to sustainable improvements to it. – The conference also offers opportunities for academicians and industry experts to meet and interact with local and international participants. – Enable the researchers to publish their contributions in high-ranked journals and indexed proceedings by Scopus.
Conference Committees Conference Chairs Khaled Hussainey Allam Hamdan Bahaaeddin Alareeni
University of Portsmouth, UK Ahlia University, Bahrain Middle East Technical University–(NCC), Turkey
x
Conference Title
Conference Board Roselina Ahmad Saufi Talal Al-Hayale Abdul Nasser Nour Qasim Zureigat Vincenzo Corvello Reem Hamdan Amina Mohamed Buallay Hasan Ghura
Universiti Malaysia Kelantan, Malaysia University of Windsor, Canada An-Najah National University, Palestine Sulaiman AlRajhi School of Business, Saudi Arabia University of Messina, Italy University College of Bahrain, Bahrain Higher Education Council, Bahrain Kuwait College of Science and Technology, Kuwait
International Scientific Committee Muhammad Obeidat Vincenzo Corvello Pedro Sánchez-Sellero Nadiia Reznik Tariq H. Malik Myriam Cano-Rubio Wissem Ajili Mustafa Hanefah Maite Cancelo Mohammad Al-Tahat Anand Nayyar Atilla Akbaba Rim Jallouli Hassan Aly Roheet Bhatnagar Marwan Darwish Samer Yassin Alsadi Gamal Shehata Mohammed Salem Hani El Chaarani Tareq Alhaj Sameer Hana Khader Derar Eleyan
Kennesaw State University, USA Department of Engineering, University of Messina, Italy Universidad de Zaragoza, Spain National University of Life and Environmental Sciences of Ukraine, Ukraine Liaoning University, China University of Jaén, Spain ESLSCA Paris Business School, France Universiti Sains Islam Malaysia, Malaysia University of Santiago de Compostela, Spain University of Jordan, Jordan Duy Tan University, Da Nang, Vietnam ˙Izmir Katip Çelebi University, Turkey University of Manouba, Tunisia Nile University, Egypt Manipal University, India Al-Quds Open University, Palestine Palestine Technical University-Kadoorie, Palestine Cairo University, Egypt University College of Applied Sciences, Palestine Beirut Arab University, Tripoli Campus, Lebanon An-Najah National University, Palestine Palestine Polytechnic University, Hebron, Palestine Palestine Technical University-Kadoorie, Palestine
Conference Title
Bahaa Awwad
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Palestine Technical University-Kadoorie, Palestine Abdelouahid Assaidi Laurentian University, Canada Ahmad Mohammed Ewais Arab American University Palestine, Palestine Mohammed Maree Arab American University Palestine, Palestine Yaser. A. H. Shaheen Palestine Ahliya University, Bethlehem, Palestine Ismail Romi Palestine Polytechnic University, Palestine Noorshella Binti Che Nawi Universiti Malaysia Kelantan, Malaysia Bishr Mowafak Applied Sciences University, Bahrain Islam Elgedawy Middle East Technical University, Cyprus Sabri Mushtaha Al-Quds Open University, Palestine Ihab Sameer Qubbaj Palestine Technical University-Kadoorie, Palestine Othman A. K. Sawafta Palestine Technical University-Kadoorie, Palestine Venkata Madhusudan Rao Datrika Osmania University, India Ebrahim Mansour The Hashemite University, Jordan Muiz Abu Alia An-Najah National University, Nablus, Palestine Ahmad Areqat Al-Ahliyya Amman University, Jordan Kholoud Al-Kayid University of Wollongong, Australia Abdulkader Nahhas University of Leicester, UK Samaa Haniya Parkland College, Illinois, USA Shadi AbuDalfa University College of Applied Sciences, Palestine Norhaziah Nawai Universiti Sains Islam Malaysia, Malaysia Ali H. I. AlJadba Universiti Sains Islam Malaysia, Malaysia Ismail Qasem Islamic University of Gaza, Palestine Marwan Jaloud Palestine Polytechnic University, Hebron, Palestine Raed Jaber Arab Open University, Jordan Yuri Shenshinov Siberian Transport University, Russia Hosni Shareif Shanak Palestine Technical University-Kadoorie, Palestine Mohammad A. A. Zaid Palestine Technical University-Kadoorie, Palestine R. Vettriselvan DMI-St., John the Baptist University, Malawi Mahmoud Aleqab Yarmouk University, Jordan Rami Hodrob Arab American University, Palestine Faiz Ur Rehman Quaid-i-Azam University, Pakistan Mohammad Kamal Abuamsha Palestine Technical University-Kadoorie, Palestine Qadri Kamal Alzaghal Palestine Technical University-Kadoorie, Palestine
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Conference Title
Shatha Abdel-Rahman Qamhieh Hashem Mohammad Tawfiq Abusharbeh Ahmed Adnan Zaid
An-Najah National University, Nablus, Palestine
Arab American University, Palestine Palestine Technical University-Kadoorie, Palestine Fadi Shihadeh Palestine Technical University-Kadoorie, Palestine Zuhair A. A. Barhamzaid Palestine Technical University-Kadoorie, Palestine Rami N. M. Yousuf Palestine Technical University-Kadoorie, Palestine Nancy Mohammad Alrajei Palestine Polytechnic University, Hebron, Palestine Bahaa Subhi Ruzieh Palestine Technical University-Kadoorie, Palestine Ghassan Omar Shahin Palestine Polytechnic University, Hebron, Palestine Mervat Hatem Shahin Al-Istiqlal University, Jericho, Palestine Fadi Herzallah Palestine Technical University-Kadoorie, Palestine Mohammed Maali Palestine Technical University-Kadoorie, Palestine Raed Ibrahim Saad Arab American University, Palestine Emad Mahmoud Jawher Aladali Arab American University, Palestine Rana N. Zahdeh Palestine Polytechnic University, Hebron, Palestine Issam Ayyash Palestine Technical University-Kadoorie, Palestine Adnan A. A. Qubbaja Palestine Ahliya University, Bethlehem, Palestine Enkeleda Lulaj University Haxhi Zeka, Kosovo Nael Salman Palestine Technical University-Kadoorie, Palestine Mohammed W. A. Saleh Palestine Technical University-Kadoorie, Palestine Ahmad Mohammed Issa Hasasneh Palestine Ahliya University, Bethlehem, Palestine Hussein Mohamad Jabareen Hebron University, Palestine Majdi Alkababji Al-Quds Open University, Palestine Justin Nelson Micheal Kristu Jayanti College Autonomous Bengaluru, India Jaheer Mukthar K. P. Kristu Jayanti College Autonomous Bengaluru, India Abdulkader Nahhas University of Leicester, UK
Conference Title
Organizing Committee Reem Khamis Ricardo Vinícius Dias Jordão Nohad Nasrallah Muiz Abu Alia Mohammad Kamal Abuamsha Rim El Khoury Nadia Mansour Ahmad Yousef Areiqat Ali H. I. AlJadba Saliha Theiri
Brunel University–London, UK Swiss Management Center, Switzerland Notre Dame University, Lebanon An-Najah National University, Palestine Palestine Technical University-Kadoorie, Palestine Notre Dame University, Lebanon The University of Sousse, Tunisia, and The University of Salamanca, Spain Al-Ahliyya Amman University, Jordan Universiti Sains Islam Malaysia, Malaysia University of Tunis El Manar, Tunis
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Contents
The Level of Financial Resilience from Muslim Workers in South Jakarta During Pandemic COVID-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Najla Rahmah Delia, Puji Sucia Sukmaningrum, Nisful Laila, and Luthfi Nur Rosyidi How to Mitigate the SMEs Supply Chain Risk During the Pandemic in Indonesia with Failure Mode and Effect Analysis? . . . . . . . . . . . . . . . . . . . . . . . Febriana Wurjaningrum, Nurulaily Kartika, and Atik Purmiyati Characterising the Islamic Financial Cycle in Indonesia Post-Pandemic Era: Markov Switching Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Irfan Nurfalah, Aam Slamet Rusydiana, Nisful Laila, Puji Sucia Sukmaningrum, and Luthfi Nur Rosyidi Evaluating the Impact of Diaspora Contributions to Economic Growth and Development in Nigeria: A Housing Finance and Infrastructure Perspective 1998–2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Saji George, Umar Abbas Ibrahim, and Cross Ogohi Daniel Factors Shaping the Entrepreneurial Intentions Among Hospitality Students in Jordan: The Mediating Role of Self-efficacy . . . . . . . . . . . . . . . . . . . . . Sultan Alzyoud, Ayman Harb, and Wejdan Alakaleek Minimalism in Agribusiness: Efficient Supply Chains and Sustainable Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . K. P. Jaheer Mukthar, C. Nagadeepa, Jorge Castillo-Picón, Leoncio Cochachin-Sánchez, Jorge Manrique-Cáceres, Luciano Tinoco-Palacios, and Roger Rurush-Asencio A Study to Assess the Effectiveness of Advertisements Specifically Focusing on Soft Drinks in the City of Bengaluru . . . . . . . . . . . . . . . . . . . . . . . . . . Syed Kazim, Naveen Pol, K. P. Jaheer Mukthar, Ravi Shankar Bhakat, C. G. Manjunatha, and Kotigari Reddi Swaroop The Impact of External Debt on the Indian Economy - An Analytical Study . . . . Komal A. Dave, Mohammad Z. Ashfaque, Syed Kazim, and K. P. Jaheer Mukthar
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Minimalist Farm-To-Table Practices: Connecting Consumers with Local Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Tatiana Gonzales-Yanac, C. Nagadeepa, K. P. Jaheer Mukthar, Jorge Castillo-Picón, Jorge Manrique-Cáceres, Elia Ramirez-Asis, and Carlos Huerta-Soto Perception Towards Green Deposits Among Working Women . . . . . . . . . . . . . . . . 123 S. Saranya and Nittymol Antony Stress at Work and the Ability of Older Employees to Continue Working in the Service Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 Hernan Ramirez-Asis, Jose Clemente-Almendros, Eduardo Rocca-Espinoza, Jehovanni Velarde-Molina, and Wilber Acosta-Ponce Co-creation in Tourism Marketing Before and After the Advent of Social Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 N. Sneha, Ajai Abraham Thomas, and Jaspreet Kaur A Study on Consumer’s Behaviour Towards Fast Moving Consumer Goods with Special Reference to Thanjavur District in the State of Tamil Nadu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 P. Kumarasamy and V. Francy Sheeba The Effectiveness of Leadership Style on Organisational Innovativeness in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Hazel Vakharia and Sruthi Sivaraman Trade in Agro-Food Products Between Ukraine and African Countries . . . . . . . . 175 Dukhnytskyi Bogdan, Melnychenko Svitlana, Mamchur Volodymyr, Lezhepokova Victoriia, Bezhenar Inna, and Sydor Bogdan A Review on Critical Success Factors for Sustainable Infrastructure Construction Project Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 Damiebi Denni-Fiberesima, Nazatul Shima Abdul Rani, and Khairul Azizan Suda Tax Avoidance in State Owned and Family-Owned Enterprises: An Indonesian Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 Yudanto Adi Nuraindra and Ayu Chairina Laksmi
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Impact of Project Management Soft Skills Training on Employee Performance in the Oil and Gas Projects in Yemen . . . . . . . . . . . . . . . . . . . . . . . . . 206 Majid Al-Nabae, Norshahrizan Nordin, Dania Sammani, Mustafa M. A. Mudhsh, Abdulwadod Saeed Abdulwasea Hassan, Ali S. A. Maaodhah, Abdullah Mahfoudh Salem Baadhem, and Fahmi Fadhl Al-Hosaini Which One Has a Greater Impact on Marketing Agility: Organizational Learning or Organizational Innovation? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 Susanna Rotua Saragih, Arlina Nurbaity Lubis, Endang Sulistya Rini, and Syafrizal Helmi Situmorang A Framework for Environmental Performance: Integrating Stakeholder Theory and Natural Resource-Based View . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 Muafi Muafi, Imanirrahma Salsabil, Ahmad Johan, and Fatimah Az Zahra The Effect of Intellectual Capital, Capital Structure and Company Size on Company Value: Study in State Owned Companies in Indonesia . . . . . . . . . . . 241 Ilyas Alfian Suhadi and Arief Rahman The Impact of Visitor Experience on Community Loyalty in Borneo Convention Centre Kuching . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251 Mohammad Amirul Ayu Rajiman, Shaik Azahar Shaik Hussain, and Ahmad Hazizi Shah Jamil A Closer Look at Regional Government Expenditure Changes in Indonesia . . . . 260 Putri Geubrina Rizki, Nuraini A Nuraini A., Syukriy Abdullah, and Khusnul Afifah Zharaura Budget Deficit in the Early Islamic History: A Review of the Literature and Examination of the Historical Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 Said Al Salmani and Syed Marwan bin Syed Azman What Do Employees Really Want? A Comparative Analysis of Available and Important Job Satisfiers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289 Mohammed Al Subaie and Noor Ul Hadi An Analysis of Inventory Management Practices in the Polymer Packaging Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301 Ayoub Danka, Tzen Yik Lau, and Shatina Saad Behavioral Finance in Psycho-Social Approaches: A Literature Review . . . . . . . 311 Vera Mita Nia, Hermanto Siregar, Roy Sembel, and Nimmi Zulbainarmi
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The Influence of Mixue’s Price and Product Quality on Millennial Generation Consumer Buying Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 Putu Ayu Titha Paramita Pika Enhancing Organizational Performance Through Accelerated Knowledge Creation, with Innovation Quality and Speed as Mediating Variables: A Second-Order Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340 I. Nyoman Sunarta, Gine Das Prena, I. Made Suidarma, Ni Wayan Lasmi, and Partiwi Dwi Astuti Profitability and Liquidity to Increase Company Value Through Dividend Policy: A Case Study on an Infrastructure Company Listed on the Indonesia Stock Exchange for the 2019–2021 Period . . . . . . . . . . . . . . . . . 352 I. Made Suidarma and Richa Chairunnisia The Effect of Financial Knowledge, Financial Behavior, and Financial Attitude on Culinary SMEs Financial Performance in Denpasar City . . . . . . . . . . 363 Komang Sri Widiantari, I Made Suidarma, and I. G. A. Desy Arlita Enhancing the Business Growth of Micro and Small Enterprises (MSEs) via Innovation and Competency in Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375 Ketut Tanti Kustina, Ida Bagus Raka Suardana, Ni Komang Yumi Arya Kusuma Dewi, I Gusti ayu Tirtayani, Gusi Putu Lestara Permana, and Ni Luh Putu Sariani Leveraging Social Media Marketing and Brand Awareness for Enhancing Purchase Intention in the Food and Beverage Industry Post-COVID-19 . . . . . . . . 384 Nyoman Sri Subawa, Ida Nyoman Basmantra, Ni Putu Ria Utami, and Caren Angelina Mimaki Investigation of Product Experience and Brand Trust on Customer Loyalty Based in Bali, Indonesia (The Case Study of Frozen Food Brands in Pandemic Covid-19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394 Ida Nyoman Basmantra, Ni Luh Putu Melyana Putri, Elif Baykal, Ni Wayan Widhiasthini, Upayana Wiguna Eka Saputra, and Ni Made Dhian Rani Yulianti Zero-Waste Store Development and Consumer Behavior in Bali, Indonesia: An Analysis of Environmental Consciousness and Purchase Decision Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404 Desak Made Febri Purnama Sari, Ida Ayu Oka Martini, and Gede Crisna Wijaya Determining Factors of Firm Value: Legitimacy Theory Perspective . . . . . . . . . . 414 Putu Purnama Dewi and Ni Ketut Widya Utami
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The Effect of Employee Engagement, Job Satisfaction, and Superior-Subordinate Relationships on the Desire to Change Jobs and Its Implications in Employee Resignation . . . . . . . . . . . . . . . . . . . . . . . . . 423 Ida Bagus Raka Suardana and Luh Kadek Budi Martini Marketing Content Strategy in Building Brand Equity to Increase Consumer Interest Buying in Tiktok Shop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437 Nyoman Sri Manik Parasari, I. A. Iswari Pidada, Desak Made Pebri Purnama Sari, A. A. Istri Agung Maheswari, and Ni Putu Yunita Anggreswari Profitability and Liquidity on Hedging Decision During Covid-19 Pandemic . . . 446 Made Ratih Nurmalasari, Putu Putri Prawitasari, Kadek Linda Kusnita, Ni Wayan Merry Nirmala Yani, and Ni Putu Ari Krismajayanti Income, Financial Literacy and Financial Inclusion Increase Investment Interest in Gianyar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454 Kadek Wulandari Laksmi P., I. G. N. Oka Ariwangsa, Ni Wayan Lasmi, and I. Dewa Made Arista Apriadi The Influence of Authenticity and Product Innovation on Quality Perceptions and Interest in Buying Silver Crafts as Souvenirs at the Celuk Silver Village . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464 Ni Nyoman Sri Wisudawati The Effect of New Work Policies During Covid-19 on Employee Performance and Loyalty in Jepun Kuta Bali Hotel . . . . . . . . . . . . . . . . . . . . . . . . . 473 Nyoman Sri Subawa, Ida Nyoman Basmantra, Putu Ratna Juwita, and Sandra Dinata The Fundamental of Work Attitude in Consequence of Work Family Conflict, Ostracism, and Emotional Exhaustion for Female Employees in Bali . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 482 Ida Nyoman Basmantra, Agnes Ayu Prasetyarianti, Sevenpri Candra, and Elif Baykal The Affirmation of Financial Literacy as the Moderating Influence on Financial Inclusion and SMEs Growth: Culinary Sector in Sanur . . . . . . . . . . 492 Ida Nyoman Basmantra, Putu Junianti, and Omar Khalid Bhatti
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Exploring the Factors Leading to the Failure of Millennial Entrepreneurs: Challenges in Green Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 498 Ida Nyoman Basmantra, Ida Ayu Karina Widya Apsari, Adie Wahyudi Oktavia Gama, Elif Baykal, and A.A.A. Ngurah Sri Rahayu Gorda Auditors Ability in Detecting Fraud: Evidence from External Auditor in Bali . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506 Nyoman Sri Subawa, Fellicia Ayu Ningrat, Made Srinitha Millinia Utami, Nyoman Sridiva Dian Prabarini, Ni Kadek Winda Yanti, and Ida Nyoman Basmantra Legalizing Village-Owned Enterprises (BUMDES) Through Dialectics of Strengthening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 516 I. Nyoman Subanda, Ida Ayu Putu Sri Astiti Padmawati, and Ida Ayu Ratna Kumala Collaborative Governance as the Form of Corporate Social Responsibility (CSR) and Community Empowerment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526 I. Nyoman Subanda and Nuning Indah Pratiwi A Comparison of Restaurant Services at the Rural, Seaside and Urban Tourist Destinations in Bali . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 535 Ni Made Eka Mahadewi, I. Nyoman Arcana, and Karunavani Sarukunaselan Slum Tourism in Indonesia - the Phenomena of Slum Destination in Kampung Akuarium, Jakarta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 544 Ni Made Eka Mahadewi, Dewa Ayu Made Lily Dianasari, Anom Heri Suasapha, Lidya Henrica, and Ni Made Prasiwi Bestari Author Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551
The Level of Financial Resilience from Muslim Workers in South Jakarta During Pandemic COVID-19 Najla Rahmah Delia, Puji Sucia Sukmaningrum(B) , Nisful Laila, and Luthfi Nur Rosyidi Department of Islamic Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia [email protected]
Abstract. COVID-19 delivered economic difficulties and triggered a decrease in financial resilience. Workers are one of the affected parties. This study aims to measure financial stability and identify and analyze the effect of demographic characteristics such as age, gender, type of work, and income on the economic resilience of Muslim workers in South Jakarta. This research is quantitative research using multiple linear regression analysis methods. The purposive sampling technique and the Lemeshow equation were used to determine the sample size, with the criteria being the workforce, Muslim, and working or having worked in the South Jakarta area during the COVID-19 pandemic. The financial resilience framework consists of four categories: economic resources, financial products and services, financial knowledge and behavior, and social capital, which measure financial resilience. Of the 85 respondents, all experienced low economic strength. Gender does not significantly affect Muslim workers’ financial stability, while age, type of work, and income significantly affect financial resilience. However, simultaneously, all variables affect the high and low economic strength of Muslim workers in South Jakarta during the COVID-19 pandemic. With low financial stability, people must learn to increase financial productivity to be more optimal in dealing with difficult situations. Future research is expected to be able to measure economic resilience with more factors such as optimism or a mortgage owned with a much larger area. Keywords: Financial Resilience · Muslim Workers · COVID-19 · Financial Empowerment · Financial stability
1 Introduction In the event of an unforeseen occurrence, the implementation of a strategic approach becomes necessary to effectively address and surmount the situation. The ongoing COVID-19 pandemic is characterized by its unpredictable nature and urgent status since the number of cases continues to rise daily. Policies such as Large-Scale Social Restrictions (LSSR) and Enforcement of Community Activity Restrictions (CARE) have © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 1–10, 2024. https://doi.org/10.1007/978-3-031-53998-5_1
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been advocated and have demonstrated favorable outcomes. However, it is important to acknowledge that these policies have also been associated with adverse effects, such as the emergence of financial crises. According to [1], workers constitute a significant group that experiences the consequences of certain circumstances. In the case of Indonesia, out of the total working-age population of 205.36 million, 9.30% were adversely affected [2]. This negative impact manifested in various ways, including a reduction in working hours for 15.72 individuals, temporary job loss for 1.11 million individuals, and unemployment for 1.62 million individuals. Consequently, there is a dearth of financial resources and an inherent ambiguity surrounding the ability to fulfill present financial requirements. Resilience refers to the capacity to navigate through uncertainties and challenges. However, empirical evidence suggests that during periods of financial crisis, individuals’ financial resilience tends to diminish [3]. Hence, it is imperative to conduct further research on the financial resilience of workers in the context of the financial crisis. The primary objective of this study is to examine the financial resilience of workers, with a specific emphasis on the impact of demographic factors such as age, gender, occupation, and income on their financial resilience. To be more precise, this pertains to those of the Muslim faith who are employed in the South Jakarta region. The high prevalence of Islam among Indonesia’s population, accounting for 86.88% (Kusnandar, 2021), along with the popularity of South Jakarta as a prime employment hub [4] et al., 2013), has rendered this region particularly susceptible to the impact of the COVID-19 pandemic, characterized by a significantly elevated rate of positive cases. According to the source provided. it can be inferred that The existing body of research on individual finances, particularly on the extent of resilience and financial well-being, remains rather constrained, particularly within the context of Indonesia. According to studies by [1, 3, 5, 6] the majority of existing literature on personal finances focuses on the subjects of financial concerns, economic hardships, financial vulnerabilities, and individual job insecurity. These studies explore the interconnectedness between these factors and their impact on individual well-being and life satisfaction. The study by [6] delves into the various causes and effects of financial hardships. This study centers on the quantification of financial resilience and the examination of the relationship between demographic variables and financial resilience. However, it delves deeper by focusing on Muslim laborers and narrowing its coverage to South Jakarta. This analysis focuses on the examination of two key aspects: firstly, the financial resilience of Muslim workers in South Jakarta amidst the COVID-19 pandemic, and secondly, the impact of demographic characteristics on the level of financial resilience among Muslim workers in the same region during this crisis. The subsequent part will expound upon the literature review and thereafter go into the research methodology. The subsequent section will expound on the findings and analysis of the conducted research, culminating in the presentation of conclusions and recommendations for future investigations.
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2 Literature Review 2.1 Financial Crisis A financial crisis is an event when there’s a fall in the value of the domestic currency against foreign currencies, with a certain pattern and creates a loss of wealth. The financial crisis is one of the impacts of COVID-19. The crisis adversely affected income and caused financial fragility [7] this also occurs due to the presence of the termination of employment which increases the unemployment rate [7, 8]. 2.2 Financial Resilience Individuals have different abilities to bounce back from the adverse event of an economic downturn [9] This ability is called resilience. Resilience is highly dependent on an individual’s access to internal sources, such as financial literacy, and external resources, and being able to pay bills or access appropriate financial products and services [4] which the main goal can achieve [10]. Building resilience is important because nearly everyone will experience at least one major adverse event at some point in their life [9]. Muir et al. (2016) have constructed a framework related to the resources needed in financial resilience with the four components of internal and external resources: (1) economic resources; (2) financial products and services; (3) financial knowledge behavior (4) social capital, as shown in Table 1. Table 1. Components in Financial Resilience Framework Components
Objective
Economic Resources
Captures the money-related factors and becomes the internal resources including individual savings (can be future or retirement savings), debt management, the ability to meet living expenses, the ability to raise funds in an emergency, and investment.
Financial Products and Services
Combining and measuring an individual’s access to products and services (bank, insurance, and credit) and the demand for financial products and services.
Financial Knowledge and Behavior
Captures an individual’s level of financial knowledge such as financial products and services, confidence when using, and desire to get financial advice.
Social Capital
It looks at an individual’s connection to cope with unexpected expenses and events. Social networks such as access to community and governments, and the ability to pay zakat.
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2.3 Demographic Characteristics Human nature is complex, many factors such as demographic characteristics can affect an individual’s capacity and ability to cope with shocks [11]. Age can be one of the factors in determining an individual’s ability to adapt to unexpected events and adversity [4]. Selfknowledge generally increases with age [12]. Gender differences will have an impact on financial vulnerability in COVID-19 [13] although Salignac et al. (2019) found not much difference between men and women in endurance. Labor force status and income are significantly associated with an individual’s financial vulnerability, which means could lower the financial [11]. Thus, the hypothesis formulated is as follows: H1: Muslim workers in South Jakarta experienced low financial resilience during COVID-19. H2: Younger workers have higher financial resilience H3: There’s no significant difference between women’s and men’s financial resilience scores H4: Labor force status leads to higher financial resilience H5: Higher income leads to higher financial resilience
3 Methodology 3.1 Study Design The process of research, measurement, hypothesis testing, and data analysis uses numerical data. A quantitative approach is applied to this study with questionnaires as the technique for collecting data. Multiple linear regression was used with the consideration this method can generalize, extract data patterns, and perform parallel calculations (Amrin, 2016). IBM SPSS Version 26 software was used to process the data. This study aims to determine the effect of the four independent variables namely age, gender, labor force status, and income with one dependent variable namely financial resilience with the formula formed: Y = a + B1 X1 + B2 X2 + B3 X3 + B4 X4 + e Y = Financial resilience (Dependent Variable) a = Constant B1 – B4 = The coefficient of independent variable regression X1 = Age (Independent Variable) X2 = Gender (Independent Variable) X3 = Labor force status (Independent Variable) X4 = Income (Independent Variable) e = Error 3.2 Subjects The sample was selected using a purposive or judgment sampling technique, with no random consideration and there are criteria such as workforce, Muslims, and workers in the South Jakarta area (both active and dismissed workers during COVID-19). The
The Level of Financial Resilience from Muslim Workers
5
Lemeshow equation is used to determine the size of the sample to describe the real population so that it is found that the minimum sample is 68 people and the sample obtained in this study is 85 people. n=
1, 6452 .0, 5.(1 − 0, 5) Z2 .p.(1 − p) = 2 d 0, 102
n = Sample needed Z = Standard normal table with certain alpha (1,645) P = Case focus (Due to the unknown population, so assumed 50% of the population or 0.5) d = Alpha (0,10) or 10% from a level of confidence 90% 3.3 The Methodology This study uses OLS and the results of the questionnaires that have been filled out by the respondents will be tested using three stages, namely the instrument test consisting of a validity test and a reliability test to measure whether a questionnaire is valid or not and whether the data is reliable [14]. Then the classical assumption test measures the presence or absence of normality, linearity, multicollinearity, and heteroscedasticity. Finally, the F-test and t-test are used to determine the relationship between the independent variable to the dependent variable and the R2 test will be used to see how much the relationship between the independent variable and the dependent variable. In measuring the financial resilience score of Muslim workers, the result of the questionnaire will be averaged first to see the score that will be obtained. This score will show how resilient the Muslim workers in South Jakarta are, as shown in Table 2. Table 2. Financial Resilience Spectrum Score
Category
1–1,75
Severe financial vulnerability
1,76–2,5
High financial vulnerability
2,51–3,25
Low financial vulnerability
3,26–4
Financially resilient
4 Result and Discussion 4.1 Result The financial resilience score is determined from an average result on a scale of 1 to 4 which indicates very low financial resilience (severe financial vulnerability) to financially resilient.
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N. R. Delia et al. Table 3. Averaged Score Per Component of Financial Resilience
COMPONENT
MEAN
DESCRIPTION
Economic Resources
2.17
High financial vulnerability
Financial Resources
2.46
High financial vulnerability
Financial Knowledge and Behaviour
1.95
High financial vulnerability
Social Capital
2.16
High financial vulnerability
8,24% of respondents stated that they have no savings in this situation. However, not all respondents stated that 42.3% stated their savings were sufficient to meet their needs for 1 to 2 months and 40% for 3 to 4 months. Positively, around 9,4% of respondents stated that their savings and assets were significant to meet their needs. This also led to the conclusion that 91,76% of respondents already had savings to support their needs. With savings, respondents are helped to pay off their debts (95%), and 33% stated that it is easy to meet their daily needs even though it is quite difficult to collect emergency funds (84%) and understand investment as well as diversification (49%). Similar to the component of economic resources, the components of financial products and services also show that respondents experience low financial resilience even though the average score of these components is higher than the scores of other components (2.46). This indicates that respondents are easy to access banking services (100%) and have basic insurance protection (44%). However, 59% stated that they do not have access to the official financial sector and prefer not to use the official financial sector despite having access. Table 3 shows both average components of financial knowledge and behavior and social capital indicating that respondents experienced low financial resilience (1.84 and 2.14). Although respondents have basic financial knowledge (68%) and are quite confident in using it (40%), 28% of respondents indicated that they have never thought of financial advice (financial advice) and will only ask for help in certain situations (48%). If you look at the social funds they have, 67% of respondents indicated that it was quite difficult to get assistance from other parties and the government (61%) although they stated that it was quite easy to pay zakat (65%). Table 4. Financial Resilience Respondent’s Spectrum Result Category Severe Financial Vulnerability
Respondent
Percentage
4
5%
High Financial Vulnerability
70
82%
Low Financial Vulnerability
11
13%
0
0%
85
100%
Financially Resilient TOTAL
The Level of Financial Resilience from Muslim Workers
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The findings (Tables 3 and 4) showed that all respondents experienced a level of financial vulnerability during the pandemic COVID-19. Most respondents experienced high financial vulnerability during the pandemic and no respondent is financially resilient when unexpected events come. 4.2 Discussion Financial resilience is an individual’s capacity to overcome and recover from a difficult situation. Table 4 shows that most of the respondents (82%) experienced high financial vulnerability which means low financial resilience. This result is in line with the research conducted by [3, 4] which found that the average adult population in Australia has low financial resilience. This indicates that COVID-19 has disrupted the network of economic resources, financial products and services, financial knowledge of behavior, and social capital of Muslim workers in South Jakarta. This study has similar results to the research conducted by [11] where the results of the study indicate that income, expenditure, savings, investment, and debt have been disrupted. Individual abilities in dealing with unexpected events vary, as well as strategies. However, by relying on only one source to meet their needs, undesirable situations can occur such as not meeting their needs because the source is only able to fulfill them within a certain period. Just as stated by [11] this also shows that the readiness of Muslim workers in South Jakarta in unexpected situations is low. In difficult circumstances, the individual cannot rely on anyone other than himself. Almost all Muslim workers in South Jakarta mentioned it was difficult to get funds from other parties and the government. It can be said that Muslim workers in South Jakarta depended more on themselves as long as they could and asked for help from other parties when they could not meet their needs. It showed that internal resources are more needed than external resources such as help from other parties. So, trying to survive by relying on savings only will certainly cause individuals to experience financial vulnerability. Factors such as relying on only one source, not having an adequate strategy, and emergency funds to support can be concluded as the cause of individuals experiencing financial vulnerability and making their financial resilience become much lower. The workers need to take the willingness to learn how to increase their financial productivity to be more optimal in preparing themselves for unexpected events. t-test (Table 5) shows age that age has a significant negative effect, gender has no effect, and labor force status and income have a significant positive effect. Even the F test showed all of them simultaneously affect financial resilience. This can be interpreted as the higher the age, the financial resilience does not necessarily increase, and the better the labor force status and income obtained, the financial resilience will also increase. As the workers get older, their needs will also increase. The ability of individuals to find income to meet their needs depends on their age, this can be seen from the existence of retirement period. In line with [9] that stated there is a high level of stability in personality and locus of control in adults aged 25–60. This indicates that young adults are relatively more stable in going through difficult times. The cycle of work they have will be much stronger, that is, it will be much easier to find another job with better income if they’re affected by COVID-19, [15] stated the same.
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N. R. Delia et al. Table 5. Hypothesis Test Result
Variable
Results t Test
Sig. (t-test)
C
10.567
0.000
Age
–2.624
0.010
Gender
0.091
0.928
Labor Force Status
2.795
0.006
Income
4.960
0.000
R2 F
R2 test
F test
0.279 7.739*
*Sig. 0.000 atau 5%
The analysis test shows that gender does not affect financial resilience. There was no significant difference between women and men. The fact that all components of financial resilience show that individuals have low resilience also shows that both men and women experience the same difficulties such as difficulties with resources, meeting bills and other needs, and other difficulties. Activities undertaken to overcome difficult situations can also be said to be the same, by working or looking for work to be able to meet their needs. [6] also stated the same thing that men and women experienced the same experiences during difficult times. If it is associated with this study, men and women Muslim workers both experience the same thing during COVID-19. The impact received is also no different, of course, it has an impact on work and income which results in lower financial resilience. Labor force status and income have a significant positive effect and both are directly related to the resources owned by Muslim workers. With changes in working hours, reduced income, or even the loss of a job, individuals will be much more financially vulnerable. This is caused by a lack of resources which will trigger lower financial resilience. This result is in line with previous research which stated the same thing [3, 11]. Lower income can also lead to inequality and could be a factor in why they are financially vulnerable. In overcoming the difficulty of rising from a difficult situation, Muslim workers in South Jakarta need to strengthen themselves regarding the awareness of the financial problems they will face, and the strategies that will be used when difficult times come that need to be prepared before these difficult times come. This can be based on awareness of managing finances and understanding how to increase financial productivity so that the risk of financial fragility that will be faced is much reduced.
5 Conclusion Financial resilience refers to an individual’s capacity to effectively navigate and rebound from challenging circumstances. The COVID-19 pandemic has had a significant influence on employment and income, resulting in many consequences such as decreased
The Level of Financial Resilience from Muslim Workers
9
working hours, restricted worker mobility, diminished earnings, and even job losses. The findings of this study indicate that a total of 85 participants residing in South Jakarta exhibited a poor level of financial resilience. The aforementioned statement suggests that the COVID-19 pandemic has caused significant disruptions to economic resources, financial products and services, financial knowledge behavior, and social capital among Muslim employees residing in South Jakarta. The findings of this study additionally demonstrate that financial resilience is influenced by factors such as age, labor force status, and income. Younger employees exhibit a greater degree of financial resilience, as their work cycles tend to be more robust, rendering them more capable of securing alternative employment opportunities with improved income prospects in the event of being adversely affected by the COVID-19 pandemic. Enhanced tactics about both external and internal resources are necessary to bolster individual financial resilience in the face of unforeseen circumstances, such as the COVID-19 pandemic. This research aims to enhance public understanding regarding financial management. In addition, it is anticipated that this study will contribute to the government’s ability to consider, solicit, promote, and deliver training in effective financial planning and management strategies following the aftermath of the COVID-19 pandemic, which has resulted in diminished financial resilience among Muslim laborers in South Jakarta. The scope of this study is restricted to participants residing exclusively in the South Jakarta region. It is anticipated that future studies on the examination of employees’ financial resilience can adopt a more comprehensive approach, encompassing additional variables for analysis in addition to age, gender, employment stability, and income. For instance, the study examines demographic attributes in various provinces and sub-districts, as well as socio-economic indicators like mortgage ownership and access to supplementary money from specialized entities such as Zakat funds.
References 1. Fiksenbaum, L., Marjanovic, Z., Greenglass, E.: Financial threat and individuals’ willingness to change financial behavior. Rev. Behav. Financ. 9(2), 128–147 (2017). https://doi.org/10. 1108/RBF-09-2016-0056 2. BPS: BeritaResmi Statistik Keadaan Ketenagakerjaan Indonesia Februari (2021) 3. Salignac, F., Marjolin, A., Reeve, R., Muir, K.: Conceptualizing and measuring financial resilience: a multidimensional framework. Soc. Indic. Res. 145(1), 17–38 (2019). https://doi. org/10.1007/s11205-019-02100-4 4. Muir, K., Reeve, R., Connolly, C., Marjolin, A., Salignac, F., Ho, K.: Financial Resilience in Australia 2015. Underst. Financ. Wellbeing Times Insecurity, August 2016 5. Litbang, B., et al.: Jurnal Ekonomi dan Pembangunan Indonesia Pengaruh Variabel SosioDemografis terhadap Mobilitas Ulang- Alik di Jabodetabek Pengaruh Variabel SosioDemografis terhadap Mobilitas Ulang-Alik di Jabodetabek. Effect Socio-Demogr. Variables Commutin. 13(2) (2013). https://doi.org/10.21002/jepi.v13i2.04 6. Cowan, B., Garcia, K.S.: How has Covid-19 affected young workers? CESifo Forum 22(4), 8–14 (2021) 7. Hopkins, S.: Economic stability and health status: evidence from East Asia before and after the 1990s economic crisis. Health Policy (New York) 75(3), 347–357 (2006). https://doi.org/ 10.1016/j.healthpol.2005.04.002
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8. Shibata, I.: The distributional impact of recessions: the global financial crisis and the COVID19 pandemic recession. J. Econ. Bus. 115(November 2020), 105971 (2021). https://doi.org/ 10.1016/j.jeconbus.2020.105971 9. Etilé, F., Frijters, P., Johnston, D.W., Shields, M.A.: Measuring resilience to major life events. J. Econ. Behav. Organ. 191, 598–619 (2021). https://doi.org/10.1016/j.jebo.2021.09.004 10. Putri, I.K.: Financial planning for Islamic Economics Students in Yogyakarta. J. Islam. Econ. Lariba 2(1), 17–24 (2016) 11. Goyal, K., Kumar, S., Rao, P., Colombage, S., Sharma, A.: Financial distress and COVID-19: evidence from working individuals in India. Qual. Res. Financ. Mark. 13(4), 503–528 (2021). https://doi.org/10.1108/QRFM-08-2020-0159 12. Baron, R.A., Franklin, R.J., Hmieleski, K.M.: Why entrepreneurs often experience low, not high, levels of stress: the joint effects of selection and psychological capital. J. Manag. 42(3), 742–768 (2016). https://doi.org/10.1177/0149206313495411 13. Chhatwani, M., Mishra, S.K.: Financial fragility and financial optimism linkage during COVID-19: Does financial literacy matter?. J. Behav. Exp. Econ. 94(July), 101751 (2021). https://doi.org/10.1016/j.socec.2021.101751 14. Dogar, C., Mare, C.: Quantitative methods for sound financial management decisions in Romanian European social fund implementation. Procedia - Soc. Behav. Sci. 109, 290–294 (2014). https://doi.org/10.1016/j.sbspro.2013.12.459 15. Chhatwani, M., Mishra, S.K.: Financial fragility and financial optimism linkage during COVID-19: does financial literacy matter?. J. Behav. Exp. Econ. 94(November 2020), 101751 (2021). https://doi.org/10.1016/j.socec.2021.101751
How to Mitigate the SMEs Supply Chain Risk During the Pandemic in Indonesia with Failure Mode and Effect Analysis? Febriana Wurjaningrum(B)
, Nurulaily Kartika, and Atik Purmiyati
Universitas Airlangga, Surabaya 60286, Jawa Timur, Indonesia [email protected]
Abstract. Covid-19 has caused severe economic shock in many countries. Many companies have failed during the pandemic, showing the unpreparedness of current supply chains for disruption and unexpected environmental changes. This research aims to identify risks that may occur and evaluate risks along with identifying mitigation action plans for the printing SME supply chain during the pandemic. Therefore, this study determines three indicators for assessing the company risks using Failure Mode and Effect Analysis. The theoretical implications of this research are identifying 16 risk events and 23 risk agents with the highest Risk Priority Number of 576. Also, six main risk agents are found based on the 80/20 Pareto principle. The managerial implications of this study are (1) Applying the principles of Supply Chain Risk Management to determine the supply chain risk management using the compiled risk management framework in Word and Excel; (2) Production managers can monitor supply chain risks regularly to determine the appropriate managing efforts by risk conditions in the future; and (3) Improving customer relations is the proposed risk management strategy. Keywords: risk mitigation · failure mode effect analysis · small and medium enterprise
1 Introduction The COVID-19 pandemic has caused severe economic shock in many countries. Prevention and mitigation measures taken by governments worldwide to evade health system failure. This situation has led to regional and national lockdowns in different waves. At the beginning of the epidemic, regional shutdowns in China, several countries in Asia and even several countries in Europe had a massive impact on global supply chain networks. This situation creates new challenges that supply chain management must surmount under extreme uncertainty and time pressure. As many companies collapse, the Covid-19 pandemic demonstrates the unpreparedness of existing supply chains for unexpected disruptions and environmental changes. The retail sector has been hit in particular through the lockdown restrictions, with more than thousands of retail stores at risk in the UK and an estimated loss of 2 billion pounds sterling per week from before © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 11–21, 2024. https://doi.org/10.1007/978-3-031-53998-5_2
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Christmas sales due to the second lockdown [1]. Several preventive strategies and policies continue to be carried out by the government to minimize the risk of spreading the Corona Virus. To follow the social distancing policy issued by the president, each regional government issues derivative policies, such as Work from Home (WFH) and learning-from-home policies. In this effort to implement WFH in preventing the spread of the Corona Virus in Indonesia, every government agency, institution, or company must think of a strategy so that every employee who carries out the policy can continue to work optimally. It is also related to the operational processes of a company’s business activities and services [2, 3]. Supply chain management has become the dominant disaster mitigation paradigm in recent decades. In industries like manufacturing, wholesale, and retail, the crucial aspect is the supply chain and supply chain management strategies, which are very helpful and often used in the industry [4]. Supply chain management is a strategic concept and step currently widely used by companies to increase their productivity, so companies must be able to integrate various kinds of information in all supply chain elements [5]. In addition, implementing supply chain management in a company positively influences operational capabilities, especially in increasing value [6]. As for managing supply chain management, companies often face uncertainties related to unbeknown things in the future. This uncertainty differed into two things, namely, positive uncertainty (opportunity) and negative uncertainty (risk). Risk is a thing not to ignore and must carefully consider if you want to be successful [7, 8]. Therefore, various policies regarding supply chain management to use to fight against COVID-19 and minimise supply chain risk become essential to do. In the uncertain circumstances caused of pandemic, the collaboration of all parties in the supply chain is crucial not only for the main actors but also for the role of supporting actors is needed. Changes or actions by one supply chain member will affect other members [9]. Failure Mode Effect Analysis (FMEA) is a systematic method for identifying and preventing system, product, and process problems before occurring. The focus is preventing problems, improving safety and increasing customer satisfaction [10]. FMEA procedure assigns a numerical value to each risk associated with causing failure using the severity, occurrence and detection index. Then, we multiply these numerical values to obtain the Risk Priority Number (RPN) [11]. The research questions posed are (1) What are the risk types might arise in the supply chain flow in SMEs during the COVID-19 pandemic? (2) How to evaluate SME risks using the FMEA method during the COVID-19 pandemic? and (3) What is the mitigation action plan to minimize the risks that arise during the COVID-19 pandemic?
2 Research Methods The research method is a process that aims to help so that the knowledge achieved from a study could produce the maximum possible performance. Similarly, research methodology is adopted approach to facilitate a company’s work. The research approach used is qualitative [12]. This study uses a qualitative approach to reveal the symptoms in a horizontal-contextual manner through data collection directly from the source. In this case, the topic discussion is an overview of supply chain risk management during the COVID-19 pandemic with the FMEA approach. The research object selected is Small and Medium Enterprise (SMEs) in Surabaya, namely CV Jaya Abadi.
How to Mitigate the SMEs Supply Chain Risk During the Pandemic
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The data analysis technique used is the FMEA approach and risk evaluation, which includes weighting the risk ranking with the RPN. When the risk ranking is complete, the appropriate mitigation is prepared to handle the risks that may arise. First, the main problem that the company, with the concept of the supply chain, is going through based on the SCOR concept consists of Plan, Make, Source, Deliver, and Return. Second, identify risk events that may arise from the supply chain activities using unstructured interviews. Third, identify the risk agents of the identified risk events using a structured list of questions. Fourth, evaluate the risks that arise using the FMEA method. Through FMEA, it will obtain the RPN value from each cause of the problem. The FMEA procedure assigns the numerical value for each risk associated with the failure causes using the severity, occurrence, and detection index, as well as the RPN. Last, determine mitigation actions through in-depth interviews with business managers. Data validity verification is crucial in qualitative research to maintain data validity, data reliability, and trustworthiness level of data. The data validation technique is by applying the triangulation technique. It’s one of the verification of data validity by utilizing something other than the data for checking purposes or as a comparison against the data [13]. Through this verification technique, the author intended to use triangulation of data sources, so we use many data sources in data collection. There is more data source from more than one informant in this study.
3 Results This research aims to identify, evaluate, and provide suggestions for management strategies related to the supply chain risks of the SME. This study uses the FMEA method that can assist in managerial decision-making. Before risk identification, it is necessary to map the supply chain activities to discover what risks may arise from each activity. Further, authors used Supply Chain Operational Reference (SCOR) model to group the identified supply chain activities into five activity categories to facilitate the risk analysis process. According to the previous study [14, 15], Supply Chain is a network of autonomous or semi-autonomous business entities involved in various business processes and activities that produce physical goods or services for customers through upstream and downstream links. In the supply chain activities of the SME (see Fig. 1), three kinds of flow are material flows consisting of product flows that process from upstream to downstream, financial flows that process from downstream to upstream, and information flows that process both from upstream to downstream and vice versa. This study grouped the identified supply chain activity of the SME into the SCOR model. This grouping aims to simplify also as a primary reference in recognizing risk events and risk agents that arise in the supply chain of the SME. This grouping is done based on the results of observations in the location and interviews with the director of the SME. The supply chain activities diverged into five categories (Table 1). The first stage in implementing SCRM is to identify risks. This stage is one of the crucial steps in the implementation of SCRM because only the identified risks underwent analysis at further stages. The identification process of the supply chain risk in the SME is the identification of risk events and risk agents. The identifying risk events process in the supply chain of the SME is carried out based on the results of grouping activities in the previous stage. This identification process is carried out based on the results of
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Fig. 1. Graphical membership function of the three fuzzy sets.
interviews with the director of the SME and field observations. The results of the risk event identification process have received confirmation from the director of the SME. Based on the risk events identification of the supply chain, 16 risk events have been found. The next stage is identifying risk agents or causes that may be the reason for the occurrence of risk events in the supply chain of the SME. We obtained risk agents through the process of filling out a questionnaire distributed to the director of the SME. Based on the identification results, it’s found 23 risk agents. Assessment of supply chain risk of the SME using the FMEA method aims to evaluate the impact and frequency of risks using the severity, occurrence, and detection measures. The assessment of severity, occurrence, and detection level is by questionnaire. Severity (S) is the magnitude of the impact of a risk event that will affect the supply chain process of the SME. Occurance (O) is the probability rate of the occurrence of risk agents that will affect the supply chain process of the SME. Detection (D) is the ability level to identify or control the occurrence of risk agents that will affect the supply chain process of the SME. The severity, occurence, and detection level determination for each risk event is
How to Mitigate the SMEs Supply Chain Risk During the Pandemic
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Table 1. The grouping results of supply chain activities in the CV Jaya Abadi based on SCOR. Scale
Description
Definition
Plan
Price offer to customers
Receive order specifications from customers and determine bid prices
Planning for purchasing supplier raw materials
Planning and purchasing raw materials
Product sample creation
Manufacture of finished product samples according to order specifications
Raw material approval
Produce invoices for receiving raw materials and conducting inspections
Raw material storage
Storage of raw materials before processing according to schedule
Raw material cutting
Cut the paper size according to the print size
Plate Making
Perform plate manufacture according to the design order
Printing machine preparation
Carry out machine cleaning and colour stability checks
Source
Make
Deliver
Return
Product Printing
Carry out the printing process
Product delivery
Prepare to pick up or deliver products according to the agreement
Payment billing
Produce sales notes and make billing
Return of raw materials that are defective/not according to the order
Produce invoices for returning raw materials and shipping to suppliers
Defective product returns
Accept returns of defective products from customers
Sales of defective products/waste
Conduct sales of defective products/production waste
using a scale of 1–10 from previous study [7]. Afterward, determine the risk priority number (RPN) for each risk agent by multiplying the value of severity, occurrence, and detection of each risk agent. The results of the RPN calculation on each supply chain risk agent of the SME are in Table 2.
4 Discussion Prioritize risk can help companies identify which risks have the most significant impact and assist companies in determining actions based on certain types of risks that allow companies to manage their risks with limited resources. One of the tools to prioritize risk based on the RPN is the Pareto Diagram [6]. The Pareto rule is the basis for prioritizing supply chain risk in the SME to be handled first. Based on the 80/20 rule, 20%
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F. Wurjaningrum et al. Table 2. Risk Priority Number value calculation results.
Ei
Risk Events
Ai
Risk Causes
S O D RPN
E1
The offer price is lower than the production cost
A1
Less thorough in the price calculation process The raw material price database is not updated Delivery delays from suppliers Lack of communication with suppliers The manufacture of print samples is not following the production capacity Data input error during the ordering process The supplier lacks conscientiousness Queues in the production process scheduling The paper size far exceeds the printable area The glass used is less clean The abstract colour composition in the design file Lack of oil usage The machine often stops Folded/corrugated paper The printing employee’s absence Queues in goods delivery Delay in picking up goods by customers Error in generating sales invoices Delay in disbursement of customer funds Queues for delivery of goods
6 5
4
120
5
4
120
4 5 4 5
5 6
100 120
8 7
7
392
8 5
5
200
5
6
240
7 6
5
210
8 7
6
336
9 5 7
4 8
180 504
6 8 8 9 9 9 7 7 6 6
6 6 7 8 5 6
288 432 567 504 210 252
9 5 8
3 8
135 576
6 5
5
150
7 5
6
210
7 8 5
4 5
224 175
A2 E2 E3 E4
E5
Raw materials delivery delay Raw material stock vacancies at suppliers The colour doesn’t match the product
A3 A4
Raw materials do not match the order specifications
A6
A5
A7 E6 E7 E8
Accumulation of raw materials before processing Accumulation of scrap pieces of raw material Not perfectly imprint the design on the plate
E9 Paint clumping E10 Unstable colour E11 Interrupted printing process E12 Product delivery delay
E13 Order payment delay
A8 A9 A10 A11 A12 A13 A14 A15 A16 A17 A18 A19
E14 Delay in defective raw materials A20 delivery E15 Production process error A21 Lack of conscientious during the inspection process E16 The accumulation of waste from A22 Error during printing process the production process A23 Delay in picking up goods by collectors
of the primary agents identified that cause 80% of supply chain risk problems at the SME. The primary agent of supply chain risk in the SME identified from Pareto analysis amounted to 6 risk agents consisting of delay in disbursement of customer funds (A19), folded/corrugated paper (A14), the abstract colour composition in the design file (A11), absence of the printing employee (A15), the machine often stops (A13), and the manufacture of print samples is not following the production capacity (A5). The director of
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the SME has confirmed the identification results. The RPN resulted in the order of the main causes of supply chain risk in the SME. Based on the results of interviews with the director of the SME, the COVID-19 pandemic has an impact on increasing the frequency of risk events so that most of the primary risk agents have a very high probability of occurrence with an occurrence value of 7. These are the analysis result of each of the primary risk agents in the SME’s supply chain based on the interviews with the director of the SME. The delay in disbursement of funds from customers (A19) is in the first order of the highest risk agent with details of each severity, occurrence, and detection value, which are 9, 8, 8. The delay in disbursing funds from customers is related to the smooth flow of cash owned by the SME. The COVID-19 pandemic is one of the causes of the weakening of the global economy. Fluctuating market conditions and declining customer demand have made the financial performance of several companies affected by COVID-19 not optimal. This matter makes some customers face difficulty when they want to order payment and ask for an additional time limit. If the customer is late in making payment for the order, then the SME has to spend more cash to pay the cost of raw materials to the supplier first, so the cash flow of the SME becomes slow. Folded/corrugated paper (A14) is the second place of the highest risk agent with details for each severity, occurrence, and detection level, which are 9, 9, 7. Based on the narrative of the director of the SME during the interview, paper is the most important component in the printing industry. Paper becomes the raw material that absorbs the most costs, so damage to paper becomes a relatively high risk for the SME. Usually, poor paper storage methods or insufficient paper storage space can cause the risk. In addition, different paper types can also affect the paper’s resistance to damage. Some types of paper are more prone to corrugation than others, such as duplex paper. Folded or corrugated paper is prone to snagging in the printing press, then the printing process stops. In mild cases, it is easy to pull the paper from the printer, which makes the printing process can continue. However, in more severe cases, jammed paper can cause damage to the printer. The abstract colour composition in the design file (A11) is the third highest risk agent with details of each severity, occurrence, and detection value, which are 9, 7, 8. The abstract colour composition causes an imperfect printed design, so it has to be reworked on the plate, which can delay the processing time of that order. Usually, the file type by the customer in a format other than Pdf or Ai causes this imperfect colour composition. The printing press uses a colour scheme with four varieties of colour separation: process cyan, process magenta, process yellow, and process key (black), or commonly abbreviated as CMYK. Several other file formats, such as JPG and PNG, use different colour schemes, namely RGB (red, green, blue). This difference becomes the reason for the abstract colour composition in some print files because they use different colour schemes. In addition, image resolution is also the cause of imperfect colour composition. The lower resolution of the image, then the image will appear blurry, making it difficult to separate the individual colour components. The absence of the printing employee (A15) is the fourth place of the highest risk agent with details of each severity, occurrence, and detection value, which are 9, 7, 8. Although the main activity of the CV. Jaya Abadi is printing production, but it is a service
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company that runs a mass customization business. So, human resources is an essential factor because the availability of customers and service providers simultaneously will carry out the production. The SME has ten employees, including two staff and eight production staff. Also, the SME has two printing machines, each with the specification for a 4-colour printing machine and a 2-colour printing machine. The 2-colour printing machine requires two operators to run the printing process, while the 4-colour printing machine requires four operators. One operator handles the cutting section and the layout design section. If a printing employee is absent, there only three employees can operate the 4-colour printing machine. Due to the COVID-19 pandemic, the intensity of absent print employees has increased. Problems occur when several print employees apply for vacation at once, that cause the operational process becomes hampered. In addition, the printing press operation requires experts, so if the printing employee is absent, the printing process cannot run. The machines often stop (A13) is the fifth highest risk agent with details of each severity, occurrence, and detection value, which are 8, 9, 6. Printing machines are one of the main assets in the printing industry. The operation of the printing press encounters several problems, such as paper jams or interruptions in the electricity flow and spare parts, causing the printing process often stops. Printing machines in the SME are from abroad, so some specific spare parts are difficult to find domestically. Therefore, if there is damage to the spare parts, the SME must place an order with a spare parts provider company abroad, which takes quite a long time. The manufacture of print samples that isn’t following production capacity (A5) is the sixth order of the highest risk agent with details of each severity, occurrence, and detection value, which are 8, 7, 7. As previously explained, the printer uses the CMYK colour scheme that usually printed graphic design products use. Meanwhile, digital based graphic of design products usually, for example, on television screens, computers, and cell phones, use the RGB colour scheme. The CMYK colour scheme works by masking a white background so that the addition of colour will produce a darker colour until it becomes black. RGB uses the principle of adding colour, so the base that was originally coloured black will get brighter until it becomes white if it gets additional colour. This difference in working principles is the reason for the difference between the design colours seen on the computer screen and the actual printed results. It often causes the colour that comes out on the printing machine not to match the colour in the file sent by the customer. In addition, the different basic colours of the paper can also affect the colour that will appear in the printed result. Problems related to colour differences in printouts are a problem that fairly often happens in the printing industry, and customers usually tolerate colour changes as long as they are not too significant. Based on the results of in-depth analysis and discussion with the director of the SME, this study presents several alternatives to handle risks that arise in the supply chain of the SME (see Table 3). These risk alternatives have received confirmation from the director of the SME.
How to Mitigate the SMEs Supply Chain Risk During the Pandemic
19
Table 3. Supply chain risk management strategy of the SME. Ai
Risk Causes
Strategy Type
A19
Delay in disbursement of customer Risk Avoidance funds
A14
Folded/corrugated paper
A11
The abstract colour composition in Risk Avoidance the design file
A15
The absence of printing employee
Risk Mitigation
Risk Mitigation Risk Transfer
A13
The machine often stops
Risk Avoidance
A15
The manufacture of print samples isn’t following the production capacity
Risk Avoidance
Management Strategy Improve customer relationships and coordinate with customers regarding mutually agreed payment mechanisms 1) Determine specific areas for storing paper raw materials and avoid employee traffic activities 2) Conduct continuous checks during the printing process so the problem with the paper can get discovered and resolved quickly in time 1) Determine the specific file format used as a reference for the print design file 2) Determine the minimum image resolution needed for design files Managing printing employee leave through systematic scheduling Use the services of a freelance for operating the printer or outsourcing when experiencing a shortage of print employees due to sudden leave Perform regular machine maintenance to minimize breakage on the machine 1) Change the file format according to the colour scheme of the printing machine 2) Conduct initial inspection of the proof results to identify colour differences and other minor errors before the printing process runs
5 Conclusion This research concluded that the FMEA method identified 16 risk events and 23 risk agents with the highest RPN of 576. From a total of 23 identified risk agents, the risk evaluation and analysis found six main risk agents in the supply chain based on the 80/20 Pareto principle, namely delay in disbursement of customer funds (A19) with an RPN of 576, folded/corrugated paper (A14) with an RPN of 567, the abstract colour composition in the design file (A11) with an RPN of 504, the absence of the printing employee (A15) with an RPN of 504, the machine often stops (A13) with an RPN of 432, and the manufacture of print samples is not following the production capacity (A5) with an RPN of 392. The risk management strategy consists of improving customer relationships and coordinating with customers regarding payment mechanisms, determining the spesific area for storing paper raw materials, conducting continuous checks during the printing process, determining the specific file format for print design files, determining minimum
20
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image resolution for design files, managing printing employee leave through systematic scheduling, using the services of a freelance for operating the printer or outsourcing, performing regular machine maintenance, changing the file format according to the colour scheme of the printing machine, as well as conducting an initial inspection of the proof results. The managerial implications identified are in the form of a proposed risk management strategy to minimize the supply chain risk. First, the company can apply the principles of SCRM to identify, evaluate, and determine the managing efforts related to supply chain risks using a compiled risk management framework in Word and Excel. Last, the production manager can monitor supply chain risks regularly, both on the Main risk causes and the minor risk causes, to determine the appropriate management efforts by risk conditions in the future. The research results are not general as it only focuses on the enterprise’s internal and has limitations regarding data originating from external or enterprise partners. Further research can include data input from both the supplier and customer sides so researchers can get a complete overview of the supply chain flow to be analyzed.
References 1. McMaster, M., et al.: Risk management: rethinking fashion supply chain management for multinational corporations in light of the COVID-19 outbreak. J. Risk Financ. Manag. 13(8), 173 (2020) 2. Safitri, T.: Supply chain risk management during the Covid-19 pandemic (2020). https://sup plychainindonesia.com/manajemen-risiko-keamanan-rantai-pasok-saat-pandemi-covid-19/ 3. Remmiya Rajan, P., Dinesh, A.: Darken phase of MSME due to Covid 19 in India. In: Aloysius Edward, J., Jaheer Mukthar, K.P., Asis, E.R., Sivasubramanian, K. (eds.) ICEBS 2023. CESIBT, pp. 162–167. Springer, Singapore (2023). https://doi.org/10.1007/978-98199-3366-2_19 4. Pujawan, I.N., Er, M.: Supply chain management: completely discusses strategy, planning, operations and supply chain improvements to achieve competitiveness. ANDI, Yogyakarta (2017) 5. Lotfi, Z., Sahran, S., Mukhtar, M.: A product quality-supply chain integration framework. J. Appl. Sci. 13(1), 36–48 (2013) 6. Faizal, K., Palaniappan, P.L.K.: Risk assessment and management. Glob. J. Res. Eng. 14(2), 19–30 (2014) 7. Zhu, Q., Golrizgashti, S., Sarkis, J.: Product deletion and supply chain repercussions: risk management using FMEA. Benchmark. Int. J. 28(2), 409–437 (2021) 8. Esakkidevi, M., Rani, S.M.L.: Consumer attitudes towards organic food products in Tirunelveli district. In: Aloysius Edward, J., Jaheer Mukthar, K.P., Asis, E.R., Sivasubramanian, K. (eds.) ICEBS 2023. CESIBT, pp. 168–179. Springer, Singapore (2023). https:// doi.org/10.1007/978-981-99-3366-2_20 9. Schleper, M.C., Gold, S., Trautrims, A., Baldock, D.: Pandemic-induced knowledge gaps in operations and supply chain management: COVID-19’s impacts on retailing. Int. J. Oper. Prod. Manag. 41(3), 193–205 (2021) 10. Rakesh, R., Jos, B.C., Mathew, G.: FMEA analysis for reducing breakdowns of a sub system in the life care product manufacturing industry. Int. J. Eng. Sci. Innov. Technol. 2(2), 218–225 (2013) 11. Sellappan, N., Palanikumar, K.: Modified prioritization methodology for risk priority number in failure mode and effects analysis. Int. J. Appl. Sci. Technol. 03(04), 27–36 (2013)
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12. Yin, R.K.: Case Study: Design and Methods. Rajawali Pers, Jakarta (2015) 13. Moleong, L. J. Qualitative Research Methodology. Remaja Rosdakarya, 2018) 14. Samaranayake, P.: A conceptual framework for supply chain management: a structural integration. Supply Chain Manag. 10(1), 47–59 (2005) 15. Argade, N.U., Mazumdar, H.: 3D printing: a game changer for Indian MSME sector in industry 4.0. In: Nayyar, A., Naved, M., Rameshwar, R. (eds.) New Horizons for Industry 4.0 in Modern Business. CESIBT, pp. 295–329. Springer, Cham (2023). https://doi.org/10.1007/978-3-03120443-2_14
Characterising the Islamic Financial Cycle in Indonesia Post-Pandemic Era: Markov Switching Approach Irfan Nurfalah1 , Aam Slamet Rusydiana1 , Nisful Laila2(B) , Puji Sucia Sukmaningrum2 , and Luthfi Nur Rosyidi2 1 SMART Consulting, Bogor, Indonesia 2 Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia
[email protected]
Abstract. Numerous scholars have conducted studies on the conventional financial cycle, yet there is a lack of scholarly discourse on the distinct Islamic financial cycle. However, Islamic finance plays a significant role within a nation’s economic framework, particularly in regions with a predominantly Islamic population. This study integrates variables from Islamic banking, the Islamic capital market, and macroeconomics, covering the period from 2009 to 2022. The research employs the MSVAR methodology to identify and analyze transitions between distinct regimes. The findings indicate that the duration of the deceleration regime phase is longer than the accelerated regime phase, lasting approximately 9 years versus 5 years. Furthermore, the study reveals that the six variables examined significantly impact Indonesia’s economic growth, with each variable displaying a unique response to shocks. Keywords: Islamic Financial Cycle · Markov Switching · Post-Pandemic
1 Introduction In 1998, Indonesia experienced a severe economic crisis with the rupiah plunging from Rp. 2,429 to Rp. 16,650 against the US dollar within a year. This crisis was exacerbated by an inflation rate of 77.63%, causing significant challenges for both the private sector and the government to meet their short-term obligations. According to World Bank data, Indonesia’s short-term debt relative to its total reserves soared to 187.9%. Consequently, Indonesia’s economy contracted by 13.13% in 1998, marking the worst recession in its history. Refer to Fig. 1 below for detailed information on Indonesian GDP, inflation, and exchange rates from 1997 to 2006. Indonesia’s recovery from the financial crisis was hindered by the 2008 U.S. subprime mortgage crisis. The U.S. government securitized subprime mortgages into mortgagebacked securities (MBS), which were transformed into Collateralised Debt Obligations (CDOs), attracting global investors with high credit ratings. However, a surge in subprime loans in the early 2000s led to poor loan performance, exacerbating the crisis © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 22–38, 2024. https://doi.org/10.1007/978-3-031-53998-5_3
Characterising the Islamic Financial Cycle in Indonesia
23
Fig. 1. Indonesian GDP, Inflation, and Exchange Rate 1997–2006. Sources: World Bank, Indonesian Bureau Statistic, Central Bank of Indonesia, author processed.
(Immergluck, 2015). Research (Cheong et al., 2012) and Amanda (2021) confirm the impact of the subprime mortgage crisis on the Indonesian stock market, and exchange rate volatility followed stock price fluctuations, with the Federal Reserve implementing Quantitative Easing (QE) to counter the recession (Dinata and Oktora, 2020) (See Fig. 2).
JKSE (Le)
14,000 12,000 10,000 8,000 6,000 4,000 2,000 02-11-2009
02-09-2009
02-05-2009
02-03-2009
02-01-2009
02-11-2008
28-102008, 1,111
02-07-2009
27-11-2008, 12,275
02-09-2008
02-07-2008
02-01-2008
02-11-2007
02-09-2007
02-07-2007
02-05-2007
02-03-2007
02-01-2007
05-01-2007, 9,050
02-05-2008
09-012008, 2,830
02-03-2008
3,000 2,500 2,000 1,500 1,000 500 -
EXC (Right)
Fig. 2. Data of JKSE and Exchange Rate 2007–2009. Source: Indonesian Stock Exchange and Central Bank of Indonesia, author processed.
Furthermore, Viphindrartin et al. (2021) revealed the link between U.S. interest rates, money supply, and Indonesian GDP growth, while rising U.S. inflation correlated with decreased Indonesian GDP. The emergence of Central Bank Digital Currencies (CBDCs)
24
I. Nurfalah et al.
and the economic downturn due to Covid-19 in 2020 further complicated Indonesia’s economy. Figure 3 shows the Indonesian economic growth per quarter.
7.07 5.72 5.02 5.02 5.45 5.01
5.06 5.05 5.01 4.96 3.51
2.97
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2022 2022 -2.17 -0.7 -3.49 -5.32
Fig. 3. Indonesian Economic Growth Per Quarter (yoy). Source: Indonesian Bureau Statistic, processed by author.
Despite the growth in Islamic finance in Indonesia, research has primarily focused on conventional financial cycles, with the distinct features of the Islamic financial cycle often overlooked, making it an essential area of investigation (Nurfalah et al., 2018; Nurfalah and Rusydiana, 2021). Islamic finance in Indonesia has seen remarkable growth, such as annual asset growth exceeding 30% during the 2008–2009 crisis, and despite the pandemic, the Islamic banking sector recorded approximately 13% growth in 2020 (Fig. 4). Additionally, data on Islamic capital market assets (Islamic stocks, Islamic corporate bonds, Islamic mutual funds, and Islamic government bonds) revealed good development, with Islamic capital market assets increasing by approximately 25.60% in 2012 compared to the previous year. Even though it declined by 7.95% in 2015 due to economic instability and the devaluation of the rupiah and again by 3.21% in 2020 because to the Covid-19 outbreak, it grew dramatically in 2021 and 2022 by 18.02% and 19.02%, respectively. In addition, data on the non-bank Islamic financial business had tremendous growth, with an increase of 36.67% in 2016, a decline of 2.04% in 2018, an increase of 10.17% during the Covid-19 2020 pandemic, and a strong increase of 20.8% in 2022. Here are the visual particulars: Figures 5 and 6 and facts indicate that Islamic finance has an effect on Indonesian economic growth. In order to optimise the growth potential of Islamic finance and contribute to the expansion of the economy as a whole, it is required to conduct a study that focuses exclusively on the Islamic financial cycle. Therefore, the purpose of this study is to investigate the Islamic financial cycle as a whole in order to establish the duration of each cycle, the factors that influence economic growth, and the transition between Islamic financial cycles. In light of this, it is anticipated that this research will assist the government in formulating policies. This study used the Markov Switching VAR model,
Characterising the Islamic Financial Cycle in Indonesia
8,00,000
7,44,379 6,93,795
2011,49%
7,00,000 6,00,000
5,38,498
2009,33%
4,00,000 3,00,000 2,00,000 1,00,000
37,754
51,248
68,214
40%
3,65,662 3,04,001
30% 2020,13%
1,99,717 1,48,987 1,00,258
60% 50%
6,08,892
5,00,000
25
20% 10%
2015,09%
00%
-
Aset Islamic Bank
Growth (yoy)
Fig. 4. Islamic Bank Aset and Its Growth (yoy). Source: Indonesia Financial Service Authority, processed by author.
6,213
7,000 25.60%
6,000
4,569
5,000 4,000
3,172 2,565
3,000
25.00% 19.04% 20.00%
5,219 4,423
30.00%
18.02%
15.00% 10.00%
2,919
5.00%
2,042 2,000
0.00% -3.21%
1,000
-5.00%
-7.95%
2011
2012
2013
2014
2015
2016
-10.00% 2017
Islamic Capital Market
2018
2019
2020
2021
2022
Growth
Fig. 5. Islamic Capital Market Asset (Trillion) and Its Growth. Source: Indonesia Financial Service Authority, DJPPR-Ministry of Finance, processed by author.
which can predict the Islamic financial cycle in real terms based on data, the transition period between cycles, cycle duration, and the interrelationships of research variables.
2 Literature Review 2.1 Financial Cycle: An Overview Borio (2012) defines the financial cycle as an interaction between risk-taking behavior and financing constraints, leading to cyclical peaks and troughs, with five key features: (1) mainly linked to credit and property prices, (2) longer cycles compared to traditional
26
I. Nurfalah et al.
146.11925
160.000 36.67%
140.000
100.000
88.67391
80.000 60.000
35.00% 116.35131
120.000
54.41333
40.00%
30.00% 20.88% 25.00%
99.13328 97.11501
20.00%
64.88200
15.00% 10.17%
10.00%
40.000
5.00%
20.000
0.00%
-2.04%
2014
2015
2016
2017
2018
Non-bank IFI
-5.00%
2019
2020
2021
2022
Growth
Fig. 6. Non-Bank IFI (Trillion) and Its Growth. Source: Indonesia Financial Service Authority, DJPPR-Ministry of Finance, processed by author.
business cycles, (3) closely tied to financial crises, (4) useful for early real-time risk detection, and (5) influenced by prevailing policy regimes, with determinants related to total financing indicators. This concept includes various indicators like interest rates, volatility, and default rates. The financial cycle in industrialized nations has typically lasted about 16 years since the 1960s, often coinciding with banking crises. In contrast, Abel et al. (2011) defines the business cycle as fluctuations in aggregate economic activity, encompassing aspects beyond GDP, with durations ranging from one to twelve years. Business cycles involve co-movements in multiple economic variables and have varying durations, from about a year to over a decade. Figure 7 shows a typical countries economic cycle.
Fig. 7. Diagram of typical countries economic cycle. Source: Adamauskas and Krušinskas (2012).
There are three primary theoretical explanations for business cycles: Keynesian, Monetarist, and Real Business Cycle (RBC) theories. The Keynesian theory underscores
Characterising the Islamic Financial Cycle in Indonesia
27
investment as a key driver influenced by profit expectations, costs, and demand variations. Monetarist theory highlights money as the primary driver, where changes in the money supply affect prices and output. Real Business Cycle theory attributes business cycle fluctuations to technology disruptions impacting productivity. These theoretical perspectives contribute to a comprehensive understanding of economic cycles. 2.2 Previous Studies Borio (2014) emphasizes the financial cycle, showcasing its association with credit and real estate prices. It is more extensive and long-lasting than conventional business cycles, closely linked to banking crises, enabling early crisis detection, and heavily dependent on financial, monetary, and real-economy policies. Harun et al. (2014) investigated the Indonesian financial cycle from 1994 to 2014, highlighting various crisis, recession, trough, and peak periods. It revealed the financial cycle’s ability to depict shifts in financial agents’ perceptions, its connection to financial crises, and its utility for countercyclical policies. Research by Harahap et al. (2018) explored business cycles in Indonesia, uncovering recession and crisis periods related to various events, with the business cycle accelerating until 2018. The financial cycle, marked by credit growth, shifted into an increasing pattern by Q3 2018. Strohsal et al. (2019) examined the financial cycle in different countries, emphasizing its longer duration and greater amplitude compared to the business cycle, driven by a global cycle influenced by U.S. monetary policy, particularly in the United Kingdom. Filardo et al. (2019) employed the traditional business cycle approach, identifying statistically significant factors associated with the business cycle, including real interest rates, inflation volatility, and the riskiness of the macro-financial environment. They also delved into the vulnerability related to net foreign asset positions. Another study by Stremmel (2021) focused on constructing financial cycle measures, suggesting that a synthetic financial cycle measure including the credit to GDP ratio, credit growth, and house prices to income was the most suitable. Nurfalah and Rusydiana (2021) investigated the instability of the financial cycle in Islamic banking and finance in Indonesia, Malaysia, and Pakistan, uncovering periods of crisis and stability. Schüler et al. (2021) delved into characterizing the financial cycle in 13 European Union countries, finding that credit and asset prices were closely related to financial cycles and more effective at predicting banking crises than the credit-to-GDP ratio. The study revealed that financial cycles tend to be lengthy and exhibit country-level heterogeneity.
3 Research Methodology This study combines utilise several factors to accommodate all sectors in Islamic finance. We implement the Industrial Production Index (IPI) as a proxy from GDP for the dependent variable, and this factor is also used by (Rahman et al., 2020). Moreover, as independent indicators, we divide into three sectors: first, Islamic banking factors, namely total Islamic Bank Financing (TFIN), which is also used by (Stremmel, 2021) and (Schüler
28
I. Nurfalah et al.
et al., 2021), Non-Performing Financing (NPF), Financing to Deposit Ratio (FDR) as it is also used by (Nurfalah and Rusydiana, 2021). Second, Islamic capital market indicators, such as Jakarta Islamic Index (JKII) as it is also used by (Ridlo et al., 2021) and (Septiarini et al., 2020), Islamic Government bonds (SBSN) as it is used by (Ledhem, 2022) and (Naz and Gulzar, 2022). Lastly, macroeconomic indicators, such as Exchange Rates (EXC), Inflation (INF), and Indonesia Foreign Debt, which is also used by Viphindrartin et al. (2021). 3.1 Data The investigation period spanned from January 2009 to December 2022, and numerous secondary data sources were consulted. The data of dependent variable, which is IPI, were obtained from the Central Bureau of Statistics (BPS), while the data for Islamic banking (TFIN, NPF, and FDR) were obtained from the Islamic Banking Statistics of the Financial Services Authority (SPS-OJK), the data of JKII were obtained from Indonesian Stock Exchange (IDX), the data of SBSN and DEBT were acquired from Directorate general of financing and risk management, Ministry of Finance. Finally, the data of EXC and INF were acquired from the Indonesian Economic and Monetary Statistics, Bank Indonesia (SEKI-BI). 3.2 Model Development We apply a linear model to construct the Islamic financial cycle formula, which is as follows, based on (Wang, 2009): IPIt = β0 + β1 TFINt + β2 NPFt + β3 FDRt + β4 JKIIt + β5 SBSNt + β6 EXCt +β7 INFt + β8 DEBTt + εt
(1)
where β1−8 are parameters, ε is the error term. The primary goal of this research is to look into the non-linear link between the financial cycle and growth. Thus, we use the Markov switching modelling approach to analyse the nonlinear behaviour of the Islamic financial cycle towards economic growth. According to Wang (2009) the time series utilised by the MS model are presumed to be stationary and are dependent on the latent process. Therefore, the states (St , where t = 0 or 1) around which time series evolve are unobservable. We postulate regime dependence of the mean (St ; where t = 0, 1), variance (St ; where t = 0, 1), and coefficients of IPI (IPIst ; where t = 0, 1). It implies that these parameters evolve in relation to the regimes. We assume two regimes, regime 0 is associated with acceleration and regime 1 is linked with deceleration. It is assumed that when the economy is expanding as a result of financial cycle, average economic growth will be higher while volatility will be lower. Therefore, μ0 > μ1 and σ0 < σ1 , indicating high growth-low volatility regime and vice versa. The specific equation of MS (2) can be written as: yt = μst + βst Zt +
5 i=1
θi Xi + εst
(2)
Characterising the Islamic Financial Cycle in Indonesia
29
In Eq. (1), yt is IPI, μst is state-dependent intercept, Zt denotes state-dependent switching variable, that is, IPI and Xi are state-invariant variable, such as TFIN, NPF, FDR, JKII, SBSN, EXC, INF, DEBT, while εt ∼ i.i.d.N(0, σε2 ). The probabilities will be: 0 with probability P00 (3) St = 1 with probability P11 and Pr =
p00 p01 p10 p11
and
M
p j=1 ij
= 1 for i = 0 and i = 1
(4)
where P00 and P11 are the probabilities remaining in regime 0 and regime 1, respectively, while P01 and P10 indicating the movement of probability from one regime to another. Hence, Pij = Pr (St = j|St−1 = i) for all i, j = 0 and 1 In MS (2) model, the mean and and variance are expected to behave as: μ0 μst = > 0 and μ1 < μ0 and σ0 < σ1 μ1
(5)
(6)
where St = 0 refers to acceleration regime and St = 1 refers to deceleration regime. Equations (5) and (6) are generated by ergodic probabilities which are given in Eqs. (7)–(10). P00 = Pr (St = Acceleration Regime|St−1 = Acceleration Regime)
(7)
P01 = Pr (St = Acceleration Regime|St−1 = Deceleration Regime)
(8)
P11 = Pr (St = Deceleration Regime|St−1 = Deceleration Regime)
(9)
P10 = Pr (St = Deceleration Regime|St−1 = Acceleration Regime)
(10)
4 Empirical Results and Discussion 4.1 Preliminary Investigation We scrutinised several preliminary experiments to assess the model’s stability. First, the unit root test, which requires determining the cycle and trend shared by the variables. (Wang, 2009). In Table 1, the unit root test indicates that some indicators, including TFIN, JKII, SBSN, INF, and DEBT, are significant at the level. Others, such as IPI, FDR, NPF, and EXC, are significant upon first difference.
30
I. Nurfalah et al. Table 1. Stationary Test Result
Variables
ADF test
PP test
IPI
−12.77088*
−20.32118*
TFIN
−3.254997*
−3.907284*
FDR
−14.04530*
−14.10863*
NPF
−4.761495*
−15.33789*
JKII
−3.658625*
−3.659897*
SBSN
−4.195496*
−4.697664*
EXC
−12.80563*
−12.80775*
INF
−3.204338*
−3.094260*
DEBT
−3.700275*
−4.223889*
Note: *: significant at 1% Table 2. Heteroskedasticity Test Result
Heteroskedasticity
F-statistic
Prob. F-statistic
3.092282
0.0029*
Note: *: significant at 1% Table 3. Lag Optimum
Lag optimum
AIC
SC
HQ
Lag
−25.36100*
−23.63122*
−24.65860*
1
Note: *: significant at 1%
Second, the Prob. F-Statistic value of 0.029 > 0.01 in Table 2 indicates insignificant result. Hence, the null hypothesis is rejected, and there is no heteroskedasticity. Moreover, according to Khim and Liew (2004) the optimal criterion for measuring the lag length of an equation is the AIC for small number, yet HQ is appropriate for numerous number. In accordance with this presumption, the result of this study demonstrates that the optimal lag for this model is 1, as can be seen in Table 3. Finally, Table 4 depicts the results of the LR linearity test, indicating that the chisquare value and the Davies value of equation is less than 0.05, that is to say that the research data is non-linear between the variables; consequently, the data analysis was performed using a non-linear regression model, such as MS-VAR. 4.2 Islamic Financial Cycle This study uses IPI as an indicator to accumulate data on the Islamic financial cycle, which other Islamic financial variables use as determiners to acquire cyclical processes in
Characterising the Islamic Financial Cycle in Indonesia
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Table 4. LR Test Result
LR Test
Value
Chi-Square
Davies
398.8527
0.0000*
0.0000*
Note: *: significant at 1%
the Indonesian economy. As fortified by (Abel et al., 2011) that economic cycle consists of growth acceleration (from trough to peak) and growth deceleration (from peak to trough). Hence, this study analyses the events of the Islamic financial cycle based on (Krolzig, 2000), which implemented two regimes of switching. Moreover, this research uses the formula of Markov Switching Intercept (MSI) – Vector Autoregression (VAR) based on the preliminary test. The graph can be seen below:
Fig. 8. Markov Switching Intercept (MSI) – Vector Autoregression (VAR). Source: Author’s elaboration (2023)
Indonesia’s economic trajectory, shown in Fig. 8, features two phases: robust growth and economic sluggishness, with swift transitions due to global instability from the subprime mortgage crisis, impacting economic stability and leading to Century Bank’s insolvency (Immergluck, 2015; Harahap et al., 2018). A government bailout, though sometimes less preferable (Rosas, 2006), highlights the need for comprehensive crisis policies (Sitorus, 2016). Subsequently, from December 2009 to December 2013, Indonesia experienced significant growth acceleration, with a nearly 50% increase in Islamic bank assets in 2011 (Harahap et al., 2018), but intermittent downturns ensued due to deteriorating global economic conditions, especially from January 2014 to August
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2016, affecting Islamic capital market assets (Harahap et al., 2018). Challenges persisted, including prolonged declines from January 2017 to February 2022, influenced by global economic difficulties and the impact of COVID-19 in early 2020 (IMF, 2019; Joseph, 2023; Chairil, 2020). Nevertheless, Indonesia displayed signs of potential recovery, albeit lagging behind some other emerging markets (Gudmundsson et al., 2022). Additionally, the study suggests a prolonged deceleration phase in Indonesia’s financial cycle, similar to the duration of business cycles, revealing commonalities between Islamic and conventional financial cycles marked by volatility (Harahap et al., 2018). Table 5 shows the regime results, with a duration of 7.28 and 12.67 for Regimes 1 and 2, respectively. Table 5. Regime Result nObs
Prob
Duration
Regime 1
60.7
0.3649
7.28
Regime 2
100.6
0.6351
12.67
Source: Author’s finding (2023)
In terms of transition probabilities, the probability of being in the deceleration regime is greater than the probability of being in the acceleration regime; Table 6 demonstrates that the proportion of being in regime 2 is 92.11%, while the rate of being in regime 1 is 86.27%. In addition, the rate of transition from regime 1 to regime 2 is 13.73%, while the reverse rate is merely 7.89%. Table 6. The Regime Proportion Regime 1
Regime 2
Regime 1
0.8627
0.1373
Regime 2
0.0789
0.9211
Source: Author’s finding (2023)
4.3 Determinant Indicators of Islamic Financial Cycle The estimation of various Islamic finance indicators using the MSVAR approach reveals that a majority of the tested indicators, namely TFIN, NPF, JKII, SBSN, EXC, and INF, exhibit statistically significant effects on Indonesia’s economic growth. Conversely, the indicators FDR and DEBT demonstrate no impact. Therefore, it is imperative to take into account the influence of these issues while formulating comprehensive economic policies. Table 7 presents the findings of the estimation analysis. Table 7 illustrates the significance of the total financing variable conducted by Islamic banks, with a probability value (0.0048) below the confidence level (0.01). The study reveals that TFIN has a positive coefficient, indicating that a 1% increase in Islamic
Characterising the Islamic Financial Cycle in Indonesia
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Table 7. Hypothesis Analysis Coefficient TFIN FDR
29.74310 −174.0792
NPF
−45.13794
JKII
0.030278
SBSN EXC INF
2.859443
Prob 0.0048*
−1.022833
0.3079
−2.430346
0.0162*
2.651492
0.0088*
−13.54688
−3.574446
0.0005*
78.52657
7.762438
0.0000*
−219.9371
DEBT
t-Statistic
−43.37652
−4.540662
0.0000*
−1.952853
0.0526
Robustness Test R-Square
0.783755
Adjusted R-Square
0.772874
Note: *: significant at 1% Source: Author’s finding (2023)
banks’ overall financing leads to about a 29.74% increase in Indonesia’s economic growth. These findings align with several studies, such as Stremmel (2021) emphasizing credit growth as a predictor of the European financial cycle and Ginting and Widyawati (2022) finding a direct impact of commercial bank credit on Indonesia’s economic growth. Additionally, the study indicates that a 1% increase in NPF results in a significant 45.14% decrease in Indonesia’s economic growth, consistent with earlier research by Anita et al. (2022) and Foglia (2022) illustrating negative correlations between non-performing loans and GDP. The variable JKII has a positive impact on Indonesia’s economic growth, consistent with prior studies, while Islamic state bonds negatively affect economic growth, contrasting previous reports. Furthermore, EXC (exchange rate appreciation) positively influences economic growth, consistent with studies highlighting its impact on exports and overall economic growth, while inflation negatively impacts economic growth, as supported by earlier research. 4.4 Impulse Response Analysis The impulse response analysis demonstrates how the variables respond to shocks or changes between acceleration and deceleration phases. In Fig. 9, the Industrial Production Index (IPI) reflecting economic growth shows notable fluctuations with an initial increase of 1 point followed by a substantial decline, eventually stabilizing. On the other hand, the aggregate financing variable related to Islamic banking exhibits minor changes. The FDR variable remains stable over the study period, as does the NPF variable. Notably, Islamic banking in Indonesia is more stable than in Malaysia and Pakistan, as highlighted by Nurfalah and Rusydiana (2021), showing increased stability during the 2009 and COVID-19 crises and substantial asset expansion.
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Fig. 9. Impulse Response Function (IRF) Test Results. Source: Author’s elaboration (2023)
Regarding Islamic capital market factors, JKII experiences significant responses to shocks, mainly due to its connection with the global market. This aligns with the findings in Castro et al.’s (2023) research on the impact of the 2007–2009 global financial crisis on the euro area. Islamic state bonds remain stable with slight fluctuations, driven by the demand for these bonds and their role in ensuring banking liquidity. Analyzing macroeconomic factors, inflation rapidly adjusts to shocks with an initial increase but returns to stability over time. Exchange rates (EXC) show movements during shocks, but their rate of change is slower than inflation. Debt remains steady in the presence of shocks, similar to the findings in Wahyuningsih and Ningsih’s (2019) research where DEBT remained relatively constant throughout the initial phase.
5 Conclusion and Recommendation 5.1 Conclusion In summary, several key findings emerge. Firstly, during 2009–2010, Indonesia’s Islamic Financial Cycle rapidly shifted between acceleration and deceleration phases, with a more extended 9-year deceleration period compared to a 5-year acceleration phase, notably spanning 2011–2013 and significant deceleration phases from 2014–2016 and 2020–2022. Secondly, impacting factors can be categorized into three groups: Islamic banking variables (like total financing and non-performing financing), Islamic capital market factors (such as the Jakarta Islamic Index and Islamic state securities), and macroeconomic factors (encompassing inflation and the exchange rate of the Indonesian rupiah against the US dollar). Thirdly, the variables display varied responses to
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disturbances, with some, like IPI, JKII, and INF, demonstrating high responsiveness, while others, like TFIN, FDR, and EXC, maintain greater stability, albeit with occasional minor fluctuations. Conversely, variables like NPF, DEBT, and SBSN consistently exhibit substantial stability. Future research could explore policy implications and strategies for optimizing Indonesia’s Islamic Financial Cycle, considering these determinants, to guide economic and financial policies in a changing global economic landscape. 5.2 Recommendation Given Indonesia’s prolonged deceleration phase in its Islamic financial cycle, it is advisable for the government to emphasize the well-being of society, especially during the post-COVID-19 period. Exploring policies that expedite the transition to the deceleration phase, possibly by incorporating Islamic banking for strategic projects, is recommended. Simultaneously, Islamic finance experts in Indonesia should concentrate on elements such as total financing, non-performing financing within Islamic banking, the Islamic capital market index, and other macroeconomic factors that can influence the stability of Islamic finance. They should also be ready to take proactive actions in response to unforeseen fluctuations.
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Evaluating the Impact of Diaspora Contributions to Economic Growth and Development in Nigeria: A Housing Finance and Infrastructure Perspective 1998–2023 Saji George(B) , Umar Abbas Ibrahim, and Cross Ogohi Daniel Department of Business Administration, Faculty of Management Sciences, Nile University of Nigeria, Plot 681, Cadastral Zone C-OO Research & Institution Area Nigeria, Airport Rd, Jabi, Abuja 900001, Nigeria [email protected]
Abstract. Migrant remittances remain a critical contributor to the economic growth and development of many emerging nations like Nigeria. The feasibility study would be useful for financial institutions, migrants, social workers, families, government and non-governmental organizations interested in migrant remittances and home improvement and financing. The study will provide vital information on how the remitted money could be used for housing development and other investment needs that can lead to greater domestic and economic development outcomes across Nigeria. This study utilized the descriptive research design on the field survey involving Nigerians in diaspora involved in various fields of endeavour across different countries. The responses from the study were examined using descriptive statistical analysis as derived from the responses generated through the questionnaires administered on Nigerian emigrants and representatives of randomly selected financial institutions as respondents of the study. The findings suggest a correlation with the survey findings elicited by 78% of respondents willing to utilise diaspora mortgages as a preferred means of home acquisition. The findings with regards to funding needs also aligns with the responses, where 92% and 78% of respondents agreed/strongly agreed that lack of access to mortgage and high interest rates were major factors from their perspective that impacts access to home acquisition and financing in Nigeria. Remittances can have a strong impact on development at both the macro and micro levels, especially because of its multiplier effects when directed to economic activities like housing development and construction. To ensure that remittances are also directed to support housing finance, some recommendations have been made, in order to address the concerns with information asymmetry, it is important to create platforms that increase the accessibility of vital information to Nigerians in the diaspora. Keywords: Diaspora Contributions · Economic Growth · Development · Nigeria · Housing Finance & Infrastructure
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 39–51, 2024. https://doi.org/10.1007/978-3-031-53998-5_4
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1 Introduction The connection between settlements, monetary development and financial improvement has turned into an area of interest for state run administrations and monetary foundations in arising nations. As indicated by research by Adegoke and Agbola (2020), settlements decidedly influence financial development by supporting the decrease of credit limits on family pay, as settlements possibly animate business action and individual venture. The exercises of the Nigerian in Diaspora Association (NIDO) are likewise significant according to financial development and improvement. NIDO was instrumental in proposing a regulated model for carrying on with work in Nigeria. What’s more, NIDO effectively upheld the National Administration of Nigeria’s first $300 million diaspora bond issue to expand the country’s Gross domestic product for infrastructural and mechanical turn of events. The contentions and various perspectives on industry partners required a fundamental review to survey the view of monetary establishments and Diasporas to furnish pertinent partners with solid information for venture choices and supportable improvement in the housing and home loan market where diaspora is likewise alive. Cash moves are involved. Data on the view of Nigerians in the diaspora towards contract banking is imperative and will empower government, controllers, lenders and different partners to have a more clear image of the administrations and mediations expected to work with admittance to housing money and house purchasing by Nigerians in the diaspora. Additionally, towards settling on informed venture choices on how best to work on house buying through contract access for Nigerians in the diaspora. The feasibility study would be valuable for monetary foundations, transients, social laborers, families, government and non-legislative associations keen on traveller settlements and home improvement and funding. The review will give fundamental data on how the transmitted cash could be utilized for housing advancement and other venture needs that can prompt more noteworthy homegrown and monetary improvement results across Nigeria. The aftereffects of the possibility study are supposed to give helpful data to different monetary organizations, government workplaces and services depended with overseeing relocation arrangements and improvement needs inside the country. This would assist with tending to the ongoing circumstance where data on worldwide relocation and the utilization of settlements by transients isn’t handily recognized and measured in that frame of mind of monetary development and housing advancement in the country. The examination would add to the writing on relocation, settlements, and financial turn of events and development. This would add to momentum information and lead to additional examination on the connection between monetary development in settlements and housing improvement. Settlements can delay monetary development assuming these settlements are utilized essentially for utilization instead of venture. Settlements can likewise by implication influence workforce dynamism, as certain families who get settlements are urged to work less. This diminishes the labor force as well as monetary development. At the point when this occurs, beneficiaries who are essential for the labor force foster a mindset of reliance on outsider settlements to get by. Past investigations by Lopez et al. (2017) additionally noticed that settlement inflows
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can prompt an enthusiasm for the host nation’s cash and can likewise hurt the country’s economy by keeping down sends out. As per the Unified Countries (2019) view of Nigerians in the diaspora towards these settlements are instruments of unfamiliar trade profit, unfamiliar direct speculation, help and other confidential capital ventures. In this way, settlements are probably going to be a somewhat crazy wellspring of unfamiliar pay. The plausibility concentrate on endeavors to survey traveller settlements and its effect on housing finance and financial development in Nigeria. The particular goal of the review are as per the following: • Evaluate the perspectives on Nigerians in the diaspora on the utilization of home loan credits back home in Nigeria.
2 Methodology Primary and Secondary data was collected exclusively for this survey report, to ensure a high degree of accuracy and objectivity in comparing perceptions of Nigerians in Diaspora towards the adoption of mortgage lending towards home ownership as well as eliciting information about their housing preferences and issues preventing access to mortgage finance and home acquisition from the perspective of financial institutions involved in the demand and supply end of housing development and finance. This study utilized the descriptive research design on the field survey involving Nigerians in diaspora involved in various fields of endeavour across different countries. The responses from the study were examined using descriptive statistical analysis as derived from the responses generated through the questionnaires administered on Nigerian emigrants and representatives of randomly selected financial institutions as respondents of the study. 2.1 Data Collection An online survey link was shared across leading social media platforms like Facebook and LinkedIn with established interactions and sizeable following involving Nigerians in diaspora. Survey data through interviews was also collected from representatives of financial institutions via email. The online survey poll lasted for a period of 2–3 Weeks before the link was closed. In addition to the survey, we also had focused group discussions with representatives of local financial institutions that consisted of Bank and Non-Bank financial institutions towards gathering additional insights into the operations of the housing finance sector in Nigeria in relation to diaspora mortgage lending operations and product offerings. 2.2 Survey Sample Size The sample size consisted of 112 completed responses received from individual respondents in Diaspora resident in different countries globally. In addition to the responses, we also held focused group discussions with the representatives of eight (8) institutions that consisted of six (6) financial institutions and (2) government agencies involved in housing finance provision and development).
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The sample size effectively represents the group of Nigerians in Diaspora (or target population) and financial institutions whose opinions were considered valuable as subject matter experts in respect to unravelling the feasibility of mortgage lending as a product offering to the Nigeria Diaspora population at large. 2.3 Statistical Relevance of Sample Statistical analytic sampling was applied to the survey study to determine the margin of error to measure in percentage terms how much we expect this survey results to reflect the views of the overall diaspora population. The margin of error statistically determines the level of validity of the survey results in understanding the disposition of Nigerians in diaspora towards mortgage and home ownership. The survey sample of 255 respondents was evaluated by using an online survey statistical analytic sampling calculator tool to determine the survey confidence level, margin of error and the adequacy of the sample size based on an estimated population of 15 million Nigerians in Diaspora according to NiDCOM. The outcome of the statistical calculator is captured in the Table 1. Table 1. Tabular representation of Statistical Relevance of Survey Population (Survey study Data 2023) Projected Population Size:
15 million
Confidence Level (%):
90%
Margin of Error (%):
10%
Survey Sample Size:
255 Respondents
The survey also had elements akin to a market survey research. In view of the market survey research, the exercise presents an opportunity to help uncover more information about diaspora mortgage, the characteristics and housing market preferences by clients in diaspora (a specialised target market). The statistical significance of the sample points to its ability to easily help reveal insights and give assurances about the overall target market and the accuracy of information derived from the survey. 2.4 Nigeria’s Housing Finance Dynamics As per the Middle for Reasonable Housing Money (CAHF, 2022), the greater part (53%) of Nigeria’s populace of more than 216 million live in metropolitan regions. With a quickly developing populace, Nigeria is supposed to turn into the third most crowded country on the planet by 2050, with north of 300 million occupants and a housing lack of 28 million. Urbanization and populace development keep on setting out open doors and with it the country’s land and housing area. To address the nation’s housing issues, in 2013 the Central Government, in organization with the World Bank and the confidential area, sent off the Public Housing Money Program, which was answerable for the foundation of the Nigeria Home loan Renegotiate Company (NMRC).
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The NMRC was made to extend the housing and home loan market by making an optional market liquidity office. Likewise in 2016, the central government sent off the Public Housing Project (NHP) to fabricate OK, open, and reasonable houses the nation over. To give in excess of 300,000 homes and make 1.5 million positions the nation over, the central government laid out the Family Homes Asset (FHFL) in 2016 to carry out the public authority’s Public Social Housing Project (NSHP). Housing and environment issues have become effective in Nigeria as numerous urban communities in Nigeria are tested by the quantity of fallen structures and ecological catastrophes. In September 2022, the Public Crisis Organization (NEMA) impacted in excess of 508,000 individuals and in excess of 30,000 houses. The impacted states incorporate Jigawa, Taraba, Kano, Bauchi, Adamawa, Niger, Anambra and Ebonyi states. To relieve environment related calamities in the country, the public authority has supported the Public Flood Crisis Readiness and Reaction Plan. Present Status of Home Loan Loaning in Nigeria: Market Size and Execution The Nigerian government keeps on putting forth cognizant attempts to further develop admittance to housing finance. One such drive is to decrease the value paid on contract credits through the Public Housing Asset Plan (NHF) from 5% to 0% for advances up to ₦5 million naira and from 15% to 10% for advances above ₦5 million. The Government Home loan Bank of Nigeria (FMBN) gives contract credits to licensed Essential Home loan Banks (PMBs) at least financing cost of 4% through the NHF framework. PMBs loan to NHF payers at a pace of 6%, with a home loan term of as long as 30 years. As a commitment to the development of housing finance showcases, the FMBN presented a new non-interest-bearing rent-to-possess contract item in 2022 to upgrade monetary consideration. Additionally, in 2022, to extend admittance to housing finance for Nigerians in the Diaspora, the FMBN presented the Public Housing Asset Plan for Nigerians in the Diaspora. FMBN’s lease to-possess model empowers housing advance recipients to move into homes utilizing month to month, quarterly, or yearly rental installments made towards definite homeownership. The NMRC in its essential goal to develop the real estate market renegotiates the advance arrangement of home loan moneylenders to empower reasonable home loan rate admittance to endorsers. The NMRC contract renegotiate portfolio starting around 2022 totalled about ₦30 billion ($72.2 million) contrasted with ₦21.1 billion ($50.8 million) in 2021. The NMRC as a feature of its market improvement drive sort National Bank of Nigeria (CBN) endorsement to extend contract renegotiate exercises to each of the 34 essential home loan banks and 24 business banks working in Nigeria. FMBN’s rental model permits home advance recipients to move into a loft by paying month to month, quarterly or yearly lease towards extreme house buying. In its essential target of extending the real estate market, NMRC renegotiates the advance arrangement of home loan moneylenders to give reasonable home loan admittance to supporters. NMRC’s home loan renegotiating portfolio was roughly ₦30 billion ($72.2 million) in 2022, up from ₦21.1 billion ($50.8 million) in 2021. As a feature of NMRC’s market improvement drive, it as of late got the National Bank of Nigeria endorsement to develop
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contract renegotiating tasks to permit each of the 34 essential home loan banks and 24 business banks working in Nigeria admittance to the home loan renegotiate window. The quantity of extraordinary home loan credits in Nigeria surpassed 32,000 of every 2021. While the 6% loan cost presented by FMBN is the most minimal in the country, the financing cost presented by prime home loan banks and business banks can go from 18% to as high as 28%.. Somewhere in the range of 2021 and 2023, contract renegotiating rates went from 9.5% to 14.5%. The ongoing business sector credit to-esteem proportion of home loan advances ranges between 70%-90%. As a feature of the five-year housing improvement smart course of action covering the period 2020 to 2024, the national government intends to increment contract assets to ₦712 billion ($1.7 billion) by 2024. While the NMRC as a component of its drawn out technique is to build the home loan credit proportion from 0.5% to above 3% of Gross domestic product somewhere in the range of 2018 and 2023, to expand the home loan advance stock in the market by 450,000 units somewhere in the range of 2018 and 2023, yet as of now 1,300 has a home loan advance in its renegotiating portfolio from the beginning of tasks in 2015–2023. 2.5 Diaspora Settlement Streams and Commitment to Financial Turn of Events and Housing Nigeria represents in excess of 33% of transient settlements to sub-Saharan Africa. PwC gauges that these inflows added up to $23.63 billion out of 2018 (2017: $22 billion) and addressed 6.1% of Nigeria’s Gross domestic product. Traveler settlements in 2018 represented 83% of the national government’s 2018 financial plan and multiple times FDI inflows over a similar period. Nigeria’s settlements were additionally 7.4 times the $3.4 billion in net authority improvement help (unfamiliar guide) it got in 2017. As per PwC gauges, transient settlements to Nigeria could increment to $25.5 billion, $29.8 billion and $34.8 billion of every 2019, 2021 and 2023, individually. PwC anticipates that settlements should Nigeria to practically twofold north of a 15-year time frame from $18.37 billion of every 2009 to $34.89 billion by 2023.The development of settlements is impacted by worldwide financial powers that can support or impede the progression of settlements, different elements influencing the progression of settlements remember the increment for resettlement rates, monetary circumstances in occupant nations and the monetary essentials of the Nigerian economy. Starting around 2020 as indicated by UN Populace Division appraises, the quantity of global transients overall remained at more than 300 million (3.8% of absolute populace). As per the UN relocation information entrance, there were 1.67 million exiled people from Nigeria in diaspora. However the authority records do exclude those brought into the world of Nigerian guardians in the diaspora who hold citizenship of their introduction to the world nations. The Nigeria in Diaspora Commission reports that starting around 2017 there are around 15 million Nigerians in the diaspora. This class additionally represent the settlement streams to Nigeria. As per the NBS reports and PWC (2021), official settlements have surpassed Nigeria’s oil incomes for four successive years. Since numerous exchanges are not recorded
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or are led through casual channels (distributed), the genuine volume of settlements into the nation is seemingly higher. In 2018, traveler settlements to Nigeria were $25 billion, addressing 6.1% of Gross domestic product. This likewise addresses a 14% year-overyear increment more than 2017 income of $22 billion. The 2018 figure addresses 83% of the central government’s 2018 financial plan and multiple times FDI inflows over a similar period. Nigeria’s settlements were likewise multiple times bigger than the net authority advancement help (unfamiliar guide) it got in 2017 ($3.4 billion). Perceiving the essential significance of the Nigerian Diaspora, the Central Government in July 2017 endorsed into regulation the Commission on Nigerians in the Diaspora. The Demonstration made the Nigerians in Diaspora Commission (NiDCOM), an association made to draw in and use human resources, the material assets of this segment towards the financial, social and political advancement of Nigeria. The Nigerians in Diaspora Commission has sent off different drives to add to housing and home loan improvement, for example, the Diaspora Land Stage in organization with driving engineers, for example, Metropolitan Haven and Mixta Africa to work with admittance to sound land from authorize designers including direct buy supporting too. Make portion installments or use contract advances. NiDCOM additionally worked with the foundation of the Diaspora NHF Home loan Plan by the Government Home loan Bank of Nigeria, which offers contract advances to Nigerians in the diaspora to construct or purchase houses in Nigeria. One of NiDCOM’s lead projects for housing improvement is the Diaspora City project laid out by the Government Housing Authority (FHA) in the Bureaucratic Capital Region of Abuja on an area of north of 675 hectares fully intent on conveying more than 17,000 housing units of different kinds, which make vastness. Esteem chain and open doors with an extended worth of more than 300 billion Naira ($700 million). The proposed cooperation what began in 2017 will be duplicated in different metropolitan communities and states in Nigeria like Port Harcourt, Benin, Lagos, and Enugu. As per the Nigerian in Diaspora Association (NIDO), with an ongoing gathering of north of 1,900 carried out and confirmed off takers among the diaspora, the undertaking is being systematized as a model for doing land business in Nigeria (NIDO, 2019). As a component of the commitment to housing improvement, the Panel of Nigerians in Diaspora has collaborated with the Government Home loan Bank of Nigeria (FMBN) and the National Bank of Nigeria (CBN) to work with the commitment of Nigerians in the Diaspora to the Public Housing Asset (NHF). The new drive will give admittance to credits of N50 million naira ($80,000-$100,000) for Nigerians in the diaspora to buy homes in Nigeria. Likewise, NIDO upheld the effectively bought in $300 million diaspora bond issue pointed toward extending Gross domestic product development by putting resources into foundation and innovation improvement in Nigeria. The Home loan Brokers Relationship of Nigeria, in organization with nearby monetary foundations, held yearly Diaspora Housing Money Gatherings in the Unified Realm and the US of America to advance land speculation. During the commitment, FHFL as of late expanded its housing portfolio deals and acquisitions from Nigerians in the diaspora by more than 5% to arrive at a complete housing portfolio worth of N120 billion ($258 million) in 2022.
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3 Findings The example size comprised of 255 finished reactions got from individual respondents in occupant in various nations universally. The example size addresses the gathering of Nigerians in Diaspora (a subset of the review populace projected to be around 15 million people). The input from these respondents was assessed with expressive measurable instruments featuring their Orientation, Financial profile, segment subtleties, Nation of home, housing, and supporting inclinations/Interest. The outline of reactions is organized as expressive measurements beneath; Analysis of Findings: Financial Institutions and Nigerians in Diaspora In addition to the survey data derived from the engagement with financial institutions and survey responses from diasporans, additional insights were gathered and further discussed in this section of the report as stated below; Projections and Potential Demand: Regarding the interest from diaspora for housing, most of the financial institutions we interviewed indicated that the current potential is huge and linked to existing relationship ties by diasporans back home in Nigeria. In alignment with this observation the current survey was able to uncover existing and growing diaspora mortgage services and portfolios with Fidelity Bank and Family Homes Funds Limited of about $15 million about N7 billion Naira. In terms of the potential projections for diaspora mortgage growth, both FHF and Fidelity have a potential combined pipeline of an additional 5,000 mortgage request that will require a combined funding need of about $150 million to deliver in the next 2–3 years as part of their market growth strategy. Additional potential demand currently exists under the auspices of the collaboration between the Federal Mortgage Bank of Nigeria and Nigerians in Diaspora Commission (NiDCOM) for the “Diaspora Cities” Housing programme. The Real-estate platform of NiDCOM currently holds about 5,000 prequalified diasporans with an effective offtake for home acquisition in Abuja and Lagos under diaspora cities Pilot. At an average mortgage loan demand of $100,000 per applicant, NiDCOM and the Real-estate platform working with FMBN, and partner commercial and mortgage banks will require about $200 million to deliver an initial 2,000 units or the equivalent of 40% of its existing prequalified mortgage offtake portfolio. The findings suggest a correlation with the survey findings elicited by question 12 and 19(b) with 78% of respondents willing to utilise diaspora mortgages as a preferred means of home acquisition. Funding Sources and Needs: The typical funding sources for financial institutions currently offering diaspora mortgage loans typical includes depositors’ funds, capital market issuances and structured multilateral loans that are priced in line with the market rates and inflation. These highlighted sources of funds are typically priced from 18%– 30% for naira denominated loans and 12%–13% for dollar denominated mortgage loans. These loans where available are usually capped at between 50 m–100 m naira based on availability of liquidity to fund such demands. In terms of the assessed funding needs across all eight institutions that were part of the study, the total aggregated needs were a total of $540 million to meet their immediate funding requirements to either expand their
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existing portfolios or deliver on already prequalified and pending request for Diaspora mortgages. The findings with regards to funding needs also aligns with the responses for question, where 92% and 78% of respondents agreed/strongly agreed that lack of access to mortgage and high interest rates were major factors from their perspective that impacts access to home acquisition and financing in Nigeria. Growth Prospects and Size of the Diaspora Mortgage Market The growth prospects and size of Nigeria’s diaspora mortgage market has been highlighted in its contribution to housing market growth in recent years. According to housing market report by Housing Cable (2022) and Northcourt (2023), Nigeria’s diaspora remittances of over $65.34 billion from 2019–2022 covering a three-year period boosted Nigeria’s economic activities for the period. Housing cable also noted that the inflow accounted for 4% of Nigeria’s gross domestic product (GDP). In terms of capacity to drive housing market growth, Northcourt had earlier in their definitive real-estate market report for 2023, noted that Nigerians in the diaspora are not only high earners but also contribute significantly to 5% of the country’s GDP. As most developers in the Lagos, Abuja and Port Harcourt markets have attributed about 70–80% of their property subscription and sales to diasporan clients seeking investment on the back of the appreciation of the dollar against the naira giving diasporans significant purchasing power parity. In terms of the depth and of the diaspora mortgage market, this survey estimates a demand of over $500 million with portfolio growth projections of an additional 5%–10% yearly on the back of the activities of Fidelity Bank, Family Homes Funds Limited, and the NiDCOM & FMBN collaboration. The diaspora market clearly offers a huge opportunity for real estate financing, in view of the fact that from funds remitted to Nigeria annually from the diaspora market about 70% of remittances are spent on household essentials including education, while an outstanding 30% is spent on home acquisition related activities and in terms of the last 3 years that would imply that about $19.6 billion went into housing with strong implications for growth where mortgage availability and access is created. The potential of Nigerians in diaspora to contribute to housing finance growth correlates with the survey responses to questions 7, 10 and 15 respectively where respondents indicated that a combined 55% earn from $60k–80k and above with a combined 67% of respondents looking to acquire homes for investment and retirement purposes. These responses further correlate with the findings that a combined 64% of respondents can afford housing priced between 30 million–50 million Naira and above.
4 Recommendations and Conclusion Remittances can have a strong impact on development at both the macro and micro levels, especially because of its multiplier effects when directed to economic activities like housing development and construction. To ensure that remittances are also directed to support housing finance, some recommendations have been made below:
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i. Creation of credible property investment portals: in order to address the concerns with information asymmetry, it is important to create platforms that increase the accessibility of vital information to Nigerians in the diaspora. The Nigerian diaspora consists largely of high earning skilled professionals that require credible home ownership investment opportunities that ensure their investments are protected. NiDCOM’s real estate platform is a worthy example but can be improved upon by going into partnerships with leading financial institutions and players for depth and reach like FHFL and NMRC. Such robust partnerships will reduce information asymmetry in housing investment opportunities. ii. Promote the establishment of diaspora housing cooperatives: the creation of pooled investment vehicles targeted at home acquisition by diasporans is trend that could become common in Nigeria. A major obstacle to investing home ownership by diasporans is the minimum downpayment required to access mortgages. Cooperative investment vehicles, that enables diasporans to pool funds and be verified for access to equity home payments using the property acquired as collateral, will encourage increased access to homeownership for and by diasporans iii. Many countries around the world, including Nigeria, have developed plans to attract investment from the diaspora community for national development. In essence, trust determines the extent to which the diaspora contributes to a country’s development affairs. In most countries, sub-national governments (states) also take advantage of the vast potential of the diaspora. In summary, additional initiatives to spur an increased participation by diasporans in the local housing value-chain through diaspora mortgages is needed to turn remittances into productive investment capital for the growth and further development of the construction, and real estate sectors, which in turn creates jobs.
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Factors Shaping the Entrepreneurial Intentions Among Hospitality Students in Jordan: The Mediating Role of Self-efficacy Sultan Alzyoud1(B) , Ayman Harb2 , and Wejdan Alakaleek1 1 Department of Business Administration, Business School, The Hashemite University, Zarqa,
Jordan [email protected] 2 School of Tourism and Hospitality, University of Jordan, Aqaba, Jordan
Abstract. This study aims to explore hospitality students’ intentions toward entrepreneurial activities. The study examines the influence of modeling, entrepreneurial education, financial support, and students’ satisfaction with their major on their entrepreneurial intentions through the mediation of self-efficacy. A questionnaire was developed and distributed to hospitality students in three public universities in Jordan. A total of 246 valid responses were received. SEM was employed in this study to analyze the data through Smart-PLS software. The results demonstrated that students’ self-efficacy positively related to their entrepreneurial intentions. Furthermore, modeling and students’ satisfaction with their major were associated positively with self-efficacy, and self-efficacy mediated the influence of modeling and students’ satisfaction with their major on students’ entrepreneurial intentions. Conversely, entrepreneurial education and financial support were not significantly associated with self-efficacy; thus, there was a rejection of the proposed mediation of self-efficacy in the relationship between entrepreneurial education and financial support as an exogenous variable and entrepreneurial intentions as an endogenous variable. This study contributes to the discussion on what encourages students’ entrepreneurial intention, particularly in the hospitality field as there is a lack of studies regarding this vital topic. Keywords: Entrepreneurial intentions · self-efficacy · hospitality · university students · Jordan
1 Introduction In this rapidly developing global environment, entrepreneurship has emerged as a pivotal force driving economic growth and innovation. In the hospitality sector, there is a growing recognition of the importance of entrepreneurship, however, there remains a notable research gap concerning entrepreneurial intentions specifically among hospitality students (Al-Jubari et al., 2023; Otache et al., 2021; Pinto Borges et al., 2021). One of the crucial elements that has been discussed in the literature as promoter of entrepreneurial intension is self-efficacy (e.g. Crespo et al., 2020; Saoula et al., 2023). © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 52–66, 2024. https://doi.org/10.1007/978-3-031-53998-5_5
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Indeed, the relationship between the self-beliefs of efficacy and entrepreneurial intentions is complicated and demands further investigation, especially in new unexplored contexts. The impact of the context, where the entrepreneur operates, still needs more research (Elnadi and Gheith, 2021). Moving the level of analysis forward, entrepreneurial intention literature demands studies investigating the intent to start a business and selfefficacy in developing countries context, such as the context of a Middle Eastern society (Elnadi and Gheith, 2021; Sharahiley 2020). This research, thus, seeks to investigate the entrepreneurial intention and self-efficacy of students in the context of Jordan, more specifically, this research focuses on the university students of hospitality and tourism. Moreover, different factors have been suggested in some past studies to be related to self-efficacy and entrepreneurial intention. In this study, we selected some factors that have been argued to influence entrepreneurial intention with or without the mediation of self-efficacy namely modeling, entrepreneurial education, financial support, and students’ satisfaction with their major. Regarding the last factor, to the best of our knowledge, we have not found any study that sheds light on the relationship between students’ satisfaction with their major and entrepreneurial intention; thus, this relationship will be examined in this study. By examining the proposed factors and exploring students’ aspirations, motivations, and mindsets, we aim to uncover valuable insights that can influence the development of educational programs, mentorship initiatives, and policies aimed at fostering entrepreneurship within the hospitality field. In this article, we embark on a journey to comprehend the entrepreneurial spirit within the hearts and minds of hospitality students in a developing country, Jordan.
2 Research Background and Hypotheses Development 2.1 Entrepreneurial Intention and Self-efficacy Entrepreneurial Intention (EI) is defined by Thompson (2009, p. 676) as “a person that intends to set up a new business venture and consciously plans to do so at some point in the future”. To understand how EI is developed, we utilize the theory of planed behavior (TPB model), which is defined as an effective model to analyze an individual intention toward entrepreneurship (Karimi et al., 2016; Fayolle and Gailly, 2009). This intention model was originally introduced by Fishben and Ajzen (1977) and Ajzen and Fishben (1980) to describe the individual’s intention as the best predictor of reasoned behavior (Drnovsek and Erikson, 2005; Ajzen, 1991). Drawing on the TPB, this study examines the students’ intention toward entrepreneurial activities. In research on new venture creation, studying the EI is essential (Thompson 2009) and thus, it has received considerable attention. Researchers have investigated the effect of different determinants on the EI, such as entrepreneurial attitude (e.g. Vamvaka et al., 2020; Fayolle and Gailly 2015), personality traits (e.g. Laouiti et al. 2022; Biswas and Verma, 2022), entrepreneurial competencies (e.g. Alakaleek et al. 2023) and self-efficacy (e.g. Saoula et al., 2023; Crespo et al., 2020). In the EI literature, one of the frequently investigated questions that have attracted the interest of several researchers is whether an individual’s self-efficacy has any association with intentions to start a business. Do individuals with strong beliefs to perform some activities and be independent have the desire to start their own business?
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Self-Efficacy (SE) reflects “people’s beliefs about their capabilities to produce designated levels of performance that exercise influence over events that affect their lives” (Bandura 1994, p. 1). These people’s beliefs affect their activities, behaviors, and efforts in dealing with challenges, and thus, people with high SE are more active in coping efforts and controlling their behavior (Bandura and Adams, 1977). Individual’s self-beliefs of efficacy can be conducted through four processes including cognitive process (goal setting), decisional process (activities that individual decides to choose), motivational process (self-regulation of motivation), and affective process (sense of SE; individual’s feeling of stress in difficult situations) (Bandura 1994). These processes affect how people think of self-enhancing, motivation, and choices (Benight and Bandura 2004). Most experts argue that SE is domain-specific, for example, “that it is occupation-specific SE (as opposed to generalized SE) that exerts effects on career development and performance. One type of occupation-specific self-efficacy is entrepreneurial self-efficacy” (Newman et al. 2019, p. 404). In the career choice-related process, previous studies found that SE ‘plays a crucial role in determining whether individuals pursue entrepreneurial careers and engage in entrepreneurial behavior’ (Newman et al., 2019, p. 404). SE defined to be an important determinant of the EI of university students (Soomro and Shah 2022; Anwar et al., 2022; Saoula et al., 2023; Wu et al., 2022; Crespo et al., 2020; Yousaf et al., 2021). Newman et al. (2019) systematic review of entrepreneurial SE showed that most previous empirical studies have reported a positive influence of entrepreneurial SE on EI among university students. Therefore, it is evident that entrepreneurial SE is an important predictor of EI, this study proposes the following hypotheses: H1: SE is associated positively with students’ EI. SE also acts as a mediator to explain the relationship between different factors and individuals’ EI (e.g. Jiatong et al., 2021; Oyugi, 2015; Wu et al., 2022). Specifically, how an individual self-belief of efficacy is formed and does it affect the EI? This reflects the influence of different factors that might directly influence SE and indirectly influence EI. Previous research has found that the SE of individuals is a consequence of several factors, such as the entrepreneurial ecosystem (Elnadi and Gheith, 2021), role models (Austin and Nauta 2016; Laviolette et al., 2012) and entrepreneurship education (Kubberød and Pettersen, 2017; Wu et al., 2022). The social, political and institutional environments, in which an individual embeds, have an impact on forming the individual’s entrepreneurial SE (Belas et al., 2017). This reflects that the effect of these environments might differ from one context to another. To explain the impact of different environments (social, political, and institutional) in a new under-explored context, this study seeks to focus on exploring the effect of some factors on forming the students’ SE. More specifically, this research focuses on the direct effect of modeling, entrepreneurship education, financial support, and students’ satisfaction with their major on SE and indirectly on EI through SE. Figure 1, at the end of this section, illustrates the proposed model.
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2.2 Factors Influencing SE Modeling: Developing strong self-beliefs of efficacy depends on several sources such as vicarious experiences through social model (Bandura 1994). Research has confirmed that being exposed to role models, like mentors, coaches, and parents, develops individuals’ SE (Laviolette et al., 2012). A number of studies reported the positive contribution of modeling in improving entrepreneurial SE (Newman et al., 2019). For example, research shows that female students who have role models exhibit higher levels of SE (Austin and Nauta 2016; McAuley 1985). Laviolette et al. (2012) argue that using real-life models in education is key to enhancing the entrepreneurial SE of students. The presence of role model not only affect individuals’ SE directly but also influence EI indirectly through SE. The mediating effect of SE was confirmed in some studies conducted among university students (e.g. Maheshwari and Kha, 2022; Oyugi, 2015; Wu et al., 2022). This study, therefore, proposes the following hypotheses: H2a: Modeling is associated positively with SE. H2b: SE mediates the relationship between modeling and students’ EI. Entrepreneurship Education (EE): University education is found to be vital in developing students’ competencies that relate to their choice of entrepreneurship as a career (Colombo and Piva, 2020). In the literature of EI, it is evident that EE has a significant impact on entrepreneurial SE (Soomro and Shah 2022; Anwar et al., 2022; Kubberød and Pettersen 2017; Rauch and Hulsink 2015). EE uses various methods, such as mentoring, guest speakers, case studies and learning about the entrepreneurs’ lifestyle, to enhance students’ entrepreneurial SE (Newman et al., 2019). These teaching methods adopted in the EE influence students’ entrepreneurial SE (Abaho et al., 2015). This means that the higher the level of EE that graduates receive, the stronger their entrepreneurial SE (Mei et al., 2020). Research also has confirmed that SE mediates the link of entrepreneurship education on entrepreneurial intention (e.g. Anwar et al., 2022; Mei et al., 2020; Rauch and Hulsink 2015; Yun 2010). As such, EE leads to the enhancement of individuals’ SE and indirectly affects entrepreneurial intention. It can be concluded that EE affects directly and indirectly, through SE, EI. Therefore, this study proposes: H3a: Entrepreneurship education is associated positively with SE. H3b: SE mediates the relationship between entrepreneurship education and students’ EI. Financial Support: People’s belief in their own ability to succeed is influenced by how they perceive the environment around them. Having a supportive environment can increase people’s confidence in starting a new business, where SE defines ‘whether entrepreneurs feel that they have the capacity to adequately respond to a particular entrepreneurial challenge’ (Brändle et al., 2018, p. 18). The discussion of environmental factors focused on the influence that some variables, such as having financial support, might have in formulating individuals’ intentions to start a business (Franke and Lüthje, 2004). Availability of financial resources, such as equity, family financial support, grants and subsidies (Teixeira et al., 2018) represents an important predictor of SE (Elnadi and
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Gheith, 2021) and EI (Ahmed et al., 2021; Farashah 2013). This type of support is important and has a significant effect on enhancing students’ entrepreneurial SE (Elnadi and Gheith, 2021). Examining the entrepreneurial ecosystem and environmental factors, self-efficacy also mediates financial support and EI relationship (Al-Qadasi et al., 2023; Elnadi and Gheith, 2021). Therefore, this research hypothesizes that: H4a: Financial support is associated positively with SE. H4b: SE mediates the relationship between financial support and students’ EI Students’ Satisfaction with Their Major: Exploring the intricate interplay between students’ satisfaction with their chosen major and entrepreneurial intentions is a crucial aspect of understanding the dynamics of educational and career aspirations. While extant literature has extensively examined factors influencing entrepreneurial intentions, there is a notable research gap regarding the direct correlation between students’ contentment with their major and their inclination toward entrepreneurship, particularly within the context of hospitality education. Indeed, to the best of the authors’ knowledge, we have not come across any article that directly studies the relationship between students’ satisfaction with their major and entrepreneurial intention. In this research, we argue that satisfied students are more likely to identify opportunities, leverage their knowledge and skills, and envision themselves as future entrepreneurs within their chosen field. Conversely, students who are dissatisfied with their major may be less inclined to consider entrepreneurial paths, as their lack of enthusiasm and engagement can hinder their willingness to take risks and invest in their chosen domain. As such, the following are proposed: H5a: Students’ satisfaction with their major is associated positively with SE. H5b: SE mediates the relationship between students’ satisfaction with their major and EI
Modeling
Entrepreneurial education
SE Financial support
Satisfaction
Fig. 1. Research Model
EI
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3 Methods In this quantitative study, the data were gathered through an online survey. Hospitality students in Jordanian universities were the target population. Those students were targeted randomly through Facebook groups that for hospitality students. In addition, snowball technique was used where we asked some academic staff in the hospitability field to share the survey link with their students and encourage them to share it with other colleagues. A brief introduction was provided along with the questionnaire link about the study and its aims and how the data will be used to motivate students’ participation. The measurement items of the study’s variables were adopted from past studies. All the measurement items were anchored on a 5-point Likert scale where 1 means strongly disagree and 5 denotes strongly agree. Partial least squares structural equation modeling (PLS-SEM) was used to analyze the data using Smart PLS 3 software, which is a powerful tool for conducting complex statistical analyses and modeling in various research domains (Janib et al., 2022; Rasoolimanesh and Ali, 2018). PLS-SEM was chosen due to its suitability for handling both formative and reflective constructs, making it an ideal choice for examining the multifaceted relationships and latent variables within our research framework. This robust analytical approach allowed the researchers to comprehensively investigate the relationship among the variables under investigation and gain valuable insights into the research objectives. The study conducted data analysis in two steps, following the guidance provided by the Partial Least Squares Structural Equation Modeling (PLS-SEM) literature, specifically referencing Siyal et al. (2019). This two-step approach is a common practice in PLS-SEM methodology, allowing for a comprehensive examination of complex relationships and latent variables within the research framework. It typically involves an initial measurement model assessment, focusing on the reliability and validity of the constructs, followed by a structural model assessment, which examines the structural relationships between these constructs (Schuberth et al., 2022).
4 Results and Discussion 4.1 Profile of Respondents A total of 246 completed questionnaires were received. As shown in Table 1, about 71.7% of the respondents were males. In addition, 60.0% of the respondents were in the second year. Also, 50% of the respondents have traveled abroad.
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S. Alzyoud et al. Table 1. General information (N = 246)
Characteristics
Frequency (n)
Percentage (%)
Gender Male Female
174 72
71.7% 29.3%
Year Level 1 2 3 4 5
58 71 53 60 4
23.6 28.9 21.5 24.4 1.6
Travel Abroad Yes No
123 123
50% 50%
4.2 Measurement Model Assessment To evaluate the convergent validity of the measurement model, the researchers conducted several tests. These tests included: (1) assessing composite reliability (CR), which should exceed 0.70 according to Chin (1998); (2) examining the average variance extracted (AVE), which should surpass 0.50 based on Fornell and Larcker (1981); and (3) scrutinizing item loadings, which should be higher than 0.70 (Fornell and Larcker, 1981). The results are presented in Table 2, which displays the mean, standard deviation, composite reliability, average variance extracted, and item loadings for the research model’s constructs. Table 2 confirms that all the convergent validity criteria were met, with composite reliability ranging from 0.75 to 0.94 and AVEs spanning from 0.54 to 0.80. All item loadings exceeded the threshold of 0.7. In this study, we employed the criteria outlined by Gefen and Straub (2005) to assess discriminant validity. These criteria entail comparing the square root of the average variance extracted (AVE) for a particular construct to its correlations with other constructs within the model. The results, displayed in Table 3, illustrate the square root of the AVE for each construct, with this AVE being contrasted against the highest variance shared by each construct with others in the model. These findings indicate minimal correlations between the construct of interest and the measurements of other dimensions. Discriminant validity was further assessed using the Heterotrait-monotrait (HTMT) criteria. HTMT is calculated as the average item correlations across different constructs divided by the average correlations among items measuring the same construct, as defined by Hair et al., (2019). The outcomes of the HTMT analysis are presented in Table 4, which summarizes the HTMT findings. These results reveal that all the values in Table 4 are below the threshold of 0.85, suggesting that there are no concerns regarding discriminant validity based on the HTMT criteria, in accordance with the work of Henseler et al. (2015).
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Table 2. Mean scores and the reliability statistics of the measurement model Indicators and Factors
Mean (SD)
CR
AVE
F2: EI
4.59 (0.75)
0.94
0.80
EI_1
4.67 (0.68)
0.89
EI_2
4.65 (0.69)
0.89
EI_3
4.55 (0.81)
0.90
EI_4
4.49 (0.81)
0.90
F6: SE
3. 97 (0.89)
SE1
3.86 (0.91)
0.78
SE2
3.98 (0.89)
0.85
SE3
4.04 (0.88)
0.86
SE4
4.03 (0.90)
0.80
SE5
3.99 (0.88)
0.87
SE6
3.93 (0.89)
0.80
F3: Modeling
2.6 (0.44)
Modeling_1
1.83 (0.38)
Modeling_3
1.54 (0.50)
F4: EE
4.31 (0.49)
EE1
1.56 (0.50)
0.71
EE2
1.37 (0.48)
0.78
EE3
1.38 (0.48)
0.80
F1: Fin_SUP
2.49 (1.04)
FIN_SUP_1
2.47 (1.09)
0.82
FIN_SUP_2
2.51 (0.99)
0.91
F5: SAT
3.82 (1.13)
SAT2
3.75 (1.09)
0.86
SAT3
3.81 (1.19)
0.84
SAT4
3.86 (1.12)
0.94
SAT5
3.87 (1.11)
0.94
0.93
0.86
Loadings
0.68
0.76 0.95 0.79
0.75
0.85
0.94
0.54
0.75
0.80
These findings indicate robust evidence of both convergent and discriminant validity for the measurements employed in the study. In summary, the results from the measurement model confirm their adequacy, providing assurance that the evaluation of the structural model is acceptable.
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S. Alzyoud et al. Table 3. Fornell-Larcker Criterion FIN-SUP
EI
Modeling
FIN-SUP
0.864
EI
0.088
0.894
Modeling
0.054
0.243
0.871
EE
SAT
−0.173
0.079
0.135
0.706
SAT
0.216
0.181
0.036
−0.110
0.896
SE
0.096
0.234
0.187
0.103
0.287
EE
Table 4. Heterotrait-Monotrait Ratio (HTMT) FIN-SUP
EI
Modeling
EE
SAT
FIN-SUP EI
0.119
Modeling
0.081
0.297
EE
0.318
0.123
0.217
SAT
0.278
0.193
0.095
0.166
SE
0.121
0.256
0.216
0.151
0.305
4.3 Structural Model Results and Discussion Table 5 presents the outcomes of the hypothesized structural model, encompassing the R2 values, estimated path coefficients, F square values, adjusted bias confidence intervals, t-values, and p-values. Based on the model performance metrics, it can be concluded that the proposed model fits the data well. Bootstrapping was employed to assess the significance of each path. The model accounts for 22% of the variability in self-efficacy and 50% of the variability in intentions. Table 5. Results of Partial least square-structural equation modeling (PLS-SEM) Original Sample (O)
Bias Corrected CI
F Square
T Statistics (|O/STDEV|)
P Values
SE → EI
0.234
0.009
0.58
2.434
0.015
Modeling → SE
0.155
0.006
0.28
2.782
0.006
EE → SE
0.119
0.015
0.027
1.473
0.141
−0.011
0.010
0.001
0.123
0.902
0.276
0.001
0.16
3.921
0.000
FIN-SUP → SE SAT → SE
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The results revealed a positive and significant association between self-efficacy and entrepreneurial intention with a path coefficient of 0.234 (P < .05), which supports hypothesis H1. This denotes that students’ self-belief of efficacy can be considered a significant predictor of their intention to be entrepreneurs. This result is in line with various past studies, particularly among university students, such as the work of Crespo et al. (2020), Newman et al. (2019), Saoula et al. (2023), and Soomro and Shah (2022). Moreover, the results here align with the findings of a recent study by Luong and Lee (2023) among hospitality students in New Zealand where they found that students’ selfefficacy is an essential element to promote their entrepreneurial intention. As such, the outcomes regarding the association between self-efficacy and entrepreneurial intention are supported by the literature. Furthermore, the outcomes support the proposed association between modeling and self-efficacy with a path coefficient of 0.155 (P < .01), and that supports hypothesis H2a. Consequently, as modeling was found to be related to self-efficacy, and the latter to be associated with entrepreneurial intention, hypothesis H2b is supported, which proposed the mediation of self-efficacy between Modeling and entrepreneurial intention. These results are also supported by various past studies (e.g. Laviolette et al., 2012, Maheshwari and Kha, 2022; Oyugi, 2015; Wu et al., 2022). For example, Luong and Lee (2023) suggested that having entrepreneurial role models is a strong predictor of entrepreneurial self-efficacy and the desire for entrepreneurship among tourism and hospitality students. Consequently, the results presented here are consistent with findings from earlier research. Conversely, the findings did not support the hypothesized relationship between entrepreneurial education and self-efficacy (0.119, P = .141, ns), which led to the rejection of hypotheses H3a and H3b. This is in contrast with our anticipations. In addition, the results regarding the role of entrepreneurial education deviate from the findings of earlier studies (e.g. Anwar et al., 2022; Mei et al., 2020; Newman et al., 2019; Rauch and Hulsink 2015; Yun 2010). The reason behind this unexpected result might be that entrepreneurship had not been fully covered in participants’ modules or there is a lack of attention regarding entrepreneurship in the universities where the participants study. Moreover, a non-significant association was discovered between financial support and self-efficacy and that led to the rejection of hypotheses H4a and H4b. These findings also differ from the authors’ anticipations and do not correspond with previous studies such as the work of Ahmed et al. (2021), Elndi and Gheith (2021), Farashah (2013), and Teixeira et al., (2018). For example, Nengomasha, (2018) collected data from university students in South Africa and found a positive association between financial support, self-efficacy, and entrepreneurial intention. More recently, Al-Qadasi et al., (2023) found similar results in Yemen. Nevertheless, the results provide empirical support for hypothesis H5a as a significant association was found between students’ satisfaction with their major and self-efficacy (0.276, P = .000). Thus, as students’ satisfaction with their major was found to be related to self-efficacy, and the latter to be related to entrepreneurial intention, hypothesis H5b is also supported, which proposed the mediation of self-efficacy between students’ satisfaction with their major and entrepreneurial intention. This denotes that students who find contentment in their chosen field of study are more likely to possess a stronger belief
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in their own abilities (self-efficacy) and a heightened interest in pursuing entrepreneurial ventures. This observation is in harmony with the notion that a sense of contentment and alignment with one’s academic path can encourage one’s self-assuredness. When students derive satisfaction from their major, it can motivate and enhance their competence, thus contributing to heightened self-efficacy, which, in turn, can influence their likelihood of contemplating entrepreneurial endeavors.
5 Conclusion, Limitations, and Directions for Future Research The aim of this study was to shed light on the important role of some factors in promoting entrepreneurial intention through the mediation of self-efficacy among hospitality students in some public universities in Jordan. The study examined the influence of modeling, entrepreneurial education, financial support, and student’s satisfaction with their major on students’ belief in their capabilities (self-efficacy) and its influence on their intention to become entrepreneurs. A total of 246 valid responses were received and the data were analyzed using Smart-PLS SEM. The results revealed that self-efficacy was positively related to students’ entrepreneurial intention. Moreover, the findings support the proposed association between modeling and self-efficacy, and the mediation of self-efficacy between modeling and students’ entrepreneurial intention. However, no significant relationship was found between entrepreneurial education and self-efficacy, thus, the suggested mediation of self-efficacy in the path from entrepreneurial education to students’ entrepreneurial intention was rejected. Furthermore, financial support was not found to be related to self-efficacy, which is contrary to the authors’ expectations, as such, the hypothesized mediation of self-efficacy in the relationship between financial support and students’ entrepreneurial intention was also rejected. Nevertheless, the outcomes supported the association between students’ satisfaction with their major and their self-efficacy, and that the latter mediated the influence of students’ satisfaction with their major on students’ entrepreneurial intention. To the best of the authors’ knowledge, this study is amongst the first attempts to examine the relationship between student’s satisfaction with their major, self-efficacy, and entrepreneurial intention among hospitality students. Moreover, this study contributes to the discussion on what encourages students’ entrepreneurial intention, particularly in the hospitality field as there is a lack of studies regarding entrepreneurship. This study tried to provide a comprehensive understanding of hospitality students’ perspectives and contribute to the broader discourse on entrepreneurship in education. However, this study is not free of limitations. One of the limitations of this study is that it collected data from only three public universities in Jordan, which limits the generalizability of the study’s conclusions. Thus, future studies are recommended to gather data from various public and private universities. Furthermore, this study collected data using a self-administered survey where students filled out the questionnaire at one point in time, and that could potentially bring up the concern of common methods bias. Nevertheless, various techniques were implemented to tackle this issue such as making participation in the study voluntary and assuring the anonymity of the respondents to encourage them to provide honest answers; also using clear, simple, and free of jargon questions. Another limitation is that this is a quantitative study where the tested factors
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were derived from past studies; thus, future studies are suggested to conduct a qualitative study that explores from students’ perspectives what inspires them to embark on entrepreneurial endeavors. Additionally, this study provides some recommendations for academic institutions, policymakers, and industry players to create specific approaches aimed at nurturing an environment of creativity and entrepreneurship in hospitality education. This can be done by introducing new modules, providing training courses, and increasing students’ awareness of the significance of entrepreneurship.
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Minimalism in Agribusiness: Efficient Supply Chains and Sustainable Practices K. P. Jaheer Mukthar1(B) , C. Nagadeepa1 , Jorge Castillo-Picón2 Leoncio Cochachin-Sánchez2 , Jorge Manrique-Cáceres2 , Luciano Tinoco-Palacios2 , and Roger Rurush-Asencio2
,
1 Kristu Jayanti College Autonomous, Bengaluru, India
[email protected] 2 Universidad Nacional Santiago Antunez de Mayolo, Huaraz, Peru
Abstract. Minimalism in agribusiness represents a paradigm shift in the way we approach farming and food production. Its emergence can be traced back to a growing global awareness of the ecological and social challenges associated with traditional agricultural practices. As consumers demand more sustainable and transparent food systems, the agribusiness sector has undergone a transformation, integrating minimalism principles to enhance supply chain efficiency and promote sustainable practices. This paper titled “Minimalism in Agribusiness: Efficient Supply Chains and Sustainable Practices” explores the impact of adopting minimalism practices, technology integration, and sustainable agriculture on supply chain efficiency and alignment with sustainable practices. By employing a mixed-methods approach, we gather data from a diverse sample of 122 agri producers and 186 intermediaries across the supply chain. Our findings reveal that minimalism practices, technology integration, and sustainable methods significantly influence supply chain efficiency. Larger agribusinesses, specific locations, and market demand also play pivotal roles. This research contributes to understanding the holistic relationship between minimalism and agribusiness, paving the way for a more sustainable and efficient future. Keywords: Minimalism · Agribusiness · Supply Chain Efficiency · Sustainable Practices · Technology Integration
1 Introduction In recent years, the concept of minimalism has transcended the realm of interior design (MORE, 1985) and lifestyle choices (Meissner, 2019) to make a significant impact on the world of agribusiness. Minimalism in agribusiness represents a paradigm shift in the way we approach farming and food production. Its emergence can be traced back to a growing global awareness of the ecological and social challenges associated with traditional agricultural practices. As consumers demand more sustainable and transparent food systems, the agribusiness sector has undergone a transformation, integrating minimalism principles to enhance supply chain efficiency and promote sustainable practices (AminChaudhry et al., 2022). © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 67–78, 2024. https://doi.org/10.1007/978-3-031-53998-5_6
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The Emergence of Minimalism in Agribusiness: Minimalism in agribusiness emerged in response to the urgent need for more sustainable and eco-conscious food production methods. Conventional agriculture, characterized by heavy resource use, excessive waste, and over-reliance on synthetic chemicals, has posed significant threats to the environment and food security (Pretty and Bharucha, 2014). The concept of minimalism in agribusiness prioritizes efficiency, resource optimization, and sustainability. The global adoption of minimalism in agribusiness has seen substantial growth in recent years. According to the World Bank, the global land area dedicated to organic farming increased by 20% between 2010 and 2019. Organic agriculture, a core component of agribusiness minimalism, has experienced steady growth. Furthermore, data from the United Nations Food and Agriculture Organization (FAO) indicates an increasing number of agribusinesses adopting sustainable practices and seeking certifications, underscoring the industry’s shift toward minimalism. Efficient Supply Chains: Efficient supply chains have become a focal point in the adoption of minimalism within agribusiness (Soderlund et al., 2008). Minimalism, by reducing waste and improving resource utilization, naturally aligns with supply chain optimization. Just-in-Time (JIT) production, lean practices, and transportation route optimization have become common strategies to streamline supply chains and lower operational costs (Yang et al., 2021). Sustainable Practices: Sustainable practices, such as organic farming, crop rotation, and certification programs, are integral components of minimalism in agribusiness (Goodman and Goodman, 2001). These practices aim to reduce the environmental impact of agriculture, enhance soil health, and ensure the long-term viability of agribusiness operations. Certification programs, such as USDA Organic and Fair Trade (Cervellon and Carey, 2011), offer consumers transparency and assurance regarding the sustainability of the products they purchase. Current research in the agribusiness sector is focused on achieving efficient supply chains through the adoption of minimalism principles, technology integration, and sustainable practices. Agribusinesses are increasingly turning to technology to optimize production, transportation, and distribution processes. The integration of IoT sensors, data analytics, and automation allows for real-time monitoring and data-driven decision-making, resulting in more efficient supply chains (Gaffney et al., 2019). 1.1 Flow of the Study The study unfolds in a structured manner, beginning with an introduction that highlights the emergence of minimalism in agribusiness, its significance, and the associated challenges. The subsequent section offers a comprehensive review of the literature, tracing the growth of minimalism in agribusiness and its impact on supply chain efficiency. It also delves into sustainable practices and the integration of technology as key components of this paradigm shift. The research methodology section outlines the mixed-methods approach used, explaining the sample size, data collection methods, and potential limitations. Following this, the data analysis presents the results of regression analysis, revealing the influences of minimalism practices, technology integration, and sustainable methods on supply chain efficiency, while considering control variables. The study concludes by summarizing the findings and their implications for the agribusiness sector,
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stressing the significance of adopting minimalism practices to achieve more efficient and sustainable supply chains.
2 Review of Literature on the Concepts Minimalism in agribusiness emphasizes the implementation of sustainable practices (Streeter et al., 1991). This includes organic farming methods, crop rotation, and the pursuit of certifications. These practices not only reduce the environmental footprint but also respond to the growing consumer demand for ecologically responsible products, enhancing the overall sustainability and appeal of the agribusiness sector (Lockie et al., 2002). Minimalism in agribusiness has rapidly evolved to revolutionize the industry by promoting efficient supply chains and sustainable practices. The integration of technology (Alshuwaikhat and Abubakar, 2008) and the commitment to ecological responsibility continue to drive the sector toward a more environmentally friendly, transparent, and efficient future. As research in this field progresses, the agribusiness industry is poised to meet the evolving demands of a conscientious and eco-conscious consumer base (Schrank and Running, 2018). 2.1 Minimalism Practices Minimalism in agribusiness involves streamlining operations to eliminate waste, reduce inefficiencies, and maximize resource utilization. It focuses on doing more with less. Reducing unnecessary inputs (water, energy, chemicals (Darfour, 2019)), minimizing food waste during production and distribution and ensuring efficient use of labor and machinery. Minimalism practices directly impact supply chain efficiency by reducing operational costs, minimizing waste, and ensuring timely delivery of products (Closs et al., 2011). By eliminating waste and inefficiencies at all stages of production, agribusinesses can optimize supply chains, reduce costs, and improve overall. Following are the important minimalism practices in agribusiness. Efficient Harvesting: Implementing practices that minimize crop losses during harvesting and transportation. Food Preservation: Using methods such as canning, freezing, and drying to extend the shelf life of perishable goods. Redistribution of Surplus Food: Partnering with food banks and non-profit organizations to donate excess food rather than discarding it. Renewable Energy Sources: Integrating renewable energy sources like solar and wind power into agribusiness operations to reduce carbon emissions. Water Management: Implementing efficient irrigation techniques and water recycling to minimize water consumption and reduce environmental impact. Responsible Land Management: Avoiding overuse of land resources and protecting natural habitats. Implementing no-till farming practices to reduce soil erosion and increase carbon sequestration.
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2.2 Sustainable Practices Sustainable Agriculture Methods: Sustainable agriculture methods in agribusiness encompass practices that prioritize ecological and social responsibility, focusing on long-term environmental and economic viability (Beddington et al., 2012). Organic farming techniques, crop rotation to maintain soil health, the use of natural fertilizers and pest control methods, and seeking certifications such as USDA Organic, Fair Trade, and others to ensure sustainable and ethical practices. Sustainable agriculture methods are closely linked to the efficiency and sustainability of the supply chain. By reducing the environmental impact of agricultural practices, such as reducing chemical use and maintaining soil health (Javaid et al., 2022), agribusinesses can ensure a consistent and reliable supply of quality products. Certifications provide transparency and assurance to consumers, enhancing the appeal and sustainability of supply chains (Hobbs, 2019). Following are the important key aspects of sustainable practices. Organic Farming: Transitioning to organic farming methods that avoid synthetic chemicals and promote soil health, biodiversity, and reduced environmental impact. Precision Agriculture: Using technology like GPS, drones, and sensors to optimize resource use, reduce water and fertilizer consumption, and increase crop yields. Crop Rotation and Diversification: Implementing crop rotation and diversification strategies to enhance soil fertility, reduce pests and diseases, and improve overall sustainability. Sustainable Packaging: Minimizing the use of non-recyclable and single-use plastics by adopting sustainable packaging solutions. Sustainable Supply Chain Certification: Obtaining certifications such as Fair Trade, Rainforest Alliance, and USDA Organic to demonstrate commitment to sustainable and ethical practices. Technology Integration: Technology integration in agribusiness refers to the adoption and integration of various technologies and digital tools to enhance production, monitoring, and decisionmaking processes (Pylianidis et al., 2021). Using IoT sensors (Jaheer Mukthar et al., 2023) to monitor crop conditions, employing data analytics for better decision-making, implementing GPS technology for route optimization in transportation, and adopting automation for various farming and processing tasks (Sinha and Dhanalakshmi, 2022). Technology integration plays a pivotal role in achieving an efficient supply chain. It provides real-time data and insights for better decision-making, helps in tracking and tracing products, optimizes transportation routes, and enhances transparency and accountability within the supply chain. By integrating technology, agribusinesses can improve efficiency, reduce errors, and minimize delays. The following aspects are the technology integration through which we can achieve efficient supply chain management in agribusiness. Just-In-Time (JIT) Production: Adopting JIT principles to reduce excess inventory and minimize /eliminate waste in the supply chain. Lean Manufacturing: Implementing lean principles to eliminate waste, improve productivity, and enhance the efficiency of production processes. Modern Technology: Utilizing modern technologies like IoT, blockchain, and data analytics to optimize supply chain operations, reduce costs (Nagadeepa et al., 2023).
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2.3 Efficient Supply Chain An efficient supply chain is a system of organizations, people, activities, information, and resources involved in the production, distribution, and delivery of products or services from the point of origin to the end consumer (Stock and Boyer, 2009; Azzi et al., 2019). The primary goal of an efficient supply chain is to optimize its operations in a way that minimizes costs, maximizes the utilization of resources, and ensures timely delivery of high-quality products or services while meeting customer demands and expectations (Ketchen et al., 2008). Key characteristics and components of an efficient supply chain include: Minimized Costs: Efficient supply chains aim to reduce costs at every stage of the process. This can include minimizing production and transportation costs, optimizing inventory management, and streamlining labor and equipment usage. Reduced/ eliminate Waste: Waste in the form of excess inventory, inefficient processes, or defective products is minimized to enhance efficiency. Techniques like lean management and just-in-time (JIT) inventory systems are often employed. Effective Inventory Management: Inventory is maintained at optimal levels to prevent overstocking or stockouts. This helps in reducing carrying costs and ensuring that products are available when needed. Optimized Transportation and time Delivery: Efficient supply chains make use of optimal transportation methods and routes to minimize shipping costs and reduce the environmental impact. Transparency and Visibility: Modern supply chains often use technology, such as sensors and tracking systems, to provide real-time visibility into the movement of products, which helps in decision-making and problem-solving. Collaboration: Effective communication and collaboration between all entities in the supply chain, from suppliers to manufacturers to distributors, is essential for smooth operations. The overarching goal of minimalism in agribusiness is to create a more sustainable and efficient food production system that minimizes its impact on the environment while ensuring food security and quality. It aligns with the growing consumer demand for products that are both ecologically responsible and ethically produced. The following Fig. 1 shows the efficient supply chain in Agribusiness. Research Gap: While there is growing recognition of the need for sustainability and efficiency in the agribusiness sector, a research gap exists in the understanding of how the adoption of minimalism practices, technology integration, and sustainable agricultural methods collectively impact supply chain efficiency and alignment with sustainable practices. Existing research often focuses on individual elements, but there is a need for a comprehensive study that examines the interplay between these factors and their combined influence on agribusiness supply chains. This research aims to bridge this gap by providing insights into the holistic relationship between minimalism practices, technology integration, sustainable agriculture, and supply chain performance.
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Fig. 1. Venn Diagram of Efficient Supply Chain
2.4 Statement of the Problem The modern agribusiness sector faces significant challenges related to resource-intensive and environmentally harmful practices, as well as inefficiencies in supply chain management. Conventional agricultural methods often result in excessive waste, overuse of resources, and a considerable carbon footprint. These issues are compounded by inefficient supply chains, which can lead to product losses, increased costs, and delayed delivery. The problem lies in finding a sustainable and efficient approach to agribusiness that reduces waste, optimizes resource use, and streamlines supply chains, while meeting the growing demand for eco-conscious and transparent food systems. 2.5 Research Question “What is the impact of adopting minimalism practices in agribusiness, including the integration of technology and sustainable agricultural methods, on supply chain efficiency and alignment with sustainable practices?”
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2.6 Hypotheses Hypothesis 1: Adoption of Minimalism Practices The adoption of minimalism practices in agribusiness positively influences supply chain efficiency and alignment with sustainable practices. Hypothesis 2: Technology Integration Technology integration in agribusiness positively correlates with improved supply chain efficiency and alignment with sustainable practices. Hypothesis 3: Sustainable Agricultural Methods Sustainable agricultural methods positively influence supply chain efficiency and alignment with sustainable practices in agribusiness.
3 Research Methodology For this study, a mixed-methods research approach will be employed, including both quantitative and qualitative data collection and analysis. The research will target a diverse sample of agribusiness stakeholders, including agricultural producers and intermediaries, who play critical roles at various stages of the supply chain, such as commission agents, millers, wholesalers, retailers, mandi traders, and others. Sample Size and Respondents: The sample size for this research will include 122 Agri producers and 186 intermediaries across the supply chain. Agri producers will be selected from different regions and sectors, including crop and livestock farming, to ensure a representative sample. Intermediaries will encompass commission agents, millers, wholesalers, retailers, and mandi traders, covering the entire spectrum of agribusiness operations. Data Collection Methods: Surveys: Quantitative data will be collected through structured surveys administered to both agri producers and intermediaries. The surveys will focus on their adoption of minimalism practices, technology integration, and sustainable agricultural methods, as well as their perceptions of supply chain efficiency and sustainability. Interviews: Qualitative insights will be gathered through in-depth interviews with a subset of participants from both groups. These interviews will provide a deeper understanding of the challenges, motivations, and specific practices related to minimalism, technology integration, and sustainable agriculture. Limitations: It is important to acknowledge potential limitations of the study, including the representativeness of the sample and any biases that may arise from self-reporting in surveys and interviews.
4 Data Analysis Quantitative data collected from the surveys are analyzed using statistical techniques, regression analysis to test the research hypotheses. The analysis determines the relationships between the adoption of minimalism practices, technology integration, and sustainable agriculture methods, and their impact on supply chain efficiency and alignment with sustainable practices.
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K. P. J. Mukthar et al. Table 1. Demographic information - Agri producers and intermediaries
Demographic Characteristic
Agri Producers (N = 122)
Age - Under 30 years 12 (10%) - 30–40 years 30 (25%) - 41–50 years 36 (30%) - 51–60 years 24 (20%) - Over 60 years 18 (15%) Gender - Male 85 (70%) - Female 37 (30%) Education Level - High School or Below 24 (20%) - Bachelor’s Degree 55 (45%) - Master’s Degree 30 (25%) - Ph.D. or Higher 13 (10%) Years of Experience in Agribusiness - 0–5 years 18 (15%) - 6–10 years 30 (25%) - 11–20 years 37 (30%) - 21–30 years 24 (20%) - Over 30 years 13 (10%) Type of Agribusiness - Crop Farming 49 (40%) - Livestock Farming 36 (30%) - Agri-Processing 24 (20%) - Other (Agri-Tech, Agri-Retail) 13 (10%) Location - Rural 73 (60%) - Urban 49 (40%) Annual Revenue of Agribusiness - Less than $10,000 31 (25%) - $10,000–$24,999 42 (35%) - $25,000–$49,999 24 (20%) - $50,000 and above 25 (20%) Market Reach - Local 49 (40%) - Regional 36 (30%) - National 24 (20%) - International 13 (10%)
Intermediaries (N = 186) 15 (8%) 45 (24%) 55 (30%) 38 (20%) 33 (18%) 120 (65%) 66 (35%) 18 (10%) 90 (48%) 54 (29%) 24 (13%) 32 (17%) 45 (24%) 62 (33%) 37 (20%) 10 (5%) 50 (27%) 42 (23%) 55 (30%) 39 (21%) 85 (46%) 101 (54%) 24 (13%) 50 (27%) 59 (32%) 53 (28%) 41 (22%) 42 (23%) 63 (34%) 40 (21%)
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The following Table 1, provides a detailed breakdown of demographic characteristics for both Agri producers and intermediaries in the supply chain, with the number of respondents and the percentage of each category. The Table 1 shows the demographic characteristics of the research sample, consisting of 122 agri producers and 186 intermediaries in the supply chain, offer a wellrounded representation of the agribusiness sector. The age distribution shows a mix of experience levels, with the majority falling in the 30–60 age range, ensuring a diverse range of perspectives. While male respondents make up the majority, the inclusion of a substantial number of female participants underscores gender diversity in agribusiness. Educational backgrounds vary, with many agri producers holding bachelor’s degrees, while intermediaries display a wider array of education levels. This diversity within the sample enriches the study’s insights. In terms of experience, both newcomers and industry veterans are represented, further enhancing the study’s comprehensive outlook. The types of agribusiness are diverse, with crop farming dominating but intermediaries engaging in various sectors. The location distribution demonstrates a balance between rural and urban settings, providing a holistic understanding of the agribusiness landscape. Regarding annual revenue, the sample comprises businesses of various scales, and the market reach covers local, regional, national, and international scopes. This diverse demographic composition ensures a robust foundation for the research, facilitating a comprehensive examination of factors influencing supply chain efficiency in the agribusiness sector. Regression Analysis: This current research aims to analyze the relationship between the dependent variable, “Supply Chain Efficiency,” and the independent variables, “Minimalism Practices,” “Technology Integration,” and “Sustainable Practices,” while controlling for the effects of the control variables, “Size of the Agribusiness,” “Location,” and “Market Demand.“ The regression equation is: Supply Chain Efficiency = β0 + β1 ∗ Minimalism Practices + β2 ∗ Technology Integration + β3 ∗ Sustainable Practices + β4 ∗ Size of Agribusiness + β5 ∗ Location + β6 ∗ Market Demand + ε where: β0 is the intercept. β1, β2, and β3 are the coefficients for the independent variables: Minimalism Practices, Technology Integration, and Sustainable Practices. β4, β5, and β6 are the coefficients for the control variables: Size of Agribusiness, Location, and Market Demand. ε represents the error term. The test result of the data so collected were showed in Table 2. Regression Equation: The regression equation based on the provided coefficients is Supply Chain Efficiency = 22.836 + 0.191 ∗ Size of Agribusiness + 0.116 ∗ Location + 0.234 ∗ Market Demand + 0.408 ∗ Minimalism Practices + 0.845 ∗ Technology Integration + 0.183 ∗ Sustainable Practices
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K. P. J. Mukthar et al. Table 2. Regression Results of Supply Chain Efficiency Model β
Sig
22.836
0.042
Size of Agribusiness
0.191
0.003
Location
0.116
0.042
Intercept Control Variables
Independent Variables
Market Demand
0.234
0.001
Minimalism Practices
0.408
0.001
Technology Integration
0.845
0.001
Sustainable Practices
0.183
0.004
R square is 0.321
This equation allows for estimating the impact of each variable on supply chain efficiency in practical terms. One-unit increase in “Technology Integration” corresponds to an increase of 0.845 units in supply chain efficiency, while a one-unit increase in “Market Demand” is associated with an increase of 0.234 units in supply chain efficiency. The regression analysis examines the factors influencing supply chain efficiency in the context of agribusiness. The model includes both control variables and independent variables to shed light on their impact. The intercept, representing the expected supply chain efficiency when all other variables are zero, is statistically significant with a p-value of 0.042, indicating the presence of a substantial baseline level of supply chain efficiency. Among the control variables, “Size of Agribusiness” and “Location” have statistically significant positive impacts on supply chain efficiency, with coefficients of 0.191 and 0.116, respectively. This suggests that larger agribusinesses and businesses located in specific areas tend to have more efficient supply chains. Same way, “Market Demand” has a statistically significant positive impact on supply chain efficiency, with a coefficient of 0.234. The independent variables also play a significant role. “Minimalism Practices” (coefficient: 0.408), “Technology Integration” (coefficient: 0.845), and “Sustainable Practices” (coefficient: 0.183) all have statistically significant positive impacts on supply chain efficiency. This indicates that adopting minimalism practices, integrating technology, and embracing sustainability positively contribute to supply chain efficiency in agribusiness. The overall model’s R-squared value of 0.321 implies that the included variables collectively explain 32.1% of the variation in supply chain efficiency, demonstrating a moderate level of explanatory power for predicting supply chain efficiency in agribusiness.
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5 Conclusion Minimalism in Agribusiness and efficient Supply Chains sheds light on a transformative shift in the agribusiness sector. Minimalism practices, technology integration, and sustainable agricultural methods collectively influence supply chain efficiency, while control variables such as the size of agribusiness, location, and market demand also play essential roles. This research bridges a critical gap by providing comprehensive insights into the holistic relationship between these factors. The implications of this study are far-reaching, as it informs agribusiness stakeholders of the potential for sustainability and efficiency in supply chains. As the world increasingly seeks eco-conscious and transparent food systems, minimalism principles and technological advancements are key drivers in meeting these evolving consumer demands. 5.1 Implication of the Study The implications of this research are multifaceted and hold significance for agribusiness practitioners, policymakers, and consumers alike. By highlighting the positive impact of minimalism practices, technology integration, and sustainable methods on supply chain efficiency, agribusiness stakeholders can make informed decisions to enhance their operations. This research provides a roadmap for practitioners to adopt eco-conscious and efficient supply chains, ultimately meeting the growing demand for sustainability. For policymakers, it underscores the importance of promoting practices that support minimalism in agribusiness and the integration of technology. Consumers can make informed choices by supporting agribusinesses that align with sustainability and transparency, contributing to a more responsible and efficient food supply chain.
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Hobbs, J.E.: Heterogeneous consumers and differentiated food markets: implications for quality signaling in food supply chains. Can. J. Agric. Econ./Revue canadienne d’agroeconomie 67(3), 237–249 (2019) Jaheer Mukthar, K.P., Nagadeepa, C., Satheesh Kumar, T.K., Ramirez-Asis, E., VillanuevaCalderón, J., Singh, J.K.: Internet of Things for healthcare: evaluate user’s acceptance and sustainability during pandemics. Technol. Sustain. Bus. Comp. Advantage, 25–47 (2023) Javaid, M., Haleem, A., Singh, R.P., Suman, R.: Enhancing smart farming through the applications of Agriculture 4.0 technologies. Int. J. Intell. Netw. 3, 150–164 (2022) Ketchen, D.J., Jr., Rebarick, W., Hult, G.T.M., Meyer, D.: Best value supply chains: a key competitive weapon for the 21st century. Bus. Horiz. 51(3), 235–243 (2008) Lockie, S., Lyons, K., Lawrence, G., Mummery, K.: Eating ‘green’: motivations behind organic food consumption in Australia. Sociol. Rural. 42(1), 23–40 (2002) Meissner, M.: Against accumulation: lifestyle minimalism, de-growth and the present postecological condition. J. Cult. .omy 12(3), 185–200 (2019) More, M.: Design In. In: Surveying and Mapping: Quarterly Publication of American Congress on Surveying and Mapping, vol. 45, p. 69. The Congress (1985) Nagadeepa, C., Jaheer Mukthar, K.P., Ramirez-Asis, E., Huaranga-Toledo, H., Espinoza-Maguiña, M., Mory-Guarnizo, S.: A reinforcer to become a foodpreneur through cloud kitchen: sustainable technology-driven business model during pandemic. In: Al Mubarak, M., Hamdan, A. (eds.) Technological Sustainability and Business Competitive Advantage. Internet of Things, pp. 401–413. Springer, Cham (2023). https://doi.org/10.1007/978-3-031-35525-7_25 Pretty, J., Bharucha, Z.P.: Sustainable intensification in agricultural systems. Ann. Bot. 114(8), 1571–1596 (2014) Pylianidis, C., Osinga, S., Athanasiadis, I.N.: Introducing digital twins to agriculture. Comput. Electron. Agric. 184, 105942 (2021) Schrank, Z., Running, K.: Individualist and collectivist consumer motivations in local organic food markets. J. Consum. Cult. 18(1), 184–201 (2018) Sinha, B.B., Dhanalakshmi, R.: Recent advancements and challenges of Internet of Things in smart agriculture: a survey. Futur. Gener. Comput. Syst. 126, 169–184 (2022) Soderlund, R., Williams, R., Mulligan, C.: Effective adoption of agri-food assurance systems. Br. Food J. 110(8), 745–761 (2008) Stock, J.R., Boyer, S.L.: Developing a consensus definition of supply chain management: a qualitative study. Int. J. Phys. Distrib. Logist. Manag. 39(8), 690–711 (2009) Streeter, D.H., Sonka, S.T., Hudson, M.A.: Information technology, coordination, and competitiveness in the food and agribusiness sector. Am. J. Agr. Econ. 73(5), 1465–1471 (1991) Yang, J., Xie, H., Yu, G., Liu, M.: Achieving a just–in–time supply chain: the role of supply chain intelligence. Int. J. Prod. Econ. 231, 107878 (2021)
A Study to Assess the Effectiveness of Advertisements Specifically Focusing on Soft Drinks in the City of Bengaluru Syed Kazim1(B) , Naveen Pol2 , K. P. Jaheer Mukthar3(B) , Ravi Shankar Bhakat4 , C. G. Manjunatha5 , and Kotigari Reddi Swaroop6 1 JAIN (Deemed-to-Be University), CMS Business School, Bengaluru, India
[email protected]
2 ISBR College, Bengaluru, India 3 Kristu Jayanti College Autonomous, Bengaluru, India
[email protected]
4 Faculty, MDI Murshidabad, Bengaluru, India 5 Manipal Law School, Manipal Academy of Higher Education (MAHE), Bengaluru, India 6 Department of Commerce, NMIMS (Deemed to Be University), Hyderabad Campus,
Bengaluru, India
Abstract. The objective of this research paper is to assess the effectiveness of advertisements that specifically target soft drinks in the urban context of Bengaluru. The study aims to examine the impact of these advertisements on consumer perception, brand awareness, and purchase behavior. A quantitative research approach will be employed, utilizing a structured questionnaire survey to collect primary data from residents of Bengaluru who consume soft drinks. The sample will be selected using a combination of probability and convenience sampling methods. The collected data will be analyzed using descriptive and inferential statistics to draw conclusions and make recommendations regarding the effectiveness of the advertisements. The findings of this study will contribute to the understanding of the effectiveness of targeted advertisements in the soft drink industry and provide insights for advertisers, marketers, and policymakers in developing effective advertising strategies for this specific market segment. Keywords: Advertisements · Soft Drinks · Celebrity Endorsement · Consumers’ attitudes and impulsive purchase behavior
1 Introduction Advertising is a vital aspect of mass communication, serving as the primary element within promotional activities. It involves the intentional and well-crafted dissemination of non-personal information, typically driven by persuasion and supported through financial means. The aim is to communicate details about products or services using diverse media platforms, while clearly identifying the sponsoring entities [3]. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 79–95, 2024. https://doi.org/10.1007/978-3-031-53998-5_7
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In recent years, the landscape of advertising media has witnessed remarkable diversity. While traditional platforms like television broadcasts and print media still hold significant market share, the emergence of the World Wide Web, commonly known as the Internet, and cable TV have led to their growing importance. These digital channels have made substantial inroads into the realm of network advertising. By subsidizing the dissemination of information and entertainment, advertising enables consumers to access a wide range of content through these media platforms. As a result, advertisers are eagerly seizing the opportunity to capitalize on these evolving mediums. The global economic landscape, including that of India, has undergone significant transformations due to the process of globalization. This shift has had a profound influence on media buying activities within industries. Today, media buying has evolved into a more scientific and strategic practice, with careful consideration given to the allocation of channel time. Companies allocate a significant portion of their sales revenues, ranging from 5% to 20%, towards the purchase of media time or space. Furthermore, there has been an increased emphasis on identifying and utilizing suitable media platforms to enhance the effectiveness of advertising efforts. Gaining insights into the effectiveness of highly creative advertisements is crucial to ensure that they effectively communicate the desired messages to consumers and translate ad liking into purchase intent. Advertising has the power to influence various mental processes and consumer behavior. Previous studies conducted by Broadbent (1975) and Jones (1995) indicate that consumer loyalty often extends to multiple national brands, with preferences evolving over time. To gain a larger market share, individual brands employ increased advertising efforts along with other promotional activities, aiming to outperform competing brands. According to the market survey conducted by the Blackstone Agency, the Indian industry’s expenditure on advertising and promotions is dominated by Fast Moving Consumer Goods (FMCG) companies, accounting for approximately 70% of the total spending. The majority of this budget is allocated to mainstream media channels, while the remaining portion is directed toward below-the-line promotional activities. Notably, the soft drinks industry alone contributes over 8% of the total advertising expenditure in India. In the Indian soft drinks market, the dominant players are Coca-Cola and Pepsi. Market reports suggest that these two multinational companies collectively hold a staggering 97% market share, with the remaining portion controlled by smaller local manufacturers. The rivalry between these two industry giants for a larger market share is long-standing and intense. This rivalry is reflected in their substantial advertising expenditures, and their competitive spirit is evident in the content and strategies employed in their advertisements.
2 Literature Review According to Tim Ambler [4], the primary role of advertising is to maintain awareness and attitudes rather than solely focusing on increasing them. This notion is supported by studies conducted by Maloney [5], which found that product experience plays a more significant role in influencing consumers than the persuasive effects of advertising.
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In the context of understanding the impact of advertising, Vakratsas and Ambler [7], as well as Ambler and Goldstein [6], propose that product experience serves as a crucial intermediate effect that must be taken into account. They argue that in certain situations, product experience takes precedence in shaping beliefs, attitudes, and preferences while advertising acts to reinforce existing habits, frame experiences, or simply serve as a reminder or reinforcement. In essence, these studies emphasize that advertising should not be solely viewed as a means to induce immediate changes in consumer attitudes or awareness. Instead, it plays a significant role in supporting and sustaining existing beliefs and attitudes, working in conjunction with product experience to influence consumer behavior and preferences. In their comprehensive review of over 250 journal articles and books, Vakratsas and Ambler [7] sought a deeper understanding of the impact of advertising on consumers. They identified cognition, affect, and experience as the three essential intermediate measures of advertising effects. However, the authors contest the notion of a hierarchical or temporal sequence of these effects, advocating instead for their examination in a three-dimensional space, free from a strict hierarchical structure. Throughout the years, there has been significant progress in understanding the processing of advertising and its relationship with established attitudes and purchasing behavior. Franzen [8] challenges the traditional notion of sequential stages in this process, proposing instead that there is a continuous and simultaneous interaction between existing knowledge, attitudes, and behavior on one hand and the perception and processing of advertisements on the other. This concept prompted Preston and Thorson to develop a theory that suggests an interconnectedness between preexisting associations, evaluations, and behavioral tendencies, alongside the assimilation of advertising information. Moriarty [9] challenged the conventional notion of effects and recommended a reorganization of these effects in a more meaningful manner, emphasizing their interconnectedness. She introduced three primary areas, namely Perception, Learning, and Persuasion, as having more significant impacts on purchase decisions, with the potential for further subgroups at different involvement levels. According to Pretty, Cacioppo, and Schumann [10], celebrity endorsement is considered a “peripheral cue,” effective primarily for consumers processing an advertisement through the peripheral route. On the other hand, for consumers processing the advertisement through the central route, the influence is mainly determined by the strength and quality of the message argument. The researchers discovered that in high involvement situations, arguments played a significant role in shaping attitudes, while in low involvement situations, celebrities had a greater impact on attitudes. These findings indicate that the influence of celebrities may be more dependent on the product itself rather than the individual celebrity endorsing it. This insight provides valuable guidance to marketers in selecting the most suitable celebrity for their product. Research on celebrity endorsements has produced inconsistent findings concerning their believability and overall effectiveness in advertisements and purchase intent [1]. However, Friedman and Friedman [11] put forth a hypothesis and subsequently demonstrated that utilizing celebrity endorsers resulted in greater believability, a more
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positive evaluation of the product and advertisement, and a significantly higher intention to purchase the product compared to ads featuring expert or “typical consumer” endorsers. In his study on celebrity endorsement, Roy [12] presents intriguing propositions regarding celebrities and their impact on branded products. He notes that selecting a celebrity for endorsement cannot rely on a global evaluation of their personality, as consumers’ perceptions of both the celebrity and the brand are multi-faceted and constantly changing. This dynamic process involves a variety of personality attributes. Furthermore, Roy argues that celebrities, such as Cricketers, are often evaluated based on their on-field performance. Consequently, when these celebrities encounter failures or the country suffers a loss in a match, consumers react promptly and negatively to such events. Wang [13] conducted a study to investigate how audiences incorporate expert and consumer endorsements in their product evaluations, as well as the influence of endorsement consensus on this process. The findings indicate that both positive expert and consumer endorsements positively impact audiences’ attitudes towards the endorsed product. Marketers encounter another challenge in the form of advertising clutter. The existing high levels of clutter are far from encouraging for marketers seeking to capture the audience’s share of mind. Cobb [14] conducted a study to examine the impact of clutter and its effect on commercial recall. The findings revealed that a high level of clutter has a detrimental effect on commercial recall compared to situations with lower clutter. Moreover, various studies have explored both recall and attention amid varying degrees of clutter. Webb and Ray [15] conducted a study in which they manipulated clutter levels and observed that as non-program material increased, the effectiveness of commercials decreased. In a study conducted by Blackholer [2], it was observed that there exists a distinction in the consumption of sugar-sweetened beverages between high school graduates and college graduates in response to a price increase. The research revealed that the reduction in consumption was notably greater among individuals with a college-level education compared to those with a high school education. In their research, Kaur and Singh [17] identified a correlation between higher education and favorable consumer behavior toward healthy foods. It is observed that consumers with a university education displayed greater knowledge about healthy foods compared to individuals with lower levels of education. Regarding soft drinks, it is found that consumers with higher educational attainment were more than twice as likely to engage in conversations with others following an awareness campaign about the hazards of soda and sugary drinks. Boles [18] conducted a study and observed that respondents aged 45 and older were less inclined to reduce their consumption of soda or sugary drinks, even after being exposed to health-related campaign advertisements about these products. It is found that soft drink consumers were primarily young individuals between the ages of 15 and 30 years old. It is reported that young adults aged 17 to 30 years exhibited the most positive attitude towards soft drinks and consumed them in greater quantities.
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Regarding the usage of healthy foods, Dobrenova [19] discovered that young consumers tend to utilize healthy foods more than older consumers. It was also found that the consumption of healthy foods is higher among older adults. It implemented a schoolbased nutrition education program for children aged 7 through 11 years, resulting in a modest reduction in carbonated beverage consumption.
3 Research Methodology 3.1 Objectives • To examine the impact of celebrity endorsement on consumers’ attitudes towards the brand, advertisement, and purchase intent. • To investigate the relationship between point-of-purchase advertising and impulsive purchase behavior. 3.2 Research Design This study employed a quantitative research design to assess the effectiveness of advertisements, specifically focusing on soft drinks in the city of Bengaluru. The research design involved the collection and analysis of numerical data to draw statistical inferences and determine the relationship between variables. 3.3 Sampling The population for this study consisted of residents of Bengaluru who were consumers of soft drinks. The sample size was 610. The participants were selected using a combination of probability and convenience sampling methods. Probability sampling involved randomly selecting participants from different areas of Bengaluru, while convenience sampling was used to include individuals who were easily accessible and willing to participate in the study. 3.4 Data Collection Primary data was collected through a structured questionnaire survey. The questionnaire was designed to assess the participants’ perceptions of and attitudes towards advertisements specifically focusing on soft drinks in Bengaluru. The questionnaire included items that measured the effectiveness of these advertisements, including factors such as message recall, brand perception, purchase intention, and overall impact. 3.5 Data Analysis The collected data was analyzed using appropriate statistical methods. Descriptive statistics such as frequencies, percentages, means, and standard deviations were used to summarize the participants’ responses. Inferential statistical techniques, such as correlation analysis and regression analysis, were employed to examine the relationships between variables and identify factors that contributed to the effectiveness of advertisements. Statistical software was utilized to facilitate data analysis and interpretation.
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3.6 Ethical Considerations Ethical guidelines were followed throughout the research process. Informed consent was obtained from all participants, ensuring their voluntary participation and the confidentiality of their responses. The study adhered to ethical standards regarding data protection and privacy. 3.7 Limitations It was important to acknowledge the potential limitations of this study. The findings could have been influenced by factors such as sample size, participants’ biases, and external environmental factors. Additionally, the study focused on a specific city (Bengaluru) and soft drink advertisements, which could have limited the generalizability of the results to other regions or product categories. 3.8 Implications The findings of this study provided insights into the effectiveness of advertisements specifically focusing on soft drinks in Bengaluru. The results could have implications for marketers and advertisers, informing their strategies in designing and targeting advertisements for the local market. Additionally, the study could have contributed to the existing body of knowledge in advertising research and consumer behavior. The research methodology enabled the assessment of the effectiveness of advertisements focusing on soft drinks in Bengaluru, contributing to a better understanding of the impact of advertising in this specific context. Figure 1 shows the conceptual framework.
Fig. 1. Conceptual Framework
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4 Analysis and Interpretation 4.1 Demographic Factors Table 1. Gender Options
Respondents
Percentage
Male
560
91.80
Female
50
8.20
Total
610
100%
Table 2. Age of the Respondents Options
Respondents
Percentage
19 to 21 Years
322
52.79
22 to 29 Years
210
34.43
30 to 45 Years
78
12.79
Total
610
100%
Table 3. Income Options
Respondents
Percentage
Low
0
0
Medium
323
52.9
High
287
47.1
Total
610
100%
Tables 1, 2, and 3 show the descriptive statistics of demographic variables, mainly gender, age, and income, respectively. 4.2 Validity and Reliability The questionnaire’s validity was assessed through a pre-test involving 22 consumer shoppers. This test revealed that none of the shoppers encountered any challenges in comprehending or responding to the questions. To ensure both face and content validity, the questionnaire underwent a review by subject matter experts within the researcher’s current company. To evaluate the instrument’s reliability, the SPSS Windows version was utilized. Table 4 provides a breakdown of the values corresponding to each component of the questionnaire. The Cronbach’s Alpha values for all elements surpass 0.70, affirming the instrument’s reliability [16].
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Ad elements
Mean
SD
Items
Alpha
Celebrity Endorsements
4.97 4.79 4.85
0.18 0.41 0.36
5
0.80
POP Advertisement
4.82 4.88 4.82 4.84 4.86 4.80 4.83
0.39 0.33 0.38
5
0.82
Attitude towards Brand
4.93 4.89
0.26 0.36
2
0.77
Attitude towards Ad
4.87 4.91
0.45 0.31
2
0.89
Purchase Intent
4.91 4.91
0.31 0.31
2
0.97
4.3 Descriptive Statistics While conducting the questionnaire administration, each shopper leaving the store was inquired whether they had purchased Soft Drinks for personal consumption in the past month. The results showed that only 14% of the shoppers responded positively, indicating a minimal incidence of Carbonated Soft Drinks. After determining the shopper’s age group, they were asked to provide a list of five advertisements they had come across on TV, newspapers, or magazines in the last three months. Table 5 provides a comprehensive breakdown of the recalled advertisements, including celebrity models and associated brands. The advertisements featuring film stars as models were recalled by the majority of the sampled consumers (81%), who perceived these models as possessing attributes such as attractiveness, good looks, prettiness, and believability. These consumers rated the aspect of model attractiveness’ more favorably. Conversely, a smaller percentage of consumers (3%) recalled advertisements with sports personalities as models, and they rated the ‘model attractiveness’ element less positively. It is clear from Table 6 that, Purchase Intent element has a higher mean score of 4.87 and is strongly skewed towards ‘strongly agree’ indicating a higher level of association between Point of Purchase Ads and Purchase Intent. Similarly, ‘Perception of Store’ has a high mean value of 4.61 supporting the industry belief that Point of Purchase Ads increases the ambience of the store and hence the store image among shopper.
A Study to Assess the Effectiveness of Advertisements Table 5. List of Ads Recalled Advertisement
Brand Advertised
Celebrity
Thanda Matlab Coca Cola
Coca Cola
Aamir Khan
Mango Frooti Fresh ‘n’ Juicy
Frooti
Ram Charan and Alia Bhat
Kit Kat Break Banta Hai
Kit Kat
Ayushmann Khurrana
Thums Up, Taste the Thunder
Thumbs Up
Akshay Kumar
Kya Aapke Toothpaste Mein Namak Hai?
Colgate
Kiara Advani
Kya Aap Close-Up Karte Hain?
Close-Up
Suriya
Washing Powder Nirma, Sabki Pasand Nirma!
Nirma
Hrithik Roshan
Yeh Toh Bada Toing Hai
Amul Macho
Vicky Kaushal
Char Boondo Wala:
Ujjala
Deepika Padukone
Taste Bhi, Health Bhi
Maggi
Amitabh Bachchan
Yeh Dil Maange More
Pepsi
Shah Rukh Khan
Table 6. Celebrity Endorsed Advertisement Statements
Mean
SD
1.1. The model exhibits an appealing appearance, being both good-looking and attractive
4.85
0.36
1.2. The alignment between the model and the advertised brand is strong
4.35
0.48
1.3. The model is perceived as trustworthy
4.38
0.49
1.4. The model comes across as believable
4.42
0.49
1.5. I find the model featured in the advertisement likable
4.57
0.50
1.6. Simplifies the process of locating my preferred Soft Drink
4.44
0.50
1.7. Possesses a distinctive and pleasing display that sets it 4.35 apart from other presentations
0.48
1.8. Makes Soft Drinks distinguishable from competing brands
4.42
0.49
1.9. Enhances my overall impression of the store
4.61
0.49
1.10. Heightens my desire to buy soft drinks on a more regular basis
4.87
0.34
87
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4.4 Correlation Analysis Karl Pearson’s coefficient of correlation analysis was performed to comprehend and establish any positive or negative correlations among all variables, particularly focusing on the relationship between Predictor variables 1 (averages of Celebrity and POP Ad effects elements) and the Outcome elements. Table 7. Karl Pearson’s coefficient of correlation Variables
A
B
C
D
Celebrity Endorsed Ad
1.000
POP Ad
0.909
1.000
Attitude Towards Brand
0.893
0.911
1.000
Attitude towards Ad
0.949
0.940
0.955
1.000
Purchase Intent
0.891
0.916
0.979
0.971
E
1.000
The strength of the linear relationship among the variables in Table 7 was assessed using the Pearson Correlation coefficient, denoted as γ. The results revealed a positive correlation between the variables, implying that changes in both variables occur in the same direction. Specifically, the correlation between Purchase Intent and Brand Attitude exhibited a remarkably high positive value of 0.978*, signifying a strong positive relationship between Purchase Intent and Brand Attitude. The correlation was slightly lower at 0.9711 with Attitude towards the Advertisement. Likewise, Attitude towards the Brand displayed a stronger positive correlation with POP Advertisements (0.911*) compared to Celebrity Endorsement. Meanwhile, the correlation between Attitude towards the Advertisement and Celebrity Endorsements was higher at 0.949*. 4.5 Regression Analysis Regression analysis was employed to test the statistical relationship between the identified Cause and Outcome variables. The assumption in this context is that the relationship between variables follows a linear pattern, and it is also presumed that the residuals (the differences between predicted and observed values) adhere to a normal distribution. In typical situations, when dealing with two or more independent variables, the application of multiple regression analysis becomes necessary. In the case of multiple regression analysis, the reliability of the regression coefficients diminishes as the degree of correlation between independent variables increases Kothari [17]. This heightened correlation among independent variables can lead to a challenge known as multicollinearity. In such instances, as advised by Kothari [17], it is recommended to utilize only one set of independent variables at a time for making estimations.
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Consequently, to evaluate the hypothesis, this study has opted for Linear Regression Analysis with a single set of independent variables, assuming that this approach will be appropriate. 4.5.1 Assessment of Hypothesis No. 1 H0 : There is no significant relationship between Advertisements featuring Celebrity cues and Attitude towards the Brand being advertised. H1 : There is a significant relationship between Advertisements featuring Celebrity cues and Attitude towards the Brand being advertised. Table 8. Regression Analysis Results of Celebrity Endorsed Ads on Attitude towards Brand Model Variable entered
R
R2
Adj. R2
β
t
Sig.
Celebrity Endorsed Ads
0.893
0.798
0.797
0.893
34.550
.000
Analysis of Variance output F 3.728 = 119
The correlation coefficient, denoted as the R value of 0.893 in Table 8, signifies a substantial connection between Celebrity Endorsed Ads and the Attitude towards the Brand. The Coefficient of Determination, represented by R2, is a statistical measure that reveals the proportion of explained variation in relation to the total variation. In this context, it illustrates that approximately 79.80% of the variability in Attitude towards the Brand can be accounted for by Celebrity Endorsed Ads. The β value, indicative of the predictive power of the variable (Celebrity Endorsed Ads), is equivalent to the Correlation Coefficient. This correspondence implies a strong correlation between the two factors. Moreover, the ‘t’ value assesses whether the regression coefficient significantly deviates from zero. In this specific outcome, the ‘t’ value is 34.550, underscoring a meaningful relationship between Celebrity Endorsed Ads and the Attitude towards the Brand. The ‘F’ value, which measures 1193.728 and holds significance at a level of less than 0.001, is provided in the Analysis of Variance table within the Regression output. This value strongly suggests that a noteworthy and meaningful association exists between the Attitude towards the Brand being advertised and the usage of Celebrity Endorsed Ads. The substantial weight of evidence supports the conclusion that there is ample reason to reject the null hypothesis (H0 ) and instead favor the alternative hypothesis (H1 ). As a result, we accept the hypothesis that posits, “A significant relationship exists between Advertisements featuring Celebrity endorsements and the Attitude towards the Brand being advertised.“
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4.5.2 Assessment of Hypothesis No. 2 H0 : No significant relationship exists between Advertisements featuring Celebrity cues and Attitude towards Advertisement. H1 : A significant relationship exists between Advertisements featuring Celebrity cues and Attitude towards Advertisement. Table 9. Regression Analysis Results of Celebrity Endorsed Ads on Attitude towards Advertisement Model Variable entered
R
R2
Adj. R2
β
t
Sig.
Celebrity Endorsed Ads
0.949
0.902
0.901
0.949
52.671
.000
Analysis of Variance output F = 2774.235
The correlation coefficient, denoted as the R value of 0.949 in Table 9, signifies a strong positive relationship between Celebrity Endorsed Ads and the Attitude towards the Advertisement. The Coefficient of Determination, represented by R2, is a statistical measure that indicates the proportion of explained variation relative to the total variation. In this case, it reveals that approximately 90.20% of the variability in Attitude towards the Advertisement can be accounted for by Celebrity Endorsed Ads. The β value, which gauges the strength of the predictor variable (Celebrity Endorsed Ads), aligns with the coefficient of Correlation and denotes a robust correlation between the two factors. The ‘t’ value, functioning as a test of whether the regression coefficient significantly differs from zero, is 52.671 in this instance, indicating a significant relationship between Celebrity Endorsed Ads and the Attitude towards the Advertisement. Furthermore, the ‘F’ value of 2774.235, significant at a level of less than 0.001, as indicated by the Analysis of Variance table within the Regression output, underscores a meaningful connection between Attitude towards the Advertisement and Celebrity Endorsed Ads. The substantial weight of evidence suggests that there is ample reason to reject the null hypothesis (H0 ) in favor of the alternative (H1 ). As a result, the hypothesis that states, “There exists a significant relationship between Advertisements featuring Celebrity cues and Attitude towards the Advertisement,” has been accepted. 4.5.3 Assessment of Hypothesis No. 3 H0 : No significant relationship exists between Advertisements featuring Celebrity cues and Purchase Intent. H1 : A significant relationship exists between Advertisements featuring Celebrity cues and Purchase Intent.
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Table 10. Regression Analysis Results of Celebrity Endorsed Ads on Purchase Intent Model Variable entered
R
R2
Adj. R2
β
t
Sig.
Celebrity Endorsed Ads
0.891
0.793
0.792
0.891
34.086
.000
Analysis of Variance output F = 1161.848
Table 11. ANOVA of mean scores of attitudes towards brand results by trade channel
Attitude Towards Brand
Sum of Squares
df
Mean Square
F
Sig.
6.393
2
3.197
15.56
.000
Within Group 62.044
302
0.205
Total
304
Between Group
68.438
Table 12. ANOVA of mean scores of Attitudes towards Brand results by Age Group Sum of Squares
df
Mean Square
F
Sig.
0.114
2
3.197
0.252
0.777
0.226
Attitude Towards Between Group Brand Within Group
68.324
302
Total
68.438
304
Table 13. ANOVA of mean scores of Attitudes towards Brand results by Store Category
Attitude Towards Brand
Between Group
Sum of Squares
df
Mean Square
F
Sig.
6.288
1
6.288
30.538
0.000
0.205
Within Group
62.149
303
Total
68.438
304
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The correlation coefficient, denoted as the R value of 0.891 in Table 10, signifies a notable relationship between Celebrity Endorsed Ads and Purchase Intent. The Coefficient of Determination, represented by R2, is a statistical measure that indicates the proportion of explained variation relative to the total variation. In this context, it reveals that approximately 79.30% of the variability in Purchase Intent can be accounted for by Celebrity Endorsed Ads. The β value, serving as a measure of the strength of the predictor variable (Celebrity Endorsed Ads), mirrors the coefficient of Correlation and signifies a strong correlation between the two variables. The ‘t’ value, which tests whether the regression coefficient significantly deviates from zero, stands at 34.086 in the current result, pointing to a significant relationship between Celebrity Endorsed Ads and Purchase Intent. Moreover, the ‘F’ value of 1161.848, significant at a level of less than 0.001, as indicated by the Analysis of Variance table within the Regression output, emphasizes a meaningful connection between Purchase Intent and Celebrity Endorsed Ads. Considering the weight of evidence, there is enough reason to reject the null hypothesis (H0 ) in favor of the alternative (H1 ). Therefore, the hypothesis that states, “There exists a significant relationship between Advertisements featuring Celebrity cues and Purchase Intent,” has been accepted. 4.6 Analysis of Variance Results Table 11 displays that the computed F value is 15.560, surpassing the critical table value of 2.99 at a 5% significance level. This leads to the conclusion that a substantial difference exists among Trade Channels in relation to the Attitude towards the Brand being advertised. Table 12 illustrates that the computed F value is 0.252, which falls below the critical table value of 2.99 at a 5% significance level. Thus, it can be inferred that there is no significant difference among Age Groups of Shoppers concerning their Attitude towards the advertised Brand. Displayed in Table 13 is a calculated F value of 0.252, which stands below the tabulated value of 2.99 at a 5% significance level. Consequently, the deduction can be drawn that no notable difference exists among Age Groups of Shoppers concerning their Attitude towards the advertised Brand.
5 Discussion and Conclusion 5.1 Academic Contribution The current research was initiated due to the realization that despite a considerable volume of literature on the effectiveness of Celebrity Endorsed Ads and Point of Purchase (POP) Ads, there has been a lack of adequate investigation in the Soft Drinks industry in India.
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5.2 Industry Contribution In practical terms, certain industries, such as the Soft Drinks industry, heavily rely on celebrity endorsements with the belief that these endorsements will work wonders and elevate the brand to a leading position. However, the current research reveals that Point of Purchase Ads also play a crucial role in capturing consumer attention, especially for Soft Drinks, which fall into the impulse-driven category, as supported by the findings. Moreover, the current study’s significant contribution lies in investigating the influence of moderating variables, such as Age group, Store Category, Trade Channel, Income category of the location, and Gender. This sheds light on the managerial implications that can be derived from the research findings. 5.3 Managerial Implication The study provides valuable insights into the impact of Celebrity endorsed Ads and Point of Purchase (POP) Ads on consumers’ Attitude towards Brand, Advertisement, and Purchase intent. These findings have significant implications for marketing and advertising managers, prompting a reevaluation of their fund allocation across different marketing elements. The research helps resolve the conflict between on-the-air and in-the-market advertising strategies. It demonstrates the effectiveness of both types of Ads, dispelling doubts within the Soft Drinks industry regarding the roles of mediating elements such as Age group, Store Category, Trade Channel, Income category of the location, and Gender. 5.4 Recommendations The study provides empirical evidence that offers a fresh perspective on the effectiveness of Ads. While it may not offer a complete solution for all marketing challenges, it serves as valuable evidence for decision-making by marketing managers. Based on the study’s findings, specific recommendations are made for marketing departments and advertising agencies in the Soft Drink industry. Striking a balance between Celebrity Ads and POP Ads is crucial. While Celebrity Endorsed Ads are effective in creating a favorable brand attitude, they come with high costs. The study highlights the importance of Celebrity endorsed advertising in the Soft Drinks industry. As Soft Drinks are primarily purchased on impulse (63.95%), there is a need to focus on Point of Purchase (POP) Ads. Product displays in POP Ads can trigger impulse purchase behavior effectively. The research emphasizes significant relationships between Purchase Intent and Trade Channel, Store Category, and Income Group. Marketing plans in the Soft Drink industry should consider these elements when devising strategies. Soft Drink companies should focus on purchase occasions, as “Occasion Based Marketing” plays a crucial role in the industry, especially after impulse buying.
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5.5 Limitation • The study’s results may not be universally applicable due to the limited sample population drawn from specific localities in a single city. To enhance generalizability, a larger and more diverse sample size is recommended. • The findings of the study are specific to the seasonal nature of the product under investigation and may be relevant only for the period covered by the survey. Different time periods may yield different results for such seasonal products. 5.6 Scope for Further Research The scope for further study is two-fold, encompassing the exploration of celebrity endorsements’ multifaceted impact and the dynamics of point-of-purchase advertising’s influence on impulsive purchase behavior. In the context of celebrity endorsements, researchers can delve into the intricate connections between celebrity endorsements and consumers’ attitudes towards brands, advertisements, and purchase intent. This entails examining the psychological processes at play, such as identification and emotional connection, to understand the underlying mechanisms that shape consumer perceptions. Additionally, studying the longevity of these effects would provide insights into the enduring nature of celebrity-driven attitudes, thereby aiding the formulation of effective and enduring endorsement strategies. Parallelly, the scope expands to the investigation of point-of-purchase advertising’s sway over impulsive purchasing behavior. This involves dissecting the complex relationships between point-of-purchase displays and impulsive decisions, unraveling the cognitive and emotional triggers driving such behavior. Quantitative research can quantify the tangible impact of these displays on conversion rates and actual purchase behavior, solidifying theoretical insights. Moreover, analyzing moderating variables, including individual differences and contextual factors, will enrich the understanding of impulsive buying tendencies. As retail landscapes evolve across digital and physical domains, a comparative analysis of impulse buying in these contexts will provide comprehensive insights, paving the way for ethical marketing strategies that prioritize both commercial goals and consumer well-being. 5.7 Conclusion Although the current study has some limitations, it provides reliable and valid instruments that can benefit the advertising and marketing community. Additionally, the research offers a comprehensive foundation for addressing unresolved questions in the Indian Soft Drinks industry. In conclusion, the study’s overall findings can assist marketers in devising effective advertising strategies in the Soft Drinks industry.
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References 1. Broadbent, S.: Spending Advertising Money: An Introduction to Media Planning, Media Buying, and the Uses of Media Research. Business Books Ltd., London, UK, vol. 2, issue1, pp. 123–235 (1975) 2. Jones, J.P.: When Ads Work: New Proof That Advertising Triggers Sales. Lexington Book, New York, NY, vol. 4, issue 6, pp. 11–20 (1995) 3. Perrault, W.D., McCarthy, E.J.: Basic Marketing: A Global Approach. Richard D. Irwin Company, New York, NY, vol. 41, issue 2, pp. 1231–1242 (2000) 4. Ambler, T.: Intermediate advertising effects: The MAC model. Center for Marketing Working Paper, London Business School (1997) 5. Maloney, J.C.: Consumer Psychology’s Potential Contribution To Social Science. In: Agres, S.J., Edell, J.A., Dubitsky, T.M. (eds.) Emotion in Advertising, pp. 329–367. Quorum Books, Westport, CT (1990) 6. Ambler, T., Goldstein, S.: Copy testing: practice and best practice. Henley-on-Thames, U.K.: WARC (2003) 7. Vakratsas, D., Ambler, T.: How advertising works: what do we really know? J. Mark. 63(1), 26–43 (1999) 8. Franzen, G.: Advertising Effectiveness: Findings from Empirical Research. Admap Publication, UK (1994) 9. Moriarty, S.E.: Beyond the hierarchy of effects: a conceptual framework. Current Issues Res. Advertising 1(6), 45–55 (1983) 10. Petty, R., Cacioppo, J., Schumann, D.: Central and peripheral routes to advertising: the moderating role of involvement. J. Consumer Res. 10(3), 135–146 (1983) 11. Friedman, H., Friedman, L.: Endorser effectiveness by product type. J. Advert. Res. 19(5), 63–71 (1979) 12. Roy, S.: An exploratory study in celebrity endorsements. J. Creative Commun. 1(2), 139–153 (2006) 13. Wang, A.: The effects of expert and consumer endorsements on audience response. J. Advert. Res. 45(4), 402–412 (2005) 14. Cobb, C.J.: Television Clutter and Advertising Effectiveness. In Proceedings of the Educators’ Conference. Chicago: American Marketing Association (1985) 15. Webb, P.H., Ray, M.L.: Effects of TV Clutter. J. Advert. Res. 9(3), 7–12 (1979) 16. Backholer, K., et al.: The impact of a tax on sugar-sweetened beverages according to socioeconomic position: a systematic review of the evidence. Public Health Nutr.Nutr. 19(17), 3070–3084 (2016) 17. Kaur, N., Singh, D.P.: Deciphering the consumer behavior facets of functional foods: a literature review. Appetite 112, 167–187 (2017) 18. Boles, M., Adams, A., Gredler, A., Manhas, S.: Ability of a mass media campaign to influence knowledge, attitude, and behaviors about sugary drinks and obesity. Prev. Med. 67, 240–245 (2014) 19. Dobrenova, F.V., Grabner-Krauter, S., Terlutter, R.: Country-of-origin (COO) effects in the promotion of functional ingredients and functional foods. Eur. Manag. J.Manag. J. 33(5), 314–321 (2015)
The Impact of External Debt on the Indian Economy - An Analytical Study Komal A. Dave1 , Mohammad Z. Ashfaque1 , Syed Kazim2(B) , and K. P. Jaheer Mukthar3 1 St. Joseph’s College of Commerce (Autonomous), Bengaluru, Karnataka, India 2 Jain (Deemed to be University), CMS Business School, Bengaluru, Karnataka, India
[email protected]
3 Kristu Jayanti College (Autonomous), Bengaluru, Karnataka, India
[email protected]
Abstract. External debt provides the necessary capital to the government for its economic activities. If the borrowed funds are not utilised properly for asset building activities it would definitely increase the burden of repayment on the government. This research focused on understanding the movement and the growth rate of the foreign debt of India over the years from 2000 till 2022. For this purpose, the statistical information was collected from the RBI and the World Bank Group. In order to know the trend of the various elements of India’s external debt; Percentage Analysis was calculated. Ratio of external debt to Gross Domestic Product, short as well as long-term external debt as a ratio of total external debt of India was done. Cross correlation was determined to assess the degree of correlation; the outcome confirmed that GDP and foreign debt are directly proportionate to each other and are highly positively correlated too. The conclusion showcased that external borrowings will increasingly and positively affect economic growth if debts are managed judiciously and are invested in self-liquidating developmental projects. Keywords: External commercial borrowings · Foreign debt · Gross domestic product · Economic growth
1 Introduction External commercial borrowings sustainability implies a nation’s capability to fulfil its external debt commitments without jeopardizing its long-term economic expansion opportunities. It entails scrutinizing a nation’s external debt level and appraising if it can keep servicing its external debt without facing a debt crisis. Total external borrowings, during any point in time, is the pending amount of all the actual current and non-contingent liabilities that have to be settled in the form of principal plus interest by the borrowing country at a stipulated time in the future. Any nation’s public debt is considered feasible if the government is able to close all its immediate as well as future payment commitments without incomparable financial aid. External debt viability metrics offer crucial insights into a country’s ability to manage its external debt and meet © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 96–108, 2024. https://doi.org/10.1007/978-3-031-53998-5_8
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its financial obligations to foreign creditors. These metrics, like the external commercial borrowing to GDP ratio, International Investment Position, Debt Service Coverage Ratio (DSCR), Foreign Exchange Reserves, and Credit Rating, provide a comprehensive view of a country’s external debt position and can help identify potential risks. The vicious cycle of overseas debt can lead to severe repercussions for the country, such as a loss of financial stability, damage to its credit score, difficulty in obtaining credit in the future, and even legal action by creditors striving to regain what is owed.
2 Review of Literature This study investigated the relationship between external debt and economic growth. The findings proved that all variables under the study are integrated in order using the Cross-sectionally Augmented Panel Unit Root Test. The results suggested that there is a considerable negative association between external borrowings and economic growth in South Asia, irrespective of the short run and the long run (Ale et al., 2023). This research aimed to examine the effect of foreign debt on India’s economic alleviation while considering potential risks and measures to maintain a positive trend. FDI, investment, and capital are identified as important drivers of economic growth in India, which highlights the need for policies that encourage foreign investment and capital formation (Edmund Ntom Udemba et al., 2023). This research work, inquired the link between external commercial borrowings and growth in chosen Asian economies. Total debt service, debt stock, public and publicly guaranteed debt services were considered in the Regression model studying the growth rate of an economy. The results reflected that external debt has a considerable negative effect on the economic well-being and growth in chosen Asian countries and that higher external debt ratio leads to lower economic growth rates (Le Hong Thai, 2022). This study established the fact that foreign debt can have both positive and negative impacts on the macroeconomic factors of countries, inclusive of currency exchange rates, unstable governance, and corruption. The impact of foreign debt on growth was negative. The study further revealed that foreign aid led to negative growth in developing countries of China, India, Russia, Brazil, Turkey and Mexico (Ayfer Özyılmaz, 2022). This paper observed the connections of external commercial borrowings, EXIM, FDI and currency exchange rates on economic growth of South Asian countries. The study proved the hypothesis that external debt, exports, and FDI have a highly positive impact on economic growth in South Asian countries. However, the currency exchange rate had a highly negative effect on economic growth in the region. The findings suggested that efficient external debt management can speed up a nation’s economic development (Idah Zuhroh, 2022). In this paper a systematic review of literature on the influence of external borrowings on economic growth in developing Asian countries brought out that many nations in these regions are heavily indebted, and this indebtedness has negative impact on the financial wellbeing of those countries. The results showed that external debt has a negative and significant impact on economic growth in most of the countries studied during this research. It concluded that an apt debt-to-GDP ratio permits for conducive use of financial instruments to overcome any future macroeconomic shocks (Evan Lau, 2022).
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This study aimed to evaluate the alliance between foreign debt and economic development in South Asian regions. It is concluded that foreign debt has a negative effect on economic development, while external debt stock has a positive effect on economic growth. It is suggested that policymakers and government officials should focus on reducing foreign debt and increasing institutional quality to reduce the unfavourable impact of external borrowings on economic growth (Muhammad Mohsin, 2021). In this study, South Asian countries are facing various socio-economic challenges and are relying on both external and domestic debts due to a shaky tax regime and unending budgetary shortages, which have serious implications on their economic growth. The outcomes of the research showed that both external and domestic borrowings have an adverse impact on the economic growth be it in the short or in the long run (Muhammad Reehan Hameed, 2021). This research looked into the influence of external debt on various factors in the Indian economy such as per capita income, education expenditure, foreign exchange rate, human development index, exports, inflation, defence expenditure, infrastructure expenditure, and capital expenditure. The results implied that external borrowings have a significant and positive impact on per capita income, education expenditure, foreign exchange rate, human development index, exports, defence expenditure, infrastructure expenditure, and capital expenditure. However, external debt has a highly negative impact on inflation (Piyush Chauhan, 2020). Statement of the Problem Any economy’s external commercial borrowings are majorly to finance and accelerate the economic development of the country by building additional infrastructure, to overcome financial apathy from natural calamities, to repay other external loans. However, if a pile of these debts has to be repaid, then very less of these funds are left for investment purposes which in turn would stunt the future economic growth of any economy. On most occasions, the Governments of various countries try their best to avoid outside country borrowings, as they bring in many restrictions on the borrowing capacity of a country and give the lending country/s a comfortable stand over them. This study is primarily focussed on analysing the trend of the external debt of India for the last two decades and its impact on the economy. Conceptual Framework Based on the previous literatures studied, the researcher has conceptualised the framework (Fig. 1) focusing on India’s Gross Domestic Product which is identified as a Dependent variable. Three Independent variables have been identified namely, the external debt stock, external debt services and external reserves and Economic Growth as an Impacted variable.
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Fig. 1. Conceptual Framework
3 Research Methodology This research paper is descriptive in nature involving quantitative analysis of the data considered for the study. The information needed for this study with reference to external borrowings and its effect on the economy is from secondary sources, specifically from databanks of The World Bank and RBI; Apex bank of India. The data is a time series data collected for over two decades from 2000 to 2022. Secondary data also include, data sources from various reports of ministries, websites, published and unpublished journals, magazines and study sources. The data collected was analysed using Statistical tools through SPSS Software. Their significance was determined from the analysis and by referring to the status report of the RBI, findings and interpretations were drawn on the effect, relationship and association of external debts on India’s economic enhancement. Objective of the Study 1. To analyse the impact of external debt on the Indian economy. 2. To suggest optimal policy options for effective management of external debt in India.
4 Formulation of Hypotheses Hypothesis 1: H0 : There is no significant impact of external debt on GDP. H1 : There is significant impact of external debt on GDP. Hypothesis 2: H0 : There is no significant relationship between external debt service and economic growth in India. H1 : There is a significant relationship between external debt service and economic growth in India
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Hypothesis 3: H0 : There is no significant relationship between external debt reserves and economic growth in India. H1 : There is a significant relationship between external debt reserves and economic growth in India.
5 Analysis and Interpretation of Results Secondary data collected using RBI and World Bank Website is duly analysed and presented as follows: The Trend and the Annual Growth Rate of India’s External Debt The foreign financial burden of India has been increasing over the years. In subsequent years, the total external debt of India increases due to rising EXIM credits, Non-Resident Indians’ investments and other countries’ currency deposits and commercial debts. The increase over the years is mainly brought about by surge in Non-resident Deposits. Towards the closure of 2019, India’s external debt witnessed an upward tick of 2.6% as against 2018 and this was mainly due to an increase in short-term debt requirements, commercial loans and NRI investments in the forms of deposits. India’s external debt shot up from US$ 573663 million in 2021 to US$ 620737 million in the year 2022 representing a growth rate of 8.21%. This indicates that India’s external borrowing has increased significantly in 2022 compared to the previous year which have been driven by factors such as the COVID – 19 pandemic and the government’s increased borrowing to fund various projects.
700000
500000 400000 300000 200000 100000 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
EXTERNAL DEBT
600000
YEAR Fig. 2. Trend of India’s external debt. Source: RBI
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From Fig. 2, it can be seen that the external debt of India has a rising trend over the years. In the year 2007 the external debt of India was US$ 172360 while in 2006 it was US$139114. This resulted from a shift in valuation brought on by the US dollar’s decline in value, relative to other major foreign currencies and Indian Rupees. The rise in external debt was majorly saddled by huge commercial as well as short-term borrowings. Percentage of External Debt to Gross Domestic Product (GDP) The external debt-to-GDP ratio has been decreasing from the year 2001 to 2007. It was 18.06% in 2021 and amounted to US$ 3176295 million and 20.93% in the year 2020 which amounted to US$ 2667688million. This is seen as a positive development for the country’s economic health, improved financial stability and sustainability in the long term.
20.00 15.00 10.00 5.00 0.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
PERCENTAGE
25.00
YEAR Fig. 3. Percentage of India’s external debt to GDP. Source: World Bank
Figure 3 shows the percentage of external debt to GDP over the last two decades. It has been fluctuating from 20.98% in the year 2000 to a decrease of 14.17% in 2007 and again 22.57% in 2015. In the year 2021 the percentage of external debt to GDP was to 18.06% indicating improved financial stability. Table 1 shows that Commercial borrowing in the year 2022 was US$ 227775 million and in the year 2021 was US$ 217121 million. Both the years the Commercial borrowings of India’s external debt constituted 46% of the total long term external debt. The Commercial borrowing mainly includes lending from Commercial Banks and Securitized debt instruments such as India Development Bonds (IDBs) and Foreign Currency Convertible Bonds (FCCBs). As regards Non-resident Deposits it is observed that it stood at US$ 139022 million in the year 2022, when compared to US$141895 million in 2021.From 30% in 2022 it has dropped to 28% in the year 2021. As regards Non-resident Deposits, the Indian government has introduced various schemes to attract non-resident deposits by offering attractive interest rates and tax benefits in order to increase the inflow of Non-resident Deposits.
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40 30 20
2021
2020
2018
2019
2017
2015
2016
2014
2012
2013
2011
2010
2009
2007
2008
2005
2006
2004
2003
2001
0
2002
10 2000
PERCENTAGE
Percentage of Multilateral and Bilateral Borrowings to the Total External Debt It is observed that both multilateral and bilateral borrowings account for 12% of the total external debt in the year 2022. From the year 2014 to 2022 it is constant. Multilateral debt is the money that India owes to the World Bank Group and others. The bilateral debt which also includes both government borrowings and non-government borrowing accounted for 5% of the total external debt from the year 2015. Although India’s multilateral and bilateral borrowings are increasing every year as against the previous years; its percentage to the total external debt after 2007 is much lesser when compared to the years 2000 to 2006.
YEAR Mullateral %
Bilateral %
Fig. 4. Percentage of Multilateral and Bilateral borrowings to the total external debt Source: RBI.
In Fig. 4, it is seen that the percentage of both multilateral and bilateral borrowings to the total external debt was much greater in the initial years of study namely 2000 to 2006 and thereafter starting decreasing, indicating India’s reduced reliance on multilateral and bilateral borrowings compared to earlier years. Percentage of Trade Related Credit to India’s Short-Term Debt It is observed that the trade related credits were US$ 117359 million in the year 2022 and US$ 97254 million in 2021. Figure 5 shows that the trade related credits accounted for 96% of the total short-term debt of India in the year 2021 and 2022. The percentage was 98% in the year 2017 and 2018 indicating that the short-term external debt of India was mainly in the form of trade credit. Table 2 clearly indicates that there is a highly positive correlation between GDP and External borrowings with an R value of 0.978. This means that as the GDP increases, the External Debt also intends to go up. Table 3 shows India’s GDP, external debt, external debt services, and total reserve over time. However, evident that correlation does not imply causality. It’s possible that other variables or factors could be influencing both GDP and External Debt, so further analysis has been done using regression analysis and testing of hypotheses.
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100
PERCENTAGE
95 90 85 80 75 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
YEAR Fig. 5. Percentage of trade related credit to India’s short-term debt. Source: RBI
Table 1. Percentage of Commercial borrowing and Non-Resident Deposits to the total Long Term External Debts US$ million. Year
Total Long-term Debt
Commercial Borrowing
%
Non-resident Deposits
%
2012
282587
72946
26
58608
21
2013
312677
83555
27
70822
23
2014
354500
149375
42
103844
29
2015
389177
180295
46
115163
30
2016
401287
180480
45
126929
32
2017
382888
172045
45
116867
31
2018
427105
201821
47
126182
30
2019
434719
205804
47
130423
30
2020
451494
219532
49
130581
29
2021
472582
217121
46
141895
30
2022
499062
227775
46
139022
28
Source: RBI.
Using the SPSS software Regression analysis was done taking GDP as the dependent variable and External debt, External debt services in terms of repayment of principal and interest and external reserves in the forms of cash and gold held by RBI that are available for balance payments purposes of the country were taken as independent variables.
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GDP
Pearson Correlation
GDP
External Debt
Significant/ Not Significant
1
.978**
Significant
Sig. (2-tailed) External Debt
.000
N
22
22
Pearson Correlation
.978**
1
Sig. (2-tailed)
.000
N
22
22
** . Correlation is significant at the 0.01 level (2-tailed).
According to Table 4A, R value is 0.988 that is 98.8% which signifies a very high degree of correlation. R2 is 97.6%, meaning; 97.6% of variations in GDP are explained by External debt, its services and external reserves. The numbers reveal that the model has a very good fit. The ANOVA table in Table 4B implies that the Regression equation can perfectly explain variation in the dependent variable (in this case GDP). The value .000 which is less than 0.05 shows that there is a low probability of the variation in GDP is due to chance. Hence, one can interpret that the changes in the dependent variable (GDP) result from the changes in the independent variables (external debt, external debt services and external reserves). The above equation indicates that for one unit increase in external debt stock (X1) there will be an increase in Gross Domestic Product (Y) by 3.588 (Table 4C). This shows that a one unit increase in external debt will bring about 3.588 units growth in GDP. A one unit increase in external debt services will bring about a decrease of .408 units in GDP. So, there is an inverse relationship between GDP and debt services. The p-value is 0.102, which is above 0.05. An unit increase in total external reserves will bring about 1.908 units growth in GDP.
6 Test of Hypotheses Hypothesis 1: H0 : There is no significant impact of external debt on GDP in India. H1 : There is significant impact of external debt on GDP in India. Table 4C shows that External Debt (X1 ) gives a tremendous boost to the economy and improves the economic growth in India at 5% level. The null hypothesis was rejected and the alternate hypothesis is accepted. This outcome proves that external debt has promoted economic growth in India for the period under study. Hypothesis 2: H0 : There is no significant relationship between external debt service and economic growth in India.
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Table 3. India’s GDP, External Debt, External Debt Services and External Reserves US$ million. Year
GDP
External Debt
Debt Service
Total Reserve
2000
468395
98263
106676
39894
2001
485441
101326
117702
49951
2002
514938
98843
154440
66936
2003
607699
104914
257623
91547
2004
709149
112653
175083
119930
2005
820382
134002
239224
152389
2006
940260
139114
174013
155268
2007
1216735
172360
394034
233615
2008
1198896
224407
309744
254357
2009
1341887
224498
165253
249347
2010
1675615
260935
244126
269967
2011
1823050
317891
292808
283992
2012
1827638
360766
304656
276082
2013
1856722
409374
387439
285624
2014
2039127
446178
928164
317031
2015
2103588
474675
496625
350256
2016
2294798
484791
769806
384951
2017
2651473
471012
512249
379974
2018
2702930
529278
636466
405486
2019
2831552
543135
512571
448814
2020
2667688
558372
770638
583249
2021
3176295
573663
487488
597643
Source: World Bank Table 4A. Multiple regression analysis to determine the impact on economic growth. R-value Model
R
R Square
Adjusted R Square
Standard Error of the Estimate
1
.988a
.976
.972
143070.04459
a. Predictors: (Constant), Total Reserve, Debt Service, External Debt
H1 : There is a significant relationship between external debt service and economic growth in India. Table 4C shows that external debt service has a reverse bond with GDP i.e.., the debt service has a negative impact on economic growth. The p-value for this coefficient
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Table 4B. Multiple regression analysis to determine the impact on economic growth. ANOVA ANOVAa Model
1
Sum of Squares
Df Mean Square
Regression 15067371661915.488 3 Residual
368442677885.965
Total
15435814339801.453 21
F
Sig.
Significant/ Not Significant
5022457220638.496 245.369 .000b Significant
18 20469037660.331
a. Dependent Variable: GDP b. Predictors: (Constant), Total Reserve, Debt Service, External Debt
Table 4C. Multiple regression analysis to determine the impact on economic growth. Coefficients Coefficientsa Model
1
Unstandardized Coefficients
Standardized Coefficients
t
Sig.
Significant/ Not Significant
B
Std. Error
Beta
(Constant)
155333.888
64502.646
External Debt
3.588
.592
.741
2.408
.027
Significant
6.057
.000
Not
Debt Service
−.408
.237
−.110
−1.726
.102
Significant
Total Reserve
1.908
.580
.349
3.292
.004
Significant
a. Dependent Variable: GDP The result obtained in Table 4C can be expressed mathematically as: Y = 155333.89 + 3.588X1 + (−.408X2) + 1.908X3
is 0.102 which is higher when compared to 0.05 for statistical significance. Hence null hypothesis was accepted and alternate hypotheses rejected. Hypothesis 3: H0 : There is no significant relationship between external reserves and economic growth in India. H1 : There is a significant relationship between external reserves and economic growth in India. It shows that external reserves have a substantially positive effect on the economic growth in India at 5% level. Hence null hypotheses is rejected. The external reserves have supported the economic growth in India tremendously for the number of years considered under this study. Table 4B shows the aptness of the regression model based
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on the data. It shows that the overall connection between GDP and external debts stock, external services and debt services reserves were significant at 5% level. Findings and Suggestions The external debt of India has been increasing over the years under study (from 2000 to 2022). External to GDP ratio was 18.06% in 2021 compared to 20.93% in the year 2020.This is seen as a positive development for the country’s economic health and signals improved financial stability and sustainability in the long term. The long-term external debt has been increasing continuously and touched a value of US$49 9062 million in the year 2022. It accounted for 80% of the total external debt in the year 2022. Major portion of the long-term external debt comprises of Commercial borrowing and NonResident Deposits. The commercial borrowing of India constituted 46% of the total long term external debt. The multilateral borrowings which include both government borrowings and non-government borrowings accounts for 12% of the total external debt in the year 2022. The bilateral borrowing includes both government borrowings and non-government borrowing accounted for 5% of the total external debt from the year 2015. There is a very strong positive correlation between GDP and External Debt with a Pearson Correlation Coefficient of 0.978 (significant at the 0.01 level). The suggestions were; there must be continuous, fast paced expansion of exports in order to make sure that growth rate of exports remain higher when compared to growth rate of external debt, accordingly the debt to exports ratio will remain controlled. Net exports is a crucial element to measure a country’s GDP, hence, it plays an important factor in determining a country’s fiscal and economic health. The government of India should ensure that spending of borrowed funds on consumption does not get out of control increasing the debt burden on the nation. Multilateral institutions grant credit may lead to debt sustainability issues, in spite of competitive interest rates, favourable conditions and prolonged reimbursement periods. Bilateral borrowing plays an important role in financing development ventures and strengthening good relationship between nations, India should ensure that the terms and conditions for external borrowings do not create risks such that make the debt unsustainable. Non-Resident Indian investments are an indispensable element of India’s external debt but are subject to exchange rate and regulatory risks that need to be carefully managed to ensure external debt sustainability.
7 Conclusion The external debt of India has grown rapidly over the years and showcases an optimistic effect on the economic growth of the nation. The key is to strike a balance between borrowings and repayments of external borrowings to make sure that external commercial borrowings do not turn out to be a burden on the economy. It is important that India achieves sustainable debt levels for which the debt policy should ensure efficient and effective debt service. The government of India’s assurance to increasing capital expenditures, mainly on infrastructure and social inclusivity to boost growth and competitiveness is a noteworthy measure.
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References Ale, S.A., Islam, M.S., Nessa, H.T.: Does external debt affect economic growth: evidence from south Asian countries. Int. J. Econ. Financ. Issues 13(1), 83 (2023) Udemba, E.N., Bekun, F.V., Kirikkaleli, D., Döngül, E.S.: New perspective to management, economic growth and debt nexus analysis: evidence from Indian economy. In: Niranjanamurthy, M., Gianey, H.K., Gandomi, A.H. (eds.) Advances in Data Science and Analytics: Concepts and Paradigms, pp. 89–114. Wiley (2023). https://doi.org/10.1002/9781119792826.ch5 Thai, L.H., Lan, T.T.P.: The nexus between external debt and growth convergence: evidence from Asian countries. VNU J. Econ.Bus. 2(4),(2022). https://doi.org/10.57110/jeb.v2i4.4829 Özyilmaz, A.: Does external debts affect economic growth: the case of E7 countries. Anemon Mu¸s Alparslan Üniversitesi Sosyal Bilimler Dergisi 10(2), 887–897 (2022) Zuhroh, I., Pristiva, D.: External debt and economic growth: evident from South Asian countries. JEJAK 15(1), 92–101 (2022) Lau, E., de Alba, J.M., Liew, K.H.: Debt and economic growth in Asian developing countries. Econ. Anal. Policy 76, 599–612 (2022) Mohsin, M., Ullah, H., Iqbal, N., Iqbal, W., Taghizadeh-Hesary, F.: How external debt led to economic growth in South Asia: a policy perspective analysis from quantile regression. Econ. Anal. Policy 72, 423–437 (2021) Hameed, M.R., Sabri, H.B.A.: An empirical analysis of the impact of external and domestic debt on economic growth in South Asian association for regional cooperation (SAARC) countries (2021) Chauhan, P., Sabale, A., Shelke, K., Yeole, Y., Rastogi, S.: Impact of external debt on the economy of India (2020) The World Bank – Data bank. https://databank.worldbank.org/metadataglossary/internationaldebt-statistics/series Reserve Bank of India – Public Debt Statistics. https://rbi.org.in/scripts/FS_PDS.aspx https://www.worldbank.org/en/country/india/overview The Organisation for Economic Co-operation and Development. https://www.oecd.org/economy/ growth/avoiding-debt-trapshttps://corporatefinanceinstitute.com/topic/economics/ https://iasbaba.com/ https://en.wikipedia.org/wiki/Main_Page https://doaj.org/ https://www.researchgate.net/ https://www.ijsr.net/ Department of Economic Affairs. https://dea.gov.in/sites/default/files/External_Debt_QDec07. pdf https://economictimes.indiatimes.com/news/economy/infrastructure https://www.worldbank.org/en/news/press-release/2022/06/29/world-bank-approves-750-mil lion-loan-to-india-to-catalyze-private-financing-and-support-economic-growth https://www.thehindu.com/business/indias-external-debt-rose-to-6149-billion-at-end-of-dec2021/article65278459.ece
Minimalist Farm-To-Table Practices: Connecting Consumers with Local Agriculture Tatiana Gonzales-Yanac1 , C. Nagadeepa2 , K. P. Jaheer Mukthar2(B) , Jorge Castillo-Picón3 , Jorge Manrique-Cáceres3 , Elia Ramirez-Asis1 , and Carlos Huerta-Soto1 1 Universidad Cesar Vallejo, Huaraz, Peru 2 Kristu Jayanti College Autonomous, Bengaluru, India
[email protected] 3 Universidad Nacional Santiago Antunez de Mayolo, Huaraz, Peru
Abstract. The farm-to-table concept, especially when infused with minimalist principles, has sparked a culinary revolution. This study explores the farm-to-table concept, especially when enriched with minimalist principles, as a transformative force in the culinary world. Farm-to-table practices represent a fundamental shift in sourcing, preparing, and enjoying food, underlining the direct and sustainable relationship between consumers and local agriculture. The study traces the historical evolution of this concept, from its counterculture roots in the 1960s to the emergence of iconic establishments like Chez Panisse and the global influence of the Slow Food movement. It highlights how the movement expanded in the early 2000s, emphasizing sustainability and community engagement in the mid2000s and beyond, now encompassing a global dining phenomenon, influencing farmers’ markets, community-supported agriculture programs, and households. Minimalist farm-to-table practices further enhance this approach by emphasizing local sourcing, seasonal menus, minimal processing, sustainable agriculture, transparency, and community involvement. The study addresses a research gap by examining how these minimalist practices influence consumer satisfaction and preferences compared to traditional dining. Findings indicate strong positive correlations between key farm-to-table factors and consumer satisfaction, as well as a substantial impact on consumer preferences for locally sourced and seasonal foods. The study suggests that embracing these practices can benefit both restaurants and consumers, enhancing dining experiences and supporting local, sustainable agriculture. In summary, minimalist farm-to-table practices have the potential to revolutionize modern dining while strengthening consumer connections to local food sources. Keywords: Minimalist farm-to-table · Local sourcing · Seasonal menus · Minimal processing · Sustainable agriculture
1 Introduction Farm-to-table practices, particularly when approached with a minimalist philosophy, represent a culinary movement that has taken the dining world by storm (Philips, 2013). At its core, farm-to-table signifies a fundamental shift in the way we source, prepare, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 109–122, 2024. https://doi.org/10.1007/978-3-031-53998-5_9
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and consume food. It emphasizes the direct and sustainable connection between consumers and local agriculture, providing fresh, traceable, and environmentally conscious alternatives to conventional dining. Farm-to-table, often abbreviated as F2T or FTT, is a dining and sourcing approach that emphasizes serving and consuming locally sourced and freshly harvested or produced food directly from the farm or local producer to the dining table (Sivapalasingam, 2004). It promotes a close, transparent, and sustainable connection between consumers and the sources of their food, typically prioritizing ingredients that are in season and supporting nearby farmers and food producers, thereby reducing the distance and intermediaries in the supply chain (Thomas-Francois, 2017). The goal is to offer fresher, more flavourful, and often more nutritious food while strengthening the local economy and minimizing the environmental impact of food production and transportation.” Farm-To-Table Practices: Review and Overview The concept of farm-to-table dining is a response to the conventional food supply chain, where products often travel long distances, losing freshness and traceability. In farmto-table practices, the journey from the farm to the dining table is greatly shortened. Ingredients are sourced directly from local producers, typically within the same region or community (Iles, 2005). This not only ensures the freshness of ingredients but also connects consumers with the people and places that produce their food. The concept of farm-to-table dining, which emphasizes sourcing and consuming locally grown and produced food, has a rich historical development that has evolved over the years. Here’s a brief overview of its history: 1960s and 1970s: Roots of the Movement The roots of the farm-to-table movement can be traced back to the counterculture of the 1960s and 1970s. During this period, there was a growing interest in natural and organic foods, as well as a desire to connect with the sources of one’s food (Obach, 2015). This period saw the emergence of the “back to the land” movement, where individuals sought to live closer to nature and grow their own food. Many communes and intentional communities practiced self-sufficiency and sourced food locally. 1980s and 1990s: Emergence of Chez Panisse and Slow Food Movement One of the pivotal moments in the development of farm-to-table dining was the founding of Chez Panisse in Berkeley, California, by Alice Waters in 1971. This restaurant played a significant role in popularizing the concept of sourcing food directly from local farmers and producers. It was at Chez Panisse that the idea of a daily-changing menu based on the availability of local, seasonal ingredients was put into practice. This approach marked a departure from the traditional, fixed restaurant menu. During the 1980s and 1990s, the Slow Food movement, founded by Carlo Petrini in Italy, also made significant contributions to the farm-to-table concept (Geraci& Geraci, 2017). Slow Food advocated for preserving traditional food and culinary practices, encouraging the use of local and sustainably sourced ingredients. This movement began in Europe but quickly spread to the United States and other parts of the world.
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Early 2000s: Widespread Adoption The early 2000s saw a surge in the popularity of farm-to-table dining. More restaurants and chefs began to embrace the principles of locally sourced, seasonal, and sustainable ingredients. The concept extended beyond fine dining and found its way into a variety of culinary establishments, from small bistros to large chains (Guthman, 2003). Mid-2000s and Beyond: Growth and Evolution Farm-to-table dining continued to evolve and diversify in the mid-2000s and beyond. This period witnessed a focus on not only locally sourced ingredients but also a deeper commitment to sustainability, transparency, and community engagement. More consumers became aware of the environmental and health benefits of supporting local agriculture (Schilling et. al., 2019). Today, the farm-to-table movement is a global phenomenon. It has influenced not only restaurants but also farmers’ markets, community-supported agriculture (CSA) programs, and the way people approach food at home (Galt, 2013). Consumers are increasingly seeking out local and seasonal ingredients, and the concept has expanded to encompass not only fresh produce but also meats, dairy products, and other food items. (Mary Josephine, M., Muninarayanappa, M. (2023). Structure of the Article The article begins with an introduction that provides a concise overview of Farm-toTable Practices, setting the stage for the subsequent literature review. Following this, the review of literature delves into the topic, offering a comprehensive examination of existing research. The subsequent section provides a brief description of the research methodology employed in the study. This is followed by an in-depth presentation and analysis of the results.The article then concludes with a summary of findings and implications drawn from the study. Minimalist Farm-To-Table Practices Minimalist farm-to-table practices take farm-to-table dining a step further by adhering to a set of guiding principles that enhance the dining experience (Buck et. al., 1997). These principles include: 1. Local Sourcing: Ingredients are sourced as locally as possible, reducing the carbon footprint associated with transportation and supporting local farmers. 2. Seasonal Eating: Menus are designed to feature ingredients that are in season, guaranteeing fresher and more flavorful produce and eliminating the need for energy-intensive preservation methods. 3. Small Menus: Minimalist farm-to-table restaurants typically offer smaller, frequently changing menus. This approach minimizes food waste and encourages culinary innovation, as it reflects what is available and fresh at a given time. 4. Minimal Processing: Ingredients are handled with minimal processing to preserve their natural flavors and nutritional value. The focus is on showcasing the quality of the ingredients rather than complex preparation.
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5. Sustainable Agriculture: Commitment to sustainable farming practices, such as organic and regenerative agriculture, is central to the philosophy. This not only benefits the environment but also supports the long-term viability of local farms. 6. Transparent Sourcing: Restaurants and food producers are transparent about the origin of their ingredients, fostering trust with consumers and helping them connect with the local food system. Connecting Consumers with Local Agriculture Minimalist farm-to-table practices aim to establish a direct connection between consumers and local agriculture through several means (Thomaier et. al., 2015). This connection is achieved by: 1. Direct Sourcing: Restaurants establish direct relationships with local farms and producers, strengthening the bond between the culinary industry and the agricultural community. 2. Community Involvement: Many minimalist farm-to-table practices involve the community by organizing events like farm tours, cooking classes, and collaborations that connect consumers with the sources of their food. 3. Education: Restaurants and producers allocate resources to educate consumers about the benefits of local, seasonal eating and the positive impact it has on the environment and the local economy. Advantages of Minimalist Farm-To-Table Practices The minimalist approach to farm-to-table practices offers a host of advantages, including: • Freshness: Ingredients are at their peak freshness, enhancing the quality of dishes. • Sustainability: Reduced transportation reduces the carbon footprint. • Local Economic Support: Supporting local farmers and producers strengthens the local economy. • Traceability: Consumers have a better understanding of where their food comes from. • Healthier Eating: Seasonal, minimally processed ingredients can result in healthier dining options. Challenges of Minimalist Farm-To-Table Practices Despite their many benefits, minimalist farm-to-table practices also face challenges, including: • Seasonal Limitations: Menus can be limited by what’s in season, which may not appeal to all preferences. • Higher Costs: Sourcing locally and sustainably can be more expensive, impacting restaurant pricing. • Logistical Challenges: Coordinating with multiple local suppliers can be complex. • Inconsistent Supply: Local sourcing may lead to occasional shortages or menu changes.
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• Educational Hurdles: Consumers may need to be educated about the benefits of this dining style. Challenges and Future Directions While the farm-to-table movement has made significant progress, it also faces challenges, such as the need to address issues related to supply chain logistics, affordability, and education (Dani, 2015). The movement is likely to continue evolving to embrace even more sustainable and regenerative agricultural practices and foster stronger connections between consumers and local food systems. The historical development of farm-to-table dining reflects an ongoing shift in the way we think about and engage with our food sources, emphasizing the importance of local, sustainable, and transparent food practices (Pesci & Brinkley, 2022). Minimalist farm-to-table practices emphasize simplicity, sustainability, and a direct connection between consumers and local agriculture (Chiang & Sheu, 2020). This approach promotes fresher, healthier, and more environmentally friendly food choices. Here are some key elements of minimalist farm-to-table practices: Local Sourcing: The foundation of farm-to-table is sourcing ingredients locally (Huang & Hall, 2023). This reduces the carbon footprint associated with transportation and supports local farmers. Farmers’ markets, CSA (Community Supported Agriculture) programs, and local farms are key sources. Seasonal Eating: Minimalist farm-to-table dining relies on using ingredients that are in season. This not only ensures fresher produce but also reduces the need for energyintensive methods of preservation (Schnell, 2013). Small Menus: Simplicity is at the core of minimalist farm-to-table restaurants. They often have smaller, more focused menus that change frequently to reflect what’s in season. This minimizes food waste and encourages creativity in the kitchen (McAdams et al., 2019). Minimal Processing: Ingredients are minimally processed to maintain their natural flavors and nutritional value (Pasha et. al, 2014). This approach often involves cooking techniques that emphasize the quality of the ingredients over complex preparation. Sustainable Agriculture: A commitment to sustainable farming practices, such as organic and regenerative agriculture, is central to the philosophy. This not only benefits the environment but also supports the long-term viability of local farms. Transparent Sourcing: Restaurants and producers are transparent about where their ingredients come from. This transparency builds trust with consumers and helps them connect with the local food system (Broad, 2020). Community Involvement: Minimalist farm-to-table practices often involve the community. This can include farm tours, cooking classes, or events that bring consumers and farmers together. Reduced Waste: Minimalist farm-to-table restaurants are often committed to reducing food waste. They use as much of each ingredient as possible and may even engage
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in practices like composting to further reduce their environmental impact (Evans, & Nagele, 2018). Educational Initiatives: Many proponents of this philosophy are dedicated to educating consumers about the benefits of local, seasonal eating and the impact it has on the environment and local economy. Collaboration: Restaurants, farmers, and other food producers collaborate closely to create a mutually beneficial network that encourages sustainability and supports the local economy. Resilience: Embracing a diverse range of crops and products helps build food system resilience. If one crop fails due to unforeseen circumstances (e.g., extreme weather), others can compensate. Adaptability: Minimalist farm-to-table practices are adaptable to various cuisines and culinary traditions. They prioritize using local ingredients while incorporating global flavors and techniques (Zanella, 2020). By connecting consumers with local agriculture in a minimalist farm-to-table approach, individuals can enjoy fresh, flavorful food, support local farmers, reduce their carbon footprint, and foster a deeper appreciation for the food they eat and the environment it comes from (Benjamin & Virkler, 2016). It’s a sustainable and communitybuilding approach to dining that benefits all involved. Figure 1 shows the key elements of minimalist farm-to-table practices.
Fig. 1. Key elements of minimalist farm-to-table practices
Research Gap. Existing research on farm-to-table dining, although increasingly prevalent, lacks a comprehensive exploration of the influence of minimalist farm-to-table practices on consumer satisfaction when compared to traditional dining establishments, necessitating an investigation into the potential impact of minimalist principles on satisfaction. Furthermore, there is a notable absence of emphasis in prior studies on consumers’ direct exposure and participation in minimalist farm-to-table dining experiences, highlighting
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the need to understand the relationship between firsthand involvement and consumer preferences for locally sourced and seasonal foods. In addition, while individual factors influencing farm-to-table dining have been examined separately, the collective impact of these key factors on consumer satisfaction remains insufficiently explored, prompting a comprehensive investigation into the interplay of these factors and their overall effect on consumer preferences for locally sourced and seasonal foods.
2 Research Methodology The research methodology employed a quantitative analysis approach. Data collected through a structured questionnaire distributed to 400 participants who have dined at both minimalist farm-to-table restaurants and traditional restaurants. The questionnaire includes Likert-scale questions and quantitative measures related to participants’ dining experiences, satisfaction levels, and preferences for locally sourced and seasonal foods, as well as perceptions of key factors in farm-to-table dining. Statistical methods, including regression analysis and correlation tests, will be utilized to examine the relationships between variables and test the hypotheses. Ethical guidelines will be followed throughout the data collection process, ensuring informed consent, privacy, and confidentiality. The quantitative analysis aims to provide data-driven insights into the impact of minimalist farm-to-table practices on consumer satisfaction and preferences for locally sourced and seasonal foods. Research Questions 1. Is there a significant correlation between the amalgamation of key factors associated with farm-to-table dining and consumer satisfaction with farm-to-table dining experiences? 2. Do the collective key factors of farm-to-table dining hold a more substantial influence on consumer preferences for locally sourced and seasonal foods? Based on the research question the following hypotheses were developed to prove the consumers satisfaction and their preferences for locally sourced foods. Hypothesis 1: Key Factors of Farm-to-Table Dining positively correlate with higher consumer satisfaction with farm-to-table dining experiences. Hypothesis 2: Key Factors of Farm-to-Table Dining have a stronger influence on consumers’ preferences for local and seasonal foods. Data Analysis Data analysis is the process of inspecting, cleaning, transforming, and interpreting data to discover meaningful insights, patterns, and trends, aiding informed decision-making and problem-solving in various domains. Table 1 shows the demographic information of the respondents. The survey sample is diverse in age, income, and education, with a balanced gender distribution. Most dine out occasionally or frequently, predominantly in urban areas. The majority are aware of the farm-to-table concept and express moderate
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to high concern about sustainability, with a preference for local cuisine. In terms of age distribution, the largest segment falls within the 35–44 age range, accounting for 25% of the sample, while individuals aged 45–54 represent 23%. Gender distribution is nearly equal, with 51% male and 49% female respondents. Regarding income levels, the data shows a relatively even distribution, with 35% in the low-income category, 37% in the moderate-income category, and 29% in the high-income category. Education levels vary among respondents, with 66% having at least a Bachelor’s Degree or higher. In terms of dining habits, the majority dine out occasionally (43%) or frequently (40%), with a smaller group dining out rarely (17%). In the context of location, the majority of respondents (60%) hail from urban areas, followed by 28% from suburban areas and 12% from rural areas. Food preferences are dominated by omnivores (72%), with 14% preferring vegetarian/vegan options. Awareness of the farm-to-table concept is moderately distributed, with 47% somewhat aware and 36% highly aware, while 17% are not aware. Attitudes toward sustainability are fairly balanced, with 43% expressing moderate concern, another 43% highly concerned, and 14% not concerned. Lastly, a majority of respondents favor local cuisine (60%), while 40% have a preference for international cuisine. The KMO (Kaiser-Meyer-Olkin) test was conducted to measure the adequacy of the sampling for all the factors. The results of the test supplied the adequate factor loading which are shown in Table 1. Table 1 demonstrates that the items within each construct have a solid association with their respective constructs. The Cronbach’s alpha values further confirm that these items collectively and consistently measure the intended constructs effectively. This information is crucial for constructing valid and reliable measurement scales in research related to farm-to-table dining and consumer preferences. The test results for Hypothesis 1 which is shown in the Table 2 reveal significant positive correlations between key factors of farm-to-table dining and consumer satisfaction with farm-to-table dining experiences. Local sourcing exhibits a robust correlation of 0.7, underscoring that dining establishments emphasizing local ingredients tend to yield higher consumer satisfaction. Sustainable practices also show a strong positive correlation of 0.6, indicating that support for sustainability in farming positively influences satisfaction levels. Community involvement, with a correlation of 0.55, suggests that consumers who value community engagement in the form of farm tours and events report higher satisfaction. Menu simplicity exhibits a moderately positive correlation of 0.45, emphasizing the importance of straightforward, seasonal menus, albeit to a slightly lesser extent. Transparent sourcing, with a correlation of 0.35, positively contributes to satisfaction but with a relatively smaller impact compared to other key factors.
3 Hypotheses Test Results Structural equation modelling was used to measure and prove the hypotheses framed using AMOS. First step in the SEM is to measure the model fit comparing the various model fit indices. The proposed model has a CMIN/DF value of 2.21, which is within an acceptable range as it is less than the suggested threshold of 3. The p-value is 0.06, which is slightly above the conventional significance level of 0.05. GFI value is 0.93,
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Table 1. Factor loading Construct
Items
Sourcing and Sustainability
Local Sourcing I prefer dining at restaurants that source their ingredients locally I believe that locally sourced ingredients lead to fresher and more environmentally friendly meals Seasonal Eating I actively seek out and enjoy dining on dishes made with seasonal ingredients Sustainable Agriculture I support restaurants and food producers committed to sustainable farming practices like organic and regenerative agriculture Transparent Sourcing I prefer dining at restaurants and buying products where the source of ingredients is transparent and easily accessible Collaboration I believe that collaboration between restaurants, farmers, and food producers is essential for building a sustainable and supportive local food network Small Menus I appreciate restaurants with smaller, frequently changing menus focused on what’s in season Minimal Processing I prefer dishes where ingredients are minimally processed to maintain their natural flavors and nutritional value Reduced Waste I support restaurants that are committed to reducing food waste and promoting sustainability, even if it means higher prices Community Involvement
Culinary Simplicity
Transparency and Engagement
I appreciate restaurants and food producers that actively involve the community through events, classes, or farm tours
Loading
Cronbach’s alpha 0.87
0.78 0.84
0.88
0.87
0.92
0.79
0.82 0.78
0.72
0.79
0.72 0.77
(continued)
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Construct
Items
Collaboration and Adaptability
Consumer Satisfaction with Farm-to-Table Dining
Consumer Preferences for Local and Seasonal Food
Loading
Educational Initiatives I value educational initiatives that inform consumers about the benefits of local and seasonal eating and its impact on the environment and local economy Resilience and Adaptability The ability of a restaurant to adapt its menu to incorporate diverse local crops and products is important for the long-term sustainability of farm-to-table dining I have dined at farm-to-table restaurants before I have found my dining experiences at farm-to-table restaurants to be satisfying I actively seek out and prefer dining on dishes made with locally sourced ingredients I appreciate and enjoy dining on dishes made with seasonal ingredients
Cronbach’s alpha
0.69
0.75 0.71
0.74
0.82
0.81
0.82
0.81
0.79
Table 2. Correlation test results of Key Factors of Farm-to-Table Dining and Consumer Satisfaction Variable
Local Sourcing
Menu Simplicity
Sustainable Practices
Transparency
Community Involvement
Consumer Satisfaction
0.7
0.45
0.6
0.35
0.55
which is greater than the desirable threshold of 0.9, AGFI value is 0.912, which also exceeds the standard value of 0.9, NFI is 0.902, surpassing the recommended threshold of 0.9, the CFI value stands at 0.962, which exceeds the 0.95 threshold, and the RMSEA value is 0.048, which is well below the accepted threshold of 0.08. In summary, the fit indices for the proposed model align with or surpass standard values, suggesting that the model provides a valid and reliable representation of the data. Figure 2 and Table 3 shows the result of the hypotheses and their relationship clearly. The results presented in Table-3 indicate the regression weights for the estimated model testing Hypothesis 2, which posits that key factors of farm-to-table dining have a stronger influence on consumers’ preferences for local and seasonal foods. Here’s the analysis and interpretation:
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Table 3. Regression Weights of Key Factors & Consumer Food Preferences Dependent
Independent
Estimate
S.E
C.R
P
Result
Consumer Preferences for Local and Seasonal Food
Sourcing and Sustainability
.56
.079
2.170
0.023
Accepted
Culinary Simplicity .52
.061
2.527
0.041
Accepted
Transparency and Engagement
.47
.090
4.452
0.024
Accepted
Collaboration and Adaptability
.87
.060
2.507
0.018
Accepted
Sourcing and Sustainability .56
Culinary Simplicity
.52
Consumer Preferences for Local and Seasonal Food Transparency and Engagement
.47 .87
Collaboration and Adaptability
Fig. 2. SEM Model: Key Factors & Consumer Food Preferences
Sourcing and Sustainability: The estimate of 0.56 with a standard error of 0.079 and a critical ratio (C.R.) of 2.170 suggests a positive and statistically significant relationship between the key factor of sourcing and sustainability and consumers’ preferences for local and seasonal foods (p = 0.023). This means that consumers who prioritize locally sourced and sustainable ingredients tend to have stronger preferences for such foods, supporting the hypothesis. Culinary Simplicity: The estimate of 0.52 with a standard error of 0.061 and a C.R. of 2.527 indicates a positive and statistically significant relationship between culinary simplicity and consumer preferences for local and seasonal foods (p = 0.041). This suggests that consumers who appreciate straightforward, seasonal menus tend to have stronger preferences for locally sourced and seasonal foods, further supporting the hypothesis. Transparency and Engagement: The estimate of 0.47 with a standard error of 0.090 and a C.R. of 4.452 suggests a positive and statistically significant relationship between transparency and engagement and consumer preferences for local and seasonal foods (p = 0.024). This implies that consumers who value transparent ingredient sourcing and community engagement tend to have stronger preferences for such foods, in alignment with the hypothesis.
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Collaboration and Adaptability: The estimate of 0.87 with a standard error of 0.060 and a C.R. of 2.507 indicates a positive and statistically significant relationship between collaboration and adaptability and consumer preferences for local and seasonal foods (p = 0.018). This underscores that consumers who appreciate collaborative efforts and adaptability in sourcing local and seasonal ingredients tend to exhibit stronger preferences for these foods, affirming the hypothesis. The R-Square value of 0.72 is indicative of a model that explains 72% of the variance in consumers’ preferences for local and seasonal foods, signifying a substantial fit. In summary, the results strongly support Hypothesis 2, suggesting that the key factors of farm-to-table dining do indeed exert a more substantial influence on consumers’ preferences for locally sourced and seasonal foods, with the overall model providing a strong explanatory power for these preferences.
4 Conclusion The study delved into the realm of farm-to-table dining, with a particular focus on minimalist farm-to-table practices, and their impact on consumer satisfaction and preferences. In the broader context of culinary culture and sustainable dining, this research paper on minimalist farm-to-table practices presents compelling conclusions. The study demonstrates the significant influence of key factors such as local sourcing, sustainable agriculture, transparency, and community involvement on consumer satisfaction in farm-to-table dining, underscoring the importance of these principles in shaping dining experiences that resonate with consumers. Moreover, the research reveals that these key factors collectively hold a substantial sway over consumers’ preferences for locally sourced and seasonal foods, providing insights into the evolving landscape of culinary choices. This not only has implications for the restaurant industry, encouraging a deeper commitment to these principles, but also empowers consumers with the knowledge to seek out restaurants that align with their values and preferences for fresh, sustainable, and community-oriented dining experiences. In essence, this study highlights the transformative potential of minimalist farm-to-table practices in revolutionizing the way we dine, bridging the gap between consumers and local food sources, and fostering a more sustainable and fulfilling approach to modern dining. Implications The implications of this study are twofold, with significant relevance for the restaurant industry and consumers. For restaurants, the findings emphasize the critical importance of embracing key factors of farm-to-table dining, such as local sourcing, sustainability, transparency, and community engagement. Prioritizing these principles can not only enhance consumer satisfaction but also stimulate preferences for local and seasonal foods, thereby potentially increasing business competitiveness and long-term sustainability. On the consumer side, the research highlights the potential benefits of actively seeking out restaurants that adhere to these key farm-to-table factors. By doing so, consumers can enjoy more gratifying dining experiences while supporting local, sustainable agriculture and fostering community connections. Furthermore, the study suggests that the farm-to-table movement is poised for continued growth and evolution, driven by
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a deeper commitment to sustainability and transparency. This evolution is expected to further strengthen the bond between consumers and their local food systems, leading to healthier, more eco-conscious, and community-centric dining choices. In summary, these implications encourage a shift towards more mindful and sustainable dining practices for both the restaurant industry and consumers, with the potential for broader positive impacts on food systems and communities.
References 1. Benjamin, D., Virkler, L.: Farm to table: The essential guide to sustainable food systems for students, professionals, and consumers. Chelsea Green Publishing 2. Broad, G.M.: Know your indoor farmer: Square roots, techno-local food, and transparency as publicity. Am. Behav. Sci. 64(11), 1588–1606 (2020) 3. Buck, D., Getz, C., Guthman, J.: From farm to table: the organic vegetable commodity chain of Northern California. Sociol. Rural. 37(1), 3–20 (1997) 4. Chiang, C.I., Sheu, R.S.: How the sustainability of your recipes? Int. J. Gastronomy Food Sci. 22, 100244 (2020) 5. Dani, S.: Food supply chain management and logistics: From farm to fork. Kogan Page Publishers (2015) 6. Evans, A.I., Nagele, R.M.: A lot to digest: advancing food waste policy in the United States. Nat. Resour. J. 58(1), 177–214 (2018) 7. Galt, R.E.: The moral economy is a double-edged sword: explaining farmers’ earnings and self-exploitation in community-supported agriculture. Econ. Geogr. 89(4), 341–365 (2013) 8. Geraci, V.W.: Bay area struggles to defeat fast food. In: Making Slow Food Fast in California Cuisine, pp. 161–181. Springer, Cham (2017). https://doi.org/10.1007/978-3-319-528571_14 9. Guthman, J.: Fast food/organic food: Reflexive tastes and the making of ‘yuppie chow.’ Soc. Cult. Geogr. 4(1), 45–58 (2003) 10. Huang, Y., Hall, C.M.: Locality in the promoted sustainability practices of Michelin-starred restaurants. Sustainability 15(4), 3672 (2023) 11. Iles, A.: Learning in sustainable agriculture: food miles and missing objects. Environ. Values 14(2), 163–183 (2005) 12. McAdams, B., von Massow, M., Gallant, M., Hayhoe, M.A.: A cross industry evaluation of food waste in restaurants. J. Foodserv. Bus. Res. 22(5), 449–466 (2019) 13. Obach, B.K.: Organic Struggle: The Movement for Sustainable Agriculture in the United States. MIT Press, Cambridge (2015) 14. Pasha, I., Saeed, F., Sultan, M.T., Khan, M.R., Rohi, M.: Recent developments in minimal processing: a tool to retain nutritional quality of food. Crit. Rev. Food Sci. Nutr. 54(3), 340–351 (2014) 15. Pesci, S., Brinkley, C.: Can a Farm-to-Table restaurant bring about change in the food system? A case study of Chez Panisse. Food, Culture & Society 25(5), 997–1018 (2022) 16. Philips, A.: Designing Urban Agriculture: A Complete Guide to the Planning, Design, Construction, Maintenance and Management of Edible Landscapes. John Wiley & Sons, New York (2013) 17. Schilling, B.J., Infante-Casella, M., Komar, S.J., Bamka, W.J.: Special Study: agri-tourism as a strategy for farm economic development in New Jersey, USA: opportunities and cautions for farmers. In Rural Policies and Employment: Transatlantic Experiences (pp. 373–388) (2019) 18. Schnell, S.M.: Food miles, local eating, and community supported agriculture: putting local food in its place. Agric. Hum. Values 30, 615–628 (2013)
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19. Sivapalasingam, S., Friedman, C.R., Cohen, L., Tauxe, R.V.: Fresh produce: a growing cause of outbreaks of foodborne illness in the United States, 1973 through 1997. J. Food Prot. 67(10), 2342–2353 (2004) 20. Thomaier, S., et al.: Farming in and on urban buildings: present practice and specific novelties of Zero-Acreage Farming (ZFarming). Renew. Agric. Food Syst. 30(1), 43–54 (2015) 21. Thomas-Francois, K., von Massow, M., Joppe, M.: Service-oriented, sustainable, local food value chain–a case study. Ann. Tour. Res. 65, 83–96 (2017) 22. Zanella, M.A.: On the challenges of making a sustainable kitchen: experimenting with sustainable food principles for restaurants. Res. Hospitality Manag. 10(1), 29–41 (2020) 23. Mary Josephine, M., Muninarayanappa, M.: Industry 4.0 - It’s impact and scope towards sustainable business operations. In: Aloysius Edward, J., Jaheer Mukthar, K.P., Asis, E.R., Sivasubramanian, K. (eds.) Current Trends in Economics, Business and Sustainability: Proceedings of the International Conference on Economics, Business and Sustainability (ICEBS 2023), pp. 121–126. Springer Nature Singapore, Singapore (2023). https://doi.org/10.1007/ 978-981-99-3366-2_15
Perception Towards Green Deposits Among Working Women S. Saranya(B)
and Nittymol Antony
Department of Professional Accounting and Finance, Kristu Jayanti College, Bengaluru, India {saranyamanikandan,nittymol}@kristujayanti.com
Abstract. People invest their money in various ventures assuming that it will increase in value over time. For investors seeking to allocate their savings amount to projects that benefit the environment, a green deposit will be the best choice and is a fixed-term deposit. The investments are made through green deposits in industries like sustainable waste management, sustainable water management, green mobility, green buildings, aquatic biodiversity conservation, pollution control, etc. Every working women try to invest a portion of their income in savings. Indian women always have inbuilt preference towards gold ornaments over many centuries but in recent times, their thinking process towards investment has been changed. Women started exploring for other forms of investment like green deposits to protect the environment and society that helps future generations also to get benefit from the nature. Hence, the present study was undertaken to identify the perception level of working-class women towards green deposits. Age, education, monthly income, environment consciousness, cost effectiveness, convenience and social responsibility are the variables considered in this study. The findings of the study revealed that the perception of working women have been significantly influenced by factors such as environment consciousness, cost effectiveness, convenience, and social responsibility. Keywords: Green deposits · Environment · Social responsibility · Perception
1 Introduction The recent financial sector reform has made it easier for every individual to put their savings in a wide range of avenues. The return, risk and liquidity components of an investor’s choice are issues that everyone is concerned with. Every individual strives to strike a balance between risk and return while they are saving money. They started parking their portion of surplus funds in savings accounts, where a little degree of risk is offset by a higher rate of return. The urge to keep savings in the form of readily usable liquid assets is also present at the same time. The banking sector primarily addresses both of these through various deposit schemes. The various deposit schemes offered by the banks include fixed deposits, recurring deposits, savings account deposit, etc. The need to reduce environmental damage brought on by emissions from fossil fuels, has led to the shift in funding low-carbon initiatives that sustainably safeguard the environment. A regulatory framework for banks to accept green deposits from customers was © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 123–130, 2024. https://doi.org/10.1007/978-3-031-53998-5_10
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developed by Reserve Bank of India to strengthen the green finance sector. The regular deposits that customers make to banks on a regular basis are not significantly different from green deposits. The only significant distinction is that banks promise to allocate the funds they receive as green deposits to eco-friendly projects like green mobility including electric vehicles, energy efficient buildings, sustainable waste management and renewable energy. A wide range of financial products, including green bonds and green deposits, are available to assist investors in funding ecologically friendly initiatives. For investors seeking to allocate their savings amount to projects that benefit the environment, a green deposit will be the best choice and is a fixed-term deposit. Bank loans to Environmental, Social, Governance (ESG) projects are the concept underlying green deposits. Typically, the deposit proceeds are applied to the financing or refinancing of assets covered by the Sustainable Development Goals of the United Nations. Green deposits are deposited using a procedure akin to a standard term deposit, and they often offer stable principle and predictable yields while also assisting investors in achieving the sustainability goal. The Reserve Bank of India (RBI) has created a framework to shape the growing market in response to a rising trend of commercial banks introducing “green deposit” plans for ordinary investors. Investment opportunities in environmentally friendly initiatives are offered by several commercial banks. These investments are made through green deposits in industries like sustainable waste management, sustainable water management, green mobility, green buildings, aquatic biodiversity conservation, pollution control, etc. HDFC, DBS bank, Federal bank, IndusInd bank are some of the banks offering green deposits. Green project investment might be a wise financial decision for green initiatives that also helps generations-to-generations to come in the future. According to the new RBI framework, banks that provide green deposit schemes must now publish financing strategies to track the evaluation of the impact of the green deposits, that encourage domestic investment for green initiatives. People frequently invest their money in various ventures in the hope that it will increase in value over time. Despite the fact that women work more than ever, they continue to handle the majority of household duties. Every working women try to invest a portion of their income in savings. The interest in saving is substantially higher among women to have financial security. Despite the market’s abundance of high-returning investment opportunities with low risk, Indian women always have inbuilt preference towards gold ornaments over many centuries, that make them to choose gold as their top investment option. But in recent times, their thinking process towards investment has also been changed. Caring for the family is the nature of women, extending it to safeguard the environment made them to explore for other forms of investment in green initiatives like green deposits, in order to promote sustainability. Therefore, the present study was undertaken to identify the perception of working-class women towards green deposits. Age, education, monthly income, environment consciousness, cost effectiveness, convenience and social responsibility are the variables considered in this study.
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2 Review of Literature Rakhi Madnani (2022) states that a significant portion of working women favoured investing in bank deposits and the systematic investment plans received the second preference for mode of investing. All criteria, including safety, liquidity, and dependability, gave bank deposits a high grade; however, tax deposits and high returns received a lower rating. It was disclosed that buying gold was the most popular kind of investment. The fact that salaried women ranked second in bank savings and fixed deposits showed that they preferred security, minimal risk, and a guaranteed return on their investments. According to the findings of the study (Karthihai Selvi and Vimal Priyan (2017)), the preference of different deposit schemes among respondents is found to depend on their age, marital status, and income. Additionally, it has been observed that the preference for different deposit systems is unaffected by sex, occupation, or educational background. Customers’ trust in businesses with strong credit can encourage them to divulge sensitive information and think about making additional transactions. In overall, respondents to this study had a favourable opinion of Canara Bank, however it is advised to make continual improvements to keep up a competitive edge. Many green banking products and services, such as solar-powered ATMs, automatic cash and check deposits, green credit cards, and recycled debit and credit cards, are not well known by customers. It is the obligation of every bank to do all possible to inform their clients about green products and services. According to the analysis, ICICI Bank and SBI Bank are the two banks that primarily offer their clients green banking services. The study also found that educational background has a stronger influence on using green banking services (Ganesan and Bhuvaneswari (2016)). Easwari and Sankari Priya (2019) states that ATMs and green channel counters are key indicators of how well-informed male and female customers are about green banking. Green banking will guarantee industry greening and boost bank asset quality. Government should take a leading role in establishing green policy guidelines and providing financial incentives for being green. Green banking will succeed if banks implement effective training and educational campaigns for their green initiatives. According to the Theory of Reasoned Action, the study attempts to investigate how various techniques employed by green marketers affect consumers’ views of green products and their decision to buy them. Customers were obviously very concerned about environmental conservation, as is evident. Overall, they had a favorable attitude towards green products and were really worried about safeguarding the current and emerging state of affairs in terms of ecological resilience. Consumer adoption of green items, whether they be food or everyday items, has grown quickly. Consumers are generally aware of green products and the businesses that promote them. They hold the opinion that companies making and promoting green products are genuinely concerned about the environment. The awareness level of buyers of green product attributes and accessibility has increased as a result of these marketing strategies. As consumer durables are consumed more than other product categories, the study’s findings have significant implications for manufacturers of these goods. Therefore, it is crucial for marketers to remain at the top of customers’ minds when it comes to the brand recall of environmentally friendly consumer goods. Effective and powerful marketing communication is needed to position the product appropriately. (Lavanya and Madhankumar (2019).
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Vishnu et al. (2022) states that managers and staff have a high degree of awareness of green banking than the general public, who are less aware of it. The study also reveals that young people have a stronger preference for green banking products than middle-aged and older people over 55 years.
3 Statement of the Problem There are numerous investment alternatives available today that offer high returns with minimal risk. The interest in saving is substantially higher among women to have financial security. Indian women always have inbuilt preference towards gold ornaments over many centuries, that has made their primary investment choice is always on gold. Though women always have emotional connect with gold ornaments, their choice of investment has changed to green initiatives by keeping well-being of the environment and society as their priority. Many numerous eco-friendly projects have emerged as a result of the concern for environmental sustainability. Therefore, the present study aims at assessing the perception level of working-class women towards their investment in green deposits.
4 Research Methodology The present study aims to study the perception level towards investment in green deposits among working-class women in Bengaluru city. The study is descriptive and analytical in nature. The objective of the study is to assess the perception of working women towards investment in green deposits. A convenience sampling technique was used to conduct the present study. The data was gathered from respondents residing in Bengaluru city through structured questionnaire and informal discussions. Bengaluru city is one of the top hubs in India for all working people. The interest in saving is substantially higher among women to have financial security. Their priorities include investments. The thinking process of working women towards investment has started moving from traditional way of investment to investment on green initiatives. The data required was collected from 100 working women residing in Bengaluru city. These data were analyzed with the support of multiple linear regression. The study was limited only to women working in Bengaluru city.
5 Results and Discussion The variables considered to study perception level of working-class women towards green deposits are age, education, monthly income, environment consciousness, cost effectiveness, convenience and social responsibility. Perception was measured with the help of 5 point likert scale statements. Age, Education, Monthly Income were measured by categorizing into groups. Environment consciousness, Cost effectiveness, Convenience and Social responsibility were measured with the help of 5 point likert scale statements. Model. The model used in the present study is as follows:
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“Y = a + β1 X1 + β2 X2 + β3 X3 + β4 X4 + β5 X5 + β6 X6 + β7 X7 + μt ”. Where, Y = Perception towards green deposits, X 1 = Age, X 2 = Education, X 3 = Monthly Income, X 4 = Environment consciousness, X 5 = Cost effectiveness, X 6 = Convenience, X7 = Social responsibility, “β0 , β1 , β2, β3, β4 , β5, β6, β7 ” are the constants and μt is the Error term. The autocorrelation test measures the correlation between the variables used in the model and the results are displayed in Table 1. The autocorrelation errors in the regression models can be tested thorough Breusch-Godfrey test or LM test. The null hypothesis states that “there is no serial correlation in any order existing among the variables”. From Table 1, it is clear that the test statistic value of Chi-square distribution with degrees of freedom is above 0.05. Hence the null hypothesis is accepted which indicates that there is no autocorrelation existing in the data. Table 1. Analysis of Autocorrelation Breusch-Godfrey LM Test for Serial Correlation F-statistic
2.016432
Prob. F(2.65)
0.1376
Obs*R-squared
3.438782
Prob. Chi-Square(2)
0.1146
The basic assumption to be fulfilled in order to perform linear regression is the assumption of homoscedasticity. Homoscedasticity explain about the distribution of residuals with equal variance at each level of prediction. When this assumption is not fulfilled it shows the presence of heteroscedasticity. The heteroscedasticity test results are shown in Table 2. The stated null hypothesis was that “the residuals are distributed with equal variance or homoscedasticity is present in the data”. From Table 2, it is observed that the corresponding values are above the threshold limit of 0.05 which indicates that the presence of homoscedasticity, one of the assumptions of regression models. Hence it is concluded that heteroscedasticity is not present in the data. Table 2. Analysis of Heteroscedasticity Heteroskedasticity Test: Breusch-Pagan-Godfrey F-statistic
1.473576
Prob. F(7)
0.2480
Obs*R-squared
9.490587
Prob. Chi-Square(7)
0.2097
Scaled explained SS
6.426772
Prob. Chi-Square(7)
0.5210
The regression models can be performed in a dataset if there do not exist high correlation between dependent variables in the study. If the independent variables are correlated with each other, it shows the existence of multicollinearity. The selected
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independent variables must be independent in order to conduct regression analysis and further interpretation. The test of multicollinearity with the help of correlation matrix is given in Table 3. When the correlation values are greater than 0.7 or less than − 0.7 among any two independent variables in the data set it shows the presence of multicollinearity and data is not fit to run any regression models. From Table 3, it is observed that none of the correlation values are above 0.7 or below − 0.7 which indicate that there is no correlation among the independent variables used in the study or they are free from multicollinearity. The values in detail are given in Table 3. Table 3. Analysis of Multicollinearity X1
X2
X3
X4
X5
X6
X7
X1
1.000000
0. 412131
− 0. 373691
0. 132647
− 0. 562242
− 0. 613695
− 0. 613691
X2
0.412131
1.000000
0. 168214
0. 175724
− 0. 147581
0. 255852
− 0. 584828
X3
− 0.373691
0.168214
1.000000
− 0. 144827
0. 598721
0. 179611
0. 487636
X4
0.132647
0.175724
− 0.144827
1.000000
0.525651
− 0.191943
− 0.191943
X5
− 0.562242
− 0.147581
0.598721
0.525651
1.000000
− 0. 103783
0. 256534
X6
− 0.613695
0.255852
0.179611
− 0.191943
− 0.103783
1.000000
− 0. 147824
X7
− 0. 613691
− 0.584828
0.487636
− 0. 191943
0. 256534
− 0.147824
1.000000
Regression Analysis is used in research “to determine the change in dependent variable due to a change in independent variables”. The coefficients and p values in regression analysis explain whether the relationships in the model are significant or not based on the statistics. The p values in regression models help to analyses whether the observed relations in sample exist in population too. The null hypothesis for the regression analysis is that the independent variables in the study has no relation with the dependent variable in the study. When there is no correlation there will be no association between independent and dependent variable. That is a variation in independent variable do not cause any deviation in dependent variable. Linear regression also tell about the positive or negative variation in dependent variable due to a variation in independent variable. A coefficient with positive sign denotes that there is a positive relation between dependent and independent variable. Whereas coefficient with negative sign indicate that dependent and independent variables are inversely related. The results of multiple linear regression applied in the present study are given in Table 4. Age, education and monthly income were the demographic variables considered in the study. Among these variables age is the only significant variable but it shows negative association with the dependent variable as the coefficient value is associated with a negative sign. That is as the age increases there is less perception towards investment in green deposits. Age and monthly income are not significant as their p value is higher than significant value 0.05. Any change in education or monthly income do not make any difference in the perception of working-class women towards investment in green deposits. The other independent variables in the study were Environment consciousness, Cost effectiveness, Convenience and Social responsibility. All these variables are statistically significant in effecting the perception of women towards investment in green deposits.
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The p values are 0.0429, 0.0387, 0.0281 and 0.0278 respectively for Environment consciousness, Cost effectiveness, Convenience and Social responsibility. Every working women try to invest a part of their income in savings. When they are concerned about environment, cost, convenience and social responsibility they try to divert a portion of their savings towards investment options that promote sustainability. Hence in the present study it is observed that perception towards green deposits are effected by factors like environment consciousness and social responsibility. Table 4. Analysis of Multiple Linear Regression. Variable C
Coefficient
Std. Error
t-Statistic
Prob
10.36458
0.0000
3.836184
0.388172
X1
−0.187841
0.241351
5.061804
0.0470
X2
0.091719
0.161359
0.574191
0.5618
X3
0.210449
0.234492
0.914385
0.3768
X4
0.264569
0.233767
1.059682
0.0429
X5
0.489527
0.238473
2.084668
0.0387
X6
0.560844
0.238469
2.272823
0.0281
X7
0.536456
0.245168
2.241841
0.0278
R-squared
0.351549
Mean dependent var
3.638218
Adjusted R-squared
0.313279
S.D. dependent var
1.341583
S.E. of regression
1.065614
Akaike info criterion
2.961860
Sum squared resid Log likelihood
91.62189 −129.7863
F-statistic
6.374454
Prob(F-statistic)
0.000007
Schwarz criterion
2.911927
Hannan-Quinn criter
2.973279
Durbin-Watson stat
1.565311
6 Conclusion Savings are the major source of mobilizing resources for infrastructure and social development. In order to promote Green Finance Ecosystem Governments at state and central level have initiated various schemes of investment that focus on green initiatives. It promotes projects that are eco-friendly and sustainable. In the earlier years the main area of investment by women was gold and certain saving schemes that generate steady income and are risk free. Over the years the government and RBI has taken initiatives to broaden the area of investments available for a common man. As a result green deposits were also emerged as one of the alternative for investment among common man. But in the earlier years of this scheme people were not willing to shift from traditional way of investment to another investment as they were scared of the risk associated with it. In the recent
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past people started thinking about environmental sustainability as they witnessed many incidents which were the result of causing harm to the environment. As such there is a change occurred in the mindset of the people. The present study was conducted with an aim to study the perception of working women in Bengaluru city towards green deposit schemes. Based on the prior literatures it was identified that there are many factors that influence the perception of women towards investments. Age, education and monthly income of the respondents do not influence their perception towards investments. As the age increases they are less prone to invest in green deposits. The middle-aged women prefer traditional form of investment as compared with green deposits. Whereas youngsters prefer green deposits. The other factors like their concern for environment, convenience, cost associated with and their responsibility towards society have shown significant effect on the perception level of working women towards green deposits. The present study has considered only few factors. The external factors are not considered in the present study. Similarly, the study was limited to women working in Bengaluru city.
References 1. Madnani, R.P.: Salaried women’s perception towards bank fixed deposits: a study with reference to Ulhasnagar City, Thane District. Int. J. Creative Res. Thoughts 10(11), 100–109 (2022) 2. Selvi, K., Priyan, V.: Perception of customers towards service quality of Canara bank towards deposit schemes. ICTACT J. Manag. Stud. 3(1), 461–469 (2017) 3. Ganesan, Bhuvaneswari: Customer perception towards green banking. IOSR J. Econ. Finance 7(5), 5–17 (2016) 4. Easwari, Priya, S.: A study on awareness of customers towards green banking with special reference to SBI in Nagercoil. Int. J. Res. Advent Technol. 7(3), pp. 935–939 (2019) 5. Lavanya, Madhankumar: Consumer perception towards green products and strategies that impact the consumers perception. Int. J. Sci. Technol. Res. 8(11), 3543–3548 (2019) 6. Vishnu, P.K., Anil, P.V., Vyshak, P.K.: Adaptation towards Green banking; exploring acceptance and awareness among stakeholders of Banking Industry; A Post COVID-19 outbreak analysis. Asian J. Manag. 13(3), 186–192 (2022)
Stress at Work and the Ability of Older Employees to Continue Working in the Service Sector Hernan Ramirez-Asis1(B) , Jose Clemente-Almendros2 Eduardo Rocca-Espinoza3 , Jehovanni Velarde-Molina4 and Wilber Acosta-Ponce5
, ,
1 Universidad Nacional Santiago Antúnez de Mayolo, Huaraz, Perú
[email protected]
2 Universidad Internacional de La Rioja, Logroño, Spain
[email protected]
3 Pontificia Universidad Católica del Peru, Lima, Peru
[email protected]
4 Escuela de Posgrado Newman, Tacna, Peru
[email protected] 5 Universidad Cesar Vallejo, Lima, Peru [email protected]
Abstract. Businesses drive economic growth and offer excellent employment opportunities, but Peruvian legislation sets retirement at 70 for men and 65 for women. Because of the greater mental and physical effort required to master new technologies, productivity declines accordingly. However, little academic work has addressed this issue. The study involved 218 workers over 50 years of age who completed the Occupational Stress Questionnaire (OSQ) and the Perceived Work Capability Questionnaire (WTQ), both previously validated for content validity by a panel of six experts, with trust measured using Cronbach’s alpha. Spearman’s Rho = -0.763 and a P-value of 0.00** indicate that the no normal distribution can be assumed for two variables, as determined by a Kolmogorov-Smirnov normality test. Older workers in the service sector show a moderately unfavorable correlation between job stress and performance. Keywords: Work capacity · physical effort · mental effort · work stress · service sector · elderly
1 Introduction Many people who are well beyond the traditional retirement age continue to participate actively in the labour market. This issue has gained momentum in Latin American discourse from two angles: the rights-based approach, which led to the appointment of an United Nations Human Rights Council Appoints Independent Expert on the Full and Equal Enjoyment of Human Rights by Older People, who has examined, among other © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 131–140, 2024. https://doi.org/10.1007/978-3-031-53998-5_11
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things, older persons’ access to the right to work and social protection; and the analysis of the accelerated ageing processes taking place in many countries in the region and their impact on labour market dynamics. Workers over 50 who, for various reasons (including stress in the service sector caused by continuous interaction with clients), report feeling unable to fulfil their work obligations have not been the subject of any research [1]. Experts scientifically endorse the service sector as a stressful activity in relation to occupational health [2], with anxiety, depression and disturbed sleep patterns being the most common symptoms. There is widespread recognition, by society in general, that business is constitutive of the economic and social development of countries and that, in particular, businesses represent the production of products and services [3]. Anxiety and sadness are associated with the stresses and situations faced by service workers [4]. Knowing the sources of work stress is the first step to be taken into account by the manager of any company in the service sector [5], so, based on the analysis of 120 surveys of workers in 14 companies, [6] presents the main causes of work stress and how they affect workers in terms of job satisfaction and health status. Weak company growth, low wages and emphasis on work-life balance. However, the exact number of workers suffering from chronic stress is unclear because it is sometimes misdiagnosed as something else [7]. On the other hand, this article analyses how the Social Security System can be put at the service of a particular Employment Policy, namely one that seeks to promote, encourage or stimulate the extension of the working life of older workers, either by preventing them from leaving (voluntarily or involuntarily) their activity, or by providing them with financial support while they continue to work [8]. To begin to answer this question, it is necessary to identify the facts or phenomena that may motivate such a policy, such as the gradual ageing of the population in general, the increase in the average age of the working population in particular, together with the increasing longevity of older citizens and the cessation of working activity by older workers well before the age at which they are entitled to a retirement pension. After this background and a categorization of the different formulas available to the public authorities to respond to the early retirement of these workers (penalizing policy, compensatory policy and maintenance and reintegration policy), the study addresses the following questions. The first step is to determine what are the objectives and priorities of an Employment Policy for the new millennium, both at EU level and in our country, defining the latter as a “policy to encourage the delay of the age at which older workers leave the labour market”. Secondly, it is a question of determining what kind of preventive and restorative measures, specific to this employment policy, can and should be adopted by the system of social protection for temporary and permanent cessation of activity. Thirdly, an examination of the legislative initiatives, some currently in force and others in the pipeline, which aim to address the issue of premature termination of activity in our country.
2 Review of the Literature Work-related stress in the over 50s. Some people’s health problems are caused by stress, which is a widespread problem. Health experts from all over the world state that stress is one of the psychosocial factors
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that can increase the risk of illness and decrease the quality of life. Stress is closely linked to cardiovascular disease and psychological problems, increasing the likelihood of mortality and suicide, according to studies involving 30 ministries of health on five continents. According to [9], stress has several causes and arises from an individual’s reaction to events that he or she considers detrimental to his or her well-being in the environment. They go on to explain that a person’s emotional balance is disturbed due to stress, which in turn triggers a cascade of biochemical changes in the body. According to [10], when the body is subjected to stress, corticotropin hormone (CRH) is secreted by the hypothalamus and travels to the pituitary gland, where it stimulates the release of adrenocorticotropic hormone (ACTH) to stimulate the production of glucocorticoids, which then bind to mineralocorticoid receptors in the adrenal cortex and produce cortisol. Cortisol is the by-product of this process and directly affects stress-related neural pathways in the brain. [6] explains that the brain and the immune system work together to keep the individual safe from harm. The brain is responsible for monitoring the social environment and deciphering the signals that arise in it to determine whether the environment is safe or dangerous. As a result, the neuro-immuno-endocrine interaction reacts to maintain a healthy state. Thus, stress develops as a series of complex responses that primarily involve the hypothalamic-pituitary-adrenal (HPA) axis and the autonomic nervous system (ANS), causing short- and long-term changes that are reflected in behaviour, cardiovascular functions, endocrine glands, metabolic glands and the immune system, and ultimately lead to “fight or flight” when the individual is confronted with various stressors. Anxiety, irritability, anger and rage, worry, sadness, panic and hopelessness are symptoms of the emotional response to stress, as stated by [11] and as a result, stress triggers biochemical mechanisms at the neuroendocrine level that decrease or suppress the immune response. This topic has been the focus of a great deal of research on several continents. [12] provided an in-depth analysis of the connection between stress and the body’s hormonal and neurological systems, as well as the impact that stress has on one’s diet. They came to the conclusion that an increase in corticotropin release factor is produced in the hypothalamus in response to stressful events, which renders a person more susceptible to sickness by suppressing their immune system. According to [13], psychosocial variables like stress can have profound impacts on the body’s endocrine and immunological systems. They infer that long-term stress is linked to diseases including cardiovascular disease, obesity, depression, and cancer. According to [7], although there are numerous potential triggers for stress in individuals and many established preventative methods, the latter are often insufficient. Stress, according to [3], reduces immune system function and involution of the thymus, resulting in a weakened immune system that promotes the development of various illnesses. Psychological changes, such as stress, anxiety, and sadness, have been linked by [14] to the onset and progression of specific somatic disorders. Based on their findings that stress raises cortisol levels, [15] recommend more research into including nurse activities into radiation and chemotherapy to help patients
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cope. In order to live a happier and healthier life, [16] explains the latest findings regarding stress, including its causes, effects, and mitigation strategies. He comes to the conclusion that not enough is being done in terms of education, thus greater efforts should be made to develop and organize activities that help people deal with stress. Furthermore, as noted by Herrera et al., there are numerous researches showing the connection between stress and chronic illnesses (such as arterial hypertension, atherosclerosis, osteoporosis, diabetes, immunodeficiency, and various forms of cancer). This connection is still debated in certain circumstances, and the evidence is not always convincing. The purpose of this narrative review is to describe the scientific output that links stress to chronic diseases in adults in Latin America and to synthesize the importance of previous studies related to stress and diseases like diabetes, hypertension, cancer, and kidney disease, among others, providing a scientific basis for this relationship. According to [17], there are three different types of stress: There are three types of stress: acute, episodic, and chronic. The three can make us feel poorly, but persistent stress is the most common cause of illness dismissed as unimportant. Do you tend to overreact, mistake a momentary state for a permanent one, or ignore warning signs for long periods of time? Again, blame is futile, but understanding the three forms of stress could help you gain perspective and develop empathy [4]. Perception of work capability in the over 50s. Governments across Europe are increasingly concerned to ensure that their citizens are able to work to their full potential throughout their careers, making the question of how best to monitor people’s capabilities at work crucial. In addition, characteristics that reduce work capacity include ageing, being overweight, declining health status, working in a particularly intellectually demanding profession and working in a large institution [18]. Work ability is a reflection of the interaction between an individual’s traits, the work environment, workers’ functional capacities and their health. More than half of service sector workers are over 50 years old and, given that the maximum retirement age is 70 for men and 65 for women, advancing age inevitably reduces their productivity at work. In addition, the demands of the job condition the degree of physical and mental aptitudes of the individual, as stated by [19]. There is a correlation between unsatisfactory job performance and issues such as poor ergonomic circumstances, poor job management, inadequate control over work and low job satisfaction [9]. Emotional exhaustion and the number of illnesses together accounted for 55% of the work capability index, which is also explained by the authors’ recognition of the impact of psychological demands and control over work [7]. Multiple studies of occupational groups have demonstrated the detrimental effects of factors such as advanced age, obesity, insufficient leisure-time exercise, limited musculoskeletal capacity, high mental needs, lack of autonomy and high physical workload. Therefore, work capacity is considered here as a set of physical, mental and social talents, skills, abilities and/or potentialities that make the performance of a job feasible [2]. At the core of occupational health and safety is the worker’s work capacity, which can be defined as the individual’s mental and physical preparedness to perform the functions of his or her job. The skills of communication, negotiation, problem solving, critical thinking, empathy, leadership in coordinating a work team, collaboration, adaptability to change and self-confidence fall into this category, as they enable the worker to interact
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effectively with others. In contrast, soft talents are extremely difficult for robots to replicate. New jobs that require human creativity and social intelligence have always been able to keep people employed despite the rise of technology. To contribute to career studies on workers over 50, we sought to answer the following question: what is the relationship between occupational stress and work ability in older workers in the service sector? Therefore, the aim was to identify the relationship between occupational stress and the ability of older employees to continue working in the service sector.
3 Methodology The present research is descriptive and correlational with a quantitative approach [20] a sample of 218 workers from service sector companies in the city of Huaraz, Peru was used. The data collection technique was the survey and the questionnaire as an instrument, the method used was simple random sampling, to measure occupational stress in teachers was used the Occupational Stress Questionnaire (CEO) in Spanish adapted by [21], divided into three groups: Occupational stressors, psychological strain and coping resources, has 31 items, measured by a Likert scale never (1), sometimes(2), frequently(3), Almost always(4), Always(5), which was validated by expert judgment and a coefficient of 0. 786 Cronbach’s alpha. Regarding perceived work ability, an adaptation of the perceived work ability questionnaire (PWA) was used, the Spanish version of this instrument was obtained and validated by [22], comprising a total of 10 questions grouped into 7 items: subjective estimation of current work capacity compared to lifetime best (0 to 10 items), subjective assessment of work capacity in relation to physical and mental work demands (2 to 10 items), number of physician-diagnosed illnesses (1 to 7 items), estimation of work limitations due to illness (1 to 6 items), absenteeism due to illness in the last 12 months (1 to 5 points), prognosis of work ability after two years (1, 4, 7 points) and mental resources (daily enjoyment, activity and good mood, optimism) (1 to 4 points), the total score of the questionnaire ranges from 7 to 49 points, the cut-off point of poor (0–14 points), moderate (15, 29), good (30, 49) was used. Employees were asked to complete the questionnaire after receiving their informed consent, and the results were entered into a database using SPSS V29 software before being analyzed using descriptive statistics and cross-tabulations to determine job stress and work ability. The Kolmogorov-Smirnov normality test was used to test the hypothesis, and its result of p0.05 indicates that neither variable follows a normal distribution.
4 Results The average age was 57 years and the standard deviation was 3.54; 64% of the sample was male and 36% female; 68% of the total workers were in the Supervisor category, 23% in the Operator category and only 9% in the Auxiliary category. According to Fig. 1, it has been identified that 49.8% of older workers perceive a low level of work ability and only 13.6% perceive high work ability.
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49.8% 50.0%
36.5%
40.0% 30.0% 20.0%
13.6%
10.0% 0.0% High
Medium
Low
Fig. 1. Perceived work capacity in workers over 50 years old
Fig. 2. Levels of stress in workers over 50 years of age
According to Fig. 2, it has been identified that 51.2% of older workers have high stress and only 17.3% perceive low stress. According to Table 1 it is observed that workers with a high level of stress are those who perceive a low work ability with 40%, but there are 10% with low stress and perceive a high work ability, By Means of Spearman’s Rho = -0.763 significance level of 0.00** the hypothesis is demonstrated: there is Occupational stress is negatively associated with job satisfaction to a modest extent ability in workers over 50 years of age.
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Table 1. Perceived work capacity according to stress levels. Stress in workers
Work capability
Total
High
Medium
Low
High
6%
7%
40%
53%
Medium
8%
16%
2%
26%
Low
10%
6%
5%
21%
Total
24%
29%
47%
100%
5 Discussion This study offers a new perspective on occupational stress by examining it through three dimensions and 14 indicators in workers over 50 years of age. It shows a high level of stress generated mainly by occupational overload, level of responsibility, physical strains and a low level of recreation. These results are similar to those presented by [23], where he exposes that the working hours of regularly employed workers seem to be insufficient, but are forcibly extended. Furthermore, the results show that employees over 60 years of age had a moderate degree of burnout subscales, which complements the findings of [24]. This implies that initiatives should be developed to better organize the service sector taking into account the prevalence of stress. On the other hand, occupational stressors represent the working conditions of workers over 50 years of age. These are a factor that generates chronic stress, such as role ambiguity and occupational overload, because they accumulate many tasks, including physical activities and administrative activities. This result is comparable to that found by [25], who conducted a study with female workers and found that the better the working conditions, the lower the level of occupational stress. Furthermore, [26; 27] argue that organizations should develop wellness plans for people over 50. These policies should identify employees with psychological problems and integrate physical recreation activities. According to [28;29], older employees have a low level of work ability, which is largely explained by high physical and mental demands at work, as well as absences created by health circumstances. This conclusion is consistent with the findings of [30; 31]. The data presented here lends credence to the hypothesis that increasing levels of mechanical demand, such as performing a job by raising one’s arms, has a cumulative impact on work ability. Furthermore, the wide diversity of jobs implies that high degree’s negative challenge, high human resource priority, and low role conflict all predict low current and expected future work capabilities [32]. Although the observed associations between work capability and individual characteristics tend to confirm those reported in the literature, the results demonstrate a strong relationship between advancing age and declining work capability [33]. According to research conducted by [34] on Finnish employees, both physical and mental illnesses have a significant negative influence on workers’ confidence in their abilities to do the job.
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6 Conclusions Job stress has a moderately unfavorable relationship with workers’ perceived abilities to perform their work when they are over 50 years of age. In addition, workers over 50 years of age experience a higher degree of job stress than younger workers. Finally, workers over 50 have a low degree of self-perceived competence to perform their job. These outcomes can be explained by the service industry’s poor capacity to adapt to new technology as well as its poor quality of labour relations. In conclusion, the findings presented here present a wealth of opportunities for further investigation into this workforce demographic. Keep in mind that the results might be enhanced by longitudinal study in which stress and work capacity are tested on a quarterly basis, and even by conducting comparisons with younger workers. This is something that should be kept in mind.
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Co-creation in Tourism Marketing Before and After the Advent of Social Media N. Sneha1(B)
, Ajai Abraham Thomas1
, and Jaspreet Kaur2
1 Department of Professional Management Studies, Kristu Jayanti College Autonomous,
Bengaluru, Karnataka 560077, India {sneha.n,ajaiabraham}@kristujayanti.com 2 Department of Management, Kristu Jayanti College Autonomous, Bengaluru, Karnataka 560077, India [email protected] Abstract. Tourism service providers have historically utilized Self-Generated Content (SGC) throughout history to promote their products through traditional media. However, with the advent of social media in the past decade, marketers have shifted their preferences to user-generated content (UGC) over SGC, which positively impacts organizational performance. Prior to the emergence of social media, marketers created innovative marketing strategies through marketing mix elements. This approach known as “co-creation” has garnered attention from both marketers and academia. Social media is an excellent platform for attracting stakeholders to participate in co-creation. While there is growing interest in using social media in tourism marketing and its benefits, there is limited understanding of the development and issues of social media marketing (SMM) through co-creation. This study aims to fill this research gap by comparing co-creation scenarios before and after the implementation of SMM in tourism, using a narrative literature review and exploratory research design. The paper discusses the key dimensions of tourism marketing through co-creation, including the types of stakeholders and the impact of social media on business performance. The study suggests that marketers should strengthen co-creation processes in social media marketing to benefit tourism service providers. The study’s main finding indicates that co-created social media marketing positively impacts the performance of tourism businesses, but this relationship can be hindered by various crises at any given time. To address this, a framework was developed with cocreation as the guiding principle, which serves as a conceptual foundation for future research and is relevant for designing, marketing, and engaging in smart tourism marketing. Keywords: Conventional marketing · Social media marketing · Tourism businesses · Co-creation · Tourism service providers · Integrated conceptual framework · Stakeholder marketing · Performance · Issues
1 Introduction Co-creation services are a collaborative effort between consumers and producers, combining customer ideas and information with the company’s knowledge for mutual benefit Zwass, (2014). This approach can be applied both online and offline and is crucial for © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 141–156, 2024. https://doi.org/10.1007/978-3-031-53998-5_12
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successful customer experiences Kotler, (1972, p. 46). Co-creation is an extension of the Stakeholder Marketing Theory Cardona-Smits, (2021), considering the needs of different stakeholders. The traditional focus on customer satisfaction in marketing is justified by the fact that they are the primary source of revenue Hult et al., (2011, p.1). According to both the traditional and stakeholder marketing perspectives Ingenbleek and Immink, (2010), a company must deal with the heterogeneous and frequently conflicting interests of numerous stakeholders. In tourism, marketers have invested heavily in traditional media such as television, radio, newspapers, events, and outdoor advertising to promote tourism products and services using Self-Generated Content (SGC). The service-dominant (SD) logic was first put forth by Vargo and Lusch, (2004), who claimed that the firm and its clients jointly create value Vargo et al., (2008) among others, acknowledge that value is co-created with many stakeholders and not just with customers in their more recent contributions to SD logic Lusch and Webster, (2011, p.1). Lusch and Vargo, (2011) contend that this fundamentally distinct viewpoint offers a better comprehension of marketing practices across a wide range of industries. However, with the advent of social media, conventional advertising has evolved to e-WoM or word-of-mouth marketing, which is used by loyal customers as testimonials and referrals. This shift has led to a paradigm shift in marketers, capturing the interests of all stakeholders, especially customers who are perceived as distinct and connected. Moorman et al. (2022) suggest that businesses are getting saturated from using UGC marketing and are slowly shifting back to conventional marketing. MarketingSherpa suggests more engagement with traditional advertisements, with over half of consumers reading print advertisements received through mail from their preferred companies. This study aims to explore co-creation in conventional media marketing versus social media marketing, focusing on what aspects of social media marketing are helpful in influencing the value co-creation process and whether co-creation through conventional marketing is still relevant for the tourism industry. The study proposes a framework combining co-creation through conventional and social media marketing to sustain and enhance tourism business performance, discussing the relevance of co-creation through conventional marketing and the scope of future research directions. The remaining sections are organized with the synthesis of review findings before and after the advent of social media. Next, the study proposes a framework combining co-creation through conventional and social media marketing to sustain and enhance tourism business performance followed by the discussion on the relevance of co-creation through conventional marketing in the tourism industry. The final section will then draw conclusions for the co-creation scenarios for tourism marketing covering study’s limitations and directions for future research are addressed.
2 Literature Review Tourism businesses and consumers’ focus has switched from stationary media to ongoing media. Social media features as a component of service design that is needed in the digital environment to perform the service successfully Gibbons, (2017). The shift from the traditional marketing of Self-Generated Content (SGC), which is company-created,
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is moving towards using customer-created User-Generated Content (UGC). Since the beginning of this co-creation, it has become commonplace to work together with other stakeholders to direct the design process Co-creation, (n.d.). Involving customers or tourists in the actual design process might be a game changer. In this age of consumer sovereignty, co-created marketing has been encouraged on social media platforms and official business websites, fueling the future of marketing at the same time social media is not free from various challenges for tourism marketers Sneha and George, (2018). Wang (2008a, 2008b), nonetheless, contends that to address the issues in management and marketing, collaboration is a logical answer. Nonetheless, contends that to address the issues in management and marketing, collaboration is a logical answer More, (2023). After the launch of social media sites, it has emerged as one of the primary means of social interaction and communication for people, businesses, and governments. Social media have been extensively utilized in recent years to start brand communities Lim and Rasul, (2022, p.2). More than 1.5 million business entities participated in these activities, according to recent studies, helping to leverage co-creation activities like social sharing and co-create market value. If included in the social media marketing design, Brey, (2019), will deliver the intended results of co-creation. These firms are actively using social media and UGC to gain insight into customers’ preferences Rashid et al., (2019). When it comes to the possible functions of social media in value co-creation, academia has divergent views. Some of the authors analysed strongly disagree with this assertion, while another group of writers maintain that additional primary research must be conducted before any conclusive conclusions can be drawn Mladenovi and Dolonec, (2016). However, businesses who make all their sales online are driving this trend, forecasting an increase in traditional advertising spending Moorman et al. (2002). This performance gap has become more pronounced as internet advertising prices have gone up, especially when impression, click, and conversion fraud is taken into consideration, while traditional media expenses have gone down Sahni, (2023). It simply makes good economic sense to rebalance spending away from digital clutter. Thus, marketers can take advantage of conventional co-created marketing with the ever-changing scenarios White, (2022). Traditional companies have historically had to reinvent themselves to respond to fluctuating market conditions. With robust networks among all parties involved, marketing collaboration is less dependent on a company’s value offer alone Prahalad and Ramaswamy, (2004). Table 1 explains the dimensions of co-creation in tourism marketing before and after social media. Table 1. Dimensions of Co-creation in Tourism Marketing Before Social Media
After Social Media
Stakeholders
Conventional Co-creation
Co-creation through social media
Performance
Organic collaboration
Mediated with tech tools
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3 Author’s Illustration Theories explain and inform collaboration across these different dimensions and, more importantly, what recommendations do they suggest for organisations wishing to maximise their collaborative advantage through organic and mediated processes. Social media tools to gain a competitive and commercial advantage served as a reminder that no official social media tools were available prior to 2003 Correia, (2013). Social networking platforms on the Internet allow users to set up a profile within a controlled environment, articulate a list of other users with whom they share a connection, and read and navigate both their list of connections and those produced by others within the system Ayanso and Lertwachara, (2014). The author refers to traditional media, such as television, as passive activities. Over the past few years, online social marketing has become increasingly infectious to businesses Hussin, Putit and Subramaniam, (2023). Building profiles, groups, and specific events on most social networking sites is quite useful because they enable businesses to engage with target clients and provide targeted messaging easily Prasanna Kumar and Arthi, (2023). Christou et al. (2012) highlighted the fundamental changes that social media brings about in the way travellers and tourists search, find, read, and trust, as well as collaboratively produce information about tourism suppliers and tourism destinations. Kirti¸s et al., (2011) investigate whether firms spend less money on social media to realize their marketing strategies compared with traditional media, as well as the importance of social media in the marketing area. The objectives of Xiang et. al., (2010) are to examine the extent to which social media appearing in search engines results in travel-related searches. Successful social media marketing using various methods can result in increased levels of consumer involvement Nasution et al., (2023). It can also help businesses build on the knowledge and lessons obtained from first-generation social media marketing initiatives Evans et al., (2010). Marketers who want frequent users of social media networks to establish connections and create systems based on trust and loyalty can take advantage of the vast potential accessible to them by manipulating the social media engine Buskirk, (2010). Some marketers conclude that word-of-mouth promotions cannot be purchased. Social network-generated word-of-mouth marketing is a type of advertising that must be earned as opposed to traditional advertising that may be bought. Businesses in the current difficult times, where many of their operations are changing to online platforms, should consider social media influencers as one of the strategies to sell their goods and services Kian Yeik et al., (2021). Cogenerated value is created when both the client and the provider interact. Marketing has evolved into a way for businesses across the service spectrum tocommunicate directly with customers outside the realm of traditional value-creating activities to capitalize on opportunities. Brey, (2019). While this provides a variety of options for engaging with clients, an increase in the saturation of social media networks has also led to an increase in the value of organic conversations. With the help of cutting-edge technology, users can combine information from many sources on their mobile devices, customize their profiles through social networks and applications, and interact dynamically with their context. Information and communication technologies (ICTs) that recognize users’ physical surroundings are used in context-based marketing. The most advanced ICTs that offer capabilities to respond
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better to the context within and around their users are becoming increasingly known to tourism marketers. Their study connects the many ideas of mobile devices, social media, and context-based marketing. Using social context mobile (SoCoMo) marketing, it is said, would be a novel way for advertisers to increase value for all destination stakeholders. Contextual data is becoming more and more crucial as big data is gathered by various service design methods. Buhalis and Foerste, (2015). Occasionally, the service component is overlooked in marketing because of the emphasis on digital experiences that encourage the purchase of goods Dunbar, (2020). Kumar et al., (2017) capture the time-varying effects of social media and the time-varying synergistic effects of social media and traditional marketing using a time-varying effect model (TVEM) approach. Chen et al., (2019) proposed the effects of social media marketing activities on continuance intention, participation intention, and purchase intention via the mediation of social identification, perceived value, and satisfaction. The basic framework of the present study is a process model of the value co-creation of service systems, that is, co-experience and co-definition Novani et al., (2012). Under the general framework of smart city initiatives, the European Commission (2015) has identified travel information and communication as strategic objectives for improving human mobility and transportation. Gligorijevic, (2016) explored four open innovation approaches for the utilization of user-generated content to increase web traffic, create and nurture a community of dedicated contributors, increase brand value, and improve sales. The study offers novel insights into the divergent and interactive nature of tourist complaints that unfold on social media, and the importance of adequate organizational responses to foster value co-creation or avoid co-destruction Dolan et al., (2019). Despite a few attempts to measure online engagement, Huang et al., (2019) found no studies on fully operationalized engagement in tourism destinations. Considering that existing Customer Engagement scales may not fully capture the scope of the value co-creation process and its context-dependent nature Huang et al., (2019) proposed the development of a tourist engagement scale (TES) that incorporates more actors in value co-creation at the destination. Thus, brand reputation plays a determining role in competitive strategy. The contribution of Katsikari et al., (2020) is to investigate which elements of a destination, when displayed on social media, could be attractive to tourists. Tussyadiah and Zach, (2013) explored the multidimensionality of consumer cocreation capacity. Lower-level capabilities, such as the power to explore, transform, and exploit consumer insights into consumer-centric products and services, make up the co-creation capacity. Consumers are increasingly engaging in social media knowledge exchange procedures. It has been demonstrated that social media strategies have a positive impact on co-creation capacity, particularly the power to transform consumer knowledge into advantageous assets. The authors discovered that the ability of tourism organizations to co-create has a favorable effect on their performance. Pohjola et al. (2022) also, reiterate that the interaction processes between players in dynamic networks and e-tourism are being impacted and improved by the rapid development of information communication technology and varied value co-creation processes. The authors opine that complex tourism networks operate dynamically to
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facilitate interaction, communication, and learning among actors. Co-creative processes for value creation are frequently used to develop and improve interesting and fulfilling service experiences. Their integrative framework capitalizes on the conceptual transition from service-dominant to customer-dominant logic, advocating the primary role of the customer in value creation and tourism experience processes, in recognition of the relevance of co-created networks and online travel. Cheung et al., (2021) offer recommendations for marketers on ways to improve customer brand engagement and perceived brand value by encouraging good social media platform referrals, utilizing Social Media Marketing (SMM) with entertaining and tailored content, and enhancing consumers’ value co-creation intention. Additionally, the relationship between value co-creation and destination brand equity is mediated through social commerce information sharing Pohjola et al., (2022). An alternative marketing logic based on value-in-use, known as service-dominant (S-D) logic, evolved from the debates of C.K and Ramaswamy, (2004) According to this viewpoint, who argue that the responsibilities of producers and consumers are not clearly separated, suggesting that value is always jointly created and reciprocally Vargo et al. (2008). Value co-creation, a broad notion that describes cooperation between various stakeholders, has attracted much attention from academics and practitioners in this new logic Pham et al., (2022).
4 Theoretical Contributions to Understanding the Co-creation in Tourism Marketing 4.1 Before Social Media Although the firm is no longer taking centre stage in all value creation, it is a catalyst through which value creation can be enabled, shaped, and accelerated Sawhney et al., (2005). To suit the greater demands of the customers, tourism businesses are heavily reliant on the elements of the classic marketing mix theory proposed by Jerome McCarthy which has been a milestone of the marketing theories used by the tourism industry for more than 70 years. Using the correct combination of marketing mix elements is both an art and science. In McCarthy’s version, the marketing mix is composed of product, price, place, and promotion. McCarthy’s marketing mix has been widely adopted through time by managers and academicians, becoming a key element of marketing theory and practice. This wide diffusion may be justified based on its simplicity of use and understanding which makes it a useful tool both for marketing decisions Dominici, (2009). The Managerial School of Marketing views the concept of marketing mix as an operational instrument for achieving marketing objectives, as a formula for those marketing aspects that the firm can manage in an unpredictable competitive environment Bruner, (1988). The marketing mix has always been a topic of debate among managers and academics as progressed through various stages in time, from its inception in the 1970s to the introduction of Total Quality Management in the 1980s and relationship marketing in the 1990s to today’s adaptation to the digital context Yudelson, (1999). In the 1960s, client contact and the communication possibilities of the Internet were unthinkable.
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4.2 After Social Media In this evolutionary process, there has always been conflict between “conservatives”, who hold that the 4Ps paradigm can adapt to environmental changes by incorporating new aspects into each “P”, and “revisionists”, who claim that the 4Ps paradigm is outdated and propose alternative paradigms. This study aims to clarify these two different approaches to marketing mix evolution through a survey of major e-marketing mix literature and a focus on the development of marketing mix theory for the digital domain. According to Prahalad and Ramaswamy, (2004), consumers are seeking a higher degree of personalization in their consumption experiences, hence businesses must re-evaluate their business models to be more responsive to customer wants. Digital technologies can be helpful for retaining the 4 Ps as the core of Internet marketing while enhancing the functionality of the mix. Peattie and Peters, (1997) noted that although the marketing mix approach can adapt to the new requirements for product, with the introduction of co-creation with customers; price, with higher levels of transparency; place, with the creation of new ways to reach customers; and promotion, with the new interactive capabilities, the new communicative capabilities provided by the digital technologies are radically changing marketing in several sectors. Numerous studies and pieces of research have been done to find a new paradigm for operational marketing that, beyond the 4 Ps who argues that a profound reconceptualization is required. The biggest criticism of the four Ps is that they are internally focused, which prevents them from being customer-focused and paying enough attention to their relationships with customers Dominici, (2009). An externally oriented paradigm that takes a network system view is required in today’s markets. Therefore, research on the use of social media for co-creation services is required. As a result, the Technology Acceptance Model (TAM) by Davis, is reviewed since researchers have grown significantly in favour of TAM Charness and Boot, (2016). TAM is designed to measure the adoption of new technology. As seen in the previous literature, the effort of using social media and the expected benefits from it are the most significant factors that motivate users’ widespread adoption of social media.
5 Discussion Application of both theoretical approaches sparks a real debate that co-creation is strongly existing in both traditional and modern tourism marketing. One of the most relevant studies associated with the proposed conceptual framework is provided by Tussyadiah and Zach, (2013), who confirmed that co-created social media marketing positively influences the performance of the tourism business, but any given time crisis can restrain this relationship. Prahalad and Ramaswamy, (2000), discusses the historical involvement of customers in the product development process, seeking their inputs in every product offering. Through Table 1, the authors explain the transformation of traditional role of consumers and adding value as co-creators even before the use of social media. Figure 1 shows the evolution and transformation of customers. However, with an increased proliferation of internet and social media, active interactions between consumers and service providers are taking place which controlled by the customers. It can be said that customer
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Fig. 1. The Evolution and Transformation of Customers. Source: Harvard Business Review
consciously or unconsciously through e-word of mouth are co-creating viral marketing which is enhancing the business performance. Movement of customers from passive to active interactions alone cannot be considered as enhanced business performance, this is just one step in the co-creation process. The scope of personalization is high after the advent of social media since customers are not prepared to accept fabricated marketing experiences. Companies through traditional marketing conduct field surveys to get customer’s opinion, needs and preferences to take their input to co-create products but this should extend to co-creating customer experiences. In contrast, it can be noticed that co-creation through social media is used to shape customer’s expectations by educating them. This may also have a downside when customers or brand ambassadors pit against each because of co-creation which may affect business performance. Vargo and Lusch, (2008) not only emphasize the importance of customer role in value creation but highlights the popularity of customer interactions in traditional marketing as an important part of the co-creation process. They offer a paradigm shift in marketing theory and practice by talking about Service-Dominant logic (SDL) and value co-creation. Payne et al., (2008) argue that effective management of value co-creation leads to improved business performance. It emphasizes that organizations that actively involve customers in the co-creation process are more likely to achieve higher levels of customer satisfaction, loyalty, and overall business performance. Sawhney et al., (2005) reveals that companies that leverage the internet as a platform for customer collaboration and co-creation achieve accelerated business performance, including increased sales, market share, and profitability. Based on the extensive literature review presented, this study proposes a conceptual framework after illustrating the co-creation of the tourism business before and after the advent of social media which offers applicability to the real-world marketing practices to enhance business performance. The 4 Ps marketing mix, created in the early days of
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marketing, was dominant in physical products, distribution, and mass communication. However, the marketing mix paradigm is increasingly criticized for its outdated and inadequate nature for the 21st Century. The search for a new dominant paradigm for operative decisions in digital environments is still in progress, with no widely accepted standard able to fully substitute the 4 Ps’ mix. Despite controversies, the basic usage of the 4 Ps is still valid when marketers wish to co-create in the tourism industry and, with some extension and adaptation with the TAM model, can become the core of social media co-created marketing decisions. To succeed in a hostile market environment, less isolationism and more collaboration are needed, and a more nuanced and multidimensional theoretical approach is required. Before the advent of social media, the tour operator’s reputation, the client’s budget, and self-generated advertisements in magazines, newspapers, and other media were some of the most important factors that customers considered when making offline reservations for tour packages. To improve how the tours are run, travel agencies invested on marketing in different traditional mediums and used their existing customers through Word of Mouth, referrals, and testimonial marketing to generate new customer interest. Figure 2’s representation of a typical tourism marketing shows the simple use of conventional media through collaborating with all stakeholders. Marketers do not get any instant feedback on the status of the offers. Results of the marketing is seen only at a later stage organically with the revenue and business performance. There is no scope of any modification of the marketing used in tourism industry at an early stage. The advent of social media has significantly impacted tourism marketing illustrated in Fig. 3, with various amateurs and organized platforms playing a crucial role. This has led to the co-creation of tourism marketing, where businesses can create pin-pointed marketing campaigns based on instant feedback received on social media campaigns. This snowball effect allows for the modification of marketing strategies after receiving instant feedback and reactions. The fear of missing out (FOMO) has pressurized tourism organizations to incorporate social media into their daily marketing activities, allowing them to piggyback on customer UGC. A conceptual framework is proposed to offer a Co-Creation Mix for the tourism industry, which infuses elements of both the marketing mix and TAM. The proposed framework illustrated in Fig. 4 postulates the intermediation of potential traditional and social media co-creation prospects, which is consistent with the current impact of the COVID-19 pandemic and the need for co-creation for the survival of tourism service providers. Adapting both traditional and social media marketing for co-creation is necessary, as different businesses require a specific type of blended marketing. In a scenario where companies are returning to traditional media, it is ideal to use the best practices of online and offline marketing while using the right technology based on perceived usefulness and ease of access. This enables innovative marketing offers based on customer requirements, boosting brand recognition, and keeping the market buzzing.
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Fig. 2. Co-creation of Tourism Marketing before Social Media. Source: Author’s Illustration
Fig. 3. Co-creation of Tourism Marketing after Social Media
Fig. 4. Marketing Co-creation Mix Framework for Tourism. Source: Author’s Illustration
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6 Conclusion Co-creation must be a continuous process that ought to be present at every stage of the marketing design elements in tourism businesses, such as tour planning, selection of tourism products, resolving customer queries, quotations, providing best offers, booking tour packages, on-tour services, and updates, and collecting post-tour feedback and testimonials. These activities reinforce brand image and will continue to resonate with a buzz in the market, where the customers themselves become social media ambassadors for the brand. This study aimed to explore co-creation in conventional media marketing versus social media marketing improves business performance. We also sought to identify what aspects of social media marketing are helpful in influencing the value co-creation process. According to the review conducted it was found that Tourism is a chain of stakeholders, resources, and activities involving various interconnected core and allied industries, and their environments. Tourism stakeholders, to varying degrees, are relevant to the co-creation process of social media marketing in tourism. Academic research suggests that co-creation in marketing, both in traditional and modern contexts, has a positive impact on business performance. The proposed framework is proposing a combination mix of traditional and modern marketing before and after the advent of social media as a shift in marketing paradigms to benefit both service suppliers and customers. The implications of the proposed Marketing Co-Creation Mix framework by combining co-creation through conventional and social media marketing to sustain and enhance tourism business performance is to offer actionable advice to the industry to actively involve customers in the heart of the value creation process. It has practical implications for marketers and organizations seeking to engage customers and enhance value co-creation. This will help companies to enhance customer satisfaction, loyalty, brand perception, and financial outcomes, leading to improved overall business performance. The Marketing Co-Creation Mix can contribute to the theoretical development of marketing by providing a comprehensive and systematic approach to integrating co-creation principles into the marketing mix. Introducing this framework fills a gap in current marketing theories by acknowledging the growing importance of customer involvement and collaboration. Scholars are constantly seeking new concepts that can enhance our understanding of marketing phenomena. The major limitation of the study was dealing with an under-explored topic. Although snowball sampling has been used to locate new articles that provide insight into the co-creation concept’s early growth, the snowball sampling of the article selection method may be seen as a limitation. The outcomes can serve as pedagogical applications through an integration in marketing curricula. This creates future opportunities for scholars to conduct empirical studies and develop new measurement scales for investigating the impact of different co-creation strategies on consumer behaviour, examining the role of technology in facilitating cocreation, or studying the effects of co-created experiences on brand loyalty. The user intention to continuously use and accept the latest technology is quite evident in the present times. This may hold good for a long time and demands for future empirical research on newer technologies with co-creation possibilities in Artificial Intelligence and machine-driven tools used for marketing in tourism upcoming digital space. Future research should focus on measuring the Return on Investment (ROI) received by tourism
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service providers after adopting co-created traditional and social media marketing along with the usage of cutting-edge social media tools and co-creation capacities can empower businesses to handle serious new issue like Covid-19 which can only be managed and mitigated if the co-creation mix is embedded in the marketing processes of tourism businesses.
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A Study on Consumer’s Behaviour Towards Fast Moving Consumer Goods with Special Reference to Thanjavur District in the State of Tamil Nadu P. Kumarasamy(B)
and V. Francy Sheeba
Department of Commerce (UG), Kristu Jayanti College (Autonomous), Bengaluru , Karnataka 560077, India {kumarasamy,francy}@kristujayanti.com
Abstract. Consumers are the gods of the business and their behaviour is most important in Marketing including in FMCGs. A lot of factors influence the buying behaviour of the consumers in the globalized markets. Wants and Needs are changed often in the day-to-day lives of the consumers. The contribution of Fast Moving Consumer Goods to the national GDP is significant. As a result, finding the changes in the behaviour of consumers toward FMCGs is unavoidable. This study aims to examine the purchasing behaviour of the consumer towards Fast Moving Consumer Goods based on the Age, Gender, Education, and Occupation of the respondents in Thanjavur District in the state of Tamilnadu. Keywords: Consumer Behaviour · Fast Moving Consumer Goods (FMCG) · Consumer Buying Behaviour
1 Introduction Fast-moving consumer goods (FMCG) called Consumer packaged Products (CPG) sold quickly and nearly at the lowest cost. Examples include non-durable goods such as packaged food, beverages, toiletries, etc. The FMCG Sector is the fourth largest sector in India and contributes 20% of the national GDP. Further, the fourth sector participates in employing the people in our nation and plays a major part in the day-to-day life of the public as well. In recent decades, FMCG sectors have found tremendous growth in our country with improvements in literacy, income, culture, and changes in family structure, etc. Companies launch many new products and attract consumers in the very competitive market. Companies changed their style of marketing their products through online orders and delivery directly to the consumer’s place. So companies concentrate on maintaining and categorizing qualities, quantities, Packaging, Pricing, etc. They try to focus on the factors that influence the buying behaviour of consumers. Companies have understood very well the important factors influencing the behaviours of consumers. This study attempts to find the consumer’s behavior towards Fast Moving Consumer Goods in Thanjavur District of Tamilnadu. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 157–166, 2024. https://doi.org/10.1007/978-3-031-53998-5_13
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2 Review of Literature Sulekha, Dr. Kiran Mor (2013) ‘An Investigation of Consumer Buying Behavior for FMCG: An Empirical Study of Rural Haryana’ reveals that consumers in rural areas focus on the quality, price, reliability, and other critical aspects of the fast-moving consumer Goods. Rural Marketers should adopt innovative marketing strategies for their sales promotional activities. FMCG needs a special kind of marketing mix to the rural marketing that expects low prices of goods. Sangeetha M., Dr. Gurupandi M ‘Consumer Behaviour on Fast-Moving Consumer Goods’ reveals that the market relating to fast-moving consumer goods does not depend on the needs of the consumer but only on their wants & preferences of. Post-purchase decisions and Alternative Purchase Decisions are taken while purchasing the goods in the market of FMCG. Dr. Venkatasalam M., Karunakaran C (2021) ‘A Study on Consumer Perception towards Brand Loyalty of FMCG Products in Dharamapuri District’ concluded that Advertisement is the major tool (108) that promotes the products and Head of the family (Husband and Wife) initiate the needs of the fast-moving consumer goods in the society. Brand loyalty is highly influenced by the perception of FMCG. Mahaboob Basha A.M (2016) ‘A study on consumer behaviour towards FMCG goods - An empirical study with special reference to SPSR Nellore district of Andhra Pradesh’ reveals that Marketers should encourage regular buyers by way of sales promotional offers. Helen. J., Dr. Darling Selvi V (2022) Consumer Behaviour on Fast-Moving Consumer Goods dealt with 385 respondents and concluded that there is a strong relationship between features of the products such as price, products, location, etc., and Psychological state. Dr. Rifaya Meera1 M., Mahalakshmi R., Padmaja R. (2017) Consumer Behaviour towards FMCG Products: A Study with Special Reference to Rajapalayam suggested that the company should concentrate on user-friendly online shopping procedures for their customer. Markand Wath, (2020) “Factors Influencing Purchase of FMCG by Customers in Jalgaon District” concluded the significant difference behind the consumer buying behaviour towards FMCG. Factors of Product availability, packaging, affordability, and Quality followed by the long-lasting nature of products are the major factors behind the selection of the products in the research area. Dr. Priyadharshini T., Karthick T. (2021) “A Study on Consumer Behaviour towards FMCG Durable Goods with Special Reference to Coimbatore City” reveals that Customers are aware of the needs of the products, and information of products. Consumers consider fast-moving goods based on the brands and loyalty of the products. Hemanth, K. P., & Shruthi, V. K. (2013). Determinants of consumer buying behaviour: A theoretical framework of rural India reveals that brand name, Price, Packaging, and availability were the important factors influencing the buying decisions of the rural consumer towards FMCGs. The study focused further on the mode of communication, brand switching reasons, patterns of billing, and level of satisfaction with the FMCGs among rural consumers.
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Kumar, N. A., & Joseph, J. (2014). A Study on consumer behavior towards FMCG products among the rural-suburban Hubs of Ernakulum states that quality and pricing are the major factors in the purchasing decision of the respondents in the research area. Education is one of the main factors that construct one’s perception and measure the value of a brand. Further Income and Marital Status of the respondents influence in the purchasing decision of FMCG goods. 2.1 Objectives of the Study • To study the consumer buying behavior towards Fast Moving Consumers through reviews • To study the consumer buying behavior towards Fast Moving Consumer Goods in Thanjavur District in Tamilnadu • To analyze and find the Demographic factors that influence the buying behavior of the purchaser towards Fast Moving Consumer Goods in Thanjavur District in the state of Tamilnadu. 2.2 Need of the Study There is a need to study and understand consumer behavior towards fast-moving consumer goods based on geographical location with demographical factors as FMCG becomes a part of the day-to-day life of people. Studying the factors influencing buying behavior will also help marketers understand consumers and their behavior toward consumer goods. 2.3 Limitations of the Study The study area was Thanjavur District which has 3 revenue divisions and 9 Taluk 900 villages are included. The objectives and findings are strictly restricted to the research area only. Findings and conclusions may vary if we apply the same in the other areas.
3 Research Methodology This research adopts the Non-Probability sampling Method – Convenient Sampling and Data is collected through the Google Questionnaire from 150 respondents. Primary and Secondary data have been taken for analysis and interpretation to find reliable outputs. Research tools in the research are Percentage Method, and Chi-Square to test the hypothesis. The questionnaire which is set with close-ended and open-ended Questions was followed to collect the primary data among the respondents in the research area. Thanjavur District was taken to conduct the research and to analyze the consumer’s behaviour towards FMCG.
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3.1 Research Hypothesis • No significant association of Gender with consumer behaviour towards Fast Moving Consumer Goods in the research area. • No significant association of Age with consumer behaviour towards Fast Moving Consumer Goods in the research area. • No significant association of Education with consumer behaviour toward Fast Moving Consumer Goods in the research area. • No significant association of Occupation with consumer behaviour towards Fast Moving Consumer Goods in the research area.
4 Data Analysis and Interpretation 4.1 Frequency Analysis of Demographical Factors of the Respondents Towards FMCGs in Thanjavur District in the State of Tamilnadu Results: Table 1 shows that a maximum of respondents belong to postgraduate and professional degree holders in the research, below the secondary education is on is 66% of respondents belong to Income Level less than 1 lakh and 53% percent respondents belong to 3 lakhs and more. As per behavior is concerned, 33.8% and 40% of respondents belong to Good Quality or Price on the fast-moving consumer goods. 4.2 Chi-Square Test Analysis of Gender of the Respondents and Behaviour Factors Towards FMCG Hypothesis H0: No significant association of Gender with consumer behaviour towards Fast Moving Consumer Goods in the research area. Null Hypothesis H1: Significant association of Gender with consumer behaviour towards Fast fast-moving consumer Goods in the research area. Results: Table 2 shows the analysis of Gender of the respondents and consumer buying behaviour towards fast-moving consumer goods. As the calculated value using Chi-Square Test (16.55) in the 4 degrees of freedom is greater than the p-value (9.488) at 0.05%. The null hypothesis is rejected. Further, the Alternative hypothesis is accepted and states that there is a significant association between Gender and Buying behaviour of the respondents towards fastmoving consumer goods in Thanjavur District in the state of Tamilnadu. 4.3 Chi –Square Test Analysis of the Age of the Respondents and Behaviour Factors Towards FMCG Hypothesis H0: No significant association of Age with consumer behaviour towards Fast Moving Consumer Goods in the research area. Null Hypothesis H1: Significant association of Age with consumer behaviour towards Fast Moving Consumer Goods in the research area. Results: Table 3 shows the analysis of the age of the respondents and consumer buying behaviour towards fast-moving consumer goods. As the calculated value using
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Table 1. Demographical Factors and Behavioural Factors of respondents towards FMCGs Variables Gender factor Age factor
Education
Income Level
Occupation
Buyer Behaviour
Frequency
Percent
Valid percent
Cum percent
Male
82
51.3
51.3
51.3
Female
78
48.8
48.8
100.0
Below 20
30
18.8
18.8
18.8
Between 21 –40
82
51.3
51.3
70.0
Above 40
48
30.0
30.0
100.0
Up to H.SC
2
1.3
1.3
1.3
Under Graduate
24
15.0
15.1
16.4
Post Graduate
67
41.9
42.1
58.5
Professional Degree
66
41.3
41.5
100.0
Below 1 lakh
59
36.9
36.9
36.9
Between 1 lakh–2 lakhs
31
19.4
19.4
56.3
Between 2 lakhs–3 lakhs
17
10.6
10.6
66.9
Above 3 Lakhs
53
33.1
33.1
Brand Ambassador
10
6.3
6.3
6.3
100.0
Brand
25
15.6
15.6
21.9
Healthy
21
13.1
13.1
35.0
Good Quality
54
33.8
33.8
68.8
Price
50
31.3
31.3
100.0
Brand Ambassador
10
6.3
6.3
6.3
Brand
25
15.6
15.6
21.9
Healthy
21
13.1
13.1
35.0
Good Quality
54
33.8
33.8
68.8
Price
40
25.0
25.0
100
Sources: Primary
Chi-Square Test (37.475) in the 4 degrees of freedom is greater than the p-value (15.507) at 0.05%. The null hypothesis is rejected. Further, the Alternative hypothesis is accepted and states that there is a significant association between age and buying behaviour of the respondents towards fast-moving consumer goods in Thanjavur District in the state of Tamilnadu.
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Table 2. Chi-Square Test – Gender and Buying Behaviour of the respondents towards FMCG Gender
Behaviour Factor Brand
Healthy
Good Quality
Price
Chi.Sqre Value
df
Brand Ambassador
Asy. Sig. (2-sided)
Male
8
12
14
33
15
16.55
4
0.002
80.0%
48.0%
66.7%
61.1%
30.0%
Female
2
13
7
21
35
20.0%
52.0%
33.3%
38.9%
70.0%
Output: SPSS
Table 3. Chi-Square Test – Age and Buying Behaviour of the respondents towards FMCG Age Factor
Behaviour Factor Healthy
Good Quality
Price
Chi.Sqre Value
df
Brand
Asy. Sig. (2-sided)
4
2
9
14
37.475
8
0.001
10.0%
16.0%
9.5%
16.7%
28.0%
4
18
11
16
33
40.0%
72.0%
52.4%
29.6%
66.0%
Brand Ambassador
Below 20 1 Between 21–40
Above 40 5 50.0%
3
8
29
3
12.0%
38.1%
53.7%
6.0%
Output: SPSS
4.4 Chi –Square Test Analysis of Education of the Respondents and Behaviour Factors Towards FMCG Hypothesis H0: No significant association of education with consumer behaviour towards Fast Moving Consumer Goods in the research area. Null Hypothesis H1: Significant association of education with consumer behaviour towards Fast Moving Consumer Goods in the research area. Results: Table 4 shows the analysis of the education of the respondents and consumer buying behaviour towards fast-moving consumer goods. As the calculated value using Chi-Square Test (24.018) in the 4 degrees of freedom is greater than the p-value (21.026) at 0.05%. The null hypothesis is rejected. Further, the Alternative hypothesis is accepted and states that there is a significant association between education and buying behaviour of the respondents towards fastmoving consumer goods in Thanjavur District in the state of Tamilnadu.
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Table 4. Chi-Square Test – Education and Buying Behaviour of the respondents towards FMCG Education
Behaviour Factor
Up to H.SC
Brand
Healthy
Good Quality
Price
Chi.Sqre Value
df
Brand Ambassador
Asy. Sig. (2-sided)
1
0
0
1
0
24.018
12
0.2
10.0%
0.0%
0.0%
1.9%
0.0%
Under Graduate
0
5
4
6
9
0.0%
20.0%
19.0%
11.1%
18.4%
Post Graduate
2
12
4
22
27
20.0%
48.0%
19.0%
40.7%
55.1%
Professional Degree
7
8
13
25
13
70.0%
32.0%
61.9%
46.3%
26.5%
Output: SPSS
4.5 Chi –Square Test Analysis of the Annual Income of the Respondents and Behaviour Factors Towards FMCG Hypothesis H0: No significant association of annual income with the consumer behaviour towards Fast Moving Consumer Goods in the research area. Null Hypothesis H1: Significant association of annual income with the consumer behaviour towards Fast Moving Consumer Goods in the research area. Table 5. Chi-Square Test – Annual Family Income Level and Buying Behaviour of the respondents towards FMCG Income Level
Behaviour Factor Brand Ambassador
Brand
Healthy
Good Quality
Below 1 lakh
0
7
4
0.0%
28.0%
19.0%
Between 1–2 lakhs
2
6
2
12
9
20.0%
24.0%
9.5%
22.2%
18.0%
Between 2 2 lakhs–3 20.0% lakhs
4
2
7
2
16.0%
9.5%
13.0%
4.0%
6
8
13
23
3
60.0%
32.0%
61.9%
42.6%
6.0%
Above 3 Lakhs
Output: SPSS
df
Price
Chi.Sqre Value
Asy. Sig. (2-sided)
12
36
59.319
12
0.001
22.2%
72.0%
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Results: Table 5 shows the analysis of annual family income of the respondents and consumer buying behaviour towards fast-moving consumer goods. As the calculated value using Chi-Square Test (59.319) in the 12 degrees of freedom is greater than the p-value (21.026) at 0.05%. The null hypothesis is rejected. Further, the Alternative hypothesis is accepted and state that there is a significant association between annual family income and buying behaviour of the respondents towards fast-moving consumer goods in Thanjavur District in the state of Tamilnadu. 4.6 Chi –Square Test Analysis of the Annual Income of the Respondents and Behaviour Factors Towards FMCG Hypothesis H0: No significant association of occupation with the consumer behaviour towards Fast Moving Consumer Goods in the research area. Null Hypothesis H1: Significant association of occupation with the consumer behaviour towards Fast Moving Consumer Goods in the research area. Table 6. Chi-Square Test – Occupation and Buying Behaviour of the respondents towards FMCG Occupation
Brand
Healthy
Good Quality
Price
Chi.Sqre Value
df
Brand Ambassador
Asy. Sig. (2-sided)
Farmer
0
1
0
1
6
32.315
20
0.4
0.0%
4.0%
0.0%
1.9%
12.0%
Professional
4
9
10
20
11
40.0%
36.0%
47.6%
37.0%
22.0%
5
9
6
19
12
50.0%
36.0%
28.6%
35.2%
24.0%
Student
1
2
2
7
3
10.0%
8.0%
9.5%
13.0%
6.0%
Others
0
4
2
5
18
0.0%
16.0%
9.5%
9.3%
36.0%
Business
0
0
1
2
0
0.0%
0.0%
4.8%
3.7%
0.0%
Employee
Behaviour Factor
Output: SPSS
Results: Table 6 shows the analysis of the occupation of the respondents and consumer buying behaviour towards fast-moving consumer goods. As the calculated value using Chi-Square Test (32.315) in the 20 degrees of freedom is greater than the p-value (31.41) at 0.05%. The null hypothesis is rejected. Further, the Alternative hypothesis is accepted and state that there is a significant association between occupation and buying behaviour of the respondents towards fastmoving consumer goods in Thanjavur District in the state of Tamilnadu.
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5 Conclusion Fast Moving Consumer Goods has grown fast in the market in recent years as a result of changes in marketing strategies. Demands for FMCG gradually increase in the rural markets. Media and competitors play a major role in the buying behaviour of the products among consumers. Availability of information, products, alternatives, and money flow among the consumers takes to the FMCG Markets. Further, Male respondents prefer Brand ambassador goods around 80% but 70% of Female respondents prefer FMCG goods on the Price of the Products. 60 years and more of respondents prefer branded products (53.7%) but the Price of the goods is taken by the respondents aged 41–60 years old. As per the annual income of the respondents, consumers whose income comes under 1 lakhs buy the products by comparing the price of goods but if income is more than 3 lakhs, they buy by considering the health and Quality of the Products. Further, as far as the occupation of the respondents and buying behaviour are concerned, Employees and Professionals prefer to buy Quality (35.2% & 20%) and Healthy products (10%). Here, the research concludes that demographical factors of Age, Gender, Educational level, Income, and Occupation of the respondents are the factors that influence the buying behaviour of the consumers towards Fast Moving Consumer Goods in Thanjavur District in the state of Tamilnadu. It suggests that marketers can categorize FMCG products based on the demographical factors of the respondents while making decisions regarding advertisements, marketing, sales, and promotional activities.
6 Future Research The research study of consumer behaviour towards fast-moving consumer goods was conducted to analyze the behavior and influencing factors in the purchase decisions of the buyer in a particular district of the state of Tamilnadu. The suggestions and conclusions that we derived from this research cannot be applied or suitable to another area or years. Further, Research scholars can analyze the factors that influence the intentions and satisfactions of FMCG Goods buyers in the future.
References Sulekha., Mor, K.: An investigation of consumer buying behavior for FMCG: an empirical study of rural Haryana. Global J. Manag. Bus. Res. Mark. 13(3), 2013 (2013). Online ISSN: 2249-4588 Sangeetha, M., Gurupandi, M.: Consumer behaviour on fast-moving consumer goods. Emerg. Trends Bus. Manag. 12–16 (2023). ISBN: 978-93-94293-14-4 Venkatasalam, M., Karunakaran, C.: A study on consumer perception towards brand loyalty of FMCG products in Dharamapuri district. Int. J. Aquat. Sci. 12(02), 4858–4868 (2021). ISSN: 2008–8019 Mahaboob Basha, A.M.: A study on consumer behaviour towards FMCG goods - An empirical study with special reference to SPSR Nellore district of Andhra Pradesh. Int. J. Adv. Technol. Eng. Sci. 04(08), 289–295 (2016) Helen, J., Darling Selvi, V.: Consumer behaviour on fast-moving consumer goods. Int. J. Manag. (IJM), 13 (03), 214–221 (2022). ISSN: 0976–6510. https://doi.org/10.17605/OSF.IO/QZMV4
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Rifaya Meera1, M., Mahalakshmi, R., Padmaja, R.: Consumer behaviour towards FMCG products: a study with special reference to Rajapalayam. Res. J. Humanit. Soc. Sci. 8(1), 69–80 (2017).https://doi.org/10.5958/2321-5828.2017.00011.0 Wath, M.: Factors Influencing Purchase of FMCG by Customers in Jalgaon District. Int. J. Res. Eng. IT Soc. Sci. 10(02), 13–16 (2020). ISSN 2250–0588 Priyadharshini, T., Karthick, T.: A study on consumer behaviour towards FMCG durable goods with special reference to Coimbatore City. EPRA Int. J. Multi. Res. (IJMR) 7(7), 17–20 (2021).https://doi.org/10.36713/epra2013 Hemanth, K.P., Shruthi, V.K.: Determinants of consumer buying behaviour: a theoretical framework of rural India. J. Exclusive Manag. Sci. 2(3), 1–16 (2013) Kumar, N.A., Joseph, J.: A study on consumer behavior towards FMCG products among the rural-suburban Hubs of Ernakulum. J. Global Econ. 2, 1–10 (2014)
The Effectiveness of Leadership Style on Organisational Innovativeness in India Hazel Vakharia(B) and Sruthi Sivaraman Department of Psychology, Kristu Jayanti College, Bengaluru, Karnataka, India [email protected]
Abstract. The aim of this study is to assess the relationship between leadership effectiveness and organizational innovativeness with respect to age and gender. Data was collected from 25 employees working in various sectors in India. The Leadership Effectiveness Scale and Organizational Innovativeness Scale were used for data collection. SPSS21 software was employed for data analysis. The results indicated a positive correlation between leadership effectiveness and organizational innovativeness. Furthermore, there were no significant differences in leadership effectiveness and organizational innovativeness concerning age and gender. Future research could explore this topic on a larger scale to provide deeper insights into leadership effectiveness in the Indian context. Additionally, internal organizational studies could replicate this research to examine the impact of leadership decisions within specific organizations. Keywords: Leadership effectiveness · organizational innovativeness · gender · age · India
1 Introduction In today’s challenging and dynamic business environment, organizations face a pressing and multifaceted challenge – retaining and ensuring the contentment of their employees [1]. As the global landscape continues to evolve rapidly, organizations grapple with uncertainties that can have far-reaching consequences. Effective leadership emerges as a linchpin, a guiding force, steering these organizations toward sustainable progress. This critical role of leadership in uncertain times is underscored by Bernard’s definition, which characterizes leadership as “the quality of an individual’s behavior as they guide people in organized work activities” [2]. Beyond mere guidance, leadership embodies the complex interplay of traits and qualities that distinguish individuals who ascend to positions of authority within organizations. This paper is structured as follows: Sect. 2 presents a review of the literature, Sect. 3 outlines the objectives and hypotheses, Sect. 4 details the research methods, Sect. 5 provides the results and discussion, Sect. 6 highlights limitations and future research directions, and Sect. 7 offers the conclusion.
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 167–174, 2024. https://doi.org/10.1007/978-3-031-53998-5_14
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2 Review of Literature One prominent theory that underlines the significance of leadership in organizational dynamics is the contingency theory. This theory posits that there is no universal, onesize-fits-all approach to leadership that can be effective in all situations [3]. Instead, it acknowledges the fluid and context-dependent nature of leadership. Leaders must carefully consider various situational factors when determining the most suitable course of action, recognizing that what works in one context may not work in another. In essence, leadership attributes encompass personal qualities such as the ability to motivate others, provide clear guidance, foster high morale, enhance the working environment, and catalyze decisive action. Importantly, these leadership skills are not fixed traits but can be developed and honed over time through practice and learning. The effectiveness of leadership can be measured by a leader’s capacity to influence their followers effectively, ultimately facilitating the achievement of the organization’s objectives [4]. In addition to effective leadership, another crucial organizational trait is innovativeness. Rogers and Shoemaker define innovativeness as “the extent to which an individual is significantly ahead in adopting innovations compared to other members of their group” [4]. Innovativeness is not a fleeting attribute; rather, it is an enduring characteristic found in forward-thinking and adaptable firms. Subramanian and Nilakanta further emphasize that innovative behavior is a consistent and defining feature of innovative organizations [5]. Interestingly, the impact of leadership style extends beyond guiding daily operations; it exerts a substantial influence on innovation across various industries [6]. Research conducted in a Japanese manufacturing firm, where employee involvement is a cornerstone of the company culture, revealed that technical expertise significantly influences employee innovativeness. Moreover, the workplace culture plays a vital role as a moderating factor in the relationship between technical knowledge and employee innovativeness [7]. This research underscores the intricate interplay between leadership, innovation, and organizational culture. In summary, the complex relationship between leadership, innovation, and employee contentment is central to the modern organizational landscape. Effective leadership is not a one-size-fits-all concept but a dynamic and context-dependent skillset that plays a pivotal role in guiding organizations through turbulent times. As we delve deeper into the literature, we will explore how various leadership styles and strategies impact innovation and, consequently, influence an organization’s capacity to thrive in an ever-changing world.
3 Objectives and Hypotheses 3.1 Objectives The aim of the study is to assess the relationship between leadership effectiveness and organizational innovativeness. In this rapidly changing world, it is difficult to keep up with the current trends. It becomes important for organizations to re-skill and learn new technology which comes from employees’ innovation capabilities and interests. The type of leader and the effectiveness it has on the employee and organization.
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3.2 Hypotheses H01 : There is no relationship between organizational innovativeness and leadership effectiveness. H02 : There is no difference in organizational innovativeness based on age. H03 : There is no difference in leadership effectiveness based on age. H04 : There is no difference in organizational innovativeness based on the years of experience. H05 : There is no difference in leadership effectiveness based on the years of experience.
4 Method The research was conducted during a recession period among employees aged 21 to 40, representing various sectors across India. A convenient sampling method was employed, involving the participation of twenty-five employees who provided data through a Google Form survey. The data collection utilized the Leadership Effectiveness Scale, consisting of 79 items measured on a 5-point Likert Scale [8]. The reliability of this scale was assessed, resulting in a test-retest reliability coefficient of .77. Furthermore, split-half reliability was determined using both the odd and even method, yielding a coefficient of .78. When using the first half versus the second half method, the split-half reliability coefficient was .80. Additionally, the Organizational Innovativeness scale, designed by Somonnoy Ghosh and Bhupen K. Srivastava (2018) [9], comprised 22 items, measured on a 5-point interval scale. The Cronbach’s alpha coefficient, which measures the internal consistency of the scale, was calculated for the general construct consisting of these 22 items and yielded a high value of 0.925. Moreover, factor-level reliability ranged from 0.766 to 0.858, indicating substantial reliability across different dimensions.
5 Results and Discussion The data collected was analyzed using the SPSS 21 version. Three outliers were identified, reducing the data-set to 22 participants. Table 1 describes the socio-demographic details of the participants. The participants were aged between 22–49, and their years of experience ranged from 0–15 years. Table 1. Demographic Details of the Participants Age
22–29
Years of experience
0–15 years
Total number of participants
6
30–39
40–49
14
2
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Table 2. Descriptive Statistics and Correlation Between Leadership Effectiveness and Organizational Innovativeness M
SD
N
Correlation coefficient
Leadership Effectiveness
317.727
25.26
22
.549**
Organisational Innovativeness
115.318
15.295
22
–
Note: **p = 0.008 < 0.01 Table 3. Significant Difference Between Age, Leadership Effectiveness, and Organizational Innovativeness df
F
Partial eta2
Sig.
Leadership Effectiveness X Age
2
1.259
.307
.117
Organisational Innovativeness X Age
2
.452
.643
.042
Table 2 presents the descriptive statistics for leadership effectiveness (M = 317.727, SD = 25.26) and organizational innovativeness (M = 115.318, SD = 15.295). The correlation coefficient was .549, indicating that leadership effectiveness and organizational innovativeness were moderately correlated (p = .0008). Table 3 shows a one-way ANOVA was performed to compare the effect of age on organizational innovativeness. A one-way ANOVA revealed that there was not a statistically significant difference in organizational innovativeness between at least two groups (F 2, 19) = .420, p = .663). Tukey’s HSD Test for multiple comparisons found that the mean value of organizational innovativeness was significantly different between 22–29, 30–39, and 40–49 (p = .042, 95% C.I. = 108.5367, 122.0997). However, there was no statistically significant difference between 22–29, 30–39, and 40–49 (p = .663). Table 4. Significant Difference Between Years of Experience, Leadership Effectiveness, and Organizational Innovativeness df
F
Sig.
Partial eta2
Leadership Effectiveness X Years of Experience
2
.356
.705
.036
Organisational Innovativeness X Years of Experience
2
.452
.653
0.45
Table 4 presents the results of a one-way ANOVA conducted to assess the impact of years of experience on organizational innovativeness. The analysis revealed that there was no statistically significant difference in organizational innovativeness among at least two groups (F (2, 19) = .452, p = .643).
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Applying Tukey’s HSD Test for multiple comparisons, it was determined that the mean organizational innovativeness values were significantly different between the age groups of 22–29, 30–39, and 40–49 (p = .677, 95% Confidence Interval = 306.5515 to 328.9031). However, no statistically significant difference was observed between the age groups of 22–29, 30–39, and 40–49 (p = .677). Table 5. Leadership Effectiveness as a Predictor of Organizational Innovativeness in Bangalore Model
Unstandardized coefficients
Standardized coefficients
B
Std. Error
Beta
(Constant)
213.391
35.815
Leadership Effectiveness
.905
.308
.549
t
Sig.
5.958
.008
2.938
Note. R2 = 0.301, Adj.R2 = 0.266, F = 8.629, p = 0.05
Table 5 shows that linear regression analysis revealed that leadership effectiveness significantly predicted organizational innovativeness by 90.5% (F (21) = 8.629, p < 0.01). The results indicated that the change in leadership effectiveness could influence the change in organizational innovativeness. Previous research in this area has suggested that leaders can directly influence their subordinates by tapping into their intrinsic motivation and their highest-level criteria, both of which are recognized as crucial drivers of creativity (Musleh, 2021) [10]. A research study’s findings emphasize the importance of organizations establishing specific criteria for selecting leaders with innovative capabilities. Furthermore, management should consider implementing performance and creativity-based reward structures, which could serve as effective tools for motivating and encouraging creative and innovative employees to enhance productivity. The research highlights that transformational leadership significantly predicts organizational innovation (García-Morales et al., 2012) [11]. A prior study concluded that transformational leadership plays a central role in driving organizational innovation. Moreover, as indicated by Gloet and Terziovski (2004) [12], human resources management procedures can exert an influence on both product and process innovation. The study underscores the significance of specific leadership variables, including a leader’s effectiveness, their ability to catalyze change in a creative manner, their interpersonal skills, and their capacity to inspire and motivate (Gilley et al., 2008) [13]. These findings suggest that leaders who possess the skills to coach and inspire their followers towards innovation are better equipped to foster innovation within their organization. The research also establishes a strong link between a leader and their subordinates, ultimately resulting in enhanced innovation (Ricard et al., 2017) [14]. Furthermore, Lewis and Ricard (2014) [15] conducted an investigation into the relationship between leadership and innovation, finding that a leader’s personality traits significantly correlate with the organization’s level of innovativeness. It is noteworthy that while previous studies have explored various factors impacting organizations, the current study specifically
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examines leadership effectiveness in the context of age and years of experience within the Indian setting.
6 Limitations and Implications 6.1 Limitations 1. This study could be conducted on a larger population for better understanding of the relationship between the variables. 2. The relationship between leadership effectiveness and organizational innovativeness with respect to gender can be carried out in future studies. 6.2 Implications 1. The findings of this study have practical implications for organizations in India and beyond. Understanding the positive correlation between leadership effectiveness and organizational innovativeness suggests that organizations should invest in leadership development programs to enhance leadership skills among their employees. This, in turn, can lead to increased innovativeness within the organization. 2. The lack of significant differences in the relationships between age and organizational innovativeness or age and leadership effectiveness implies that organizations should focus on leadership development regardless of the age of their employees. Leadership skills can be beneficial at all career stages. 3. While this study focused on age and years of experience, future research could explore other demographic factors such as education level and cultural background to gain a more comprehensive understanding of their impact on leadership effectiveness and organizational innovativeness. 4. The study’s findings highlight the importance of transformational leadership in driving organizational innovation. Organizations should consider adopting transformational leadership practices and providing training to develop these skills among their leaders. 5. Further research could delve into the specific leadership behaviors and strategies that are most effective in fostering innovation within organizations, providing actionable insights for leaders and organizations seeking to enhance their innovativeness.
7 Conclusion The primary focus of this study was to investigate the relationship between leadership effectiveness and organizational innovativeness. The results indicate a moderate positive correlation between leadership effectiveness and organizational innovativeness. Furthermore, the regression analysis conducted in the study reveals that leadership effectiveness is a strong predictor of organizational innovativeness, accounting for 90.5% of the variance in organizational innovativeness scores. In addition, the study’s findings suggest that there are no significant differences observed in the relationships between age and organizational innovativeness or age and leadership effectiveness. Similarly, no statistically significant differences were found in
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the relationships between years of experience and organizational innovativeness or years of experience and leadership effectiveness. Future research could expand on this study by investigating the relationship between leadership effectiveness and organizational innovativeness with respect to gender. Additionally, exploring the impact of leadership style on innovation in different cultural contexts could provide valuable insights. Moreover, studying the effectiveness of leadership development programs in enhancing leadership skills and their subsequent influence on organizational innovation is a potential avenue for future research.
Conflict of Interest. The authors of this article do not have any pertinent financial or non-financial interests to report. There are no conflicts of interest among the author.
References 1. Dubey, P., Pathak, A.K., Sahu, K.K.: Assessing the influence of effective leadership on job satisfaction and organisational citizenship behaviour. Rajagiri Manag. J. 17(3), 221–237 (2023). https://doi.org/10.1108/RAMJ-07-2022-0108 2. Truptimayee: What Is Leadership?. https://www.economicsdiscussion.net/management/ leadership/what-is-leadership/32116#:~:text=According%20to%20Bernard%20Keys%20a nd,continuous%20process%20of%20influencing%20behaviour (n.d.) 3. Gupta, A.: A Study of Leadership Effectiveness of Principals of Secondary Schools. Int. J. Creative Res. Thoughts 10(4), 905–910 (2020). ISSN 2320–2882, https://portal.issn.org/res ource/ISSN/2320-2882 4. Rogers, E.M., Shoemaker, F.F.: Communication of Innovations; A Cross-Cultural Approach (1971) 5. Subramanian, A., Nilakanta, S.: Organizational innovativeness: exploring the relationship between organizational determinants of innovation, types of innovations, and measures of organizational performance. Omega 24(6), 631–647 (1996) 6. Cuza, A.: The Impact of Leadership on Innovation in Organizations. Diamond Publications (2021). https://www.dpublication.com/wp-content/uploads/2021/01/07-353.pdf 7. Nallaluthan, K., Indiran, L., Dalayga, B., Baskaran, S.: Employees’ innovativeness in manufacturing industry: a case study from a Japanese firm. Int. J. Acad. Res. Bus. Soc. Sci. 11(8), 26–50 (2021) 8. Taj, H.: Manual for Leadership Effectiveness Scale. Agara, National Psychological Corporation, Bhargava Bhavan (2010) 9. Ghosh, S., Srivastava, B.K.: Rescaling organizational innovativeness: the Indian context. Glob. Bus. Rev. 19(1), 241–255 (2018). https://doi.org/10.1177/0972150917714112 10. Musleh, A.A.: The influence of leadership behaviour and skills in stimulating innovation in organizations. Int. J. Entrepreneurship Manag. Practices 4(16), 38–54 (2021) 11. García-Morales, V.J., Jiménez-Barrionuevo, M.M., Gutiérrez-Gutiérrez, L.: Transformational leadership influence on organizational performance through organizational learning and innovation. J. Bus. Res. 65(7), 1040–1050 (2012). https://doi.org/10.1016/j.jbusres.2011. 03.005 12. Gloet, M., Terziovski, M.: Exploring the relationship between knowledge management practices and innovation performance. J. Manuf. Technol. Manag. 15(15), 402–409 (2004) 13. Gilley, A., Dixon, P., Gilley, J.W.: Characteristics of leadership effectiveness: implementing change and driving innovation in organizations. Hum. Resour. Dev. Q. 19(2), 153–169 (2008)
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14. Ricard, L.M., Klijn, E.H., Lewis, J.M., Ysa, T.: Assessing public leadership styles for innovation: a comparison of Copenhagen, Rotterdam, and Barcelona. Public Manag. Rev. 19(2), 134–156 (2017) 15. Lewis, J., Ricard, L.M.: Innovation Capacity in the Public Sector: Structures, Networks, and Leadership (2014)
Trade in Agro-Food Products Between Ukraine and African Countries Dukhnytskyi Bogdan1 , Melnychenko Svitlana2(B) , Mamchur Volodymyr1(B) Lezhepokova Victoriia3 , Bezhenar Inna1 , and Sydor Bogdan1 1 National Research Center “Institute of Agrarian Economics”, 10, Heroiv Oborony Str.,
Kyiv 03127, Ukraine {mamchur111,inna_bezhenar}@ukr.net 2 Department of Hotel and Restaurant Business and Tourism, National University of Bioresources and Nature Management of Ukraine, 15, Heroiv Oborony Str., Kyiv, Ukraine [email protected] 3 Department of World Economy, State University of Trade and Economics, 19, Kyoto Str., Kyiv-156, Kyiv 02156, Ukraine [email protected]
Abstract. For Ukraine, foreign sales of agricultural raw materials and food industry products are traditionally the main source of income, providing the lion’s share of total export revenues. In recent years, the product structure of our external supplies has been very clearly formed, which is not too diversified, but finds its consumer in all corners of the planet. One of the important regions where there is a stable demand for Ukrainian food is Africa. Despite the lower turnover of trade with them compared to the markets of the European Union and Asia, Africa in many ways does not have a full-fledged alternative. This is based both on the specifics of the demand of local sales markets, and on various exotic products that it offers to the Ukrainian consumer due to the impossibility of their production in our natural and climatic conditions. At the same time, due to the greater geographical distance of African countries, trade with them is more sharply affected due to the application of restrictions, both during the COVID-19 pandemic and in the event of force majeure, in particular, the war in Ukraine. There is a significant dependence of the results of export and import of agri-food products on the intensity of trade operations with Egypt, some countries of North Africa and others. Until now, we do not have signed and functioning bilateral agreements on free trade zones. In general, the region is characterized by high instability in the socio-economic plan, the presence of constant risks for the organization and conduct of business activities. There is a noticeable difference between different subregions of the continent in the levels of economic development and income of the population. In contrast to such factors, Africa is recognized by many experts as the most promising and fast-growing part of the world, offering interested parties a number of interesting opportunities. Therefore, the need for a more detailed study of the region, especially regarding the potential of agricultural trade with Ukraine, is becoming increasingly urgent. Keywords: agriculture · international trade · food security · Africa · diversification · potential
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 175–184, 2024. https://doi.org/10.1007/978-3-031-53998-5_15
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1 Formulation of the Problem According to the existing classification, there are more than 50 countries and territories in Africa. Among all regions of the world, it is the most intensively growing in terms of population - according to the latest available data, 1.4 billion people already live here [1]. However, typical structural problems do not disappear over the course of decades, although the world community makes significant efforts to do so. Among the urgent tasks, it is necessary to fight hunger, social inequality, low technological development, political instability, and constant military conflicts. A higher standard of living is inherent in the countries of North Africa (due to the proximity to the borders of the European Union), the Republic of South Africa and some others rich in natural resources and minerals. The agricultural sector of both the entire region and the absolute majority of states mainly serves to meet the needs of their own food markets, and participation in international trade acts as a supplement to the existing supply. The peculiarities of the local climate make it possible to offer to the global market such unique products that are not widely distributed or are not cultivated anywhere at all - cocoa beans, coffee, tea, tobacco, some exotic fruits and nuts. In terms of the African continent, the direction of crop production is dominant, the importance of animal husbandry in agriculture is not so important. Naturally, Africa is highly dependent on external food supplies, including conventional imports and targeted aid under international programs. In parallel with this, many global business structures are mastering niche markets on the continent, which are still small in terms of capacity, but bring high revenues and have growth potential. South Sudan is located in Africa, which is officially recognized as the newest state in the world, having gained independence in 2011. Since the diversification of the commodity and geographical structure of food exports, which are almost unchanged, is becoming more and more relevant for Ukraine, the study of Africa as a whole and its individual states from the point of view of import needs is necessary for further strategy and building priorities in terms of current sales markets.
2 Literature Review and Methodology The scientific and informational basis of this study were thematic publications of Ukrainian and foreign scientists, articles and reports from various journalistic resources, statistical data of the State Statistics Service of Ukraine, the State Customs Service of Ukraine, specialized analytical materials of the Food and Agriculture Organization of the United Nations (FAO), the International Trade Center (ITS), own generalizations of interpretation and evaluation. The purpose of the article is to study the current state of trade in agri-food products between Ukraine and African countries, highlighting its most important aspects and outlining opportunities for further optimization. During the research and detailing of foreign trade in agri-food products of Ukraine with African countries, the following methods were applied: theoretical generalization - to describe the key features of the region as a whole with an emphasis on its growing population and the state of development of the agricultural sector, characteristics of total agricultural trade over the last period, compliance with existing needs and objective
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capabilities; analysis and synthesis - for a detailed review of the state of mutual food exports and imports for 2018–2022, selection of the most important commodity positions and partner countries; comparative assessment - to find and explain the difference in the main indicators of trade under the influence of actual factors of global and regional origin in relation to specific time periods of their occurrence; historical - to indicate the systemically formed structure of Ukrainian agricultural exports over a long period, priority directions of import, a list of problematic segments of the system of African countries that have an impact on the economy, geopolitics, and intra-regional relations; graphic and tabular - for optimal visual display of statistical data of this scientific study.
3 Results of the Investigation African countries traditionally have a negative balance of foreign trade in agro-food products. According to the results of 2022, the region’s total exports amounted to almost 71 billion dollars, while imports exceeded 108 billion dollars. During the last fiveyear period, which included international trade restrictions related to the coronavirus pandemic, as well as the negative consequences of the Russian invasion of Ukraine, African countries gradually increased the value indicators of agricultural trade, because in 2018 their exports amounted to 61 billion dollars, and imports slightly exceeded 87 billion dollars [2]. If we talk about the regional leaders in agri-food export, then last year the largest sales to foreign markets were made by the Republic of South Africa, Morocco, Ivory Coast, Egypt, Kenya and Ghana. The main importers of agricultural products among African countries in 2022 were Egypt, Algeria, Morocco, South Africa, Nigeria and Ethiopia (Table 1). For the vast majority of states in the region, a typical situation is when agricultural exports are much inferior to imports, that is, this indicates not only a negative balance, but often demonstrates the real dependence of their domestic food markets on supplies from abroad. A very small number of countries have a positive balance of foreign sectoral trade. Among them are, in particular, South Africa and Ivory Coast, which are leading exporters in Africa. Table 1. African countries in international food trade (2022). The largest exporters
Export value, million dollars
The largest importers
Import value, million dollars
South Africa
12981
Egypt
17245
Morocco
8231
Algeria
10540
Ivory Coast
7314
Morocco
10096
Egypt
6690
South Africa
7418
Kenya
4038
Nigeria
5585
Ghana
3421
Ethiopia
3954
Source: created by the author based on [1; 2]
In the world market, African countries specialize mainly in the supply of fruits and nuts, cocoa products, coffee, tea and spices, fish and seafood, and various vegetables. In
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2022, these product groups accounted for 55% of regional agricultural export revenue. At the same time, the greatest need for imports is recorded for grain crops, oils and fats, sugar and its products, dairy products, eggs, honey, seeds and fruits of oil crops. Last year, these products accounted for 60% of the total value of food imported to the continent [2]. Perhaps the most important and most desirable solution in Africa is the acute problem of hunger. In general, the current specialized report of the Food and Agricultural Organization of the United Nations (FAO) entitled “The State of Food Security and Nutrition in the World - 2023” contains a general assessment of the number of hungry people in the world, which as of 2022 numbered 735 million people. It turns out that more than 9% of the world’s population is chronically hungry. However, for Africa, this share is much higher - on the continent, about 20% of the inhabitants are undernourished. In general, this is more than 280 million people, territorially more than 90% of this number live south of the Sahara. The most unfavorable situation with hunger is recorded in Nigeria (34 million), the Democratic Republic of Congo (34 million), Ethiopia (26 million), Tanzania (15 million), Madagascar (15 million), Kenya (15 million), Uganda (15 million) [5] . Based on this information, all trading partners of African countries and providers of humanitarian aid in the form of food are direct participants in the food security process. Ukraine definitely belongs to such countries, especially in the context of the raw material orientation of our exports, which are directed to Africa, because grain is the most important and universal product, the physical presence of which is used to determine related indices, in particular, the formation of stocks and delivery terms. During the analyzed period, the mutual trade between Ukraine and Africa was not characterized by stability, especially in the part of exports, which alternated between notable ups and downs. Its maximum value was recorded in 2021 – 3,728 million dollars. On the other hand, imports were mostly in the range of 300 million dollars per year, with the highest figure also in the pre-war year 2021 – 342 million dollars. However, the war radically changed the situation. The blockade of the sea ports and the destruction of the usual logistics routes for counterparties on both sides caused a decrease in the total turnover of trade - in 2022, Ukrainian agricultural exports to Africa brought revenue in the amount of only 1,643 million dollars, while imports from the region to our country increased to 242 million dollars [3; 4]. However, the significant predominance of exports over imports remained, so the positive balance for Ukraine amounted to 1,400 million dollars (Fig. 1). Over the past year, African countries retained third place in the regional structure of Ukrainian food sales with a share of 6.8%, remaining behind the European Union and Asia as the main consumers of our products, but ahead of the CIS countries (Fig. 2). As in previous years, one representative of Africa stands out among the main sales markets for our agri-food products. This is Egypt. In 2022, this country accounted for 40% of the value of sectoral sales from Ukraine to the region. Only last year it entered the total number of the twenty largest buyers of agricultural and processing industry products of Ukrainian production, taking 12th place in it with an indicator of 653 million dollars. For comparison, the first three positions here were formed by the following countries: Poland - 2,710 million dollars, Romania - 2,557 million dollars, Turkey - 2,212 million dollars [3; 4].
Trade in Agro-Food Products Between Ukraine and African Countries 3728
179 Export
3332
Import 2945
2326
1643
292
282
2018
2019
331
2020
342
2021
242
2022
Fig. 1. Dynamics of trade in agro-food products between Ukraine and African countries, million dollars. (Source: created by the author based on [3; 4].).
CIS, 3.4%
Others, 3.4%
Africa, 6.8%
EU, 55.5%
Asia, 30.9%
Fig. 2. Regional structure of agricultural exports of Ukraine in 2022, %. (Source: created by the author based on [3; 4]).
The commodity structure of exports from Ukraine to Africa, although generally typical, has its own specifics. Last year, the basis of our food supply was grain crops, oils and fats, meat and by-products, which together formed more than 90% of exports in monetary terms (Fig. 3).
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Cereals
1259
191
Oils and fats
Meat and meat offal
Others
43
150
Fig. 3. Commodity structure of Ukraine’s export of agri-food products to Africa in 2022, million dollars. (Source: created by the author based on [3; 4]).
In 2022, Ukraine exported 4.9 million tons of grain crops to African countries, including 2.5 million tons of wheat, 2.2 million tons of corn, and 0.2 million tons of barley. At the same time, the largest sales of this group of products were made to Egypt (2.1 million tons worth $536 million), Libya (0.8 million tons worth $183 million), Algeria (0.6 million tons worth $180 million) and Tunisia (0.6 million tons worth 137 million dollars) [3; 4]. Among the supplies of oils and fats, sunflower oil stood out, which almost completely occupied the commodity exports of this group - 130,000 tons worth 182 million dollars. Among African countries, the main consumers of this product group last year were: Egypt - 25 thousand tons worth $30 million, Libya - 15 thousand tons worth $28 million, Tunisia - 21 thousand tons worth $24 million, Sudan - 16 thousand tons for 21 million dollars, the Republic of South Africa - 12 thousand tons worth 16 million dollars. A similar picture was also recorded in our export of meat products, where the supply of poultry meat in the amount of 35 thousand tons, which brought Ukrainian companies revenue of 43 million dollars, absolutely dominated. The main consumers from this part of the world in 2022 were Gabon (8 thousand tons for $9 million), Angola (6 thousand tons for $6 million), Congo (6 thousand tons for $6 million), and Egypt (3 thousand tons for 5 million dollars). On the other hand, regarding the import of agri-food products to Ukraine, African countries have a weaker position in the geographical structure. Last year, their share was 3.8% in terms of value. This became the fourth indicator among actual supplier regions, because it was significantly inferior to the European Union (53.3%), Asia (19.5%), as well as the countries of Latin America (6.6%), although it slightly exceeded the share of the CIS (3,2%) [3; 4]. Due to the generally low indicators of food supplies from Africa, none of the countries there is included in the list of the twenty largest ones, from which we make import purchases. In the product structure of Ukraine’s imports from African countries in 2022, cocoa products, various fruits, tobacco products, coffee and tea stood out, which accounted for more than 70% of the expenses of our specialized companies (Fig. 4).
Trade in Agro-Food Products Between Ukraine and African Countries
Cocoa preparations
58 57
Fruit and nuts
30
Tobacco products
Coffee, tea
Others
181
27
70
Fig. 4. Commodity structure of Ukraine’s import of agri-food products from Africa in 2022, million dollars. (Source: created by the author based on [3; 4]).
The total amount of cocoa products imported by our country last year was 18,000 tons, of which almost 11,000 tons were cocoa paste, 3,000 tons were cocoa powder, and 2,000 tons were cocoa beans. Two countries became the largest regional suppliers: Ivory Coast – 15,000 tons worth $50 million, Ghana – 3,000 tons worth $8 million [3; 4]. About 58,000 tons of fruits of African origin were imported, mainly citrus fruits in the amount of 52,000 tons. The vast majority of products of the fruit group were purchased in Egypt (38,000 tons for 28 million dollars) and South Africa (15,000 tons worth 18 million dollars) [3; 4]. In 2022, African countries sold a total of more than 4,000 tons of tobacco products to Ukraine, mostly raw materials. The main supplier for us was Malawi (3 thousand tons worth $24 million), which was supplemented by Mozambique (about 1 thousand tons, $3 million) and Zimbabwe (0.3 thousand tons worth $2 million). Traditionally, coffee and tea, which are not grown in our country, are indispensable imports for Ukraine. Over the past year 5,000 tons of coffee and 3,000 tons of tea were purchased on the African continent. The largest sellers of coffee were Ethiopia (1.5 thousand tons for 8 million dollars) and Uganda (2 thousand tons for more than 6 million dollars). The tea segment was strongly dominated by only one regional supplier - Kenya, which exported 2.5 thousand tons of tea worth 6 million dollars to our domestic market. So far, the current year is characterized by a further decrease in the volume of mutual trade in agricultural and food industry products between the parties. In the first half of 2023, its total turnover was equal to 814 million dollars, which is about a quarter less than the same indicator for the corresponding period last year. At the same time, there was an increase in imports by almost 23% to 130 million dollars, but the final result caused a drop in the value of exports from Ukraine by almost 30%, which amounted to only 684 million dollars. At the same time, Egypt remains the main trading partner for our specialized enterprises in the region, having purchased food from Ukraine in the amount of 402 million dollars in January-June of this year, at the same time taking the first place in terms of supplies, for which 47 million dollars were paid [3; 4].
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After setting another record for the export of agro-food products by Ukraine in 2021, there was every reason to continue this trend. In the first two months of 2022, statistical data indicated the continued increase in quantitative and value sales of agricultural goods by our exporters. However, Russian military aggression has become a challenge not only for the state, the Armed Forces of Ukraine, the population in general, but also for the entire business environment focused on foreign economic activity in the agri-food sector. There was a break not only in traditional logistics routes, but also in the loss of entire segments of foreign markets that depended on the uninterrupted functioning of sea transport. Thus, due to the significant geographical remoteness of African countries, there was again a decline in foreign trade indicators with it, as in 2020, when restrictions on international trade were introduced in connection with the coronavirus pandemic. Such a factor is objective, so it must be taken into account by all interested economic entities, taking into account the described risks. In addition to the low variability of trade routes, the agricultural export of Ukraine is still extremely limited - it is concentrated on an even smaller than usual number of commodity items that have a raw material origin, and therefore, with any fluctuations in the market situation, they will significantly depend on the formed prices. The geography of sales to Africa does not differ in diversification, mainly covering Egypt and other North African countries. Therefore, despite the significant growth of Africa’s economic potential, it remains unused by Ukrainian companies in the context of opening new markets and diversifying the product range of food products offered for export. The named processes must take place synchronously, but do not give a one-time result, so we should not count on a quick change of these characteristic features. In fact, there is no alternative to the product content of imports, which our companies carry out, buying mainly critical, irreplaceable goods from African countries - cocoa, coffee, tea, tobacco, etc. Most likely, given the ongoing active military operations and high risks in our economy, no one will dare to reformat the existing approaches and structure of relations now. Therefore, in the near future, agricultural trade between the parties will retain its inherent quantitative and qualitative parameters. At the same time, it is worth conducting an in-depth economic analysis of prospective areas of activity at this stage in order to avoid too hasty decisions and have some competitive advantages in the future, when their implementation will become relevant.
4 Conclusions and Discussions Africa plays, albeit a temporary, but special role in the geographical structure of the export of Ukrainian agricultural products. In some markets, the positions of our specialized companies are so strong that they withstand serious obstacles of a force majeure nature, allowing to receive income even under such difficult conditions. The commodity structure of Ukraine’s agricultural exports to Africa is a simplified version of general sectoral exports. At the same time, there are countries on the continent where you can win at the expense of higher solvent demand of citizens, by correctly promoting and positioning your products. In particular, individual value-added products do not usually require too many sales to earn the required level of income. It is obvious that the existing assortment
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in the form of wheat, corn, poultry meat and sunflower oil should be expanded both in numerous areas of crop production and at least with some livestock products, not to mention ready-made food products. Approximately 20% of the countries are actually covered by trade with us on the continent, while among the rest there are also prospects for establishing cooperation. In Africa, the food problem is extremely acute, so food products will in any case have the highest demand, even with the limited ability of the local population to pay. What seems optimal at this stage is not a change, but rather an expansion of the existing product diversification of exports due to the gradual addition to the existing offer of products that have recently proven themselves well in other regional markets - for example, fresh fruits, walnuts, frozen berries, honey, sweets, ice cream. At the first stage, it will be quite sufficient to supply small batches for familiarization, which, with successful demand indicators, will contribute to a more stable entry into the selected market. Liberalization measures are not carried out sufficiently due to the lack of functioning of bilateral agreements on free trade zones. Initial precedents would play a positive role in activating and geographically expanding these initiatives. On the other hand, the situation with imports from Africa for Ukraine is objective in terms of goods and supplier countries. Activities in the conditions of a full-scale war for Ukrainian agribusiness are gradually acquiring more predictable characteristics, so it should be expected that companies will seek to expand the number of sales markets not only through Europe and Asia, but also much more distant ones, where competition is not so fierce. In the short term, taking into account current trends, the state of food trade with Africa will remain generally stable, without sharp fluctuations in the direction of increase or decrease. However, the most important thing is that the macroeconomic situation in Ukraine also remains sufficiently predictable. Developments of a general strategic nature regarding the development of trade with the region and specific measures based on the example of selected countries, where there is a potential for successful entry into the market with a new, unique product or an offer of systemic cooperation, designed for a long period, are the prospects for further research in this thematic direction.
References 1. Official website of the FAOSTAT. FAOSTAT/Data, trade/Crops and livestock products (2023). https://www.fao.org/faostat/en/#data/TCL 2. Official website of the International Trade Centre. Trade Map/Imports/List of supplying markets (2023) https://www.trademap.org/Country_SelProductCountry_TS.aspx?nvpm= 1%7c826%7c%7c%7c%7c22%7c%7c%7c2%7c1%7c1%7c1%7c2%7c1%7c2%7c1% 7c1%7c1 3. Official website of the State Customs Service of Ukraine. Statistics and Registers/Total volume of import and export by country (2023). https://customs.gov.ua/statistika-ta-reiestri [In Ukrainian] 4. Official website of the State Statistics Service of Ukraine. Countries by commodity structure of foreign trade (2023). http://www.ukrstat.gov.ua [In Ukrainian] 5. The State of Food Security and Nutrition in the World 2023 (2023). https://www.fao.org/doc uments/card/en/c/cc3017en 6. Boiko, V.: Providing functioning agricultural market of Ukraine under martial law conditions. Herald Khmelnytskyi Nat. Univ. Econ. Sci. 5(1), 197–202 (2022). https://doi.org/10.31891/ 2307-5740-2022-310-5(1)-32
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7. Irtyshcheva, I., Kramarenko, I., Sirenko, I.: The economy of war and postwar economic development: world and Ukrainian realities. Baltic J. Econ. Stud. 8(2), 78–82 (2022). https:// doi.org/10.30525/2256-0742/2022-8-2-78-82 8. Lupenko, Y.O., Puhachov, M.I., Dukhnytskyi, B.V. (Eds.). Formation of global and regional markets for agricultural raw and food: monograph. K.: NNTs «IAE», p. 320 (2015) 9. Agrarian prospects of Ukraine 2017–2030: Baseline scenario (2017). https://www.apd-ukr aine.de/ua/images/APD_APR_06-2017_AGMEMOD_Baseline_ukr.pdf 10. World Food Programme (2023). https://www.wfp.org/overview 11. Kovalenko, O., Verbytskyi, S.: Ukrainian agri-food sector: foreign trade amid globalization. The Scientific Journal of Cahul State University “Bogdan Petriceicu Hasdeu”. Cahul, Moldova. 2(4), 43–58 (2018) 12. Data on expenditures on food and alcoholic beverages in selected countries. https://www.ers. usda.gov/topics/international-markets-us-trade/international-consumer-and-food-industrytrends/ 13. Dukhnytskyi B.V.: Actual problems in food supplying to the world’s population. Ekonomika APK. 2020(6), 91–97 (2020) 14. Chart: The World’s Largest 10 Economies in 2030. https://www.visualcapitalist.com/worldslargest-10-economies-2030/ 15. Balassa, B.: The Theory of Economic Integration/B. Balassa. Routledge, p. 318 (2013) 16. Agricultural Outlook 2023–2032 (2023). https://www.oecd-ilibrary.org/agriculture-andfood/oecd-fao-agricultural-outlook-2023-2032_08801ab7-en 17. Ahn, S., Steinbach, S.: COVID-19 Trade actions in the agricultural and food sector. J. Food Distrib. Res. 52(2), 51–75 (2021). https://www.fdrsinc.org/wp-content/uploads/2021/09/JFD R52.2_3_Ahn.pdf 18. Fedun, I.L., Fedun, L., Reznik, N., Kudirko, L., Lezhepokova, V., Oleinikov Y.: Regional priorities of agriculture integration of Ukraine. Int. J. Adv. Sci. Technol. 29(8), 2518–2523 (2020). http://sersc.org/journals/index.php/IJAST/article/view/14754 19. Fedun, I., Kudyrko, L., Shnyrkov, O., Bey, R., Yatsiuk, M., Syniuchenko, A.: Economic and political challenges of development in Ukraine industry 4.0. In: Alareeni, B., Hamdan, A., Khamis, R., El Khoury, R. (eds.) Digitalisation: Opportunities and Challenges for Business: Volume 1, pp. 453–467. Springer International Publishing, Cham (2023). https://doi.org/10. 1007/978-3-031-26953-0_42
A Review on Critical Success Factors for Sustainable Infrastructure Construction Project Portfolios Damiebi Denni-Fiberesima1(B) , Nazatul Shima Abdul Rani2 and Khairul Azizan Suda3
,
1 UniKL Business School, Postgraduate Section, Universiti Kuala Lumpur, Quill City Mall,
Jalan Sultan Ismail, Bandar Wawasan, 50250 Kuala Lumpur, Malaysia [email protected] 2 UniKL Business School, Centre for Women Advancement and Leadership, Universiti Kuala Lumpur, Quill City Mall, Jalan Sultan Ismail, Bandar Wawasan, 50250 Kuala Lumpur, Malaysia 3 UniKL MIDI, Universiti Kuala Lumpur, 119, Jalan 7/91, Taman Shamelin Perkasa, 56100 Kuala Lumpur, Malaysia
Abstract. This research seeks to identify the critical success factors for sustainable infrastructure project delivery. It will focus on 18 infrastructure priority areas framed into three categories which are energy and environment, people and communities, and connections. The successful delivery of infrastructure projects presents a unique set of challenges that must be addressed to ensure the sustainability and success of infrastructure construction projects. The research will help define the true nature of the challenges and potential for change to help close the infrastructure deficit gap. Furthermore, this research will explore the various cross cutting factors such as skills and human capacity, energy efficiency and environmental sensitivity, state of existing infrastructure, accessibility, climate change adaptation, governance and ownership that contribute to the successful delivery of infrastructure projects. This study identifies and discusses the essential components and critical project management success factors for sustainable infrastructure (CPMSF) that may help ensure the successful completion of the project. This paper forwards the framework that has been provided for this investigation. Keywords: Project Management Constraints · Human Factors · Strategic Alignment · Sustainable Project Success
1 Introduction Understanding the critical success factors of sustainable infrastructure construction project portfolios is essential. It affords stakeholders and sponsors to have a comprehensive overview of the factors that contribute to sustainable project success and sustainability initiatives in construction projects. According to [1] this information can be used by project managers to improve their chances of success in implementing sustainability initiatives. As organizational project managers have a challenging role that is © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 185–192, 2024. https://doi.org/10.1007/978-3-031-53998-5_16
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characterized by overwhelming responsibilities, chaotic busyness, lack of focus, and the need to prioritize efficiency [2, 3]. This puts a significant burden on project managers, who must cope with a heavy workload, frantic activity, fragmented work, and a need for superficial solutions. Many research studies of building strategies emphasized the intricate and complex nature of construction as an industry. Project success is a multidimensional phenomenon, and successful execution of projects is critical to organizations’ success [3]. Therefore, before categorizing projects as a success or failure, it is necessary to determine the criteria upon which this evaluation is to be made. A synonym for success is effectiveness, which is measured in terms of the degree of objectives achievement. [5] opined that when the construction project is being planned, an appropriate measuring tool for critical success factor analysis may need to be identified and defined. Therefore, project managers need to develop a more appropriate critical success factor identification technique to avoid the problem of over planning or under planning at the start of the project in ensuring project success. As such, this paper highlights the critical success factors for sustainable infrastructure construction project portfolios.
2 Literature Review 2.1 Overview on Project and Project Management [6] argues that project management is essential for organizations to be able to successfully implement projects and achieve their intended outcomes. Projects with strong project management are more likely to be successful in terms of meeting their objectives, staying on budget and schedule, and delivering the intended outcomes [7–9]. Furthermore, [10, 11] found that project management is essential for achieving strategic goals, which are the long-term objectives of an organization. [12, 13] found that through projects execution and implementation project management can help organizations to achieve their goals by delivering intended outcomes such as new products and services, improved customer experiences, and increased operational efficiency. They further opined that projects that are well-managed are more likely to achieve their desired results than projects that are not well-managed, however, although projects are often started with the best intentions, still the projects experience failure. This failure can stem from various reasons, such as running out of funds, exceeding time constraints, lack of clear communication, inadequate resource planning, underestimation of required resources, and overburdening the project team with excessive workloads [7–13] (Table 1). 2.2 Components of Project Constraints [15] argues that project management constraints, also known as the triple constraint or iron triangle, are essential factors for project success, encompassing time, cost, and scope. [16] also recognize the triple constraint as a model that defines project management, emphasizing the frequent conflicts among these constraints and the responsibility of project managers to achieve a balance. Efficient time management is crucial to ensure timely completion [17]. Cost control is critical to stay within budget [6, 18]. Scope
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Table 1. Project success rates Description
Percentage Source
IT projects that are unsuccessful
68%
PMI
Organization that reports at least one project failure in the past 12 months 70%
KPMG
Amount of project spending wasted due to poor project performance
11%
PMI
Projects over $100M that are successful
2%
Oxford
management is necessary to prevent scope creep [19, 20]. Which can lead to project failure. These constraints are interconnected, and the changes in one can impact the others. Construction project portfolios have additional constraints of quality and risk management. Quality ensures project outputs meet stakeholder requirements [19, 21]. Risk management is crucial in construction projects to mitigate negative impacts [22, 23] [24]. These constraints play a significant role in successful construction project portfolio management, requiring the use of risk management tools and techniques, as well as effective risk leadership and integration into project initiatives [25]. 2.3 Component of Project Success [26–28] defines success factors as the characteristics of a project that contribute to its success. [27, 28] cited project risk management as a key factor in project success. While most recent authors have a unified definition of success factors as the factors that contribute to the successful completion of a project, they differ in their perspective and findings. [11, 14] argue that project communication is essential for project success. [29] argue that project governance is a key factor in project success. [30] argues that project stakeholder management is another essential factor for project success. [31] in their systematic review of the literature on critical success factors for project management, they found that the most important critical success factors are clear and concise goals and objectives, well-defined scope, effective communication, clear and concise communication, effective risk management, and effective stakeholder management. Furthermore, [29] asserts project success will be likely enhanced if the complexity of the project is low, the duration is shorter, the managerial actions are effective, the client is private and experienced, the client is competent in providing a project brief and making decisions, the project team leaders are competent and experienced, and the project is executed in a stable environment with developed technology and an appropriate organizational structure. 2.4 Component of Human Factors [32] asserts that leadership competence is vital for successful sustainable construction project management (SPM) as leaders must demonstrate commitment to sustainability and provide necessary resources and support. [33] citing the theory of reasoned action,
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argues that project managers are more likely to adopt sustainable practices when they have the intention and belief in their ability to do so. [26, 27] argues that project managers utilizing a transformational leadership style are more likely to achieve success, as they inspire and motivate team members to excel. [32] stresses stakeholder engagement throughout the project lifecycle, in project planning and execution for timely and budgetcompliant outcomes. Consultations with nearby businesses and communities should be part of this involvement. The idea of planned behavior is emphasized by [33] to make the claim that project managers are more likely to incorporate sustainable practices in construction projects and that people are more likely to engage in each action if they have support from their peers and stakeholders. [31] emphasize the crucial role of the project team leader in ensuring the success of a project. They stress the significance of having the appropriate abilities and expertise, collaborating well, and gaining leadership support from management. A crucial aspect of strategic alignment is grouping projects and programs together in a portfolio to achieve specific strategic goals. A portfolio is a coordinated collection of projects, programs, and other work that aims to achieve strategic objectives. A portfolio is a carefully selected group of initiatives that support the organizational strategy, not just a random variety of projects. Through the portfolio management process, this alignment is accomplished. Organizations may optimize the value they get from their portfolios by adhering to portfolio management principles and making sure they invest in the proper projects and programs [34]. [35] contend that portfolio management plays a crucial role in enhancing project success in both agile and complex settings. They argue that portfolio management enables organizations to effectively choose and oversee projects in agile and complex environments, thus maximizing the likelihood of achieving desired success outcomes. [34, 35] emphasize the significance of Project Portfolio Management (PPM) as an effective tool for enhancing decision-making in organizations regarding the dynamics of their project portfolios. The authors strongly back the notion that linking project management to strategy is frequently achieved through program management and project portfolio management. These methods are crucial for aligning projects with organizational strategy and efficiently handling associated risks. Project portfolio management is employed to choose suitable projects for investment, considering factors like alignment with organizational strategy, potential benefits, constraints, and risks [34, 35].
3 Methodology The authors reviewed over 300 articles published between 2017 and 2023 to gain an understanding of the depth and breadth of the current state of knowledge on the critical success factors, and sustainability performance of construction projects. The findings of the review identified a few key critical sustainable project success factors. The review emphasizes the need for a conceptual framework and a more all-encompassing method of assessing and controlling sustainability-related performance and key success elements in building projects. The planning, design, building, and operation of construction projects should consider environmental, social, technical, and economic aspects as well as the demands of various stakeholders [36, 37].
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3.1 Literatures Reviewed on Project and Project Management, Project Success, Project Constraints, Human Factors, and Strategic Alignment The author commenced collection and review of journal articles in January 2022. In total 300 articles were reviewed, and 95 categorized and finalized into four dimensions with each having subsets of key factors. As shown in Table 2, about twenty-one journal articles related to project management constraints, twenty-five on strategic alignment, twenty-nine on human factors, and twenty on sustainable project success. From the reviews of those articles, the background of the study, literature reviews and discussion on the critical factors for sustainable project success are forwarded. Table 2. Number of journal articles for PMC, SA, HF, and SPS Description
Number of Articles
Project management constraints (PMC)
21
Strategic Alignment (SA)
25
Human Factors (HF)
29
Sustainable Project Success (SPS)
20
4 Critical Factors for Sustainable Project Success The critical success factors (CSFs) are the essential components that must be successfully managed and achieved to guarantee the success of a construction project. They are crucial elements that directly support the project’s goals and have a big impact on its overall success. According to [1], sustainability, in the context of construction, is a multifaceted and complex concept that lacks a singular definition, resulting in various interpretations by different stakeholders. The performance of construction projects, in terms of sustainability, is influenced by a multitude of factors. These include the project’s scope, budget, schedule, and location, as well as the expertise and experience of the project team [17–20]. The first factor is on human factor, as supported by [6–13] demonstrate the critical importance of organizational leadership and project manager sustainability mindset is critical in ensuring the success of sustainable projects. [6] asserts that these elements are indispensable for organizations seeking to effectively implement sustainable project management practices. [14] reveals that project managers who possess a sustainability mindset are more likely to succeed in leading sustainable projects. [8, 9] establish the vital role of technical skills in sustainable project management, with workers possessing strong technical acumen being more likely to succeed in leading and managing sustainable projects. [10, 11] find that project management knowledge and expertise have a considerable impact on project success, and projects with robust project management leadership are more likely to be successful. [12, 13] affirm that project management knowledge and expertise play a crucial role in digital transformation projects, contributing to their success.
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The second factor is strategic alignment that requires effective communication and collaboration by stablishing clear communication channels and promoting open and transparent communication among all project participants is a critical success factor that has a relationship between strategic alignment and project success, facilitating problemsolving and decision-making [33–35]. The third factor relates to project management constraints. Project planning and scope definition are crucial steps in this process, as are defining the project’s scope, objectives, and requirements, creating a detailed project plan with timelines, milestones, and deliverables, as well as identifying potential risks and developing strategies for risk mitigation and quality control and assurance [15–20]. In respect to project management restrictions, these actions have a substantial impact on the project’s success. Figure 1 shows the components for sustainable project success.
Strategic Alignment
Human Factors
Sustainable Project Success Fig. 1. Components for Sustainable Project Success
5 Conclusion Socio-technical systems theory highlights the importance of the interaction between social and technical systems for organizational success. It emphasizes that for sustainable project success, these factors must be well-aligned and managed. According to the sociotechnical systems theory, the success of an organization relies on the interaction between the social and technical systems [36, 37]. The social system includes factors such as human behavior, communication, collaboration, and leadership, while the technical system encompasses technology, processes, and tools. By considering the interrelation of these factors, the sociotechnical systems theory can increase the likelihood of achieving sustainable project success. It explains how the social and technical systems interact with each other to shape the outcome. For instance, if there is a lack of alignment between the social and technical systems, conflicts may arise, decrease productivity, and ultimately
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hinder the success of the project. Similarly, if the human factors and project constraints are not effectively managed, such as stakeholders’ risks, budgetary limitations, or time constraints, it can result in delays, cost and schedule overruns, and the inability to achieve project goals. Numerous literatures reviewed identified leader competence requirements stood out most strongly [8–11], and these would be tested further with other identified critical success factors via a series of diagnostic questions intended to identify interactions interconnections interrelatedness and congruency amongst variables. Henceforth, the critical success factors for sustainable project success are highly dependent on human factors, strategic alignment, and project management constraints.
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Tax Avoidance in State Owned and Family-Owned Enterprises: An Indonesian Study Yudanto Adi Nuraindra(B) and Ayu Chairina Laksmi Universitas Islam Indonesia, Yogyakarta 55283, Indonesia [email protected], [email protected]
Abstract. Tax avoidance is a form of tax planning. The methods and techniques used for tax avoidance involve exploiting weaknesses in the tax laws and regulations themselves order to reduce the amount of tax payable. Several factors influence tax avoidance, namely profits, debt, company size, company risk and tax loss compensation. The main method of conceptual research is literature review. The author will analyze and synthesize relevant literature to develop a deeper understanding of a concept or theory. The conclusion of this study is that tax avoidance factors such as profit, debt and company size do not have a significant influence on tax avoidance. However, tax avoidance factors such as business risk and tax loss compensation are found to have a significant influence on tax avoidance. The expected implication is that investors and governments can better understand the tax avoidance acts carried out by the Company, so that they can make the right decisions. Keywords: Tax avoidance · fiscal loss compensation · leverage · firm scale · corporate risk
1 Introduction Taxes are the largest source of state revenue and revenue. Realized state income comes from taxes in 2021 which reached IDR 1,231.87 trillion (100.19% of the 2021 APBN target). Tax revenues are expected to continue to increase so that the country’s development can run well. An increase in tax revenue is achieved if taxpayers carry out their obligations to pay taxes and report their taxes. Currently, the government is increasingly making efforts to increase tax revenues. To build the facilities, quite large funds are needed and taxes make a big contribution to the development carried out by the government. In practice, there are obstacles faced by the government in collecting taxes (Ilahi & Yopie, 2018). Tax avoidance is a form of tax planning. The methods and techniques used in tax avoidance are by exploiting the weaknesses contained in the tax laws and regulations themselves, to reduce the amount of tax owed. Tax avoidance is an effort to reduce the tax burden without violating the law. Tax avoidance is a strategy and technique to avoid © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 193–205, 2024. https://doi.org/10.1007/978-3-031-53998-5_17
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tax conducted legally and safe to be done by tax payers since it does not against the law and regulations (Mardiasmo, 2018). CNBC Indonesia (2021) reported that one of tax evasion cases in Indonesia occurred at PT Perusahaan Gas Negara (PGN), which is a state-owned company and the largest company engaged in the transmission and distribution of natural gas in Indonesia. It was indicated that PT PGN had evaded tax amounting to IDR 4.15 trillion according to the Tax Assessment Letter of Underpayment issued by the Indonesian Directorate General of Taxes. PT PGN had avoided tax twice for almost the same reasons in 2012 to 2013 and 2014 to 2017. PT PGN was indicated to conduct tax evasion since it did not include VAT on the price of its gas products. Since PT PGN had become one unit, they were not subject to VAT, however, according to the Directorate General of Taxes, VAT should be charged in exchange for distribution services. Other Indonesian news outlets, such as Liputan6.com (2010) and Tempo.co (2010), claimed tax evasion in companies owned by the Bakrie Group family. According to reports, Bakrie Group is involved in a dispute involving alleged IDR 2.1 trillion in unpaid taxes. Order to fix this issue, Bakrie Group requested assistance from a Directorate General of Taxes employee. Bakrie Group’s tax arrears were resolved through the issuance of Tax Assessment Letters and Annual Tax Notification Letters. Due to cases of helping tax evasion, corruption, bribery, forgery, and money laundering, the employee was later detained by Indonesian law enforcement and later sentenced to 29 years in jail. Tight competition, unpredictability and high volatility characterize today’s market. The emergence of COVID-19 is a classic example of a “perfect storm,” representing the sudden and unexpected environmental changes a business can face. Many businesses are considering corporate tax planning (Hussin, Putit & Subramaniam, 2023). A company’s capital structure is evaluated by debt-to-equity ratio, debt-to-equity ratio, short-term debt to total debt ratio and short-term debt ratio. A company’s profitability is assessed by return on equity and return on assets. Based on correlation analysis, some companies have weak and strong relationships. Based on regression analysis, this is significant for some companies and insignificant for others (Eshwari & Sayang, 2023). According to the information provided, tax avoidance that leads to tax evasion occurs in Indonesia and is carried out by both state-owned and private firms. Since taxes are Indonesia’s primary source of money and are used to fund the nation’s development, this is highly concerning. To reduce their tax obligations to the government, however, many Indonesian taxpayers engage in tax planning. Tax avoidance is one of the tax planning strategies used by taxpayers. Companies of all kinds may engage in tax avoidance because they want to maximize profits; as a result, management attempts to reduce tax payments by avoiding taxes. Previous research has found that there are several factors that influence tax avoidance, including profitability, leverage, Firm Scale, risk, institutional ownership, internal control, family ownership, and fiscal loss compensation. As a result, the purpose of this study is to investigate conceptually the factors that can influence tax avoidance in Indonesian state-owned and family businesses.
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2 Theoretical Basis 2.1 Theory of Agency Agency theory is a theory that describes the relationship that exists between company management as the agent and the company owner as the principal. The principal is the party who directs another party, the agent, to carry out all activities on the principal’s behalf. The company’s owner, or principal, is always interested in learning about the company’s activities, including management activities involving operating funds invested in the company. The principal obtains the necessary information and serves as an assessment tool for the agent’s performance during a specific period through the accountability report prepared by management as an agent. The origins of agency theory can be traced back to a conflict of interest between the principal and the agent. The owner or shareholder is the principal, while the manager is the agent. The principal delegated authority over the company’s resources to the agent. An agency relationship is formed when one or more people (principal) hire another person (agent) to provide a service and then delegate decision-making authority to the agent (Jensen & Meckling, 1976). 2.2 Profitability According to Hery (2018), profitability is a company’s ability to generate profits from all of its resources and capabilities derived from sales, asset use, and capital use. According to Kasmir (2019), profitability is a profitability ratio, which is a ratio used to assess a company’s ability to seek profit or profit a given period. According to Sirait (2017), profitability is a company’s ability to obtain comprehensive profits order to convert sales into profits and cash flow. Profitability is measured using number of ratios, one of which is Return on Assets. Re-turn on Assets is a ratio that shows the return on a company’s assets. Return on Assets is also used to assess management’s efficiency in managing investments (Kasmir, 2019). According to Akbar, Irawati, Wulandari, and Barli (2020), the profitability of companies owned by family members has no effect on tax evasion. Furthermore, this study is supported by Sulistiana, Fachri, and Mubarok (2021), who found that profitability has no effect on tax avoidance. 2.3 Leverage Leverage is a company’s ability to use assets or capital with fixed costs (debt or shares) to achieve the company’s goals of maximizing the value of the company in question. It is hoped that once this leverage is applied, the company’s wealth level will rise as well. Leverage is a ratio that measures a company’s ability to finance assets with both long-term and short-term debt. This leverage is a source of debt-based external company funding. The debt at issue is long-term debt (Abdullah, 2020). The term leverage refers to a company’s ability to use assets or funds with a fixed cost (fixed cost assets or funds) to increase the level of income (return) for company owners. In addition, leverage is used to assess a company’s ability to meet all of its obligations,
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both short and long term, if the company is dissolved (Kasmir, 2019). Arviyanti and Muiz (2018) found that leverage has no effect on tax avoidance, whereas Akbar, Irawati, Wulandari, and Barli (2020) discovered that leverage and family ownership positively influence tax avoidance. 2.4 Firm Scale Firm scale refers to the size or magnitude of the company’s assets or resources. Firm scale describes how large or small a company is in terms of total assets. The capital that will be used for the company’s operations is heavily influenced by its size. Firm Scale is a scale that determines the size of a company based on equity value, sales value, number of employees, total asset value, and other factors (Rahmadani, Iskandar, & Abubakar, 2020). Firm Scale is classified into four categories by Law Number 20 of 2008, namely micro businesses, small businesses, medium businesses, and large businesses. Firm Scale is determined by the total assets owned and the total annual sales of the company. Wahyuni and Febiola (2021) research found that institutional ownership has no effect on tax avoidance, and Ilahi and Yopie (2018) research found that firm size has no effect on tax avoidance. 2.5 Company Risk The volatility of a company’s earnings can be measured using the standard deviation formula. If the company’s risk is high, the standard deviation figure is likely to be high as well. The level of company risk reveals whether the executive’s personality is risk-taking or risk-averse. Concerning executive character, the company’s responsibility to shareholders creates an incentive for institutional owners to ensure that company management makes decisions that maximize shareholder welfare (Moeljono, 2020). Meanwhile, and Haya and Mayangsari (2022) found that company risk has a significant and positive effect on tax evasion. 2.6 Fiscal Loss Compensation Fiscal loss compensation is a loophole in Income Tax Law number 36 of 2008. It states that companies that have incurred losses in a single accounting period are exempt from paying taxes. These losses will be compensated for the next five years, with company profits used to reduce the amount of compensation. Fiscal loss compensation is a scheme for compensating individual and corporate taxpayers who suffer losses in their bookkeeping, and compensation can be made in the following year for five consecutive years. In general, a company’s finances are divided into two types: commercial and fiscal calculations. Fiscal calculations will be taken in account more in the preparation of its tax report in the annual tax report and will take in account the tax consequences from the company’s side. According to Munawaroh and Sari (2019) and Murwaningtyas (2019) research, fiscal loss compensation has a positive and significant effect on tax avoidance.
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2.7 Tax Avoidance One type of tax planning is tax avoidance. Tax avoidance methods and techniques involve taking advantage of flaws in tax laws and regulations to reduce the amount of tax owed. Tax evasion is the attempt to reduce one’s tax liability by not breaking the law. Tax avoidance is a legal avoidance of taxes strategy and technique that is risk-free for taxpayers because it does not violate tax laws (Mardiasmo, 2018).
3 Methodology The research methodology used in several research methodologies used in conceptual journals is using literature review. The main method in conceptual research is literature review. The author will analyze and synthesize relevant literature to develop a deeper understanding of a concept or theory. A literature review may include a review of existing theories, concepts, frameworks, or approaches.
4 Discussion Table 1 shows a summary of existing studies. 4.1 Profitability Arviyanti and Muiz (2018) investigated the impact of state-owned company characteristics on tax avoidance as measured by profitability. According to the findings of the study, profitability has no effect on tax evasion. Sulistiana, Fachri, and Mubarok (2021) investigated the impact of profitability and corporate governance, as measured by the number of independent commissioners and audit quality in state-owned enterprises, on tax evasion. According to the findings of the study, the profitability variable has no significant effect on tax avoidance. Furthermore, the independent commissioner variable influences tax avoidance significantly. In part, the audit quality variable has no effect on tax avoidance. Khomsiyah, Muttaqin, and Katias (2021) conducted research on the impact of state-owned company profitability on tax evasion. According to the findings of the study, profitability has no significant impact on taxes. Company profitability is one of the fundamentals for assessing a company’s condition; therefore, an analytical tool is required to assess it. In this way, every business entity will always try to increase its profitability, because the higher a business entity’s level of profitability, the more certain its survival will be. Previous research found that a company’s profitability has no effect on its tax avoidance. This may occur because companies with large or small profits must consider the costs and benefits of engaging in tax avoidance practices.
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References
Independent Variable
Dependent Variable
Method
Outputs
Arviyanti and Muiz (2018)
Profitability (X1), Leverage (X2), Company Size (X3), Capital Intensity (X4)
Avoidance (Y)
Panel Data Analysis
Influential characteristics for firms represented by profitability, leverage, size, capital intensity ratio, only profitability has a significant negative impact on tax evasion. The impact of leverage and size is not significant, but capital intensity ratio has a minor influence on tax avoidance. Influence structure ownership is represented by ownership, manager influence is positive insignificant on tax avoidance and organizational ownership has a significant negative impact on tax avoidance are not
Sulistiana, Fachri, and Mubarok (2021)
Profitability (X1), Corporate Governance (X2)
Tax Avoidance (Y)
Regression Multiple
Profit variables do not have a significant impact on tax evasion. In addition, the independent commissioner variable (Inboard) has a significant influence on tax evasion. In part, the audit quality variable does not have a significant impact on tax evasion
(continued)
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Table 1. (continued) References
Independent Variable
Khomsiyah, Muttaqin, and Katias (2021)
Dependent Variable
Method
Outputs
Protability (X1), Avoidance (Y) Ownership Institutional (X2), Board of Commissioners Independent (X3), Audit Committee (X4), Debt to Equity Ratio (X5), Company Size (X6), Growth Sales (X7),
Regression Multiple
Profitability (return on assets), independent board of trustees, company size affect tax evasion and are known to have their own negative direction. Leverage (debt-to-equity ratio) and growth selling have a significant positive impact on tax evasion. While institutional ownership has a negative and insignificant effect on tax evasion, audit committee has a positive and insignificant effect on tax evasion
Wahyuni and Febiola (2021)
Commissioner Independent (X1), Audit Committee (X2), Profitability (X3), Ownership Institutional (X4)
Avoidance (Y)
Regression Multiple
Audit committee and institutional ownership have no impact on tax avoidance, while independent trustee and profit variables have an impact on tax avoidance
Akbar, Irawati, Wulandari, and Barli (2020)
Profitability (X1), Growth Sales (X2), Ownership Family (X3)
Avoidance (Y)
Regression Multiple
Variable profit Does not affect tax evasion. Variable leverage does not affect tax evasion. The changing growth of the company has an impact on tax evasion. Families whose assets change do not affect tax evasion. Through concurrent variable profitability, leverage, business growth, and family ownership influence tax avoidance
(continued)
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References
Independent Variable
Dependent Variable
Method
Outputs
Ilahi & Yopie (2018)
Size (X1), Leverage (X2), Return On Asset (X3), Company Growth (X4)
Avoidance (Y) & Ownership Family (Y)
Regression
The results of the study indicate that compensation management, ownership group, firm size, and leverage do not have a significant influence on tax evasion. Instead, research shows that return on assets and firm growth have a significant effect on tax avoidance
Moeljono (2020) Return On Assets Avoidance (Y) (X1), Leverage (X2), Company Size (X3), Compensation Loss Fiscal (X4), Ownership Institutional (X5), Corporate Risk (X6)
Multiple Linear Regression Method
Research results show that profitability, corporate leverage measures, compensation lead tax revenue loss, organizational and business ownership are at risk. Do not affect tax evasion
Haya and Mayangsari (2022)
Multiple Linear Regression Method
The analysis demonstrates that tax avoidance behavior is positively associated with risky business operations and that the size of enterprises against such a practice is negatively correlated with the scale of their losses. Meanwhile, financial difficulties have a negative impact on tax avoidance
Risk (X1), Company Tax Avoidance (Y) Size (X2), Financial Distress (X3)
(continued)
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Table 1. (continued) References
Independent Variable
Dependent Variable
Method
Outputs
Munawaroh and Sari (2019)
Committee (X1), Proportion Ownership Institutional (X2), Profitability (X3), Compensation Loss Fiscal (X4)
Avoidance (Y)
Multiple Linear Regression Method
The results of the study show that audit committee and remuneration influence tax avoidance, while institutional ownership and profitability do not influence tax avoidance
Murwaningtyas (2019)
Responsibility Avoidance (Y) Social (X1), Profitability (X2), Company Age (X3), Compensation Make a loss Fiscal (X4)
Panel Data Regression Method
The results show that inadequate response in terms of social enterprise, profitability, company age and remuneration lead to significant tax revenue loss due to tax avoidance. In part, we answer the social company, the age of the company, the compensation that causes tax losses have a significant positive effect on tax evasion and profits there is no significant effect of self on tax evasion
Analysis Method Multiple Linear Regression
The research results show that to some extent, the loss of part of tax compensation, debt and audit quality have a significant impact on tax evasion, but transfer pricing does not affect tax evasion. The Indonesia stock exchange’s tax avoidance habit in the years 2017–2020 is heavily influenced by transfer pricing, tax revenue loss, leverage, and audit quality
Sitorus, Angel, Transfer Pricing and Liona (2022) (X1), Compensation Make a loss Fiscal (X2), Leverage, and Audit Quality (X3)
Avoidance (Y)
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4.2 Leverage Illahi and Yopie (2018) investigated the effect of management compensation on tax avoidance when family ownership was moderated. According to the findings of this study, leverage has no significant effect on tax evasion. Arviyanti and Muiz (2018) investigated the impact of state-owned company characteristics on tax evasion as measured by leverage. According to the findings, Leverage has a negligible negative impact on tax evasion. Leverage is a company’s ability to use assets or capital with fixed costs (debt or shares) to achieve the company’s goals of maximizing the value of the company in question. It is hoped that once this leverage is applied, the company’s wealth level will increase as well. Previous research discovered that leverage has no effect on a company’s ability to avoid taxes. This may occur because companies with more debt have lower effective tax rates, resulting in fewer tax avoidance practices. 4.3 Firm Scale Arviyanti and Muiz (2018) investigated the impact of state-owned company characteristics on tax evasion as measured by Firm Scale and capital intensity. According to the findings of the study, Firm Scale has no significant effect on tax avoidance. Khomsiyah, Muttaqin, and Katias (2021) investigated the impact of Firm Scale on tax avoidance in state-owned enterprises. According to the findings of the study, Firm Scale has a significant impact on tax avoidance and is known to have a negative direction. The size or magnitude of the company’s assets or resources. Firm scale describes how big or small a company is, and it can be expressed in terms of total assets. The capital that will be used for the company’s operations is heavily influenced by its size. Firm Scale is a scale that determines the size of a company based on equity value, sales value, number of employees, total asset value, and other factors. Previously, it was discovered that Firm Scale has no effect on a company’s tax avoidance. This is possible because paying taxes is a requirement for all citizens and entities or businesses. Large corporations will be better able to meet their tax obligations. 4.4 Company Risk Haya and Mayangsari (2022) investigated the impact of company risk, Firm Scale, and financial distress on tax evasion in infrastructure transportation companies listed on the IDX. According to the findings of the analysis, company risk has a positive influence on tax avoidance while firm scale has a negative influence on tax avoidance. Meanwhile, financial hardship has a negative impact on the avoidance of taxes. 4.5 Fiscal Loss Compensation Munawaroh and Sari (2019) investigated the impact of the audit committee, institutional ownership proportion, profitability, and fiscal loss compensation on tax avoidance. According to the findings of the study, the audit committee and fiscal loss compensation have an impact on tax avoidance, whereas the proportion of institutional ownership and profitability have no impact on tax avoidance.
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Murwaningtyas (2019) investigated the factors that influence tax evasion. According to the findings, corporate social responsibility, profitability, company age, and fiscal loss compensation all have a significant impact on tax evasion. Corporate social responsibility, company age, and fiscal loss compensation all have a significant positive influence on tax avoidance, while profitability has no significant influence. The standard deviation formula can be used to calculate the volatility of a company’s earnings. If the company’s risk is high, the standard deviation figure is likely to be high as well. The level of corporate risk indicates whether the executive’s personality is risk-taking or risk-averse. Previous research discovered that corporate risk affects a company’s tax avoidance. This may occur because executives or company leaders are willing to take risks in their decisions in order avoid taxes and appear profitable to investors. For up to five years, fiscal losses in one tax year can be offset by income from the next consecutive tax year. As a result, the company will avoid paying taxes for the next five years because taxable profits will be used to reduce the amount of loss compensation. Previous research discovered that fiscal loss compensation affects a company’s tax avoidance. This could happen because if a company makes a loss, it will have a tax debt that must be paid when the company makes a profit, but on the other hand, the company has demands against investors who want profit distribution when the company is losing money.
5 Conclusion Based on existing research, it is found that profitability, leverage, and Firm Scale have no effect on tax avoidance. This is possible because large companies tend to easily carry out their tax obligations, and companies that have large profits tend to think more about costs and benefits if they want to avoid taxes, while companies that have high debt tend not to avoid taxes because companies that have debt higher receive more tax relief benefits. However, research examining company risk and fiscal loss compensation found that these two things influenced tax avoidance. This is possible because of a leadership style that dares to take risks and demands from investors who want high profit sharing. The expected implication is that tax avoidance through Profitability, leverage, firm scale, corporate risk, and compensation for tax losses can theoretically be used as reference material for conducting further research and can provide a deeper understanding of how companies avoid tax. Helping investors and other stakeholders to make decisions can also encourage companies and investors to avoid detrimental and unethical tax avoidance practices. The government is expected to encourage stricter regulations and supervision of tax avoidance practices by tax agencies and other regulators. This can help prevent abuse of tax loopholes. The limitation of the research is that many tax avoidance practices are carried out in secret by companies. Information about the strategies and tactics used may not be available to researchers, especially if the company does not wish to disclose these practices. Future research direction is future research that is expected to be able to reveal fraud committed by companies to avoid taxation and be able to reveal the company’s secret efforts to avoid taxes, which can be detrimental to the state.
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6 The Structure of the Paper: 1. Introduction The introduction presents the background of the problem that the author described when preparing the thesis, followed by a description of the main problem. 2. Theoretical Basis Theoretical basis includes explanations and discussions of the theories that underpin this study. 3. Methodology Methodology xplain how to identify issues or concepts related to existing literature. 4. Discussion Discussion contains descriptions and analyzes related to results found in the existing literature. 5. Conclusion Conclusion contains the research conclusions obtained from the study, research limitations and research recommendations
References Abdullah, I.: The influence of liquidity and leverage on tax avoidance in food and beverage companies. J. Acc. Bus. Res. 20(1), 16–22 (2020) Akbar, Z., Irawati, W., Wulandari, R., Barli, H.: Analysis of profitability, leverage, sales growth and family ownership on tax avoidance. J. Acc. 07(2), 190–199 (2020). ISSN 2549–5968 Arviyanti, Muiz, E.: The influence of company characteristics and ownership structure on tax avoidance in state-owned companies listed on the IDX in 2013-2016. J. Account. 7(1), 28–46 (2018). https://doi.org/10.37932/ja.v7i1.22 Eshwari, D., Baby, M.K.: The effect of capital structure on the profitability of FMCG companies. In: Aloysius Edward, J., Jaheer Mukthar, K.P., Asis, E.R., Sivasubramanian, K. (eds.) Current Trends in Economics, Business and Sustainability: Proceedings of the International Conference on Economics, Business and Sustainability (ICEBS 2023), pp. 313–320. Springer Nature Singapore, Singapore (2023). https://doi.org/10.1007/978-981-99-3366-2_37 Haya, S., Mayangsari, S.: The influence of company risk, company size, and financial distress on tax avoidance. Trisakti Econ. J. 2(2), 1901–1912 (2022) Hery.: Financial Report Analysis: Integrated and comprehensive Edition. Gramedia, Jakarta (2018) Hussin, R.M., Putit, L., Subramaniam, G.: Social media as an open innovation: deciphering its relationship with firm performance, compatibility, and security concern. In: Rafiki, A., Dana, L.-P., Nasution, M.D.T.P. (eds.) Open Innovation in Small Business: Creating Values for Sustainability, pp. 87–98. Springer Nature Singapore, Singapore (2023). https://doi.org/10.1007/ 978-981-99-5142-0_6 Ilahi, A.A., Yopie, S.: Analysis of the effect of management compensation on tax avoidance (moderating effect of family ownership). Glob. Financ. Acc. J. 01(02), 1–15 (2018) Jensen, M.C., Meckling, W.H.: Theory of the firm: managerial behavior, agency cost and ownership structure. J. Financ. Econ. 3(4), 305–360 (1976) Kasmir. Financial Report Analysis. Depok: PT. Rajagrafindo Persada (2019)
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Khomsiyah, N., Muttaqin, N., Katias, P.: The influence of profitability, corporate governance, leverage, company size, and sales growth on tax avoidance in mining companies listed on the IDX for the 2014–2018 period. J. Ecopreneur 04(01), 1–19 (2021). ISSN 2615–6237 Mardiasmo. 2018 Revised Edition of Taxation. Penerbit Andi, Yogyakarta (2018) Moeljono.: Factors that influence tax avoidance. J. Econ. Bus. Res. 5(1), 103–121 (2020) Munawaroh, M., Sari, P.S.: The influence of the audit committee, proportion of institutional ownership, profitability and fiscal loss compensation on tax avoidance. Nat. Master Manag. Bus. Semin. 1(1), 352–367 (2019). ISSN: 2685–1474 Murwaningtyas, E.N.: Faktor-faktor what influences tax avoidance. J. Acc. Auditing Acc. Inf. Syst. 3(1), 132–142 (2019) Rahmadani, M.I., Abubakar, E.: The influence of company size, profitability, leverage, and profit management on tax avoidance is moderated by political connection. J. Acc. Financ. Res. 8(2), 375–392 (2020) Sirait, P.: Financial Report Analysis. Ekuilibria, Yogyakarta (2017) Sitorus, F.D., Angel, M., Liona, L.: The influence of transfer pricing, fiscal loss compensation, leverage, and audit quality on tax avoidance practices in state-owned companies that have go public for the 2017–2020 period. Acc. Res. J. 06(03), 2556–2564 (2022). ISSN 2548–9224 Sulistiana, I., Fachri, S., Mubarok, M.S.: The influence of profitability and corporate governance on tax avoidance in state-owned companies listed on the Indonesian stock exchange for the 2014–2018 period. J. Acc. Tax 21(02), 333–339 (2021) Wahyuni, R., Febiola, F.: The influence of independent commissioners, audit committees, profitability and institutional ownership on tax avoidance. J. Point Equilibr. Manag. Acc. 03(01), 135–151 (2021) Liputan6. Liputan6.com: https://www.liputan6.com/news/read/298592/gayus-akui-terima-uangdari-bakrie-group. Accessed 03 Jan 2023 Tempo.co. Bisnis.tempo.co: https://bisnis.tempo.co/read/234327/lagi-petinggi-grup-bakrie-jaditersangka-kasus-pajak. Accessed 03 Jan 2023 CNBC Indonesia. cnbcindonesia.com: https://www.cnbcindonesia.com/market/202101050 94526-17-213520/erick-turun-tangan-begini-kronologi-kasus-pajak-pgn-rp-68-t. Accessed 03 Jan 2023
Impact of Project Management Soft Skills Training on Employee Performance in the Oil and Gas Projects in Yemen Majid Al-Nabae1(B) , Norshahrizan Nordin1 , Dania Sammani2 , Mustafa M. A. Mudhsh3 , Abdulwadod Saeed Abdulwasea Hassan4 , Ali S. A. Maaodhah5 , Abdullah Mahfoudh Salem Baadhem4 , and Fahmi Fadhl Al-Hosaini6 1 Faculty of Business and Communication, Universiti Malaysia Perlis (UniMAP), Perlis,
Malaysia [email protected], [email protected] 2 Faculty of Design and Architecture, University Putra Malaysia, Selangor, Malaysia 3 Faculty of Business, Darunnajah University, Jakerta, Indonesia 4 Faculty of Business and Communication, Universiti Malaysia Perlis (UniMAP), Perlis, Malaysia {abdulwadod,abdullahmahfoudh}@unimap.edu.my 5 Azman Hashim International Business School, UTM University, Kuala Lumpur, Malaysia 6 Faculty of Administrative Sciences, University of Science and Technology, Aden, Yemen
Abstract. Effective project management requires a proficient and knowledgeable team to optimize resource utilization and maintain effective coordination and communication with project stakeholders. While hard skills, such as quality and cost management, remain crucial, the importance of soft skills is on the rise, especially in the context of teamwork, problem-solving, and relationship-building. In this study, the author investigates the impact of soft skills training, including communication, problem-solving, decision-making, and teamwork skills, on the performance of employees engaged in oil and gas projects in Yemen. Data were collected through survey questionnaires distributed to 208 employees working on these projects in Yemen. Subsequently, the data were analyzed using PLS-SEM. The analysis results revealed significant correlations between training in communication, problem-solving, and teamwork skills and both employee performance and project performance. However, the findings did not indicate a substantial positive connection between decision-making training and employee performance. These empirical findings validate the influence of soft skills training on employee performance, emphasizing the importance of providing such training, especially for those employed in Yemeni oil and gas projects. This study is organized into several sections to provide a coherent structure. It begins with an introduction that outlines the research objectives and the context of the study. The subsequent sections delve into the literature review, methodology, conceptual framework, findings, analysis, limitation and conclusion. Keywords: Soft skills · communication skill · problem-solving skill · decision-making skill · teamwork training skill · employee performance
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 206–218, 2024. https://doi.org/10.1007/978-3-031-53998-5_18
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1 Introduction The topic of success has gained significant prominence within the field of project management, capturing substantial attention from researchers and practitioners alike (Alvarenga et al., 2020). There is a growing focus on labor-force skill requirements, but despite the extensive coverage of skill needs in various enterprises and sectors in previous literature, a detailed examination of skill demands within specific vocations in a particular sector remains an uncharted territory (Hassan et al., 2020). The energy sector, particularly with the expanding influence of computerization and digitalization, presents an area where the evolving pattern and trend of skill requirements within energy companies have not been thoroughly explored (Lyu & Liu, 2021). Proficiency in technical skills empowers individuals to explore potential career trajectories (Ganapathy & Deepak, 2023). Within this context, PMI studies categorize skills into soft and hard skills, mirroring the observations of (Takey & Carvalho, 2015). Khamaksorn (2016) similarly emphasizes the significance of knowledge and skills in project management. Furthermore, Isabel, Aragón, Jiménez, and Valle (2014) propose that multi-skill training can expand employees’ perspectives and enhance their adaptability by instilling innovative skills and mindsets. To address the shortage of experienced project managers, training in both soft skills (SSs) and hard skills is recommended (Jena & Satpathy, 2017). It’s important to note that the success or failure of projects hinges on a multitude of factors, and a critical challenge that can impede project achievement and elevate the chances of success is the scarcity of skilled project managers and workers (Al-Nabae & Sammani, 2019). Moreover, particularly in this evolving global landscape, individuals need to possess the capacity to collaborate and produce content using technology. This includes the demonstration of leadership and teamwork abilities. Furthermore, to thrive in the tech industry, it is imperative for individuals to have a solid grasp of both business and marketing concepts (Kaushik, 2023).
2 Literature Review 2.1 Soft Skills Soft skills are essential for personal growth, social interaction, and professional success. They also have an impact on project success and developer productivity (Galster et al., 2023). Soft skills are known as interpersonal skills and life skills, either for individuals, groups or communities and it is the complement of hard skills in the workplace (Manullang, 2017). It reflects an individual’s relationship with other employees through his personality characteristics and soft skills (Jena & Satpathy, 2017). It is challenging to measure these types of skills (Balcar, 2016). Katumbi, Musembi,and Mbuthia (2018) claimed that the failure of a project is associated with poor soft skills or ineffectively employed soft skills in the day-to-day management of a project. Project managers have a multifaceted task and responsibilities that significantly affect the success of projects (Sunindijo, 2015). As mentioned above, leadership skills are of one of two types of soft skills and considered the critical factor in the success of any activity that includes collaboration among a group of people (Buba & Tanko, 2017).
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Communication Skills The word “communication” comes from the Latin word “communicare”, which means “to make common”, and creating a common understanding when communicating (Zulch, 2014). Communication in a project is not only the exchanging of messages but also a means that a Project Manager uses to generate the success of a project (Ziek & Anderson, 2015). This skill includes written communication skill, oral communication skill, and comprehensive communication skills (Awan et al., 2015). According to Zulch (2014), among team members in a project there must be collaboration, collation, sharing and integration of knowledge and information to understand and achieve project aims. So, it is necessary to possess communication skills. Besides. In this study, we focus on the main communication skills, which includes: discussion skill, presentation skill, Reports writing skill, and presentation skill. The researchers hypothesized that employee performance would improve after communication skills training. Team-Building Skill Team building skills are crucial within the realm of project management, and it is expected that a project manager possesses these skills to motivate the team in achieving project objectives (Cheng, 2016). The PMI (2017) reported that this proficiency is deemed essential for project leaders and encompasses skills related to structuring teams, evaluating the competencies of team members, delegating responsibilities, and ensuring their effective integration. In an increasingly team-oriented environment, the significance of effective teamwork-building skills cannot be overstated. (Britton et al., 2017). A team is defined as a collective of individuals with diverse abilities, skills, and knowledge collaborating and assisting each other (Svalestuen et al., 2015). According to Cheng (2016), team-building involves various activities, including appropriate team selection, aligning team goals with project objectives, fostering commitment among team members, establishing robust communication channels, securing support from senior management, empowering team members, refining organizational interfaces, managing conflicts, conducting team-building meetings, fostering enthusiasm, defining work structures, and cultivating a positive project image. This study centers on enhancing key communication skills, which encompass enhancing team coordination, promoting cognitive outcomes (such as shared knowledge among team members), clarifying team member roles, and collaborating to facilitate team goal setting. The researchers posited that employee performance would experience enhancement following training in team building skills. Problem-Solving Skill According to Lin et al. (2015), problem-solving competence is identified as a critical skill in project management, facilitating the achievement of project goals. Proficiency in problem-solving holds a significant role in ensuring workplace success (Rosen & Foltz, 2014). Therefore, the acquisition of problem-solving abilities stands as an essential element for project success, as emphasized by (Lin et al., 2015). It is a vital term aspect of project success (Elmahroug et al., 2016). For this reason, it is considered of the list of 21st-century skills (Esa et al., 2014). This type of skill involves being able to identify
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problems promptly, problem analyzing skill, judging, and decision- making skill, as well as problem-solving and controlling skills (Awan et al., 2015). Hence, the present study delves into the connection between problem-solving skills and the job performance of employees engaged in the oil and gas projects in Yemen. Furthermore, it explores the extent to which problem-solving abilities contribute to employee performance, employing four selected measures: problem recognition, problem analysis, solution generation, and the implementation of the most suitable resolution. Decision-Making Skills The process of decision-making holds a pivotal role in the management of organizations across all levels (Esa et al., 2014). Within the current landscape of business, managers are often compelled to make challenging decisions in a world characterized by uncertainty and constant change (Donovan et al., 2015). As emphasized by Wu et al. )2017) the decision-making process is intricate, demanding an active exchange of knowledge and team meetings to arrive at effective decisions. In the intricate contemporary milieu, effective decision-making necessitates proficient managers and adept teams. Consequently, providing managers with comprehensive training and fostering the development of innovative and adaptable decision-making models equips them with multiple options for making informed choices (Gorzen-Mitka & Okreglicka, 2014). Taking into consideration the above-mentioned literature, we have included the acquisition of decision-making skills, identification of decision-making alternatives, selection of the optimal option, and the ability to assess and implement decisions as control variables in our analysis of their impact on employee performance in oil and gas projects. 2.2 Employee Performance Conceptually, performance is described as “the goods or services that have been produced during a determined period and as per the desired goals.” Effectiveness and efficiency are two factors of performance that stand out, and performance covers an employee’s efforts to meet these two factors (Kara, 2018). Employee performance (EP) is how the employees achieve the organization’s goals and associate their inter-personal activities with the organizational standards (Osman et al., 2016). One of the four primary components of organisational performance is employee performance, which is also comprised of technical, administrative, and general performance (Ratnawat & Jha, 2019). According to Muda et al. (2014), satisfactory employee performance (EP) must reflect the employees’ ability to contribute throughout their jobs, leading to the achievements that are in line with the he organization’s objectives. Aragón, Jiménez, and Valle (2014); and Emenike et al., (2017), concluded that training and development positively affect employee performance and training can improve the performance of employees (Emenike et al., 2017; Seidle et al., 2016).
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3 Conceptual Framework and Hypothesis Testing This conceptual framework explores a number of soft skills of project employees towards achieving project employees’ performance and making recommendations for future research. We argue that this study was needed to discover the significant role that soft skills possess in project management and how they affect employees’ performance in the oil and gas project in yamen. The previous literature review suggests providing four soft skills to enhance project employee’s performance. These include communication skills, problem-solving skill, decision-making skill, and team-building skill. Along with the soft skills, which we treat as independent variables. On the other hand, this study’s dependent variable is the employee performance (EP). The four major determinants identified above are hypothesized to determine the soft skills training. These arguments are summarized in Fig. 1, which forms the conceptual framework of the study. The relationship between the variables that are analyzed in this study is demonstrated in Fig. 1 below.
Communication skill Problem-Solving skill
Empolyee performance
Decision-making skill Teamwork skill Fig. 1. The Conceptual Framework
The Research Hypothesis The hypothesis of this study were: – – – –
H1: Communication skill significantly affects employee performance. H2: Problem-solving skill significantly affects employee performance. H3: Decision-making skill significantly affects employee performance. H4: Teamwork skill significantly affects employee performance.
The Research Objectives – – – –
To investigate the impact of communication skill on employee performance. To investigate the effect of problem-solving skill on employee performance. To investigate the effect of decision-making skill on employee performance. To investigate the effect of teamwork skill on employee performance.
Research Question The specific questions formulated as follows:
Impact of Project Management Soft Skills Training
– – – –
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What is the impact of communication skill on employee performance? What is the impact of problem-solving skill on employee performance? What is the impact of decision-making skill on employee performance? What is the impact of teamwork skill on employee performance?
4 Methodology This study examines the relationship between soft skills and employee performance, focusing on communication, problem-solving, decision-making, and teamwork skills as independent variables, and employee performance as the dependent variable. The research surveyed employees in Yemen’s oil and gas projects using a quantitative approach. Due to the complexity of the population, a survey questionnaire was distributed. A total of 314 questionnaires were distributed between February 20, 2020, and April 20, 2020, with 236 returned. After eliminating questionnaires with missing values, the final sample size was 208, representing a 66% response rate. The data were analyzed using SPSS and SMART PLS software, mainly employing descriptive and correlational analysis methods.
5 Data Analysis and Results Descriptive Statistics for Variables The study utilized a 5-point Likert scale, ranging from 1 (strongly disagree) to 5 (strongly agree), to measure various attributes. Table 1 presents the mean scores for different attributes. The standard deviations (SDs) for these attributes ranged from 0.462 to 0.610, indicating acceptable variability in the data. See Table 1 for a comprehensive overview of the descriptive statistics. Table 1. Descriptive Statistics for All Variable Variables
Code
Mini
Maxi
No. of Items
Mean
%
S.D
Communication skill CS
2.50
5.00
4
4.1442
82.884
.47990
Problem-Solving skill
PSS
2.00
5.00
4
4.1779
83.558
.61007
Decision-making skill
DMS
2.00
5.00
4
4.0505
81.01
.60929
Teamwork skill training
TS
2.00
5.00
4
4.1514
83.028
.60635
Administrative Performance
AB
2.00
5.00
6
4.1869
83.738
.60140
Technical performance
TB
2.13
5.00
8
4.1689
83.378
.58200
Employee performance
EP
2.34
5.00
14
4.1767
81.534
.49707
30
4.1251
82.12
.46267
Overall
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Assessment of PLS-SEM Path Model Result Convergent Validity The study’s convergent validity was verified (refer to Table 2). A factor loading analysis is displayed in Table 2 and Fig. 2. Every loading is greater than 0.7 and falls within the range of 0.733 and 0.862. “Outer loading above 0.50 is considered significant, so the item should remain,” according to Hair et al., (2014). Table 2. Items loading, Cronbach’s alpha, Composite Reliability (CR), and AVE Variables Communication skill
Problem-solving skill
Decision-making skill
Teamwork skill training
Administrative Performance
Technical performance
loading
Cronbach’s alpha
CR
AVE
0.766
0.852
0.591
0.864
0.907
0.710
0.841
0.893
0.677
0.846
0.896
0.684
0904
0.926
0.675
0.920
0.935
0.641
CS1
0.797
CS2
0.780
CS3
0.761
CS4
0.733
PSS1
0.846
PSS2
0.862
PSS3
0.844
PSS4
0.816
DMS1
0.847
DMS2
0.840
DMS3
0.838
DMS4
0.762
TS1
0.806
TS2
0.843
TS3
0.855
TS4
0.803
AB3
0.822
AB4
0.870
AB5
0.833
AB6
0.800
AB7
0.772
AB8
0.831
TP1
0.757
TP2
0.800
TP3
0.808
TP4
0.855
TP5
0.804
TP6
0.826
TP7
0.808
TP8
0.745
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Discriminant Validity (DV) The dependent variable indicates how significantly one construct differs from another (Hair et al., 2017). It is assessed by employing AVE for every construct that exceeds the squared correlation among other constructs (Fornell & Larcker, 1981). Table 3 demonstrates the AVE’s square root for every construct exceeding the correlations between the construct and other constructs in the model. Table 3. DV and AVE for Latent Variables AVE
AP
CS
DMS
PSS
TP
AP
0.675
0.822
CS
0.591
0.477
0.768
DMS
0.677
0.487
0.543
0.823
PSS
0.710
0.548
0.589
0.708
0.842
TP
0.641
0.778
0.367
0.451
0.498
0.801
TS
0.684
0.479
0.401
0.629
0.624
0.477
TS
0.827
Coefficient of Determination: R2 Value In this study, the squared multiple correlation or R2 of the structural model on employee performance was 0.369. Hence, the result shows that all exogenous variables: communication, problem-solving, decision-making, and teamwork skills training explained 36.9% of the variance in employee performance, as shown in Fig. 2.
6 Hypotheses Results H1: Communication skill (CS) significantly and positively influences Employee Performance (EP) As shown in Table 4, the t-value (C.R) and p-value of Communication skill in predicting employee performance were 2.191 and 0.030; (p0.05), respectively, implying that the probability of receiving a T-value as large as 2.191 in absolute value is 0.05, implying that the regression weight for Communication skill in predicting employee performance differs significantly from zero at the 0.05 level. As a result, H1 was approved. H2: Problem Solving Skill (PSS) significantly and positively influences Employee Performance (EP) The results of the study demonstrate that problem-solving ability has a t-value (C.R.) and a p-value. The employee performance prediction was found to be 2.728 and 0.014, respectively (p < 0.05). This suggests that there was a less than 0.05 chance of obtaining a T-value as high as 2.728 in absolute value. This indicates a significant difference from zero at the 0.05 level in the regression weight for problem-solving abilities in predicting employee performance (EP). H2 was therefore supported.
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Fig. 2. Measurement Model / Outer Mode
H3: Decision-making skill (DMS) significantly and positively influences Employee Performance (EP) Table 4 reveals that decision-making skill does not significantly influence employee performance (EP), with the T-value (C.R.) and p-value of 0.86 and 0.386, respectively, in predicting employee performance; p> 0.05. H3 was therefore not supported. H4: Teamwork skill (TS) does not significantly influence Employee Performance (EP) As shown in Table 4, the likelihood of obtaining a T-value as high as 2.129 in absolute value was less than 0.05. The t-value (C.R) and p-value of collaboration skill training in the prediction of employee performance were 2.727 and 0.007, respectively. In other words, at the 0.05 level, the regression weight for teamwork skill training in predicting EP differs significantly from zero. H4 was therefore supported (Fig. 3). Table 4. Hypotheses Testing Results of structural Model H
Exog
Endo
Estimated
C.R
P-Value
Status
Result
H1
CS
OP
0.151
2.191
0.030
Sig
Supported
H2
PSS
OP
0.259
2.728
0.007
Sig
Supported
H3
DMS
OP
0.085
0.869
0.386
Not Sig
Not Supported
H4
TS
OP
0.232
2.727
0.007
Sig
Supported
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Fig. 3. Structural Model with (Bootstrapping)
7 Limitations and Future Research This study primarily focuses on skills training as a key factor in enhancing employee performance in Yemeni oil and gas projects, specifically those with a five-year history in Yemen. While the study is limited in scope to this industry, it provides valuable insights that may serve as a foundation for future comparisons. The findings contribute to understanding the significance of skills training and its impact on employee performance in this specific sector, potentially guiding decision-makers. Furthermore, the study holds potential for those interested in project management and could serve as a reference for future research in skills training and its effects on project performance, suggesting a broader application across various industries and project types.
8 Recommendations This study suggests that oil and gas project managers prioritise soft skills training for their employees in order to improve performance. The key recommendations are as follows: first, improve skill training at all levels of the project to foster a learning culture and gain a competitive advantage; second, focus on creating a work environment that encourages the use of soft skills; and third, increase the training budget to encourage a more active role in project activities.
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9 Conclusion This study aimed to investigate the impact of soft skills on employee performance in Yemen’s oil and gas projects, a subject less explored in existing research. Four soft skills, namely communication, problem-solving, decision-making, and teamwork, were examined for their influence on employee performance. Through empirical evidence, it was found that communication, problem-solving, and teamwork training significantly contributed to employee performance in these projects, thus enhancing the prospects of project success. This study emphasizes the importance of providing soft skills training to employees in the Yemeni oil and gas industry, offering theoretical and practical insights. Managers are advised to ensure the availability of necessary resources for effective soft skills training to improve employee productivity and overall project performance.
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Which One Has a Greater Impact on Marketing Agility: Organizational Learning or Organizational Innovation? Susanna Rotua Saragih(B) , Arlina Nurbaity Lubis, Endang Sulistya Rini, and Syafrizal Helmi Situmorang Doctoral Program in Management Science, Faculty of Economics and Business, Universitas Sumatera Utara, Medan, North Sumatera, Indonesia [email protected], {endang.sulistya, syafrizal.helmi}@usu.ac.id
Abstract. This study aims to analyze the relationship between organizational learning and organizational innovation and their impact on marketing agility within the express delivery service industry in Indonesia. Specifically, we aim to identify which factor has the most significant influence on marketing agility, considering the dynamic nature of the industry characterized by frequent market changes and evolving customer expectations. To achieve our research objectives comprehensively, we will employ a quantitative research approach that involves the active participation of owners and managers from reputable express delivery service providers in Indonesia. Data analysis will be conducted meticulously using specialized software for structural equation modeling (SEM), with the methodology employing partial least squares (PLS). The analytical framework will be extensively utilized to establish the study’s conceptual foundations. This research is expected to yield empirical findings that contribute to a better understanding of marketing agility, potentially enhancing its description and measurement in the current literature. The research offers both theoretical and practical guidance for business owners and managers, enabling well-informed decision-making, ultimately benefiting the express delivery service industry. Keywords: Marketing Agility · Organizational Learning · Organizational Innovation · Dynamic Capability · Express Delivery
1 Introduction The express delivery sector in Indonesia has experienced significant growth and has emerged as a crucial contributor to the country’s economy and industrial landscape. This is evident in the consistent growth of membership within Asperindo, which stands for the Association of Express Delivery, Post, and Logistics Companies of Indonesia. According to Asperindo (2023), the organization’s membership reached 150 companies in 2023, which indicates positive growth in the express delivery services sector in Indonesia. One notable feature of this industry is its relatively low entry barrier. The accessibility and © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 219–231, 2024. https://doi.org/10.1007/978-3-031-53998-5_19
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competitiveness of the market foster innovation and continuous improvement (Bento 2020). It is crucial to acknowledge that any challenges in this sector could potentially have significant consequences. These consequences may impact the distribution of goods across diverse industries, such as e-commerce, SMEs, retail, and manufacturing. In the dynamic business landscape, express delivery service companies encounter persistent challenges, such as intense competition, evolving customer preferences, and rapid technological advancements (Roberts and Grover 2012). In order to effectively navigate these challenges, it is essential for every company to continuously adapt, monitor market dynamics, and demonstrate agility (Siregar and Selwendri 2023). The aspects that have been identified as key components of marketing resilience (Slater and Narver 1995; Tippins and Sohi 2003) are crucial for achievement. Marketing agility is especially crucial when confronted with escalating competition and the inevitable technological changes (Nasution et al. 2023). It enables companies to effectively fulfill the demand for faster, more flexible, and more efficient services (Moi and Cabiddu 2021). In the context of organizational innovation, companies engage in activities that are specifically designed to create value for both the organization and its stakeholders (Atuahene-Gima 2005). This study argues that express delivery service providers should consider adopting the concept of marketing agility. Marketing agility refers to the capacity to comprehend the market, make well-informed marketing decisions, adapt strategies, and promptly execute them in response to market fluctuations (Kalaignanam et al. 2021). Organizational learning plays a crucial role in enhancing marketing agility. It involves acquiring, interpreting, and applying knowledge to enhance marketing performance (Pham and Hoang 2019). Continuous training and development are necessary in order to acquire a deeper understanding of the market and make competitive marketing decisions (Lewnes, 2020). By fostering a culture of continuous learning, companies can effectively enhance marketing agility and respond promptly to dynamic market conditions (Kalaignanam et al. 2021). The integration of marketing agility, organizational innovation, and organizational learning forms a robust framework for companies to navigate market changes and achieve their performance objectives (Hussin et al. 2023). This interrelation can be understood through the lens of dynamic capability theory. Marketing agility plays a pivotal role in a company’s capacity to flourish in today’s rapidly changing and constantly evolving business environment. However, despite its paramount significance, research dedicated to marketing agility remains somewhat limited and is still evolving (Kalaignanam et al. 2021; Moi and Cabiddu 2021). Therefore, this study aims to enhance the comprehension of the conceptual framework of marketing agility, specifically within the context of Indonesia’s dynamic express delivery service industry. This sector is significantly influenced by a variety of external factors, which makes it an intriguing and relevant subject for investigation. Within the realm of marketing agility, two crucial variables emerge as significant influencers: learning and innovation. These variables play a crucial role in enabling a company to adapt swiftly to the unpredictable demands of a dynamic marketplace (Kalaignanam et al. 2021). However, despite the existing body of knowledge, there is still a notable gap—a lack of comprehensive research that clearly explains the paramount
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role played by either of these variables in shaping marketing agility within the express delivery service sector in Indonesia. This preliminary study aims to comprehensively explore the concepts of organizational learning and innovation. Our upcoming research will aim to address knowledge gaps related to our framework. We aim to elucidate the relationship between learning and innovation and how their influence shapes marketing agility within the express delivery service industry in Indonesia. The research outcomes have a broader impact beyond academia, providing valuable insights into a crucial industry that drives related sectors, including e-commerce, manufacturing, and SMEs in Indonesia.
2 Literature Review 2.1 Express Delivery Service The logistics industry relies heavily on express delivery services, which are essential for providing efficient and timely delivery solutions to customers. Express delivery services also have a positive impact on various sectors of the economy, including production, investments, trade facilitation, job creation, and contributing to the overall gross domestic product (Economics 2009). The e-commerce sector depends on the services offered by the express delivery industry for the timely and secure transportation of goods (Morganti et al. 2014). Express delivery service providers carefully select the most efficient methods and transportation modes to ensure a seamless door-to-door delivery of items, documents, and parcels. Advanced technology is used to monitor the status and location of shipments (U.S. International Trade Commission 2004). It is important to note that express delivery services, which cater to both documents and parcels, typically come at a higher price compared to standard delivery services. This is because customers have heightened expectations for consistency, streamlined processes, rapid delivery, convenience, and the assurance of item security. In Indonesia, the current absence of regulations regarding express delivery service pricing is noteworthy, as the government has yet to establish official guidelines for pricing. Due to the industry’s relatively low barrier to entry and the market forces that primarily determine pricing, there is fierce competition in this sector (Wasesa et al. 2022). Competition among industry players to secure large shipment volumes relies on customers’ choices regarding their preferred provider of express delivery services. Customers make these choices based on a variety of factors, such as service quality, competitive pricing, delivery speed, pickup convenience, precise delivery endpoints, item safety, access to tracking and tracing capabilities for their shipments, and overall service reliability. 2.2 Organizational Innovation Innovation is a dynamic process that entails a company undertaking unprecedented actions in response to internal and external shifts. These transformative efforts aim to address challenges, improve overall performance, enhance cost-efficiency, and boost
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operational effectiveness (Damanpour 1991). In a broader sense, innovation encompasses an organization’s capacity to embrace novel components, such as devices, systems, policies, programs, processes, products, or services, whether they are developed internally or acquired externally (Phan 2019). The concept of organizational innovation has emerged due to the necessity of improving or altering services, products, or processes (Mendoza 2015). Organizational innovation encompasses entirely new dimensions rooted in creativity, ideation, coordination, collaboration, administration, methodologies, strategies, work procedures, mechanisms, work systems, and processes. These innovations are strategically deployed by organizations to troubleshoot, enhance operational performance, achieve cost efficiency, and sharpen their competitive edge (Rajapathirana and Hui 2018; Damanpour 1991; Mendoza 2015). The practical application of organizational innovation within a corporate entity, involving the utilization of new methodologies, primarily manifests in three main domains: business practices, workplace organization, and external relationships (Phan 2019). Organizational innovation is closely tied to the changes and updates that an organization implements in various areas, including coordination, collaboration, information and knowledge-sharing practices, learning, procedural frameworks, and systems (Tether and Tajar 2008; Van der Aa and Elfring 2002). 2.3 Organizational Learning Organizational learning is a dynamic process that revolves around the accumulation, creation, acquisition, transfer, and integration of knowledge, experiences, and insights within a company. The main goal is to improve performance, overcome challenges, and foster adaptability in the face of change (Ghasemzadeh et al. 2019). Organizational learning has the potential to transform the organizational structure, ensuring that knowledge and information are readily accessible to individuals and teams. This transformation is facilitated by integrating company resources - promoting a learning culture that emphasizes the sharing and exchange of knowledge between the company and its external environment (Chen and Zheng 2022). Discussions and collaborations among teams facilitate the generation of innovative ideas and effective problem-solving strategies. Learning teams facilitate the sharing of knowledge, the exchange of experiences and insights, and the cultivation of a culture of ongoing organizational learning through consistent practice. They endeavor to become experts in their respective domains by conducting regular evaluations, implementing improvements, and staying up-to-date with the latest effective business and operational practices (Asif 2019). 2.4 Marketing Agility The evolution of technology, the shifting of consumer behaviors, the increased number of customer touchpoints with companies, and heightened competition have compelled businesses to become more responsive and adaptable. These factors have contributed to the development of the concept of marketing agility. The Agile methodology encompasses flexibility, team collaboration, and a prompt response to change (Kalaignanam
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et al. 2021). Marketing agility has emerged as a response to the rapid, unyielding, and ongoing changes in the business and technology landscape. The company’s ability to respond promptly and adapt to changes in the market environment, customer needs, and market demands is indicative of its marketing agility capability (Moi and Cabiddu 2021). Marketing agility is fostered by seamlessly integrating innovation, effectively utilizing technology, and cultivating direct interactions between the company and its esteemed customers. The company’s ability to swiftly and effectively adapt to changes in market trends and competitive dynamics is a matter of concern, necessitating continuous learning. Heightened competition compels companies to seek ways to respond more promptly to the opportunities and threats presented by their competitors. Marketing agility allows companies to effectively address these challenges. The manner in which businesses adapt their marketing strategies (Khan 2020), introduce innovative products or services, and utilize new technologies to remain competitive (Phan 2019) serves as examples of this. Nowadays, businesses have significantly simplified the process of creating marketing campaigns, evaluating their efficacy, and making necessary adjustments to their strategies. This is made possible by utilizing cutting-edge marketing technologies, including automation, personalization, and analytics (Nasution et al. 2023). Advancements in data and analytics technology have granted companies improved access to real-time consumer data and market information. This allows them to develop optimal strategies and make data-driven marketing decisions, ultimately aiming to achieve competitive advantages and ensure the sustainability of their business (Ghina et al. 2023). Within the context of organizational learning, companies actively seek information that supports data analysis and facilitates the learning process. This aids in the development of appropriate marketing strategies in consideration of any alterations. Marketing agility is closely linked to organizational learning, organizational innovation, and dynamic capability. Companies must consistently learn, innovate, adapt rapidly to changes, and refine their marketing strategies to remain competitive and guarantee the long-term viability of their businesses. 2.5 Dynamic Capability Theory Teece et al. (1997) introduced the theory of dynamic capability, which is a concept in the field of strategic management. This theory highlights the significance of a company’s capacity to efficiently integrate, construct, and configure its internal and external resources in order to promptly adapt to a constantly changing business environment. This dynamic capability allows the company to identify and seize opportunities, promote innovation, redistribute resources and capabilities, adapt marketing strategies, and engage in continuous learning in order to maintain a competitive advantage (Zahra and George 2002). The Dynamic Capability Theory suggests that, in order to maintain a leading market position, companies must establish adaptive strategic objectives. Enhancing dynamic capabilities effectively enables the company to adapt to changes in both internal and external environments. This, in turn, enables the company to align its market behavior with the current conditions. In the ever-changing and highly competitive business environment, the concept of dynamic capability becomes essential for companies to maintain and enhance their performance, as well as to stay ahead of their competitors.
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The key facets of dynamic capability encompass several crucial aspects. These abilities encompass adapting to changes in the business environment, fostering innovation within the organization, evolving work processes, products, and services, effectively managing human resources, facilitating organizational learning, expediting the decision-making process, and flexibly allocating and managing available resources among strategic units. All of these capabilities aim to enable the company to adapt to the dynamic market environment, enhance its performance, and achieve long-lasting competitive advantages. Companies that possess robust, dynamic capabilities will naturally demonstrate marketing agility in their endeavors. 2.6 The Impact of Organizational Innovation on Marketing Agility Organizational innovation involves revitalizing a company’s established routines and the adoption of new procedures, ideas, processes, products, or services (Phan 2019). The importance of its role in enhancing a company’s competitiveness and marketing performance has been noted (More 2023). In contrast, marketing agility refers to a company’s ability to swiftly and efficiently adapt to evolving customer preferences, market trends, and competitive dynamics. This requires flexibility, adaptability, and responsiveness in marketing strategies and operations. Organizations utilize dynamic capabilities to drive innovation and foster agility in their marketing practices, thereby enhancing their competitive advantage and overall performance. Organizational innovation is of utmost importance in bolstering a company’s marketing agility. It cultivates a proactive, adaptable, and responsive mindset that caters to evolving customer preferences and market demands in a dynamic marketplace (Tang et al. 2022). A proactive and adaptable disposition is exemplified when organizations revitalize established routines and embrace innovative processes, products, and services. One crucial element of organizational innovation that contributes to marketing agility is the development of dynamic capability. Companies can significantly enhance their marketing agility and archive a distinct competitive advantage by cultivating dynamic skills, redirecting their focus towards the market, and fostering greater organizational flexibility. These strategic imperatives enable organizations to swiftly adapt their marketing strategies, promptly respond to market fluctuations, and effectively meet customer demands. By committing to continuous innovation and refining operational paradigms, companies can maintain their competitive standing and thrive in the ever-evolving business landscape. In light of the literature review, prior studies, and the preceding discussion, we posit the following hypothesis: H1: Organizational innovation has a positive and significant impact on marketing agility. 2.7 The Impact of Organizational Learning on Marketing Agility Organizational learning holds paramount importance in enhancing an organization’s dynamic capabilities and its ability to adapt to constantly evolving market environments (Chen and Zheng 2022). Continuous learning allows organizations to maintain agility in
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responding to market shifts and enhance marketing strategies by acquiring a thorough understanding of customer needs and preferences. Organizational learning facilitates the exchange of knowledge and the acquisition of new knowledge and skills within organizations through training programs. This enables them to adeptly adjust to everevolving market conditions. Marketing agility refers to an organization’s capacity to swiftly adapt and respond to alterations in the market environment (Khan 2020). Continuous learning equips organizations with the necessary capabilities to effectively navigate the dynamic and competitive marketing landscape. One of the methods for promoting marketing agility is to foster collaborative team efforts within the organization. Teams have the potential to act as catalysts for success by promoting the sharing of knowledge, encouraging collaboration, and facilitating continuous learning. Team learning plays a crucial role in enhancing marketing agility and dynamic capability, thereby assisting organizations in maintaining their competitiveness. Therefore, organizational learning plays a crucial role in fostering marketing agility and achieving a competitive advantage in today’s dynamic business environment. Based on the literature review, previous research, and the discussion above, we posit the following hypothesis: H2: Organizational learning positively affects and significantly enhances marketing agility. 2.8 Measuring Marketing Agility Within the Framework of Organizational Learning and Organizational Innovation The ability to respond effectively to market fluctuations and meet customer demands is crucial for establishing a strong connection between marketing agility, organizational learning, and organizational innovation. The model used in this study to look at how organizational learning affects marketing agility has three parts: gaining knowledge (Huber 1991; Ho et al. 2017; Antunes and Pinheiro 2020; Pedersen et al., 2011); sharing knowledge (Mirzaee and Ghaffari 2018; Al-Zoubi et al. 2020; Nugroho 2018); and learning as a team (Senge 1990; Rebelo et al. 2019; Decuyper et al. 2010). Knowledge acquisition is the first step in organizational learning, which involves crucial tasks like searching, gathering, comprehending, and organizing knowledge from various sources. These sources may potentially include internal, experiential, and external channels. This is followed by knowledge sharing, during which information is transferred within the company in order to enhance processes and performance, thereby initiating the team learning process. In their study, Kalaignanam et al. (2021) identified the team as a crucial driving factor for marketing agility at the organizational level. Organizations that actively engage in team learning possess the ability to assess performance, correct errors, generate innovative ideas, adapt to changes, and explore new strategies. They achieve this by engaging in dialogue, promoting collective thinking, and fostering a participatory atmosphere. Organizational innovation, which includes the implementation of new business practices, external partnerships, and work organization methodologies, plays a crucial role
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in influencing marketing agility (Phan 2019; Soto-Acosta et al. 2016). By understanding these dimensions, organizations can empower themselves to develop innovative strategies and practices that enhance marketing agility. Organizations that are able to effectively integrate both organizational learning and organizational innovation into their operations are better equipped to swiftly adapt to market changes, thereby gaining a competitive advantage. As a result, the measurement will place a strong emphasis on the two variables that determine both response time and adaptability to changes. The study investigates various facets of marketing agility, such as execution speed, responsiveness, flexibility, and cross-functional collaboration (Kalaignanam et al. 2021; Khan 2020). Table 1 shows the constructs, dimensions, and indicators. Table 1. Dimension and Indicator Constructs
Dimensions
Indicators
Key References
Organizational Learning
Knowledge Acquistion
Easily accessible knowledge
(Huber 1991; Ho et al. 2017)
Management and (Huber 1991; Antunes knowledge processes in and Pinheiro 2020) organization to meet organizational requirement
Knowledge Sharing
Team Learning
Internal and external knowledge and information is always updated
Pedersen et al. 2011
Organization provide knowledge and information sharing facilities through IT
Mirzaee and Ghaffari 2018
Mentoring
Al-Zoubi et al. 2020
Frequently employee shares training and experience insights
Nugroho 2018
Dialogue and productive discussion
Senge 1990; Rebelo et al. 2019
Thinking together
Senge 1990; Rebelo et al. 2019 (continued)
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Table 1. (continued) Constructs
Organizational Innovation
Dimensions
Indicators
Key References
Participation creation
Decuyper et al. 2010; Rebelo et al. 2019
New business practice Business re-engineering Phan (2019) New supply chain management system
Phan (2019)
Quality management New external relationships
E-business usage
(Soto-Acosta et al. 2016)
Partnerships
Phan (2019)
Outsourcing of business activities Sub-contracting Use of new methods for integration with suppliers
New methods of organizing work responsibilities and decision making
New system of employee responsibilities
Phan (2019)
Decentralization in decision-making Renewing the implementation of a management information system
Marketing Agility
Speed of execution
Swift action based on a strong marketing plan
Kalaignanam et al. 2021; Khan 2020
Rapidly adjust services for market shifts Rapidly change unproductive efforts Responsiveness
Quickly establish a strategy for handling competitor price fluctuations (continued)
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Constructs
Dimensions
Indicators
Key References
Regularly assessing service development efforts in alignment with customer expectations React quickly if a competitor targets our customers High flexibility
Adaptable to market requirement changes Adaptable to changing needs and circumstances Prefer adapting or creating solutions over preserving the original in unexpected situation
Cross-functional collaboration
Cross-Training and Skill Sharing Joint Problem Solving Interdisciplinary Teams
3 Research Methodology This preliminary research employs content analysis of prior studies to construct a comprehensive framework. We have carefully selected various previous articles and studies to substantiate our approach, and our subsequent study will utilize a quantitative method to examine several hypotheses.
4 Conclusion The main objective of this study is to comprehensively analyze the relationships between marketing agility, organizational learning, and organizational innovation in the express delivery service industry of Indonesia. Our specific aim is to assess the influence of organizational learning and organizational innovation on marketing agility within this industry. To reach this goal, we will do a carefully researched empirical study to compare how important organizational learning and organizational innovation are for improving marketing agility in this specific sector. This study aims to investigate the relationships between these variables and their influence on marketing agility, thus offering a comprehensive understanding of their
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interconnections. It is important to note that there is a lack of studies specifically measuring and evaluating the factors that contribute to marketing agility. Therefore, this research aims to address the gap in the current literature by providing valuable insights into these relationships. Additionally, the findings derived from this empirical study will significantly contribute to the broader field of corporate strategic management. This contribution holds particular relevance within the specific context of the express delivery service industry in Indonesia. It provides scholars and practitioners with a more profound comprehension of the inherent dynamics within this sector.
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A Framework for Environmental Performance: Integrating Stakeholder Theory and Natural Resource-Based View Muafi Muafi1,1(B)
, Imanirrahma Salsabil2 and Fatimah Az Zahra1
, Ahmad Johan3
,
1 Department of Management, Faculty of Business and Economics, Universitas Islam
Indonesia, Yogyakarta, Indonesia [email protected] 2 Department of Management, Faculty of Economics and Business, Universitas Widyatama, Bandung, Indonesia 3 Department of Business Administration, Faculty of Administration Science, Universitas Bandung, Bandung, Indonesia
Abstract. The awareness and attention towards environmental issues from both scholars and practitioners are currently raising due to the numbers of detrimental impact of organizational activities toward the environment. This study aims to provide an integrative framework and offer new propositions on of how environmental performance can be achieved by integrating emerging theories in strategic management such as natural resource-based view (NRBV) and stakeholder theory. We attempt to identify the factors that can lead to environmental performance by considering the role of stakeholder pressure, green human resource management, and enabler of green culture. Through this study, we advance the strategic HRM literature by providing a framework that integrates existing studies and theories, offering new explanations of how firm can translate pressures from stakeholders into positive outcomes such as higher environmental performance. Keywords: Stakeholder Pressure · Green Human Resource Management · Enabler of Green Organizational Culture · Environmental Performance
1 Introduction The issue of environment has long been a concern of various parties [1], and it has received increasing popularity in recent years due to environmental losses caused by industrial waste or pollution [2, 3]. This encourages organizations to become more responsible and actively involved in managing the environment [4], improve reputation, reduce the risk of environmental disasters from hazardous waste and chemicals from industry [5], and improve environmental performance [6]. In the issue of environmental stewardship, organizations also need to pay attention to pressure from external stakeholders. Stakeholders are individuals or groups who have an interest in the organization and can be influenced or influence the organization [7, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 232–240, 2024. https://doi.org/10.1007/978-3-031-53998-5_20
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8]. According to [9], organizations are currently under pressure to take a more proactive approach towards environmental issues. For this reason, the human resources (HR) department plays a crucial role in responding to stakeholder pressure related to environmental issues as an important contributor to strategic management and a key driver of the organization [4, 10]. [11] stated that organizational sustainability depends on the energy, knowledge, and skills of employees, which when managed by the HR department can lead to the achievement of environmental, social, and economic goals of the organization. One type of sustainable HRM practice that focuses on the environment is green human resource management (GHRM). GHRM is closely related to environmental sustainability in organizations [12], and it is developed to influence or increase awareness and environmentally friendly employee behavior [3]. GHRM is defined by [13] as the use of HRM policies to encourage the sustainable use of environmental resources in running a business and supporting the environment which can later lead to improved environmental performance. Environmental performance itself refers to organization’s commitment to protecting the environment and showing attention to the environment by defining operational parameters related to the environment that can be measured [9, 14]. Organizations implement programs to support environmental performance to achieve competitive advantage [6]. In this regard, HR department can respond to stakeholder pressures that require organizations to be more environmentally oriented by implementing GHRM practices in the organization [5] and creating an environmentally based organizational culture [15]. This study attempts to integrate stakeholder theory, social context theory, and the natural resource-based view (NRBV) to build a framework for environmental performance in organizations. According to stakeholder theory [7], managers need to design a specific process to manage stakeholder expectations. Stakeholders often expect the organization to be more responsible and concerned about the environment. The process that organizations undertake to respond to this is through GHRM, as it can increase the organization’s competitive advantage, which can lead to improved environmental performance, referring to the natural resource-based-view (NRBV) [16, 17]. The NRBV theory states that environmentally-sound organizational resources that are rare, valuable, inimitable, and irreplaceable, will be able to help organizations achieve competitive advantage. In this study, EGC is expected to mediate the relationship between GHRM and environmental performance, as an environmentally sound organizational culture not only drives environmental performance, but can also strengthen the influence of GHRM on environmental performance. The objective of this study is to provide an integrative framework and offer new propositions on of how environmental performance can be achieved by integrating emerging theories in strategic HRM such as natural resource-based view (NRBV), stakeholder theory, and social context theory. This study has three sub-main part, namely: • Introduction, which explains the theoretical issue and empirical studies related to stakeholder pressure, GHRM, and environmental performance • Literature Review, which includes the explanation on theories used, and the relationship between stakeholder pressure, GHRM, EGC, and environmental performance.
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• Methodology, which explains the research method and approach for examining the influence between the variables. • Discussion, implication, and conclusion, which includes the theoretical and practical implication that can be derived from this study as well as future research directions that can be carried out.
2 Literature Review 2.1 Stakeholder Theory Stakeholder theory posits that managers need to design specific processes to manage stakeholder expectations [7]. Stakeholders are defined as individuals or groups who can affect or are affected by the actions, decisions, policies, practices, or goals of the organization [7]. This theory exists to help executives make better decision. According to [18], the most effective organizations in managing HR systems are those that meet the needs of all stakeholders of the organization. [19] mentioned several important points in this theory. First, the organization needs to consider the influence of its actions on others, and the influence of others on the organization. To understand this, the organization needs to understand the behavior, values, and background of stakeholders. Then, the organization needs to understand how stakeholders relate from three levels of analysis, namely the organization, process, and transactional. This can help the organization to think about the structure, process, business function, and strategic planning process by involving the expectations of stakeholders [19]. In stakeholder theory, the main implication is that “stakeholders are about business, and business is about stakeholders” [19]. An organization’s ability to generate sustainable profits in the long term is determined by its relationship with stakeholders [20]. With the changes in globalization, information technology, and issues related to business ethics, there is an urgency to adopt stakeholder theory to shape value for the organization. 2.2 Natural Resource-Based View The initial resource-based view (RBV) theory stated that HR in organizations can be the key to maintaining a firm’s competitive advantage [16]. RBV has been used to better understand the importance of HR aspects in organizations in improving organizational performance [21] as HR aspects can have a positive influence on organizations ability to adopt new organizational practices [16]. This is because HR is a unique organizational resource, not easily replicated, and able to provide a unique competitive advantage for the organization [22]. The knowledge, skills, and activities of organizational members are core resources that contribute to an organization’s competitive advantage [21, 22]. When these resources are valuable, rare, inimitable, and irreplaceable, they provide a competitive advantage to the organization [16]. Few years after the RBV theory is developed, [17] extended the theory by considering the firm’s relationship to the natural environment, thus brought up the terms natural resource-based view (NRBV). This theory proposes that firms can gain a competitive advantage by adopting three interconnected strategies, which consist of pollution prevention, product stewardship, and sustainable development [17, 23]. This theory emphasizes the significance of natural environment in shaping the competitive advantage of the organization.
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2.3 Social Context Theory [24] stated that the term social context refers to the mechanisms that show how HRM systems relate to organizational effectiveness. Aspects of the model and assumptions about organizations and HRM systems are necessary to develop an understanding of the work environment and its influence on organizations. [24] used the thinking of [25] that culture and climate contribute to organizational productivity. The design of HRM systems can reveal important and useful information about organizational culture. Thus, organizational culture can reflect a powerful mechanism for integrating, connecting, and shaping mechanisms capable of contributing to organizational effectiveness through focused and unified collective action [24, 26]. In social context theory, it is posited that HRM systems influence organizational effectiveness through system flexibility, employee behavior, and organizational reputation, where organizational context and culture also come into play [24]. Culture can be applied to a team, factory, division, region, or a multinational company at large. The theory encompasses factors internal and external to the organization, including organizational reputation, HRM systems, organizational effectiveness, and organizational culture [24]. 2.4 Proposition Based on the stakeholder theory stated by [7], organizations need to design specific processes to manage the expectations of stakeholders (see Fig. 1). Managers’ perceptions of stakeholder pressure will encourage organizations to design processes that can improve their environmental performance [8]. Previous research shows that organizations that can respond to stakeholder pressure are more likely to have high performance [5], are able to develop broader and deeper processes related to the environment, and increase access to external networks to share competencies and information on environmental issues [8]. In this case, the two stakeholders discussed in this study, namely decision makers and customers, make organizations meet pressures for different purposes. Organizations respond to pressure from decision-makers by improving environmental performance for their social legitimacy needs [5]. Meanwhile, pressure from customers is responded by organizations to satisfy customers’ environmental expectations [5]. Stakeholders can pressure companies to implement environmental management practices that can lead to environmental performance [7]. Proposition 1: Stakeholder pressure has a positive influence on environmental performance With pressure from stakeholders, organizations adopt the initiation of environmental management practices [27], especially in the form of GHRM to monitor and control human resources in the organization to be more environmentally sound, to improve environmental performance in the organization. The relationship between these three variables is based on stakeholder theory [7] and NRBV theory [16, 17], that organizations need to design processes to manage expectations from stakeholders. Stakeholders in the organization expect the organization to be more proactive and concerned with the environment.
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Pressure from stakeholders is responded by organizations by implementing GHRM practices consisting of green hiring/recruitment, green training and development, green performance management, and green compensation to environmentally conscious individuals [15, 28]. Organizations can recruit individuals who have beliefs and values in accordance with those of the organization, provide training and involve employees in environmentally sound organizational activities, and assess performance and reward performance in accordance with the organization’s environmental goals. When organizations understand the importance of responding to stakeholder pressure in environmental aspects, this will be able to help organizations to develop effective strategies through GHRM practices and achieve competitive advantages, thereby improving environmental performance. Proposition 2: GHRM mediates the positive influence between stakeholder pressure and environmental pressure The relationship between GHRM, EGC, and environmental performance is based on social context theory. In this theory, [24] stated that culture can mediate the relationship between HR systems and organizational effectiveness or performance, which in this study is focused on environmental performance. This can happen because organizational culture not only helps improve performance, but also strengthens the impact of HR systems on performance [29]. In this case, GHRM can be a strategy to help organizations achieve their environmental goals by establishing an environmentally sound organizational culture and members who are concerned about environmental issues [14, 30]. Research by [15] shows that GHRM practices can become EGC by doing several things. First, in the emphasis of pro-environmental leadership, the HR department is responsible for recruiting environmentally conscious employees and promoting these employees as leaders in the organization, so that the values held by leaders can be passed down to other members [15]. Second, in message credibility, the HR department can deliver pro-environmental messages such as waste reduction through training sessions [3, 15]. Third, in employee empowerment, the HR department can empower organizational members through training and performance appraisals [15]. Fourth, in coworker engagement, HR departments encourage employees to work with their coworkers to provide environmental initiatives [31]. Thus, through these four things, GHRM can act as an EGC in the organization. Proposition 3: EGC mediates positive influence of GHRM towards environmental performance
Fig. 1. Framework for Environmental Performance
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3 Methodology The study regarding the influence of stakeholder pressure on environmental performance through the serial mediation of GHRM and EGC can be done using quantitative approach to test the propositions developed in this study. This topic is not limited to certain organizations, such as environmentally-oriented organization, but it is also relevant to be assessed in all organizations in general. This is because the pressure from stakeholder to be more mindful towards the environment applies to all kinds of organization. The study can be aimed to understand the process by which the pressure from stakeholder is translated into higher environmental performance through the role of GHRM and EGC. Furthermore, it is more appropriate for the study to be carried out through survey with distributing questionnaire or even carrying out direct interviews to obtain accurate data from the organization to prove the propositions in this study.
4 Discussion and Implication This study is carried out to answer the existing gaps that has been addressed by previous scholars by establishing a framework for environmental performance through integrating existing theories on strategic management and HRM. Several studies [1, 32] have mentioned the need to conduct research on the topic of GHRM, especially in Asia. This is due to the increase in environmental challenges along with the need to deal with sustainable development and environmental management. In this study, we present a framework that recognize the process by which stakeholder pressure can be translated into positive outcomes for the organizations such as environmental performance. This framework explains the process by taking into account several variables such as GHRM and EGC. This approach offers several theoretical contributions towards strategic HRM literatures. First, by integrating several theories such as stakeholder theory, NRBV, and social context theory, this study creates a comprehensive framework for understanding environmental performance. This integration provides a more holistic view of the factors that influence environmental performance, which is a valuable contribution to the field of strategic HRM. Second, the present study provides a sequential lens that illuminates the step-by-step process through which stakeholder pressure leads to positive outcomes such as improved environmental performance. This sequential perspective adds depth to existing research, which often focuses on isolated factor, by combining the factors mentioned in previous studies, such as stakeholder pressure, GHRM, and environmental performance [32, 33]. Finally, this study highlights another influential factor that may not have received as much attention but are worthy of further examination [34, 35]. In particular, we draw attention to the significance of EGC within the context of strategic HRM, which is particularly noteworthy as the variable is still quite underexplored [33, 36]. This provides an opportunity for further investigation into how an organization’s culture can influence its environmental performance. Practically, the framework developed in this study also offers practical guidance for organization which aims to improve their environmental performance. It emphasizes how
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crucial it is to embrace GHRM practices and foster a green culture in addition to responding to stakeholder pressure. Furthermore, by emphasizing the link between stakeholderdriven environmental responsibility and improved performance, our study highlights that sustainability can be a source of competitive advantage; guiding organization to pursue a more sustainable strategy.
5 Conclusion In conclusion, this study presents a comprehensive framework for understanding how stakeholder pressure can lead to improved environmental performance through the integration of multiple theories. The theoretical contributions and practical implications of this study are substantial, and the identified research gaps and future directions offer a roadmap for scholars to advance the field of strategic HRM in the context of environmental sustainability. Future studies could undertake a comparative analysis of the proposed framework in different industries and regions. This would help assess the framework’s applicability and effectiveness in diverse contexts. In addition, to understand the longterm impact of stakeholder-driven environmental initiatives, future scholars can conduct longitudinal studies tracking organizations’ performance over several years, as it would reveal the sustainability of improvements and potential setbacks. Finally, investigating how employees perceive and contribute to green culture and environmental performance can be a fruitful area for future research. Employee attitudes, engagement, and behaviors in relation to sustainability initiatives can significantly impact outcomes.
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The Effect of Intellectual Capital, Capital Structure and Company Size on Company Value: Study in State Owned Companies in Indonesia Ilyas Alfian Suhadi(B) and Arief Rahman Department of Accounting, Faculty of Business and Economics, Universitas Islam Indonesia, Yogyakarta, Indonesia [email protected], [email protected]
Abstract. This study aims to investigate the influence of intellectual capital, capital structure and company size on company value in Indonesia. The research investigated 147 state-owned companies listed on the Indonesia Stock Exchange (IDX) during 2016 to 2022, based on purposive sampling method. For this study, the data analysis included descriptive statistical analysis, assumption testing and multiple linear regression using SPSS 25. The results of hypotheses testing prove that intellectual capital (VAIC) and capital structure (DER) have a positive and significant effect on the value of the Company. However, the size of the Company (SIZE) has negative significant results on the value of the company. Keywords: Intellectual Capital (VAIC) · Capital Structure (DER) · Company Size (SIZE) · Company Value (PBV)
1 Introduction In the era of globalization, many companies are competing to face changes in the business environment and technological dynamics. Of course, the business will concentrate on boosting a company’s value. This company value will later become the main target to compete competitively with competing companies. The stock price is a company’s target in benchmarking a company’s value. According to [1], the value for investors is the value depicted in the company’s stock price. According to [2], Company value is the judgment that investors make about a company’s performance and how it relates to stock prices. Company value is always trending at any time because it is the fulcrum and main target of any company, especially government-owned companies (BUMN). There are two phenomena related to the value of the Company, especially in BUMN. The first phenomenon, reported by Kontan.id news [3] in mid-2022, BUMN companies have experienced weakening share prices. This was spoken by Alfred Nainggolan as Head of Research Praus Capital who explained that there were several BUMN companies that experienced weakening share prices, so that many were sold at low prices. BUMN companies that experienced share price weakness consisted of PT Kimia Farma Tbk © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 241–250, 2024. https://doi.org/10.1007/978-3-031-53998-5_21
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down 28.81%, PT Adhi Karya Tbk down 18.99%, PT Waskita Karya Tbk down 13.39%, PT Semen Baturaja Tbk down 12.90%, PT Wijaya Karya Tbk down 9.95%, PT Semen Indonesia Tbk down 5.52%, PT PP Tbk down 1.01%, PT Bank Tabungan Negara Tbk down 0.87%. According to Alfred Nainggolan as head of research at Praus Capital, the performance of BUMN in the construction and cement sectors is considered not good because of the weak fundamental factors of the company. From the poor performance, it can affect the value of the share price. Still in 2022, reported on Kompas.id news [4], it turns out that there are BUMN pharmaceutical sector companies that are both experiencing weakening share prices. This is because PT Indofarma Tbk experienced a decline in sales of 60.5% and PT Kimia Farma suffered a loss of around $11 million. Meanwhile, PT Indofarma Tbk also suffered a more serious loss, which is a loss of $28 million because the effects of the pandemic were severe. A company value is crucial for the company, as may be seen from the explanation of the two phenomena that have occurred. According to [5], the high value of the company is indicated by good performance in prospering the company and prospering shareholders. Some factors are prone to affecting the value of the Company. One of these factors is intellectual capital. According to [6], intellectual capital is a source of exclusive and high-value knowledge. The management of the company’s assets must be prioritized to increase performance and value. The main resources owned by the company do not only include tangible resources, but resources that are valuable, unique, superior, cannot be easily replaced, and cannot be imitated. These intangible resources are intellectual capital that must be managed effectively by the company in search of a competitive advantage. According to [7], intellectual capital in Indonesia continues to run as evidenced by the number of companies that use knowledge-modelled strategies, such as the many banking collaborations with fintech and the emergence of digital banks. Research from [2, 8–15]indicates that intellectual capital has an impact on business value, in contrast to research from [16–19] which indicates that it has no such impact. The next factor is certainly not far from the capital. Capital is a very vital obligation in the development of a company. Capital is also a reliable source when the company will develop or expand. In understanding this, a company needs to do a capital structure. According to [20] the proportion of domestic and foreign capital is referred to as the capital structure. While long-term or short-term debt makes up foreign capital, retained earnings and shareholder equity make up own capital. The company will have a higher value if its capital structure is better. Previous research by [21–28] found a positive relationship between capital structure and firm value, in contrast to the findings of [29–32] which found no such relationship. Another factor that is believed to affect firm value is the company’s size. [33] explain that company size can affect company value because company size can affect the company’s ability to get a high profit. Previous research by [28, 34, 35] company size can have a favorable impact on firm value. Contrarily, data from [26, 30, 31, 36, 37] indicates that business value is unaffected by company size. The authors desire to revisit the research using a different sample and a fresh period because the results of earlier studies are contradictory from the above description. The author of this study will use a sample of central government-owned companies (BUMN) due to the phenomenon factors described above which explain that there are events in several BUMN entities in
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2022–2023. The author of this study also adds a wider range of periods, namely from 2016–2022.
2 Literature Review and Hypothesis Resource Base theory according to [38] is a theory that explains that the resources owned by a company are inseparable sources because these resources can later support a company’s competitive advantage. [39] explained that a company’s resources will be easily achieved if it can process all its assets. Signal theory according to [40] is a theory that explains the importance of signals or information provided by management. Then the party who is willing to accept a signal is the investor. Investors as signal recipients will always consider the information signal, this is because a signal will later help investors to make decisions. Trade-off argument suggests businesses can go bankrupt when the tax advantages of taking on additional debt outweigh the cost of their incapacity to pay off their debts [41]. Debt does not always help a company, if the company does not have a good capital system, then every debt will be at risk. Resource Base theory according to [38] is a theory that explains the resource is something that cannot be separated. These resources can later support a Company’s competitive advantage. Intellectual capital is a resource that must be owned by the Company which includes tangible and intangible assets. According to resource-based theory, a company’s worth might improve if it has strong intellectual capital or resources. From this explanation, the logic is that the higher the intellectual capital, the higher the value of the Company.[2, 8–15]state that intellectual capital affects firm value, but is not in line with research by [16–19] state that intellectual capital does not affect company value. H1 = The valuation of the company is positively impacted by intellectual capital. According to the trade-off argument outlined by [41], businesses can go bankrupt when the tax advantages of taking on additional debt outweigh the cost of their incapacity to pay off their debts. According to [42] the market value will be achieved by a good capital structure and of course supported by the trade-off theory. Trade-off theory explains that if you want the value of the company to increase, then the position of the capital structure must be below the optimal point. On the other hand, if the capital structure is above the ideal position, any debt will reduce the company’s worth. According to this assertion, the capital structure increases the company’s value. So, the better the capital structure owned, the better the value of the Company. Previous research by [21–28] stated that capital structure has a positive effect on firm value, but contrary to the results of research by [29–32] said that the value of a company’s capital structure is unaffected. H2 = The company’s worth is positively impacted by the capital structure. Signal theory according to [40] is a theory that explains management as a party that functions to send signals, while the party who receives signals is an investor. Signal theory supports that a good company size can be an informational signal to investors. If the Company has a good size, then investors will capture positive information. So, the logic is that the better the size of the Company, the better the value of the Company. Previous research by [28, 34, 35] company size can increase firm value. However, on the contrary, research from [26, 30, 31, 36, 37] claims that a company’s size has no bearing on its worth. H3 = Company Size Has a Positive Impact on the Value of the Company.
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3 Methods This study belongs to the quantitative research category and employs multiple regression linear analysis techniques. This research uses secondary data, namely the financial statements of state-owned companies listed on the IDX in the 2016–2022 period. Sampling in this study used purposive sampling. The number of data samples to be tested is 147 samples. 3.1 Variable Measurement Table 1. Variable Measurement Variable
Indicator
Scale
Intellectual capital Capital Structure Firm Size Company Value
VAIC = HCE + SCE + CEE Total Debt/Total Equity Ln Total Asset Market Price per Share/Book Value per Share
Ratio Ratio Ratio Ratio
According to [16] Company Value is a characteristic of the company’s state established by investors, creditors, and stakeholders and is typically correlated with the stock price. In this study, the value of the company is proclaimed with Price Book Value (PBV). VAIC is a method developed by [43]. The VAICTM model, which accounts for capital employed efficiency, human capital efficiency, and structural capital efficiency, measures intellectual capital. Initial calculations for the measurement model involve estimating the added value using VA. Value added or VA will be used to calculate the efficiency of each component of intellectual capital. Human capital in this study is proxied with Human Capital Efficiency (HCE). Structural capital in this study is proxied with Structural Capital Efficiency (SCE). Capital Employed in this study is proxied with Capital Employed Efficiency (CEE). In this study, the capital structure uses Debt To Equity Ratio (DER). According to [44], the DER ratio determines how much debt a corporation has in relation to its equity. According to [45] the size of the company is a value that explains the size or size of the company by looking at total assets, total market capitalization and total sales. This study utilizes SPSS 25 for multiple linear analyses, assumption testing, and descriptive statistics. Assumption tests include normality test, heteroscedasticity test, autocorrelation test, multicollinearity test while hypothesis testing includes R test, F test, T test and multiple regression linier analysis. Independent factors in this study are VAIC, DER, and SIZE. Table 1 describes all variables. The PBV value of the company serves as a proxy for the dependent variable in the study. PBV = α + β1 VAIC t + β2 DER t + β3 SIZE t + εrror Note PBV: Company Value β1 VAIC t: Intellectual Capital β2 DER t: Capital Structure β3 SIZE t: Company Size
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4 Results 4.1 Statistic Descriptive
Table 2. Statistic Descriptive Variable
Average
Standard Deviation
Minimum
Maximum
VAIC DER SIZE PBV
4.824 2.935 31.669 1.431
10.656 3.508 1.701 1.533
−73.37 −10.83 29.21 −4.26
37.15 17.07 35.23 11.050
Based on the Table 2, it is known that the average VAIC is 4.824, with a minimum value of −73.37 in 2021 at WSBP, and a maximum value of 37.15 in 2019 at ANTAM. For the DER variable, it is known that the average is 2,935, with a minimum value of −10.83 in 2020 at WSBP, and a maximum value of 17.07 in 2020 at BBTN. When it comes to the Size variable, it is known that the average value is 31.669, with a minimum value of 29.21 in 2017 at ELNUSA and a maximum value of 35.23 in 2022 at BMRI. PBV has an average of 1.431, with a minimum value of −4.26 in 2020 at WSBP and a maximum value of 11.050 in 2017 at SMBR. 4.2 Assumption Test (See Table 3). Table 3. Assumption Test Assumption Test
Results
Normality Test (Kolmogorov-Smirnov)
The results of the Kolmogorov-Smirnov test show a significance of 0.067, which means a significance greater than 0.05. This value determines the data’s normal distribution The DW value is 2.682, for dU = 1.77 then DW > dU such that it satisfies the third assumption, which means that there is no data autocorrelation VAIC 0.182 > 0.05, DER 0.126 > 0.05, SIZE 0.141 > 0.05. The results of the glesjer test stated that the three independent variables had significance above 0.05 which means there is no heteroscedasticity VAIC 1.035 < 10, DER 1.374 < 10, SIZE 1.409 < 10. The VIF value of each independent variable is expressed to be less than 10, so that there is no violation of the multicollinearity assumption
Autocorrelation Test (Durbin Watson)
Heteroscedasticity (Glesjer Test)
Multicollinearity Test
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Variable
B
Std.Error
T
Sig.
Hypothesis
Constant
29.764
4.554
6.550
0.000
VAIC
0.00049
0.000051
8.880
0.000
Accepted
DER
0.459
0.073
6.259
0.000
Accepted
SIZE
−0.928
0.147
−6.294
0.000
Rejected
R Square Test
52,7%
F-Test
0.000
4.3 Hypothesis Test PBV = 29.764 + 0.00049 VAIC + 0.0459 DER−0.0928 SIZE + 4.554 R-Square in the aforementioned table is 52.7%, indicating that these three factors account for 52.7% of the company’s value variable and that the remaining portion is impacted by other factors. Based on the table above, the F test has a significance value of 0.000. It can be said to have a simultaneous effect if the significance value < 0.05. The table above indicates that the company’s value can be affected by several independent factors (Table 4). The value of the company is positively impacted by intellectual capital, which has a positive coefficient direction of 0.00049 and a significance level below 0.05. Then the results of the first hypothesis are supported. RBT theory (resource base theory) says that a good company can have a competitive advantage and can rely on its intellectual assets. From this, the Resource Base Theory supports that the higher the intellectual value of the capital, the higher the value of the Company. This study’s findings are consistent with [2, 8–15]. Capital structure has a positive coefficient direction of 0.459 and has a significance below 0.05 which means that the capital structure positively affect the value of the Company. Then the results of the second hypothesis are supported. This outcome supports the trade-off theory. Trade-off theory explains that a company that has a good level of capital structure, then the company can have an operational balance in running its capital. The natural conclusion is that a company’s value increases in direct proportion to its capital structure. This study’s findings are consistent with [21–28]. The size of the Company has a considerable negative impact on the value of the Company with a negative coefficient of −0.928 and a significance below 0.05. This demonstrates that investors and potential investors view a company’s size as indicated by its total assets as being too large as a bad omen. If the Company has large total assets, this will worry the owner. But it can make the management free to use these assets. An excessively large company can have a negative impact on management’s strategy by making supervision less effective, which lowers the company’s worth. According to [46], this episode is a result of conflicting shareholder and management interests, which is consistent with agency conflicts as articulated in the agency theory. The results of this investigation are congruent with [26, 30, 31, 36, 37].
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5 Conclusions VAIC’s measurement of intellectual capital has some favorable effects on the company’s worth. This means that if a company is better at managing all of its assets, including both tangible and intangible assets, it can gain a competitive advantage over rivals, which will inevitably enhance the company’s worth. The Company’s capital structure as assessed by DER has a favorable impact on its value. This means that the company may use its full capital more effectively and efficiently if it uses debt and equity well. Therefore, if the capital structure is successful, it will raise the company’s valuation. The size of the Company partially negatively affects the value of the Company. From this, it means that the larger the size of the Company, it can give a negative perception to investors, because the size of the Company that is too large can cause concerns that can affect the supervision carried out by management. Conflicts known as agency disputes or agency conflicts arise because when the interests of shareholders and managers do not align.
6 Recommendation Companies must pay close attention to their capital structure and intellectual capital factors since they can greatly raise a company’s value and turn it into a desirable investment. Investors tend to choose companies more carefully, and they may avoid investing in large asset firms that lack efficient supervision. In the future, researchers can also include other factors such as variables measuring total asset turnover or control variables to get more comprehensive conclusions.
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The Impact of Visitor Experience on Community Loyalty in Borneo Convention Centre Kuching Mohammad Amirul Ayu Rajiman2(B) , Shaik Azahar Shaik Hussain1 and Ahmad Hazizi Shah Jamil1
,
1 University of Malaysia, Kuala Lumpur, Sarawak, Malaysia 2 Institute of Creative Arts and Technology (iCreate), Universiti Malaysia Sarawak (UNIMAS),
Kota Samarahan, Malaysia [email protected]
Abstract. This study aims to analyze the customer engagement and valueproposition in influencing the visitor experience to ensure they will become a loyal visitor. The study focuses on the visitor experience at Borneo Convention Center Kuching (BCCK). The researcher uses quantitative methods by distributing as many as 384 questionnaires to individuals in Sarawak who have visited BCCK. The results of this questionnaire form can help collect data to analyze using SPSS to meet the needs of the study. With this study, the researcher can know whether these factors influence visitors’ overall experiences. Additionally, it can also help parties involved with the management of BCCK, especially in developing the Customer Experience framework, to improve their visitor totality of cognitive, affective, sensory, and behavioral consumer responses during all stages of the consumption process, including pre-purchase, consumption, and post-purchase stages for the services provided by BCCK. Keywords: Visitor experience · customer engagement · value-proposition
1 Introduction 1.1 Study Background User experience (UX) is increasingly recognized as a crucial factor for economic success, particularly in the digital service market’s information technology sector. Successful user-centered firms are incorporating UX design into their marketing and branding efforts, such as Apple. The visitor experience can also be linked to UX, as it entails traveling, seeing, learning, enjoying, and living in a new way. Tourism, in this perspective, is all about experiences, and any visitor encounters can influence their learning and future behavior. Cultural institutions, such as museums, are increasingly emphasizing the notion of “user experience” to diversify their services and attract new audiences. Customer loyalty is a significant business consequence, with high satisfaction levels enhancing customer loyalty, buy intent, word-of-mouth recommendation, profit, market share, and return on investment. Marketing practitioners are driven to generate loyal © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 251–259, 2024. https://doi.org/10.1007/978-3-031-53998-5_22
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consumers for market success, as it leads to financial advantages such as price premiums, cost reductions, and increased sales income. This research aims to examine the impact of user experience on community loyalty in Borneo Convention Centre Kuching (BCCK) to see if other elements and perspectives should be considered when evaluating visitor experience. 1.2 Problem Statement Issues
Questions
User dissatisfaction can What are the factors that devalue the services that are can influence visitor provided (Van de Walle 2018). experience? A complicated design framework can discourage a user from using the services (Yargin et al. 2018).
Objectives To identify the factors that can influence visitor experience
How is the design To study the practical design framework affect the visitor framework that can optimize experience? visitor experience
User disinterest in the services How will the visitor will lead to negative customer experience design impact engagement (Park 2019). customer engagement?
To analyze visitor experience design that brings positive customer engagement
Van de Walle’s concept of customer happiness emphasizes the importance of understanding factors contributing to satisfaction and developing strategies to increase it. A satisfied client base is crucial for thriving firms, and a firm’s perceived value is determined by the cost-benefit analysis of market offerings. Service failure, or value failure, occurs when a firm fails to achieve the necessary level of client pleasure. User interaction is another crucial aspect, influencing decision-making through user-machine interactions, interface design, user preference controls, and data visualization techniques. In a networked world, non-transactional consumer behavior is increasingly crucial, as customers can communicate with other customers and companies through social media. Customer involvement is a critical component in online and social business contexts, and this study aims to understand visitor behavior and keep them engaged to ensure customer satisfaction and repeat visits. 1.3 Hypothesis In the study hypothesis, researchers expected that visitors would have minimal knowledge of the Borneo Convention Centre Kuching as an event location where people could meet and generate extraordinary ideas. The data gathered may be utilized to test any theory appropriate to the research and form a conclusion towards the hypothesis either supported by the data collected or rejected by the data obtained. The following are the null hypotheses that have been proposed: H0 (a) the Value-Proposition Does not Affect the Visitor Experience. H1 (B) Customer Engagement Does not Influence the Visitor Experience.
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2 Literature Review 2.1 Customer Loyalty Theory Miller et al. (2019) emphasize the importance of customer loyalty in gaining a firm’s competitive advantage. Customer loyalty is a customer’s favorable attitude towards a product or service provider, leading to recurrent purchasing behavior. Understanding the antecedent elements of customer loyalty and the interactions between these variables is essential for academics. Miller et al. (2019) argue that understanding consumers’ needs, aspirations, and other factors that influence their judgments, attitudes, choices, and purchasing patterns is crucial for marketing researchers. However, maintaining customer loyalty is a challenging challenge for modern businesses, especially in competitive industries. 2.2 Visitor Experience (VX) Miller, Rice, Taff, & Newman’s research highlights the importance of a dynamic interaction of social, ecological, and managerial components in parks and protected areas. Social elements include individuals, psychological states, behaviors, and activities, while ecological factors include animals, water features, landscapes, and night sky. Management characteristics include regulations, transit networks, and facilities. The visitor experience (VX) is a result of these components working together. 2.3 Customer Engagement (CE) Thakur (2018) highlights customer engagement (CE) as a psychological state where a brand or media is emotionally involved with the customer, leading to frequent interactions. This concept is still developing in literature, with various interpretations. Engagement is a result of a specific method of interacting with a medium, and customer motives can influence experiences. Calder et al. (2009) developed a model for measuring engagement in various media, including social media, print media, live concerts, mobile media, and online shopping. These models have been applied in various research areas. 2.4 Customer Experience (CX) Pine and Gilmore’s experience economy and Schmitt’s strategic experiential model have emerged as key concepts in the field of Customer Experience (CX). CX is a process of experience that involves a customer’s interaction with a service or product, focusing on sensory, emotional, cognitive, behavioral, and relational benefits. Other researchers, such as LaSalle and Britton (2002), Shaw and Ivens (2005), Gentile et al. (2007), and Verhoef et al. (2009), have also contributed to the understanding of CX, emphasizing the importance of a holistic experience.
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2.5 Brand Experience (BX) Gentile et al.‘s research on brand experience (BX) highlights the impact of a company’s relationships with consumers on its intangible qualities, such as brand equity. Brand equity, a collection of assets and liabilities associated with a brand’s name and symbols, can be influenced directly or indirectly by BX. Brand equity factors include brand awareness, brand associations, perceived quality, brand loyalty, and proprietary asset. This research can be applied to the context of mobile service use.
3 Methodology This chapter discusses the research method used to obtain authentic and reliable data for a study. Secondary data sources include journals, articles, books, and websites. Library methods are dominant for obtaining accurate and reliable information. The website method facilitates obtaining authentic information. The research design is exploratory, breaking down broad problem statements into smaller sub-problems. The theoretical framework is based on customer loyalty and service theories, used in value propositions. Convenience sampling was used for respondents, allowing for nonprobability sampling. The study aims to understand visitor satisfaction levels through questionnaire surveys. This study uses an area sampling design, derived from a restricted probability sampling design, to form geographic clusters within identifiable geographical areas. Data collection techniques include a literature review, a questionnaire survey, and SPSS statistical package for the social sciences. The questionnaire was self-administered and distributed to 384 respondents using the Likert scale. The SPSS software platform offers advanced statistical analysis capabilities, including machine learning algorithms, text analysis, and interaction with big data. The research’s value is greatly enhanced using appropriate methods.
4 Data Analysis Table 1 shows the correlation analysis done by researchers to study the relationship between two independent variables (value-proposition and customer engagement) with the dependent variable–visitor experience. The results of the correlation analysis show the value-proposition variable influencing the visitor experience with a correlation value of as much as 0.192 and 0.000 significant value. The value proposition of the services BCCK gives positively correlates with the visitor experience. Furthermore, the correlation between the customer engagement with the visitor experience variable shows a correlation value of 0.106 and a significant value of 0.39.
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Table 1. Correlation Analysis Correlations Value- proposition (B5) Value- proposition Pearson Correlation (B5)
1
Sig. (2-tailed)
Customer engagement (C6)
Visitor experience (D9)
.061
.192**
.233
.000
N
384
384
384
Pearson Correlation
.061
1
.106*
Sig. (2-tailed)
.233
N
384
384
384
Visitor experience
Pearson Correlation
.192**
.106*
1
(D9)
Sig. (2-tailed)
.000
.039
N
384
384
Customer engagement (C6)
.039
384
*. Correlation is significant at the 0.05 level (2-tailed) **. Correlation is significant at the 0.01 level (2-tailed) B5* The service by BCCK offered must be visitor-oriented C6* Continuous Quality improvement principles by testing new ideas to change the current process BCCK use D9* The website contains complete information needed by the visitor
5 Discussion, Suggestions, and Conclusion 5.1 Value-Proposition (Obj. 1)
Table 2. Gender * The service by BCCK offered must be visitor oriented Crosstabulation. The service BCCK offers must be visitor-oriented Disagree Gender
Female Male
Total
9
Total
Neutral
Agree
35
185
Strongly agree 82
311
3
11
40
19
73
12
46
225
101
384
Table 2 shows crosstabulation for gender with the service by BCCK offered must be a visitor-oriented statement. The majority of female respondents agreed with the statement, with 185. Meanwhile, only 9 female respondents disagreed. Most male respondents agreed with the statement, and only 3 respondents disagreed.
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Table 3. Level of Education Achieved * Continuous Quality improvement principles by testing new ideas to change the current process BCCK use Crosstabulation. Collaborative networks between BCCK and other companies Strongly disagree Level of Education Achieved
Total
SPM
Disagree 0
2
Neutral 6
Total Agree 29
Strongly agree 5
42
STPM
1
2
9
52
13
77
Diploma
1
8
11
64
30
114
Foundation
0
0
4
16
7
27
Matriculation
0
4
0
11
3
18
Skills certificates
0
1
7
26
15
49
Degree
1
2
5
23
18
49
Bachelor’s Certificates
0
0
1
7
0
8
3
19
43
228
91
384
5.2 Customer Engagement (Obj.2) Table 3 shows crosstabulation for the level of education achieved with collaborative networks between BCCK and other companies. The majority of the respondents have achieved diploma certificates, with 114 and 64 agreeing with the statement. Seventyseven of the respondents have achieved STPM certificates, and most of them agreed with the statement–64 respondents. Respondents who have achieved degree and skill certificates with 49 respondents each agreed with the statement–26 and 23 respondents, respectively. Of the respondents who have achieved SPM are 42, most of them agree with the statement–29 agreed. Moreover, 27 respondents have achieved foundation certificates, and most of them agreed with the statement–16 respondents agreed. Eighteen of the respondents have achieved matriculation certificates, with the majority of them agreeing with the statement–11 agreeing. Only 8 of the respondents have achieved bachelor’s certificates, and most of them agreed with the statement–7 agreed. 5.3 Visitor Experience (Obj.3) Table 4 shows crosstabulation for age, stating that the website is optimized for the phone interface. Most of the respondents are aged 21 and below, and most agreed with the statement–56 agreed. A total of 102 respondents are aged between 21–25, and most of them agreed with the statement–45 of the respondents agreed. Moreover, 45 respondents were aged between 26–30–the majority of the respondents agreed (19 agreed). A total of 42 respondents are aged between 31 and 35, and most agreed with the statement–20 agreed. A total of 33 respondents are aged between 36–40, and most of them agreed with the statement (17 agreed). In addition, 17 of the respondents are aged between 41–45,
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Table 4. Age (Years old) * The website is optimized for phone interface Crosstabulation. The website is optimized for phone interface Strongly disagree Age (Years old)
Total
Disagree
Neutral
Agree
Strongly agree
21 and below
7
18
13
56
39
133
21–25
6
11
12
45
28
102
26–30
3
5
9
19
9
45
31–35
0
10
3
20
9
42
36–40
1
2
4
17
9
33
41–45
1
1
4
9
2
17
45 and above
0
1
0
9
2
12
18
48
45
175
98
384
Total
and most of them agreed with the statement–9 agreed. Only 12 respondents are aged 45 and above–the majority of the respondents agreed with the statement (9 agreed). 5.4 Discussion The study’s findings met the study’s goals of identifying the aspects that potentially impact the visitor experience. Second, research a realistic design framework for improving the visitor experience. Finally, to examine user experience design that encourages consumer involvement. The findings of data acquired from the questionnaires that were distributed also addressed the study’s query. 5.5 Suggestion This study examined the effectiveness of customer engagement and quality of service in influencing the community’s loyalty through a great visitor experience. With the help of the questionnaire and the statistic of the SPSS, the researcher can explain the relationship between these variables–the results can help BCCK provide more sustainable and effective service plans. 5.5.1 BCCK This study found that the interaction and quality of service significantly influenced the visitor experience. Therefore, these two factors should be considered by the BCCK in presenting interactive services and improving the quality of the services. Moreover, it is essential to have an open mind, challenge assumptions, and always ask “what if” questions. It all comes down to producing experiences visitors want to share long after departing. In addition, making BCCK an educational leisure place by dedicating a space,
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for instance, as an art exhibition space. This can attract visitors, mainly the younger visitors such as a teenager or adults, to come to relax and indirectly promote BCCK to their friends and relatives. Thus, BCCK can market the service and product they are currently selling. 5.5.2 Community The community needs to support BCCK by joining any events they conduct in collaboration with foreign businesses, specifically local businesses. Any feedback from the community can help improve their shortcoming. The word ‘feedback’ refers to a person’s helpful information or criticism regarding a previous action or behavior given to another person (or a group) who may utilize that knowledge to alter and improve current and future actions and behaviors. When the environment reacts to an action or behaviors, it is called feedback. Customer feedback, for example, is buyers’ reactions to a company’s products, services, or regulations; employee performance feedback, on the other hand, is employees’ reactions to feedback from their management—the information exchange includes both expected and shown performance. Thus, the community plays a significant role in making BCCK an excellent organization. Therefore, the community need to be loyal and sincere in supporting BCCK. 5.5.3 Future Researcher For future researchers, essential information and data can be supplemented and produced through qualitative studies. With the combination of sources available through this study, future researchers will be easier to elaborate on how and the importance of visitor experience as a factor that can affect the community’s loyalty. With qualitative methods, future researchers will obtain more detailed information on how an excellent user experience framework plays a role in designing a positive interactive experience. This research can contribute to the rapid growth of excellent service plans, incredibly sustainable and flexible with extreme environmental changes. 5.6 Conclusion The researchers’ results are based on the study’s structure and objectives as a guide throughout the investigation. According to the SPSS analysis, the researchers have explained the effect of visitors and the association with the value proposition and consumer engagement in this chapter. Value proposition and customer involvement are highly associated with the visitor experience towards BCCK, as predicted at the study’s outset. The percentage, in particular, suggests that the value proposition has a high level of trust, and the correlational analysis also demonstrates that visitor involvement has a strong link. These variables are interdependent since they provide visitors with satisfaction, which leads to visitors deciding to become loyal clients. This research infers that there is a gap that future researchers may fill by identifying new UX design frameworks that can be implemented to improve service quality.
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References Gentile, C., Spiller, N., Noci, G.: How to sustain the customer experience: an overview of experience components that co-create value with the customer. Eur. Manag. J. 25(5), 395–410 (2007) Lasalle, D., Britton, T.A.: Priceless: Turning Ordinary Products into Extraordinary Experiences, 1st edn. Harvard Business Review Press, Brighton (2002) Park, E.: Motivations for customer revisit behavior in online review comments: analyzing the role of user experience using big data approaches. J. Retail. Consum. Serv. 51, 14–18 (2019) Schmitt, B. H.: Experiential Marketing: How to Get Customers to Sense, Feel, Think, Act, Relate To Your Company And Brands. Free Press (2000) Shaw, C., Ivens, J.: Building Great Customer Experiences, Revised Edition. Palgrave Macmillan (2005) Thakur, R.: Customer engagement and online reviews. J. Retail. Consum. Serv. 41, 48–59 (2018) Van de Walle, S.: Explaining citizen satisfaction and dissatisfaction with public services. In: Ongaro, E., Van Thiel, S. (eds.) The Palgrave Handbook of Public Administration and Management in Europe, pp. 227–241 (2016) Verhoef, P.C., Lemon, K.N., Parasuraman, A., Roggeveen, A., Tsiros, M., Schlesinger, L.A.: Customer experience creation: determinants, dynamics and management strategies. J. Retail. 85(1), 31–41 (2009) Yargın, G. T., Süner, S., Günay, A.: Modelling user experience: Integrating user experience research into design education. In Proceedings of the IADIS International Conferences Interfaces and Human Computer Interaction, Ankara, Turkey, pp. 26–34 (2018)
A Closer Look at Regional Government Expenditure Changes in Indonesia Putri Geubrina Rizki, Nuraini A Nuraini A.(B) , Syukriy Abdullah, and Khusnul Afifah Zharaura Universitas Syiah Kuala, Banda Aceh 23911, Indonesia [email protected]
Abstract. This study seeks to investigate the underlying motivations behind budgetary changes at the regional government level and whether budget variance and fiscal stress are the principal determinants of such alterations in regencies and cities throughout Indonesia. The sample for this study includes 224 regencies and cities in Indonesia, selected through purposive sampling from a total population of 514. The results indicate that budget variance and fiscal stress significantly influence budget changes, whereas revenue variance are not a driving force for budget changes within the regional governments of Indonesian regencies and cities. These results suggest that the government, as the executive authority responsible for budget execution, tends to maximize budget allocations for expenditures. Empirical evidence shows that Regional Budgets are consistently structured with budget allocations reaching the maximum threshold, resulting in a balanced budget without surplus or deficit. Conversely, the magnitude of revenue variance from the preceding fiscal year is not a reason for regional governments to initiate changes to their budget allocations. Furthermore, a high level of fiscal stress is a driving factor behind budget changes in regional governments. These research findings have profound implications and recommendations for regional governments in policy formulation and resource allocation in the Regional Budgets to reduce the magnitude of regional expenditure variance. It also serves as a practical guide for budget changes to lower fiscal stress levels within the Regional Budgets, aiming to reduce the budget deficits in the actual budget realization reports. Keywords: Revenue Variance · Expenditure Variance · Fiscal Stress · Budget Changes
1 Introduction In public sector organizations, the budget is viewed as a fundamental tool for accountability and primary governance. The budget plays a pivotal role in the nation’s economy and the public sector administration. Regional governments are expected to optimize the allocation of budgetary expenditures because, through regional spending, the government can provide services to the public. The budget serves the purpose of allocating financial resources among various interests [1]. The interests of the community, represented by the legislative body, will approve and endorse the budget as a financial plan. Public budgets also play a critical role as a bridge between the public’s demands © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 260–272, 2024. https://doi.org/10.1007/978-3-031-53998-5_23
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for public services and the government’s efforts to fulfil those demands. Public budgets require that all government funds are managed effectively and efficiently to ensure the achievement of these goals and the community welfare. Budget management is confronted with the availability of resources that often fluctuate from year to year, leading to uncertainty [2]. Budget changes, often referred to as re-budgeting, result from disparities between the initially planned budget and the current requirements. These changes are not included in the government financial report, which, unfortunately, means that a significant portion of the population remains unaware of changes in the Regional Budgets and Expenditure (APBD). Consequently, effective oversight of APBD implementation by the public becomes challenging. Budget modifications can involve both increases and decreases in revenue, expenditures, or financing. These changes can enhance the performance and quality of the regional government budget [3]. Various factors impact changes in the APBD, primarily due to political considerations involving politicians in the Regional People’s Representative Council (DPRD). Meanwhile, [24] states that some factors driving changes in the APBD include: 1) Uncertainty regarding the previously planned sources of revenue during budget formulation. 2) Shifting policies in regional tax and fee regulations. 3) The necessity to review and adapt budget targets to follow evolving developments over time. Budget changes in this study specifically refer to alterations in expenditure budgets, as they hold the utmost significance within the public sector, particularly in government operations [4]. In the context of regional government and achieving budget targets, a crucial consideration is the impact of budget variance. Budget variance is the difference between the budgeted targets and actual budget performance. In practice, variance tends to occur for all budget components, encompassing both revenue and expenditures [5]. The extent of budget variance becomes evident after budget realization. Discrepancies between projected revenue and actual revenue performance can be indicative of inaccuracies in the target-setting phase during the budget formulation process. In the context of revenue collection, the surpassing of predefined targets manifests as revenue variance [4]. Conversely, budget allocations for expenditures often follow a maximal basis, meaning the budgeted expenditure amount serves as the reference for the maximum disbursements that may be executed as a tangible realization of the expenditure budgets. This practice stands in contrast to revenue budgeting, which adheres to a minimal basis [15]. One of the causes of budget changes is income uncertainty. Revenue projections play a crucial role in the budgeting process. The financial condition of a region can become unstable if actual revenues fall short of planned expenditures. In cases where a discrepancy materializes between the foreseen revenue projections and the actual collections, the governmental body is compelled to undertake a budgetary revision to restore equilibrium [16]. Consequently, one facet of governmental response to address budget deficits resulting from this imbalance is the implementation of measures designed to curtail expenditure [17]. Erroneous revenue projections typically arise during budget formulation when regional governments harbor uncertainties regarding the extent of deficits and the funding sources to offset them. This situation is exacerbated by government assumptions that
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are less precise when predicting revenue. Expenditure, in the government’s definition, represents the funds needed for the subsequent fiscal year, as determined by evaluating current-year expenses, to provide a consistent level of service as in the preceding year [6]. Fiscal stress refers to a dire financial condition, financial crises, and financial hardships, which materialize when state revenues cannot meet government expenditures, both at the central and regional levels [18]. In one of the regional governments in North Sumatra, it is noted that a high disparity in fiscal capacity exists among regions. Some regions with promising revenue sources, such as taxes, fees, and natural resource availability, do not face fiscal issues. Conversely, autonomy presents a unique challenge due to the demand for greater regional self-sufficiency in other resource-deprived regions. It has led to heightened fiscal pressures (fiscal stress) compared to the pre-autonomy era. Fiscal pressure motivates regional governments to seek innovative solutions to meet the financing requirements for governmental functions and public services, often necessitating budget revisions during implementation [6]. Budget changes or revisions enacted during the fiscal year are a commonplace phenomenon within government budgeting [5]. Such budget amendments are prompted by deviations from the assumptions underpinning budget policies, such as budget overruns or the failure to meet regional revenue projections, allocation of regional expenditures, and the sources and utilization of previously determined costs [10]. This phenomenon is illustrated in several regions in Indonesia, including the approval of changes to the APBD for the 2021 fiscal year. This event transpired during the plenary session of the DPRD. The changes to the APBD were initiated by various political factions’ calls for the regional government to promptly revise the North Sumatra APBD. Additionally, these changes in the general budget policy for the 2021 fiscal year provide support for the development of the Revised Regional Budget (P-APBD) for 2021, which forms the foundation for the elaboration of the Priorities and Preliminary Budget Ceiling (PPAS) of the P-APBD for 2021. Table 1 below outlines the planned changes to the North Sumatra APBD, which have been approved for augmentation. Table 1. Planned Changes to P-APBD for the 2021 Fiscal Year Description
Initial APBD (Rp)
Increase (%)
Increase (Rp)
APBD Target After Revised
Revenue Structure
13,517,499,451,958
1.14%
153,886,210,567
13,671,385,662,525
Regional Expenditure
13,749,499,451,958
0.01%
188,168,841,872
13,937,668,293,830
In the face of such circumstances, it is crucial to assess changes in regional budgetary expenditures, even if the percentage of these adjustments is not exceptionally high. These modifications can have a significant impact on the actual realization of regional development and the future well-being of the community. Logically, the more budgetary resources available, the broader the scope of government services to optimize the benefit
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for the regional community. The role of the DPRD is paramount when dealing with budget changes, both in terms of oversight and management. The DPRD represents the people and acts as an agent of the voters. Therefore, there is an expectation that through this essential role, budget changes in the APBD can be effectively utilized and implemented based on the principles of accountability to the community, adherence to legal regulations, and a commitment to improving the overall regional quality [7]. In another perspective, budget changes have occurred in one of the provinces on the island of Java, specifically in East Java. This issue arose with the submission of the financial note on the proposed Regional Regulation (PERDA) for the changes of the East Java APBD for 2022 to the DPRD. The changes in the APBD encompass both revenue and regional expenditures, distributed across various Regional Apparatus Organizations (OPD). Revenue items witnessed a change from IDR 27,642,174,891,811 to IDR 28,499,005,276,237, an increase of IDR 856,830,384,426. Similarly, regional expenditures changed from IDR 29,454,858,347,811 to IDR 32,535,504,220,036, resulting in an additional IDR 3,080,645,872,225 and leading to a budget deficit of IDR 4,036,498,943,799. This deficit was offset by regional financing sourced from the Prior Year’s Budget Surplus (SILPA) from the previous year’s APBD. Based on the phenomenon outlined, it can be asserted that changes in regional government budgets are a common occurrence. They are a routine aspect of regional government operations carried out each year as a step in budget adjustment. The reasons for changes in each component of the APBD can be diverse and grounded in different rationales [23]. Although budget changes are common and frequently observed in regional governments, research findings present diverse outcomes. For instance, budget alterations occur due to transformations in revenue projections and regional financing inflows [6]. The financial condition of a region may experience instability if the actual revenue falls short of the planned expenditures. When discrepancies arise between revenue projections and actual collections, government entities must revise the budget to restore equilibrium [16]. Furthermore, [10] illustrates that both revenue and expenditure variance negatively affects changes in expenditure budgets. Revenue variance relates to the accuracy of revenue target determination, while expenditure variance pertains to the precision of resource requirements for carrying out regional governance functions and public service provision. From another perspective, budget changes also transpire due to fiscal stress. [26] asserts that fiscal stress occurs when state revenues cannot meet government expenditures, whether at the central or regional level. This study aims to examine the factors contributing to regional government budget changes and to assess whether fiscal stress and budget variance, whether in revenue or expenditure, influence changes in regional expenditure budgets in Indonesia. The outcomes of this research are anticipated to serve as practical guidance and references for regional government policy formulations, particularly those related to changes in regional expenditure budgets.
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2 Theoretical Framework and Hypotheses 2.1 Agency Theory and Budget Changes The application of Agency Theory in the context of public sector budgeting posits that organizational activities are executed based on the availability of budgetary resources, without the intent of generating financial profit or gain from the utilization of such budgetary allocations. Over time, various approaches have emerged in public sector budgeting, encompassing federal, state, and regional government budgeting [19]. Agency Theory arises due to the existence of work contracts stemming from agreements made between agents and principals. The relevance of agency theory to budget regulations can be observed in the relationship between the executive branch (agent) and the legislative branch (principal) [8]. Agency problems between the executive and legislative branches emerge when the executive receives a mandate to formulate general budget policies, including the drafting of budget proposals. One such agency problem is the phenomenon of moral hazard, characterized by a situation in which a contract has been concurred upon by the principal and agent, yet the agent possesses informational advantages that may lead to a reluctance to fulfil the contractual obligations [9]. Budget changes, whether at the central or regional government level, precipitate conflicts of interest. In this context, the executive as an agent, demonstrates a vested interest and propensity to formulate inherently achievable budgets. In revenue budgeting, it is common for the executive to establish conservative revenue targets relative to the actual revenue potential. This approach adheres to the minimal principle, wherein the predetermined revenue target represents the lower threshold that must be achieved. The lower the revenue, the easier it is to attain the target. Conversely, when budgeting for expenditure, the executive often proposes amounts exceeding actual needs. Expenditure budgeting aligns with the maximal principle, where the allocation of resources closely approximates or reaches the uppermost limit that the executive is authorized to utilize [5]. These self-interest patterns reflect inaccuracies in the budget amounts in alignment with revenue potential and spending capacity for each [2]. 2.2 Revenue Variance Revenue variance refers to the difference between the budgeted revenue and the actual revenue at the end of the year. During budget implementation, the initial estimation of revenue in the budget seldom aligns perfectly with the actual figures or the realized amounts by the year-end, leading to a disparity known as revenue budget variance [10]. Typically, revenue variances are positive, indicating that the actual revenue surpasses the predicted value, enabling regional governments to avoid fiscal stress. Fiscal stress arises when a regional government fails to meet revenue targets while being obligated to cover all expenditures and other outlays stipulated in the budget. The magnitude of the variance can be determined once the entire budget is fully realized. Ideally, all revenue targets should be met or even exceeded. However, often there are markdowns or underestimations in setting revenue targets, primarily due to the moral hazard inherent in an agent. This revenue variance indicates the inefficiency and lack of precision in budgetary goal-setting during the budget formulation process. If revenue
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increments occur, the surplus over the designated target becomes the revenue variance [10]. The size of regional revenue plays a pivotal role in determining the allocation of regional expenditure. Previous research findings indicate that negative revenue variances negatively impact changes in regional expenditure budgets [10]. It implies that regional governments respond promptly to negative revenue variances by initiating budget changes. However, contrasting results have been observed in studies suggesting that revenue variances do not influence changes in expenditure budgets [5]. H1: Revenue variance affects changes in regional government expenditure budgets. 2.3 Expenditure Variance Expenditure variance denotes the difference between the budgeted expenditure and the realized expenditure at the end of the year. Expenditure budget variance occurs when the expenditure target is not met by the year-end realization [10]. The budgeted expenditure represents the maximum limit of spending permitted by the regional government. In this context, the performance of government spending is considered commendable if the actual expenditure does not surpass the budget. Variance analysis entails an evaluation of the disparities or differences between realized expenditure and the budget [25]. Within this context, when the actual expenditure falls below the budget, it is characterized as a favorable variance, whereas if the actual expenditure exceeds the budget, it is classified as an unfavorable variance. A significant difference between realized and budgeted expenditures can have two implications. First, it may indicate budget efficiency, and second, the opposite. If a shortfall occurs, there are likely weaknesses in budget planning, leading to inaccurate expenditure estimates, or an unabsorbed budget might result from unexecuted programs and activities mandated within the budget. Therefore, to ascertain the root causes of these variances, DPRD needs to conduct investigations and direct consultations with the executive branch to determine whether these variances reflect sound budget performance or inefficiencies in the designated budget [25]. Prior research has indicated the significance of regional expenditure variance as a predictor for changes in the current year’s expenditure budget [2]. Furthermore, in alignment with this study, prior research has shown a significant positive relationship between budget changes and expenditure variance. It suggests that substantial expenditure variance in the preceding year precipitates changes in the contemporary year’s expenditure budget. These revisions typically involve increases in expenditure budgets more frequently than decreases, indicative of a cautious or fiscally conservative approach during initial budgeting. As a result, expenditure budget changes often exceed the initial expenditure budget [13]. H2: Expenditure variance affects changes in regional government expenditure budgets. 2.4 Fiscal Stress Fiscal Stress is a condition characterized by poor financial health, financial crises, budget deficits, or financial difficulties [12]. In cases of fiscal stress within a region, it indicates
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that the regional government is incapable of meeting its financial obligations, both in the short term and long term, and this includes the inability to enhance regional revenue or provide necessary goods and services for the public. Fiscal pressure arises when the income received by a nation or region falls short of covering government expenditures, whether at the central or regional level. Regional governments require substantial funds to fulfil their duties and functions, which are delineated in the budget. Regional expenditure budgets consistently increase each year in line with economic growth in each region. Thus, autonomous regions are expected to boost their regional revenue by capitalizing on regional potential. In doing so, they can secure the funds needed to cover regional expenditures. If revenue is insufficient to cover regional expenditure, it can trigger fiscal stress [26]. High fiscal stress levels indicate the limited capacity of a region to accommodate budget adjustments, particularly concerning expenditures. This situation reflects the region’s reduced capacity to finance all its responsibilities. Correspondingly, as the fiscal stress degree rises, the magnitude of budget adjustments, especially in expenditures, tends to increase within the regional government [4]. Previous research outcomes have unveiled that the statistical analysis indicates the significant impact of the fiscal stress variable on expenditure changes. Consequently, fiscal stress negatively influences expenditures. In practical terms, the higher the level of fiscal stress, the less pronounced the adjustments within the expenditure budget. It implies that regional governments grappling with fiscal stress face restricted flexibility in modifying their budgets [16]. H3: Fiscal stress affects changes in regional government expenditure budgets.
3 Research Methods 3.1 Population and Sample This study employs a quantitative research methodology. The data used in this research is secondary data, which refers to information already presented by existing sources. The data for this study is derived from the Regional Government Budget Realization Report (LRA) and the balance sheet outlined in the Audit Report on Regional Government Financial Statements (LKPD) of all regencies in Indonesia for the fiscal years 2019 and 2020. The population in this research consists of all regencies and cities in Indonesia that have submitted LKPD and have been audited by the Audit Board of the Republic of Indonesia (BPK). According to the Ministry of Home Affairs Decree Number 050145 of 2022, Indonesia has a total of 416 regencies and 98 cities, summing up to 514 regencies and cities in total. The sampling technique used in this research is purposive sampling, where samples are selected based on specific criteria or characteristics. The sampling criteria for this study include regencies and cities in Indonesia that possess LKPD reports and regencies or cities that experienced a deficit in the previous years, specifically in 2019 and 2020. Additionally, the variable for regional expenditure budget changes considers regional governments that made changes in 2019 and 2020.
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3.2 Variable Measurements The measurement of each variable is presented in Table 2: Table 2. Variable Measurements Variable
Indicators
Scale
Budget Changes (Y)
The difference between the post-change expenditure Ratio budget and the budgeted expenditure in the initial APBD Budget Changes = Expenditure budget after revised Expenditure budget in the initial APBD. (Arma, 2016)
Revenue Variance (X1)
1. Realized Revenue 2. Budgeted Revenue Revenue Variance = Difference between realized revenue – Budgeted revenue. (Mahmudi, 2010)
Ratio
Expenditure Variance (X2)
1. Realized Expenditure 2. Budgeted Expenditure Expenditure Variance = Difference between realized expenditure – Budgeted expenditure. (Mahmudi, 2010)
Ratio
Fiscal Stress (X3)
The deficit figure in year n-1 in the LRA. (Arnet, 2021)
Ratio
3.3 Multiple Linear Regression Analysis The research utilizes multiple linear regression analysis to assess the correlation between the independent variables – revenue variance, expenditure variance and fiscal stress and the dependent variable, budget changes. The multiple linear regression equation is as follows: Y = α − β0 − β1 X1 − β2 X2 + β3 X3 + ε
(1)
where: Y = Budget Changes; X1 = Revenue Variance; X2 = Expenditure Variance. X3 = Fiscal Stress; β1, β2, β3 = Coefficients for X1, X2, X3, α = Constant; and ε = Error terms.
4 Findings and Discussion 4.1 Descriptive Statistics Table 3 presents the findings of descriptive statistics. The average value of revenue variance is 229,503,000,000. This statistical result identifies that high-income variance indicates significant fluctuations or variations in income during the observation period.
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The higher the variance, the greater the data deviation from the mean, which may indicate income instability or risk. Descriptive statistics reveal five regencies/cities with aboveaverage mean values of income variance. Meanwhile, the mean fiscal stress value is approximately 99,675,000,000. This result suggests that the average level of fiscal stress among regional governments in Indonesia is around 99,675,000,000. Table 3. Descriptive Statistics N
Minimum
Maximum
Mean
Std Deviation
Revenue Variance
224
4762,45
7030433,84
229503,4339
705442,15667
Expenditure Variance
224
1517548,67
1616342,83
1536123,9151
9503,25442
Fiscal Stress
224
19041,66
300610,16
99675,3979
47060,78025
Budget Changes
224
12751,03
266928,98
132936,1534
62241,34777
Valid N (listwise)
224
4.2 Multiple Linear Regression Analysis Based on the results of multiple linear regression analysis using SPSS, Table 4 provides the coefficient values for revenue variance, expenditure variance, and fiscal stress. The coefficient for revenue variance is −0.003, indicating that a negative value for revenue variance will decrease budget changes by −0.003. The coefficient for expenditure variance is −1.942, suggesting that a negative value for expenditure variance will reduce budget changes by −1.942. Fiscal Stress has a regression coefficient of 0.316, signifying that a positive value for Fiscal Stress will increase budget changes by 0.316. Additionally, the analysis results show an Adjusted R-Square value of 0.707. This means that 70.7% of the variance in the dependent variable, budget changes, can be explained by the three independent variables (revenue variance, expenditure variance, and fiscal stress). The remaining 29.3% is influenced by other variables beyond the scope of this study. 4.3 Discussion Based on the results of the hypothesis testing for revenue variance, the calculated t-value of −0.607 is less than the critical t-table value (1.651), and the significance value of 0.544 is greater than 0.05. It indicates that hypothesis H1, which suggests that revenue variance does not significantly influence budget changes, is rejected. According to agency theory, when the executive branch of the government budgets for income, it tends to set the income target as the minimum threshold that must be achieved. The lower the income, the easier it is to reach this target.
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Table 4. Hypothesis Testing B
T
Sig.
(Constant)
2880658,60
Revenue Variance (X1 )
−,003
−,607
,544
Expenditure Variance (X2 )
−1,942
−4,751
,000
Fiscal Stress (X3 )
,316
3,813
,000
F Test
14.879
Adjusted R Square
70,7%
The results of the descriptive analysis of this variable show that the hypothesis is rejected. The average value demonstrates that the revenue variance from the previous year does not affect changes in the current year’s budget execution. Revenue variance indicates the government’s performance from the previous year and is used to create new policies for the current year’s budget. In other words, revenue variance is not a reason for regional governments to make changes to the mid-year budget, but it is more related to the initial budgeting for the year. The hypothesis testing results show that expenditure variance has an impact on changes in the regional government budget. The calculated t-value of −4.751 is greater than the critical t-table value (1.651), and the significance value of 0.000 is less than 0.05. It indicates that H2 negatively influences budget changes, as the government (agent), in the budget implementation, tends to maximize the allocation of budget expenditure. When there is a budget surplus due to actual expenditures being lower than the budgeted amount, this condition does not become a consideration for regional governments when setting the budget at the beginning of the year. H2 is supported by the earlier descriptive analysis, where the average values indicate that expenditure variance from the previous year does affect changes in the execution of the budget for the current mid-year. A larger variance from the previous year will result in a larger variance in the current year’s budget, thus leading to smaller changes in budget expenditure. This finding is consistent with the research conducted by [2], which states that the expenditure variance has a significant influence. The results of hypothesis testing for H3 indicate that fiscal stress affects changes in regional government budget expenditure. The calculated t-value of 3.813 is greater than the critical t-table value (1.651), and the significance value of 0.000 is less than 0.05. It suggests that Fiscal Stress positively affects changes in regional government budget expenditure. In other words, the higher the level of fiscal stress, the greater the changes that regional governments will make to budget expenditure. Based on the agency theory, high fiscal stress indicates a low capacity of regional governments to adjust their budgets. The strict decision-making regarding expenditure allocation between the executive and legislative branches reflects the limited capacity of regional governments to finance all the development and public service needs that fall under their responsibility. The previous descriptive analysis illustrates that the number of regions in Indonesia experiencing fiscal stress below the average is 71 districts/cities. It indicates that almost
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half of the regions in Indonesia are experiencing fiscal stress, where regional revenue is not sufficient to cover half of the regional expenditures. These results show that more than 50% of regional expenditures will be funded by central government transfers and other legitimate income. This research aligns with the study conducted by [6], which states that fiscal stress affects expenditure changes. Hypothesis testing using an F-test reveals that the calculated F-value of 14.879 is greater than the F-table value (2.650), and the significance value is 0.000, which is less than 0.05. Therefore, H4 is accepted. It indicates that revenue variance, expenditure variance, and fiscal stress simultaneously affect the level of budget changes.
5 Conclusion This research aimed to examine the influence of revenue variance, expenditure variance, and fiscal stress on changes in the budgets of districts and cities. The results show that expenditure variance and fiscal stress do have an impact on changes in regional government budget expenditure, while revenue variance does not affect changes in regional government budget expenditure. This outcome suggests that expenditure variance and fiscal stress are factors that drive regional governments to make changes in budget expenditure, whereas the magnitude of revenue variance is not a reason for district/city governments to make budget changes. The negative expenditure variance can be attributed to regional governments (as agents) tending to maximize their budget allocation. A thorough review of resource allocation policies within the budget, as outlined in the APBD, may be needed to reduce the extent of regional government expenditure variance. High fiscal stress can signify the limited capacity of regional governments to adjust their budgets. The tight decisionmaking regarding expenditure allocation between the executive and legislative branches reflects the low capacity of regional governments to finance all the development and public service needs they are responsible for. Therefore, regional governments should strive to reduce the deficit in their APBD so that the deficit in their LRA can also be minimized. One limitation of this research is the relatively short observation period of two years. Future researchers could extend the research time frame to obtain more comprehensive results, for example, by comparing the period before and during the COVID-19 pandemic. It is also recommended to modify the model by adding variables such as Regional Original Revenue (PAD) and Surplus/Deficit of the Regional Budget (SilPA) to gain further insights into the subject.
References 1. Anessi-Pessina, E., Sicilia, M., Steccolini, I.: Rebudgeting: scope, triggers, players. Budgetary Res. Rev. 5(1), 15–29 (2013) 2. Novelsyah, M., Nor, W.: Model Prediksi Perubahan Anggaran Belanja Daerah Pada Kabupaten Kota di Kalimantan Selatan. Jurnal Akuntansi Keuangan dan Bisnis 14(1), 401–410 (2022)
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3. Marzalita, N., Abdullah, S.: AKTOR-FAKTOR YANG MEMPENGARUHI Perubahan Anggaran Belanja Barang dan Jasa pada Pemerintah Daerah di Indonesia. Jurnal Magister Akuntansi 3(3), 46–58 (2014) 4. Kurniawan, A., Arza, F.I.: Pengaruh Fiscal Stress, Varians Anggaran dan Preubahan Sisa Lebih Perhitungan Anggaran terhadap Perubahan Anggaran Belanja pada Pemerintah Daerah. Jurnal Eksplorasi Akuntansi 1(3), 1275–1292 (2019) 5. Abdullah, S., Nazr, R.: Analisis Varian Anggaran Pemerintah Daerah Penjelasan Empiris dari Perspektif Keagenan. Konferensi Ilmiah Akuntansi. Mercu Buana University, Jakarta (2015) 6. Abdullah, S., Junita, A.: Bukti Empiris tentang Pengaruh Budget Ratcheting terhadap Hubungan antara Pendapatan Sendiri dan Belanja Daerah pada Kabupaten/Kota di Aceh. MODUS 28(2), 185–201 (2016) 7. Shalsabila, C.A., Kamilah, K.: Analisis Penyebab Perubahan APBD Provinsi Sumatera Utara. Jurnal Ekonomi dan Bisnis 1(2), 117–125 (2022) 8. Abdullah, S., Halim, A.: Hubungan dan Masalah Keagenan di Pemerintahan Daerah. Jurnal Pengurusan 2(1), 53–64 (2006) 9. Gudono: Teori Organisasi. BPFE UGM, Yogyakarta (2014) 10. Junita, A.: Perubahan Anggaran, Partisipasi Anggaran, dan Gaya Kepemimpinan Pada Pemerintah Daerah Bukti Empiris Dari Perspektif Goal-Setting Pada Satuan Kerja Perangkat Daerah di Aceh. Jurnal Penelitian Ekonomi Akuntansi 2(2), 93–107 (2018) 11. Hla, D.T., Ping, C.S., Md.Isa, A.H., Tinggi, M.: Public budget ratcheting: do malaysia federal government agencies adjust their budgets based on expenditure variances? UNIMAS Rev. Account. Finan. 1(1), 11–35 (2016) 12. Anessi-Pessina, E., Sicilia, M., Steccolini, I.: Budgeting and rebudgeting in regional governments: siamese twins? Public Adm. Rev. 72(6), 875–884 (2012) 13. Arnett, S. B. (2012). Fiscal Stress in the U.S. States: An Analysis of Measures and Responses. Georgia State University. Atlanta 14. Sugiono. (2013). Metode Penelitian, Kuantitatif, Kualitatif dan R&D. Bandung: Alfabeta 15. Cheng, B.S.: Causality between taxes and expenditures: evidence from Latin American countries. J. Econ. Finan. 23, 184–192 (1999) 16. Cornia, G.C., Nelson, R.D., Wilko, A.: Fiscal planning, budgeting, and rebudgeting using revenue semaphores. Public Adm. Rev. 64(2), 164–179 (2004) 17. Reschovsky, A.: The implication of state fiscal stress for regional governments. Fiscal J. 1–25 (2003) 18. Finky, S., Ida, F.A.P.: Analisis Faktor-Faktor yang Mempengaruhi Fiscal Stres. Jurnal Pendidikan Akuntansi dan Keuangan 7(1), 57–64 (2019) 19. Abdullah, S.: Perilaku Oportunistik Legislatif dan Faktor-faktor yang Mempengaruhinya: Bukti Empiris dari Penganggaran Pemerintah Daerah di Indonesia. Disertasi (Tidak Dipublikasikan). Universitas Gadjah Mada, Yogyakarta (2012) 20. Arnett, S.B.: Fiscal Stress in the U.S. States: An Analysis of Measures and Responses. Georgia State University. Atlanta (2012) 21. Mahmudi: Analisis Laporan Keuangan Pemerintah Daerah, Edisis Kedua, Cetakan Pertama. STIM YKPN, Yogyakarta (2010) 22. Arma, E.M.A.: Faktor-faktor yang mempengaruhi serapan anggaran pemerintah daerah Kabupaten/Kota di Provinsi Sumatera Utara dengan Penetapan Anggaran sebagai Variabel Moderating. Tesis. Universitas Sumatera Utara. Medan (2016) 23. Fahrinda, Y., Kuntadi, C.: Faktor-Faktor Yang Mempengaruhi Perubahan Anggaran Pemerintah Daerah. Jurnal Ilmiah Manajemen 13(3), 449–456 (2022)
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Budget Deficit in the Early Islamic History: A Review of the Literature and Examination of the Historical Evidence Said Al Salmani(B)
and Syed Marwan bin Syed Azman
International Islamic University, Jln Gombak, 53100 Kuala Lumpur, Selangor, Malaysia [email protected], [email protected]
Abstract. This paper explores the issue of budget deficit in the early days of Islam, particularly during the era of the Prophet Muhammad and his companions. The paper reviews the literature on this topic and analyses the sources and uses of public revenues and expenditures, as well as the situations where the Islamic state faced deficits and how they were financed. The paper identifies four instruments of financing deficits that were used in the early days of Islam: public loans, paying Zakah in advance, setting up a reserve fund, and paying Altawzif (taxes)2. The paper analyzes the conditions and rules that govern each instrument and compares them with the modern concepts of budgeting and taxation. The paper concludes that the early Islamic state had a streamlined and flexible budget system that was able to cope with various challenges and achieve economic and social objectives. Keywords: Budget Deficit · Altawzif · Zakah
1 Introduction In recent years, the budget deficit has emerged as a significant and increasingly crucial issue within the economics and financial sectors. This phenomenon is noteworthy in many contemporary nations, particularly those countries where there are a Muslim majority. Despite its current relevance, an intriguing historical question arises: how did the inaugural Islamic state manage its financial challenges? What were its primary sources of income and areas of expenditure? Moreover, what strategies did it employ to bridge the gaps in its budget? This paper delves into these inquiries by examining the budgetary practices of early Islamic societies, aiming to shed light on these fundamental aspects of their fiscal management. In light of the ongoing discussions surrounding this topic, it is crucial to delve into the methods employed by Islamic nations to manage their financial shortfalls. Research indicates that a majority of these nations grapple with budget deficits and an increasing public debt, as highlighted in studies like Boumediene [1]. As a result, these countries employ diverse strategies to tackle the issue of budget deficits, often resorting to methods that deviate from the principles of Shariah. Notably, these approaches frequently involve interest-based mechanisms which are clearly prohibited and denounced in the Islamic teaching. As mentioned in the holy Quran: © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 273–288, 2024. https://doi.org/10.1007/978-3-031-53998-5_24
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“As for those who devour interest, they behave as the one whom Satan has confounded with his touch. Seized in this state they say: Buying and selling is but a kind of interest, even though Allah has made buying and selling lawful, and interest unlawful. Hence, he who receives this admonition from his Lord, and then gives up (dealing in interest), may keep his previous gains, and it will be for Allah to judge him. As for those who revert to it, they are the people of the Fire, and in it shall they abide (Q. 2:275) [2]”. Among the fundamental rules in Quran and Sunnah is the prohibition of Riba (interest). Its negative effects are not restricted to the parties involved, but also extend to societies and countries as a whole. In the realm of Islamic finance, it is widely acknowledged that adhering to the original Quranic guidance is paramount for scholars, practitioners, and policymakers. This adherence is crucial for replacing conventional finance with Islamic finance, thereby fostering the sustainability and enhancement of the entire community [3, 4]. Muslim scholars and researchers unanimously agree that the era of the Prophet and the Rashidun (the rightly guided caliphs) exemplifies the ideal and fundamental source for the practical implementation of Islam. During the Prophet’s era, the essence of Sunnah, or the Prophet’s practices, was firmly established. In the Rashidin’s era, the Companions provided interpretations shaped by evolving circumstances and the changing dynamics resulting from Islam’s unprecedented geographical expansion and the inclusion of various nations. Consequently, exploring methods to finance budget deficits based on the practical applications from the early days of Islam holds significant theoretical relevance [5–7]. This paper delves into incidents of budget deficits in the early days of Islam, focusing on how the Prophet and his companions addressed them. By examining these incidents, we can obtain valuable insights into the strategies employed by the Prophet and his companions to effectively manage the budget shortfalls. The research begins by reviewing relevant literature on this topic, followed by an in-depth discussion of budgeting practices during the early days of Islam. The study then focuses on its central issue: budget deficits in the eras of the Prophet and the Rashidin. A detailed exploration of the mechanisms employed to finance budget deficits in Islam’s early days ensues, shedding light on this critical aspect of financial management in Islamic history.
2 Literature Review In simple words, a deficit occurs when expenses exceed revenue. So, a deficit is when the total amount spent by a government or business is more than the total money received [8]. In the financial sector, budget deficit has been considered a hot topic for a long time and is becoming more prominent each year. There is no unanimity among economists about budget deficit and its effects [9]. The concept of balancing a state’s income and expenditures has roots in ancient financial thought. Islamic scholars too have delved into this issue. For example, Ibn
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Khaldun[10], in his renowned work Al-Muqaddimah (The Introduction), emphasised the pivotal role of finance within a state. He argued that a government should employ skilled staff to meticulously record both income and expenses. He considers budgeting is one of the necessary functions of any authority, and this function only occurs in a stable country. Al-Mawardi, another influential Islamic scholar, discussed the budgetary matters in his book Royal Ruling. He highlighted that a ruler, when faced with a surplus budget, cannot levy additional taxes on the people. However, in the case of a deficit, taxation becomes permissible. Additionally, Al-Mawardi permitted borrowing for Baitu Al-Mal (public treasury), with subsequent rulers responsible for repaying these loans [11]. Different opinions were voiced within Islamic scholarship regarding the utilization of surplus funds. According to Abu Hanifah, excess money should be saved for the future, while Al-Shafi’i argued that it should be spent for the benefit of the Muslim community. In instances of deficits, the Muslim community was expected to finance the shortfall [12]. These historical perspectives provide valuable insights into the nuanced approach toward budgeting and deficits within Islamic finance. The interest in budget deficits isn’t a recent development; it’s deeply rooted in history and remains crucial today. Even during the time of Prophet Mohamed, instances of public borrowing were noted, indicating that deficits are a normal part of any economy [13]. However, in the modern world, budget deficits have become commonplace, especially in Muslim countries. These deficits lead to a significant increase in public debt, hindering progress. Scholars like Chapra [14] and Kahf. [15] highlighted the severity of this issue, showcasing its negative impact on growth and development. Unfortunately, this problem is worsening over time [1]. While previous studies have explored this area, diverse approaches have been taken. Some researchers used historical and jurisprudential methods to analyse old deficit instruments [16, 17]. Others delved into the efficiency of these instruments and their relevance in the modern era [18–22]. More recent studies, employing sophisticated methodologies, demonstrated the potential of Islamic banking and finance in mitigating deficits. Evidence from various Islamic countries supports this claim [23–25]. These studies collectively shed light on the diverse strategies and historical contexts surrounding budget deficits, offering valuable insights into managing these financial challenges in contemporary settings. Islamic finance offers various methods to handle deficits apart from borrowing, as highlighted by Shabra [26]. However, many Muslim majority nations predominantly resort to borrowing, ignoring the diverse alternatives sanctioned by Islam, especially when deficits are incurred for purposes other than investment funding. Although Islamic scholars have differing opinions on budget deficits, it is essential to understand that neither the Qur’an nor Sunnah dictate rigid public finance systems. Shariah’ allows room for budgetary maneuvers in particular taking into account the need for public. Thus, government can be in deficit as a matter of necessity, but this deficit must be regulated. However, Islamic socioeconomic objectives are not compromised by pressures of deficit. Moreover, the methods used to finance budget deficits must align with Islamic principles, ensuring their permissibility [27]. The literature related to the topic of the study can be divided into three main categories:
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1. Studies discussing budget deficits in Islamic economic history. 2. Studies discussing the role of Islamic financial instruments in mitigating budget deficit. 3. Studies examining the effectiveness of sovereign Sukuk in financing budget deficit. While many studies fit these categories, some approach the topic from different angles. For example, Monzer Kahf [20] discusses the budget deficit within the scope of the role of a state in the Islamic economy. As part of his research, he looked at restrictions placed on the government’s economic policy and how resources can be managed, and revenues are spent so that the state won’t reach the point of deficit. This study aligns with the first category, focusing on the period during the lifetime of the prophet Muhammad (Peace and Blessings be Upon Him). Taking a step back and interrogating the history and biography of the Prophet can be useful as a springboard for further investigation. By delving into this historical perspective, the study aims to contribute to a better understanding of the concept of budget deficits within Islamic economic frameworks.
3 Budgeting in the Early days of Islam Before delving into the topic of budget deficits, it’s important to consider the existence of a budget itself. The concept of a state’s general budget, as we understand it today, was unimaginable fourteen centuries ago. Our modern budget is a product of significant advancements in human thought. Surprisingly, the foundational principles of modern budgeting were embedded in early Islamic financial thought. Although the term ‘budgeting’ is a recent concept, its essence was expressed in the form of estimating funds in ancient times [28]. Additionally, some researchers argue that the idea of budget and its deficits can be found in the Holy Qur’an, specifically in the story of Joseph, making it perhaps the first instance of government budgeting in recorded history [22]. In the early days of Islam in Mecca, Muslims didn’t have a formal state or authority. Because of this, there were no public revenues or expenditures, meaning there wasn’t a general budget in place. However, after the migration to Medina and the formation of the Islamic state, things changed. Public revenues and expenditures became organised. Prophet Muhammad established Baitu Al-Mal, the treasury, where all the incoming revenue was recorded meticulously and estimated it before it was received [5]. When Umar ibn al-Khattab sought to create a Diwan (a record-keeping system) to fairly distribute people’s financial rights, there was a discussion among the Companions about where to start. Umar recalled: “I remember that I attended with the Messenger of Allah and he started with Bani Hashem and Bani Al Muttalib” [29]. This indicates the presence of an early form of a general budget since the Prophet’s era even before the time of Caliph Umar ibn al-Khattab. The budget developed greatly in the later years. For example, Al-Khwarizmi [30] -an encyclopedic scientist and great mathematician- who died in the fourth century AH- gave us some precise details about Diwan (the central finance department, chief administrative office, or regional governing body) [31]. Al-Khwarizmi discussed many types of documents used in Diwan. The first thing he mentioned that there was a law regarding Al-Kharaj (a land tax initially imposed only on non-Muslims but soon after
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mandated for Muslims as well [32]) that governed it. Also, there was Al-’awarij, which is a book of revenues and what each person must pay to the Baitu Al-Mal, and how many payments are to be made. Additionally, Al-ruwznamaj (the calendar book) determines the daily expenses and revenues. There is also Al-Khtma (book of conclusions), which is a monthly budget report. Al-Khtma Al-Jameh (book of final conclusions) which is an annual budget report. Al-taarij is similar to Al-ruwznamaj but it categorises expenses and revenues under chapters. In addition, Al-bra’ah (innocence) is a receipt issued by Al-juhabdh (budget officer) or Al-Kazen (treasurer) to anyone who brings money to the treasure. After that, he discussed the financial determination process and how it is done, and then he talked about the army budget and the accounting methods that were used. Moreover, Al-Khwarizmi explained the method of estimating the next year’s budget. Specifically, he mentioned that Al-juhabdh should look at the highest and lowest budgets recorded over the past few years. Once these figures are added up and divided in two, next year’s budget will be determined. These give us the impression that budgeting was well known at the dawn of Islam. Moreover, it is confirmed the precedence of Islamic thought over others in this field and clarifies the error of those who imagine that the general budget just began in England in17 century. Al-Nuwairi [33] stressed the importance of keeping track of expenditures and revenues. As well as creating a separate file for each source of income and the expected funds from that source. He highlighted the importance of budgeting and accounting procedures. Also, he discussed setting up a budget that includes any surpluses from previous years as well as yearly expenses. According to Shrfah [22]; budget in simple form began after the battle of Badr -in the second year of hijra. Then it expanded and reached an advanced stage in Umar Ibn AlKhattab’s era with the conquering of several countries followed by a surge in revenues, accompanied by the creation of Diwans (bureaus). While Lehyani [12] rejected with consistent clarity the statement that there is a general budget at the beginning of the Islamic state. According to them, general budget is a specific concept, and it did not exist in the early Islamic state. Perhaps we are inclined to agree with the of Al-Kattani [34] that the Messenger applied in his emerging country the best-known systems at his time. However, general budget in the early Islamic state does not detract from the financial system in that era. Budgeting is an organization like all other organizations that develops with the development of knowledge and science.
4 Budget Deficit in the Prophet’s and Khulafa Ar Rashidin’s Era There are indications that there were deficits and surpluses during the Prophet’s era. Occasionally, the Prophet’s state was even unable to cover the necessary expenses because of a deficit in revenues. In these situations, the Messenger urged donations and sacrifices for the sake of Allah, but in some cases he took loans from community members Muslims or non-Muslims to finance the deficit [5]. was known to borrow in his personal capacity, at least during the The Prophet difficult early years in Medina. According to a narration, the Prophet used to borrow frequently to help needy Muslims, whenever circumstances required it. Although these loans were for relatively small amounts in kind or cash. The scope of the current study is limited to those instances when the Prophet borrowed as a leader of Muslims and
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head of government [5, 6]. For example, Abi Dawud narrated in his book As- Sunan (3562) “The Messenger of Allah borrowed coats of mail from him on the day of (the battle of) Hunayn. He asked: Are you taking them by force. Muhammad? He replied: No, it is a loan with a guarantee of their return”. Also. An-Nasa’i narrated in his book As- Sunan (4683), ‘Abdallah b. Abu Rabi’a said “The Prophet borrowed forty thousand from me, then some wealth came to him, and he paid me back and said: ‘May Allah bless your family and your wealth for you: the reward for lending is praise and repayment”. Some researchers claim [5, 6, 21, 22] that the aforementioned narration about the Battle of Hunayn, when the Prophet borrowed forty thousand shields from a polytheist, this incident is seen by these researchers as a kind of budget deficit. Additionally, S.adr [35] analyzed this narration and concluded that, the government may decide to borrow ammunition rather than taking debt whenever they exert the same effect. As a result, there were no costs associated with procuring them. Furthermore, S.adr [35] discussed the second narration that the Prophet borrowed 40,000 dirhams (130,000 dirhams as stated in another narration) from a newly converted Muslims of Makkah. S.adr drew the following conclusions: the Prophet paid back his loan three months later after returning from Hunayn. Therefore, no outstanding debts could be accounted for as a part of the government’s budget deficit during the same year. Siddiqui [6] claims that there is no difficulty in distinguishing between the personal borrowings made by Prophet Muhammad , and the borrowings he made for public purposes. Siddiqui mentioned six cases of borrowing by the prophet, but in two cases, he was not sure whether those cases were for personal or public uses. However, the book of Sunan Abo Dawud has a chapter that addresses taking out a loan and paying it back from Zakat funds. Narrated by “Abdallah b. ‘Amr b. al-‘As commanded him to equip an army. Then, when the camels told that the Prophet were insufficient, he commanded him to keep back the young camels of Sadaqah. He said, “I was taking a camel to be replaced by two when the camels of Sadaqah came.” (Reported by Abo Dawud, Ahmed, al-Hakim and al-Baihaqi). According to this hadith, needed camels to prepare for one of the battles, but there were not the Messenger enough of them, so he allowed the purchase of a single camel in return for two camels when the camels of Sadaqah came. This hadeeth confirms that a ruler can borrow money and repay it with Zakat. Similarly, according to the majority of scholars, there is no Riba took one for two, neither is Al-Fadl (the interest of excess) in animals because he there Riba Al-Nasi’ah (the interest of delay), because Zakat comes at the end of the year [36]. Moreover, in anther narration that “the Messenger of Allah borrowed a young camel, and when the camels of the Sadaqah (alms) came to him, he ordered me to pay the man his young camel. I said: I find only an excellent camel in its seventh year. So the Prophet said: “Give it to him, for the best person is he who discharges his debt in the best manner” (Reported by Muslim (2905) and Abu Dawud (3346)). This hadith has many benefits, such as explaining the Prophet’s morals. It is possible that he borrowed a camel for a needy companion, then returned it better than when he took with a camel of Zakat. Thus, neither he nor his family are allowed to receive charity from the Prophet [37]. In light of these two hadiths, we can conclude that the Messenger of
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Allah borrowed for public purposes and these hadiths demonstrate the importance of borrowing wisely, for the needs of the public. Notably, the deficit or surplus experienced by the early Islamic state is not comparable with that terminology using today. Due to the fact that deficit or surplus was unintentional, and not part of a planned general budget, the deficit arises from a shortfall of revenues over expenditures at the moment when spending is required. Thus, the deficits and surpluses were experienced by the first Islamic state were exceptional cases. In that sense, we can say that the early Islamic state committed itself to achieving general budget equilibrium and avoid being indebted [12]. However, there is no mention of the budget deficit in the era of the Rightly Guided Caliphs, which forced them to impose some taxes or take out loans. In the Umayyad and Abbasid states, several incidents were reported in this regard, and people were taxed heavily. There are also incidents of usurious loans [6, 20].
5 Methods of Financing the Deficit Our great jurists discussed the issue of the budget deficit extensively. This only demonstrates the importance of the issue at the same time as its seriousness. In which they discussed four options for funding the budget deficit and implemented strict controls. Rather than addressing them in detail, we will try to address them briefly, otherwise each of these tools deserves in-depth study. 5.1 Public Loans Islamic public financial policy dictates that a state should primarily utilize its regular resources to fulfill its public obligations. However, if these resources prove insufficient, the Islamic State is not left empty-handed. It is permissible, according to Islamic jurisprudence and supported by the Sunnah, consensus, and analogy, for a just leader to resort to public borrowing without interest. This borrowing can be used to fulfill vital public purposes, such as equipping the army or covering obligatory expenses. The evidence for this rule is derived from the Quran, Sunnah, consensus, and analogy [38]. As mentioned in the Holy Quran:
“O Muslims, fight in the way of Allah and know that Allah hears everything and knows everything. Who is there among you who will lend to Allah a good loan267 that He may return after multiplying it manifold? Allah alone can decrease and increase (wealth) and to Him you shall all return (2: 245). [2]. According to Mohammed Rashid Reda, the Holy Qur’an here mentioned fighting and then followed it up with an exhortation to loan. This is because repelling aggression and defending rights requires a great deal of effort and an exorbitant expenditure of money. The urge to spend in this verse is meant to spend in public interests, and it includes donations and loans that individuals make to governments [39]. In several instances, the prophet’s loans were only geared towards the general welfare of the country as was evident from the two aforementioned narrations and other
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hadiths. For example, “Abu Rafi’ reported that Allah’s Messenger took from a man as a loan a young camel (below six years). Then the camels of Sadaqa were brought to him. He ordered Abu Rafi’ to return to that person the young camel (as a return of the loan). Abu Rafi’ returned to him and said: I did not find among them but better camels above the age of six. He (the Holy Prophet) said: “Give that to him for the best men are those who are best in paying off the debt” (Sahih Muslim Book 22, Hadith 147). Imam Al-Shafi’i said: the Holy Prophet did not repay the loan from the camels of Zakah, took was for the because Zakah is not permissible for him, unless the loan that he poor and paid the loan from their money -Zakah- [40]. Ibn Abd al-Barr said: the camel was borrowed by the prophet to the poor of his country when he saw their extreme need. Then he returned it from the Zakah’s camels [38]. There is unanimity among scholars that the guardian of Baitu Al-Mal –treasuryshould be obligated to take on a debt for the benefit of Muslims. In the Kuwaiti Encyclopedia: There is no dispute among fuqaha -jurists- that it is permissible for the Imam to borrow money for the treasury in times of crises and calamities and out of necessity or out of a legitimate (preponderant) interest [41]. Evidence from analogy: the jurists made comparison between the guardian of a Baitu Al-Mal and the guardian of an orphan and determined that if the guardian of the orphan can borrow to provide alimony, food, and clothing to the orphan, then the guardian of Baitu Al-Mal can as well take out loans for the benefit of Muslims[19]. In no doubt, the jurists restricted taking out public loan to perhaps seven conditions: First condition; the state’s ability to repay the loan. Public loans can be obtained if the Baitu Al-Mal has expected income to pay back the loans. According to Imam Al Shatibi, borrowing during times of crisis depends on the Baitu Al-Mal having an expected income. But if no income is anticipated, and the income levels are low, the Imam may impose taxes [42]. In conformity with this condition Imam Al-Juwayni stated that: it was mentioned that the Messenger of Allah used to borrow when needs arise and he hastens for Zakah. I do not deny the permissibility of that, but I allow borrowing in emergency situations and Baitu Al-Mal’s funds are depleted. In the end, it must be assumed that the revenues will be higher than the expenditures [43]. The jurists stressed the importance of the ability to pay, in which our scholars made a critical point about the dangers of debts to future generations and the preservation of state sovereignty. The second condition, existence of a situation of urgency and legitimate interest. Ibn Hajar said: The Imam may borrow money for Baitu Al-Mal, to fulfill the needs of his people, and repay it from Zakah. Moreover, borrowing is permissible in order to meet payroll, such as military salaries, and similar obligations, which by delaying it becomes a debt owed by the Baitu Al-Mal. According to Abu Ya’la, if Baitu Al-Mal incurs two obligations and only has the money to fulfill one of them, Baitu Al-Mal has to pay what will become a debt if it isn’t settled. In the event the ruler cannot clear both, he should take out a public loan to settle the debt. However, the ruler who succeeds him in power must pay off the debts if he has a surplus in the budget [44]. The third condition; insufficient regular revenues. The state must first ensure that its regular, legitimate revenues, such as Zakah, returns from natural wealth and other public funds, are insufficient in order to resort to public borrowing. Also, the state must reduce or postpone some unnecessary expenses without resulting in harm or damage [45].
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The fourth condition: the Imam returns to Baitu Al-Mal all what he took from it for himself, his family, and his relatives unjustly and what he ever put into the forbidden things. After that, if there is still a need to borrow, it is permissible. Consistent with this is what was mentioned by Ibn al-Subki that When Sultan Qutuz decided to march from Egypt to fight the Tatars. Qutuz asked Al-‘Izz Ibn ‘Abdussalaam to borrow from the merchants’ money. Al-‘Izz Ibn ‘Abdussalaam replied, before that, you and the princes must first return all your money to the Muslims’ Treasury House. If this money is not sufficient to prepare for the battle, then you could borrow from the merchants’ money [46]. The fifth condition is no-interest loans. Riba (interest) is forbidden in Islam. It is clearly prohibited by the Noble Qur’an and the honorable Sunnah of the Prophet [19, 38, 45]. The sixth condition; borrowing must not lead to greater harm. Most harm usually is a consequence of external public loans, where the external loan becomes a weapon in the hands of the creditor countries. External loans is used as a pretext for interfering in the affairs of the borrowing country as well as a way to limit its freedom[19, 45]. The seventh condition; rationalization of public spending. Public spending should be rationalized by eliminating unnecessary expenses or improvements and being sufficient with the necessities and needs [19]. Al-Mawardi [29] gives examples of the expenditures that a country can skip in time hardship: (if it is not common harm, such as a bumpy road, but people can use another road farther away, or discontinuity of source of drinking water, but people still find other ways to get water. 5.2 Altawzif (Taxes) Altawzif is an Islamic term similar to taxes. Despite the similarities, Altawzif is a tax that is only imposed in times of crisis on the rich. Moreover, in modern financial thought, taxes are imposed on income, wealth and consumption. While Islamic jurisprudence in short -, sees Altawzif is a function of income and wealth only. In contrast with Zakah, Islamic financial legislation does not contain detailed instructions from Allah or His Messenger. Public interest is the only reason for Altawzif , as it must be used to support people’s living. In fact, the early Islamic state had no intention of imposing Altawzif , not because of the illegality of it, but because it was not needed [5, 19]. Therefore, during times of crisis, catastrophes and epidemics, the state may resort to Altawzif. As a temporary measure, Altawzif must be used if the treasury is incapable of financing the public needs. In spite of his knowledge that the kings around him levying their people hug amount of taxes, the Messenger of God did not impose any kind of taxes throughout his honorable life, but what he did when was required to finance the state treasury, either by asking for donations or borrowing [22]. There is disagreement among scholars about the legality of taxation. Conflict over it arises from the disagreement about whether there is a duty on wealth aside from Zakah? The first view holds that it is not permissible to impose taxes, and the only right in wealth is Zakah. The requirements after that are voluntary, and its non-compliance cannot be sanctioned. The second opinion has been held by the majority since the Companions and their followers, and including many contemporary scholars which is that wealth has
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another right besides Zakah, and taxes may be levied under certain conditions [18–22, 35]. Conforming to the second opinion Imam Al-Ghazali emphasizes this point by saying: if the hands are empty of money, and there is no money in to Baitu Al-Mal to meet military expenditures and it is feared that the enemy will enter the land of Islam or people of evil will seize power, a ruler may levy the rich the amount of soldiers’ sufficiency. Considering the rule if two evils or two harms contradict each other, the greater of them should be eliminated [47]. In agreement with this statement, Al-Qurtubi said: After paying Zakah, if Muslims have a need, then the ruler must fulfill it. According to Malik, the people must redeem their captives, no matter how much money they spend [48]. Imposing taxes to cover necessary and needed spending must meet certain conditions, the most important ones being the state’s treasury must be empty, or the funds in it are insufficient to cover these essential or necessary expenses. Then, the Imam - the ruler must be just. Moreover, Altawzif should be taken from the surplus of the rich first. Also, levying Altawzif should not exceed the limits of need because Altawzif is an exceptional measure nor and it’s not a permanent source of income[18–22]. The Islamic legislation does not specify any percentage or other amounts precisely for Altawzif . This does not mean specifying a rate is wrong or in conflict with the objectives of the legislation. In fact, Altawzif rates are determined by the achievement of its objectives. It is a technical matter depending on the state’s policy in achieving the Altawzif goals. In Islamic jurisprudence, the rate of Altawzif is determined according to the type of situation that calls for it, and they can be divided it into three categories. First, when financial crisis is not general and the affluents are able to cope with it, as long as Altawzif is the only thing that keeps the risks in check, thereby Altawzif is levied by the government on these people the precise amounts that are needed. Second, if the financial crisis is general, then the state will leave the rich what they need for a whole year, and they will be taxed on what exceeds that. Third, when the crisis is even greater than that, for the sake of the necessity to pay it off, the state is entitled to make use of whatever it deems best for the circumstance, to prevent further harm from occurring [19, 22, 45]. Imam Al-Juwayni presented in his book two opinions of the jurists on the nature of Altawzif . Is it expropriation from individuals and spending it in the interests of the society, or is it a form of loan between the state and the rich? With his preference for the first, he sees no objection to the second’s permissibility [43]. However, our great scholars discussed an important issue that shows this religion is more than just a belief system. It is a way of life that is based on justice and understanding. In light of the trade-off between Altawzif and public loans, most jurists tended to favor borrowing due to their strong faith in the sanctity of private money, with the most critical condition being the hope that Baitu Al-Mal will have income in the future. Al-Shatibi says: “Taking a loan in times of crisis is only when it is hoped that the Baitu Al-Mal will have an income that is expected or hoped for. But if nothing is expected or the sources of income are weak, then the rule must apply Altawzif . Al-Shatibi, Al-Ghazali, and others compared Baitu Al-Mal to the insolvent rich man, believing that Altawzif is a kind of donation, and people are not obligated to donate to rich man, but only to lend it. Thus, Al-Mawardi said Baitu Al-Mal should be treated as an insolvent man, and the
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proceedings should be postponed until a convenient time. The Baitu Al-Mal’s resources are Karaj, Zakah, Jizya, and so on. Borrowing the Baitu Al-Mal means it will repay you from these sources [49]. Therefore, it is possible for the ruler to borrow in times of need and necessity for interest of eight categories of Zakat and repay it from Zakah funds later. 5.3 Paying Zakah Before It is Due Several narrations proved that taking Zakah in advance is legitimate to finance the budget. Additionally, the Prophet Mohammed used this instrument to finance the budget deficit of early Islamic state. However, Zakah is one of the essential periodic financial resources of the Islamic state. It is the third pillar of Islam and one of the firmest financial obligations. It is a financial act of worship and its beneficiaries specified by the Quran. Zakah is based on the Holy Quran, the Sunnah and consensus. Zakah is a social organization with economic and financial foundations based on justice. Zakah aims to ensure the sufficiency and stability of this nation, as well as achieving social security and solidarity. In light of this, most scholars agree that the Zakah budget is for the eight specified categories and should not be included in the state’s general budget. Since it is a perpetual and renewable resource, the state must collect it and spend it according to what Allah commanded. Zakah budget has separate revenues, and its expenditure follows a specific and strict pattern. Zakah keeps economy from being shocked, as economic variables are continually corrected without waiting until they accumulate into a situation that is hard to deal with [13, 50–52]. In accordance with the Qur’an and the Sunnah of the Prophet, Zakah may only be paid on its specified date. One of those conditions is that it is paid annually. Muslims are required to give Zakah, the annual alms on their wealth, once every lunar year on the profit, or potential of it, from eligible wealth. If a certain emergency occurs, the community or individuals may need to pay Zakah before time turns around. In order to pay the Zakah before the appointed time for it, the condition of Nisab -it is the minimum amount of wealth that obligates you to pay Zakah- must be met. Considering this, the following question arises: would it be permissible to pay Zakah before it is due when its Nisab is held? There is a need to investigate the opinions of the jurists as well as the evidence they relied on. There has been disagreement among jurists on whether Zakah can be paid before it is due. Upon this topic, the jurists split into two categories: the majority allow Zakah to be paid in advance and the Maliki jurists who don’t. The majority of scholars quoted narration of Al-Abbas bin Abdul Muttalib’s -the uncle of the Prophet- that “Abbas asked the Prophet about paying his Sadaqah before it is due, and he granted him permission to do that (Sunan Ibn Majah 1795)”. Also, the narration that the Prophet said to Umar: “We have taken this year’s Zakah from Al-Abbas in the previous year (Jami‘ at-Tirmidhi 679)”. However, the scholars who permitted paying Zakah in advance set two conditions for that: The first condition: obtaining of the Nisab. Whoever gives out Zakah before his money reaches the Nisab, what he gives out is considered voluntary charity, not obligatory Zakah. The Second condition: Wealth must be calculated at the end of the year, and how much was paid from it as Zakah. There is another topic related to this point that scholars have discussed: the maximum period to pay Zakah in advance. Among the
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schools of thought, Hanafi is the most lenient on this issue, as they have permitted paying Zakah in advance for more than two years. While the rest of the Mazhab did not allow acceleration for permitted paying Zakah in advance for a year or two. This is because of the different narrations about the story of Al-Abbas, whether the Prophet took his Zakah for a year or two in advance [53, 54]. In brief, if the argument for paying Zakah in advance is not established due to the weakness of the evidence, it would be permissible based on broad concept of Shari’ah. The concept of Shariah encompasses not only legal rules but also every bit of guidance that Allah Most High has given to mankind. Shari’ah considers the need and the predominant interest of the people. In case of budget deficit, that accompanying exacerbation of social and cultural problem and cause disruption of most of the jobs, the scarcity of livelihoods, and human affliction, paying Zakah in advance in this case is a public interest. It is considered to be an optimal solution to prevent any negative impact. Even though our focus here is on Zakah and its presentation in the past, this does not mean it is an outdated tool that is no longer relevant or cannot be used today. There have been many researchers in Islamic economics who have tried to estimate the proceeds of Zakah. Their estimates varied greatly from one another. Researchers are interested in estimating the proceeds of Zakah because it allows them to assess the impact of the distribution of these resources on economic and social development in Islamic countries. Researchers’ estimates of Zakah proceeds differ due to two main factors: First, lack of economic statistics in Arab and Islamic countries. Upon availability, it may not be arranged in a way to estimate the proceeds of Zakah. Second, different perspectives on Nisab and the wealth that subject to Zakah. In Saudi Arabia, Moqbel Al-Thukair [55] estimated the average Zakah proceeds to be about 3% of GDP. Munzer Kahf [56] used three hypotheses to estimate the proceeds of Zakah in eight Islamic countries. According to one hypothesis, the proceeds of Zakah vary between 1% to 2% of GDP, while the outcome of second hypothesis between 1.7% to 6.3% of GDP, the third hypothesis ranges from 2% to 7.5% of GDP. While Taher thinks that the proceeds of Zakah are approximately 10–14% of GDP in oil-producing countries [51]. Muhammad Anas Al-Zarqa [57] estimated the proceeds of Zakah in Syria in 1971 at 3% of GDP, and in Sudan at 3.6% of GDP in 1982. Another study estimated the proceeds of Zakah in Kuwait at 12% of GDP from the total state revenues for the fiscal year 1993/92 [58]. Nevertheless, paying Zakah in advance in times of budget deficit and hardship situations has significant economic and social effects that affect government, society and individuals. Among those effects are the following: The marginal propensity for consumption increases in the poor due to increase in income, which results in an increase in effective demand, which then leads to an increase in production as this hypothesis described by Keynesian Theory. Advancing Zakah in times of crises results in an increase in investment, which in turn saves the economic community from the effects of problems such as unemployment, poverty, etc. Advancing Zakah would be used in another possible scenario. It is possible for a government to take Zakah in advance to reduce the monetary mass in circulation for the purpose of reducing inflationary [53, 59, 60]. In general, the economy is greatly impacted by Zakah. A dynamic panel data model is used by Jedidia & Guerbouj [59] to examine the role of Zakah in the economic growth of a sample of eight Muslim countries from 2004 to 2017. According to the
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findings, Zakah stimulates economic growth in these countries. Zakah funds stimulate consumption, resulting in an increase in investments and positively influencing economic growth. This is because Zakah funds are used to finance multiple economic activities that would otherwise not be possible. A similar result found by [61]. He examined how Zakah can be used to optimize the asset investment portfolio. Results show that Zakah has an optimal effect on investment. An optimum portfolio with the Zakah element has a much higher return than a portfolio without it. According to the study of Yusoff [62], Zakah expenditure has a positive long-term relationship with real GDP. 5.4 Reserve Funds Several Islamic scholars believe that creating a general reserve can strengthen the budget plan and preserve the government from a sudden deficit. There is no doubt that the Prophetic era’s monetary system differed greatly from our contemporary monetary and banking systems. During that period, the financial system was based on the gold and silver bimetallic system, the free exchange rate between these two currencies, and the absence of national or international monetary authority. Most of the legal decisions that were based on this system differ significantly from our current systems [63]. However, notable in this regard is the action of Umar Ibn al-Khattab when he preserved the wealth for future generations. When Iraq was conquered during Umar’s era, the commanders of the soldiers urged Umar to divide the lands among the army, as the Messenger of Allah did in Khaybar, but he refused and said, “If I divided it among you, there would be nothing left for those who come after you”. The refusal of Umar - may God be pleased with him - to divide the conquered lands shows his wisdom in making sure those lands would be a waqf for future generations, which they would inherit one generation after another. In the absence of that step, nothing would protect their descendants, and the wealth would accumulate in the hands of a few Muslim individual [64]. One of the issues closely related to our subject and it was one of the issues that preoccupied jurists in the past is the issue of budget surplus. Dispute over was presented since the era of the Companions. There are two jurisprudential directions that deal with the surplus. The first opinion: advocating for creating a general reserve to avoid falling into the trap of deficit. They believe that the surplus funds should be kept for emergencies after covering any current expenditures. This opinion is adopted by of the Hanafi and the Maliki doctrines and an opinion in the Hanbali doctrine. Al-Mawardi mentioned that Abu Hanifa believed that if the found in Baitu Al-Mal exceeds the need, it is necessary to form a reserve to face crises, years of hardship and calamities. As aforementioned, Imam Al-Juwayni supported the opinion of creating a general reserve to strengthen the budget plan and protect the government from exposure to a sudden deficit. Also, preventing government from resorting to borrowing or enforce taxes upon rich people. On the other hand, the second opinion is against forming a general reserve. Instead of keeping surplus as an emergency reserve, simply redistribute it among people. As this approach is based on the idea that it is permissible for the ruler to tax the rich to meet government needs. Or, to put it differently, money is distributed when there is surplus, but taxes are imposed when there is shortage. This is the opinion of Shafi’i’s doctrine, and some Hanbalis’
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scholars [12, 22]. Scholars’ interest in creating a crisis reserve indicates that the budget deficit was very much discussed, and it is extremely crucial.
6 Conclusion This paper examines the issue of budget deficit in the early days of Islam, focusing on the era of the Prophet Muhammad and his four righteous successors. The paper aims to explore the historical instances of budget deficit and the methods of financing it from an Islamic perspective. The paper uses a historical jurisprudential approach to analyze the primary sources of Islamic law, such as the Qur’an, the Sunnah, and the consensus of the companions. The paper also reviews the literature on this topic and compares it with modern financial thought. The paper finds that the concept of budgeting was well known and practiced in the early Islamic state, although it was not in the same form as the modern budget. The paper also finds that the early Islamic state experienced occasional deficits and surpluses, which were not part of a planned general budget, but rather resulted from a shortfall or excess of revenues over expenditures at the moment when spending was required. The paper identifies four methods of financing the budget deficit that were used or discussed by the Prophet and his companions: public loans, paying Zakah in advance, setting up a reserve fund, and paying Altawzif (taxes). The paper also discusses the conditions and restrictions that were imposed by the jurists on these methods to ensure their compliance with Islamic law and objectives. The paper concludes that the early Islamic state was committed to achieving general budget equilibrium and avoiding debt. The paper also concludes that there is no rigid or fixed system of public finance in Islam, but rather a flexible and adaptable one that allows room for maneuvering according to the public interest and changing circumstances. The paper suggests that modern Muslim countries can benefit from the historical experience and wisdom of the early Islamic state in managing their budget deficits and public debts. Further research is needed to explore other aspects of public finance in Islam, such as public expenditure, fiscal policy, and monetary policy.
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What Do Employees Really Want? A Comparative Analysis of Available and Important Job Satisfiers Mohammed Al Subaie and Noor Ul Hadi(B) College of Business Administration, Prince Mohammad Bin Fahd University, Al-Khobar, Saudi Arabia [email protected]
Abstract. Zamil offers various job satisfiers for employee job satisfaction, but it remains unknown whether these satisfiers are aligned with what their employees consider important for job satisfaction. This study is designed to ascertain which satisfiers are present at Zamil and which satisfiers the employees believe are critical for increasing their job satisfaction at Zamil. This research employs a quantitative approach using positivist research philosophy. An online survey was conducted with the employees of Zamil; 120 valid responses were analyzed. The findings show that job security, meaningful work, respectful treatment of all employees, and opportunities to utilize skills and abilities were significant contributors to job satisfaction. Feeling safe in the work environment and opportunities to use skills and abilities were especially significant factors. The study’s implications are farreaching for both Zamil’s management and human resource management in general, emphasizing the need to prioritize job security, meaningful work, respectful treatment, and skill utilization to increase overall job satisfaction. Implementing these findings into their HR practices could foster higher job satisfaction, leading to enhanced organizational performance. Keywords: job satisfiers · Zamil · Saudi Arabia
1 Background of the Study In a 2021 poll conducted by the Saudi Ministry of Human Resources and Social Development, 73.8% of Saudi employees reported job satisfaction. This means that more than one quarter of Saudi Arabia’s workforce may not be fully engaged or productive due to dissatisfaction at work, which could compromise productivity, efficiency, and the competitiveness of its labor market (Alotaibi 2022). Furthermore, this statistic underscores the need for targeted efforts from corporations to increase job satisfaction among employees in order to retain talent, maintain morale, and increase performance. Thus, this statistic not only highlights a serious human resource management concern in Saudi Arabia but also underlines its significance and potential impact in improving job satisfaction (Alkandi et al. 2023). Job satisfaction is crucial to a company’s long-term performance, and a study by Al-Ghamdi and Al-Shammari (Al-Ghamdi and Al-Shammari 2017) identified a strong correlation between job satisfaction and employee performance. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 289–300, 2024. https://doi.org/10.1007/978-3-031-53998-5_25
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Studies on job satisfaction have been widely conducted across sectors and organizations worldwide, underscoring its vital role in both corporate performance and employee well-being (Binzafrah and Taleedi 2022; Ishfaq et al. 2022). Yet, when applied to large multinational corporations operating within Saudi Arabia’s unique socio-cultural context, there remains an evident gap. One such company that exhibits this is Zamil Corporation – one of Saudi Arabia’s premier industrial conglomerates boasting an enormous and diverse workforce (Zamil Corporation 2021). Zamil Corporation stands in contrast to Aramco, a state-owned oil company that has been the subject of considerable research (Aramco 2022), by operating across a diverse array of sectors (steel, plastics, and HVAC). This diversity provides an unprecedented opportunity to investigate job satisfaction across job roles and industry sectors while adding depth to existing literature. Zamil Corporation’s workforce is notably diverse, comprising employees with various cultural backgrounds, social norms, and gender roles; this allows for an in-depth examination of how these factors interact with job satisfaction, building upon Altoibi (2022). Large organizations are focusing on job satisfiers to keep their employees satisfied. However, it remains unknown whether these job satisfiers have perceived value for employees (valence). To address this, the study considers Zamil Corporation as a case study.
2 Literature Review 2.1 Job Satisfaction and Its Significance Job satisfaction refers to employees’ positive feelings and attitudes toward their work experience and is a central concept in organizational behavior. Evidence links positive outcomes associated with job satisfaction to both employees and organizations, such as increased productivity, reduced turnover rates, and enhanced job performance (Zhu 2013). Employee dissatisfaction can have a serious detrimental effect on both their well-being and that of the organization as a whole. Research has demonstrated that job dissatisfaction can have devastating repercussions, including increased absenteeism, lower job performance, and increased turnover rates (Judge et al. 1994; Judge et al. 2020; Spector 1997). Kiani et al. (2018) found that job dissatisfaction was a significant predictor of turnover intentions among employees working in the Saudi Arabian retail industry, while Almansour and Gobbi (2022) demonstrated its impact on absenteeism within Saudi Arabian public sector organizations. Job dissatisfaction can also trigger adverse emotions and behaviors among employees, including stress, frustration, and disengagement (Spector 1997). This can create a toxic work environment, which threatens employee well-being as well as overall organizational performance. As such, job satisfaction should be prioritized to promote employee well-being and increase organizational performance (Assiry et al. 2022). Unhappy employees could result in absenteeism, turnover, or reduced job performance, which negatively impacts organizations overall. For this reason, organizations must prioritize employee job satisfaction to create positive work environments within organizations (Alfuraih and Alsaadi 2022).
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2.2 Job Satisfaction in Saudi Arabian Large Companies Albassami et al. (2015) conducted a comprehensive investigation of employee job satisfaction within the Saudi Arabian banking sector. Their study revealed that factors contributing most strongly to job satisfaction included job security, opportunities for career growth, and recognition and rewards. Idris and Manganaro (2017) conducted research on job satisfaction among private company professionals in Saudi Arabia and found that salary, work environment, and job security were major determining factors of job satisfaction. Alqurashi and Almutairi (2019) examined job satisfaction among nurses working in Saudi Arabian hospitals and identified three top factors contributing to job satisfaction: job security, working hours, and relationships with colleagues. Alshammari (2021) explored the effect of organizational culture on job satisfaction within Saudi Arabian hospitality industries, discovering that employees who perceived their organization to have positive culture reported greater job satisfaction levels compared to those who perceived a negative culture within their organization. Studies conducted on large Saudi Arabian companies indicate that job security, career development opportunities, salary, work environment, relationships with colleagues, and organizational culture all play a part in job satisfaction levels. It should be noted, however, that these factors may also apply in other countries or industries. One unique factor contributing to job satisfaction in large Saudi Arabian companies is the importance of religious and cultural values. Allam (2013) found that religiosity significantly determined levels of employee job satisfaction at Saudi Arabian universities. Haroon et al. (2006) also concluded this. Cherif (2020) found that an Islamic work ethic, which emphasizes hard work and dedication, positively correlates with job satisfaction among Saudi Arabian employees. However, Cherif (2020) also discovered low trust levels between management and employees that resulted in decreased job satisfaction among employees of Saudi Arabian banks. In general, job satisfaction at large companies in Saudi Arabia is driven by various factors. These include job security, career development opportunities, salary, work environment, relationships with colleagues, and organizational culture, as well as religious and cultural values. Although some of these elements may be similar in other industries or countries, Saudi Arabian job satisfaction differs in unique ways that must be recognized for employee job satisfaction to flourish in an organizational context. Organizations operating within this region should recognize these characteristics in order to create a work environment that promotes employee job satisfaction. 2.3 Factors Contributing to Job Satisfaction Job satisfaction is a multifaceted construct that is influenced by a range of factors. This section reviews the literature on how job design, organizational culture, leadership, and compensation impact job satisfaction, with a specific focus on large Saudi Arabian companies. Job design refers to the way that tasks and responsibilities are organized within a job; it can have a significant impact on job satisfaction. Cherif (2020) found that job design was positively associated with job satisfaction among employees in Saudi Arabian banks. Specifically, employees with more autonomy and control over their work reported higher levels of job satisfaction. Herzberg’s two-factor theory – also known as
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motivation-hygiene theory – provides a compelling framework for this research on job satisfaction at Zamil Corporation. Herzberg proposed in 1959 that job satisfaction and dissatisfaction are not opposites but are, rather, determined by two sets of distinct factors: motivation factors and hygiene factors. Motivation factors (or intrinsic factors) include achievement, recognition, the work itself, responsibility, and growth or advancement. Their presence can bring great job satisfaction and motivation, but their absence does not always equate to dissatisfaction (Herzberg 1959). Hygiene factors (or extrinsic factors), meanwhile, include company policy and administration, supervision, interpersonal relationships, working conditions, salaries, status, and job security. While these extrinsic factors do not directly contribute to satisfaction or motivation when present, their absence can cause dissatisfaction (Herzberg 1959). Zamil Corporation provides an ideal context in which to apply Herzberg’s theory. Compensation, job security, and career opportunities – identified as crucial aspects of employee satisfaction in large Saudi Arabian corporations by Al-Rubaiaan et al. (2014) – can be seen as hygiene factors, while recognition, work-related achievements, and the work itself serve as motivating factors, aligning perfectly with Herzberg’s theory. Herzberg’s two-factor theory thus provides an excellent theoretical basis for this research, offering a structured method to comprehend and measure job satisfaction at Zamil Corporation. This research can also contribute to expanding and applying Herzberg’s theory to large corporations operating within Saudi Arabia.
3 Methodology Employee job satisfaction at Zamil Corporation was measured on a scale adopted from a research report published by Society for Human Resource Management (SHRM). Data were collected through an online survey from Zamil Company. Around 150 workers at Zamil received the survey via email. Descriptive statistics were used to examine the data gathered from the online survey, summarizing the data and finding trends in the responses. After the data was analyzed statistically, it was analyzed critically to determine the elements that contribute to employee satisfaction in this workplace. 3.1 Demographic Information From the gender distribution data, male-dominated samples (71%) suggest that they might exert more of an effect on overall job satisfaction scores within their company than women do; this could also reflect industry factors that attract more male workers or reflect corporate culture/recruitment policies. The age distribution among respondents indicates a predominantly young workforce (62%) within the age bracket of 18–30 years. Marriage rates show an almost equal distribution between single (46%) and married (48%) individuals, suggesting interesting distinctions in job satisfaction level. A high percentage of respondents had bachelor’s (48%) and master’s degrees (29%). A majority of employees (34%) had been with the company for one to three years (34%), and the departmental distribution of employees demonstrates a higher representation from the IT (24%), marketing (19%), and operations (19%) departments.
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3.2 Employee Perceptions of Job Satisfiers From a general viewpoint, most employees reported the presence of high satisfaction for aspects under their personal control or directly related to their roles, such as Respectful Treatment of All Employees at All Levels (4.2), Opportunities to Utilize Skills and Abilities in Your Work (4.3), and Meaningfulness of Job (4.5). Concerns are evident when it comes to Employee Satisfaction with Trust between Employees and Senior Management (3.8), as well as Communication between Departments (3.5). Low scores suggest that employees may feel that trust between senior management and general staff is lacking, leading to less effective communication. Therefore, improved dialogue and collaboration across various levels within an organization would increase transparency and mutual trust. Also, Networking Opportunities scored the lowest (3.4), suggesting that employees may feel restricted in their opportunities for professional growth and interdepartmental collaboration within the organization. 3.3 Importance of Job Satisfiers to Employees at Zamil Job Security (4.8) and Feeling Safe in Your Work Environment (4.8) both carry high significance for employees seeking stability and safety in the workplace. Job Security may be seen as being especially necessary given the current economic climate and job market uncertainty, while Feeling Safe refers not only to physical but also psychological safety, meaning that employees feel free to express their thoughts without fear of negative repercussions. Opportunities to Use Your Skills and Abilities in Your Work (4.7) and Meaningfulness of Job (4.7) indicate that employees derive satisfaction from having the opportunity to put their personal abilities and competencies to meaningful use. This emphasizes the need for job roles that align with employees’ abilities, as well as tasks that contribute towards larger organizational goals. This would give their work meaning and purposefulness. Respectful Treatment of All Employees at All Levels (4.6) and Organization’s Financial Stability (4.6) represent two crucial elements of job satisfaction in an environment and organization that prioritizes courtesy. A respectful work environment helps employees feel valued and appreciated, which has an enormous effect on morale and productivity. The financial security of an organization also plays a pivotal role, as it ensures job security, timely compensation and payments, and growth within its walls. Non-Financial Benefits (3.9) was scored lower than other aspects, suggesting that such benefits are appreciated but less essential to job satisfaction than other elements. This may indicate that while non-financial benefits can contribute to employee satisfaction, Zamil Corporation employees prioritize an atmosphere that fosters stability, respect, and safety at work, where their skills can be put to good use. To enhance job satisfaction for their employees, Zamil could benefit from increasing communication across departments, creating networking opportunities, and considering non-financial benefits as a way of improving satisfaction levels.
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3.4 Comparisons From Table 1, a number of key observations can be made. For aspects that are of great importance such as Job Security, Feeling Safe in Your Work Environment, and Opportunities to Use Your Skills and Abilities in Your Work, satisfaction scores tend to be quite high – an encouraging indication that Zamil Corporation is effective at meeting employee expectations in these areas and offering opportunities for employees to utilize their abilities in their jobs. However, areas such as Respectful Treatment of All Employees at All Levels, Trust between Employees and Senior Management, and Communication between Employees and Senior Management show an apparent discrepancy between importance and satisfaction scores. These findings indicate that although employees greatly value these factors, improvements could still be made to fulfill employee expectations; it would therefore be beneficial if companies invest in initiatives to create a culture of respect, trust, and improved communication within their workplace. Table 1. Comparison Importance and Satisfaction Score Average Importance Score
Importance Score (%)
Aspect of Job Satisfaction
Average Satisfaction Score
Satisfaction Score (%)
4.6
92%
4.2
84%
4.4
88%
3.8
76%
3.9 4.5
78% 90%
3.7 4
74% 80%
4.8 4.2
96% 84%
4.4 3.9
88% 78%
4.7
94%
4.3
86%
4.3
86%
4.1
82%
4.6
92%
4.3
86%
4.4
88%
3.8
76%
4.1
82%
3.6
72%
4.8
96%
Respectful treatment of all employees at all levels Trust between employees and senior management Non-financial benefits Compensation/pay, overall Job security Relationship with immediate supervisor Opportunities to use your skills and abilities in your work Immediate supervisor’s respect for your ideas Organization’s financial stability Management’s recognition of employee job performance Communication between employees and senior management Feeling safe in your work environment
4.5
90%
(continued)
What Do Employees Really Want? Table 1. (continued) Average Importance Score
Importance Score (%)
Aspect of Job Satisfaction
Average Satisfaction Score
Satisfaction Score (%)
4.3
86%
3.9
78%
4.6 4.4 4.2
92% 88% 84%
4.4 4.2 3.7
88% 84% 74%
4.1
82%
4
80%
4.7 4.5
94% 90%
4.5 4.1
90% 82%
4.3
86%
4
80%
4.1
82%
3.9
78%
3.9
78%
3.6
72%
4.2 3.8
84% 76%
4.1 3.5
82% 70%
4.1
82%
3.8
76%
4.5
90%
4.2
84%
4 3.7 4.3
80% 74% 86%
4 3.4 4.1
80% 68% 82%
4.2
84%
3.9
78%
4.1
82%
3.8
76%
4
80%
Management’s communication of organization’s goals and strategies The work itself Overall corporate culture Career advancement opportunities within the organization Autonomy and independence Meaningfulness of job Relationships with co-workers Teamwork within department/business unit Organization’s commitment to professional development Teamwork between departments/business units Job-specific training Communication between departments/business units Career development opportunities Contribution of work to organization’s business goals Variety of work Networking opportunities Company-paid general training Organization’s commitment to corporate social responsibility Organization’s commitment to a diverse and inclusive workforce Organization’s commitment to a “green” workplace
3.7
74%
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4 Discussion To assess the importance of each factor in generating job satisfaction at Zamil, we discuss them according to their perceived importance as revealed through survey responses. Job Security: With an importance rating of 4.8, job security was identified as a primary factor of employee job satisfaction at Zamil. This finding aligns with the recent literature; Probst et al. (2019) showed that employees with high job security expressed greater job satisfaction and performed better overall, perhaps because job security fosters an environment in which employees can focus on their work without fear of job loss. Feeling Safe in Work Environment: Feeling secure in the work environment is one of the biggest influences on job satisfaction, alongside job security. A safe workplace encourages employees to contribute their best, since they do not feel threatened or at risk in any way. Clarke (2013) and Niu (2010) highlight this factor as being key for job satisfaction as well as employee well-being. Opportunities to Employ Skills and Abilities: Employees at Zamil ranked this aspect very highly (4.7), aligning with the finding of Koubova and Buchko (2013) that job satisfaction increases when employees feel they can effectively apply their skills and abilities in their jobs – perhaps due to a sense of self-efficacy and accomplishment that comes from successfully using one’s abilities. Meaningfulness of Job: Rated at 4.7, this factor highlights employees’ need to find purpose and significance in their work. A study conducted by Allan, Autin, and Duffy (2014) proved that perceived meaningfulness of work could predict job satisfaction and engagement levels. Respectful Treatment of All Employees at All Levels: With an importance rating of 4.6, respectful treatment underscores the need for a positive, inclusive workplace culture – aligning with the study of Trivellas, Gerogiannis, and Svarna (2013), which found that an open and trusting work environment significantly increases job satisfaction. Examining each factor that contributes to job satisfaction at Zamil, we discovered a strong correlation with the recent literature. Sora, Caballer, and Peiro (2013) demonstrated the significance of job security for job satisfaction, leading to positive organizational behavior and lower employee turnover rates. This study’s findings also support Clarke’s (2013) emphasis on a safe climate in organizations: an environment free from threats or harm can enhance employee well-being while increasing job satisfaction levels and overall job satisfaction. The research of Fernandez-Salinero San Martin, Topa, and Morales Dominguez (2019) supports this study’s findings, reporting that opportunities to use skills and abilities are central to employee satisfaction. They found that employees felt more content and dedicated when their talents could be fully utilized in their roles. This study’s illuminating evidence of meaningful work fits in nicely with the finding of Rosso Dekas Wrzesniewski (2010) that meaningful work contributes significantly to job satisfaction, engagement, and workplace performance. The respectful treatment of employees was another significant aspect identified by this study’s findings, which resonates with the research findings of Leary, Tate, Adams, Allen, and Hancock (2007). Their study concluded that respectful treatment at all levels significantly enhances job satisfaction while decreasing stress, emphasizing its value within the workplace. Comparing this study’s survey responses with the existing literature validates them, further emphasizing what Zamil employees universally acknowledge
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as contributors to job satisfaction; these are contributing elements that companies must pay attention to in order to improve employee productivity and satisfaction. These findings reveal the integral nature of each factor for Zamil employee job satisfaction. Furthermore, the interrelations become evident; for instance, an efficient work environment may make employees feel safer, thus contributing to an enhanced sense of job security. Similarly, when employees utilize their abilities more fully within their work, tasks can become more meaningful for them, contributing further toward job satisfaction. Overall, these results demonstrate why a holistic approach must be taken when cultivating job satisfaction rather than considering factors individually. 4.1 Implications This study’s findings have numerous important implications for both Zamil Corporation’s management and for human resource management in general. By exploring factors contributing to job satisfaction at Zamil, this research offers valuable insight that could inform its strategies and policies. Management at Zamil Corporation understands the value of job security, safe work environments, meaningful tasks, and opportunities for employees to use their skills and abilities as essential ingredients of job satisfaction. Studies have confirmed the correlation between employee productivity and organizational performance (Iaffaldano and Muchinsky 1985) as well as job satisfaction; improving any one or more aspects could yield substantial business advantages, such as lower staff turnover rates, greater productivity levels, or an enhanced company reputation resulting from improved job satisfaction levels. Lastly, this study’s results underscored the significance of effective communication, as employees found significant discrepancies between the perceived importance and satisfaction of certain factors (such as communication between departments/business units) versus the actual satisfaction levels for some factors, such as communication. While employees might not view such factors as highly important compared to others, improvements made could still significantly increase job satisfaction levels. This study also has significant implications for human resource management. Human resource practitioners can draw insights from this study regarding the significance of job security, meaningful work, respectful treatment, and skill utilization as factors affecting job satisfaction. Implementing these findings into their human resource practices could foster higher job satisfaction, leading to enhanced organizational performance. This research thus has both theoretical and practical ramifications. Not only does it contribute to the literature on job satisfaction, but it also provides Zamil Corporation with actionable insights that could improve employee job satisfaction, leading to enhanced organizational performance and greater employee loyalty. 4.2 Limitations and Future Research As with all research, this study does have some limitations. Since it only took place within one organization, its generalizability may be compromised, and response bias could arise with self-reported surveys. Future research could examine job satisfaction across different organizational contexts in Saudi Arabia and make cross-cultural comparisons
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to identify cultural influences on job satisfaction. Longitudinal studies could also provide insight into how job satisfaction and its contributing factors change over time. This research offers valuable insights into the factors contributing to job satisfaction at Zamil Company, contributing both insight and direction for management strategies, as well as to the wider literature surrounding job satisfaction. According to its findings, job security, meaningful work, respectful treatment, and opportunities to use skills and abilities are proven factors to significantly boost job satisfaction, leading to more productive and motivated workforce members.
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An Analysis of Inventory Management Practices in the Polymer Packaging Industry Ayoub Danka1(B)
, Tzen Yik Lau1
, and Shatina Saad2
1 MISI University, Bukit Jelutong, 40150 Shah Alam, Selangor, Malaysia
[email protected]
2 Universiti Teknologi MARA, 41450 Shah Alam, Selangor, Malaysia
[email protected]
Abstract. Effective inventory management is essential for ensuring the smooth operation of production processes and reducing costs associated with ordering and holding inventory. This paper presents a practical approach for inventory management of polymers in the packaging industry, aiming to address the key challenge faced by companies in this sector. The research, conducted through a qualitative research methodology and interviews with four key managerial personnel from a packaging company, provides valuable insights into current inventory management practices. It proposes a practical approach that includes implementing an inventory policy, studying cycle service level, assessing the impacts of demand forecasting, and considering suppliers’ lead times on inventory policy. By specifically focusing on the packaging industry and the unique challenges associated with managing inventory for polymers, this study contributes to the existing literature on inventory management in the manufacturing industry. The findings offer valuable insights for practitioners in the packaging industry seeking to enhance their inventory management strategies and processes. Keywords: Inventory Management · Inventory Policy · Packaging Industry · Polymer supply chain · lead time · safety stock
1 Introduction Inventory stands as a vital cog in the production machinery, serving as a resource to fulfil both present and future requirements. However, the improper handling of inventory can lead to issues such as deterioration and hidden expenses when stock lingers excessively in warehouses. Conversely, insufficient inventory hampers the ability to meet customer demands and incurs financial losses. Furthermore, the inherent unpredictability of demand, compounded by the failure to consider factors like supplier lead time in order calculations, accentuates these issues (Dewi et al. 2021). In the contemporary industrial landscape, businesses confront heightened competition. The survival and success of these enterprises hinge on the efficacy of their inventory management practices. Within the manufacturing domain, the maintenance of inventories encompassing raw materials, work-in-process, and finished products is indispensable to © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 301–310, 2024. https://doi.org/10.1007/978-3-031-53998-5_26
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ensure continuous operations. Prudent management of these inventories emerges as a critical factor in the industry’s growth and sustainability. Any inadequacies in control may culminate in both understocking and overstocking dilemmas (Baten and Kamil 2009). The overarching objective of inventory management revolves around ensuring the availability of necessary items while minimizing instances of stockouts (Stevenson 2015). Inventory management encompasses various approaches, including the continuous review system that maintains a consistent inventory level and the periodic review system that orders inventory when needed. The choice of approach depends on the industry and product, with retail and e-commerce favouring continuous review systems, while manufacturers of customized products often opt for periodic review systems to mitigate storage costs. Prudent inventory policy selection is vital to avoid stockout risks, and numerous inventory management approaches have been discussed in the manufacturing industry literature (Silver et al. 2017). This research aims to identify suitable inventory management systems specifically for the packaging industry. This case study research endeavours to pinpoint and assess the most fitting inventory policy for the subject company. Its overarching aim is to circumvent stockout scenarios, which can detrimentally affect customer satisfaction and profitability. To attain this objective, the research identifies the optimal inventory policy, considering factors such as lead time, safety stock, total inventory, pipeline inventory, and inventory holding costs. This study furnishes valuable insights into the company’s inventory management practices, enhancing the efficiency and effectiveness of its supply chain.
2 Literature Review Inventory management plays a pivotal role in ensuring efficient operations and the continued success of companies in the manufacturing industry. Effectively managing inventory necessitates decisions on what to order, when to order, the quantity to order, and the appropriate stock levels. These decisions aim to minimize costs associated with ordering and inventory holding while ensuring uninterrupted production and sales. Within the packaging industry, polymers serve as a crucial raw material for manufacturing various packaging products. Effective polymer inventory management is essential to maintain seamless and efficient operations. Prior literature on inventory management in manufacturing explored different strategies for managing key raw materials. Numerous inventory models have been proposed in the manufacturing literature to accommodate the diverse characteristics of production inventory. One such strategy is the application of inventory models like the Economic Order Quantity (EOQ) model, which minimizes the sum of ordering and holding costs under the assumption of constant demand and order cost (Erlenkotter 1990). Another approach involves the periodic review inventory system (R, S), where a fixed quantity (Q) is ordered whenever inventory levels reach the reorder point (R) (Silver et al. 2017). These approaches are suitable for manufacturing companies with stable demand and predictable lead times. In cases of probabilistic demand, the (s, S) or (R, s, S) systems are recommended. The Just-in-Time (JIT) inventory system minimizes inventory by producing only what’s needed when needed (Ohno 1988). However, it faced challenges during crises
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like the 2010 Thai flood and the 2020–21 COVID-19 pandemic. As an alternative, the Just-in-Case (JIC) system has emerged but needs further research. Recent literature in manufacturing inventory management emphasizes incorporating uncertainty factors (Cachon and Terwiesh 2005; Zipkin 2000). Supplier uncertainty, in particular, affects inventory and can lead to stockouts (Dewi et al. 2021). Effective inventory policy addresses three pivotal challenges: 1) Monitoring frequency of inventory levels; 2) Timing of replenishment orders; and 3) Replenishment order size. These issues are relatively straightforward to resolve in cases of deterministic demand. However, under probabilistic demand, solutions to these challenges become more intricate. Determining inventory levels requires resources, with less frequent monitoring accommodating demand fluctuations but risking customer satisfaction. Balancing early ordering costs (excess stock) against customer service costs addresses the second challenge. The third challenge involves EOQ-like calculations complicated by replenishment order timing (Silver et al. 2017). The choice between continuous and periodic inventory review systems depends on industry-specific traits. Periodic systems (R, S) and (s, S) suit manufacturing, while the hybrid (R, s, S) gains favour amid volatile demand and supplier uncertainty (Silver et al. 2017). Recent literature introduces advanced analytics and data-driven techniques enhancing inventory management with more accurate forecasts and real-time inventory data (Kelle et al. 2020; Lambert and Stock 2001; Yuan et al. 2020). Additionally, studies have highlighted machine learning’s benefits in inventory management, including better forecast accuracy and reduced holding costs (Praveen et al. 2020; Wang et al. 2021). In conclusion, the literature on inventory management in manufacturing has evolved significantly, proposing diverse models and approaches. Nevertheless, inventory management remains a complex endeavour, necessitating a delicate balance between ordering and holding costs while satisfying customer demand (Stevenson 2015). The literature underscores the importance of considering uncertainty factors in inventory models and advocates for advanced analytics, data-driven methodologies, and machine learning in the quest to optimize inventory management performance (Lambert and Stock 2001).
3 Research Methodology Given the limited literature on inventory practices in the packaging industry, we conducted an exploratory inductive case study to gain insights into polymer inventory management. In today’s complex business environment, a mix of research approaches is essential, and case studies, despite concerns about their rigour, offer in-depth analysis when conducted meticulously. We initiated this study due to the scarcity of research on inventory management in Malaysia’s packaging industry. The inductive case study approach was suitable for understanding the company’s practices and objectives, including identifying inventory management practices in Malaysia’s packaging industry, in alignment with the evolving supply chain landscape (Easterby-Smith et al. 2015; Kumar Ranjit 2019). Data collection, especially in qualitative research, is crucial. We conducted semistructured interviews with seasoned polymer packaging professionals to comprehend inventory practices (see Table 1). We crafted, pre-tested, and ensured the anonymity
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of interview questions. Interviews were held via Skype, recorded, and transcribed for thematic analysis (Golicic and Sebastiao 2011; Dawson 2008), facilitated by Dedoose thematic coding software, to identify patterns and themes in the interview data, ensuring a comprehensive understanding of inventory management practices. Limitations encompass the inability to generalize findings due to the focus on a single company and a small sample size, with ethical considerations involving informed consent, confidentiality, and bias minimization. The study maintained objectivity and transparency (Saunders et al. 2012; Creswell and Poth 2016). In summary, despite these limitations, this research yields valuable insights into polymer inventory management in the packaging industry, with ethical and methodological decisions preserving its integrity. Table 1. Details of the informants from the company No.
Informants
Job title
Experience in industry
1
Mr. FA
Factory Manager
12 years
2
Mr. NZ
Purchasing Manager
8 years
3
Ms. AM
Blending Manager
11years
4
Mr. TT
Freelancer and consultant in plastics packaging manufacturing
35 years
4 Findings 4.1 Inventory Policy The inventory policy of a polymer packaging company underwent analysis to gain insights into its inventory management practices. Initially, the company adhered to a 1 + 1 + 1 inventory policy, encompassing 1 month of inventory on hand (IOH), 1 month in transit (IOW), and 1 month in order (IOO), resulting in a 13-week inventory level. The equation for the inventory policy can be represented as: IP = IOH + IOW + IOO In 2019, the company transitioned to a new inventory management formula based on the periodic review system (R, S). This system employed average demand data, standard deviation, and lead time to calculate safety stock and reorder points. Notably, this approach was exclusively applied to items categorized as “A,” representing polymers, utilizing 12 months of historical demand data with a target cycle service level (CSL) of 95%. The new system yielded significant improvements in inventory management efficiency, leading to a reduction in the overall inventory position from 13 to 10 weeks. One of the key benefits of the periodic review inventory system is its ability to coordinate the replenishments of related items, which is especially advantageous when ordering from overseas to optimize shipping container capacity and control shipping
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costs. The (R, S) system provides regular opportunities to adjust the order-up-to-level S, a desirable feature when the demand pattern is changing. However, it should be noted that replenishment quantities can vary, and carrying costs may be higher than in continuous-review systems. In this case study, the company reviewed its inventory levels every week, assessing current inventory levels during each review to determine if additional orders were needed to maintain optimal stock levels. This policy is particularly effective when demand for an item is steady, predictable, and has a longer lead time for reordering. To determine procurement requirements, the company integrated historical consumption data into the system. Participants confirmed the effectiveness of the new inventory policy in efficiently managing inventory levels, and it has consistently delivered positive results since its implementation. In summary, the study found that the new inventory management system enhanced inventory management efficiency and reduced the overall inventory position. The periodic review system, predominantly applied to “A” items, played a pivotal role in achieving these positive outcomes, with historical demand data and the calculation of safety stock and reorder points contributing to its success. 4.2 Cycle Service Level The “cycle service level” (CSL) quantifies the percentage of customer demand met from inventory over a year. It assesses inventory management’s efficiency and its impact on customer satisfaction. A higher CSL suggests better customer demand fulfilment but also entails increased safety stock (SS) and tied-up working capital. Within the packaging industry, a 95% cycle service level (CSL) is considered the standard and has substantially improved inventory management. The company maintained a 10-week inventory to balance customer service and costs effectively, significantly influencing practices like safety stock planning and reducing costly stockouts. Before 2019, the company struggled with disorganized inventory management due to a lack of CSL understanding. However, the introduction of a periodic review system (R, S) alongside the 95% CSL brought substantial improvements, reducing stockouts, enhancing efficiency, and enabling cost savings while meeting customer demands. In conclusion, the novel inventory management system has yielded remarkable efficacy for the company. Adhering to a CSL of 95% and employing the periodic review system for inventory management has enabled the company to uphold a service level consistent with industry standards while concurrently diminishing the overall inventory position. This achievement has translated into substantial cost savings, positioning the company better to meet customer demands and expectations. 4.3 Pipeline Inventory and Inventory Holding Cost Pipeline inventory, also known as in-transit inventory, involves goods in transit from suppliers to customers or between facilities. Proper management of pipeline inventory is crucial in inventory management as mishandling it can affect a company’s overall inventory status, potentially causing delays and excessive stock accumulation. Efficient
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pipeline inventory management is essential to govern overall inventory and prevent stockouts or obsolescence. On the other hand, inventory holding costs include storage, insurance, taxes, and obsolescence expenses that accumulate over time, impacting profitability and the cost of goods sold. Reducing these costs entails maintaining an optimal inventory level, balancing holding expenses with costs from stockouts or missed sales and employing techniques like JIT inventory systems and optimization algorithms to minimize expenses while ensuring adequate inventory for customer demands. In the context of the Malaysian packaging company, pipeline inventory represents the transition of inventory from petrochemical suppliers to the company’s facilities. Maintaining an optimal pipeline inventory level is crucial for efficient production planning and top-tier customer service, with a continuous replenishment process involving one month in hand and two months in transit. This approach reduced the company’s total inventory from 13 weeks to 10 weeks after implementing the periodic review system (R, S), improving efficiency and cost control. These costs are influenced by demand variability and supply chain disruptions. Two key managerial personnel emphasized understanding and managing factors contributing to inventory holding costs. For businesses dealing with rare materials or long lead times, inventory retention can be costly due to delivery time unpredictability and supply interruptions. Additionally, obsolescence adds to these costs when items exceed their shelf life. However, the packaging company reduced inventory holding costs by adopting a periodic review system, optimizing levels while meeting customer demands. In summary, efficient management of inventory holding costs and pipeline inventory is vital for business success, requiring consideration of multifaceted factors like demand fluctuations, supply chain disruptions, and obsolescence to minimize their impact. 4.4 Lead Time Lead time in inventory management refers to the duration between placing an order with a supplier and receiving the item, encompassing order processing, manufacturing, and transportation. It plays a critical role in determining inventory availability and quantity, with longer lead times often requiring larger safety stocks and increasing holding costs. Understanding and managing lead time is crucial for businesses to meet customer demand, as protracted lead times necessitate safety stocks to prevent stockouts and delays. The significance of comprehending and managing lead time is underscored through insights gleaned from semi-structured interviews with personnel from a packaging company. According to participants, lead time for raw materials exhibits substantial variations contingent upon product origin. Distinct lead times are observed for raw materials sourced from the Middle East as opposed to those from the US, as well as between sales on water stock and raw materials supplied from a hub. Lead time disparities affect the transit duration for specific grades, ranging from as little as 10 days to as much as 10 weeks, contingent upon product origin. Conversely, spot purchases from domestic suppliers typically entail minimal lead time. Efficiently incorporating lead time into inventory policies is vital to avoid stockouts and delays, as emphasized by personnel at the packaging company. Lead time
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significantly shapes safety stock levels and reorder points, with variability based on raw material origins, ranging from 10 days to 10 weeks. For example, polymer production occurs in the USA, but petrochemical companies maintain nearby inventory, resulting in shorter lead times for shipments to the Malaysian packaging firm. While shorter lead times are often preferred for cash flow optimization and quicker revenue realization, practicality may vary commercially. Longer lead time suppliers may offer competitive prices or preferred packaging. Thus, assessing factors like cash flow, revenue, pricing, and packaging preferences is essential for informed lead time choices that minimize financial implications and enhance production planning.
5 Discussion and Conclusion 5.1 Discussion Inventory Policy: The case study packaging company previously had an inventory policy (IP) that comprised one month of inventory on hand, one month in transit, and one month on order. In 2019, the company transitioned to the periodic review system (R, S), a theoretical inventory policy aimed at enhancing inventory management practices. While periodic review systems have shown effectiveness in reducing stockouts and improving overall inventory management, their suitability hinges on factors like demand predictability and lead time for reordering. However, it became evident through our analysis that this policy might not be the most optimal choice for a packaging manufacturer. Therefore, The study recommends a shift from the periodic review inventory system (R, S) to the hybrid periodic review inventory system (R, s, S) which is better suited for manufacturing industries where demand and lead time are highly variable. This approach combines the (s, S) and (R, S) systems, with inventory position checked every R unit of time. If the position falls at or below the reorder point ‘s’, enough inventory is ordered to raise it to ‘S’. If the position is above ‘s’, no action is taken until the next review. This system has been shown to minimize the total costs of review, replenishment, carrying, and shortage, but determining the optimal values of the three parameters i.e. R, s and S can be challenging (Silver et al. 2017; Visentin et al. 2021). Cycle Service Level: Since 2019, the selected packaging company has maintained a 95% cycle service level (CSL) for polymer inventory planning. While a higher CSL is beneficial for averting stockouts, it may not be the most suitable benchmark for manufacturing companies. High CSLs can lead to increased inventory costs, reduced flexibility, stock obsolescence, forecasting challenges, and financial constraints. Hence, businesses, especially in the packaging industry, should critically evaluate the trade-offs between maintaining a higher CSL for enhanced customer service and the associated increased costs. Exploring an optimum cycle service level, as the current CSL of 95% may be too high for the manufacturing industry. This can be done through the use of a heuristic or linear programming approach to determine the best fit CSL level. By lowering the CSL to an optimum level, the company can reduce inventory holding costs and improve inventory control. As recommended in the previous section, the switch to
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a hybrid periodic review inventory system will further improve inventory management. If an exact CSL cannot be determined, an approximate value can be used (Cardós et al. 2006; Cardós and Babiloni 2011). Pipeline Inventory and Inventory Holding Cost: Effective inventory management in the packaging industry necessitates a holistic evaluation of pipeline inventory and holding costs. Maintaining a longer pipeline inventory can act as a safeguard against supply chain disruptions and stockouts, albeit at the potential cost of increased working capital and storage expenses. Our case study exemplifies this balance, as the packaging company successfully reduced its pipeline inventory from 13 to 10 weeks through the adoption of the periodic review system (R, S) in 2019. This strategic shift not only minimized total inventory but also curbed inventory-holding costs while preserving operational efficiency and customer service. Determining the optimal pipeline inventory level depends on a company’s unique needs, requiring a thorough analysis as part of an overall inventory management strategy. This approach enables informed decisions that balance efficiency with cost-effectiveness, finding a middle ground between a longer pipeline inventory and minimizing holding costs. Companies must assess the impact of stockouts and weigh it against holding costs, considering tangible and intangible factors like demand fluctuations and supply chain disruptions. Integrating this analysis into their inventory strategy helps businesses align with their distinctive characteristics and goals. Lead Time: Lead time plays a pivotal role in inventory management, affecting a company’s reputation and financial health. The packaging company in our case study has judiciously integrated lead time management into its inventory policy to forestall stockouts and mitigate delays, recognizing the potential repercussions of these events. Notably, the lead time for raw materials demonstrates considerable variability, ranging from 10 days to 10 weeks, contingent upon the source. While shorter lead times are favoured for cash flow optimization and rapid revenue realization, practical considerations occasionally dictate longer lead times, influenced by factors such as pricing dynamics and packaging preferences. Efficient lead time management remains paramount for averting stockouts and production delays, which can detrimentally affect a company’s performance and reputation. The case study company, while striving to minimize lead times, acknowledges the inherent trade-offs when exclusively prioritizing lead time in procurement decisions. A more comprehensive approach considers not only lead time but also inventory holding costs and other pertinent factors, ensuring not only immediate financial stability but also long-term prosperity. 5.2 Conclusion Effective inventory management is vital for business competitiveness and long-term success. This study examines key inventory aspects, including policy, cycle service level, pipeline inventory, holding costs, and lead time, offering valuable insights. Choosing the right inventory policy affects working capital and various parameters. Balancing the cycle service level involves strategic trade-offs. Pipeline inventory management
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evaluates tailored benefits and costs. Striking the right balance between holding costs and pipeline inventory is a persistent challenge. Lead time management is pivotal, impacting performance and decision-making despite variations. In summary, this study underscores the multifaceted nature of inventory management and its profound implications for business operations. By incorporating the insights and recommendations offered herein, companies can navigate the intricate landscape of inventory management more adeptly, achieving the delicate balance between efficient operations and cost optimization. 5.3 Recommendation for Future Research This study exposes inventory management techniques in a particular industrial field, the packaging sector. It also looks at the influence that inventory policies and other considerations play in the choice to establish an inventory policy for the packaging company’s manufacturing division. The study also reveals the causes, effects, and mitigation strategies used by the company to deal with stockouts in the packaging sector. The hybrid periodic review inventory system (R, s, S) and changing the CSL from 95%, as mentioned in the above section, are highly recommended for the manufacturing business. Further research can be done by gathering actual data after these changes are made in the packaging industry and determining whether the industry achieves an ideal system.
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Behavioral Finance in Psycho-Social Approaches: A Literature Review Vera Mita Nia1(B) , Hermanto Siregar2 , Roy Sembel3 , and Nimmi Zulbainarmi1 1 School of Business Bogor Agriculture Institute, Pakuan University Indonesia, Raya Padjajaran
Street, Kota Bogor 16151, Indonesia [email protected] 2 School of Business Bogor Agriculture Institute, Raya Padjajaran Street, Kota Bogor 16151, Indonesia 3 IPMI International Business School, Rawajati Timur I/1 Street, Kalibata, South of Jakarta 12750, Indonesia
Abstract. Investors are individuals who have a diversity of personalities, goals and risk tolerance. Investors’ behavior is influenced by psycho-social factors such as personality, emotions, environment, and culture. This paper aims to 1) explore behavioral finance theory through psycho-social approaches, 2) build a theoretical framework through clustering and 3) map the development of the topic. The method used is SLR through the Scopus database from 2009 to 2022. The Keywords used are Characteristic OR Financial Literacy OR Social Media OR Demography AND Investment Decision AND Investment Behavior. The search results show that 27.2% of the 66 articles filtered classified into business, management, and accounting, while 26.1% were categorized into economics, econometrics, and finance. India is the most widely used country as the object of research, with as many as 25 articles or 37.88% of all research subjects. The main theoretical framework with an average similarity of 4.13% is the corpus "information," then "social" (2.58%), "literacy" (2.48%), and "behavior" (2.14%). We conclude that research with a personality-based approach is less published. This topic can be elaborated by researchers in the future to complete the theoretical framework and help investors or financial managers choose a portfolio that suits the personality. Keywords: behavioral finance · psycho-social approaches · systematic literature review · characteristic · demography · social media JEL Classification: G11
1 Introduction Investment is purchasing assets or investing capital in market instruments to increase wealth (Nurbarani and Soepriyanto 2022; Umamaheswari et al. 2022). The Classical Theory uses a quantitative approach such as the Efficient Market Hypothesis (Fama 1970). It concluded that 1) prices reflect the information available in the market so that © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 311–329, 2024. https://doi.org/10.1007/978-3-031-53998-5_27
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abnormal returns cannot be obtained; 2) investors will react quickly to emerging information, so prices will change in line with the value of information and 3) classification of the market-based on the velocity of the market to reflect the emerging information (Farimani et al. 2022; Haritha and Uchil 2020b; Lugmayr 2013). Through the classification of the market, Fama has proven assumptions of The Classical Theory: 1) investors are rational; if there are irrational investors, arbitrageurs will balance the price so that a new equilibrium point is formed; 2) all assets in the market are liquid; 3) investors are price takers and have homogeneous return and risk preferences; 4) all information is available in the market and can be accessed freely. However, the classical theory could not explain anomalies, such as the bubble burst in the stock market, excessive reactions when public information emerges, or negative sentiment due to disease outbreaks or wars (Lugmayr 2013). Researchers developed Behavioral Finance Theory in 1980, known as The Modern Period, to answer the anomalies. Tversky and Kahneman (1974) proposed that investors are only sometimes rational due to limited information and cognitive abilities. The investor’s utility theory, known as the Prospect Theory, measures investors rationally based on uncertainty faced in investments. As a result, an investor tends to ignore information that contradicts their beliefs, which is divided into cognitive dissonance. The disposition effect has been found when the investors sell their winning investment earlier and hold the loser’s one too long (Shefrin and Statman 1994, 1997; Barber and Odean 2005). Behavioral finance theory has several assumptions: 1) investors are irrational; 2) markets are inefficient; 3) investors form portfolios based on Behavioral portfolio theory, and 4) the desired return and risk are calculated based on financial behavior and risk tolerance, so it cannot be calculated as mean-variance and is not homogeneous (Sahi 2015; Shefrin and Statman 1997). Woods et al. (2020) state that investors have diverse personalities, goals, risk tolerance, and financial requirements. They are influenced by psycho-social factors such as beliefs, reasoning, personality, emotions, environment, and culture (Baker and Nofsinger 2011; Daniel et al. 1998; Shefrin 2002; Shefrin and Statman 1997; Thaler 1999). Beliefs and reasoning lead investors to take shortcuts in processing received information, known as heuristics. Barber and Odean (2013) state that heuristic behavior occurs in the individual investor due to uninformed or lack of literacy and skills in limited information processing. Heuristic behavior leads to cognitive biases grouped by Shefrin (2002), such as overconfidence bias, excessive optimism bias, representativeness bias, availability bias, anchoring bias, and adjustment bias. The environment where individuals interact will shape perceptions and sentiments classified as herd behavior biases. Human behavior tendencies act as social multipliers (Baker and Nofsinger 2011) and are stimulated through internet interaction sources (Campbell and Shiller 2001). The digital era has simplified information digestion, but low-confidence investors tend to follow herd behavior patterns (Durand et al. 2015). On the other hand, social factors such as culture instilled in individuals will shape their personality. It is an innate preference that influences decision-making processes in choosing a portfolio combination, information channel, and risk tolerance they are willing to face (McCrae and Costa 2008). Behavioral finance theory has been extensively explored with qualitative and quantitative methods since the beginning of the modern
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finance era. However, a psycho-social approach through a systematic literature review (SLR) method is still rare. The qualitative SLR method identifies, assesses, and interprets purposes in past articles. The purpose is to map research on the selected intellectual area to develop knowledge in the future. This paper aims to explore Behavioral finance theory through a psychosocial approach using the SLR method to map the development of the topic during the research duration. Additionally, this study aims to build a theoretical framework developed by clustering previous research and identifying opportunities for further theory development by researchers.
2 Methodology The methodology follows Valcanover et al.’s (2020), which used a three-stage protocol to create an SLR article on financial behavior topics. The researcher limits the search for articles with publication years from 2009 to 2022 to obtain recent articles. Based on the above protocol, this article is structured with the following research questions: • What is the map of financial behavior characteristics based on psycho-social approaches? • What is the theoretical framework of psycho-social approaches in published research from 2009 to 2022? • What are the opportunities for future research on psycho-social approaches in financial behavior? Referring to Valcanover et al. (2020) study, the research protocol is organized as follows: (1) Stage 1 is planning the SLR consisting of identifying, elaborating, and specifying topic criteria. • Identifying and elaborating on financial behavior with a focus on psycho-social factors affecting investor decisions. • Determining psycho-social factors, such as human characteristics and social factors, financial literacy, and information gathering through social media. • Establishing research criteria, such as demographics and bias affecting financial behavior. (2) Stage 2 is determining appropriate sources and keywords and establishing limitations as a screening procedure. • Searching for articles on the Scopus database from 2009 to 2022 using the string: a Title – Abstract – Keyword. • Keywords used are Characteristic, Financial Literacy, Social Media, Demography, Investment Decision, AND Investment Behavior. Limitations were imposed for English articles and final articles. • In step two we limit ourselves only to the fields of business, management, accounting, economics, econometrics, finance, social science, and computer science. Next step we chose only journal articles, proceedings, and book chapters in journal format and excluded whole books, withdrawn articles, and article reviews.
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• The author screened by reading the title, abstract, and keywords corresponding to the topic, as shown in Fig. 1.
Fig. 1. Flow Chart of Literature Screening Process
(2) Stage 3 organizes research results based on predetermined criteria and provides a map of previous research and a picture of future developments. The Nvivo application is used as a tool for qualitative data analysis to filter, separate, and present the results of data analysis following the selected criteria, which are: • Mapping all the literature that has been filtered based on publication year, subject area, research country, and author contributions. • Coding all literature in the form of nodes, memos, and annotations from Nvivo 12. Clustering is done using Sorensen’s Coefficient, which compares codes that have similarity (semantic) in two literature to build a research theory.
3 Mapping Result 3.1 Articles Mapping Based on Publication Year The literature search in stage two was aligned with the identification protocol in stage one. Human characteristics describe the psycho-social factors identified by financial literacy and information collection through social media. The distribution of publications based on the search results from 2009 to 2022 can be seen in Fig. 2 below. The result shows that only one article per year was published from 2009 to 2011, two articles in 2013, and over four articles on average from 2014 to 2019, seems the issues have been more interesting in being elaborated. Whereas 2022 had 19 articles or 28.79% of the total articles the highest number of publications caused by the COVID-19 pandemic that changed the global economy. The articles that addressed the pandemic issue comprised eight: articles in 2020 written by Kesavan et al. (2020), one written by Hafez (2021), and the rest written in 2022. Investors tend to behave normally, causing the market to no longer be efficient. The influence of information obtained through social media stimulates investor behavior,
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Fig. 2. Distribution Articles between 2009 and 2022
causing sentiment in the market. Valle-Cruz et al. (2022) used a text mining method on Twitter to find sentiment in the market during the COVID-19 and H1 N1 virus pandemics. It showed that during the Covid-19 pandemic, the market reacted from 0 to 10 days after the news was shared on Twitter accounts such as The New York Times, Bloomberg, CNN News, and Investing.com, while investor behavior changed from 0 to 6 days after the news was shared. However, these results contradict Hafez’s (2021) research that Egyptian investors tend to be rational during the pandemic. They use fundamental analysis of companies to hold their investments and avoid overconfidence bias, loss, and regret biases, disposition bias, herd behavior bias, representativeness bias, and gambler fallacy bias. 3.2 Articles Mapping Based on Subject Area Based on this framework, we divide the literature into several fields of study to examine its relevance to the topic discussed in this research. In line with the research of Kishan and Alfan (2018), who divided their topic into several areas of study, our results are shown in Fig. 3 below:
Fig. 3. Distribution Articles by Subject Area
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Figure 3 shows 34 articles (27.2%) that fall into business, management, and accounting. The second field is economics, econometrics, and finance, with 27 articles (26.1%) then the literature about computer science is 22 articles (17.6%), social science is 11 articles (8.8%), and decision-making science is 10 articles (8%). Table 1 below shows the details of the article selection results based on the subject area along with the title, author name, number of citations, and relevant keywords. However, we only present data on the three articles that received the highest number of citations. Table 1. Article Selection Result Based on Subject Area Article Title
Author
Publication Journal Cit
Keywords
Impact of behavioral Metawa N., Hassan factors on investors’ M.K., Metawa S., financial decisions: Safa M.F case of the Egyptian stock market
International 39 Journal of Islamic and Middle Eastern Finance and Management
Herd behavior; Investor sentiment; Overconfidence; Overreaction; Underreaction
Past behavior, Raut R.K financial literacy, and investment decision-making process of individual investors
International Journal of Emerging Markets
27
Behavioral finance; Financial literacy; Financial market; Past behaviour; TPB
Financial literacy in Tunisia: Its determinants and its implications on investment behavior
Research in International Business and Finance
27
Financial literacy; Household; Stockholding; Tunisia
Investor information Loibl C., Hira T.K search
Journal of Economic Psychology
50
Information search; Investments; Involvement
The role of overconfidence and past investment experience in herding behavior with a moderating effect of financial literacy: Evidence from Pakistan stock exchange
Asian Economic and Financial Review
17
Herding behavior; Overconfidence; Past investment experience
Business, Management and Accounting
Mouna A., Anis J
Economics, Econometrics and Finance
Sabir S.A., Mohammad H.B., Shahar H.B.K
(continued)
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Table 1. (continued) Article Title
Author
Publication Journal Cit
Keywords
Springer Proceedings in Business and Economics
16
Behavioral biases; Behavioral finance; Big Five personality test; Heuristics; Prospect theory
Stock market Khan W., Ghazanfar prediction using M.A., Azam M.A., machine learning Karami A classifiers and social media, news
Journal of Ambient 29 Intelligence and Humanized Computing
Deep learning; NLP; Predictive modeling; Sentiment analysis; Stock market prediction
Does Twitter Affect Stock Market Decisions? Financial Sentiment Analysis During Pandemics: A Comparative Study of the H1N1 and the COVID-19 Periods
Valle-Cruz D., Fernandez-Cortez V., López-Chau A., Sandoval-Almazán R
Cognitive Computation
20
Affective computing; Finance; Pandemic; Sentic computing; Sentiment analysis; Stock market
Analyzing stock market trends using social media user moods and social influence
Li D., Wang Y., Madden A., Ding Y., Tang J., Sun G.G., Zhang N., Zhou E
Journal of the Association for Information Science and Technology
17
Commerce; Economic and social effects; Financial markets; Social networking (online); Financial decisions
10
Behaviour; Decision making; Heuristics
Behavioral Finance: Rizvi S., Fatima A A Study of Correlation Between Personality Traits with the Investment Patterns in the Stock Market Computer Science
Social Science Developing an instrument for measuring the effects of heuristics on investment decisions
Yalcin K.C., Tatoglu Kybernetes E., Zaim S
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Article Title
Author
Publication Journal Cit
Keywords
Effects of demographic factors on risky decision-making behavior
Rana H.M., Murtaza S., Noor F., Inam-udin, Kashif-urRehman
Journal of the Association for Information Science and Technology
6
Education; Individual risk preferences; Risk perception; Risk propensity; Decisionmaking; Behavior
Small active investors’ perceptions and preferences towards tax saving mutual fund schemes in Eastern India: An Empirical note
Kumar J., Adhikary A., Jha A
International Journal of Asian Business and Information Management
4
Demographics differences; Eastern India; Mutual funds; Perception; Preference and Eastern India; Small active investors
26
Financial Risk Tolerance; Personality; Self-esteem; Sensation Seeking
Decision Science Relationship between Biopsychosocial Factors and Financial Risk Tolerance: An Empirical Study
Kannadhasan M., Vikalpa Aramvalarthan S., Mitra S.K., Goyal V
An exploratory study Mak M.K.Y., Ip of the investment W.H behavior of investors
International Journal of Engineering Business Management
25
Exploratory study; financial industry; investor behaviour; Regression; statistical analysis
Stock Market Prediction with Historical Time Series Data and Sentimental Analysis of Social Media Data
Proceedings of the International Conference on Intelligent Computing and Control Systems, ICICCS 2020
7
LSTM; Sentiment Analysis; Stock Market; Stock price; Time Series data
Kesavan M., Karthiraman J., Ebenezer Rajadurai T., Adhithyan S
3.3 Articles Mapping Based on Country and Author Contribution Aligns with Akhtar et al. (2015), Farimani et al. (2022), and Kishan and Alfan (2018), we mapped the subject of the research by the number of author contributions in each country. The aim is to find the novelty of the subject in the future. As shown in Fig. 4, the analysis results indicate that India has become the object of research the most, with 25 articles or 37.88% of all research subjects. India is a developing country with a dynamic growth ranking and is considered stable and healthy in the Asian region (Adil et al. 2022; Desai and Bulsara 2016). The demographics of the Indian population come from a mixture
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of various ethnicities, races, and religions, each of which has different psychological and social behaviors (Hafez 2021). In addition, the level of education and the region’s geographical location also shape the investors’ personality, which is interesting to study (Bhattacharya and Dutta 2019). United States is become second country with 8 articles (12.12%), followed by Malaysia with 6 articles (9.09%), and Indonesia and Pakistan tied for fourth place, both with 5 articles (7.57%). Results show that China has 4 articles (6.06%); Saudi Arabia, Turkey, and The United Kingdom each have 3 articles (4.54%); Canada, Germany, Iran, and Egypt each have 2 articles (3.03%); Brunei Darussalam, Finland, Georgia, Hong Kong, Italy, Mexico, South Africa, Thailand, and Tunisia each have 1 article (1.51% of the total articles for each country). We mentioned that countries that have more than 5 articles are heterogeneous demographics, such as India.
Fig. 4. Distribution of Authors of The Textual Corpus by Country
4 Discussion 4.1 Framework Theory of Previous Research Based on Analysis of Criteria And Types of Publications The criteria selected for this research are the demographics and behavioral biases of investors caused by psycho-social factors in financial behavior. Our framework can be seen in Fig. 5 below: Figure 5 shows that 42 articles investigating financial behavior biases have been verified, consisting of 37 journal articles, three proceedings articles, and two journal articles compiled in a book. Meanwhile, the theme of the relationship between financial behavior and demographic factors such as age, gender, income, and education level has been discussed in 16 articles (24.24%) in journals = 14 articles and proceedings = 2 articles. The financial literacy theme was found in 21.21% of 13 journal articles and
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Fig. 5. Analysis of Criteria
one proceeding article. Meanwhile, the theme of information sources or social media has been discussed in 23 articles consisting of 18 journal articles, four proceedings articles, and one journal article in a compilation book. However, only five articles, or 7.57%, related to personality were found, consisting of 4 journal articles and one journal article in a compilation book. The result shows that researchers have yet to explore the personality theme extensively. Bitca et al. (2021) and Hao et al. (2022) stated that heuristics occur because investors have much information but need more time to process it. A survey conducted by Loibl and Hira (2009) showed that heuristics and dependence on financial advisors could be reduced by searching for information through all available media, including print, interpersonal, and social media. Mak and Ip (2017); Özen and Ersoy (2019); and Woods et al. (2020) found that overconfidence tends to occur in investors who have social education and financial literacy implemented by Adil et al. (2022) that stated bias was not found in women if moderated by financial literacy. Research by Rahmawati et al. (2015) concluded that gender influences risk tolerance in Pakistan because culture shapes women to be more cautious in their actions and is considered not to contribute to the country’s economy. Male investors tend to be more confident than women (Kumar et al. 2018; Metawa et al. 2019; Shiva and Singh 2020; Sutantyo 2022). Volatility in the market is commonly caused by interaction in the social media community. Many researchers concluded that overconfidence bias makes investors ignore information that contradicts their beliefs and choose to follow their circle’s decision, known as herd behavior (Haritha and Uchil 2020; Sabir et al. 2019; Metawa 2019; Woods et al. 2020). Research by Ankitha Nair et al. (2017) conducted in the Indian stock market stated that women investors and elderly investors are more likely to follow environmental behavior due to a lack of financial literacy and information sources. Contrary to Nurbarani and Soepriyanto (2022), herd behavior is insignificant in the demographic factors of cryptocurrency investors in Indonesia. Investors use their financial capabilities and literacy to manage their money in trade rather than consider the market’s sentiment. The popularity of social media containing massive amounts of data can create market sentiment caused by public opinion created from factual information or rumors in social media and financial news (Bozanta et al. 2021; Carrillo et al. 2022; Keller and Scholz
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2019; Wei and Wang 2016; Zhou et al. 2016). Sentiment would increase or decrease stock price, that sometimes contrary to fundamental analysis. Previous research discusses artificial intelligence as a tool for mining words and sentiment analysis on social media (Farimani et al. 2022). Ma and Zhao (2017) wrote that sentiment caused by media social provides new insights for investors to survive longer in the market. Khatik et al. (2021 found that Generation Z in Malaysia is highly dependent on social media, including financial decisions. In line with this, Shiva and Singh (2020) have proved that Twitter and Facebook are the two social media platforms most favored by investors in selecting speculative stocks. Ismail and Sham (2018) stated that investors in Malaysia use the information on social media to buy stocks from reliable and reputable companies. 4.2 Framework Theory of Previous Research Based on Word Frequency Based on the coding that has been done, corpus analysis is conducted to visualize the words that are considered necessary in this research (Valcanover et al. 2020). Figure 6 shows eighty corpora that have been selected with a minimum letter length of three letters. The analysis results show that “information” and “behavior” are the most frequently found words in the reviewed references (2.27% and 2.18% of the entire corpus). The corpus “social” is the third most frequent corpus (1.93%), followed by “education” (1.84%) and “literacy” (1.82%). The sixth to twelfth corpus have a percentage greater than 1%, indicating that these words are essential elements in all literature. If arranged in order, they are “demographic”, “age”, “biases”, “news”, “gender”, “sentiment”, and “herding”.
Fig. 6. Word Cloud of Textual Corpus
Information is essential in decision-making, but the process of interpretation could cause behavioral biases (Hao et al. 2022; Li et al. 2019; Shi et al. 2022). The digital era
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has disrupted the dissemination and provision of information for investors by providing big data and shortening the time investors need to process information (Farimani et al. 2022; Loibl and Hira 2009; Rana et al. 2014; Wei and Wang 2016, Shanmugasundaram and Balakrishnan 2010). Information from digital news and social interaction can influence the market but gender and age affect the way of information sources which could generate herding bias and overconfidence bias that is related to investor’s cognitive ability and disposition effect (Adil et al. 2022; Haritha and Uchil 2020; Metawa et al. 2019; Sabir et al. 2019). The young generation prefers digital sources, but older investors find information from their direct communities (Dickason and Ferreira 2018; Kannadhasan et al. 2016; Rana et al. 2014; Sutantyo et al. 2022). Furthermore, the level of education and financial literacy influence the way of investor mindset. Many old-generation investors have high financial risk tolerance caused they believe in their experiences and abilities known as availability bias (Kishan and Alfan 2018; Mouna and Anis 2016; Shiva and Singh 2020). 4.3 Framework Theory of Previous Research Based on Cluster Analysis We divided the codes into three clusters to explain three research criteria, as seen in Fig. 7. The clusters answer the second research question about the theoretical framework of psycho-social approaches published during the research time frame.
Fig. 7. Cluster Analysis of Textual Corpus
Cluster 1 is the demographics and the financial behavior theoretical framework. The corpus “biases” is the core of the semantic word in all filtered literature that has a relationship with “demographic”, “social”, “characteristics”, “literacy”, and “information”. The research of Patwardhan and Vaidya (2019) and Mangala and Sharma (2014) have discussed the topic of demographics, behavioral biases, and the impact on the market and investor decisions in the form of literature studies. The relationship between
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demographic factors and behavioral biases in investment decisions has been explained by Adrianto and Hamidi (2020), Bhattacharya and Dutta (2019), Mehta and Sondhi (2016), Brous and Han (2022) and Mathuraswamy and Rajendran (2015). Men are less risk-averse than women, indicating that women hold their lost assets longer than men and prefer a fixed-income instrument rather than a risky one. Meanwhile, younger male investors with higher education levels are more risk-tolerant than the older. The bias of sheep-flock effects due to the influence of moods to follow investment decisions of influential institutions or individual influencers has been studied by Li et al. (2019). He found that microblogs on Tencent Weibo can create sentiments that can affect market volatility. Yalcin et al. (2016) stated that mental accounting bias and representativeness bias are considered less significant when compared to the effects of a person’s assessment of the importance of information (salience effect) on investment decisions of diverse demographic investors. Cluster 2 answers the influence of personality as a psychological factor in investor decisions. The clustering results show few semantic words in the filtered literature, indicating that the relationship between investor decision and personality has yet to be researched from 2019 to 2022. The corpus “psychology” is only related to “demographic” and “information”, while “characteristics” is correlated with “psychology” and “biases”. Negative sentiment resulting from information received on media social has caused narrow framing, especially in uninformed investors, so investors no longer consider technical or fundamental company information (Jalilvand et al. 2018). Investors tend to behave emotionally and show instability of emotion. It has been linked to high stress and anxiety about risk. They tend to follow herd bias and avoid risk contrary to investor who has the stability of emotions and are good at holding risk preference. They choose to sell their risky investments and switch to safer instruments when risk has increased breaking their preference. Kannadhasan et al. (2016) explain the relationship between Type A and Type B characters with risk aversion that arises in their behavior. The results show that investors with Type A have a higher risk tolerance, especially those with higher education and income. Meanwhile, Rizvi and Fatima (2015) investigated the relationship between the five personalities, namely extraversion, agreeableness, conscientiousness, neuroticism, and openness, towards randomly selected investor decisions in various demographics. They showed that neurotic investors are hardly convinced by financial advisors because they are likely to be anxious and have higher risk tolerance. Cluster 3 answers a sociological perspective and has the highest number of relations among all the literature studied. The analysis results show four semantic words are “information” with an average similarity percentage of 4.13%, “social” (2.58%), “literacy” (2.48%), and “behavior” (2.14%). The corpus “information” is the center of this approach. The way of investors gain information plays a vital role in investment decisionmaking (Ismail and Sham 2018; Loibl and Hira 2009; Sumant et al. 2022). Conservative investors find information from their communities or using experience and availability information. Nevertheless, moderate investors combine information from many sources. The value of information will affect the compensation investors desire (Rana et al. 2014). Most wealthy investors use financial advisors to seek valuable information and behave heuristically (Nurbarani and Soepriyanto 2022; Rana et al. 2014). Meanwhile, highly
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educated and financially literate investors prefer lower risk levels (Woods et al. 2020). Increasing literacy is one of the solutions to prevent investors from various behavioral biases (Ammer and Aldhyani 2022; Özen and Ersoy 2019; Rahmawati et al. 2015; Sabir et al. 2019), although Worasatepongsa and Deesukanan’s (2022) research proves that literacy is not significant in the financial behavior of Generation Z in Thailand. According to Shi et al. (2022), Farimani et al. (2022), and Haritha and Uchil (2020), searching for information through social interaction in individuals who have similarities, named homophily, on social media such as Twitter or digital discussion forums has dangerous impacts. It reduces the accuracy of investors’ opinions and causes overreacted and herd biases. However, Khan et al. (2022), Kesavan et al. (2020), and Wei and Wang (2016) show that social media and financial news have a high level of accuracy in predicting market conditions and are good sources of financial information.
5 Conclusion This study used a literature review method to explore and map articles on behavioral finance with psychological and sociological approaches based on demographic criteria and behavioral biases. The purpose of this study was to map and develop a theoretical framework for behavioral finance based on research published from 2009 to 2022. Furthermore, finds opportunities for future development theory of the topic. The mapping results show that most articles were found in 2022, with 19 articles, even though from 2009 to 2011 there was only one article per year but the topic was more interesting to be researched in the following years. By subject area shows that 27.2% belong to the fields of business, management, and accounting. In comparison, 26.1% are categorized under the fields of economics, 17.6% are classified based on the computer science field, 8.8% in the field of social science, and 8% in the decision-making science. Whereas by the contribution of the author in each country shows India is the most country that studied the topic, with 25 articles or 37.88% of all research subjects. The theoretical framework is built through three clusters formed from codes on nodes, memos, and annotations in the Nvivo 12. The results show that cluster 3 is the main theoretical framework in all literature studied, with an average similarity percentage of 4.13% on the word “information,” followed by the words “social” (2.58%), “literacy” (2.48%), and “behavior” (2.14%). Cluster 1 is the theoretical framework for research criteria, namely demographic and bias in Behavioral finance. The word “biases” obtained a percentage of 1.17% of all literature and is the core of the semantic word in this cluster. This word has a relation line with “demographic,” “social,” “characteristics,” “literacy,” and “information.” Meanwhile, Cluster 2 answers the research question about Behavioral finance based on personality and is the cluster with the smallest percentage of word similarity in all literature. The result shows that the relationship between personality and financial decision-making has excellent potential for elaboration in the future.
6 Research Limitation Research-based on literature study provides flexibility for the author to explore articles from various sources that have validity. We used the Scopus library and six keywords to explore prior articles on this topic. However, the limitation of screening articles from
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one source and using six keywords made the provision of articles that have the same topic limited. We suggest future research to use more than one source in the same current keywords. Future Research Development. Further research can use other libraries to crawl the articles with various keywords to enrich and elaborate the topic. We believe the theoretical framework would be more comprehensive and complete to help investors and financial managers in choosing suitable investment.
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The Influence of Mixue’s Price and Product Quality on Millennial Generation Consumer Buying Interest Putu Ayu Titha Paramita Pika(B) Universitas Pendidikan Nasional, Jl. Bedugul No. 39, Sidakarya, Denpasar Selatan, Kota Denpasar, Bali 80224, Indonesia [email protected]
Abstract. This research delves into how the price and quality of Mixue products affect the likelihood of people from the millennial generation, who are fond of Mixue products, to make a purchase. We selected a group of 85 individuals through purposive sampling. We gathered data using questionnaires, interviews, and observations, and we made sure the data was reliable and valid. We subjected the collected data to various statistical tests, including classical assumption tests, multiple linear regression analysis, F tests, t tests, and determination of the coefficient of determination. The results show a significant and positive connection between both the price and quality of Mixue products and the intention to buy them. In conclusion, this study highlights that price and product quality are crucial factors that influence people’s decision to purchase Mixue products. Keywords: Price · Product Quality · Purchase Intentions · Mixue
1 Introduction Current developments in the culinary business present significant opportunities for profit, bolstered by shifts in human lifestyles that have led to evolving food and beverage needs. In today’s era, consumers are becoming increasingly attentive to their necessities and desires. Consequently, companies must be astute and continually innovate to create products that align with consumer preferences and tastes, ensuring customer satisfaction. Ice cream is a delicacy with a wide range of flavors, enjoyed by many across the globe. Its soft texture and sweet taste make it a popular dessert choice. In the business world, ice cream is a competitive market segment. More and more companies worldwide are vying for a share of ice cream sales. Ice cream is a dairy product made by freezing and blending a cream known as ice cream mix (ICM). With the right ingredients and proper processing, one can produce high-quality ice cream (Septiyaningrum et al. 2023). Enjoyed by all age groups, from children to adults, the ice cream market in Indonesia shows promising potential and offers lucrative opportunities for existing ice cream manufacturers. Mizue Ice Cream and Tea originated from China and established in 1997. To date, Mixue boasts over 10,000 outlets spread across China, Vietnam, Singapore, Malaysia, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 330–339, 2024. https://doi.org/10.1007/978-3-031-53998-5_28
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and of course, Indonesia. Mixue has garnered attention from netizens due to its rapidly expanding presence in Indonesia. The company, owned by Zhang Hongchaio, made its debut in Indonesia in 2020, specifically at Cihampelas Walk in Bandung City. Since then, its presence has grown to encompass 300 outlets scattered across various parts of Indonesia, from malls and traditional markets to roadside stalls. The franchise holder for Mixue in Indonesia is PT Zisheng Pacific Trading. Apart from China and Indonesia, Mixue outlets can also be found in Vietnam, Thailand, the Philippines, Singapore, and Malaysia. The widespread establishment of Mixue outlets throughout almost all regions of Indonesia has led to intense competition. The company needs to consider factors influencing purchasing interest to boost its revenue. Therefore, factors such as product quality and price are believed to influence the buying interest of millennial consumers for Mixue products. A study by Nugroho and colleagues in 2023 supported this statement, suggesting that price plays a crucial role in influencing consumer decisions when purchasing a product, thereby significantly determining the product’s marketing success. Whether high or low, price affects buying interest, especially among student consumers. Price also serves as a reference for the quality of a product, indicating whether it is good or not (Nugroho et al. 2023). The second factor presumed to influence purchasing interest is product quality. A quality product is one that offers tangible benefits and meets consumers’ needs and desires. Product quality can also be a decisive factor in customer satisfaction when purchasing a product. If a product is of high quality, it can fulfill both the needs and desires of consumers. Numerous prior studies on consumer buying intentions have been conducted. For instance, research conducted by Prasad and their team in 2021 emphasized the impact of endorsements on consumer purchasing intentions. Furthermore, the expertise, integrity, and credibility of an endorser were highlighted as pivotal factors influencing consumer purchasing intentions (Prasad et al. 2022). Additionally, research has shown that electronic word-of-mouth (E-WOM) can have a significant effect on consumer buying intentions. Studies conducted by Al-Gasawneh and their colleagues, as well as research by Haddad and their team in 2022, demonstrated that E-WOM, particularly through highquality content on social media marketing, has a substantial influence on consumer purchasing intentions (Al-Gasawneh et al. 2023; Al-Haddad et al. 2022). A study by Iqbal and colleagues in 2021 also found a positive influence of E-WOM on consumer buying intentions. However, that study further found that credibility, quantity, and format of E-WOM on online shopping platforms have a greater impact compared to social media on consumer buying intentions (Iqbal et al. 2022). A study by Govender and Yavisha 2023 found that trust plays a role of 68% in influencing consumer buying intentions. The study also suggests that a business should monitor the quality of its brand content on social media so that it can be trusted by consumers, which indirectly also influences their buying intentions (Govender and Yavisha 2023). Another finding in a study by Widayat et al. 2023 shows that a positive image of the place of origin and product quality can influence consumer purchasing intentions (Widayat et al. 2023). Given the issues and previous research, the author is interested in investigating the influence of product quality and price on the buying intensions of Mixue’s product. Therefore, the following hypotheses are proposed (see Fig. 1):
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H1: The Price Influences the Buying Intentions of Mixue’s Consumers. H2: The Product Quality Influences the Buying Intentions of Mixue’s consumers. H3: The Product Quality and price have influence on the Buying Intentions of Mixue’s consumers.
Price (X1)
H1
Product Quality (X2)
H2
Buying Intensions (Y)
H3
Fig. 1. Research Model
2 Methodology This research was conducted in 2023, employing a quantitative approach. The study examines two key variables: independent variables, which are price and product quality, and the dependent variable, which is the purchasing interest of Mixue consumers. The study’s target population comprises customers who purchase products and receive services from Mixue Sidakarya. The sample for this research was determined using purposive sampling. To ensure the validity of the analysis, it was essential to maintain a sample size of at least 50 respondents, as recommended by Hair et al. (2010). Accordingly, this study included 85 respondents following this guideline. The data sources utilized in this research encompass both primary and secondary data. Data collection techniques encompassed interviews, observations, and questionnaires. To ensure the accuracy and validity of the research instrument, which is the questionnaire, validity testing was conducted. Furthermore, reliability testing was employed to assess the consistency and dependability of the questionnaire. The data analysis was facilitated by the Smart-Partial Least Square (PLS) application, or Smart PLS. The analytical methods employed in this study encompassed classic assumption tests, including normality tests, multicollinearity tests, and heteroscedasticity tests. Additionally, multiple linear regression analysis was used to assess the relationships between variables. The research also involved F-tests to evaluate simultaneous effects and T-tests for partial effects in the model.
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3 Results and Discussion 3.1 Validity Test Tables 1, 2 and 3 indicate that each question item has an R-value greater than the R-table (0.220) and is positive. Therefore, those question items are deemed valid and are ready to be used for data collection. Table 1. Results of the Validity Test for the Price Variable No.
R-Value
R-Table 5% (81)
Validity
1
0.558
0.220
Valid
2
0.597
0.220
Valid
3
0.660
0.220
Valid
4
0.667
0.220
Valid
5
0.577
0.220
Valid
6
0.687
0.220
Valid
Table 2. Results of the Validity Test for the Product Quality Variable No.
R-Value
R- Table 5% (81)
Validity
1
0.561
0.220
Valid
2
0.613
0.220
Valid
3
0.580
0.220
Valid
4
0.444
0.220
Valid
5
0.652
0.220
Valid
Table 3. Results of the Validity Test for the Consumer’s Buying Intensions Variable No.
R-Value
R- Table 5% (81)
Validity
1
0.467
0.220
Valid
2
0.396
0.220
Valid
3
0.645
0.220
Valid
4
0.678
0.220
Valid
5
0.720
0.220
Valid
6
0.599
0.220
Valid
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3.2 Reliability Test A reliability test was administered to all the questionnaire items provided to 83 respondents. A questionnaire item is deemed reliable if its Cronbach’s Alpha value exceeds 0.60. The findings of the reliability test are displayed in Table 4. Table 4. Reliability Test Result Variables
Reliabilitas Coefficient
Cronbach Alpha
Reliability
Price
6 questions
0.849
Reliable
Product Quality
5 questions
0.781
Reliable
Consumer’s Buying Intentions
6 questions
0.811
Reliable
3.3 Normality Test- Classic Assumption Test Figure 2 reveals that the Normal P-P Plot displays data distributed around the diagonal line and aligns with the direction of the diagonal line. This suggests that the regression model complies with the normality assumption.
Fig. 2. Normal P-P Plot
3.4 Multicollinearity Test – Classic Assumption Test According to the results of the Multicollinearity test analysis displayed in Tables 5, 6 and 7, the Coefficients Table indicates that all three independent variables exhibit VIF values
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close to 1 (specifically, the Price variable is at 1.821, and the Product Quality variable is also at 1.821). Moreover, all variables demonstrate a tolerance value exceeding 0.1 (10%). Consequently, it is safe to conclude that the regression model does not exhibit signs of multicollinearity. Table 5. Coefficients Table Model 1
Tolerance
VIF
Price
0.549
1.821
Product Quality
0.549
1.821
Dependent Variable: Buying Intentions Table 6. Coefficient Correlations Table Model
Product Quality
1
Correlations
Product Quality
−0.672
Price Covariance
Product Quality
1.000 −0.007
0.12 −0.007
Price
Price −0.672
1.000
0.008
Dependent Variable: Buying Intentions Table 7. Collinearity Diagnostics Table Model
Dimension
Eigenvalue
1
1
2.982
2 3
Condition Index
(Constant)
Price
Product Quality
1.000
0.00
0.00
0.00
0.011
16.364
1.00
0.16
0.16
0.007
21.375
0.00
0.84
0.83
Dependent Variable: Buying Intentions
3.5 Homoscedasticity Test – Classic Assumption Test Figure 3 illustrates that the data points are randomly dispersed without forming any discernible, consistent pattern. They are distributed both above and below the 0 mark on the Y-axis. This suggests that there is no evidence of heteroscedasticity in the regression model, making it well-suited for predicting competitive advantage based on its independent variables. 3.6 Autocorrelation Test – Classic Assumption Test The test results in Table 8, utilizing the Durbin–Watson test on the regression equation residuals, yielded a d-value of 2.146. Typically, Durbin–Watson values fall within the
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Fig. 3. Scatterplot
range of 0 to 4. If the Durbin–Watson statistical test value is less than one or greater than three, it indicates that the residuals or errors in the multiple regression model are not independent, or autocorrelation is present. However, in this study, the Durbin–Watson statistical test value falls within the range of one and three (2.146), indicating the absence of autocorrelation. Table 8. Model Summary Table Model
R
R Square
Adjusted R Square
Std. Error of the Estimate
Durbin-Watson
1
0.777a
0.604
0.594
1.753
2.146
a. Predictors: (Constant), Product Quality, Price b. Dependent Variable: Buying Intensions
3.7 Data Analysis – Correlation and Determination Coefficients The multiple linear correlation coefficient serves as a numerical indicator used to gauge the strength of the relationship between two variables. In contrast, the coefficient of determination elucidates the degree to which the independent variables (Price and Product Quality) influence the dependent variable (Buying Intentions). In Table 8, an R Square value of 0.604 is presented. This signifies that the independent variables exert an impact on the dependent variable to the extent of 60.4%, while the remaining 39.6% is affected by other unexamined variables. Consequently, there is a call for further research development pertaining to this subject.
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3.8 T-Test Analysis As shown in Table 9, in the price row, the T-Value exceeds the T-Table value (3.532 > 1.993), and the significance value is less than 0.05. Consequently, it can be concluded that Price has a significant and positive impact on Consumer Purchase Intentions. A similar observation is made for product quality, where the T-Value surpasses the T-Table (5.377 > 1.993), and the significance value is less than 0.05. Hence, it is evident that Product Quality significantly and positively influences Consumer Purchase Intentions. Table 9. T-Test Result Model
1
Unstandardized Coefficients
Standardized Coefficients Beta
t
Sig.
B
Std. Error
(Constant)
2.899
1.491
1.945
0.055
Price
0.322
0.091
0.336
3.532
0.001
Product Quality
0.592
0.110
0.511
5.377
0.000
Dependent Variable: Buying Intensions
3.9 F-Test Analysis According to the information in Table 10, the F-Value surpasses the F-Table value (60.921 > 2.46), and the significance value is less than 0.05. Hence, it can be concluded that Price and Product Quality together have a significant influence on Consumer Purchase Intentions. Table 10. F-Test Result Model 1
Sum of Squares
df
Mean Square
F
Sig.
Regression
374.423
2
187.212
60.921
0.000
Residual
245.842
80
Total
620.265
82
3.073
Dependent Variable: Buying Intensions Predictors: (Constant), Product Quality, Price
4 Discussion The research has revealed that Price has a substantial and positive impact on Consumer Purchase Intent. Price plays a pivotal role in determining a company’s success, as it directly impacts the profits derived from the sale of goods or services. When the price is
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set too high, it can lead to reduced sales, while an excessively low price may diminish the company’s profitability. Additionally, price serves as an indicator of product quality, with consumers often associating higher prices with superior product quality. Furthermore, the study has established that Product Quality significantly and positively influences Consumer Purchase Intent. The quality of a product is a fundamental attribute that manufacturers must prioritize. Consequently, producers are expected to deliver high-quality products to capture consumer interest and establish a presence in the market. It’s important to note that product quality is determined not by the company but by the feedback received from consumers. When consumers make a purchase, the perceived product quality is influenced by their pre-purchase expectations as well as the post-purchase experience. The research also found that Price and Product Quality, when considered together, exert a significant and positive influence on Consumer Purchase Intent. These factors collectively account for 60.4% of their impact on consumer purchasing decisions, leaving the remaining 39.6% influenced by variables beyond the scope of this study.
5 Conclusion Based on the findings of this research, it is evident that both the price and product quality have a significant impact on the purchase intent of Mixue’s consumers. Therefore, there’s a need to improve product quality to enhance consumer purchase intent. Additionally, the company should also consider offering a price that is affordable and in line with the product quality to boost the sales of Mixue ice cream.
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Nugroho, M.I., Doni Damara, R., Sanjaya, V.F.: Pengaruh Harga Dan Kualitas Produk Terhadap Minat Beli Iphone: Studi Kasus Mahasiswa Uin Raden Intan Bandar Lampung. Srikandi: J. Islamic Econ. Banking 2(1) (2023) Prasad, N.V.S., Rahiman, H.U., Nawaz, N., Gajenderan, V.: Owner endorsement of brands and consumer buying intentions. Innovative Mark. 18(2), 85–98 (2022). https://doi.org/10.21511/ im.18(2).2022.08 Ramadhani, D.: Analisis Pengaruh Kualitas Pelayanan, vol. 1, no. 1 (2023) Septiyaningrum, E., Nur Fajar, R., Fermiana, D., Asmarani Utami, Y., Fergiawan, D.: Pengaruh Harga, Kualitas Produk Dan Promosi Terhadap Keputusan Pembelian Seblak Pasta Taman Siswa Bagi Mahasiswa Sekolah Tinggi Ilmu Ekonomi (STIE) Widya Wiwaha Yogyakarta. Prosiding Seminar Nasional Dan Call Paper STIE Widya Wiwaha (2023) Widayat, W., Azis, N., Sari, H.M.K., Warsono, W., Masudin, I.: Determinants of consumer purchasing behavior toward Korean cosmetic products: evidence from Indonesia. Innovative Mark. 19(2), 129–142 (2023). https://doi.org/10.21511/im.19(2).2023.11
Enhancing Organizational Performance Through Accelerated Knowledge Creation, with Innovation Quality and Speed as Mediating Variables: A Second-Order Analysis I. Nyoman Sunarta1 , Gine Das Prena1(B) , I. Made Suidarma1 , Ni Wayan Lasmi1 , and Partiwi Dwi Astuti2 1 Universitas Pendidikan Nasional, Jl. Bedugul No.39, Sidakarya, Denpasar Selatan, Kota
Denpasar, Bali 80224, Indonesia [email protected] 2 Universitas Warmadeva, Jl. Terompong No. 24 Tanjung Bungkak Denpasar, 80235 Bali, Indonesia
Abstract. This research investigates whether the speed and quality of innovation play a mediating role in the connection between knowledge creation (KC) and the performance of rural banks in Bali, Indonesia. Data for the study were gathered through a questionnaire distributed to managers of rural banks in Bali. The analysis was conducted at the organizational level, and the dataset encompassed responses from 102 rural banks. The data underwent analysis using Structural Equation Modelling with Partial Least Squares (SEM-PLS). The results reveal that both KC and the speed and quality of innovation exert significantly positive influences on organizational performance. Additionally, KC demonstrates a substantial positive impact on the speed and quality of innovation. The study also indicates that the speed and quality of innovation partly mediate the effect of KC on organizational performance. In practical terms, this research offers valuable insights for rural bank managers in Bali, highlighting the benefits of continuing to prioritize knowledge creation, as it enhances organizational performance and empowers organizations to innovate swiftly and effectively. This research is notable for its exploration of the mediating role of innovation speed and quality in the relationship between knowledge creation and organizational performance in rural banks in Bali, Indonesia. Keywords: Knowledge Creation · Speed Innovation · Quality Innovation · Organizational Performance
1 Introduction Knowledge is a strategy (Nurulin et al. 2019) for enhancement in innovation and performance (Yu and Yan 2021; Abubakar et al. 2019; Rumanti et al. 2023). Organizations that facilitate knowledge creation (KC) effectively will have the creative ability to create added value (Nonaka 2007; Farnese et al. 2019). © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 340–351, 2024. https://doi.org/10.1007/978-3-031-53998-5_29
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Knowledge creation enables companies to carry out continuous innovation (Abubakar et al. 2019; Nonaka and Takeuchi 1995) because innovation depends on how far knowledge is used and synthesized to increase innovation sustainably (Nisula et al. 2022) and contributes significantly in increasing innovation and organizational performance (Laeeque and Babar 2017). KC enables companies to innovate continuously (Nonaka and Takeuchi 1995; Nguyen et al. 2016; Soon Seng et al. 2021) and significantly enhances innovation and organizational performance (Laeeque and Babar 2017). Previous research has consistently demonstrated a positive correlation between KC and organizational performance, as evidenced by studies by Chung et al. (2019), Barua (2018), Farnese et al. (2019), Liao and Wu (2010), Liow et al. (2019), and Li Sa et al. (2020). Additionally, findings from Nguyen et al. (2016) and Mardani et al. (2018) support the notion that KC significantly impacts innovation, with a particular focus on how product innovation influences financial performance. Moreover, Laeeque and Babar (2017), Setiawan and Yuniarsih (2020), and Nisula et al. (2022) have proposed that KC affects innovation, and innovation acts as a mediator for KC in terms of its impact on performance, as indicated by the research of Laeeque and Babar (2017). Now, it is worth noting that there are two critical dimensions of innovation, namely the speed and quality of innovation, as emphasized by Wang and Wang (2012). Surprisingly, the interaction between these two innovation facets and KC has not been thoroughly investigated thus far. Therefore, this study aims to explore whether the speed and quality of innovation mediate the relationship between Knowledge Creation (KC) and organizational performance. To address this, the study employs SEM-PLS with Warp-PLS 8.0 to test the following hypotheses. H1: Knowledge creation positively influences organizational performance. H2: Knowledge creation positively influences the speed of innovation. H3: Knowledge creation positively influences the quality of innovation. H4: The speed of innovation positively influences organizational performance. H5: The quality of innovation positively influences organizational performance. H6: The speed of innovation mediates the effect of knowledge creation on organizational performance. H7: Quality innovation mediates the effect of knowledge creation on organizational performance.
2 Methodology 2.1 Measurement of the Research Variables Following the procedures outlined by Schulze and Hoegl (2006), KC was assessed across four dimensions: socialization, externalization, combination, and internalization. The speed of innovation variable was measured with five indicators evaluating the organization’s ability to generate new ideas, introduce new products, develop fresh products, create innovative processes, and resolve novel problems in comparison to its primary competitors. This instrument was adapted from the work of Liao and Wu (2010) and Wang and Wang (2012). Assessment of innovation quality relied on an instrument derived from Haner (2002) and Lahiri (2010). The five indicators considered the novelty and creativity of a company’s new concepts, products/services, processes, practices, and
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management. Lastly, the evaluation of organizational performance encompassed two dimensions: financial and non-financial. The financial dimension employed four instruments developed by Wang and Wang (2012) and Campo et al. (2014). The non-financial dimension was assessed with four instruments as well. One instrument was designed by Wang and Wang (2012) and Campo et al. (2014). The other two were developed by Bontis et al. (2000), with the remaining one crafted by Campo et al. (2014). 2.2 Data Collection Testing the model that has been built uses survey data from the Rural Bank in the Province of Bali, Indonesia. 102 respondents have participated in this study. Most respondents had 5–10 years of service, with 72 or 70.59%, with 43 personnel manager positions representing 42.16%. Respondents who participated were mostly male, with 69 people representing 67.65%, with the age of the respondents being mostly between 31–40, and as many as 85 people representing 83.33%. The educational level of the respondents was mostly undergraduate, with 89 people representing 87.25%.
3 Results 3.1 Evaluation of the Outer Model. a) Evaluation of Indicator Measurements with Constructs Table 1 reveals that all components exhibit a composite reliability exceeding 0.7, signifying the reliability of the indicators employed to assess the construct. Furthermore, Table 1 demonstrates that convergent validity criteria have been met. This is evident in the loading factor values surpassing 0.70, as per the criteria outlined by Hair et al. (2014) and the Average Variance Extracted (AVE) exceeding 0.05 (Hair et al. 2017). In Table 2, discriminant validity has been achieved, as indicated from the diagonal column’s AVE root, which exceeds the correlations between constructs in the same column. The measurement model of this study is both reliable and valid, as implied by the outcomes of the validity and reliability analysis. b) Evaluation of indicator measurements with dimensions Table 3 displays that all components exhibit a composite reliability greater than 0.7, confirming the reliability of the indicators employed to measure the dimensions. Table 4 provides evidence of convergent validity compliance. This is manifested through the loading factor values surpassing the 0.70 threshold and an AVE exceeding 0.05 These guidelines (Hair et al. 2014 and Hair et al. 2017) stipulated that an AVE value equal to or greater than 0.50 signifies the fulfillment of convergent validity. Furthermore, Table 4 affirms the attainment of discriminant validity, as the AVE root in the diagonal column exhibits values that are higher than the correlations between constructs within the same column. The results of the validity and reliability analysis denoted that the dimensional measurement model employed in this study is both reliable and valid.
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Table 1. Convergent validity test results Construct
Item
Factor loading
AVE
Composite reliability
Cronbach’s alpha
Full Colin. VIF
Innovation Speed (IS)
is1
0.846
0.663
0.908
0.873
1.821
is2
0.824
is3
0.782
is4
0.825
is5
0.791
qi1
0.783
0.642
0.900
0.861
1.821
qi2
0.812
qi3
0.807
qi4
0.808
qi5
0.797
qi6
0.783
Innovation Quality (IQ)
Notes: n = 102 Table 2. Correlations among latent variables with square roots of average variances extracted (AVEs) AVE
Composite reliability
Innovation speed (IS)
Innovation speed (IS) 0.663
0.908
(0.814)
Innovation quality QI 0.642
0.900
0.672
Innovation quality QI
(0.801)
c) Second-Order Test The second-order test was used to evaluate each dimension with knowledge creation and organizational performance constructs by assessing reliability and validity. Table 5 demonstrates that all components exhibit a composite reliability exceeding 0.7, indicating the reliability of the dimensions used for measuring the construct. Furthermore, Table 5 confirms that convergent validity criteria have been fulfilled. In Table 6, it is evident that discriminant validity requirements have been satisfied. This is apparent from the AVE root in the diagonal column, which exceeds the correlations between constructs within the same column. Based on the findings from the validity and reliability analyses, the second-order measurement model employed in this study is confirmed to be both reliable and valid.
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Dimensions
Factor loading
AVE
Composite reliability
Cronbach’s alpha
Full Colin. VIF
Socialization (SO) So1
0.804
0.700
0.903
0.857
2.954
So2
0.862
So3
0.838
So4
0.841
Ex1
0.811
0.709
0.907
0.863
3.073
Ex2
0.857
Ex3
0.868
Ex4
0.830
Co1
0.828
0.635
0.874
0.808
2.514
Co2
0.773
Co3
0.806
Co4
0.780
In1
0.812
0.621
0.868
0.796
2.630
In2
0.805
In3
0.764
In4
0.770
Kk1
0.782
0.618
0.866
0.794
2.277
Kk2
0.790
Kk3
0.811
Kk4
0.762
Kn1
0.737
0.631
0.872
0.805
2.445
Kn2
0.803
Kn3
0.820
Kn4
0.816
Externalization (EX)
Combination (CO)
Internalization (IN)
Financial Performance (KK)
Non-Financial Performance (KN)
Item
Notes: n = 102
3.2 Structural Model Testing In this study, the structural model was determined using the bootstrap resampling method with 500 iterations. The overall model analysis results are presented in Fig. 1 and Table 7, which reveal that knowledge creation (KC) exhibits a noteworthy positive association with organizational performance (OP), with β = 0.37 and p < 0.01. Additionally, a significant positive relationship is observed between knowledge creation (KC) and both innovation speed (IS) with β = 0.74 and p < 0.001, and innovation quality (QI) with β = 0.73 and p < 0.01, thereby confirming Hypotheses H1, H2, and H3. Additionally,
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Table 4. Correlations among latent variables with square roots of average variances extracted (AVEs) AVE
Composite reliability
SO
EX
CO
IN
KK
KN
SO
0.700
0.903
(0.836)
EX
0.709
0.907
0.702
(0.842)
CO
0.635
0.874
0.685
0.690
(0.797)
IN
0.621
0.868
0.688
0.707
0.680
(0.788)
KK
0.618
0.866
0.689
0.647
0.583
0.635
(0.786)
KN
0.631
0.872
0.675
0.705
0.638
0.558
0.620
(0.795)
Table 5. Second-order test results for the construct of knowledge creation and organizational performance Construct
Dimensions
Factor loading
AVE
Composite reliability
Cronbach’s alpha
Full Colin. VIF
Knowledge Creation (KC)
Socialization (Iv_SO)
(0.877)
0.769
0.930
0.900
2.943
Externalization (Iv_EX)
(0.884)
Combination (Iv_CO)
(0.870)
Internalization (Iv_IN)
(0.877)
Financial (Iv_KK)
(0.900)
0.810
0.895
0.765
2.943
Non-Financial (Iv_KN)
(0.900)
Organizational Performance (OP)
Table 6. Correlations among latent variables with square roots of average variance extracted (AVEs). AVE
Composite reliability
KC
KC
0.663
0.908
(0.877)
OP
0.642
0.900
0.813
OP (0.900)
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a significant positive correlation is detected between innovation speed (IS) and organizational performance (OP) with β = 0.33 and p < 0.01, as well as between innovation quality (QI) and organizational performance (OP) with β = 0.26 and p < 0.02, providing support for hypotheses H4 and H5.
Fig. 1. Full research model
Table 7. A theoretical model of the direct relationship of research variables Independent Variable
Dependent Variable
Hypotheses
Relevant Path
Path coefficient
p-value
Remarks
KC
OP
H1
KC
IS
H2
KC → OP 0,37
0.70). In conclusion, all indicators satisfy the criteria for convergent validity, which is crucial for a measurement model with reflective indicators. Convergent validity is achieved when individual indicators exhibit correlation values exceeding 0.70, indicating their validity in assessing the underlying constructs. √ From the information presented in Table 5, it is evident that the variables with AVE values greater than 0.5 are Liquidity, Profitability, Company Value, and Dividend Policy.
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Fig. 1. SEM-PLS Algorithm results Table 4. Outer Loading Dividend Policy
Liquidity
CR DPR
Company Value
Profitability
1,000 1,000
PBV
1,000
ROE
1,000
As a result, these variables are valid. As for the alpha Cronbach values for each variable, it surpassed 0.6, and the composite reliability values exceeded 0.7. These findings affirm the reliability of the data utilized in this study. Table 5. Convergent Validity and Reliability Test Results Variable
AVE
Profitability
1,000
Liquidity
√
AVE
Cronbach’ Alpha
Composite reliability
1,000
1,000
1,000
1,000
1,000
1,000
1,000
Dividend Policy
1,000
1,000
1,000
1,000
Company Value
1,000
1,000
1,000
1,000
Table 6 presents the R-Square (R2) values for Dividend Policy and Company’s Value. For Dividend Policy, it indicates that 75.7% of the variation can be explained by Profitability and Liquidity, while 24.3% is attributed to unexamined factors like company size, leverage, and investment opportunities. In the case of the Company’s Value, the model accounts for 50.2% of the variation using Profitability, Liquidity, and Dividend Policy, leaving the remaining 49.8% influenced by unexplored factors. The outcomes of the significance test (bootstrapping) for the model can be observed in Fig. 2.
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R2
Dividend Policy
0,757
Company Value
0,502
Fig. 2. Results of bootstrapping analysis
The Direct Effect analysis assesses whether specific factors have a significant impact on the company’s value. If the results indicate a significance level of less than 0.05 or a statistical t-value exceeding 1.96 (at a 0.05 significance level), the null hypothesis (H0) is accepted. The findings (refer Table 7) from testing the research hypotheses are as follows: Hypothesis 1: Profitability has a positive impact on the company’s value. This implies that when profitability is high, the company’s value is also high. The results reveal a coefficient value of 0.297, a t-statistics value of 3.586 and a p-value of 0.00, indicating that Hypothesis 1 is supported or accepted. Hypothesis 2: Liquidity positively affects the company’s value. In other words, when liquidity is high, the company’s value is also high. The results reveal a coefficient value of 0.444, a t-statistics value of 2.220, and a p-value of 0.027, leading to the acceptance of Hypothesis 2. The Indirect Effect analysis assesses whether dividend policy acts as a mediator in the relationship between profitability or liquidity and firm value. The null hypothesis (H0) is accepted when the significance level (sig value) is less than 0.05 or when the statistical t-value is greater than 1.96 at a 0.05 significance level. The results of the hypothesis tests (refer Table 8) are as follows: Hypothesis 3: Dividend Policy mediates the relationship between Profitability and Firm Value. This hypothesis proposes that profitability indirectly affects firm value through dividend policy. The results indicate a coefficient value of 0.162, a t-statistic value of 2.237 (greater than 1.96), and a p-value of 0.032 (less than 0.05), resulting in the acceptance of Hypothesis 3.
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Table 7. Path analysis and statistical testing (Direct Influence) Variable
Original Sample (O)
T Statistics (|O/STDEV|)
P value
Information
Policy_Dividend -> Value_Company
0,246
2,261
0,020
Significant
Liquidity -> Policy_Dividend
0,231
2,250
0,021
Significant
Liquidity -> Value_Company
0,444
2,220
0,027
Significant
Profitability -> Policy_Dividend
0,227
2,113
0,035
Significant
Profitability -> Value_Company
0,297
3,586
0.000
Significant
Hypothesis 4: Dividend Policy mediates the relationship between Liquidity and Firm Value. This hypothesis posits that liquidity indirectly influences firm value through dividend policy. The results demonstrate a coefficient value of 0.108 and a t-statistic value of 2.618. The t-statistic value surpasses 1.96, and the p-value is 0.028 (less than 0.05), leading to the acceptance of Hypothesis 4. Table 8. Path Analysis and Statistical Testing (Indirect Influence) Variable
Original Sample (O)
T Statistics (|O/STDEV|)
P value
Information
Liquidity -> Policy Dividend -> Value Company
0,108
2,618
0,028
Significant
Profitability -> Liquidity -> Policy Dividend
0,162
2,237
0,032
Significant
4 Discussion The effect of Profitability on Firm Value By using a bootstrapping method with direct effect analysis, a significant positive relationship between profitability and firm value was identified. In simpler terms, when profitability is high, the firm’s value tends to be high as well. The coefficient value of 0.297, a t-statistic of 3.586 (which exceeds 1.96), and a p-value of 0.00 (less than 0.05) strongly support the conclusion that profitability, as measured by Return on Equity (ROE), positively and significantly influences firm value. These findings are in line with
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prior research conducted by Abdellatif and Elsayed (2023), which also demonstrated a positive impact of profitability on firm value. Effect of Liquidity on Firm Value Through the application of a bootstrapping method with direct effect analysis, the research has unveiled a significant positive relationship between liquidity and firm value. To put it simply, when liquidity is high, firm value is also more likely to be high. The coefficient value of 0.444, a t-statistic of 2.220 (surpassing 1.96), and a p-value of 0.027 (less than 0.05) provide strong support for the conclusion that liquidity has a positive and significant role in shaping firm value. This finding is consistent with previous research conducted by Stere´nczak (2022), which also established a positive impact of liquidity on firm value. The Effect of Profit on Firm Value through Dividend Policy as an Intervening Variable Using a bootstrapping method with indirect effect analysis, the results indicate that profit indirectly affects firm value, with dividend policy acting as a mediator in this relationship. In simpler terms, a high dividend policy can indirectly influence the impact of profit on firm value. The coefficient value of 0.162, a t-statistic of 2.237 (exceeding 1.96), and a p-value of 0.032 (less than 0.05) provide support for this conclusion, leading to the acceptance of hypothesis 3. Profit, which reflects a company’s ability to generate earnings or managerial efficiency, is closely linked to dividend policy, as shareholders anticipate receiving a portion of the earnings as dividends. When dividends are paid, investors receive positive signals regarding the company’s performance. This finding aligns with previous research conducted by Alfianita and Santosa (2022) and Tran (2020), which underscores the mediating role of dividend policy in the relationship between profit and firm value. The Effect of Liquidity on Company Value, Mediated by Dividend Policy The research findings, as determined through the utilization of the bootstrapping method with indirect effect analysis, indicate that liquidity has a notable and indirect impact on firm value, where dividend policy functions as an intermediary. In other words, a high dividend policy can indirectly influence both liquidity and firm value. This is supported by a coefficient value of 0.108, a t-statistic of 2.618, and a p-value of 0.028, all indicating statistical significance. Therefore, hypothesis 4 is confirmed. Dividend policy pertains to the company’s decision on distributing profits to shareholders or retaining earnings for future investments. Liquidity, on the other hand, refers to the company’s ability to meet short-term financial obligations. A well-chosen dividend policy can strengthen firm value by ensuring good liquidity, as companies with robust liquidity can fulfil their financial commitments, access additional financing sources, and build a positive reputation.
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5 Conclusion In summary, this research reveals that profitability, as measured by Return on Equity (ROE), has a substantial and positive impact on firm value, indicated by Price-to-Book Value (PBV). This suggests that high profitability attracts investor interest, leading to an increased company valuation, driven by the promise of growth prospects. Similarly, liquidity, measured by the Current Ratio (CR), has a significant and favourable influence on firm value (PBV). Enhanced liquidity, which facilitates a company’s operations and investments, attracts a larger investor base, signifying efficient performance and, consequently, boosting the firm’s valuation. Moreover, profitability (ROE) demonstrates a positive and significant indirect effect on firm value (PBV) through dividend policy (DPR) mediation. This underscores the role of dividend policy as an intermediary between profitability and firm value. When a company generates substantial profits and adopts a dividend policy that distributes these earnings to shareholders, it conveys positive information about the company’s value, enhancing investor confidence and market value. Likewise, liquidity (CR) significantly affects firm value (PBV) through dividend policy (DPR) mediation. Companies with strong liquidity are better positioned to meet financial obligations, explore additional funding sources, and build a favorable reputation among customers and investors. In this context, a well-considered dividend policy strengthens investor trust and market confidence, ultimately increasing the firm’s overall value.
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The Effect of Financial Knowledge, Financial Behavior, and Financial Attitude on Culinary SMEs Financial Performance in Denpasar City Komang Sri Widiantari(B) , I Made Suidarma, and I. G. A. Desy Arlita Universitas Pendidikan Nasional, Jl. Bedugul No. 39, Sidakarya, Denpasar Selatan, Kota Denpasar, Bali 80224, Indonesia [email protected]
Abstract. The main aim of this study is to investigate how financial knowledge, financial behavior, and financial attitude affect the financial performance of small and medium-sized enterprises (SMEs) in the culinary industry located in Denpasar City, Bali. The research specifically focuses on SMEs within Denpasar City. The study used a purposive sampling method, which involves nonprobability sampling techniques, to select a representative subset of the population, resulting in a sample of 94 respondents. Data analysis was carried out using path analysis in SPSS version 23, employing a two-step regression analysis approach. The research results indicate that financial knowledge, financial behavior, and financial attitude each have a positive and significant impact on the financial performance of SMEs in the culinary sector. Keywords: SMEs Financial Performances · Financial Knowledge · Financial Behavior and Financial Attitude
1 Introduction Importance of SMEs creative industry among emerging economies is becoming more evident due to their capability to generate employment, increase national income, and enhance purchasing power nationally and internationally (Rahim and Balan, 2020). As president of the Republic of Indonesia, Joko Widodo has been heavily involved in developing Indonesia’s creative industries. Jokowi has taken a big step to help Indonesia’s SMEs and the whole creative economy by establishing a new non-ministerial institution, the Creative Economy Agency (BEKRAF). BEKRAF has a vision to build Indonesia into one of the top five creative economies worldwide by 2030 (Badan Ekonomi Kreatif, 2018). Based on the Presidential Regulation No. 6 of 2015, the BEKRAF was created to accelerate the development of creative economies in Indonesia. Through the Creative Economy Agency (BEKRAF), the Government of Indonesia seeks to provide innovation and pay more attention to this sector, with the aim of exploring the potential and maximizing opportunities as well as overcoming the challenges of the Creative Economy in Indonesia. This creative industry based on © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 363–374, 2024. https://doi.org/10.1007/978-3-031-53998-5_31
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creativity and innovation is expected to contribute to national economic growth, become a new power for the Indonesian economy, and improve the welfare of the Indonesian people as a priority in national development efforts. Hence, the Indonesian Ministry of Finance in Pratama & Wijayangka (2019) claimed that this development target can only be achieved if SMEs creative industry are used as the driving wheel of innovation and national economic growth to maintain national economic stability. Additionally, the creative industry sector is known for its resilience during times when various other sectors are impacted by global financial crises. According to the International Labor Office (2019, p. 1), the most recent statistics show that there were 816,000 SMEs established in Indonesia, contributing 27% to the country’s GDP and providing employment for 7.9 million people. This sector has been growing at a rate of 60–80% annually and is expected to become the primary driver of economic growth in Indonesia (Global Business Guide, 2018). Nationally, the highest number of sub-sectors within the creative industry includes culinary (41.47%), fashion (17.68%), and handicrafts (14.99%) (Pemprov Bali, 2020). The culinary sub-sector makes a significant contribution, which is 41.47% of the total revenue from the tourism and creative economy sectors. Thus, the government needs to support this sub-sector to be more advanced since culinary industry has a very strong potential to develop. In terms of regional macroeconomic growth, assistance to economic enterprises like SMEs should be geared towards enhancing their competitiveness and business productivity, making them competitive in global, national, and local markets (Surya et al., 2021). As per BEKRAF (2018), Bali is among the five provinces that made the largest contributions to the GDP of the creative economy in 2016. The quality of creative SME products in Bali not only has the potential to cater to the domestic market but also to the export market. This positions Bali as having immense potential for the growth of the tourism sector and creative industries. Located in the province of Bali, Denpasar is a business center city with large and small businesses alike. Many SMEs in Denpasar City is an asset that will strengthen the foundation of the regional economy. Moreover, Denpasar City was officially confirmed as Indonesia’s creative city award at Innovation Government Award (IGA) 2019, makes the capital of the Province of Bali a parameter for the development of the Creative Economy. Additionally, this data points out that culinary SMEs have great potential as economic drivers for Denpasar City. Data compiled by Denpasar Data Centre (Pusat Data Kota Denpasar) indicate that the culinary business in Denpasar City rose from 18,871 in 2017 to 28,428 in 2018(see Fig. 1). Then, followed by a significant increase in 2019 to 36.063 culinary businesses. The rapid increase in the number of SMEs in Denpasar City underscores the importance for all SME stakeholders to focus on their business performance, enabling them to thrive and excel on both a national and global level. A company’s growth and performance are often closely linked to the characteristics and roles of its owners. In many cases, the personal traits, knowledge, and habits of the owners are reflective of how the business will be managed and operated (Rafik and Rahayu, 2020). To make a significant contribution to improved performance, it is crucial for every SME manager to possess financial literacy, which means having the ability to understand, analyze, manage, and communicate about the financial health of the business
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Fig. 1. Growth of Culinary Businesses in Denpasar City
(Menike, 2018). This notion is supported by the findings of Sakhizada (2019), which state that both business owners and individuals should possess a reasonable level of knowledge about the information they have access to make informed decisions, and it confirms that financial literacy directly impacts business performance. When it comes to managing finances, a combination of knowledge, attitude, and behavior in handling finances is crucial. Financial knowledge and the ability to act in a certain manner will ultimately influence one’s attitudes and decision-making (King et al., 2020). As Rahim & Balan (2020) point out, financial knowledge is equally important for potential and aspiring small-medium entrepreneurs to achieve and sustain financial stability and growth in the long run. Financial knowledge encompasses both financial education and financial experience, which can enhance financial decision-making skills by improving one’s ability to make informed financial decisions. The lack of financial literacy among SMEs can have detrimental effects on their performance, making them unable to effectively manage their finances and make informed business decisions (Satiti, 2020). According to the 2019 National Survey on Financial Literacy conducted by Otoritas Jasa Keuangan, Bali had a financial literacy index of 38.06%, slightly higher than the national average of 38.03%. Bali was ranked thirteenth among all provinces in terms of financial literacy. DKI Jakarta had the highest percentage at 59.16%, while East Nusa Tenggara had the lowest at 27.82%. The survey results by Otoritas Jasa Keuangan indicated that in 2019, the level of financial literacy reached the target set by the government, as specified in the Presidential Regulation on the National Strategy for Consumer Protection No. 50 Year 2017, which had a financial literacy rate target of 35% for 2019. However, the level of financial literacy based on regional and urban characteristics still falls short of the target set at the urban level, which is 41.41% (Bali Puspa News.com, 2019). The level of financial literacy for SME operators in Bali is only at 38%, and this lower percentage of financial literacy can have a negative impact on their performance. In other words, the goals of SMEs may not be properly achieved due to their lack of financial literacy, and they face significant challenges in managing their finances. So far, many SME actors have not paid attention to the financial management of their business by combining their personal money and business money (Idawati and Pratama, 2020). Mistakes that are often made by SMEs Enterprise are still using the same account between personal accounts and business accounts, not recording expenses and operating results aren’t invested. Meanwhile, It is indeed to understand the role of financial literacy, as it helps SME business actors manage their finances well, which
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directly impacts the performance of SMEs. In managing finance SMEs Enterprise must have knowledge, behaviour and attitude in terms of finance, so that SMEs can manage finances optimally. Research that discusses social factors on SMEs enterprise has been carried out by many parties. Prior research by Satiti (2020) also contended that financial literacy can empower business individuals to acquire the necessary financial knowledge and skills to develop financial strategies for their businesses and enhance their performance. Based on the findings mentioned, below are the hypothesis. H1. Financial knowledge has a positive impact on SMEs’ performance. The study conducted by Dai et al. (2019) conclude that behavioral finance influences the performance of SMEs and below will be the hypothesis. H2. Financial behavior has a positive impact on SMEs’ performance. The findings from the study conducted by Wijayanto et al. (2020) support the idea that an improvement in the attitudes and mindset of entrepreneurs, coupled with a better understanding of the importance of financial literacy, will result in enhanced performance of SMEs. Based on these results, the hypothesis is: H3. Financial attitude has a positive impact on SMEs’ performance.
2 Research Methods This study is a quantitative investigation with the objective of assessing the impact of financial knowledge, financial behavior, and financial attitude on the performance of SMEs. The dependent variable in this study is the financial performance of SMEs. Aribawa (2016) defines the performance of SMEs as the outcomes achieved by an individual within the company over a specific timeframe, which is linked to the company’s value or standards where the individual works. The independent variables used are financial knowledge, financial behavior, and financial attitude. Financial knowledge (X1) refers to the ability to comprehend, analyze, and manage finances to make informed financial decisions and prevent financial issues (Rahman et al., 2020). In financial literacy, various financial aspects are considered (Nababan et al., 2012). Financial behavior (X2) is the result of an individual’s desire to meet their needs in line with their earned income. It relates to how an individual handles, manages, and uses their financial resources. Individuals with responsible financial behavior tend to be effective in managing their money, including budgeting, saving, controlling spending, investing, and meeting financial obligations on time (Susanti et al., 2018). Financial attitude (X3) is defined by an individual’s attitude, opinions, and assessments regarding their finances (Kemal et al., 2020). It reflects an individual’s state of mind and can be understood by examining their psychological perspective when assessing their financial management practices. Financial attitude offers insight into an individual’s personality in terms of practicing good financial management. This research utilizes both primary and secondary data sources. Primary data is gathered from respondents through questionnaires, which contain various questions related to the research. The questionnaire employs a Likert Scale for measurement. Additionally, secondary
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data sources, such as books, literature, and readings related to the research topic, complement the primary data. These secondary sources are collected from literature reviews of various articles in scholarly journals and publications from public, private, or civil society organizations related to Bali SMEs. The study’s population consists of all culinary SMEs in the city of Denpasar, numbering 1,280 culinary SMEs distributed across four subdistricts. Based on calculations using the Slovin formula with a 10% margin of error, the proportional sample size is determined to be 92.75, which is rounded up to 93 respondents. Homogeneous purposive sampling is used in this study, focusing on a particular subgroup with similar characteristics, such as a specific occupation or hierarchical level within an organization (Thabet et al., 2019). The sampling method is purposive, and criteria include SMEs in the culinary sector based in Denpasar city, currently in operation for at least the last year, with annual revenues ranging from a minimum of 300 million to a maximum of 500 billion rupiah or having a minimum of 50 million rupiah in net assets. Data analysis employs multiple linear regression analysis to assess the impact of financial knowledge, financial behavior, and financial attitude on the performance of culinary SMEs in Bali. This type of analysis is used because there are three independent variables. It helps determine the direction and strength of the relationship between the independent variables and the dependent variable, whether the relationship is positive or negative (Ardhiyanti et al., 2021). The analytical technique used in this research is path analysis with SPSS version 23.
3 Results and Discussion 3.1 Characteristics of Respondent The data of gender in this study reflects the different gender of both male and female respondents who have the SMEs culinary sector that has been operating in Denpasar city. Based on gender in Table 1, the number of male respondents shows 56% or 53 people. In contrast, it is around 44% or 41 people as female respondents. The slight difference between male and female respondents showed that male is dominant than female. Table 1. Attributes based on Gender. Gender
Number of Respondents
Percentage
Female
41
44%
Male
53
56%
Total
94
100%
The age range in this study reflects the range of age of respondents who have the SMEs culinary sector that has been operating in Denpasar city started from 17–45 years old or above. Table 2 of the age range in this study shows that the highest respondent in
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SMEs in the culinary sector based in Denpasar city is in the age range of 26–35 years old with 40%. The slight difference of 4% with the age of 36–45 years old, as in 36%. Both age ranges that have been explained before have a sharp difference with the age range of 17–25 years old with 19%. Then, the age of respondents above 45 years old is the lowest percentage with 5%. Table 2. Attributes based on Age. Age
Number of Respondents
Percentage
17–25 years old
18
19%
26–35 years old
38
40%
36–45 years old
33
36%
> 45 years old
5
5%
Total
94
100%
The educational background in this study reflects the last education that has completed by respondents who have the SMEs culinary sector that has been operating in Denpasar city. Based on the educational background in Table 3, the highest number of respondents who have completed their study is in diploma III/bachelor’s degree with 80% or around 75 people. There is a big gap between diploma III/bachelor’s degrees with the other educational backgrounds. With a difference of 63%, the respondents of senior high school as their last education have reached in the percentage of 17%. The other educational background that might have a different educational background from the listed data with 5% follows it. Surprisingly, 1% of the respondents who had the last educational background of the elementary school participated in SMEs culinary sector as the lowest. None of the respondents who had the last education from junior high school participated in this study. Thus, the entrepreneur that has run the SMEs culinary sector based in Denpasar city in Diploma III/Bachelor’s degree background dominated the respondents of this study. The business duration in this study reflects the length of the SMEs in the culinary sector that has been operating in Denpasar city, which can be divided into several categories: 1 year, 2 years, 3 years, and more than 3 years. Table 4 shows that around 10 people or 10% have been operating the business in culinary for 1 year as the lowest duration of business in Denpasar city. Then, followed by 3 years and 2 years of business duration in Denpasar city with 13% and 27% sequentially. On the other hand, 50% of respondents that have been running the culinary business for more than 3 years is the highest duration of business in Denpasar city. Thus, the culinary business duration that is mostly run by the respondents in Denpasar City is in more than 3 years. The total sales turnover per month in this study reflects the sales of the SMEs culinary sector per month that has been operating in Denpasar city divided into two categories: more than 25 million rupiahs – 208 million rupiahs and more than 208 million rupiahs – 4.2 million rupiahs. Table 5 shows that 50% or 50 people sequentially in those total sales
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Table 3. Attributes based on Educational Background Educational Background
Number of Respondents
Percentage
Elementary school
1
1%
Junior High school
0
0%
Senior High school
16
17%
Diploma III/Bachelor’s Degree
75
80%
Others
2
2%
Total
94
100%
Table 4. Attributes based on Business Duration Business Duration
Number of Respondents
Percentage
1 year
10
10%
2 years
25
27%
3 years
12
13%
> 3 years
47
50%
Total
94
100%
turnovers per month that has been getting by the respondents who have done operated the SMEs culinary sector in Denpasar city. Thus, the sales per month of SMEs culinary sector that has been operating by the respondents in Denpasar City is equal to 50%. Table 5. Characteristics based on Total Sales per Month Sales per Month
Number of Respondents
Percentage
> Rp 25.000.000 – Rp 208.000.000
47
50%
> Rp 208.000.000 – Rp 4.200.000.000
47
50%
Total
94
100%
3.2 Normality Test Based on the results of the normality test, as shown in Table 6, the Asymptotic (twotailed) significance value (Sig.) is 0.134. Since this p-value is greater than the commonly
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used significance level of 0.05, it suggests that the research data in this study follows a normal distribution. Therefore, it can be concluded that the statistical model meets the assumption of normality. This means that the data points are roughly normally distributed, which is important for many statistical analyses and ensures that the results are valid and reliable. Table 6. Normality Test Result Unstandardized Residual N Normal Parametersa.b Most Extreme Differences
94 Mean
,0000000
Std. Deviation
,17823380
Absolute
,082
Positive
,065
Negative
-,082
Test Statistic
,082
Asymp. Sig. (2-tailed)
,134c
a. Test distribution is Normal. b. Calculated from data. c. Lilliefors Significance Correction.
3.3 Multicollinearity Test In Table 7, it is evident that all independent variables have tolerance values greater than 0.10. The variable “financial knowledge” (X1) has the highest tolerance value at 0.986, while “financial behavior” (X2) has the lowest tolerance value at 0.447. “Financial attitude” (X3) has a tolerance value of 0.450. Furthermore, the Variance Inflation Factor (VIF) values were calculated, and they are reported as 1.015 for X1, 2.235 for X2, and 42.220 for X3. The fact that these VIF values are all less than 10 indicates that there is no significant multicollinearity present in the regression model. This means that the independent variables in the model are not highly correlated with each other, which is important for accurate and reliable regression analysis. 3.4 Heteroscedasticity Test The results from the heteroscedasticity test presented in Table 8 indicate that none of the independent variables have a significant effect on the dependent variable, as evidenced by the significance levels of the independent variables. The highest value of heteroscedasticity in this study is associated with the variable X3, which represents financial attitude, with a value of 0.798. Following that, the variable X1, representing financial knowledge, has a value of 0.729, and the variable X2 has the lowest value of
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Table 7. Multicollinearity Test Result Coefficientsa Model
1
Unstandardized Coefficients
Standardized Coefficients
B
Std. Error
Beta
(Constant)
,894
,292
x1
,357
,047
x2
,217
,057
x3
,234
,067
t
Sig
Collinearity Statistics Tolerance
VIF
3,060
,003
,473
7,551
,000
,986
1,015
,353
3,799
,000
,447
2,235
,324
3,498
,001
,450
2,220
a. Dependent Variable: y
heteroscedasticity at 0.299. Overall, all the independent variables have p-values greater than 0.05, indicating that there is no statistically significant heteroscedasticity present in the regression model in this study. This suggests that the assumption of constant variance of errors is met, which is important for valid regression analysis. Table 8. Heteroscedasticity Test Result Coefficientsa Model
1
Unstandardized Coefficients
Standardized Coefficients
t
Sig
B
Std. Error
Beta
(Constant)
,305
,193
1,581
,117
x1
,011
,031
,036
,348
,729
x2
-,039
,038
-,161
-1,044
,299
x3
-,011
,044
-,040
-,257
,798
a. Dependent Variable: ABS_RES
3.5 Multiple Regression Analysis Test Based upon Table 9, multiple regression equation can be shown as below: Y = α + β1 X1 + β2 X2 + β3 X3 + ε = 0.894 + 0.357X1 + 0.217X2 + 0.234X3 + e a) The constant value (α) of positive 0.894 states that if the independent variables consisting of financial knowledge, financial behavior, and financial attitude are declared as the same as a constant at zero, then the value of SMEs culinary performance has increased by 0.894.
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b) The coefficient value (β1) of 0.357 states that if the financial knowledge variable increases, SMEs culinary performance will increase significantly. Thus, the higher the financial knowledge provided, the higher the level of SMEs performance in culinary sector in Denpasar city. c) The coefficient value (β2) of 0.217 illustrates that if the financial behavior variable increases, SMEs performance in culinary will show the upgrading its value. Therefore, the higher level of financial behavior of the owner or person who managed and have SMEs in Denpasar city, it can increase their SMEs performance in culinary sector. d) The coefficient value (β3) of 0.234 shows that if the financial attitude variable increases, SMEs performance in culinary sector will increase. Therefore, the higher level of risk aversion financial attitude, it can increase their SMEs performance in culinary sector in Denpasar city. e) Based on the previous study above, the finding of this study has the same result that there is a strong significant effect of financial knowledge, financial behavior, and financial attitude towards SMEs performance
Table 9. Multiple Regression Test Result Coefficientsa Model
1
Unstandardized Coefficients
Standardized Coefficients
B
Std. Error
Beta
(Constant)
,894
,292
x1
,357
,047
x2
,217
x3
,234
t
Sig
Collinearity Statistics Tolerance
VIF
3,060
,003
,473
7,551
,000
,986
1,015
,057
,353
3,799
,000
,447
2,235
,067
,324
3,498
,001
,450
2,220
a. Dependent Variable: y
4 Conclusion Based on the problem formulation and the research results discussed in the previous chapters, the following conclusions can be drawn: a) Financial knowledge (X1) has a significant impact on SMEs’ performance (Y). This means that the financial knowledge of SME practitioners can enhance the performance of SMEs in the culinary sector in Denpasar city. Therefore, the first hypothesis is supported. b) Financial behavior (X2) has a positive and significant influence on SMEs’ performance (Y). This implies that higher levels of positive behavior among SME practitioners lead to improved performance in the culinary sector in Denpasar city. Hence, the second hypothesis is confirmed.
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c) Financial attitude (X3) has a positive and significant impact on SMEs’ performance (Y). This suggests that a stronger financial attitude is associated with higher performance among SMEs in the culinary sector in Denpasar city. Consequently, the third hypothesis is validated. In summary, this research demonstrates that financial knowledge, financial behavior, and financial attitude have a significant and positive impact on the performance of SMEs in the culinary sector in Denpasar city. These findings underscore the importance of these factors in enhancing SME performance and suggest that interventions or initiatives to improve financial knowledge, behavior, and attitude among SME practitioners can lead to better business outcomes.
References Aribawa, D: Pengaruh Literasi Keuangan Terhadap Kinerja Dan Keberlangsungan Umkm Di Jawa Tengah (2016) Kreatif, B.E.: Opus: Ekonomi Kreatif Outlook 2019. Badan Ekon. Kreat. 14 (2018) Bali Puspa News.com, 2019. Survey OJK 2019 : Indeks Literasi Keuangan Capai 38,03 Persen [WWW Document] Dai, R.M., Kostini, N., Tresna, P.W.: The effect of behavioral finance on financial performance leading medium enterprises in Cimahi City. J. Pemikir. dan Penelit Adm. Bisnis dan Kewirausahaan 4, 57–62 (2019) Global Business Guide: Indonesia’s Creative Industry: Set to Become the Next Economic Powerhouse Glob. Bus. Guid. Indones (2018) Idawati, I.A.A., Pratama, I.G.S.: Pengaruh Literasi Keuangan Terhadap Kinerja dan Keberlangsungan UMKM di Kota Denpasar. Warmadewa Manag. Bus. J. 2, 1–9 (2020). https://doi.org/ 10.22225/wmbj.2.1.1644.1-9 International Labour Office: Financing Small Businesses in Indonesia: Challenges and Opportunities, Innovation Strategies in the Food Industry: Tools for Implementation (2019) Kemal, W.S., Darmawan, A.: Pengaruh Financial Knowledge Dan Financial Attitude Terhadap Financial Behavior Pada Youth Entrepreneur Kota Malang. J. Adm. Bisnis 140 (2020) King, N., Herijanto, K., Rahadi, R.A.: 1.A Conceptual Study On The Implications Of Financial Literacy Rate On The Company Profitability of Msmes 133–142 (2020) Menike, L.M.C.S.: Effect of Financial Literacy on Firm Performance of Small and Medium Enterprises in Sri Lanka. SSRN Electron. J. (2018) https://doi.org/10.2139/ssrn.3306719 Nababan, D., Sadalia, I.: Analisis Personal Financial Literacy dan Financial Behaviour Mahasiswa S-1 Fakultas Ekonomi Universitas Sumatera Utara (2012) Bali, P.: Pemprov Bali Terus Dukung UMKM Lokal di Masa Pandemi. Pemerintah Provinsi Bali (2020) Pratama, W.Y., Wijayangka, C.: Pengaruh Literasi Keuangan terhadap Akses Pembiayaan pada UMKM. J. Manaj. dan Bisnis 3, 378–388 (2019) Rafik, A., Rahayu, A.S.: Financial behaviour and financial wellbeing of MSMEs actors: the role of financial literacy and cognitive factors. J. Siasat Bisnis 24, 72–86 (2020). https://doi.org/10. 20885/jsb.vol24.iss1.art6 Rahim, S., Balan, V.R.: Financial literacy: the impact on the profitability of the smes in kuching. Int. J. Bus. Soc. 21, 1172–1191 (2020) Rahman, A., Yousida, I., Kristansi, L., Paujiah, S.: Pengaruh Pengetahuan Keuangan, Perencanaan Keuangan Dan Kontrol Diri Terhadap Perilaku Pengelolaan Keuangan Pada Mahasiswa Yang Menjalankan Praktik Bisnis Dikota Banjarmasin. J. Mitra Manaj. 4, 1405–1416 (2020). https:// doi.org/10.52160/ejmm.v4i9.466
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Sakhizada, A.S.: Impact of the Financial Literacy on the Business Performance: A Case Study in Afghanistan (2019). https://doi.org/10.13140/RG.2.2.27134.82243 Satiti, N.R.: Financial literacy: an essential in small medium enterprises (SMEs) performance. Manaj. Bisnis 10, 51–61 (2020). https://doi.org/10.22219/Jmb.V10i2.14825 Surya, B., Menne, F., Sabhan, H., Suriani, S., Abubakar, H., Idris, M.: Economic growth, increasing productivity of SMEs, and open innovation. J. Open Innov. Technol. Mark. Complex. 7, 1–37 (2021). https://doi.org/10.3390/joitmc7010020 Susanti, A., Ismunawan, P., Ardyan, E.: Tingkat Pendidikan, Literasi Keuangan, dan Perencanaan Keuangan terhadap Perilaku Keuangan UMKM di Surakarta. Telaah Bisnis 18, 45–56 (2018). https://doi.org/10.35917/tb.v18i1.93 Thabet, O. Bin, Ali, A.A.M.F., Kantakji, M.: Financial literacy among SME’s in Malaysia. Humanit. Soc. Sci. Rev. 7, 376–383 (2019). https://doi.org/10.18510/hssr.2019.7244 Wijayanto, S.A., Wahyullah, M., Aribawa, D.: The Effect of entrepreneur orientation and financial literacy toward small business enterprises performance in Mataram. J. Benefita 5, 352 (2020). https://doi.org/10.22216/jbe.v5i3.5022
Enhancing the Business Growth of Micro and Small Enterprises (MSEs) via Innovation and Competency in Strategy Ketut Tanti Kustina(B) , Ida Bagus Raka Suardana, Ni Komang Yumi Arya Kusuma Dewi, I Gusti ayu Tirtayani, Gusi Putu Lestara Permana, and Ni Luh Putu Sariani Universitas Pendidikan Nasional, Jl. Bedugul No.39, Sidakarya, Denpasar Selatan, Kota Denpasar, Bali 80224, Indonesia [email protected]
Abstract. The primary objective of this study is to explore how innovation can act as an intermediary factor within the framework of entrepreneurs’ competency strategies, contributing to the enhanced growth of Small and Medium Enterprises (SMEs) operating in the Silver Crafts industry in Celuk Village, Gianyar Regency, Bali. To assess the proposed model, a survey questionnaire was employed to gather data from the Celuk Village Silver Craft Company situated in the Gianyar Regency of Bali, Indonesia. Data analysis encompassed the use of path analysis techniques to assess and confirm the research hypotheses. The study provides valuable insights and practical implications, emphasizing the significance of entrepreneurs continually improving their competence in shaping business strategies and fostering a culture of openness to innovative approaches to stimulate business growth. This empirical study is unique and uncommon, as it investigates the mediating role of innovation in the relationship between strategic competency and business growth within the specific context of the Silver Crafts industry in Celuk Village, Gianyar, Bali. Keywords: Innovation · Strategic competency · Business Growth · SMEs
1 Introduction Innovation also stands as a critical factor for gaining a competitive edge. Entrepreneurs must continue to infuse innovation into different facets of their business, spanning products, services, and processes, to meet the evolving market needs. The intensified competition motivates entrepreneurs to craft robust strategies to secure their business’s continuity and expansion. However, it’s essential to acknowledge that not all entrepreneurs possess the proficiency to design intricate, long-term strategies (Jamie & Oliver, 2020; Jardim, 2021; Turner & Endres, 2017). Many are more adept at the technical or creative aspects of their business than at devising comprehensive, future-oriented strategies. A deficiency in entrepreneurial competencies can result in a lack of clarity when it comes to identifying business opportunities and formulating future strategies (Mustapha © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 375–383, 2024. https://doi.org/10.1007/978-3-031-53998-5_32
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et al., 2020; Nieuwoudt et al., 2017; Turner & Endres, 2017). While entrepreneurs acknowledge the importance of innovation in the competitive business environment, uncertainties often surround the effective integration of these innovations into their business strategies (Farida & Setiawan, 2022; Gebrekidan et al., 2023). When strong entrepreneurial competencies are combined with innovation, the latter can serve as a mediator or intermediary between entrepreneurial competence and business growth (Hwang et al., 2020; Rehman et al., 2023; Syurwana et al., 2022). In this context, innovation plays a crucial role in translating entrepreneurial skills and knowledge into value-added business solutions, helping to overcome challenges that often arise from limited resources or small operational scales, which are commonly observed in Micro, Small, and Medium Enterprises (MSMEs). By offering more innovative products or services, entrepreneurs can expand their customer base, enhance customer loyalty, and consequently, drive business growth (Kamuri, 2021; Tamyez et al., 2017). The primary goal of this research is to explore how innovation can act as an intermediary factor, amplifying the effectiveness of entrepreneurial competency strategies and, in turn, promoting the growth of small and medium-sized enterprises (SMEs). By examining various relevant approaches, this article aims to offer practical insights for bridging this gap and fostering sustainable business expansion within a highly competitive environment. In line with the study’s objectives, the following four hypotheses are formulated: H1: Strategic Competency positively and significantly impacts Business growth. H2: Strategic Competency positively and significantly effect on Innovation. H3: Innovation positively and significantly affects Business growth. H4: Innovation significantly mediates the impact of Strategy and competency on business growth. These hypotheses are illustrated in the framework depicted in Fig. 1.
Innovation
Fig. 1. Theoretical Framework.
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2 Methodology To explore the significance of innovation in the identification of strategic competencies and their impact on corporate growth, this study employed a quantitative research methodology. The research was conducted at the Celuk Village Silver Craft Company in the Gianyar Regency of the Indonesian province of Bali. A purposive sampling approach was utilized to select 89 participants (involved in silver craftsmanship) who took part in this study as respondents. Data collection was carried out using a questionnaire as the survey method. The questionnaire followed established guidelines for data collection. Respondents quantitatively answered the questionnaire using a Likert scale with values ranging from one to five. Path analysis techniques were applied to evaluate the collected data.
3 Results and Discussion 3.1 Construct Validation The validity of an instrument is closely tied to its ability to accurately measure what it is intended to measure. In other words, an instrument is considered valid when its design and application enable it to measure its intended target effectively. The validity of the research instrument in this study was assessed using the product moment Pearson correlation, as recommended by Ahrens et al. (2020). The variables for strategic competency, innovation, and business growth have qualified validity tests where the Pearson correlation value of each instrument is above 0.30, then the instruments qualify to be used as a measure of the variables (refer Table 1). Table 1. Validity Test Results Variable
Instrument
Pearson Correlation
Description
Strategic competency (X)
X1.1
0,942
Valid
X1.2
0,959
Valid
X1.3
0,849
Valid
Innovation (Z)
Business growth (Y)
X1.4
0,939
Valid
Z.1.1
0,863
Valid
Z.1.2
0,849
Valid
Z.1.3
0,928
Valid
Z.1.4
0,938
Valid
Y1.1
0,873
Valid
Y1.2
0,899
Valid
Y1.3
0,953
Valid
Y1.4
0,942
Valid
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3.2 Reliability As shown in Table 2, the reliability test result on each variable is Business growth of 0.936, strategic competency of 0.941, and Innovation of 0.936, which has a value above the 0.60 point shown on Cronbach’s Alpha, then it can be said that the entire instrument has qualified for reliability. Table 2. Reliability Test Results Variable
Cronbach’s Alpha
Description
Strategic competency
0,941
Reliable
Innovation
0,914
Reliable
Business growth
0,936
Reliable
3.3 Path Analysis Table 3 presents the path analysis results on Sub-Structural 1. Table 3. Path Analysis Results on Sub-Structural 1 Model
Unstandardized Coefficients
Standardized Coefficients
B
Std. Error
Beta
(Constant)
1.377
0.287
Strategic competency
0.593
0.079
0.627
t
Sig
4.791
0.000
7.504
0.000
R2 : 0,393
The results from the path analysis in Table 3 allow us to formulate the sub-structural equation as follows. Z = p2 X + e1
(1)
Z = 0, 627 X + e1
(2)
These structural equations can be interpreted as: The coefficient for the variable “Strategic competency” is 0.627, indicating a positive influence on “Innovation.“ This suggests that as “Strategic competency” increases, “Innovation” is expected to improve. The path analysis results for Sub-Structural 2 are presented in Table 4.
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Table 4. Path Analysis Results on Sub-Structural 2 Model
Unstandardized Coefficients
Standardized Coefficients
t
Sig
B
Std. Error
Beta
(Constant)
0.391
0.304
1.283
0.203
Strategic competency
0.346
0.095
0.327
3.622
0.000
Innovation
0.570
0.101
0.509
5.639
0.000
R2 : 0,575
From the results of the path analysis presented in Table 4, we can formulate the structural equation as follows. Y = p1 X + p3 Z + e2
(3)
Y = 0, 327X + 0, 509Z + e2
(4)
The variable “Strategic competency” has a coefficient of 0.327, indicating a positive influence on “Business Growth.“ This means that when “Strategic competency” increases, “Business Growth” is expected to increase as well. Similarly, the variable “Innovation” has a coefficient of 0.509, signifying that “Innovation” also has a positive impact on “Business Growth.“Direct impact occurs when one variable affects another without any other variable mediating: (a) The direct impact of “Strategic competency” on “Business Growth” with a coefficient of 0.327 (b) The direct impact of “Strategic competency” on “Innovation” with a coefficient of 0.627 (c) The direct impact of “Innovation” on “Business Growth” with a coefficient of 0.509. Indirect effects occur when another variable mediates the relationship between the two variables. The impact of “Strategic competency” on “Business Growth” with “Innovation” as a mediator is calculated as 0.627 x 0.509 = 0.319. To find the total impact, add the direct impact of “Strategic competency” on “Business Growth” (0.327) to the indirect impact through “Innovation” (0.319), resulting in a total impact of 0.327 + 0.319 = 0.646. In the calculation of the error influence (e), the result shows an impact of error structure 1 (e1) as 0.779 and the impact of error structure 2 (e2) as 0.652. Further calculations will be made to determine the total determination coefficient.: R2m = 1−(e1 )2 (e2 )2 = 1−(0, 779)2 (0, 652)2 = 1−0, 258 = 0, 742 Upon calculating the total determination coefficient and obtaining a value of 0.742, it can be concluded that 74.2% of the variance in the “Business Growth” variable within
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the silver craft industry in the village of Celuk, Gianyar district, is influenced by “Strategic competency” and “Innovation.“ The remaining 25.8% is influenced by other factors not considered in the research model or outside the scope of the study. Based on the structural equation, the results of the path coefficient calculations will be elucidated through the standardized beta coefficient values for each variable’s impact on the relationships between them. The following are the coefficients representing the influence of each variable’s path in Fig. 2, which demonstrates the magnitude of the impact of “Strategic competency” on the variables “Innovation” and “Business Growth.“
Fig. 2. Model path analysis
Table 5 provides a comprehensive summary of the values representing both direct and indirect influences between variables, in addition to error values in each structural equation generated using path analysis techniques. Strategic competency exerts a direct influence on Innovation with a coefficient of 0.627. Innovation directly impacts business growth with a coefficient of 0.509. Strategic competency has a direct influence on business growth with a coefficient of 0.327. Additionally, there’s an indirect influence of 0.319 from Strategic competency on business growth mediated through innovation. Table 5. Direct effect, Indirect effect Strategic competency (X), to Innovation (Z) and Business Growth (Y). Variable effect
Direct effect
X→Z
Indirect effect through Z
Total Effect
Significance
Result
0,627
0,627
0,000
Significant
Z→Y
0,509
0,509
0,000
Significant
X→Y
0,327
0,646
0,000
Significant
0,319
The Sobel test was carried out to examine the indirect impact of the “Strategic competency” (X) variable on “Business Growth” (Y) through the intermediary variable “Innovation” (Z). If the calculated Z value exceeds 1.96, at a 95 percent confidence level, it indicates that the mediating variable significantly plays a role in mediating the relationship between the independent variable and the dependent variable.
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Description: a = 0, 627; Sa = 0, 079; b = 0, 509; Sb = 0, 101 0, 627.0, 509 Z = 0, 5092 0, 0792 + 0, 6272 0, 1012 + 0, 0792 0, 1012 Z=
0, 319 ; Z = 4, 230 0, 075
As explained by Sobel Test, the result Z = 4,230 > 1,96, which means the Strategic competency variable influences Business Growth by mediating Innovation, so Innovation is a significant influence mediation variable between Strategic competency and Business Growth. 3.4 Discussion The findings of the hypotheses in this study indicate that “strategic competency” has a positive and significant effect on business development. In simpler terms, an improvement in strategic competency results in business growth. This finding holds true for silver crafts in Celuk Village, Gianyar district, validating the first hypothesis. This study aligns with competency theory, as proposed by Bird (1995), which emphasizes that entrepreneurial competency, involving effective business procedures, can indeed foster business growth. This view is also corroborated by Venia & Slamet’s research (2020). Furthermore, the results of the hypotheses support the idea that strategic competency has a positive and significant impact on business development, confirming the acceptance of the second hypothesis. The research findings establish a significant relationship between strategic competency and the Innovation variable. This aligns with previous research conducted by Fadillah and Imran (Imran et al., 2021), which suggests a substantial influence of business strategy on company innovation. This influence is attributed to a company’s strategic approach to enhancing product quality. Additionally, this study demonstrates that innovation has a positive and significant effect on business growth. In simpler terms, an increase in innovation is linked to increased business growth, supporting the acceptance of the third hypothesis. Therefore, it can be concluded that innovation plays a role in influencing business growth. This finding is consistent with prior research (Arcuri et al., 2023; Braunerhjelm & Thulin, 2023; Scaliza et al., 2022; Tehseen & Sajilan, 2016). While innovation can have a positive and significant impact, it also carries potential risks for enterprise development. In summary, the study’s results indicate that strategic competency positively influences the growth of Silver craft businesses in the village of Celuk, Gianyar district. Furthermore, the study reveals that innovation acts as a mediating variable, implying that innovation plays a mediating role in the relationship between strategic competency and business development. These findings are in line with previous research (Fernández, 2023; Neely & Hii, 1998; Tehseen & Sajilan, 2016), emphasizing the significant impact of innovation on business development.
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4 Conclusion Based on the analysis and discussion provided, the following conclusions can be drawn: a) There is a positive and significant impact on business growth, indicating that an enhancement in “Strategic competency” leads to increased business growth. b) There is a positive and significant influence on innovation, demonstrating that when “strategic competency” is improved, it leads to an increase in innovation. c) There is a positive and significant effect on business growth. This suggests that when innovation is enhanced, it results in increased business growth. d) Innovation can mediate the influence of “strategic competency” on business growth. This means that “strategic competency” has an impact on business growth when mediated by innovation.
References 1. Arcuri, M.C., Gandolfi, G., Russo, I.: Exploring the impact of innovation intensity on the growth of female-led entrepreneurial firms. J. Small Bus. Enterp. Dev. (2023). https://doi.org/ 10.1108/JSBED-04-2022-0209 2. Bird, B.: Toward a theory of entrepreneurial competency. Adv. Entrepreneurship, Firm Emergence Growth 21, 115–131 (1995). https://doi.org/10.1108/S1074-754020190000021011 3. Braunerhjelm, P., Thulin, P.: Does innovation lead to firm growth? Explorative versus exploitative innovations. Appl. Econ. Lett. 30(9), 1179–1182 (2023). https://doi.org/10.1080/135 04851.2022.2041166 4. Farida, I., Setiawan, D.: Business strategies and competitive advantage: the role of performance and innovation. J. Open Innov.: Technol., Market, Complexity 8(3), 163 (2022). https:// doi.org/10.3390/joitmc8030163 5. Fernández, I.A.: Innovation and international business: a systematic literature review. Heliyon 9(1) (2023). https://doi.org/10.1016/j.heliyon.2023.e12956 6. Gebrekidan, T.H., Chebo, A.K., Wubetie, Y.F., Dhliwayo, S.: Linking technology entrepreneurship to a business model towards the growth of ventures: lessons from Ethiopian small manufacturing ventures. Soc. Sci. Hum. Open 8(1), 100506 (2023). https://doi.org/10. 1016/j.ssaho.2023.100506 7. Hwang, W.S., Choi, H., Shin, J.: A mediating role of innovation capability between entrepreneurial competencies and competitive advantage. Technol. Anal. Strategic Manage. 32(1), 1–14 (2020). https://doi.org/10.1080/09537325.2019.1632430 8. Imran, M., Ismail, F., Arshad, I., Zeb, F., Zahid, H.: The mediating role of innovation in the relationship between organizational culture and organizational performance in Pakistan’s banking sector. J. Public Aff. 22(2), 1–15 (2021). https://doi.org/10.1002/pa.2717 9. Jamie, G., Oliver, R.: Entrepreneurial competencies: a required skill for business performance. Eur. J. Bus. Innov. Res. 8(3), 50–61 (2020). https://doi.org/10.37745/ejbir/vol8.no3.pp50-61 10. Jardim, J.: Entrepreneurial skills to be successful in the global and digital world: Proposal for a frame of reference for entrepreneurial education. Educ. Sci. 11(7) (2021). https://doi.org/ 10.3390/educsci11070356 11. Kamuri, S.: Creating as an entrepreneurial competence, innovation and performance of valuesystem actors in Kenya’s leather industry. Sci. Afr. 11, e00664 (2021). https://doi.org/10.1016/ j.sciaf.2020.e00664
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12. Mustapha, W.N.W., Al Mamun, A., Mansori, S., Balasubramaniam, S.: Effect of entrepreneurial competencies on micro-enterprises income and assets in Malaysia. Asia Pacific J. Innov. Entrepreneurship 14(3), 249–261 (2020). https://doi.org/10.1108/apjie-012020-0009 13. Neely, A., Hii, J.: Innovation and business performance: a literature review. Business (1998). http://89.249.21.76/data/696/521/1221/litreview_innov1.pdf 14. Nieuwoudt, S., Henning, J.I.F., Jordaan, H.: Entrepreneurial competencies and financial performance of farmers in South Africa. S. Afr. J. Econ. Manage. Sci. 20(1), 1–13 (2017). https:// doi.org/10.4102/sajems.v20i1.1640 15. Pereira, C.S., Veloso, B., Durão, N., Moreira, F.: The influence of technological innovations on international business strategy before and during COVID-19 pandemic. Procedia Comput. Sci. 196(2019), 44–51 (2021). https://doi.org/10.1016/j.procs.2021.11.071 16. Rehman, S.U., Elrehail, H., Nair, K., Bhatti, A., Taamneh, A.M.: MCS package and entrepreneurial competency influence on business performance: the moderating role of business strategy. Eur. J. Manag. Bus. Econ. 32(1), 1–23 (2023). https://doi.org/10.1108/EJMBE04-2020-0088 17. Scaliza, J.A.A., et al.: Relationships among organizational culture, open innovation, innovative ecosystems, and performance of firms: Evidence from an emerging economy context. J. Bus. Res. 140(December 2021), 264–279 (2022). https://doi.org/10.1016/j.jbusres.2021. 10.065 18. Syurwana, A.M., Bado, B.: Competitive advantage as a mediation of competence and entrepreneurial orientation in business success: an empirical evidence from Indonesia. Asian J. Bus. Manage. 10(3), 70–79 (2022). https://doi.org/10.24203/ajbm.v10i3.6999 19. Tamyez, F.P., Ali, J., Ishak, N.: Entrepreneurial competencies and networks in the construction industry. Int. J. Appl. Eng. Res. 12(23), 13374–13380 (2017) 20. Tehseen, S., Sajilan, S.: Impact of innovative practices on business growth under the moderating impacts of culture-a conceptual model. Rev. Integrative Bus. Econ. Res. 5(2), 28 (2016). http://buscompress.com/journal-home.html 21. Turner, S., Endres, A.: Strategies for enhancing small business owners’ success rates. Int. J. Appl. Manage. Technol. 16(1), 34–49 (2017). https://doi.org/10.5590/ijamt.2017.16.1.03 22. Venia, V., Slamet, F.: Pengaruh kompetensi strategi dan kompetensi etika terhadap pertumbuhan usaha yang dimediasi oleh kompetensi jaringan. Jurnal Manajerial Dan Kewirausahaan 2(2), 406 (2020). https://doi.org/10.24912/jmk.v2i2.7934
Leveraging Social Media Marketing and Brand Awareness for Enhancing Purchase Intention in the Food and Beverage Industry Post-COVID-19 Nyoman Sri Subawa(B) , Ida Nyoman Basmantra, Ni Putu Ria Utami, and Caren Angelina Mimaki Faculty of Economic and Business, Universitas Pendidikan Nasional, Jl. Bedugul No.39, Sidakarya, Denpasar Selatan, Kota Denpasar, Bali 80224, Indonesia [email protected]
Abstract. The COVID-19 pandemic has had a profound impact on all aspects of people’s lives. Beyond health concerns, the economy is one of the areas that has been significantly affected by the pandemic, leading to job losses and reduced incomes for many workers. Among the economic sectors that have been affected, the food and beverage (F&B) industry has faced challenges in adapting to the economic downturn. In this context, digital marketing through social media has emerged as a crucial tool for business owners to maintain sales, especially in the context of social distancing measures. Brand awareness is also vital for business optimization, and social media marketing and brand awareness are believed to be key factors influencing customers’ purchase intentions. This study employs a descriptive qualitative approach, and sampling is conducted through the purposive sampling method. The research findings highlight the effectiveness of social media, particularly platforms like Instagram, in combination with brand awareness, in enhancing purchase intentions. These insights can be valuable for entrepreneurs looking to develop their businesses and inform their future strategies. Keywords: Social Media Marketing · Instagram · Brand Awareness · Purchase Intention · Covid-19
1 Introduction COVID-19 is a well-known infectious disease caused by a novel coronavirus named SARS-CoV-2. The World Health Organization (WHO) first became aware of this on December 31, 2019, when they received a report about a cluster of cases involving “viral pneumonia” in Wuhan, People’s Republic of China [1]. Due to that, President Joko Widodo has announced that Indonesia was affected by COVID-19 on March 2, 2020 that marked the beginning of social distancing which was later changed its name to physical distancing [2]. During this implementation, the public is advised to distance away from physical contact between one another, always stay at home, avoid crowds, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 384–393, 2024. https://doi.org/10.1007/978-3-031-53998-5_33
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frequently wash their hands, and prioritize wearing masks. Many activities were also switched from being previously face-to-face to fully online. Worship places and schools were temporarily suspended, office employees mostly were working from home and worse scenario, countless companies were unable to operate which caused massive lay off. The impact of the policy that restricted community activities is evident in the performance of businesses, which, in turn, affected the country’s economy. According to a report from the Indonesia Central Agency of Statistics [3], the economic growth of Indonesia only reached 2.97 percent in the first quarter of 2020, a significant drop from the 5.02 percent growth in the same period in 2019. Additionally, as depicted in Fig. 1, the Food and Beverages Sector in Indonesia experienced a substantial decline with a 6.2% drop-in GDP growth rate from 2019 to 2020. Consequently, the government encouraged businesses in this sector to adapt and innovate to survive the challenging economic conditions brought about by the downturn. In response, food, and beverage (F&B) industry owners altered their marketing strategies to focus more on online services using social media.
Fig. 1. GDP growth rate for the food and beverage manufacturing sector in Indonesia from 2018 to 2022 [4].
Social media as a means of digital marketing, especially during COVID-19 pandemic has become an important platform for business owners to promote their products to achieve their sales target despite the occurring social restrictions. In the field of marketing, social media has emerged as a superior marketing channel compared to traditional methods. This shift has changed the way consumers assess, select, and disseminate information [5]. This is because according to [5], the best performing companies in the industry have an integrated and active social media presence. Using the speed of information dissemination on social media, business owners can boost their marketing, brand awareness, and expand their reach. In addition, F&B companies also use social media to gather consumer feedback to improve their businesses and accelerate the growth of their businesses.
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In the current “new normal” era, social media has become an effective and efficient means of promoting and marketing products. This approach is commonly referred to as social media marketing (SMM), a type of Internet marketing that leverages social networking platforms as promotional tools [6].According to [7], social media marketing motivates people to promote their websites, products, or services through online social platforms. It allows them to engage with a much larger community, which is more inclined to participate in marketing activities compared to traditional advertising channels. [8] added that the use of social media by marketers in a business, allows the success of promotional activities that have an impact on consumers to share preferences and collect information as consideration in deciding to purchase a product. Therefore, social media marketing can be used to develop and optimize a business, especially in the food and beverage industry. Nonetheless, relying solely on Social Media Marketing is insufficient for a business to thrive in the challenging pandemic environment. Brands also hold a crucial role, closely intertwined with perceptions. The competition between companies is more about shaping perceptions rather than just battling products [9]. Thus, building Brand Awareness is vital for a company. Brand Awareness refers to consumers’ ability to recognize a brand in various contexts, achieved through brand recognition and brand memory. According to research [10], Brand Awareness can be enhanced using internet and social media marketing tools. These tools inform, remind, and persuade customers about a brand, its products, or services. Customers may engage with brands through various means, such as watching videos, playing games, exploring websites, interacting with other customers, or viewing advertisements. To boost Brand Awareness, it is essential to foster positive brand associations, strengthen brand loyalty by connecting with the target audience, and motivate customers to become more acquainted with the brand and its offerings. Brand Awareness is cultivated through internet or social media advertising, promotion, sales efforts, and public relations. Thus, these factors are believed to enable businesses in the food and beverage sector to withstand the challenges posed by the COVID-19 pandemic. Among the business owners of food and beverage (F&B) in Indonesia that was affected but still able to withstand the challenges of COVID-19 pandemic is the Kopi Janji Jiwa. This is evidenced by data from the [11] which is an award event that analyses the performance and evaluates the strategy of Indonesian brands. According to Table 1, Kopi Janji Jiwa has gotten the first place as the most popular coffee shop in Indonesia during the COVID-19 pandemic. Kopi Janji Jiwa is also a coffee brand that has won the Indonesian World Record Museum (MURI) award for “The Fastest Coffee Shop Growth in One Year” in 2019 for breaking Muri’s record as a local coffee with ‘Fastest Coffee Shop Growth in One Year’. Although Kopi Janji Jiwa was launched in 2018, the sales figures have increased and attracted the eyes of the public. It can be seen from the number of outlets that have been expanded to 700 outlets in a year which involves 50 major cities in Indonesia. Aside from providing a variety of coffee that suits the trend of coffee consumption nowadays, flavoured drinks and toasted bread with fillings were sold at affordable prices. Another uniqueness of Kopi Janji Jiwa is the “Jiwa + “ application that made it easier for customers to order Kopi Janji Jiwa and Jiwa Toast online. Apart from that, Kopi Janji Jiwa tried to attract consumers with the use of social media especially on Instagram. This is due to the findings of a survey conducted by
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Table 1. Top Brand Award (Coffee Shop) 2021. [11] Brand
TBI 2021
Janji Jiwa
39.5%
TOP
Kenangan
36.7%
TOP
Kulo
12.4%
TOP
Fore
6.4%
[12], which revealed that 59% of micro-influencers consider Instagram to be the most effective social media platform for engaging with their audience. Additionally, 67% of influencers who collaborate with brands believe that Instagram is the most effective platform for creating branded and sponsored content. Kopi Janji Jiwa’s most successful promotions were frequently and consistently posted on Instagram to attract the attention and curiosity of potential customers in terms of product, taste, appearance, and price. Through social media, Kopi Janji Jiwa has carried out various promotions, starting from giving discounts, making quizzes as well as displaying unique logos and packaging. In this case, Kopi Janji Jiwa seeks various maximum promotional strategies to increase the number of consumers. Figure 2 shows some feeds of Kopi Janji Jiwa’s Instagram account with the username of @kopijanjijiwa.dpsplazarenon.
Fig. 2. Kopi Janji Jiwa’s Instagram Feeds [13]
Referring to the data of Kopi Janji Jiwa’s achievements, the researchers are interested in understanding and knowing how the effectiveness of Kopi Janji Jiwa’s strategies through Social Media Marketing and Brand Awareness in developing creative and innovative businesses to attract customers’ attention and interest in purchasing. Furthermore,
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there were several previous research and journals that were used as references before the title of this study was created. Prior research conducted by [14], which explored the connection between Social Media Marketing, Brand Awareness, and Brand Image, highlighted that social media serves as a primary information source. Additionally, it emphasized the positive influence of Instagram on consumer purchase intentions. In a separate study conducted by [15], it was revealed that social media marketing and active brand awareness have a direct and significantly positive impact on purchasing decisions. However, a study conducted by [16] in Indonesia noted that not all Micro-Small Medium Enterprises (MSMEs) experienced a significant increase in income when utilizing social media as their promotional tool. Based on a thorough examination of prior research, as far as concerned, no one has conducted research that studies on the effectiveness of using Instagram as social media marketing in increasing customer purchase intention specifically at Kopi Janji Jiwa and Jiwa Toast Plaza Renon. Furthermore, in this study, the authors use a combination of independent variables with dependent variable to find out how effective the inter-variables are so that it can be a company effort, especially in the food and beverage industry to be able to survive COVID-19 pandemic. Researchers feel that this research is important to do as an effort to help entrepreneurs develop their business and also rise up in this new normal era in order to improve the country’s economy aside from to assist future researchers that need references. Hence, for this study, the researcher decided to raise the title of Instagram: A Reliable Tool for Marketing and Brand Awareness – Nurturing Purchase Intentions in Bali’s New Normal at Kopi Janji Jiwa and Jiwa Toast Plaza Renon. Accordingly, the conceptual framework in this study is depicted in Fig. 3.
Fig. 3. Research Framework
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2 Methodology The research locations in this study are Kopi Janji Jiwa and Jiwa Toast Plaza Renon Jl. Raya Puputan No. 210, Sumerta Kelod, Kec. Denpasar Timur, Denpasar, Bali 80239. The selection of location is because Kopi Janji Jiwa Plaza Renon is located between other Kopi Janji Jiwa outlets in Bali and situated in the middle of the city, making it easier to reach. Many consumers are more likely to visit Kopi Janji Jiwa Plaza Renon outlet because its location is inside a mall. In addition, the Kopi Janji Jiwa Plaza Renon outlet is also active on social media, especially Instagram. This research was conducted from October to December 2021. The type of data used is descriptive qualitative data. [17] states that the qualitative strategy may be an inquire about strategy based on the reasoning of post positivism, utilized to think about normal objects, where this strategy is utilized to get in-depth information, information that contains meaning. However, to present the results and discussion, the researcher used a descriptive case study. Descriptive case is utilized to depict a mediation or wonder and the real-life setting in which it happens [18]. The informants in this study were selected purposively. According to [17], purposive sampling is a sampling technique for data sources with certain considerations that the informant is considered to have mastered the information to be extracted. Then, the researcher will choose suitable informants for this study using purposive sampling. There are two types of informants in this study which is 1 main informant, namely Marketing Staff and 5 supporting informants, namely customers of Kopi Janji Jiwa. Marketing staff who is working at Kopi Janji Jiwa Plaza Renon is the informant who has the authority to manage the social media marketing especially Instagram of Kopi Janji Jiwa Plaza Renon. Meanwhile, customers who become informants have different backgrounds, with the same level of importance for this research. By choosing these company and informants, researchers are able to know how effective Social Media Marketing and Brand Awareness are on Purchase Intention in the new normal era. In this study, data are obtained using Observation, Interview, and Documentation. Observation is an activity of monitoring, paying attention and seeing an object by using all the five senses [17]. This study applied Passive Participation Observation because researchers only observe from afar while ticking checklist and are not actively involved in the situation. Interviews were conducted in semi-structured interviews to discover issues more straightforwardly while the interviewees are inquired for their suppositions and concepts with the help of interview tools and voice recorders. The results of the interviews that have been conducted then was discussed towards a comprehensive understanding of the company’s survival in the new normal era through Social Media Marketing with Brand Awareness to increase Consumer’s Intention. Meanwhile, for documentation, data collection was obtained through both print and online media from Badan Pusat Statistik (BPS), Statista, several national journals, and few international journals from the Google Scholar website with a handbook that supports the theoretical basis used. To check the validity of data, this research uses triangulation method and data source triangulation. Data obtained from various sources are described, categorized, namely the same view, different views, and various specificities of the various sources [17].
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3 Results and Discussion Based on the interviews done, it can be agreed to the statement made by [14] which is Social Media Marketing may be a frame of prepare that permits somebody to advance their items or administrations through online social channels and enter a much bigger community. Currently, by trying to face the challenges that have existed since the COVID-19 pandemic emerged, social media acts as a tool that can increase engagement with influencers. And it can be said that the Purchase Intention of social media customers has a role that tends to increase the Purchase Intention of the company [19]. The first interview that was conducted by the Researcher with the Marketing Staff of Kopi Janji Jiwa Plaza Renon, Ms. Ayu Yanti Widiastuti on November 1st, 2021, at 16.00 WITA regarding Social Media Marketing concludes that the utilization of social media through Instagram Kopi Janji Jiwa Plaza Renon during the new normal era has been optimized. Kopi Janji Jiwa Plaza Renon’s Instagram content also contains many promotions and follows the latest innovations that can increase customer Purchase Intentions. The features on Instagram Stories such as Vote and QnA have also been used to be able to interact well with the followers of the Kopi Janji Jiwa Plaza Renon Instagram. Informants 2 to informant 6 are customers of Kopi Janji Jiwa Plaza which are Ms. Gung Mirayanti, Ms. Ita Putri, Mr. Rahul Maulana, Mr. Pande Prasta and Mr. Akira Ivandio. Regarding the variable of Social Media Marketing, from the interviews, it can be concluded that the sharing of content carried out by Kopi Janji Jiwa Plaza Renon on their Instagram was able to make them interested in buying products. The content on the Kopi Janji Jiwa Plaza Renon’s Instagram Feed also has eye pleasing design with great products’ photos that can attract customers. From the sharing of these contents, they can conclude that their Purchase Intention is increasing in the new era as it is today. However, when viewed from the results of interviews related to the interactions that exist on the Instagram of Kopi Janji Jiwa Plaza Renon, informants 4, 5, and also 6 are less interested in following the interactions that have been carried out by Kopi Janji Jiwa Plaza Renon on their Instagram as they focus more on the content on Instagram Feed or Instagram Stories aside from focusing on the latest discounts/promotions in the current new normal era. Previous research done by [14] stated that social media is a primary source for obtaining information which produces similar result with this research that Instagram has a good influence on consumer Purchase Intentions. In addition, a study conducted by [20] also found that there is a significant and positive impact of social media marketing strategies and trends online interaction on the involvement of social media users, especially Instagram which ultimately affects the Purchase Intention of customers. Regarding the second variable, which is Brand Awareness, based on the results of the interview, informant 1 who is the Marketing Staff stated that Kopi Janji Jiwa Plaza Renon can be recognized and remembered easily by consumers. Young people who follow current trends and use social media, especially Instagram, are the majority who recognize and remember Kopi Janji Jiwa’s brand as they are aware of Kopi Janji Jiwa’s unique name, namely “Janji Jiwa” with a logo that matches its name which is the promise hand gesture. In addition, “Teman Sejiwa” is also a nickname for their customers besides having the slogan “Kopi Dari Hati”. Moreover, Kopi Janji Jiwa also has a food menu that sets it apart from its competitors, namely “Jiwa Toast”. From these uniqueness and
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differences, Kopi Janji Jiwa is at the top-of-mind level which is easy to be recognized and remembered by consumers of Kopi Janji Jiwa brand. With their awareness, the Purchase Intention of consumers will also increase in accordance with the theory of [21] which mentioned that people have tendency to purchase product from familiar enterprise. This is in line with the results from interviews with Kopi Janji Jiwa’s customers which are informants 2 to 6 who stated that they could easily recognize and remember Kopi Janji Jiwa brand due to the fact that Kopi Janji Jiwa has many outlets, the prices are pocket-friendly, has a unique name with a logo in the form of a promise hand gesture, has the slogan “Kopi Dari Hati”, has a nickname for its customers, namely “Teman Sejiwa”, and offers food menu that makes Kopi Janji Jiwa different from its competitors, namely “Jiwa Toast”. The results of these interviews matched with the theory of Kwan in [22] which mentioned that customer’s Purchase Intention is influenced by knowledge of the brand’s existence. Products with well-known brands will tend to be purchased by consumers compared to products that are still new to them. Several findings were found from the discussion regarding the research done on Kopi Janji Jiwa Plaza Renon. It is shown that Social Media Marketing is essential to generate consumer’s intention in this study since it was proven that Instagram as a Social Media Marketing can positively affect consumers’ Purchase Intentions. [23] also stated that customers’ readiness to purchase brands will increase when Social Media Marketing Activities increase customers believe in certain brands. Hence, by optimizing the use of Instagram as a Social Media Marketing, Kopi Janji Jiwa Plaza Renon can increase customer’s buying interest and is a way to survive in the new normal era. In addition, the contents containing the latest promotions and discounts as well as product designs on Instagram Coffee Kopi Janji Jiwa Plaza Renon do attract customer’s attention which then will increase their buying interest. This is supported by research done by [24] which mentioned that the promotional applications on Instagram will positively affect consumer’s interest to purchase the products. Lastly, research from [25] supports that company needs to take the responsibility to build a positive image of their brand. To keep consumers aware of their existence and to retain their customers, companies must continue to fuel their brands and advertise more to allow large number of crowds to know about their presence. Thus, by ensuring their brand always appear different and unique, Kopi Janji Jiwa can create Brand Awareness at the top-of-mind level where customers can easily recognize and remember Kopi Janji Jiwa brand’s which results in the increase of customer Purchase Intentions.
4 Conclusion This study analyzed the effectiveness of Instagram as a Social Media Marketing and Brand Awareness on customer’s Purchase Intention of Kopi Janji Jiwa Plaza Renon in the current new normal era. Based on the findings, it is proven that the indicators of sharing content and interaction on Social Media Marketing variables show different results. The content sharing indicator shows positive results from the five informants as from the contents in Instagram, Kopi Janji Jiwa can increase their Purchase Intention. However, the interaction indicator also showed that three out of five informants are less interested in interacting as they only focus on the latest discounts/promotions in the current new normal era.
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Meanwhile, for the Brand Awareness variable with top-of-mind indicator, it shows positive results from the five informants. In the current new normal era, they can easily recognize and remember Kopi Janji Jiwa’s brand and with Brand Awareness at the top-of-mind level, customers’ Purchase Intentions do increase. Since majority of Kopi Janji Jiwa Plaza Renon’s customers are millennials, it is also proven that the millennial generation or young people are very positive in seeing the latest, interesting, and creative things, which causes the aspects of attention and buying interest to be easily obtained.
References 1. World Health Organization: Novel Coronavirus (2019-nCoV) Situation Report – 1. https:// www.who.int/health-topics/coronavirus#tab=tab_1. Accessed 03 Aug 2023 2. Kompas.com: Update Virus Corona 2 Maret: 89.212 Orang di 68 Negara Terinfeksi. https://sains.kompas.com/read/2020/03/02/170200123/update-virus-corona-2-maret89212-orang-di-68-negara-terinfeksi?page=all. Accessed 07 July 2023 3. Badan Pusat Statistik: Pertumbuhan Ekonomi Indonesia Triwulan IV-2020. https://www.bps. go.id/pressrelease/2021/02/05/1811/ekonomi-indonesia-2020-turun-sebesar-2-07-persen-c-to-c-.html. Accessed 07 July 2021 4. Wolff, H.N.: Indonesia GDP growth rate of food and beverage manufacturing sector 2022 Statista. https://www.statista.com/statistics/1302675/indonesia-gdp-growth-rate-offood-and-beverage-manufacturing-sector/#statisticContainer. Accessed 11 Aug 2023 5. Perumal, I., Devi Krisnan, U., Abdul Halim, N.S.B.: Social media in food and beverages industry: case of Klang Valley, Malaysia. Int. J. Bus. Manag. 12, 121 (2017). https://doi.org/ 10.5539/ijbm.v12n6p121 6. Bansal, R., Zehra Masood, R., Dadhich, V.: Social media marketing-a tool of innovative marketing changing landscape of virtual teaching learning pedagogy during & post COVID-19 pandemic view project social media marketing-a tool of innovative marketing (2014) 7. Weinberg, T.: The new community rules: marketing on the social web. O’Reilly Media, Sebastopol, CA (2009). https://doi.org/10.4148/1051-0834.1141 8. Schultz, D.E., Block, M.P.: Sales promotion influencing consumer brand preferences/purchases. J. Consum. Mark. 31, 212–217 (2014). https://doi.org/10.1108/JCM-012014-0822/FULL/XML 9. Suciningtyas, W., Manajemen, J., Ekonomi, F.: Pengaruh brand awareness, brand image, dan media communication terhadap keputusan pembelian. Manag. Anal. J. 1 (2012). https://doi. org/10.15294/MAJ.V1I1.505 10. Margarita, I.: Raising brand awareness through internet marketing tools. Independent J. Manag. Prod. 7, 320–339 (2016). https://doi.org/10.14807/ijmp.v7i2.391 11. Top Brand Award: Hasil Komparasi Brand (2021) 12. Lee, K.: instagram dominates: micro-influencers use the platform far more than others. https://influence.bloglovin.com/instagram-dominates-micro-influencers-use-the-pla tform-far-more-than-others-d4fed257eb8f. Accessed 19 Aug 2023 13. @kopijanjijiwa.dpsplazarenon: Kopi Janji Jiwa® _ Plaza Renon Instagram photos and videos 14. Nasreen, K., Leng, T.S., Shereen, K., Vergara, R.G.: Qualitative study on Millennial’s response to social media marketing on purchase intention: framework analysis (2020) 15. Awaludin, M.N., Sukmono, S.: The effect of social media marketing and brand awareness on purchase decisions with viral marketing as intervening variables on Janji Jiwa coffee consumers among students using social media area jabodeta. (2020)
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16. Rizkika, C., Parahiyanti, Prasasti, A.: Comparative Study of Post-Marriage Nationality Of Women in Legal Systems of Different Countries International Journal of Multicultural and Multireligious Understanding Engage Your Customers During the Pandemic: The Impact of Social Media-Instagram Usage to Micro-Small Medium Enterprises (MSMEs) in Indonesia (2021). https://doi.org/10.18415/ijmmu.v8i6.2711 17. Sugiyono, D.R.: Metode Penelitian Pendidikan Pendekatan Kuantitatif, Kualitatif dan R&D (2013) 18. Yin, R.K.: Case study methods. In: APA Handbook of Research Methods in Psychology. Research Designs: Quantitative, Qualitative, Neuropsychological, and Biological, vol 2, pp. 141–155 (2012). https://doi.org/10.1037/13620-009 19. Mason, A.N., Narcum, J., Mason, K.: Social media marketing gains importance after Covid19, 8 (2021). http://www.editorialmanager.com/cogentbusiness, https://doi.org/10.1080/233 11975.2020.1870797 20. Majeed, M., Owusu-Ansah, M., Ashmond, A.A.: The influence of social media on purchase intention: the mediating role of brand equity, 8 (2021). http://www.editorialmanager.com/cog entbusiness. https://doi.org/10.1080/23311975.2021.1944008 21. Foroudi, P., Jin, Z., Gupta, S., Foroudi, M.M., Consultancy, F.: Perceptional components of brand equity: configuring the symmetrical and asymmetrical paths to brand loyalty and brand purchase intention (2018) 22. Nugraha, A., Setyanto, R.P.: The effects of vlogger credibility as marketing media on brand awareness to customer purchase intention how are MSMEs promoted by millennials? Visual Analysis of the GenPi Website View project Guerrilla Marketing of Covid-19 Healthy Measure View project Refius Pradipta Setyanto. Article in Journal Of Research In Management (2018). https://doi.org/10.32424/jorim.v1i2.20 23. Yadav, M., Rahman, Z.: Measuring consumer perception of social media marketing activities in e-commerce industry: scale development & validation. Telematics Inform. 34, 1294–1307 (2017). https://doi.org/10.1016/J.TELE.2017.06.001 24. Habibie, F.H.: Promotion of instagram and purchase intention a case of beverage business at Covid-19 pandemic (2021) 25. Shahid, Z., Hussain, T., Zafar, F.: The Impact of Brand Awareness on the Consumers’ Purchase Intention (2017). https://doi.org/10.4172/2168-9601.1000223
Investigation of Product Experience and Brand Trust on Customer Loyalty Based in Bali, Indonesia (The Case Study of Frozen Food Brands in Pandemic Covid-19) Ida Nyoman Basmantra1(B) , Ni Luh Putu Melyana Putri1 , Elif Baykal2 , Ni Wayan Widhiasthini1 , Upayana Wiguna Eka Saputra3 , and Ni Made Dhian Rani Yulianti4 1 Universitas Pendidikan Nasional, Jl. Bedugul No.39, Sidakarya, Denpasar Selatan, Kota
Denpasar, Bali 80224, Indonesia [email protected] 2 Istanbul Medipol University, Kavacık Mah. Ekinciler Cad. No: 19, Kavacık Kav¸sa˘gı, 34810 Beykoz, Istanbul, Turkey 3 Politeknik Negeri Bali, Kampus Bukit, Jimbaran, South Kuta, Badung Regency, Bali 80364, Indonesia 4 Kumoh National Institute of Technology, 61 Daehak-ro, Gumi-si, Gyeongsangbuk-do, South Korea
Abstract. Despite the challenges posed by the Covid-19 pandemic, the food and beverages industry have the potential for positive growth. However, it faces intense competition due to similar target markets and brand marketing strategies aimed at providing the best consumer experience. Therefore, this study seeks to examine the relationship between Product Experience and Brand Trust in influencing Customer Loyalty, both individually and collectively. The research employs a quantitative approach and gathers data from 142 individuals who have consumed frozen food products in Bali. Online questionnaires were used for data collection, employing a purposive sampling method, and the analysis was conducted using SPSS. The findings reveal that Product Experience has no significant impact on Customer Loyalty, with a value of 0.215 and a t-count of 1.942 (less than the t-table value of 1.97705). On the other hand, Brand Trust partially affects Customer Loyalty, with a value of 0.568 and a t-count of 7.702 (greater than the t-table value of 1.97705). However, when Product Experience and Brand Trust are considered together, they collectively have a positive and significant impact on Customer Loyalty, with a significance value (F) of 0.000 (less than the significance level of 0.05).These results can be valuable for companies and frozen food business owners looking to enhance their competitive edge and maintain customer loyalty. Keywords: Food and Beverage Industry · Covid-19 · Brand Trust · Product Experience · Customer Loyalty
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 394–403, 2024. https://doi.org/10.1007/978-3-031-53998-5_34
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1 Introduction The Investment Coordinating Board (BKPM) has identified the food and beverage industry as one of the five key sectors contributing to Making Indonesia 4.0, with a substantial investment of US$21.4 billion [1]. This sector also played a significant role in employment, particularly during the pandemic, as evidenced by the 3.75% workforce participation in 2020, according to BPS data [2]. It’s worth noting that products in the food and beverage industry are highly responsive to consumer trends [3]. Among these products are frozen food items, which have gained popularity due to their convenience in meeting customers’ needs, offering a quick and practical solution for individuals with busy lifestyles [4]. As a result, the food and beverage manufacturers, including those producing frozen foods, gain a competitive edge by catering to the demands and preferences of their customers [5]. Frozen food has emerged as a top choice among communities because of its extended shelf life, quick preparation, affordability, and nutritional value [6]. In essence, frozen food serves as a viable option for emergencies or when people find themselves confined to their homes during a pandemic. The global Covid-19 pandemic, which swept across the world in early 2020, had a profound impact on various sectors, including Health, Education, and Economics [7, 8]. Although these far-reaching consequences, data from the Ministry of Industry of the Republic of Indonesia reveals a positive growth of 1.58% in the food and beverage industry during the fourth quarter of 2020 [9]. Notably, there is a discernible uptick in the consumption of frozen food in Indonesia, marked by the emergence of new frozen food brands at various scales, from small to large. Furthermore, the pandemic led to significant job losses in these sectors, with millions of individuals being either laid off or dismissed by their employers [8]. Consequently, many people sought alternative sources of income, embarking on endeavors such as creative businesses or home-based ventures. During times of crisis, small and medium-sized enterprises (SMEs) exhibit greater adaptability compared to their larger counterparts [10, 11]. This real-world observation underscores the proliferation of new frozen food brands, spanning the spectrum from small businesses to major companies. In the face of stiff competition and a multitude of frozen food product options available in the market, it becomes imperative to explore the factors influencing customer loyalty when confronted with numerous choices. Ammar et al. [12] point out that acquiring new customers is a more costly endeavor compared to retaining existing ones. Maintaining a base of loyal customers grants a company significant leverage, allowing them to tap into potential markets without incurring additional customer acquisition costs. This hinges on cultivating trust in the brand and ensuring a positive product experience for consumers. Consequently, companies should place a high emphasis on building consumer trust and delivering an excellent product experience to foster loyalty. In previous research, several journals served as valuable references for the authors, offering insights and guidance in shaping potential research topics. For instance, a study by Utami & Chaldun [13] exclusively examined the relationship between Product Experience and Customer Loyalty in the context of frozen food products. On the other hand, a study by Safeer et al. [14] focused on the connection between Brand Experience and
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Customer Loyalty, finding that a superior brand experience dimension leads to loyalty when customers primarily consider sensory and intellectual experiences. After an extensive review of the existing literature, it is evident that no previous study has simultaneously examined the relationship between Product Experience, Brand Trust, and their influence on Customer Loyalty, especially within the unique context of Bali. This research is of significance as its outcomes can shed light on the factors influencing Product Experience and Brand Trust. This, in turn, can assist the frozen food industry in boosting their growth, beyond understanding the perspectives of Bali’s customers on frozen food products, encompassing aspects not covered in prior studies. Furthermore, the findings can aid in the strategic design of product experiences and building strong brand trust, granting businesses a competitive edge in securing loyal customers, thus advancing to the next level of success. As a result, the researchers have chosen the title “The Impact of Product Experience and Brand Trust on Customer Loyalty in Bali, Indonesia: A Case Study of Frozen Food Brands During the Covid-19 Pandemic” for this study. This study incorporates two independent variables, specifically Product Experience (X1) and Brand Trust (X2). According to Desmet & Hekkert [15], Product Experience refers to the alterations in fundamental factors that stem from interactions between humans and products. On the other hand, as per Singh [16], Brand holds a pivotal role in fostering consumer loyalty, as consumers are often willing to invest more in a particular brand that offers enhanced functionality, distinctiveness, and quality compared to others. As for the dependent variable, this study employs Customer Loyalty (Y), which is a critical element in determining a company’s sales, stemming from the continued use of a product and the word-of-mouth recommendations frequently made by loyal customers, thereby boosting sales [17]. The research framework, as depicted in Fig. 1, centers on examining the impact of Product Experience and Brand Trust on Customer Loyalty within the context of frozen food brands. The hypotheses under investigation are delineated below: H1: Product Experience has significant influence on Customer Loyalty of Frozen Food Product. H2: Brand Trust has significant influence on Customer Loyalty of Frozen Food Product. H3: Product Experience and Brand Trust have significant influence on Customer Loyalty of Frozen Food Product simultaneously.
2 Methodology The research was conducted in Bali Province, chosen based on the findings of the 2020 Covid-19 Impact Survey on Social Demographics and Business Activities in Bali Province by the Central Bureau of Statistics. The survey revealed a 23.49% increase in shopping activity compared to pre-pandemic years [18]. The study’s population consists of people in Bali who have experience consuming frozen food products. Sampling was carried out using purposive sampling which allows researchers to select respondents providing relevant information [19].
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H1
Customer Loyalty
H2
Brand Trust (X2) H3 Fig. 1. Research Framework
Quantitative data was collected through a questionnaire, featuring 142 respondents who answered 29 questions within one week. Likert scale points were employed to gauge attitudes, opinions, and perceptions, offering four response alternatives: strongly agree (SA), agree (A), disagree (D), and strongly disagree (SD) [20]. Data quality was assessed through validity and reliability tests. Data validity was analyzed using SPSS with Bivariate Pearson, and reliability was assessed using Cronbach’s alpha values. Data analysis involved descriptive statistics, classical assumption tests, multiple linear regression analysis, and hypothesis testing [21].
3 Results and Discussion Through purposive sampling technique from 142 respondents who have consumed frozen food products in Bali, it can be established that the majority of respondents who become consumers of frozen food in Bali are respondents within the age group of 21–30 years, which is 60.6%. Meanwhile, the respondents are also dominated by female respondents, which are 107 consumers. While the majority of respondents who are still single with a percentage of 83.1%, the respondents also were dominated by consumers who had a high school education, which was 61.3% of the total respondents. Largest number of respondents in this study have an average monthly expenditure of less than IDR 1,000,000, with a percentage of 33.8%. Besides, the respondents who participated in this study were mainly students with a percentage of 61.3%. The respondents with domicile in Denpasar had the highest percentage of 57.7% of the total sample, which was 82 people. Then, respondents who chose the Fiesta brand had the highest percentage of 53.5% or as many as 76 consumers. The reliability of the instruments in this study, which include the Product Experience, Brand Trust, and Customer Loyalty variables, was assessed using Cronbach’s alpha values, and the results are tabulated in Table 1. Each variable exhibited strong and consistent reliability as all of them achieved alpha values exceeding 0.70. The results from Statistic Descriptive is shown in Table 2 which provides a description of the data seen from the minimum, maximum, average, and standard deviation values. The classical assumption test was employed to assess the multiple linear regression model for potential violations of classical assumptions. This test encompasses assessments for normality, multicollinearity, heteroscedasticity, and linearity. Upon examining the results of the normality test in Table 3, it is evident that the significance level of the
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No
Variable
Cronbach’s Alpha
Internal Consistency
1
Product Experience (X1 )
0.900
Good
2
Brand Trust (X2 )
0.789
Good
3
Customer Loyalty (Y)
0.809
Good
Table 2. Statistic Descriptive Results N
Minimum
Maximum
Mean
Std. Deviation
x1
142
31.00
76.00
60.5704
7.77466
x2
142
4.00
16.00
12.0986
2.45328
y
142
6.00
24.00
17.3239
3.70077
Valid N (listwise)
142
Asymp value (2-tailed) is 0.200, which exceeds the threshold of 0.05; confirming that the model aligns with the normality assumption. Table 3. Normality Test Result (One-Sample Kolmogorov-Smirnov Test) Unstandardized Residual N
142
Normal Parameters a,b
Mean Standard Deviation
0.0000000 0.47186938
Most Extreme Differences
Absolute Positive Negative
0.063 0.048 −0.063
Test Statistic
0.063
Asymp. Sig. (2-tailed)
c,d
Note: a. Test distribution is Normal, b. Calculated from data, c. Lilliefors Significance Correction, d. This is a lower bound of the true significance
The multicollinearity test results, displaying tolerance values and variance inflation factors (VIF), are presented in Table 4. In all cases, the independent variables exhibit tolerance values greater than 0.10. Upon calculating the VIF values, it is evident that all variables have VIF values below 10. This confirms the absence of multicollinearity within the regression model. Nonetheless, the outcomes of the heteroscedasticity test presented in Table 5 reveal that none of the independent variables exhibit a significant impact on the dependent variable. Specifically, the significance level of the independent variable exceeds 0.05,
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Table 4. Multicollinearity Test Result Coefficentsa Model
1
Unstandardized Coefficients
Standardized Coefficients
B
Std. Error
Beta
(Constant)
0.484
0.320
x1
0.215
0.111
x2
0.568
0.074
Collinearity Statistics t
Sig
Tolerance
VIF
1.513
0.132
0.142
1.942
0.565
7.702
0.054
0.782
1.278
0.000
0.782
1.278
Note: a. Dependent Variable: y
leading to the conclusion that there is no evidence of heteroscedasticity in the regression model within this study. Table 5. Heteroscedasticity Test Result Coefficientsa Model
1
(Constant)
Unstandardized Coefficients
Standardized Coefficients
B
Beta
Std. Error 0.753
0.198
x1
−0.135
0.069
-0.185
x2
0.014
,046
0.028
t
Sig
3.802
0.000
−1.963
0.052
0.296
0.768
Note: a. Dependent Variable: ABS_RES
The findings of the ANOVA linearity test in Table 6 indicate that all the independent variables possess significance levels below 0.05. This, in turn, proved that the data used in this research has successfully passed the linearity test. With all the classical assumption tests successfully met, a multiple linear regression test is conducted to examine the impact of each independent variable on the dependent variable. From the result in Table 7, a multiple regression equation is obtained which is: Y =α + β1X 1 + β2X 2 + ε =0.484 + 0.215X 1 + 0.568X 2 + e The constant value (α) of 0.484 indicates that when both independent variables, Product Experience and Brand Trust, are held constant at zero, the value of Customer Loyalty increases by 0.484. The coefficient value (β1) of 0.215 clarifies that an increase in the Product Experience variable leads to an increase in Customer Loyalty. In other words, higher levels of Product Experience result in higher Consumer Loyalty to frozen food products. The coefficient value (β2) of 0.568 signifies that an increase in the Brand Trust variable also leads to an increase in Customer Loyalty. This means that greater consumer confidence in the frozen food brand can enhance their loyalty to the product.
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y*x1
Between Groups
(Combined)
Mean Square
F
Sig
21.414
31
0.691
2.358
0.001
8.849
1
8.849
30.204
0.000
12.565
30
0.419
1.430
0.094
Within Groups
32.227
110
0.293
Total
53.642
141
(Combined)
24.722
11
2.247
10.103
0.000
Linearity
21.395
1
21.395
96.173
0.000
3.327
10
0.333
1.496
0.148
Within Groups
28.920
130
0.222
Total
53.642
141
Linearity Deviation from Linearity
y*x2
df
Between Groups
Deviation from Linearity
In the t-Test results, the influence of the Product Experience variable (X1) is examined, and the obtained t-count value is 1.942, which is less than the t-table value of 1.97705. Therefore, H1 is rejected. Conversely, when testing the impact of the Brand Trust variable (X2), the t-count value is 7.702, significantly exceeding the t-table value of 1.99705. Consequently, H2 is accepted. Moving on to the F-test, it yields a value of F = 49.247 with a significance level of 0.000. This result signifies that, at a 5% confidence level, the research variables Product Experience and Brand Trust collectively have a substantial impact on Customer Loyalty. As a result, the model is considered suitable for testing, and the hypothesis can be further explored. However, in the Coefficient Determination Test, the R2 value is found to be 0.415, indicating that 41.5% of the variability in the Customer Loyalty variable can be explained by variations in the Product Experience and Brand Trust variables. The remaining 58.5% (100% - 41.5%) of the variation can be attributed to external factors beyond the scope of this research model. Regarding the association between Product Experience and Customer Loyalty, the tstatistical test reveals that the Product Experience variable (X1) yields a t-count value of 1.942, which is lower than the t-table value of 1.97705. Consequently, it can be inferred that Product Experience (X1) does not have a significant impact on Customer Loyalty (Y). This outcome aligns with the findings of a study conducted by Wang et al. [22], where a significant relationship between Product Experience and Customer Loyalty was not identified. This result can be rationalized by the context in which the research was
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carried out during the COVID-19 pandemic, a period when individuals favored healthier products with higher nutritional value. Moreover, frozen food products are primarily purchased by individuals such as students who are seeking convenient and instant meal solutions. Given that the study’s sample was drawn from Bali, where local cuisine tends to feature rich and flavorful dishes, the preference for such cuisine may have influenced the perception of frozen foods. The t-statistical test reveals that the Brand Trust variable (X2) yields a t-count value of 7.702, which surpasses the t-table value of 1.97705. This leads to the conclusion that Brand Trust (X2) has a positive and significant impact on Customer Loyalty (Y). This finding is consistent with the outcomes of research conducted by Pratiwi et al. [23] and Adekiya & Adepoju [24], both of which identified a positive and significant relationship between Brand Trust and Customer Loyalty. This observation is logical as trust plays a pivotal role in consumers’ decision-making process when it comes to choosing and purchasing products [23]. As noted by Chinomona & Maziriri [25], a high level of trust in a brand’s ability to fulfill their needs fosters repeat purchases, strengthens customer commitment, and cultivates loyalty to the brand. In terms of the interplay between Product Experience and Brand Trust in relation to Customer Loyalty, the simultaneous significance test (F test) yields a significance value of 0.000 F. This significance value of 0.000 is less than the threshold of 0.05, indicating that Product Experience and Brand Trust, when considered together, exert a substantial influence on Customer Loyalty. This outcome signifies that both independent variables can collectively predict and elucidate the phenomenon of Customer Loyalty. This finding aligns with the results of research conducted by Srivastava & Kaul [26] and Adekiya & Adepoju [24], which identified a positive and significant relationship between Product Experience and Brand Trust in terms of their impact on Customer Loyalty. The results of this study are in line with the notion that positive product experiences, characterized by favorable emotional interactions between products and consumers, can trigger specific behaviors and future responses, such as customer loyalty and repeat purchases [13]. Furthermore, a higher level of consumer trust in a particular brand can foster greater loyalty to the product. Thus, within the context of this research conducted during the COVID-19 pandemic, with a predominantly female respondent population aged 21–30, mostly students, and having monthly expenditures below IDR 1,000,000, a positive Product Experience and a strong brand trust can indeed bolster the cultivation of heightened Customer Loyalty. Hence, considering the comprehensive scope of this research, the distinctive aspects of this study include: (1) The investigation was carried out in Bali during the COVID-19 pandemic, enabling an exploration of variations in community perceptions concerning frozen food; (2) The inclusion of additional variables, notably Brand Trust, as an independent factor; and (3) The revelation of the connection between Product Experience, which was found to have no significant impact on Customer Loyalty during the pandemic.
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4 Conclusion The results of this study confirm that Brand Trust exerts a positive and significant influence on Customer Loyalty. However, the impact of Product Experience on Customer Loyalty is significant and positive only when accompanied by Brand Trust. These findings have valuable implications for frozen food manufacturers in Bali and beyond, offering insights into the factors that shape customer loyalty in relation to local tastes, cultural considerations, and demographic variables. Therefore, frozen food companies should place a strong emphasis on earning and maintaining their customers’ trust by ensuring that their products meet customer needs and perform as promised. This involves the development of innovative strategies that prioritize the overall aesthetic experience of customers, spanning from the purchasing process to product usage. Furthermore, it is essential to provide clear and comprehensive product descriptions, highlighting benefits, features, specifications, and usage guidelines, in addition to ensuring product quality is of the highest standard.
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10. Juergensen, J., Guimón, J., Narula, R.: European SMEs amidst the COVID-19 crisis: assessing impact and policy responses. J. Ind. Bus. Econ. 47, 499–510 (2020). https://doi.org/10.1007/ S40812-020-00169-4/TABLES/2 11. Patma, T.S., Wardana, L.W., Wibowo, A., Narmaditya, B.S., Akbarina, F.: The impact of social media marketing for Indonesian SMEs sustainability: lesson from Covid-19 pandemic. Cogent Bus. Manage. 8 (2021). https://doi.org/10.1080/23311975.2021.1953679 12. Ammar, W., Mateen, Z., Ghaffar, A., Rehman, A.U.: Attaining Customer Loyalty! The Role of Customer Satisfaction and Customer Retention (Mobile Handset Industry-University of Gujrat, Pakistan). 17, 16–31 (2015). https://doi.org/10.9790/487X-17311631 13. Rachmawati, E., Fiona, M., Utami, D., Chaldun, E.R.: The influence of product experience on customer loyalty of frozen food product. Asian J. Technol. Manage. 12, 177–190 (2019). https://doi.org/10.12695/ajtm.2019.12.3.2 14. Safeer, A.A., Yuanqiong, H., Abrar, M., Shabbir, R., Rasheed, H.M.W.: Role of brand experience in predicting consumer loyalty. Mark. Intell. Plan. 39, 1042–1057 (2021). https://doi. org/10.1108/MIP-11-2020-0471/FULL/XML 15. Hekkert, P., Desmet, P.: Framework of product experience human-product interaction. Int. J. Des. 1(1), 13–23 (2007) 16. Singh, R.: factors affecting brand loyalty in the footwear industry-a study of Ludhiana district. Int. J. Res.-Granthaalayah. 4, 139–149 (2016). https://doi.org/10.29121/granthaalayah.v4.i6. 2016.2647 17. Majid, M., Bagram, M., Khan, S.: Attaining customer loyalty! The role of consumer attitude and consumer behavior, 2306–9007 (2012) 18. Badan Pusat Statistik: Pertumbuhan Ekonomi Indonesia Triwulan IV-2020. https://www.bps. go.id/pressrelease/2021/02/05/1811/ekonomi-indonesia-2020-turun-sebesar-2-07-persen-c-to-c-.html. Accessed 07 July 2021 19. Campbell, C., Farrell, J.R.: More than meets the eye: The functional components underlying influencer marketing. Bus. Horiz. 63, 469–479 (2020). https://doi.org/10.1016/j.bushor.2020. 03.003 20. Sugiyono: Metodelogi Penelitian Kuantitatif Kualitatif dan R&D (2013) 21. Ghozali, I.: Aplikasi analisis multivariete dengan program IBM SPSS 23. Badan Penerbit Universitas Diponegoro (2016) 22. Wang, J.N., Du, J., Chiu, Y.L., Li, J.: Dynamic effects of customer experience levels on durable product satisfaction: Price and popularity moderation. Electron. Commer. Res. Appl. 28, 16–29 (2018). https://doi.org/10.1016/J.ELERAP.2018.01.002 23. Pratiwi, H., Rosmawati, P., Usman, O.: Effect of price, promotion, brand trust, and customer satisfaction on customer loyalty in packaging products mineral water aqua. SSRN Electron. J. (2019). https://doi.org/10.2139/SSRN.3312168 24. Bamidele Adepoju, A.A.: The relationship between brand trust and customer loyalty: the moderating impact of demographic characteristics abstract. https://www.researchgate.net/pro file/Bamidele-Adepoju-2/amp. Accessed 30 Oct 2023 25. Chinomona, R., Maziriri, E.T.: The influence of brand awareness, brand association and product quality on brand loyalty and repurchase intention: a case of male consumers for cosmetic brands in South Africa. www.jbrmr.com J. Acad. Bus. Retail Manage. 12, (2017). https://doi.org/10.24052/JBRMR/V12IS01/TIOBABAAPQOBLARIACOMCFCBISA 26. Srivastava, M., Kaul, D.: Exploring the link between customer experience–loyalty–consumer spend. J. Retail. Consum. Serv. 31, 277–286 (2016). https://doi.org/10.1016/J.JRETCONSER. 2016.04.009
Zero-Waste Store Development and Consumer Behavior in Bali, Indonesia: An Analysis of Environmental Consciousness and Purchase Decision Factors Desak Made Febri Purnama Sari(B) , Ida Ayu Oka Martini, and Gede Crisna Wijaya Universitas Pendidikan Nasional, Jl. Bedugul No.39, Sidakarya, Denpasar Selatan, Kota Denpasar, Bali 80224, Indonesia [email protected]
Abstract. The global environmental crisis has prompted citizens worldwide to adopt eco-friendly lifestyles and has given rise to various environmental movements and businesses within communities. One such movement is the zero-waste concept, which has also evolved into a business model. However, this concept exhibits several shortcomings and doesn’t entirely align with the preferences of Indonesian consumers. Nevertheless, zero-waste stores have started emerging in Indonesia, particularly in Bali, with over 37 such stores nationwide, including seven in Bali, all embracing the zero-waste approach. Consequently, local consumer engagement has been on the rise. This suggests opportunities for local consumers to patronize zero-waste stores and facilitate the growth of this concept. The objective of this study is to identify the factors influencing purchasing decisions at zero-waste stores, using a quantitative methodology and the confirmatory factor analysis technique, with a sample of 80 respondents. The study analyzes various consumer behavior variables and marketing stimuli, encompassing eight sub-variables with 16 indicators. The findings reveal that only 15 indicators could be effectively analyzed, resulting in the identification of five key factors that influence consumer purchasing decisions in zero-waste concept stores which are social influence, promotion and product, quality, location, and economic circumstances. Keywords: Consumer Behavior · Marketing Stimuli · Purchase Decision · Zero Waste
1 Introduction Indonesia is grappling with a severe plastic waste crisis, ranking as the world’s secondlargest contributor to marine plastic pollution, trailing only China. This disparity becomes even more evident when compared to India, which has a similar coastal population but ranks much lower in plastic pollution [1]. This issue exposes significant flaws in Indonesia’s waste management system. Mismanaged plastic waste poses serious health, environmental, and economic challenges. In tourist destinations like Bali, known for its natural beauty, plastic waste threatens to mar its allure. Bali generated a © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 404–413, 2024. https://doi.org/10.1007/978-3-031-53998-5_35
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staggering 1.5 million tons of waste in 2019, with plastics being a major concern [2]. Unlike organic waste and paper, plastic waste takes centuries to decompose, despite its escalating production and consumption. Addressing this crisis is imperative to protect Indonesia’s environment and economic prospects. The Indonesian government has taken steps to address the waste issue through Presidential Regulation Number 97 of 2017, aiming to manage household and similar waste comprehensively. The nation’s goal is to become waste-free by 2025 by reducing waste generation by 30% and improving waste management by 70%. Bali’s government has echoed this commitment with local regulations restricting single-use plastics. However, these policies have not yielded the expected results, with only 4% of daily waste recycled in 2019 [3]. The challenges in waste management point to a lack of public awareness and proper program implementation. Consumer behavior plays a vital role in this context, as it’s influenced by cultural, social, personal, and psychological factors [4]. The growing environmental crisis has driven global citizens to adopt eco-friendly lifestyles, sparking the emergence of environmental movements and businesses worldwide [5]. One such movement is the zero-waste concept, which has evolved into a business model. Zero-waste stores primarily offer refill and bulk options, enabling customers to use their containers or recycled packaging to minimize waste. However, this concept has its limitations, including time-consuming shopping, a limited product range, products that may differ from conventional stores, concerns about hygiene, price discrepancies, and the inconvenience of carrying containers [6]. In Indonesia, and particularly in Bali, there is a lack of public awareness about this concept, posing a challenge. Nevertheless, the zero-waste concept is gaining traction in Indonesia, with more than 37 stores, including seven in Bali, embracing it. Local consumer visits to these stores have increased by 88% [7]. Despite the low environmental awareness among the public, there are opportunities for local consumers to support zero-waste stores, facilitating the development of this eco-friendly business model. Consumer purchasing decisions are influenced by both internal and external factors [4]. Internal factors stem from the consumer’s motivation, perceptions, attitudes, lifestyle, personality, and other elements related to their behavior. External factors are found in the product itself and include marketing stimuli factors such as price, product attributes, promotional efforts, and distribution channels [8]. Various factors have been identified in previous studies as influencing purchasing decisions. These include knowledge, green attitude, income, and time in the context of green purchasing [9]. Environmental concerns, price, and product quality were significant determinants of purchases in zero-waste retail, as found in research on grocery retail in Scotland [10]. Another study highlighted the importance of location, brand image, discounts, product quality, and price in shaping consumer purchasing decisions [11]. It is worth noting that research on the zero-waste store concept from a consumer perspective is limited, especially in Western countries where consumer characteristics differ significantly from those in Indonesia. Additionally, many studies on this topic rely on qualitative methods, making it difficult to calculate data with certainty. Drawing from previous research and established theories, consumer purchasing decisions are influenced by a multitude of factors. Therefore, it becomes crucial to thoroughly
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examine these factors that impact consumers when making purchasing choices in the context of zero-waste stores. This exploration can contribute to an expanded body of knowledge on the determinants of purchasing decisions, which, in turn, can aid zero-waste stores, both existing and prospective ones, in devising strategies to reach a wider customer base. This study, therefore, seeks to investigate the factors that shape consumer purchasing decisions within zero-waste concept stores, considering both consumer behavior and the marketing stimuli, as illustrated in Fig. 1.
Fig. 1. Research Framework
2 Methodology This research is conducted in Kuta Utara, specifically at three establishments: Zero Waste Bali Kerobokan (located at Jalan Banjar Anyar No.30, Kerobokan), Soil Food Temple (situated at Jl. Mertanadi No. 11 Kerobokan Kelod), and Bali Buda Kerobokan (found at Jalan Banjar Anyar No.24, Kerobokan). The study focused on Indonesian consumers who have made purchases at these zero-waste stores, namely Zero Waste Bali Kerobokan, Bali Buda Kerobokan, or Soil Food Temple. Since the exact number of buyers is either unknown or cannot be precisely determined, this population is categorized as indefinite. Adhering to the guidelines set forth by Hair et al. [12], the sample size, in terms of respondents, is determined based on the number of question indicators employed in the questionnaire. Typically, this involves a range of 5 to 10 times the number of indicators. In this study, there are 16 indicators, each corresponding to a questionnaire item. Hence, the minimum required number of respondents is calculated as 16 × 5, which equals 80 respondents. These respondents are selected using a random sampling technique. This research follows a quantitative design and leverages primary and secondary data sources, incorporating a comprehensive literature review. Primary data is collected through observation and questionnaires administered via Google Forms. Confirmatory Factor Analysis (CFA) is employed as the analytical technique, with data analysis conducted using SPSS version 25.
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3 Results and Discussion 3.1 Total Variance Explained The Total Variance as tabulated in Table 1, outlines the number of factors established. In this investigation, there are 15 variables, and thus, 15 components warrant scrutiny. The extraction of sums of square loadings reveals the quantity of variations or factors that can be fashioned. In the presented data, there are five distinct factors indicated, each with a corresponding Eigenvalue: component 1 (5.167), component 2 (2.137), component 3 (1.714), component 4 (1.235), and component 5 (1.172). Components beyond the fifth component possess Eigenvalues below 1, rendering them ineligible to be classified as factors. Consequently, the data in the table manifests that five factors exhibit Eigenvalues surpassing 1, contributing to a cumulative variance of 76.172%. This signifies that, out of the fifteen variables, only 76.172% could be distilled into five concise factors. The remaining variance could not be extracted. Table 1. Total Variance Component
Initial Eigenvalues
Extraction Sums of Squared Loadings
Rotation Sums of Squared Loadings
Total
% of Variance
Cumulative %
Total
% of Variance
Cumulative %
Total
% of Variance
Cumulative %
1
5,167
34,447
34,447
5,167
34,447
34,447
2,757
18,382
18,382
2
2,137
14,248
48,695
2,137
14,248
48,695
2,673
17,823
36,205
3
1,714
11,428
60,123
1,714
11,428
60,123
2,449
16,326
52,531
4
1,235
8,234
68,356
1,235
8,234
68,356
1,929
12,858
65,388
5
1,172
7,816
76,172
1,172
7,816
76,172
1,618
10,784
76,172
6
0,788
5,252
81,425
7
0,610
4,064
85,488
8
0,521
3,473
88,961
9
0,445
2,964
91,925
10
0,307
2,047
93,972
11
0,238
1,585
95,556
12
0,229
1,526
97,082
13
0,178
1,184
98,266
14
0,152
1,013
99,280
15
0,108
0,720
100,000
a. Factors Grouping Out of the 16 initially tested indicators, only 15 remain for further analysis in the context of purchasing decisions within the zero-waste store concept. The indicator “reference group” was excluded from the study due to having an MSA (Multiple Standardized Loading) value less than 0.5, specifically with an MSA value of 0.282. The remaining 15 indicators, including Culture, Social Class, Family, Economic Circumstance,
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Lifestyle, Motivation, Perception, Product Variety, Product Quality, Price According to Quality, Price According to Consumer Ability, Sales Promotion, Advertisement, and Accessibility, along with Proximity to Consumers, is processed to derive factors that influence purchasing decisions within the zero-waste store concept. The categorization of variables into factors relies on the loading factor values, as presented in Table 2. Following a variance rotation, the outcome is the grouping of the 15 variables into five distinct factors. The post-rotation factor analysis results in a more distinct distribution of these variables. In the table, it is evident that each variable’s highest value has been allocated to one of these five factors. This variable distribution reveals that Family, Social Class, and Lifestyle are integrated into the first factor. The second factor encompasses Sale Promotion, Motivation, Product Variety, Price Relative to Consumer Ability. The third factor is characterized by Price Relative to Quality, Product Quality, Perception, and Advertisement. The fourth factor pertains to factors related to Accessibility and Proximity to Consumer. Economic Circumstances and Culture constitute the fifth factor. Table 2. Rotated Component Matrix Component 1
2
3
4
5
Culture
0,323
−0,081
0,336
0,305
0,705
Social Class
0,858
−0,032
0,161
0,237
0,254
Family
0,884
0,137
0,270
−0,065
−0,025
Economic Circumstance
0,298
0,267
0,088
0,130
0,728
Lifestyle
0,852
0,083
0,049
0,056
0,251
Motivation
−0,063
0,732
0,050
0,184
0,014
Perception
0,286
0,362
0,448
0,367
−0,440
Variety Product
−0,033
0,612
0,273
0,381
−0,114
Quality Product
0,125
0,552
0,623
−0,145
0,314
Price To Quality
0,314
0,108
0,842
−0,054
−0,039
Price To Consumer Ability
0,111
0,605
0,555
−0,161
0,284
Sale Promotion
0,229
0,846
−0,021
−0,033
0,080
Advertisement
0,056
−0,003
0,737
0,242
0,176
Accessible Proximity To Consumers
0,227 −0,017
0,355
0,005
0,774
0,056
−0,046
0,043
0,856
0,182
b. Factor Interpretation This process of interpretation is employed to designate the factors. The factors are given names by identifying the variables that structure the factor and are deemed to represent the constituent variables. This interpretation is reliant on judgment and is inherently
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subjective, leading to the potential for varying interpretations. At times, the factor may be named after the variable with the highest loading factor value [13]. In this study, the analysis resulted in five distinct factors, which are as follows: 1. Social Factor. The first factor, comprised of Family, Social Class, and Lifestyle, is aptly named the social factor. This name is attributed to the family indicator, which has the highest component value and aligns with Kotler and Armstrong’s [14] theory that situates it within the social variable. Additionally, the choice of this name reflects the inherent connections between social class, lifestyle, and various social interactions. 2. Promotion and Product Factor. The second factor encompasses elements related to both promotion and product. This factor encompasses Sale Promotion, Motivation, Product Variety, and Price to Consumer Ability. The name reflects the close associations these elements share with product and promotion, whether directly or indirectly. 3. Quality Factor. Factor 3 is appropriately dubbed the quality factor, encompassing Price to Quality, Product Quality, Perception, and Advertising. This name mirrors the close links between the indicators of this factor and the overall quality of a product. 4. Place Factor. Factor 4 comprises elements related to accessibility and proximity to consumers, making it fittingly named the Place Factor. Both indicators align with Adiwijaya’s [15] theory regarding the place variable. 5. Economic Circumstance Factor. The final factor is christened the Economic Circumstance Factor. This factor comprises Economic Circumstance and Culture, with the name selected based on the prominence of the economic circumstance indicator within this factor.
4 Discussion 4.1 Social Factor The social factors examined in this study encompass family, social class, and lifestyle, collectively accounting for 34.447% of the variance. When it comes to the consumer purchasing process, individuals often make decisions that not only affect themselves but are also influenced by and consider the perspectives of those in their social circles [14, 16]. Previous research on consumer purchasing decisions consistently highlights the substantial and significant influence of social factors [17]. Furthermore, lifestyle and family-related indicators have been found to shape purchasing decisions [18]. In zero-waste concept stores, it is evident that consumers typically purchase products not only for personal consumption but also with the needs and preferences of their families in mind, especially for items like food ingredients, daily necessities, and spices. Consequently, consumers at zero-waste stores consider the requirements of their households. Interestingly, many individuals who shop at zero-waste stores follow particular lifestyles, such as being vegan, health food enthusiasts, organic product advocates, or tea connoisseurs. These specific lifestyle choices often correspond to group communities and social environments that share similar preferences.
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4.2 Promotion and Product Factor The promotion and product factors comprise Sale Promotion, Motivation, Product Variety, and Price to Consumer Ability, collectively explaining 14.248% of the variance. This finding aligns with previous research, such as that of Nasir et al. [19], who discovered that promotion played a dominant role in influencing consumer purchase intentions, accounting for 62%. A similar trend was noted by Janice et al. [11], who found that promotion affects consumer purchase intentions, albeit to a lesser degree. Kotler and Armstrong [14] define a product as anything offered to fulfil consumers’ needs or desires. In line with this, Nasir et al. [19] found in their research that products influenced 21% of decision-making. It is important to note that in zero-waste stores, product prices often exceed those in conventional stores. However, due to the refill and bulk system applied, consumers can personally adjust the quantity and cost of the products they purchase. When sale promotions, such as product discounts, are introduced in these stores, it serves as an additional motivator for consumers, sparking a desire and perceived need to make a purchase. In zero waste concept shops, most products available are organic and include certain health-oriented items that are typically scarce in conventional stores. As a result, consumers who patronize these stores often come prepared, already having a clear idea of the products they need and want. The successful implementation of promotions in these stores helps establish a strong presence in consumers’ minds. 4.3 Quality Factor The Quality Factor comprises Price to Quality, Product Quality, Perception, and Advertising, explaining 11.428% of the variance. Previous research has consistently identified quality as a crucial factor influencing purchasing decisions [10, 20]. It is important to emphasize that good product quality entails products that meet consumers’ descriptions and expectations. In the context of zero waste concept stores, where product prices are often higher than those in conventional stores, these shops position themselves as purveyors of healthy and organic goods. As a result, consumers perceive products from these stores as healthier and of superior quality compared to those found elsewhere. This perception instils in consumers the belief that paying a slightly higher price is commensurate with the health benefits and product quality offered by the store. Furthermore, the advertisements employed by these stores serve to attract consumers and emphasize the advantages and health benefits of their products. This not only motivates consumers to make purchases but also molds their perception that the store’s products offer greater benefits for themselves and the environment. 4.4 Place Factor The fourth factor, Place, represents a variance value of 8.234% and encompasses accessibility and proximity to the consumer. Prior research conducted by Janice et al. [11] highlights the significance of location as a vital variable, underscoring its high importance. Fitrio [18] also identified location as a factor in his study. Furthermore, insights
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from interviews with zero waste consumers revealed that consumers expect products to be readily accessible [10, 20]. While it is true that the location of zero waste stores may be somewhat distant from Denpasar city, it is only a 15-min drive away. It is worth noting that consumers do not seem deterred by this distance, as they view shopping at these stores as a part of their leisure activities. Consequently, even if the store is a bit far from their homes or workplaces, they are likely to continue shopping there as long as it remains accessible by vehicle. 4.5 Economic Circumstance Factor The final factor is Economic Circumstance, with a variance value of 7.816%. This factor encompasses economic circumstances and culture. According to Kotler & Keller [8], personal characteristics influencing a buyer’s decision include economic circumstances. Economic circumstances pertain to an individual’s financial situation, including income available for spending, savings, and the capacity to borrow money [21]. When it comes to purchasing decisions, economic conditions significantly influence what products consumers buy and their buying habits. In zero waste concept stores, product prices are typically higher. However, consumers at these stores are accustomed to these elevated prices and are not deterred by them. They do not mind paying a premium as long as the prices remain affordable and align with the quality of the products and services on offer.
5 Conclusion Out of the 16 indicators examined in this study, one indicator could not be further processed due to having an MSA value below 0.5. Therefore, the remaining 15 indicators were condensed into five factors that influence consumer decisions when shopping at zero-waste concept stores. These five factors can account for 76.172% of the variance and are identified as Social factors, Promotion and Product factors, Quality, Place, and Economic Circumstances. The research had its limitations, with factors like time constraints, object conditions, and sample-related challenges impacting the study’s execution. Online questionnaires, a method used for data collection, sometimes resulted in answers that might not fully represent the real situation. Additionally, the ongoing Covid-19 pandemic affected the research object’s conditions, leading to suboptimal data collection. Based on the study’s conclusions, several recommendations emerge. First, it’s essential to enhance the Promotion and Product factors. Stores should offer unique products and expand beyond general needs, focusing on items that are typically hard to find in conventional stores, such as a broader variety of superfoods, tea products, and homemade goods. Furthermore, stores should consistently work on improving their services and product quality to align with consumers’ perceptions. For future researchers, expanding the research by increasing the number of respondents and samples is advised to obtain comprehensive insights into the factors influencing consumer decisions at zero-waste stores. Further data analysis can be employed to
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determine the actual significance levels of the formed factors, ensuring more precise calculations.
References 1. Adharsyah, T.: Sebegini Parah Ternyata Masalah Sampah Plastik di Indonesia, https://www. cnbcindonesia.com/lifestyle/20190721140139-33-86420/sebegini-parah-ternyata-masalahsampah-plastik-di-indonesia. Accessed 18 Sep 2020 2. Kurniawan, D.: FKP Unud Bersama Tim Bali Partnership Release Data Kebocoran Sampah ke Laut Di Prov. Bali. https://fkp.unud.ac.id/posts/fkp-unud-bersama-tim-bali-partnership-rel ease-data-kebocoran-sampah-ke-laut-di-prov-bali. Accessed 11 Sep 2020 3. Muhajir, A.: Inilah Data dan Sumber Sampah Terbaru di Bali. https://www.mongabay.co.id/ 2019/07/02/inilah-data-dan-sumber-sampah-terbaru-di-bali/. Accessed 11 Sep 2020 4. Kotler, P.: Marketing Management, Millenium Pearson Custom Publishing, Boston (2000) 5. Lu, D.: Performing zero waste: lifestyle movement, consumer culture, and promotion strategies of social media influencers. Environ Sociol. 10, 12–29 (2023). https://doi.org/10.1080/ 23251042.2023.2267829 6. Beitzen-Heineke, E.F., Balta-Ozkan, N., Reefke, H.: The prospects of zero-packaging grocery stores to improve the social and environmental impacts of the food supply chain. J. Clean. Prod. 140, 1528–1541 (2017). https://doi.org/10.1016/J.JCLEPRO.2016.09.227 7. Sulistiowati, T.: Gairah Turut Menjaga Bumi, Bisa Jadi Cuan Lewat Toko Zero Waste. https://peluangusaha.kontan.co.id/news/gairah-turut-menjaga-bumi-bisa-jadi-cuan-lewattoko-zero-waste. Accessed 21 Sep 2020 8. Kotler, P., Keller, K.L.: Marketing Management. Pearson Education Limited (2016) 9. Jayanti, N.D., Kumadji, S., Yaningwati, F.: Analisis Faktor-faktor Yang Mempengaruhi Green Purchasing (Survei Pada Pelanggan Tupperware Di Kota Malang). Jurnal Administrasi Bisnis S1 Universitas Brawijaya 5, 76212 (2013) 10. Fideršek, A.: Towards Zero Waste Grocery Retail in Scotland: Merging sustainable purchase intentions with actual purchase behavior (2015). https://doi.org/10.13140/RG.2.1.5093.1928, https://www.researchgate.net/publication/283013573 11. Janice, D., Saerang, D.P.E., Pandowo, M.: Analyzing factors that drive consumer purchase decision of product at hypermart Manado. Jurnal EMBA : Jurnal Riset Ekonomi, Manajemen, Bisnis dan Akuntansi 5, 334–353 (2017). https://doi.org/10.35794/EMBA.5.2.2017.15621 12. Hair, J.F., Black, W., Babin, B.J., Anderson, R.E.: Multivariate Data Analysis: A Global Perspective. Pearson (2010) 13. Ghozali, I.: Aplikasi Analisis Multivariate Dengan Program IBM SPSS 21 Update PLS Regresi. Badan Penerbit Universitas Diponegoro (2013) 14. Kotler, P., Armstrong, G.: Prinsip-Prinsip Pemasaran. Penerbit Erlangga (2008) 15. Adiwijaya, M.: 8 jurus jitu mengelola bisnis ritel ala Indonesia. Elex Media Komputindo (2010) 16. Peter, J.P., Olson, J.C.: Consumer Behavior & Marketing Strategy. McGraw-Hill (2010) 17. Syihab, S., Hadi, Z.: Analisis Faktor-Faktor yang Mempengaruhi Konsumen dalam Pengambilan Keputusan Pembelian Produk Handphone Merek Samsung. Management Development and Applied Research Journal (MANDAR) 2, (2019) 18. Fitrio, T.: Analisis Faktor Faktor yang Mempengaruhi Keputusan Konsumen Memilih Minimarket Sebagai Tempat Berbelanja pada Minimarket di Kota Rengat. Jurnal Manajemen dan Bisnis. 7,155–171 (2018). https://doi.org/10.34006/jmbi.v7i4.135 19. Nasir, M., Saputro, E.P., Setyaningrum, D.P.: Faktor stimulus produk ramah lingkungan. In: The 10th University Research Colloqium, pp. 37–45 (2019)
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Determining Factors of Firm Value: Legitimacy Theory Perspective Putu Purnama Dewi(B) and Ni Ketut Widya Utami Universitas Pendidikan Nasional, Jl. Bedugul No.39, Sidakarya, Denpasar Selatan, Kota Denpasar, Bali 80224, Indonesia [email protected]
Abstract. This study was conducted to explore the impact of effective corporate governance and corporate social responsibility (CSR) disclosure on a company’s value, with firm size serving as a moderating variable. Additionally, data provided by the Indonesia Stock Exchange (IDX) is readily accessible via the website www.idx.co.id. The study encompassed 72 businesses in the Food and Beverage subsector, indexed on the IDX from 2017 to 2021. Sample selection for this study employed purposive sampling, where specific criteria and considerations were used to determine the sample. According to these criteria, 100 companies from the Food and Beverage subsector between 2017 and 2021 were included in the study. Panel data regression analysis using STATA 16 was the primary research technique employed. Based on the findings, this study concludes that effective corporate governance has a favorable impact on a company’s value, and CSR disclosure also affects a company’s value. Moreover, the size of the firm mitigates the influence of effective corporate governance on firm value, and it similarly mitigates the impact of CSR disclosure on firm value. Keywords: Firm Value · Corporate Governance · Corporate Social Responsibility Disclosure · Firm Size
1 Introduction A company’s value is closely linked to its brand value, with a high company value leading to increased shareholder wealth (Brigham, 1996). Investors, in their role as stakeholders, are on the lookout for companies that hold the potential for attractive returns and generally consider a company’s worth as a significant factor in their investment choices. Stock prices in the capital market reflect the balance between investor demand and supply, serving as a fair indicator of a company’s value. Higher stock prices signal greater perceived success to investors. Companies going public or listed on the IDX often utilize this approach to increase their firm’s value, a crucial measure for stakeholders in assessing and enhancing company performance (Pinatih & Purbawangsa, 2021). Firm value is a reflection of the public’s trust in a company’s performance and products during its operations (Rahayu & Sari, 2018). According to theory, a company’s primary goal is to maximize its corporate value (Jensen et al., 1976). © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 414–422, 2024. https://doi.org/10.1007/978-3-031-53998-5_36
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CSR is a growing trend in Indonesia, emphasizing a company’s responsibility for both financial and social issues (Rosiana et al., 2013). CSR implementation leads to a positive reputation among the community and the environment, with GRI (Global Reporting Initiative) aiding in assessing CSR through economic, environmental, and social indicators. Research by Dewi & Edward (2020), Hemayani & Dewi (2021), Wirawan et al. (2020), and Benne (2020) underscores that companies are increasingly focusing on social and environmental matters, with CSR significantly enhancing firm value and promoting sustainable economic development.In theory, the larger a company is, the more robust the relationship between CSR disclosure and effective corporate governance becomes in relation to the company’s value. Previous research, as noted by Sani et al. (2022), Buallay & Hamdan (2019), and Solikhah et al. (2022), suggests that firm size, as a moderating variable, can moderate the connection between effective corporate governance and company value. This research draws upon various insights from previous research on firm value. Its primary goal is to identify factors that contribute to an increase in firm value, particularly how effective corporate governance impacts the value of Indonesian food and beverage companies. The research also sheds new light on the influence of CSR disclosure on firm value and offers fresh evidence on how firm size affects the relationship between effective corporate governance and CSR disclosure within the context of Indonesian food and beverage companies.
2 Theoretical and Literature Review This study adopts Agency Theory, which explores the interaction between the principal and the agent. In a company, principals invest capital, while agents work and provide information to the principals. However, conflicts known as agency problems can arise, typically involving a clash of interests between shareholders or investors and management (Jensen et al., 1976). These conflicts stem from individuals prioritizing their interests. The primary goal of the company is to continually enhance its value. Companies have the option to adopt effective corporate governance as a measure to avert conflicts between management and shareholders. Studies by Sitorus & Rianti (2020) and Fana & Prena (2021) illustrate that effective corporate governance has a beneficial impact on a company’s value. Building upon the theoretical foundations and empirical evidence outlined, the first hypothesis (H1) of this study is as follows: H1: Effective corporate governance positively influences firm value. Benne (2020) and Wirawan et al. (2020) demonstrate that the disclosure of CSR has a noteworthy and favorable impact on a company’s value. Investors gauge a company’s reputation when making investment decisions. Drawing from existing research the second hypothesis (H2) examined in this study is as follows: H2: CSR disclosure positively influences firm value. Sani et al. (2022) and Junenti et al. (2022), show large of company, the need for funding also increases. One of the company’s funding comes from external. As the number of investors seeking to acquire company shares rises, it is anticipated that both the company’s share price and overall value will experience an increase. This study
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aims to test the third hypothesis (H3), drawing upon theoretical studies and empirical evidence to support this assertion. H3: Firm size can strengthen the effect of good corporate governance on firm value. The research conducted by Handayati et al. (2022), Kesumastuti & Dewi (2021), and Sanchez et al. (2020) suggests that firm size can enhance the correlation between CSR disclosure and company value. Therefore, in light of this theoretical and empirical evidence, the fourth hypothesis (H4) to be tested in this study is as follows: H4: Firm size can strengthen the effect of CSR disclosure on firm value.
3 Research Methodology This study is centered on the Food and Beverage sector of the Indonesia Stock Exchange (IDX), using financial data available on www.idx.co.id. Out of a total of 72 companies in this sector, 20 were chosen as the sample. The selection criteria included being listed on the IDX from 2017 to 2021, not reporting losses during this period, consistently releasing financial and sustainability reports, and conducting an initial public offering (IPO) before 2017–2021. The resulting sample consists of 100 companies, spanning five years, from 2017 to 2021. This information is presented in Table 1. This research investigates how good corporate governance and CSR disclosure impact a firm’s value, with a focus on the moderating role of firm size. Tobin’s Q is employed as a measure of firm value, reflecting the financial market’s estimate of investment returns. The independent variables in this research encompass good corporate governance and CSR disclosure. CSR is quantified using the corporate social disclosure index (CSDI). This study employs panel data regression analysis, specifically utilizing STATA 16, to examine the relationship between the dependent variable (Y) and the independent variables (X1 and X2).This technique allows for a comprehensive analysis of the data over time.
4 Result and Discussion The results presented in Tables 2 and 3 indicate the use of a random effects model. The classical hypothesis test examines standard and multicollinearity due to the crosssectional nature of panel data regression. In contrast, autocorrelation and variable variance tests address the variations observed in panel data across different data points. Table 4 depicts the results of the panel data regression. In this study, a random effect model was utilized for the regression analysis. The results in Table 5 indicate that the Prob > Chi2 values for each variable are all less than 0.05, suggesting that the data conforms to a typical distribution. The summary of the multiple linear regression analysis in Table 6 assesses the influence of Good Corporate Governance and Corporate Social Responsibility Disclosure on Firm Value. Regarding the first hypothesis (H1) suggesting a positive impact of good corporate governance on firm value, three out of the five indicators examined (independent board of commissioners, audit committee, and managerial ownership) demonstrated a significant effect with values below 0.05. Notably, the independent board of commissioners (p = 0.037), audit committee (p = 0.004), and managerial ownership (p = 0.010)
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Table 1. Research Samples No
Code
Company name
1
AALI
Astra Agro Lestari Tbk
2
ADES
Akasha Wira International Tbk
3
BISI
Bisi International Tbk
4
BUDI
Budi Starch & Sweetener Tbk
5
CEKA
Wilmar Cahaya Indonesia Tbk
6
CLEO
Sariguna Primatirta Tbk
7
CPIN
Charoen Pokphand Indonesia Tbk
8
DLTA
Delta Djakarta Tbk
9
DSNG
Dharma Satya Nusantara Tbk
10
JPFA
Japfa Comfeed Indonesia Tbk
11
LSIP
PP London Sumatra Indonesia Tbk
12
MLBI
Multi Bintang Indonesia Tbk
13
MYOR
Mayora Indah Tbk
14
ROTI
Nippon Indosari Corpindo Tbk
15
SKBM
Sekar Bumi Tbk
16
SKLT
Sekar Laut Tbk
17
SMAR
SMART Tbk
18
SSMS
Sawit Sumbermas Sarana Tbk
19
TBLA
Tunas Baru Lampung Tbk
20
ULTJ
Ultra Jaya Milk Industry & Trading Company Tbk
Table 2. Common Effect Model Panel Data Regression t
P > |t|
[95% Conf.
Interval]
6.665486
−4.11
0.000
−40.61678
−14.14032
2.946118
−2.41
0.018
−12.94259
−1.240101
−2.57
0.012
−70.31902
−9.062468
−0.58
0.565
−98.78872
54.2685
Y
Coef.
Std. Err.
IBC
−27.37855
BD
−7.091346
AC
−39.69074
15.42142
IO
−22.26011
38.53237
MO
73.62777
57.58341
1.28
0.204
−40.73786
187.9934
CSRD
−43.94615
51.85307
−0.85
0.399
−146.9308
59.03852
Z
−9.074417
−2.22
0.029
−17.18861
−9602234
_cons
461.0049
3.27
0.002
180.8193
741.1905
4.085519 141.0742
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P. P. Dewi and N. K. W. Utami Table 3. Fixed Effect Model Panel Data Regression Std. Err.
P > |t|
Y
Coef.
IBC
4.187942
5.398014
0.78
0.440
−6.570285
BD
−2.02508
3.386088
−0.60
0.552
−8.773545
AC
−6.215087
−0.22
0.823
−61.30267
27.64057
IO
35.49575
117.905
MO
−700.5842
156.8848
CSRD
14.0364
Z
8.092593
_cons
−198.8916
sigma_u
92.012574
sigma_e
15.875195
rho
9710929
t
Interval] 14.94617 4.723384 48.87249
0.30
0.764
−199.4887
270.4802
−4.47
0.000
−1013.255
−387.9132
0.65
0.520
−29.25275
21.72063
57.32554
0.63
0.532
−17.61671
33.8019
−0.48
0.635
−1030.638
632.8553
12.89982 417.3347
[95% Conf.
Table 4. Random Effect Model Panel Data Regression Y
Coef.
Std. Err.
z
P > |z|
[95% Conf.
Interval]
IBC
1.965152
5.852833
2.34
0.037
−9.50619
13.43649
BD
−3.994718
3.508255
−1.14
0.255
−10.87077
2.881336
AC
17.5939
24.55072
2.72
0.004
−65.71242
30.52462
IO
12.77855
81.09162
0.16
0.875
−146.1581
171.7152
2.58
0.010
−512.4615
−70.16453
MO CSRD
291.313 6.275528
Z
−2.656504
_cons
149.8498
112.8329 24.47006 8.382871 284.1849
2.56
0.008
−54.23596
41.6849
−2.32
0.041
−19.08663
13.77362
3.53
0.000
−407.1424
706.842
exhibited a positive association with firm value. Conversely, the board of director indicator (p = 0.255) and institutional ownership (p = 0.875) did not exhibit significant effects (p > 0.05). Therefore, it is concluded that H1 is supported, as good corporate governance positively affects firm value. The second hypothesis (H2) posits that CSR disclosure positively impacts firm value. The regression coefficient for this variable was 6.275528, with a significance level of 0.008, which is less than 0.05. Thus, H2 is confirmed, as CSR disclosure has a positive effect on firm value. In connection with the moderating role of firm size, hypothesis three (H3) proposes that firm size can influence the impact of good corporate governance on firm value. The results indicate that out of the five indicators of good corporate governance, three indicators weaken the relationship between variables. The analysis reveals that the board
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419
Table 5. Normality Test Variable
Obs
Pr(Skewness)
Pr(Kurtosis)
adj chi2(2)
Prob > chi2
Y
100
0.0000
0.0000
51.66
0.0000
IBC
100
0.0001
0.0030
19.48
0.0001
BD
100
0.6671
0.0111
6.25
0.0439
AC
100
0.0004
0.2448
11.72
0.0029
IO
100
0.1169
0.9581
2.53
0.0027
MO
100
0.0000
0.0000
56.57
0.0000
CSRD
100
0.0402
0.2093
5.59
0.0012
Z
100
0.7690
0.0000
70.25
0.0000
of directors (p = 0.226 > 0.05), audit committee (p = 0.508 > 0.05), and institutional ownership (p = 0.767 > 0.05) exhibit regression coefficients indicating that firm size diminishes their impact on firm value. However, the independent board of commissioners (p = 0.034 < 0.05) and managerial ownership (p = 0.010 < 0.05) have regression coefficients suggesting that firm size strengthens their relationship with firm value. Thus, firm size diminishes the impact of good corporate governance on firm value, leading to H3 being rejected. Finally, the fourth hypothesis (H4) suggesting that firm size can moderate the impact of corporate social responsibility disclosure on firm value is examined. The results indicate a regression coefficient of −0.1812, with a significance level of 0.818, exceeding 0.05. Consequently, H4 is rejected, as firm size does not significantly moderate the effect of corporate social responsibility disclosure on firm value.
5 Discussion The first hypothesis (H1) posits that good corporate governance positively affects the firm value. Among the five indicators of good corporate governance, three demonstrated significant effects (p < 0.05). Specifically, the independent board of commissioners (p = 0.037), audit committee (p = 0.004), and managerial ownership (p = 0.010) had significant positive effects on firm value. However, the board of directors’ indicator (p = 0.255) and institutional ownership (p = 0.875) did not exhibit significant effects (p > 0.05). This implies that good corporate governance indeed influences firm value positively. In summary, higher levels of good corporate governance within a company lead to an increase in its value. Contrary to the findings of Sitorus & Rianti (2020) and Fana & Prena (2021), this study yielded different results. The second hypothesis (H2) suggests that corporate social responsibility (CSR) disclosure positively affects firm value. The results indicate a regression coefficient of 6.275528 with a significance level of 0.008, which is below the threshold of 0.05. This suggests that corporate social responsibility (CSR) disclosure positively impacts firm value. Therefore, H2 is confirmed. These results are
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P. P. Dewi and N. K. W. Utami Table 6. Moderation Linear Regression Analysis Results
Y
Coef.
IBC BD AC
P > |z|
Std. Err.
z
[95% Conf.
Interval
1.965152
5.852833
0.34
0.737
-9.50619
13.43649
−3.994718
3.508255
−1.14
0.255
−10.87077
2.881336
−17.5939
24.55072
−0.72
0.474
−65.71242
30.52462
IO
12.77855
81.09162
0.16
0.875
−146.1581
171.7152
MO
−291.313
112.8329
−2.58
0.010
−512.4615
−70.16453
CSRD
−6.275528
24.47006
−0.26
0.798
−54.23596
41.6849
Z
−2.656504
8.382871
−0.32
0.751
−19.08663
13.77362
_cons
149.8498
284.1849
0.53
0.598
−407.1424
706.842
IBC_z
.064125
1886144
2.38
0.034
−3055524
4338025
BD_Z
−.1349202
1115298
−1.21
0.226
−3535145
−0836741
AC_Z IO_Z MO_Z CSRD_Z
−5103032 722724 9.348049 −.1812643
.7706919 2.437598 3.607592 .7861723
0.66 0.30 2.59 −0.23
0.508 0.767 0.010 0.818
−2.020832 −4.05488 −16.4188 −1.722134
1.000225 5.500328 −2.277297 1.359605
consistent with earlier research by Benne (2020) and Wirawan et al. (2020), which similarly demonstrated a substantial positive effect of CSR disclosure on firm value. Hypothesis 3 (H3) investigates how firm size moderates the connection between good corporate governance and firm value. Among the five corporate governance indicators, three weaken this relationship. For example, the board of directors has a coefficient of −0.1349202 with a significance of 0.226, and the audit committee’s coefficient is −0.5103032 with a significance of 0.508, both exceeding 0.05. Similarly, institutional ownership has a coefficient of 0.722724 with a significance of 0.767, also above 0.05. On the contrary, the independent board of commissioners exhibits a coefficient of 0.064125 with a significance of 0.034, less than 0.05, while managerial ownership has a coefficient of 9.348049 with a significance of 0.010, also less than 0.05. This implies that firm size reinforces the relationship between good corporate governance and firm value, except for the board of directors, the audit committee, and institutional ownership. These indicators suggest that company size can enhance the relationship between good corporate governance and firm value. Therefore, the study rejects H3. These findings align with research by Fitri & Muda (2018) and Akbar et al. (2022), which highlights how company size diminishes the influence of good corporate governance on firm value. Regarding the fourth hypothesis (H4), it proposed that firm size moderates the impact of corporate social responsibility disclosure on firm value. However, the results revealed a regression coefficient of −0.1812643 with a significance level of 0.818, which is greater than the 0.05 threshold. In simpler terms, it means that the size of the company weakens the connection between corporate social responsibility disclosure and firm value. Therefore, H4 is not supported. This finding emphasizes that having a larger company size doesn’t necessarily lead to a stronger correlation between CSR disclosure
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and company value. This conclusion aligns with the research conducted by Rehanil et al. (2021), which concluded that company size does not act as a moderating factor for the impact of CSR disclosure on firm value.
6 Conclusion In summary, good corporate governance has a positive impact on firm value by mitigating information asymmetrical issues that can lead to fraud and financial manipulation. It also helps in resolving conflicts between management and shareholders. Furthermore, CSR disclosure significantly influences a company’s value, as strong CSR practices enhance a company’s reputation, attracting investor interest and positively affecting share prices. However, it is important to note that the influence of good corporate governance and CSR disclosure on firm value can be weakened by the size of the company. Larger companies may have less pronounced connections between these factors and their overall value. Despite these insights, the study has certain limitations, including a limited sample size in terms of articles and sectors covered. It also relies on a specific set of articles, potentially missing out on relevant variables and sources. For deeper understanding, future research could encompass a wider range of sectors, extend the research period, and explore more articles on firm value.
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The Effect of Employee Engagement, Job Satisfaction, and Superior-Subordinate Relationships on the Desire to Change Jobs and Its Implications in Employee Resignation Ida Bagus Raka Suardana1(B) and Luh Kadek Budi Martini2 1 Universitas Pendidikan Nasional, Jl. Bedugul No. 39, Sidakarya, Denpasar Selatan, Kota
Denpasar, Bali 80224, Indonesia [email protected] 2 Sekolah Tinggi Bisnis Runata, Jl. Tukad Badung VII No. 9, Renon, Denpasar Selatan, Kota Denpasar, Bali 80234, Indonesia
Abstract. The objective of this research was to investigate the following aspects: (1) how work engagement affects employees’ inclination to switch jobs; (2) the impact of job satisfaction on employees’ desire to change jobs; (3) the role of the superior-subordinate relationship in influencing employees’ job change intentions; (4) how the desire to change jobs influences employee resignations; (5) the connection between work engagement and employee resignations; (6) the relationship between job satisfaction and employee resignations; and (7) the effect of the superior-subordinate relationship on employee resignations. This research was carried out at a hospital in Denpasar City and employed a quantitative research approach. Data sources included both primary and secondary data. The study’s sample consisted of healthcare workers, including doctors, nurses, midwives, analysts, and pharmacists, from a private hospital in Denpasar, totaling 83 individuals. Data was collected using a questionnaire, and data analysis was performed using the Partial Least Square (PLS) method. The findings from this study revealed that (1) work engagement had a significant negative impact on employees’ inclination to change jobs; (2) job satisfaction negatively affected employees’ desire to switch jobs; (3) the quality of the superior-subordinate relationship had a negative influence on employees’ intention to change jobs; (4) the desire to change jobs had a positive and significant effect on employee resignations; (5) work engagement had a negative and significant impact on employee resignations; (6) job satisfaction also had a negative and significant influence on employee resignations; and (7) the superior-subordinate relationship had a negative and significant effect on employee resignations. Keywords: Work Engagement · Job Satisfaction · Employee Resignation
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 423–436, 2024. https://doi.org/10.1007/978-3-031-53998-5_37
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1 Introduction The problems faced by companies today in human resource management are the high rate of employee resignation, which is triggered by several factors including work engagement, job satisfaction, desire to change jobs, and performance standards that are difficult for employees to meet (Hung et al., 2018; Oluwafemi, 2013; Chiang & Hsieh, 2012). Falkenburg and Schyns (2007) states that job satisfaction positively affects commitment organization and employee performance. Work engagement with the company is the main feature of the company’s success in dealing with employee human resource problems (Lim Yee Siew, 2022). The higher the employee’s engagement with the organization the better the performance and it becomes the better the company’s performance in turn (Vorina, A., Simoniˇc, M., & Vlasova, M., 2017). Employees work not only to achieve financial compensation but also non-financial ones such as personal and career rewards. Because it is not possible to build their attachment only with a very structural approach. They as individuals must first be “tied” with a value system approach. The organizational culture system as well as the corporate work culture (efficient, quality, transparency, and accountability) must be instilled since they enter the new social system, namely the company. Gradually they are fostered so that the value system in the company has become a necessity (DeSimone et al., 2012). Employees who are more engaged than employees who are satisfied or simply committed to an organization or a person. Engagement includes advocating (defending) the organization where they work, which includes being willing to buy their products, improving their workplace, and even investing in their organization (Schiemann, 2013). Another factor related to employee resignation is the superior-subordinate relationship factor. The superior-subordinate relationship is a relationship between superiors and subordinates that influence each other. The superior-subordinate relationship does not only look at the behavior of superiors but also emphasizes the quality of the relationship between superiors and subordinates, due to limited time to interact with all subordinates, superiors build a special relationship with small groups of their subordinates (Cheche et al., 2017). Every year, a private hospital in Denpasar City grapples with the issue of high employee turnover, particularly a significant desire among employees to change jobs. This constant wave of resignations poses a major challenge for the hospital, as it has invested substantial resources in employee development, including education and training to enhance their knowledge and skills. Thus, this research seeks to achieve two primary objectives: (1) analyze the impact of work engagement, job satisfaction, and superior-subordinate relationships on the desire to change jobs, and (2) examine the influence of the desire to change jobs, work engagement, job satisfaction, and the quality of superior-subordinate relationships on employee resignations. The research framework is presented in Fig. 1.
2 Research Methodology This research was conducted in a private hospital in Denpasar City in June 2021. The choice of this location was driven by two main factors: firstly, to address the issue of high employee turnover in the private hospital, and secondly, to address the challenge
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Fig. 1. Research Framework
of low work engagement among its staff. The research encompassed all health workers, including doctors, nurses, midwives, analysts, and pharmacists, with a total of approximately 83 participants, making it a comprehensive census research. The study collected primary data through questionnaires prepared by the researchers and distributed to the health worker employees, and secondary data was obtained from various sources like journals, literature, records, and historical reports, both published and unpublished. The questionnaires used were closed-ended, with respondents providing brief answers or selecting predefined alternatives. The questionnaire underwent testing for validity and reliability before use. The analysis technique employed for testing research hypotheses was Partial Least Squares (PLS), which is a tool that enables researchers to derive values for latent variables to make predictions.
3 Results and Discussion 3.1 Outer Model Testing Using SmartPLS software version three, the research data was analyzed, and the results are depicted in Fig. 2. According to Fig. 2, it is evident that none of the indicators have a factor loading value below 0.5, indicating that there is no need to eliminate any indicators from the model. In Table 1, the loading values of the indicators comprising the construct (variable) exceed the other cross-loading values. This suggests that the research model is not affected by discriminant validity issues. Based on the information in Table 2, the composite reliability value for the construct is greater than 0.5, and the Cronbach’s alpha value also exceeds 0.5. Therefore, it can be concluded that the model developed in this research does not exhibit any reliability or one-dimensionality issues. 3.2 Inner Model Testing According to the data in Table 3, the desire to change jobs accounts for 89.8% of the variance in the intention to change jobs when considering work engagement, job satisfaction, and superior-subordinate relations as factors. Furthermore, the R-Square
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Fig.2. Structural Equation Modelling (SEM) with PLS
value for the employee resignation construct is 0.900, indicating that the combined influence of job engagement, job satisfaction, superior-subordinate relationships, and the desire to change jobs can explain 90.0% of the variance in employee resignation, assuming there are no other variables at play. 3.3 Direct Influence of Structural Model Using the path coefficients data in Table 4, a structural equation model for direct effects can be made. a. The direct effect of work engagement, job satisfaction, and superiorsubordinate relationships on the intention to change jobs. Y1 = α1X1 + α2X2 + α3X3 Y1 = 0.095X1 + 0.603X2 + 0.435X3 The structural equation of the model reveals the following relationships: a) Work engagement has a positive effect of 0.095 on the desire to change jobs when all other variables remain constant. This means that higher levels of work engagement positively influence the desire to change jobs, or conversely, reduce the desire to change jobs. b) Job satisfaction has a positive impact of 0.603 on the desire to change jobs when other variables are held constant. This implies that greater job satisfaction has a positive effect on the desire to change jobs, or it reduces the desire to change jobs. c) Superior-subordinate relationships have an equal positive influence of 0.435 on the desire to change jobs when other variables are unchanged. This suggests that improved superior-subordinate relationships positively affect the desire to change jobs, or they lower the desire to change jobs.
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Table 1. Cross Loading
Absorption
Superior-subordinate relations
The desire to change job
Job satisfaction
Work engagement
Employee resignation
0.533
0.445
0.654
0.641
0.409
Affection
0.552
0.397
0.459
0.391
0.358
Dedication
0.398
0.323
0.413
0.695
0.353
Desire to find vacancies
0.773
0.802
0.765
0.325
0.776
Desire to leave 0.769 the organization
0.768
0.725
0.910
0.760
Ability
0.544
0.444
0.581
0.411
0.425
Leadership
0.532
0.584
0.591
0.625
0.485
Faithfulness
0.769
0.768
0.725
0.910
0.760
Honesty
0.491
0.460
0.563
0.599
0.418
Indirect compensation
0.733
0.802
0.765
0.325
0.776
Contribution
0.593
0.339
0.461
0.434
0.469
Creativity
0.533
0.445
0.654
0.641
0.409
Work environment
0.533
0.445
0.654
0.641
0.409
Loyalty
0.769
0.768
0.725
0.910
0.760
Submitted a letter of resignation
0.769
0.768
0.725
0.910
0.760
Thoughts to get out
0.383
0.524
0.440
0.244
0.238
Respect for the 0.737 profession
0.791
0.764
0.324
0.783
Often make the 0.495 same mistake
0.303
0.354
0.255
0.617
Missed work 0.737 5 days in a row
0.791
0.764
0.324
0.783
Salary Level
0.737
0.791
0.764
0.324
0.783
Vigor
0.769
0.768
0.725
0.910
0.760
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Cronbach’s Alpha
Superior-subordinate relations
0.761
0.608
The desire to change job
0.746
0.524
Job satisfaction
0.863
0.825
Work engagement
0.798
0.636
Employee resignation
0.766
0.557
Table 3. R Square R Square The desire to change job
0,898
Employee resignation
0,900
Table 4. Path Coefficients (Direct Efect) Superior-subordinate The Job Work Employee relations desire satisfaction engagement resignation to change job Superior-subordinate relations
0,435
0,770
The desire to change job
0,319
Job satisfaction
0,603
0108
Work engagement
0,095
0,028
Employee resignation
b. The direct effect of work engagement, job satisfaction, superior-subordinate relations, desire to change jobs to employee resignation Y2 = β1X1 + β2X2 + β3X3 + β4Y1 Y2 = 0.028X1 + 0.108X2 + 0.770X3 + 0.319Y1 The structural equation model explained the following relationships: a) Work engagement has a positive effect of 0.028 on employee resignation, assuming all other variables remain constant. This suggests that higher work engagement positively
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influences employee resignation, or conversely, reduces the likelihood of employees resigning. b) Job satisfaction has a positive impact of 0.108 on employee resignation, when other variables are held constant. This implies that greater job satisfaction has a positive effect on employee resignation, or it decreases the likelihood of employees resigning. c) Superior-subordinate relationships have a substantial positive influence of 0.770 on employee resignation, assuming other variables remain constant. This indicates that better superior-subordinate relationships significantly reduce the likelihood of employee resignation. d) The desire to change jobs has a positive effect of 0.319 on employee resignation, with all other variables held constant. This means that a stronger desire to change jobs positively affects employee resignation, or it increases the likelihood of employees resigning. 3.4 The Indirect Influence of Structural Model The indirect effect of the structural model, derived from the SmartPLS calculations is tabulated in Table 5. Table 5. Indirect Effect Superior-subordinate The Job Work Employee relations desire satisfaction engagement resignation to change job Superior-subordinate relations
-
-
-
The desire to change job
-
-
-
0,139
Job satisfaction
-
-
-
-
0,193
Work engagement
-
-
-
-
-0,030
Employee resignation
-
-
-
-
A structural equation model for indirect influence can be made as follows: Y2 = l1X1 + l2X2 + l3X3 Y2 = −0, 030 X1 + 0, 193X2 + 0, 139X3 a) Work engagement has an indirect effect of -0.030 on employee resignation, with a negative influence. This suggests that higher work engagement can reduce employee resignation, and this reduction occurs through its impact on the desire to change jobs.
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b) Job satisfaction has an indirect effect of 0.193 on employee resignation, with a positive influence. This means that increased job satisfaction can lead to higher employee resignation, and this relationship is mediated by the desire to change jobs. c) Superior-subordinate relationships have an indirect effect of 0.139 on employee resignation, also with a positive influence. This implies that stronger superiorsubordinate relationships can contribute to higher employee resignation, and this effect is mediated by the desire to change jobs. 3.5 The Total Effect of Structural Model The total effect structural model obtained from SmartPLS calculations is shown in Table 6. The overall effect of work engagement on employee resignation through the desire to change jobs is −0.088, indicating a negative influence. This means that work engagement negatively affects employee resignation, and higher levels of work engagement result in lower resignation rates. On the other hand, the total effect of job satisfaction on employee resignation through the desire to change jobs is 0.276, reflecting a positive influence. In this case, higher job satisfaction contributes to reduced employee resignation through the desire to change jobs. The total effect of the superior-subordinate relationship on employee resignation through the desire to change jobs is 1.048, also with a positive influence. A stronger superior-subordinate relationship leads to lower employee resignation rates through the desire to change jobs. Table 6. Total Effect Superior-subordinate The relations desire to change job Superior-subordinate relations
Job Work Employee satisfaction engagement resignation
0,435
The desire to change job Job satisfaction Work engagement
0,909 0,319
0,603
0,084
−0,095
−0,058
Employee resignation
A structural equation model for the total effect can be made, as follows: Y2 = δ1X1 + δ2X2 + δ3X3 Where: Y2 = β1X1 + β2X2 + β3X3 + β4Y1 Y2 = −0, 058X1 + 0, 084X2 + 0, 909X3 + 0, 319Y1
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Y2 = −0, 058X1 + 0, 084X2 + 0, 909X3 + 0, 319Y1(−0, 095X1 + 0, 603X2 + 0, 435X3) Y2 = −0, 058X1+0, 084X2+0, 909X3+(0, 319∗−0, 095X1+0, 319∗0, 603X2+ 0, 319 ∗ 0, 435X3) Y2 = −0, 058X1 + 0, 084X2 + 0, 909X3(−0, 030X1 + 0, 192X2 + 0, 139X3) Y2 = (−0, 058X1+−0, 030X1)+(0, 084X2+0, 192X2)+(0, 909X3+0, 139X3) Y2 = −0, 088X1 + 0, 276X2 + 1, 048X3 3.6 Hypothesis Testing Table 7 provides insights from the bootstrapping analysis, shedding light on several key relationships: 1. Work Engagement’s Impact on the Desire to Change Jobs: It demonstrates a negative influence with a coefficient of –0.095. On average, work engagement stands at 0.105, showing low variation with a standard deviation of 0.066. The t-statistic (t count) is 2.334, and the p value is 0.005. 2. Job Satisfaction’s Influence on the Desire to Change Jobs: Job satisfaction has a positive impact with a coefficient of 0.603. On average, job satisfaction is 0.596, with a standard deviation of 0.130. The t-statistic (t count) is notably high at 4.628, and the p value is 0.000. 3. The Superior-Subordinate Relationship and the Desire to Change Jobs: This relationship positively affects the desire to change jobs, with a coefficient of 0.435. On average, it’s rated at 0.452, with a standard deviation of 0.118. The t-statistic (t count) registers at 3.700, and the p value is 0.000. 4. The Desire to Change Jobs’ Impact on Employee Resignation: The desire to change jobs has a positive effect on employee resignation, indicated by a coefficient of 0.319. On average, this desire is scored at 0.310, with a standard deviation of 0.139. The t-statistic (t count) is 2.301, and the p value is 0.024. 5. Work Engagement’s Influence on Employee Resignation: It negatively impacts employee resignation with a coefficient of –0.028. On average, work engagement is rated at 0.025, exhibiting a standard deviation of 0.084. The t-statistic (t count) is 2.730, and the p value is 0.002. 6. Job Satisfaction and Employee Resignation: Job satisfaction also negatively influences employee resignation, with a coefficient of –0.108. The average job satisfaction score is 0.081, with a standard deviation of 0.174. The t-statistic (t count) is 2.323, and the p value is 0.005. 7. The Superior-Subordinate Relationship and Employee Resignation: This relationship has a positive impact on employee resignation, indicated by a coefficient of 0.770. On average, it’s rated at 0.751, with a standard deviation of 0.113. The t-statistic (t count) stands at a substantial 6.811, and the p value is 0.000.
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I. B. R. Suardana and L. K. B. Martini Table 7. Path Analysis with Bootstrapping Original Sample (O)
Sample Mean (M)
Standard Deviation (STDEV)
T Statistics (|O/STDEV|)
P-Values
Superior-subordinate relations → The desire to change job
0,435
0,452
0,118
3,700
0,000
Superior-subordinate relations → Employee resignation
0,770
0,751
0,113
6,811
0,000
The desire to change job → Employee resignation
0,319
0,310
0,139
2,301
0,024
Job satisfaction → The desire to change job
0,603
0,596
0,130
4,628
0,000
Job satisfaction → Employee resignation
–0,108
0,081
0,174
2,323
0,005
Work engagement → The desire to change job
–0,095
0,105
0,066
2,334
0,005
Work engagement → Employee resignation
–0,028
0,025
0,084
2,730
0,002
4 Discussion 4.1 The Influence of Work Engagement on the Desire to Change Jobs Based on the analysis results, the P-value for work engagement was 0.005, which falls below the significance threshold of 0.05. This indicates that work engagement has a negative and significant impact on the desire to change jobs among employees in a private hospital in Denpasar City. In other words, the hypothesis stating that “higher levels of work engagement led to a reduced desire to change jobs” is supported by this research. These findings are consistent with the ideas of Pradhan & Jena (2017) and Lamidi (2010), who suggest that employee engagement can decrease the inclination to switch jobs. Additionally, the opinions of Dajani (2015) and the results of Cook’s research (2008) support the idea that highly engaged employees are less likely to seek new employment opportunities in the coming year. This aligns with the results of a study by Park and Gursoy (2012), which found that the three dimensions of employee engagement (vigor, dedication, and absorption) negatively influence the desire to change jobs.
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4.2 The Effect of Job Satisfaction on the Desire to Change Job The analysis results indicate a P-value of 0.000 for job satisfaction, which is significantly below the threshold of 0.05. This signifies that job satisfaction has a negative and substantial impact on the desire to change jobs among employees in a private hospital in Denpasar City. In simple terms, this supports the hypothesis that “higher job satisfaction results in a reduced desire to change jobs for employees.” These findings are in alignment with the outcomes of research conducted by Hassan (2014) and Rageb et al. (2013), both of which revealed that job satisfaction has a negative effect on employees’ desire to change jobs. 4.3 The Effect of Superiors and Subordinates Relationships on the Desire to Change Jobs The analysis results reveal a P-value of 0.000 for the superior-subordinate relationship, significantly below the 0.05 threshold. This indicates that the quality of the superiorsubordinate relationship has a negative and substantial impact on the desire to change jobs among employees in a private hospital in Denpasar City. In other words, it supports the hypothesis that “a stronger superior-subordinate relationship leads to a reduced desire to change jobs.” These findings are consistent with previous research by Saeed et al. (2014), Ozdevecioglu (2015), as well as Indonesian studies by Partina and Harsono (2012) and Valensia et al. (2014). All of these studies demonstrated that superior-subordinate relationships have a negative effect on the desire to change jobs. 4.4 The Influence of the Desire to Change Job on Employee Resignation The analysis results reveal a significant finding, with a P-value of 0.024 for the desire to change jobs, which is below the significance threshold of 0.05. This implies that the desire to change jobs has a positive and noteworthy impact on employee resignations in this study. In other words, it confirms the hypothesis that “the higher the desire to change jobs, the higher the rate of employee resignation in a private hospital in Denpasar City.” These findings align with previous research by Javed et al. (2014), which also found that the desire to change jobs has a positive effect on employee resignations. In practical terms, a strong desire to switch jobs leads to a higher rate of employee turnover. 4.5 The Effect of Work Engagement on Employee Resignation The analysis results indicate a P-value of 0.002 for work engagement, which is below the significance threshold of 0.05. This implies that the impact of work engagement on employee resignation in this research is both negative and statistically significant. In other words, the hypothesis stating that “higher levels of work engagement result in lower employee resignation rates in a private hospital in Denpasar City” has been validated. Work engagement is defined as the extent to which a person’s work performance influences their self-esteem and their psychological connection to their work. Those with a strong attachment to their work tend to identify closely with it and view work as a vital aspect of their overall self-image.
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4.6 Effect of Job Satisfaction on Employee Resignation The analysis reveals a significant finding with a P-value of 0.005 for job satisfaction, which is below the significance threshold of 0.05. This suggests that the desire to change jobs has a negative and meaningful impact on employee resignations in this study. In simple terms, it confirms the hypothesis that “higher job satisfaction results in lower resignation rates among employees in Private Hospitals in Denpasar City.” Job satisfaction is closely tied to the positive emotional attitude and joy employees derive from their work experiences. When employees find joy and satisfaction in their roles, it has a positive impact on their well-being. Satisfied employees tend to be happier, experience less stress, and feel secure and comfortable in their work environment, which reduces their inclination to seek other job opportunities. Theoretically, job satisfaction discourages the desire to change jobs, implying that higher job satisfaction leads to lower intentions to switch positions within the company. Conversely, lower job satisfaction is associated with a greater desire to explore alternative job opportunities, as supported by previous research (Tariq and Ahmed, 2014; Mbah and Ikemefuna, 2012; Mahdi et al., 2012). 4.7 The Effect of Superiors and Subordinates Relationships on Employee Resignations The analysis reveals a significant finding with a P-value of 0.000, well below the significance threshold of 0.05, indicating that the connection between the desire to change jobs and employee resignation is both negative and statistically substantial. In simpler terms, the hypothesis that a stronger superior-subordinate relationship results in lower employee resignation rates in a private hospital in Denpasar City has been validated. This aligns with Shiva and Suar (2010) research, emphasizing the importance of a robust superior-subordinate relationship in reducing employee turnover. Consequently, it’s vital to delve into the factors influencing this relationship, recognizing its crucial role in fostering employee commitment. Effectively managing employees, which entails balancing management’s rights and responsibilities, proves to be a challenging task for organizations.
5 Conclusion The research findings yield the following conclusions: a) Work engagement has a negative and significant effect on the desire to change jobs in a private hospital in Denpasar City. This indicates that high levels of work engagement reduce the desire to change jobs. Engaged employees tend to work harder, stay longer with the organization, enhance customer satisfaction, and positively influence organizational outcomes. b) Job satisfaction also has a negative and significant impact on the desire to change jobs in the same hospital. Satisfied employees are more likely to remain in their current organization, while dissatisfied employees are prone to seek opportunities elsewhere. Job satisfaction plays a crucial role in influencing an individual’s inclination to resign.
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c) The quality of relationships between superiors and subordinates has a negative and significant effect on the desire to change jobs. A harmonious superior-subordinate relationship is associated with a decreased desire to change jobs. Compatibility, mutual understanding, and attention to each other’s needs contribute to this effect. d) A strong desire to change jobs has a positive and significant impact on employee resignation in the private hospital. A heightened desire to change jobs corresponds to higher resignation rates and serves as an early indicator of employees’ intentions to leave the organization. e) Work engagement negatively and significantly influences employee resignation, indicating that higher employee engagement is linked to lower resignation rates. Work engagement reflects an internalized appreciation of the value and significance of one’s work. f) Job satisfaction also negatively and significantly affects employee resignation, with higher job satisfaction associated with reduced resignation rates. Job satisfaction represents the positive emotional attitude derived from one’s work experience. g) Superior-subordinate relationships have a negative and significant effect on employee resignation. A stronger relationship between superiors and subordinates is connected to reduced urgency for employee resignation. This relationship quality extends beyond superior behavior and emphasizes the overall relationship quality between superiors and subordinates.
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Marketing Content Strategy in Building Brand Equity to Increase Consumer Interest Buying in Tiktok Shop Nyoman Sri Manik Parasari(B) , I. A. Iswari Pidada, Desak Made Pebri Purnama Sari, A. A. Istri Agung Maheswari, and Ni Putu Yunita Anggreswari Universitas Pendidikan Nasional, Jl. Bedugul No. 39, Sidakarya, Denpasar Selatan, Kota Denpasar, Bali 80224, Indonesia [email protected]
Abstract. Social media has become part of the lifestyle in sharing information, interaction, and discussion between communities. Through a good content marketing strategy, brand awareness can grow for a product. This study aims to identify and analyzes the application of content marketing strategies in building brand equity for clothing brands and determine brand equity mix efforts in increasing consumer buying interest in shopping online. This research uses a qualitative method, using a purposive sampling technique to determine informants consisting of clothing business owners, content creator staff, and consumers. The results of this study are the implementation of the strategy used through the social media platform TikTok which can build value from the brand equity of the clothing business. Efforts to mix brand equity in increasing consumer buying interest have implemented brand awareness, brand association, perceived quality, and brand association, to increase consumer buying interest in shopping online. Keywords: Strategy Content Marketing · Brand Equity · Brand Fashion
1 Introduction According to the Kata Data website (2023), TikTok stands out as one of the most widely used social media platforms across the globe. As reported by We Are Social, this short video app has reached a staggering 1.09 billion users worldwide as of April 2023, marking a 12.6% increase year-on-year. Quarter-to-quarter, TikTok’s user base has grown by 3.9%. In Indonesia, TikTok boasts 112.97 million users, with the recent introduction of Business TikTok, a feature tailored for product and business promotion. Zhang (2023) highlights that content marketing has emerged as a pivotal platform in the digital marketing landscape, particularly in the context of thriving e-commerce. Research by Baydas et al. (2023) underscores the significance of content marketing as a contemporary strategy offering long-term benefits. It revolves around building brand loyalty by engaging target audiences with valuable content, bypassing conventional promotional methods. The study suggests that brands must adopt innovative approaches © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 437–445, 2024. https://doi.org/10.1007/978-3-031-53998-5_38
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instead of relying on traditional marketing techniques to gain a competitive edge through customer-centric strategies when facing rival brands. Brands hold a critical role as they define a product’s identity. A strong brand can enhance the effectiveness of marketing communication initiatives because it is already recognized by consumers. Consumer choices carry external influences that serve as informational sources for specific products, shaping consumer values, attitudes, and behaviors. This decision-making process is influenced by various marketing strategies, including the product itself, media advertising, direct marketing, personal selling, and other promotional activities. The objective of this research is to recognize and assess the utilization of content marketing strategies for enhancing brand equity in the context of clothing brands. It also aims to ascertain how efforts related to brand equity components impact consumer interest in online shopping. 1.1 Brand Equity Theory According to Aaker (2017) as follows Brand Equity or brand equity is a set of brand assets and liabilities related to a brand, its name, and symbol, which increase or decrease the value provided by an item or service to a company or company customer. Then Shimp (2018) states that “Brand equity is a brand value that results in high brand awareness and strong, favorable, and possibly unique brand associations that consumers remember for certain brands”. Brand Equity Dimensions (Brand Equity): a. Brand Awareness. Brand Awareness is the customer’s ability to recognize and recall a brand and associate it with a particular product. Brand recognition involves people being able to recognize the brand as something different from other brands, by hearing about it, after they have been introduced to the brand. b. Brand Association. Brand associations are concerned with everything related to the customer’s memory of a brand. c. Perceived Quality. Perceived Quality of the brand describes the customer’s overall response to the quality and advantages offered by the brand. d. Brand Loyalty. Brand Loyalty is a strong commitment to subscribe to or repurchase a brand consistently in the future. 1.2 Content Marketing According to the Content Marketing Institute (2022), “content marketing is a strategic marketing technique that focuses on developing and distributing valuable, relevant and consistent content” to attract and retain a defined audience for profit. According to Steimle (2014), content marketing is a marketing method that involves developing and delivering important, relevant, and consistent content to attract and acquire a clear audience to drive profitable consumer action. In creating interesting and creative content marketing, several factors must be considered, namely the following: a. Design. Today’s internet users are savvy, audiences have visited several websites, and know what good design looks like (although audiences cannot explicitly identify what makes good design. As many as 50% of visitors will not return to a website due
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b. c.
d.
e.
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to color or design. Interesting content will not have a big impact if it is not balanced with the design that is made. Current Events. Good content is content that presents news about events and phenomena that are currently taking place. The Reading Experience. Apart from design and current events, the next thing that must be considered is how the design and content that has been created can produce an interesting mix that is easy to read. Timings. After packaging the content attractively with an attractive and easy-to-read design, the next step that must be considered is when and how many times the content is uploaded. Tone. The tone referred to in this case is the content compatibility factor (suitability) between the company and its target audience. Basic concepts like quality and styling are universal, but some features don’t translate well across industries or topics.
1.3 Purchase Intention Interest is a psychological aspect that has a considerable influence on the attitude toward decisions that will be made, and interest is also a source of motivation that will direct someone to do what they want to do. According to Kotler and Keller (2003) consumer buying interest is a consumer behavior where consumers have a desire to buy or choose a product, based on experience in choosing, using and consuming or even wanting a product. According to Ferdinand (2014), buying interest can be identified through the following indicators: a. Transactional interest, namely a person’s tendency to buy a product. b. Referential interest, namely the tendency of a person to refer the product to others. c. Preferential interest, namely interest that describes the behavior of someone who has a primary preference for the product. This preference can only be changed if something happens to the preferred product. d. Explorative interest, this interest describes the behavior of someone who is always looking for information about the product he is interested in and looking for information to support the positive properties of the product.
2 Research Methodology This qualitative study employed purposive sampling to select informants, including clothing brand owners, content creator staff, and consumers or followers of TikTok stores, with the aim of gaining insights into the implementation of content marketing strategies. The research process involved data collection, reduction, presentation, and conclusion/verification. Information was gathered through direct participation, such as in-depth interviews, field observations, and document reviews. The researchers conducted observations on clothing brands, focusing on sales, consumers, and purchase decisions, both before and after the utilization of content marketing strategies through social media. During interviews, brand owners revealed a shift in consumer behavior from offline to online shopping. Additionally, the study utilized the SWOT Analysis Technique to develop effective content marketing strategies on TikTok.
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3 Results and Discussion According to Aaker’s theory (1991), actively engaging with interested customers can boost their interest in purchasing the offered products. This is achieved by maintaining brand awareness through consistent practices such as creating informative posts, producing high-quality videos, collaborating with frequently trending creators, and featuring the best-selling culottes trousers on the TikTok shop platform. This approach ensures that consumers readily recognize the products offered by their chosen online shop. The interviews with customers revealed that the responsiveness and service provided by the shop’s admin, along with appealing marketing content, product quality, a wide range of design, size, and color options, and the practice of giving gifts with each purchase, result in high customer satisfaction and loyalty, prompting repeat purchases. According to an informant, an online shop owner, content marketing has been implemented and what platforms or media are often used to distribute content, as follows: “In doing marketing, especially in the fashion business, it is very important to do promotions with the internet. Product marketing is used only through Tiktok content. The advantages possessed by posting photos and videos, this social media provides good quality and appearance. The challenge of using digital marketing is that there is too much competition. By always diligently posting content marketing and implementing affiliate marketing in collaboration with content creators so that you can increase brand awareness. The advantages of the price offered are of course more affordable than other products, whereas, on the Tiktok platform, the prices offered start from 50 thousand rupiah. To increase the impression of purchase based on the awareness that this is a product seen from the video content presented. The online shop sells quality products and updates according to market interest. The difference with other competitors from similar businesses is that they provide good service in terms of content managed by the admin, interaction with the audience, and guarantee product returns if the product received by the buyer is not suitable in terms of size. Implementing a content marketing strategy, of course, is a big opportunity for online shops.” Based on the results of interviews with informants, an admin content creator based on the application of Content Marketing that has been implemented on platforms or media that are often used to distribute content: “In the marketing process using the Tiktok platform, the marketing strategy implemented emphasizes video content marketing which contains product information, such as product details, how to use the product, and how to make purchases through the Tiktok platform. The task of the Emerald. Label admin is to carry out promotions through social media, by preparing content marketing materials, collaborating with influencers, and providing fast responses to customers”. Results of interviews with informants based on the content presented, enthusiasm about the content, interest in making purchases to repurchasing the product, sister’s assessment of the brand that provides the content, satisfaction with the content presented,
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filling in content material fulfilling needs related to fashion product information, product excellence offered, satisfaction with the service, as follows: “From the content presented, growing consumer interest in fashion. The content presented is very interesting, so consumers are interested in buying the product. Consumers feel enthusiastic because the content provided is very informative, but sometimes the same content is still posted. The products offered are of good quality and made from premium. Services provided to consumers are satisfactory. Display content that is expected to contain info on promos, discounts, and admins who are responsive to the comments given”. The expected response from carrying out a content marketing strategy is to increase purchases that bring benefits to the business. By using content marketing, where previously only viewing content will turn into consumers more quickly. The challenge in doing content marketing is that there is too much competition. “Consumers are very enthusiastic when watching content because the content displayed is interesting and consumer interest increases after watching the content. The online shop provides quite complete product information both in terms of size and product design. Consumers hope that the online shop will maintain content like this so that other consumers become more aware. Usually, the response that consumers give is in the form of likes and comments on posts, regarding the products offered that are more updated and by trends so that consumers become interested in making repeat purchases” The response of consumers when they saw the content presented was very enthusiastic to see the existing promos. After consumers see the content, they always provide detailed product information that is being launched so that consumers feel clear and understand the content provided. Content marketing, it can penetrate a wider range of consumers not only in Bali. The admin is very responsive to replying to customer chats, so consumers are interested in shopping at the online shop. The service provided is also in the form of a link that goes directly to the Tiktok shop platform, so consumers feel satisfied. 3.1 Discussions Rangkuti (2017) explained that SWOT Analysis is the systematic identification of various factors to formulate a company strategy as shown in Table 1. This analysis is based on logic that can maximize Strengths and Opportunities but simultaneously can minimize Weaknesses and Threats. The results obtained from the results of interviews with researchers with corporate sources, namely; Application of Content Marketing Strategy in Building Brand Equity As per insights from interviews with the online shop owner, they have employed a content marketing strategy to attract customers through internet channels. Following Kotler et al.’s (2017) approach, this strategy involves crafting and disseminating content to
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N. S. M. Parasari et al. Table 1. SWOT Analysis
Indicators
Results
Strengths
The first element of SWOT is Strengths, which is meant by Strengths is all the potential that a company has in supporting the company’s development process, such as the quality of human resources, company facilities both for HR and for consumers, and others. There are Strengths as follows: 1. The online shop has a very affordable price offered compared to other products, which are on the marketplace selling prices start from IDR 50,000.00 2. It has a variety of options such as size and color 3. Sold on the Tiktok platform and Shopee Marketplace 4. Has a responsive and fast service, so customers don’t have to wait long to ask questions related to the product
Weakness
Weakness is an analysis of weaknesses, where situations and conditions are the weaknesses of a company at this time. Precisely the company’s internal conditions are deficient, and as a result, the company’s activities cannot be carried out optimally. There are Weaknesses as follows: a) The weakness of clothing brands is that they do not yet have an offline store so customers who want to shop offline cannot choose or try their products first b) Promotions with content marketing are still difficult to ap-pear on FYP (for your page) so there are limits to reach by other consumers c) Products are not yet available on all marketplace platforms d) Haven’t implemented customer relationship management yet e) e. Lack of admin staff
Opportunity Opportunities are positive external or external environmental factors, which can simply be interpreted as any favourable environmental situation for a company or business unit Implementing a strategy of content marketing creates a fantastic opportunity for product intro-duction where the reach obtained is wider, not only focusing on Bali but can also be expected outside the island of Bali Threats
Threats are challenges that are shown or doubt-ed by a trend or an un-favourable development in the environment that will cause a decline in the company’s position. Thus, it can be said that threats are environmental factors that do not benefit a business unit. There are several challenges faced, namely: a. Lots of competition in similar businesses b. There is content marketing from more interesting competitors c. There is an erratic change in fashion trends Customers who commit fraud are hit n run when shopping and transacting
engage audiences, ultimately converting them into customers, and expanding marketing efforts via social media. This is essential as modern consumers often seek product information online before making a purchase, and platforms like TikTok have gained immense popularity. The shop prides itself on offering high-quality, comfortable, and stylish fabrics with various clothing designs suitable for different occasions. Leveraging these advantages, the Content Marketing Strategy is expected to enhance brand quality.
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This, in turn, fosters strong Brand Equity, mitigating customers’ risk associated with product quality in their purchasing decisions. Efforts to Mix Brand Equity in Increasing Consumer Purchase Interest a. Brand Awareness. With interactions with customers who feel interested, it can increase customer interest in buying the products offered, where the role of brand awareness is to always make informative posts, good video quality. b. Brand Association. From consumer statements and the experiences described, where the memory of the brand has a good brand association so that when consumers are looking for fashion products, they will remember brands that provide women’s fashion with sizes and other design choices. c. Perceived Quality. From the quality provided, starting from the content and products, it has been achieved, which in the statement the customer is satisfied with the quality of the product, the materials used are premium so that they are comfortable to wear every day and provide clothing designs that are always updated to keep up with the times. d. Brand Loyalty. Based on the results of interviews with customers, the response and service that the admin provides, the marketing content that is displayed is attractive, the product quality is good, it provides many design, size, or color choices, and always gives gifts for every product purchase, making customers feel satisfied so that customers remain loyal and want to buy the same product repeatedly. From the research conducted, the following findings can be obtained: a) Application of Affiliate Marketing on Tiktok. In implementing the content marketing strategy, affiliate marketing is also implemented where the TikTok Affiliate program can connect creators with sellers through commissions and creativity. Just like other affiliate partnerships, this affiliate program from TikTok will provide several commissions to creators. Commissions are earned from the sales generated by the seller. The commission will be paid automatically with a certain percentage of sales. Simply put, content creators will create and post videos on TikTok. The video contains products that are promoted by including product specific links. The commission given is 10% per product sold. b) Marketing Through Tiktok Live Streaming. Marketing communications through Tiktok Live Streaming can reach a wider target market and increased sales using content marketing and collaboration with content creators can be seen from increased sales and increased number of followers. c) Product excellence. The culottes product offered has a variety of colors and sizes ranging from S-XXL, so this product is the most popular among customers and sells approximately 8,000 pieces on the Tiktok platform. d) Lack of Content Material for Tiktok. There is still the same TikTok content being uploaded several days in a row so it can lead to the perception that you have run out of material for content. e) Have not Implemented Tiktok Ads yet. The promotion that has been implemented is not maximized because it only relies on posted video content, whereas if you
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subscribe to TikTok Ads you can further expand your market reach, as well as attract new customers who can increase sales turnover.
4 Conclusion Based on the discussion above, researchers can conclude that the application of a content marketing strategy in building brand equity in the TikTok Shop is as follows: 1. The strategy used by Emerald. Labels through the social media platform TikTok can build brand equity value in Emerald. 2. Brand equity efforts to increase consumer buying interest in Emerald have implemented brand awareness, brand association, perceived quality, and brand association. a. Brand Awareness. By interacting with consumers and feeling interested, it can increase consumer interest in buying the products offered where the role of Brand Awareness which is part of Brand Equity is an advantage possessed by the brand with the impression given about the content making consumers more familiar with the product they have. by Emerald. b. Brand Association. From consumer statements and the experiences described, where are the memories regarding the brand Emerald? The label has a good brand association. c. Perceived Quality. Perceived Quality of the brand describes the customer’s overall response to the quality and advantages offered by the brand. Because perceived quality is the perception of the customer, customer perception will involve what is important to the customer because each customer has different interests in a product or service. d. Brand Loyalty. With a strong commitment to subscribe or repurchase a brand consistently in the future. Maximizing communication with consumers so that consumers become close and establish good relationships so that consumers are loyal to the online shop and participate in promoting it to the community.
References Aaker, D.A.: Managing Brand Equity: Capitalizing on the Value of a Brand Name. The Free Press, New York (1991) Aaker, D.A.: Manajemen Ekuitas Merek: Memanfaatkan Nilai Dari Suatu Merek. Alih Bahasa Oleh Aris Ananda. Spektrum Mitra Utama, Jakarta (2017) Bayda¸s, A.: Effects of content marketing on customer satisfaction and brand loyalty. J. Soc. Sci. Fascicle Mark. Logist. VI(2), 37–46 (2023). Düzce University, Konuralp Campus, Faculty of Business Administration. https://doi.org/10.52326/jss.utm.2023.6(2).03 Ferdinand, A.: Management Research Methods. Diponegoro University Publishing Agency, Semarang (2014) Rangkuti, F.: Excellent Customer Care Improves Performance Company Through Excellent Service Plus Service Case Analysis Raharja. Gramedia Pustaka Utama, Jakarta (2017) Kotler, P., Dan Keller, K.L.: Manajemen Pemasaran, Edisi 12, Cetakan III, Alih Bahasa Oleh Benyamin Molan (2003)
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Kotler, P., Keller, K.L.: Marketing management. In: Global Edition, 15th edn. Pearson, New Jersey (2018) Steimle, J.: What Is Content Marketing? Forbes (2014) The Content Marketing Industry in 2022. Content Marketing Institute (2022). https://contentma rketinginstitute.com/2022/02/shifting-gears-a-look-atthe-content-marketing-industry-in2022/ Zhang, J.: The strategies for improving the efficiency of content marketing in the field of e commerce. Journal Education, Humanities and Social Sciences Volume 16. College of English, Beijing Language and Culture University, Beijing, China (2023)
Profitability and Liquidity on Hedging Decision During Covid-19 Pandemic Made Ratih Nurmalasari(B) , Putu Putri Prawitasari, Kadek Linda Kusnita, Ni Wayan Merry Nirmala Yani, and Ni Putu Ari Krismajayanti Universitas Pendidikan Nasional, Bali, Indonesia [email protected]
Abstract. The global impact of the Covid-19 pandemic, affecting countries worldwide, including Indonesia, has resulted in significant fluctuations and a general decline in currency exchange rates, thereby impacting the world economy. Companies engaged in international business operations have had to take measures to navigate these challenges, and one such measure is making financial decisions, particularly related to hedging. This study seeks to investigate the influence of a company’s profitability and its ability to meet short-term liabilities (liquidity) on their decision to engage in hedging. The research relies on quantitative data, specifically secondary data sourced from the financial reports of manufacturing companies listed on the Indonesia Stock Exchange during the COVID-19 pandemic from 2020 to 2021. The findings reveal that profitability does not significantly affect a company’s decision to hedge, while liquidity has a notable negative impact on such decisions. In conclusion, during a pandemic context, companies facing difficulties in meeting short-term liabilities tend to prioritize risk reduction by employing hedging techniques. Keywords: profitability · liquidity · hedging decision
1 Introduction International trade involves the exchange of goods between the residents of one country and those of other nations, typically under mutual agreements (Ayuningtyas et al., 2019). Within the realm of international trade, one common business approach is to engage in export-import activities. Companies often opt to import goods to access more affordable raw materials from other countries, while exporting helps them expand their business. However, businesses engaged in international trade encounter various challenges, particularly when it comes to transactions in foreign currencies. The use of different currencies can give rise to several risks that companies must grapple with, including the perils of foreign currency exchange rate fluctuations, interest rate fluctuations, and changes in commodity prices. Unbalanced supply and demand for currency can cause fluctuations in exchange rates, giving rise to currency risk (Griffin & Pustay, 2005: 88). This risk can be minimized, one of which is by implementing a hedging policy (Sasmita & Hartono, 2019). © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 446–453, 2024. https://doi.org/10.1007/978-3-031-53998-5_39
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Yeboah & Takacs (2019) concluded from their research that hedging techniques can protect companies from exposure to exchange rate fluctuations. Hedging is a practice used by companies to prevent losses arising from business activities using foreign currency. In other words, hedging can also protect the value of the company. Research conducted by Haron & Othman (2021) and Savero & Leon (2023) reveals that when a company chooses to hedge all its international trading operations, it has a beneficial effect on the overall value of the company. A study by Hannenstein et al (2020) even states that hedging avoids costs that may arise from financial distress. Usually hedging practices are carried out using financial instruments, namely derivatives. The choice of a company to hedge its international activities can be shaped by various factors, one of which revolves around an evaluation of the company’s financial performance. Profitability stands out as a key financial metric often employed as a reference point when making financial decisions, as it gauges a company’s capacity to generate profits. Companies boasting high profitability tend to expand their operations to bolster their overall profitability, but it’s worth noting that this expansion also comes with increased risks. In other words, companies with high margins are more likely to be exposed to risk. In such a dynamic international market environment, every company that makes transactions can cause enormous losses for companies that transact in large quantities (Pitangga & Puryandani, 2018). Saraswati and Suryantini (2019), Pitangga and Puriandani (2019), Sasmita and Hartono (2019), and Hannenstein et al. (2020) obtained results that are consistent with the theory that profitability positively influences hedging decisions. However, Utomo & Hartanti (2020) reported the opposite. Furthermore, the liquidity ratio is intricately linked to a company’s financial choices as it pertains to the company’s capacity to fulfill its short-term commitments. Businesses that have trouble paying their current obligations generally prefer to minimize risk by using hedging techniques. Studies by Megawati et al (2016), Sasmita & Hartono (2019), Utomo & Hartanti (2020), Meridelima & Isbanah (2021) and Yudha et al (2023) concurred that liquidity has a notable adverse influence on corporate hedging decisions. Nonetheless, the findings of Herawati and Abidin (2020) presented a contrasting perspective, indicating that liquidity exerts a considerable positive impact on a company’s hedging decisions. The emergence of the COVID-19 pandemic, which has a global impact has exacerbated the risks of international trade using foreign exchange. Due to the uncertainty of the global economy, hedging has become one of the hot topics for companies in their international trade. According to Bank Indonesia’s money market development plan, there is a risk of an increase in interest rates by the Fed in the next few years, which further emphasizes the importance of hedging. Hedging instruments, especially long-term ones, can reduce risk so that potential losses are more measurable and predictable. Based on previous research and various theories, researchers are interested in looking again at whether profitability and liquidity as a company’s financial ratios a consideration for companies in are still making hedging decisions to minimize risk during the COVID19 pandemic through a conceptual basis according to Figure 1. The formulation of the hypothesis as follows:
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Fig. 1. Conceptual Framework
H1: Profitability demonstrates a significant positive impact on the hedging decisions made by manufacturing companies that were listed on the Indonesia Stock Exchange during the COVID-19 pandemic, specifically in the years 2020 and 2021. H2: Liquidity exerts a significant negative impact on the hedging decisions made by manufacturing companies that were listed on the Indonesia Stock Exchange during the COVID-19 pandemic, specifically in the years 2020 and 2021.
2 Research Method This study employed a purposive sampling method with a quantitative approach. The data collected is secondary data sourced from the financial reports of companies, which are accessible on the websites of each manufacturing company and on the Indonesian Stock Exchange for the years 2020 and 2021. IBM SPSS Statistics 23 was utilized for data processing. Out of the 49 manufacturing companies listed on the Indonesia Stock Exchange, 37 of them engage in international trade and provided comprehensive data on the variables under examination. Among these 37 companies, 10 opted for hedging while 27 did not hedge during the research year (Table 1). 2.1 Variable Operational Definitions The operational definitions in this study are as follows: 1. Dependent Variables: Hedging activity is the dependent variable in this study and is assessed using dummy numbers. Companies conducting hedging activities with derivative instruments are assigned a code of 1, while companies refraining from such hedging activities with derivative instruments receive a code of 0. 2. Independent Variables: Independent variables, which elucidate or influence other factors, encompass the following in this study: a. Profitability. The profitability variable, denoted by ROA (Return on Assets), is used in this study. It can be expressed as follows: ROA = net income/total assets. A higher ROA value is indicative of an improved company performance, as it reflects the return on all assets provided to the company. b. Liquidity. The liquidity variable, represented by CR (Current Ratio), is utilized. CR is a financial ratio evaluating the company’s capacity to meet its current short-term liabilities. It can be formulated as follows: CR = current assets/current liabilities
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Table 1. List of Companies No
Company
Hedging
1
Argha Karya Prima Industry Tbk
NO
2
Astra Internasional Tbk
YES
3
Ateliers Mecaniques D’Indonesia Tbk
NO
4
Budi Starch & Sweetner Tbk
NO
5
Champion Pacific Indonesia Tbk
NO
6
Charoen Pokphand Indonesia Tbk
NO
7
Darya Varia Laboratoria
NO
8
Delta Djakarta Tbk
YES
9
Emdeki Utama Tbk
NO
10
Fajar Surya Wisesa Tbk
YES
11
Garuda Putra Putri Jaya Tbk
NO
12
Impack Pratama Industri Tbk
NO
13
Indocement Tunggal Prakasa Tbk
YES
14
Indofood CBP Sukses Makmur Tbk
NO
15
Indofood Sukses Makmur Tbk
NO
16
Industri Jamu dan Farmasi Sido Muncul Tbk
NO
17
Japfa Comfeed Indonesia Tbk
YES
18
Kalbe Farma Tbk
NO
19
Kino Indonesia Tbk
NO
20
Mayora Indah Tbk
NO
21
Multi Bintang Indonesia Tbk
NO
22
Panca Budi Idaman Tbk
YES
23
Sekar Laut Tbk
NO
24
Selamat Sempurna Tbk
NO
25
Semen Indonesia (Persero) Tbk
NO
26
Surya Toto Indonesia
NO
27
Trisula Internasional Tbk
NO
28
Trisula Textile Industries Tbk
YES
29
Tunas Baru Lampung Tbk
YES
30
Ultra Jaya Milk Industry & Trading Company Tbk
NO
31
Unilever Indonesia Tbk
YES
32
Wijaya Karya Beton Tbk
NO (continued)
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M. R. Nurmalasari et al. Table 1. (continued)
No
Company
Hedging
33
Wilmar Cahaya Indonesia Tbk
NO
34
Mark Dynamics Indonesia Tbk
YES
35
Phapros Tbk
NO
36
Ekadharma Internasional Tbk
NO
37
Tempo Scan Pacific Tbk
NO
3 Result 1. Goodness of Fit Test The feasibility of the regression model was assessed using the Hosmer and Lemeshow fit tests. When the Hosmer and Lemeshow goodness of fit value exceeds 0.05, it indicates that the model fits the data. Conversely, if the Hosmer and Lemeshow goodness of fit value is less than 0.05, it suggests that the model does not fit the data. The test results, as displayed in Table 2, exhibit a significance value of 0.148, which is greater than 0.05. Therefore, the model is considered suitable, signifying that it aligns with the actual data. Consequently, this research model is deemed acceptable. Table 2. Hosmer and Lemeshow Test Step
Chi-square
df
Sig.
1
12,078
8
,148
2. Simultaneous Test. According to Table 3, the significance result is 0.000, which is less than 0.05. This suggests that when all explanatory variables are tested together, the explanatory variables in this study have a significant impact on hedging decisions. Table 3. Omnibus Tests of Model Coefficients
Step 1
Chi-square
df
Sig.
Step
17,777
2
,000
Block
17,777
2
,000
Model
17,777
2
,000
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4 Logistic Regression Tests The hypothesis can be assessed by comparing the significance level (sig) with the error rate (α) = 0.05. According to Table 4, the variable “profitability” (Return on Assets) has a value of 1.125 with a significance of 0.725, which is less than 0.05. This implies that the return on assets does not influence the company’s hedging decisions. On the other hand, the variable “liquidity” (Current Ratio) has a value of −0.362 with a significance of 0.003, which is also less than 0.05. This suggests that liquidity has a significant negative impact on the company’s hedging decisions. Table 4. Variables in the Equation
Step 1a
B
S.E
Wald
df
Sig
Exp(B)
ROA
1,125
3,194
,124
1
,725
3,079
CR
−,362
,124
8,573
1
,003
,696
Constant
−,557
,474
1,381
1
,240
,573
Based on the results of logistic regression testing at a 5% error rate, the logistic regression for this study can be formulated as follows: Logistic = −0, 557 + 1, 125ROA−0, 362CR
5 Discussion Profitability does not affect the company’s decision to hedge, meaning that the decision to hedge during the COVID-19 pandemic does not depend on the company’s ability to generate profits. The findings of this research are inconsistent with the theory that companies with high margins will try to expand their business the higher the risks they face, so companies tend to choose to hedge. This may be because manufacturing companies tend not to expand their business, especially through international trade during the COVID-19 pandemic, because it is too risky. Liquidity has a significant negative impact on a company’s decision to hedge. This may be due to the fact that during a pandemic, companies that have difficulty paying their current obligations tend to minimize risks by using hedging techniques. The research results are in line with previous studies by Megawati et al (2016), Sasmita & Hartono (2019), Utomo & Hartanti (2020), Meridelima & Isbanah (2021) and Yudha et al (2023), which prove liquidity has a significant negative impact against the company’s hedging decisions.
6 Conclusion This research aimed to investigate the impact of profitability and liquidity on hedging decisions within manufacturing companies listed on the Indonesia Stock Exchange during the period of 2020–2021. The findings reveal that profitability does not influence the
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company’s choice to hedge, whereas liquidity exerts a negative influence on the company’s hedging decisions. The results of the first hypothesis do not align with the theory that suggests companies with high profitability would seek to expand their businesses. However, the results of the second hypothesis are consistent with the theory. During the COVID-19 pandemic, companies, especially manufacturing companies, tend to consider many factors when making hedging decisions. Considering that there are still many factors other than profitability and liquidity in a company that can influence a company’s decision to hedge, this study suggests that further research can be conducted using other independent variables such as the company’s share of debt (leverage) and growth opportunities especially during times of crisis, in this case the COVID-19 pandemic.
References Amaliyah, I.: Pengaruh financial distress, growth opportunity, firm size, managerial ownership terhadap pengambilan keputusan hedging (studi kasus pada perusahaan manufaktur subsektor otomotif dan komponen di bursa efek indonesia periode 2014–2018. Jurnal Sekolah Tinggi Ilmu Ekonomi Indonesia 20(1), 1–16 (2020) Ayuningtyas, V., Warsini, S., Mirati, E.: Analisis faktor yang mempengaruhi pengambilan keputusan hedging menggunakan instrument derivatif valuta asing. Jurnal Politeknik Negeri Jakarta 6(1), 980–992 (2019) Bank Indonesia. Blue Print Perkembangan Pasar Uang 2025: Membangun Pasar Uang Modern Dan Maju Di Era Digital (2023) Griffin, R.W., Pustay, M.W.: Internasional Business: A Managerial Perspective. Pearson Prentice Hall, Pennsylvania State University (2005) Hahnenstein, L., Köchling, G., Posch, P.N.: Do firms hedge in order to avoid financial distress costs? New empirical evidence using bank data. J. Bus. Finan. Account. 48(3–4), 718–741 (2021). https://doi.org/10.1111/Jbfa.12489 Haron, R., Othman, A.H.A.: Hedging, managerial ownership and firm value. J. Asian Bus. Econ. Stud. 28(4), 263–280 (2021). https://doi.org/10.1108/Jabes-08-2020-0101 Herawati, A., Abidin, Z.: The effect of profitability, leverage, and growth opportunity on hedging activities in 2017 (study on bumn listed on Indonesia stock exchange). Adv. Econ. Bus. Manag. Res. 135(1), 51–57 (2020) Mahardini, N.Y., Suprihatin, N.S., Nurzamzami, F.: Does leverage, dividend per share, and cash flow volatility affect hedging decisions?: an empirical study on listed manufacturing companies. J. Account. Auditing Bus. 3(2), 104 (2020). https://doi.org/10.24198/Jaab.V3i2.28736 Megawati, P., Wiagustini, L.P., Gede, L., Artini, S.: Determinasi keputusan hedging pada perusahaan manufaktur di bursa efek Indonesia. E-Jurnal Ekonomi dan Bisnis Universitas Udayana 5(10), 3391–3418 (2016) Meridelima, E., Isbanah, Y.: Analisis faktor-faktor yang mempengaruhi keputusan hedging perusahaan sektor industri pengolahan yang terdaftar di BEI Tahun 2014–2018. Jurnal Ilmu Manajemen 9(1), 112–128 (2021) Pitangga, S., Puryandani: The influence of growth profitability, leverage and opportunity on hedging activities in state-owned enterprises companies 2012–2016. Adv. Econ. Bus. Manag. Res. 135(1), 213–217 (2019) Saraswati, A.P.S., Suryantini, N.P.S.: Pengaruh leverage, firm size, profitabilitas terhadap keputusan hedging pada perusahaan manufaktur Di Bursa Efek Indonesia. E-Jurnal Manajemen Universitas Udayana 8(5), 2999–3027 (2019). https://doi.org/10.24843/Ejmunud.2019.V08. I05.P15
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Sasmita, I.E., Hartono, U.: Nomor 3-jurusan manajemen fakultas ekonomi universitas negeri surabaya. Jurnal Ilmu Manajemen 7(3), 655–667 (2019) Savero, R.S., Leon, F.M.: Capital expenditures, hedging, liquidity dan firm value pada perusahaan manufaktur di Indonesia. JBEE 5(2), 1–14 (2023). http://jurnal.shantibhuana.ac.id/jur nal/index.php/bee Utomo, L.P., Hartanti, B.: Determinan pengambilan keputusan hedging menggunakan instrumen derivatif valas. Manag. Bus. Rev. 4(1), 22–31 (2020). https://doi.org/10.21067/Mbr.V4i1.4611 Yeboah, M., Takacs, A.: Does exchange rate matter in profitability of listed companies in South Africa? An empirical approach. Int. J. Energy Econ. Policy 9(6), 171–178 (2019). https://doi. org/10.32479/Ijeep.8208 Yudha, M., Oktavia, R., Desriani, N.: The effect of foreign debt, liquidity, firm size, and exchange rate on hedging decision. J. Indonesian Econ. Bus. 38(2), 133–146 (2023). https://journal.ugm. ac.id/v3/jieb
Income, Financial Literacy and Financial Inclusion Increase Investment Interest in Gianyar Kadek Wulandari Laksmi P.(B) , I. G. N. Oka Ariwangsa, Ni Wayan Lasmi, and I. Dewa Made Arista Apriadi Universitas Pendidikan Nasional, Jl. Bedugul No. 39, Sidakarya, Denpasar Selatan, Kota Denpasar, Bali 80224, Indonesia [email protected]
Abstract. The aim of this study is to assess the individual and combined influences of income, financial literacy, and financial inclusion on investment intentions. The study involved a sample size of 100 participants and employed various data analysis techniques, such as validity testing, reliability testing, classical assumption testing, multiple regression analysis, coefficient of determination examination, model feasibility assessment, and t-tests. The findings reveal several key relationships: income and financial literacy both significantly and positively affect investment intentions; financial inclusion has a noteworthy positive impact on investment intentions as well as income, and investment interest plays a significant role in driving investment intentions. Collectively, these independent variables account for 54.9% of the variation in investment interest. Thus, it is recommended that the residents of Gianyar to allocate a portion of their income for future investments and consider attending investment seminars regularly to enhance their investment knowledge, while also making prudent use of the available investment options. Keywords: Income · Financial Literacy · Financial Inclusion · Investment Interest · Theory of Planned Behavior
1 Introduction Making intelligent financial judgments is very important for everyone to pay attention to, as the development of today’s increasingly contemporary era is accompanied by the development of increasingly efficient and sophisticated financial goods. Furthermore, someone should set aside some of their salary to save and use as a reserve fund in case something bad happens. Someone needs financial management knowledge to be able to undertake good financial planning and decision making to attain the goals to be achieved, namely financial well-being in the future. There are numerous methods and media via which someone can allocate their money so that they do not face financial challenges in old life, one of which is investment. Investment is the process of managing funds or capital in the present to get several © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 454–463, 2024. https://doi.org/10.1007/978-3-031-53998-5_40
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profitable payment streams in the future. Funds are managed through the purchase of securities or financial assets such as stocks, bonds, or derivatives such as options and futures contracts (Nila & Ferina, 2020). Lestari (2021) mentioning revenue is the total amount of money earned by a person or group of individuals from donations, both energy and thought put to receive reimbursement within a specific time frame. Income is defined as the total amount of money received by an individual or household over a specific time period. Income includes wages earned from employment, income from wealth such as rent, interest, and dividends, and government transfer payments or receipts such as social benefits or unemployment insurance (Lazuardi et al, 2020). Income has a beneficial effect on investing interest, according to this statement (Hidayat & Kayati, 2020). Increased income leads to increased consumption and investment. When a result, when income rises, so will consumption and investment. According to the income function, there are two types of income in the economy: consumption and savings or investment. Where investments that are directly related to income and consumption must be evaluated. People are generally interested in investing in the capital market. However, there are numerous hurdles that must be overcome, particularly for novice investors or those who lack expertise if they do not correctly comprehend the procedures and risks that a potential investor faces. The first step that all potential investors must take is to gain basic understanding. This is done to protect investors from illogical investment practices (gambling) or illegality, as well as the danger of loss when investing in the capital market. To determine what types of investments are in demand, appropriate information and expertise, experience, and business sense are required (Darmawan et al., 2019). Financial literacy, according to the Financial Services Authority (OJK), is knowledge, skills, and beliefs that impact attitudes and behaviors to improve the quality of decision making and financial management to achieve prosperity. Financial literacy in the form of understanding all aspects of personal finance is not intended to make life difficult or to prevent people from enjoying it, but rather to enable individuals or families to enjoy life by appropriately utilizing their financial resources in order to achieve their personal financial goals. Figure 1 depicts the results of the Indonesian National Financial Literacy and Inclusion Survey (SLNIK) performed by the Financial Services Authority (OJK), which show an increase in financial literacy over the last three years. In 2019, the degree of financial literacy in Bali remains very low at 38.06%, but financial inclusion is 92.91% (Financial Services Authority, 2019c). The low level of financial literacy in Bali, which is inversely linked to financial inclusion, demonstrates that people do not fully comprehend the numerous financial products and services provided by professional financial service providers. Financial inclusion is inextricably linked to financial literacy. Financial literacy develops people’s thinking, intelligence, and motivation in planning and managing their finances (Viana, et al, 2021). However, high levels of financial inclusion and financial literacy do not always translate into high levels of financial literacy. Indonesia is a developing country where the community’s financial orientation is still short-term or in the category of a saving society. Meanwhile, when compared to industrialized countries that already have a long-term financial orientation or are classified
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as an investing society, they can allocate 30% of their income to investment postings, indicating that public knowledge to invest is still inadequate (Rizki & Pajar, 2017). 92,91%
10 80%
71,3%
60% 40% 20%
38,6% 19,5%
0% 2016
2019
Source: Financial Services Authority (2016-2019) Fig. 1. Financial Literacy and Inclusion Index in Bali
According to Indonesia Stock Exchange data as shown in Table 1, the total number of capital market investors in stocks, bonds, mutual funds, and derivative products in Bali in 2020 was 78,617, or almost 70%. Denpasar has the highest concentration of investors (45%), followed by Badung (18%) and Gianyar (9%). According to these data, the growth in the number of investors in the capital market has been quite rapid, but the growth in the number of investors in most districts, including Gianyar, is still much lower than in Badung and Denpasar regencies, even though Gianyar is an area directly adjacent to the city of Denpasar, which has the highest level of investors. This research is prompted not just by some of these issues, but also by research gaps discovered in prior studies. Previous research found that investment desire, investing knowledge, and income all had an impact on investment interest, with the independent variable having a 41% ability to influence the dependent variable. (Hutapea, 2021). Meanwhile, according to the results of the study (Widiantika, 2021) There was no significant connection between income and investment interest when considering the influence of perceived return, motivation, financial literacy, and income on student investment interest. Faidah (2019) reveals that financial literacy characteristics have a strong beneficial influence on student investing interest, both partially and simultaneously. This demonstrates that the greater pupils’ financial literacy, the greater their investment interest. While the study’s findings (Fariqi, 2020) shows that financial literacy has no effect on investment interest. Stolper and Walter (2017) emphasizes the significance of financial literacy, which is defined as an individual’s knowledge and grasp of financial principles such as budgeting, saving, investing, and debt management. Making healthy financial decisions requires financial knowledge. Financial literacy is defined as a person’s knowledge and awareness
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Table 1. The Number of Investors in Each District in Bali (Bali.bisnis.com) District/City
Sum Level Investor
Badung Regency
18%
Bangli Regency
2%
Buleleng Regency
8%
Gianyar Regency
9%
Jembrana Regency
3%
Karangasem Regency
4%
Klungkung Regency
3%
Tabanan Regency
8%
Denpasar Regency
45%
of financial instruments, investment possibilities, and the risks and rewards associated with them. (Seraj, Alzain and Alshebami, et al., 2022). Ansari et al., (2022) financial literacy can be improved through education and awareness programs, allowing investors to make more educated and productive financial decisions. Another aspect that influences investor interest is financial inclusion. Financial inclusion is an effort to provide financial services and products to individuals and enterprises who do not have access to the traditional financial system. Financial inclusion has a substantial impact on investment interest because it gives people the tools and resources they need to make informed investment decisions. The availability and accessibility of financial services to individuals and businesses, particularly among underprivileged and marginalized communities, is fundamental to financial inclusion. (Gálvez-Sánchez et al., 2021). The results of a study titled “Financial Literacy, Financial Inclusion, and Investment Interest of Generation Z in Jabodetabek” revealed that the level of financial literacy and average financial inclusion of generation Z in Jabodetabek is included in the well literate category, financial literacy does not affect investment interest, while financial inclusion affects investment interest. (Viana, et al., 2021) While the results of the study (Sari, 2020) states that financial inclusion does not have a significant effect on investment interest. Based on the background description above, the author is interested in conducting research entitled “The Effect of Income, Financial Literacy and Financial Inclusion on Community Investment Interest in Gianyar”. Based on the aim of this study, the following hypotheses are formulated: H1: Income has a positive effect on people’s investment interest. H2: Financial literacy has a positive effect on people’s investment interest. H3: Financial inclusion has a positive effect on people’s investment interest.
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2 Methodology This study focuses on the population of Gianyar Regency, Bali, comprising individuals aged 17 years and older who possess identity cards (KTP). To gather the sample, a purposive sampling approach was employed, and the Solvin formula was used to determine a sample size of 100 people with bank savings accounts. Data collection was carried out through the distribution of questionnaires using Google Forms, with Likert scale-based questionnaires (rated 1–4) used to gauge the study’s various factors. Data analysis was conducted using statistical methods, involving several steps such as classical assumption testing, multiple linear regression analysis, partial significance testing (t-test), model feasibility testing (F-test), and determination coefficient assessment (R2 ). The research presented some challenges due to constraints in terms of time, human resources, and research funds. Nevertheless, this approach offers the advantage of enabling the statistical analysis of quantitative data.
3 Results and Discussion 3.1 Multiple Linear Regression Analysis As shown in Table 2, the default investment ratio is 0.035 when income, financial literacy, and financial inclusion are all set to zero. The analysis reveals that for each unit increase in income, there is a corresponding 0.138 increase in the investment level, indicating that as income rises, so does investment interest. Similarly, a one-unit increase in financial literacy results in a 0.320 increase in the investment ratio, showing that improving financial literacy can boost investment interest. Moreover, an increase of 0.429 in financial inclusion is associated with a 0.429 increase in the level of investment, underscoring the positive impact of enhanced financial inclusion on investment interest. Table 2. Multiple Linear Regression Results Coefficientsa Model
1
Unstandardized Coefficients
Standardized Coefficients Beta
t
Sig.
0.042
0.967
B
Std. Error
(Constant)
0.035
0.849
Income
0.138
0.059
0.211
2.356
0.021
Financial Literacy
0.320
0.100
0.281
3.190
0.002
Financial Inclusion
0.429
0.105
0.381
4.074
0.000
a Dependent Variable: Investment interest
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From the results of the multiple regression analysis presented in Table 2, the following multiple regression equation is derived: Y = a + b1 x1 + b2 x2 + b3 x3 + e Y = 0, 035 + 0, 138 x 1 + 0, 320 x 2 + 0, 429 x 3 + e
3.2 Partial Regression Coefficient Significant Test (t-Test) The t-test analysis presented in Table 3 yields insightful findings regarding the impact of various factors on investment interest. First, when examining the effect of income on investment interest, the t-test result shows a coefficient of 0.138, with a t-statistic of 2.356, surpassing the critical t-table value of 1.984. Additionally, the significance value of 0.021, compared to the significance level (α) of 0.05, indicates that income (X1) has a statistically significant positive influence on investment interest (Y) at a 5% confidence level. Moving on to the impact of financial literacy, the analysis reveals a regression coefficient of 0.320, accompanied by a t-score of 3.190, exceeding the critical t-table value. The significance level of 0.002, compared to the α of 0.05, confirms that financial literacy (X2) also significantly and positively affects investment interest (Y) at a 5% confidence level. Lastly, when assessing the influence of financial inclusion, the regression coefficient stands at 0.429, and the t-score of 4.074 is notably higher than the critical t-table value. The significance value of 0.000, lower than the α of 0.05, signifies a significant positive impact of financial inclusion (X3) on investment interest (Y) at a 5% confidence level. In sum, these results indicate that all three variables, income, financial literacy, and financial inclusion, have statistically significant and positive effects on investment interest. Table 3. Partial Regression Coefficient Significant Test Model
Unstandardized Coefficients
Standardized Coefficients
t
Sig.
B
Std. Error
Beta
(Constant)
0.035
0.849
0.042
0.967
Income
0.138
0.059
0.211
2.356
0.021
Financial Literacy
0.320
0.100
0.281
3.190
0.002
Financial Inclusion
0.429
0.105
0.381
4.074
0.000
3.3 Model Feasibility Test Results (Test F) The F-test analysis in Table 4 reveals important findings. The computed F statistic, with a value of 41.134, significantly surpasses the critical F-table value of 2.70. Furthermore,
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the significance level of 0.000, when compared to the significance threshold of 0.05 (α), indicates that the significance value falls well below this threshold, leading to the rejection of the null hypothesis (H0). This outcome signifies that, at a confidence level of 5%, all three variables - income (X1), financial literacy (X2), and financial inclusion (X3) - collectively exert a substantial and real influence on investment interest (Y). Consequently, the research model is deemed valid, allowing for the continuation of hypothesis testing. Table 4. Model Feasibility Test Results (Test F) Model 1
Sum of Squares
df
Mean Square
F
Sig.
Regression
313.051
3
104.350
41.134
0.000b
Residual
243.539
96
2.537
Total
556.590
99
a Dependent Variable: Investment interest b Predictors: (Constant), Financial inclusion, Financial literacy, Income
3.4 Test Results of Coefficient of Determination (R2 ) As per the data in Table 5, the Adjusted R-square (R2 ) stands at 0.549, which corresponds to 54.9% when expressed as a percentage. This signifies that a significant portion of the variations in investment interest factors can be accounted for by changes in income, financial literacy, and financial inclusion. However, it is worth noting that the remaining 45.1% of variations in these factors are influenced by variables not included in the research model. Table 5. Coefficient of Determination (R2 ) Results Model Summaryb Model
R
R Square
Adjusted R Square
Std. Error of the Estimate
1
0.750a
0.562
0.549
1.593
a Predictors: (Constant), Financial inclusion, Financial literacy, Income b Dependent Variable: Investment interest
4 Discussion 4.1 The Effect of Income on People’s Investment Interest in Gianyar The study examined the impact of income on investment levels and found significant results: a t coefficient of 2.356 (greater than t-table 1.984), a regression coefficient of 0.138, and a significance value of 0.021 (less than 0.05), leading to the rejection of the
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null hypothesis (H0). Instead, the alternative hypothesis (H1) is accepted, indicating that income has a positive effect on the investment interest of the Gianyar community. In practical terms, higher income is associated with greater investment interest, while lower income corresponds to lower investment interest. According to the Theory of Planned Behavior (TPB), human behavior is rooted in behavioral intention, which is influenced by various factors, including income. Income is a pivotal factor influencing investment behavior. As an individual’s or family’s income increases, they have more financial resources at their disposal, which they can allocate toward investments. With higher incomes, individuals have the capacity to invest more money in various forms, whether for generating passive income or pursuing long-term capital growth. Higher income often instills a greater sense of financial security, motivating individuals to seek investment opportunities and take on risks. This aligns with findings from studies conducted by Lazuardi et al. (2020) and Destiana (2022), both of which support the idea that income has a positive impact on investment interest. 4.2 The Influence of Financial Literacy on People’s Investment Interest in Gianyar The study examined the impact of financial literacy on investment interest and found significant results: a t coefficient of 3.190 (greater than t-table 1.984), a regression coefficient of 0.320, and a significance value of 0.002 (less than 0.05), leading to the rejection of the null hypothesis (H0). Instead, the alternative hypothesis (H2) is accepted, indicating that financial literacy has a strong and positive effect on investment interest. In practical terms, enhanced financial literacy increases people’s interest in Gianyar, while a lack of financial literacy diminishes their interest in the area. This aligns with previous research, such as the study by Hermansson and Jonsson (2021), which supports the idea that financially literate individuals are more inclined to take risks and invest in riskier assets. According to the TPB, human behavior is influenced by behavioral intention, one of the three factors that shape conduct. Normative beliefs, or expectations about what is considered normal, play a crucial role in this process. Individuals with higher financial literacy understand investment better, leading to a strong intrinsic motivation to invest (Stolper and Walter, 2017). Financial literacy is positively associated with financial behavior, including investment interest. Financially literate individuals tend to be more tolerant of risks, invest in riskier assets, make sound financial and investment decisions, and manage their finances effectively. This aligns with findings from Seraj et al. (2022), further underscoring the positive impact of financial literacy on individual investment decisions. 4.3 The Influence of Financial Inclusion on the Investment Interest of the Community in Gianyar The study assessed the impact of financial inclusion on investment interest, revealing significant results: t-value 4.074 (greater than t-table 1.984), a regression coefficient of 0.429, and a significance value of 0.000 (less than 0.05). This implies that the null
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hypothesis (H0) can be rejected, and the alternative hypothesis (H3) can be accepted. In essence, financial inclusion strongly influences investment interest, indicating that higher levels of financial inclusion correlate with greater public interest in investing in Gianyar, while lower levels of financial inclusion correspond to decreased public interest in investing in the area. According to Xu and Sun (2022), the results of the regression analysis show that each unit increase in financial inclusion results in a 2.53% increase in investment participation. Behavioral intention, as per the TPB, serves as the foundation for a person’s actions. Factors that facilitate or hinder the execution of an action can shape perceptions and beliefs about that action, thereby influencing the individual’s behavior and intentions. Enhanced access to investment opportunities through financial inclusion simplifies the investment process for people, making it more convenient and increasing their interest and participation in investments. One notable advantage of financial inclusion is its ability to expand the investment options available to the community. When individuals have access to bank accounts, mutual funds, and other investment instruments, they gain the flexibility to invest their funds in various ways.
5 Conclusion Higher income positively influences people’s investment interests as it provides them with more financial resources to allocate towards various investment opportunities. Higher income levels often lead to a greater sense of financial security, making individuals more inclined to work towards long-term financial goals and explore a wider range of investment options. Additionally, those with higher incomes tend to possess a better understanding of financial matters, enabling them to make more informed investment choices. Financial literacy also plays a crucial role in fostering investment interest. Individuals with a higher level of financial literacy are better equipped to comprehend investment instruments, risks, and potential opportunities, making them more eager to invest. Their financial knowledge empowers them to make well-informed investment decisions, set clear financial goals, and effectively manage their investment portfolios. Furthermore, financial literacy aids in understanding the benefits of diversification, risk management, and long-term investment planning, all of which contribute to an increased interest in investment. Financial inclusion, another influential factor, has a positive impact on investment interest by granting individuals access to previously inaccessible financial products and services. As accessibility to banking services, investment options, and credit expands, people are more likely to engage in investment activities. Financially inclusive individuals can diversify their investments across various asset classes, such as stocks, bonds, real estate, and other instruments, which leads to improved portfolio management, risk mitigation, and long-term investment planning. Consequently, financial inclusion enhances people’s desire to invest and participate in financial markets.
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The Influence of Authenticity and Product Innovation on Quality Perceptions and Interest in Buying Silver Crafts as Souvenirs at the Celuk Silver Village Ni Nyoman Sri Wisudawati(B) Universitas Pendidikan Nasional, Jl. Bedugul No. 39, Sidakarya, Denpasar Selatan, Kota Denpasar, Bali 80224, Indonesia [email protected]
Abstract. In many developing countries export earnings account for a large percentage of the country Gross Domestic Product (GDP), government revenues and expenditures and public investment. High dependency on a limited number of commodities for export increases the economy vulnerability to price fluctuations in the global markets. Not only instability in export earnings reduces the ability of the economy to finance development, but also increases uncertainty about future growth. Economic diversification underscores the importance of productivity growth to balance development and reduce dependency on international markets. The new economy, driven by digital technologies could help developing countries diversify output and foster economic growth. Building capacity for digital development enhances the country capabilities to promote innovation, create knowledge and disseminate information. Digital networks increase communication as well as allow people, regions and nations to collaborate and share information aiming at fostering growth and sustaining development. For developing countries, external knowledge enhances the economy readiness to diversify output, create employment opportunities and improve global competitiveness. Keywords: First Keyword · Second Keyword · Third Keyword
1 Introduction Improving the welfare of local communities through the tourism industry is an alternative that can be done through utilizing the local potential of the region. Utilization of local potential can be supported through product innovation by highlighting the authenticity of a tourist destination. One of the tourisms supporting products that can be developed through creative economic activities is the souvenir craft industry (Zulaikha & Brereton, 2011). Souvenirs are a form of local cultural replica that is commercialized for tourists to keep (Cohen, 1989). The growing and developing dominance of existing souvenir production is commodified and produced on a large scale so that it sometimes loses © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 464–472, 2024. https://doi.org/10.1007/978-3-031-53998-5_41
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its authenticity or cultural characteristics because it follows the wishes or tastes of the developing market. However, not all tourists seek authenticity in souvenirs, this inauthenticity is recognized as an experience and can still be enjoyed (Moscardo & Pearce, 1999). The silver crafts that developed in Celuk village are a cultural heritage passed down from generation to generation and have authenticity regarding the motifs applied to silver craft products (Suardana & Sumantra, 2023). At the beginning of its development, silver crafts were used for local community needs, then along with the development of globalization, silver crafts aimed to fulfill export commodities in accordance with market demand, resulting in a shift in creativity and cultural elements starting to fade, which was reflected in the silver craft products produced. The regeneration of silver craftsmen in Celuk village is starting to decrease and the product models produced are almost the same without any distinctive characteristics being displayed because most of the goods produced follow market demand so that the creativity of the craftsmen is experiencing a shift (Wisudawati & Maheswari, 2018). Typical Balinese silver crafts, especially from Celuk village, are known as burnt silver crafts as a differentiator from silver crafts from the city of Gede, Yogjakarta. The reduction in cultural elements contained in Celuk silver handicrafts has the impact of making them indistinguishable from silver crafts from other regions or countries as a characteristic souvenir originating from Bali, especially Celuk village. The development of globalization makes it easier for other countries such as China and Thailand to produce similar models and at competitive prices. In fact, an interesting phenomenon occurs in almost all gold and silver craft entrepreneurs. Apart from selling gold and silver crafts produced in Celuk village, they also sell imported products originating from China and Thailand to reduce production costs and obtain maximum profits (Arsa & Widiastini, 2018). Another phenomenon also occurs with the use of alpaca as a substitute for silver with lower quality and cheaper prices. The community is tempted by the economic profits obtained and is negligent about the quality of the craft products made, which affects the image and sustainability of Celuk village as a center for silver crafts. The problems currently faced are related to weak human resources in terms of creativity and innovation, which has an impact on weakening competitive advantage and business performance (Sutapa et al., 2017). Silver crafts influence the acceptance of modern society with the uniqueness or authenticity of regional motifs and shapes that can influence tourists’ buying interest as souvenirs. Tourists even tend to dare to pay high prices with the definition of quality assessed and felt subjectively (Soukhathammavong & Park, 2019). Thus, this research aims to determine the influence of authenticity and product innovation on Celuk silver crafts related to the perception of quality felt by tourists, thereby generating buying interest in order to increase sales of silver crafts in Celuk village, Gianyar district.
2 Methodology This research employs a quantitative approach, utilizing accidental sampling as the method for selecting the sample. In this particular study, the sample comprises 100 tourists who have knowledge of silver craft products from Celuk village. The respondents, who are tourists in this context, are asked to provide their responses to a series
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of statements related to each latent variable. Data collection involves observation, questionnaires, and documentation. The data collected is evaluated using a Likert scale, assigning values from 1 to 5 to each indicator for every variable, where 1 represents “strongly disagree,” and 5 indicates “strongly agree.” The four variables in this study are Authenticity (exogenous), Product Innovation (exogenous), Perception of Quality (exogenous/endogenous) and Tourist Buying Interest (endogenous). This research adopts a quantitative descriptive research approach, incorporating hypothesis testing through path analysis techniques to demonstrate strong relationships between the variables under investigation. Structural Equation Modeling (SEM) is employed in this research, and the relationships among the proposed variables are empirically tested using SmartPLS software. An Outer Analysis or Measurement Model is conducted to elucidate the connection between indicator blocks and their respective latent variables. Convergent Validity, Discriminant Validity, and Composite Reliability criteria are utilized to assess the outer model’s measurement properties.
3 Results and Discussion 3.1 Confirmatory Factor Analysis Following the test analysis using Smart PLS with 22 indicators, six indicators were excluded from the analysis as they did not meet the loading factor requirement of > 0.7 (Chin, 1998). A summary of the results of the confirmatory factor analysis, with the excluded indicators that did not meet the requirements, is presented in the following Table 1. The assessment of validity is determined by examining the Cronbach Alpha and Composite Reliability values for each variable. The results of the reliability tests for the research variables are presented in Table 2. In this study, the values for Cronbach Alpha and Composite Reliability surpass 0.7, indicating that all variables exhibit strong reliability. Furthermore, the R square value for the perceived quality variable is 0.833, signifying that the model featuring the endogenous variable of perceived quality possesses strong predictive capabilities. Simultaneously, the R square for the tourist buying interest variable stands at 0.827, suggesting strong predictive power, as indicated in Table 2. When manually calculating the goodness of fit (GOF) value, it is determined to be 0.346, placing it within the medium criteria and allowing for further analysis. The output of the structural equation model developed after carrying out analysis through an algorithmic process is depicted in Fig. 1.
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Table 1. Summary of confirmatory factor analysis results (N = 100) No
Measurement Items Loading factors
Samples Mean
Standard Deviation
P Value
X1
Authenticity
1)
Celuk silver crafts reflect easily recognizable Balinese cultural motifs
0.892
0.889
0.028
0,000
2)
Celuk silver crafts show the uniqueness of Balinese culture
0.847
0.843
0.043
0,000
4)
Celuk silver crafts 0.865 have original designs that cannot be found in other areas
0.863
0.029
0,000
5)
Celuk silver crafts 0.710 reflect the work and efforts of the Celuk silver crafts community
0.709
0.056
0,000
X2
Product Innovation
1)
The design of 0.946 Celuk silver craft products is growing and there are many choices
0.947
0.020
0,000
2)
I feel that Celuk crafts use a combination of materials and motifs that follow developments
0.965
0.966
0.009
0,000
3)
Celuk silver crafts have unique characteristics that stand out and differentiate them when compared to other similar products
0.729
0.726
0.056
0,000
(continued)
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No
Measurement Items Loading factors
Samples Mean
Standard Deviation
P Value
4)
The process of making Celuk silver crafts is faster than before
0.902
0.042
0,000
Y1
Perception of Quality
1)
Celuk silver crafts 0.761 are durable and last forever
0.763
0.046
0,000
2)
The price of silver 0.881 crafts is commensurate with the quality and design provided
0.878
0.023
0,000
3)
The price is reasonable when compared to other silver crafts
0.783
0.778
0.053
0,000
4)
The purchase price of silver crafts is not much different from my previous estimates
0.786
0.786
0.040
0,000
Y2
Tourist Buying Interest
1)
I would recommend Celuk silver crafts to others
0.862
0.863
0.022
0,000
2)
I looked for 0.820 information about Celuk silver crafts via the internet and relatives
0.822
0.028
0,000
3)
I will still buy Celuk silver crafts even though it is not recommended
0.749
0.076
0,000
0.901
0.759
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Table 2. Results of Reliability and Feasibility Tests Variable Authenticity Product Innovation Perception of Quality Tourist Buying Interest
Cronbach Alpha 0.849 0.908 0.816 0.750
Composite Reliability 0.899 0.938 0.879 0.855
AVE 0.692 0.792 0.647 0.664
(R²) 0.833 0.827
Fig. 1. Structural model of the influence of authenticity and product innovation on perceived quality and purchasing interest of tourists
3.2 Direct Effect Analysis As depicted in Table 3, it becomes evident that there exist four direct relationships between various variables, while one variable remains devoid of any direct linkage to others. The outcomes concerning the direct impact of exogenous variables on endogenous variables are considered significant at a 1% (0.01) significance level. Specifically, the null hypothesis (Ho) is rejected when the P-value falls below 0.05. 3.3 Indirect Effect Analysis As shown in Table 4, the research findings highlight the significance of the relationship between authenticity and buying interest, which is mediated by perceived quality. This significance is evident in the t-statistic value of 5.142, surpassing the critical threshold of 1.96. In essence, it affirms that the connection between authenticity and buying interest, when channeled through perceived quality, is indeed substantial. This relationship, which flows from authenticity to buying interest via perceived quality, exhibits its influence with a P-value of 0.000, underscoring its statistical significance (P < 0.05).
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Hypothesis
Exogenous → Endogenous
Original Sample (O)
Samples Mean
Standard Deviation
P Values
H1
X1 → Y1
0.545
0.551
0.099
0,000
H2
X1 → Y2
−0.407
−0.405
0.105
0,000
H3
X2 → Y1
0.396
0.390
0.099
0,000
H4
X2 → Y2
0.116
0.101
0.094
0.219
H5
Y1 → Y2
1,156
1,169
0.098
0,000
Furthermore, the association between product innovation and tourists’ purchase intention, mediated by perceived quality, also emerges as significant. The t-statistic value of 4.093 exceeds the threshold of 1.96, reinforcing the idea that the direction of the relationship between product innovation and purchase intention is influenced by perceived quality. This mediation by perceived quality is accompanied by a highly significant effect, with a P-value of 0.000, once again underscoring the statistical relevance of this relationship (P < 0.05). Table 4. Indirect influence of exogenous variables on endogenous variables Exogenous → Endogenous
Original Sample (O)
Samples Mean
Standard Deviation
P Values
X1 → Y1 → Y2
0.630
0.645
0.135
0,000
X2 → Y1 → Y2
0.458
0.454
0.114
0,000
3.4 Total Effect Analysis According to the information presented in Table 5, it is evident that perceived quality exerts the most substantial influence on tourists’ buying interest, as indicated by its value of 1.156. This means that the perception of quality plays a dominant role in driving the increased purchases of silver crafts in Celuk village by tourists. 3.5 Discussion These findings, obtained through the SmartPLS program, enable a deeper understanding of the impact of various variables on one another as hypothesized. 1. The direct influence of authenticity on the perception of the quality of silver crafts in Celuk village is substantial. Authenticity exhibits a significant effect on the perception of silver craft quality, with a path coefficient of 0.545 and a t-statistic value of 6.163. This implies that authenticity is a key factor that contributes to the perceived quality of a product, making it distinct and exclusive characteristics highly valued by tourists.
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Table 5. The total effect of exogenous variables on endogenous variables Exogenous → Endogenous
Original Sample (O)
Samples Mean
Standard Deviation
P Values
X1 → Y1
0.545
0.551
0.099
0,000
X1 → Y2
0.223
0.240
0.150
0.139
X2 → Y1
0.396
0.390
0.099
0,000
X2 → Y2
0.574
0.555
0.144
0,000
Y1 → Y2
1,156
1,169
0.098
0,000
2. In contrast, the direct influence of authenticity on tourists’ purchasing interest is found to be non-significant. Authenticity does not significantly impact tourists’ buying interest, as evidenced by a path coefficient of −0.407 and a t-statistic value of 3.709. This suggests that while authenticity is valuable, it is not the sole driver of tourists’ purchasing decisions. Other factors also influence their buying choices. 3. Product innovation is found to have a significant direct influence on the perception of the quality of silver crafts in Celuk village. This is evident in the path coefficient of 0.396 and a t-statistic of 4.484. Product innovation enhances the perceived quality of handicraft items by offering a variety of shapes, motifs, and production processes that attract tourists. 4. Similarly, product innovation directly affects tourist buying interest, albeit to a lesser degree. It has a significant impact with a path coefficient value of 0.116 and a t-statistic of 1.235. This result indicates that innovative designs, shapes, and motifs in silver crafts increase tourists’ buying interest by providing an array of appealing choices. 5. Perceived quality is shown to have a remarkable and direct influence on tourists’ buying interest. It exhibits a substantial effect with a path coefficient value of 1.156 and a t-statistic of 11.263. This analysis underscores that when a silver craft product boasts high quality, tourists’ buying interest is notably heightened.
4 Conclusion and Recommendations Based on the data analysis, several key conclusions can be drawn: 1. There is a significant impact of authenticity on the perceived quality of silver crafts in Celuk village. This suggests that the stronger the cultural authenticity of a silver craft item produced at the Celuk silver craft center, the higher the quality it is perceived to have in the eyes of tourists. 2. However, there is no significant influence of authenticity on tourists’ purchasing interest. It indicates that tourists’ interest in buying Celuk silver craft products is not solely based on their authenticity. Other factors, such as design and shape, play a more critical role in attracting tourists’ interest for purchase. 3. Product innovation significantly influences the perception of silver craft quality. Innovations in terms of shape, design, gem combinations, and manufacturing processes enhance the quality perception among tourists.
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4. Product innovation also significantly impacts tourists’ purchasing interest. The creative innovations made by silver craftsmen in designing unique shapes and motifs, as well as expediting the production process, generate a heightened interest among tourists to make purchases. 5. The perceived quality of silver crafts significantly influences tourists’ buying interest. By enhancing the overall quality of Celuk’s silver crafts, tourists’ interest in purchasing products from the Celuk silver craft center is greatly amplified. The research findings yield several valuable recommendations for Celuk village, a prominent center for silver crafts in Gianyar district, which are crucial for both the local silver crafts community and future research. In light of the discussions, the following suggestions can be made: 1. It is important for silver craftsmen and entrepreneurs in Celuk village to address the absence of a significant influence between the authenticity variable and tourists’ buying interest. Souvenir products associated with tourism must embody authenticity as it serves as a key differentiator in the tourism industry, enhancing their competitiveness in the international market. 2. The research underscores the significance of maintaining and even further developing product authenticity and innovation. This is crucial to consistently provide unique, creative, and high-quality silver craft products. With continuous innovation and creativity, the quality of silver crafts in Celuk village will naturally improve, attracting tourists and fostering loyalty. 3. Future research should explore additional factors that can enhance the quality of Celuk’s silver crafts and further stimulate tourist buying interest. These factors encompass services, packaging of silver craft products, and product marketing strategies, all of which can significantly impact the sales of silver crafts in Celuk village.
References Arsa, I.K.S., Widiastini, N.M.A.: Jewelry in celuk: its trends, development, and implications for the village artisans. Int. J. Appl. Sci. Tourism Events 2(1), 70 (2018) Cohen, E.: The commercialization of ethnic crafts. J. Des. Hist. 2(2/3), 161–168 (1989) Moscardo, G., Pearce, P.L.: Understanding ethnic tourists. Ann. Tour. Res. 26(2), 416–434 (1999) Soukhathammavong, B., Park, E.: The authentic souvenir: what does it mean to souvenir suppliers in the heritage destination? Tour. Manage. 72, 105–116 (2019) Suardana, I.W., Sumantra, I.M.: The existence of pure and sacred silver craft creation in Gianyar Bali. Mudra Jurnal Seni Budaya 38(1), 39–45 (2023) Sutapa, S., Mulyana, M., Wasitowati, W.: The role of market orientation, creativity and innovation in creating competitive advantages and creative industry performance. JDM (Jurnal Dinamika Manajemen) 8(2), 152–166 (2017) Wisudawati, N.N.S., Maheswari, A.I.A.: Potential of silver craft product through to communitybased for tourism sustainability in celuk village. Int. Res. J. Manag. IT Soc. Sci. (IRJMIS) 5(1), 9–15 (2018) Zulaikha, E., Brereton, M.: Innovation strategies for developing the traditional souvenir craft industry. In: Proceedings of the First International Conference on Engineering, Designing and Developing the Built Environment for Sustainable Wellbeing, pp. 53–58. Queensland University of Technology (2011)
The Effect of New Work Policies During Covid-19 on Employee Performance and Loyalty in Jepun Kuta Bali Hotel Nyoman Sri Subawa(B) , Ida Nyoman Basmantra, Putu Ratna Juwita, and Sandra Dinata Universitas Pendidikan Nasional, Jl. Bedugul No. 39, Sidakarya, Denpasar Selatan, Kota Denpasar, Bali 80224, Indonesia [email protected]
Abstract. The Jepun Kuta Bali Hotel has taken proactive measures to combat COVID-19 in Bali. This includes implementing a novel work system that involves reduced salaries and adjusted employee hours. The introduction of this new work system is expected to impact employee performance and loyalty during the COVID-19 pandemic at the Hotel Jepun. To assess this, the study employed a descriptive qualitative research approach, involving field research through interviews and documentation. The findings revealed that the new work policy, which entailed reduced salaries and modified working hours, had a positive influence on both employee performance and loyalty. Despite these adjustments, the company continued to provide employee benefits through bonuses earned from guest services. The company’s decision to implement this policy was not solely profitdriven but also considered the well-being of its employees. The opportunities presented by this company had a notable impact on enhancing employee performance, as employees felt highly supported and, in turn, were motivated to deliver their utmost in terms of quality and responsibility. Moreover, the availability of a work-from-home option, a comfortable work environment, and supportive colleagues all contributed to creating a favorable impression on individual employees. This, in turn, allowed employees to enhance their knowledge, insights, and skills, both directly and indirectly. Keywords: Human Resources Management · Performance · Loyalty · New Work System
1 Introduction Effective human resource management is crucial for optimizing the potential of existing human resources. As defined by Hasibuan (2011), human resource management is both a science and an art aimed at efficiently managing the workforce’s roles and relationships, ultimately contributing to the realization of company, employee, and societal goals. Proficient human resource management can significantly impact employee performance. Sedarmayanti (2013) defines performance as the results achieved by individuals © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 473–481, 2024. https://doi.org/10.1007/978-3-031-53998-5_42
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or groups, aligned with their authority and responsibilities, in pursuit of organizational objectives while adhering to the law and ethical standards. Conversely, Harefa and Sinambela (2012) emphasize that employee performance is the capability to execute tasks with particular skills. Assessing this performance entails considering factors like economy, efficiency, and effectiveness (Ridwansyah & Arifin, 2020). In addition to performance, employee loyalty plays a pivotal role in a company’s success. According to Hasibuan (2011), employee loyalty represents an element employed to gauge an employee’s commitment to their work, position, and the company. This loyalty signifies an employee’s willingness to advocate for and support the company, even outside working hours. Employee loyalty has consistently posed a challenge for management, prompting various policies aimed at fostering loyalty, which subsequently enhances employee performance. An individual’s work loyalty leads them to prioritize performance regardless of their salary, placing a strong emphasis on the quality of their work (Safitri, 2015). Bali stands out as a renowned tourist destination, captivating not only domestic but also international visitors with its unique culture and natural beauty. The island continues to attract growing numbers of tourists each year. This surge in tourism has spurred employment opportunities in the Balinese tourism sector, encompassing areas such as travel agencies, souvenir shops, and lodging services. However, the past two years have witnessed a dramatic decline in tourist arrivals due to the COVID-19 pandemic, leading to the closure of numerous hotels and the layoff of employees. In contrast, the Jepun Kuta Bali Hotel has continued to operate by implementing a new policy, which includes salary reductions and shifting to three-hour work shifts, alongside enabling some employees to work remotely. Given this backdrop, the study seeks to examine the impact of these COVID-19induced work life policies on employee performance and loyalty at the Jepun Kuta Bali Hotel. The research, titled “The Effect of Work Life Policies on Employee Performance and Loyalty of Jepun Hotel Employees During the COVID-19 Pandemic,” aims to shed light on how these new work life policies influence employee performance and work loyalty. The COVID-19 pandemic has triggered significant changes in company work policies, especially at the Jepun Kuta Bali Hotel, thereby affecting employee performance and loyalty through the implementation of new policies, including salary reductions and revised working hours. The research is guided by the question: “How do the new work life policies impact employee performance and work loyalty?”.
2 Methodology In this study, a descriptive qualitative research approach is employed, utilizing a field research methodology to explore the factors aligned with the research objectives. Data sources are derived from interactive interviews conducted with both hotel managers and employees across various departments. The research focuses on investigating the impact of the new work life policies on employee performance and loyalty at the Hotel Jepun Kuta Bali during the COVID-19 pandemic.
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3 Result and Discussions The COVID-19 pandemic has forced many hotels in Bali to suspend their operations, leading to employee layoffs. However, the Hotel Jepun Kuta has taken a different approach by continuing its operations and introducing a new work system. To ensure that employees do not face unfair treatment due to the pandemic, the company has opted not to resort to employee terminations. Instead, they have implemented a system of dividing work hours into shifts and adjusting employee salaries based on their working hours. The details of the informants and their respective roles within the hotel are provided in Table 1. Table 1. Research Informant Informant
Position
1
Manager
2
Marketing Staff
3
Admin Staff
4
Housekeeping Staff
5
Kitchen Staff
6
FnB Manager
7
Back Office Manager
8
Housekeeping Manager
9
FO Manager
10
Human Resources Development
a. Work Performance Jepun Hotel Employee The newly implemented work policies for Jepun Hotel employees have a direct influence on their performance. These policies, which involve salary reductions and adjustments to working hours, serve multiple purposes. They enable efficient company management, grant employees more free time for activities outside of work, and even allow for remote company management through a work-from-home system. These findings align with insights gathered from interviews with various informants, who shared the following perspectives: “The company’s new policy has made it significantly more convenient for me to work with flexibility while also ensuring my presence at the hotel to monitor its overall situation and the staff. Staff working hours are now divided into two categories: working from home and full-time shifts with reduced hours. This reduction in working hours was introduced in response to the decreased tourist activity in Bali, resulting in fewer hotel guests. However, there are still long-term
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guests who require assistance, necessitating some staff to remain on-site. Alongside the adjusted working hours, the company’s new policy involves a reduction in employee salaries. The profound impact of the COVID-19 pandemic has compelled the management to find ways to preserve jobs and uphold fairness. Hence, the approach taken involves reducing working hours and salaries while maintaining employment.” (Informant 1) “Prior to the pandemic, work was conducted in a conventional manner within the confines of hotels. However, the landscape has shifted significantly. The marketing team has now shifted its focus to promoting hotels through online channels. Their tasks involve curating articles for publication on the Jepun Hotel’s website, crafting enticing offers to attract visitors to our site. All these tasks are executed remotely, with the team consistently monitoring the progress of their marketing efforts. It’s worth noting that the marketing staff members don’t have a structured division of working hours, and as a result, they are required to work full-time. This aligns with the company’s pandemic-related policy of reducing salaries.” (Informant 2) “The room booking process at Jepun Hotel during the COVID-19 pandemic has been relatively less demanding compared to the period before the pandemic. In the pre-COVID era, room reservations, events, and numerous seminar meetings often required extensive effort from me as an admin. I had to make decisions regarding the venue, timing, and communicate various conditions to the staff members for accommodating the guests. In contrast, during the ongoing pandemic, I have been able to efficiently manage the administrative tasks. Furthermore, guests are now well-informed about the pandemic-related requirements, such as adhering to health protocols in line with the guidelines issued by the Ministry of Health.” (Informant 3) “Throughout the COVID-19 period at Hotel Jepun Kuta Bali, no significant issues arose in the realm of housekeeping. The only minor concerns revolved around scheduling, particularly with respect to the allocation of morning, afternoon, and evening shifts that occasionally did not align perfectly with each cleaning employee’s specific role. One notable advantage of this policy is the absence of employee layoffs, enabling us to sustain our workforce even when working hours aren’t at full capacity. Furthermore, this situation allows me to place a stronger emphasis on security monitoring at the Jepun Hotel, given the staggered shifts that have been implemented.” (Informant 4) “As a chef at Hotel Japan, my role involves being prepared to cater to the needs of arriving guests. This means that we operate when guests are present, and during shifts without guests, we use the time to enhance kitchen facilities, which may include cleaning cooking utensils, refining the menu offerings, and introducing innovative dishes suitable for the current pandemic situation. The leadership at Hotel Japan has adopted a policy that doesn’t overburden us, the kitchen staff, and allows us to utilize our downtime for improving kitchen operations and addressing any shortcomings.” (Informant 5) “The reduction in hotel guests caused by the COVID-19 pandemic has led to the kitchen staff having less hectic schedules than they did in the past. The allocation
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of tasks among the staff is well-structured and functions smoothly. Despite the current circumstances, we have reasons to be thankful because we still have our jobs, which is a privilege considering that many other hotel employees have been laid off. This situation has boosted the enthusiasm of the staff to work, creating a win-win scenario where hotel operations can proceed optimally.” (Informant 6) “The company has introduced a new work system, and it varies for each division. In the back-office department, the policy entails a transition from the conventional office setting to remote work from home. This shift aims to reduce workplace congestion in accordance with government recommendations, except for essential in-person meetings, if necessary. Thus far, the new work system has been effectively implemented, and the staff has readily adapted to it. In our own division, we have encountered no significant issues during the rollout of the new work system.” (Informant 7) “No, the reduced salary has honestly diminished my enthusiasm for work. Furthermore, my responsibilities as a manager haven’t changed significantly from before.” (Informant 8) “Although the new system hasn’t brought about many alterations, it’s essential to exercise added caution when creating schedules and incorporating changes due to frequent cancellations by customers. This necessitates increased coordination with other staff members to prevent misunderstandings. The company’s policies, involving reduced working hours and salaries, must be embraced with understanding, given the challenging job market at present. On a positive note, this has led to an improvement in performance since the workload is not as demanding as it used to be, allowing for a more focused approach to completing tasks.” (Informant 9) “The necessity to adapt to the current work system has prompted the reorganization of all schedules and employee salaries. The hotel’s current policy is appropriate, as it has enabled the hotel’s operations to proceed smoothly despite potential challenges for both parties involved. These changes have increased my responsibilities in addressing work-related issues and seeking suitable solutions. These altered conditions require me to put in extra effort to maintain a comfortable work environment.” (Informant 10) The increase in employee performance during the COVID-19 pandemic can be attributed to the implementation of a new work life policy. Even though there have been reductions in working hours and salaries, employees have demonstrated a higher level of initiative, resulting in notable improvements at Japanese hotels. Their ability to utilize the shortened work hours effectively is evident through the introduction of innovative customer service approaches, reflecting enhanced skills. The new work policy, including a salary reduction system and reduced working hours, has positively impacted employee performance. These findings align with previous research by Rahman et al. (2020), which highlights the interconnectedness of work culture and work ethic in influencing employees’ decision-making while completing their tasks. Similarly, Mamahit (2016) has indicated that organizational commitment plays a positive role in enhancing employee performance. Thus, the new work policy established in response to the
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COVID-19 pandemic has yielded a positive impact on the performance of Hotel Jepun Kuta Bali’s employees. b. Loyalty of Jepun Hotel Employee Based on insights gathered from interviews with several informants regarding the policies enacted by the leadership at Hotel Jepun Kuta Bali, it is evident that employee work loyalty is influenced by salary adjustments aligned with their working hours. This adaptation is noticeable through the reduction in work hours, resulting in corresponding salary deductions based on employees’ tenure with the company. Remarkably, these salary cuts have not diminished employee performance or loyalty. Despite the division of working hours and reduced wages, employees have become more manageable, with the majority complying with the company’s leadership policies. These findings resonate with information obtained from various sources during interviews, which emphasized the same sentiment. “The policy set by the owner of Jepun Hotel undoubtedly comes with both advantages and disadvantages when considering income. Moreover, when we look at the working hours of other employees, it should align with the practice of reducing workers’ salaries. For instance, in the pre-pandemic period, salaries were at full scale, and the working hours were also complete. In contrast, amid the pandemic, the working hours have been reduced to just 3 h, and there’s a 30% reduction in salary. While this adjustment is certainly a change, it is a preferable alternative to potential job layoffs experienced in other companies. Remaining employed here allows individuals to fulfill their responsibilities and explore additional activities once their work duties are complete.” (Informant 1) “Indeed, there is a difference. Several of my friends who were employed at other hotels have experienced layoffs or job terminations, whereas we have managed to retain our jobs, albeit with some alterations. Additionally, Japanese hotels are supporting employees by providing essential necessities, which has indirectly heightened my loyalty to the company.” (Informant 2) “The policy implemented by our superiors at Jepun Hotel, which prioritizes the well-being of employees, has had a highly positive impact on all of us. Our employment is based on our skills and performance in our respective roles, and we are rewarded for our efforts. I am genuinely appreciative of our leadership, particularly for the decision not to resort to employee layoffs at Jepun Hotel.” (Informant 3) “The favorable aspect of the Jepun Hotel owner’s policy is that it enables me to continue providing for my family. Despite the salary reduction, I have available time to engage in additional activities outside the hotel, which allows me to earn extra income.” (Informant 4) “The policy introduced by our superiors during the ongoing COVID-19 pandemic is something we appreciate. It includes a shift distribution system that significantly aids in organizing, provisioning, and assessing the kitchen department. Alongside this shift system, there is also a salary reduction, which, in my view, aligns with the circumstances in the kitchen.” (Informant 5)
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“The present company policy embodies a mutualistic approach, wherein the company can sustain its operations by reducing the workforce, while employees can maintain their jobs by accepting reduced working hours and salaries. This decision underlines the company’s deep commitment to the well-being of its employees, extending beyond the conventional employer-employee relationship. Therefore, there is no incentive for disloyalty to the company. This spirit of loyalty strengthens further when the company encounters challenges, as it continues to support its employees and deliver its services.” (Informant 6) “The impact of the pandemic has made finding another job a challenging prospect, which is why it is essential to remain loyal to Jepun Hotels. These hotels have introduced innovative work policies that are instrumental in retaining their employees. Despite implementing salary reductions, the hotel offers additional bonuses derived from taxes and room booking services, making it an attractive place to continue working.” (Informant 7) “The new company policy has had no significant impact on the workload, as it remains largely consistent with pre-pandemic levels. Despite the reduction in salaries, employees have adapted to this situation and continue to derive satisfaction from their work environment, which is characterized by positivity and support from colleagues. Such a workplace fosters strong loyalty to the company. Additionally, there is a service bonus that supplements monthly income, which helps mitigate the impact of the salary reduction.” (Informant 8) “Performance, loyalty, and work policies are intricately linked. The alterations in work life resulting from the pandemic have the potential to enhance performance due to reduced workloads, allowing employees to concentrate on their tasks. The current employment policy is particularly beneficial for the economy, necessitating a display of excellent and efficient performance. The implementation of the new work policy by Jepun Hotel has heightened work responsibilities, subsequently bolstering employee loyalty. Notably, the inclusion of a monthly room reservation service bonus serves to boost morale, reinforcing the connection between these aspects.” (Informant 9) “The deterioration in the condition of furniture and property was a significant factor in Jepun Hotel’s decision to remain operational throughout the COVID-19 pandemic. The prolonged periods of room inactivity could lead to damage to furniture, peeling paint from walls, and the development of mold in bathrooms, which would incur substantial maintenance costs. To address these challenges, the management and owner brainstormed to find a solution that would minimize the overall losses. Their solution involved implementing a new policy, which focused on retaining all employees while reducing their working hours. This prudent decision was well received by the employees. Despite the reduction in salaries, they continued to earn income from service fees charged to guests and restaurant services, which were equitably distributed among the staff. The fairness and transparency of this policy bolstered employee loyalty to the company.” (Informant 10) The leadership’s policies at Hotel Jepun Kuta Bali have led to an increase in employee performance and loyalty. This is evident in their commitment to the company, even
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in the face of reduced salaries and shorter working hours. Employee loyalty is largely attributed to the company’s decision not to lay off employees during the pandemic. Many employees understand and embrace this policy, fulfilling their roles diligently in various departments, including management, marketing, administration, security, and kitchen staff at the hotel. These results are consistent with the research findings of Jayaweera (2015), which emphasize the positive impact of good relationships among colleagues on employee performance. Studies conducted by Preko et al. (2013) and Lydia Gomes (2017) also confirm that loyalty positively influences employee performance. Therefore, the implementation of the new work system, including salary reductions and adjusted work schedules, has a favorable effect on the relationship between loyalty and employee performance.
4 Conclusion and Recommendations 4.1 Conclusion The new policies implemented by Jepun Kuta Bali Hotel during the Covid-19 pandemic, which include retaining employees, adjusting working hours, and reducing salaries, have had a positive impact on employee performance. This positive effect can be attributed to the hotel’s commitment to its employees by devising efficient and effective work systems. The introduction of work-from-home options enables employees to execute their duties optimally and comfortably from various locations. Likewise, the new work system positively influences employee loyalty. This is evident in the employees’ dedication to remaining with Jepun Hotel despite encountering similar workloads and experiencing reductions in their salaries. These circumstances reflect the employees’ sense of responsibility and loyalty to the organization. Moreover, the employees are encouraged to express themselves freely and engage in creative and innovative thinking. Each employee is assigned tasks that correspond to their capabilities, ensuring a comfortable work environment. The positive influence of the new work policies established by the company’s leadership on employee performance and loyalty is demonstrated through the following policies: 1. Retaining employees during the pandemic without layoffs. 2. Implementing a shift system with morning, afternoon, and evening shifts. 3. Adjusting employee salaries based on their working hours at Jepun Kuta Bali Hotel. These three policies contribute positively to employee loyalty by providing job security during the pandemic and maintaining a salary structure that corresponds to their working hours at the hotel. 4.2 Recommendations Based on the research conducted concerning the variables of new work life, employee performance, and work loyalty, the following recommendations are offered for Hotel Jepun Kuta Bali:
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1. Develop contingency schedules for situations in which staff members are unable to attend to their duties. This proactive approach will contribute to the smooth operation of hotel activities. 2. Implement strategies to enhance employee motivation and benefits. By offering these incentives, employees will be more inclined to maximize their performance, leading to improved service quality. 3. Continuously evaluate the new work policy. Regular assessments of the policy’s effectiveness should be conducted to identify and address any existing shortcomings. This iterative process will contribute to enhancing employee performance and loyalty over time.
References Gomes, L.: Pengaruh motivasi kerja dan loyalitas karyawan terhadap kinerja karyawan di CV Hartono Flash Surabaya. Agora 5(2) (2017) Harefa, H.Y.A., Sinambela, T.: Pengaruh Pembinaan terhadap Motivasi Kerja dan Produktivitas Kerja Pegawai Negeri Sipil (Studi: Pemerintah Daerah Kabupaten Serdang Bedagai). Jurnal Bina Praja: Journal of Home Affairs Governance 4(3), 207–216 (2012) Hashibuan Melayu, S.P.: Human Resource Management. PT Bumi Akasara Jakarta (2011) Jayaweera, T.: Impact of work environmental factors on job performance, mediating role of work motivation: a study of hotel sector in England. Int. J. Bus. Manag. 10(3), 271 (2015) Mamahit, C.: The comparative study of employee performance before and after training at bank rakyat indonesia, manado sarapung branch. Jurnal Berkala Ilmiah Efisiensi 16(4) (2016) Preko, A., Adjetey, J.: A study on the concept of employee loyalty and engagement on the performance of sales executives of commercial banks in Ghana. Int. J. Bus. Res. Manag. (IJBRM) 4(2), 51–62 (2013) Rahman, Y., Masaong, A.K., Haris, I., Ngiu, Z.: The influence of the work culture and the work environment towards the performance of the civil servants in bone bolango government, Indonesia. Am. J. Humanit. Soc. Sci. Res. 4(1), 81–88 (2020) Ridwansyah, R.A., Arifin, M.Z.: Studi Tentang Kinerja Pegawai Di Kantor Badan Pengembangan Sumber Daya Manusia (BPSDM) Provinsi Kalimantan Timur. 8(3), 9441–9455 (2020) Safitri, R.: Pengaruh kompensasi terhadap loyalitas karyawan PT. Putera Lautan Kumala Lines Samarinda. eJournal Administrasi Bisnis 3(3), 650 (2015) Sedemayanti: Human Resource Management. Print 1. Publisher PT Refika Aditama Bandung (2007)
The Fundamental of Work Attitude in Consequence of Work Family Conflict, Ostracism, and Emotional Exhaustion for Female Employees in Bali Ida Nyoman Basmantra1(B) , Agnes Ayu Prasetyarianti1 , Sevenpri Candra2 , and Elif Baykal3 1 Universitas Pendidikan Nasional, Jl. Bedugul No. 39, Sidakarya, Denpasar Selatan,
Kota Denpasar, Bali 80224, Indonesia [email protected] 2 Bina Nusantara University, Jl. Hang Lekir I No.6, RT.1/RW.3, Senayan, Kec. Kby. Baru, Kota Jakarta Pusat, Daerah Khusus Ibukota Jakarta 10270, Indonesia 3 Istanbul Medipol University, Kavacık Mah. Ekinciler Cad. No: 19, Kavacık Kav¸sa˘gı, 34810 Beykoz, ˙Istanbul, Turkey
Abstract. In Bali, women are tasked with multiple roles that extend beyond being homemakers and supporting their husbands. They shoulder three distinct roles, encompassing their responsibilities in the workplace, their duties within the family, and their role in religious customs and traditions. In this research relations between work-family conflict, ostracism, emotional exhaustion, and work attitude were investigated quantitatively. The discussion leads to the conclusion that the dual role challenge, examined in this study through the work-family conflict experienced by Balinese women juggling three distinct roles, significantly influences the level of stress they experience. Consequently, it can be asserted that the outcomes of work-family conflict, ostracism, and emotional exhaustion are likely to result in a negative work attitude. Keywords: Female Employees · Emotional Exhaustion · Work Attitude · Bali
1 Introduction One of the most prevalent activities in human existence is work. Humans work for a variety of causes and goals. The most fundamental reason is to make a living to fulfil necessities like clothing, food, and housing. Humans must work to be able to pay the expenses involved. Gender issues that include discrimination and unequal treatment based on sex in the workplace is something that cannot currently be neglected from discussions about roles and the problem at the workplace (Dhawan 2021). Women in Asia have more and more employment chances as the female labor participation rate continues to increase in the current period especially in Indonesia. Indonesia was ranked 15th with 53.7% of participation rate, followed by Hong Kong in the 16th © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 482–491, 2024. https://doi.org/10.1007/978-3-031-53998-5_43
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place based on the data presented by The Global Economy (2021). Women are no longer being limited to domestic duties as nowadays women and men have equivalent opportunity to contribute to strengthening the household economy. As married women get involved in economic activity, they will simultaneously play the roles of career women and stay-at-home moms. The presence of women in the workforce does not give them reason to deny on their domestic responsibilities; rather, they must perform both in unison. Many results from previous studies have verified the statement that female employees are more prone to work-family conflict. Research by van der Lippe and Lippényi (2020) shows that women participating in the survey indicate experiencing slightly greater work–family conflict than males. Gragnano et al. (2020) research backs up the notion that the impact of work-to family conflict was stronger for women, parent employees, and older workers. Ostracism in the workplace is one of the problems raised on by a poor work environment. When a worker is shunned, left out, or neglected by their co-workers, it is referred to as workplace ostracism (Williams 2007). Employees who are subjected to workplace ostracism are vulnerable to extreme anxiety, according to earlier research conducted by Lambert et al., (2020). In Bali, women have not just one role as the homemaker and assisting their husband but, they have three roles, which included role in workplace, family, and role of religious custom (Suryawan et al. 2021). Balinese women are versatile women who serve as family members, social members, family breadwinners, and are involved in religious activities such as creating banten (sacraments) for Hindu holy days such as Galungan, and Kuningan (Indrayani and Musmini 2019; Kapur 2018). Some Balinese women endure exhaustion and monotony because of their daily activity which are divided among traditional and workplace responsibility. This struggle can be psychologically distressing which will increase their emotional exhaustion level. This research is crucial to conduct in order to raise awareness of the significance of company support for female employees in Indonesia, particularly in Bali.
2 Theoretical Background and Hypotheses Development 2.1 Work-Family Conflict Work-family conflict is classified as a type of inter-role conflict resulting from imbalances and pressures arising from both the work and family environments (Greenhaus and Beutell 1985; Safrizal et al. 2020; Yang and Peng 2018). Work and family life have different demands and issues, which might cause work to interfere with family life or vice versa. Fully Having dual responsibilities for job and family puts pressure on one to fulfill one or the other responsibility possible, which can be conflicting in a number of ways. 2.2 Ostracism The Ancient Greeks employed a practice called ostracism to punish certain members of their communities, showing that the concept of ostracism has been present in human
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history since the earliest recorded times. While exile and banishment represent severe and absolute forms of ostracism, this phenomenon can also manifest through less dramatic behaviors such as giving someone the silent treatment or avoiding eye contact (Ferris et al. 2008). Individuals are believed to experience a little act of exclusion daily, whether they are aware of it. Regular application of ostracism may indicate that it can serve beneficial reasons. It appears that ostracism has served a purpose maybe since the origin of humans. 2.3 Emotional Exhaustion When energy becomes tiredness, engagement becomes cynicism, and effectiveness becomes ineffectiveness, this ongoing state can be categorized as emotional exhaustion. Emotional exhaustion is a state of mental and emotional depletion caused by persistent stress, which leads to a high degree of dissociation and burnout (Li et al. 2017; Maslach and Leiter 2008). Grandey (2003) argued that emotional weariness was the outcome of despair, emotional apathy, and a cynical attitude toward external stimuli. 2.4 Work Attitude Work attitude is the way individuals feel about the many characteristics of their work environment. How they feel about their work frequently influences their behavior at work. Attitudes tend to cluster and self-categorize. Based on their unique experiences, a person who has acquired a positive attitude toward one aspect of their profession is likely to react positively to other related aspects. Therefore, if a person is engaged in their work, they are likely to be content with their position and committed to the organization. A dissatisfied employee may become less invested in their work and less dedicated to their employer (Knoop 1995). Yusuf and Metiboba (2018) stated attitudes reveal a person’s favorable and unfavorable feelings toward other people, things, events, and activities in their surroundings. The hypothesis that can be built from the results of the explanation above are: • Relationship between WFC and emotional exhaustion Research by Wang et al. (2019) shows work-family conflict was significantly correlated with emotional exhaustion. It is considered that as workers use more energy on the job or for the organization, fewer resources are available to be used at home, resulting in even greater emotional exhaustion. This result is also supported by research done by Dodanwala and Shrestha (2021) which findings of the model used indicated that the work–family conflict has a positive direct effect on emotional exhaustion. Nevertheless, Liu et al. (2015) contradicted the findings of two earlier studies, as their research demonstrated that, at the within-person level, there was no significant association between work-to-family conflict and emotional exhaustion. This lack of correlation might be attributed to the fact that both work-to-family conflict and emotional exhaustion were measured in the workplace, suggesting that the interference of family responsibilities with work duties may have a diminished effect on depleting resources for the participants in their work environment. Hence, the hypothesis for this variable as follows: H1: Work-family conflict has a positive effect on emotional exhaustion.
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• The Relationship between ostracism and emotional exhaustion Workplace ostracism promotes mental exhaustion, thus are more likely to suffer emotional exhaustion resulting to reduced personal resources if they are exposed to excessive amounts of such treatment (e.g., concentration, energy, social interactions) (Koay 2018). Another study by Qi et al. (2020) also supports the result by stating that workplace ostracism was positively correlated with emotional exhaustion. As ostracism can be a danger to social resources, it is considered that experiencing ostracism at the workplace can cause stress symptoms such as tension, fear, worry, and sadness. On top of that, Jiang et al. (2021) support both result by stating that workplace ostracism was positively and significantly related to emotional exhaustion. From the explanation above the hypotheses for this variable is: H2: Workplace ostracism has a positive significant effect on emotional exhaustion. • The connection between work-family conflict (WFC) and work attitudes has received significant attention due to its established negative correlation with various factors related to employee well-being. Research by Mauno et al. (2006) stated that there is considerable evidence to show that work-to-family conflict is associated with poor general well-being as well as with negative job attitudes. This statement is supported by result of research done by Bashir et al. (2015) and Gözükara and Çolako˘glu (2016) in which the two research show a negative relationship between work-family conflict and job satisfaction in which job satisfaction is one of the elements of work attitude. It can be concluded that the hypothesis for this variable is: H3: Work-family conflict has negative significant effect on work attitude. • The relationship between workplace ostracism and work attitude Aliza et al. (2022) found that workplace ostracism has a positive impact on negative attitudes and behaviours in the workplace. This statement also supported by Li and Pan (2020) which stated that workplace ostracism affects employees’ work attitudes, causing employees to have defensive silence, turnover intentions, and reduced job satisfaction. Hence the hypothesis for these variables is: H4: Workplace ostracism has negative significant effect on work attitude. • The relationship between emotional exhaustion and work attitude Previous research by Liao (2012) and Gopinath (2020) found a relationship between work attitude and job satisfaction, employee engagement, and organizational commitment where both studies stated that workplace attitude is primarily determined by job satisfaction, employee engagement, and organization commitment. This aligns with the findings of a study conducted by Park and Kim (2021), which established a significant negative relationship between emotional exhaustion among hotel front desk employees and job satisfaction. It was noted that a decrease in job satisfaction could also have an adverse impact on work attitude. Hence the hypothesis for this variable is: H5: Emotional exhaustion has negative significant effect on work attitude.
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3 Methodology 3.1 Measurement Data analysis is the examination of data needed to guarantee the validity of a hypothesis and the accuracy of the findings (Malhotra et al. 2017). In this study, the questionnaire data were analysed by using Smart Partial Least Square (PLS) tool and the structural equation modelling (SEM) technique. For this study, data collection was conducted through a survey method. A questionnaire, which consists of a set of structured survey questions (Malhotra et al. 2017), was designed. This survey was then implemented using Google Forms, making it possible to distribute it to online respondents. This approach proved to be highly effective, as it allowed for geographical distribution and the collection of responses from individuals regardless of their location. Potential participants who met the criteria for the purposeful sample were provided with the URL of the Google Form used for data collection. This research utilized a closed questionnaire, which means that the researchers will present respondents with a list of possible responses, and respondents will select one based on their experience (using a checkbox in the column supplied). The Likert scale was implemented for value weighting in this research investigation. The following table is the Likert scale’s point of measurement (see Table 1): Table 1. Likert scale point of measurement Answer
Weight
Strongly Agree
4
Agree
3
Disagree
2
Strongly Disagree
1
This research used non-probability sampling in the type of accidental sampling also refers to the selection of samples based on the availability. The presumption is that the participants interviewed are representative of the target population with relation to the researched attribute. Respondents were selected through the procedure of accidental sampling based on the researchers’ assessment that individuals fit the standards and criteria. Among some of the criteria that can operate as respondents are the following: 1. Balinese female. As it is stated that Balinese female has three roles: domestic roles, production roles, social roles (Suyadnya 2009). Therefore, this research was necessary to determine the impact of these three role burdens on the level of stress that can lead to mental exhaustion in female workers. 2. Married female employees. According to prior research by (Khurseed et al. 2019), work-family conflict is a key issue that nearly all female employees confront, and it creates poor outcomes such as depression, weariness, absence at work, and intentional turnover.
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3. The sample size of this study was determined by the number of indicators multiplied by 5. As this research has 19 indicators, therefore the number of respondents needed for this study is 95 respondents (Hair et al. 2006).
4 Results In this study, hypotheses were examined by calculating the path coefficient value, which signifies the level of significance. The path coefficient or model value in this research was determined using the bootstrapping procedure in SmartPLS 3.0. For testing a two-sided hypothesis, the t-statistic obtained should be greater than or equal to 1.96, as outlined by Hair et al. (2021). The impact of work-family conflict on emotional exhaustion is presented in Table 2. According to the study’s hypothesis, work-family conflict is expected to have a positive influence on emotional exhaustion. As indicated in the table, there is indeed a positive correlation between work-family conflict and emotional exhaustion, with the original sample value of work-family conflict affecting emotional exhaustion standing at 0.598. The p-value for this relationship is less than 0.5, signifying a significant connection between work-family conflict and emotional exhaustion. Additionally, the T-Statistics value for the link between work-family conflict and emotional exhaustion is 8.773, surpassing the 1.96 threshold, confirming the relationship’s significance. In conclusion, the study’s hypothesis (H1), which posits that work-family conflict has a positive impact on emotional exhaustion, is supported by the findings. Furthermore, the calculations reveal a significant influence of work-family conflict on emotional exhaustion. Table 2. The Hypothesis Testing Result of the influence of work family conflict towards emotional exhaustion.
Work Family Conflict - > Emotional Exhaustion
Original Sample(O)
T Statistics (O/STDEV)
P Values
0,598
8,773
0,000
The impact of ostracism on emotional exhaustion is displayed in Table 3. According to the study’s hypothesis, ostracism is expected to have a positive influence on emotional exhaustion. As shown in the table, there is indeed a positive correlation between ostracism and emotional exhaustion, with the original sample value of ostracism affecting emotional exhaustion standing at 0.232. The p-value for this relationship is less than 0.5, indicating the significance of the connection between exclusion and emotional exhaustion. The analysis of the hypotheses further reveals a robust association between emotional exhaustion and ostracism, with a T-statistic value of 5.326, which exceeds the threshold of 1.96. Given that ostracism had a positive and significant effect on emotional exhaustion, the H2 hypothesis in this study is confirmed. The impact of work-family conflict on work attitude is depicted in Table 4. According to the study’s hypothesis, work-family conflict is expected to have a negative and significant effect on work attitude. The original sample value of work-family conflict
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Table 3. Hypothesis Testing Result of the Influence of Ostracism to Emotional Exhaustion
Ostracism - > Emotional Exhaustion
Original Sample(O)
T Statistics (O/STDEV)
P Values
0,232
5,326
0,000
concerning work attitude is −0.101, indicating a negative relationship between workfamily conflict and work attitude, as demonstrated in the hypothesis testing table provided earlier. The p-value for this relationship is less than 0.5, suggesting that the association between work-family conflict and work attitude lacks significance. Furthermore, the Tstatistic value is 0.171, which falls below 1.96, indicating that the relationship between work-family conflict and work attitude is not statistically significant. Consequently, the H3 hypothesis in this study is accepted, implying that work-family conflict has a negative impact on work attitude. However, the calculations reveal that there is no significant correlation between these two variables. Table 4. Hypothesis Testing Result of the Influence of Work-Family Conflict towards Work Attitude
Work Family Conflict −> Work Attitude
Original Sample(O)
T Statistics (O/STDEV)
P Values
−0,101
0,171
0,554
Table 5 shows the influence of ostracism on work attitude. According to the study’s hypothesis, ostracism has a significant and negative impact on work attitude, but this hypothesis is rejected because the original sample size showed a positive result, specifically 0.049. The p-value for the link between ostracism and work attitude is 0.717, which is greater than 0.5and indicates that there is no significant relationship between these two variables. A T-statistic less than 1.96 also indicates that the association between the two variables which are ostracism and work attitude is insignificant. This research’s H4 that stated ostracism has a negative and significant influence on work attitude has thus been rejected. Table 5. Hypothesis Testing result of the influence of ostracism to work attitude.
Ostracism −> Work Attitude
Original Sample(O)
T Statistics (O/STDEV)
P Values
0,049
0,136
0,717
Table 6 shows the relationship of emotional exhaustion on work attitude. According to the table above, there is a negative association between emotional exhaustion and work attitude, with an original sample value of - 0.344 for emotional exhaustion on work
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attitude. The relationship’s pvalue is less than 0.5, which shows that there is a significant link between emotional exhaustion and work attitude. In addition, the T-statistic for the relationship between emotional exhaustion and work attitude is 2.448, which is greater than 1.96 and indicates that the direction of the relationship is significant. Hence the H5 which stated that emotional exhaustion has negative significant effect on work attitude is accepted. Table 6. Hypothesis Testing result of the influence of emotional exhaustion to work attitude
Emotional Exhaustion −> Work Attitude
Original Sample(O)
T Statistics (O/STDEV)
P Values
−0,334
2,448
0,015
5 Discussion, Implications and Limitations Based on the research findings and the discussion presented above, the following conclusions can be drawn: Work-family conflict has a notably significant impact on emotional exhaustion. This is supported by the high level of significance indicated by the t-statistics obtained during the hypothesis testing. Ostracism has a substantial and positive effect on emotional exhaustion. The tstatistic from the hypothesis testing indicates that ostracism significantly contributes to emotional exhaustion among Balinese female employees in their workplace. Work-family conflict exerts a negative but statistically insignificant influence on work attitude. The t-statistic value of 0.171 falls below the threshold of 1.96, suggesting that the significance of the relationship between work-family conflict and work attitude is not substantial. It can be inferred that Balinese female employees experiencing work-family conflict may have a negative work attitude, but this connection is not statistically strong. Work-family conflict influences job satisfaction, employee engagement, and organizational commitment, all of which directly impact work attitude. Surprisingly, the impact of ostracism on work attitude is positive and not significant. The t-statistic derived from the hypothesis testing does not meet the minimum standard of 1.96, and the original sample value for this construct is 0.049. Emotional exhaustion has a significant negative effect on work attitude. This is evident from the t-statistic value, which exceeds 1.96, indicating that emotional exhaustion experienced by Balinese female employees has a substantial influence on reducing their work attitude. The conclusion that can be derived from the discussion is the dual role issue, which in this study focuses on the work-family conflict faced by Balinese women with three active roles determine the degree of stress they feel. With this, it can be stated that the consequences of work family conflict, ostracism, and emotional exhaustion will lead into deprived work attitude.
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References Acker, G.M.: Burnout among mental health care providers. J. Soc. Work. 12(5), 475–490 (2012). https://doi.org/10.1177/1468017310392418 Liao, C.-W.: Work values, work attitude and job performance of green energy industry employees in Taiwan. Afr. J. Bus. Manag. 6(15), 5299–5318 (2012). https://doi.org/10.5897/ajbm11.1449 Dhawan, V.: Gender discrimination at the workplace in India. Int. J. Law Manag. Humanit. 4(4), 2237–2246 (2021) Dishop, C.R., Green, A.E., Torres, E., Aarons, G.A.: Predicting turnover: the moderating effect of functional climates on emotional exhaustion and work attitudes. Community Ment. Health J. 55(5), 733–741 (2019). https://doi.org/10.1007/s10597-019-00407-7 Ferris, D.L., Brown, D.J., Berry, J.W., Lian, H.: The development and validation of the workplace ostracism scale. J. Appl. Psychol. 93(6), 1348–1366 (2008). https://doi.org/10.1037/a0012743 Gopinath, D.R.: Role on employees’ attitude in work place. Gedrag. Organ. Rev. 33(02) (2020). https://doi.org/10.37896/gor33.02/156 Gragnano, A., Simbula, S., Miglioretti, M.: Work–life balance: weighing the importance of work– family and work–health balance. Int. J. Environ. Res. Public Health 17(3), 9–11 (2020). https:// doi.org/10.3390/ijerph17030907 Grandey, A.A.: When the show must go on: surface acting and deep. Acad. Manag. J. 46(1), 86–96 (2003) Greenhaus, J.H., Beutell, N.J.: Sources of conflict between work and family roles. Acad. Manag. Rev. 10(1), 76–88 (1985). https://doi.org/10.5465/amr.1985.4277352 Hair, J.F., Ortinau, D.J., Harrison, D.E.: Absolute essentials of marketing research. In: Absolute Essentials of Marketing Research (2021). https://doi.org/10.4324/9781003165194 Indrayani, L., Musmini, L.S.: The meaning of feminist economics from the Balinese women’s perspective. Eur. J. Res. Social Sci. 7(6), 23–32 (2019) Kapur, R.: Prob. Issues Workplace 6(1), 10 (2018) Khurseed, A., Mustafa, F., Arshad, I., Gill, S.: Work-family conflict among married female professionals in Pakistan. Manag. Stud. Econ. Syst. 4(2), 123–130 (2019). https://doi.org/10.12816/ 0052919 Knoop, R.: Relationships among job involvement, job satisfaction, and organizational commitment for nurses. J. Psychol. 129(6), 643–649 (1995). https://doi.org/10.1080/00223980.1995.991 4935 Lambert, E.G., Liu, J., Jiang, S., Kelley, T.M., Zhang, J.: Examining the association between work– family conflict and the work attitudes of job satisfaction and organizational commitment among Chinese correctional staff. Psychiat. Psychol. Law 27(4), 558–577 (2020). https://doi.org/10. 1080/13218719.2020.1734980 Li, J.J., Wong, I.A., Kim, W.G.: Does mindfulness reduce emotional exhaustion? a multilevel analysis of emotional labor among casino employees. Int. J. Hosp. Manag. 64, 21–30 (2017). https://doi.org/10.1016/j.ijhm.2017.03.008 Malhotra, N.K., Nunan, D., Birks, D.F.: Marketing research. In: The Marketing Book, 7th edn. (2017). https://doi.org/10.4324/9781315890005 Maslach, C., Leiter, M.P.: Early predictors of job burnout and engagement. J. Appl. Psychol. 93(3), 498–512 (2008). https://doi.org/10.1037/0021-9010.93.3.498 Safrizal, H.B.A., Eliyana, A., Febriyanti, K.L.: The effect of double role conflict (work family conflict) on female worker’s performance with work stress as the intervening variable. Syst. Rev. Pharm. 11(10), 418–428 (2020). https://doi.org/10.31838/srp.2020.10.65 Suryawan, I.M.Y., Ratnawati, N.L.T.T., Latupeirissa, J.J.P.: Conflict analysis of balinese women on equality in work, family and social life. J. Human. Social Sci. Public Adm. Manag. (HUSOCPUMENT) 1(1), 26–31 (2021). https://doi.org/10.51715/husocpument.v1i1.5
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The Affirmation of Financial Literacy as the Moderating Influence on Financial Inclusion and SMEs Growth: Culinary Sector in Sanur Ida Nyoman Basmantra1(B) , Putu Junianti1 , and Omar Khalid Bhatti2 1 Universitas Pendidikan Nasional, Jl. Bedugul No.39, Sidakarya, Denpasar Selatan,
Kota Denpasar, Bali 80224, Indonesia [email protected] 2 Istanbul Medipol University, Kavacık Mah. Ekinciler Cad. No: 19, Kavacık Kav¸sa˘gı, 34810 Beykoz, ˙Istanbul, Turkey
Abstract. Sanur tourism area as an international tourism area in Denpasar City, Bali, suffered a reduction of tourist arrivals due to the COVID-19 pandemic. Many SMEs located in this area were affected by this pandemic, one of them being the culinary business. These businesses were facing revenue decline and some even bankruptcy. However, we now live in the post pandemic era, where SMEs are re-establishing and aiming for regrowth. This study finds that access to finance as a part of financial inclusion may impact SMEs growth by allowing businesses to reach accessibility of financial services from financial institutions to provide financial support and achieve sustainability. Hence, this study aimed to analyze the impact of financial inclusion through access to finance towards SMEs growth in the culinary sector and how financial literacy moderates the relationship between financial inclusion and SMEs growth using a quantitative method. Keywords: Financial Inclusion · SMEs Growth · Access to Finance · Financial Literacy · Financial Knowledge
1 Introduction The COVID-19 virus, also known as the Coronavirus pandemic, had a significant influence on the economy globally inclusing Indonesia (Ministry of Finance 2020; Devi et al. 2020). Many nations have experienced mental repercussions such as disappointment, worry, and stress because of the crisis or isolation measures adopted to prevent the spread of coronavirus (Gani 2020; Pratama et al. 2021), but have also had a detrimental influence economically on a global scale, corporations, businesses, as well as small and medium-sized firms (Segal and Gerstel 2020; Pratama et al. 2021). SMEs are the greatest susceptible since they must deal with layoffs, company closures, monetary problems, security, also the diminished business ability for future growth (Craven et al. 2014, 2020; Pratama et al. 2021). The dominated country of Indonesia © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 492–497, 2024. https://doi.org/10.1007/978-3-031-53998-5_44
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by the highest number of SMEs making it the most contributing monetary factor to the country had been impacted by this matter. Among the sixteen sub-sectors in the creative economy small and Medium Enterprises (SMEs), such as culinary businesses, are the business sectors most affected by this pandemic, with societal constraints resulting in lost income and changes in business practices (Irawan 2020). To aim for regrowth and re-establish SMEs in the post pandemic era is to have accessible funds to fulfill the company requirements, since improved access to financial resources through financial inclusion can assist SMEs in growing and becoming profitable, resulting in higher company growth (Claessens 2016; Ambrose 2018). However, the majority of Indonesian SMEs continue to struggle with access to funding through financial inclusion. The primary barrier to financial inclusion is the need to enhance financial literacy (Intelligent 2022). Financial literacy is the ability to efficiently control monetary capacity towards long-term financial well-being by using information and skills (Hung et al. 2009; PACFL 2008). Many SME owners and managers still lack basic financial understanding (Okello et al. 2017; Cressy and Beck et al. 2008; Schiffer and Weder 2001). In Indonesia, a low beginning level of financial literacy at 49.68% compared to financial inclusion which calculates to 85.10% on a national level suggests that the citizens in Indonesia do not have adequate knowledge about the products or services they are using (OJK 2022; SNLKI 2022). Based on the background information, the questions that will be addressed in this research are: 1. How does financial inclusion have a positive impact SME’s growth of the culinary sector in Sanur, Bali Indonesia? 2. How does financial literacy able to positively moderate the effect between financial inclusion SME’s growth of the culinary sector in Sanur, Bali Indonesia?
2 Research Framework The current research consists of three variables, financial inclusion [FI], financial literacy [FL], and SMEs growth (see Fig. 1). Financial inclusion as the independent will measure the significance of its impact or effect towards SMEs growth as the dependent variable. The growth of SMEs in Indonesia is crucial for its economic development and FI plays a big role in positively affecting SMEs growth. SMEs can receive financial services through financial inclusion via financial institutions to help fulfil the business needs and achieve growth in the long run (Okello et al. 2017). However financial inclusion can only be fully utilized if business owners or managers are financially literate. Financial literacy is being more recognized as playing a key role in financial inclusion. According to the OECD, there is a significant correlation between FL and FI (Boletawa 2015). Hence why FL will be the moderating variable affecting the relationship of FI and SMEs growth. Examining the effect of financial inclusion on SMEs growth yielded a favorable result, owing to the impact of both internal and external factors (Salman et al. 2015; Riwayati 2017). Similarly in the study of FI influencing SMEs growth which also showed a positive result of access to finance influencing SMEs growth through financial accessibility of loans, capital funds, investment, etc. (Ratnawati 2020). Furthermore, financial
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Fig. 1. Research Framework; Source: Chin (2006)
inclusion boosts and contributes to SMEs growth, since it eases the access of financial services from financial institutions to achieve required fulfilment of the businesses (Marus et al. 2020). Therefore, the first hypothesis for this research is: H1: Financial Inclusion has a positive impact on SMEs growth. Financial literacy helps small and medium-sized business owners obtain the financial information and skills needed for business planning, starting savings plans, and making wise investment decisions (Greenspan 2002; Okello et al. 2017). As a result, it is reasonable to believe that financial knowledge among SMEs managers and owners is crucial to boosting SMEs’ development and financial inclusion. Most crucially, financial literacy functions as a moderating variable by influencing the degree and direction of that link. Boletawa (2015) and Hasan et al. 2021). As a result, the second hypothesis for this study is: H2: Financial literacy positively moderates in the relationship between financial inclusion and growth of SMEs.
3 Methodology 3.1 Research Design In this research, the writer implemented a measurement design of quantitative method. This method is a strategy used to measure the impact of variables of one another by focusing on quantifying the collection and analysis of data. Through a quantitative method the writer hopes to measure the direct impact of financial inclusion towards SMEs growth and the influence of financial literacy as the moderating variable affecting the relationship between financial inclusion and SMEs growth. 3.2 Sampling Technique The sampling technique used in this research is purposive sampling where it uses an approach that selects individuals upon purpose based on characteristics they possess.
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Non-probability sampling was also implemented to conduct this research since it does not provide each entity in the target population a fair probability of being included due to the limited number of respondents needed for this research. 3.3 Research Instrument A questionnaire was utilized to convey this research, and it was distributed to a representative sample of a target demographic. The questionnaire approach is a collection of questions designed specially to obtain information about a certain population or group of individuals that is completed online using the program Google Form. The link to the Google Form was given to possible responders who met the criteria indicated in the data collection process. The data collection was conducted online using Google Form which adopted the Likert scale to measure people’s perceptions and views of a certain situation (Sugiyono 2020). Likert scale questions involve a universal method of collecting data, making it easy to understand them and draw conclusions or results from the responses (Preedy et al. 2010). The Likert scale is a type of psychometric response scale in which respondents express their extent of agreement with a statement using a four-point scale with options ranging from “strongly disagree” to “strongly agree”. The targeted area for gathering the data is called Sanur in Denpasar city, Bali Indonesia. The respondent data was collected 100% from SMEs of culinary sectors in Sanur, Denpasar Bali.
4 Results 4.1 The Influence of Financial Inclusion on SMEs Growth The results show that the first hypothesis (H1) is accepted. The growth of SMEs in terms of its sales, assets and profitability are impacted by the access towards finance, financial usage, and financial quality of financial inclusion. The results are also in accordance with previous studies that have investigated the same matter. According to Septiani and Wuryani (2020), Financial inclusion plays an important role as access to financial services may have a significant influence on the sustainability and growth of SMEs. Moreover, financial inclusion is required to be enhanced to aid small and medium enterprises in attaining business success. Therefore, it can be inferred that financial inclusion can influence SMEs growth, but not significantly. 4.2 The Influence of Financial Literacy on the Relationship Between Financial Inclusion and SMEs Growth The results show that the second hypothesis (H2) is accepted. it is proven that financial literacy in terms of its knowledge, attitude and behavior can affect the effect of financial inclusion to SMEs growth, bust not significantly. Previous studies have also implied the same results. According to the present study, having good financial knowledge leads to decision-making abilities that help people balance their alternatives and make informed financial decisions, such as choosing how and when to save and spend, comparing costs
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before making a big purchase, and setting aside money for retirement or other long-term investments. This research also shows how financial literacy positively influences the link between financial inclusion and the growth of SMEs. Because of sensible and better entrepreneurial financial judgments and choices, these competencies enable increased access to financial services in formal financial institutions. Financial literacy enhances financial management capabilities by being able to operate an individual’s finances. This behavior, knowledge and attitude will contribute to an SME owner, actor, or manager to potentially grow their business efficiently avoiding high risks by the advancement of their financial knowledge.
5 Conclusion Financial inclusion has a positive impact on SMEs growth, but not significant. Access to finance contributes to the growth of SMEs through obtaining sources of financing. The utilization of financial services and products that meet the businesses requirement also contributes to SMEs growth. Furthermore, the quality of delivering financial services to businesses in terms of its effectiveness, and how responsible as well as sustainable the services are will positively impact the growth of SMEs. This can be proven by the accessibility towards financial institutions that carry out activities such as getting loans and credit, making payments and deposits etc., On that note, the growth of SMEs in this study measures the sales, assets, and profitability of the business. Through the elements of financial access, usage and quality of financial inclusion, there is a positive impact on the sales, assets, and profitability of the growth of SMEs. It can be concluded that the study had demonstrated how financial inclusion efforts play a part in the growth of SMEs. Financial literacy positively moderates in the relationship between financial inclusion and growth of SMEs, but not significantly. The knowledge, attitude, and behavior of financial literacy increases the risk avoidance and management of actors of a business in achieving growth for small and medium enterprises. Financial literacy reflects a strong relationship between financial inclusion which extends to accessibility of financial products and services, making it crucial for small and medium enterprises, since these financial services and product may help in the growth of their business. This can be shown by SME owners’ decision-making abilities through financial knowledge, which helps them weigh options and make informed financial choices, including such when and how to save and spend, comparing costs before making a significant purchase, and planning for retirement or other long-term expenditures for the success of SMEs. Thus, when financial literacy is promoted and fully utilized, it will impact financial inclusion and SMEs growth in a positive matter.
References Devi, S., Warasniasih, N.M., Masdiantini, P.R.: The impact of COVID-19 pandemic on the financial performance of firms on the Indonesia stock exchange. J, Econ. Bus. Account. Ventura 23(2), 226–242 (2020). https://doi.org/10.14414/jebav.v23i2.2313
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Pratama, V., Santoso, I., Mustaniroh, S.A.: Development strategy of SMEs in the new normal era of coronavirus disease 2019 (COVID-19): a literature review. IOP Conf. Ser. Earth Environ. Sci. 733(1), 012058 (2021). https://doi.org/10.1088/1755-1315/733/1/012058 IntelligentHQ.. 5 challenges to financial inclusion (2022). https://www.intelligenthq.com/5-cha llenges-to-financial-inclusion/ Hung, A.A., Parker, A.M., Yoong, J.K.: Defining and measuring financial literacy. Defin. Meas. Finan. Liter. 708, 28 (2009). https://doi.org/10.7249/wr708 Bongomin, G.O.C., Ntayi, J.M., Munene, J.C., Malinga, C.A.: The relationship between access to finance and growth of SMEs in developing economies. Rev. Int. Bus. Strat. 27(4), 520–538 (2017). https://doi.org/10.1108/ribs-04-2017-0037 OJK. National strategy on Indonesian financial literacy (SNLKI) 2021–2025 (2022). https:// www.ojk.go.id/en/berita-dan-kegiatan/publikasi/Pages/National-Strategy-on-Indonesian-Fin ancial-Literacy-(SNLKI)-2021---2025.aspx OECD. Home. OECD iLibrary (2022). https://www.oecd-ilibrary.org/sites/13753156-en/index. html?itemId=/content/component/13753156-en Boletawa, E.: Financial literacy: An important tool for financial inclusion (2015). https://www. afi-global.org/newsroom/blogs/financial-literacy-an-important-tool-for-financial-inclusion/ Rahayu, S.: Financial inclusion and the success of MSMEs. JIA (Jurnal Ilmiah Akuntansi) 7(1), 147–158 (2022). https://doi.org/10.23887/jia.v7i1.46966 Ratnawati, K.: The influence of financial inclusion on MSMEs’ performance through financial intermediation and access to capital. J. Asian Finan. Econ. Bus. 7(11), 205–218 (2020). https:// doi.org/10.13106/jafeb.2020.vol7.no11.205 Preedy, V.R., Watson, R.R.: Handbook of Disease Burdens and Quality of Life Measures, vol. 4288. Springer, New York (2010). https://doi.org/10.1007/978-0-387-78665-0_6363
Exploring the Factors Leading to the Failure of Millennial Entrepreneurs: Challenges in Green Business Ida Nyoman Basmantra1(B) , Ida Ayu Karina Widya Apsari1 , Adie Wahyudi Oktavia Gama1 , Elif Baykal2 , and A.A.A. Ngurah Sri Rahayu Gorda1 1 Universitas Pendidikan Nasional, Jl. Bedugul No. 39, Sidakarya, Denpasar Selatan,
Kota Denpasar 80224, Bali, Indonesia [email protected] 2 Istanbul Medipol University, Kavacık Mah. Ekinciler Cad. No: 19, Kavacık Kav¸sa˘gı, 34810 Beykoz, ˙Istanbul , Turkey
Abstract. In the 21st century, the global economy has experienced a surprising shift, marked by an increasing focus on sustainability. Millennial entrepreneurs have acknowledged the necessity of addressing social and environmental issues and have responded to this changing landscape by embracing green business initiatives. Nevertheless, these entrepreneurs confront substantial challenges stemming from external risks associated with green enterprises. To investigate these challenges, this research employed a qualitative approach, involving semi-structured interviews that combined both organized and unstructured elements to comprehensively explore the subject. The study identifies eight pivotal factors that hinder the success of green businesses led by millennial entrepreneurs. These factors encompassthe absence of clear industry policies for green enterprises, a deficiency in technical knowledge related to green practices, a short-term investment mindset resulting in limited financial support, negative evaluations from experts and within the realm of social media, a lack of external pressures promoting sustainability, unfavorable shifts in the external business environment, constraints in aligning business capabilities with sustainability objectives, and flawed business models. Furthermore, researchers have recognized that the inherent characteristics of millennial entrepreneurs also contribute to shaping these factors. The findings highlight the critical influence of these eight factors on the challenges encountered by green businesses, shedding light on how millennial attributes affect the ultimate success or failure of such ventures. Keywords: Millennial Entrepreneurship · Failure Factor · Green Business · Challenges
1 Introduction The global economy has undergone unprecedented challenges and transformations in the 21st century. Millennial entrepreneurs are increasingly recognizing the need to address not only economic but also social and environmental requirements, in response to the © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 498–505, 2024. https://doi.org/10.1007/978-3-031-53998-5_45
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heightened global focus on environmental sustainability (Cui et al. 2019). Sustainability, encompassing economic, social, and environmental aspects, is being embraced by more businesses due to its numerous benefits (Geng et al. 2021; Liu et al. 2019). Research indicates that millennials are deeply committed to making positive social and environmental impacts. They are more likely to attribute global warming to human activity and show support for environmentally friendly policies such as the development of green energy and financial incentives for sustainability (Naderi and van Steenburg 2018). Green business, which involves meeting consumer needs without contributing to environmental or social concerns, is seen as the solution to achieving sustainability. However, millennial business owners often lack the qualifications necessary for their green ventures (Demirel et al. 2019). Researchers have identified eight factors that can lead to the failure of green businesses (Cui et al. 2019): the absence of green business sector policies, inadequate understanding of manufacturing or technology, a lack of investment, a short-term investor mindset, negative evaluations from experts and on social media, a dearth of external pressures promoting green business, unfavorable shifts in the external business environment, business capacity limitations that hinder growth, and poor business decision-making and adaptability. Previous research has explored how the perspectives of millennial entrepreneurs influence their perceptions of business failure (Boso et al. 2019). Cui et al. (2019) made the same assertion, emphasizing the connection between cognition and the eight factors contributing to green business failure. In summary, this study addresses the need to delve into the intricate dynamics of green businesses. The contributions of this research include: 1. An exploration of the factors influencing green business failure. 2. The incorporation of millennial characteristics into the analysis of green business failure factors.
2 Theoretical Framework and Hypotheses Entrepreneurial characteristics vary between millennials and other generations (Struckell 2019). While successful entrepreneurs tend to prioritize the success of their ventures with a strong focus on achievement and determination, millennials are often characterized as narcissistic and self-centered. They are accustomed to instant gratification without significant effort, and while they claim to be achievement-oriented, they are more driven by status and prestige rather than hard work. In contrast, entrepreneurs pursue their goals tenaciously, regardless of rank or reputation. Millennials are often seen as impatient, frequently changing jobs if promotions or better opportunities are delayed. In contrast, entrepreneurs exhibit resilience and determination in the face of challenges. Millennials are often viewed as high maintenance, seeking constant feedback, nurturing, and guidance in the classroom and workplace. Entrepreneurs, on the other hand, are characterized by their autonomy, self-reliance, and confidence in their abilities to complete tasks. Millennials place a high value on work-life balance and leisure time, reflecting a reduced emphasis on work centrality compared to their baby boomer predecessors and entrepreneurs. Lastly, millennials are seen as multitasking and skimming
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the surface of various tasks, while entrepreneurs tend to focus on one endeavor at a time and exhibit in-depth knowledge in every aspect of their business. The failure of green businesses is influenced by several factors, including millennial characteristics (Cui et al. 2019). According to Cui et al. (2019), eight factors contribute to the failure of green firms. First, there is a direct link between a short-term investor mindset and insufficient investment and the failure of green businesses. Green companies require substantial financial support due to various costs associated with environmental sustainability. Funds are the foundation of corporate development, and long-term financial support is essential. The inability of a company’s business capacity to adapt to its growth is a primary reason for the failure of green firms. Inadequate self-awareness regarding the company’s capabilities leads to business failure, and addressing this issue may require leadership reorganization and oversight. Lack of proper leadership is identified as a fundamental requirement for the survival of green firms in the evaluation results. Furthermore, the absence of green technological knowledge and the lack of policies specific to the green business industry can easily lead to the collapse of a green firm. Green businesses should prioritize the acquisition of green technical knowledge and the implementation of industry policies to reduce the risk of failure. Negative opinions and appraisals from professionals and on social media platforms play a significant role in the failure of green businesses. Public perception and consumer feedback can have a substantial impact on a company’s growth, highlighting the importance of managing these aspects. The absence of external pressure is another major contributor to business failure. External pressures from various sources, such as system specifications (Jia et al. 2017), environmental considerations (Yu et al. 2017), and policy changes (Antonietti et al. 2017), can influence green businesses positively. Adverse changes in the external environment, poor business decisions, and a failure to learn also contribute to business failure. To mitigate these risks, managers should monitor external environmental changes, adapt business plans accordingly, and learn from past mistakes.
3 Methodology This research was conducted in Bali without specifying a particular area. The study analyzed the factors contributing to the failure of millennial entrepreneurship in the context of green businesses in Bali. Bali served as the primary location because there was a growing interest in green business, especially among millennial entrepreneurs. These entrepreneurs employed different strategies and decisions in their green business ventures based on their unique characteristics. The research design chosen for this study is descriptive qualitative. In selecting the sample, key informants or individuals involved in social events were purposefully chosen using purposive sampling. This technique targeted people or data sources believed to possess extensive information relevant to the research objectives. For data collection, a semi-structured interviews were conducted. Semi-structured interviews incorporated elements of both organized and unstructured interviews. In this approach, the interviewer prepared a set of standard questions that all informants had to address. Supplementary
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questions were also introduced during interviews to delve deeper into specific topics. This interview style aimed to directly extract opinions and ideas from the interviewees, facilitating a more comprehensive understanding of the issues.
4 Results and Discussion As reported by Klimas et al. (2021), the attributes of millennial entrepreneurs played a role in affecting the failure rates of green businesses. Research conducted by Guerrero et al. (2021) revealed that Millennials have become increasingly self-centered and self-reliant. Their inclination toward a more nomadic lifestyle, driven by the pursuit of personal fulfillment, has led to reduced commitment to their formal organizations. A compilation of characteristics drawn from various sources includes traits like narcissism, overconfidence, impatience, a preference for a supportive work environment, limited trust beyond family and friends, a need for regular validation and guidance, a focus on work-life balance, and a sense of optimism (Struckell 2019). These distinctive characteristics of millennial entrepreneurship exerted an influence on the factors contributing to the failure of green businesses. Millennials exhibited their unique qualities, and their findings diverged from those of earlier studies. The following characteristics (Cui et al. 2019) underscore the intricate relationship between millennial entrepreneurship and the elements contributing to failure: a. The lack of industry policy of green business Millennial entrepreneurs engaged in green businesses continue to face challenges related to government policies. These challenges are intertwined with the characteristics of millennial entrepreneurship, specifically in the realm of relationships. Millennial entrepreneurs are often characterized by having low levels of trust. This lack of trust can significantly affect their businesses, particularly in their interactions with the government. The government’s inability to establish clear regulations and update existing laws has resulted in numerous hindrances for millennial entrepreneurs in the green business sector. b. Lack of green technical knowledge A lack of skills and knowledge in the field of green technology is evident, necessitating a more profound understanding and training in its use. This issue is linked to a common characteristic of millennials – their desire for a nurturing environment with opportunities for training and development. However, this desire is not consistently met in millennial entrepreneurship, resulting in inadequate training for employees and, consequently, a lack of essential skills among the workforces. c. Short-term investor mind-set and less investment Millennial entrepreneurship often fails to recognize future opportunities, particularly in the context of green investments. They tend to rely on their own resources and funding without seeking external assistance. This behavior is linked to the overconfidence characteristic commonly associated with millennials. They believe in their abilities to a high degree and may not see the need for additional support or experience. d. Negative opinion and evaluation from experts and social media The opinions or evaluations received may not significantly affect the company, but it is important to address them promptly to prevent potential issues from escalating. Failing
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to address these concerns could harm the company’s reputation. This relates to the millennial characteristic of work ethics, as millennial entrepreneurship prioritizes maintaining the company’s image. Nevertheless, it is advisable for millennial entrepreneurship to consistently monitor and evaluate customer complaints to prevent them from turning into major problems. e. Lack of external pressure Government policies like the G20’s focus on green, blue, and circular economies do not necessarily boost the profits of green businesses. Green businesses typically align with these concepts already, and as a result, such policies do not significantly impact their demand or profits. This can be linked to the optimistic and accepting nature of millennial entrepreneurship. Millennials tend to hold an optimistic view of government policies, even when they may not experience direct benefits. It is vital to note that these policies may not cover all businesses. f. Changes in the external environment are not conducive to the development of companies Severe weather conditions significantly impact the operations of green businesses by disrupting the manufacturing and shipping of goods. This is connected to a characteristic of millennial entrepreneurship, which is their acceptance of the uncertainty of climate change. Millennial entrepreneurs tend to accept the reality of climate change without having a clear strategy for mitigating its effects. This lack of proactive action can result in disruptions to the production process due to unforeseen weather challenges. g. The company’s business capacity cannot adapt to the company’s development Consumer preferences play a significant role in shaping the production processes of green businesses. In cases where consumers express a strong aversion to chemical preservatives, millennial entrepreneurs choose to create products without these additives. Unfortunately, this approach can result in the products having shorter shelf lives. This is linked to the self-centered characteristic of millennial entrepreneurs, as they often prefer products that incorporate chemicals to minimize the risk of spoilage. In contrast, consumers prioritize maintaining product aesthetics while adhering to natural ingredients. h. Invalid business decisions and failure to learn Unsuccessful decisions in green businesses often stem from a lack of awareness regarding the external environment. Rushed decision-making that skips proper identification and evaluation can lead to invalid choices. This tendency is linked to the characteristic of impatience among millennial entrepreneurs, who may not fully consider the consequences of their actions. To enhance their decision-making, millennial entrepreneurs should exercise greater caution and formulate strategies while taking into account the prevailing environmental conditions.
5 Conclusion, Implication and Recommendations 5.1 Conclusion This research investigates the factors contributing to the failure of millennial entrepreneurship in green businesses, aiming to uncover the challenges faced by millennial entrepreneurs and their relationship with specific millennial characteristics. The
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findings reveal eight factors that hinder green businesses and their connection to millennial cognition. Many participants concur that one of the key challenges is the absence of clear industry policies for green businesses, leading to obstacles in obtaining governmental support. This challenge is influenced by millennial characteristics, particularly the aspect of relationships, characterized by a perceived lack of trust in the government. This trust deficit can have a substantial impact on the affected companies. Another factor involves a short-term investor mindset and minimal investment in green initiatives. Millennial entrepreneurs often fail to recognize future opportunities, specifically in terms of green investments, and tend to rely on their own funds rather than seeking external assistance. This behavior is linked to the characteristic of overconfidence, where millennial entrepreneurs may feel self-assured without seeking additional experience or expertise. Furthermore, negative opinions and evaluations from experts and social media can impact businesses. While these critiques may not always have an immediate impact, addressing them promptly is essential to prevent the issue from escalating. This reflects the work ethics characteristic of millennial entrepreneurship, emphasizing the importance of maintaining a positive company image. However, it is advisable for millennial entrepreneurs to continuously monitor and evaluate customer complaints to prevent these issues from escalating. The lack of external pressure, such as the G20’s promotion of green, blue, and circular economies, does not significantly increase profits for green businesses. This is because most green businesses have already adopted eco-friendly practices. This response is influenced by millennial characteristics, particularly optimism and acceptance. Millennial entrepreneurs tend to be optimistic about government policies, even if they have not directly experienced their effects. Additionally, changes in the external environment can hinder business development. Extreme weather conditions can significantly disrupt the production and transportation of green goods. This issue is connected to the millennial characteristic of acceptance, where millennial entrepreneurship acknowledges the uncertainty of climate change but may lack a proactive strategy to address it. Lastly, invalid business decisions and a failure to learn from past experiences contribute to the challenges faced by green businesses. Impatience is a notable characteristic of millennial entrepreneurship, which can result in rushed decision-making without proper evaluation of the external environment. To address these challenges, millennial entrepreneurs should exercise greater caution and develop strategies that consider the prevailing environmental conditions. 5.2 Implications By highlighting the aspects of failure within millennial entrepreneurship, this study opens numerous prospects for future research, encompassing both theoretical advancements and concept validation. To expand upon the innovative findings of this study, additional research will be essential. The current research offers a comprehensive sample selection that primarily delves into investigating the relationship between failure factors and the prototypical millennial entrepreneur. This presents an opportunity to delve deeper into the factors leading to green business failures and explore other relevant variables.
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The study also delves into the root causes of green business failure, emphasizing the importance of organizations, employees, and stakeholders in assessing their external risks. A thorough examination and analysis of external factors can significantly reduce obstacles for green businesses. Moreover, it becomes evident that millennial characteristics have a bearing on these failure factors. Therefore, millennials should exercise prudence and diligence when making decisions. The exploration of this phenomenon in the current study lays the groundwork for future research, which could benefit from collaboration with academic institutions and universities. 5.3 Recommendations Taking a fresh perspective on the topic, it is important to recognize that millennial entrepreneurs are not the sole participants in the green business landscape. Therefore, future research should delve deeper into various entrepreneurial characteristics and their responses to industry changes. In addition to the eight identified failure factors that impact green businesses, there may be other potential factors worth exploring. This underscores the necessity for future research to conduct thorough investigations into these potential failure factors affecting green businesses. For green businesses to thrive, it is crucial to consider the perspectives of both internal and external stakeholders, as they play a significant role in enhancing business performance. Moreover, fostering collaboration and support among colleagues and employees is key. Identifying areas for improvement and addressing deficiencies is equally important. Ultimately, green businesses must establish robust planning and strategies to sustain their operations. Experts recommend conducting PESTLE analyses for comprehensive internal and external assessments, thereby mitigating business risks and averting failure.
References Antonietti, R., de Marchi, V., di Maria, E.: Governing offshoring in a stringent environmental policy setting: evidence from Italian manufacturing firms. J. Clean. Prod. 155, 103–113 (2017). https://doi.org/10.1016/j.jclepro.2016.11.106 Boso, N., Adeleye, I., Donbesuur, F., Gyensare, M.: Do entrepreneurs always benefit from business failure experience? J. Bus. Res. 98, 370–379 (2017). https://doi.org/10.1016/j.jbusres.2018. 01.063 Cui, L., Chan, H.K., Zhou, Y., Dai, J., Lim, J.J.: Exploring critical factors of green business failure based on Grey-Decision Making Trial and Evaluation Laboratory (DEMATEL). J. Bus. Res. 98(March), 450–461 (2019). https://doi.org/10.1016/j.jbusres.2018.03.031 Demirel, P., Li, Q.C., Rentocchini, F., Tamvada, J.P.: Born to be green: new insights into the economics and management of green entrepreneurship. Small Bus. Econ. 52(4), 759–771 (2019). https://doi.org/10.1007/s11187-017-9933-z Geng, D., Lai, K.H., Zhu, Q.: Eco-innovation and its role for performance improvement among Chinese small and mediumsized manufacturing enterprises. Int. J. Prod. Econ. 231 (2021). https://doi.org/10.1016/j.ijpe.2020.107869 Guerrero, M., Amorós, J.E., Urbano, D.: Do employees’ generational cohorts influence corporate venturing? a multilevel analysis. Small Busin. Econ. 57(1), 47–74 (2021). https://doi.org/10. 1007/s11187-019-00304-z
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Jia, Q., Guo, Y., Barnes, S.J.: Enterprise 2.0 post-adoption: Extending the information system continuance model based on the technology-Organization-environment framework. Comput. Hum. Behav.. Hum. Behav. 67, 95–105 (2017). https://doi.org/10.1016/j.chb.2016.10.022 Klimas, P., Czakon, W., Kraus, S., Kailer, N., Maalaoui, A.: Entrepreneurial failure: a synthesis and conceptual framework of its effects. Eur. Manage. Rev. 18(1), 167–182 (2021). https://doi. org/10.1111/emre.12426 Liu, J., Zhu, Y., Serapio, M., Cavusgil, S.T.: The new generation of millennial entrepreneurs: a review and call for research. Int. Bus. Rev. 28(5), 101581 (2019). https://doi.org/10.1016/j.ibu srev.2019.05.001 Naderi, I., van Steenburg, E.: Me first, then the environment: young Millennials as green consumers. Young Consumers 19(3), 280–295 (2018). https://doi.org/10.1108/YC-08-201700722 Struckell, E.M.: Millennials: a generation of un-entrepreneurs. 19(2), 156–168 (2019) Yu, J., Lo, C.W.H., Li, P.H.Y.: Organizational visibility, stakeholder environmental pressure and corporate environmental responsiveness in China. Bus. Strateg. Environ. 26(3), 371–384 (2017)
Auditors Ability in Detecting Fraud: Evidence from External Auditor in Bali Nyoman Sri Subawa1(B) , Fellicia Ayu Ningrat1 , Made Srinitha Millinia Utami2 , Nyoman Sridiva Dian Prabarini3 , Ni Kadek Winda Yanti1 , and Ida Nyoman Basmantra1 1 Universitas Pendidikan Nasional, Jl. Bedugul No. 39, Sidakarya, Denpasar Selatan,
Kota Denpasar, Bali 80224, Indonesia {shribawa,shribawa}@undiknas.ac.id 2 Murdoch University, 90 South Street, Murdoch, WA 6150, Australia 3 Universitas Diponegoro, Jl. Prof. Sudarto No. 13, Tembalang, Kec. Tembalang, Kota Semarang, Jawa Tengah 50275, Indonesia
Abstract. Lack of professional skepticism by auditorscan lead to fraudulent and inaccurate financial reporting, which can result in substantial loss and reputational damage to the company. Thus, the purpose of this study is to understand how professional skepticism affects auditors’ ability to detect fraud by identifying these factors (auditor’s experience, independence, and competence). In this study, 16 Certified Public Accountant (CPA) firms in Bali province were analyzed by means of a questionnaire survey. The findings suggest that auditor experience (0.000 sig. 1.667). Consequently, H0 is rejected, and H2 is accepted. This suggests that auditors’ independence significantly and positively affects their fraud detection capabilities. This finding aligns with the work of Pratiwi et al. [22] and underscores the importance of auditors maintaining their independence. Additionally, research indicates that cognitive and motivational biases can undermine independence, potentially leading to incorrect audit conclusions [23, 24]. Heightened independence reduces the likelihood of undetected fraud, reinforcing the notion that more independent auditors are more effective at detecting fraudulent activities. Lastly, the analysis in Table 1 reveals that the variable X3 (AC) exhibits a positive and statistically significant effect on AA, with a sig value of 0.001 (below the 0.05 threshold), a positive regression coefficient of 0.683, and a tcount value exceeding the critical ttable value (3.357 > 1.667). Thus, H0 is rejected, and H3 is accepted. This indicates that auditors’ competence has a notable and positive impact on their ability to identify fraud, consistent with findings from Pratiwi et al. [22] This underscores the importance of developing competencies in auditors through on-the-job training, in addition to higher education, as each client’s business is unique, requiring auditors to invest time in gaining insight into potential fraudulent activities through skill development, knowledge acquisition, and competence enhancement in areas such as understanding the client’s business and internal control systems. b) Simultaneous Significance Test (F-Test) H0 is rejected if Fcount > Ftable ; nevertheless, H0 is accepted if Fcount < Ftable , using a significance level of 5% or 0.05. Based on the results of the analysis in Table 2, the significance value of the F test is 0.000 < 0.05 and Fcount > Ftable (22.368 > 3.13). This result means that AE, AI, and AC have a joint effect on AA. Table 2. F-Test Model
Model
Sum of Squares
df
Mean Square
F
Sig.
1
Regression
404.506
3
134.835
22.368
0.000b
Residual
403.888
679
Total
808.394
70
6.028
c) Coefficient of Determination (R2 ) Test Based on Table 3, the influence of the predictor variables toward the dependent variable is represented by the total determination value of 0.478, which means that AE, AI, and AC affect 47.8% of the auditor’s ability to detect fraud, while the remaining 52.2% is involved by other factors that were not in the framework.
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Table 3. R2 Test Model
R
R Square
Adjusted R Square
Std. Error of the Estimate
1
0.707a
0.500
0.478
2.455
3.2 Moderated Regression Analysis Hypothesis Testing Moderated regression analysis is performed to see whether a moderating variable can increase or decrease the association between the independent and dependent variables. The Moderating Effect of PS on the Relationship between AE and AA Based on Table 4, the constant value assumes that value of AA reduces by 92.556 if the variables AE, PS, and moderate 1 are not included. If X1 (AE) increases by 1, then AA will increase by 5.287. If M (PS) increases by 1, then AA will increase by 2.931. If X1M (Moderate 1) increases by 1, then AA will decrease by 0.124. Variable M1 (Moderate 1) has a significant value on AA, this can be seen from the value of sig M1 (Moderate 1) 0.000 < 0.05 and the value of tcount > ttable (−4.399 > 1.667). Therefore, H0 is rejected and H4 accepted. Table 4. MRA Test 1 Dependent Variable
AA
Independent Variable
Unstandardized Coefficients
t
Sig.
−3.552
0.001
B
Std. Error
(Constant)
−92.556
26.057
AE
5.287
1.031
5.129
0.000
PS
2.931
0.701
4.184
0.000
Moderate 1
−0.124
0.028
−4.399
0.000
Hypothesis testing indicates that PS moderates the relationship between AE and AA, and surprisingly, the results reveal a negative moderation effect. The negative t-count value and regression coefficient of −0.124 signify that the variable Professional Skepticism (M) has the potential to weaken the connection between Auditors’ Experience (X1) and their Ability to Detect Fraud (Y). This negative impact arises because professional skepticism among auditors is an internal factor that varies among individuals, likely due to differences in their awareness of fraud risk [25]. The study involved 45 auditors with one to three years of work experience, potentially leading to a reduced level of suspicion, which, in turn, affects their ability to detect fraud. Furthermore, professional skepticism does not consistently yield the same results, and auditor skepticism does not always result in the discovery of misstatements. Consequently, more extensive investigations or procedures may be required, potentially causing time and cost overruns that audit firms cannot easily recover [26].
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The Moderating Effect of PS on the Relationship between AI and AA A constant value suggests that, excluding the variables of AI, PS, and moderate 2, the value of AA increases by 114.252 as shown in Table 5. If X2 (AI) increases by 1, then AA will decrease by 2.659. If M (PS) increases by 1, then AA will decrease by 2.209. If X2M (Moderate 2) increases by 1, then AA will increase by 0.073. Variable M2 (Moderate 2) has a significant value on AA, this can be seen from the value of sig M2 (Moderate 2) 0.032 < 0.05 and the value of tcount > ttable (2.195 > 1.667). Thus, H0 is rejected and H5 is accepted. Table 5. MRA Test 2 Dependent Variable
Independent Variable
Unstandardized Coefficients B
Std. Error
AA
(Constant)
114.252
30.232
3.779
0.000
AI
−2.659
1.236
−2.152
0.035
PS
−2.209
0.817
−2.704
0.009
0.073
0.033
2.195
0.032
Moderate 2
t
Sig.
The hypothesis testing reveals that AI with the moderating variable of PS has a significant effect on AA. This result was in accordance with prior research [27], which revealed that the auditors’ ability to detect fraud will improve if there is a greater interaction between independence and professional skepticism. Other researchers [28, 29] reported that auditors seem unable to detect financial accounting irregularities leading to a shortage of independence and professional skepticism, even though auditor independence is an essential component of ensuring the consistency and validity of management-prepared financial statements. The Moderating Effect of PS on the Relationship between AC and AA The constant value assumes that removing AC, PS, and moderate 3 reduces the value of AA by 62.339 as shown in Table 6. If X3 (AC) increases by 1, then AA will increase by 4.911. If M (PS) increases by 1, then AA will increase by 2.077. If X3M (Moderate 3) increases by 1, then AA will decrease by 0.109. The variable M3 (Moderate 3) has a significant value on AA, this can be seen from the value of sig M3 (Moderate 3) 0.034 < 0.05 and the value of tcount > ttable (−2.162 > 1.667). Therefore, H0 is rejected and H6 is accepted. The hypothesis testing reveals that AC with the moderating variable of PS has a significant effect on AA in a negative way. Therefore, the variable Professional Skepticism (M) has the potential to weaken the link between Auditors’ Competence (X3) and Auditors’ Ability to Detect Fraud (Y). This finding contradicts that of Zarefar et al. [30]. Although when red flags indicate a risk of deception, this could be due to other factors, such as presumed trust as the dominant mental perspective [31]. When the possibility of deception exists, auditors’ firm adherence to presumed confidence levels may reflect their general reluctance to detect deceit or to exercise the level of professional skepticism
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Table 6. MRA Test 3 Dependent Variable
AA
Independent Variable
Unstandardized Coefficients
t
Sig
−1.557
0.124
B
Std. Error
(Constant)
−62.339
40.027
AC
4.911
1.845
2.662
0.010
PS
2.077
1.082
1.920
0.059
Moderate 3
−0.109
0.050
−2.162
0.034
required by fraud-related standards. Another factor is that auditors tend to conduct audit evidence examinations against the auditing standards and knowledge suggested by Du [18], which limits their ability to maximize skepticism. As a result, auditors are unable to spot carefully orchestrated potential fraud. In sum, even if auditors are competent, if the suspicion is inappropriate, the outcome will be adverse, leading to a reduced auditor’s ability to detect such deception.
4 Conclusion This study shows that auditors’ experience, independence, and competence have a positive and significant effect on the auditors’ ability to detect fraud and auditor professional skepticism positively moderating the relationship between auditors’ independence and their ability to detect fraud. Interestingly, the results of this study suggest that professional skepticism is moderated by reducing the relationship between auditor experience and ability to detect such fraud. These findings suggest the importance of bridging the gap in audit expectations between user and auditor perceptions. Accounting firm leaders must align the goals of the workplace organization with the organization’s professional goals, paying particular attention to skepticism. The findings also aim to address public concerns about the ability and responsibility of external auditors to detect fraud.
References 1. Prameswari, A., Purwohedi, U., Respati, D.: Factors affecting auditor’s ability to detect fraud. Jurnal Akuntansi, Perpajakan dan Auditing 3, 78–96 (2022). https://doi.org/10.21009/japa. 0301.06 2. PCAOB. 2020. Auditing Standards of the Public Company Accounting Oversight Board. Public Company Accounting Oversight Board. Accessed 29 Sept 2021. https://pcaobus.org/ oversight/standards/auditing-standards 3. Hardies, K.: Auditor independence impairment: bonding between clients and individual engagement partners and individual engagement partners. Spanish J. Finance Accounting 00(00), 1–25 (2019). https://doi.org/10.1080/02102412.2019.1667177 4. Petra, S., Spieler, A.C.: Accounting scandals: enron, worldcom, and global crossing. Corporate Fraud Exposed, 343–360 (2020). https://doi.org/10.1108/978-1-78973-417-120 201022
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5. Subawa, N.S., Widhiasthini, N.W., Permatasari, N.P.I.: Local brand franchise competition in the disruption era. Int. J. Productivity Quality Manage. 31(4), 445–460 (2020) 6. Hadian, A.I.: SNP Finance Case Dragging Retail Financing Legend. Accessed 30 Sept 2021 (2018). https://en.katadata.co.id/in-depth/2018/10/15/snp-finance-case-dragging-retailfinancing-legend 7. Widhiasthini, N.W., Subawa, N.S., Basmantra, I.N., Wisudawati, N.N.S.: The practice of new public management in the digitalisation of election campaign. Int. J. Electron. Governance 14(4), 490–505 (2022) 8. ACFE. 2019. Survei Fraud Indonesia 2019. ACFE Indonesia, 72. Accessed 27 Sept 2021. https://acfe-indonesia.or.id/survei-fraud-indonesia/ 9. Olojede, P., Erin, O., Asiriuwa, O., Usman, M.: Audit expectation gap: an empirical analysis. Future Bus. J. 6(1), 1–12 (2020). https://doi.org/10.1186/s43093-020-00016-x 10. Duh, R.R., Kuo, L.C., Yan, J.C.: The effects of review form and task complexity on auditor performance. Asia-Pac. J. Account. Econ. 25(3–4), 449–462 (2018). https://doi.org/10.1080/ 16081625.2017.1346479 11. Yuen, D.C.Y., Law, P.K.F., Lu, C., Guan, J.Q.: Dysfunctional auditing behaviour: empirical evidence on auditors’ behaviour in Macau. Int. J. Account. Inf. Manag.Manag. 21(3), 209–226 (2013). https://doi.org/10.1108/IJAIM-12-2012-0075 12. Su, J.M., Lee, S.C., Tsai, S.B., Lu, T.L.: A comprehensive survey of the relationship between self-efficacy and performance for the governmental auditors. Springerplus 5, 1 (2016). https:// doi.org/10.1186/s40064-016-2104-x 13. Zahmatkesh, S., Rezazadeh, J.: The effect of auditor features on audit quality. Tékhne 15(2), 79–87 (2017). https://doi.org/10.1016/j.tekhne.2017.09.003 14. Kassem, R.: Understanding financial reporting fraud in Egypt: evidence from the audit field. Third World Quarterly 40(11), 1996–2015 (2019). https://doi.org/10.1080/01436597.2019. 1626709 15. Qi, B., Yang, R., Tian, G.: Do social ties between individual auditors and client CEOs/CFOs matter to audit quality? Asia-Pac. J. Account. Econ. 24(3–4), 440–463 (2017). https://doi. org/10.1080/16081625.2015.1135067 16. Umar, H., Erlina, Fauziah, A., Purba, R.B.: Audit quality determinants and the relation of fraud detection. Int. J. Civil Eng. Technol. 10(03), 1447–1460 (2019) 17. Siriwardane, H.P., Kin Hoi Hu, B., Low, K.Y.: Skills, knowledge, and attitudes important for present-day auditors. Int. J. Auditing 18(3), 193–205 (2014). Doi:https://doi.org/10.1111/ ijau.12023 18. Du, M.: Corporate governance: five-factor theory-based financial fraud identification. J. Chin. Governance 6(1), 1–19 (2020) 19. Mardijuwono, A.W., Subianto, C.: Independence, professionalism, professional skepticism. Asian J. Accounting Res. 3(1), 61–71 (2018). https://doi.org/10.1108/ajar-06-2018-0009 20. Kusumawati, A., Syamsuddin, S.: The effect of auditor quality to professional skepticsm and its relationship to audit quality. Int. J. Law Manage. 60(4), 998–1008 (2018). https://doi.org/ 10.1108/IJLMA-03-2017-0062 21. Indrijawati, A., Rahmawati, H., Mannan, A.: Auditor experience, work load, personality type, and professional auditor skeptisism against auditors ability in detecting fraud. Talent Dev. Excellence 2, 1878–1890 (2020) 22. Pratiwi, W., Rizal, N., Indrianasari, N.T., Wiyono, M.W., Ifa, K.: Auditor competence, auditor independence, auditor experience, audit fees and time budget pressure against fraud detection. J. Adv. Res. Dynamical Control Syst. 11(12), 26–33 (2019). https://doi.org/10.5373/JARDCS/ V11I12/20193208 23. Church, B.K., Jenkins, J.G., McCracken, S.A., Roush, P.B., Stanley, J.D.: Auditor independence in fact: research, regulatory, and practice implications drawn from experimental
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Legalizing Village-Owned Enterprises (BUMDES) Through Dialectics of Strengthening I. Nyoman Subanda1(B) , Ida Ayu Putu Sri Astiti Padmawati2 , and Ida Ayu Ratna Kumala3 1 Universitas Pendidikan Nasional, Jl. Bedugul No. 39, Sidakarya, Denpasar Selatan,
Kota Denpasar, Bali 80224, Indonesia [email protected] 2 Universitas Hindu Negeri, Jl. Ratna No. 51, Tonja, Kec. Denpasar Utara, Kota Denpasar, Bali 80237, Indonesia 3 Universitas Udayana, Jl. Raya Kampus Unud, Jimbaran, Kec. Kuta Sel., Kabupaten Badung, Bali 80361, Indonesia
Abstract. The issuance of Government Regulation in Lieu of Law No. 2 of 2022 regarding Job Creation represents a notable change in the title of Village-Owned Enterprises (BUMDes). Previously classified as business entities, BUMDes are now redefined as legal entities. This transformation carries significant implications for village governance, presenting a range of opportunities and challenges. The objective of this study is to examine and assess the importance and outcomes of BUMDes transitioning into legal entities. In this research, a qualitativenormative legal approach was employed, utilizing primary, secondary, and tertiary legal sources obtained through literature reviews and document analysis. Two distinct research approaches were adopted in this article: the statutory approach and the conceptual approach. The study’s findings can be summarized as follows: the reclassification of BUMDes as legal entities is intended to clarify their ability to effectively enhance economic management at the village level. Following the enactment of the Job Creation Regulation, BUMDes acquired legal status similar to a Limited Liability Company (PT). This new status is also on par with State-Owned Enterprises (BUMN) nationwide and Regional-Owned Enterprises (BUMD) locally. This change has resulted in a) Adjustments in the position and organizational structure of BUMDes; b) Enhanced authority to engage in collaborations with other entities; and c) The capacity to secure loans and financial resources. Keywords: Village Owned Enterprises (BUMDes) · Legal Entities · Urgency
1 Introduction The growth and establishment of Village-Owned Enterprises, commonly referred to as BUMDes, are anticipated to represent a novel economic influence in rural regions. BUMDes can be regarded as a tool for enhancing village autonomy, signifying the development of the village’s potential, facilitated by the village administration within © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 516–525, 2024. https://doi.org/10.1007/978-3-031-53998-5_47
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the bounds of the village’s capacities and jurisdiction. Furthermore, they serve as a means for enhancing the well-being of the community, accomplished by engaging residents in the management of BUMDes, and as part of a government program aimed at elevating the living standards of the community. BUMDes functions by providing a structured, professionally managed framework for incorporating community economic activities into an organization. BUMDes can serve as the central hub of community life, capable of harnessing the community’s productive capabilities, and its doors are open to all members of the village. The formation of this economic entity is no longer dictated solely by government directives. Instead, it should stem from the aspirations of the village community, grounded in the untapped potential that, when efficiently utilized, can create market demand. The goal is to ensure that, in the future, the existence of economic institutions is not subject to the dominance of particular groups with substantial capital. These establishments are meant to be under communal ownership and administration by the village, primarily with the goal of improving the economic prosperity of the entire village community. In accordance with Law Number 6 of 2014, also known as the Village Law, specifically outlined in Chapter X, it is stipulated that Villages have the authority to create Village-Owned Enterprises referred to as BUMDes. Article 1, paragraph 6 of the Village Law defines that: “Village-Owned Enterprises, hereinafter referred to as BUM Desa, are business entities whose capital is wholly or largely owned by the Village through direct participation originating from separated Village assets in order to manage assets, services and other businesses for the greatest possible welfare. Villagers” The cornerstone of economic activities within the village, represented by BUMDes, serves a dual role as both a social organization and a business entity. As a social institution, BUMDes promotes the community’s welfare by providing crucial social services. At the same time, as a commercial entity, BUMDes is focused on profit generation through the supply of local resources (goods and services) to the market. In its business operations, efficiency and efficacy values are of utmost importance. After the publication of Government Regulation in Lieu of Law of the Republic of Indonesia no. 2 of 2022 concerning Job Creation (hereinafter referred to as the Job Creation Perpu) brings major changes to the position of BUMDes, which were initially still placed as just business entities, then after the presence of Article 117 of the Job Creation Perpu they changed to become Legal Entities. Article 117 of the Job Creation Perpu determines the following. “Village-Owned Enterprises, hereinafter referred to as BUM Desa, are legal entities established by Villages and/or together with Villages to manage businesses, utilize assets, develop investment and productivity, provide services, and/or provide other types of business for the maximum the great welfare of the village community.” This transition carries significant implications for village governance, potentially giving rise to new challenges. The transition of BUMDes from being initially considered
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a business entity to a legal entity necessitates a thoughtful examination of the scope and consequences of this legal entity status. This is particularly important due to the less than ideal management of BUMDes by the village government. In view of the aforementioned concerns, the author’s interest is to investigate two legal aspects: 1. What is the rationale behind changing BUMDes’ status to that of a legal entity? 2. What are the repercussions of BUMDes’ transformation into a legal entity? The overarching objective is to examine and analyze the significance and ramifications of BUMDes’ shift to legal entity status.
2 Methodology The authors employ the Normative legal research method in crafting this scientific article. Normative legal research is an approach to legal inquiry that focuses on defining the ideal state of the law, rather than simply describing its current state. Its main objective is to evaluate and propose improvements or changes to established legal frameworks and systems. Normative legal research delves into issues related to legal philosophy, ethics, and justice, with the aim of shaping the legal landscape based on ethical and moral principles. The research approach utilized to underpin the data in this study involves legislation and conceptual approaches.
3 Results and Discussion 3.1 The Urgency of Changing the Position of BUMDes to Become a Legal Entity Article 18B, paragraph (2) of the 1945 Constitution of the Republic of Indonesia establishes the fundamental norm that mandates the state to acknowledge and respect customary law community units (villages, gampongs, nigari, villages, etc.) along with their traditional rights. The term “legal community unity” has characterized the village as a hybrid organization, combining elements of a self-governing community with those of local government or local self-government. Most Indonesian people always come to the village government to obtain services and solve social problems 24 h a day without stopping. This distinction sets the village apart from local governments, which have specific working hours to serve the community. Consequently, the village, as a community government organization that combines self-governing community and local selfgovernment elements, deserves recognition and respect within the government system of the Republic of Indonesia. a) Villages take the form of community government or community-based government. Village government is different from regional government, where regional government does not contain community elements, but rather bureaucratic apparatus. b) Villages should not be confused with village governments and village heads. The village encompasses both the local self-government and the self-governing community, forming a single legal entity. The enactment of the Village Law has established the village as a collective platform for both state and community affairs, giving rise to the concept of Village Tradition as a framework for community and state activities within the village. The fundamental principles of the Village Tradition include:
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a) Villages serve as the foundation of social capital, nurturing inclusive values of unity, collaboration, self-assistance, and cooperation that go beyond the limitations of family ties, tribal affiliations, religious beliefs, or similar distinctions. b) Villages possess authority and a governance structure that includes the power and responsibility to oversee and govern community interests. c) Villages function as local economic catalysts with the capacity to provide essential services and distribute them to the community while ensuring their protection. The Village Tradition Concept represents an elementary concept intertwined with the formation of BUMDes. Village Traditions align with the abundance of social and political capital, influencing the continuance and feasibility of BUMDes. The central tenets of Village Traditions in the establishment of BUMDes include: a) BUMDes require social capital, encompassing cooperation, solidarity, trust, and similar factors, to facilitate business development that extends to a broader and more inclusive social network. b) BUMDes fosters inclusive politics by engaging in Village Deliberation as the foremost platform for developing Village economic enterprises, led by BUMDes. c) BUMDes represents a collective form of Village economic enterprise involving both the Village government and the Village community. d) BUMDes serves as a business entity established in accordance with the Village Law to facilitate all activities in the economic sector and/or public services managed by the Village or inter-Village cooperation. e) BUMDes evolves into a learning platform for Village residents, fostering their development in managerial skills, entrepreneurship, effective Village Governance, leadership, trust, and collective action. f) BUMDes orchestrates the conversion of government-initiated programs (government-driven or government projects) into assets owned by the village community. The primary objective behind the creation of BUMDes was to promote and facilitate a wide range of income-generating activities within the community. This encompasses activities that align with local customs and culture, as well as economic initiatives handed over to the community for management through programs or projects initiated by the Central Government and Regional Government. Specifically, BUMDes was created to assist village workers, stimulate creativity, and create economically productive opportunities for individuals with lower incomes. Its broader purpose is to empower village communities economically, enabling them to develop various productive businesses and bolster the local economy. In essence, BUMDes exists to optimize the management of existing village assets, drive economic progress in the village, and enhance the well-being of village communities. BUMDes operates with a profit-oriented approach and functions as a catalyst for the village economy, generating Original Village Income (PADes) while also contributing to the accelerated improvement of community welfare. As it evolved, the enactment of the Job Creation Perpu led to significant shifts in the status of BUMDes. Originally categorized as mere business entities, they underwent transformation into Legal Entities following the introduction of Article 117 of the Job
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Creation Perpu. Article 117 of the Job Creation Perpu outlines the following changes: “Village-Owned Enterprises, hereinafter referred to as BUM Desa, are legal entities established by Villages and/or together with Villages to manage businesses, utilize assets, develop investment and productivity, providing services, and/or providing other types of business for the greatest welfare of the Village community.” The aforementioned provisions clarify that Village BUMDes were established by the Village Government with the purpose of harnessing the complete economic potential, economic institutions, natural resources, and human resources to enhance the well-being of the Village community. Nevertheless, it is important to note that BUMDes should not be considered on par with legal entities like limited liability companies or cooperatives. It is anticipated that BUM Desa should have the capability to establish business units to utilize economic potential. If these business activities operate and progress successfully, there is a strong likelihood that over time, BUM Desa may transition into a legal entity in accordance with statutory regulations. Furthermore, Article 87 of the Job Creation Perpu determines the following: a) Villages can establish Village BUMs. b) BUM Desa, as mentioned in paragraph (1), is administered with a sense of community and collaboration. c) BUM Desa is authorized to engage in economic sector businesses and/or public services, adhering to legal regulations. d) BUM Desa, as described in paragraph (1), has the authority to establish legal entity business units as deemed necessary and purposeful. e) Additional regulations pertaining to Village BUM, as outlined in paragraphs (1), (2), (3), and (4), are stipulated in Government Regulations. To integrate regional development, BUMDes and its subordinate business units in conducting business activities must be in agreement with the regional development master plan. Based on the above, BUMDes as a legal entity has an equal position with BUMN and BUMD. The amendments regarding the status of BUMDes in the Job Creation Perpu are accompanied by the following regulations: Government Regulation Number 11 of 2021 concerning Village-Owned Enterprises, Minister of Law and Human Rights Regulation No. 40 of 2021 regarding the Issuance of Legal Entity Registration Certificates for Village-Owned Enterprises/Joint Village-Owned Enterprises. Additionally, there is the Regulation of the Minister of Villages, Development of Disadvantaged Regions, and Transmigration Number 3 of 2021, which covers Registration, Data Collection and Ranking, Guidance and Development, and Procurement of Goods and/or Services for Village-Owned Enterprises/Joint Village-Owned Enterprises. This change in position is intended to strengthen self-governing community and local self-government owned by the Village. On the other hand, the new position of BUMDes as a legal entity aims to straighten out that BUMDes is able to actually strengthen its management village government economics. This change of course cannot be separated from the aim and spirit of the Job Creation Perpu itself, namely to increase investment in Indonesia. BUMDes’ legal entity status allows for more extensive collaboration with external parties and increases trust among potential collaborators due to its legal recognition as an entity.
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On the other hand, it is also important to remember that apart from economic functions, BUMDes also have social functions. If BUMDes’ economic role is to engage in the development and management of village businesses, generating profits for the village and its community, its social function may comprise the following: a) Indirect Social Function, by contributing to the village treasury through added Village Original Income (PADes), which is subsequently utilized for village development projects following standard village management procedures; and b) Direct Social Function, providing guidance and assistance to businesses carried out by village communities, in addition to managing public goods/services (not private) BUMDes can oversee the management of communal assets, including resources like clean water, irrigation, village markets, village tourism, village forests, village electricity, and more. This approach allows all residents to effectively utilize the village’s public resources. 3.2 Consequences on the Position of BUMDes Becoming a Legal Entity In Indonesia, from a legal standpoint, business entities can be categorized into two groups: a) Business entities that are legal entities. b) Business entities that are illegal entities. A legal business entity is a distinct legal subject, separate from its human members, ensuring that personal assets of management/members remain protected if the company goes bankrupt. Conversely, a non-legal business entity does not have this legal separation, making the personal assets of management/members liable for confiscation in case of bankruptcy. BUMDes can be classified as a legal business entity due to the following criteria: a) The existence of separate assets. BUMDes wealth can be sourced from Village Funds or state finances which are separated from village assets. b) Have a specific purpose. BUMDes was established to utilize the economic potential, economic institutions, along with the potential of natural resources and human resources to enhance the well-being of rural communities. c) Pursues its own agendas. In line with its goals, BUMDes is profit-oriented and contributes to enhancing the well-being of the community. d) There is an orderly organization. BUMDes organizations are separate from village government organizations and BUMDes organizations consist of at least advisors and operational leaders. Following the Job Creation Perpu, BUMDes have obtained a new legal entity status, on par with Limited Liability Companies (PT) at the national level and BUMD at the regional level. This transformation, as clarified in the Amendment to Article 117 of the Job Creation Perpu, amending Article 787 of the Village Law, emphasizes that the legal
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entity status of BUMDes is distinct from that of Companies and Cooperatives, leading to specific outcomes: Position and Organizational Structure BUMDes is an institution whose position is outside the village government organizational structure. Article 14 of PP No.11 of 2021 establishes that the Village-Owned Enterprises (BUM Desa) are distinct from the Village Government. The composition of the BUM Desa management, as stated in Article 14, is elected by the Village community through Village Deliberation, following the guidelines provided in the Ministerial Regulation. This marks a shift from the previous practice where the management was directly appointed by the village government. Article 15 PP no. 11 of 2021 determines that the joint BUM Village/BUM Village organizational apparatus consists of: a) b) c) d)
Village Deliberation/Inter-Village Deliberation; advisor; operational executor; and supervisor.
The Advisor, who serves as the ex-officio village head, and the Supervisor, a qualified individual with expertise, integrity, leadership skills, experience, honesty, good behavior, and strong dedication to advancing BUMDes, play key roles in its development. Supervisors are nominated by the Village Head, the village consultative body, or community members and are subsequently appointed through Village Deliberation/Inter-Village Deliberation. Additionally, operational executors are essential to assist directors in their tasks and functions, with their appointments decided through village deliberations. After changing the status of BUMDes to become a business entity which is a legal entity, the organizational structure can be carried out as follows: a) Directors, responsible for village business operations, are appointed through the Village Head’s Decree, which has made it challenging for BUMDes to achieve independence from the influence of the village head or government. This managerial approach lacks professional recruitment, resulting in BUMDes being closely tied to the election of village heads. Hence, PP No. 11 of 2021 aims to delineate the organization and status of BUMDes, with the intention of establishing a more professional structure that enables it to compete effectively with other legal entities. b) BUMDes can own and/or form BUMDes Business Units in accordance with statutory provisions. Thus, under BUMDes there are micro business units. BUMDes can have capital outside the BUMDes Business Unit after obtaining approval from the Village Deliberation/Inter-Village Deliberation. c) BUMDes holds a position on par with a Limited Liability Company (PT) and is comparable to BUMN at the national level and BUMD at the regional level. This status grants BUMDes the liberty to engage in collaborations with other legal entities. According to Article 54 of PP 11 of 2021, BUMDes is authorized to partner with other entities when conducting business in the economic sector and/or providing public services. This collaboration should be mutually advantageous and safeguard the interests of both the Village and its community, along with collaborating entities.
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However, on the other hand, of course this policy will also have a negative impact on the development of village government and regional potential, for example: a) Human Resources Problems It is observed that the strengthening of BUMDes into legal entities has not been accompanied by adequate human resources and governance. The thought arises that whether the human resources in the village can manage BUMDes well? The knowledge, expertise and competitiveness of rural communities is a matter of governance for BUMDes which have legal entity status with other legal entities that have resources with professional recruitment that looks at education and career path. Thus, the possibility of strengthening BUMDes as a legal entity can only be felt and optimized by villages that are closer to urban areas. b) Fund Source Problems The giving of BUMDes’ ample opportunity to receive disbursement of funds, especially the permission to borrow from the state, provides an understanding that the source of BUMDes funds can come from the village and/or state finances. The source of these funds is managed by BUMDes themselves which can carry out their own business/investments. To minimize possibility on mismanagement, BUMDes are expected to implement risk management policies to avoid errors and losses. c) Problems of Optimizing Village Potential Every village possesses unique potential. Can BUMDES explore and offer solutions to enhance this potential? It is crucial to acknowledge that, up to this point, both villages and BUMDes have not been particularly effective in capitalizing on the village’s potential in the business sector. Recognizing and understanding the potential of each village stands as the central focus of BUMDes’ business activities. In essence, comprehending the village’s potential is the primary step in advancing BUMDes itself. d) Regulatory Issues Several villages that already have BUMDes apparently have not yet made regulations regarding BUMDes. Indeed, Article 88, paragraphs (1) and (2) of the Village Law clearly specify that the establishment of BUMDes is subject to approval in a Village Deliberation and is finalized by the enactment of a Village Regulation. These provisions underscore that the sole legally binding and valid method for establishing BUMDes is by way of the enactment of Village Regulations. Based on indications of these problems, before implementing the policy to strengthen BUMDes with legal entity status, the government must create a BUMDes categorization policy that has been in place so far. It is necessary to categorize the level of development of BUMDes based on their development status so that the absorption and implementation of the Job Creation Perpu policy and its derivatives can be implemented optimally. By creating this categorization, the government can carry out strategies for socializing and implementing BUMDes policies not only in developed villages, but can also touch remote villages. It is also important to use this as a basis for policy making and development of BUMDes in the future according to the level of progress that has been achieved. With this grouping, the government determines budget, credit and other policies according to the basis or needs of BUMDes in each group.
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4 Conclusion In conclusion, the transformation of BUMDes into a legal entity is a significant step towards strengthening village government economics. With its newfound status equivalent to a Limited Liability Company (PT), akin to BUMN at the national level and BUMD at the regional level, BUMDes experiences changes in its position and organizational structure, gains the authority to engage in collaborations, and becomes capable of borrowing funds. These changes undoubtedly yield positive impacts, offering BUMDes greater opportunities for development and substantial contributions to the village economy. However, it’s important to acknowledge the potential challenges that may arise as a result of this legal entity status, including human resource issues, funding source challenges, optimization of village potential, regulatory matters, and marketing obstacles. To address these concerns, it is advisable for government entities at the central, regional, and village levels to establish a categorization policy that considers the capacity of BUMDes. Such a strategy can empower competitiveness among BUMDes and other legal entities, ensuring the collective growth and prosperity of the village and its economic ventures.
References 1. Eko, S., et.al.: Desa Membangun Indonesia (Yogyakarta, FPPD, 2014) 2. Susanti, Dyah Ochtorina dan Efend, Aan. Penelitian Hukum (Legal Research) (Jakarta, Sinar Grafika, 2015) 3. Agunggunanto, Edy Yusuf dan Edi Wibowo Kushartono. Pengembangan Desa Mandiri Melalui Pengelolaan Badan Usaha Milik Desa (BUMDes). Jurnal Dinamika Ekonomi dan Bisnis 13, No. 1 (2016) 4. Alfisiansyah, “Status Badan Usaha Milik Desa Sebagai Badan Hukum Atas Diundangkannya Undang-Undang Cipta Kerja” Jurnal Ilmu Sosial dan Pendidikan 5, No. 2 (2021) 5. Alkadafi, M.: Penguatan Ekonomi Masyarakat Melalui Pengelolaan Kelembagaan Badan Usaha Milik Desa Menuju Asean Economic Community 2015. Jurnal El-Riyasah 5, No.1 (2014) 6. Buntoro, H.P., dan Ratnawati, A.: Sistem Pembinaan Desa Informasi Dalam Layanan Akses Informasi Masyarakat. Jurnal Penelitian Pos Dan Informatika 4, No. 2 (2014) 7. Thompson, D.F.: Two Concepts of Corruption, Edmond J. Safra Research Lab Working Papers, No. 16, Harvard University (2013) 8. Fitriska, K.: Strategi Pengembangan Badan Usaha Milik Desa Dalam Meningkatkan Kesejahteraan Masyarakat di Desa Lancang Kuning Kecamatan Bintan Utara. Jurusan Ilmu Administrasi Negara FISP UMRAH 5, No. 2 (2017) 9. Kashogi, I.H., Radjab, D., Bustanuddin: Analisis Pembentukan Badan Usaha Milik Desa Sebelum dan Sesudah Diundangkannya Undang- UndangNomor 11 Tahun 2020 Tentang Cipta Kerja. Limbago: Journal of Constitutional Law 2, No. 1 (2022) 10. Nadriana, L.: Konstruksi Hukum Badan Usaha Milik Desa (BUMDes) sebagai Bentuk Ketahanan Ekonomi Masyarakat Di Masa Pandemi Covid-19. AUDI: Jurnal Penelitian Hukum 1, No. 1 (2022) 11. Pradesyah, R.A.: Pengelolaan Potensi Badan Usaha Milik Desa (BUMDes) Berbasis Syariah di Desa Rambung Sialang Hulu Kecamatan Sei Rampah Kabupaten Serdang Bedagai Sumatera Utara. Jurnal Prodiknas: Hasil Pengabdian Masyarakat 2, No. 2 (2018) 12. Putra, A.S.: Badan Usaha Milik Desa: Spirit Usaha Kolektif Desa (Jakarta, Kementerian Desa, Pembangunan Daerah Tertinggal, dan Transmigrasi Republik Indonesia, 2015)
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13. Wahyuningtyas, I.K.: Pera Strategis BUMDes (Badan Usaha Milik Desa) Dalam Pemberdayaan Ekonomi Desa. Jurnal Jendela Inovasi Daerah IV, No. 1 (2021) 14. Zitri, I., Rifaid, R.U.: Pendampingan Penguatan Kapasitas Anggota Badan Permusyawaratan Desa (BPD) Desa Karang Bongkot Dalam Penyusunan Perdes Pembentukan BUMDes. J. Character Educ. Soc. 5(3) (2022)
Collaborative Governance as the Form of Corporate Social Responsibility (CSR) and Community Empowerment I. Nyoman Subanda(B) and Nuning Indah Pratiwi Universitas Pendidikan Nasional, Jl. Bedugul No. 39, Sidakarya, Denpasar Selatan, Kota Denpasar, Bali 80224, Indonesia [email protected]
Abstract. Corporate social responsibility encourages companies to mingle and do community service to be able to help the community in overcoming existing problems. Social responsibility is also an indicator of the assessment of investors to invest in a company. Banjar Ambengan cooperates with PT Indonesia Power for community empowerment and helping the community to obtain new sources of income. The purpose of this study was to determine the process of Collaborative Governance as a form of corporate CSR by empowering the community. The method used is descriptive with a qualitative approach. So that we get the result that PT Indonesia Power together with Banjar Ambengan succeeded in establishing Serati Yadnya Shanti by going through the Collaborative Governance, resources become a supporting component and limited information as a barrier. Keywords: Collaborative Governance · CSR · Community Empowerment
1 Introduction A corporation is an establishment established by an individual or a group of individuals with the primary objective of executing production and distribution procedures to fulfil human requirements. Much like private entities, corporations are instituted with the goal of generating profit, preferably maximizing it while minimizing expenses (Sukihana and Kurniawan 2016: 194). The substantial profits sought are fundamentally a manifestation of the company’s commitment to its financiers and investors. Consequently, corporations consistently strive to optimize their performance to cultivate a positive image that entices investors to entrust their capital to the company. Good Corporate Governance (GCG) serves as an indicator or criterion for investors when evaluating a corporation. Corporations are bound by an obligation to maximize their economic responsibilities. However, social responsibility cannot be disregarded, as it represents one of the evaluation criteria for Good Corporate Governance (GCG) and is known as social responsibility or Corporate Social Responsibility (CSR). The company’s emphasis on meeting and enhancing its economic responsibilities often results in the neglect of its social responsibilities or Corporate Social Responsibility (CSR). However, it’s essential to recognize that social considerations also play a © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 526–534, 2024. https://doi.org/10.1007/978-3-031-53998-5_48
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significant role in bolstering the company’s reputation. Neglecting these social aspects frequently leads to conflicts between the company and the local community in its vicinity (Anom and Ngurah 2011:3). The significance of CSR for both society and corporations lies in its potential to promote the economic well-being of the local community. According to the Global Reporting Initiative (GRI), economic sustainability is defined by a company’s ability to positively impact stakeholders and the economic system at the local, national, and global levels. In Indonesia, CSR has acquired the status of a legal requirement for companies, as stipulated in Article 74 of Law Number 40 of 2007 on Limited Liability Companies, Law Number 25 of 2007 on Capital Investment, and Government Regulation No. 47 of 2012 regarding the Social and Environmental Responsibility of Limited Liability Companies (Siregar 2007:286). In essence, CSR has evolved into a shared necessity recognized by the government, society, and the business sector, founded on the principle of mutual benefit and partnership. Corporate Social Responsibility not only bestows a positive image upon the company but also carries favourable implications for enhancing community wellbeing, creating employment opportunities, and demonstrating a commitment to “people” (local communities), “planet” (environment), and, naturally, “profit” for the company (Sukihana and Kurniawan 2016:195). Under the CSR program, companies embark on “blusukan” missions to identify the challenges confronting the community and determine how the company can contribute to resolving these issues. “Blusukan” is a prevailing trend among leaders, involving direct engagement with the community to gain a better understanding of the social landscape, particularly the conflicts and problems faced by the residents (Putri 2017: 670). These grievances serve as valuable inputs for the company, aiding in the formulation of a strategy for selecting CSR methods that can be effectively applied to benefit the community. This principle is closely associated with the concept of Collaborative Governance, which promotes cooperation across various sectors (non-governmental) to implement policies and address societal issues (Sudarmo in Hardi 2020:42). The participation of multiple stakeholders vividly demonstrates the collaborative social dynamics between management and government authority. This form of collaborative governance lies at the core of democratic pluralism (Jaya 2017:3). Collaborative Governance acts as a mediator or facilitator, bringing together different entities, including government, community, and private organizations, with the shared goal of collectively addressing issues that cannot be adequately resolved by a single institution alone (Garver et al. 2021:4). Conceptually, involving another party, such as the corporate or private sector, is essential to tackling societal challenges, including empowering communities to unlock their potential and rejuvenate the local economy. Consequently, the government can engage companies in this collaborative process, while companies can seize this opportunity to fulfil their Corporate Social Responsibility commitments. The author observes a model akin to this one being put into practice within the seller community initiative (known as “Sekaa Serati Yadnya Shanti”) in the Balinese ceremonial context, which is the outcome of a partnership between the Ambengan community (“Banjar Ambengan”) and PT Indonesia Power. PT Indonesia Power, situated in the Pedungan Subdistrict, has initiated a series of programs as part of its corporate social
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responsibility (CSR) in Banjar Ambengan. Recognizing the potential within its community, Banjar Ambengan decided to collaborate with PT Indonesia Power to establish and foster the development of “Sekaa Serati Yadnya Shanti.”
2 Methodology This research is descriptive research; thus discussion will be in the form of a presentation described in words or narratives as comprehensively, carefully, and as thoroughly as possible to obtain information. The research location is Banjar Ambengan, Pedungan Village, South Denpasar District. The focus of this research is that the results of this research can provide an overview of collaboration or cooperation between several parties. Types and sources of data are primary data and secondary data by determining informants from various elements using purposive sampling technique. The data collection techniques used by researchers are interviews, observation, and documentation.
3 Results and Discussion Banjar Ambengan represents one of the traditional communities within the Pakraman Village, encompassing both Pedungan and Pedungan Village. Pakraman Village, in turn, functions as an autonomous territorial entity responsible for managing traditional matters, customs, and socio-religious activities (Triguna 2011:43). In its practical execution, various cultures, values, customs, and traditions are evident in the Pakraman village, rooted in earlier Banjar community engagements. Consequently, the Banjar plays a central role in orchestrating traditional and socio-religious activities for the Balinese people during certain activities within the Pakraman village. Banjar Ambengan comprises 215 family heads, and the composition is detailed in Table 1. This data was obtained from secondary source from Data Archives of the Head of the Environment of Banjar Ambengan. The gender demographic is number of Women: 1162 People = 53.97% and number of Men: 991 People = 46.03%. The women position can be empowered more in all aspects due to larger proportion. In the composition of employment data for native residents of the Banjar Ambengan (shown in Table 2) the largest composition, namely 521 people, are students. The jobs that are mostly occupied by native residents of the Banjar Ambengan are in the tourism sector, amounting to 387 people. And the lowest position is as a salt farmer, namely 15 people with a percentage of 0.699%. Banjar Ambengan is the main access for the people of Denpasar City and even Balinese people to get to the Bali Mandara Toll Road, Ngurah Rai Airport and the Nusa Dua area, so the roads in Banjar Ambengan tend to be busy every day. Apart from that, many large companies occupy the Banjar Ambengan area, thus having both positive and negative impacts on Banjar Ambengan. Companies in the Banjar Ambengan area have a negative impact, such as increasing traffic jams, apart from people who want to go to the Bali Mandara Toll Road, Ngurah Rai Airport and the Nusa Dua area, but also workers from these large companies. Another negative impact is air and water pollution which is dangerous for public health.
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Table 1. Data on the Number of Native Residents of Banjar Ambengan in 2021 No
Category (age range)
Man
Woman
Total
Percentage
1
0–10 Years
2
11–20 Years
145
156
301
13,98%
138
170
308
14,30%
3
21–30 Years
137
163
300
13,93%
4
31–40 Years
133
145
278
12,91%
5
41–50 Years
140
174
314
14,58%
6
51–60 Years
136
170
306
14,21%
7
>60 Years
162
184
346
16,07%
2.153
100%
Overall Total
Table 2. Employment Data for Indigenous People of Banjar Ambengan in 2021 No
Category (Occupation)
Total
Percentage
1
Students
521
24,19%
2
Fisherman
60
2,78%
3
Salt Farmer
15
0,69%
4
Non-Tourism Company Employees
387
17,97%
5
Tourism Company Employees
495
22,99%
6
Self Employed
130
6,03%
7
Civil Servants
245
11,37%
8
Non-Productive
300
13,93%
2.153
100%
Overall total
Source: Data Archives of the Head of the Environment of Banjar Ambengan
Apart from these negative impacts, the community also feels many positive impacts from the many large companies in the Banjar Ambengan environment, one of which is the availability of many job opportunities and easy access for local people to become workers at the company, so that people have no difficulty in finding work. Several large companies, to fulfil their social responsibilities or Corporate Social Responsibility (CSR) sometimes provides assistance in the form of cash, basic necessities and other necessities which are then distributed to the people of Banjar Ambengan. One of them is PT Indonesia Power, which is a limited liability company as a subsidiary of PLN that carries out commercial business in the field of electricity generation. PT Indonesia Power operates in a very crucial sector, of course it really needs the support of the surrounding community, and the community also needs assistance from PT Indonesia Power in several matters, especially for the people of Banjar Ambengan. In accordance with the goals and mission of the banjar as a traditional community, as well as the main forum for organizing social and religious activities, Banjar Ambengan
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initiated the formation of small groups by empowering women over 60 years of age who are no longer productive and housewives to fill their free time by learning to make offerings as basic needs for the Balinese people, especially the banjar as a traditional community. Banjar as a traditional group of Balinese people holds various Panca Yadnya ceremonies in Bali, starting from human being such as weddings or weddings, cutting teeth or cutting teeth, pitra yadnya ceremonies like cremation or burning bodies in Bali, and yadnya god ceremonies like piodalan. So, the maker group of banten, as a means of ceremony, it is considered to have a very important position in this matter. To realize the founding of this community, of course Kelihan (Leading Authority) Banjar Ambengan requires the involvement of other parties who can help from costs to a more professional administrative process, with the hope that this group of banten makers will not only work for Banjar Ambengan, but also for the general public, so that the community has a new source of income through this group. Banjar Ambengan collaborated with PT Indonesia Power to realize the establishment of this group. This is also a golden opportunity for PT Indonesia Power in terms of social responsibility or CSR activities and also having a fostered group as an output social responsibility or CSR will be the extra point for investors, because the company will be convinced to be serious in providing service to its community. Since 2016, Banjar Ambengan and PT Indonesia Power have been establishing Sekaa Serati Yadnya Shanti of Banjar Ambengan which is successfully operating and active to this day. This group of people who make donations, which involves the elderly and housewives, has shown success progress which is very significant every year. Starting from attending training several times at geriya (where sulinggih lives in Bali), to doing pawintenan (purification so that it is permissible/permissible to make offerings for big ceremonies in Bali). Sekaa Serati Yadnya Shanti under the guidance of PT Indonesia Power and Banjar Ambengan, it already has many customers, ranging from the local community of Banjar Ambengan to communities outside Banjar Ambengan. Sekaa Serati Yadnya Shanti is also one of the flagship programs of PT Indonesia Power, because this community can show very significant progress and of course becomes the main source of income for its members. 3.1 Collaborative Governance According to Emerson, Nabatchi and Balogh (in Fatimah 2021) a collaborative governance is involving or participation civil society in administering government. This process involves deciding in society by constructively involving other people or parties. Ansell and Gash (in Syaeful Islamy 2018: 81) state that Collaborative Governance is a public organization involving non-public organizations or interested parties in formal, consensus-oriented, and role-sharing collective decision-making activities, with the aim of establishing and implementing public policies or managing government programs or public assets. From the latter, the author concludes that collaborative governance is a cooperation or collaboration involving government and non-government organizations, each of which has an interest in achieving certain goals. In the collaboration process, to achieve each other’s goals, of course through several stages. Ansel and Gash (Syaeful Islamy 2018:82) made a model of collaborative
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governance. Meanwhile, collaborative governance in development patterns Sekaa Serati Yadnya Shanti, are as follows: a) Face to Face Dialogue Face to face dialogue is one of the first processes in collaborative governance which is of course very important. In this process the parties or stakeholder holding face-toface meetings and dialogue. So that at this stage it is possible for interactive dialogue to occur between interested parties, with the aim of equalizing perceptions in the process of obtaining common interests. At this stage, basically the government, the private sector and the community discuss the problems experienced by each party, including what steps can be taken to overcome these problems by considering what benefits can be achieved or obtained by each party. PT Indonesia Power chose Banjar Ambengan to carry out its corporate social responsibility (CSR) activities. Banjar Ambengan as a traditional community and sub-village government authority, conveyed the condition of the community, population distribution, and what the hopes and goals of Banjar Ambengan are in the future. Banjar Ambengan as a traditional community, as well as a forum for organizing social and religious activities, of course requires a group that can make it easier for members of the banjar or krama banjar in carrying out religious ceremonies. In this condition, Banjar Ambengan wants to empower its community, so that economic turnaround can occur from, by, and for Banjar Ambengan. Considering that religious ceremonies are one of the main activities of Banjar as an indigenous community. Stages of face to face dialogue has been carried out or passed according to the rules. Several meetings have been held by the parties, namely Prajuru Banjar Ambengan, Representatives from PT Indonesia Power, and community representatives from Serati Yadnya Shanti. In the beginning (before it was formed), Serati Yadnya Shanti were represented by several people who will be nominated as administrators in this group. So at this stage what is important is a meeting between the government, the private sector and community representatives to discuss the decisions to be taken and the interests to be achieved. b) Trust Building Trust plays a crucial role in collaborative governance, especially in complex collaborations involving multiple parties with different interests. In such collaborations, decisions are carefully considered, and potential risks are thoroughly analyzed to facilitate early improvement and anticipation, reducing the likelihood of negative outcomes in the future. At this stage, Banjar Ambengan together with PT Indonesia Power explained the concept and SWOT analysis with the establishment of this group of banten sellers. The parties are also required to convey their respective plans and interests to be achieved. PT Indonesia Power provided an overview or concept map of forms of social responsibility (CSR) that they could contribute to the establishment of this group of sellers of social assistance. PT Indonesia Power conveyed the assistance that it intends to provide and contribute to this collaboration process and as a social responsibility program, it is assisting the process of establishing a group of sellers of offerings (banten).Serati Yadnya Shanti), providing training on the process of making monthly reports and annual reports to
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members, facilitating training on making donations, and building places as base camp member’s place Serati Yadnya Shantito work. c) Commitment to the process In the collaboration process, commitment is the main reference for the parties’ future contributions. Commitment itself is a motivation to get involved collaborative governance, required a strong commitment from each stakeholder in preventing risks in collaborative processes (Garver 2021:9). As a form of commitment to collaboration between Banjar Ambengan and PT Indonesia Power, it was published Memorandum of Understanding or a memorandum of understanding as the basis for implementing collaboration. A memorandum of understanding is needed as a guarantee of seriousness in the cooperation process. d) Shared Understanding At this stage of the process, interested parties share understanding and understanding with each other. The goal is for each stakeholder have the same understanding. And the hope is to realize the basic values that form the basis of the forum. e) Intermediate Outcomes Intermediate Outcomes is a temporary result of an ongoing process that provides benefits of strategic value (Garver 2021:10). Provisional results on the formation collaboration process Serati Yadnya Shantiis starting from the realization of community empowerment for Banjar Ambengan and PT Indonesia Power. With the seriousness of this collaboration, for approximately 6 years running, Serati Yadnya Shanti able to show consistency and existence in learning and working. This group of offerings sellers has proven to make things easier for Banjar Ambengan in their affairs offer or ceremonial facilities, even the community also makes things easier. Outcomes this makes PT Indonesia Power have a very good image for the surrounding community and of course for investors. For investors, good community service is a plus for the company. 3.2 Supporting Factors Collaborative Governance Factors that support its implementation of collaborative governance well, among others: a) Resource Resources of both human and financial resources are crucial in collaborative governance. The human resources possessed by Banjar Ambengan have enough potential to be formed into a community of offerings sellers. Native residents of Banjar Ambengan, who are housewives and elderly, are optimized to be involved in this community, with the aim of socializing, increasing knowledge and getting a source of income. Another thing that supports it too, members Serati Yadnya Shantiare people who are fond of the field ceremony and spirituality, so that when carrying out their activities they are based on sincerity and devotion. Financial resources are also an important thing to consider in collaboration. PT Indonesia Power provides full financial assistance to Banjar Ambengan, especially for Serati Yadnya Shanti. This assistance is allocated properly and responsibly by this group by providing monthly reports and annual reports as a form of responsibility, transparency, and administrative order. The assistance provided by PT Indonesia Power is used for training and business capital for Serati Yadnya ShantiBanjar Ambengan.
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b) Authority Authority as a supporting factor of Collaborative Governance. The authority given to other parties by the government is a very important decision for implementing collaboration. The government decides partner collaboration must be wise and fair, so that there is no social jealousy for the community or other companies. PT Indonesia Power for the last 6 years, has been consistent in aiding and coaching to Serati Yadnya Shanti which was founded together with Banjar Ambengan. Collaboration like this, represents symbiotic mutualism, namely mutual benefit for the parties or stakeholder. 3.3 Obstacle Factor Collaborative Governance Apart from supporting factors, implementation of Collaborative Governance also has several inhibiting factors, including: a) Lack of Commitment In the process of collaboration when there is no commitment, then it is difficult for stake holder another to continue what was the plan and agreement from the start. b) Information Limitations The information obtained is still very limited. Not all parties who take part can access information easily. Information will be easy to obtain if there is an element of closeness between one another or the activeness of each party involved is required to search for the required information (Garver 2021:11). c) Network Structure Networks or connections in a business are important. If business actors are not active in building connections, then it is certain that the business will find it difficult to develop. Since its inception of Serati Yadnya Shanti activated ngayah (sacrifice without expecting anything in return) as a form of self-actualization with several parties, so that through Nayath’s group can add to their experience.
4 Conclusion Based on the discussion above, the conclusions in this research are presented in the following points: a) Implementation Collaborative Governance in the context of empowering the people of Banjar Ambengan, Pedungan Village, South Denpasar District, it can be said that it has been running optimally based on process Collaborative Governance according to Ansell and Gash. All cooperation or collaboration processes carried out between Banjar Ambengan and PT Indonesia Power are in accordance with procedures, such as face-to-face meetings, building trust, commitment, mutual understanding, until joint results have been progressed. PT Indonesia Power as partner collaboration from Banjar Ambengan succeeded in realizing the community Serati Yadnya Shanti by involving the residents of Banjar Ambengan consisting of housewives and the elderly. Banjar Ambengan has also succeeded in creating or increasing sources of income for its residents, apart from helping residents facilitate ceremonial processions, such as cremation.
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b) The supporting factors of collaborative governance between Banjar Ambengan and PT Indonesia Power are human resources who are very enthusiastic about joining Serati Yadnya Shanti with the same hobby background, financial resources from PT Indonesia Power for training needs and business capital for Serati Yadnya Shanti, and the authorities from Banjar Ambengan who initiated the idea of forming a community of offerings and voting sellers partner the right collaboration. c) Apart from supporting factors, there are also inhibiting factors collaborative governance is limited information that members still have to develop Serati Yadnya Shanti to become more developed.
References Anom, I., Ngurah, G.: Pengembangan Tanggung Jawab Sosial Perseroan (Corporate Social Responsibility) Dikaitkan dengan Konsep Tri Hita Karana (Studi di Provinsi Bali) (Tesis Program Magister Program Studi Ilmu Hukum Universitas Udayana Denpasar), h. 3 (2011) dan Gash, A.: Collaborative governance in theory and practice. J. Public Adm. Res. Theory 543, 571 (2007) Emerson, K., Nabatchi, T., Balogh, S.: An integrative framework for collaborative governance. J. Public Administration Res. Theory, 1–29 (2012) Fadlurrahman, F.F., Kurniasih, Y.K., Winanta, R.A.: Collaborative Governance Dalam Pengelolaan dan Pengembangan Pariwisata di Desa Ngargogondo Kecamatan Borobudur. Jurnal Pemerintahan dan Politik 7(2) (2022) Fatimah, A.S.: Collaborative governance dalam pengembangan usaha mikro di kota tasikmalaya. jak publik (Jurnal Administrasi & Kebijakan Publik), 2(3) (2021) Garvera, R.R., Arifin, F.S., Fazrilah, A.N.: Collaborative governance dalam mewujudkan kemandirian desa (Studi di Desa Bojongmengger, Kecamatan Cijeungjing, Kabupaten Ciamis). Dinamika: Jurnal Ilmiah Ilmu Administrasi Negara 8(3), 502–513 (2021) Hardi, W.: Collaborative Governance Dalam Perspektif Administrasi Publik (2020) Jaya, M.: Collaborative governance sebagai model pemberdayaan masyarakat dusun krinok. Jurnal Ilmiah Kajian Politik Lokal dan Pembangunan E-ISSN, 2406, 8985 La Ode Syaiful Islamy: Collaborative Governance Konsep Dan Aplikasi. In Deepublish Publisher, 1st edn. Deepublish (2018) Putri, M.I.: Jurnalisme Lingkungan Pada Media Online Arus Utama dan Jurnalisme Warga di Era Digital: Framing Pemberitaan Banjir di Indonesia Pada Detik. com dan Suarakomunitas. net (Environmental Journalism in Online Media Main Stream and Digital Age Journalism: Framing of Flood Coverage in Indonesia at Detik. com and Suarakomunitas. net). Indonesian Media Research Awards and Summit, pp. 656–689 (2017) Siregar, C.N.: Analisis sosiologis terhadap implementasi corporate Social responsibility pada masyarakat indonesia. Jurnal Sosioteknologi 6(12), 286 (2007) Sudarmo: Menuju Model Resolusi Konflik Berbasis Governance: Memuat Pengalaman Penelitian Lapangan Tentang Isu Pedagang Kaki Lima Dan Konflik Antar Kelompok. Sebelas Maret University Press (2015) Sukihana, I.A., Kurniawan, I.G.A.: Tanggung Jawab Perusahaan dari Profit Menuju Stakeholders Oriented Studi CSR di Tabanan. Jurnal Ilmiah Fakultas Hukum Universitas Udayana 51, 194 (2016) Triguna, Ida Bagus Gde Yudha. 2011. Strategi Hindu. Jakarta: Pustaka Jurnal Keluarga. https:// www.globalreporting.org/. Access Sept 1 2022 12:27
A Comparison of Restaurant Services at the Rural, Seaside and Urban Tourist Destinations in Bali Ni Made Eka Mahadewi1(B) , I. Nyoman Arcana1 , and Karunavani Sarukunaselan2,3 1 Politeknik Pariwisata Bali, Jl. Dharmawangsa, Benoa, Kec. Kuta Sel., Kabupaten Badung,
Bali 80361, Indonesia [email protected] 2 Universitas Pendidikan Nasional, Jl. Bedugul No. 39, Sidakarya, Denpasar Selatan, Kota Denpasar, Bali 80224, Indonesia 3 Red Sea Associates, Puchong, Malaysia
Abstract. Bali, a highly favored tourist destination, has encountered significant challenges in adapting to the evolving global tourism industry. The onset of the Covid-19 pandemic particularly impacted the culinary sector, which had been a top choice for tourists after the allure of Bali’s natural and cultural attractions. Numerous culinary entrepreneurs and restaurant owners worldwide were compelled to temporarily close their establishments, with some even facing bankruptcy, including restaurants in Bali. This study has three primary objectives: (1) to examine the operational characteristics of restaurants in Bali’s urban, rural, and seaside regions; (2) to pinpoint the factors distinguishing the operational features of restaurants in rural and seaside tourist areas from those in urban areas during the new normal era; and (3) to develop operational strategies that restaurant industry managers should adopt across these three destination types in the new normal era. The study’s findings highlight distinctions in the characteristics of restaurants in urban, seaside, and rural areas, including differences in (1) the primary consumer segment, (2) community behavior, (3) operational status (limited or temporarily closed), (4) sales volume, (5) peak times and days of guest visits, and (6) restaurant ownership. Keywords: Operational Characteristics · Survival Strategies · Restaurant Industries · Tourist Areas or Destinations
1 Introduction Since the declaration of COVID-19 as a global pandemic by the World Health Organization (WHO), consumer behavior across various industries has undergone a significant shift. Consumers have become more cautious about their consumption choices, focusing on self-care and adapting to the new circumstances. In response to the global impact of the Covid-19 pandemic, Indonesia, including Bali, has witnessed a transformation in human behavior, transitioning towards a “new normal” era characterized by three key health protocol principles: health, hygiene, and safety. This transformation has also © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 535–543, 2024. https://doi.org/10.1007/978-3-031-53998-5_49
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affected the restaurant industry in various regions of Bali’s tourism areas, where many establishments have been compelled to temporarily shut down or reduce their operational activities in the face of limited social restrictions. Types of destination can be defined into three areas namely seaside destination, rural destination, and urban destination (Holloway et al. 2009). From perspectives of tourism planning, as a tourist area, the relationship of geographical element to other destinations of tourism system categorized into three element such as: geographical element, physical element and industrial element (Hall 2008). Andaleeb and Conway (2006) uses the variables Food quality/Reliability, Responsiveness, Physical Design, and Price. Pun and Ho (2001) uses factors of food quality, customer service, competitive location, and price. Kivela et al. (2000) use factors of food excellence, service excellence, ambience excellence, first and last impressions, feeling comfortable eating there, and reservation & parking. Abdullah and Rozario (2009) use the variables of food quality/reliability, service quality/responsiveness, and price. This study study serves three main purposes, firstly, it investigates the features of restaurants in the Ubud Tourism Area (a rural destination), the Canggu - Berawa area (a seaside destination), and Denpasar City (an urban destination) following the Covid19 pandemic social restrictions. Secondly, it aims to pinpoint the factors that set apart the operational characteristics of restaurants in Ubud and Canggu-Berawa from those in Denpasar City during the new normal era. Lastly, it seeks to develop operational strategies for restaurant managers in the three areas to navigate the challenges of the new normal.
2 Methodology The study involved restaurant managers and owners from Denpasar, Sanur, and Ubud City who are members of the Indonesian Food & Beverage Executive Community Bali. Data collection methods included observations, Focus Group Discussions (FGDs), and interviews with these individuals and association members. The interviews were structured to comprehensively address the research problem, focusing on factors affecting restaurant operations during the Covid-19 pandemic. The study sought to explore these factors through interviews and FGDs with the aim of understanding how the pandemic impacted restaurants in diverse market segments across Denpasar City, Canggu – Berawa, and the Ubud Tourism Area. 2.1 Research Variable The variables formulated based on the results of the FGD with restaurant owners and managers are based on the theory of restaurant operational variables, including: consumers/market segments, marketing and promotion strategies, prices, menu choices and package offers, services, operating hours, employees, procurement of ingredients, sales volume, application of CHSE (Mill 2007; Reid and Bojanic (2006: 174); Buyer (2015), Juju and Ferry (2009), and Bajpai, Pandey, and Shriwas (2012) in Wardhana (2015); Evans (2012); Abdullah and Rozario (2009). The identification of research variables is presented in Table 1 below.
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Table 1. Identification of Research Variables No Variables
Indicators
1
The main segments of restaurant consumers
a. Foreign tourist consumers/KITA’s Holder/Expat b. Consumers of domestic tourists c. Homogeneous local consumers d. Heterogeneous/urban local consumers e. Adult consumers f. Teenage consumers g. Regular/loyal customers h. Non-fixed customers
2
Characteristics of community behavior
a. b. c. d. e.
3
Marketing and promotion strategy
a. Through social media b. Through delivery applications (gojek, grab, go food) c. Through roadside outlets d. Through Word-of-Mouth Recommendation (WOM) e. Through electronic Word-of-Mouth Recommendation (e-WOM: Trip Advisor)
4
Selling price
a. Fixed price during the Covid 19 pandemic b. Providing price discounts during the Covid 19 pandemic c. Special price offers during the Covid-19 pandemic
5
Menu options and package offers
a. Reducing menu choices during the COVID-19 pandemic b. Offering new menu packages during the COVID-19 pandemic
6
Type of service
a. Restaurant ‘dine in’ service b. Take away service c. Delivery service
7
Restaurant operation
a. b. c. d.
Dine out Dine home by delivery service Take away Self-cooking Thrifty consumers
Open normal as usual Open Limited Temporarily close Permanently closed (continued)
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No Variables
Indicators
8
Limited open operations
a. Reducing the number of employees on duty b. Reducing the number of seats (health protocols) c. Reduce restaurant opening hours
9
Procurement of raw materials
a. Managers buy their own food and beverage raw materials b. Purchase of raw materials through partners / suppliers
10
Sales volume
a. Restaurant sales remain during the pandemic b. Restaurant sales decreased 25 percent c. Restaurant sales decreased by 50% d. Restaurant sales decreased by 75% e. Restaurant sales declined above 75%
11
Implementation of CHSE for customers and a. Restaurants consistently implement employees CHSE b. Restaurants inconsistently implement CHSE
12
Expense savings
a. Savings by reducing the number of employees b. Savings by reducing employee working hours c. Savings in overhead costs (energy, water, materials)
13
Restaurants crowded with visitors
a. Daily b. On weekends and holidays c. On weekday (Monday-Friday)
14
Restaurant Ownership
a. b. c. d.
Local Balinese entrepreneurs Entrepreneurs outside Bali Belong to foreign nationals Foreign investment
Sources: Arcana (2015), Buyer (2015), Wardhana (2015); Evans (2012), Abdullah and Rozario (2009), and Juju and Ferry (2009)
The Fig. 1 summarizes the methodology flow of this proposed study.
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Fig. 1. Methodology Process Flow
3 Findings and Discussion 3.1 Characteristics of Denpasar City Restaurants in Urban Destination People who live in the Denpasar City area are generally urbanites who work in various sectors besides the original people of Denpasar City. The characteristic of the people of Denpasar City is a heterogeneous society. These urbanites from various regions from regencies in Bali and from outside Bali generally work in the business and trade sectors, government, police, education, informal sector, hospitals, and college students. 3.2 Characteristics of Restaurants in Canggu-Berawa Area, Badung in Seaside Destination This area in Canggu - Berawa is very much liked by these KITAS visa holders because the cost of living in Canggu - Berawa is relatively much cheaper when compared to the cost of living in their home country, a comfortable living environment (near Ngurah Rai Airport, near the beach, close to entertainment venues and the customary rules of the village area are not so strict). Some of the popular restaurants in the area are Waroeng Sushi Canggu, Sensorium Bali, Lokomia Resto Cafe, Shmurger Burger, Matcha Cafe Bali, Living Food Lab, and Urban Bite Cafe.
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3.3 Characteristics of Restaurants in Ubud Tourism Area, Gianyar in Rural Destination Most consumers are foreign tourists/KITA’s Holders/Expats and domestic tourists from outside Bali. The characteristics of ubud local people from the middle to upper class are not used to eating at restaurants in the Ubud area or area. They are actually more accustomed to eating at restaurants when visiting outside Bali, for example when in Jakarta, Singapore or in Australia. Based on the 14 restaurant characteristic variables that have been described, the differences in restaurant characteristics in the three regions are presented in Table 2 with variables. Table 2. Differences in restaurant characteristics Variables
Denpasar Area (Urban destination)
Canggu – Berawa Area (seaside destination)
Ubud Area (Rural destination)
The main segments of consumers
- Heterogeneous/urban consumers of local communities - Regular/loyal customers - Dine out - Dine home by delivery service - Through social media - Through delivery applications (gojek, grab, go food) - Through roadside outlets - Through Word-of-Mouth recommendation (WOM) - Through electronic Word of Mouth recommendation (e-WOM: Trip Advisor) - Providing price discounts during the Covid-19 pandemic - Special price offers during the Covid-19 pandemic - Reducing menu choices during the COVID-19 pandemic - Offering new menu packages during the COVID-19 pandemic
- Foreign tourists/KITAS Holder/Expat - Regular/loyal customers - Dine out
- Domestic market - Independent Consumer
Characteristics of community behavior Marketing and promotion strategy
Price
Menu options and package offers
- Take away service - Thrifty consumers
- Through social media - Through Word-of-Mouth recommendation (WOM) - Through electronic Word of Mouth recommendation (e-WOM: Trip Advisor)
- Through social media - Through Word-of-Mouth recommendation (WOM) - Through electronic Word of Mouth recommendation (e-WOM: Trip Advisor)
- Providing price discounts during the Covid-19 pandemic - Special price offers during the Covid-19 pandemic - Reducing menu choices during the COVID-19 pandemic - Offering new menu packages during the COVID-19 pandemic
- Providing price discounts during the Covid-19 pandemic - Special price offers during the Covid-19 pandemic - Reducing menu choices during the COVID-19 pandemic - Offering new menu packages during the COVID-19 pandemic
(continued)
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Table 2. (continued) Variables
Denpasar Area (Urban destination)
Canggu – Berawa Area (seaside destination)
Ubud Area (Rural destination)
- Restaurant ‘dine in’ service - Delivery service Restaurant Operation - Open Limited (50%) - Temporarily closed (50%)
- Restaurant ‘dine in’ service - Take away service - Open Limited (50%) - Temporarily closed (50%)
Operational Restrictions
- Reducing the number of employees on duty - Reducing the number of seats (health protocols) - Reduce restaurant hours - Managers buy their own food and beverage ingredients (50%) - Purchase of ingredients through partners / suppliers (50%) - Sales declined by about 50% - Inconsistently applying CHSE
- Restaurant ‘dine in’ service - Take away service - Temporarily closed (80%) - Open Limited (15%) - Permanently closed (5%) - Reducing the number of employees on duty - Reducing the number of seats (health protocols) - Reduce restaurant hours - Managers buy their own food and beverage ingredients (80%) - Purchase of ingredients through partners/suppliers (20%)
Restaurant service style
Procurement of raw materials
Sales/revenue volume Implementation of CHSE for customers and employees
Spending savings on aspects
Crowded day of guest visits Restaurant Owmnership
- Reducing the number of employees on duty - Reducing the number of seats (health protocols) - Reduce restaurant hours - Managers buy their own food and beverage ingredients (60%) - Purchase of ingredients through partners / suppliers (40%) - Sales declined by about 50% - Consistency of fast-food restaurant applying CHSE
- Sales declined by about 75% - 90% - Inconsistently applying CHSE (except restaurants that are crowded with guest visits) - Number of employees - Number of employees - Number of employees - Employee working - Employee working - Employee working hours during the week hours during the week hours during the week - Overhead costs - Overhead costs - Overhead costs (energy, water, (energy, water, (energy, water, electricity) materials) materials) - Every day - In week days - On weekends and holidays - Local Balinese - Local Balinese - Local Balinese entrepreneurs (35%) entrepreneurs (20%) entrepreneurs (60%) - Out-of-region - Out-of-region - Out-of-region entrepreneurs (65%) entrepreneurs (30%) entrepreneurs (20%) - Foreigners (25%) - Foreigners (10%) - PMA (25%) - PMA (10%)
3.4 Restaurant Operational Strategy During the Covid-19 Pandemic All FGD participants agreed that the role of the strategy that has been carried out is very important to maintain restaurant operations during the Covid-19 pandemic to this day. While each restaurant’s level of focus, investment, and strategy is different, each restaurant intentionally sets a clear and active strategy to pursue their goals or objectives.
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Furthermore, deposit managers keep a close eye on what competitors are doing and do different things or develop what is trending in the market.
4 Conclusion Based on the results of data analysis that have been previously described, the results of this study can be concluded as follows: a. The research reveals differences and similarities in the characteristics of the restaurant industry between urban areas and those in tourism destinations during the Covid-19 pandemic. b. b. In the Ubud Tourism Area, where the majority of consumers are tourists, over 80% of restaurants have been compelled to cease operations, with the remaining approximately 20% continuing to operate on a limited scale. c. In Denpasar City, where most consumers are local residents, roughly 80% of restaurants are still operating to a limited extent, while the remaining 20% have temporarily closed due to a decline in consumer purchasing power. d. In the Canggu – Berawa tourist area, which is part of the Kuta Tourism Strategic Area and primarily caters to foreign nationals with KITAS Visas residing in the vicinity, around 50% of restaurants have suspended operations, while the other 50% are still running on a limited scale.
5 Research Limitation and Recommendation The limitations of this study are due to the analysis that is mostly based on aspects of the restaurant market segment and the characteristics of the area in which the restaurant operates. The second limitation is to compare the restaurant industry in a tourism area with a wider coverage area (Ubud Tourism Area, Gianyar as rural destination) with the restaurant industry in part of the Tourism Area (Canggu - Berawa area is part of the Kuta Tourism Strategic Area, Badung as seaside destination). The third limitation is the constraints on the collection of field data from research samples on the population of the number of restaurants that are widespread in the three regions.
References Arcana, N.: Marketing Strategy Formulation for Small Size Restaurant in Ubud Tourist Resort. Paper Proceeding in 4th International Conference on Business, Economic, and Accounting (IDEA). Ho Chi Minh, Vietnam (2015) Aker, H. (NA). Major Segments of the Restaurant Industry. Retrieved 8 19, 2015 Ban, V.: Analysis of the Upscale/Fine Dining Sector in the Restaurant Industry. Johnson & Wales University, MBA Student Scholarship (2012) Evans, D.: Social Media Marketing – An Hour a Day. Indiana: John Willey & Sons, Inc. (2012) Farrish, J.R.: Critical Success Factors in Barbecue Restaurants: Do Operators and Patron Agree? A dissertation submitted in partial fulfillment of the requirements for the Doctor of Philosophy in Hospitality Administrationn William F. Harrah College of Hotel Administration. Nevada, Las Vegas (2010)
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Slum Tourism in Indonesia - the Phenomena of Slum Destination in Kampung Akuarium, Jakarta Ni Made Eka Mahadewi1(B) , Dewa Ayu Made Lily Dianasari1 , Anom Heri Suasapha1 , Lidya Henrica1 , and Ni Made Prasiwi Bestari2 1 Politeknik Pariwisata Bali, Jl. Dharmawangsa, Benoa, Kec. Kuta Sel, Kabupaten Badung,
Bali 80361, Indonesia [email protected] 2 Universitas Pendidikan Nasional, Jl. Bedugul No. 39, Sidakarya, Denpasar Selatan, Kota Denpasar, Bali 80224, Indonesia
Abstract. Slum tourism stands apart from traditional tourism in that it diverges from the usual focus on appealing scenery, instead offering an unfiltered look at poverty within a region. It represents an unconventional and contemporary tourism model that turns urban poverty into a tourist attraction. This study employed a qualitative approach, primarily aiming to depict the participants’ experiences. The findings reveal that slum tourism in Kampung Akuarium delivers diverse benefits to the community, both directly and indirectly. Keywords: Slum · Community · Social interaction · Tourism
1 Introduction A tourist destination is typically associated with beauty and comfort, but these attributes can diminish without proper management. Conventional tourism, also known as mass tourism, has long been the prevailing model. It involves large-scale tourist trips organized by operators, offering substantial economic benefits but also causing noticeable negative effects, including environmental harm and socio-cultural deterioration [1]. According to [2], the global tourism paradigm is shifting towards a new model. Mass tourism is characterized by group package tours, an emphasis on leisure activities like sunbathing, and broad-scale offerings, attracting a standardized international clientele favoring artificial attractions. Conversely, the emerging model focuses on independent travelers seeking unique experiences and prioritizing the natural environment and local culture. The products in this model typically feature distinctive attractions, local-style services, and indigenous facilities. Shifting from mass tourism to alternative tourism is seen as a strategic approach to realizing sustainable tourism. Tourism is increasingly recognized to alleviate poverty, drawing the attention of various stakeholders worldwide, including multilateral bodies, tourism organizations, donors, and other entities [3]. According to the United Nations, slums are characterized © The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 544–549, 2024. https://doi.org/10.1007/978-3-031-53998-5_50
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by unsafe living conditions, where residents lack legal property titles or land rights. These settlements typically suffer from insufficient access to clean water, poor housing, and severe overcrowding [4]. The concept of slum tourism is not a recent one. It originated in Victorian London when various groups, including the upper class, politicians, clergy, academics, reformers, journalists, scientists, and writers, toured the city’s East End [5]. Unlike conventional tourism, slum tourism offers a unique perspective by shedding light on the harsh realities of poverty rather than showcasing beauty [6]. When properly managed, slum tourism can bring not only financial benefits but also positive changes to impoverished communities, transforming people’s perceptions of poverty. As [7] noted in their research on slum tourism, it has the potential to empower individuals, broaden their horizons, and raise awareness among governments regarding areas in need of attention. Slum tourism has flourished in various countries, including South Africa, India, Mexico, Brazil, and Indonesia [8]. However, it has yet to gain substantial attention in Indonesia, particularly in Jakarta. Slum Tourism, an unconventional modern tourism model, presents urban poverty as a unique tourist destination. It offers intriguing glimpses into the lives and challenges faced in the city’s outskirts through exotic tour packages, despite the controversy surrounding it [9]. Habitat for Humanity [10] reports that slum settlements worldwide are estimated to house around 1.6 billion people, a quarter of the urban population, with projections of reaching 2 billion residents by 2030. Efforts to combat poverty in these slum areas, such as charity, education, and employment opportunities, have faced challenges in proper implementation [11]. Poverty must be addressed and eradicated, as it represents a significant social issue. However, a new dilemma has arisen when poverty itself becomes a commodity, it complicates the efforts to combat it [12]. In Indonesia, the Jakarta Hidden Tour was established in 2008 by Ronny Poluan, introducing slum tourism with visits to settlements like Ciliwung, Tanah Abang, Papango, Galur, and Lual Batang. This initiative faced debates regarding its legitimacy as “tourism.” Indonesia’s former Minister of Tourism, Jero Wacik, expressed regret about tourist attractions showcasing poverty, emphasizing that poverty should be eliminated, not exploited [9]. Ronny implemented three programs within the Jakarta Hidden Tour: 3E (Emergency, Education, Empowerment), providing funds to the slum villages based on their specific needs [13]. Slum tourism, a subset of “dark tourism,” offers a firsthand experience of urban poverty. This practice provides a window into the realities of impoverished city areas [14]. Initially established in Brazil and India, slum tourism has proven to be a successful endeavor in economically uplifting densely populated slum communities in these countries [15]. This success has since been adopted by other developing nations, including Indonesia. According to reviews on Trip Advisor, tourists who engaged in slum tourism packages expressed high satisfaction with the experience. However, some visitors also reported feeling disappointed, as the poverty they witnessed in these urban areas did not align with the poverty observed in other regions like Kalimantan and Papua.
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2 Methodology In this study, qualitative descriptive methods were employed, utilizing a phenomenological research approach. Data collection involved interviews and observations conducted within the authentic setting while applying an emic perspective. The emic approach, which considers the viewpoint of the local population, aims to elucidate a societal phenomenon from the community’s own perspective. Following the principles of psychological phenomenology by [16], this approach emphasizes the description of participants’ experiences rather than the researcher’s interpretation. Consequently, it aims to portray the unadulterated experiences of the participants. Data analysis followed the [17], which dictates that qualitative data analysis should be an ongoing, interactive process continuing until data saturation is achieved. The analysis process involves data reduction, data presentation, drawing conclusions, and verification.
3 Slum Tourism at Kampung Aquarium Jakarta The allure of slum tourism in Kampung Akuarium lies in the inhabitants themselves and the environment they live in. The main draw of this program is the slum tourism activities that benefit the Kampung Akuarium community. Since the inception of Jakarta Hidden Tour’s slum tourism program in Jakarta, Kampung Akuarium has remained one of the featured villages in the tour package. Many of Kampung Akuarium’s residents have resided in the village since the 1980s, with the majority working as fishermen and laborers. The presence of numerous semi-permanent residences in the area has contributed to the somewhat disorganized appearance of the village. With the introduction of slum tourism to Kampung Akuarium, the local community is gradually experiencing improvement, albeit at a gradual pace. Most of the tourist activities available in Kampung Akuarium are closely tied to volunteer work. Jakarta Hidden Tour encourages tourists to adopt the 3E (emergency, education, empowerment) approach in all their undertakings. 3.1 Study Club Study club activities refer to educational sessions frequently conducted by Jakarta Hidden Tour in the presence of tourists, as depicted in Fig. 1. Kampung Akuarium is home to approximately fifty children. In addition to tourists volunteering as tutors for these children, some university students also regularly dedicate their time to tutoring the kids for specific periods. Joanne, a participant in the Jakarta Hidden Tour, was deeply moved by the opportunity to teach the children in Kampung Akuarium. In addition to fundamental subjects like art and mathematics, the children of Kampung Akuarium also learn various foreign songs. This enables them to perform for foreign tourists who visit, as they gather to sing the songs taught by Jakarta Hidden Tour. In return, tourists are encouraged to sing a song from their own culture for the children. This experience boosts the children’s confidence when interacting with visitors. They have become proficient in introducing themselves in English to tourists. The study club is an
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integral part of the educational aspect of the 3E mission carried out by Jakarta Hidden Tour. It not only provides instruction for children but also offers educational sessions for parents to enhance their knowledge and skills. This includes educating them about the importance of environmental conservation and teaching them how to grow trees from seeds, as some tourists have done.
Fig. 1. Study club activities
3.2 Social Interaction Situated not far from the Kota Tua tourist attraction, Kampung Akuarium often draws the attention of passers by, with many tourists stopping to engage in conversations and interact with the local community. However, tourists who participate in the Jakarta Hidden Tour program are granted special opportunities to converse with the locals and inquire about various aspects of their lives. Visitors who express an interest in staying overnight in Kampung Akuarium can find accommodation in the homes of welcoming local residents. They are also provided with simple meals. It’s important to note that this option is not a formal offering but is available to a select few tourists who express interest. In return for this experience, tourists are encouraged to make generous donations to support the local community where they stay. 3.3 Sharing Staple Food and Donations From the moment participants register for the Jakarta Hidden Tour program, they are informed and encouraged to bring donations in the form of essential items, stationery, and toys to contribute. Some participants opt to shop for these donations alongside the resident coordinator and subsequently distribute them to the residents of Kampung Akuarium. Occasionally, tourists also directly provide donations to members of the Kampung Akuarium community they feel could benefit from assistance. These donations typically consist of essential supplies and stationery.
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3.4 Touring the Village Another activity that tourists invariably engage in when participating in the Jakarta Hidden Tour program is embarking on a village tour alongside children from the local Kampung Akuarium community. This experience often involves taking a boat ride along the river surrounding Kampung Akuarium.
4 Conclusion The presence of slum tourism in Kampung Akuarium has brought about various direct and indirect benefits for the community. One of the most notable changes is the increased confidence in interacting with foreigners within the community. Those who are open to this experience have made it easier for both tourists and organizers (NGOs) involved in slum tourism. Consequently, there’s a growing openness to embracing new cultures through the participatory activities of slum tourism. While the positive impacts of this program have been experienced by the residents of Kampung Akuarium, the distribution of benefits may not be entirely uniform. The mission of Jakarta Hidden Tour, focusing on the 3E principles (Emergency, Education, Empowerment), aims to facilitate collective development in a positive direction. However, not all aspects have been optimally realized due to resource limitations within the Jakarta Hidden Tour organization. Obstacles in implementing the slum tourism program in Kampung Akuarium stem from both internal and external sources. External challenges encompass limited government support, difficulty in finding tourists willing to partake in slum tourism, and a shortage of volunteers for the program. Meanwhile, internal obstacles include a lack of community awareness regarding the slum tourism initiative conducted in their village. Nevertheless, these challenges have not thwarted the execution of the slum tourism program. The absence of substantial government support has not impeded the program’s operation, as no government interference has been reported. In fact, the locals who have benefited are content to host visiting tourists seeking to make a positive impact. Essentially, in a slum area, slum tourism can serve as a tool for transforming poverty into a tourist attraction and contributing to community development. While the changes in the area have not been rapid or monumental, the community has reaped social and economic advantages, particularly in Kampung Akuarium.
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5. Nisbett, M.: Empowering the empowered? Slum tourism and the depoliticization of poverty. Geoforum 85, 37–45 (2017). https://doi.org/10.1016/J.GEOFORUM.2017.07.007 6. Outterson, K., Selinger, E.: The Ethics of Poverty Tourism. SSRN Electron. J. (2009). https:// doi.org/10.2139/SSRN.1413149 7. Meschkank, J.: Investigations into slum tourism in Mumbai: poverty tourism and the tensions between different constructions of reality. GeoJournal 76, 47–62 (2011). https://doi.org/10. 1007/S10708-010-9401-7/METRICS 8. Rolfes, M.: Poverty tourism: theoretical reflections and empirical findings regarding an extraordinary form of tourism. GeoJournal 75, 421–442 (2010). https://doi.org/10.1007/S10 708-009-9311-8/METRICS 9. Saputra, M.I.: Wisata Kumuh untuk Mengekspos Kemanusiaan. https://telusuri.id/wisatakumuh-untuk-mengekspos-kemanusiaan/. Accessed 13 Dec 2022 10. Habitat for Humanity reaches 29 million served as it rises to growing challenges of housing quality and affordability in the U.S. and around the world | Habitat for Humanity, https://www.habitat.org/newsroom/2019/habitat-humanity-reaches-29-million-served-itrises-growing-challenges-housing. Accessed 27 Oct 2023 11. Munggaran, R.A., Setiono, L.S.: Orientasi Slum Tourism Jakarta Hidden Tour sebagai Praktik Kosmopolitanisme. SOSIETAS. 10, 841–850 (2020). https://doi.org/10.17509/SOSIETAS. V10I2.30101 12. Nurghida, B.: Slum Tourism: Kemiskinan Menjadi Objek Wisata. http://pride.co.id/slum-tou rism-kemiskinan-menjadi-objek-wisata/. Accessed 13 Dec 2022 13. Jakarta Hidden Tour, Tur Senyap Panggung Kemiskinan Ibu Kota. https://www.cnnindone sia.com/nasional/20190806164344-20-418938/jakarta-hidden-tour-tur-senyap-panggungkemiskinan-ibu-kota. Accessed 13 Dec 2022 14. Frenzel, F.: Slum tourism in the context of the tourism and poverty (relief) debate. Erde. 144, 117–128 (2013). https://doi.org/10.12854/ERDE-144-9 15. Ma, B.: A Trip into the Controversy: A Study of Slum Tourism Travel Motivations (2010). http://repository.upenn.edu/uhf_2010http://repository.upenn.edu/uhf_2010/12 16. Moustakas, C.: Phenomenological research methods. Phenomenological research methods. (1994). https://doi.org/10.4135/9781412995658 17. Miles, M.B., Huberman, A.M., Saldaña, J.: Qualitative Data Analysis A Methods Sourcebook (1994)
Author Index
A Abdullah, Syukriy 260 Acosta-Ponce, Wilber 131 Al Salmani, Said 273 Al Subaie, Mohammed 289 Alakaleek, Wejdan 52 Al-Hosaini, Fahmi Fadhl 206 Al-Nabae, Majid 206 Alzyoud, Sultan 52 Anggreswari, Ni Putu Yunita 437 Antony, Nittymol 123 Apriadi, I. Dewa Made Arista 454 Apsari, Ida Ayu Karina Widya 498 Arcana, I. Nyoman 535 Ariwangsa, I. G. N. Oka 454 Arlita, I. G. A. Desy 363 Ashfaque, Mohammad Z. 96 Astuti, Partiwi Dwi 340 B Baadhem, Abdullah Mahfoudh Salem 206 Basmantra, Ida Nyoman 384, 394, 473, 482, 492, 498, 506 Baykal, Elif 394, 482, 498 Bestari, Ni Made Prasiwi 544 Bhakat, Ravi Shankar 79 Bhatti, Omar Khalid 492 bin Syed Azman, Syed Marwan 273 Bogdan, Dukhnytskyi 175 Bogdan, Sydor 175 C Candra, Sevenpri 482 Castillo-Picón, Jorge 67, 109 Chairunnisia, Richa 352 Clemente-Almendros, Jose 131 Cochachin-Sánchez, Leoncio 67 D Daniel, Cross Ogohi 39 Danka, Ayoub 301
Das Prena, Gine 340 Dave, Komal A. 96 Delia, Najla Rahmah 1 Denni-Fiberesima, Damiebi 185 Dewi, Ni Komang Yumi Arya Kusuma Dewi, Putu Purnama 414 Dianasari, Dewa Ayu Made Lily 544 Dinata, Sandra 473 G Gama, Adie Wahyudi Oktavia 498 George, Saji 39 Gonzales-Yanac, Tatiana 109 Gorda, A.A.A. Ngurah Sri Rahayu 498 H Hadi, Noor Ul 289 Harb, Ayman 52 Hassan, Abdulwadod Saeed Abdulwasea 206 Henrica, Lidya 544 Huerta-Soto, Carlos 109 Hussain, Shaik Azahar Shaik 251 I Ibrahim, Umar Abbas Inna, Bezhenar 175
39
J Jaheer Mukthar, K. P. 109 Jamil, Ahmad Hazizi Shah 251 Johan, Ahmad 232 Junianti, Putu 492 Juwita, Putu Ratna 473 K Kartika, Nurulaily 11 Kaur, Jaspreet 141 Kazim, Syed 79, 96 Krismajayanti, Ni Putu Ari
© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 B. Alareeni and A. Hamdan (Eds.): ICBT 2023, LNNS 924, pp. 551–553, 2024. https://doi.org/10.1007/978-3-031-53998-5
446
375
552
Kumala, Ida Ayu Ratna 516 Kumarasamy, P. 157 Kusnita, Kadek Linda 446 Kustina, Ketut Tanti 375 L Laila, Nisful 1, 22 Laksmi, Ayu Chairina 193 Lasmi, Ni Wayan 340, 454 Lau, Tzen Yik 301 Lubis, Arlina Nurbaity 219 M Maaodhah, Ali S. A. 206 Mahadewi, Ni Made Eka 535, 544 Maheswari, A. A. Istri Agung 437 Manjunatha, C. G. 79 Manrique-Cáceres, Jorge 67, 109 Martini, Ida Ayu Oka 404 Martini, Luh Kadek Budi 423 Mimaki, Caren Angelina 384 Muafi, Muafi 232 Mudhsh, Mustafa M. A. 206 Mukthar, K. P. Jaheer 67, 79, 96 N Nagadeepa, C. 67, 109 Nia, Vera Mita 311 Ningrat, Fellicia Ayu 506 Nordin, Norshahrizan 206 Nuraindra, Yudanto Adi 193 Nuraini A., Nuraini A 260 Nurfalah, Irfan 22 Nurmalasari, Made Ratih 446 P Padmawati, Ida Ayu Putu Sri Astiti 516 Parasari, Nyoman Sri Manik 437 Permana, Gusi Putu Lestara 375 Pidada, I. A. Iswari 437 Pika, Putu Ayu Titha Paramita 330 Pol, Naveen 79 Prabarini, Nyoman Sridiva Dian 506 Prasetyarianti, Agnes Ayu 482 Pratiwi, Nuning Indah 526 Prawitasari, Putu Putri 446 Purmiyati, Atik 11 Purnama Sari, Desak Made Pebri 437 Putri, Ni Luh Putu Melyana 394
Author Index
R Rahman, Arief 241 Rajiman, Mohammad Amirul Ayu Ramirez-Asis, Elia 109 Ramirez-Asis, Hernan 131 Rani, Nazatul Shima Abdul 185 Rini, Endang Sulistya 219 Rizki, Putri Geubrina 260 Rocca-Espinoza, Eduardo 131 Rosyidi, Luthfi Nur 1, 22 Rurush-Asencio, Roger 67 Rusydiana, Aam Slamet 22
251
S Saad, Shatina 301 Salsabil, Imanirrahma 232 Sammani, Dania 206 Saputra, Upayana Wiguna Eka 394 Saragih, Susanna Rotua 219 Saranya, S. 123 Sari, Desak Made Febri Purnama 404 Sariani, Ni Luh Putu 375 Sarukunaselan, Karunavani 535 Sembel, Roy 311 Sheeba, V. Francy 157 Siregar, Hermanto 311 Situmorang, Syafrizal Helmi 219 Sivaraman, Sruthi 167 Sneha, N. 141 Suardana, Ida Bagus Raka 375, 423 Suasapha, Anom Heri 544 Subanda, I. Nyoman 516, 526 Subawa, Nyoman Sri 384, 473, 506 Suda, Khairul Azizan 185 Suhadi, Ilyas Alfian 241 Suidarma, I. Made 340, 352, 363 Sukmaningrum, Puji Sucia 1, 22 Sunarta, I. Nyoman 340 Svitlana, Melnychenko 175 Swaroop, Kotigari Reddi 79 T Thomas, Ajai Abraham 141 Tinoco-Palacios, Luciano 67 Tirtayani, I Gusti ayu 375 U Utami, Made Srinitha Millinia 506 Utami, Ni Ketut Widya 414 Utami, Ni Putu Ria 384
Author Index
V Vakharia, Hazel 167 Velarde-Molina, Jehovanni 131 Victoriia, Lezhepokova 175 Volodymyr, Mamchur 175
W Widhiasthini, Ni Wayan 394 Widiantari, Komang Sri 363 Wijaya, Gede Crisna 404 Wisudawati, Ni Nyoman Sri 464
553
Wulandari Laksmi P., Kadek 454 Wurjaningrum, Febriana 11 Y Yani, Ni Wayan Merry Nirmala 446 Yanti, Ni Kadek Winda 506 Yulianti, Ni Made Dhian Rani 394 Z Zahra, Fatimah Az 232 Zharaura, Khusnul Afifah 260 Zulbainarmi, Nimmi 311