Ijcbs Vol 2 No 3 March 2011 Issn 2156-7506

International Journal of Contemporary Business Studies Vol: 2, No: 3 .March, 2011 ISSN 2156-7506

Copyright © 2011. Academy of Knowledge Process

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ISSN 2156-7506

International journal of Contemporary Business Studies

An International Journal Published by

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Copyright © 2011 IJCBS

VOLUME 2 NUMBER 3 MARCH 2011

IN THIS ISSUE:

Managerial Competence and Non-Performance of Small Firms in a Developing Economy Sanda.A, Jocelyn Sackey, Ylva Fältholm A Comparison of Artificial Neural Network (ANN) Model & Auto RegressiveIntegrated Moving Average (ARIMA) Model For Forecasting Indian Stock Market Dr. Tripathy.N Idea Generation: A Catalyst for Productivity and Innovation in Advertising Jahanzeb Shah,Dr. Bakhtiar Ali

Corporate Social Responsibility: A Corporate Vision Dr (Ms) Ravi Kiran, Anupam Sharma



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Chief Editor

Editorial Board Editorial Board consists of PhD doctors from all over the world

Prof. Dr. Nada k. Kakabadse Professor - Management & Business Research

University of Northampton Business School UK

Dr. M. A. Sharifian

PhD Industrial/Organizational Sociology University Jussieu, (Paris VII),

France

Dr. Salaheldin Ismail PhD. University of Glasgow, UK

Head of Department Marketing & Management College of Business & Economics

Qatar University

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Scotland

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University of Wollongong Australia

Prof. Dr. Viorel Cornescu

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Romania

Prof. Dr. Vasyl Gerasymchuk PhD Economics

National Technical University of Ukraine, Kyiv Politechnic Institute,Ukraine

Assoc. Prof. Dr. Elena Druica PhD Microeconomics & Risk Economics Head of Department, Business & Administration University of Bucharest Romania Prof. Dr. Jorgen L. Pedersen PhD Ass. Prof. Dept. of Manufacturing Engineering & Management Technical University of Denmark Denmark Dr. Saeid Saeida PhD Business Administration Assistant Professor Dept. of Economics, Management & Accounting Yazd University Iran Dr. Azlan Amran PhD Assistant Professor School of Management, University Sains Malaysia Dr. Ah Pak Ass. Professor Department of Management Xi'an Jiaotong-Liverpool University China Dr. A. Pourezzat Assistant Professor School of Management, University of Tehran Iran

International journal of Contemporary Business Studies A journal of Academy of Knowledge Process



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Sasan Ghasemi CEO Ala Excellence Consulting Group

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Prof. Dr. Moaddi M. Almeth-hib College of Business Administration

Department of Management King Saud University

Kingdom of Saudi Arabia

Dr. Mohammad Ali Feizpour PhD Industrial Economics

Assistant Professor Dept. of Economics, Management & Accounting

Yazd University Iran

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PhD. Lecturer Scientific Secretary

Faculty of Economics Study

Prof. Dr. Michela Cortini PhD, Ass. Prof. Department of Work and Organizational Psychology University of Bari Italy Prof. Dr. Sven Voelpel Professor of Business Administration Jacobs Center on Lifelong Learning and Institutional Development Jacobs University Germany Dr. Madan Bhasin Professor in Accounting College of Business, Hospitality and Tourism Studies, Fiji National University, P.O. Box 7222, Valelevu, Nasinu, Fiji Islands

University of Petesti Romania



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Contents


VOLUME 2, NUMBER 3 March 2011

Managerial Competence and Non-Performance of Small Firms in a Developing Economy Sanda.A, Jocelyn Sackey, Ylva Fältholm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 A Comparison of Artificial Neural Network (ANN) Model & Auto Regressive Integrated Moving Average (ARIMA) Model For Forecasting Indian Stock Market Dr. Tripathy.N. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 6 Idea Generation: A Catalyst for Productivity and Innovation in Advertising Jahanzeb Shah,Dr. Bakhtiar Ali. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 0

Corporate Social Responsibility: A Corporate Vision Dr (Ms) Ravi Kiran, Anupam Sharma. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 8



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Managerial Competence and Non-Performance of Small Firms in a Developing Economy

Sanda.A , PhD Division of Industrial Work Environment

Department of Business Administration, Technology and Social Sciences Luleå University of Technology, SE – 971 87, Luleå

Sweden Telephone: +46 920 49 3024, Fax: +46 920 49 10 30

Joceln Sackey Division of Industrial Work Environment

Department of Business Administration, Technology and Social Sciences Luleå University of Technology, SE – 971 87, Luleå, Sweden

Telephone: +46 920 49 3838, Fax: +46 920 49 10 30 Ylva Fältholm, PhD

Division of Industrial Work Environment Department of Business Administration, Technology and Social Sciences

Luleå University of Technology, SE - 971 87, Luleå,Sweden Tel: +46 920 49 1408; Fax: +46 920 49 1030

ABSTRACT

Executives of small firms in developing economies have the competences to make their firms competitive. Their inability to use their competences to simultaneously attain efficiency and effectiveness in managing their workplaces render them non-competitive. This observation is made following a study that examines the competence challenges of executives of small firms and their non-performance in the Ghanaian industrial environment. Data were collected by surveying 72 executives using questionnaires. The result shows that executives of small firms in Ghana possess the managerial competences and behaviors to enhance the performances of their firms. The executives show a high level of autonomy and influence on the work they manage by appreciably combining their operant competences and their organizational citizenship behaviors. Yet still, despite the executives exhibiting competence and organizational behavior attributes, these characteristics appear not to have positive impacts on their performances toward making their firms competitive. For the executives to be efficient, they should have the capability to use their managerial competences for conducting research optimally (i.e., without wastage) in order to achieve organizational goals. Also, for executives to be effective, they should have the capability to use their requisite competences in carrying out research to complement their other managerial competences toward attaining the firm’s set goals. Keywords: Executive Competence; Discretionary Behavior; Operant Competence; Small Firms; Developing Economy.



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INTRODUCTION

Small and medium-scale enterprises (SMEs) are critical in the economic and social development of most countries. They are especially important for their role in job creation with low investment, entrepreneurship development, regional development, and as suppliers to large companies. Technology-based SMEs also play important roles in the innovation of new products and processes (Sanda, 2006). Institutions, such as the Organization for Economic Co-operation and Development (OECD) provide guidance for donors on support for the private sector in development which emphasizes the importance of SMEs (OECD, 1994). The United Nations Industrial and Development Organization’s (UNIDO) defines small-scale enterprises in developing countries as firms that employ 5 to 19 workers. UNIDO also defines a medium-scale enterprise as firms that employ 20 to 99 workers. In Ghana, SME’s form a great percentage of businesses in both the formal and the informal sector. The Ghana Statistical Services defines small scale enterprises as businesses that have less than 10 employees. Ghana Statistical Services also defines medium and large scale enterprises as businesses with more than 10 employees. The Ghana National Board for Small Scale Industries (NBSSI) uses this definition to identify small business. The NBSSI also uses the value of a firm’s fixed assets as a definition criterion. For example, the NBSSI defines a small-scale enterprise as a firm with maximum of 9 workers that has plant and machinery (excluding land, buildings and vehicles) assets whose total value do not exceed 10 million Ghanaian cedis (Kayanula and Quartey, 2000; Abor and Quartey, 2010). SMEs and Growth in Developing Economies Mengu and Grier (1997) argue that irrespective of government policies, SMEs in most developing countries cannot attain their full potential without improvements in their ability to access, absorb, adapt, and exploit new technologies and business techniques. In Ghana, Aryeety (1998) observes that a number of factors, such as access to international markets, technology, equipment and finance are barriers to the development of the SME sector. Gockel and Akoena (2002) relate the prevalence of these barriers to the fact that lack of managerial competencies hampers most executives of these SME’s. Kuffour (2008) explains that the capacities of SMEs in Ghana to translate their strategies into specific policies are critical issues that need addressing. This focus is necessary because SMEs in the Ghanaian industrial environment are incapable of achieving competitive advantage due to the inability of their executives to exhibit the requisite managerial competences that can help motivate and increase their employees’ performances. This view builds from Boyatzis (1982), and Lucia and Lepsinger (1999), that competencies are characteristics that result in effective and outstanding performance. Ghanaian SME executives are unable to achieve much since the kind of managerial competences they require to make their firms’ policies functional are unknown. This challenge relates to the problems such executives normally encounter in their efforts to implement their business policies and strategies efficiently and effectively (Sanda, 2010). The growing evidence that most business executives in Africa are unclear about their managerial roles reinforces this observation. Munene, Bbosa, and Obonyo (2003) note that many of business executives in Africa tend to have the same jobs as their subordinates. Hogg (1993) explains that outstanding performance is a reflection of the competence that an executive has, and the competences average performers possess. This phenomenon is worthy of study, especially from the perspectives of the learning that can be made on managerial competences and their use to motivate and increase employee performances. LITERATURE REVIEW The concept of competence is viewable from several perspectives. For example, competence is quantifiable as predictive competence (i.e., testing the characteristics and aptitudes that are



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likely to differentiate superior performers), organizational core competencies (i.e., aggregates of capabilities, where synergy is created that has sustainable value and broad applicability for an organization), proven competence (i.e., a real and demonstrated ability to successfully carry out some activity which is totally identified), as well as adaptive competence (i.e., the ability to read a new situation and adapt/apply appropriate competences). Cheng, Dainty, and Moore (2003) argue that research on managerial competence is narrowly focused and confusing in its terminology. A disparity exists between the definitions and assessments of competence developed in the United States and the approaches adopted in the United Kingdom (Cheng et al., 2003). Hogg (1993) argues that predicting a person’s competences based on performance is impossible. Other researchers believe that competencies are the factors that affect the success of performance in a job or situation. Barney (1986, 1991) posits that organizational resources and capabilities that are rare, valuable, non-substitutable, and imperfectly imitable form the basis for a firm’s sustained competitive advantage. This resource-based-view of organizational strategy and competitive advantage has engendered a great deal of theoretical and empirical efforts (e.g., Amit and Schoemaker, 1993; Barney, 1991; Conner, 1991; Hansen and Wernerfelt, 1989; Lado, Boyd, and Wright, 1992; Mahoney and Pandian, 1992; Reed and DeFillippi, 1990; Rumelt, 1991). The resource-based view suggests that human resource systems can contribute to competitive advantage by facilitating the development of competencies that are firm specific. Such competencies embed in a firm’s history and culture, and produce complex social relationships, as well as generate tacit organizational knowledge (Barney, 1992; Reed and DeFillippi, 1990; Wright and McMahan, 1992). Distinguishing Between Firms Resources and Capabilities Different authors label resources and capabilities differently and these labels reflect a wide range of research objectives and theoretical perspectives. For example, Reed and DeFillippi (1990), and Fiol (1991) label resources and capabilities as distinctive competence , Prahalad and Hamel (1990) label resources and capabilities as core competence, Pavitt (1991) labels resources and capabilities as firm-specific competencies, Ulrich and Lake (1990) as well as Stalk, Evans, and Shulman (1992) label resources and capabilities as organizational capabilities, Prescott and Visscher (1980), Ranson (1987), and Tomer (1987) label resources and capabilities as organizational capital, while Kagire and Munene (2007) also label resources and capabilities as operant competencies. Cheng et al. (2003) view each of these perspectives as incomplete and not providing a comprehensive frame for understanding both managerial competence and the management of performance. Cheng et al. (2003) argue that these perspectives fail to deal with issues of the dynamic environment and the widely different contexts for managerial performance, particularly with regard to identifiable cultural differences. Chong (2008) reinforces Cheng et al’s. (2003) argument by noting that competencies of executives from different nationalities are subject to cultural factors that shape personality and behavioral choices. The arguments by Cheng et al. (2003) and Chong (2008) establish the need to study and understand managerial competences and its impact on employee performances and firm productivity within a sociocultural setting. In this respect, this study has the following two objectives: (1) to identify the competencies that executives of small firms in Ghana use in managing their workplace; (2) to understand why these firms are non-performing. The study poses the following research question. Do executives of SMEs in Ghana possess the relevant managerial competencies for effective work? In addition, the study tests the following hypothesis; executives’ managerial competencies do not relate with their operant competences. Conceptual Framework The study uses the term, “competent”, to identify someone who is efficient and effective in performing to a standard (Kagire and Munene, 2007). Competency refers to a specific behavior and characteristics of a person that result in effective or superior performance. Boyatzis (1982)



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defines competency as an underlying characteristic of an individual that relates causally to effective or superior performance. Competence also refers to areas of work in which a person is competent, and competency refers to the dimensions of behavior lying behind the competent performance (Woodruffe, 1991). McLagan (1997) notes that competencies are products of analyzing jobs, and they link work, people and strategy for improving performance once they are generated. Previous studies (e.g., Organ, 1988; Organ and Konovsky, 1989) show that many of these contributions which aggregate over time and persons considerably enhance organizational efficiency and effectiveness. Thus, Cheng et al. (2003) view the establishment of the competency of individuals to be crucial for further development of an organization. Competency assessment is a versatile and powerful tool in human resource management practices (Armstrong, 2003). Thus competence is about what one needs to know as well as how one needs to do it (Armstrong and Baron, 1995). The concept of competency then refers to applied knowledge and skills, performance delivery, and the behaviors required to get things done very well (Armstrong and Baron, 1995). Competency profiling is a process through which principal accountabilities of ones competencies and critical outputs could be obtained. These indicate what the role holder has to be able to do, and the behavior required of him/her to perform the role effectively (Armstrong, 2000). According to Armstrong (2000), executives uniformly highlight certain characteristics of competence that are: (a) related to realistic practices that are evident at the work place, (b) expressed as an outcome rather than the procedure or process, (c) observable and assessable, (d) not contain evaluative statements, but instead be tied to performance criteria against which they will be assessed, (e) sensible and specific and not subject to diverse interpretations, and (f) transferable across organizations, industries and occupations. Thus, the establishment of the competency of individuals is crucial for further development of an organization (Cheng et al., 2003). All organizations distinguish between behavior-based competencies that relate to “how the executive acts” and attribute-based competencies that refer to “who the executive is” (Jurie, 2000). Competency is the underlying characteristic of an individual that relates causally to effective or superior performance (Boyatzis, 1982). Woodruffe (1991) suggests viewing competency as the dimensions of behavior lying behind a competent performance. Armstrong (2000) notes that in the process of establishing what executives are able to do, and the behavior required of them to perform the role effectively, their competence profiles must be created. The dominant approaches in the management literature to identify competence build from the scientific principles of rationalistic research tradition that focus on job analysis (Armstrong, 1991; Cascio, 1995; Ferris, Rowland, and Buckley, 1990; Fine, 1988). Three main approaches are distinguishable. These approaches include the worker-oriented approach, the work-oriented approach, and the multi-method oriented approach (Sandberg, 1994; Veres, Locklear, and Sims, 1990). The worker-oriented approach is the operant approach (Munene, 1996). Although advocates of the worker-oriented approaches take the worker as the point of departure, advocates of the work-oriented approaches take the work as the point of departure (Fine, 1988; Flangan, 1954). In the work-oriented approach, activities that are central to accomplishing specific work are firstly identified, and then transformed into personal attributes. By doing so, more concrete and detail descriptions of what constitutes competence are generated and, this, largely overcome the problem of generating descriptions of competence that are too general. One basic criticism of the work-oriented approaches is that, a list of work activities does not sufficiently indicate the attributes required to accomplish those activities efficiently (Raven, 1994). Proponents of the multi-method oriented approaches also stipulate that a specific set attributes constitutes competence. What distinguishes the multi-method approaches from the other approaches is that they adopt a more comprehensive approach to competence. In attempts to avoid the criticism against the worker approach and the work-oriented approach, the multi-method approach draws



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from both of these approaches (i.e., the worker approach and the work-oriented approach). Veres et al.(1990) note that within the worker-oriented approaches, competence is primarily constituted by attributes possessed by workers, typically represented as knowledge, skills, abilities and personal traits required for effective work performance. For example, a commonly used worker-oriented approach is the job element method (Veres et al., 1990). The relevant attributes are captured through the use of a group of job incumbents and supervisors. The attributes identified are organized into predefined categories. The attributes are then rated to allow quantitative measurement of the correlation between success in accomplishing the work and possession of the designated attributes. METHODS AND MATERIALS The conceptual appraisal describes several ways of studying and using competences. For the purposes of this research, operant competencies describe the executive’s specific resources and capabilities that enable him/her to develop, choose, and implement value-enhancing strategies. These resources include all individual-specific assets, knowledge, skills, and capabilities embedded in the individual’s capability, ability and interpersonal relationships. Worker-oriented competence framework guides the study here (Veres et al., 1990). Munene (1996) describes worker-oriented competence as the operant competence framework. Data Collection The participants (i.e., data sources) are executives of SMEs in Ghana. Random sampling method was used to draw 100 participants to whom a standardized self-completion questionnaire (Kagire and Munene, 2007) was administered. The questionnaire entails an amalgamation of competencies attributes which allow quantitative measurement of the correlation between success in accomplishing the work and possession of the designated attributes. For instance, “Preparing work plans and establishing activities to be executed in the budget”; Cronbach alpha was 0.95. For instance, “find new ways of doing things, and being practical”; Cronbach alpha was 0.85. The response rating in the questionnaire follow the five-point Likert scale from 1 (strongly disagree) to 5 (strongly agree). Scale scores were computed by averaging across responses to the items in each scale. The duration for data collection was five weeks. DATA ANALYSIS & RESULTS The response rate for the administered questionnaire was 72 percent. The specific competences exhibited by the executives are firstly assessed and Pearson correlation analysis is then carried out to establish the levels of their significance in influencing the executives’ competences attributes. Analyses of respondents’ demographic characteristics (see Figure 1) show that there are more males (68%) than females (32%).



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Males, 49, 68%

Females, 23, 32%

FIGURE 1: Distribution of Executives’ Gender

The distribution in Figure 2 shows that majority of the respondents (71%) are in their middle-ages (i.e., 30 years and above).

20-29 yrs, 21, 29%

30-39 yrs, 24, 33%

40-49 yrs, 22, 31%

50-59 yrs, 5, 7%

FIGURE 2: Distribution of Executives’ Age.

Generally, the respondents are adequately educated (see Figure 3). Forty (55%) of them are university graduates. Twelve (17%) of them are diploma holders while 16 (22%) of them have certificates. Only 4 (6%) of the respondents do not have a degree or diploma or certificate, but have some level of educational training.

Certif icate, 16, 22%

Diploma, 12, 17%

Degree, 27, 37%

Postgraduate, 13, 18%

Other, 4, 6%

FIGURE 3: Distribution of Executives’ Level of Education.

In relation to the number of years respondents’ have been functioning as executives in their firms, the distribution in Figure 4 shows that 24 (33%) of them have been managing their firms for more than 7 years. Twenty-eight (39%) respondents have been executives for a period ranging from 3



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to 6 years. Thirteen (18 %) were executives for periods of one to two years. Seven (10 %) respondents have been managing their firms for less than one year.

Less than 1yr, 7, 10%

1 to 2 yrs, 13, 18%

3 to 4 yrs, 20, 28%5 to 6 yrs, 8, 11%

7 to 8 yrs, 8, 11%

9 to 10, 5, 7%

More than 11 yrs, 11, 15%

FIGURE 4: Distribution of Year’s Respondent’s served as Executives.

Therefore, the executives surveyed are qualified and experienced to provide the needed information in the questionnaire that is administered. The sections that follow analyze the managerial competences attributes that the executives use in managing their firms. This analysis is done from the perspectives of the following two themes: identification of managerial competence attributes possessed by the executives; understanding the functional complimentalities of the executives’ competence attributes. Identification of Managerial Competence Attributes Possessed by the Executives An assessment of the executives’ operant competencies show that in their approach towards achieving results and improving individual and organizational contribution, they most often meet deadlines set for organizational activities. They praise their staff whenever they exhibit good performances and also encourage excellence among work teams in their firms. Aside taking risks in the interest of their firms, they are able to use their competences toward the improvement of individual and organizational contribution towards the achievement of results. The executives exhibit the competences that allow for the smooth set up of their firms’ operational systems, as well as the testing and inspections of their products and services. They exhibit such competences by ensuring the smooth set up of their firms’ operational systems by deciding on the kind of tools and equipment necessary to do a job before hand. They estimate causes of operational errors when they (i.e., errors) occur before proceeding on to decide on what to do to address such errors. The executives also conduct tests as well as carry out inspections of products and services. Furthermore, the executives exhibit innovative competence in finding and creating valuable, useful new products, services, ideas, procedures or processes by finding new ways of doing things well, and also by being practical in their approaches. The executives exhibit competences in motivating their employees to work together to achieve organizational goals by using the medium of delegation and staff empowerment, and quick decision-making. They also ensure that activities in their firms are planned so as to create a desired work environment by involving their staff in decision-making as well as putting organizational resources to their efficient and effective use. The executives show their competence towards enhancing clear communication with their staff by listening to the ideas of their employees, and giving them feedback. The executives also ensure that they manage their



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C o m m u n ica t in g th e o r g an is a tio n m is s io n an d v is io n

In i t ia t in g s t ra teg ic id ea s , re v iew in g an d u p d a t in g th e o b je c tiv e s o f th e d ep a r tm e n t .

Id e n t i fy in g re s o u r ce s an d d ev e lo p in g p ro g ram s , p o l ic ie s an d p ro c ed u r e s

F o l lo w in g u p , m o n i to r in g an d a s s e ss in g th e p ro g r e s s o f o p e r a t io n s

C o m m u n ic a tin g th e o rg a n is a t io n m is s io n a n d v is io n

1

I n i tia t in g s t ra te g ic id e a s , r ev ie w in g a n d u p d a tin g th e o b je c t iv e s o f th e d ep a rtm en t .

.6 8 * * 1

I d en t i f y in g re so u rc e s a n d d e v e lo p in g p ro g r am s , p o l ic ie s a n d p r o ce d u re s

.6 2 * * .8 3 * * 1

F o l lo w in g u p , m o n ito r in g an d a s s e s s in g th e p ro g re s s o f o p e ra t io n s

.5 8 * * .6 5 * * .7 5 * * 1

* * . C o rr e la t io n is s ig n ific an t a t th e 0 .0 1 le v e l ( 1 -ta i le d ).

emotions and behaviors as executives in a social interactive context. They do this by trying very well to understand employees’ issues that do not relate to work but which impact on work performance. The executives exhibit the requisite competences of communicating clearly with their staff. They executives also manage their self-emotions, self-behaviors, and that of their employees in a social interactive manner. They do not take offence when employees criticize them. Competence in strategically planning for firm In the assessment of the executives’ competences when strategically planning for their firms, 50 (70 %) executives communicate their organization’s mission and vision very often. Fifty-three (78 %) executives also enhance their strategic planning process by initiating strategic ideas as well as reviewing and updating the objectives of their businesses. Forty-five (63 %) executives indicate that in their planning process, they put much emphasis on identifying needed resources and also in developing programs, policies and procedures. The results also show that 60 (83.3%) executives engage in follow-ups as well as monitor and assess the progress of their business operations. The implication here is that SME executives in Ghana exhibit the requisite competences that enhance their capacities to strategically plan their businesses, as well as assess and monitor progress of their firms’ operations. Correlation analysis between these managerial competences categories show that they are very significantly correlated (see Table 1). This indicates that the executives’ exhibitions of specific competences are positively influenced by their ability to exhibit the other competences. TABLE 1: Pearson Correlation Coefficients for Relationship between Executives’ Specific

Competences in Strategically Planning for the Firm

Competence in producing financial resources and budgets Analysis of the executives’ competence in developing, mobilizing and producing financial resources and budgets show that 48 (67%) of them review their budget and financial activities most often. Fifty-two (72%) executives most often prepare work plans and establish activities to be executed in the budget, while 47 (65%) others engage in resources allocation and budget implementation. Fifty-one (71%) executives also use the medium of monitoring, evaluation and budget performance review in developing, mobilizing and producing their financial resources and budgets. The implication here is that SME executives in Ghana exhibit the requisite competences that enhance their capacities to develop, mobilize and produce financial resources and budgets for



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their firms. These competences are also very significantly correlated (see Table 2), and as such the executives’ exhibition of a specific competence is positively influenced by their ability to exhibit the other competences. TABLE 2: Pearson Correlation Coefficients for Relationship between Executives’ Specific

Competences in Producing Financial Resources and Budgets

Reviewing previous budget and financial activities.

Preparing Work plans and establishing activities to be executed in the budget.

Allocating resources and implementing budget


Reviewing previous budget and financial activities.

1

Preparing Work plans and establishing activities to be executed in the budget.

.84** 1


.76** .81** 1

Following up, monitoring and assessing the progress of operations

.74** .76** .84** 1

**. Correlation is significant at the 0.01 level (1-tailed).

Competence in creating work environment for high performance In this analysis, the competences that the executives use to create work environment for high performance and utilization of human resources and management of their individual development plans is assessed. Fifty (69%) executives note that they often engage themselves in the monitoring and evaluation of their firms’ programs and activities. Thirty-eight (52.8%) others indicate that they often conduct research and surveys of the organization’s products, services and operations. Forty-five (63%) executives note that they assess their firms’ policies and procedures and then make appropriate recommendations. They also earmark organizational issues to be given special attention by reviewing, editing and approving reports. The implication here is that SME executives in Ghana exhibit competences that enable them to create work environments for high performances. These competences facilitate their ability to utilize their human resources and manage their employees’ individual development plans. Correlation analysis shows that these competences correlate significantly (see Table 3).



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M o n ito rin g , re v iew in g an d e v a lu a tin g th e p h ys ic a l a ss ets m a n a ge m e n t s ys tem

A cc o u n tin g fo r th e firm ’s p h ys ica l a ss ets .

D ev elo p in g p ro p er c las sifica t io n o f as se ts fo r m a in ten a n c e a n d b u d g eta ry p u rp o se s

O rg a n izin g a n d atten d in g to stak eh o ld e r co m m u n ic at io n s

P ro v id in g fe ed b a c k to m an ag e m en t a n d sta ff o n firm ’s b u s in e s s t ren d s.

E x p lo itin g o p p o rtu n ities th a t ad d v alu e to firm a n d re c o m m e n d o n h o w to co m p e te o r c o o p e ra te e ffe ctiv e ly.

M o n ito rin g , re v ie w in g a n d e v alu a tin g th e p h y sic al a ss ets m an a g e m en t s y stem 1

A cc o u n tin g fo r th e firm ’ s p h y sic al a ss ets . .7 6 * * 1

D ev e lo p in g p ro p e r c la ss ifica tio n o f a ss ets fo r m ain ten a n c e a n d b u d g e tar y p u rp o se s

.7 9 * * .7 3 * * 1

O rg an iz in g an d a tte n d in g to sta k eh o ld e r c o m m u n ica tio n s

.5 8 * *

.5 1 * *

.6 2 * *

1

P ro v id in g fe e d b a ck to m an a g e m e n t a n d s ta ff o n o r ga n is atio n -b u sin e ss tren d s .

.7 1 * *

.6 2 * *

.7 4 * * .8 2 * * 1

E x p lo itin g o p p o rtu n ities th at a d d v a lu e to firm an d rec o m m en d o n h o w to c o m p e te o r c o o p e ra te e ffe ctiv e ly .

.6 6 * *

.6 3 * *

.7 4 * * .7 1 * * .7 8 * * 1

* * . C o rrela tio n is sig n ific a n t a t th e 0 .0 1 le v el (1 -ta iled ).

TABLE 3: Pearson Correlation Coefficients for Relationship between Executives’ Specific Competences in Creating Work Environment for High Performance

Initiating, developing and reviewing performance management systems

Implementing systems for utilization and development of a competent workforce.

Reviewing the capacity of staff, setting and communicating performance targets.

Reviewing assigned tasks, appraising and supporting staff.

Identifying training needs, training opportunities available and costs to be incurred

Initiating, developing and reviewing performance management systems

1

Implementing systems for utilization and development of a competent workforce.

.77** 1

Reviewing the capacity of staff, setting and communicating performance targets.

.65** .66** 1

Reviewing assigned tasks, appraising and supporting staff.

.63** .67** .84** 1

Identifying training needs, training opportunities available and costs to be incurred

.67** .70** .78** .83** 1


Competence in developing and safeguarding physical resources Regarding the competences that the executives’ exhibit in order to develop, mobilize and produce financial resources and budgets, 48 (67%) executives indicate that they most often ensure that their previous budget and financial activities are reviewed. Fifty-two (72%) executives note that they do these by preparing work plans and establishing activities to be executed in the budget, while 47 (65%) others engage in resources allocation and budget implementation. Fifty-one (71%) executives use the medium of monitoring, evaluation and budget performance review in developing, mobilizing and producing their financial resources and budgets. Forty-eight (67%) executives involve themselves in the monitoring, reviewing and evaluation of their firms’ management system in their approach towards developing and maintaining profitable cooperation and relationship with key stakeholders. Forty-nine (68%) executives indicate that they most often account for the organization’s physical assets, while 49 (70%) executives engage in developing proper classification of their firm’s assets for maintenance and budgetary purposes.

TABLE 4: Pearson Correlation Coefficients for Relationship between Executives’ Specific

Competences in Maintaining Relationship with Key Stakeholders.



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The implication here is that SME executives in Ghana exhibit the requisite competences that enhance their capacities to develop, mobilize and produce financial resources and budgets for their firms. The executives also exhibit the requisite competences that facilitate their efforts towards developing and maintaining profitable cooperation and relationship with key stakeholders of the organization. Correlation analysis between these competences that the executives exhibit shows that they correlate significantly (see Table 4). As such, the exhibition of a specific competence by the executives is positively influenced by their ability to exhibit other competences. Competence in accessing information and communication systems The competences shown by the executives that enable them to maintain as well as access information and communication systems is appraised here. Forty-seven (65%) of the executives indicate that they engage mostly in organizing and attending to stakeholder communications, such as management and staff meetings. Forty-eight (67%) executives note that they engage themselves in the provision of feedback to management and staff on organization-business trends. Fifty-four (75%) executives exploit opportunities that add value to their firms and make recommendations on how to compete or cooperate effectively. The implication here is that SME executives in Ghana exhibit the requisite competences that allow them to maintain and access information, as well manage their firms’ communication systems. Correlation analysis between these competences exhibited by the executives show that they are very significantly correlated (see Table 5). As such, the exhibition by the executives of a specific competence is positively influenced by their ability to exhibit the other competences.

TABLE 5: Pearson Correlation Coefficients for Relationship between Executives’ Specific

Competences in Accessing Information and Communication Systems

Identifying information and communication requirements.

Implementing work flows that facilitate accessing, collecting and processing data

Analyzing, filtering and disseminating available information

Developing networking tools for information and knowledge exchange.

Identifying information and communication requirements.

1

Implementing work flows that facilitate accessing, collecting and processing data

.72** 1

Analyzing, filtering and disseminating available information

.72** .85** 1

Developing networking tools for information and knowledge exchange.

.80** .82** .82** 1


Competence in producing and analyzing business reports and policies In producing and analyzing reports, proposals, policies and procedures, 47 (65%) executives most often identify their firms’ information and communication requirements as well as implementing work flows that facilitate accessing, collecting and processing data. They compliment these by analyzing, filtering and disseminating available information. The executives also engage in developing networking tools for information and knowledge exchange. The implication from this analysis is that SME executives in Ghana exhibit competences that enhance their capacities towards the production and analyses of reports, proposals, policies and procedures for their firms.



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S trate g ic a lly p la n fo r th e f irm .

D e v elo p , m o b il iz e an d p rod u ce fin an c ial re so u rce s an d bu d g ets .

C re a te a w o rk e nv iron m en t fo r h ig h p e rfo rm an ce .

D ev elop a n d im p le m en t s ys tem fo r u tilizing ph ys ic a l reso u rc es an d also m a in tain p ro fita b le co o p e ra tio n a n d rela tio n w ith k e y stak eh o ld e rs.

M ain ta in an d a c ce ss in fo rm a tio n .

P rod u c e an d an a lyz e rep o rts, p ro po sa ls, p o lic ies and p ro ced u re s.

S trate gic a lly p la n fo r the firm - D ev e lo p , m o b iliz e a n d p rod u c e fin a n cia l res ou rc e s an d b ud g e ts.

.5 1 ** - .7 2 * * -

C re a te a w o rk en v iro n m e n t fo r h ig h p e rfo rm a nce .

.4 2 ** - .7 8 * * .5 2 ** - .7 7 ** -

D ev e lo p a nd im p le m en t s y stem fo r u til iz in g p h ys ica l re so urc es, a n d a lso m a in tain p ro fita b le co o p e ratio n a n d re lation w ith ke y sta keh o ld ers .

.4 0 ** - .7 1 * * .4 5 ** - .6 9 ** .3 9 ** - .6 8 ** -

M ain ta in an d a c c es s in fo rm a tion .

.4 4 ** - .6 4 * * .5 6 ** - .7 2 ** .53 ** - .7 2 ** .57 ** - .8 1 * * -

P rod u c e a n d a n a lyz e re p orts, p ro po sa ls , p o licie s a nd p ro ce d u re s.

.14 - .67 ** .1 5 - .6 6 ** .1 4 - .7 3 * * .17 - .82 ** .2 9 ** - .84 ** -

* * . C orrela tio n is sig n ific a n t a t th e 0 .0 1 le v el (1 -ta iled ). * . C o rrela tio n is sig n ific a n t a t th e 0 .0 5 le v el (1 -ta iled ).

Correlation analysis between these competences exhibited by the executives shows that they are very significantly correlated (see Table 6), and as such the exhibition by the executives of a specific competence are positively influenced by their ability to exhibit the other competences. TABLE 6: Pearson Correlation Coefficients for Relationship between Executives’ Specific

Competences in Producing and Analyzing Reports, Proposals, Policies and Procedures.

Monitoring and evaluating programs and activities

Conducting research and surveys of the firm’s products, services and operations

Assessing policies and procedures and making appropriate recommendations

Earmarking issues to be given special attention

Reviewing, editing and approving reports

Monitoring and evaluating programs and activities

1

Conducting research and surveys of the firm’s products, services and operations

.29** 1

Assessing policies and procedures and making appropriate recommendations

.76** .31** 1

Earmarking issues to be given special attention

.78** .29** .81** 1

Reviewing, editing and approving reports

.76** .30** .81** .78** 1


Understanding the Complimentalities of the Executives’ Competence Attributes The executives’ show specific competency attributes necessary for managing an organization. Based on this observation, further correlation analysis (see Table 7) test whether or not the different competence attributes the executives use in executing the specific tasks correlate significantly to each other. The executives’ perceptions of status, the need for consultation, and the degree of openness of communication between executives and their subordinates are likely to influence the managerial competencies (i.e., intra-competence attributes) (Chong, 2008).

TABLE 7: Pearson Correlation Coefficients for Relationship between Different Competences Attributes Exhibited by Executives



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From the correlation coefficients ranges shown in Figure 7 above, the specific competences in five of the competence attributes used by the executives to carry out specific tasks are significantly correlated to each other. These concern the competence attributes the executives exhibit in carrying out the following five functions: (1) strategically planning for the firm; (2) developing, mobilizing and producing financial resources and budgets for the firm; (3) creating a work environment for high performance and utilization of the firm’s human resources and the management of their individual developments; (4) developing, reviewing, maintaining and implementing a system for the acquisition, utilization and safeguarding physical resources, as well as maintaining profitable cooperation and relation with key stakeholders of the firm; (5) maintaining and accessing the firm’s information and communication systems. The only exception is that some specific competences in this competence attributes do not significantly correlate with the executives’ specific competence in conducting research and surveys of their firms’ products, services and operations. Correlation analysis shows that the executives’ competence in conducting research and surveys of their firms’ products, services and operations is not significantly correlated (α = .14) to their competences in initiating strategic ideas, reviewing, and updating their firm’s objectives. Similarly, the executives’ specific competence in conducting research and surveys of their firms’ products, services and operations is not significantly correlated (α = .18) to their specific competence in identifying resources and developing programs, policies and procedures. The implication here is that the executives cannot use their competences in producing and analyzing reports, proposals, policies, and procedures to reinforce their capacity to strategically plan for their firms. The executives’ specific competence in conducting research and surveys of their firms’ products, services and operations is not significantly correlated (α = .15) to their specific competence in preparing work plans and establishing activities to be executed in the budget. The implication here is that the executives cannot use their competences in producing and analyzing reports, proposals, policies and procedures to reinforce their capacity to develop, mobilize and produce their firm’s financial resources and budgets. The executives’ specific competence in conducting research and surveys of their firms’ products, services and operations is not significantly correlated (α = .14) to their specific competence reviewing the capacity of staff, setting and communicating performance targets. The implication here is that the executives cannot use their competences in producing and analyzing reports, proposals, policies and procedures to support their ability to create a work environment for high firm performance, and the utilization of human resources. The executives’ specific competence in conducting research and surveys of their firms’ products, services and operations is not significantly correlated (α = .17) to their specific competence in organizing and attending to stakeholder communications like management and staff meetings. Similarly, the executives’ competence in conducting research and surveys of their firms’ products, services and operations is not significantly correlated (α = .19) to their competence in exploiting opportunities and making recommendations on how to compete or cooperate effectively. The implication here is that the executives cannot use their competences in producing and analyzing reports, proposals, policies and procedures to compliment their capacity to develop and maintain profitable cooperation with their firm’s key stakeholders.



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DISCUSSION The SME executives exhibit competence in working to achieve results and to improve individual and organizational contribution. This relationship is due to their ability to meet deadlines, praise good performance, encourage excellence among the team, and take risks in the interest of the organization. The executives also show the requisite competence in ensuring smooth set up of operational systems by deciding the kind of tools and equipment necessary to do a job. They also decide causes of operational errors and deciding what to do, and conducting tests and inspections of products and services. The executives’ show their managerial competence for motivating employees to work together to achieve organizational goals by delegating tasks and empowering staff. They also engage in quick decision-making and work hard to set pace for the teams in their firms. Involving staff in decision making and putting resources to their efficient and effective use portrays the executives as possessing the requisite competence for ensuring planning activities to create a desired organizational/work environment. By delegating, the executives need to allow for the existence of freedom in work activities within their firms’ contexts of directions. This delegation is necessary, according to Kim (2004), because, once freedom, support from management, and directions are present, the context empowers workers to achieve high performance for the organization. As Dennison (1984) argues, empowering employees provides them with high work meaningfulness, competence, self-determination and impact that lead to organizational effectiveness (Lee and Koh, 2001). Empowerment within organization is another way to give rise to the intensity of effort (Kim, 2004). In this respect therefore, most SME executives in Ghana exhibit the requisite organizational citizenship behavior attributes that enable them to plan activities in their firms. They create a desired-organizational/work environment and also motivate their employees to work together to achieve organizational goals. The executives’ tendency to listen to the ideas of others, and also give feedback is reflective of their competency in making efforts to communicate clearly with every staff. Also, their ability to find new ways of doing things, as well as being practical shows them as possessing the competence for finding and creating valuable new products, services, ideas, procedures and/or processes. Finally, the executives portray their competence in ensuring that emotions and behaviors of oneself and others are managed in a social interactive context by valuing and working with subordinates without taking personal offence when criticized. They also show an understanding of workers issues not related to work, but which impact on work performance. Thus, Ghanaian SME executives possess the requisite managerial competence attributes that allow them to function effectively. The executives show specific behaviors and characteristics of persons that result in the effective or superior performance (Mansfield, 1999). In this respect, the executives are competent in their handling of the following four interrelated aspects of jobs outlined by Mansfield (1999): (a) technical expectations, (b) managing change, (c) managing different work activities and (d) managing work relationships. As Organ (1988) argues, business executives need to have the requisite competences that differentiate them from their subordinates. The business executives must use these competences to engage in behaviors that are important to the well-being of their organizations. They must also use it to motivate and increase their employees’ in-role performances. The conceptual importance of the observations made above is the emergence of the executives’ competences as reflective of those characteristics that signifies superior performance. The executives’ perceptions of their influence on work activities and the use of their discretionary competencies had a strong independent positive influence on the mobilization of competences. Organizational citizenship behavior is the individual’s behavior that is discretionary, and which in the aggregate promotes the effective functioning of the organization (Organ, 1988). Such



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discretionary behaviors are more strongly mobilized when the employees have a strong level of affective attachment to the organization (Tremblay, 2000). In this regard therefore, this study has shown that SME executives in Ghana possess the competences to enhance the performances of their firms. This postulation builds on Barney’s (1991) resource-based theoretical argument that, competencies lead to firm performance for sustained competitive advantage. But the analysis of the executives’ managerial competences indicates that their specific competence in conducting research and surveys of their firms’ products, services and operations do not relate significantly to their competences in undertaking some managerial tasks. These tasks include the following: (1) initiating strategic ideas, reviewing and updating the firm’s objectives; (2) identifying resources and developing programs, policies and procedures; (3) preparing work plans and establishing activities to be executed in the budget; (4) reviewing the capacity of staff, setting and communicating performance targets; (5) organizing and attending to stakeholder communications like management and staff meetings; (6) exploiting opportunities that add value to the organization and making recommendations on how to compete or cooperate effectively. Yet, the analysis of the executives’ operant competences shows the executives as exhibiting innovative competence when trying to find and create valuable, useful new products, services, ideas, procedures or processes. They exhibit innovative competence by finding new ways of doing things well and also being practical in their approaches. These activities represent a limitation to the functionality of the firm, and perhaps an indication that the executives engage themselves in finding new ways of doing things for their firms without much emphasis on conducting research and surveys of their firms’ products, services and operations. This observation, as Barney (1991) argues, raises the issue of how competency can lead to firm performance for sustained competitive advantage. The term, competent, identifies someone who is efficient and effective or who has the ability to perform to a standard (Kagire and Munene, 2007). By this definition, an executive’s competence can become visible if she is efficient and effective in whichever competence attribute that she exhibits. This view brings to the fore the efficiency-effectiveness dilemma in management, whereby executives are challenged in their attempt to be efficient and effective in managing their workplaces. CONCLUSION Based on the results and discussion, the executives of SME in Ghana appear to show a high level of autonomy and influence on the work they manage by appreciably combining their operant competences and their organizational citizenship behaviors. The executives’ use of their operant competencies has a strong independent positive influence on the mobilization of their discretionary behaviors (Tremblay, 2000). By implication, and in consonance with the suggestions of MacKenzie, Podsakoff and Fetter (1991), organizational citizenship behavior (Organ, 1988) is apparently an important class of behavior that reflects on the overall managerial performance of SME executives in Ghana. Thus, the findings that the executives possess the requisite competence and organizational behavior attributes, but which characteristics did not impact positively on their performances towards making their organizations competitive is of phenomenal interest . Since SME executives in Ghana possess the requisite competences and discretionary behaviors to enhance the performances of their firms, it is hypothesized that their inability to make such competences reflect in the performances of their businesses might be due to their inabilities to simultaneously attain efficiency and effectiveness in the management of their workplaces. For the competencies inherent in SME executives to become visible and impact positively on the



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business they manage, then they must be seen to be efficient and effective in complementing whichever competence attribute they exhibit with their competence for conducting research and surveys of the firms’ products, services and operations. For the executives to be efficient, they should have the capability to use their managerial competences for conducting research optimally (i.e., without wastage) in order to achieve organizational goals. Also, for them to be effective, they should have the capability to use their requisite competences in carrying out research to complement their other managerial competences toward attaining the firm’s set goals. Nurturing competency of SME executives may be possible by establishing what they (i.e., executives) can do to overcome the limitations relating to their inability to complement their managerial competences in conducting research efficiently and effectively. LIMITATION Focusing the study on SME executives in Ghana alone is a limitation, since a study of other countries could provide findings with a broad perspective, and which could have had an impact on the results. SIGNIFICANCE OF RESEARCH This research is relevant in its practical and theoretical insights into aspects of the challenges facing executives in Ghanaian SMEs. The findings made on the competences and organizational citizenship behavior among the executives can help sustain and support the achievement of the intended organizational and individual outcomes required of Ghanaian SMEs within a competitive world of work. The outcome of this research contributes to the sum total of knowledge in the study and practice of organizational citizenship behavior and operant competences in the field of human resource management. Specifically, for Ghana, this research provides a platform for the development of a database that will help inform policy-makers on the requisite competences and organizational citizenship behavior to be required of SME executives in managing businesses. REFERENCES Abor, J. & Quartey, P. (2010). Issues in SME development in Ghana and South Africa.

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A Comparison of Artificial Neural Network (ANN) Model & Auto Regressive Integrated

Moving Average (ARIMA) Model For Forecasting Indian Stock Market

Dr. Tripathy.N

Associate Professor (Finance), Indian Institute of Management Shillong, Meghalaya,

India PIN 793 014, Phone: +91-364-2308037, Fax: +91-364-2230041,

Email: [email protected], [email protected]

ABSTRACT

Today the accuracy in forecasting the stock market and predicting the trend correctly is of crucial importance for any future investment. The use of computational intelligence based techniques for forecasting has been proved extremely successful in recent times. So keeping in view the present study has been undertaken to forecasting the next day’s close value of Stock price by using ANN Model and ARIMA Model in Indian Stock Market. We have also use Mean absolute error (MAE) and Mean absolute percentage error (MAPE) to evaluate the performance of the models and compare the results and trends between the ANN &ARIMA model for forecasting stock market in India .The paper concludes that ANN model is very useful for predicting stock markets than the ARIMA models in India

Key words: ANN, ARIMA, Stock Index, Prediction

JEL classification: G1; G14; G17

INTRODUCTION In recent years, with the introduction of online trading, the stock market has become one of the avenues where even small investors can earn good profits. Therefore Stock market prediction is one of the demanding applications of modern time series forecasting. However, because of the high volatility of the underlying laws behind the financial time series; it is not an easy task to build such a forecasting model. Over the last few decades, a large number of studies have proposed and developed different methods to analyse and forecast stock market activity. The stock market are inherently noisy, non-stationary and deterministically chaotic (S. Yaser and A. Atiya 1996). These characteristics suggest that there is no complete information that could be obtained from the past behaviour of such markets to fully capture the dependency between the



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future rates and that of the past. One general assumption is made in such cases is that the historical data incorporate all those behaviour. As a result, the historical data is the major player in the prediction process. According to Efficient Market Hypothesis (Samanta and Bordoloi, 2005; Fama, 1965 and Fama, 1970) all available market information are factored immediately into the formation of stock price and therefore, the best predictor of future stock price is the latest stock price is the latest available price. Technical analysis, (Murphy, 1999) refers to the various methods that aim to predict future price movements using past stock prices and volume information. It is (Mills, 1990; Priestley, 1988) possible that non-linear models are able to explain this residual variance and produce more reliable predictions of the stock price movements. In the last few decades; many forecasting models have been developed. For more than two decades, Box and Jenkins’ Auto-Regressive Integrated Moving Average (ARIMA) technique has been highly popularized, widely used and successfully applied in economic time series forecasting. ARIMA model has been used as a benchmark to evaluate many new modelling approaches (H. B. Hwarng and H. T. Ang 2002). However, ARIMA is a general univariate model and it is developed based on the assumption that the time series being forecasted are linear and stationary. Recently, it is well documented that many economic time series observations are non-linear while, a linear correlation structure is assumed among the time series values therefore, the ARIMA model cannot capture nonlinear patterns and, approximation of linear models to complex real-world problem is not always satisfactory. While nonparametric nonlinear models estimated by various methods such as Artificial Intelligence (AI), can fit a data base much better than linear models and it has been observed that linear models, often forecast poorly which limits their appeal in applied setting. The Artificial Neural Networks, the well known function approximates in prediction and system modelling, has recently shown its great applicability in time-series analysis and forecasting (J. Yao, Y. Li and C. L. Tan, 2000, S. Yaser and A. Atiya, 1996, G. Zhang and M. Y. Hu, 1998). Neural network can mine valuable information from a mass of historical information and can be efficiently used in financial areas, so the applications of neural networks to financial forecasting have become very popular over the last few years (Zhang, et al, 2004, Windrow, et al, 1994, Refenes, 1995; Kate, et. al, 2000, J. T. Yao, et al, 1996; Abu- Mostafa, at el, 2001) ANN assists multivariate analysis. Multivariate models can rely on greater information, where not only the lagged time series being forecast, but also other indicators (such as technical, fundamental, inter-marker etc. for financial market), are combined to act as predictors. Artificial neural networks have been used in stock market prediction during the last decade. One of the first projects was by Kimoto.et.al (1990) who had used ANN for the prediction of Tokyo stock exchange index. Mizuno, H., Kosaka, M., Yajima, H. and Komoda NMizuno et.al (1998) applied ANN again to Tokyo stock exchange to predict buying and selling signals with an overall prediction rate of 63%. Phua, P.K.H. Ming, D., Lin, W. Phua and friends (2000) applied neural network with genetic algorithm to the stock exchange market of Singapore and predicted the market direction with an accuracy of 81%.Though many studies have been carried out to examine the prediction of Stock market but none of the studies so far in India has applied ANN and ARIMA model to predict the Indian stock market volatility. Specifically we raise three research questions. First the present study develop models for forecasting the next day’s close value of Stock price by using techniques of artificial neural network and autoregressive integrated moving average. Secondly, we examined and compare the results and trends of actual and predicted values of stock market indices.Thirdly we use mean absolute error (MAE) and mean absolute percentage error (MAPE)to evaluate the performance of the models and compare the results and trends between the ANN &ARIMA approach for forecasting stock market in Indian context to obtain new insights. Therefore, the present work offers a value addition to the existing literature and proves to be useful to the investors as well as regulators. The remaining of this paper is structured as follows: the next section describes the literature review Section three introduce the methodology and data used in this study. Section four presents the empirical results of the study. Concluding observation is presented in final section.



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LITERATURE REVIEW ANN represents one widely used soft computing technique for stock market forecasting. In fact, (White, 1998) first used Neural Networks for market forecasting. He used the IBM daily common stock returns and found that the training results are over optimistic. Kohzadi, Boyd, Kermanshahi and Kaastra (1996) compared neural networks with ARIMA using monthly live cattle data and wheat prices from 1950-90. The neural network models achieved significantly lower mean squared error than the ARIMA model.. Wun-Hua Chen, Jen-Ying Shih and Soushan Wu (2006) used AR (1) model, support-vector machines and back propagation neural networks for forecasting the six major Asian stock markets. FFNN and SVM outperformed AR (1) in mean square error and mean absolute error but AR(1) is better in directional symmetry. On the other hand, O’Connor and Madden (2006) evaluated the effectiveness of using ANNs with external indicators, such as commodity prices and currency exchange rates, in predicting movements in the Dow Jones Industrial Average index. Their results show that there are only a few benefits by using these indicators over traditional methods based on historical data output. Jinyuan Shen , Huaiyu Fan ,and Shengjiang Chang(2007) tapped delay neural network (TDNN) with an adaptive learning and pruning algorithm was proposed to predict the nonlinear time serial stock indexes ,The Simulation and comparison shows that this optimized neuron network model can not only reduce the calculating complexity greatly but also improved the prediction precision. . Asif Ullah Khan, T.K.Bandopadhyaya and Sudhir Sharma(2008) compared a Backpropogation neural network and Genetic algorithm based backpropogation neural network and showed that for stock rate prediction Genetic algorithm based backpropogation neural network gives more accurate prediction. BirolYildiz, Abullah Yalama & Metin Coskun(2008) developed an efficient three layer Neural Network with revised Back propagation Algorithm to predict the direction of Istanbul Stock Exchange National-100 Indices (ISE National -100) and the model forecast an accuracy of 74.51%. Qing Cao ,Mark E.Parry and Karyl B. Leggio (2009) examined the predictive ability of several well-established forecasting models, including dynamic versions of a single factor CAPM – based model, Fema and French’s three-factor model , compared these models with artificial neural network(ANN) models that contains the same predictor variables but relaxes the assumptions of model linearity. They find no statistical difference in the forecasting accuracy of CAPM and three factor model and found that neural networks may be useful tool for stock price prediction in emerging markets. Thus literature gives varying results as far as the comparative performance of the ANN and ARIMA is concerned. In this study, we apply the ARIMA and ANN models for evaluating the forecasting performance of the S&P CNX Nifty and try to establish the superior model amongst the two in the Indian context. TIME SERIES DATA AND METHODOLOGY The National Stock Exchange of India Limited (NSE) is the largest stock exchange in India in terms of daily turnover and number of trades, for both equities and derivative trading. It is also the third largest Stock Exchange in the world in terms of the number of trades in equities. It was set up by leading institutions to provide a modern, fully automated screen-based trading system with national reach. It is currently the second fastest growing stock exchange in the world. The NSE's key index is the S&P CNX Nifty, known as the Nifty. Since S&P CNX Nifty is one of the two most important indices in Indian stock market (other being the Sensex), there is high incentive in forecasting the index values correctly. The study employs 1385 daily closing price observations on the S&P CNX Nifty for the time period from 31 Dec 2004 to 31st July 2010. All the required information for the study has been retrieved from the National Stock Exchange (NSE) website. For ANN model, the data set has been divided into two parts: Training and Testing. The testing portion of the data is employed to calculate the errors.



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Auto Regressive Integrated Moving Average (ARIMA) Model ARIMA model has been one of the most popular approaches of linear time series forecasting methods. An ARIMA process is a mathematical model used for forecasting. One of the attractive features of the Box-Jenkins approach to forecasting is that ARIMA processes are very rich class of possible models and it is usually possible to find a process which provides an adequate description to the data. ARIMA modelling takes into account historical data and decomposes it into an Autoregressive (AR) process, where there is a memory of past events, an Integrated (I) process, which accounts for stabilizing or making the data stationary and making it easier to forecast and a Moving Average (MA) of the forecast errors, such that the longer the historical data, the more accurate the forecasts will be, as it learns over time. ARIMA models therefore have three model parameters, one for the AR(p) process, one for the I(d) process, and one for the MA(q) process, all combined and interacting among each other and recomposed into the ARIMA (p, d, q) model. An ARIMA (p, d, q) model is an univariate time series modelling technique, where p denotes the number of autoregressive terms, d the number of integrated order and q the number of moving average terms which is based on Box-Jenkins methodology. Ideally in ARIMA, model identification is to be performed using ACF (auto-correlation function) and PACF (partial auto-correlation function) plots to identify p, d and q values for the series before model estimation. Generally p, d and q values range between 0 and 2 for any practical time series. A pthorder autoregressive model: AR (p) has the general form: Yt = Ф0 + Ф1Yt−1 + Ф2Yt−2 + · · · + ФpYt−p + €t Where

Yt = Response (dependent) variable at time t

Yt−1, Yt−2, · · · ,Yt−p = Response variable at time lags t − 1, t − 2, . . . , t − p, respectively.

Ф0, Ф1, Ф2, · · ·,Фp = Coefficients to be estimated

€t = Error term at time t A qthorder moving average model MA (q) has the general form Yt = μ + €t − �1€t−1 − �2€t−2 − · · · −�q€t−q Where Yt = Response (dependent) variable at time t μ = Constant mean of the process �1, �2, · · ·, �q = Coefficients to be estimated €t = Error term at time t €t−1, €t−2, · · ·, €t−q = Errors in previous time periods that are incorporated in the response Yt Steps in ARIMA model-building First step is to determine whether the series is stationary or not by considering the graph of ACF. If the series is not stationary, it can often be converted to a stationary series by differencing. That is, the original series is replaced by a series of differences. Differencing is done until a plot of the data indicates the series varies about a fixed level, and the graph of ACF either cuts off fairly quickly or dies down fairly quickly. The theory of time-series analysis has developed a specific language and a set of linear operators. According to the equation, a highly useful operator in time-series theory is the lag or backward linear operator (B) defined by:



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BYt = Yt−1. Akaike’s information criteria (AIC) and Schwarz’s criteria (SC) is utilized for selecting lags of the model.ARIMA (p, d, q) has the general form: Ф p(B)(1 − B)dYt = μ + �q(B)"t Or Ф p(B)Wt = μ + �q(B)"t The parameters for a tentative model have to be estimated. After selection, the model must be checked for adequacy by considering the properties of the residuals whether the residuals from an ARIMA model have normal distribution and are random. An overall check of model adequacy is provided by the Ljung-Box Q-statistic. If the p-value associated with the Q statistic is small, the model is considered inadequate. Otherwise it is needed to consider a new or modified model and continue the analysis until a satisfactory model has been determined. ANN (Artificial Neural Networks) Model Artificial neural networks (ANN’s) are well-known massively parallel computing models which have exhibited excellent behaviour in the resolution of complex artificial intelligence problems.ANN is a non-parametric modelling technique that has received much recent attention in the fields of economics and finance because it can successfully modelled nonlinear behaviour and does not require a priori information on the functional form of the relation. Therefore, it is robust and flexible since it does not rely on any parametric assumption and can adapt itself to respond to dynamic changes in the data-generating processes. The philosophy behind the ANN approach is to develop the architecture inspired in the biological nervous system. While conventional computers work sequentially, contain only a few processors and must receive detailed instructions, the human brain is capable of solving large differentiated problems even if the information is incomplete or noisy. The major advantage of neural networks is their flexible capability of nonlinear modeling. With ANN, there is no need to specify a particular model. Rather, the model is adaptively based on the features presented from the data. The most common types of ANN models have been shown in figure1:

Figure 1. Most common types of ANN models We have used the feed-forward back propagation neural network (also known as a MLP network) is the neural network model. Input layer is composed of a set of inputs that feed input patterns to the network. Following the input layer, there is at least one or more intermediate layers, often called hidden layers. Hidden layers are then followed by an output layer are presented in fig-2. In feed forward networks all connections are unidirectional. MLP network is made up of an input layer, an output layer and one or more hidden layers of neurons. As the fig2 shows, each input is



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weighted with an appropriate w. The sum of the weighted inputs and the bias forms the input to the transfer function f.

Figure 2. A typical Back-Propagation neural network

Feed-forward networks often have hidden layer(s) of sigmoid neurons followed by an output layer of linear neurons. Two stages is considered in the MLP network: the running stage, in which an input pattern is presented to the trained network and transmitted through successive layers of neurons until reaching an output. The training stage in which the weights or parameters of the network are iteratively modified on the basis of a set of input–output patterns known as a training set, in order to minimize the deviance or error between the output obtained by the network and the user’s desired output. This is why MLP network learning is said to be supervised. The learning rule commonly used in this type of network is the back propagation algorithm or gradient descent method, developed and disseminated by Rumelhart, Hinton and Williams (1996). In this research, we use the following three-layer feedback networks:

]}[{1 1

∑ ∑= =

+=j

j

k

k

kiXjjGoFF γββ

Where F is the output function of the output layer unit, βo is the bias unit (equal to 1), G is the output function of the hidden layer units j , γkj denotes the weight for the connection linking input k to the hidden unit j , βj is the weight of outputs from the hidden layers in the output layer unit, and X is the input vector. Multi Layer Perception (MLP) networks are layered feed-forward networks typically trained with static back propagation. These networks, also known as back propagation networks, are mainly used for applications requiring static pattern classification. In the MLP, neurons are organized in different layers. The inputs are fed to an input layer, the outputs of the network are given to the output layer, and in between, there are an arbitrary number of hidden layers. For the MLP network to be able to map nonlinear functions, some hidden layers must have nonlinear transfer functions, such as the hyperbolic tangent function. The training phase of the network is an unconstrained nonlinear optimization problem. The inputs are fed forward through the layers. Their outputs are compared to a known target vector and an error function is computed. The error is propagated backwards through the network (the most common iterative algorithm is the ‘back propagation algorithm’) and the weights are adjusted to minimize the error function. Since the



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weights are adjusted iteratively, the network is said to be ‘‘learning’’. This procedure is repeated several times until the network outputs match the targets with the desired accuracy.Standard back-propagation use a gradient descent algorithm. This basic algorithm adjusts the weights in the direction in which the performance function is decreasing most rapidly. This method does not necessarily produce the fastest convergence. Conjugate gradient algorithms are another search method that can be used to minimize network output error in conjugate directions.The problem is to find the optimal architecture, that is, the optimal number of hidden layers and neurons. If the function is continuous with a finite number of discontinuities, then only one hidden layer of sigmoid neurons is needed. This is not necessarily the most efficient number of layers. The use of more hidden layers may result in a smaller number of neurons in total and thereby faster training. ANN is very sensitive to the number of neurons in the hidden layers. Too few neurons can lead to under-fitting but too many neurons can contribute to over-fitting, implying that it might achieve a superior forecasting accuracy over the estimation period, but will generate poor out-of-sample forecasts. For the application of ANNs to any area, following are the parameters one needs to consider and tune through the experimentation: Number of hidden layers In practice, neural networks with one or two hidden layers are widely used and have performed very well. This paper has also used 2 hidden layers for the study. Increasing the number of hidden layers also increases computation time and the risk of over fitting which leads to poor out-of-sample forecasting performance. Over fitting happens when a forecastingmodel has too few degrees of freedom. In other words, it has relatively few observations inrelation to its parameters and hence it is able to memorise individual points rather than learn the general patterns. Number of weights also shouldn't be too large. The greater the number of weights relative to the size of the training set, the greater the ability of the network to memorise idiosyncrasies of individual observations. As a result, generalisation for the validation set is lost and the model is of little use in actual forecasting. Number of hidden neurons: Despite its importance, there is no magic formula for selecting the optimum number of hidden neurons. Therefore, researchers have to go on with experimentation. Regardless of the method used to select the range of hidden neurons to be tested, the rule is to always select the network that performs best on the testing set with the least number of hidden neurons. Number of output neurons: Generally answer to this would be one. This study also has only one output which is daily Nifty values.

Transfer functions: The majority of current neural network models use the sigmoid (S-shaped) function, but others such as the hyperbolic tangent, step, ramping, arc tan, and linear have also been proposed. The purpose of the transfer function is to prevent outputs from reaching very large values which can paralyse neural networks and thereby inhibit training. Linear transfer functions are not useful for nonlinear mapping and classification. It has been found that financial markets are nonlinear and have memory suggesting that nonlinear transfer functions are more appropriate.

This paper has used the transfer function hyperbolic tangent which is commonly used for time series data because it is nonlinear and continuously differentiable which are the desirable properties for network learning. Model estimation is performed using historical data, and then latest data is used for the long run forecasting performance. The data needs to be in the format of set of input-output vector i.e. each vector contains the input for the model and the output that the model should produce. This is the basic requirement of supervised learning.The Input neurons here are the previous day index values for Nifty. For instance, if xn; xn-1; ..; x2; x1represent scaled value input set for the output xn+1. Here n denotes the window size. The window size determines



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that how many trailing data points (last n day’s Nifty values) have been used to forecast the current value. In case of ANN, window size is equal to the number of input layer neurons. This study has used the following window sizes/input layer neurons: 3, 5, and 8,10,15,20,24,34,49.By ‘3’, it means that last 3 days of Nifty values are being used as inputs for that particular model. As only one-day-ahead forecasting is to be performed, output contains only one data value.

Training of ANN Training is the process by which the free parameters of the networks (i.e. the weights) get optimal values. In these models input layer units distribute input signals to the Network. Dependent variable is the daily Nifty values while the covariates are the last n days Nifty values where n is the window size. Activation function used is hyperbolic tangent. Online type of training is used to train the model. In holdout verification, vectors are chosen randomly from the initial sample to form the validation data, and the remaining observations are retained as the training data. Normally, less than a third of the initial sample is used for validation data. Performance Measurement To evaluate the performance of the ARIMA and ANN model, two statistical tests are carried out. These tests are Mean Absolute Percentage Error (MAPE) and Mean Absolute Error (MAE). These models are used for evaluating the prediction accuracy of the model. The performance of the fusion method is measured in terms of Mean Absolute Percentage Error (MAPE). It is calculated by first taking the absolute deviation between the actual value and the forecast value. Then the total of the ratio of deviation value with its actual value is calculated. The percentage of the average of this total ratio is the mean absolute percentage error. The following equation shows the process to calculate the MAPE.

Where: n total number of test data sequences Observed t is actual stock price on day t Predicted t is forecast stock price on day t

Empirical Analysis

In our study, a forecasting tool ANN and ARIMA is used for forecasts of stock prices. To obtain forecast value we input the daily closing price to this tool. This tool then automatically become accustomed with the training datasets and makes forecast, given the current day’s stock prices. The same data is used to educate established statistical tool ARIMA. Then we produce forecast values for the test data using this ARIMA model. Fig 3 show the daily S&P CNX Nifty index for the experimental dataset respectively.

n

predictedobservedMAE

n

ttt∑

=

−= 1

∑=

−=

n

t t

tt

observedpredictedobserved

nMAPE

1

100



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Figure 3 S&P CNX Nifty (31 Dec 2004 to 31st July 2010)

1380124211049668286905524142761381

6000

5000

4000

3000

2000

Inde x

C1T ime S er ies P lot of C 1

ARIMA Model Model identification in ARIMA is performed using ACF and PACF plots to identify p, d and q values for the series before model estimation. Generally p, d and q values range between 0 and 2 for time series. From these plots, the model identified is ARIMA (1, 1, 2). (Refer Fig. 3 & 4) Model estimation is however performed for all possible combinations of p, d and q values each ranging between 0 and 2. Forecast error is the difference between the actual value and the forecast value for the corresponding period, Et = Yt - Ft Where E is the forecast error at period t, Y is the actual value at period t, and F is the forecast for period t. The forecasting performance of the various models is evaluated using Mean Average percentage error (MAPE) and Mean average error (MAE). Lower the MAPE and MAE values, better is the forecast. The models of ANN and ARIMA are used to forecast the next day Index Value for S&P CNX Nifty. Figure 4 shows ACF and PACF plots for S&P CNX Nifty. From ACF plot it's clear that there is no need of further differencing. Here ACF and PACF both plots are mixtures of exponentials.



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Figure 4: ACF and PACF plots for Nifty for ARIMA (1, 1, 2)

80706050403020101

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ocor

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Autocorrelation Function for C1(w ith 5% significance lim its for the autocorre la tions)

Table 1: ARIMA Results p d Q MAPE MAE 1 1 1 3.660% 191.868 1 1 0 3.661% 191.922 2 1 0 3.659% 191.837 0 1 2 3.664% 192.073 0 1 1 3.651% 191.391 1 1 2 3.460% 181.118 2 1 1 3.666% 192.187 2 1 2 3.660% 191.869

Figure 5: MAPE for different ARIMA Models

80757065605550454035302520151051

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Table1 shows the forecasting performance of different ARIMA models on S&P CNX Nifty using error measures like MAPE and MAE. It is observed from table-1 that MAPE is least in ARIMA (1, 1, 2) model. so it is experiential that ARIMA(1,1,2) has performed better than all the other ARIMA models.

ANN Model ANN models with different network parameters are created, trained and tested for each series is presented in table-2. For ANNs, the forecasted values are used to calculate MAPE and MAE. It is observed from table-2 that ANN Window size 15 is 0 .672%

Table 2: ANN Results

Input Neurons MAPE MAE Model Description

Hidden Layers Transfer Function 3 0.835% 43.25 2 Hyperbolic Tangent 5 0.795% 41.10 2 Hyperbolic Tangent 8 0.834% 43.28 2 Hyperbolic Tangent

10 0.733% 38.03 2 Hyperbolic Tangent 15 0.672% 34.89 2 Hyperbolic Tangent 20 0.807% 42.03 2 Hyperbolic Tangent 24 0.916% 18.76 2 Hyperbolic Tangent 34 0.906% 18.70 2 Hyperbolic Tangent 49 1.506% 31.72 2 Hyperbolic Tangent

Figure 6: MAPE for different ANN Models



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Figure 7: MAE for different ANN

Models Comparison of Forecasting Performances of ARIMA and ANN Comparisons and performance of ANN and ARIMA models have been evaluated by calculating errors between the actual close price and the predicted close price generated by these models. In the study, mean absolute percentage error (MAPE) and mean absolute error (MAE) have been calculated. These measures help in calculating and comparing accuracy of different techniques. A comparative result in terms of MAPE, MAE with the ARIMA (p,q, q) model and ANN model is given in Table 3.From the table-3 it is experimented that mean absolute percentage error is very low found in ANN model in comparison to ARIMA model. Since lower MAPE values indicate better prediction, it is clear that ANN models outperformed ARIMA models by a considerable margin in the forecasting of S&P CNX Nifty. ANN models are mostly reported to be better at forecasting than ARIMA models in literature and this fact has again been confirmed here for S&P CNX Nifty for the time period from 31 December 2004 to 29 June 2010.

Table 3: Comparison between best ANN and ARIMA Models

MAPE MAE ANN (Window size 15) 0.67% 34.89

ARIMA (1,1,2) 3.46% 181.12

Figure 8: MAPE Comparison between Best ANN and ARIMA Models



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Figure 9: MAE Comparison between Best ANN and ARIMA Models

CONCLUSION This study compare the forecasting performance of ARIMA and the ANN models.. These experiments are performed on the S&P CNX Nifty closing price values. In case of ANN, the most suitable model for forecasting comprised of 15 Input Neurons. In case of ARIMA, the most suitable model identified is ARIMA (1, 1, 2).The study also found from the comparison analysis that ANN’s outperformed all the ARIMA models used in the forecasting of the next day Index value for S&P CNX Nifty. This is observed by the MAPE (Minimum Average percentage Error) and MAE (Minimum Average Error). Lowest MAPE for ARIMA (1, 1, 2) was 3.46% and MAE was 181.118. While for the 15 Input neuron Model, MAPE is 0.672% and MAE was 34.89. So the study concludes that ANN model is found to be more appropriate for the prediction in the Indian stock market.

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Idea Generation: A Catalyst for Productivity and Innovation in

Advertising

Jahanzeb Shah (Corresponding author) Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology (SZABIST),

Plot # 67, Street # 9, H-8/4, Islamabad 44000, Pakistan. Tel: +92-51-9067-26230

Dr. Bakhtiar Ali

Assistant Professor, Faculty of Management Sciences, Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology (SZABIST),

Plot # 67, Street # 9, H-8/4, Islamabad 44000, Pakistan. Tel: +92-51-4863363-5

ABSTRACT

Idea generation and creativity in today’s hi-tech organizations is expected to boost up productivity and equip the firms to face modern times global challenges of a business world. The study is based on the assumption that certain job related dimensions which serves as impediments to creativity needs to be minimized that may opens the doors for far-reaching innovation and sustained competitive advantage. The research was conducted on Advertising Firms based in four major cities of Pakistan. The data was collected through a self-administered questionnaire using stratified random sampling technique. The analysis of data and results contended the assumption that a hypothesized structural regression model of impediments to creativity is validated when tested in Pakistani perspective using Structural Equation Modeling technique. However, the demographic characteristics and attitude/ interest taken as moderators upon working style of advertising professionals were found unimposing i.e. not serving the purpose of a catalyst for improving idea generation and creativity. Keywords: Idea generation, Creativity, Structural Equation Modeling, Advertising Firms

INTRODUCTION Increasing global recession and competition having volatile market share, along with new technological developments and market dynamism regarding product life cycle, has made firms, both local and international, more exposed to a fiasco than in the past. Consequently, it has become extremely significant for organizations to concentrate on these issues in a creative befitting manner. No proper consideration has been given to the issues of creativity and survival. However, only few organizations have realized that creativity is imperative to their long-term survival in competitive environment (Torrance, 1994).



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Likewise, it is stressed (Ford, 1999) that there are certain crucial factors required for a creative output, which are often overlooked. He summed up the factors that are essential from the perspective of collective creativity. His discussion about ‘competitive paranoia’ in the same study deals with the creation of joint feeling by a group of common interest people having a common goal of surviving against the competition faced. This approach emphasizes a creative environment on one side, by linking group members towards the long-term goal of organizational survival that encourages generation of new ideas, on the other hand, it reinforce the commitment of members towards organizations facing external threats.It is a dilemma that organizations cannot handle a creative people having great ideas because there is an unknown fear of chaos in the organizational settings. Due to this factor, people who try to be creative often are discouraged and creativity initiatives are usually placed in cold storage (Claude & Rob, 2008). The study aims to further improve the understanding of how managers in organizations tackle and figure out the impediments to creativity in this rapidly changing environment. This study will be unique from the previous research about creativity as it will underpin an Asian, non-western developing country’s context. By having a clear understanding of the impediments to creativity, one can gain a sustained competitive advantage in terms of innovative solutions to cope with market demands in the South East Asian Developing Nations. Although numerous studies have attempted to identity the personal and organizational characteristics that explained creative endowment in the western world, little research has focused on determining the factors that negatively affect organizational creativity in the developing world. The purpose of this investigation is to address this core issue in developing world context. Thus, a distinct contribution to the literature is to identify the potential barriers that affect idea generation and creativity in the developing world having special emphasis on Pakistani Organizations. This classification will lead also to a better understanding of the job-related impediments to creativity as suggested by (Amabile, Jennifer, William, Constance, Steven, & Lee, 2002) as if a manager reduces time pressure, organizational political problems, and criticism on newly developed ideas; it will augment idea generation and creativity. Likewise, a manager needs to foster the freedom of action, having challenging tasks in the work for employees; abundant resources provision like work-group supports, having diversified skillful teams, help in improving commitment of employees towards their job, and discuss and encourages useful ideas contributed by them. Moreover, if a manager values those individuals who actively contributes more, creativity will increase manifolds. If he/she provides and ensures job security among group members within the organizational settings by settings, clear and workable goals while giving free hand in completion of these goals, a positive reinforcement can induce creative ideas for a better future and finally, he/she needs to persuade top management to give rewards and recognition to those who produces creative outputs. Advertising Media and Creativity In today’s era of rapid globalization, the media and technology is playing its pivotal role in making the life patterns of humans’ softer and easier day-by-day. Nowadays, the advertising industry of Pakistan is quite dynamic and vibrant and still growing in a sophisticated and competitive market environment since the inception of private Television (TV) and Frequency Modulation (FM) Radio Stations in the past decade. Advertising is a medium used to persuade the potential buyers to purchase certain products or services. It plays a pivotal role in achieving the financial and commercial objectives of the firms concerned. The advertiser are nowadays more focused to inform, educate and facilitate the customers in order to have a timely access to certain product or a service in a creative, novel and innovative way. Thus, advertisers are conceiving different ways to make advertising more creative and effective for better penetration among potential buyers.



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Advertising plays a dominant role in the developing positive or negative perception and attitude towards purchase decision making by the consumers.Advertising must focus on social and economic dimensions of consumers and advertisers should create advertisements that are realistic and resourceful. This relationship emphasize that advertisers should be sensitive to the issues that may generate consumer indecision (Nicholas & Ugur, 2005). Creative advertisement in media, can be classified in to two types of groups, one are effective and creative, and on other side neither effective nor creative. In advertising, creativity and effectiveness go side by side in order to penetrate the consumer’s minds where efficiency of a commercial ad is measured by the proper combination of its creativity and effectiveness. Thus, a commercial advertisement is to be a creative one, which turns out, well in both streams. An important aspect is that even if creativity in advertising is a significant ingredient, however, creativity just for sake of creativity can be of no use if it is not efficient. In order to be creative, an idea, a thought or a piece of knowledge derived from research can trigger a thought provoking impact upon potential buyers. Therefore, as creativity and advertising has a strong link and ties, it needs to be empirically investigated in Pakistani context as well. To the best of researcher’s knowledge, no study on impediments to creativity in advertising industry has been carried out in the Pakistani context in past. The objective of the study is based on this notion and a search of the literature revealed a huge gap in the measurement of impediments to creativity particularly in advertising industry in Pakistan. Due to this potential vacuum, need is there to empirically identify the impediments to creativity that may be of great use in future by this industry in improving time pressure constraints, removing organizational political problems like lobbying and backstabbing. This would help in creating an environment of constructive criticism on new and creative ideas. Removing impediments to creativity will fosters the freedom and challenging assignments will be done in befitted manner. This will ultimately improve commitment towards the job, and members will openly discuss and encourages useful ideas. Moreover, by encouraging those individuals who actively contributes more by providing and ensuring job security, organization can move forward in rapidly changing global arena. This will make certain that how advertising firms may flourish by introducing new novel ideas and creative advertisements as per their customer’s needs and wants, if and only if, the impediments to creativity are effectively removed. Therefore, developing a creative environment for the advertising firms in the industry is of greater importance and there is a need to empirically measure the key impediments that undermine creativity in these firms. Problem Statement The purpose of this paper is to empirically measure and identify the impediments of creativity that obstruct idea generation with specific focus on advertising industry firms in Pakistan. The statements of the problem are given as follows:

1. What are the key impediments that inhibit idea generation in advertising industry of Pakistan? 2. What is the impact of demographic variables and attitude/interest on the behavior of employees towards idea generation in Pakistani advertising firms/organizations?



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Objective of the Study The main objective of this paper is to test the proposed model and identify the essential factors, which may undermine creativity of individuals and groups within advertising industry firms. Based on the quantitative data collected along with statistical analysis and interpretation done, we may have an opportunity to properly deduce results about the problem under consideration and may offer some recommendation for future usage. LITERATURE REVIEW Skimming through the literature on creativity studies, an exhaustive list of impediments to creativity is available. However, let us have a look as to why idea generation/creativity itself is important for organizations. Why Creativity/Idea generation is important? The global competitive forces are compelling organizations to develop highly innovative and creative environment, where idea generation is encouraged and serves as a live blood for organizational survival. Because of this pressure on organization to be more innovative and creative, they gradually turn towards idea generation. The concept of creativity generally means a move towards achieving a practical and unique result, which is quality oriented. The creativity is nothing else but the generation of novel and useful ideas (Amabile T., A model of creativity and innovation in organization, 1988). Likewise, it is commented that various scientists characterize creativity as a source of generating novel or useful ideas by individuals or teams members. This manifests that idea generation and creativity are two sides of a same coin (Greenberg & Baron, 2003). Creativity is an approach that abridges an organization systems and processes which leads towards a competitive advantage (Cook P., 1998). Moreover, creativity is a vital characteristic related to life that we act upon in daily routine. It covers a problem at workplace that become pleasure or an imagination that becomes a reality in a hi-tech world (Bonnardel, 1999). Creativity and productivity are highly correlated due to which firms strongly believe in the effects creativity has on better performance and due to this conviction, they spends a lot of money on creativity in firms (Dennard, Creativity in the 2000s and beyond, 2000). However, in order to foster the idea generation process and creativity the organization are compelled to identify the underlying elements. For creating such environment various factors have been identified & explored by the scholars (West, Sparkling fountains or stagnant ponds: An integrative model of creativity and innovation implementation in work groups, 2002a); (West, Ideas are ten a penny: its team implementation not idea generation that count, 2002b); (Mumford, 2003); (Gilson & Shalley, 2004); (Amabile, Barsade, Mueller, & Staw, 2005); (Shin & Zhou, 2003), and (Cheng, 1994). Impediments to Creativity In line with review of literature related to creativity, the various impediments are influencing idea generation/creativity and can have an extremely strong positive or negative impact if altered. Based on the studies conducted by (Eisenberger & Aselage, Incremental effects of reward on experienced performance pressure: positive outcomes for intrinsic interest and creativity, Journal of organizational Behavior, 2008), (Mostafa, 2005), (Amabile, Jennifer, William, Constance,



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Steven, & Lee, 2002), (Eisenberger & Rhoades, Incremental effects of reward on creativity, 2001), and (McNeely & Meglino, 1994), four dimensions of job related issues that serves as impediments to creative environment are operationalized as given below:- Low commitment Commitment of organizational member to their work teams and to the organization can influence team and organizational performance. Building employee commitment to the workplace is one important goal of human resource policies and practices. The previous research study presented that commitment has a positive effect on productivity, turnover and employees willingness. However, the downsizing, wage erosion and high productivity demands of recent years have reduced this commitment. Therefore, the issue is not to enhance commitment to the organization but to the specifically focused on commitment in work group or teams. A person might be committed to organizations but he will not be contended if his team performance is low. Due to this, commitment level can be enhanced by re-arranging the organizational structures in organization to foster creative endowments (Bishop J. W., 1997). It is evident that having low commitment due to lack of management support continuously reduced employee’s commitment towards the organization. If the working atmosphere led to low morale, employees would become less committed to the organization and it would directly discourage them from being creative. They would not want to serve the company whole-heartedly, nor would they like to help the company, which focus on creative thinking (Mostafa, 2005). Nevertheless, no study had been done to explore the causes of both team and organizational commitment and the effect they have on productivity, willingness to help team members, and intention to quit in Pakistani perspective. Risk aversion and time pressure All organizations to some extent avert risk. At a certain level, it is a good to be in a position to take risk if and only if calculated priory in order to protect the organizations from fallacy. However, the drawback in this approach is that many organizations has typical an unhealthy level of risk aversion which can be a major barrier to developing a sustainable innovation capability and the silent killer of many potentially great ideas the may lead to radical innovation (Christian, 2006). Moreover, Amabile (2002) studied the connection between time pressure and creativity by employing a new methodology for investigating daily thinking patterns, experiences, and dealings made in organizations. The most notable and unique finding of the same study is that generally, time pressure seems to have an important impact on creativity, but, surprisingly, this pre-supposition was found contradictory. The participants of her study were giving confirmations of being less creative when time-pressure is not there, while, more creative, when time pressure is escalated on order to meet certain deadlines in organizational settings. In addition, it is a reality that risk aversion is deeply rooted in every culture and researchers have reported that managers are often risk avoiders (Al-Nimir & Palmer, 1982); (Ali & Krishna, 1997). Excessive workload dominates most of the employees’ time and in fact, no spare time is available to settle down and think of any creative idea for talking the problem. Threatening evaluation In organizations where coercive management is used a way of doing things, a high level of negative energy produces. Creativity is used to work against autocratic leaders in spite of contributing positively to the organization (Wheatley, 1999). Therefore, participative management approach and threat free environment is conducive for creativity.



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According to Bishop (2005), short-term time pressure may be bad option to steer the mind as it does not provoke the mindset to engage in the making an effort at various cognitive levels and consequently, powerless ideas popped up through this process. However, individuals who feel themselves intrinsically motivated can perform better in short-term time pressure by setting cognitive forces in to motion and can generate more affluent ideas through this process. Mechanistic organizational structure Mechanistic organizational structure is a stable and have specialized differentiation of functional tasks. The problems and tasks facing an issue in firms as a whole are broken down in to parts. In mechanistic organizational structure, an individual task pursued is more or less dissimilar from those of the issue as a whole i.e. the functionaries tend to pursue the improvements of means, rather than the accomplishment of the ends. It reinforces the hierarchic structure by the location of knowledge of at the top-level in hierarchy, where the final reconciliation of distinct tasks and assessment of relevance is made. A mechanistic organizational structure focuses on loyalty to the issues/problem under consideration and obedience to superiors as a condition of membership in any firms/organization. In this approach, there is a vertical hierarchical approach between superiors and subordinates to do things (Burns and Stalker, 1961). Likewise, Weiner (2000) contended in a study that management has a tendency to preserve the established traditions, and therefore many rules and standard procedures were set for the employees to follow and keep them under rigid control. In fact, corporate bureaucracies often became rigidly formal and thus greatly inhibit creativity. So, based on the relevant literature review and the resulting theoretical framework, it has been argued that the various job related issues/dimensions like Low commitment, Risk aversion and time pressure, Threatening Evaluation and Mechanistic Organizational Structures are influencing the ability of employees to foster/obstruct idea generation, which is the starting point of creativity. HYPOTHESIZED MODEL The framework of this study includes a hypothesized model based on impediments to creativity as four independent variables that are assumed to have a significant impact on idea generation (dependent variable). In addition, the two other variables i.e. demographics characteristics and attitude/interest of respondents have also been hypothesized to check their impact upon dependent variable. The path model of impediments to creativity as presented in Fig.1 includes four independent variables including Low Commitment (Y1), Risk Aversion and Time Pressure (Y2), Threatening Evaluation (Y3) and Mechanistic Organizational Structure (Y4). Idea Generation being a predictor of creativity is the dependent variable in this hypothesized model. Demographics Characteristics (Z1) and attitude/interest (Z2) are moderating variables. Path analysis models are usually conceived only for testing the observed variables not the latent one (Stein, 2007). The purpose of this research study using path analysis and structural regression model is to examine the empirical influence of Low Commitment (Y1), Risk Aversion and Time Pressure (Y2), Threatening Evaluation (Y3) and Mechanistic Organizational Structure (Y4) on Idea Generation (X) of employees working in advertising industry in Pakistan. Hypotheses of the Study By looking to the path model above, there would be 07 hypotheses of our interest that would reflect the influence and predictive power of various independent variables such as Low



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Commitment (LC), Risk Aversion and Time Pressure (RA & TP), Threatening Evaluation (TREV) and Mechanistic Organizational Structure (MOS) on the dependent observed variables and BTC as latent variable for these four independent observed variables. Idea generation (X) is an observed variable along with moderating effect of two other latent variables named as demographics characteristics (Z1) and attitude/interest (Z2) that will check interrelated characteristics of idea generation. The hypotheses are as follows:- Hypothesis 1: Low commitment of employee is barrier to creativity that obstructs idea generation. Hypothesis 2: Risk Aversion and Time Pressure is barrier to creativity that obstructs idea generation. Hypothesis 3: Threatening Evaluation is barrier to creativity that obstructs idea generation. Hypothesis 4: Mechanistic Organizational Structure is barrier to creativity that obstructs idea generation. Hypothesis 5: Attitude/interest positively affects idea generation process. Hypothesis 6: Gender & Education of employee, being demographics characteristic, positively

affects idea generation process. Hypothesis 7: Barriers to creativity negatively affect idea generation process.

METHODOLOGY This exploratory study is based on survey research design in which potential impediments to creativity that affect idea generation were analyzed using LISREL 8.8 and SPSS 14.0 softwares. The study is comprised of testing certain hypotheses and overall proposed model investigation using Structure equation modeling technique. Sample Based on the fact that advertising firms in Pakistan represent a large segment of the market in today’s era of piquant media and technological environment, which has a great deal of influence upon masses, and they deserve considerable attention by researchers in the field, therefore, the sample from advertising firms has been chosen for this study.Based on their ROI/ financial returns in the past decade, the sample was drawn from Top 5 firms of Pakistan’s advertising industry. The questionnaire was developed by researcher and distributed via emails to the professionals like copy writer, art directors, media manager etc. in top five advertising firms who details were extracted from industry directory available online or via Yellow Pages (The Advertising Agencies in Pakistan, 2010). Procedure For content validity, primarily, the survey questionnaires developed by researcher were pre-tested, using expertise of professional like researchers and practitioners in the field. After the pre-testing procedure done, some minor modifications were made in consultation with experts and the language as well as flow of questions was changed. Then pilot study was conducted on 15 respondents from advertising firms and Cronbach’s alpha values for scales developed for independent variables i.e. Low Commitment (Y1), Risk Aversion and Time Pressure (Y2), Threatening Evaluation (Y3) and Mechanistic Organizational Structure (Y4) and dependent variables i.e. Idea Generation (X) of employees were found in a range of 0.65 and 0.78. Finally, the revised survey instrument was distributed initially among 80 potential professionals of five advertising firms via email as per details provided by concerned HR department of firms.



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Initially, the number of returns of questionnaire from the same survey had disappointing response rate of less than 10 per cent, then a self-administered approach for collection of data was adopted from the rest of the initial sample selected with the help of various professional colleagues at Lahore, Karachi, Islamabad and Peshawar. While utilizing two types of data-collecting procedures, the researcher got 99 self-administered questionnaires. 04 questionnaires having certain ambiguities in responses being less suitable for analysis were discarded, which finally left 95 usable questionnaires with us for analysis using the LISREL 8.8 and SPSS 14.0 softwares. MEASURES The instruments/questionnaire developed consists of three parts. Firstly, the demographic part is containing respondents name, age, gender, post field/cadre, education level, job tenure, organizational name/sector, and organizational size. Secondly, Attitude/ interest variable was measured by adopting a scale developed by Holt et al. (2002).Thirdly, the researcher developed the instrument based on a study conducted by Mostafa (2005). The developed instrument includes 03 dimensions used as independent variable derived from a study conducted by Mostafa (2005) containing dimensions such as Low Commitment, Risk Aversion and Time Pressure, Threatening Evaluation. Fourth dimension used as independent variable was adapted from a study by Ali (2008) having a dimension of Mechanistic Organizational Structure. Moreover, a 13 items scale for idea generation and creativity were developed from few creativity-based studies such as Eisenberger and Aselage (2008), Eisenberger & Rhoades (2001) and McNeely & Meglino (1994). The responses for 50 items scale, after pilot testing, were calculated on five points Likert-type scale, which ranges from 1-5 i.e. ‘Strongly Disagree’ to ‘Strongly Agree’. By using ten different scales developed by the researcher, which has different ranges between two-points (e.g. gender) to five points (Likert Scale), the data from respondents was collected in five weeks.

Reliability and Validity of Measures Developed As per Gatewood and Field (1990), an instrument’s ability to present coherent results if used repeatedly is called reliability. According to Flynn et al. (1994), the reliability and validity analysis for the measures used in empirical research is essential for several reasons. It makes one certain about the results and finding which means a clear prediction about the proposed hypotheses. In addition, a validated instrument/s may be used in different field of studies for research purposes in distinct populations’ samples.

Likewise, Nunnally and Bernstein (1994) suggested that in order to test unidimensionality for internal consistency and reliability of items used in the measures, one has to calculate Cronbach’s alpha statistics, which should be above the acceptable threshold of 0.70. Similarly, George et al. (2000) showed in their study that Cronbach’s alpha is the basic measure for testing reliability issue of scales used.For this study, the items of instrument in each variable were clubbed together, and coefficient alpha was calculated for each dimension given in Table 1 as follows:

Table 1: Reliability Statistics Constructs Items Cronbach’s Alpha 1 Low Commitment Items 08 .7038 2 Risk Aversion & Time Pressure Items 04 .7105 3 Threatening Evaluation Items 08 .7231 4 Mechanistic Organizational Structure Items 17 .7201 5 Idea Generation Items 07 .7710 6 Creativity Items 06 .8201



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The Cronbach’s Alpha calculated values for instruments used in this study are ranging from 0.70 to 0.82 as shown in Table 01, which predicts reliability of measures developed. In addition, Bagozzi and Yi (1988) also recommended that all composite reliabilities measures of constructs must exceed the recommended level of 0.70 only then one can rely on the results obtained. Moreover, for discriminant validity, the correlations of likely related constructs were also calculated to check potential multicollinearity issue in the data. According to Hair et al. (1998), no single pair of measures should have correlations among them exceeding the criterion (0.9 and above). The results shown below entails that there is no issue of multicollinearity among the study constructs that we used. The correlations are shown in Table 02 given as follows:-

Table 2: Correlations

LC RA&TP TR EV MOS Interest Gender EducationLC 1 RA & TP -0.1473 1 TR EV 0.0508 0.1421 1 MOS 0.1212 0.1749 0.6144 1 Interest 0.0338 -0.0329 0.0650 0.1890 1 Gender 0.2258 0.0596 -0.0507 -0.0859 -0.0105 1 Education 0.1245 -0.0503 0.1232 0.0408 -0.0183 0.0285 1 Idea generation -0.0661 0.2992 0.5910 0.6554 0.0561 -0.0334 0.0102

Therefore, the results of the various tests for checking the unidimensionality, reliability and discriminant validity show concrete evidence of the internal and external validity of the measurement scales which have been used in this paper. ANALYSIS OF DATA AND RESULTS Descriptive Statistics Table 3 to 7 represents descriptive statistics of sample under consideration, which include demographic characteristics such as gender, employees’ age, education level, job tenure and organizational name.

Table 3: Gender Gender Frequency Percent Male 51 53.7 Female 44 46.3 Total 95 100

Table 4: Employees Age

Age Frequency Percent 20 TO 30 yrs 24 25.3 30 TO 40 yrs 36 37.9 Above 40 yrs 35 36.8 Total 95 100



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Table 5: Education Level Education Level Frequency Percent PhD 1 1.1 MS 31 30.5 Masters 34 35.8 Bachelors 29 32.6 Total 95 100

Table 6: Job Tenure

Years Frequency Percent 1-3 yrs 30 31.6 4-7 yrs 25 26.3 8-10 yrs 21 22.1 Above 10 yrs 19 20 Total 95 100

Table 7: Name of Organizations

Name of Organization Frequency Percent Manhattan Pakistan (Pvt.) Ltd., Pakistan. 20 21.1 Orient Mccann-Erickson (Pvt.) Ltd., Pakistan. 22 23.2 Interflow Communications (Pvt.) Ltd., Pakistan. 25 26.3 R-Lintas (Pvt.) Ltd, Pakistan. 10 10.5 Prestige Communications (Pvt.) Ltd., Pakistan. 18 18.9 Total 95 100

Proposed Model Testing Structural equation modeling method was employed to test the hypothesized model. The LISREL 8.8 (Student Edition) program was used for the analysis of the same. The model testing results are shown in Figure 2. It has been found that out of 04 dimensions of impediments/ barriers to creativity, 02 of them are significantly explaining negative effect upon idea generation in advertising firm’s employees. The observed variables used to predict the latent variable in structural equation modeling were obtained by processing the data collected via research instrument. A proposed hypothesized path model as shown in Fig.1 was tested relating four dimensions of Impediments/Barriers to Creativity with Idea generation in this proposed model. This model has been validated and model fit statistics is clearly illustrating a statistically significant positive relationship (p<0.01) for 02 independent variables. No negative relationship was reported in this model fit statistics. The t-values for only two of independent variables i.e. Threatening Evaluation and Mechanistic Organizational Structure and a latent variable, Impediments/Barriers to creativity (BTC) with dependent variable Idea generation (IDEA) were found significant as it ranges between -2 to 2, so the results have been significantly proved and validating the two of the proposed hypotheses in this case. As per Wheaton et.al (1977), the relative/normed chi-square (χ2/df) as mentioned in a study by Hooper et.al (2008), Chi-square/degrees of freedom value less than or equal to three is acceptable one for model fit. Even though, there is no agreement regarding an acceptable ratio for this statistic, recommendations normally ranges from as high as 5.0 (Wheaton et. al, 1977) to as low as 2.0 (Tabachnick and Fidell,2007). Moreover, GFI, and CFI greater than 0.9, an AGFI greater than 0.8, RMSR less than 0.1, and RMSEA less than or equal 0.08 are generally being considered a model fit indices for better prediction (Hooper et.al, 2008). As depicted in Table 8, all goodness-of-fit indices for model are fulfilled and are in the range of the recommended values and model is a fit for prediction.



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Table 08: Fit Indices for Research Model

Independent Variables Chi-square/ df GFI AGFI CFI RMSR RMSEA Remarks

LC, RATP, TREV, MOS, Interest, Education, Gender

(20.204 /18) = 1.122

0.95 0.90 0.98 0.09 0.036 Model fit for prediction

Note: (χ2/df) ≤ 3, GFI and CFI > 0.9, AGFI >0.8, RMSR < 0.1 and RMSEA ≤ 0.08.

Where as GFI = goodness-of-fit index; AGFI = adjusted goodness-of-fit index; NNFI = non-normed fit index; CFI = comparative fit index; RMSR = root mean square residual; RMSEA = root mean square error of approximation.

Figure 1: Proposed Path Model



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Figure 2: Path Estimates of Research Model

Figure 3: T‐values for Research Model



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Hypothesis Testing Hypothesis 1 and 2 are postulated that Low Commitment and Risk Aversion/Time Pressure are barriers to creativity and have negative effects on idea generation. However, the direct paths between Low Commitment towards barriers to creativity and Risk Aversion/Time Pressure towards barriers to creativity are insignificant since the regression coefficients (β11 and β12) are (0.14 and 5.28) with insignificant t-values for both of them. These shows an insignificant statistical result and conclude that Low commitment and Risk Aversion/Time Pressure issues does not hampers idea generation in our chosen sample. However, Hypothesis 3 and 4 are postulated that Threatening Evaluation and Mechanistic Organizational Structure is a barriers to creativity and negatively affect Idea generation. The regression coefficients (β13 and β14) are (6.14 and 5.56) with t-values of 4.37 and 4.47. This clearly portrays a significant statistical result and deduces that when there is a high level of Threatening Evaluation and Mechanistic Organizational Structure in organizations, it serves as impediments/barriers to creativity.

Table 9 shows relative hypothesis test results for research model under study.

Hypothesis Co-efficient t-values Sig. H1 β11= 0.14 0.00 Non-supported H2 β12= 5.28 0.00 Non-supported H3 β13= 6.14 4.37 Supported H4 β14= 5.56 4.47 Supported H5 β15= 0.017 0.32 Non-supported H6 β16= 0.023 0.22 Non-supported H7 β17= 0.12 4.56 Supported

In addition, Hypothesis 5 and 6 are postulated that Demographic Characteristics and Attitude/Interest have a positive effect on Idea generation. The regression coefficient (β15 and β16) are 0.017 and 0.023 with t-values of 0.32 and 0.22. This insignificant result also shows that Demographic Characteristics and Attitude/Interest have a no significant effect on Idea generation. Finally, Hypothesis 7 postulates that impediments/barriers to creativity obstruct idea generation process. The regression coefficient (0.12) and t-value (4.56) clearly predicts that idea generation decreases with an increase in impediments/barriers to creativity. The whole model summary such as R Square and Adjusted R square values that predicts model fit in this case are presented in Table 10 given as follows:-

Table 10: Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate 1 .734 .538 .501 .4701

a. Predictors: (Constant), Low Commitment, Risk Aversion & Time Pressure, Threatening Evaluation, Mechanistic Organizational Structure, Gender, Education and Interest Dependent Variable: Idea Generation DISCUSSION AND CONCLUSION This paper underscores the impact of various dimensions of impediments/barriers to creativity in advertising firms and its degree of importance in generating new ideas. The creativity barriers in



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various dimensions play a decisive role in impeding the workforce to think creatively and reduce novel idea generation. This study is being an empirical investigation popped up with results that various dimensions of barriers to creativity undermine idea generation.The most prominent finding of the study is that a high level of importance and value that has been calculated for threatening evaluation and Mechanistic Organizational Structures i.e. two important variables of creativity barriers. It is concluded in our study that least concern was reported about Low Commitment, and Risk Aversion & Time Pressure, which is totally in line with studies conducted by Bishop (1997) and Amabile (2002). Low commitment has no affect upon idea generation in our sample just because in order to be creative, employee not only needs to be committed to the job but require freedom, trust and idea support. As our chosen sample predicted that there is no issue of commitment among advertising firms’ employees and a climate having higher level of freedom, trust and supporting new ideas, employees are purposely doing their job in such a manner as they like so they are creative and exercise organic control for strategic alignment towards organizational goals. Secondly, the sample of study have not clearly acknowledged one of the hypotheses i.e. Risk Aversion and Time pressure does not affect idea generation activity as a better motivating/ instrument, and they are least concerned with Risk Aversion and Time pressure issues at workplace for idea generation and creativity. This is also in line with surprising results already investigated by Amabile (2002). So, this hypothesis has been validated in connection with previous research done. In this study, it has been concluded that, tough and rigid climate characterized by threatening evaluations, mechanistic structures and rigid rules is potential threat for advertising firms that needs to focused and overpowered for better productivity. Workers who execute their activities in a predefined way having no autonomy to alter or redefine their assignments will ultimately impede creativity. Based on the analysis and results obtained, it is concluded that an approach to enhance and boost up idea generation for achieving innovation in work performance with the help of reducing Threatening Evaluations and Mechanistic Organizational Structure is a simplest way. It is suggested that the Top Level Leadership of advertising firms must exert their focus upon further humanizing their organizational environment by reducing impediments/barriers to foster idea generation and creativity. RECOMMENDATIONS AND RESEARCH IMPLICATIONS This paper has offered understanding regarding the impact of key factors associated with barriers to creativity upon idea generation. As per finding of this study, Leadership of advertising firms may further develop commitment and support for risk-taking attitude, based on the premise that learning and new ideas could be the outcome of risk taking and will make the employee feel at higher level of satisfaction. In fact, the employees’ behavior can be altered in such way when they will make mistakes and handle them at their own. This will determine whether employee feel liberated to act creatively or not. Brodtrick (1997) advocated the same by saying that mistakes can be discounted, censored, used to punish someone or considered as a learning opportunity. Thus, we can precisely say that acceptance of mistakes is an important component that encourages and elevates creativity and innovation.



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The HR and Marketing experts may revise and improve their organizational environment and its working in order to achieve a competitive advantage. For that reason, this study shows empirical results that may be useful for the Top Level decision makers in organizations, as the results have clearly showed the considerable relationships and links between various dimensions of barriers to creativity and idea generation process for creativity in organizations. This study contributed to the literature by discovering a model having key facts regarding the insight about employees of Advertising Industry of Pakistan, which were not empirically investigated in Pakistani context up until now. The academic implication of this study is that a new dimension was explored in developing country context and knowledge on the subject field has been enlarged. Through this approach, an organizational culture can be altered by applying this tested model in order to cope up with latest challenges and threats faced by 21st century organizations. Moreover, an empirical investigation will further provoke the issue under consideration to further enumerate the impediments to creativity in a better way in other social and scientific field of studies and will make effort to reduce them in order to gain competitive advantage. RESEARCH LIMITATIONS A sample chosen for this study was reasonable in number/size, but due to limited resources like time factor and financial resources, the study was restricted to a sample chosen from only Top five advertising industry firms of Pakistan. This study was conducted in Pakistani perspective so it is not a better idea to generalize the results to other Asian Countries as the economic, technological, environmental and political situations are very much different from Pakistan. FUTURE RESEARCH OPPORTUNITIES The future research may focus on the impact of creative barriers upon idea generation in relatively large sample taken from advertising industry of Pakistan for more persuasive assessment. In this paper, a limited sample based study was conducted and need is there that more firms may be included in the sample and further investigated by researchers so that to have a clear and more compelling predictive assessment among majority of advertising companies working in advertising industry in Pakistan. A sample from various other industries such as Oil and Gas Sector, Banking, Telecommunication etc. can be drawn and empirically tested to properly generalize the model and results calculated from the same study. In this way, the unidimensionality and generalizability of the current study can only be achieved. REFERENCES Ali, B. (2008) 'Critical success for effective knowledge management in corporate sector

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Corporate Social Responsibility: A Corporate Vision

Dr (Ms) Ravi Kiran

Professor, School of Mgmt. & Social Sciences,

Thapar University, Patiala.,India Ph. 91-175-2393080 (O),Fax 91-175-2393005

Anupam Sharma

Research Scholar, School of Mgmt. & Social Sciences,

Thapar University, Patiala.,India Ph. 91-9855572517 (M)

ABSTRACT With the introduction of globalization and liberalization the concept of corporate social responsibility is coming into light. What business enterprises think of corporate social responsibility and how they perceive others who are going for socially responsible behavior has comes under scanner. As the global scenario is changing day by day the business enterprises are looking for making a strong case for their investments to sustain as well as to grow. The present work is an attempt to capture the use of corporate social responsibility to promote socially responsible image of the organization from the society’s prospective and the study will also through light on the benefits that corporate organizations gain by implementing a socially responsible practices. Quite often the other factors such as human factor support from stakeholders, collateral assets, customer satisfaction and evaluation methodologies play an important role for determining the functionality of corporate social responsibility practices followed by the business enterprises. Most of the business enterprises ignore these factors and are not able achieve suboptimal share of market and customer support. There is an urgent need for extending the due attention to these factors and evaluate corporate social responsibility in light of the policies adopted by Multinationals,corporate social responsibility as a philanthropic approach as community investment. Keywords: Corporate Social Responsibility (CSR), Multinationals, Philanthropy and community investment



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INTRODUCTION With the introduction of globalization the concept of corporate social responsibility (CSR) has been reinforced. The campaign of corporate social responsibility (CSR) has been actively supported by global agencies like the World Bank, OECD and the European commissions. Modern corporations are putting considerable focus on the economy, politics and on society of a nation (Baxi 2006).CSR can be defined as a conducting business in an ethical way and in the interests of the wider community. In brief, the concept of CSR has evolved considerably since it first emerged in the 1950s (Carroll 1999; Freeman 1984; Carroll and Beiler 1977; Sturdivant 1977). There appears to be a disagreement about what CSR means, whether it should be implemented, how it should be implemented, or why it should be implemented. (Welford 2004; Stigson 2002) Corporate social responsibility is a commitment to improve community well-being through discretionary business practices and contributions of corporate resources. Developing countries need to create alternatives for social sector development and one of the suggested route for doing so is to develop viable and strategic public-private partnership. One of the biggest challenges for the governments in the developing countries like India is to create and nurture a durable framework which will help in translating public policies into deliverables. India needs a strong institutional framework for meeting the multiple objectives of economic growth and development into practices. The implementation of the developed framework requires strong commitment and support from the top-management side also. “Corporate Social Responsibility (CSR) is a powerful way of making sustainable competitive profit and achieving lasting value for the shareholder as well as for stakeholders. CSR and the reporting thereof is a win-win opportunity, not just for companies and for financial investors, but for society also” (CSR Europe 2003). CSR can affect a variety of stakeholders, including customers, employees and their families, investors, local communities, environmental groups, government, suppliers, and competitors. Indians multinationals like the Tata group, ITC, Ranbaxy, Infosys, and DuPont India, have endeavored to create a better social order. What is significant in these companies is that they initiated the process of CSR from their very doorstep, by providing a better and healthy work atmosphere to employees (Prasad 2006). The term CSR may depend on individual perceptions of responsibility/obligation that in turn addresses the broader topic of the role of the organization in society (Deresky 2000; Stigson 2002; Woodward et al 2001; Maignan et al. 2002; Maignan and Ferrell 2003; Epstein and Roy 2001; Haugh 2003; Crane and Matten 2004). CSR encompasses many dimensions of business activity ranging from the social (community programs), to economic (employment) to the environmental (waste reduction).

From the last two decades the rise in popularity of the term ethical consumerism can be linked to the rise of corporate social responsibility (CSR) concept globally. As the global population is increasing, pressure on limited natural resources for meeting the rising consumer demands is also increasing. Industrialization in many developing countries is booming as a result of technology and globalization (Grace and Cohen, 2005). With the changing market scenario, consumers are also becoming more and more aware about the environmental and social implications, of their day-to-day consumer decisions and are starting to make their purchasing decisions according to products environmental and ethical concerns. The role among corporate stakeholders to work collectively is exerting pressure on corporations to change. Shareholders and investors themselves, though socially responsible are exerting pressure on corporations to behave responsibly. Now a day’s Non-governmental organizations are



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Figure1: Forces affecting CSR

also by using the power of the media and the Internet are increasing their attention towards social corporate behavior. Through education and dialogue, the development of community in holding businesses responsible for their actions is growing.Porter and Kramer introduce two approaches a company may apply in choosing its CSR agenda. As shown in the following table:

Table1: Companies approaches towards CSR agenda

Source: Porter and Kramer (2006)

According to responsive CSR, a company may choose to act as a good corporate citizenship that has to serve social concerns of stakeholders. A company may pursue agenda that help it mitigates existing or anticipated adverse effects from its business activities along its value chain. Strategic CSR focuses on a small number of initiatives which social and business advantages are large and distinctive. Some companies adopt CSR agenda where the business innovation to benefit society converges with improved company’s competitiveness in the product company is offering and the value chain. Implementation of corporate social responsibility activities or offering feedback to improve the process requires a strategic framework. To integrate the different perspectives of corporate social responsibility design and implementation into a single framework needs a development of a preliminary model that will test and refine through multiple case studies. The organization must align its corporate social responsibility goals and decision making with its overall goals and strategies, so that taking corporate social responsibility becomes as natural as taking customer perspective. Thus, organizations must build on their corporate values to create an organizational culture that is receptive to change and can sustain a corporate social responsibility strategy over the long run (Maon et al. 2009).



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As India entered the phase of liberalization, all the agencies and organizations including the multinational firms have started the social sector development in India. Our economy is exposed to changing market structures and competition forces. Now India would relook at the cumulative experience of promoting corporate social responsibility (CSR) action in a transparent and accountable manner as early as possible. To face these challenges the need of the hour is the development of a corporate social responsibility (CSR) framework that may help organizations in putting their concepts of corporate social responsibility (CSR) into practice. Another helpful technique in drawing up a CSR plan is to create a matrix of proposed CSR actions (Hohnen, Paul 2007). The matrix can be set out by different aspects like environmental, social and economic aspects, though there may be some overlap. The matrix plots out current and possible CSR activities, processes, products and impacts which can then also be used to check the cross-reference against a company’s current activities and structure. An example of this type of matrix is illustrated in the following table:

Table2: Matrix of CSR actions

Source: Hohnen (2007) Note: *OHSAS: Occupational Health and Safety Standard ** SA: Social Accountability Standard CSR: DIFFERENT PERSPECTIVES A brief resume of researches conducted in India and abroad has been presented under the following heads:

• CSR and Multinationals • Philanthropy and Community Investment

Environmental activity Social activity (e.g. workers, communities

Economic activity (e.g. quality assurance, customer satisfaction)

Current Proposed Current Proposed Current Proposed

Processes Registered to

ISO 14001

Kyoto emission

reductions?

Certified to

OHSAS*

SA 8000** or

Fair labor

Association

Registered

to ISO9001

Integrated

Management

System Products/

Service

Some products

use known

logo

products to be

certified to local

energy standards

None at

present

SA 8000

Use of

ISO9001

Logo

Keep abreast

of ISO work

on IMS Impacts Internal impact

assessment

undertaken

Supply Chain

Internal

impact

assessment

undertaken

Supply Chain

Internal

impact

assessment

undertaken

Supply Chain

Focal point Environmental Affairs Department Human Resource Department Quality Assurance Department



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CSR and Multinationals The study by Ramasamy and Yeung (2009) increases our understanding of corporate social responsibility from the Chinese consumer’s prospective. The main focus of the study was on two Chinese cities at different stages of economic development, namely Shanghai and Hongkong. The findings of the study show that the levels of consumer support for responsible business in Hongkong are significantly lower than that in China. Results confirm that Chinese consumers are able to differentiate among the economic, legal, ethical, philanthropic responsibilities of business. Fukukawa and Teramoto (2009) explores the case of Japanese multinationals and corporate social responsibility practises. Japan is considered to be lagging behind in its understanding and adoption of corporate social responsibility. Study reveals that Japanese business is not keeping up with corporate social responsibility practices, and it needs to achieve a more global mode of transparency and accountability. The evolution of CSR in these developing economies shows varying results. Muller and Kolk (2009) explores that corporate social responsibility in emerging markets has increased in recent years. The study is based on survey conducted among companies in the Mexican auto industry. Corporate social responsibility performance was investigated across three dimensions: environmental, labour and community. Study shows that local companies engaged in the type of corporate social responsibility activities commonly associated with corporate social responsibility in developed countries, and still it’s in a very nascent stage. A corporate social responsibility initiative taken by a multinational corporation in their home country was different and makes a comparison of their efforts in India (Lather, 2007). Study show that there was a significant difference between corporate social responsibility practices of multinationals in India and back home. Multinationals were more concerned particularly in implementing socially responsible programs in their home country. To know the changing relationship between companies, the state and the society, Krishnan and Balachandran (2004), studied the impact of emerging markets on corporate social responsibility. The findings of the study show that consumers prefer to boycott the company’s products and services in case of negative corporate citizenship behavior.

Table: 3- Summary of CSR and Multinationals: Author About the study Contribution

Ramasamy and Yeung (2009)

The study was on two Chinese cities at different stages of economic development. Study explores the impact of economic, legal, ethical, philanthropic responsibilities of business on consumer buying behaviour.

Results confirm that Chinese consumers are able to differentiate among the economic, legal, ethical, philanthropic responsibilities of business.

Fukukawa and Teramoto (2009)

The study throws light on Japanese multinationals and their corporate social responsibility practises.

Japan is considered to be lagging behind in its understanding and adoption of corporate social responsibility and it needs to achieve a more global mode of transparency.

The study is based on survey conducted among companies in the Mexican auto industry.CSR performance was investigated across three dimensions: environmental, labour and community.

Results of the study shows that six of the nine corporate social responsibility dimensions are intercorrelated, which suggest that CSR in the Mexican auto parts industry is more structural than incidental.

Muller and Kolk (2009)



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Lather, (2007)

The study covered the corporate social responsibility initiatives taken by multinational corporations in their home country and makes a comparison of their efforts in India.

Corporate social responsibility practices of multinationals in India and back home were different. Multinationals were more concerned particularly in implementing socially responsible programs in their home country.

Krishnan and Balachandran (2004)

The study explores the impact of emerging markets on corporate social responsibility.

Consumers prefer to boycott the company’s products and services in case of negative corporate citizenship behavior.

Last but not the least, firms all over is beginning to grasp the importance of corporate social responsibility into practice to enhance more market share and enhanced reputation in the market. In the near future only those firms will remain in the markets that have gained the goodwill in the general public.

Philanthropy and Community Investment Corporate responsibility is what lies beyond the law and an important area of discretionary responsibility has been the idea of ‘giving back’ to the society through philanthropic donations. Lewicka and Strzalecka (2006), identify the opportunities and limitations of corporate social responsibility in the countries of transformation. It’s suggested that when some of the countries attempted to implement the effective solutions transferred from developed economies, it did nothing to improve the situation but it increased poverty and even widened the social gaps that are tearing the society apart. Research shows that number of Polish company’s especially small and average businesses, participating in the programs promoting corporate social responsibility may provide a chance for successful development of the concepts in the near future. Corporate social responsibility is now established as a fundamental addition to stakeholder’s criteria for judging companies reputation and also for a reappraisal of company’s brand and reputation management (Lewis, 2003). The study shows that customers buying behavior is very much affected by the brand loyalty towards social and environmental responsibility and it has been increasingly continuously in the period 1998-2002. Porter and Kramer (2006) stated that strategically corporate social responsibility (CSR) can become the source of tremendous social progress, as the business applies its considerable resources, expertise and insight to the activities that benefit society, surveys shows that companies should operate in ways that secure long-term economic performance by avoiding short-term behavior that is socially detrimental or environmentally wasteful. Corporation’s socially responsible behavior can positively affect consumer’s attitude towards the corporations (Lichtenstein and et.al. 2004). The increase in corporate social responsibility initiatives has been prompted both by companies that increasingly recognize it as a key to success and also by non-profit companies that are always in need for resources. Lichtenstein et.al. (2004) measure the relationship between customer-corporations and non-profit donations. They suggest that if a company has a poor corporate social responsibility record, it should choose a non-profit partner and it should engage in the corporate social responsibility initiatives as a part of a genuine effort to change its market position. Corporate social responsibility defines what and how a company looks beyond profits. Corporates are also collaborating with NGO’s, local self-government bodies to ensure the better strategy formulation and for getting inputs from the government. Study by Chaudhary (2009) shows that though the number of corporate social responsibility projects has increased in India but, there is a lack of



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clear metrics or framework for formulating and evaluating their actual impact in improving social conditions. Maon et. al. (2009), suggest an integrative framework of corporate social responsibility design and implementation. The qualitative case-study approach was used to understand the contextual issues that surrounded each organization. The research proposed a integrative framework for designing and implementing corporate social responsibility incorporates nine steps: raising corporate social responsibility awareness inside the organization, assessing corporate purpose in a societal context, establishing a working definition and vision for corporate social responsibility, assessing current corporate social responsibility status, developing an integrated corporate social responsibility strategic plan, implementing the corporate social responsibility integrated strategic plan, maintaining internal and external communication, evaluating corporate social responsibility related strategies and communication and institutionalizing corporate social responsibility policy.

Table 4: Philanthropy and Community Investment

Author About the study Contribution

Lewicka and Strzalecka (2006)

Study identifies the opportunities and limitations of corporate social responsibility in the countries of transformation.

The success of corporate social responsibility strategy depends on numerous situational factors such as economic, social, cultural and institutional.

Lewis, (2003) Study explores that corporate social responsibility is established as a fundamental addition to stakeholder’s criteria for judging companies reputation and company’s brand reputation management.

Customers buying behavior is very much affected by the brand loyalty towards social and environmental responsibility.

Porter and Kramer (2006)

The study stated that strategically CSR becomes a source of tremendous social progress, as the business applies its considerable resources, expertise and insight to the activities that benefit society,

Successful corporations need equal opportunities for a productive workforce. Safe products and working conditions not only attract customers but lower the internal rate of accidents.

Lichtenstein, Drumwright and Braig (2004)

The study through the light on the concept that a corporation’s socially responsible behavior can positively affect consumer’s attitude towards the corporations.

There is a significant relationship between customer-corporations and non-profit donations. It should engage in the CSR initiatives as a part of a genuine effort to change its market position.

Chaudhary (2009)

The study shows that though the number of corporate social responsibility projects has increased in India but, there is a lack of clear metrics or framework.

Corporates are collaborating with NGO’s, local self-government bodies to ensure the better strategy formulation and for getting inputs from the government.

Maon, Lindgreen and Swaen (2009)

The study suggests an integrative framework of corporate social responsibility design and implementation.

Study contributed by giving a integrative framework for designing and implementing corporate social responsibility.



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All the themes of the CSR use can exist simultaneously in the organizations in this changed globalized world but the organizations that are socially responsible have a dominant position in the market. These organizations can focus of customers and resources of the organization and influence the performance of the organization in the market. It can be expected that with time and experience the organizations opting for CSR practices, will graduate from Social entrepreneurship to new philanthropy. From the above studies nine factors have been identified and how these influence organizations corporate social responsibility practices has been explained below:

Table 5: Factors Influencing Corporate Social Responsibility

Factors CSR & Multinationals

Philanthropy and Community Investment

Enhanced Reputation Experimentation Improved

Alliance with business partner Futuristic New Opportunities

Better stakeholder relationships Quick Decisions Better Decisions

Attractive employer High Moderate

Customer satisfaction- loyalty High Considerable

New business opportunity Strategic Tactical

Cost savings High Moderate

Minimize risks Quantitative Quantitative & Qualitative

Reduced regulatory interventions Relatively Difficult Easy

On the basis of studies undertaken a framework has been designed to highlight the factors influencing CSR. The framework also presents the differences in the prospective of the influence these factors with regard to the two approaches i.e. CSR and multinationals and the CSR as a philanthropy and community investment. Although all these nine factors influences the organizations but the extent or the purpose for which they are adopted is different.



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Figure: 2 Framework of CSR

If the corporate organizations are implementing corporate social responsibility practices they will get alliance with more business partners and this will give them new business oppurtunities. Organizations good social image will enchance the reputation and help in the reduced regulatory interventions either by government or by the share holders. Enchanced reputation of the firm will attract more and more customers towards organization that will increase organizations sales and company will enjoy more profits and corporates will able to minimize risk by enchanced reputation and with new business oppurtunities and finally it will help organization in cost saving and making good relations with stakeholders.

CONCLUSION

This research will portray the real picture of corporate social responsibility practices opted by companies. Due to globalization and liberalization corporate social responsibility practices are becoming essential for the survival of every company. Foreign multinationals are adopting corporate social responsibility practices at higher level and customers are preferring their products more than the national/local companies products, so this research will help the companies as well as customers both by designing a framework for socially responsible behavior. So its concluded that by opting a corporate social responsibility practices or a framework for implementing firms corporate social responsibility practices corporates will be able to enchance their market reputation and social image.

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and Influence of Industry Type’, Journal of Marketing,Vol.67, pp 106-122.



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Dr (Ms) Ravi Kiran is M.phil, Ph.D. She has published 52 papers in refereed Indian/International journals and around thirty papers in Conferences. Her area of specialization is industrial management, productivity and e-business. Five Ph. D. Scholars have completed their research work with her and & eight Ph D. Scholars are pursuing their research. She has finished five R& D projects. She has organized Five National Conferences and Fifteen Short term training programmes.

Ms Anupam Sharma is B.Tech in Computers and MBA with specialization in Human Resource and Marketing Management. She has presented two papers in refereed International Conferences. Currently she is pursuing Ph.D. on Corporate Social Responsibility from School of Mgmt. & Social Sciences, Thapar University, Patiala, India.



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