Ijcbs Vol 2 No 3 March 2011 Issn 2156-7506

ISSN 2156-7506
VOLUME 2 Journal of Contemporary Business Studies

International
NUMBER
Vol: 2, No: 3
3 .March, 2011 ISSN 2156-7506
MARCH
2011
International journal of Contemporary Business Studies
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 Regressive

Integrated 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
An International Journal Published by

Academy of Knowledge Process
www.akpinsight.webs.com
Copyright © 2011. Academy of Knowledge Process
Copyright © 2011 IJCBS 1
International Journal of Contemporary Business Studies
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
-publish monthly (one volume per year) fast publication
-is open access to the full text
-has the editorial board & reviewers comprise of renowned scholars across the globe,
-has the quality policy includes indexing according to APA manual and its current status is international.
-is indexed & listed in:
One of the largest Research Databases of world

Indexed in Proquest
Indexed in CABELL-USA
Open Access Policy

This journal provides immediate open access to its content on the principle that making research freely available to the public
supports a greater global exchange of knowledge.

Copyright
To protect the copyright of the journal enable, IJCBS and the Publisher, authors must assign copyright in their manuscripts to
IJCBS. Authors should make sure on submission that the article is original, is not under consideration for publication by another
journal, has not previously been published elsewhere and that its content has not been anticipated by previous publication.

2
A journal of Academy of Knowledge Process
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
Saddal H.A
Chief Editor
Editorial Board
Editorial Board consists of PhD doctors from all over the world
Prof. Dr. Nada k. Kakabadse Assoc. Prof. Dr. Elena Druica

Professor - Management & Business Research PhD Microeconomics & Risk Economics
University of Northampton Business School Head of Department, Business & Administration
UK University of Bucharest
Romania
Dr. M. A. Sharifian
PhD Industrial/Organizational Sociology Prof. Dr. Jorgen L. Pedersen
University Jussieu, (Paris VII), PhD
France Ass. Prof. Dept. of Manufacturing Engineering &
Management
Dr. Salaheldin Ismail Technical University of Denmark
PhD. University of Glasgow, UK Denmark
Head of Department Marketing & Management
College of Business & Economics Dr. Saeid Saeida
Qatar University PhD Business Administration
Assistant Professor
Prof. Dr. Luiz Moutinho Dept. of Economics, Management & Accounting
Professor of Marketing Yazd University
University of Glasgow Iran
Scotland
Dr. Azlan Amran
Dr. Ali Salaman Saleh PhD
PhD Assistant Professor
University of Wollongong School of Management, University Sains
Australia Malaysia
Prof. Dr. Viorel Cornescu Dr. Ah Pak

PhD Economics Ass. Professor
Vice Rector of "Nicolae Titulescu" University Department of Management Xi'an Jiaotong-
Romania Liverpool University
China
Prof. Dr. Vasyl Gerasymchuk
PhD Economics Dr. A. Pourezzat
National Technical University of Ukraine, Kyiv Assistant Professor
Politechnic Institute,Ukraine School of Management, University of Tehran
Iran

3
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
Sasan Ghasemi Prof. Dr. Michela Cortini

CEO Ala Excellence Consulting Group PhD, Ass. Prof.
International Speaker Department of Work and Organizational
Psychology
Prof. Dr. Moaddi M. Almeth-hib University of Bari
College of Business Administration Italy
Department of Management
King Saud University Prof. Dr. Sven Voelpel
Kingdom of Saudi Arabia Professor of Business Administration
Jacobs Center on Lifelong Learning and
Dr. Mohammad Ali Feizpour Institutional Development
PhD Industrial Economics Jacobs University
Assistant Professor Germany
Dept. of Economics, Management & Accounting
Yazd University Dr. Madan Bhasin
Iran Professor in Accounting
College of Business, Hospitality and Tourism Studies,
Magdalena Radulescu Fiji National University,
PhD. Lecturer P.O. Box 7222, Valelevu, Nasinu,
Scientific Secretary Fiji Islands
Faculty of Economics Study
University of Petesti
Romania

4
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
VOLUME 2, NUMBER 3
March 2011
Contents
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


5
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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
Luleå University of Technology, SE – 971 87, Luleå, Sweden
Telephone: +46 920 49 3838, Fax: +46 920 49 10 30
Ylva Fältholm, PhD
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.

6
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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

7
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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)

8
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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

9
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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%).

10
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
Females, 23,
32%
Males, 49,
68%
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).
50-59 yrs, 5,
7%
20-29 yrs, 21,
29%
40-49 yrs, 22,

31%
30-39 yrs, 24,

33%
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.
Other, 4, 6% Certificate,
16, 22%
Postgraduate,
13, 18%
Diploma, 12,
17%
Degree, 27,
37%
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

11
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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,

More than 11 yrs,
10%
11, 15%
9 to 10, 5, 7% 1 to 2 yrs, 13, 18%
7 to 8 yrs, 8, 11%
5 to 6 yrs, 8, 11%
3 to 4 yrs, 20, 28%
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

12
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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
C o m m u n ica tin g th e In i t i a ti n g s t ra t e g i c Id e n t i fy i n g re s o u r c e s F o llo w in g u p ,

o r g a n i s a ti o n m i s s i o n i d e a s , re v i e w in g a n d a n d d e v e lo p i n g m o n ito r in g an d
an d v is io n u p d a t in g th e p ro g ra m s , p o l i c i e s a s s e ss i n g th e
o b j e c ti v e s o f th e a n d p ro c e d u r e s p ro g r e s s o f
d e p a r tm e n t . o p er atio n s
C o m m u n i c a ti n g t h e o rg a n i s a t i o n
m is s io n a n d v is io n 1
I n i ti a t in g s t ra t e g i c i d e a s ,
r e v i e w i n g a n d u p d a ti n g th e .6 8 * * 1
o b je c t i v e s o f t h e d e p a rt m e n t .
I d e n t i f y i n g re so u rc e s a n d
d e v e lo p in g p ro g r a m s , p o l i c ie s .6 2 * * .8 3 * * 1
a n d p r o c e d u re s
F o l l o w i n g u p , m o n it o r i n g a n d
a s s e s s i n g t h e p ro g re s s o f .5 8 * * .6 5 * * .7 5 * * 1
o p e ra t i o n s
* * . C o rr e l a t io n i s s i g n i fi c a n t a t t h e 0 .0 1 l e v e l ( 1 -t a i l e d ).
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

13
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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.

Competences in Producing Financial Resources and Budgets
Reviewing previous Preparing Work plans Allocating Allocating

budget and financial and establishing resources and resources and
activities. activities to be implementing implementing
executed in the budget. budget budget
Reviewing previous budget and

financial activities. 1
Preparing Work plans and

establishing activities to be .84** 1
executed in the budget.
Allocating resources and

implementing budget .76** .81** 1
Following up, monitoring and

assessing the progress of .74** .76** .84** 1
operations
**. 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).

14
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506

Competences in Creating Work Environment for High Performance
Initiating, Implementing Reviewing the Reviewing Identifying training
developing and systems for capacity of staff, assigned tasks, needs, training
reviewing utilization and setting and appraising and opportunities
performance development of communicating supporting staff. available and costs
management a competent performance to be incurred
systems workforce. targets.
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.

Competences in Maintaining Relationship with Key Stakeholders.
M o n ito rin g , A cc o u n tin g D ev elo p in g O rg a n izin g a n d P ro v id in g E x p lo itin g
re v iew in g an d fo r th e firm ’s p ro p er atten d in g to fe ed b a c k to o p p o rtu n ities
e v a lu a tin g th e p h ys ica l c las sifica tio n stak eh o ld e r m an ag e m en t th a t ad d v alu e to
p h ys ic a l a ss ets . o f as se ts fo r co m m u n ic atio n s a n d sta ff o n firm a n d
a ss ets m a in ten a n c e firm ’s b u s in e s s re c o m m e n d o n
m a n a ge m e n t a n d b u d g eta ry tren d s. h o w to co m p e te
s ys tem p u rp o se s 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

1
th e p h y sic al a ss ets m an a g e m en t s y stem
A cc o u n tin g fo r th e firm ’ s p h y sic al

.7 6 * * 1
a ss ets .
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 .7 9 * * .7 3 * * 1
p u rp o se s
O rg an iz in g an d a tte n d in g to sta k eh o ld e r
.5 8 * * .5 1 * * .6 2 * * 1
c o m m u n ica tio n s
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 .6 6 * * .6 3 * * .7 4 * * .7 1 * * .7 8 * * 1
c o m p e te o r c o o p e ra te e ffe ctiv e ly .
15
* * . 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 ).
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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.

Competences in Accessing Information and Communication Systems
Identifying Implementing work Analyzing, Developing
information and flows that facilitate filtering and networking tools for
communication accessing, collecting disseminating information and
requirements. and processing data available knowledge exchange.
information
Identifying information and

communication requirements. 1
Implementing work flows that

facilitate accessing, collecting .72** 1
and processing data
Analyzing, filtering and

disseminating available .72** .85** 1
information
Developing networking tools for

information and knowledge .80** .82** .82** 1
exchange.
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.

16
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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.

Competences in Producing and Analyzing Reports, Proposals, Policies and Procedures.
Monitoring and Conducting research Assessing policies Earmarking issues Reviewing, editing
evaluating and surveys of the and procedures and to be given special and approving
programs and firm’s products, making appropriate attention reports
activities services and recommendations
operations
Monitoring and evaluating programs

and activities 1
Conducting research and surveys of

the firm’s products, services and .29** 1
operations
Assessing policies and procedures

and making appropriate .76** .31** 1
recommendations
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
S trate g ic a lly D e v elo p , m o b iliz e C re a te a w o rk D e v elo p a n d M ain ta in an d P ro d u c e an d
p la n fo r th e an d p ro d u ce e n v iro n m en t fo r im p le m en t s ys tem fo r a c ce ss an a lyz e
firm . fin an c ial re so u rc e s h ig h p e rfo rm an ce . u tilizin g p h ys ic a l in fo rm a tio n . rep o rts,
an d b u d g ets . res o u rc es an d also p ro p o sa ls,
m a in tain p ro fita b le p o lic ies an d
co o p e ra tio n a n d p ro ce d u re s.
rela tio n w ith k e y
stak eh o ld e rs.
S trate gic a lly p la n fo r th e firm -
D ev e lo p , m o b iliz e a n d p ro d u c e
fin a n cia l res o u rc e s a n d .5 1 * * - .7 2 * * -
b u d g e ts.
C re a te a w o rk en v iro n m e n t fo r .4 2 * * - .7 8 * * .5 2 * * - .7 7 * * -
h ig h p e rfo rm a n ce .
D ev e lo p a n d im p le m en t
s y stem fo r u tiliz in g p h ys ica l
re so u rc e s, a n d a lso m a in tain .4 0 * * - .7 1 * * .4 5 * * - .6 9 * * .3 9 * * -.6 8 * * -
p ro fita b le c o o p e ratio n a n d
re latio n w ith k e y sta k eh o ld ers .
M ain ta in an d a c c es s .4 4 * * - .6 4 * * .5 6 * * - .7 2 * * .5 3 * * - .7 2 * * .5 7 * * - .8 1 * * -
in fo rm a tio n .
P ro d u c e a n d a n a lyz e re p o rts,
p ro p o sa ls , p o licie s a n d .1 4 - .6 7 ** .1 5 - .6 6 * * .1 4 - .7 3 * * .1 7 - .8 2 * * .2 9 * * - .8 4 * * -
p ro c e d u re s.
* * . 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 ).
* . 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 ).

17
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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.
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.
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.

18
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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

19
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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

20
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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.
International Research Journal of Finance and Economics, 39, 218-228.
Amit, R. & Schoemaker, P.J.H. (1993). Strategic assets and organizational rent. Strategic
Management Journal, 14, 33-46.
Armstrong, M.A. (1991). Handbook of personnel management practice. London: Kogan Page.
Armstrong, M. (200). Performance management: Key strategies and practical guidelines.
London: Kogan Page.
Armstrong, M. (2003). A handbook of human resource management practice. London: Kogan
Page.
Armstrong, M. & Baron, A. (1995). The job evaluation handbook. London: Institute of Personnel
Development.
Aryeetey, E. (1998). Informal finance for private sector development in Africa: Economic
Research Papers no. 41. Abidjan: The African Development Bank.
Barney, J.B. (1986). Organizational culture: Can it be a source of sustained competitive
advantage? Academy of Management Review, 11, 656-665.
Barney, J.B. (1991). Firm resources and sustained competitive advantage. Journal of
Management, 17, 99-120.

21
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
Barney, J.B. (1992). Integrating organizational behavior and strategy formulation research: A
resource-based analysis. In Shrivastava, P., Huff, A. & Dutton, J, (Eds.), Advances in
Strategic Management, (pp. 39-61). Greenwich, CT: JAI Press.
Boyatzis, R.E. (1982). The competent manager: A model for effective performance. New York:
Wiley.
Cascio, W.F. (1995). Managing human resources: Productivity, quality of work life, profits. New
York: McGraw-Hill.
Cheng, M., Dainty, A. & Moore, D. (2003). The differing faces of managerial competency in
Britain and America. Journal of Management Development, 22(6), 527-537.
Chong, E. (2008). Managerial competency appraisal: A cross-cultural study of American and East
Asian executives. Journal of Business Research, 61(3), 191-200.
Conner, K.R. (1991). A historical comparison of resource-based theory and five schools of
thought within industrial organization economics: Do we have a new theory of the firm?
Journal of Management, 17, 121- 154.
Dennison, D. (1984). Bringing corporate culture to the bottom line. Organizational Dynamics, 13,
4-22.
Ferris, G.R., Rowland, KM. & Buckley, R.M. (1990). Human resource management:
Perspectives and issues. Boston: Allyn & Bacon.
Fine, S.A. (1988). Functional job analysis. In Gael S. (Ed.), The job analysis handbook for
business, industry and government (pp. 79-108). New York: Wiley.
Fiol, C.M. (1991). Managing culture as a competitive resource: An identity-based view of
sustainable competitive advantage. Journal of Management, 17, 191-211.
Flanagan, C.J. (1954). The critical incident technique. Psychological Bulletin, 51, 327-358.
Gockel, A.G. & Akoena, S.K. (2002). Financial intermediation for the poor: Credit demand by
micro, small and medium scale enterprises in Ghana - a further assignment for financial
sector policy? IFLIP Research Paper 02-6. Geneva: International Labor Organization.
Hansen, G.S. & Wernerfelt, B. (1989). Determinants of firm performance: The relative
importance of economic and organizational factors. Strategic Management Journal, 10,
399-411.
Hogg, B.A. (1993). European managerial competences. European Business Review, 93(2), 21-26.
Jurie, J.D. (2000). Building capacity: Organizational competence and critical theory. Journal of
Organizational Change, 13, 264-274.
Kagire, J.R.K. & Munene, J.C. (2007). Engineering lecturers’ competencies and organizational
citizenship behavior (OCB) at Kyambogo University. Journal of European Industrial
Training, 31(9), 706-726.
Kayanula, D. & Quartey, P. (2000). The Policy Environment for Promoting Small and Medium-
Sized Enterprises in Ghana and Malawi, Finance and Development Research Program,
Working Paper Series, Paper No 15. IDPM, Manchester: University of Manchester.
Kim, A. (2004). Parent-school partnership formation through the school council in Korea.
Educational Research for Policy and Practice, 3(2), 127-139.
Kuffour, A.A. (2008). Employment generation and small medium enterprise development – the
garment and textile manufacturing industry in Ghana. Paper presented at the International
Forum on Sustainable Private Sector Development, 19th – 21st June Halifax, Nova
Scotia. Dalhousie University’s Faculty of Management, Canada.
Lado, A.A., Boyd, N.G. & Wright, P. (1992). A competency-based model of sustainable
competitive advantage: Toward a conceptual integration. Journal of Management, 18, 77-
91.
Lee, M. & Koh, J. (2001). Is empowering really a new concept? Journal of Human Resource
Management, 12(4), 684-695.
Lucia, A. & Lepsinger, R. (1999). The art and science of competency models. San Francisco:
Jossey-Bass/Pfeiffer.

22
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
MacKenzie, S.B., Podsakoff, P.M. & Fetter, R. (1991). Organizational citizenship behavior and
objective productivity as determinants of managerial evaluations of salespersons’
performance. Organizational Behavior and Human Decision Processes, 50(1), 123-150.
Mahoney, J.T. & Pandian, J.R. (1992). The resource-based view within the conversation of
strategic management. Strategic Management journal, 13, 363-380.
McLagan, P.A. (1997). Competencies: The next generation. Training and Development, 55(5),
40-47.
Mansfield, B. (1999). What is competence all about? Competency and Emotional intelligence, 6,
24-28.
Moorman, R.H. (1991). Relationship between organizational justice and organizational
citizenship behaviors: do fairness perceptions influence employee citizenship? Journal of
Applied Psychology, 76, 845-55.
Munene, J.C. (1996). Revolutionizing the management of work at an old University: Can the new
cohabit with the old? Makerere Business Journal, 1, 228-233.
OECD (1994). DAC orientations for development cooperation in support of private sector
development, DDC/DAC (93) 32/REV2, OECD, June 3, 1994. Paris: OECD
Development Co-operation Directorate, Development Assistance Committee.
Organ, D.W. (1988). OCB: The good soldier syndrome. Lexington, MA: Lexington Books.
Organ, D.W. & Konovsky, M. (1989). Cognitive versus affective determinants of organizational
citizenship behavior. Journal of Applied Psychology, 74, 157-64.
Pavitt, K. (1991). Key characteristics of the large innovating firm. British Journal of
Management, 2, 208-230.
Prahalad, C.K. & Hamel, G. (1990). The core competence of the corporation. Harvard Business
Review, 68(3), 79-91.
Prescott, E.C. & Visscher, M. (1980). Organizational capital. Journal of Political Economy, 88,
446-461.
Ranson, B. (1987). The institutionalist theory of capital formation. Journal of Economic Issues,
21, 1265-1278.
Raven, J. (1984). Competence in modern society. Edinburgh: Dinwiddie Grieve.
Reed, R. & DeFillippi, R. (1990). Causal ambiguity, barriers to imitation, and sustainable
competitive advantage. Academy of Management Review, 15, 88-102.
Rumelt, R.P. (1991). How much does industry matter? Strategic Management Journal, 12, 167-
185.
Sanda, M.A. (2006). Four case studies on the commercialization of government R&D agencies:
An organizational activity theoretical approach. Luleå, Sweden: Luleå University of
Technology Press.
Sanda, M.A. (2010). Impact of value-based transformational leadership in privatizing government
institutions in a developing economy: A case study. Business and Management Quarterly
Review, 1(3), 1-13.
Sandberg, J. (1995). Are phenomenographic results reliable? Journal of Nordic Educational
Research, 15, 156-164.
Stalk, G., Evans, P. & Shulman, L.E. (1992). Competing on capabilities: The new rules of
corporate strategy, Harvard Business Review, 70(2), 57-69.
Tomer, J.F. (1987). Organizational capital. New York: Praeger.
Tremblay, M. (2000). Organizational and individual determinants of atypical employment: The
case of multiple jobholding and self-employment. Montreal: IQRC.
Ulrich, D, & Lake, D. (1990). Organizational capability. New York: Wiley.
Veres, J.G., Locklear, T.S. & Sims R.R. (1990). Job analysis in practice: A brief review of the
role of job analysis in human resources management. In Ferris G.R., Rowland K.M. &
Buckley M.R. (Eds.), Human resource management perspectives and issues (pp. 19103).
Boston, MA: Allyn and Bacon.

23
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
Woodruffe, C. (1991). Competent by any other name. Personnel Management, 23(9), 30-33
Wright, P.M. & McMahan, G.C. (1992). Theoretical perspectives for strategic human resource
management. Journal of Management, 18, 295-320.


24
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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: nalini_prava@yahoo.co.in, nt@iimshillong.in
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

25
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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.

26
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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.

27
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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:

28
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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

29
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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:
j k
F = F { β o + ∑j=1
β jG [ ∑k =1
γ kiXj ]}
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

30
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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

31
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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.
∑ observed t − predicted t
MAE = t =1
100 n
n t − predicted
observed
MAPE =
n
∑t =1 observed t
t
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.

32
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
Figure 3 S&P CNX Nifty (31 Dec 2004 to 31st July 2010)
Time S e r ie s P lot of C 1
6000
5000
C1
4000
3000
2000
1 138 276 414 552 690 828 966 1104 1242 1380
In d e x
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.

33
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
Figure 4: ACF and PACF plots for Nifty for ARIMA (1, 1, 2)
A utoc or r e la tion F unc tion for C 1
(w ith 5% significa nce lim its for the a utocorre la tions)
1.0
0.8
0.6
0.4
Autocorrelation
0.2
0.0
-0.2
-0.4
-0.6
-0.8
-1.0
1 10 20 30 40 50 60 70 80
La g
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
PACF of Residuals for C1

(with 5% significance limits for the partial autocorrelations)
1.0
0.8
0.6
Partial Autocorrelation
0.4
0.2
0.0
-0.2
-0.4
-0.6
-0.8
-1.0
1 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80
Lag

34
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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 MAPE MAE Model Description
Neurons
Hidden Layers Transfer Function
3 0.835% 43.25 2 Hyperbolic Tangent
Figure 6: MAPE for different ANN Models

35
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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

36
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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.
REFERENCES
Abu- Mostafa, Y. S., et al. (2001). Neural Networks in Financial Engineering, IEEE Transactions
on Neural Networks, 12(4): 653-656.
Asif Ullah Khan, Bandopadhyaya T.K. and Sudhir Sharma (2008) IJCSN International Journal of
computer science & network security, .8 (7) , 162- 166.
Birol Yildiz ,Abdullah Yalama and Metin Coskun (2008) World Academy of Science
,Engineering and Technology, 46, 35-41.
Christopher M. Bishop, (1995)“Neural Networks for Pattern Recognition”, Oxford University
Press, November
Fama, E.F. (1965). The Behaviour of Stock Market Prices, Journal of Business, 38: 34-105.

Fama, E.F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work, Journal
of Finance, 25: 1465-1468
G. Zhang and M. Y. Hu, (1998) “Neural Network Forecasting of the British Pound/US Dollar
Exchange Rate,” OMEGA: Int. Journal of Management Science, 26, pp 495-506,

37
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
H. B. Hwarng and H. T. Ang, “A Simple Neural Network for ARMA(p,q) Time Series, (2002)”
OMEGA: Int. Journal of Management Science, vol. 29, pp 319-333,
J. Yao, Y. Li and C. L. Tan, (2000) “Option Price Forecasting Using Neural Networks,”
J. Zurada,( 1992)“Introduction to Articial neural systems”, 0-314-93391-3, West Publishing Co.,

St. Paul, MN, USA,
J. Yao, Y. Li and C. L. Tan, (2000) “Option Price Forecasting Using Neural Networks,”
Jinyuan Shen, Huaiyu Fan and Shengjiang Chang (2007) Springer-Verlag Berlin Heidelberg,
457-464.
J. Yao and C.L. Tan, (2000) “A case study on using neural networks to perform technical
forecasting of forex,” Neurocomputing, vol.34, pp. 79-98,
S. Yaser and A. Atiya, (1996)“Introduction to Financial Forecasting,“ Applied Intelligence, vol.

6, pp 205-213,
Kimoto, T., Asakawa, K., Yoda, M., and Takeoka, M. (1990), Stock market prediction system
with modular neural network, in Proceedings of the International Joint Conference on
Neural Networks, 1-6.
Lisa Bianchi, Jerey Jarrett, and R. ChoudaryHanumara, (1998) “Improving forecasting for
telemarketing centres by ARIMA modeling with intervention”, International Journal of
Forecasting, 14(4):497{504, Dec.
Murphy, J. J. (1999). Technical Analysis of the Financial Markets: A Comprehensive Guide to

Trading Methods and Applications. New York: Institute of Finance,pp. 4-5
Mills, T. C. (1990). Non-linear Time Series Models in Economics, Journal of Economic

Surveys,pp. 5: 215–241
Mizuno, H., Kosaka, M., Yajima, H. and Komoda N. (1998), Application of Neural Network to
Technical Analysis of Stock Market Prediction, Studies in Informatic and Control,
Vol.7, No.3, pp.111-120.
NowrouzKohzadi, Milton S. Boyd, BahmanKermanshahi, and IebelingKaastra(1996), “A

comparison of Artificial neural network and time series models for forecasting
commodity prices”, Neurocomputing,pp. 10(2):169{181,
Niall O’Connor and Michael G.Madden (2006) WWW.it.nuigalway.ie/ m_modden , 64-77.
Kate A., Simth, Jatinder, N. D, Gupta (2000). Neural Networks in Business: Techniques and
Applications for the Operations Researcher, Computer and Operations Research, pp.27:
1023-1044

38
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
Phua, P.K.H. Ming, D., Lin, W. (2000), Neural Network with Genetic Algorithms for Stocks
Prediction, Fifth Conference of the Association of Asian-Pacific Operations Research
Societies, 5th - 7th July, Singapore.
Qing Cao, Mark E.Parry and Karyl B.Leggio (2009) Springer science and business Media, 250,
89-102
Refenes, A. P., (Ed) (1995). Neural Network in the Capital Markets. England:John Wiley & Sons
Ltd, pp.149-161.
Rumelhart,D,E., Hinton,G.E and Williams, R.J.(1986)., “ Learning Internal Representations by

Error Propagation ,in Parallel Distributed Processing :Exploration in the Microstructure
of Cognition”,Vol.1, pp 318-362,MIT Press, Cambridge, MA.
Samanta G.P. and Bordoloi, Sanjib (2005).,“Predicting Stock Market- An Application of

Artificial Neural Network Technique through Genetic Algorithm”, Finance India, pp.
19(1): 173-188.
Windrow, B, D Rumelhart, E. and Lehr, M.A (1994)., Neural Networks Applications in Industry,
Business and Science, Communications of the ACM,pp. 37(3): 93-105.
Wun-Hua Chen and Jen-Ying Shih(2006), Comparison of support-vector machines and back
propagation neural networks in forecasting the six major Asian stock markets, Int. J.
Electronic Finance, Vol. 1, No. 1,
White H (1998), Economic Prediction Using Neural Networks: The Case of IBM Daily Stock
Returns, Proceedings of the Second Annual IEEE Conference on Neural Networks, Vol.
2, pp. 451-458.
Yudong, Zhang and Lenan, Wu (2009). Stock Market Prediction of S&P 500 via Combination of
Improved BCO Approach and BP Neural Network, Expert Systems with Applications,
36,pp. 8849–8854.

Yao, J.T., and Poh, H. L.(1996). Equity Forecasting: A Case Study on the KLSE Index. Neural
Networks in Financial Engineering, Proceedings of the Third International Conference on
Neural Networks in the Capital Markets. World Scientific, Singapore, 341–353.
Zhang, Defu., Jiang, Qingshan and li, Xin (2004), “ Application of Neural Networks in Financial
Data Mining”, International Journal of Computational Intelligence, 1(2), pp.116-119.

Zhang, G. Peter (2003). Time Series Forecasting Using a Hybrid ARIMA and Neural Network
Model, Neurocomputing, 50, pp.159 – 175.

39
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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).

40
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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.

41
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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?

42
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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,

43
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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.

44
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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

45
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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.

46
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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

47
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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 Education

LC 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

48
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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.

49
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
Table 08: Fit Indices for Research Model
Chi-square/
Independent Variables GFI AGFI CFI RMSR RMSEA Remarks
df
LC, RATP, TREV, (20.204 /18) = 0.95 0.90 0.98 0.09 0.036 Model fit
MOS, Interest, 1.122 for
Education, Gender 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

50
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
Figure 2: Path Estimates of Research Model
Figure 3: T‐values for Research Model


51
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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
H3 β13= 6.14 4.37 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

52
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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.

53
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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
(Pakistan)', Islamabad, Pakistan.
Ali, A. and Krishna, K. (1997) 'Expatriate and indigenous managers work loyality and
attitude towards risk', Journal of Psychology, vol. 131, pp. 260-70.
Al-Nimir, S. and Palmer, M. (1982) 'Bureaucracy and development in Saudi Arabia',
Public Adminstration and Development, vol. 21, pp. 93-102.
Amabile, T.M. (1988) 'A model of creativity and innovation in organistaion', Research in
Organistaional Behaviour, vol. 10, pp. 123-67.

54
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
Amabile, T.M., Barsade, S.G., Mueller, J.S. and Staw, B.M. (2005) 'Affect and Creativity
at Wrok', Adminsitrative Science Quarterly, vol. 50, pp. 367-403.
Amabile, T.M., Jennifer, S.M., William, B.S., Constance, N.H., Steven, J.K. and Lee, F.
(2002) 'Time Pressure and Creativity in Organzations: A Longitudnal Field Study'
Harvard Business School Working Paper, No. 02-073.
Bagozii, R.P. and Yi, Y. (1998) 'On the Evalauation of Structural Equation Model',
Journal of Academy of Marketing, vol. 16, No.1, pp. 74-94.
Bishop, J.W. (1997) How Commitment affects team perfromance - employee
committment, [Online], Available: HYPERLINK
"http://findarticles.com/p/articles/mi_m3495/is_n2_v42/ai_19224639"
http://findarticles.com/p/articles/mi_m3495/is_n2_v42/ai_19224639 [09 Jun
2010].
Bishop, K. (2005) Creativity Management and Time Pressure, EzineArticles.com,
[Online], Available: HYPERLINK "http://ezinearticles.com/?Creativity--
Management-and-Time-Pressure&id-22638" http://ezinearticles.com/?Creativity-
-Management-and-Time-Pressure&id-22638 [09 Jun 2010].
Bonnardel, N. (1999) 'Creativity in Design activities: The role of analogies in a
constrained cognitive environment', in Creativity and Cognition.
Brodtrick, O. (1997) 'Innovation as reconciliation of competing values', Optimum, vol.
27, pp. 1-4.
Burns, T. and Stalker, G.M. (1961) The Management of Innovation, [Online], Available:
HYPERLINK
"http://www.12manage.com/methods_burns_mechanistic_organic_systems.html"
http://www.12manage.com/methods_burns_mechanistic_organic_systems.html
[05 March 2010].
Cheng, J.L.C. (1994) 'On the concept of universal knowledge in organizational science:
Implications for cross-national research', Management Science, vol. 40, pp. 179-
184.
Christian, B. (2006) Strange Bedfellows: Innovation and Risk Aversion, [Online],
Available: HYPERLINK "www.dasoconsulting.com/StrangeBedfellows.pdf"
www.dasoconsulting.com/StrangeBedfellows.pdf [05 March 2010].
Claude, L. and Rob, L. (2008) Innovative Thinking and innovative Organization, a
credentials presentation , [Online], Available: HYPERLINK
"www.ideaction.net/documents/ideactionCredentials.pdf"
www.ideaction.net/documents/ideactionCredentials.pdf [06 June 2010].
Cook, .P. (1998) 'The Creativity advantage - is your organistaion the leader of the pack?',
Industrial and Commercial Training, 179-184.
Cook, P. (1998) 'The Creativity advantage - is your organistaion the leader of the pack?',
Industrial and Commercial Training, 179-184.
Dennard, R.H. (2000) 'Creativity in the 2000s and beyond', Research Technology
Management, vol. 43, no. 6, pp. 5-23.
Eisenberger, R. and Aselage, J. (2008) Incremental effects of reward on experienced
performance pressure: positive outcomes for instrinsic interest and creativity,
Journal of organizational Behavior, [Online], Available: HYPERLINK
"www.interscience.wiley.com" www.interscience.wiley.com [28 October 2009].

55
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
Eisenberger, R. and Rhoades, L. (2001) 'Incremental effects of reward on craetivity',

Journal of Personality and Social Psychology, no. 81, pp. 728-741.
Flynn, B., Schroeder, R. and Sakakibara, S. (1994) 'A Framework for quality
management research and associated instruments', Journal of Operations
Management, vol. 11, pp. 339-66.
Ford, C. (1999) Corporate Culture. In Runco, M. & Pritzker, S. (Eds), Encyclopedia of
Creativity, San Diego: Academic Press.
Gatewood, R. and Field, H. (1990) Human Resource Selection, 2nd edition, Chicago, IL:
The Dryden Press.
George, D. and Mallery, P. (2000) SPSS for Windows: A simple Guide and Reference, 2nd
edition, Boston, MA: Allyn and Bacon.
Gilson, L.L. and Shalley, C.E. (2004) 'A little creativity goes a long way: An examination
of teams' engagement in creative processes', Journal of Management, vol. 30, pp.
453-470.
Greenberg, J. and Baron, R.J. (2003) Behavior in Organizations, 8th edition, New York,
NY: Prentice-Hall.
Hair, J.F., Anderson, R.L. and Tatham, W.C. (1998) Multivariate Data Analysis with
Reading, Upper Saddle River, NJ: Prentice-Hall.
Holt, N.J., Delany, D.L. and Roe, C.A. Creativity, Subjective paranormal experiences
and Altered states of conciousness, [Online], Available: HYPERLINK
"http://m0134.fmg.uva.nl/research/PSI research/papers/47.pdf"
http://m0134.fmg.uva.nl/research/PSI%20research/papers/47.pdf [28 Feb 2010].
Hooper, D., Coughlan, J. and Mullen, M.R. (2008) 'Structural Equation Modelling:
Guidlines for Determining Model Fit', The Electronic Journal of Business
Research Methods, vol. 6, no. 1 2008, pp. 53-60.
McNeely, B.L. and Meglino, B.M. (1994) 'The role of dispositional and situational
antecedents in prosocial organizational behavior: An examination of the intended
beneficiaries of prosocial behavior', Journal of Applied Psychology, no. 79, pp.
836-844.
Mostafa, M. (2005) 'Factors affecting organizational creativity and innovativeness in
Egptian business organizations: an empirical investigation', Journal of
Management Development, vol. 24, no. 4, pp. 7-33.
Mumford, M.D. (2003) 'Where have we been, where are we going? Taking stock in
craetivity research', Creativity Research Journal, vol. 15, pp. 107-120.
Nicholas, J.A. and Ugur, Y. (2005) 'Dimensions of advertising Attitudes Congruence
between Turkish and New Zealand consumers', Marketing Intelligence &
Planning, vol. 23, no. 4, pp. 340-349.
Nunnally, J.C. and Bernstein, I.H. (1994) Psychometric Theory, New York, NY:
McGraw-Hill.
Shin, S. and Zhou, J. (2003) 'Transformational leadership, conservation, and creativity:
Evidence from Korea', Academy of Management Journal, vol. 46, pp. 703-714.
Stein, J.L., Wiedholz, L.M., Bassett, D.S., Weinberger, D.R., Zink, C.F., Mattay, V.S.
and Meyer Lindenberg, A. (2007) 'A Validated Network of Effective Amygdala
Connectivity', NeuroImage, vol. 36, no. 3, pp. 736-45.
Tabachnick, B.G. and Fidell, L.S. (2007) Using Multivariate Statistics, New York: Allyn
and Bacon.

56
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
The Advertising Agencies in Pakistan (2010), [Online], Available: HYPERLINK

"http://www.pakistanadvertising.com/directory/detail.asp?listid=1001"
http://www.pakistanadvertising.com/directory/detail.asp?listid=1001 [05 April
2010].
Torrance, E.P. (1994) Creativity, Just wanting to know, Pretoria: Benedic Books.
Weiner, R. (2000) Creativity and beyond: Cultures, Values and Change, , New York,
NY: State University of New York Press.
West, M.A. (2002a) 'Sparkling fountains or stagant ponds: An integrative model of
creativity and innovation implementation in work groups', Applied Psychology:
An international Review, vol. 51, pp. 355-387.
West, M.A. (2002b) 'Ideas are ten a penny: its team implementation not idea generation
that count', Applied Psychology: An International Review, vol. 51, pp. 411-424.
Wheatley, M. (1999) Leadership and the New Science: Learning about Organizations
from an Orderly Universe, San Francisco, CA: Berret-Koehler.
Wheaton, B., Muthen, B., Alwin, D.F. and Summers, G. (1977) 'Assessing Reliabilty and
Stability in Panel Models ', Sociological Methodology, vol. 8, no. 1, pp. 84-136.

57
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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

58
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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

59
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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).
Figure1: Forces affecting CSR

60
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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

Environmental activity Social activity Economic activity
(e.g. workers, communities (e.g. quality assurance,
customer satisfaction)
Current Proposed Current Proposed Current Proposed
Processes Registered to Kyoto emission Certified to SA 8000** or Registered Integrated
ISO 14001 reductions? OHSAS* Fair labor to ISO9001 Management
Association System
Products/ Some products products to be None at SA 8000 Use of Keep abreast
Service use known certified to local present ISO9001 of ISO work
logo energy standards Logo on IMS

Impacts Internal impact Supply Chain Internal Supply Chain Internal Supply Chain
assessment impact impact
undertaken assessment assessment
undertaken undertaken
Focal point Environmental Affairs Department Human Resource Department Quality Assurance Department
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

61
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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 The study was on two Chinese cities at Results confirm that Chinese consumers are
and Yeung different stages of economic development. able to differentiate among the economic, legal,
(2009) Study explores the impact of economic, legal, ethical, philanthropic responsibilities of
ethical, philanthropic responsibilities of business.
business on consumer buying behaviour.
Fukukawa The study throws light on Japanese Japan is considered to be lagging behind in its
and multinationals and their corporate social understanding and adoption of corporate social
Teramoto responsibility practises. responsibility and it needs to achieve a more
(2009) global mode of transparency.
Muller and The study is based on survey conducted among Results of the study shows that six of the nine
Kolk (2009) companies in the Mexican auto industry.CSR corporate social responsibility dimensions are
performance was investigated across three intercorrelated, which suggest that CSR in the
dimensions: environmental, labour and Mexican auto parts industry is more structural
community. than incidental.

62
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
Lather, The study covered the corporate social Corporate social responsibility practices of
(2007) responsibility initiatives taken by multinational multinationals in India and back home were
corporations in their home country and makes different. Multinationals were more concerned
a comparison of their efforts in India. particularly in implementing socially
responsible programs in their home country.
Krishnan and The study explores the impact of emerging Consumers prefer to boycott the company’s
Balachandran markets on corporate social responsibility. products and services in case of negative
(2004) 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

63
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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 Study identifies the opportunities and The success of corporate social responsibility
Strzalecka limitations of corporate social responsibility in strategy depends on numerous situational
(2006) the countries of transformation. factors such as economic, social, cultural and
institutional.
Lewis, (2003) Study explores that corporate social Customers buying behavior is very much
responsibility is established as a fundamental affected by the brand loyalty towards social
addition to stakeholder’s criteria for judging and environmental responsibility.
companies reputation and company’s brand
reputation management.
Porter and The study stated that strategically CSR becomes Successful corporations need equal
Kramer (2006) a source of tremendous social progress, as the opportunities for a productive workforce. Safe
business applies its considerable resources, products and working conditions not only
expertise and insight to the activities that benefit attract customers but lower the internal rate of
society, accidents.
Lichtenstein, The study through the light on the concept that a There is a significant relationship between
Drumwright corporation’s socially responsible behavior can customer-corporations and non-profit
and Braig positively affect consumer’s attitude towards the donations. It should engage in the CSR
(2004) corporations. initiatives as a part of a genuine effort to
change its market position.
Chaudhary The study shows that though the number of Corporates are collaborating with NGO’s, local
(2009) corporate social responsibility projects has self-government bodies to ensure the better
increased in India but, there is a lack of clear strategy formulation and for getting inputs
metrics or framework. from the government.
Maon, The study suggests an integrative framework of Study contributed by giving a integrative
Lindgreen and corporate social responsibility design and framework for designing and implementing
Swaen (2009) implementation. corporate social responsibility.

64
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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
CSR & Philanthropy and

Factors
Multinationals Community Investment
Enhanced Reputation Experimentation Improved
Alliance with business

Futuristic New Opportunities
partner
Better stakeholder
Quick Decisions Better Decisions
relationships
Attractive employer High Moderate
Customer satisfaction-
High Considerable
loyalty
New business opportunity Strategic Tactical
Cost savings High Moderate
Minimize risks Quantitative Quantitative & Qualitative
Reduced regulatory
Relatively Difficult Easy
interventions
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.

65
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
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.
REFERENCES
Agarwal, S.K.(2008), Corporate Social Responsibility in India, Business books from SAGE, New
Delhi.
Banerjee, S.B., Lyer, E.S. and kashyap, R.K.(2003)‘Corporate Environmentalism: Antecedents

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

66
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
Baxi, C.V.(2006), Corporate Social Responsibility concepts and cases: The Indian Experience,
Excel Books, New Delhi.
Blomback, A. and Wigren, C.(2009), ’Challenging the importance of size as determinant for CSR
activites’, International Journal Of Management Of Environment Quality, Vol.20, No. 3,
pp 255-270, Retrieved From Emerald database.
Carroll, A. B. (1999) ‘Corporate Social Responsibility: the evolution of a definitional construct’
Business and Society, Vol. 38(3), pp. 268-295.
Carroll, A. and G. Beiler (1977) “Landmarks in the Evolution of the Social Audit” in Carroll, A.
(ed.). 1978. Managing Corporate Social Responsibility. Boston: Little, Brown and Co.
Chaudhary, N. K. (2009), ’Facilitators & Bottlenecks of Corporate Social Responsibility’, The
Indian Journal of Industrial Relations, Vol.44, No.3, pp 387-393.
Crane, A. and Matten, D. (2004) Business Ethics: A European Perspective. NY, USA: Oxford
University Press.
Deresky, H. (2000) International Management: Managing Across Boarders and Cultures. Third
Edition, New Jersey: Prentice Hall Inc.
Epstein, M and Roy, M. (2001) ‘Sustainability in Action: Identifying and Measuring the Key
Performance Drivers’Long Range Planning. Vol. 34, pp.585-604.
Freeman R.E., (1984) Strategic Management: A stakeholder Approach. Massachusetts: Pitman
Publishing Inc.
Fukukawa, K. and Teramoto, Y.(2009), ‘Understanding Japanese CSR: The reflections of
managers in the field of global operations’, Journal of Business Ethics, pp 133-146.
Haugh, R. (2003) ‘Getting the attention of big pharma’. Hospitals & Health Networks.
Chicago: Oct. 2003. Vol. 77, Iss.10; pp. 44.
Hohnen, Paul (2007). Corporate social responsibility: An implementation guide for business.
Krishnan, S.K. and Balachandran, R. (2004), ‘Corporate Social Responsibility as a determinant of
market success: An exploratory analysis with special reference to MNCs in emerging
markets’, At IIM K- NASMEI International Conference.
Maignan, I. et al, (2002) ‘Managing Socially Respon sible Buying: How to Integrate
Noneconomic Criteria into the Purchasing Process’European Management Journal. Vol. 20,
no.6, pp. 641-648.
Maignan, I. and Ferrell, O. (2003), ‘Nature of Corporate Responsibilities: Perspectives from
American, French, and German Consumers’ Journal of Business Research, Vol. 56, pp. 55-
67.
Lewicka, A. and Strzalecka, (2006), ‘Opportunities and limitations of CSR in the post communist
countries: Polish case’, Emerald Group Publishing, Vol.6, No. 4, pp 440-448.
Nielsen, A.E. and Thomson, C.(2009), ‘Corporate Social Responsibility communication in small
and medium-sized enterprises’, International Journal of Corporate Communication,
Vol.14, No. 2, pp 176-189, Retrieved From Emerald database.
Pederson, E.R.(2009), ‘Modeling CSR : How managers understand the responsibility of business
towards society ’Journal of Business Ethics.
Porter, M.E. and Kramer, M.R. (2006), ‘Strategy and society: The link between competitive
advantage and Corporate Social Responsibility’, Harvard Business Review, pp 78-92.
Porter, M.E. and Kramer, M. R. (2006) “Strategy & Society: The link between competitive
advantage and corporate social responsibility” Harvard Business Review (December), pp 1-
15.
Ramasamy, B. and Yeung, M.(2009), ‘Chinese Consumers Preception of Corporate Social
Responsibility’, Journal of Business Ethics, pp 119-132.
Sturdivant, F. (1977) Business and Society. Homewood: R.D. Irwin Inc.
Stigson, B. (2002:2) Corporate Social Responsibility: A New Business Paradigm
www.isuma.net/v03n02/stigson_e.shtml.

67
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506
Wanderley, L.S.O., Lucian, R., Farache, F. and Filho, J.M.d.S.(2008), ‘CSR Information
Disclosure on the Web:A Context-Based Approach Analysing the Influence of Country of
Origin and Industry Sector’, Journal of Business Ethics,Vol.82, pp 369-378.
Welford, R. (2004) ‘Corporate Social Responsibility in Europe and Asia: Critical Elements and
Best Practice’, Journal of Corporate Citizenship, Issue 13.
Woodward, D. et al (2001) ‘Some Evidence on Executives’ Views of Corporate Social
Responsibility’ British Accounting Review. Vol.33, pp. 357-397.
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.


68
Vol: 2, No: 3 .March, 2011 ISSN 2156-7506

Enrich Knowledge through
Quality Research

An International Journal Published by

Academy of Knowledge Process
www.akpinsight.webs.com
Copyright © 2011 IJCBS
69

Ijcbs Vol 2 No 3 March 2011 Issn 2156-7506

Caricato da

Informazioni sul documento

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Ijcbs Vol 2 No 3 March 2011 Issn 2156-7506

Caricato da

Copyright:

Formati disponibili

ISSN 2156-7506

VOLUME 2 Journal of Contemporary Business Studies

International journal of Contemporary Business Studies

Managerial Competence and Non-Performance of Small Firms in a

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

Idea Generation: A Catalyst for Productivity and Innovation in Advertising

Corporate Social Responsibility: A Corporate Vision

An International Journal Published by

International journal of Contemporary Business Studies

-publish monthly (one volume per year) fast publication

-is open access to the full text

-is indexed & listed in:

One of the largest Research Databases of world

Open Access Policy

Copyright © 2011. Academy of Knowledge Process

Prof. Dr. Nada k. Kakabadse Assoc. Prof. Dr. Elena Druica

Prof. Dr. Viorel Cornescu Dr. Ah Pak

Copyright © 2011. Academy of Knowledge Process

Sasan Ghasemi Prof. Dr. Michela Cortini

Copyright © 2011. Academy of Knowledge Process

International journal of Contemporary Business Studies

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

Idea Generation: A Catalyst for Productivity and Innovation in Advertising

Corporate Social Responsibility: A Corporate Vision

Copyright © 2011. Academy of Knowledge Process

Managerial Competence and Non-Performance

Executives of small firms in developing economies have the competences to make

Keywords: Executive Competence; Discretionary Behavior; Operant Competence;

Copyright © 2011. Academy of Knowledge Process

SMEs and Growth in Developing Economies

Copyright © 2011. Academy of Knowledge Process

likely to differentiate superior performers), organizational core competencies (i.e., aggregates

Distinguishing Between Firms Resources and Capabilities

Copyright © 2011. Academy of Knowledge Process

defines competency as an underlying characteristic of an individual that relates causally to

Competency profiling is a process through which principal accountabilities of ones competencies

Copyright © 2011. Academy of Knowledge Process

METHODS AND MATERIALS

DATA ANALYSIS & RESULTS

Copyright © 2011. Academy of Knowledge Process

FIGURE 1: Distribution of Executives’ Gender

40-49 yrs, 22,

30-39 yrs, 24,

FIGURE 2: Distribution of Executives’ Age.

FIGURE 3: Distribution of Executives’ Level of Education.

Copyright © 2011. Academy of Knowledge Process

Less than 1yr, 7,

9 to 10, 5, 7% 1 to 2 yrs, 13, 18%

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

Identification of Managerial Competence Attributes Possessed by the Executives

Copyright © 2011. Academy of Knowledge Process

Competence in strategically planning for firm

TABLE 1: Pearson Correlation Coefficients for Relationship between Executives’ Specific

C o m m u n ica tin g th e In i t i a ti n g s t ra t e g i c Id e n t i fy i n g re s o u r c e s F o llo w in g u p ,

Competence in producing financial resources and budgets

Copyright © 2011. Academy of Knowledge Process

TABLE 2: Pearson Correlation Coefficients for Relationship between Executives’ Specific

Reviewing previous Preparing Work plans Allocating Allocating

Reviewing previous budget and

Preparing Work plans and

Allocating resources and

Following up, monitoring and

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

Competence in creating work environment for high performance