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Empirical Testing of ARCTIC Model for Assessment of Competence Based Synergy in Acquisition Process
Full text linkPurpose: the aim of this paper is to develop and empirically test an integrative research model which would help to assess prerequisites of competence-based synergy in acquisition process.
Design/methodology/approach: What we wanted to know was how core competences should be evaluated as sources of synergy in acquisition/alliance? Having answered this question analysis we have researched the latest theoretical findings in antecedents of synergy in merger and acquisition process and empirically tested by means of illustrative case study.
Findings: Based on literature review in depth, an ARCTIC model has been developed. We have selected illustrative case study of Facebook acquisition of WhatsApp by in mid 2014 year and tested empirically developed methodology.
Research limitations/implications: Illustrative case study involved explores the competence transfer as main drivers of successful acquisition process. The author suggests further empirical testing on illustrative case studies and possible development of methodology for evaluation of all six factors.
Practical implications: Research identified four steps to investigate whether core competence transfer in an acquisition process is an important source of synergy and whether is better to acquire or ally for competence transfer. The ARCTIC model can be used effectively in evaluating core competencies as a means of synergy creation in the M&A context.
Originality/value: The authors believe that six factors of ARCTIC models allow making preliminary evaluation of core competences as sources of synergy in acquisitions and new ARCTIC model should be helpful to mangers facing mergers, acquisitions and alliances, as well as to management academic specialists, studying this area.
Research paper: empirical research, testing of a model
Foreword
No full textNowadays growing instability of the socio-economic system is evident. Scholars of social sciences attempt to explain this by examining multiple, very diverse, reasons. Economists often refer to the debit crisis, long cycles, swelling resource prices; political scientists and economists – to the shifting centres of economic gravity; demographers – to changes in the demographic structure, sociologists – to the crisis of value system, etc.
All these explanations, however, seem to have a significant common drawback, which is the lack of a systematic view. One of the most viable hypotheses asserts that it is the political sub-system in the socio-economic system that lags behind in its development from the economic and technological subsystems in the hierarchy. We must be dealing with the system crisis, which is inevitably long-term and, as history shoes, can span multiple generations.
In conditions of growing instability entrepreneurs must find quick and insightful decision. We can identify two main approaches to dealing with this situation. The first option is to have a certain number of ready, previously tested, recipes that proved working well (e.g. financial management, fiscal regulation, personnel training). The second is to prepare entrepreneurs to be ready for spotting new opportunities and decisions in unexpected situations and uncertain environments. For successful implementation of these solutions substantial changes are necessary in business and enterprise education at the higher and lifelong learning levels. Education and training must be refocused towards development of creativity and other non-cognitive skills. Papers selected for the new issue of the Journal of Business Management address both approaches with the first being prevalent.
The publications portfolio of the 8th issue of the Journal of Business Management comprises studies presented at the 7th annual International Scientific Conference “Business and Uncertainty: Challenges for Emerging Markets” hosted by Riga international School of Economics and Business administration in April 2014. The conference attracted scientists from eleven countries (mostly Eastern and Northern European).
Head of the Editorial Board,Professor Dr. Vulfs Kozlinski
The nature of uncertainty in anticipating and coping with crises: a semiotic approach
Full text linkThe movements in financial markets have been modelled and interpreted through the history by various disciplines. All the economist, the psychologist, the sociologist but also the anthropologist, can provide an interesting vision useful to a better understanding of the financial phenomena. The most actively mathematical models and numerical data have been used. But even though quotations seem objective for investors, they face of overwhelming uncertainty. As the market is above all a social institution with social interaction and despite the fact that financial economics is one of the social sciences where the empirical data is the most numerous, it cannot reduce market to a set of figures. Quotations still remain social constructions and therefore the quotation does not summarize the actors communicative action but is only a reflection of it.
As an example of semiotical approach the purpose of the article is to analyze whether using Google Trends as one of the most widely used online search methods, would it have been possible to forecast the beginning of the ongoing financial crisis. In other words: would it have been possible to predict that there is a bubble in the real estate market in the USA since the beginning of 2006.
The analysis is based on online data for the period 2004-2010 and is based on the T-Statistics and regression analysis. We had an assumption that at the time when real estate prices were moving up people had suspicions about the possibility of having bubble in the prices. Our assumption found proof and all statistically significant relationships were in line with the theoretical foundations though some aspects of the results may be debatable. Nevertheless, we found that this method may be a good tool for having the indication of people´s moods and views
The problem of capital attraction into venture capital funds of Latvia
Full text linkThe paper deals with the problems of capital attraction into venture capital funds of Latvia. In the post-crisis period, investor concern towards risks worsened. The attitude of banks to venture projects became more cautious as well. Therefore, it has become increasingly important to identify causes and factors that hinder the attraction of venture capital into venture capital funds and, consequently, potential portfolio companies. A questionnaire survey of venture capitalists was conducted in Latvia in the frames of this research. The paper analyses the causes that, according to the venture capitalists, negatively affected the attraction of venture capital into venture capital funds; the factors that did not negatively affect the attraction of investors were also examined. In addition to the questionnaire survey, the logical and constructive methods and comparative analysis were employed in the research. As a result, basic factors that obstruct the attraction of investors into venture capital funds were identified. Among the key problems of capital attraction into the venture industry of Latvia are: insufficient activity of Latvian institutional investors, insufficient investor confidence in venture capitalists, their performance and experience, and the negative investor referring towards investments after the crisis
Realistic investment valuation: a comprehensive real options model
Full text linkPurpose – The purpose of this paper is to present the developed real options analysis framework and outline how it complements the traditional investment valuation approach – discounted cash flow model. While real options analysis has gained both professional and academic interest in recent years, Latvian companies are seemingly lagging behind in its application. The framework is intended to demystify real options, demonstrate practical benefit of this theory and is explained in process of investment valuation of a selected logging industry enterprise in Latvia.
Design/methodology/approach – The research is defined as descriptive in its purpose, quantitative in its approach, deductive in its logic and applied as of its outcome. Investigation of the issue is carried out in a non-contrived setting with minimal researcher’s interference. Secondary sources of data are used to provide theoretical basis for the framework, while primary data, obtained from entity’s representatives during several unstructured interviews, is applied to solve the real options problem addressed in the practical part of the paper.
Findings – The developed real options analysis framework can be successfully applied in solving a real options problem. During valuation of the selected enterprise’s real options portfolio, which comprises of deferral, expansion, contraction and switching options, real options portfolio value present value is calculated as 28 246 LVL. If decision to realize either real option is deferred, real options increase net present value of cash flows by 5.55%. By this amount entity management has augmented its investment’s value with the introduction of the framework in its capital budgeting process.
Practical implications – Developed real options analysis framework can be used for real options valuation in both academic and professional environments. Model can also be used as a learning tool by those, who seek insight into real options theory
Human capital in commercial banks: development trends and problems of management in the unstable economic conditions
Full text linkThe Latvian economy has undergone a number of various changes in the last decade. The early 2000’s were associated with a moderate economic progress. Active economic growth observed within the period 2005 to mid-2007 against the background of emerging global financial crises then changed into a sharp decline and in 2008 already the Latvian economy entered the stage of crisis that lasted until the end of 2010. Nowadays the Latvian economy is overcoming consequences of the crisis, which leads to new the emergence of new specific features in operations of the banking system and, in turn, puts forward new requirements towards personnel of the local banks.
Changing trends in the banking sector are accompanied by changes in requirements towards knowledge and skills of the banks’ employees. At present, the banks demand not only qualified sellers of their products associated with management of the customer’s assets, financial consulting, investment business etc., but also the employees possessing knowledge and skills in the field of credit monitoring, financial analysis, risk management. Saturation of the market with highly skilled specialists must be closely connected with enhancement of the training process in higher education institutions.
The research is dedicated to the analysis of the employees’ movements in the banking sector, setting new requirements for personnel in the banks, as well as examining the personnel management policy in the Latvian commercial banks. Based on the summarized statistical information and the analysis of the questionnaires obtained from surveyed HR Departments, there specific recommendations to enhance the training programmes for the Latvian institutions which educate financial and banking specialists are worked out, as well as the suggestions how to enhance the efficiency of personnel management in the commercial banks
Obstacles to university–industry cooperation in the domain of entrepreneurship
Full text linkAn imperative concerning entrepreneurship education noticeable in the European research sources is fostering cooperation between universities and companies. Coupled with a now widely accepted educational view of entrepreneurship as a practical domain, the task becomes even more relevant, but challenging to accomplish. Despite the recognised importance of cooperation between universities and businesses in our society, the present university-industry environment in Europe is “underdeveloped and highly fragmented”, 40% of academics do not engage in this cooperation at all.
Several sources already attempted to identify these obstacles and provide with suggestions for overcoming them, but none of these sources attempted to look at the problem through the prism of entrepreneurial university. This paper primarily aims to apply the four pillars framework of entrepreneurial university introduced by Etzkowitz and to structure the obstacles to university-industry cooperation according to this framework thus offering a theoretical basis for further empirical research of the problem. Secondly, the paper provides corresponding solutions to overcome the identified obstacles. To achieve the aims set, general scientific research methods, including monographic and logical construction tool, were employed.
The paper suggests the main obstacles to university-industry cooperation are: conservatism and rigidness of the academic system, insufficient communication between the parties and detachment of academia from practice, closed corporate culture of businesses, differing attitude of the parties to knowledge, among others. On the other hand, it appeared that commercialisation of scientific commons endangers future progress of science, academic degrees are losing value because of “academic inflation”, and companies are unwilling to cooperate within industry-based projects initiated by universities as it is unclear how created intellectual property will be divided.
Solutions that might help the universities to overcome the existing obstacles are based on good practice examples – involvement of large companies as intellectual donors, science-to-business marketing, renovation of entrepreneurship curriculum, industry-based projects, incentives for companies and others.
The paper contributes to the use of the entrepreneurial university concept, provides classification of the universityindustry cooperation obstacles with a focus on entrepreneurship education, and can serve as a shortcut to exploration of the topic
Efficiency Assessment Tool for Credit Granting Process
Full text linkCredit granting process has experienced considerable changes in the last years. Households as well as bank officials admit that a credit granting process has become more complicated, excessively time-consuming and non-transparent. A pre-research conducted by the authors pointed out that commercial banks lack tools for proper reflection and evaluation of decision-making process in credit granting. This implies that commercial banks have little control over the process and are unable to measure its efficiency.
The purpose of the research presented in the paper is to develop a tool for assessment of efficiency of decisionmaking process in credit granting and to provide practical recommendations for its improvement.
To achieve the purpose of the research, the authors used a qualitative method – the modified Delphi method and a graphical tool – decision tree. In order to design it the authors applied two criteria – event probability and time component, which reflect time, spent by credit specialists to proceed each activity in all stages of credit granting process.
Results and findings of the research – The authors have developed a decision tree of credit granting process, which proved to be a credible tool for efficiency assessment of decision-making process in credit granting. Moreover, the developed tool ensures transparency and accountability of decision-making process and provide an opportunity to measure and analyze different parts of the decision making process. The authors have elaborated recommendations for efficiency improvement of credit granting process, which implies necessity of changes in the order of data proceeding in credit granting process. This means that information with higher degree of influence on the final decision has to be clarified during the first stage of decision-making process, whenever it is possible, and information that has less degree of influence on the final decision has to be left for clarification on the later stages of decision-making process. That sort of structure of decision-making process in credit granting ensures less time consumption leading to a negative decision on credit granting and, therefore, improves efficiency of the whole credit granting process.
Limitation of the research – This research is limited to the study of the decision-making process applied by commercial banks in granting mortgage credits to households
Corporate Income Tax Aggressiveness in China: Regulatory Enviroment and Ownership Impact
Full text linkPurpose – Corporate income tax aggressiveness, via aggressive tax planning behaviour, involves utilising the tax regime to reduce income tax paid. In 2008 China implemented its new Enterprise Income Tax Law with several major effects. First, the tax rate was reduced from 33 to 25 per cent. Second, this rate was applied to all enterprises, including foreign enterprises and enterprises with foreign investments. Finally, the reforms included enforcement of tax scrutiny to match the application of the 2007 Accounting Standards for Business Enterprises No.18 - Corporate Income Tax Accounting. This study addresses two questions regarding potential corporate responses to the statutory changes in tax rates and greater scrutiny by the tax office in China. Have the changes to the tax regulatory environment had an impact on the corporate tax aggressiveness of listed companies in China? Does the structure of ownership of these companies – i.e., state-controlled, private or foreign-invested – impact on the response to the changes?
Design/methodology/approach – China’s 2007 implementation of its Accounting Standards for Business Enterprises No.18 - Corporate Income Tax Accounting and its 2008 implementation of its Enterprise Income Tax Law offer a ‘natural experiment’ opportunity involving both accounting standard and tax regime reforms in a transition economy. This study uses quantitative methods to examine the book-tax gap in light of the above research questions. It is based on effective tax planning, agency, tax avoidance and legitimacy theories. Data is comprised of a sample of 1900 companies listed on the Shanghai and Shenzhen Stock Exchanges with state-controlled, private or foreigninvested ownership characteristics. This provides 6287 firm-years of observations for the 2007 to 2010 period.
Findings – The results suggest that tax aggressiveness of listed companies as measured by the book-tax gap measure has reduced as a result of the 2008 Enterprise Income Tax reform. However, we find limited evidence to support claims that different ownership structures (state-controlled, private or foreign-invested ownership) have a significant relationship with tax aggressiveness in China.
Originality/value – Originality results from use of the ‘natural experiment platform’ and examination of changes in tax aggressiveness in China resulting from the introduction of its new accounting and tax regimes. The paper’s contributions are: to demonstrate the effectiveness of China’s 2008 tax reforms in limiting tax aggressiveness; and to add to the literature on the impact of ownership structure on tax aggressiveness. In the specific case of China this has received little attention to date. This information will be of use to tax regulators, investors and corporations
Saturation of financial market as stimulus for export of financial services
Full text linkPurpose – The aim of the given research is to ascertain indicators which characterise saturation of domestic market of financial services as the reason that stimulates financial services export.
Design/methodology/approach – There were used such research methods as analysis of advanced researches in financial field and interviewing experts concerning their opinion on financial services market saturation indicators.
Findings – In order to define the level of financial services market saturation there were suggested 12 indicators divided into two categories. To the first category of indicators one relates those which ought to be used at the initial stage of financial services market analysis. To the second category one relates the indicators which have auxiliary character, i.e. those which can be used only as additional ones for more exact definition of separate aspects of financial services market saturation.
Originality/value – The given research is important for both the countries which intend to position themselves as exporters of financial services - in respect of defining possibility and necessity of entering the world market with their financial services, and for the countries and individual financial institutions which are working out their strategy in financial services export - in respect of discovering of regions and financial services for export