ekonomski vjesnik / econviews - unios

EKONOMSKI VJESNIK / ECONVIEWSGOD. XXXIII • BR. 1/2020. • STR. 1-316 • OSIJEK, LIPANJ, 2020.

VOL. XXXIII • NO. 1/2020 • PP. 1-316 • OSIJEK, JUNE, 2020

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EKONOMSKI VJESNIKČasopis Ekonomskog fakulteta u Osijeku

N / PSVEUČILIŠTE JOSIPA JURJA STROSSMAYERA U OSIJEKU, EKONOMSKI FAKULTET U OSIJEKU / JOSIP JURAJ STROSSMAYER UNIVERSITY OF OSIJEK, FACULTY OF ECONOMICS IN OSIJEK

G / E--CBoris Crnković, Josip Juraj Strossmayer University of Osijek, Faculty of Economics in Osijek, Croatia

Z /D E--CSanja Pfeifer, Josip Juraj Strossmayer University of Osijek, Faculty of Economics in Osijek, Croatia

P / Slavica Singer, Josip Juraj Strossmayer University of Osijek, Faculty of Economics in Osijek, Croatia

I / E EJasminka Mihaljević, Josip Juraj Strossmayer Uni-versity of Osijek, Faculty of Economics in Osijek, Croatia

U / A EDario Šebalj, Josip Juraj Strossmayer University of Osijek, Faculty of Economics in Osijek, Croatia

T / T Oto Wilhelm, Josip Juraj Strossmayer University of Osijek, Faculty of Economics in Osijek, Croatia

U / E BDražen Barković, Đula Borozan, Ivan Ferenčak, Jas-na Horvat, Mirna Leko Šimić, Marcel Meler, Josip Mesarić, Sunčica Oberman Peterka, Željko Požega, Domagoj Sajter, Nataša Šarlija, Antun Šundalić, Marijana Zekić Sušac, all from Josip Juraj Stross-mayer University of Osijek, Faculty of Economics in Osijek, C, Maja Biljan – August, University of Rijeka, Faculty of Economics, C, Suzana Marković, University of Rijeka, Faculty of Tourism and Hospitality Management, C, �omas Cleff and Regina Moczadlo, from Pforzheim Uni-versity, Faculty of Business and Law, G, Erzsebet Hetesi, University of Szeged, Faculty of Economics and Business Administration, H-, Antal Szabo, E, H, Helena Maria Baptista Alves, University of Beira Interior, Depart-ment of Management and Economics, P, Marius Gavriletea, Babes – Bolyai University, Facul-ty of Business, R, Zsuzsanna Katalin Szabo, “Petru Maior” University, Faculty of Economics, Ju-ridical and Administrative Sciences, R, Er-ich Schwarz, Alpen - Adria University of Klagenfurt, Faculty of Management and Economics, A, Antti Paasio, University of Turku, Turku School of Economics, F, Irena Ograjenšek, University of Ljubljana, Faculty of Economics, S, Mi-roslav Rebernik, University of Maribor, Faculty of Economics and Business, S, Igor Jakomin, University of Ljubljana, Faculty of Maritime Studies and Transportation, S, Allan Gibb, Dur-ham University, U K, Jerome Katz, Saint Louis University, USA, Jasminka Ninković, Oxford College, University of Emory, USA, Nirun-don Tapachai, Faculty of Business Administration, Kasetsart University Bangkok, T.

Review of contemporary business, entrepreneurship and economic issues

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L /E L E TLjerka Radoš Gverijeri

L /C L EEmina Berbić Kolar

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A /A Sveučilište Josipa Jurja Strossmayera u Osijeku,Ekonomski fakultet u OsijekuTrg Ljudevita Gaja 731000 OsijekCroatia

www.efos.unios.hr/ekonomski-vjesnikwww.efos.unios.hr/ekonomski-vjesnik/en/

[email protected]

Copyright© 2020 Sveučilište Josipa Jurja Strossmayera u Osijeku, Ekonomski fakultet u Osijeku

CONTENTS / SADRŽAJ

O / I

1. César Sahelices-Pinto, Ana Lanero-Carrizo, José Luis Vázquez-Burguete .............................................9Sustainability, food topics and weblogs: do they really fit? Targeting and valuing food-related eWOM generators Održivost, hrana i weblogovi: kako pronaći i iskoristiti autore elektroničke usmene predaje

2. Mahdi Salehi, Mahmoud Lari Dashtbayaz ............................................................................................... 25�e mediating effect of audit quality on the relationship between earnings and earnings valuation in IranUtjecaj kvalitete revizije na odnos između dobiti i vrednovanja dobiti u Iranu

3. Regina Moczadlo ............................................................................................................................................. 39Re-industrialization to foster growth and employment in the European UnionReindustrijalizacija za poticanje rasta i zapošljavanja u Europskoj uniji

4. Željko Pavić, Antun Šundalić ........................................................................................................................ 59Capitalism, meritocracy and legitimacy: Croatian society thirty years afterKapitalizam, meritokracija i legitimacija: hrvatsko društvo trideset godina poslije

5. Dominika Crnjac Milić, Domagoj Pavić, Bruno Mandić ......................................................................... 71Training methods in municipal enterprisesMetode edukacije u komunalnim poduzećima

6. Joanna Hernik, Antonio Minguez Vera ....................................................................................................... 83Gender equality in parliaments - where do we stand in Europe? Considerations from the economic development and society’s masculinity index point of viewRodna ravnopravnost u parlamentima – kakvo je stanje u Europi? Razmatranja sa stanovišta gospodarskog razvoja i indeksa maskuliniteta društva

7. Dina Lončarić, Tihana Cegur Radović, Patricia Skendrović ................................................................ 101Who attends Christmas Markets and why? Analysis of visitor structure and motivation for attending two Christmas Markets in CroatiaTko i zašto posjećuje božićne sajmove? Analiza strukture posjetitelja i motiva posjete dvaju božićnih sajmova u Hrvatskoj

P / P 1. Mile Bošnjak, Ivan Novak, Zoran Wittine ................................................................................................ 117

Hysteresis in the trade flows of some EU member countriesHistereza u trgovinskim tokovima nekih zemalja članica EU

2. Zbigniew Bentyn, Ante Luetić, Neven Šerić .............................................................................................. 133Development of business strategies based on logistics performance of the Republic of CroatiaRazvoj strategije poslovanja poduzeća za tržište Europske unije temeljen na logističkim performansama Republike Hrvatske

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3. Lukša Lulić, Vinko Mostarac, Marinko Jurčević ..................................................................................... 151�e digital transformation of Croatian economy compared with EU member states Digitalna transformacija gospodarstva Republike Hrvatske u odnosu na države članice Europske unije

4. Michal Patak, Lenka Branska, Zuzana Pecinova ................................................................................... 165Importance of reverse logistics services as an antecedent for building a green supply chainVažnost povratnih logističkih usluga kao preduvjeta izgradnje zelenog lanca opskrbe

5. Ana Štambuk, Ivan Uroda, Nikolina Anđelić .......................................................................................... 175Adjustment and early retirement intentions of the older workers in the Croatian public sector Prilagodba i namjere prijevremenog umirovljenja starijih radnika u hrvatskom javnom sektoru

6. Roman Domanski, Michalina Labenda .................................................................................................... 191Omnichannel of private label grocery products in Tesco and Carrefour retail chains on the Polish marketOmnikanalna prodaja proizvoda s trgovačkom markom u maloprodajnim lancima Tesco i Carrefour na poljskom tržištu

R / P

1. Nejla Manov, Alisa Mujkić, Melika Husić-Mehmedović ....................................................................... 205Universities’ enrollment challenge: �e role of corporate image in higher education Izazov sveučilišnih upisa: uloga korporativnog imidža u visokom obrazovanju

2. Vlatka Bilas .................................................................................................................................................... 217Smart specialisation concept as a tool for improving innovation performance of the European Union member countries Koncept pametne specijalizacije kao alat za unapređenje inovacijske izvedbe zemalja članica Europske unije

3. Tina Šugar, Kristina Brščić .......................................................................................................................... 227Consumers’ perceptions of organic food products in CroatiaPercepcija potrošača o ekološkim prehrambenim proizvodima u Hrvatskoj

4. Mira Lulić, Ivana Rešetar Čulo .................................................................................................................. 243Poverty: A challenge to the protection of human rights of older persons in the Republic of CroatiaSiromaštvo: izazov za zaštitu ljudskih prava starijih osoba u Republici Hrvatskoj

5. Katarina Marošević ...................................................................................................................................... 255Lagging regions: �e case of Eastern CroatiaRegije koje zaostaju u razvoju: primjer istočne Hrvatske

6. Ana Zrnić, Dubravka Pekanov Starčević, Boris Crnković ..................................................................... 271Recent trends in sustainability reporting: Literature review and implications for future researchNajnoviji trendovi u izvještavanju o održivosti: pregled literature i implikacije za buduća istraživanja

6 God. XXXI, BR. 2/2018. str. 7-20

S / P

1. Marijana Ćurak, Dujam Kovač .................................................................................................................. 287Upravljanje rizicima društava za neživotno osiguranje i reosiguranje primjenom tehnike sekuritizacijeRisk management of non-life insurance and reinsurance companies applying securitization technique

B / P

1. Tihana Škrinjarić .......................................................................................................................................... 305Financial Econometrics, Mathematics and Statistics: �eory, Method and Application

2. Predrag Bejaković.......................................................................................................................................... 309Innovation Culture in Crony Capitalism: Does Hofstede’s Model Matter?

O I

César Sahelices-Pinto, Ana Lanero-Carrizo, José Luis Vázquez-Burguete: Sustainability, food topics and weblogs: do they really fit? Targeting

and valuing food-related eWOM generators

Mahdi Salehi, Mahmoud Lari Dashtbayaz: �e mediating effect of audit quality on the relationship between earnings

and earnings valuation in Iran

Regina Moczadlo: Re-industrialization to foster growth and employment in the European Union

Željko Pavić, Antun Šundalić: Capitalism, meritocracy and legitimacy: Croatian society thirty years after

Dominika Crnjac Milić, Domagoj Pavić, Bruno Mandić: Training methods in municipal enterprises

Joanna Hernik, Antonio Minguez Vera: Gender equality in parliaments - where do we stand in Europe? Considerations

from the economic development and society’s masculinity index point of view

Dina Lončarić, Tihana Cegur Radović, Patricia Skendrović: Who attends Christmas Markets and why? Analysis of visitor structure

and motivation for attending two Christmas Markets in Croatia

9God. XXXIII, BR. 1/2020. str. 9-24

SUSTAINABILITY, FOOD TOPICS AND WEBLOGS: DO THEY REALLY FIT? TARGETING AND VALUING FOOD-RELATED EWOM GENERATORS

Original scientific article

Received: February 19, 2019Accepted for publishing: September 27, 2019

César Sahelices-PintoUniversity of LeónFaculty of Economics and Business StudiesCampus de Vegazana, s/n,24071 León, [email protected]: +34987291000

Ana Lanero-CarrizoUniversity of LeónFaculty of Economics and Business StudiesCampus de Vegazana, s/n,24071 León, [email protected]: +34987293296

José Luis Vázquez-BurgueteUniversity of LeónFaculty of Economics and Business StudiesCampus de Vegazana, s/n,24071 León, [email protected]: +34987291751

A

Without any doubt, the advent of the Internet has substantially transformed the way and rhythm of our lives. �is circumstance reflects directly on our daily behaviours, which are today quite different from what they used to be only a few years ago. In this sense, the current patterns of search for information and con-sumption are frequently paced by the eWOM communication. In addition, environmental concerns have driven consumers to increasingly demand the so-called environmentally friendly products. Considering both issues together, literature reveals that the study of the interaction between eWOM and sustainable consumption is still scarce and needs more attention. For this reason, the present research is devoted to the identification and evaluation of a sustainable food-related eWOM. In this regard, an online survey of authors of food-related weblogs/videoblogs was conducted containing different questions about their food consumption styles. Even though the existence of a distinct group of green authors was confirmed, the fol-lowing examination of centrality levels showed that the influence exerted by this group on the Web 2.0 is exactly the same as that of the other groups. Jointly, these findings provide information of great importance that has implications for businesses and professionals in marketing.

Keywords: Sustainable eWOM, food topics, weblogs/video-blogs, cluster analysis, centrality analysis

César Sahelices-Pinto, Ana Lanero-Carrizo, José Luis Vázquez-Burguete: Sustainability, food topics and weblogs: do they really fit? Targeting and valuing food-related eWOM generators

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1. Introduction

�e advent of the Internet has substantially trans-formed the way of life by supplying us with a wide range of possibilities which are simply unimagina-ble through traditional offline channels. �is cir-cumstance reflects directly on our consumption

patterns, which are today quite different from what they used to be only a few years ago.

In this regard, the purchasing behaviour represents a fair example as the online channel is becoming, for lots of consumers, the most common way of acquiring many product categories. According to


10 God. XXXIII, BR. 1/2020. str. 9-24

data retrieved from Statista (2018a1; 2018b2), in 2017, 60.2% of global Internet users purchased products online, a figure which is expected to grow to 63.0% in 2019. �ese percentages amount, in terms of sales, to 2.30 trillion U.S. dollars in 2017 and a projection of 2.84 trillion U.S. dollars in 2018 and 3.45 trillion in 2019, which confirms the growing trend.

Moreover, the Internet has also altered the tradi-tional manner of interaction between individu-als (King et al., 2014). According to a recent study (GWI, 20193), a typical Internet user spent around 2:23 hours per day on online social networking in 2018, while it was 1:36 hours back in 2012 (GWI, 20164). Indeed, users worldwide have rapidly in-tegrated online social networking into their daily communication routines, their decision-making processes (Zhu, Zhang, 2010) and, thus, their habits when searching for information (Litvin et al., 2008). In this sense, the reviews that consumers post on the Internet are known to play a noticeable role in effecting and shaping consumer attitudes and be-havioural intentions (Park, Lee, 2009), constituting one of the most effective methods of communica-tion (also termed as electronic word-of-mouth communication, eWOM hereafter).

Besides that, but definitely not less important, today’s world has also caused consumers to be-come increasingly concerned about the environ-ment. Such concerns have begun to be displayed in their decisions and consumption patterns, with individuals increasingly interested in buying envi-ronmentally friendly products, a tendency which has motivated the emergence of a “new market-ing philosophy”, known as the “green marketing” (Belz, Peattie, 2009; Kumar, 2016), whose aim is to achieve a balance between the objectives of sales and profits of companies and a concern for society and the environment (Kärnä et al., 2002; Papadas et al., 2017).

In this sense, companies, seeking to remain com-petitive in the market and to meet consumer de-mands, have begun to incorporate these newly emerging concerns in their management and mar-keting decisions by paying special attention to mar-ket segmentation and market orientation (do Paço et al., 2008; Lu et al., 2013; González et al., 2015).

Considering both issues together, it has been ob-served that research on eWOM and sustainable consumption is in its initial phases and needs more

attention in order to attract the power of eWOM communications since, according to some authors, focusing on dissemination of efficient eWOM re-sults in influence and impact on consumer behav-iour (Fan, Miao, 2012; Reichelt et al., 2014). Like-wise, as Chang and Chang (2017) point out, few studies have evaluated the interaction between eWOM and sustainable consumption of food prod-ucts. �us, the present study aims at determining the tone in the content of the food-related eWOM, and, if sustainable food-related eWOM is identified, shaping its relevance on the Internet.

�e paper is structured as follows. �e next two sections review the essential literature related to eWOM, food aspects, and sustainability. After this contextualisation, the main methodological aspects related to the investigation are presented in the fourth section. Subsequently, the results are pre-sented in the fifth section. Finally, the last section sets out some valuable conclusions.

2. eWOM on the Web 2.0

Online weblogs/videoblogs, microblogs, discussion forums, opinion websites, social network platforms themselves, collaborative projects, virtual worlds,… are all social websites (Aichner, Jacob, 2015) that consumers frequently visit to read reviews from other consumers (in such a case, they are opinion seekers) and/or to generate reviews for other con-sumers –opinion givers (Gruen et al., 2006; López, Sicilia, 2013; Luo et al., 2013; Serra, Salvi, 2014). �ese are tools that conform to the term Web 2.0, that is, the participative and interactive web that emerged in about 2000 and created by and for us-ers from collective intelligence (Boyd, Ellison, 2008; O’Reilly, 20055).

For example, in the Spanish market (AIMC, 20186), it is worth stressing that 77.0% of online custom-ers stated they read comments and reviews com-ing from other customers before making a final decision, with 50.9% of them trusting largely those reviews. In addition, 58.8% of Spanish Internet us-ers stated to have posted any kind of review about a product or service during 2017 (AIMC, 2018).

Marketing researchers have termed this phenom-enon with the broad appellation of online Word-of-Mouth communication, Word-of-Mouse commu-nication, or electronic Word-of-Mouth (eWOM). Continuing the line adopted by Hennig-�urau et al. (2004: 39), eWOM can be defined as “any posi-


11God. XXXIII, BR. 1/2020. str. 9-24

tive or negative statement made by potential, actu-al, or former customers about a product or company, which is made available to a multitude of people and institutions via the Internet”.

�e significance of eWOM communication re-search lies in its considerable commercial impact due to its capacity to influence and to determine attitudes and behaviour of consumers toward a product, service, brand or organization (Brown, Reingen, 1987; Christiansen, Tax, 2000; Nadeem et al., 2011; Van Noort, Willemsen, 2012), even more so than the traditional mass media such as radio, press, and television.

�is influence on consumer attitudes and behav-iour does not reflect uniquely, then, on the purchase decision, but rather on four different stages of the decision-making process (Smith et al., 2005; Lee et al., 2008; Chan, Ngai, 2011; Pan, Zhang, 2011; Jalil-vand, Samiei, 2012). eWOM has an impact, firstly, on a cognitive level, facilitating and raising aware-ness about a product/brand/company hitherto un-known; secondly, on an affective or emotional level, where a feeling, sense, or meaning is attached to it; thirdly, on a conative and behavioural level, motivat-ing response, either acceptance/purchase, inaction or rejection; and finally, on a post-behavioural or feedback level, stimulating an outcome about experi-ences as a result of consumption/non-consumption.

Apart from that, it should be noted that issues such as credibility, accuracy, or quality of eWOM com-munication are, undoubtedly, of high interest in the great majority of publications (Smith et al., 2005; Park et al., 2007; Cheung et al., 2008; Park, Lee, 2009; Steffes, Burgee, 2009; Gupta, Harris, 2010; El-liot et al., 2013; Kim, Park, 2013; Moran, Muzellec, 2017).

Moreover, eWOM transcends local boundaries and the small, intimate, and private groups in which traditional WOM usually occurs (from one person to another); consumers are connected with other consumers beyond their personal circle (compris-ing relatives, friends, acquaintances, etc.) and out-side their geographical and sociocultural borders. Supported by the worldwide scope of the Internet, opinions and experiences are transmitted globally through eWOM from a single person to the entire world (Dellarocas, 2003; Cheung, �adani, 2012; Mauri, Minazzi, 2013; Serra, Salvi, 2014).

Furthermore, eWOM is usually produced in an asynchronous way, passing from informants to re-

cipients of information who are separated in terms of time and space (Hung, Li, 2007; Steffes, Burgee, 2009). �is also implies that the information up-loaded onto the Internet remains available world-wide, anywhere, and at any time, causing informa-tion to flow exponentially (Hussain et al., 2017).

3. Food products and sustainability

Debating on sustainability and food consumption, it is worth mentioning that there is an old rela-tion between food and sustainability dating back to the 1980s (Rana et al., 2008). In this context, the food sector has long been facing a number of chal-lenges in terms of sustainability (Hartmann, 2011). Primarily, the food sector is directly influenced by environmental, human and physical resources. Moreover, the food sector is diverse and complex and this reality provides different perspectives of approaching CSR, which further implies conflict-ing perspectives in this respect. Costanigro et al. (2016) gathered a series of nine activities geared to that accomplishment of sustainability, initially developed for the dairy industry but adaptable to different food sectors. �ese activities were the pursuit of animal welfare, control of energy con-sumption, control of water consumption, control of air pollution, community involvement, promot-ing employee opportunities, stimulation of local operations, waste management, and commitment to sustainable agricultural practices. Moreover, to these actions one could add the communication of sustainable information as a sustainable activity it-self, understood as an exercise in transparency and reliability (Pérez et al., 2019).

In line with the previous statements, the influ-ence of sustainability over the consumer decision-making process in the food sector is more relevant and appropriate in a context when domestic food chains are challenged by tightening price competi-tion which furthermore forces food enterprises to permanently look for sustainable sources or com-petitive advantage (Forsman-Hugg et al., 20077; Heikkurinen et al., 2011).

In this context, many experts have analysed the main obstacles that may prevent consumers from choosing sustainable products. For instance, Grunert (2011) identified six barriers related to awareness, perceptions or credibility. One of those obstacles may consist in the idea that exposure does not lead to perception, which means that custom-


12 God. XXXIII, BR. 1/2020. str. 9-24

ers may notice the existence of a certain sustain-able brand but without purchasing it. Moreover, perception leads only to peripheral processing if we take into account that customers, although notic-ing a new brand, do not make the necessary effort to understand it. However, if we presume that cus-tomers succeed to see the label, they might still not understand its meaning or message due to wrong reasoning. Furthermore, we should not forget that eco-information is traded off against other criteria. �us, potential consumers might be afraid that the price is higher and maybe the taste is not so good. For example, when asked about the main barriers to purchase and use of sustainable products, per-ceived high price is among the top answers (Röös, Tjärnemo, 2011). �e fifth possible obstacle that a potential consumer might face in his behaviour is the lack of awareness or credibility: custom-ers sometimes hesitate while choosing sustainable products because they find it difficult to carry such choices out in practice. �at is because consumers can say that they seek for green food but without necessarily buying it (Ward, 20128). Ultimately, any kind of association between products and motiva-tions can be perceived as a way of enduring per-sonal values (de Boer et al., 2006). Finally, the last obstacle or barrier, according to this classification, consists in the lack of motivation at time of choice. �is barrier is characterized by consumers disre-garding their positive attitudes related to sustain-ability while making food choices (Grunert, 2011; Grunert et al., 2014).

Aside from those above mentioned sustainability barriers usually faced by the food sector, there are four relevant rules that could also be considered as impediments to sustainable consumption (Dzene, Yorulmaz, 2011). �e first of those assertions sup-ports the idea that the lack of an unsatisfied sus-tainable need excludes from the start the possibility to purchase new products created on sustainable principles. �e second statement pleads for the idea that a negative attitude towards sustainability will not lead to a sustainable consumer behaviour. Continuing the list of thoughts that can represent sustainability barriers, the third one states that the lack of clear information about sustainable food products might have a negative impact on the deci-sion making process. Finally, according to the last statement, there is a straight relation between the availability of sustainable products and consumer’s

ability to purchase because the first one clearly de-termines the second one.

As evidenced in this latter, as both the array of food-related sustainability practices and barriers are wide and dispersed, the research on sustainable consumer behaviour has also been inevitably re-flected in wide-ranging studies about customer loy-alty, brand image, reputation and credibility (Pivato et al., 2008; Obermiller et al., 2009; Cha et al., 2016; Pino et al., 2016), product awareness and product evaluation (Lotz et al., 2013; Lee et al., 2014; Cos-tanigro et al., 2016), or purchase intention and will-ingness to pay (WTP) (Mohr, Webb, 2005; Yoon, George, 2012; Chen et al., 2016; Pino et al., 2016).

In consideration of the above review, the grow-ing impact of eWOM on consumers’ behaviour has been illustrated, as well as the importance and complexity of implementing diverse sustainability criteria in food products. In this line, if both ap-proaches were bound, there would be a great op-portunity that companies could exploit by focusing their communication efforts on those individuals who perform eWOM. Anyway, literature reveals that little is known whether green or sustain-able food-related eWOM actually exists, and if so, what its relevance is in terms of capacity of influ-ence. �ese are the main reasons why an eWOM segmentation is strongly needed. �us, the present study presents an approach diving into Web 2.0 and eWOM with reference to food issues, considered these within their wider spectrum: gastronomy, restaurants, cooking, products, etc. For that pur-pose, two main objectives are established:

1) Firstly, to perform a segmentation of au-thors of food-related eWOM based on their food-related lifestyle and determine wheth-er there is, among them, a distinct group displaying consistent sustainability features,

2) and secondly, if this condition is fulfilled, to verify whether the capacity of this par-ticular group to influence the behaviour of opinion seekers is higher compared to the other groups.

4. Methodology

In order to address the purpose previously point-ed, a survey was conducted with a total sample of 150 authors of food-related weblogs/videoblogs in Spanish. Initial respondents were randomly select-


13God. XXXIII, BR. 1/2020. str. 9-24

ed from general online population of weblogs and videoblogs through searches performed on “Goog-le” search engine (www.google.es) during March 2013, and authors were contacted via e-mail (usual keywords were recipes blog/vlog9, kitchen tools blog/vlog, gastronomy blog/vlog, nutrition blog/vlog, restaurants blog/vlog,…). �is initial group of participants constituted a directory of 2,951 con-tacted authors, from which 428 responses were re-ceived. Later, 278 of them had to be discarded since no relational structure was established, that is, they were isolated individuals in the population of food-related weblogs/videoblogs.

�e questionnaire was auto-administered online by respondents themselves but under control of SphinxOnline 3.1.2., software specialized in digital surveys. Based on these criteria, the total sample comprised 139 females (92.7%) and 11 males (7.3%), aged 20 to 59 years old. By age group, 18.0% were 20 to 29 years old, 48.7% were 30 to 39, 26.0% were 40 to 49, and 7.3% were 50 to 59 years old. �ese data highlight that the population of authors of food-related weblogs/videoblogs is mainly comprised of women aged between 30 and 49. For more detailed information about methodological aspects, see Ta-ble 1.

Table 1 Technical data

Population Authors of personal food-related weblogs/video-blogs

Sample size 150 individuals

Surveying technique CAWI (computer aided web interview)

Sampling method Simple random sampling

Sampling error (e) ±8.16%

Level of significance (α) 95.5% (p = q = .50)

Date March 2013

Source: Authors.

All respondents answered voluntarily to a question-naire composed of three main sections. �e first section gathered information about the most basic demographic variables, such as gender and age.

In the second section, in order to determine and clas-sify the food-related lifestyle depicted by respondents, and hence, also in the content they generate and share through their weblogs, the Food-related Lifestyle in-strument - FRL was included (Brunsø et al., 2004; Wycherley et al., 2008). �e FRL model has been widely and successfully applied to various European and non-European food cultures since its creation and its validity and reliability are beyond any doubt. �is instrument attempts to explain behaviour toward food purchase through examining the food-related lifestyle of individuals by looking at the importance of five interrelated aspects: ways of shopping, quality as-pects for evaluating food products, meal preparation methods, consumption situations, and purchase mo-tivations. For our survey, the FRL adaptation consist-ed of 28 statements and the response modality took the form of a Yes/No type question.

Finally, the third section was devoted to the meas-urement of centrality. Centrality is a sociometric measure, meaning that it requires the calculation

of network data, in this instance relationships be-tween individuals. Centrality (Wasserman, Faust, 2009) refers to the “strategic position of an actor within a network” (p. 169), which makes him or her “particularly visible to the other network actors” (p. 171). To this end, the most common procedure is to ask each respondent about the people they turn to or would turn to for information, affection, advice, help or financing, etc., as the case may be (Requena-Santos, 1996; Rogers, 2003). �e standard practice in this is to state a specific number of contacts to be cited by each participant. �us, with the aim of establishing links between participants, and conse-quently a database with a grid structure, the indi-viduals contacted were asked to answer the ques-tion: “Please name up to five weblogs/video-blogs to which you most frequently turn or would turn to obtain information and/or to ask for advice about food-related topics, such as recipes, nutrition, res-taurants, kitchen tools, etc.”

Once data were processed, two main techniques of analysis were performed to respond to the listed ob-jectives: firstly, by using the software SPSS version 24.0.0.1, a k-means Cluster Analysis was conducted in order to segment respondents, and secondly,


14 God. XXXIII, BR. 1/2020. str. 9-24

with the intent of facilitating the visualization of central individuals, a sociogram was generated us-ing the software Netdraw 2.159 (Borgatti, 2002).

�e specific centrality measure selected for the study was the in-degree centrality (Freeman, 1979). In its simplest form, in-degree centrality helps to locate those actors involved to a greater extent in relationships with other actors. In-degree centrality provides an easy means to examine the relevance of network actors, designating as central the ac-tor with multiple ties. Specifically, an actor is cen-tral according to in-degree centrality if he or she exhibits more direct links with adjacent actors in comparison with other network actors by adding together the number of received mentions.

In the next section, the main results are presented under two sections: first of all, the analysis of dif-ferent food-related lifestyle segments/contents, and after that, the study of the relation between levels of centrality and clusters.

5. Results

5.1 Clustering of weblog/videoblog authors

With the aim of accomplishing a meaningful seg-mentation of authors of food-related eWOM, a k-means Cluster Analysis was conducted in order to divide weblog and videoblog authors who were selected. After several preliminary trials, this sta-tistical procedure distinguished three groups of individuals which come together through similari-ties in various FRL aspects. At the same time, some variables of the FRL instrument were not statisti-cally significant (see Appendix I), which means that these variables are not strong enough to establish differences between respondents, being aspects equally shared by all of them.

Taking into account these variables (Appendix I), it can be stated that authors of food-related weblogs are, generally speaking, highly impressionable by ad-vertising and comments of other people about food topics. Furthermore, they all like everything relating to the act of cooking itself (they love cooking, try-ing new products and recipes, and avoid purchasing ready-to-eat foods). Moreover, our respondents tend to have and enjoy meals at home with a strong social component. �e authors of food-related weblogs at-tach, thus, great value to food.

Aside from this, there are particularities that justify a further distinction among them. On this point,

as it was mentioned above, three differentiated groups were highlighted (Table 2). After interpret-ing and comparing characteristics and patterns of each cluster, jointly with scorings obtained from the cluster analysis (Table 3), different segments were labelled conservative savers, gourmets, and greens.

Table 2 Clusters’ size

Clusters Cases Percentage

Conservative saversGourmetsGreensTotal sample

564252

150

37.33%28.00%34.67%

100%

Source: Authors.

Conservative savers, 37.33% of the sample (Table 2), are very price conscious and hence also the most in-terested in the price/quality relation. Conservative savers pay attention to shopping lists and planning for menus. Moreover, for this segment cooking does not have to be time-consuming and complex nor involve the whole family. �ey value social re-lationship aspects of having lunch/dinner the most, and they adhere to mealtimes (Table 3).

Gourmets represent 28.00% of the sample (Table 2). People in this group enjoy shopping for food the most and use specialty shops more than oth-ers. On the other hand, this group is not as much concerned about prices. Gourmets, sybarite and he-donistic food consumers, consider taste as the most relevant indicator of quality. �ey also differ from other segments in their foresight, since they tend to be more impulsive and spontaneous when go-ing shopping and planning menus. Eating between meals is not particularly common and social inter-action at mealtimes is also important for this group (Table 3).

Finally, greens, 34.67% of respondents (Table 2), are characterized by a strong interest in product infor-mation and quality aspects such as healthfulness, freshness, and organically grown food. In contrast, they attach the least value to taste of all segments. Eating between meals is not particularly common for this group. Moreover, greens are more price conscious and farsighted than gourmets but less so compared to conservative savers. Greens also tend to involve the whole family in cooking tasks while the social side of eating is perhaps not as important for them as it is for the other segments (Table 3).


15God. XXXIII, BR. 1/2020. str. 9-24

Table 3 Significant FLR statements’ scoring in clusters

Statement Scoring*

Conservative savers

I always check prices. .8 High

I like buying food products in specialty food shops. .1 Low

Before I go shopping for food, I make a list of everything I need. .7 High

I always try to get the best quality for the best price. .9 High

I prefer fresh products to canned or frozen products. .4 Low

I try to involve the whole family in meal chores. .2 Low

I always plan what we are going to eat a couple of days in advance. .5 High

I attempt to adhere to mealtimes. .9 High

�e most important thing when having dinner with friends is that we are together. .8 High

Gourmets

I just love shopping for food. .9 High

I like buying food products in specialty food shops. .6 High

I always check prices. .1 Low

I always try to get the best quality for the best price. .4 Low

I find the taste of food products important. .9 High

I always plan what we are going to eat a couple of days in advance. .3 Low


�e most important thing when having dinner with friends is that we are together. .7 High

Greens

I read information labels and compare products. .8 High

Before I go shopping for food, I make a list of everything I need. .7 High

I prefer to buy organic products, i.e. products without preservatives. .9 High

I always buy organically grown food products. .8 High

I find the taste of food products important. .1 Low

I try to involve the whole family in meal chores. .5 High

Going to restaurants is a regular part of my eating habits. .3 Low


* Significance level of 95% Source: Authors

At this point, once the data derived from cluster analysis has been interpreted, it can be reliably con-firmed that the respondents in the sample retrieved from the Internet have three differentiated and con-sistent food-related lifestyles (conservative savers, gourmets, and greens), which will guide the eWOM communication through their personal weblogs.

5.2 Group comparison by centrality

Figure 1 shows the sociogram resulting from the relational data previously gathered and reproduces the links between participants. Isolated nodes have

been deleted, and the identity of nodes is not shown to respect their anonymity. As can be seen, there are considerable differences between the relational structures of actors at an individual level.

Actors with a high in-degree centrality, such as par-ticipants 1, 65, 68, 83, 129, 134, and 135 in Figure 2, are considered prestigious and relevant actors, since the others try to establish links with them – hence their importance.

�is exploratory analysis was followed by the iden-tification of the cluster to which those central actors


16 God. XXXIII, BR. 1/2020. str. 9-24

belonged, that is, conservative savers, gourmets, or greens, in order to check the possibility of exist-ence of different levels of influence depending on the group of membership, which would imply that all these three groups are not equally prominent or relevant on the food-related Web 2.0.

In this sense, a certain balance was found between cluster memberships among the different central individuals (Table 4). Presumably, this indicates that greens, just as much as conservative savers and gour-mets, show the same power of influence when boost-ing the flow of information on the Internet about food-related issues by means of their weblog content.

Figure 1 Relational structure between participantsFigure 1 Relational structure between participants

Source: Sahelices-Pinto, Rodríguez-Santos (2013)

Figure 2 Participants with highest levels of in-degree centrality


Source: Sahelices-Pinto, Rodríguez-Santos (2013).


Figure 1 Relational structure between participants



Source: Sahelices-Pinto, Rodríguez-Santos (2013) Source: Sahelices-Pinto, Rodríguez-Santos (2013).


17God. XXXIII, BR. 1/2020. str. 9-24

Table 4 Group membership of central actors

Node Cluster1 Conservative savers

65 Gourmets68 Conservative savers83 Greens

129 Conservative savers134 Gourmets135 Greens

Source: Authors

6. Discussion

�e results of this study represent information of great importance that could be reflected in impli-cations for businesses and professionals in market-ing, to be considered at the time of making strate-gic and/or managerial decisions. In this regard, it should be noted that, to date, while sustainable food consumption is a noticeable topic in mass media channels such as newspapers and TV, there are still few existing studies focusing on the intersection be-tween this topic and eWOM. For all that, originality and convenience of this paper denote a value which is far from negligible.

Apart from that, it is worth of mention that the methodological approach used in the present paper, even though it is not a widespread technique in the professional practice, exemplifies a suitable means to examine eWOM generators’ food consumption style in a rather simple and efficient way, especially as regards the aspects related to the social network analysis and centrality measurement. By identifying these central network members, advertising practi-tioners can encourage positive eWOM and prevent spreading of negative consumer reviews. In addi-tion, social network sites allow marketing profes-sionals to have access to a large number of consum-ers with worldwide scope at low cost.

In reference to food-related eWOM, whose authors have been analysed above, there is reason to believe that those aspects which are in tune with preferences and opinions of these opinion leaders will most likely be supported and penalized, in contrast to those which are not. Anyway, eWOM must be viewed and treated as opportunity rather than a threat, since it allows a more efficient communication, capable of reaching a greater number of consumers and higher levels of trust and customer loyalty, in the same line as pointed out by Farzin and Fattahi (2018).

In particular, related to the two explicit objectives to which the present study is devoted, its findings indicate that approximately a third of authors of food-related weblogs are guided by green princi-ples when making their decisions about food con-sumption, and, presumably, also share eWOM in the same sustainable tone when communicating through their weblogs/videoblogs.

Nevertheless, considering clustering solutions to-gether with the in-degree centrality measures, it is proven that green consumers do not take more prominent places than conservative savers or gour-mets in online social networks, and therefore, they exert the same influence as the other groups.

�is circumstance, alluding to the core aim of this research, does not indicate that conservative sav-ers or gourmets are less committed to sustainable production or not prone to sustainable behaviour. It should not be forgotten that behavioural patterns are not univocally consistent with attitudes; in oth-er words, positive attitudes towards organic food might not necessarily be translated into actual pur-chases of green products. �erefore, conservative savers and gourmets are not willing to give up cer-tain product attributes such as convenience, avail-ability, price, quality, or taste to purchase a product only for its environmentally friendly attributes. �is discrepancy is widely known as the ‘attitude-behav-iour gap’ (Chatzidakis et al., 2006; Chekima et al., 2017; Wiederhold, Martinez, 2018).

In this vein, as organic food consumption is highly susceptible to eWOM effects (Chang, Chang 2017; Allen, Spialek, 2018), it is of critical importance to increase the audience’s exposure to credible in-formation about the environment and sustainable consumption through maintaining higher levels of self-disclosure and social presence of compa-nies on social networks (Kaplan, Haenlein, 2010). �e ultimate intention would be to assure the in-ternalisation of this green knowledge advocated by marketers, and eventually to stimulate consumers to purchase green.

Finally, despite the contribution of this study, the scope of the findings is limited by several aspects. �e first aspect to consider is the issue of longevity of results in these kinds of study. Social networks, in this case personal weblogs, are comprised of transient and changeable populations that grow and decrease constantly as individuals emerge and vanish from them. As a consequence, relationships


18 God. XXXIII, BR. 1/2020. str. 9-24

between actors can reflect different information in the short term. In addition, the limited sample size renders it difficult to generalize the final results across such a huge population. �ese issues point to the need to increase the sample size to achieve a higher scientific strength. Working with a larger group would produce more representative and sta-ble results in terms of population and time. Moreo-

ver, it should be noted that the research context is only focused on one particular geographic region (Spain). �is limitation, however, represents a new opportunity for an enhanced future research, since this approach, if replicated and expanded (i.e. to in-ternational contexts), would result in new studies with greater validity, generalizability and compara-bility of results.


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23God. XXXIII, BR. 1/2020. str. 9-24

Appendix I

- Information from advertising helps me to make buying decisions

- I just love cooking

- I like to try out new recipes

- We use a lot of ready-to-eat foods in our household

- I consider the kitchen to be the woman’s domain

- I used to nibble between meals

- We often get together with friends/relatives to have dinner in a restaurant

- I like to be praised for my cooking skills

- Eating is to me a very exciting sensation

- I only buy and eat foods which are familiar to me

E

1 Statista (2018a), “Digital buyer penetration worldwide from 2016 to 2021”, available at: https://bit.ly/2ruCMpV (Accessed on: May 25, 2018)

2 Statista (2018b), “Retail e-commerce sales worldwide from 2014 to 2021”, available at: https://bit.ly/2QNosqN (Accessed on: May 25, 2018)

3 GWI (2019), “GWI social, Flagship Report 2019”, available at: https://bit.ly/2LIkr4N (Accessed on: July 26, 2019)

4 GWI (2016), “GWI social, summary -Q3 2015-”, available at: https://bit.ly/1O7KZF0 (Accessed on: May 25, 2018)

5 O’Reilly, T. (2005), “What is Web 2.0? Design patterns and business models for the next generation of software”, available at: https://oreil.ly/2jOvae7 (Accessed on: November 25, 2018)

6 AIMC (2018), “Navegantes en la Red – Encuesta AIMC a usuarios de Internet”, available at: https://bit.ly/2Epaqpt (Accessed on: December 11, 2018)

7 Forsman-Hugg, S., Katajajuuri, J. M., Mäkelä, J., Paananen, J., Pesonen, I., Timonen, P. (2007), “Enhancing corporate social respon-sibility in the food chain with a stakeholder dialogue”, Proceedings of the Nordic Consumer Policy Research Conference, available at: https://bit.ly/2m09PCC (Accessed on: July 26, 2019)

8 Ward, J. I. (2012), “Can companies market greener food choices to consumers?”, available at: https://bit.ly/2SDDOLK (Accessed on: December 10, 2018)

9 In colloquial language, blog and vlog are synonyms with weblog and videoblog, respectively.


24 God. XXXIII, BR. 1/2020. str. 9-24

César Sahelices-Pinto

Ana Lanero-Carrizo

José Luis Vázquez-Burguete

O, :

S

Razvoj interneta nesumnjivo je promijenio način i ritam života, što se odražava na naše svakodnevno po-našanje koje se na više načina razlikuje od onoga prije samo nekoliko godina. U tom smislu, na današnje načine traženja informacija i potrošnje često utječe elektronička komunikacija, odnosno usmena predaja na društvenim mrežama (eWOM). Nadalje, zabrinutost za okoliš potiče potrošače na povećanu potražnju za ekološki prihvatljivijim proizvodima. U literaturi zasad nema dovoljno istraživanja interakcije tih dvaju područja, održive potrošnje i usmene predaje elektroničkim putem. U ovom će se radu provesti istraživanje i evaluacija elektroničke komunikacije i usmene predaje povezane s održivošću u prehrani. U tu je svrhu provedena internetska anketa autora weblogova i video-blogova u kojoj su odgovarali na pitanja o svojem pristupu hrani i potrošnji hrane. Iako je potvrđeno da postoji definirana skupina „zelenih“ autora, izračun centralnosti pokazuje da je utjecaj te skupine na Web 2.0 jednak utjecaju ostalih skupina. Ti rezultati daju informacije koje mogu biti korisne ekonomskim subjektima i osobama koje rade u marketingu.

Ključne riječi: održivi eWOM, elektronička preporuka, hrana, weblogovi/video-blogovi, klasterska anali-za, analiza centralnosti

25God. XXXIII, BR. 1/2020. str. 25-38

THE MEDIATING EFFECT OF AUDIT QUALITY ON THE RELATIONSHIP BETWEEN EARNINGS AND EARNINGS VALUATION IN IRAN


Received: July 16, 2019Accepted for publishing: October 28, 2019

Mahdi SalehiFerdowsi University of MashhadEconomics and Administrative SciencesAzadi Square,9177948974 Mashhad, [email protected]: +989121425323

Mahmoud Lari DashtbayazFerdowsi University of MashhadEconomics and Administrative SciencesAzadi Square,9177948974 Mashhad, [email protected]

A

�e main objective of the current study is to evaluate the relationship between earnings, its components and earnings valuation and, at the same time, to assess the impact of audit quality on these variables of companies listed on the Tehran Stock Exchange.

�e data used in this study were collected for a sample of 141 listed companies on the Tehran Stock Ex-change from 2010 to 2016. Research hypotheses were analyzed using panel data by means of the panel method.

Research findings indicated no relationship between earnings, its components and earnings valuation. By analyzing the effect of audit quality variables, we have also observed that audit firm size has a positive and significant effect on the relationship between earnings, its components and earnings valuation. Moreover, the obtained results substantiated the positive and significant effect of auditor tenure on the relationship between earnings, total discretionary accruals, operational cash flow, non-discretionary accruals, and earn-ings valuation. In addition, findings revealed that auditor industry specialization has a negative and signifi-cant effect on the relationship between earnings, its components and earnings valuation.

�e study aims to investigate the mediating effect of audit quality on the relationship between earnings and earnings valuation in Iran, so the outcomes of the current study may be helpful to the developing nations.

Keywords: Audit quality, earnings valuation, earnings elements

Mahdi Salehi, Mahmoud Lari Dashtbayaz: �e mediating effect of audit quality on the relationship between earnings and earnings valuation in Iran



CC BY-ND












5 od 6 26. 06. 2017. 12:24

1. Introduction

Accounting profit comprises cash flow and accru-als. �e accruals could be divided into discretionary and non-discretionary accruals. �e related litera-ture on earnings management considers discretion-ary accruals as opportunistic (Moradi et al., 2015), a feature that undermines the informativeness of

earnings. However, managers use discretionary ac-cruals for transferring confidential and inaccessible information to the users of financial information, which would allow them to evaluate the future eco-nomic value of a company more precisely (Habib et al., 2014). Subramanyam (1996) indicated a positive correlation between market return and discretion-


26 God. XXXIII, BR. 1/2020. str. 25-38

ary accruals. His findings showed that discretionary accruals provide useful information in the market. However, such relationship could not display clear-ly which discretionary accrual has more disclosure power.

According to Newman et al. (2005), since the cred-ibility of financial statements, including earnings, becomes highly dependent on the applied audit, the cooperation of market participation and au-dit quality during the valuation of earnings and its components is a matter of importance. Auditing, in addition to its significant role in enforcing and pre-serving investors’ rights through the identification of equity ownership, could also yield benefit to the management through transfer of reliable financial information (Habib et al., 2014). Krishnan (2003) argued that high quality auditors are more con-cerned with proper accounting procedures, report-ing of financial errors and irregularities than their low quality counterparts. Professional auditors are expected to segregate the useful information on dis-cretionary accrual components from the worthless data. �is could magnify the value of discretionary accruals. “Income reporting” is one of the items of financial statements, which is considered as a crite-rion for performance evaluation and earnings capa-bility of a non-profit unit. On the one hand, since most managers are aware of their company’s status, it is expected to provide and present information in a way that best reflects the status quo of a company. On the other hand, due to certain reasons, like stay-ing in the company, getting a reward, etc., the man-agement of a non-profit unit may un/willingly ma-nipulate the earnings to characterize the situation as desirable. Under these circumstances, the real earnings are incompatible with the reported one in the financial statements, which is called earnings management (Habib et al., 2014).

Announcing the accounting profit provokes a mar-ket reaction, which shows the effect this compo-nent has on stock return and decisions of financial statement users. �e higher the earnings stability, the more the company is able to maintain its cur-rent earnings and the earnings quality is assumed to be higher (Perotti, Wagenhofer, 2014).

We could also declare how much future value the earnings have generated for a certain company and how earnings affected the stock return. On the oth-er hand, quality, which determines the audit perfor-mance, depends on several factors, namely auditor capability (e.g. knowledge, experience, matching

power, technical efficiency) and professional per-formance (independence, objectivity, due diligence, no conflict of interest, and judgment). “Auditor size” is the most important quantitative index for auditor quality measurement, which has a direct relationship with the auditor quality, in a way that larger size would lead to higher audit quality. “Au-ditor tenure” is another quantitative index of au-dit quality measurement for the range of auditor’s due diligence and his/her surveillance capability. A longer period of tenure could cause the auditor to be better acquainted with a client and the relevant industry specialization, which could improve the audit quality (Myers et al., 2003). Habib et al. (2014) find that although earnings and its components are priced positively by the Chinese stock market, Big 4 audit does not provide any incremental benefit to clients in terms of market pricing of clients’ fi-nancial numbers. �eir research indicates a nega-tive impact of local Top10 audit on the pricing of earnings in China. However, their results show no incremental effect of local Top 10 audit on the mar-ket pricing of earnings components.

We extend this stream of research using data from Iran. No research study has been carried out so far on the relationship between earnings, its compo-nents and earnings valuation and no project inves-tigated the effect of audit quality on this relation-ship in a developing country. �erefore, the main objective of the present article is to evaluate the effect of audit quality on the relationship between earnings, its components and earnings valuation in companies listed on the Tehran Stock Exchange and we tried to establish whether audit quality of these companies could affect such a relationship or not.

2. Theoretical issues

2.1 The relationship between cash and accrual components and stock valuation

Accounting profit, which is recognized as an ac-crual, is dividable into two components of cash and accrual. Accrual accounting is used in the process of profit measurement, through which discretion-ary accruals modify the recognition of cash flow over a period to better evaluate the firm value by the modified figures. �e said discretionary accruals are based on estimations and in case they are not cor-rect, they should be modified in future discretionary accruals and future profits. �e estimation error and


27God. XXXIII, BR. 1/2020. str. 25-38

its subsequent modification decrease the usefulness of discretionary accruals. According to Dechow and Dichev (2002), the quality of discretionary accruals decreases with the increase of range of estimation er-ror. �e study of Ball and Brown (1968) indicates that by announcing the accounting profit the stock price of the firm undergoes a change. �is suggests that accounting profit has information content. Since discretionary accruals contribute to the calculation of the reported profit, we expect the quality of re-ported profit and discretionary accruals to stimulate the market response. Richardson et al. (2005) found that there is a negative and significant relationship between the discretionary accruals and future stock return. Hirshlifer et al. (2009) discovered a positive relationship between the size of discretionary ac-cruals and the stock return and noticed that the re-lationship between the size of cash flows and stock return is negative. Habib et al. (2014) declared that with the increase of abnormal discretionary accruals, the possibility of earnings management goes up and consequently the earnings quality would be lower. Under such circumstances, the investors are less likely to rely on the disclosed profit. In other words, such a situation could depreciate the information value of the earnings. �e inverse is true about cash components of profit. Dechow et al. (2008) perceived that the cash component of profit has a significant relationship with the stock price. Kothari et al. (2005) declared statistically that higher cash component of profit could bring about more earnings stability.

2.2 The relationship between audit quality and earnings valuation

Accounting profit is one of the important pieces of information provided in the financial statements, which is known as a factor for measuring the firm performance. Most of financial analysts use this fig-ure in the valuation models of the stock market and models of corporate performance evaluation (Gut-ierrez, Pombo, 2008). Investors, creditors, and oth-ers who use earnings and its components through various methods and for different evaluation pur-poses, including the outlook of cash flow in invest-ments or granted loans, and for making investment decisions, think of profit more than any other cri-teria (Perotti, Wagenhofer, 2014). In addition to this problem, which is seen today despite the rising awareness and general knowledge of financial state-ment users, there is also overreliance on accounting report figures (especially accounting profit as one of the major criteria of performance evaluation) when

making investment decisions. Such an illogical reli-ance provides a plethora of motivations for man-agers to manipulate (manage) the figures to their own benefit or, more specifically, to embark on the earnings management. In case managers have some specific purposes to mislead the users of financial statements through exercising their own power in accounting selection, the earnings management is more probable (Markarian, Santalo, 2014). In fact, earnings management is used as an effective factor to misrepresent the economic performance (Chen, Hsu, 2009). Perotti and Wagenhofer (2014) believe that announcing the firm profit leads to the market response, which is indicative of the earnings value in the capital market. Hence, the reported profit should be evaluated by an institution independ-ent of the firm. Generally, auditors and audit firms take on the responsibility. In fact, by evaluating the firm performance, in terms of the authenticity of the disclosed information, they propose their professional opinions. Since the reported profit is of the utmost importance for the investors and on the other hand, audit quality is effective in the in-crease of profit value in the public opinion, a num-ber of scholars carried out a study on this topic. For example, Gul et al. (2009) noticed that the profits valuated by major audit firms are evaluated posi-tively in the market. Krishnan (2003) also reported the same results. Jenkins et al. (2006) stated that by employing specialized auditors in the industry, the response coefficient would decline. Garcia-Blendon and Argiles-Bosch (2017) showed that there is no significant relationship between employing special-ized industry auditor and audit quality. Habib et al. (2014) studied the impact of audit quality on profit valuation and found that there is a significant rela-tionship between audit quality and profit valuation.

3. Research methodology

3.1 Research hypotheses

Given the theoretical issues and the proposed lit-erature, the following hypotheses are postulated in the study:

H1: �ere is a significant relationship between earnings and earnings valuation.

H2: �ere is a significant relationship between accruals, operational cash flows and earn-ings valuation.


28 God. XXXIII, BR. 1/2020. str. 25-38

H3: �ere is a significant relationship between nondiscretionary accruals, operational cash flow and earnings valuation.

H4: Audit firm size has a significant effect on the relationship between earnings and earnings valuation.

H5: Auditor tenure has a significant effect on the relationship between earnings and earnings valuation.

H6: Auditor industry specialization has a sig-nificant effect on the relationship between earnings and earnings valuation.

H7: Audit firm size has a significant effect on the relationship between accruals, operational cash flow and earnings valuation.

H8: Auditor tenure has a significant effect on the relationship between accruals, operational cash flow and earnings valuation.

H9: Auditor industry specialization has a signifi-cant effect on the relationship between ac-cruals, operational cash flow and earnings valuation.

H10: Audit firm size has a significant effect on the relationship between non/discretionary accruals, operational cash flow and earnings valuation.

H11: Auditor tenure has a significant effect on the relationship between non/discretionary accruals, operational cash flow and earnings valuation.

H12: Auditor industry specialization has a sig-nificant effect on the relationship between non/discretionary accruals, operational cash flow and earnings valuation.

�e present article is an ex-post facto (quasi-exper-imental) research that is based on the analysis of the previous and historical information (financial statements of companies). Moreover, the project is a type of library research and causal analysis and is based on the panel data. �is paper is called func-tional, in terms of objective and regression descrip-tive method. After performing the necessary cor-rections and classification, the data were gathered by the Excel Software based on the variables under study and were put in Eviews 9 and Statal 2 for fur-ther processing.

3.2 Statistical population and sampling method

�e statistical sample of the study consists of all manufacturing listed companies on the Tehran Stock Exchange. Using the systematic elimination method, the sample was selected among the com-panies that:

1. �eir end of fiscal year was on March 19;

2. Had no change in their fiscal year during the study period (2010-2016);

3. �eir financial information was available;

4. Were active during the research period.

3.3 Research models

A) �e following models, adapted from Habib et al. (2014), were used to analyze the relationship between earnings, its components, and earn-ings valuation:

1) RETit = α0 + α1 Earningit + α2LNAssetsit + α3Leverageit + α4Growthit + εit

2) RETit =β0 + β1 ACCit + β2 OCFit + β3LNAssetsit + β4Leverageit + β5Growthit + εit

3) RETit = µ0 + µ1 DAit + µ2 NDAit + µ3 OCFit + µ4LNAssetsit + µ5Leverageit + µ6Growthit + εit

B) �e following models, adapted from Habib et al. (2014), were used to analyze the effect of audit quality on the relationship between earn-ings, its components, and earnings valuation:

4) RETit =α0 + α1 Earningit + α2 BIGit + α3 BIGit *Earningit + α4ADTNRit + α5 ADTNRit* Earningit +α6 ADEXPit + α7 ADEXPit* Earningit + α8LNAssetsit + α9Leverageit + α10Growthit + εit

5) RETit =β0 + β1 ACCit + β2 OCFit +β3 BIGit + β4 BIGit *ACCit + β5 BIGit *CFOit + β6ADTNRit + β7 ADTNRit* ACCit + β8 ADTNRit* CFOit + β9 ADEXPit + β10 ADEXPit*ACCit + β11 ADEXPit*CFOit + β12LNAssetsit + β13Leverageit + β14Growthit + εit

6) RETit = µ0 + µ1 DAit + µ2 NDAit + µ3 OC-Fit + µ4 BIGit + µ5 BIGit *DAit + µ6 BIGit *NDAit + µ7 BIGit *CFOit + µ8ADTNRit +


29God. XXXIII, BR. 1/2020. str. 25-38

µ9 ADTNRit* DAit + µ10 ADTNRit* NDAit + µ11 ADTNRit* CFOit + µ12 ADEXPit + µ13 ADEXPit*DAit + µ14 ADEXPit*NDAit + µ15 ADEXPit*CFOit + µ16LNAssetsit + µ17Leverageit + µ18Growthit + εi

3.4 Measuring the research variables

Dependent variables:

RET: is earnings valuation, which is achieved by ad-justing the annual stock return.

Independent Variables:

Earnings: the net profit of a company, which is ad-justed by its assets at the beginning of the year.

ACC: the net profit minus the company’s opera-tional cash flow, which is adjusted by its assets at the beginning of the year.

DA: the residual of adjusted Jones’ model by Ko-thari et al. (2005).

NDA: the total accrual minus discretionary accru-als.

OCF: company’s net cash flow adjusted by its assets at the beginning of the year.

BIG: equal to 1, if the company is audited by an or-ganization, otherwise it is 0.

ADTNR: the number of years an auditor has been in charge of auditing in a company.

ADEXP: equal to 1, if the auditor is industry spe-cialist, otherwise it is 0.

Control variables:

LNASSET: the natural logarithm of total firm as-sets.

LEVERAGE: total firm debts on total firm asset.

Growth: the stock market value on stock book val-ue.

4. The results

4.1 Descriptive statistics

Table 1 displays the obtained descriptive results of the research, involving mean, median, standard deviation, minimum and maximum observation, skewness and kurtosis.

Table 1 Descriptive statistic of research variables

Variable Observation No. Mean Median Standard

deviation Maximum Minimum skewness kurtosis

RET 987 0.163 0.088 0.701 2.929 -1.740 0.774 5.117

Earning 987 0.163 0.130 0.173 0.98 -0.35 1.318 6.051

ACC 987 0.011 -0.003 0.162 1.058 -0.731 0.770 8.063

DA 987 0.005 0.003 0.279 4.183 -5.133 -2.965 6.123

NDA 987 0.006 -0.004 0.253 4.954 -3.522 2.177 8.759

OCF 987 0.152 0.123 0.162 0.977 -0.482 1.130 6.262

BIG 987 0.210 0 0.408 1 0 1.418 3.012

ADTNR 987 3.234 3 2.11 10 1 1.106 3.814

ADEXP 987 0.098 0 0.297 1 0 2.698 8.284

LNAssets 987 13.899 13.727 1.155 19.009 10.031 0.659 3.799

LEVERAGE 987 0.597 0.611 0.201 1.099 0.012 -0.134 2.909

Growth 987 2.414 2.018 1.550 7.935 0.061 1.161 4.010

Source: Research findings


30 God. XXXIII, BR. 1/2020. str. 25-38

Table 2 �e results of F-Limer test

F-Limer Test F statistic Range of probability Result

Model 1 1.159 0.0001 Panel model is appropriate







�e results of the F-Limer test for research models indicated that the data related to these models fol-low the panel method.

Hausman test for models related to research hypotheses

After establishing the panel data model, it is re-quired to determine whether the model has fixed effects or whether it has random effects. For this purpose the Hausman test was employed, the re-sults of which are depicted in Table 3.

Table 3 �e results of the Hausman test

Hausman Test Chi-square statistic Range of probability Result

Model 1 25.98 0.0000 Fixed effect panel method







After establishing the required model for testing research hypotheses, we performed the final fitting for each hypothesis.

As can be seen in Table 1, the mean adjusted stock return for dependent variable is about 0.163. In the sample companies, the earnings is 0.163 on aver-age and earnings components, including accrual and operational cash flows have the mean value of 0.011 and 0.152, respectively. Accruals, which are divided into discretionary and nondiscretionary ac-cruals, have the mean value of 0.005 and 0.006, re-spectively. In this case, the total means of earnings components (accruals and operational cash flows) is the mean earnings and the total means of non/discretionary accruals is mean accruals. �e calcu-lated audit quality, audit firm size, auditor tenure, and auditor industry specialization have the mean

of 0.210, 3.234, and 0.098, respectively. �e variable of size in sample companies is 13.899 on average, and financial leverage and growth have the respec-tive mean of 0.597 and 2.414 in the sample.

Results of the hypotheses

Since hypothesis testing is performed using a com-bined-data regression model, F-Limer test should be administered initially to determine an appropri-ate estimation.

F-Limer (Chao) for the models of research hypoth-eses


31God. XXXIII, BR. 1/2020. str. 25-38

As can be seen, the coefficient of determination in-dicates that the variable of profit accounts for 19% of changes of earnings valuation. �e significance of F statistic (1.0423) is indicative of general significance of the first hypothesis model. In the following, given the t statistic at the significance level of coefficients and the symbol of regression coefficient of each vari-

able, we could conclude that there is no relationship between earnings and earnings valuation. �erefore, the first hypothesis is rejected. In addition, the vari-ables of firm size and firm growth have a positive and significant relationship with earnings valuation, whereas there is no such relationship between finan-cial leverage and earnings valuation.

Estimation of the second and third hypothesis parameters

Table 5 �e results of final fitting of the second hypothesis

Variable Symbol Coefficient Standard deviation t statistic P-value

Constant value c -4.493 0.684 -6.568 0.0000

Accruals ACC 0.0504 0.0808 0.624 0.5327

Operational cash flow OCF -0.008 0.0457 -0.184 0.8540

Firm size LNAsset 0.323 0.0478 6.765 0.0000

Financial leverage LEVERAGE 0.119 0.163 0.731 0.4646

Firm growth Growth 0.060 0.0109 5.512 0.0000

Coefficient of determination 0.196

F statistic 1.4173

F significance level 0.0019


Estimation of the first hypothesis parameters

Table 4 �e results of final fitting of the first hypothesis model


Constant value c -4.557 0.679 -6.709 0.0000

Earnings Earning -0.002 0.045 -0.046 0.9627





F statistic 1.0423



As can be seen, the coefficient of determination indicates that the variable of accruals and opera-tional cash accounts for 19% of changes of earnings valuation. �e significance of F statistic (1.417) is indicative of general significance of the second hy-pothesis. In the following, given the t statistic at the significance level of coefficients and the symbol of regression coefficient of each variable, we conclude

that there is no relationship between the variable of accruals and operational cash and earnings valua-tion. �erefore, the second hypothesis is rejected. In addition, the variables of firm size and firm growth have positive and significant relationship with earnings valuation, whereas there is no such relationship between financial leverage and earn-ings valuation.


32 God. XXXIII, BR. 1/2020. str. 25-38

As can be seen, the coefficient of determination indicates that the variable of accruals and opera-tional cash accounts for 19% of changes of earnings valuation. �e significance of F statistic (1.407) is indicative of general significance of the third hy-pothesis. In the following, given the t statistic at the significance level of coefficients and the symbol of regression coefficient of each variable, we could

conclude that there is no relationship between the discretionary accruals, nondiscretionary accruals, and operational cash flow and earnings valuation. �erefore, the third hypothesis is rejected. In addi-tion, the variables of firm size and firm growth have positive and significant relationship with earnings valuation, whereas there is no such relationship be-tween financial leverage and earnings valuation.

Table 6 �e results of final fitting of the third hypothesis


Constant value c -4.487 0.686 -6.537 0.0000

Discretionary accruals DA 0.038 0.103 0.377 0.0705

Nondiscretionary accruals NDA 0.063 0.126 0.502 0.615






F statistic 1.407



Estimation of the third hypothesis parameters

Table 7 �e results of final fitting of the hypothesis 4, 5 and 6


Constant value c -4.423 0.674 -6.557 0.0000

Earnings Earning 0.1096 0.182 0.600 0.5486

Auditor size BIG 0.426 0.170 -2.500 0.0126

Auditor size* earnings BIG* Earning 2.088 0.485 4.303 0.0000

Auditor tenure ADTNR 0.025 0.014 -1.754 0.0798

Auditor tenure* earnings ADTNR* Earning -0.042 0.059 -0.713 0.4755

Auditor industry specialization ADEXP 0.416 0.189 2.198 0.0282

Auditor industry specialization* earnings ADEXP* Earning -1.855 0.500 -3.705 0.0002





F statistic 1.5320




33God. XXXIII, BR. 1/2020. str. 25-38

As can be seen in Table 7, the coefficient of determi-nation indicates that the independent and control variables account for 21% of changes of earnings valuation. �e significance of F statistic (1.5320) is indicative of general significance of the model. Concerning the t statistic at the significance level of coefficients and the symbol of regression coefficient of each variable, we could conclude that like the first research model, there is no relationship between the variable of earnings and earnings valuation. In the following, the findings indicate that there is a positive and significant relationship between audi-tor size and earnings valuation. Furthermore, the effect of auditor size is positive and significant on the relationship between earnings and earnings val-uation. �erefore, the fourth hypothesis is accepted at 99% of confidence level. Auditor tenure also has a positive and significant relationship with earn-

ings valuation and the effect of this variable is not significant for the relationship between earnings and earnings valuation. �us, the fifth hypothesis is rejected. In the following, the analysis of audit quality variables substantiates a positive and sig-nificant relationship between auditor industry spe-cialization and earnings valuation. In addition, the effect of auditor industry specialization is negative and significant on the relationship between earn-ings and earnings valuation. �erefore, the sixth hypothesis is accepted at 99% of confidence level. As to the applied control variables and like the pre-vious hypotheses, the variables of firm size and firm growth have a positive and significant relationship with earnings valuation, whereas there is no such a relationship between financial leverage and earn-ings valuation.

Estimation of the third hypothesis parameters

Table 8 �e results of final fitting of the seventh, eighth and ninth hypotheses


Constant value c -3.987 2.186 -1.823 0.0685

Accruals ACC 0.123 0.174 0.705 0.4805


Auditor size BIG -0.278 0.180 -1.541 0.1236

Auditor size* accruals BIG* ACC 1.299 0.450 2.887 0.0040

Auditor size* operational cash flow BIG* OCF 1.357 0.353 3.845 0.0001

Auditor tenure ADTNR 0.040 0.015 -2.684 0.0074

Auditor tenure* accruals ADTNR* ACC -0.0320 0.054 -0.602 0.543

Auditor tenure*operational cash flow ADTNR* OCF 0.081 0.037 2.154 0.0315


Auditor industry specialization* accruals ADEXP* ACC -1.088 0.571 -1.903 0.0573

Auditor industry specialization* operational cash flow ADEXP* OCF -1.724 0.337 -5.116 0.0000





F statistic 1.465




34 God. XXXIII, BR. 1/2020. str. 25-38

Table 8 shows the coefficient of determination in-dicates that the independent and control variables account for 21% of changes of earnings valuation. �e significance of F statistic (1.465) is indicative of general significance of the model. Concerning the t statistic at the significance level of coefficients and the symbol of regression coefficient of each variable, we could conclude that like the second re-search model, there is no relationship between the variable of accruals and earnings valuation. In the following, findings indicate that there is a negative and significant relationship between auditor tenure and earnings valuation, as well as a positive and sig-nificant relationship between auditor industry spe-cialization and earnings valuation. However, in this model, firm size has no relationship with earnings valuation. �e obtained results indicate the positive

and significant effect of firm size on the relation-ship between accrual and operational cash flow and earnings valuation. �erefore, the seventh hypoth-esis is accepted at 99% of confidence level. Auditor tenure has a positive and significant effect on the relationship between operational cash and earnings valuation as well. �us, the eighth hypothesis is ac-cepted at 99% of confidence level. In the following, the analysis of audit quality variables substantiates the negative and significant effect of auditor indus-try specialization on the relationship between ac-cruals and operational cash flows and earnings val-uation. �erefore, the ninth hypothesis is accepted at 99% of confidence level. Concerning the applied control variables, the variables of firm size, firm growth, and financial leverage have a positive and significant relationship with earnings valuation.

Table 9 �e results of final fitting of the tenth, eleventh and twelfth hypotheses


Constant value c -4.025 2.188 -1.838 0.0663

Discretionary Accruals DA 0.0130 0.370 0.035 0.9720

Nondiscretionary Accruals NDA 0.347 0.180 1.918 0.0554


Auditor size BIG -0.296 0.185 -1.595 0.1110

Auditor size* discretionary Accruals BIG* DA 1.401 0.504 2.780 0.0056

Auditor size* nondiscretionary Accruals BIG* NDA 1.462 0.401 3.647 0.0003

Auditor size* operational cash flow BIG* OCF 1.006 0.339 2.961 0.0031

Auditor tenure ADTNR -0.038 0.162 -2.385 0.0173

Auditor tenure* discretionary Accruals ADTNR* DA 0.002 0.099 0.029 0.9764

Auditor tenure* nondiscretionary Accruals ADTNR* NDA 0.086 0.052 1.651 0.0990

Auditor tenure* operational cash flow ADTNR* OCF -0.114 0.053 -2.139 0.0327


Auditor industry specialization* discretionary Accruals ADEXP* DA -1.092 0.607 -1.798 0.0724

Auditor industry specialization* nondiscretionary Accruals ADEXP* NDA -1.721 0.335 -4.839 0.0000

Auditor industry specialization* operational cash flow ADEXP* OCF -0.052 0.938 -0.055 0.9558





F statistic 1.431




35God. XXXIII, BR. 1/2020. str. 25-38

Table 9 shows the coefficient of determination in-dicates that the independent and control variables account for 21% of changes of earnings valuation. �e significance of F statistic (1.431) is indicative of general significance of the model. Concerning the t statistic at the significance level of coefficients and the symbol of regression coefficient of each vari-able, we could conclude that like the third research model, there is no relationship between discre-tionary accruals and earnings valuation. �e non-discretionary accruals and operational cash flows, however, unlike the third hypothesis model, have a positive and a negative relationship, respectively. In the following, findings indicate that there is a nega-tive and significant relationship between auditor tenure and earnings valuation, as well as a positive and significant relationship between auditor indus-try specialization and earnings valuation. However, in this model, firm size has no relationship with earnings valuation. �e obtained results indicate the positive and significant effect of firm size on the relationship between non/discretionary accruals and operational cash flow and earnings valuation. �erefore, the tenth hypothesis is accepted at 99% of confidence level. Auditor tenure has a positive and significant effect on the relationship between nondiscretionary accruals and earnings valuation, as well as a negative and significant effect on the relationship between operational cash flow and earnings valuation. �us, the eleventh hypothesis is accepted at 99% of confidence level. In the follow-ing, the analysis of audit quality variables substan-tiates the negative and significant effect of auditor industry specialization on the relationship between non/discretionary accruals and earnings valuation. �erefore, the twelfth hypothesis is accepted. Con-cerning the applied control variables, like the previ-ous model, the variables of firm size, firm growth, and financial leverage have a positive and signifi-cant relationship with earnings valuation.

5. Discussion and conclusion

�e main goal of the present article is to evaluate the relationship between earnings, its contributing components and earnings valuation and to assess the effect of audit quality on the relationship be-tween earnings components and valuation in com-panies listed on the Tehran Stock Exchange. �e first hypothesis was concerned with the existence of a relationship between earnings and earnings valu-ation. �e results of this hypothesis showed no sig-

nificant relationship between these two variables. Habib et al. (2014) found that the coefficient on EARN is significantly positive and earnings compo-nents are positive and statistically highly significant as well.

�e second and third hypothesis dealt with the re-lationship between earnings components and earn-ings valuation. �e results of hypothesis testing for the first, second and third subsidiary hypothesis, which was between accruals (non/discretionary) and operational cash flow and earnings valuation revealed no significant relationship and the hypoth-esis was rejected. �is result is in contrast with that of Habib et al. (2014).

In this study, we assessed the effect of audit qual-ity (audit firm size, auditor tenure, and auditor in-dustry specialization) on the relationship between earnings and earnings valuation. �e obtained re-sults showed the positive and significant effect of audit quality variables on the relationship earnings and earnings valuation. Furthermore, the results showed the positive and significant effect of audit firm size on the relationship between accrual and earnings valuation. �is result is in contrast with that of Habib et al. (2014), who found a negative ef-fect of audit firm size on the relationship between accruals and earnings valuation. Prior research has found evidence suggesting that high-quality audi-tors constrain opportunistic earnings management (Becker et al., 1998) and increase the informative-ness of earnings and its components (Krishnan, 2003). Habib et al. (2014) find that audit quality does not play any incremental role in enhancing such an effect.

In addition, auditor tenure had no effect on the relationship between accruals and earnings valua-tion. We have also observed that auditor industry specialization has a negative and significant effect on the relationship between accruals and earnings valuation.

On the other hand, the test results on the effect of variables of audit firm size, auditor tenure, and auditor specialization on the relationship between operational cash flow and earnings valuation indi-cated a positive and significant effect of audit firm size on the relationship between these variables. �is result is in contrast with that of Habib et al. (2014), who found a negative effect of audit firm size on the relationship between operational cash flow and earnings valuation.


36 God. XXXIII, BR. 1/2020. str. 25-38

Furthermore, auditor tenure has a positive and sig-nificant effect on the relationship between accruals and earnings valuation. We have established that auditor industry specialization has a negative and significant effect on the relationship between op-erational cash flow and earnings valuation.

�e test results on the effect of variables of audit firm size, auditor tenure, and auditor specialization on the relationship between discretionary accru-als and earnings valuation indicated a positive and significant effect of audit firm size on the relation-ship between these variables. �is result is in con-trast with that of Habib et al. (2014), who found a negative effect of audit firm size on the relationship between discretionary accruals and earnings valua-tion. Auditor tenure has no significant effect on the relationship between discretionary accruals and earnings valuation. In contrast, auditor industry specialization has a negative and significant effect

on the relationship between discretionary accruals and earnings valuation.

In conclusion, the test results on the effect of vari-ables of audit firm size, auditor tenure, and auditor specialization on the relationship between nondis-cretionary accruals and earnings valuation indicat-ed a positive and significant effect of audit firm size on the relationship between these variables. �is is in contrast with the result of Habib et al. (2014) who found a negative effect of audit firm size on the re-lationship between nondiscretionary accruals and earnings valuation. Auditor tenure has no positive and significant effect on the relationship between nondiscretionary accruals and earnings valua-tion. Lastly, auditor industry specialization has a negative and significant effect on the relationship between nondiscretionary accruals and earnings valuation.


37God. XXXIII, BR. 1/2020. str. 25-38

R

1. Ball, R. J., Brown, P. (1968), “An Empirical Evaluation of Accounting Income Numbers”, Journal of Ac-counting Research, Vol. 6, No. 2, pp. 120-131.

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3. Dechow, P. M., Richardson, S. A., Sloan, R. A. (2008), “�e persistence and pricing of the cash compo-nent of earnings”, Journal of Accounting Research, Vol. 46, No. 3, pp. 537-566.

4. Dechow, P., Dichev, I. (2002), “�e Quality of Accrual and Earnings. �e Role of Accrual Estimation Errors”, �e Accounting Review, Vol. 77, No. s-1, pp. 35-59.

5. Garcia-Blandon, J., Argiles-Bosch, J. M. (2017), “Audit partner industry specialization and audit qual-ity: Evidence from Spain”, International Journal of Auditing, Vol. 22, No. 1, pp. 98-108.

6. Gul. F. A., Yu Kit Fung, S., Jaggi, B., (2009), “Earnings Quality: Some Evidence on the Role of Auditor Tenure and Auditors’ Industry Expertise”, Journal of Accounting and Economics, Vol. 47, No. 3, pp. 268-287.

7. Gutierrez, L. H., Pombo, C. (2008), “Corporate ownership and control contestability in emerging mar-kets: �e case of Colombia”, Journal of Economics and Business, Vol. 61, No. 2, pp. 235-266.

8. Habib, A., Jiang, H., Zhou, D. (2014), “Audit quality and market pricing of earnings and earnings com-ponents in China”, Asian Review of Accounting, Vol. 22, No. 1, pp. 20-34.

9. Hirshleifier, D., Hou, K., Teoh, S. H. (2009), “Accruals, Cash Flows, and Aggregate Stock Returns”, Jour-nal of Financial Economics, Vol. 91, No. 3, pp. 389-406.

10. Jenkins, D. S., Kane, G. D., Velury, U. (2006), “Earnings quality decline and the effect of industry spe-cialist auditors: An analysis of the late 1990s”, Journal of Accounting and Public Policy, Vol. 25, No. 1, pp. 71-90.

11. Kothari, S. P., Leone, A., Wasley, C. E. (2005), “Performance matched discretionary accrual measures”, Journal of Accounting and Economics, Vol. 39, No. 1, pp. 163-197.

12. Krishnan, G. (2003), “Audit quality and the pricing of discretionary accruals”, Auditing: A Journal of Practice and �eory, Vol. 22, No. 1, pp. 109-126.

13. Markarian, G., Santalo, J. (2014), “Product Market Competition, Information and Earnings Manage-ment”, Journal of Business Finance & Accounting, Vol. 41, No. 5-6, pp. 572-599.

14. Moradi, M., Salehi, M., Zamanirad, M. (2015), “Analysis of incentive effects of managers’ bonuses on real activities manipulation relevant to future operating performance”, Management Decision, Vol. 53, No. 2, pp. 432-450.

15. Myers, J. N., Myers, L. A., Omer, C. T. (2003), “Exploring the Term of the Auditor-client relationship and the quality of Earnings: A case for Mandatory Auditor rotation?”, �e Accounting Review, Vol. 78, No. 3, pp. 779-799.

16. Newman, D. P., Patterson, E. R., Smith, J. R. (2005), “�e role of auditing in investor protection”, �e Accounting Review, Vol. 80, No. 1, pp. 289-313.

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38 God. XXXIII, BR. 1/2020. str. 25-38

Mahdi Salehi

Mahmoud Lari Dashtbayaz

U I

S

Glavni je cilj ovoga rada analizirati odnos između dobiti, njezinih komponenti i vrednovanja dobiti te isto-dobno procijeniti utjecaj kvalitete revizije na te varijable kod trgovačkih društava izlistanih na Teheranskoj burzi.

Upotrijebljeni podatci odnose se na uzorak od 141 društva izlistanog na Teheranskoj burzi od 2010. do 2016. Istraživačka hipoteza analizirana je na panel podatcima upotrebom panel metode.

Rezultati istraživanja nisu pokazali povezanost između dobiti, njezinih komponenti i vrednovanja dobiti. Analizirajući varijable kvalitete revizije utvrdili smo da veličina revizorskog društva ima pozitivan i znača-jan utjecaj na odnos između dobiti, njezinih komponenti i vrednovanja dobiti. Nadalje, rezultati su pokazali pozitivan i značajan utjecaj duge povezanosti osoblja s klijentom revizije na odnos između dobiti, ukupnih diskrecijskih obračunanih obveza, operativnog novčanog toka, nediskrecijskih obračunanih obveza i vred-novanja dobiti. Uz to je utvrđeno da specijalizacija revizorskog društva na određeni sektor ima negativan i značajan utjecaj na odnos između dobiti, njezinih komponenata i vrednovanja dobiti.

Cilj je istraživanja ispitati kako se kvaliteta revizije odražava na odnos između dobiti i vrednovanja dobiti u Iranu, a rezultati se mogu primijeniti i na druge zemlje u razvoju.

Ključne riječi: kvaliteta revizije, vrednovanje dobiti, elementi dobiti

39God. XXXIII, BR. 1/2020. str. 39-58

RE-INDUSTRIALIZATION TO FOSTER GROWTH AND EMPLOYMENT IN THE EUROPEAN UNION


Received: July 5, 2019Accepted for publishing: October 17, 2019

Regina MoczadloPforzheim University, Business SchoolTiefenbronnerstr. 65,75175 Pforzheim, [email protected]: +497231286595

A

In 2010, as a consequence of the financial crisis, the European Commission (EC) developed the Europe 2020 strategy. Within this strategy the EC emphasized re-industrialization and set the goal to enlarge the European manufacturing share of the gross domestic product (GDP) from 14% to 20% by 2020. �e inten-tion was to achieve a stronger international competitiveness and to increase the job creation potentials of the European labor markets. Several initiatives were founded on EU and on country level.

�is analysis based on literature and empirical data shows that it is more than doubtful if the EU can reach the proclaimed re-industrialization aim. Poland is the only EU member country with a clear re-industri-alization trend since 2000. Furthermore, the influence of industrialization on growth seems to depend on the size of the manufacturing share. A direct statistical connection between re-industrialization and employment could not be calculated. De-industrializing countries like Sweden or the United Kingdom also recovered from the financial crisis within two years and had growth rates above average since that time. Hence the manufacturing share alone might not generally be the decisive variable for growth and employ-ment. It seems therefore questionable if the re-industrialization aim of the EC is equally appropriate for all EU countries.

Keywords: Re-industrialization, de-industrialization, manufacturing, growth, employment




CC BY-ND












5 od 6 26. 06. 2017. 12:24

1. Introduction

During the financial crisis the production in the Eu-ropean Union (EU) decreased by 10% and three mil-lion industrial jobs were lost (European Commis-sion, 2012: 4)1. Shortly after the crisis, the European Commission (EC) emphasized the significance of manufacturing for the development of the Europe-an economy, because every fourth job was directly in this sector and one more indirectly depended on

it. �erefore the EC stressed the “…importance of a strong, competitive and diversified industrial man-ufacturing value chain for the EU’s competitiveness and job-creation potential.” (European Commis-sion, 2010)2 and proclaimed a re-industrialization aim to increase the share of manufacturing of the GDP from 14% in 2010 to 20% in 2020.

Since the 1970s the globalization of the value chain through offshoring, either via foreign direct invest-


40 God. XXXIII, BR. 1/2020. str. 39-58

ment or via global sourcing, has been a widespread internationalization strategy, especially in manu-facturing. Since the early 1990s concerns started to be raised about employment impacts (Hurley, Stor-rie, 2017: 3)3. In recent years, reshoring as a revision of former offshoring decisions gained attention in the media, academic research and especially in the political debate (Backer et al., 2016: 2; Naudé et al., 2019: 4).

�e aim of this paper is to evaluate to which extent the stated re-industrialization target of the EC is reached until now by looking at the development of the manufacturing share in the EU as a whole and in different member states. Furthermore, an analysis of the influence of the manufacturing share on growth and employment is carried out to evalu-ate the effects of re-industrialization on these two variables. �is paper proceeds as follows: Section 2 gives a brief overview of the used definitions, as well as the political and theoretical background. Section 3 explains the data basis and the methodol-ogy. Section 4 comprises the empirical findings. It starts with a descriptive look at the development of the manufacturing share, growth and employment on country level. After that, the available data for reshoring from the literature are analyzed. Further-more, the European countries are clustered and compared taking into account variables character-izing the macroeconomic and institutional frame-work. �e paper ends with a conclusion in Section 5.

2. Theoretical background

Industrialization, re-industrialization and de-in-dustrialization are defined by the changes of the manufacturing share in the gross domestic product (GDP) and/or domestic employment (Tregenna, 2011: 5; Peneder, Streicher, 2018: 88; Naudé et al., 2019: 3). �is paper follows the EC approach and focuses on the GDP share. Offshoring means gener-ally producing abroad via foreign direct investments (FDI) or global sourcing (WTO, 2005: 266–267)4. �e European Commission5 defines reshoring as relocation of parts of the production process previ-ously offshored to another country. It differentiates between nearshoring as the relocation to a site near the home country and backshoring as relocation to the home country itself.

Re- and de-industrialization are integral compo-nents of economies’ structural change. In the lit-erature, one can find several approaches to explain

the drivers of these changes, like different income elasticities of the demand side or technological developments through innovation (Gabardo et al., 2017: 400).

Based on a Keynesian perspective Kaldor (1966) analyzed the influence of manufacturing on eco-nomic growth. According to Kaldor’s first law, the growth rate of the real GDP depends on manufac-turing growth. In his model, manufacturing is the sector with the highest static and dynamic returns to scale, the highest productivity gains and capi-tal accumulation (Keho, 2018: 1). Hence the costs for manufacturing products fall and due to high income elasticity for manufacturing goods the de-mand increases. With a demand growth higher than productivity gains the sector requires more labor. �e additional workforce is absorbed from the other sectors having lower returns to scale or a weak relation between employment growth and output growth (�irlwall, 2018: 26). Wages in manufacturing are above average, so the increasing income leads again to a higher demand. �e ex-panding demand for manufacturing goods induces further innovation, technological progress (Rome-ro, 2019: 37) and human capital creation through learning-by-doing (Tregenna, 2011: 5). Spillover effects of output growth in manufacturing lead to productivity growth in other sectors (Di Meglio et al., 2018: 1496). When the productivity gains of the economy through manufacturing growth diminish and the domestic market for commodities grows more and more saturated, the GDP growth slows down. Kaldor’s first law could be confirmed in several empirical analyses using different data and methods for different country groups and time se-ries (Keho, 2018: 1).

�e development stage of an economy plays a major role in this regard. Due to the productiv-ity effect, industrialization takes place during an early stage of development whereas in highly developed countries there is a trend towards de-industrialization (Stijepic, Wagner, 2017: 103). It is well known that Fourastié already in 1949 de-scribed the development stages of economies with an increasing income per capita. Economies are transformed from mainly agricultural societies to industrialized countries and later to service econ-omies. Drivers on the demand side are changes of income elasticities and saturation effects, whereas on the supply side it is different sectoral produc-tivity developments that drive the transformation. In highly developed economies, only a higher de-


41God. XXXIII, BR. 1/2020. str. 39-58

mand from foreign markets can again lead to high-er production and employment in manufacturing, increases in productivity and a higher competi-tiveness (�irlwall, 2018: 27).

Romer (1990) developed an endogenous growth model in which increasing returns to scale are ex-plained by increased division of labor and innova-tion spillover effects (Gabardo et al., 2017: 397). Growth results from the research sector, in which new designs are produced by human capital. In-novations are in the long run non-rival goods. In the short run, innovating companies have a tempo-rary monopoly from which they temporarily gain monopoly rents. �ese rents are the incentives for further innovations. �e determinants of sectoral development therefore are innovations and the ac-cumulation of human capital.

Since the early 1990s trade liberalization, upcom-ing emerging markets like China and India, as well as market opening of countries, which were at that time still in transition, changed the production process in manufacturing. Today the manufactur-ing sector is characterized by fragmentation and internationalization of the value chain with conse-quences for international trade. Companies interact with international suppliers trading goods, services, technology and information (Timmer et al., 2019: 1). International trade is shifting towards an in-creased trade with intermediates (Stijepic, Wagner, 2017: 104). Offshoring of tasks within the supply chain of multinational companies (MNCs) change the comparative advantages of economies (van Neuss, 2019: 318). All these trends influence both re- and de-industrialization. �e eclectic theory of Dunning is the most frequently used theoretical framework for analyzing internationalization strat-egies of companies like offshoring (Di Mauro et al., 2018: 109).

Dunning (1977) introduced the eclectic paradigm (EP) to research the international allocation of re-sources through FDI. �e kernels of his so-called OLI paradigm are three main interdependent de-terminants: ownership advantage (O-advantage), location advantage (L-advantage) and internaliza-tion advantage (I-advantage). Beginning with the static related activities, the O-advantages result from different company-specific assets like pat-ents, brands or trademarks, but can also result from economies of scale or international transfer pricing. Consisting of particularities related to a specific country, L-advantages can be the differ-ent prices associated with important input factors

as well as economic or political frame conditions. I-advantages describe the ability of a company to exploit and co-ordinate both the O- and L-advan-tages (Dunning (1980: 10). In the dynamic per-spective, O-advantages result from technological, managerial, organizational or institutional compe-tence and are relatively mobile. �e L-advantages arise from assets of a country or region, which are location bounded and important for an MNC to be able to exploit the ownership advantages they have. �e I-advantages emerge from the compe-tences of the firm to realize O- and L-advantages better via hierarchy than through market transac-tions (Dunning, 2003: 4).

For the first time in the internationalization theory, Dunning combined internal O- and I-advantages of companies with the external L-advantage (Calvelli, Cannavale, 2019: 10). �e location advantages of for-eign markets are generally available for all MNE pro-ducing and sourcing there, but the creation of com-petitive advantages out of these conditions requires firm-specific capabilities (�eyel et al., 2018: 301).

3. Methodology and data

Based on the proclaimed aims of the EC and the theoretical background the following research questions can be derived:

1. Are there in the EU countries trends to-wards re-industrialization to observe and can the manufacturing share in the EU reach the proclaimed 20% aim by 2020?

2. Did countries with a higher manufacturing share generally overcome the consequences of the financial crisis for growth and em-ployment more quickly than others?

3. Does the manufacturing share generally have a significant influence on growth and employment?

4. Which European economies are similar to each other looking at selected macroeco-nomic and institutional determinants, re-flecting L-advantages?

For answering the first two questions, a descriptive analysis of the development of the manufacturing share in the EU countries as well as growth and employment is carried out on the basis of Euro-stat data6. �e EU countries are therefore grouped by their manufacturing share. �ese results give


42 God. XXXIII, BR. 1/2020. str. 39-58

also some hints about the hypothesis that coun-tries with a higher manufacturing share are more robust against external shocks like the financial crisis. �e description is complemented by curve fit regression analyses of the development of the manufacturing share over time with manufactur-ing share as the dependent variable and time as the independent variable to calculate the trend of re- or de-industrialization in the EU in total and in each of the member countries. All statistics were calculated with IBM SPSS Statistics 24. �e review period is generally 2000 to 2018 despite the fact that the EC proclaimed the re-industrialization aim in 2010. At that time, several countries had already overcome the financial crisis while oth-ers needed more time. Hence the influence of the business cycle could overlay the trend in this time period. For the third question, a correlation analy-sis is carried out for all EU countries and for the country groups with a manufacturing share above and below average.

Finally, a cluster analysis it carried out with regard to selected macroeconomic variables reflecting as-pects of the L-advantage, which are influenced by the respective economic policies of the countries. �erefore, data from the Global Competitiveness Report for institutions, labor costs and infrastruc-ture (for a detailed description see Schwab, 2018)7 and the country ratings published by Standard and Poor’s for 2019 (CountryEconomy, 2019)8 are taken into account. A comparison between the groups formed according to their manufacturing share and the cluster analysis show the influence of the L-advantage of the country-specific macroeconomic and institutional framework.

4. Empirical analysis

4.1 Manufacturing share

A look at the actual statistics shows clearly that it is more than questionable if the EU can reach the aim of a 20% manufacturing share by 2020. With regard to the period 2000–2018, the average man-ufacturing share in all EU 28 countries decreased from 16.7% to 13.3 % in 2009 during the financial crisis and recovered again to 14.6% in 2018. �e data show that the development of the manufactur-ing share in the EU28 and in the member countries is influenced by the business cycle, especially by the financial crisis. �e EU in total shows a slight trend towards de-industrialization, given a decline of the manufacturing share since 2000. �e average

in 2018 is used to group the EU countries into those with a share above and below average (see Figure 1).

With a 30.8% manufacturing share Ireland ranks the highest in 2018, followed by Czechia, Germany, Slovenia, Romania and Slovakia, all with a share of 20% or above.

In 2000, this group was slightly different, Finland had the highest manufacturing share with 24.2%, followed by Czechia (23.6%), Ireland (23.1%), Slo-venia (21.8%), Slovakia (21.4%), Germany (20.7%) and Sweden (20.3%). �e country with the largest reduction was Finland, which decreased its share by nine percentage points, followed by Sweden and Belgium. In these three countries a trend to de-in-dustrialization can be observed.

Ireland has also had a high dynamic GDP growth, which has tripled since 1995, whereas the export share of the GDP has grown sixfold. During this process, the manufacturing share increased by nearly eight percentage points. The main rea-sons for this re-industrialization are seen in the high degree of openness of the country, the low corporate tax of 12.5% and high FDI inflows dur-ing the last twenty years. The Irish gross value added (GVA) is dominated by MNCs (Casey, 2019: 11). In Czechia, the manufacturing share is nearly constant with slight fluctuations. That is also true for Germany, where the automotive industry, the machinery industry and the chemi-cal industry are the largest branches, all with an export share of more than 50%. Czechia, Slovakia and Romania are traditional nearshore destina-tions for manufacturing.

Above average but below 20% is the manufacturing share of Hungary, Poland, Lithuania, Austria, Fin-land and Italy. Hungary and Poland also belong to the traditional nearshore countries. �e Italian in-dustry is characterized by small and medium sized, often family-owned companies. �e strength of the manufacturing sector lies in machinery goods, tex-tile and clothing as well as the agricultural and food industries. Italy is particularly well known for lux-ury products like famous fashion brands and cars (Kangur, 2018: 11). Main industries in the Austrian manufacturing sector are machinery, automotive, agricultural and food production.


43God. XXXIII, BR. 1/2020. str. 39-58

Figure 1 Development of the share of manufacturing (s) 2000 to 2018*

* �e development of s is shown in comparison with the EU28 average in 2018 Source: Own representation based on Eurostat, 20196

�e regression analyses show a statistically sig-nificant trend to de-industrialization in the EU 28 since 2000 (see Figure 2 and Figure 7). For Bulgaria, Czechia, Germany, Greece, Hungary, Lithuania, Romania and Slovakia the regression results are not significant. A clear trend towards re- or de-indus-trialization could not be identified. For Germany, the plot line is nearly a horizontal straight line, but the fluctuations are too high for a statistically signif-icant result. All the other countries with the excep-tion of Poland have also de-industrialized. Poland is the only EU member country with a clear trend of re-industrialization (see Figure 7, Table 5 in the Appendix).

Hence a trend towards re-industrialization can’t be observed all EU countries. It is doubtful if the manufacturing share in the EU will reach the pro-claimed 20% aim by 2020.

Figure 2 Curve fit regression for the EU

Observation, Fit line Source: Own representation based on Eurostat, 20196


44 God. XXXIII, BR. 1/2020. str. 39-58

4.2 GDP growth

�e growth between 2000 and 2018 is influenced by the financial crisis of 2008/2009 and the Euro crisis starting from 2010. �e causes and effects of both crises have been extensively analyzed in the litera-ture. �erefore, the following description focuses on the potential influence of the manufacturing share on GDP growth. Generally, countries with a manu-facturing share higher than 20% overcame the crises comparably quickly and reached the GDP level of 2006/2007 again in 2011 or 2012 with the exemption of Slovenia, where it took until 2015 (see Table 1 for the EU28 average, Figure 3 for countries).

For all other country groups the results are mixed. �e GDP growth of the countries with a manufac-turing share between 20% and 14.6% is above av-erage in Lithuania, Hungary and Poland, around average in Austria and below average in Finland and Italy. In both of the latter countries there are dropping manufacturing shares in the same period.

Among the countries with a manufacturing share between 14.6% and 10%, Estonia and Latvia had the highest growth and reached over 130 points in 2018 (2010=100). Bulgaria had an impressive growth too

coming from 64 to 120 points in 2018. �e Swed-ish growth rate was also above average. All four countries were affected by the crises, but reached the pre-crisis level of 2006/2007 by 2012 and 2013 respectively; their rates are on par with the coun-tries with an above average manufacturing share of more than 20%. �e growth rates in Denmark and Belgium are comparable to the EU 28 average, but it took Denmark until 2014 to reach the pre-crisis level, whereas Belgium reached that level already in 2010. Portugal, Spain and Croatia grew below aver-age and it took Spain until 2017 and Portugal until 2018 to reach the level of 2007. Croatia has not yet reached the level of 2007.

Among the countries with a manufacturing share of less than 10%, Malta had the highest growth and overcame the financial crisis within one year. �e United Kingdom and Luxembourg also had an above average growth and recovered by 2012 and 2011 respectively. �e economic development in France is in line with the EU 28 average. As com-monly known, Greece suffered the most during the financial crisis and was a main contributor to the Euro crisis, due to the country’s dramatic indebted-ness of both the government and the private sector.

Table 1 GDP growth rate in the EU 28 (2000 to 2018, 2010 = 100)

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EU - 28 87.0 89.0 90.2 91.4 93.7 95.7 98.8 101.9 102.4 98.0

Year 2010 2011 2012 2013 2014 2015 2016 2017 2018

EU - 28 100.0 101.8 101.4 101.6 103.5 105.9 108.0 110.7 113.0

Source: Own representation based on Eurostat, 20196

Figure 3 GDP growth rate 2000 to 2018 (2010 = 100)


45God. XXXIII, BR. 1/2020. str. 39-58

Source: Own representation based on Eurostat, 20196

Figure 4 shows the growth rates of the gross value added (GVA) in comparison with manufacturing. One can see clearly that in twenty EU countries the growth rates of manufacturing were higher than the ones of the total GVA. �e exemptions are Cyprus, Finland and France with a growth below average in both total and manufacturing specific terms, and a manufacturing growth that is smaller than that of the GVA. In Latvia, Hungary, Romania, Swe-den and the United Kingdom the manufacturing growth lies under the total, but the GVA itself grew above average.

4.3 Employment

In all countries with a manufacturing share above 20% the unemployment rate in 2018 was below the EU 28 average of 7% (see Figure 5). Worth mention-ing is the decline of unemployment in Slovakia, where the rate decreased from 18.9% in 2000 to 6.6% in 2018. Ireland showed a high crisis sensitiv-ity, the unemployment rate rose from 5.0% in 2007 to 15.5% in 2012, and then sunk gradually to 5.8% in 2018. Germany started in 2000 with an unem-ployment rate of 7.9%, which increased over time to 11.2% in 2005. Due to the labor market reforms of the Agenda 2010 (Schneider and Zimmermann, 2010) and the positive economic development, this rate was brought down to 3.4% in 2018. It is remark-

able that the unemployment rate was nearly stable during the financial crisis. �e German Council of Economic Experts (Sachverständigenrat zur Begu-tachtung der Gesamtwirtschaftlichen Entwicklung, 2012: 20–21)9 attributes this development to two main aspects: the labor market reforms mentioned above and the institutional reaction of the German government with more flexible working hours and more opportunities for short-time working. In the 1990’s and early 2000’s several German companies offshored parts of the value chain to foreign coun-tries. During the crisis, companies kept their skilled German personnel and adjusted their labor force in foreign subsidiaries because it was more cost-efficient. �e unemployment in Czechia, Romania, and Slovenia developed on a lower level nearly par-allel to the EU 28 average.

�e situation differs when looking at the other groups, similarly to the one of the growth rate. In the group of countries with a manufacturing share between 20% and 14.6% the unemployment rate was the lowest in Hungary and Poland with 3.7% and 3.9% respectively. In this group, Poland was the most successful because in 2000 the unemployment rate was 16.1% and among the highest in the EU. In Greece unemployment today is still the highest at 19.3% followed by Spain with 15.3%, France with 9.1% and Croatia with 8.5%.


46 God. XXXIII, BR. 1/2020. str. 39-58

Figure 4 Gross value added growth, 2018* (2010=100)

* �e lines mark the EU 28 average Source: Own calculation based on Eurostat, 20196.

�e employment growth of the EU 28 (see Figure 6) lies below the growth rate of the GDP, reflecting an increase in labor productivity (107, 2010=100). In the countries that joined the EU in 2004 or later (Bulgaria, Czechia, Croatia, Lithuania, Poland, Ro-

mania, Slovakia and Slovenia), but also in Portugal, the growth rate of the employment in manufactur-ing was higher than in the economy in total. Hence in all the other countries the employment increase was higher in non-manufacturing sectors.


47God. XXXIII, BR. 1/2020. str. 39-58

Figure 5 Unemployment rate 2000 to 2018 (2010 = 100)

Source: Own representation based on Eurostat, 20196.

Figure 6 Development of Employment 2000 to 2018 (2010 = 100)

Source: Own calculation based on Eurostat, 20196.


48 God. XXXIII, BR. 1/2020. str. 39-58

In conclusion of the descriptive analysis, there are some aspects which indicate that the manufacturing share influences the economic development of the EU countries. A Pearson’s correlation analysis over all EU member countries shows a significant correlation of the manufacturing share with the GDP growth and manufacturing employment both for persons and hours worked (see Table 2). For the total employment and the unemployment rates the correlation is not significant. For countries with a share of manufac-

turing below average there are no significant correla-tions assessed. In contrast, for countries with a share of manufacturing above average the correlation is significant for growth, total hours worked and hours worked in manufacturing. �e influence of manu-facturing on macroeconomic variables depends, as expected, on the size of the share. One can conclude that it is not a necessity to increase the manufacturing share to achieve rising growth and employment and to overcome a crisis in a relatively short time.

Table 2 Correlations between manufacturing share, employment and growthEU and all member countries

Share of manufacturing

Growth rate

Unemployment rate

EmploymentPersons Hours worked

Total Manufacturing Total Manufacturing Correlation coefficient 1 0.462* -0.316 -0.064 0.567** 0.015 0.623**

Sig. (2-sided) 0.012 0.095 0.740 0.001 0.940 0.000

N 29 29 29 29 29 29 29

Countries with a manufacturing share below average


Growth rate

Unemployment rate


Total Manufacturing Total Manufacturing Correlation coefficient 1 0.166 0.010 -0.397 0.144 -0.398 0.187

Sig. (2-sided) 0.539 0.971 0.128 0.595 0.127 0.488

N 16 16 16 16 16 16 16

Countries with a manufacturing share above average


Growth rate

Unemployment rate


Total Manufacturing Total Manufacturing Correlation coefficient 1 0.762** -0.434 0.498 0.502 0.668* 0.665*

Sig. (2-sided) 0.004 0.158 0.099 0.096 0.018 0.018

N 12 12 12 12 12 12 12

** Correlation is significant on the 0.01 level * Correlation is significant on the 0.05 level Source: Own calculation based on Eurostat, 20196

4.4 Country clusters �e cluster analysis classifies the European coun-tries into similar groups. �erefore the previously used variable was enhanced by manufacturing la-bor costs, the GCI for institutions, skills and in-frastructure, and the Standard and Poor’s country rating. A hierarchical cluster analysis showed the number of clusters to be six. In the next step, a K-

means cluster analysis was performed (see Table 3).In the cluster analysis, the country groups are formed according to the distance of the variables be-tween them. SPSS gives for each ANOVA table (see Table 4) in a cluster analysis the hint that the F-test can only be used for descriptive purposes. Nonethe-less, the differences between the F-ratios show the


49God. XXXIII, BR. 1/2020. str. 39-58

influence of the different variables in building the clusters. Obviously, the growth rate has the highest influence followed by labor costs in manufacturing and the Standard & Poor’s rating. �e share of manu-facturing had only a low influence. �at is also true for the development of the total employment. �e CGI infrastructure was more or less ignored. Obviously, the country clusters differ from the groups built by the manufacturing share. Ireland (1) and Greece (6) are each in a separate cluster on their own. Ireland has high growth in both in GDP and employment, a moderate unemployment rate and lies in the upper field of the GCI variables and the country rating. For Greece the situation is the opposite. �e second cluster contains most of the Western European countries. �ey are all stable in a majority of the macroeconomic variables, have comparably high labor costs and a country ranking

of at least AA, but the importance of manufacturing in these economies differs a lot. Cluster 3 is com-posed of countries that joined the EU in 2004 with a manufacturing share above average, comparably low labor costs combined with sufficient skills and mostly rated between AA– and A-, the exception being Hungary with BBB. Besides Malta, Estonia and Lithuania, these countries are all traditional nearshoring destinations comparable to Romania in cluster 4. However, the countries of cluster 4 are rated worse in the GCI variables and the country rating. �e manufacturing share in Latvia lies below average. Cluster 5, containing Croatia, Cyprus, Ita-ly, Portugal and Spain, is characterized by countries with economic difficulties, high unemployment rates and mostly a low country rating between BBB and BB+. Furthermore, they have a low rank in the GCI indicators.

Table 3 Country clusters

No. Countries

1 Ireland

2 Austria, Belgium, Denmark, Finland, France, Germany, Luxembourg, Netherlands, Sweden, United Kingdom

3 Czechia, Estonia, Hungary, Lithuania, Malta, Poland, Slovakia, Slovenia

4 Bulgaria, Latvia, Romania

5 Croatia, Cyprus, Italy, Portugal, Spain

6 Greece

Source: Own calculation based on of Eurostat, 20196, Schwab, 20187 and CountryEconomy, 20198

Table 4 ANOVA of the cluster analysis

VariableCluster Error

F Sig.Sum of squares df Mean Square df

Share of Manufacturing 107.175 5 26.663 22 4.020 0.010

Growth Rate 1076.631 5 29.745 22 36.195 0.000

Unemployment Rate 52.703 5 4.155 22 12.684 0.000

Total employment (persons) 264.359 5 67.639 22 3.908 0.011

Manufact. employment (persons) 397.519 5 28.213 22 14.090 0.000

Labour costs in manufacturing 837.846 5 29.910 22 28.012 0.000

GCI Institutions 346.816 5 18.781 22 18.466 0.000

GCI Skills 165.236 5 19.419 22 8.509 0.000

CGI Infrastructure 29.864 5 45.413 22 0.658 0.659

Standard & Poor’s Rating 64.817 5 2.379 22 27.244 0.000

�e F tests should be used only for descriptive purposes because the clusters have been chosen to maximize the diffe-rences among cases in different clusters. �e observed significance levels are not corrected for this and thus cannot be interpreted as tests of the hypothesis that the cluster means are equal. Source: Own calculation based on of Eurostat, 20196, Schwab, 20187 and CountryEconomy, 20198.


50 God. XXXIII, BR. 1/2020. str. 39-58


�e stated aim of the European Commission was to enlarge the manufacturing share to 20% by 2020. It is not foreseeable yet that this aim could be reached. �e manufacturing share increased since the finan-cial crisis from 13.3% in 2009 to 14.6% in 2018, but is still on a lower level than in 2000 when it stood at 16.7%. In the observation period from 2000 to 2018 a clear trend of de-industrialization was found. Re-industrialization took place only in Poland.

During the last decade countries with a manufac-turing share of more than 20% were quite successful in terms of both economic growth and decreasing unemployment.

In addition, they overcame the financial crisis quite quickly. Nonetheless, other countries with a com-parably low manufacturing share were also suc-cessful, for example, Sweden, Luxembourg or the United Kingdom with competitive advantages in the service sector. Countries with a development level below the EU 28 average have manufacturing shares both above and below average. Between the manufacturing share and economic growth a low but statistically significant correlation was found for the EU in total and for countries with a manu-facturing share above average, but not for those below average. Such a correlation could not be cal-culated with employment variables. As is generally well known, unemployment is influenced by a wide range of determinants, which were not included in this study.

Hence it could be questioned if the EC’s general re-industrialization advice is adequate for all member countries. �e result of the cluster analysis shows that similarities between EU countries are influ-enced by several institutional and macroeconomic determinants. �e manufacturing share plays a mi-nor role.

In this paper the emphasis was laid on the re-in-dustrialization aim and the EC’s associated expec-tations. One limitation of this paper is the fact that other influencing determinants on growth and employment were not taken into account. Another limitation is the fact that the manufacturing sec-tor was considered as a whole. A detailed analysis of particular branches might give deeper insights. Furthermore, the influence of EU and country-spe-cific political programs was not taken into account.

Further research can look more closely at the devel-opment of the increasing intra-industrial trade in manufacturing between the EU countries referring to branches. �is could show economic intercon-nections between manufacturing operators within the EU countries. In addition, it would be interest-ing to analyze the indirect effects of manufactur-ing on growth and employment in other sectors. Moreover, strong offshoring connections between some branches in different EU countries due to FDI flows and global sourcing might influence the L-ad-vantage of different production agents within and between the European countries.


51God. XXXIII, BR. 1/2020. str. 39-58

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53God. XXXIII, BR. 1/2020. str. 39-58

Figure 7 Curve fit regression: Observations and fit lines for re- and de-industrializations*

Austria Belgium Croatia Estonia

Finland France Italy Latvia

Luxembourg Malta Poland Portugal

Slovenia Spain Sweden United Kingdom

*plots are displayed only for significant regressions Observation, Fit line Source: Own calculation based on Eurostat, 20196

Appendix


54 God. XXXIII, BR. 1/2020. str. 39-58

Tabl

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55God. XXXIII, BR. 1/2020. str. 39-58

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56 God. XXXIII, BR. 1/2020. str. 39-58

Tabl

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413

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57God. XXXIII, BR. 1/2020. str. 39-58

Tabl

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58 God. XXXIII, BR. 1/2020. str. 39-58

Regina Moczadlo

R E

S

Zbog posljedica financijske krize Europska komisija je 2010. donijela strategiju Europa 2020. U toj je stra-tegiji Komisija naglasila potrebu za reindustrijalizacijom te kao cilj postavila povećanje udjela europske proizvođačke industrije u bruto domaćem proizvodu (BDP) s 14% na 20% do 2020. Namjera je bila ostvariti veću međunarodnu konkurentnost i ojačati potencijal otvaranja novih radnih mjesta na europskim trži-štima rada. Pokrenuto je više inicijativa na razini EU-a te na nacionalnoj razini pojedinih država članica.

Analiza u ovome radu, koja se temelji na literaturi i empirijskim podatcima, pokazuje da je vrlo upitno može li EU ostvariti zacrtani cilj reindustrijalizacije. Poljska je jedina država članica EU-a sa zamjetnim trendom reindustrijalizacije nakon 2000. Nadalje, čini se da utjecaj industrijalizacije na rast ovisi o veličini udjela proizvođačke industrije. Nije se mogla utvrditi izravna povezanost reindustrijalizacije i zapošljava-nja. Zemlje poput Švedske i Ujedinjene Kraljevine, koje su prolazile kroz deindustrijalizaciju, također su se oporavile od financijske krize za dvije godine i otada imaju iznadprosječne stope rasta. Prema tome, udio proizvođačke industrije sam po sebi vjerojatno nije uvijek odlučujuća varijabla za rast i zapošljavanje. Sto-ga je upitno je li cilj reindustrijalizacije, kako ga je postavila Europska komisija, jednako prikladan za sve države članice EU-a.

Ključne riječi: reindustrijalizacija, deindustrijalizacija, proizvodnja, rast, zapošljavanje

59God. XXXIII, BR. 1/2020. str. 59-70

CAPITALISM, MERITOCRACY AND LEGITIMACY: CROATIAN SOCIETY THIRTY YEARS AFTER


Received: September 13, 2019Accepted for publishing: December 5, 2019

Željko PavićJosip Juraj Strossmayer University of OsijekFaculty of Humanities and Social Sciences in OsijekLorenza Jagera 9,31000 Osijek, [email protected]: +385916675636

Antun ŠundalićJosip Juraj Strossmayer University of OsijekFaculty of Economics in OsijekTrg Ljudevita Gaja 7,31000 Osijek, [email protected]: +385312244065

A

Starting from the System Justification �eory, the aim of this paper is to explore levels of general system legitimation, inequality perception and meritocracy perception among Croatian citizens, as well as to de-termine whether there is a difference between social groups of lower and higher social standing in this regard. Survey research on a sample of the Croatian general population (N = 353) revealed that on balance the respondents do not perceive the Croatian social system as legitimate, equal and meritocratic. Regres-sion analyses showed that retired persons express a substantially higher level of system legitimation and meritocracy perception when compared to employed persons, while higher religiosity was also a significant predictor in this regard. When it comes to the inequality perception, only female gender was a significant predictor. �e results are discussed within the framework of the contemporary theories of meritocracy and system legitimation, as well as with reference to specific social and economic characteristics of the Croa-tian society, such as the Croatian War of Independence, transition to capitalism, welfare state development and labour market situation. Overall, the study results provide only a partial confirmation of the System Justification �eory.

Keywords: Meritocracy, legitimacy, social inequality, crony capitalism, Croatia, system justification theory




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5 od 6 26. 06. 2017. 12:24

1. Introduction – two waves of discontent in the Croatian society

�e last decade of the twentieth century in Europe was marked by the decline of socialism and new op-portunities for the countries behind “the iron cur-tain“. �e Croatian society at the time found itself in very specific circumstances. Already in the first years of transition, many companies were collaps-ing and unemployment was rising. �e state was consequently expected to have effective social jus-tice and social sensitivity mechanisms. �e stratifi-cation of society into the narrow strata of the rich and the majority population of the poor had acti-

vated many vulnerable social groups in seeking the right to a decent life. According to Haramija and Njavro (2016), dissatisfaction with the transition was the result of unsatisfactory circumstances re-sulting from five factors: poor economic structures inherited from socialism, the institutional legacy of socialism, hasty privatization, the failed policies of the market shock therapy, and finally, the underde-veloped nature of investments that went mainly to the financial sector. It is no wonder, therefore, that the results of a research project in the late 1990s showed widespread dissatisfaction with the social consequences, efficiency and fairness of privatiza-tion (Peračković, 1999).


60 God. XXXIII, BR. 1/2020. str. 59-70

In a nutshell, Croatian society has been living in a state of permanent dissatisfaction since the inde-pendence, which was rooted in dissatisfaction with the reforms in the socialist society. �e first wave of dissatisfaction - dissatisfaction with the transi-tion and its effects - can be dated from the mid-1990s until the start of the Great Recession, whose intensity in Croatia began to be felt in 2008, when the second major wave of discontent began. From the onset of the crisis to the present, the discon-tent with political governance and the inefficient public sector has begun to dominate, and to slowly counteract the dissatisfaction with the social effects of capitalism. Croatia, either intentionally or unin-tentionally, has chosen the middle road between liberal market economies (such as those of the Bal-tic countries) and coordinated market economies (such as Slovenia). However, such choices have led to double unfavourable outcomes - lagging behind in economic growth while increasing poverty risks comparable to those of the countries that have cho-sen more consistent and thus socially insensitive market reforms (Lučev, Babić, 2012).

�e developmental problems of the Croatian so-ciety in these two waves of dissatisfaction can be linked to the social deficiencies highlighted by Franičević (2002), which arise from specific social ties that have had a pronounced impact on eco-nomic processes. �us, in the period of political capitalism as Županov called it (1995), it is noted that the influence of kinship, political, ethnic and regional ties impeded economic and social devel-opment. In the context of clear and effective social norms, such relationships can act as a generator of social capital and promote trust leading to lower transaction costs. But in the opposite situation, the impact is less positive. On the other hand, strong social ties in the Croatian context were manifested through pronounced national-political identifica-tion, which can also have double effects. On the one hand, such identification can increase the level of generalized trust and consensus around a socioeco-nomic development strategy. On the other hand, the strong identification and image of the cohesive community can block the changes and necessary sacrifices that any reform effort must require. �e growing discourse on the need for reform and the “weakening” of the state may be precisely the re-sult of the weakening national identification. From a socio-anthropological perspective, it could be claimed that in the Croatian society the processes

described by Dinko Tomašić in the 1930s have con-tinued to exist. Tomašić writes that cities were con-quered by villages whose population significantly influenced the change in the social structure of cit-ies. Something similar happened to the Croatian society in the early years of independence. A large population (mostly rural) came to Croatian cities, and from such heterogeneous population the new management elite was recruited. Kinship, regional and political ties became a common criterion for social advancement. �e rapid enrichment of in-dividuals, accompanied by an increasing number of the unemployed, had become a frequent media topic. As Šundalić (2010: 54) pointed out, “cities, as administrative-political centres, had become hubs of the homo novus with unnatural mix of socially responsible functions and socially insensitive be-haviour, ..., �e accelerated social stratification gen-erated social discontent and existential insecurity, which was also confirmed by the growing distrust of institutions. �e experience of the past years of transition has caused scepticism among the citi-zens when it comes to the state and prospects for the economy, democracy, civic values, and the like“.

2. Theoretical framework and research questions

It could be expected that the aforementioned social circumstances reflect differently on various social groups. It would also be very intuitive to posit that beliefs of social groups correspond to their real social circumstances and interests. For example, in a study from the late 1990s, Magdalenić (1998) found that the perception of social justice fulfil-ment in Croatia was lower for those workers who were less satisfied with their current circumstances and estimated their standard of living being lower than before the war. However, the system justi-fication theory (SJT; Jost, Banaji, 1994; Jost et al., 2013; Jost et al., 2004) holds that people oscillate between ego-justification, group-justification and system-justification. In other words, in some cases people will espouse beliefs that promote their real material interests or the feeling of self-worth. In other cases, group justification will be more pro-nounced. As proposed by the social identification theory (e.g., Tajfel, 1978, 1981), people tend to have negative out-groups beliefs and positive in-group beliefs in order to maintain the sense of self-worth or to promote group interests. However, SJT pro-ponents argue that there are epistemological rea-


61God. XXXIII, BR. 1/2020. str. 59-70

sons, primarily related to reducing of anxiety and uncertainty, which lead individuals to justify the existing social system. In some cases, especially when there are strong ideological legitimizing be-lief systems, social beliefs will mirror and legitimate the real positions of the social group. Sometimes, especially when measured with implicit measures, low status social classes (or groups in general) will hold negative in-group beliefs and tend to hold the system as just and legitimate, mainly because of the cognitive dissonance process. It is natural to think that persons in disadvantaged social position would hold negative beliefs about the contemporary Croa-tian society, but the aforementioned mechanism of cognitive dissonance might counteract such beliefs. Additionally, according to SJT, such justification beliefs are more often to be found when lower class-es have no strong group interests in a particular case (Owuamalam et al., 2017), which is surely the case when holding beliefs about the contemporary Croatian society and its characteristics. In sum, as Brandt (2013) noted, SJT can be distinguished from the competing theories, such as the aforementioned social identity theory and social dominance theory (Sidanius, Prato, 1999), precisely by the assertion that lower status persons provide more legitimacy to the system due to cognitive dissonance (the so-called status-legitimacy hypothesis).

Empirical confirmation of SJT is relatively scarce, and almost exclusively found with regard to dif-ferences between ethnic and racial groups (Henry, Saul, 2006; Sengupta et al., 2015). On the other hand, Brandt (2013) tested the system justification theory in three multi-year studies with large and representative samples and found no confirmation for the status-legitimacy hypothesis. Using various measures of low status (class, education, gender, race) and different measures of legitimacy (mainly trust and confidence in the system and social in-stitutions), he also found no support for the con-tention that the status-legitimacy takes place only in specific circumstances such as high inequality and high opportunities for social protest. In other words, even such social circumstances did not pro-duce cognitive dissonance that would lead to the status-legitimacy. Chang and Kang (2018) analysed the data from the World Values Survey (WVS) 2005-2007 and found that as a person’s income lev-el rises, the preference for redistribution becomes weaker, albeit with moderating impact of national identification. �ese results were fully confirmed

by Caricati (2016) using the data from the Inter-national Social Survey Program (ISSP). He found that lower status individuals, measured by social class, income, and self-position in social hierarchy, were more likely to perceive the income differences as too large. �is relation is even stronger in more democratic countries, which is contrary to the pre-dictions of the SJT.

�erefore, contrary to SJT, it seems that the re-search evidence is in line with the real-conflict the-sis which posits that persons in lower social posi-tions, in accordance with in-group interests, tend to show lower levels of willingness to legitimize the social system in which they live, as well as the fact that they are more critical about inequalities and lack of meritocracy. �is position is often labelled as the “realistic group conflict theory“. Having this in mind, the aim of this paper is to explore levels of general system legitimation, inequality perception and meritocracy perception among Croatian citi-zens, and to determine whether there is a difference between social groups of lower and higher social standings in this regard. With this in mind, in the research three research questions were proposed:

RQ1. Do Croatian citizens perceive the social system as legitimate, equal and meritocratic?

RQ2. Are the aforementioned constructs simi-lar of distinct?

RQ3. Are there any differences between social groups with higher and lower social standing when it comes to legitimacy, inequality and meritocracy perception?

3. Methods

3.1 Measurements

�e inequality perception was measured by a scale consisting of two items whereby respond-ents should indicate their level of agreement on a five-point Likert type response format. Similar, al-beit one-item measures of inequality, were used in Larsen (2016) and Roex, Huijits and Sieben (2019). �e results on the items were summed in order to obtain the summary measure of inequality percep-tion (Cronbach’s α = 0.72).

�e items were as follows:

Croatian society is polarized – there is a gap be-tween the rich and the poor


62 God. XXXIII, BR. 1/2020. str. 59-70

Croatian society is insensitive towards the less for-tunate – some social groups are struggling (unem-ployed, retired persons, disabled persons, etc.).

�e perception of meritocracy was measured by means of an item/statement, whereby respondents also indicated their level of agreement on a five-point Likert type response format. �e statement was as follows:

Croatian society is meritocratic – people get ahead by hard work, knowledge and ability.

Economic and political legitimacy perception was measured by a four-item scale consisting of two items which measured the level of economic devel-opment and two statements which measured the level of political development of Croatian society. Here as well the respondents were asked to indicate their level of agreement with statements on a five-point Likert type response format. �e statements were as follows:

Croatian society is economically developed

Croatian society is economically rich

Croatian society is fully democratic

In Croatian society there is a high level of awareness about citizens’ political rights

�e results on the items were also summed in order to obtain a summary measure of general system le-gitimisation (Cronbach’s α = 0.66).

Gender was measured with participants’ self-re-ported gender (coded 0 = women and 1 = men). Level of education was measured on a five-point scale ranging from 1 (elementary school or less) to 5 (graduate or postgraduate degree). Place of resi-dence was measured as a binary variable, with rural = 0; urban = 1. Religiosity was measured on a five-point scale (1 – not religious at all, 5 – fully reli-gious). Veteran status was measured by asking the respondents whether they or at least one of their parents had participated in the Croatian War of In-dependence (Yes = 1; No = 0).

3.2 Sampling

In the study, a non-random sample of the Croatian population was used (N = 353). Namely, under-graduate students from the Faculty of Economics, Josip Juraj Strossmayer University of Osijek (Croa-tia), collected the data by F2F interviewing in their place of residence by means of a snowball sampling procedure. Having that in mind, it can be assumed

that most of the respondents are residents of Slavo-nia and Baranja region. �e data were collected in January 2019.

In the sample, there were 54.0% of female and 46.0% of male respondents.1 �e average age was 39.66 years (SD = 17.20). About 65.63 % of the respond-ents live in urban areas and the remaining 34.38 % in rural settlements. When it comes to employment status, the data are as follows: employed – 46.02%, unemployed – 15.34%, retired – 13.92%, and stu-dents – 24.72%. Regarding the war veteran status, 48.58% of the respondents personally participated in the Croatian War of Independence or at least one of their parents was a participant. �e average religiosity on 1 to 5 scale amounted to 3.46. Only 5.97% of the respondents were people with elemen-tary school or less. Almost a half of the respondents (45.17%) completed a four–year secondary school, while a three-year secondary school was completed by 7.67% of the respondents. �e share of respond-ents with undergraduate degree was 26.99%, while the remaining 14.20% had graduate or postgraduate degree.

4. Results

Our analysis plan included descriptive statistics (RQ1), correlational analyses (RQ2), and hier-archical multiple regression analyses (RQ3). As noted in measurements section, we measured economic and political legitimacy perception with four items and summed up the results in order to obtain a total score of legitimacy. Such a score had a minimum of 4 and a maximum of 20. �e aver-age result was 11.45 (SD = 2.86). �e least accept-ed statement was the one concerning the aware-ness about citizens’ political rights (M = 2.43, SD = 1.01), followed by the statement about economic development (M = 2.63, SD = 0.92), the statement about the economic richness of Croatian society (M = 2.91, SD = 1.08), and the level of democracy in Croatian society (M = 3.49, SD = 1.06). When it comes to inequality perception, the average result on the two-item scale (the minimum was 2 and maximum 10) was 7.84 (SD = 1.60). Both state-ments had similar levels of agreement – the po-larisation statement with the average of 3.99 (SD = 0.88) and the insensitivity statement with 3.85 (SD = 0.94). �e average meritocracy perception on a 1 to 5 scale was 2.43 (SD = 0.98). �e intercorrela-tions (Pearson’s r) were as follows:


63God. XXXIII, BR. 1/2020. str. 59-70

Table 1 Intercorrelation matrix

Items Economic and political legitimacy Meritocracy Inequality

Economic and political legitimacy 1 0.37 - 0.20

Meritocracy 0.37 1 - 0.20

Inequality - 0.20 - 0.20 1

Source: Authors

As the first criterion in the regression analyses the system legitimation was entered. Before the analy-sis, we checked that all the requirements of the mul-tiple linear regression were satisfied. Namely, there was no autocorrelation (Durbin-Watson statistics was 1.52), residuals were approximately normally distributed with no apparent heteroscedasticity, and there were no multicollinearity issues (all the variance inflation factors were between 1 and 2).

From Table 2, we can note that only religiosity and employment status (retired vs. employed persons) proved to be significant predictors. More precisely, a one point rise in religiosity leads to the 0.58 rise in the political and economic legitimation scale (β = 0.24) when all other predictors are held constant. Retired persons had 1.18 points higher result on the scale. It could be also noted that education is close to the significance level of .05 (p = 0.09).

Table 2 Hierarchical linear regression with system legitimation as a criterion variable

Model 1 Model 2

Variable b SE B β b SE B β

Gender 0.02 0.31 0.01 0.18 0.32 0.03

Age (in years) -0.00 0.01 -0.01 -0.01 0.01 -0.04

Residence 0.44 0.32 0.07 0.36 0.33 0.07

Religiosity 0.59 0.13 0.25** 0.58 0.13 0.24**

Empl. status – unemployed -0.05 0.45 -0.01

Empl. status – retired 1.18 0.56 0.14*

Empl. status – student 0.03 0.46 0,01

War veteran 0.30 0.32 0.05

Education -0.29 0.17 -0,10

R2 0,06 0,08

Adjusted R2 0,05 0,06

R2 - change 0,06 0,02

F for change in R2 5.54** 1.58

Gender: Female = 0, Male = 1; Employment status: employed as the reference category; War veteran status: Yes = 1; No = 0; Residence: Rural = 0; Urban = 1. *p < .05, **p < .01 Source: Authors

In the second analysis, meritocracy perception was entered as the criterion variable. In this case as well all the requirements of the multiple regression were satisfied. Durbin Watson statistics was 1.52, the residuals were normally distributed, there was no heteroscedasticity judging from the residuals distri-butions, and there were no multicollinearity suspi-cions (VIFs ranged from 0 to 1).

�e data show that religiosity and employment sta-tus (retired persons and students when compared to employed persons) led to higher meritocracy per-ception. Religiosity was not as strong a predictor as in the case of economic and political legitimisation (b = 0.10, β = 0.12). Retired persons had 0.53 points higher meritocracy perception than employed per-sons, while students’ results was 0.37 points higher.


64 God. XXXIII, BR. 1/2020. str. 59-70

Table 3 Hierarchical linear regression with meritocracy perception as a criterion variable

Model 1 Model 2

Variable b SE B β b SE B β

Gender 0.12 0.11 0.06 0.14 0.11 0.07

Age (in years) 0.00 0.00 0.01 0.00 0.01 0.03

Residence 0.10 0.11 0.05 0.10 0.11 0.05

Religiosity 0.11 0.05 0.13* 0.10 0.05 0.12*

Empl. status – unemployed 0.16 0.16 0.06

Empl. status – retired 0.53 0.20 0.19**

Empl. status – student 0.37 0.16 0.17*

War veteran 0.12 0.11 0.06

Education 0.05 0.06 0.05

R2 0.02 0.07

Adjusted R2 0,01 0.05

R2 – change 0.02 0.05

F for change in R2 2.14* 3.34**


In the end, we also conducted a hierarchical linear re-gression with the perception of inequality as the crite-rion variable. In this case, only gender happened to be

a significant predictor. Namely, women had 0.42 points higher results than men (β = 0.13), i.e. they more often see Croatian society as polarised and insensitive.

Table 4 Hierarchical linear regression with inequality perception as a criterion variable

Model 1 Model 2

Variable B SE B β B SE B β

Gender 0.47 0.18 0.15** 0.42 0.19 0.13**

Age (in years) 0.10 0.01 0.10 0.01 0.01 0.06

Residence -0.20 0.18 -0.06 -0.21 0.19 -0.06

Religiosity -0.03 0.08 -0.02 -0.02 0.08 -0.02

Empl. status – unemployed -0.01 0.26 -0.01

Empl. status – retired -0.21 0.33 -0.05

Empl. status – student -0.33 0.27 -0.09

War veteran -0.27 0.18 -0.08

Education 0.02 0.10 0.01

R2 0.04 0.05

Adjusted R2 0.03 0.03

R2 – change 0.04 0.01

F for change in R2 3.20* 1.03



65God. XXXIII, BR. 1/2020. str. 59-70

5. Discussion

From the descriptive results it can be concluded that the respondents do not perceive the social sys-tem as legitimate, equal and meritocratic, thus giv-ing the answer to the RQ1 posed in this study. First, the respondents judge the current level of econom-ic inequality in Croatian society as unacceptable, as the average result on a 2 to 10 scale was 7.84. �is does not come as a surprise, having in mind that the citizens of former socialist East-European countries are very critical towards inequality in their societies (e.g., Kelley, Zagorski, 2004) and hold a non-meri-tocratic perception of their societies (e.g., Redmond et al., 2002). It is interesting to note that the income inequality rose in Croatia in comparison to the so-cialist times, but not at levels that are observable in some other transition countries. Namely, the Gini coefficient rose dramatically in the Slavic republics of the former Soviet Union, as well as in the Baltics. For instance, the Gini for Lithuania rose from 23 in the period 1987-1988 to 37 in the period 1993-1995 (Milanović, 1998: 42-43). As Nestić (2003) showed, in Croatia the rise was almost negligible, from 0.286 in 1988 to 0.297 in 1998. Nestić attributed this to the slow economic development that was not con-ducive to significant wage differentials and property earnings, as well as to early retirement schemes and other indirect social and capital transfers. �e first point is very interesting since the perception of so-cial differentiation was very widespread because of the property redistribution and the crony capi-talism at the time. However, the share of property income was probably still very low in the entire income distribution (Nestić, 2003: 15). In the last ten years, Gini has even shown a slightly decreasing trend, from 31.6 in 2010 to 29.7 in 2018.2

From the results it can also be inferred that the respondents judge Croatian society to be slightly non-meritocratic since the average results on a 1 to 5 scale was 2.43. Meritocracy is usually defined as a system where social positions are awarded by a transparent and impartial system that rewards merit – a combination of capabilities and effort – rather than social class origin or other ascriptive characteristics (for different approaches to defin-ing meritocracy, see Kim, Choi, 2017). Coupled with a just distribution of wealth, this can be seen as a necessary constituent of a just society. How-ever, all contemporary societies represent a mix of meritocratic (education, ability, effort, etc.) and non-meritocratic (corruption, family wealth, politi-

cal influences, random life circumstances, etc.) ele-ments. It is no wonder that a large number of recent studies show that citizens often do not see societies in which they live as meritocratic. Reynolds and Xian (2014) found that Americans more often hold meritocratic than non-meritocratic beliefs. How-ever, almost a quarter of them simultaneously hold both meritocratic and non-meritocratic beliefs. In Bubak’s (2019) study based on the WVS data, even in the Confucianism-permeated Chinese culture the statement that personal success is determined by forces outside of one’s control (luck determines success) had the average of 3.7 on a 1 to 10 scale. A similar mix of meritocratic and non-meritocratic perceptions was also found in a study conducted on a sample of Croatian student population (Šundalić, Pavić, 2011). Non-meritocratic elements are more often to be found in times where old institutional arrangements are abandoned, i.e. when individual aspirations are boundless and not integrated into legitimate social goals. In classical sociological the-ories, this situation is often labelled as anomy (Dur-kheim, 1997). In other words, the transition from one system to another always carries the uncertain-ty of the unknown. At first, the “misinterpretations” of the new system are happening. �ey can be in-tentional and sometimes due to the circumstances in which the transition occurs. �e transition of Croatian society began in the circumstances of the Croatian War of Independence that destabilized life throughout Croatia. In addition, the experience of the legacy of socialist economic policy and social-ist culture of collectivism and egalitarianism repre-sented an unfavourable climate for the takeover of civic culture and market economy.

�e level of system legitimisation is also quite low – the average of 11.45 on a 4 to 20 point scale. �is finding is not a surprise, given the developmental and political problems described in the introduc-tion, as well as the results of previous research that indicated very low and declining trust in the main institutions of Croatian society (Baloban, Rimac, 1999; Sekulić, Šporer, 2010). As an illustration, ac-cording to the public opinion research of Ivo Pilar Institute of Social Sciences (the so-called Pilar’s barometer of Croatian society) conducted in 2016, only 3 of the 11 listed institutions were rated with an average higher than 5.0 on a 1 to 10 point scale. As can be noted in the intercorrelational matrix, the three constructs are interrelated, especially when it comes to economic and political legitimisation and


66 God. XXXIII, BR. 1/2020. str. 59-70

perception of meritocracy. In consequence, our an-swer to the RQ3 would be that Croatian citizens see lack of meritocracy as one of the important reasons for the current problems related to political and economic development.

In order to provide an answer to the RQ2, we con-ducted three regression analyses, which revealed some differences between social groups with regard to the outcome variables. �e most striking find-ing is that retired persons perceived the system as more legitimate and meritocratic as compared to the employed persons. As a possible explanation, we can note that Croatia fits nicely into the group of societies with high elderly-biased welfare spending focus. Welfare systems in those societies, of which Southern European countries such as Italy, Greece and Spain are good examples, are focused on main-taining social services for the elderly (mainly gen-erous retirement schemes) as opposed to provision of services for younger cohorts such as child care or youth-targeted employment programs (Henjak, 2008). Even though pension allowances in Croatia are not high, early retirement schemes and special pensions provisions (war veterans, etc.) probably create some complacency among older generations and divert resources from possible social programs for the youth. �is further translates into high lev-els of youth unemployment and dependence on families for housing provision and income. For in-stance, in 2018, youth unemployment rate in Croa-tia amounted to 23.8%, putting Croatia in the fourth place in the EU.3 In addition, the estimated average age of leaving the parental home was over 31 years, the second highest in the EU.4 Greater satisfaction of retired persons can also be interpreted through relative deprivation (Runciman, 1966; Townsend, 1979), according to which pensioners no longer have such a critical attitude to the existing social situation since they have resolved their life priori-ties. However, an important theoretical note should be made. Specifically, there is a growing body of evidence showing that citizens are also oriented to-wards supranational criteria in assessing their sta-tus (Watson et al., 2010; Berthoud, 2012). In other words, in this case, the unfavourable assessment of Croatia might have drawn down the satisfaction, hiding the possible differences that arise from the different position within the Croatian society. �us, relative deprivation is a term that operates at dif-ferent levels of analysis, whereas groups with which individuals and groups are compared are manifold

and variable, with different comparison criteria being included in different contexts (Fahey, 2010). In the context of our research, given the accession to the European Union and the increasing promi-nence of European issues in Croatian society, it can be assumed that all categories of citizens compare Croatia to other, primarily developed, European countries. For example, an analysis conducted by Berthoud (2012) shows that one third of percep-tions of poverty can be explained by income relative to the country average and two-thirds by income relative to average income in the European Union. �is implies that the overall assessment of the situa-tion may affect different estimates of intra-national deprivation.

Also unexpected is the finding that there is no greater dissatisfaction among unemployed persons when compared to employed persons. Namely, the polarisation in the perception of inequality could be affected by the general level of meritocratic percep-tions in a country. La Roex et al. (2019) found that a country level of meritocratic perceptions is con-nected to higher polarisation between lower and higher socioeconomic strata with regard to income inequality. Having in mind low meritocratic per-ceptions in the current study, therefore, we would expect that employment status and education sig-nificantly impacted the perception of inequality in Croatian society. However, it can be assumed that in the situation of intensive emigration a large number of individuals who were unemployed and dissatisfied with this fact either left the country or found employment. Furthermore, it is possible that employee dissatisfaction also prevails with the existing situation, that is, the mere fact of employ-ment does not significantly reduce it due to insuf-ficient salaries and inadequate working conditions.

Older age in previous research was often con-nected to less meritocratic perceptions (Barnes, 2002; Reynolds, Xian, 2014). �e usual explanation is the so-called exposure thesis, which posits that experiences of unfair treatment and other non-meritocratic experiences accumulate over time and produce cynicism about meritocracy. However, the age effect was not found in the current study. �e probable explanation is that the age-effect in this case was not linear, but curvilinear. Namely, the aforementioned higher perception of economic and political legitimacy and meritocracy among retired persons has surely affected the relationship between age and these outcome measures.


67God. XXXIII, BR. 1/2020. str. 59-70

�e lack of differences in attitudes with relation to the war veteran status can be explained in two ways. One relates to the proportion of measure-ment error that we agreed to when designing the question in such a way that it included not only veterans but also veterans in the family. Such a decision was conditional on a relatively small planned sample, but it led to the stated measure-ment error resulting from differences in attitudes between the veterans themselves and their family members, since in some cases these views would not coincide. �e second interpretation may re-fer to the very ambivalence of attitudes that may stem from veterans’ experience and from warfare in general. On the one hand, suffering can lead to greater dissatisfaction regarding the social situa-tion. But on the other hand, the same experience can lead to the activation of cognitive dissonance, which entails a selective perception that focuses more on the more positive aspects of the achieved state, especially on the attainment of state inde-pendence. �us, for example, in a study of the per-ception of privatization Peračković (2000) found that war victims had a somewhat more positive perception of the privatization process than other citizens.

With regard to gender, the direction of the possible theoretical hypothesis is not clear. On the one hand, exclusion from the labour market could lead to “ac-quired helplessness“ and the attitudes that social positions are gained through forces beyond one’s control, which was confirmed in a research based on the WVS data (Fisman, O’Neill, 2009), but also disconfirmed in a study based on the USA General Social Survey data (Reynolds, Xian, 2014) wherein the correlation ran in the opposite direction. On the other hand, in the Croatian socioeconomic context, precisely the same factor can lead to unfavourable experiences and resentment due to unemployment, low pay, substandard working conditions, etc. In other words, increased participation in the labour market could lead to the perception of a lack of meritocracy and disappointment with the current social and economic development.

With regard to religiosity and meritocratic beliefs, our results confirm research indicating that reli-gious persons tend to espouse individualistic be-liefs about individual success (Hunt, 2002) and that atheists hold meritocratic perceptions about their society less often than religious persons (Reynolds, Xian, 2014). In other words, religiosity might foster the feeling of personal responsibility that translates into higher levels of legitimacy and meritocracy perceptions. In the Croatian society there is also an additional contextual factor related to the right-wing political orientation and religiosity. Namely, in Croatia, higher religiosity is connected to the right-wing political values and attitudes (e.g., La-bus, 2005; Sekulić, Šporer, 2006), with affirmative views about the Croatian statehood and negative views about the Yugoslav state being an important part of such attitudes. Consequently, holding af-firmative views about the Croatian statehood and negative views about contemporary Croatian soci-ety at the same time would represent a dissonant state of mind, thus leading to higher legitimacy and meritocracy perceptions.

6. Conclusion

As expected, the results of our pilot study showed a low level of meritocratic beliefs and political and economic legitimisation, as well as high intolerance to the current level of inequalities in Croatian so-ciety. When it comes to group differences in per-ception, we did not find consistent support for the social justification theory, the only exemption being more legitimacy and meritocratic perceptions of the retired persons. However, we believe that such, somewhat surprising, finding might be explained by evoking the peculiarities of the Croatian labour market, such as early retirement and war pensions. Given the multitude of possible measures of the aforementioned constructs, future studies with different measures should check the robustness of our findings when it comes to Croatian society. In addition, since our study was conducted on a non-random sample, future studies with random sam-ples are warranted.


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E

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Željko Pavić

Antun Šundalić

K, :

S

Polazeći od teorije opravdanja sustava, cilj je ovog rada istražiti razinu opće legitimacije sustava, percepciju nejednakosti i percepciju meritokracije među hrvatskim građanima, kao i utvrditi postoji li razlika između socijalnih skupina nižeg i višeg društvenog položaja u ovome smislu. Anketno istraživanje na uzorku opće populacije Hrvatske (N = 353) pokazalo je da ispitanici hrvatski društveni sustav ne smatraju legitimnim, jednakim i meritokratskim. Regresijske analize pokazale su da umirovljenici iskazuju znatno viši stupanj le-gitimacije sustava i veću percepciju meritokracije u usporedbi sa zaposlenima, a veća je religioznost također značajan prediktor u tom pogledu. Kad je u pitanju percepcija nejednakosti, samo je ženski spol bio znača-jan prediktor. Rezultati se u radu stavljaju u okvir suvremenih teorija meritokracije i legitimacije sustava, a objašnjavaju se i specifičnim socijalnim i ekonomskim karakteristikama hrvatskog društva, kao što su Domovinski rat, tranzicija u kapitalizam, razvoj socijalne države i stanje na tržištu rada. Ukupno gledajući, rezultati studije pružaju samo djelomičnu potvrdu teorije opravdanja sustava.

Ključne riječi: meritokracija, legitimacija, društvene nejednakosti, kapitalizam, Hrvatska, teorija opravda-vanja sustava

71God. XXXIII, BR. 1/2020. str. 71-82

TRAINING METHODS IN MUNICIPAL ENTERPRISES


Received: October 24, 2019Accepted for publishing: December 9, 2019

Dominika Crnjac MilićJosip Juraj Strossmayer University of OsijekFaculty of Electrical Engineering, Computer Science and Information Technology OsijekKneza Trpimira 2b,31000 Osijek, [email protected]: +38531224600

Domagoj PavićVODOVOD-OSIJEK d.o.o.Poljski put 1,31000 Osijek, [email protected]: +38531330738

Bruno MandićJosip Juraj Strossmayer University of OsijekFaculty of Economics in OsijekTrg Ljudevita Gaja 7,31000 Osijek, [email protected]: +358994754800

A

�e impact of change on the contemporary business is immense. Regardless of their position in an or-ganisation, employees face changes every day. Change can cause uncertainty, anxiety and discouragement. Given that business processes are becoming increasingly specialised, businesses need to be able to adapt successfully to the demands of the market and changes in the business environment. Targeted and continu-ous training helps employees acquire skills and knowledge needed to respond to the challenges they face in the workplace.

�e main goal of a business is to create value. Increasingly, businesses are starting to realise that human re-sources are one of the most important resources in achieving that goal. In today’s business environment, the success of a company greatly depends on the competences and motivation of its employees. It is becoming increasingly difficult to maintain employee motivation and engagement, and achieve the desired business outcomes. Employee training is an important factor in meeting this challenge.

�e paper presents the results of a survey on employee training methods used by municipal service compa-nies in the Republic of Croatia. An analysis is given of various training methods, explaining the importance and purpose of some of them.

Keywords: Education, municipal service companies, business organisation, motivation




CC BY-ND












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1. Introduction

�e development of technology and globalisation of markets are increasing competitive pressures on businesses, forcing them to continuously improve their performance. Businesses are becoming in-creasingly aware that their success depends on their ability to stay abreast of new trends, to adopt new technologies, and develop all segments of business. In view of all that has been mentioned so far, many

companies have recognised the importance of con-tinuous training of their employees.

Knowledge and competitive advantage are closely related in modern business. We live in the age of knowledge, i.e. the knowledge society or knowledge economy, as the new economy is called (Glavaš, 2012). Despite the growing awareness of the im-portance of continuous training, this topic is still under-researched.1 �e present paper aims to ex-


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amine the availability of employee training oppor-tunities in companies with complex organisational structures such as municipal service companies in the Republic of Croatia. Changes in these types of organisations are extremely frequent due to fre-quent changes in regulations.2 A review of recent research shows that no previous studies have inves-tigated this issue. �us, there is a need to address this research gap and analyse the training opportu-nities provided to employees of such companies as well as their participation.

Primary research was conducted by means of a survey to examine the training methods and oppor-tunities currently available to the employees of the observed companies. �e paper identifies key fac-tors as well as training methods aimed at improv-ing company performance. Specifically, the paper aims to determine the relationship between the management of a municipal service company and employee training management. Moreover, the pa-per explores and describes contemporary theoreti-cal approaches to employee training in municipal service companies. �e research points to the need for identifying the training needs of employees and developing training methods. Further empirical research is needed to analyse management percep-tions about the impact of employee training on the performance of a company.

For the purpose of this paper, both off- and on-the-job training are examined. On-the-job training is de-livered by a person who works for the company, usu-ally one of the employees who has been trained and has specific qualifications, competences and skills needed for transferring his/her knowledge to other employees. Off-the-job training is provided by per-sons who do not work for the company. �e training is delivered by external training providers either at the company premises or at an outside location.

A survey was done of a random sample of employ-ees of municipal service companies. �e profile of the respondents was diverse, in terms of their edu-cation level and position in the company.

�e paper examines the availability of employee training opportunities in municipal service compa-nies in the Republic of Croatia. It intends to deter-mine whether municipal service companies invest in the training of their employees and whether they have an allocated training budget for the coming year. Furthermore, the paper aims to determine how often such organisations provide training to

their employees as well as the employees’ attitudes towards training. �e study also seeks to examine which training methods are most frequently used in municipal service companies in the Republic of Croatia.


�is paper is based on comprehensive research as part of a doctoral dissertation defended at Josip Juraj Strossmayer University of Osijek, Faculty of Economics Osijek.3

For the purpose of this paper, the following re-search methods were used: analysis, synthesis, deduction, induction, abstraction, concretisation, generalisation, classification, etc. Furthermore, a descriptive statistical method, comparison, prov-ing and disproving were used to test the hypoth-eses. 123 employees of several Croatian municipal service companies were surveyed. �e respondents were of different age, gender, education level and work experience. �e survey sought to determine whether municipal service companies invest in the training of their employees. �e respondents were asked whether organisations they work in invest in employee training, how often they had an opportu-nity to participate in the training and which train-ing methods were used.

3. The importance of employee training for business organisations

Evidence suggests that the implementation of em-ployee training programmes contributes consider-ably to the efficient management and development of human resources. To survive and prosper in to-day’s market, companies must meet the challenges of growing competition. Lack of knowledge and skills, i.e. adequate training for employees often leads to companies losing market share or falling behind their competition. More and more compa-nies are becoming aware that money, time, and en-ergy should be invested in the training of their em-ployees. According to Noe et al. (2006), the growing use of knowledge is recognised as a highly-efficient training strategy. �e training must develop more than just the basic skills in order for companies to achieve competitive advantage. It needs to be viewed in a more general sense as a way of creating intellectual capital. As such, it entails developing skills needed for performing a job, using technology


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in the exchange of information with other employ-ees, and understanding clients and the production system (Noe et al., 2006). Furthermore, it is neces-sary to raise employee awareness of the importance of continuous learning and sharing of information and knowledge for their performance and thus the quality of products and services. “�erefore, in an economy where the only certainty is uncertainty, knowledge becomes the one sure source of last-ing competitive advantage. It becomes a major as-set and lever for development” (Bahtijarević-Šiber, 1999).

In the late 1960s, researchers showed an increased interest in adult education as a result of attempts to radically increase learning opportunities for adult learners. �e idea of adult education was conceived then and there and the concept of recurrent educa-tion was developed. It sought to provide individu-als with various forms of education after they have completed their formal education with the aim of facilitating their adaptation to the increasingly complex challenges and conditions of work (Barić, 2004).4

�e advancement of technology and the growing digitalisation of business systems have shifted the focus from physical strength to human intellect. “Knowledge management is not a new discipline; however, the development of information and com-munication technologies and globalisation trends have made it of central importance to companies seeking to respond to the increasing business chal-lenges” (Aščić, 2016).

Other reasons to provide learning and training op-portunities to employees are the growing complex-ity of workplace tasks, the rapidly changing and increasingly uncertain business environment, as well as the fact that new skills are required in the modern workplace.

To stay abreast of the current trends in the business environment, it is necessary to continually update employee knowledge and skills, considering the gap between knowledge acquired through formal edu-cation and that required in the modern workplace. �e contemporary business environment is becom-ing increasingly complex, fast-paced, and uncer-tain. To keep up, it is important for modern busi-nesses to adopt a proactive approach to employee development and make it a continuous priority as it is the only way for a company to survive and thrive. �e human resource (HR) department has an im-

portant role in the organisation of on- and off-the-job knowledge and skills training programmes for employees. �e HR department decides which em-ployees need training keeping in mind the require-ments of their job. Moreover, the HR department professionals often take on the role of trainers when there is a need to inform employees of the changes in the company’s organisational structure, culture, etc.

“Various terms are used in the theory and prac-tice of employee training and development. �ey are often used interchangeably, even though they have different meanings. Frequently used terms include, among others, learning, training, educa-tion, and development” (Bahtijarević-Šiber, 1999). Learning denotes the process of acquiring new skills and knowledge leading to permanent chang-es in the behaviour and thinking of an individual. �e acquisition of knowledge, skills, and habits through training and practice are characteristic of learning; however, the conclusions on what was learned can be made only based on the changes in behaviour. Conclusions can be made about learning only when workplace behaviour or an individual’s performance has changed. “Whether learning was successful can only be determined after the expected change in behaviour has oc-curred” (Bahtijarević-Šiber, 1999). Training is the time a single person or a number of persons spend engaged in a physical activity or developing or in-creasing their intellectual or physical capacity. Ac-cording to Dessler (2015), in order to successfully conduct employee training, it is important that the organisation successfully trains managers who will later be in charge of the training and development of other employees. Employee training can be more or less structured. It is always linked to a particu-lar workplace and aimed at increasing workplace performance. �erefore, we can say that training is a planned activity aimed at acquiring skills and knowledge required for a successful performance of a particular job or activity. “It is aimed at ac-quiring specific knowledge, skills, and techniques needed for a specific workplace and increasing employee performance” (Bahtijarević-Šiber, 1999). Education is a much wider notion than learning and training. Education enhances a person’s overall cognitive potential and facilitates the acquisition of knowledge and skills needed for independent decision-making in various situations. “Educa-tion equips one with the competencies needed for


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performing various jobs and provides a basis for further development” (Bahtijarević-Šiber, 1999). �e new knowledge, skills and abilities enable employees to take on more demanding tasks and responsibilities in the workplace, advance their ca-reer, and prepare them for future challenges. �e entire process starting with learning, to acquiring knowledge and consequent changes is called de-velopment. �e concept of development is wider than the concepts of learning, training, and edu-cation because it includes the changes that occur as a result. Development involves activities aimed at preparing employees for future jobs and chal-lenges. It is therefore important that it is timely planned and that it caters to the particular needs of the employee and job requirements.

Modern companies use various training methods and programmes, such as the following:

- Managerial skills training programme;

- Computer skills training programme;

- Communication skills training programme;

- Supervisory skills training programme;

- Professional skills training programme;

- Methods and procedures training programme;

- Consumer-relations training programme;

- Personal skills training programme;

- Employee relations training programme;

- Sales skills training programme.

�e training and development of employees is a core HR department function which should be carefully considered and executed. Given that it is used to develop skills and expand knowledge in various fields, it is also a complex one. McCourt and Eldridge define managing human resources as “the way organisations manage their staff and help them to develop” (McCourt, Eldridge, 2003). “�e end result of individual modules is important as the result of the entire training process depends on the success of each module” (Bahtijarević-Šiber, 1999). Companies today are aware of the importance of knowledge management and the need to identify knowledge gaps, and seek to help employees ac-quire new knowledge at the least possible cost. To achieve this goal, first they need to perform a train-

ing needs analysis. To this end, several analyses are carried out:

1. Organisational analysis - an analysis of the company’s attitudes, culture, practices, goals, organisational structure, changes in business operations, market and competi-tion, and available training resources, i.e. time and funds. �e aim of this analysis is to identify company needs as well as attitudes towards the existing training programme.

2. Work analysis - analysis of the work as well as the tasks performed by employees based on which it is determined whether there is a need for training, what it should include, and what type of programme should be implemented. Work analysis focuses on the specific tasks performed by employees, i.e. job description. In this phase, it is very important to assess employees’ current per-formance. Based on this analysis, it can be determined what knowledge, skills, abili-ties and personality characteristics employ-ees need to have to perform their job. �is analysis is also referred to as the analysis of tasks, knowledge, skills, and abilities.

3. Person analysis - identifies employees who need training. It is also called employee anal-ysis. One should bear in mind that employ-ees differ in their individual characteristics as well as knowledge and skills they possess. �us, not all employees need the same train-ing. Fey, Björkman and Pavlovskaya (2000) highlight that employees who possess a high level of skills and knowledge significantly contribute to the performance of their or-ganisations, which clearly makes investing into their training and development a ne-cessity. �is analysis gives an answer to the question about the subject of training, i.e. the knowledge and skills it needs to focus on.

Based on the results of these analyses, the training objectives are set. Objectives are important because they allow the management to evaluate the effec-tiveness of training in terms of acquired knowledge and skills.

We differentiate between training goals and objec-tives. Training goals are defined in line with the goals of the company. �ey include, among others, increasing competitiveness, developing soft skills,


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induction training to help new employees settle in their new roles, etc. According to Mayo (2001), soft, i.e. intangible assets are the most important new source of added value for an enterprise.

Training objectives describe how the acquired knowledge and skills will be translated into innova-tive solutions in everyday work and in the introduc-tion of new products and services to avoid knowl-edge obsolescence. Training objectives are readily measurable outcomes because they relate to specif-ic knowledge and skills which are commonly read-ily applicable in everyday work. To achieve these objectives, the content of the training programme needs to be customised to suit the specific needs of the business. Often, various training methods are combined.

“Training needs can be categorised into four groups. �e content and methods of training are decided upon based on the identified needs. �e four categories of needs are:

1. Training for the current role;

2. Acquisition of new knowledge and skills aimed at facilitating the process of adapting to changes in business operations and tech-nology;

3. Career development and training aimed at advancement in the organisation or taking on more complex tasks and responsibilities;

4. Training and preparing of employees for future changes and tasks; training for the future and flexibility” (Bahtijarević-Šiber, 1999).

All these types of training are inherent parts of em-ployee growth in the workplace and together make up a continuing process of training and develop-ment of an individual in a company.

4. Training venues

An essential part of training programme develop-ment is choosing the training venue. �ere are two types of training methods: on-the-job-training and off-the-job-training. �e latter can be categorised into two groups: training provided in the company and outside the company, i.e. at education and re-search institutions, education centres, etc.

�e choice of the training method depends on the identified training needs. An effective training

programme needs to identify the participants, the instructors, required skills and knowledge, knowl-edge gaps, venue and the most appropriate, i.e. ef-fective delivery method. “Essentially, the company needs to identify employee training needs, training objectives, and target groups, and then create and implement the training programme” (Bahtijarević-Šiber, 1999).

4.1 On-the-job training methods

�ere are different methods of on-the-job train-ing. Companies intending to implement on-the-job training programmes must have a clearly defined training policy in place with clearly defined roles and responsibilities. If the training is delivered by a manager, he/she must also be involved in assessing its outcomes. On-the-job training requires careful planning. �e training programme must be ade-quately tailored and structured, the training materi-als must be created, and the procedure for monitor-ing and evaluating post-training performance must be set. Furthermore, it is very important that per-sons delivering the training are trained themselves. “�e choice of the training method depends on the training objectives, time available for the prepara-tion and delivery of training, available tools, as well as professional, didactic and pedagogical compe-tencies of the trainer” (Vujić, 2008).

According to Bahtijarević-Šiber (1999), there are various on-the-job training methods:

a) Upskilling

b) Coaching

c) Job rotation

d) Internship

e) Traineeship

f ) Mentoring

g) Student practice.

4.2 Off-the-job training methods

�e most common and most traditional off-the-job training method is a lecture. In addition to lectures, various methods use various technology tools to facilitate learning. Depending on the learn-ing aid used, we can distinguish between audio-visual training, programmed learning, computer-based training, video training, etc. Some training methods, such as simulation and case studies, use


76 God. XXXIII, BR. 1/2020. str. 71-82

real-life situations or imitate real-life experiences to facilitate learning. A more traditional method of off-the-job training is a conference, i.e. discus-sion. Other off-the-job training methods include formal education, group training, and distance learning.

�e success of the training programme does not depend solely on the choice of the training meth-od. However, the appropriate choice will facilitate learning and the achievement of learning outcomes and it is therefore made by taking into considera-tion the particular situation and training objectives. Evidence suggests that some methods are more suited for acquiring new knowledge and skills, while others are better suited for changing employ-ee attitudes. Some are suited for developing prob-lem-solving skills; others are used for developing interpersonal skills. For instance, the most effective training methods for developing and increasing problem-solving skills are case studies and business games, “while sensitivity training (T-groups) and

role play are best suited for developing interper-sonal skills” (Bahtijarević-Šiber, 1999).

5. Results of the survey

�e surveyed municipal service companies use various training methods. �e distribution of re-spondents’ answers in terms of the frequency of use of specified training methods in their company is presented below. �e respondents were allowed to choose more than one answer. �e most fre-quently used methods include upskilling (42.7%), traineeship (44%), internship (34%), and mentor-ing (32%). 44% of the respondents reported using coaching, 47% used job rotation, while 40.5% used other training methods. Programmed learning was used rarely (29.2%), while 27.1% of the respondents reported rarely using video training and case stud-ies. 29.9% of the respondents reported never using simulation and case studies, while 26.3% reported never using audio-visual techniques. �e described data is presented in Figure 1.

Figure 1 Frequency of use of different training methods

The surveyed municipal service companies use various training methods. The distribution of

respondents’ answers in terms of the frequency of use of specified training methods in their

company is presented below. The respondents were allowed to choose more than one answer.

The most frequently used methods include upskilling (42.7%), traineeship (44%), internship

(34%), and mentoring (32%). 44% of the respondents reported using coaching, 47% used job

rotation, while 40.5% used other training methods. Programmed learning was used rarely

(29.2%), while 27.1% of the respondents reported rarely using video training and case studies.

29.9% of the respondents reported never using simulation and case studies, while 26.3%

reported never using audio-visual techniques. The described data is presented in Figure 1.

Figure 1 Frequency of use of different training methods

Source: Authors' research

The most frequently used training methods include upskilling and traineeship. 8.5% of the

respondents have never used upskilling, while 7% of them have never used traineeship.

Upskilling was used rarely by 12%, and traineeship by 8% of the respondents. Upskilling and

Source: Authors’ research.


77God. XXXIII, BR. 1/2020. str. 71-82

�e most frequently used training methods include upskilling and traineeship. 8.5% of the respondents have never used upskilling, while 7% of them have never used traineeship. Upskilling was used rarely by 12%, and traineeship by 8% of the respondents.

Upskilling and traineeship were used sometimes by 36.8% and 40% of the respondents, respectively. Upskilling and traineeship were used very often by 35% and 31% of the respondents, respectively. �e results of the analysis are shown in Figures 2 and 3.

Figure 2 Upskilling


Figure 3 Traineeship



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�e next three paragraphs contain the results of anal-ysis for internship, mentoring, and student practice. 21% of the respondents reported never or rarely us-ing internships, while 25% of them reported never or rarely using mentoring. 33.6% of the respondents reported using student practice never or rarely. Internship was used by 44%, mentoring by 43%, and student practice by 42.90% of the respondents.

Internship was used very often or always by 34%, mentoring by 32%, and student practice by 23.6% of the respondents. If we compare these three theoretically similar training methods, we can see that internship was the most frequently used method, while student practice was the least frequently used method.

Figure 4 Frequency of use of training methods


A lecture is the most traditional training method. It is cost-effective and suited for presenting mate-rial to large groups of employees. However, it is rarely used in comparison to other methods, as can be seen from Figure 5. Only 25.4% of the re-

spondents reported using it very often or always. From the data in Figure 5, it is apparent that this method was used sometimes by 39.30% of the re-spondents, while 35.3% reported using it never or rarely.

Figure 5 Lecture



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Considering that there are many different training methods, not all of them could be included in the survey questionnaire. �is is why the option “Other training methods” was added to answer choices. �e results of the analysis indicate that 40.5% of the

respondents reported using other training meth-ods sometimes. 20.7% of them reported using them very often or always, while 38.7% used them never or rarely.

Figure 6 Other training methods


Furthermore, the results indicate that combined on- and off-the-job training maximises exploitation of tacit knowledge in municipal service companies.

When it comes to employer-sponsored training, 55 respondents (44.7%) received training both on and

off the job, 20 (16.3%) received on-the-job train-ing, while 38 (30.9%) participated in the off-the-job training. Ten respondents (8.1%) reported not hav-ing received any training at all.

Figure 7 Training venue



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6. Conclusion

�e findings of this study provide guidance on how to implement effective employee training programmes and encourage employee participa-tion. Employee training is a vital function of any company, municipal service companies included. �e paper defines employee training as the pro-cess through which new knowledge and skills are acquired. To survive and prosper, companies need to continuously reinvent their business models, improve their performance, agility and efficiency through continuous training of their employees. For a training programme to be successful, training needs analyses have to be performed first, taking into consideration the needs of the company and the employees, as well as the gaps in terms of skills needed for the performance of particular tasks. �e needs analyses serve as the basis for designing the training plan and formulating the training objec-tives. Once the objectives have been set, a decision must be made on the most appropriate training method. �e two most commonly used methods include on- and off-the-job training. �e research has shown that both of these training methods have advantages and disadvantages. �e managers are responsible for choosing the training method that will cater to the particular needs of the company and employees in terms of closing employee knowl-edge and skills gaps. Outside professional trainers may not be well acquainted with the company’s specific operations, procedures and organisational culture. �is is not the case with on-the-job train-ing. Even though on-the-job training may seem

more cost-effective, managers who deliver it have to take time away from their everyday tasks. �us, it is important that they delegate their tasks to others for the duration of the training. �e results of the survey show that the most commonly used training methods were lectures and traineeships, followed by student practice, mentoring and internships. �ese methods are particularly suited for persons with very little or no experience. �e study found that once they reach a certain level of competence, employees are left to their own devices in terms of developing their skills and acquiring new knowl-edge.

�e study raises the question whether companies provide their employees with sufficient training op-portunities to increase their knowledge and skills, thus enhancing their professional and personal de-velopment and career prospects. Further research should be done to investigate the advantages and disadvantages of on- and off-the-job training and make recommendations as to their appropriateness for specific situations.

Companies should continually strive for business excellence. Based on the data collected, it can be concluded that municipal service companies still significantly lag behind other modern companies in terms of the implementation of employee training programmes. Companies should invest in the train-ing of their employees with the view of improving their performance and satisfaction, thereby im-proving the performance of the company. �is will, in turn, increase the satisfaction of service users.


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R

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2. Bahtijarević-Šiber, F. (1999). Management ljudskih potencijala. Zagreb: Golden marketing.3. Dessler, G. (2015). Upravljanje ljudskim potencijalima. 12th edition. Zagreb: Mate. 4. Fey, C. F., Björkman, I., Pavlovskaya, A. (2000), “�e effect of human resource management practices

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Dominika Crnjac Milić

Domagoj Pavić

Bruno Mandić

M

S

Utjecaj promjena na suvremeno poslovanje je velik. Neovisno na kojem radnom mjestu zaposlenik radi svakodnevno se susreće s promjenama koje mogu izazivati strah od nepoznatog, nervozu te demotiviranje za nove uspjehe u radu. Sve je više specifičnosti u poslovnim procesima te se sve više traži fleksibilnost poslovnih subjekata pri odgovoru na zahtjeve tržišta i poslovne okoline. Ciljana i kontinuirana edukacija pomaže stjecanju znanja potrebnih za nošenje s navedenim izazovima u poslovanju te omogućava zaposle-nicima lakše nošenje s izazovima koji nastaju pri njihovom obavljanju svakodnevnih aktivnosti.

Tvrtkama je glavni cilj poslovanja stvaranje vrijednosti, a sve više dolaze do spoznaje da je jedan od najvaž-nijih resursa za postizanje toga cilja ljudski potencijal. Uspjeh tvrtke danas uvelike ovisi o kompetencijama i motivaciji zaposlenika. Sve izazovnije je motivirati zaposlenike i održavati njihov angažman, te imati realizaciju posla na željenoj razini. Jedan od značajnih čimbenika prema tome je svakodnevno pružanje podrške u obliku edukacije.

Ovim su radom dani rezultati statističke obrade anketno prikupljenih podataka vezanih za metode eduka-cije zaposlenika u komunalnim poduzećima Republike Hrvatske. Dana je analiza različitih vrsta edukacije prisutne na tržištu te je ukazano na važnost i svrhu određenih metoda.

Ključne riječi: edukacija, komunalna poduzeća, poslovna organizacija, motivacija

83God. XXXIII, BR. 1/2020. str. 83-99

GENDER EQUALITY IN PARLIAMENTS - WHERE DO WE STAND IN EUROPE? CONSIDERATIONS FROM THE ECONOMIC DEVELOPMENT AND SOCIETY’S MASCULINITY INDEX POINT OF VIEW

JEL: J16, D72, O52Original scientific article

Received: July 29, 2019 Accepted for publishing: January 2, 2020

Joanna HernikWest Pomeranian University of Technology in Szczecin Faculty of Economics Zolnierska street 47, 72-210 Szczecin, Poland [email protected] Phone: +48914496900

Antonio Minguez VeraUniversity of Murcia Faculty of Economics and Business Campus de Espinardo, s/n, Edificio 2, 30100 Murcia, Spain [email protected] Phone: +34868888477

A

It is often emphasized in literature that women constitute half of all societies, but their needs and rights are not reflected in social decisions. �e UN and other international institutions aim at changing the position of women in the world, which was reflected in the so called Millennium Development Goals, and currently in the Sustainable Development Goals, one of the latter being promoting gender equality and empowering women. Authors of gender and development literature often write about women as an untapped factor of economic growth. In this paper, we want to reverse the point of view and look at women whose activity is conditioned by the economic development of the country. �erefore, this article presents a certain diagno-sis of the current state, but on the other hand, it looks for an explanation of some dependencies.

Today, the reasons for women’s presence or absence in politics are unclear; therefore, we want to inspect the basic determinants, which, in our opinion, are the wealth of the society and its character (masculin-ity vs. femininity). Consequently, the aim of the following article is to determine women’s participation in European parliaments and to verify the hypothesis that the presence of women in European parliaments is directly proportional to the economic development, measured by GDP per capita. Apart from the main hypothesis, the auxiliary one regarding the masculinity of society is also examined (Hofstede model).

�e conducted analysis allows us to conclude that the participation of women in European parliaments remains low and it is on average 28.04%, and no European country reached 50%. �e calculations confirmed the statistical significance of both hypotheses, so we can say that the presence of women in European par-liaments depends on the economic development of a given country and the type of society. �ese deter-minants are difficult to change, which is why Europe is facing further challenges. It is obvious that changes occur relatively slowly (although the upward trend is visible) and have their causes. Our analyses show that the main ones include the level of economic development and the nature of society. No relationship was found between the number of women in parliaments and other economic factors, such as unemployment.

Keywords: Europe, economic development, gender equality, Hofstede index, parliamentary elections, Sus-tainable Development Goals

Joanna Hernik, Antonio Minguez Vera: Gender equality in parliaments - where do we stand in Europe? Considerations from the economic development and society’s masculinity index point of view



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84 God. XXXIII, BR. 1/2020. str. 83-99

1. Introduction

Despite the fact that the awareness of the role of women in politics and the complexity of this issue have been growing recently, there are still few stud-ies proving specific dependencies. Furthermore, there are no works covering Europe as a whole (i.e. 51 coun-tries and disputed territories). �erefore, this article provides novel insights into the debate on women in politics by combining two elements: economic devel-opment and masculinity index of societies.

In 2019, Europe celebrated the centenary of wom-en’s rights in politics. However, women’s participa-tion in political and social life remains an ongoing issue. In most countries, women are underrepre-sented in the political arena and face difficulties in obtaining public positions. �e gender equal-ity index elaborated by the European Institute for Gender Equality in order to measure the differences between genders over time shows that although “power” is an area where the most progress has been made in the recent years, it is also an area in which the gender gap remains the largest1. �is is-sue is tackled by various organizations, such as the UN. In September 2000, world leaders met in the UN headquarters in New York to adopt the United Nations Millennium Project. It was decided that by 2015, eight Millennium Development Goals should have been reached. �ese were: to eradicate extreme hunger and poverty; to achieve universal primary education; to promote gender equality and empower women; to reduce child mortality; to improve maternal health; to combat HIV/AIDS, malaria and other diseases; to ensure environmen-tal stability, and to create a global partnership for development2. �e issues concerning women and their rights had already been debated in an inter-national forum, for example at the UN General As-sembly in December 1952, when the Convention on the Political Rights of Women was approved.

As the development paradigm began to change course towards sustainability (Frajman-Jakšić et al., 2010), Sustainable Development Goals were adopt-ed in January 2016, covering as many as 17 areas3, among them: no poverty, zero hunger, good health and well-being, quality education, decent work and economic growth, and gender equality. �e afore-mentioned Development Goals are the continu-ation of the Millennium Development Goals and they should be reached by 2030, thus the work on

the position of women in economy and politics will be continued.

�e data and analyses presented in the Millennium Development Goals Report 20154 prove that owing to targeted interventions, sensible strategies, suffi-cient resources, and political will, even the poorest countries can make great progress. For instance, the number of school-age children who could not go to school dropped by almost half worldwide – from 100 million in 2000 to about 57 million in 2015. De-spite successes, it turns out that goal #3 (Promoting gender equality and empowering women) is diffi-cult to achieve. �at is because women are still fac-ing discrimination in access to economic assets or in the area of public decision making (Braunstein, 2008). Moreover, women live in poverty more of-ten than men do5, which stems from the fact that women are still at a disadvantage in the labour mar-ket compared to men. On a global scale, about 75% of men of working age have employment, compared to only 50% of women. What is more, on average, women earn 24% less than men6 (Booth et al., 2003; Gherghina, 2015). In many countries, women with the same education as men have higher unemploy-ment rates and therefore find it more difficult to access job offers. On the other hand, women live longer and should gain more authority and reputa-tion (Hinek et al., 2019). �us, despite evident pro-gress in achieving the Millennium Goals, the area of gender equality still requires attention and work, especially in terms of enabling women to make in-dependent decisions in private and public life.

�e arguments for gender balance in economy and politics are numerous and show that women can positively influence politics and societies them-selves. �erefore, for example, the EU has commit-ted itself to achieving gender balance in political representation and participation in justice, equal-ity and democracy. Member States have been given specific recommendations on how to achieve this objective, including actions that the EU institu-tions, national governments, political parties, civil society, and the media can take. Today, the Euro-pean Union comprises 28 countries, but outside the EU, there are 22 other European countries that are also undertaking similar initiatives. �erefore, the aim of this article is to determine the degree of women’s participation in European parliaments, which will show the implementation of one of the main Millennium Goals. Our research included all


85God. XXXIII, BR. 1/2020. str. 83-99

countries and territories (including disputed ones) of Europe.

Today we can observe the shortage of women in public life, and, on the other hand, the need to ob-tain a certain critical mass that determines whether the voice of women in parliaments and politics will matter (Wängnerud, 2009; Krook, 2015). It is the analysis of this critical mass that is the keynote in this article. As Dingler et al. (2019) say, women in parliaments change the policy, and thus the future of a given society. For example, feminist issues are more often brought to the fore, as well as childcare, access to employment and equal pay, participation of women legislators in selected assemblies, bal-anced private and professional life, holidays, social security, and so on. �is seems to be an important issue, and that is why it is raised in many national forums, as well as included in the mentioned Mil-lennium and Sustainable Development Goals. �ese are the reasons for addressing this topic in our article.

As today the reasons for women’s presence or ab-sence in politics are unclear, we want to examine the basic determinants, which, in our opinion, are the wealth of the society and its character. Despite the fact that the awareness of the role of women in politics and the complexity of this problem have been growing recently (Krook, 2015; Coller et al., 2018), there are still few studies proving specific dependencies. Furthermore, there are no works covering Europe as a whole. �erefore, in these two aspects we see the value of this work.

2. Literature review

2.1 Participation of women in parliaments

Views on the existing division of power and opin-ions as to whether there should be more women in decision-making positions are very diverse and conditioned by many factors, including gender. Ac-cording to Felger and others (2017), the arguments for making more women present in politics can be divided into six groups: 1) justice argument, accord-ing to which women constitute about half of the population, and therefore have the right to be rep-resented as such; 2) experience argument – because women’s experiences differ from men’s experiences, hence they should be represented in discussions leading to the creation and implementation of poli-cies; 3) interest argument, stating that the interests of men and women are often different and even

contradictory, and therefore women are needed in representative institutions to express the interests of their group; 4) the critical mass argument, stat-ing that in order for the role of women to be no-ticed, their presence must reach a certain critical mass; 5) symbolic argument: women are attracted to political life if they have the right role models; 6) democracy argument that equal representation of women and men strengthens the democratiza-tion of governance both in countries undergoing political changes and in well-established democra-cies7. Gender researchers have repeatedly pointed out that the decisions of women’s representatives to provide public goods are different than those of men, and that women’s decisions are more likely to address issues that are of importance to voters (Ka-beer, Natali, 2013; Coka et al., 2017).

Research of Henderson and Jeydel (2014) show that women reach political positions in four ways:

1) Political family – women on this path come from families with long histories of political engagement.

2) Substitution – women who take over posi-tions, often temporarily, after their recently deceased fathers, husbands, or brothers.

3) Party member – women start at the bottom of the political ladder and work their way up, performing necessary functions to show their loyalty and usefulness to the party.

4) Political outsider – women usually lack political experience, but they keep up with new political changes and are an alternative to the status quo.

L. Wängnerud (2009), who focuses on women in parliaments in established democracies, writes that nowadays there is a global quota trend. �is is due to the fact that equal voting rights are not strong enough to guarantee participation of wom-en in parliaments, and there must also be direct equality among those elected to office. Currently, the threshold for the representation of women or men in any decision-making body in public and political life in the European Union is set at 40%8. In other European countries, those decisions are the responsibility of parliaments, which can adopt legislation and establish institutions to monitor the situation of women (Elomäki, 2015; Sophia, 2016). Some countries, such as Slovenia and France, made


86 God. XXXIII, BR. 1/2020. str. 83-99

significant progress, but the fact that the results of other countries have worsened shows that the in-crease in women’s political representation is not necessarily permanent and obvious.

It would seem that the model for other European parliaments should be the EU Parliament – howev-er, here, too, there are fewer women than men: only 35.8%9 (Macedo, Santos, 2013). Although admit-tedly in Europe much has been achieved in this re-spect, taking Finland as an example, where already in 1906 Finnish women were the first to gain the privilege to vote, and the first women in the world with the right to stand for election to parliament in full terms (Franceschet et al., 2019).

Nonetheless, it should be noted that there are two types of representation to be achieved through gender equality: descriptive and substantive10. Ac-cording to descriptive representation, the aim is to achieve the required number of women in political leadership, and the presence of women in politics is important in itself because it gives legitimacy to the governing institutions. On the other hand, substantive representation analyses the results that may be achieved owing to a better representation of women and emphasizes that women’s participation increases the probability that both the interests of women will be appropriately represented and the governing institutions will work more effectively thanks to distinctive women and their styles of governance. However, as has been mentioned, one hundred years after the suffragettes’ protests, gen-der equality in politics has still not been achieved (Galligan, Coleman, n.d.).

2.2 Women vs. political system of the state

Today there is a wealth of literature on gender rela-tions and democratic consolidation in Central and Eastern Europe, discussing the ways in which gen-der inequalities have been built and later overcome (Hughes and Paxton 2008; Rueschemeyer and Wol-chik, 2009; Kubbe, 2018; Chiva 2018). Undoubtedly, changes have been observed throughout Europe in recent years, as according to Chiva (2005, 2018), after the first election after the fall of socialism, the participation of women in the lower legisla-tive chambers of post-communist countries ranged from 4.6% in Romania to 10% in the Czech Republic and 15% in Latvia. Currently (2019), it is 18% in Ro-mania, 18.9% in the Czech Republic, and 30% in the unicameral parliament of Latvia. Initially, research would explain the absence of women in politics as

stemming from the lack of political ambitions in women. However, it is now recognized that other, more complex structural and social barriers make it difficult for women to fulfil their electoral mandates or to gain access to managerial positions (Austen, Mavisakalyan, 2016). �ere are also more specific obstacles for various groups of women based on their age, social class, ethnicity, religion, disability, or sexual orientation. S. Austen and A. Mavisakaly-an (2016) argue that women’s representation in par-liament is higher in countries whose constitutions protect the citizens against discrimination based on gender, i.e. in countries where the prohibition of discrimination is enshrined in the highest legal act. �us, the presence of women in politics, as well as in the economy, is not only a result of ambition or lack thereof, but also of the adopted political solu-tions (Beaurain, Masclet, 2016).

2.3 Women vs. socio-economic development

It should also be noted that there is a strong cor-relation between women and socio-economic de-velopment, as discussed by Jütting (2006) and Sim-sek (2014). �ey emphasize that on the one hand, women can stimulate economic development, and on the other hand – the socio-economic status of women depends on a given economy’s level of de-velopment. In other words, the relation between women and development is directly proportional and reflexive, because for example increased em-ployment of women can increase the average level of income in society. �e economic role of women naturally depends on other conditions, such as the family model and family code, a woman’s physical independence, civil liberties, as well as property rights (Beugelsdijk et al., 2017; Ndinda, Ndhlovu, 2018; Arif, 2019).

�e gender and economic development literature highlights a correlation of different factors that constrain women’s representation in politics. Spark et al. (2019) say that without a doubt, women lack sufficient financial resources to compete with men, which is connected to family wealth and educa-tion possibilities. Institutional barriers, including the educational systems and economic systems, fa-vour male candidates. Finally, culture and religion are important as well, because they shape attitudes which work against candidates, and often they re-strict women’s participation in the job market and public sphere to the ‘traditional’ place in the society.


87God. XXXIII, BR. 1/2020. str. 83-99

2.4 Women vs. nature of a society (Hofstede model)

As Gwiazda (2017) writes, in communist states gender equality was declared (everyone worked for the benefit of the party and the country), and yet there were no women in senior political positions. �is was a result of traditional gender roles, which is reflected in the masculinity index designed by G. Hofstede (2001). �us, the issue of the presence of women in parliaments is also associated with the masculine nature of a given society (Dimitrov, 2014; Minkov, 2018). Of course, the question of mascu-linity should be approached more broadly, so one needs to take into account the generally understood culture of the place. �is means that religion, val-ues, perception of the future, attitude to authori-ties and power, and so on, are important and they shape the roles of men and women. It should be remembered that the Hofstede model is not per-fect, because it was based on a white middle-class male study, and ignores e.g. non-cultural determi-nants and level of gender emancipation (Touburg, 2016; Minkov, 2018). �e model is also criticized for the lack of presence of women in its creation, as if women did not create a national culture (Mou-lettes, 2007); however, the general assumptions were repeatedly verified and its usefulness has been confirmed (Gorodnichenko, Roland, 2011; Minkov, 2018). Hofstadter’s study led to the extraction of a specific “cultural key” that was assigned to a given country. �e factors identified in the model are individualism and collectivism, distance to power, avoiding uncertainty, and a tendency to adapt to the prevailing conditions.

2.5 Gender inequity consequences

It is often emphasized in literature that women constitute half of all societies, but their specific needs and rights are not reflected in politics and social decisions (Elomäki, 2015). One can even talk about societies that are oppressive towards women, where sexism constantly draws attention to the dif-ferences between men and women to the disadvan-tage of the latter (Brennan, 1988; Hughes, Paxton 2008; Wejnert, Rodriguez, 2015). Such an approach later results in differences in the socio-economic status of men and women (Simsek, 2014). More-over, the socially accepted gender inequality might diminish women’s access to employment, financial services, education, and health care, and of course also the access to higher managerial positions, in-cluding politics11 (Kabeer, Natali, 2013; Polman,

2017). �erefore, gender inequity has many social and economic consequences, and of course, it is in-efficient because it does not maximize productive capacity, but on the other hand - it does not allow equal opportunities to come true in life. Accord-ing to Kabeer and Natali (2013), it results from the fact that when women are set aside of the salaried labour market, mediocre labour force quality will be lesser than if they are not, as more creative and hardworking female workers are kept from work in favour of less effective male employees. As a result, societies must deal with unused labour, worse eco-nomic development, and unfulfilled aspirations of people. �ese consequences also apply to the socio-political sphere.

3. Methodology

3.1 Data

Our intention was to explore all countries and ter-ritories forming Europe. �erefore, we collected the data for Albania, Andorra, Austria, Azerbaijan, Be-larus, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Republic of Cyprus, Turkish Republic of Northern Cyprus, Czech Republic, Denmark, Es-tonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, Ireland, Italy, Kazakhstan, Koso-vo, Latvia, Liechtenstein, Lithuania, Luxembourg, North Macedonia (FYROM), Malta, Moldova, Monaco, Montenegro, Netherlands, Norway, Po-land, Portugal, Romania, Russia, San Marino, Ser-bia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Transnistria (Transnistrian Moldovan Republic), Turkey, Ukraine, and United Kingdom. In total, there are 51 countries and territories (Table 1), and the data reflecting the situation in parliaments are from 2019, while the data on economic situation are from 2018.

Data sources were as follows:

1) In case of GDP, data they were extracted from CIA World Factbook12, and from OECD13.

2) Indicators regarding masculinity of societ-ies were taken from Hofstede Insights14.

3) Data on countries’ populations were re-trieved from Population of the world and countries15.


88 God. XXXIII, BR. 1/2020. str. 83-99

4) Data on parliaments were extracted from PARLINE database on national parlia-ments16.

�e possibility of making independent decisions and participating in political life has its reflection in parliaments, therefore the number of women in

the upper and lower houses can be an indicator of gender equality, as well as the general development of society, which refers to the Table 1.

Table 1 �e division of European countries according to the percentage of women in parliaments (n=51)

Countries – group under

20%

Share of women [in %]

Countries – group

between 20 and 29.9%

Share of women[in %]

Countries – group

between 30 and 39.9%


Countries – group over

40%


Transnistria 4.65 Czech Republic 20.64 Latvia 30 Norway 41.42

Ukraine 11.58 Slovakia 20.67 Kosovo 31.67 Finland 42.5

Hungary 12.06 Moldova 20.79 Germany 32.01 Sweden 46.71

Georgia 14.67 Lithuania 21.99 Netherlands 32.89

Malta 14.93 Kazakhstan 22.08 Belarus 33.13

Liechtenstein 16 Ireland 22.15 Italy 34.65

Russia 16.12 Slovenia 22.31 Austria 34.84

Azerbaijan 16.8 San Marino 23.33 Portugal 36.52

Turkey 17.48 Montenegro 23.46 France 36.76

Tur. Rep. of Cyprus 18 Poland 24.82 Serbia 37.65

Gre. Rep. of Cyprus 17.86 Luxembourg 25 Andorra 37.93

Greece 18.67 Bulgaria 25.83 Denmark 37.99

Bosnia and Herzeg. 19.3 Switzerland 28.05 Iceland 38.1

Romania 19.57 United Kingdom 29.06 N. Macedonia 38.33

Croatia 19.87 Monaco 29.17 Belgium 39.05

Albania 29.29 Spain 39.45

Estonia 29.7

Source: Own calculations based on PARLINE database on national parliaments, http://archive.ipu.org/parline-e/parli-nesearch.asp (Accessed on: April 20, 2019).

Unfortunately, not all information was acces-sible for all countries, which is why we had to remove from the final sample 16 countries for

which the masculinity index or GDP was not calculated. The final sample includes 36 coun-tries (Fig. 1).


89God. XXXIII, BR. 1/2020. str. 83-99

3.2 Research procedure

Firstly, using the official websites, we collected data about parliaments – in particular, data on the number of houses, total number of members, and number of women. It is significant that all European countries and the disputed territories have their own parliaments (there are no coun-tries without parliamentary systems, with the exception of the Vatican City). �e data on GDP and data about all Hofstede dimensions (power distance, individualism, masculinity, uncertainty

avoidance, long-term orientation, and indulgence) were collected as well.

We conclude that despite numerous educational campaigns, political appeals, and changes in the law, in the parliaments of the European countries which deem themselves developed and providing equal opportunities, there are still fewer women than men. Determinants of such a situation could be discussed, but it seems that among the main ones are those mentioned earlier: the economic development and masculinity index. �erefore, we

Figure 1 Women in the parliaments of selected European countries (in %; n=36)

Source: Own calculations based on PARLINE database on national parliaments,

http://archive.ipu.org/parline-e/parlinesearch.asp (Accessed on: April 20, 2019).

3.2. Research procedure Firstly, using the official websites, we collected data about parliaments – in particular, data on

the number of houses, total number of members, and number of women. It is significant that

all European countries and the disputed territories have their own parliaments (there are no

countries without parliamentary systems, with the exception of the Vatican City). The data on

GDP and data about all Hofstede dimensions (power distance, individualism, masculinity,

uncertainty avoidance, long-term orientation, and indulgence) were collected as well.

46,71

36,52

28,04

20,64

11,58

0 10 20 30 40 50

SwedenFinlandNorway

SpainBelgiumIceland

DenmarkSerbiaFrance

PortugalAustria

ItalyNetherlands

GermanyLatvia

EstoniaAlbania

United KingdomSwitzerland

average Bulgaria

LuxembourgPoland

SloveniaIreland

LithuaniaSlovakia

Czech RepublicCroatia

RomaniaBosnia and Herzegovina

GreeceTurkeyRussiaMalta

HungaryUkraine

Source: Own calculations based on PARLINE database on national parliaments, http://archive.ipu.org/parline-e/parli-nesearch.asp (Accessed on: April 20, 2019).


90 God. XXXIII, BR. 1/2020. str. 83-99

propose the following hypotheses (the first is the main hypothesis and the second is auxiliary):

1) �e presence of women in European parlia-ments is directly proportional to the eco-nomic development measured in GDP per capita; and

2) �e number of women in parliaments de-pends also on the type of society measured by the masculinity index.

Masculinity index is determined on the basis of factors such as: people being ego-oriented, impor-tance of money and things, living to work, high eco-nomic growth as a priority, solving conflicts with force, religion being the most important in life, men earning more than women, traditional family struc-tures, failure in life being perceived as a catastrophe (Hofstede, 2001: 297). �us, the index describes the mentality of society and its attitude towards the present and the past. We believe that apart from economic development, these are the key factors shaping the situation of women, and thus we as-sume that the lower the masculinity index in a given society, the higher the number of women in parlia-ments.

�e level of development of a given country can, of course, be assessed by means of various indicators, such as unemployment, inflation, or investments, depending on the adopted priorities. One of such indicators is also the GDP, which provides answers to many important questions concerning economic activity (Jütting et al., 2006). Of course, this is by no means a perfect measure, as it does not reflect ev-erything that happens in a country’s economy, but it is widely used and therefore allows international comparisons (Saunders, Dalziel, 2017).

In order to assess the degree of gender equality in European parliaments, we collected data on all Eu-ropean countries, including those which are only partially located in Europe (Russia, Turkey) or are disputed territories (Transnistria). As previously mentioned, data were collected for 51 European countries and territories for which the participa-tion of women in parliaments was calculated. In the analysis we included the following: percentage of women in national parliaments (PERWOMEN-PARLI); gross domestic product per capita (GDPC); masculinity dimension of the Hofstede cultural dif-ferences index (MASCULINITY), and we also used the Ordinarily Least Squares method (OLS) for sta-tistical calculations. All data is for 2018.

�e model we propose is as follows:

iiii uYMASCULINITRLIPERWOMENPA +++= 210 LGDPC βββ

iiii uYMASCULINITRLIPERWOMENPA +++= 210 LGDPC βββ

where i = 1,..., n, denotes the country, PERWOM-ENPARLI refers to the percentage of women in national parliaments, LGDPC is the logarithm of Gross Domestic Product per capita, MASCULIN-ITY is the masculinity dimension of the Hofstede cultural differences index. Finally, ui represents the error term. �e logarithm is used here to re-spond to skewness towards large values, i.e. a case in which one or a few values are much larger than the bulk of the data.

As a dependent variable, we calculated the percent-age of women in national parliaments (lower and upper houses), marked as PERWOMENPARLI. �e basic indicators calculated for the sample are shown in Table 2. Data for the sample were obtained from resources listed in Methodology part (3.1).

Table 2 Main statistical indicators calculated for the sample (n=36)

Mean Median Standard Deviation Minimum Maximum

PERWOMENPARLI 28.04 28.55 9.24 11.58 46.71

GDPC 39531.24 37092.45 19395.71 8800 107525.20

LGDPC 10.46 10.52 0.51 9.08 11.58

MASCULINITY 44.86 43.00 24.29 5.00 100.00

Variables: PERWOMENPARLI (percentage of women in national parliaments); GDCP (Gross Domestic Product per capita); LGDPC (logarithm of Gross Domestic Product per capita); MASCULINITY (masculinity dimension of the Hofstede cultural differences index).Source: Own calculations based on CIA World Factbook17, OECD18, Hofstede Insights19 and PARLINE database on natio-nal parliaments20 (all accessed on: April 20, 2019)


91God. XXXIII, BR. 1/2020. str. 83-99

According to our assumptions, as a dependent variable we calculated the percentage of women in national parliaments (PERWOMENPARLI) for lower and upper houses. We also included two independent variables: the logarithm of the Gross Domestic Product (GDP) per capita of each coun-try (LGDPC), and the masculinity dimension of the Hofstede cultural differences index (MASCULIN-ITY). For statistical calculations, due to the fact that we only had one period of data (year 2018), the ordinary least squares (OLS) method was used to estimate regression.

Table 2 presents main statistical indicators of the sample (n=36), and, as we can see, the mean of women in parliaments is only 28.04%, which is far from the equality value of 50%. In fact, the maxi-mum value observed in our sample is only 46.7%. �us, in all the studied countries men constitute a majority in the parliaments. As regards the mascu-linity dimension, we observed a large variation with values from 5 to 100. �is table also shows signifi-cant differences in the GDP per capita.

4. Results and discussion

In our considerations, we intend to establish the degree of implementation of the millennium goal concerning the promotion of gender equality and empowerment of women. It is a very complex problem, which manifests itself differently in dif-ferent countries. �erefore, we began with estab-lishing the basic information and measures for the selected countries (Table 2). As mentioned above, for the detailed analysis and calculation, the countries with the calculated masculinity in-dex have been selected, which is why their number has been reduced to 36. In Table 3, we calculated women’s participation in parliaments, and includ-ed information on GDP per capita and Hofstede’s masculinity index. For bicameral parliaments, the share of women in each chamber was calculated separately, and then the average of two values was

calculated. It should be noted here that the higher the PERWOMENPARLI variable (close to 100), the better; and the higher the GDPC variable, the better, while the lower MASCULINITY variable, the better (the country is more feminine). It can be noticed that the country with the largest represen-tation of women in the parliament is Sweden. As it was mentioned before, Sweden is the most devel-oped country in terms of gender equality, and it is also developed in terms of economic performance (it ranks 12th in Europe in terms of GDP). On the other side, there are countries like Ukraine, Hun-gary or Russia – former communist states, still struggling with problems and striving to improve their economic situation.

As far as the masculinity dimension is concerned, again Sweden has the best result with a low value of 5. Noticeable are also the good figures of Norway and Latvia. However, Slovakia presents the maxi-mum masculinity dimension with a figure of 100, followed by Hungary and Albania. Also noteworthy are the surprisingly high masculinity indexes pre-sented by Germany, Switzerland, Italy, and Austria. In terms of GDP per capita, the richest country is Luxembourg, followed by Norway, Switzerland, and Ireland, while Ukraine is the poorest country, followed by the majority of the former Yugoslav states.

The calculations of women’s participation in the parliaments of European countries presented in Table 3 show that the three countries with the highest participation of women are Scandinavian countries (Sweden: 46.71%, Finland: 42.5%, and Norway: 41.42%), where the GDP per capita is very high, while the masculinity index is very low (Sweden, Norway), or quite low (Finland). It is worth recalling that the average share of women in parliaments is 28.04% (as given in Table 2). This means that the two factors mentioned (GDP and masculinity index) can be of key importance here.


92 God. XXXIII, BR. 1/2020. str. 83-99

Table 3 Women in national parliaments, gross domestic product per capita and masculinity dimensi-on of the Hofstede cultural differences index by country (n=36)

Country PERWOMENPARLI GDPC MASCULINITYAlbania 29.29 12500.0 80Austria 34.84 50000.0 79Belgium 39.05 46600.0 54Bosnia and Herzegovina 19.30 12800.0 54Bulgaria 25.83 21800.0 40Croatia 19.87 26261.7 40Czech Republic 20.64 38021.5 57Denmark 37.99 54337.4 16Estonia 29.70 31700.0 30Finland 42.50 44500.0 26France 36.76 44100.0 43Germany 32.01 52574.3 66Greece 18.67 27800.0 57Hungary 12.06 28798.6 88Iceland 38.10 55322.1 10Ireland 22.15 76889.3 68Italy 34.65 38200.0 70Latvia 30.00 28378.1 9Lithuania 21.99 32400.0 19Luxembourg 25.00 107525.0 50Malta 14.93 41900.0 47Netherlands 32.89 53900.0 14Norway 41.42 62182.5 8Poland 24.82 29574.0 64Portugal 36.52 30500.0 31Romania 19.57 24600.0 42Russia 16.12 27900.0 36Serbia 37.65 15100.0 43Slovakia 20.67 32376.2 100Slovenia 22.31 36163.4 19Spain 39.45 38400.0 42Sweden 46.71 51404.8 5Switzerland 28.05 66299.6 70Turkey 17.48 28606.9 45Ukraine 11.58 8800.0 27United Kingdom 29.06 44909.1 66

Variables: PERWOMENPARLI (percentage of women on national parliaments); GDPC (gross domestic product per capita); MASCULINITY (masculinity dimension of the Hofstede cultural differences index).Source: Own calculations based on CIA World Factbook21, OECD22, Hofstede Insights23 and PARLINE database on natio-nal parliaments24 (all accessed on: April 20, 2019)


93God. XXXIII, BR. 1/2020. str. 83-99

Calculations also show that in terms of GDP per capita Luxembourg (over USD 107,500), Ireland (76,889.3) and Switzerland (66,299.6) have the highest level, while in these countries women’s par-ticipation in parliaments is quite average (22-28%). �is is due to the high masculinity index, which is around 50-70. �e countries with the lowest rates of women in parliaments are Ukraine, Hungary, and Malta. Ukraine has a low masculinity index (27), but it also has a very low GDP per capita, so it seems that the weak economic level has influenced the role of women in politics and society, because this country has the lowest number of women in parliament (11.58%). �is is confirmed by the sta-tistical calculations presented in Table 4.

Table 4 OLS regression of LGDPC and MASCULINITY on PERWOMENPARLI

Variables Model

LGDPC 6.829***(2.52)

MASCULINITY -0.124**(-2.15)

CONSTANT -37.865(-1.32)

F statistic 5.91***

Adjusted R Squared 0.219

Notes. (*) and (**) indicate significance levels of 5%, and 1%, respectively. T statistic in brackets.Variables: PERWOMENPARLI (percentage of women on national parliaments); LGDPC (logarithm of Gross Do-mestic Product per capita); MASCULINITY (masculinity dimension of the Hofstede cultural differences index).Source: Own calculations based on data in Table 3.

In Table 4, instead, we are searching for the rela-tionship between GDP and the number of women in parliament, and the calculations show that such a dependency does exist (and is statistically signifi-cant). As we can see, the beta coefficient presents a value of 6.8 and it is significant at 99% level. We ob-served that European countries with a higher GDP per capita have more women in their parliaments. �is finding confirms that gender equality is higher in more economically developed countries and it is in line with the arguments of Blair (2012), and Panda (2018). We have thus proven that there is a positive correlation between the number of women in parliament and GDP, and a negative correlation between the number of women and the masculin-ity index.

As the main contribution of our paper we perceive the evidence that throughout Europe, the level of social and political activity of women is associated with economic development, however, we real-ize that this is not the only factor. �us, we have also proven that countries with lower masculinity dimension have more female representatives in na-tional parliaments. In fact, we obtained a beta coef-ficient of -0.124 and the relationship is significant at 95% level. �is finding is important because, as we demonstrate, lower masculinity dimension helps to improve the gender equality politics, but also “the dominant values in a masculine society are achieve-ment and success; the dominant values in a femi-nine society are caring for others and quality of life” (De Mooij, Hofstede, 2001: 89). �is argument as-sumes that countries with more women in top posi-tions can create better conditions for living, which means better development in the future. One can, of course, wonder if other factors are (ir)relevant, such as the way parliamentary elections are conducted and the existence of gender quotas. However, among the top ten countries in Table 2 (Sweden, Finland, Norway, Spain, Belgium, Iceland, Denmark, Serbia, France, and Portugal) there is no one dominant political solution. Electoral parity for women is in force in France and Belgium (constitu-tional), and in Spain and Portugal (statutory). �e internal party regulations were applied in Sweden, while in the other five countries there are no for-mal regulations in this area (Gorzelany-Plesinska, 2011; Lu, 2016). �us, we can say that political solutions are not a key determinant. However, it seems that the significance of two factors can cer-tainly be demonstrated: prosperity measured by GDP per capita, and cultural specificity measured by the society’s masculinity/femininity index, while the role of gender quotas introduced by law is not fully evidenced. Poland can serve as an example. In 2011, gender quotas were introduced while prepar-ing electoral lists. In the elections of 2011 and 2015 more women did indeed appear on the lists, but the number of women elected to the parliament or performing important political function did not in-crease (Millard, 2014; Gwiazda, 2017). �is means that the mere presence of women on electoral lists does not guarantee their election. Figure 2 shows differences between two groups of countries: group A comprises 10 European coun-tries with the largest number of women in parlia-ment (39.61 on average), while group B comprises 10 countries with the smallest number of women (17.02 on average).


94 God. XXXIII, BR. 1/2020. str. 83-99

It can be concluded that larger numbers of wom-en in parliaments are accompanied by a higher GDP index and a lower masculinity index, while the low numbers of women in parliaments are ac-companied by a low GDP and a high masculinity index. �is means that the achievement of the new Sustainable Development Goals, in particular the situation of women, is not only dependent on the good will of politicians or promotional campaigns for gender equality, but also on the development of the economy, and the values of societies (Booth et al., 2003). Obviously, changes in both those areas require time.

In the following paragraphs, the considerations pertain to all of Europe, i.e. countries that are some-times ignored in literature on Europe, such as Tur-key, Georgia, or the Balkan states remaining out-side the EU. Although Turkey has GDPC at the level of USD 28,606, it is still much lower than the Euro-pean average (USD 39,531); it also has an above-av-erage masculinity index (45), therefore the share of women in the Turkish parliament is low (17.48%). Unfortunately, not all countries have calculated Hofstede indexes, which limited the possibility of precise calculations for all the countries of Europe. Among them is Georgia, whose society is nonethe-less similar to those of other post-communist states such as Ukraine or Poland (Tkeshelashvili, 2009); it can thus be assumed that Georgia will have a high masculinity index, which, along with low GDPC (USD 10,700) explains the very low share of women in the country’s unicameral parliament (14.67%).

Among the Balkan states, the situation is diversi-fied. Significant progress has been noted in North Macedonia, Kosovo, and Serbia, where gender quo-tas were introduced for the political representation of women. For instance, in Serbia, where GDPC is only USD 15,100, the parliament consists of 37.65% of women (with the average for Europe be-ing 28.04%). �is can be explained by the fact that in 2006 the quotas for women’s participation were put in the Serbian constitution and in the adopted electoral law, in accordance with which every third candidate on the list for the parliament had to be a person of the underrepresented gender (Lendák-Kabók, 2013). In addition, Serbia has applied for membership in the EU, and so it has to meet various requirements, among them those related to gender equality. �us, similar to France or Belgium, wom-en have access to parliament guaranteed by the Ba-sic Law. Other Balkan countries, such as Albania, Bosnia and Herzegovina, Montenegro, also tackled the issues of gender equality. In those countries, the share of women in parliaments is 29.3%, 19.3%, and 23.5% respectively, so it is higher than in Ukraine (11.58%), Hungary (12.06%), Turkey (17.48%), and even Greece (18.67%). Analysing the changes oc-curring in the Balkan countries, what should be emphasized are the law reforms and adjustments to the requirements of the EU.

Next to the most essential data, we have also col-lected information on the sex ratios and unemploy-ment levels in each country. We wanted to verify whether women really do constitute half of each population and whether it was an important factor

Figure 2 Differences between countries with the largest (A) and smallest (B) number of women in par-liaments

level. This finding is important because, as we demonstrate, lower masculinity dimension

helps to improve the gender equality politics, but also “the dominant values in a masculine

society are achievement and success; the dominant values in a feminine society are caring for

others and quality of life” (De Mooij, Hofstede, 2001: 89). This argument assumes that

countries with more women in top positions can create better conditions for living, which

means better development in the future.

One can, of course, wonder if other factors are (ir)relevant, such as the way parliamentary

elections are conducted and the existence of gender quotas. However, among the top ten

countries in Table 2 (Sweden, Finland, Norway, Spain, Belgium, Iceland, Denmark, Serbia,

France, and Portugal) there is no one dominant political solution. Electoral parity for women

is in force in France and Belgium (constitutional), and in Spain and Portugal (statutory). The

internal party regulations were applied in Sweden, while in the other five countries there are

no formal regulations in this area (Gorzelany-Plesinska, 2011; Lu, 2016). Thus, we can say

that political solutions are not a key determinant. However, it seems that the significance of

two factors can certainly be demonstrated: prosperity measured by GDP per capita, and

cultural specificity measured by the society’s masculinity/femininity index, while the role of

gender quotas introduced by law is not fully evidenced. Poland can serve as an example. In

2011, gender quotas were introduced while preparing electoral lists. In the elections of 2011

and 2015 more women did indeed appear on the lists, but the number of women elected to the

parliament or performing important political function did not increase (Millard, 2014;

Gwiazda, 2017). This means that the mere presence of women on electoral lists does not

guarantee their election.

Figure 2 shows differences between two groups of countries: group A comprises 10 European

countries with the largest number of women in parliament (39.61 on average), while group B

comprises 10 countries with the smallest number of women (17.02 on average).

Figure 2 Differences between countries with the largest (A) and smallest (B) number of

women in parliaments

Notes. Variables: MASCULINITY Av (average masculinity dimension of the Hofstede cultural differences index); GDPC/1000 Av (average Gross Domestic Product per capita divided by 1000); PERWOMENPARLI Av (average percentage of women in national parliaments).

17,0226,54887

49,3

39,6144,24468

27,8

0 10 20 30 40 50 60

PERWOMENPARLI AvGDPC / 1000 Av

MASCULINITY Avgroup A

group B

Notes. Variables: MASCULINITY Av (average masculinity dimension of the Hofstede cultural differences index); GDPC/1000 Av (average Gross Domestic Product per capita divided by 1000); PERWOMENPARLI Av (average per-centage of women in national parliaments).

Source: Own calculations.


95God. XXXIII, BR. 1/2020. str. 83-99

determining the number of women in parliaments. It turns out that the average sex ratio in European countries is 50.95% of women to 49.05% of men. Andorra (41.59%), Cyprus (47.4% and 48.91%) and Kosovo (48.5%) have the smallest proportion of women. In Estonia, Belarus, Lithuania, Ukraine, Transnistria, and Latvia, women constitute over 53% of the population. However, there is no statisti-cally significant correlation between the number of women in a given country and the number of wom-en in the country’s parliament. �ere is also no rela-tion between the number of women in parliaments and unemployment. �erefore, it seems that what can be certainly proven is the relationship between the number of women in the parliament and the level of GDP together with the masculinity index.

5. Conclusions and recommendations

As it was mentioned in the beginning, in 2019, Eu-rope celebrated the centenary of women’s rights in politics. At the beginning, it was a matter of rights themselves, but since the 1950s, the issue of wom-en’s participation in public life has become more prominent. �is is evident in the declarations of in-ternational organizations and the European Union on social and political priorities.

�e analysis of data collected for 51 European countries prove that although women constitute 50% of the population, their participation in public life remains small. Our calculations allow us to state that the participation of women in European parlia-ments is still low and on average it is 28.04%. Only three countries achieved a level above 40% (Swe-den, Finland, and Norway). No European country reached the index of 50%. As many as 15 out of 51 parliaments in Europe (29.41%) have a female participation rate below 20%. Determining clear reasons for this can be difficult, because societies are very different, however, two measures of a uni-versal nature can be used here: GDP per capita and masculinity index. So, the aim of this article was to determine the participation of women in European

parliaments and to verify two hypotheses, namely: 1) the presence of women in European parliaments is directly proportional to the economic develop-ment measured by GDP per capita; and 2) the lower the masculinity index in a given society, the higher the number of women in parliaments.

�e presented calculations confirm our hypotheses that the participation of women in parliaments de-pends on the economic level of the country and on the “masculinity” of society. Changes in both these areas are difficult and require time, so quick trans-formations should not be expected. Certainly, an appropriate information policy and the introduc-tion of legal regulations defining a specific level of women’s presence in politics (for example, the ex-istence of gender quotas) may also be of some im-portance, but the research to date does not prove a close relationship. It should be added that our calculations did not show any relationship between the total number of women in the country and the number of women in the parliaments, nor is the lat-ter related to factors such as rate of unemployment.

Undeniably, the number of women in parliaments is a result of numerous conditions. In addition to eco-nomic factors, the political system should be men-tioned here, including the constitution containing a non-discrimination clause covering gender. �ere are also other considerations involved such as the dominant religion (or lack thereof ), ethnic struc-ture of society, activity of non-governmental organ-izations, and electoral regulations, i.e. the method of electing representatives to parliaments and the existence of gender quotas. It can be assumed as well that other factors play some role too, for exam-ple, the level of internationalization of the economy, which brings different gender perceptions; how-ever, this also seems to be related to the economic development. �e above issues can be the subject of further research, however today it can be stated that the richer the country, the more women in parliaments, and the lower the masculinity index, again the more women in parliaments.


96 God. XXXIII, BR. 1/2020. str. 83-99

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10 Ibidem.

11 Polman, P. (2017), “To close the gender gap, we need to change how we think”, World Economic Forum, available at: https://www.weforum.org/agenda/2017/11/why-is-gender-equality-in-decline-and-how-can-we-reverse-it/ (Accessed on: April 20, 2019)

12 Central Intelligence Agency (2019), “The World Factbook”, available at: https://www.cia.gov/library/publications/the-world-factbook (Accessed on: April 20, 2019)

13 Gross domestic product, available at: https://data.oecd.org/gdp/gross-domestic-product-gdp.htm (Accessed on: April 20, 2019)

14 Hofstede Insights, available at: https://www.hofstede-insights.com/product/compare-countries/(Accessed on: April 20, 2019)

15 Population of the world and countries, available at: https://countrymeters.info/en (Accessed on: April 20, 2019)

16 PARLINE database on national parliaments, available at: http://archive.ipu.org/parline-e/parlinesearch.asp (Accessed on: April 20, 2019)



99God. XXXIII, BR. 1/2020. str. 83-99

18 Gross domestic product, available at: https://data.oecd.org/gdp/gross-domestic-product-gdp.htm (Accessed on: April 20, 2019)




22 Gross domestic product, available at: https://data.oecd.org/gdp/gross-domestic-product-gdp.htm Accessed on: April 20, 2019)



Joanna Hernik

Antonio Minguez Vera

R – E R

S

U literaturi se često naglašava kako žene čine polovinu svih društava, ali se njihove potrebe i prava ne uzi-maju uvijek u obzir u odlukama koje ta društva donose. Ujedinjeni narodi i druga međunarodna tijela trude se promijeniti položaj žena na svjetskoj razini putem različitih programa kao što su „Milenijski razvojni ciljevi“ i trenutačni „Ciljevi održivog razvoja“. Promicanje rodne ravnopravnosti i osnaživanje žena ubrajaju se u te ciljeve. Autori koji se bave rodnim i razvojnim pitanjima često ističu kako su žene nedovoljno isko-rišten čimbenik gospodarskog rasta. U ovome radu želimo situaciju sagledati iz druge perspektive i istražiti kako je aktivnost žena uvjetovana gospodarskim razvojem određene zemlje. Stoga je ovaj rad dijagnoza trenutačnog stanja, ali i traženje objašnjenja za neke međuovisnosti.

Razlozi za prisutnost ili odsutnost žena u politici nisu sasvim jasni; stoga će se ispitati glavne odrednice koje po mišljenju autora na to utječu, a to su bogatstvo društva i njegov karakter (maskulinitet ili feminitet). Cilj je rada analizirati sudjelovanje žena u parlamentima europskih zemalja i provjeriti hipotezu je li posto-tak žena u parlamentu izravno proporcionalan gospodarskom razvoju izraženom kao BDP po stanovniku. Osim glavne hipoteze ispituje se i pomoćna hipoteza koja se odnosi na maskulinitet društva (Hofstedeov model).

Na temelju analize može se zaključiti da je sudjelovanje žena u europskim parlamentima i dalje nisko (u prosjeku 28,04%), a nijedna europska zemlja nije došla do 50%. Potvrđena je statistička značajnost obje hipoteze te se može ustvrditi da sudjelovanje žena u europskim parlamentima ovisi o gospodarskom razvo-ju određene zemlje i vrsti društva. Jasno je da je te odrednice teško promijeniti, odnosno da su promjene relativno spore (iako je zamjetan rastući trend), te da imaju specifične uzroke. Nije utvrđen odnos između broja žena u parlamentima i drugih gospodarskih čimbenika, npr. nezaposlenosti.

Ključne riječi: Europa, gospodarski razvoj, rodna ravnopravnost, Hofstedeov indeks, parlamentarni izbori, ciljevi održivog razvoja

101God. XXXIII, BR. 1/2020. str. 101-114

WHO ATTENDS CHRISTMAS MARKETS AND WHY? ANALYSIS OF VISITOR STRUCTURE AND MOTIVATION FOR ATTENDING TWO CHRISTMAS MARKETS IN CROATIA


Received: December 13, 2019Accepted for publishing: March 8, 2020

Dina LončarićUniversity of RijekaFaculty of Tourism and Hospitality ManagementPrimorska 42,51410 Opatija, [email protected]: +38551294187

Tihana Cegur RadovićKarlovac University of Applied SciencesTrg J.J. Strossmayera 9,47000 Karlovac, [email protected]: +385917301596

Patricia SkendrovićZagorska 43,10000 Zagreb, [email protected]: +385915587087

A

�ere are various motives for visiting a festival or an event. Motivations explain why people behave in a certain way and are therefore of particular interest in the context of meeting consumer expectations and needs. In this paper, the authors investigate the motives for attending two increasingly popular Christmas Markets in Croatia. �e study compares the demographic structure of visitors, their travel behaviour and motivation for visiting the two markets and determines the level of their satisfaction and intentions for future behaviour. �e overall aim is to identify visitors’ needs and help destination managers organise ac-tivities that appeal to the target market. To this end, the authors have conducted desk and field research. Empirical research was conducted on the samples of Christmas Market visitors in Zagreb and Karlovac. �e samples were selected using the convenience sampling method. Data analysis was performed using de-scriptive, inferential and multivariate statistics. �e results of the research show that the travel behaviour of visitors and their motives for coming to the Christmas Markets differ, as well as their satisfaction level and loyalty. However, for both fairs a strong link was found between the visitors’ satisfaction with the visits and their intentions to revisit the two markets, recommend them, and share their experiences. �is study makes a small contribution to the field of consumer behaviour by enhancing our understanding of the motivations for visiting different tourist events. �e findings of this study may benefit festival and event managers by helping them deliver relevant customer experiences.

Keywords: Tourist events, festivals, Christmas Markets, tourist motives, satisfaction, loyalty

Dina Lončarić, Tihana Cegur Radović, Patricia Skendrović: Who attends Christmas Markets and why? Analysis of visitor structure and motivation for attending two Christmas Markets in Croatia



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1. Introduction

Festivals are cultural events (Frisby & Getz, 1989) that are considered a form of cultural tourism (For-mica & Uysal, 1998; Mahika et al., 2015). Festivals

and special events are the cultural resources of a destination that make possible the successful host-ing of visitors (Uysal et al., 1993: 5). �ey provide communities with a way to celebrate their unique cultural traditions and attract tourist and local


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visitors (Tanford: Jung, 2017: 209). �ese events are usually organized to create a positive image of a place and bring in money to the local community (Uysal et al., 1993: 5). Festivals offer various ben-efits to local communities because of their signifi-cant impact on the local economy (Getz, 1993) and reinforcement of social cohesion within commu-nities (Rao, 2001; Yoon et al., 2010). Local events have been known to boost sustainable tourism by facilitating learning about unique cultural herit-ages, ethnic backgrounds, and local customs (Yoon et al., 2010: 335). Tourism is often seen as having a negative impact on the cultural content and “au-thenticity” of cultural events (Richards, 2007). As the events grow, the budget also increases and the organization becomes more professional, the entire organization of the event depends on the sponsors’ will. Richards (2007) studied a traditional cultural event in Barcelona and found significant differences between different visitor groups and between dif-ferent groups of residents, suggesting the need for a more sophisticated analysis of the consumption of cultural festivals and its effects. Residents tend to have a constructive view of authenticity linked to cultural and social references, whereas visitors em-ploy a more existential view of authenticity related to their enjoyment of the event and experience of difference (Richards, 2007: 33). Varičak et al. (2019) examined the Karlovac Advent visitors’ experience and spending intention, and found that the correla-tion between “the hospitality of the local residents” and “spending intention” was higher among the visitors (trippers and tourists) than among the resi-dents. �ere is also a negative impact on the local residents caused by the influx of visitors that pro-duces congestion and noise (Brida et al., 2017). �e event could become so commercial that its original authentic traditions may be lost.

�e motivations of hosts must be identified in a timely and appropriate moment, as well as their views of a particular event, in order to keep them participating. Marketing strategies may have an important role in the organization of events (Ferreira, Sarmento, 2015). �e success of events depends on the collaboration and coordination between all stakeholders, public and private, and the local residents themselves. Other-wise, its sustainability is uncertain.

�ere are many studies on event motivations (Meang et al., 2016), customer segmentation (Chang, 2006), satisfaction (Sohn et al., 2016) and loyalty (Yuan, Jang, 2008; Tanford, Jung, 2017). �ere is also abun-

dant research on visitors’ motivations for attending festivals and special events (Uysal et al., 1993; Getz, 2008; Getz, 2010; Matheson et al., 2014; Meang et al., 2016; Tanford, Jung, 2017).

However, there are only a few papers exploring the motivation for visiting Christmas Markets (Brida et al., 2012; Brida et al., 2014; Brida et al., 2017; Bri-da, Tokarchuk, 2017; Marković et al., 2018; Vitner Marković et al., 2019). Christmas Markets have be-come very popular events in Croatia. �ey attract different types of visitors, such as families with chil-dren, young middle-aged and older people. In order for the organizers of Christmas Markets to come up with effective marketing plans, it is important they know who their visitors are, and why they have decided to visit these events. �e purpose of this research is to contribute to the debate on the mo-tivation for attending Christmas Markets. To that end, an analysis of the visitor structure and their motivation to attend the two Christmas Markets in Croatia was conducted. �is research seeks to an-swer the following questions: 1) Is there a difference in the visitor structure between the two analysed Christmas Markets? 2) Do the visitors’ motives for attending various Christmas Markets differ? 3) Do visitors differ in terms of the level of satisfaction and loyalty, i.e. do they intend to revisit the events, recommend and share the experience with friends and acquaintances? 4) Does satisfaction with a Christmas Market affect the visitors’ loyalty?

�e paper consists of five chapters. �e introduc-tory part, explaining the purpose and objectives of the research, is followed by a description of the ba-sic concepts used in the paper, a description of the methodology, and the presentation of the results of the empirical research. Discussion and conclusions of the research are given at the end of the paper.


�is section explains the motivations for attending different festivals and the concepts of satisfaction and loyalty of tourists.

2.1 Motivation to attend the festivals

To identify the reasons why tourists or other visitors decide to visit a particular destination, it is important to look at different motivation theories. Most au-thors use Maslow’s theory of motivation which pos-its that people are motivated by five basic categories of needs, extended by cognitive and aesthetic needs


103God. XXXIII, BR. 1/2020. str. 101-114

(Šimková, Holzner, 2015); and constructs like Iso Ahola’s push-pull theory (Iso Ahola, 1980). Push fac-tors (internal motives) are present as escaping mo-tives and pull factors (external stimulation) as seek-ing motives (Šimková, Holzner, 2014). Dann’s (1977) push and pull theory of motivations is another wide-ly accepted theoretical framework used for identify-ing tourists’ motivations. According to this theory people travel because they are “pushed” by internal drives (push/intrinsic factors) or “pulled” by exter-nal drives (pull/extrinsic factors) such as destina-tion attributes (Khuong, Ha, 2014; Albayrak, Caber, 2018). �ese theoretical frameworks have been used in the development of motivation scales for festivals and special events by researchers like Mannal & Iso-Aloha (1987), Uysal et al. (1993), Formica & Uysal (1996), Formica & Uysal (1998), Crompton & McKay (1997), Chang (2006), Lee & Beeler (2009), Yolal et al. (2012), Matheson et al. (2014). �e motives that pull the tourist towards a destination are the factors that make it attractive to potential visitors, such as festivals, arts and culture, and other events. Some of the main motives for travelling are to escape, get in touch with oneself, relieve stress, do what you like, strengthen family relationships, socialize, acquire prestige, do something new and exciting, and to learn. McIntosh et al. (1995) analysed motivation using four categories of motivators: physical, cultural, interpersonal and motivators of status and prestige (Cooper et al., 2008). Physical motivators involve refreshment of body and mind, health purposes and sports; cultural motivators inspire a person to learn something new about other cultures; interpersonal motivators include a desire to meet new people, so-cialize with family and friends; status and prestige motivators include the desire for recognition from others (Cooper et al., 2008).Studies have found that gender and age significantly affect the perceived image of tourist destinations. �ere are also interpersonal reasons and wishes to be physically active s which appear to be the promi-nent motives today. �e perceived image is the im-pression of the destination and it plays a crucial role in the tourists’ decision to visit a particular destina-tion (Jönsson, Devonish, 2010). Uysal et al. (1993) examined the theoretical frame-work of event motivation dimensions among differ-ent groups of individuals. �e study has revealed that older visitors tend to place more importance on Event Novelty than younger visitors. It is inter-esting that Friday visitors placed significantly more importance on socialization than Saturday visitors.

In today’s modern world we can say that the main reasons for choosing a destination are influenced by online reviews. Potential tourists can be motivated to visit a destination based on images they found online, but the visit can change their impression of the destination. Measurement of tourist motivation is seen as the key to satisfied visitors, attracting more visitors, predicting future demand and developing products and services that meet the tourists’ needs (Wolfe, Hsu, 2004; Albayrak, Caber, 2018). Differ-ences in motivation are evident according to the visitor type; key differences have been identified be-tween domestic and foreign visitors where the mean scores for all motivation factors of foreign visitors were found to be consistently higher than those of domestic visitors (Lee, 2000; Matheson et al., 2014). Maráková et al. (2018) identified the main factors which motivate visitors to attend traditional cultural events in Slovakia, and examined their viability as the basis for festival market segmentation (recon-nection seekers, experience and equilibrium seekers, multi-purpose seekers and change and togetherness seekers). �e present study investigates the motiva-tions of visitors to the Advent in Zagreb and Karlo-vac. A study by Vitner Marković et al. (2019) which looked into the motivation for visiting the Karlovac Advent concluded that it varies depending on the visitor’s age (Vitner Marković et al., 2019). Brida et al. (2012) used the sequential non-linear clustering method to analyse primary data collect-ed at three Christmas Markets in Northern Italy: Torino, Bolzano and Brunico (Brida et al., 2012). �e analysis identified three cluster segments ‘busi-ness people’, ‘Christmas fans’ and ‘general tourists’ (Brida et al., 2012). Brida et al. (2014) used the Bagged Clustering method to identify motivation and expenditure clusters for Christmas Market in Merano, North Italy (Brida et al., 2014). �e objec-tive of another study by Brida et al. (2017) was to estimate the economic or social value of the Christ-mas Market to understand in what way the event creates a benefit for society (Brida et al., 2017). �e findings of that study suggest that the use and rec-reational values for tourists differ according to trav-el costs, the type of visit experience and perceived authenticity. �ey also depend on whether tourists visit for one or several days (Brida et al., 2017).

2.2 Satisfaction with festivalsIn recent years, many authors have shown interest in examining the motivation – satisfaction relation-ship. Satisfaction has proven to have a positive influ-ence on the tourists’ post-purchase behaviour such as recommendations (Hui et al., 2007; Prebensen et


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al., 2010; Albayrak, Caber, 2018) and intention to revisit (Bigné et al., 2005; Alegre, Cladera, 2009; Albayrak, Caber, 2018). According to Oliver (1997), satisfaction is considered as consumer judgment about goods and services (Kim et al., 2010). It is the outcome of a subjective evaluation about whether the selected alternative meets or exceeds expecta-tion (Kim et al., 2010). �e researchers have used different approaches to investigate the relation-ship between tourist motivation and satisfaction. One group of authors propose that motivation is the sole determinant of overall satisfaction (Yoon, Uysal, 2005; Pan, Ryan, 2007; Schofield, �omp-son, 2007; Qiao et al., 2008; Prebensen et al., 2010, Savinovic et al., 2012; Battour et al., 2012; Lee, Hsu, 2013; Lee et al., 2014; Caber, Albayrak, 2016; Al-bayrak, Caber, 2018). Anderson et al. (1994) define overall satisfaction as an overall evaluation based on the total purchase and consumption experience with a good or service over time (Yoon et al., 2010). �e second group of researchers use motivation together with other variables as the antecedents of overall satisfaction (Meng et al., 2008; Huang et al., 2014; Tang, 2014; Albayrak, Caber, 2018). �e third group of researches use the same items of motiva-tion for the measurement of respondents’ satisfac-tion (Ross, Iso-Ahola, 1991; �omas, Butts, 1998; Fluker, Turner, 2000; Severt et al., 2007; Kao et al., 2008; Correia et al., 2013; Albayrak, Caber, 2018). All of these approaches assume that there is a linear relationship between motivation and satisfaction (Albayrak, Caber, 2018).Satisfaction in the context of festivals is defined as the visitor’s overall satisfaction with the festival, as satisfaction with specific attributes is classified in the relevant attribute category (Tanford, Jung, 2017). However, merely understanding the visitors’ motives is insufficient to guarantee visitor satisfac-tion and loyalty. �e motives also need to be consid-ered when creating attractive festival qualities and features which will influence visitor behaviour (e. g. satisfaction and loyalty) (Yoon et al., 2010). Baker and Crompton (2000) took the initiative in inves-tigating the relationships between festival quality, satisfaction and loyalty (Yoon et al., 2010). Building on four dimensions of festival quality, they discov-ered that the quality of a festival affected behav-ioural intentions, attitudinal loyalty to the festival, and the willingness to pay more, more significantly than visitor satisfaction. �e satisfaction of festival visitors has been described as a useful predictor of their future behavioural intentions (Baker, Cromp-ton, 2000; Kim et al., 2010).

Many studies have found that key elements that af-fect tourist satisfaction with festivals and events are various motivations (e.g., novelty, escape, event at-tractions and socialization) (Lee et al., 2004; Kim et al., 2010). Past studies have emphasised that satis-faction is a significant direct factor influencing cus-tomer loyalty in tourism and hospitality (Kim et al., 2010). �e customers are more likely to have a bet-ter service experience if they take part in producing the experience themselves (Harris et al., 2001; Or-gan et al., 2015). �is co-creation through customer interaction leads to greater satisfaction levels (Bij-molt et al., 2010; Brodie, Hollebeek, 2011; Organ et al., 2015). Research has also suggested that festival visitors’ emotions are related to their satisfaction levels (Grappi, Montanari, 2011; Lee et al., 2008; Mason, Paggiaro, 2012; Organ et al., 2015).

2.3 Loyalty to festivalsLoyalty is defined as repeating purchase behaviour and is characterised in terms of repurchase inten-tions, WOM communications and recommen-dations (Lee et al., 2006: 218). Oliver and Burke (1999) showed that creating loyalty depends on achieving customer satisfaction, which is affected by expectations (Kim et al., 2010). �ey suggested there is a significant positive correlation between the consumers’ satisfaction and their future inten-tions (Kim et al., 2010). Past studies have suggested that perceptions of service quality and value affect satisfaction. Satisfaction furthermore affects loy-alty and post-purchase behaviours (Oliver, 1980; Cronin, Taylor, 1992; Fornell, 1992; Andresen, Sul-livan, 1993; Tam, 2000; Bignie et al., 2001; Choi, Chu, 2001; Petrick, Backman, 2002; Chen, Tsai, 2007; Chen, 2008; De Rojas, Camarero, 2008; Chen, Chen, 2010). Satisfied tourists may revisit a desti-nation and recommended it to other tourists, or express favourable comments about the destina-tion and not recommend it to others. Dissatisfied tourists may express negative comments about a destination and damage its market reputation (Re-isinger, Turner, 2003; Chen, Chen, 2010). �e de-gree of destination loyalty is frequently reflected in the tourists’ intentions to revisit the destination and in their willingness to recommend it (Oppermann, 2000; Chen, Tsai, 2007; Chen, Chen, 2010). In the hospitality and tourism field, several studies have been conducted to investigate the relationship between consumer satisfaction and consumer loy-alty (Kim et al., 2010). Loyalty is most often defined by behavioural intentions (Mason, Paggiaro, 2012), which include intentions to revisit the festival (Choo et al., 2016) and recommend it to others (Croes, Lee,


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2015; Tanford, Jung, 2017). A few studies measure loyalty as expenditures, which include wine buying at an Australian wine festival (Brower, 2014) and in-tentions to donate at a charity festival (Inoue, 2016; Tanford, Jung, 2017). Some studies report significant relationships between satisfaction and loyalty, sup-porting the well-documented relationship between these two variables in the hospitality literature (Tan-ford, 2016; Tanford, Jung, 2017). A study by Tanford and Jung (2017) confirmed that tangible festival attributes (activities, authenticity, environment, concessions) are more strongly re-lated to satisfaction, whereas intangible attributes (escape, socialization) are more important for loy-alty. Tangible attributes are experienced “in the mo-ment” and contribute to visitors’ satisfaction with the experience. Because of its strong relationship with loyalty, overall satisfaction may in turn influ-ence intentions to return. Escape and socialization may evoke an emotional reaction so that visitors want to attend the festival again to experience the same feelings. In a study into Zagreb Christmas Market by Marković et al. (2018) tourist loyalty is defined as visitors’ intention to return to the food festival and recommend it to other people.

3. Methodology

To achieve the research objectives and answer the research questions, an empirical study was con-ducted on two Christmas Markets, one in Zagreb and another in Karlovac, Croatia, in the period from December 1, 2018 to January 6, 2019. We chose the Zagreb Advent since it is the largest and best-organized Christmas Market in Croatia, which is attracting more and more visitors every year. It is a city-wide street party in the Christmas spirit. It offers a variety of events, plenty of fun, excellent food, unique events, art, and unforgettable Christ-mas atmosphere and experience. Visitors can visit the ice park, the Advent in Zrinjevac and the Euro-pean Square, the Advent in the Tunnel, the Advent at Stross and Vranyczany Platou. �e Zagreb Ad-vent was voted the best Christmas Market in Eu-ropa for three years in a row (2016, 2017 and 2018). �e first Karlovac Advent took place in December 2017. For now, it is a small local Christmas Mar-ket. �e program for families with children starts in the morning and consists of workshops, storytell-ing, concerts for children and concerts by children attending Karlovac School of Music. In the after-noons there are performances of folk ensembles and students of Karlovac School of Music, while

the evenings are reserved for concerts by popular Croatian singers.

A self-administered survey was conducted as a data collection technique. �e questionnaire was com-piled in English and translated into Croatian. In ad-dition to demographic questions about gender and age, the questionnaire included questions about the number of previous visits, duration of stay, travel companions and accommodation. �e respondents could choose one of the offered answers. Scales from the literature were used to measure motiva-tion, satisfaction, and loyalty. Visitors responded by expressing their agreement on a Likert-type scale from 1 (strongly disagree) to 5 (strongly agree). Event motivation scale (Mohr et al., 1993), consist-ing of 22 items, was used to determine the moti-vation for attending the two fairs. Satisfaction with the experience was measured by four items taken from the paper written by Prebensen et al. (2015) to which a fifth item was added (“I will revisit the Zagreb/Karlovac Advent in the future.”). Visitor loyalty was measured using three scales: inten-tion to recommend the destination (three adapted items taken from Kim et al., 2016), intention to re-visit destination (three items taken from Kim et al., 2015), and sharing the experience (two items taken from Buonincontri et al., 2017).

�e survey was conducted on a purposive sample of visitors. A purposive sampling method was used since the accurate size of the population could not be determined. Trained researchers approached the people who visited the fair. Domestic visitors com-pleted the questionnaire in Croatian and foreign visitors completed it in the English language. A to-tal of 249 valid questionnaires were collected (113 in Karlovac and 136 in Zagreb). �e descriptive, in-ferential and multivariate statistics were used in the data analysis using a software package SPSS v. 25.

4. Findings

To answer the first research question, a descrip-tive analysis of the sample (Table 1) was carried out and the differences between the visitors were determined using the chi-square test. �e sample comprised 249 respondents. �ere were more women (62.7%) than men (36.8%). Most visitors (49%) were aged 18-25 years, while those aged 55or more accounted for only 8.8% of the sample. No differences were found among Advent visitors in Karlovac and Zagreb in terms of gender and age structure. In addition, most of them had already


106 God. XXXIII, BR. 1/2020. str. 101-114

visited the Advent. However, the sample varied in other characteristics. Domestic visitors accounted for 47.8% and foreign 52.2% of all tourists who visited the Zagreb Advent. �e Advent in Karlo-vac was visited mostly by domestic visitors. �e difference in the structure of visitors (domestic vs. international) for both Christmas Markets is

statistically significant (χ2 = 82.523; df=1, p<0.01). Statistically significant differences between the visitors of the Zagreb Advent and the Karlovac Advent were also found in the number of over-nights (χ2 = 46.002; df=3, p<0.01), travel partners (χ2 = 26.576; df=5, p<0.01), and the type of accom-modation (χ2 = 11.328; df=3, p=0.01).

Table 1 Sample structure (N = 249)

CharacteristicsZagreb Karlovac Total

Test N % N % N %

GenderFemale 86 63.2 70 61.9 156 62.7 χ2 = 0.027; df=1

(p>0.05)Male 50 36.8 43 38.1 93 37.3Age18 – 25 71 52.2 51 45.1 122 49.0

χ2 = 6.186; df=5(p>0.05)

26 – 35 24 17.6 13 11.5 37 14.936 – 45 18 13.2 25 22.1 43 17.346 – 55 11 8.1 14 12.4 25 10056 – 65 8 5.9 7 6.2 15 6.066 and more 4 2.9 3 2.7 7 2.8Country Croatia 65 47.8 113 100 178 71.5 χ2 = 82.523; df=1

(p<0.01)Other countries 71 52.2 0 0 71 28.5�e number of visits First visit 22 16.2 22 19.5 44 17.7 χ2 = 0.460; df=1

(p>0.05)One or more visits before 114 83.8 91 80.5 205 82.3�e number of overnight stays 1 night 24 17.6 62 54.9 86 34.5

χ2 = 46.002; df=3(p<0.01)

2-3 nights 75 55.1 22 19.5 97 39.04-7 nights 16 11.8 9 8.0 25 10.0More than 7 nights 21 15,4 20 17.7 41 16.5Travel partnersAlone 10 7.4 27 23.9 37 14.9

χ2 = 26.576; df=5(p<0.01)

With a partner 11 8.1 18 15.9 29 11.6Family (with children) 28 20.6 29 25.7 57 22.9Family (without children) 11 8.1 3 2.7 14 5.6Friends/colleagues 71 52.2 33 29.2 104 41.8Organised group of people 5 3.7 3 2.7 8 3.2AccommodationHotel 21 15.4 18 15.9 39 15.7

χ2 = 11.328; df=3(p=0.01)

Hostel 33 24.3 23 20.4 56 22.5Private accommodation 49 36.0 24 21.2 73 29.3Relatives and friends 33 24.3 48 42.5 81 32.5

Source: Research results.


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Visitors to the Zagreb Advent stayed longer (82.3% stayed longer than one night) than visi-tors to the Karlovac Advent (45.2% stayed lon-ger than one night). The Zagreb Advent visitors usually come with friends and acquaintances (52.2%) as opposed to the Karlovac Advent visitors (29.2%). Most of those who attended the Karlovac Advent stayed with relatives and friends (42.5%), while those who visited the Za-

greb Advent stayed in hotels (24.3%) and private accommodation (36%).

�e second research question focused on identify-ing the motives for visiting the two Christmas Mar-kets. To reduce the number of manifest variables to a smaller number of factors, explorative factor analysis was performed. Five factors were extracted that explain 59.42% of the variance (Table 2).

Table 2 Results of the explorative factor analysis (N = 249)

Itemnumber Item Factor

loadingsTotal variance explained (%)

Alpha coefficient

FACTOR 1- Unique experience (event novelty) 25.80 0.798

m_11 Because the Advent in Zagreb/Karlovac is unique. .833

m_13 Because it is stimulating and exciting. .779

m_12 Because I like the variety of things to see and do. .732

m_10 Because I enjoy arts and crafts. .525

m_15 To enjoy the food. .477

m_20 Because I heard about the Advent in Zagreb/Karlovac and it sounded like fun. .459

m_16 To get away from everyday life. .403

FACTOR 2 – Family togetherness 13.03 0.955

m_8 To help bring the family closer together. .964

m_9 Because I thought the entire family would enjoy it. .950

m_7 So that all family members could do something together. .948

FACTOR 3 – Hanging out with friends 8.33 0.930

m_2 So that I could do things with my companions. .954

m_1 So that I could be with my friends. .951

FACTOR 4 - Excitement/thrill 6.50 0.704

m_19 Because I was curious. .739

m_17 Because I enjoy the Advent crowd. .639

m_14 To observe other people attending the Advent. .576

m_21 To experience new and different things. .531

m_18 To change my daily routine. .421

m_22 Because I enjoy special events. .412

FACTOR 5 - Socialization 5.75 0.643

m_6 To be with people who enjoy the same things I do. .679

m_5 For a change of pace of everyday life. .620

m_4 For a change to be with people who are enjoying themselves. .577

m_3 To see the entertainment. .374

Source: Research results


108 God. XXXIII, BR. 1/2020. str. 101-114

By applying the t-test for independent samples, the difference in the mean values was established

among Advent visitors in Zagreb and Karlovac (Ta-ble 3).

Table 3 Results of the t-test for the main motive for attending the Advent (N = 249)

Factors Zagreb Karlovac

F t sigM* SD** M SD

Unique experience 4.16 0.45 3.79 0.85 45.189 4498 0.000

Family togetherness 2.41 1.59 3.85 1.25 23.043 7838 0.000

Hanging out with friends 4.43 0.91 4.24 0.95 0.157 1611 0.108

Excitement/thrills 3.84 0.61 3.73 0.84 20.078 1152 0.251

Socialization 3.85 0.72 4.06 0.73 0.301 2232 0.027

* M = arithmetic mean, ** SD = standard deviation Source: Research results

�e main motives of the Zagreb Advent visitors are ‘Hanging out with friends’ (M = 4.43, SD = 0.91) and ‘Unique experience’ (M = 4.16, SD = 0.45), and the lowest average mean was obtained for the motive ‘Family togetherness’ (M = 2.41, SD = 1.59). �e pri-mary motives of the visitors to the Karlovac Advent include ‘Hanging out with friends’ (M = 4.24, SD = 0.95), ‘Socialization’ (M = 4.06, SD = 0.73) and ‘Family togetherness’ (M = 3.85, SD = 1.25). Statisti-cally significant differences were found in the mean

values of the three factors that reflected the motives for attending the Advent: Unique experience (t = 4498, p < 0.01), Family togetherness (t = 7838, p < 0.01) and Socialization (t = 2232, p < 0.05). Furthermore, visitor loyalty and satisfaction with the experience measured by intention to recom-mend the destination, intention to revisit the des-tination and share the experience were explored to answer the third research question. �e results are shown in Tables 4 and 5.

Table 4 Results of the reliability test for satisfaction and loyalty (N = 249)

Item number Construct / item Alpha coefficient

SATISFACTION WITH THE EXPERIENCE 0.901

s_1 I am glad that I have decided to visit Zagreb/Karlovac Advent).

s_2 I have enjoyed this experience..

s_3 I will participate in similar types of experiences in the future.

s_4 I will revisit the Zagreb/Karlovac Advent in the future.

s_5 I will recommend the Zagreb/Karlovac Advent to others.

INTENTION TO RECOMMEND THE DESTINATION 0.914

rec_1 I would like to recommend others to visit Zagreb/Karlovac.

rec_2 I would say positive things about Zagreb/Karlovac to others.

rRec_3 If someone is looking for a good travel destination, I would suggest to him/her to visit Zagreb/Karlovac.

INTENTION TO REVISIT THE DESTINATION 0.813

rev_1 Revisiting Zagreb/Karlovac would be worthwhile.

rev_2 I will revisit Zagreb/Karlovac.

rev_3 I would like to stay longer in Zagreb/Karlovac.

SHARING THE EXPERIENCE 0.674

sh_1 I have shared my experience of the visit with others.

sh_2 I will tell others about my experience of the visit.



109God. XXXIII, BR. 1/2020. str. 101-114

�e research results in the above table indicate that all constructs are reliable (Taber, 2018), hav-

ing Cronbach alpha coefficients between 0.67 and 0.91.

Table 5 Results of the t-test for satisfaction and loyalty (N = 249)

Construct Zagreb Karlovac

F t sigM* SD** M SD

Satisfaction with the experience 4.64 0.56 4.27 0.82 15.345 4.193 .000

Intention to recommend the destination 4.52 0.84 4.14 1.04 135.771 7.321 .000

Intention to revisit the destination 4.51 0.76 4.20 0.92 50.090 6.203 .000

Sharing the experience 4.55 0.69 3.92 1.08 31.251 5.571 .000

* M = arithmetic mean, ** SD = standard deviation Source: Research results

It is evident that the mean scores for visitor satisfac-tion and intentions are higher for the Zagreb Ad-vent compared to Karlovac Advent in all measured constructs. Furthermore, all differences are statisti-cally significant.

A correlation analysis using a Pearson’s correlation coefficient was also performed to determine wheth-er there was a correlation between visitor satisfac-tion and loyalty (Table 6).

Table 6 Results of the correlation analysis (N = 249)

Satisfaction with the experience

Intention to recommend the destination

Intention to revisit the destination

Sharing of the experience

Satisfaction with the experience 1

Intention to recommend the destination 0.692* 1

Intention to revisit the destination 0.684* 0.856* 1

Sharing the experience 0.483* 0.631* 0.615* 1

* Correlation is significant at the 0.01 level (2-tailed). Source: Research results

�e correlation analysis showed that there were statistically significant correlations between the ob-served constructs. �e magnitude of the correlation coefficient ranges from 0.483 to 0.692. (p<0.001). Visitor satisfaction is highly correlated with inten-tion to recommend (r = 0.692, p<0.001) and inten-tion to revisit the destination (r = 0.684, p<0.001), while the correlation with intention to share the experience is somewhat lower (r = 0.483, p<0.001).

5. Conclusions

Christmas markets have become quite popular winter events in almost all major cities in Croa-tia. Zagreb was one of the first Croatian cities that recognised the importance of Christmas Markets

for tourism, and turned the Zagreb Advent into a recognisable brand. �is is supported by the fact that it has been voted the best Christmas Market in Europe for three years in row, based on the survey conducted by European Best Destinations organi-sation. Since many other cities are faced with the problem of tourism seasonality, organising such events during winter, which for Croatia is the low season, is a good opportunity for creating a holi-day atmosphere for the locals and attracting visitors from other cities and countries.

Empirical research has been conducted to answer the research questions concerning two Christmas markets in Croatia of which one is recent and local and the other was the best in Europe several times.


110 God. XXXIII, BR. 1/2020. str. 101-114

�e first research question aims to determine whether there are differences in the visitor struc-ture between the two Christmas Markets. It may be concluded that there is a difference in the demo-graphic structure of visitors and their travel behav-iour. �e visitors to the Zagreb Advent were mainly foreign visitors (52.2%), while all of the visitors to the Karlovac Advent were domestic (100%). �ere is also a statistically significant difference in the number of overnights, travel partners and the type of accommodation. �e Zagreb Advent visitors stay longer and usually come with friends and acquaint-ances (52.2%) compared to the visitors of the Ad-vent in Karlovac (29.2%). �e Karlovac Advent visi-tors mainly stay with relatives and friends (42.5%), while the Zagreb Advent visitors are more likely to stay in hotels (24.3%) and private accommodation (36%). �is confirms that the Zagreb Advent is an internationally recognized tourist event, while the Advent in Karlovac is still a local event.

�e second research question asked whether the visitors’ motives for attending various Christmas Markets differ. �e Zagreb Advent visitors’ main motives were ‘Hanging out with friends’ and ‘Unique experience’, while the visitors to the Karlovac Ad-vent were mainly motivated by ‘Hanging out with friends’, ‘Socialization’ and ‘Family togetherness’. In their study into traditional cultural events in Slova-kia, Marâkovâ et al. (2018), identified six domains of visitors’ motivations: to experience something new and different, to be with friends and family, to reconnect with culture and tradition, to social-ize, to restore equilibrium, and for a change from everyday life. �e study by Vitner Marković et al. (2019) found that the motivation factors of the Ad-vent visitors varied depending on their age. Some came for entertainment, others came to enjoy the Christmas atmosphere, food and wine, and yet oth-ers came to buy souvenirs and local products. An understanding of the socio-demographic structure of tourist event visitors, the tourist and consumer habits, as well as motivations for visiting fairs is of extreme importance for destination marketers and market segmentation. Understanding what moti-vates visitors to attend a certain event is essential for the development of attractive event offerings and an effective marketing mix aimed at increasing visitor numbers.

�e third research question inquired whether visi-tors differ in terms of their satisfaction and loyalty that manifests by the intention to revisit, intention

to recommend it to friends and acquaintances, and intention to share the experience. Research re-sults indicate that the mean scores for visitor sat-isfaction and intentions are higher for the Zagreb Advent than the Karlovac Advent in all measured constructs, and all the differences are statistically significant. �is additionally justifies the higher sta-tus of the Zagreb Advent which has won multiple awards and become recognisable on a global level. Furthermore, it shows that the visitors of a smaller local market have high expectations and are likely to compare a local Christmas market with other mar-kets, including the Zagreb Advent fair. �erefore, in order to enhance visitor satisfaction, the quality of tourist offerings should be increased which will result in their intention to revisit the event, recom-mend it to friends and acquaintances, and share the experience.

�e fourth question seeks to establish whether sat-isfaction with a Christmas Market affects visitors’ loyalty. As anticipated, visitor satisfaction is strong-ly correlated with the intention to recommend and intention to revisit the destination, while the cor-relation with the intention to share the experience is somewhat weaker. A study into the Strasbourg Christmas Market conducted by Castéran and Roederer (2013) concluded that if a tourist site is perceived as authentic, the frequency of visits in-creases. It can be concluded that the satisfaction of market visitors determines their loyalty to the des-tination, which means that they are more likely to visit it during other periods of the year.

�e data and information obtained through this research may be useful to managers of tourist des-tinations in creating high-quality tourist offerings and positioning the destination. �e Zagreb Advent is already recognised as one of the best in Europe. It is branded as a Christmas Market which com-petes with other Advent destinations in Europe. To maintain that position, it is necessary to continu-ously innovate and diversify the tourist offerings to attract old and new visitors. To attract more tour-ists to smaller Christmas markets, destination man-agers should develop marketing strategies that will promote it to a wider audience so that it does not remain a local seasonal event, and enhance the visi-tor experience by extending the tourist offer. In the case of the Karlovac Advent, there is a possibility of recommending the visitors of the Zagreb Advent to visit Karlovac for a day since it is only 50 kilometres away.


111God. XXXIII, BR. 1/2020. str. 101-114

�e present study has several limitations which have to be taken into consideration in future research. Different demographic characteristics of the visi-tors might have influenced the visitors’ perception of event experience, satisfaction and loyalty. �us, future research could conduct market segmenta-tion on the basis of socio-demographic variables as well as determine the differences between tour-

ist experience, satisfaction and loyalty. It could also include a comparative analysis with other cities in Croatia, both inland and along the coast. Further-more, it would be interesting to investigate the dif-ferences in tourist consumption among different types of Christmas Market visitors. �e results of this research might help in developing targeted marketing strategies.


112 God. XXXIII, BR. 1/2020. str. 101-114

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Dina Lončarić

Tihana Cegur Radović

Patricia Skendrović

T A H

S

Postoje različiti motivi zbog kojih se posjećuju određena događanja. Uglavnom je motivacija ta koja odre-đuje ponašanje potrošača i dolazi do izražaja kada potrošači očekuju da pružatelji usluga zadovolje nji-hove potrebe. Autori ovog rada usredotočili su se na motive zbog kojih posjetitelji posjećuju dva božićna sajma u Hrvatskoj, a koji su sve veći po broju posjetitelja. Ciljevi su bili usporediti demografsku strukturu posjetitelja i njihovo ponašanje na putovanju, motivaciju za posjećivanje božićnih sajmova i utvrditi ra-zinu zadovoljstva posjetitelja te njihovo buduće ponašanje, a sve to u svrhu utvrđivanja aktivnosti koje bi subjekti koji rukovode turističkim destinacijama mogli organizirati. Autori rada proveli su sekundarno i primarno istraživanje. Empirijsko istraživanje provedeno je na uzorcima posjetitelja Adventa u Karlovcu i Zagrebu korištenjem namjernog prigodnog uzorka. Analiza podataka provedena je uz pomoć deskriptivne, inferencijalne i multivarijantne statistike. Rezultati istraživanja pokazali su da se ponašanje posjetitelja i njihovi motivi dolaska na božićni sajam razlikuju, kao i razina njihova zadovoljstva i odanost. Ipak, kod oba božićna sajma pronađena je snažna veza između zadovoljstva posjetitelja, namjere za ponovnim dolaskom i preporukom te dijeljenjem iskustva. Ovaj rad predstavlja maleni doprinos znanstvenom istraživanju na polju ponašanja potrošača s fokusom na motivaciju za posjećivanje različitih turističkih događanja. Nadalje, rezultati ovog istraživanja od koristi su i subjektima koji rukovode raznim festivalima i događanjima u svrhu poboljšanja kvalitete usluga.

Ključne riječi: turistička događanja, festivali, božićni sajmovi, motivi turista, zadovoljstvo, odanost

P P

Mile Bošnjak, Ivan Novak, Zoran Wittine: Hysteresis in the trade flows of some EU member countries

Zbigniew Bentyn, Ante Luetić, Neven Šerić: Development of business strategies based on logistics performance of the Republic of Croatia

Marinko Jurčević, Lukša Lulić, Vinko Mostarac: �e digital transformation of Croatian economy compared with EU member states

Michal Patak, Lenka Branska, Zuzana Pecinova: Importance of reverse logistics services as an antecedent for building a green supply chain

Ana Štambuk, Ivan Uroda, Nikolina Anđelić: Adjustment and early retirement intentions of the older workers in the Croatian public sector

Roman Domanski, Michalina Labenda: Omnichannel of private label grocery products in Tesco

and Carrefour retail chains on the Polish market

117God. XXXIII, BR. 1/2020. str. 117-132

HYSTERESIS IN THE TRADE FLOWS OF SOME EU MEMBER COUNTRIES

Preliminary communication

Received: July 8, 2019Accepted for publishing: September 9, 2019

Mile BošnjakUniversity of Zagreb Faculty of Economics and Business Trg J. F. Kennedy 6, 10000 Zagreb, Croatia [email protected] Phone: +385953987366

Ivan NovakUniversity of Zagreb Faculty of Economics and Business Trg J. F. Kennedy 6, 10000 Zagreb, Croatia [email protected] Phone: +385976891891

Zoran WittineUniversity of Zagreb Faculty of Economics and Business Trg J. F. Kennedy 6, 10000 Zagreb, Croatia [email protected] Phone: +38598271437

A

�e paper tests for the existence of hysteresis in the net export development patterns of five EU member countries - the Czech Republic, Latvia, Hungary, Slovakia and Slovenia. Based on the quarterly data sam-ples from 1996q1 to 2017q2, country-specific estimates are obtained and tested. Time series estimates point to the fractionally integrated series of net exports for the Czech Republic and Latvia, while the net exports of Hungary, Slovakia and Slovenia are best explained by SETAR (1) model specification. �e re-search results indicate long memory property in the net export series for the Czech Republic and Latvia, thus supporting the existence of hysteresis. �e net export dynamics of Hungary, Slovakia and Slovenia are found to be nonlinear and threshold dependent but still slightly different. �e paper also found heterogene-ity in the dynamics and properties of net exports for the countries examined in this paper. Furthermore, the paper showed an indicative similarity in the change of the contemporary net export development patterns in the sample countries.

Keywords: Net exports, fractional integration, nonlinearities, European Union



CC BY-ND












5 od 6 26. 06. 2017. 12:24

1. Introduction

Export performance of a country has been the fo-cus of scholarly interest since the age of mercan-tilism. Contemporary global environment and regional integration make the issue of net exports extremely important from a country perspective as well as from the perspective of the European Union (EU). It is well known that persistent and unsus-tainable trade deficit violates international budget constraints over time and if the trade deficits per-sist, the domestic interest rates could increase con-siderably. �erefore, an economy with a persistent trade deficit can transform into a heavily indebted country that may adversely affect the welfare of the citizens. Eventually, the persistent trade deficit may

become a problem, not only of the country, but also of the EU. Some of the countries considered in this research are part of the Economic and Monetary Union (EMU). �erefore, a similar net export pat-tern among the EMU members would be at least a desirable property. Furthermore, international trade is a channel of macroeconomic spillovers and net exports present a good synthetic measure that cap-tures the change in exports as well as the change in imports. Baldwin (1986) pointed to the weak under-standing of how the determinants of trade patterns change over time. Baldwin’s assertion is still true and is becoming more and more important in the global as well as regionally integrated environments. It is a well-documented fact that the terms-of-trade shocks represent a major source of business cycles



118 God. XXXIII, BR. 1/2020. str. 117-132

in emerging and developing countries; however, the persistence of shocks has been under-examined. �erefore, the main research question in this paper is the following: is there hysteresis in the interna-tional trade flows of the EU member countries? �e paper aims to obtain country-specific estimates and provide a comparison among sample countries. To achieve that, the paper investigates the dynamics and properties of the net export development pat-terns for the five EU member countries.

�e remainder of the paper is organized as follows: Section 2 briefly summarizes the existing literature related to the topic under consideration and illus-trates hypothesis development. Section 3 presents the empirical procedure, methodology and re-search data, while Section 4 contains the empirical results and discussion. �e final section provides an overview of the main findings of the research.

2. Literature review and hypothesis development

�is paper presents another approach to examining the sustainability of trade flows. �erefore, the base-line literature for this paper relies on the foundations laid down by Husted (1992) who examined the re-lation between imports and exports and reported that there is cointegration between them. Follow-ing Husted’s work (1992), cointegration between exports and imports has been identified for many countries and groups of countries using various econometric time series approaches. Antwi-Boateng (2015) examined the case of Ghana and presented an extensive literature review on different estima-tion methods. Balaz and Hamara (2016) established a long-term equilibrium relationship between Slovak exports and imports of goods to Germany. Bošnjak et al. (2018) used a panel co-integration approach and reported the unsustainable merchandise trade between Croatia and other EU member countries. Franc and Peulić (2017) reported a long-run equi-librium in Slovenian exports and imports. However, the topic of net exports is insufficiently examined for the countries considered in this research. Baek (2016) reported cointegration between exports and imports for seven G-7 countries. Del Barrio Castro et al. (2016) examined a group of OECD countries and found a long-run relationship between exports and imports for the majority of them. Some recent papers reported a nonlinear and regime-dependent relationship between exports and imports. Topalli and Dogan (2016) employed the Markov-switching

model specification to explain the relationship be-tween Turkish exports and imports from 1990 to 2014. Khadaroo (2016) used a self-exciting thresh-old autoregressive (SETAR) model on a seasonally adjusted series to establish the relationship between Mauritian exports and imports. One strand of litera-ture pointed to the link between financial and trade liberalization to explain the trade deficit of European post-communist economies. European transition countries experienced current account deficits often explained by a rise in the domestic demand financed by the inflow of foreign loans and the real apprecia-tion of domestic currencies (Aristovnik, 2008; Bak-ker, Gulde, 2010; Obadić et al., 2014; Zakharova, 2008). However, contemporary literature has exten-sively examined the topic of international trade. Jens-en et al. (2018) found that shipping appears to be a barrier to international trade. Larue (2018) discusses the new (anti)integration issue, the winners and los-ers of economic integration, and reports that there is no economic justification for maintaining interna-tional trade barriers in some of Canada’s agri-food industries. Degiannakis et al. (2014) examined the time-varying correlation among the EU12 in terms of business cycle, and reported de-synchronization of their business cycles in the period following the Great Recession of 2007. Foellmi et al. (2018) provid-ed evidence for the theory of international product cycle as proposed by Vernon (1966). Haidar (2012) explained how a currency crisis can be transmitted through the channel of international trade. Zervoy-ianni and Anastasiou (2009) showed that trade flows affect the cross-country transmission of shocks in Europe. However, aside from very few seminal pa-pers, the persistence of shocks in international trade flows is under-examined. Ljungqvist (1994) pointed out that temporary exchange rate fluctuations can have persistent effects on trade flows. Campa (2004) documented the phenomenon of hysteresis for Span-ish manufacturing firms; the paper found sunk costs hysteresis in entry and exit to be an important factor in determining export market participation, but un-related to exchange rate uncertainty. �e mentioned research paper focused mainly on exports and its de-terminants. Kannebley (2008) found nonlinear and threshold dependent adjustment between relative price changes and Brazilian industrialized exports, thus supporting the existence of hysteresis in Bra-zilian industrial exports. Belke and Kronen (2016) found the hysteresis in the effects of real exchange rates on Greek exports. Belke et al. (2015) found ex-port hysteresis to exchange rate dynamics for many

119God. XXXIII, BR. 1/2020. str. 117-132


Eurozone countries. Evidently, hysteresis in interna-tional trade flows is under-examined and there is a gap in the international trade literature. �is paper tests for the existence of hysteresis based on the ana-lytical framework provided by Husted (1992). �us, the research hypothesis of this paper states: there is hysteresis in the net exports of the EU member states. �e paper tests for the existence of hysteresis in the net exports and determines its development patterns for the five EU member states - the Czech Republic, Latvia, Hungary, Slovakia and Slovenia. In doing so, the paper contributes to literature dealing with trade sustainability and issues relating to the EU.

3. Empirical procedure and methodology

�e research is based on the quarterly data on im-ports and exports from the first quarter of 2000 to the second quarter of 2017. �e series are obtained from national bureaus of statistics, X-13 ARIMA seasonally adjusted and taken in (natural) log val-ues. (Figure 1 in the Appendix). �e observed series (NX) for each sample country is given by the equa-tion (1):

(1)

where net export ( ) is given as the difference between exports ( ) and imports ( ) in its log levels.

�e unit root tests are well known for their low pow-er. �erefore, to improve the validity of the results, the paper employs several different unit root tests - the Augmented Dickey Fuller (1979) (ADF) test, the Phillips–Perron (1988) (PP) test, the General-ized Least Squares and Dickey-Fuller (DF-GLS) test developed by Elliott et al. (1996), the Kwiatkowski et al. (1992) (KPSS) test and the Zivot-Andrews (1992) unit rot (ZA) test. �e ADF test, the PP test and the DF-GLS test under null hypothesis assume the pres-ence of a unit root, while the KPSS test assumes the stationary under the null hypothesis and the pres-ence of a unit root as the alternative hypothesis. �e standard unit root tests are biased towards non-re-jection of unit root, in case of a structural break in the series under consideration. �e null hypothesis of the ZA test assumes that the data follow a unit root process and the alternative hypothesis is a trend stationary process that allows for a one-time break in the level, the trend, or both.

�e mixed results of unit root tests for net ex-ports of some countries raise the question of long

memory in net exports series and strength of the long-range dependence. �e literature recognizes two measures of the long-range dependence - the Hurst or self-similarity parameter (H), originally in-troduced by Mandelbrot and van Ness (1968), and the fractional integration parameter (d), introduced by Granger and Joyeux (1980). �e fractionally in-tegrated autoregressive moving average (ARFIMA) model is presented by the equation (2):

(2)

where:

d – fractional integration parameter allowed to as-sume any real value,

– the backward operator and

– need to be independent and identically distrib-uted with finite variance.

�e relationship between the self-similarity param-eter (H) and the fractional integration parameter (d) is given by the equation (3):

(3)

�e estimates of the self-similarity parameter (H) and the fractional integration parameter (d) can be obtained using a number of developed estimators. �is paper employs the GPH estimator by Reisen (1994) and Reisen et al. (2001), first developed by Geweke and Porter-Hudak (1983), the Whittle estimator for fractional Gaussian noise (Beran, 1994) and the Beran estimator, introduced by Be-ran (1993) and Beran (1994). Other employed es-timators can be found in Taqqu et al. (1995) and Montari et al. (1999). Eventually, diagnostic checks are performed to examine invertibility, stationar-ity, and identifiability of a given set of parameters. However, unit root test results show that net export for some countries is a stationary time series. Based on the unit root test results using a univariate time series approach, several models were estimated and tested. First, the ARMA model specification in equation (2) with assumed fractional integra-tion parameter (d=0) was estimated and tested. Diagnostic checks indicated misspecification and pointed to integrated series and ARIMA model. Considering the results of unit root tests, ARIMA estimates could be biased due to over-differencing. Consequently, several nonlinear specifications were estimated and tested - the Markov Switching speci-fication (Hamilton, 1989), the Smooth Transition Autoregressive specification (Van Dijk et al., 2002) and the Self-Exciting �reshold Autoregressive


120 God. XXXIII, BR. 1/2020. str. 117-132

specification (Tong, 1986). Given that Tong’s model specification (1986) was the only one that passed the diagnostic checks, the remaining sections pro-vide more details on this approach.

The Self-Exciting Threshold Autoregressive model (SETAR) represented by the following equation (4) is the only one that passed the diag-nostic checks.

(4)

where and represent delay and threshold, respec-tively. �e equation (4) illustrates the specification for the two-regime SETAR process. �e delay value is obtained by minimizing the sum of squared errors among values between 1 and 10, while the threshold value is given by the variation of the variable under consideration. As already stated, in the SETAR proce-dure Tong’s model specification (1986) was used.

4. Empirical results and discussions

Based on the presented empirical procedure and methodology, Table 1 summarizes linear unit root test results.

Table 1 Unit root test (ADF test, PP test, DF-GLS test and KPSS test) results

Variable and test (Country)Levels First difference

Constant Constant and trend Constant Constant and trend

ADF test t-stat.

NX (Czech Republic) -2.020681 -3.021837 -10.25495 -10.25494

NX (Hungary) -0.594320 -3.297262 -11.27681 -8.568201

NX (Latvia) -1.979371 -2.330311 -10.36255 -10.42012

NX (Slovakia) -2.681080 -4.822021 -11.11103 -11.03450

NX (Slovenia) -1.139591 -4.937236 -9.406286 -9.417045

PP test Adj. t-stat.


NX (Hungary) -0.692785 -3.120029 -11.96950 -13.46647

NX (Latvia) -2.044586 -2.347012 -10.30084 -10.37880

NX (Slovakia) -2.420910 -4.839902 -18.12502 -17.70542

NX (Slovenia) -1.425096 -4.869987 -17.37895 -19.69646

DF-GLS Adj. t-stat.


NX (Hungary) -0.725829 -1.577520 -10.91516 -11.53222

NX (Latvia) -1.864718 -2.018040 -1.862514 -2.854431

NX (Slovakia) -0.973586 -4.733331 -1.433231 -2.944516

NX (Slovenia) -0.734220 -4.598878 -12.33928 -9.132649

KPSS test LM-stat.

NX (Czech Republic) 1.138033 0.143808 0.097551 0.044200

NX (Hungary) 0.909535 0.236238 0.341504 0.138465

NX (Latvia) 0.400479 0.237248 0.103960 0.045588

NX (Slovakia) 1.084542 0.061998 0.500000 0.500000

NX (Slovenia) 1.131084 0.182595 0.225452 0.118306

Source: Authors

121God. XXXIII, BR. 1/2020. str. 117-132


�e Czech Republic ADF, PP and DF-GLS test results indicate I(1), while KPSS test results indi-cate trend stationary series. ADF, PP, DF-GLS and KPSS test results indicate I(1) series for Hungary. Latvia ADF, PP and DF-GLS test results indicate I(1), while KPSS test results indicate stationary series around the constant. ADF, PP, KPSS and

DF-GLS test results indicate trend stationary se-ries for Slovakian and Slovenian net exports. It is a well-documented fact that unit root tests may be biased in the presence of a structural break. Table 2 provides the results of the ZA test that takes into account the possibility of structural breaks in the observed series.

Table 2 ZA test results

Country Alternative Test statistic Critical values (significance level)

Czech Republic

Level -4.589 -5.34 (1%) -4.8 (5%) -4.58 (10%)

Slope of the trend -4.3402 -4.93 (1%) -4.42 (5%) -4.11 (10%)

Level and slope of the trend -4.4898 -5.57 (1%) -5.08 (5%) -4.82 (10%)

Hungary

Level -4.3024 -5.34 (1%) -4.8 (5%) -4.58 (10%)



Latvia

Level -4.2548 -5.34 (1%) -4.8 (5%) -4.58 (10%)



Slovakia

Level -5.4078 -5.34 (1%) -4.8 (5%) -4.58 (10%)



Slovenia

Level -5.9797 -5.34 (1%) -4.8 (5%) -4.58 (10%)



Source: Authors

Based on the Zivot and Andrews (1992) unit root test results, the net export of the Czech Republic is stationary with a break in the level or trend at a 10% significance level. In the Hungarian case, the series is stationary with a break in the slope of the trend. �e results for Latvia revealed non-stationary se-ries, while Slovakia and Slovenia are stationary se-ries in all of the tested forms.

In the case of the Czech Republic and Latvia, the ADF test for the observed series in levels does not reject the null hypothesis, so there is evidence that net exports series of these countries behave as I(1) processes. �e KPSS tests for the observed series do not reject the null hypothesis of I(0). �us, mod-eling these series either as I(0) or I(1) is too restric-tive and shows characteristics typical of fraction-ally integrated processes. �e Hungarian case is completely different. �e ADF, PP and KPSS test results indicate that the series is integrated of order one (I(1)). However, the ZA test showed that the series is stationary with a break in the slope of the

trend. �e Slovakian and Slovenian cases are more clear and for these countries the net export series are found to be stationary (I(0)). �e presented unit root test results lead to the conclusion that the net exports of the Czech Republic and Latvia might be fractionally integrated. �e net exports of Hungary might be stationary with a break in the slope of the trend, while the Slovakian and Slovenian net ex-ports are trend stationary series.

A large peak in the periodogram of seasonally ad-justed series across zero frequency indicates pos-sible fractionally integrated structure of the net export series for Latvia and the Czech Republic. Furthermore, the correlograms also provide ad-ditional evidence of possible fractional integra-tion of the net export series for both Latvia and the Czech Republic Autocorrelation for the series under consideration decreases slowly as the lag length increases, indicating that current values are dependent on its own past distant values.


122 God. XXXIII, BR. 1/2020. str. 117-132

�e aim of the ARFIMA models is to estimate d or H parameter. One of the estimators most frequent-ly used in the literature is the Geweke and Porter-Hudak (GPH) Estimator (Geweke, Porter-Hudak, 1983). �e GPH estimator is based on the regres-

sion equation using the periodogram function as an estimate of the spectral density. Estimates of the fractional or memory parameter d for the net exports of the Czech Republic and Latvia are sum-marized in Table 3.

Table 3 GPH estimates for net export series of the Czech Republic and Latvia

Country GPH estimate (d) Asymptotic standard deviation

Standard error deviation Diagnostics

Czech Republic 0.6743327 0.317623 0.1574761 FALSE

Latvia 0.7575384 0.317623 0.1597435 FALSE

Source: Authors

�e results in Table 3 show that 0.5<d<1, suggesting that shocks in the net exports of both countries are highly persistent. However, diagnostic checks indi-cate that estimates cannot be accepted. �e results in Table 3 are consistent with Labys (2016), who pointed out that regression-based GPH estimates

in levels tend to be higher and therefore biased. An-other frequently used estimator of H is the Whittle estimator for fractional Gaussian noise (see Beran, 1994). �e estimates for the net export series of the Czech Republic and Latvia obtained using the Whittle estimator are given in Table 4.

Table 4 Whittle estimates of fractional Gaussian noise for the net export series of the Czech Republic and Latvia

Country Estimate (H) Std. Error z value p-value Diagnostics

Czech Republic0.98293591 0.07329122 13.41137 < 2.22e-16

TRUEd = H - 1/2 = 0.483 (0.073)

Latvia0.98444224 0.07329957 13.4304 < 2.22e-16

TRUEd = H - 1/2 = 0.484 (0.073)

Source: Authors

�e estimates obtained using the Whittle estimator presented in Table 4 show that 0<d<0.5, suggesting that both series display a long-term memory but also have a tendency to revert to the mean. Furthermore, diagnostic checks indicate no misspecification.

�e Beran estimator, introduced by Beran (1993) and Beran (1994), was also employed, and the re-sults are summarized in Table 5.

Table 5 Beran’s Fractional EXP estimates for the net export series of the Czech Republic and Latvia

Country Estimate Std. Error t value p-value Diagnostics

Czech Republic

intercept -8.6123455 0.1122076 -76.75370 < 2.22e-16

FALSE1 - 2*H -1.9477688 0.1457652 -13.36238 2.4539e-16

H = 1.474 (0.073)

d = H - 1/2 = 0.974 (0.073)

Latvia

intercept -7.4351143 0.1437682 -51.71600 < 2.22e-16

FALSE1 - 2*H -1.8333568 0.1867645 -9.81641 3.2865e-12

H = 1.417 (0.093)

d = H - 1/2 = 0.917 (0.093)

Source: Authors

123God. XXXIII, BR. 1/2020. str. 117-132


�e results presented in Table 5 indicate that the estimates obtained using the Beran estimator are similar to the estimates obtained using the GPH estimator. Diagnostic checks indicate misspecifica-tion.

Given the mixed results obtained from the three presented tests, more estimates needed to be made. Table 6 summarizes the results obtained using vari-ous other estimators that can be found in Taqqu et al. (1995) and Montari et al. (1999).

Table 6 Self-similarity parameter estimates for the net export series of the Czech Republic and Latvia

Method Country Estimate (H) Std. Error t -value p-value Diagnostics

Aggregated Variance

Czech Republic

0.9590563 0.0155772 61.56796 2.461977e-47TRUE

β = -0.08188734

Latvia0.8242079 0.07653461 10.76909 2.118252e-14

TRUEβ = -0.3515842

Differenced Aggregated Variance

Czech Republic

1.625766 0.5422815 2.99801 0.01712353FALSE

β = 1.251531

Latvia1.4217836 0.3621807 3.925619 0.002014558

FALSEβ = 0.8435672

Aggregated Absolute Value/Moment

Czech Republic

1.1107106 0.03855989 28.80482 6.02621e-32FALSE

β = 0.1107106

Latvia0.90033865 0.06104119 14.74969 1.864663e-19

TRUEβ = -0.09966135

Higuchi or Fractal Dimension

Czech Republic

0.6263314 0.05112957 12.24989 2.204283e-16TRUE

β = -1.3736686

Latvia1.077646 0.1058935 10.1767 1.423005e-13

FALSEβ = -0.9223536

Peng or Variance of Residuals

Czech Republic

1.533734 0.0810637 18.9201 6.156417e-19FALSE

β = 3.067468

Latvia1.134875 0.1076667 10.54063 6.15534e-12

FALSEβ = 2.269749

�e R/S Method

Czech Republic

0.9386678 0.02065782 45.43885 9.910894e-35TRUE

β = 0.9386678

Latvia0.8124809 0.04259175 19.07602 4.649364e-21

TRUEβ = 0.8124809

�e Periodogram Method

Czech Republic

1.469797 0.3255098 4.515367 0.006309685FALSE

β =-1.939593

Latvia1.731015 0.3049846 5.675746 0.002363764

FALSEβ = -2.462030

�e Boxed or Modified Periodogram Method

Czech Republic

1.592605 0.08004514 19.89634 6.780113e-37FALSE

β = -2.185210

Latvia 1.568580 0.08275256 18.95507 3.352545e-35

FALSEβ = -2.137161

Source: Authors


124 God. XXXIII, BR. 1/2020. str. 117-132

Diagnostic checks examine invertibility, stationar-ity, and identifiability of a given set of parameters. �e results show that fractional integration param-eter ranges between 0 and 0.5 (0<d<0.5), suggest-ing that the net exports series displays a long-term memory and that it will revert to the mean. �e process is considered to be stationary with long memory. It can be concluded that the net exports of the Czech Republic and Latvia are weakly station-ary and exhibit persistence, long memory, mean

reversion and covariance stationarity with no sig-nificant short-term effects. �erefore, there is hys-teresis in the net exports of the Czech Republic and Latvia and the research hypothesis is supported in these two cases.

Unit root test results for Hungary indicate station-ary series with a break. �erefore, nonlinear models need to be considered. Nonlinear models are piece-wise linear models that capture the dynamics of a series before and after a certain point in time.

Table 7 SETAR Hyper parameters for net exports of Hungary, Slovakia and Slovenia

CountrySETAR Hyper parameters Number

of Possible �reshold Value

Number of �resholdValues tested with Hyper Parametersm �reshold

Delay mL mH �resholdValue

Pooled AIC

Hungary 1 0 1 1 0.04469050 -433.2192 58 58

Slovakia 1 0 1 1 0.02558082 -316.8609 55 55

Slovenia 1 0 1 1 -0.00179273 -355.7206 58 58

Source: Authors Note: m denotes the autoregressive level of the whole model; �reshold Delay denotes the delay level of the Self-exci-ting model and mL denotes low regime level, mH: High regime level.

�e results in Table 7 indicate lag one in low and high regime for each of the three countries. In the light of these hyper parameters the SETAR model

was estimated. Following the equation (4), SETAR estimates for the Hungarian net exports are sum-marized in Table 8.

Table 8 SETAR model with one threshold for the Hungarian net exports dynamics

Regime Variable Coefficient t- Statistic p-value

Low

-0.0030634(0.0028132) -1.0889 0.279406

0.8392533(0.0727939) 11.5292 < 2.2e-16

High

0.0353410(0.0127332) 2.7755 0.006843

0.5978437(0.1520015) 3.9331 0.000176

�reshold Value= 0.03584

Residuals variance = 0.0002922

AIC= -682

Proportion of points in each regime

Low regime= 63.86%

High regime= 36.14%

Diagnostic tests for the estimated SETAR specification:

ARCH Test statistic: 0.018879 p – value: 0.891100

Ljung-Box Test statistic (12): 0.7707 p – value: 0.380000

Jarque-Bera Test statistic:1.307505 p – value: 0.520090

Source: Authors

125God. XXXIII, BR. 1/2020. str. 117-132


Based on the results presented in Table 8, SE-TAR specification passed the diagnostic checks in the Hungarian case. Trend component is not found to be significant either in low or in high regime. Hungarian net export converges either to deficit in low regime dynamics or to surplus in high regime dynamics. Figure 2 in the Appen-dix illustrates the dynamics of net exports for Hungary.

In contrast, the net export series for Slovakia and Slovenia are found to be trend stationary series. Consistent with unit root test results, SETAR esti-mates indicate a significant trend in the low regime of Slovakian net export. For Slovenia, the trend component is significant in both the low and high regime. SETAR estimates and corresponding diag-nostic tests for the Slovakian net exports are pro-vided in Table 9.

Table 9 SETAR model with one threshold for the Slovakian net exports dynamics

Regime Variable Coefficient t-statistic p-value

Low

-0.14521111(0.02958150) -4.9088 5.107e-06

0.00277193(0.00054666) 5.0706 2.719e-06

0.19302130(0.16078110) 1.2005 0.233665

High

-0.03223104(0.01953045) -1.6503 0.103009

0.00057554(0.00037288) 1.5435 0.126858

0.65381217(0.20447523) 3.1975 0.002021

�reshold Value= -0.05321


AIC= -547


Low regime= 38.27%

High regime= 61.73%




Jarque-Bera Test statistic: 3.317910 p – value: 0.190338

Source: Authors

The results in Table 9 show that the constant and trend are significant in the low regime, while the autoregressive component obtains no signifi-cance at the usually accepted significance level. In the high regime, the autoregressive component is the only one that appears with significance. Diagnostic test results indicate that the SETAR

model is not misspecified in the case of Slovakia. Slovakian net export converges to deficit in both high and low regimes. Figure 3 in the Appendix illustrates the dynamics of net exports in the case of Slovakia. The estimates of the SETAR model specification for Slovenia are presented in Table 10.


126 God. XXXIII, BR. 1/2020. str. 117-132

�e results presented in Table 10 indicate that Slo-venian net exports converge to deficit in both high and low regimes, similarly to the case of Slovakia. �e Jarque-Bera test indicates normal distribution of residuals only when the observation from 1999q1 is left out of the sample. �erefore, the sharp de-cline of Slovenian net exports in 1999q1 can be considered as an outlier that violates the assump-tion of normality among residuals. Figure 4 in the Appendix illustrates the dynamics of net exports of Slovenia.

�e research results support the existence of hys-teresis in the net exports of the Czech Republic and Latvia. �e net exports of other considered countries exhibit a nonlinear development pat-tern. Furthermore, the results clearly indicate that the sample countries exhibit different dynamics and properties of net exports series. �erefore, the transmission of shocks from abroad probably differs among the considered countries given that international trade is an important transmission channel. Additionally, the structure of the consid-ered economies might be heterogeneous although all of the countries are in the same regional integra-

tion (EU). A potential explanation for this might be the differences in the process of transition among the considered countries (Podkaminer, 2013). �e reviewed literature suggests that hysteretic trade flows often arise as a consequence of exchange rate dynamics. Nusair (2016) employed nonlinear ap-proach and documented the existence of J-curve phenomenon within a sample of European transi-tion economies. However, the results of this study show different development patterns of net exports among the sample countries. Nonetheless, there is one obvious similarity. �e data series in Figure 1 suggest that all of the countries under consideration experienced an increase in the net exports after the crisis that started in 2007. Another logical explana-tion that warrants further empirical testing may be the structure of products in exports and imports. Well-known phenomena in the microeconomic theory are income elasticity of demand and price elasticity of demand. Demand for a more sophis-ticated good often exhibits higher income elastic-ity of demand for that good. Consequently, there should be lower income elasticity of demand for a less sophisticated good. �erefore, if a country

Table 10 SETAR model with one threshold for the Slovenian net exports dynamics

Regime Variable Coefficient t- Statistic p-value

Low

-0.03334176(0.00958637) -3.4780 0.0008245

0.00075955(0.00024576) 3.0907 0.0027580

0.39988748(0.13181221) 3.0338 0.0032679

High

-0.09346728(0.03048376) -3.0661 0.0029680

0.00207750(0.00065250) 3.1839 0.0020793

0.37022295(0.24369809) 1.5192 0.1327076

�reshold Value=


AIC= -612


Low regime= 60.71%

High regime= 39.29%




Jarque-Bera Test statistic:1.390317 p – value: 0.498995

Source: Authors

127God. XXXIII, BR. 1/2020. str. 117-132


exports less sophisticated products and imports more sophisticated products, the same decrease in income within a country and abroad will result in a higher decrease in imports compared to exports. Based on this assumption, a country with a trade deficit as a consequence of the crisis could move to-ward the equilibrium. Nonetheless, these assump-tions still need to be tested and therefore there is a need for further research on this topic. �e bal-ance of payments for the sample countries could be examined using the monetary and absorption ap-proaches. However, this issue also requires further investigation.

5. Conclusions

Several conclusions can be drawn based on the research presented in this paper. �e research re-sults support the existence of hysteresis in the net exports of the Czech Republic and Latvia. �e net exports of these two countries were found to be fractionally integrated. �eir fractional integra-tion parameters range between 0 and 0.5. �e net exports of the Czech Republic and Latvia were

also found to be weakly stationary, exhibiting per-sistence, long memory, and mean reversion, as well as covariance stationary with no significant short-term effects. In contrast, the net exports of Hungary, Slovakia and Slovenia exhibit nonlin-ear and threshold dependent dynamics. �e SE-TAR(1) model specification was found to be the best model for explaining the development pattern of the net exports of Hungary, Slovakia and Slo-venia. �e results are quite unexpected given that the considered countries share a similar history and a similar position in the EU. External posi-tion in terms of trade balance for all of the sample countries has improved after the crisis 2007. �is finding may be explained with the role of exchange rates and sticky prices, different structure of prod-ucts in imports and exports and the elasticity of demand. However, further research is needed to empirically confirm these findings. Future re-search should focus on the role of exchange rate in the hysteretic nature of net exports. Moreover, given that this paper examines net exports only, future research should examine hysteresis in both imports and exports.


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APPENDIX

Figure 1 Net export (NX) of five European countries

Source: Authors

131God. XXXIII, BR. 1/2020. str. 117-132


Figure 2 Hungary SETAR (1)

Source: Authors

Figure 3 Slovakia SETAR (1)

Source: Authors


132 God. XXXIII, BR. 1/2020. str. 117-132

Figure 4 Slovenia SETAR (1)

Source: Authors

Mile Bošnjak

Ivan Novak

Zoran Wittine

H EU

S

U radu se ispituje postojanje histereze u obrascima neto izvoza pet zemalja članica EU-a, odnosno Češke, Latvije, Mađarske, Slovačke i Slovenije. Na kvartalnim podatcima od 1996q1 do 2017q2 za svaku zemlju su postignute procjene koje su testirane. Procjene vremenskih serija ukazuju na djelomično integrirani niz neto izvoza za Češku i Latviju, dok se neto izvoz Mađarske, Slovačke i Slovenije najbolje objašnjava specifi-kacijom modela SETAR (1). Rezultati istraživanja otkrili su obilježje dugotrajnog pamćenja u vremenskim nizovima neto izvoza za Češku i Latviju koji podupiru postojanje histereze. Dinamika neto izvoza u Mađar-skoj, Slovačkoj i Sloveniji je nelinearna i ovisna o pragu, ali još uvijek malo drugačija. U radu se otkriva hete-rogenost dinamike i svojstava neto izvoza za zemlje ispitane u ovom radu. Međutim, rad otkriva indikativnu sličnost u promjeni suvremenog modela razvoja neto izvoza unutar uzoraka zemalja.

Ključne riječi: neto izvoz, frakcijska integracija, nelinearnosti, Europska unija

133God. XXXIII, BR. 1/2020. str. 133-149

DEVELOPMENT OF BUSINESS STRATEGIES BASED ON LOGISTICS PERFORMANCE OF THE REPUBLIC OF CROATIA

JEL: A11, D39Preliminary communication

Received: March 30, 2019Accepted for publishing: October 31, 2019

Zbigniew BentynPoznań University of Economics and Businessal. Niepodległości 10,61-875 Poznań, [email protected]: +48501010882

Ante LuetićTommy d.o.o.Domovinskog rata 93,21000 Split, [email protected]: +38521536293

Neven ŠerićUniversity of SplitFaculty of EconomicsCvite Fiskovića 5,21000 Split, [email protected]: +38521430659

A

Croatia, as a moderately new member of the EU, has recognized the prospects offered by the membership. �e participation of Croatian enterprises in European supply chains is an important opportunity for the country’s economic growth. �e analysis of its logistics performance, based on the World Bank data, suggest a positive change in recent years. �at proves a beneficial evolution of the business environment in Croatia. �e primary research presented in the paper considers the improved logistics infrastructure and other subfactors included in the analysis, the support offered to business activities and the increased readiness of the country for a potential upturn of logistics services. Using logistical advantages of Croatia as a location or improved infrastructure may be a stimulus for creating relationships with business partners in the EU. A country that applies the adaptable con-cept of a logistics platform is in a good position to use new possibilities on the EU market, especially the growing e-commerce sector. Free flow of information on the Internet and unrestricted access to customers in the single market, guaranteed by EU law, opens new possibilities for trade development and finding one’s niche. Recently the European Parliament adopted the regulation forbidding geo-blocking and thus created potential for e-commerce growth in Europe. Croatia may benefit from its location and rise in logistics performance. In this relatively new sector, the ability to use all logistical advantages has become an asset. Employing advanced analytical techniques of simulation and visualization for logistics applications has become a prerequisite for growing e-commerce on the EU market. �e questions arising from such a perspective concern the abilities of the Croatian business to exploit the described potential. How should managers of business entities adjust their strategies to logistics stand-ards? How strongly is business intelligence correlated with supply chain management? �e purpose of this paper is to formulate a protocol for creating a logistics strategy for Croatian enterprises. Preliminary research for this article included logistics performance index (LPI) analysis, literature, and data mining. Variables examined in the primary research of Croatian companies’ practice were categorized as business intelligence, supply chain manage-ment, information visibility and integration of logistics function. Factor analysis was used to connect these vari-ables, i.e. to reduce the number of variables. �e authors have tested the correlation between variables. �ere was a significant statistical correlation between business intelligence, supply chain management, information visibility and integration as prerequisites for a competitive logistics strategy of the company.

Keywords: Logistics, strategy, international trade, market



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1. Introduction

Modern market requirements focus on fast and cost-effective delivery of products and services. Competitiveness between supply chains is becom-ing one of the most important paradigms of modern business. �e business excellence of supply chains is directly correlated with the increase in value for shareholders (Slone et al., 2010; ECAP, 2013; Mur-ray 2018; Ju et al., 2019). Time is a critical factor in the process of serving a modern customer who appreciates the effort in providing reliable delivery and other additional services. Information man-agement and the ability to exchange it represent a strategy for achieving the cohesion of all functions among parties in the flow of materials and services (Luetić, 2017). Business logistics services are an im-portant factor of creating a strategic advantage over traditional distribution (Min, Mentzer, 2004; Mur-ray, 2018; Ju et al., 2019). �e innovative web-based approach to the process of serving the customer increases the requirements posed to the logistics

services of the company or its supply chain. Since the accession in 2013, Croatia has become a valuable partner for business development in the European single market. Its location and availability to trans-ship cargo, thanks to the access to the Adriatic Sea, opens up new possibilities in term of logistics ser-vices and business opportunities. Connecting west-ern and central Europe, the Black Sea region with south-eastern Europe and Baltic regions while pass-ing central Europe, with Pannonian and Mediter-ranean region – all this determines the multidirec-tional character of this country (Figure 1). Moreover, access to the Adriatic Sea creates the shortest and the most cost-effective route between Europe and Africa and Asia via the Suez Canal (Popescu (Bîzoi) and Sipos, 2014; Roso et al., 2015: 501). �e location of the port Rijeka provides excellent opportunities for transshipment to rail, road and inland waterway, which may by important due to the development of Central European Boomerang region of intensive logistic and manufacturing activities (Bentyn, 2016).

Figure 1 European Traffic Corridors in Croatia

Source: Stanković et al., 2013

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�e area in the map spans from Gdansk through Prague, reaching Budapest and reflects the develop-ment of a similar structure in Western Europe called Blue Banana (Gorzelak, 2012: 127; Nicita et al., 2013). Local advantages open up new perspectives for busi-nesses to access the European supply chain. �e trend to improve logistics performance is a clear indicator of business activities that began in the region after the series of accessions to the European Union in years 2004, 2007 and 2013. �e opportunity that has been created allows Croatian companies to participate in the European supply chain. �anks to the improve-ments in the logistics performance, it is possible to take advantage of the location of the country and to provide services on the European level. �e investment in the logistic infrastructure, both private and through European funds has a positive influence on basic logistic activities, fulfilling in this way the requirements of modern customers. �e EU business creates a unique opportunity by elimi-nating physical barriers between merchandise and the customer. Similarly, virtualization of business practices allows for faster flow of information, thus improving agility in the supply chain. Employing Internet applications helps supply chain partners to improve its performance and at the same time to better connect the whole supply net with the fi-nal customers. Transferring the basic commercial operations to the virtual world opens up new pos-sibilities for the customer such as:

• Searching for products and services; • Comparing them in a multicriterial way; • Assessing the availability of required value.

�e relative ease of acquiring goods and services in e-commerce draws the attention of growing num-bers of customers. Since Croatia’s accession to the EU in 2013, commerce started to grow. It took five years to reach the current level. �e data describing this market, gathered in 2017, indicate a promising perspective1:

•• •�e number of online buyers in Croatia is 1,75 million;

• �e growth rate in 2017 is 18%;

• 60% of all internet users are e-customers;

•• •6-10% of those e-customers buy at least once a month;

•• •�e value of the e-commerce market in Croa-tia is estimated at $446 million;

•• •Online transactions generate approximately $30 million in revenue yearly.

In view of this information, conservative logis-tics strategy in Croatian companies needs to be changed. �e alterations noted in 2017 assure the increase in the trends. �e observed 9% increase in the number of regular e-customers illustrates the growth rate in this market. Still, the comparison of the Croatian market to the markets of other Euro-pean countries offers a perspective on the size and potential ahead.

Figure 2 Share of global online grocery sales based on value in leading European Union (EU) countries in 2017

Source: Statista - �e Statistics Portal (2018), “Share of global online grocery sales based on value in leading European Union (EU) countries in 2017”, available at: https://www.statista.com/statistics/614717/online-gro-cery-shopping-in-the-european-union-eu (Accessed on: September 18, 2018)2

Changes in business philosophy of companies which are the result of the global impact of a highly competitive external environment and the internal characteristics and factors of the micro environ-ment are strongly reflected in the functioning and management of supply chains (Luetić, 2017; World Bank, 2018). �e steady growth of customer’s in-terest implies the need for reliable logistics services (Lee, Hau, 2004; Yildiz, 2014; Ju et al., 2019). �e performance in delivering the expected value is a precondition for the development in this area of business. All physical activities including transport, warehousing and additional value-adding logistics services are critical for providing the customer sat-isfaction. �e superiority of e-distribution derives from expected convenience and price attractive-


136 God. XXXIII, BR. 1/2020. str. 133-149

ness. As expected, prices are the most appreciated advantage of e-commerce. E-customers expect lower prices than in the physical store. Moreover, the added cost of delivery should be minimized as much as possible, concerning the fact that 28% of e-customers expect free shipping3. Additionally, the e-channel of distribution should provide detailed information about the product, customer reviews and feedback, maintaining the exchange of infor-mation and securing the transfer of the value. A characteristic feature of e-distribution is the abil-ity to return the product. National and European laws secure the rights of customers in this matter and build the trust in this new way of distribution. On the other hand, they increase the requirements on the logistics services designed for e-commerce. Return policy of e-business should be clearly stated on company website because e-customers pay ad-ditional attention to this fact. Unreliability in the process of return of the products is the most criti-cized behavior by e-shoppers in Croatia. A part of this depends on logistics performance in the region. Modern distribution centers are a crucial part of the logistics systems. �anks to the available space and functional opportunities, it is possible to pro-cess many orders in the right way, saving time by the way and gaining competitive advantage over the physical, traditional way of distribution. �e existing infrastructure, both logistical and infor-mational, determines the time and cost of logistics operations. �erefore, the era of e-customers relies heavily on readiness of logistics services. �e ad-vantage of geographical location of Croatia may be critical for the future development of e-business. Already an estimated 40% of Croatian e-customers order from e-shops outside of Croatia, such as Chi-na and other EU countries. Online retailers from Croatia provide services locally and globally (about 40% for local customers and 60% for global mar-kets). �e already globalized trade relations may become even more pronounced thanks to the abol-ishing of geo-blocking. In February 2018, the Euro-pean Parliament adopted the regulation forbidding geo-blocking and other forms of discrimination based on customer nationality, place of residence or place of establishment4. �is may unlock the potential for e-commerce to grow in Europe while Croatia may benefit from its location. �e idea of maintaining cohesion inside the Single European Market may further decrease the barriers and pro-duce the impulse for supplementary development in trade relations. New business perspective lying in the location and status of Croatia as an EU mem-ber is supported by the development of e-business

speeding the trade relations and describing a new competitive area based on the logistics advantages.

However, the readiness of Croatian enterprises requires adjusting their strategies in a certain way (ECAP, 2013; European Bank, 2019). It is expected that better performance of a company will be based on logistics performance, which de-mands high quality information sources and relia-ble data, thus building agility in supply chain (Mur-ray, 2018; Ju et al., 2019).Business intelligence variables such as intuition and time improvements are direct logistical values lead-ing to better performance of a company. Addition-ally, advanced analytics used in logistics activities of a business will lead to adaptability and improved responsiveness of the company. All the above state-ments should be verified by the research, providing information concerning enterprises in Croatia.

2. Methodology

�e preliminary research explains the rising logis-tics performance in Croatia.�e logistics performance index measures the abil-ity of a country to participate actively in the trade exchange and global supply chains. �e measure-ment is designed and repeated every two years by the World Bank (World Bank, 2018). �anks to that, it helps to assess the position of the country and the development in the given time. Investors use the LPI to make sure that the location of in-tensive production activities will meet the logistics competence in the region. �at may be precognition to further business development and participation of the local business in global supply chains. �e analysis will compare the change in Croatian over-all LPI from 2010 to 2018 (Figure 4) and describe changes according to two subfactors: Infrastructure (Figure 5) and Timeliness (Figure 6). Measurements for Croatia across the observed years, as presented by the World Bank, show a steady development in LPI. A greater increase occurred between the years 2010 and 2012. �is change may be caused by the development of neighboring countries, which were already members of the EU, namely Slovenia and Hungary. Both countries joined the EU in the big-gest accession in this part of Europe in 2004. �at was a great stimulus to start the development of the Central European Boomerang (CEB), an area described by Gorzelak (2012: 127), and Croatia benefited as a logistics partner. Croatia is an EU member from 01.07.2013. Since its accession to the

137God. XXXIII, BR. 1/2020. str. 133-149


EU, Croatia has ranked 55-51 in the global ranking in logistics performance. According to the most re-cent research in 2018, the country’s LPI of 3.16 is identical to the 2012 measurement.�e primary research consists of two stages. In the first stage, the authors verified claims related to variables of business intelligence required for improving the logistics potential of an enterprise. Among them are the sources and reliability of data and information, access to data and information, advanced analytics, intuition and time and the or-ganization of business intelligence. �e second stage allowed us to analyze the correlation of varia-bles chosen in the first stage related to the variables associated with logistics strategy and supply chain management. Among them are agility, adaptability, alignment, proactivity, performance.For the purpose of this paper, the most interesting empirical statistical research involves survey sam-pling. �e questionnaire was verified by general managers of Croatian companies that have experi-ence in export business. Before the final definition of the survey, preliminary research was conducted to test the questions for the primary research. �e purpose of the preliminary research was to verify the research instrument. In addition to the imple-mentation, the purpose was to determine its clarity and appropriateness for the research. In total 321 companies responded to the questionnaire. �e main instrument of this study was a questionnaire consisting of closed questions with multiple-choice answers that involve using a Likert scale with five degrees of intensity. Likert scale attitude is based on the assumption that every statement/particle on the scale has equal importance and weight in terms of how much it reflects the attitude toward a particu-lar issue or problem. �e survey participants have to choose the answer from 1 = strongly disagree to 5 = strongly agree. For this research, a measurement of the perception of respondents was employed. A deliberate sample was used to conduct this em-pirical research, and the population is represented by the set of 1000 largest companies in the Republic of Croatia by revenue in 2010. �e survey was con-ducted in 2018. �e purpose of this research was to cover companies that apply the concept of business intelligence in their business.Several recent studies that have explored business intelligence or supply chain management were tak-en into account and only companies that apply the concept studied were included in the sample. Teo and Choo (2001) investigated only those companies

that use the internet, while Howson (2008) used as a sample companies whose names she received from business intelligence tool manufacturers, or PI consultants. Taskov (2009) chose a random sample; however, in the cover letter, he explained the defini-tion of business intelligence and asked respondents who do not practice business intelligence not to an-swer the questionnaire but to return it. Grawe et al. (2011) in their cover letter asked a question about the relevance of the company so that it can partici-pate in the research. Isik (2009) also chose a sample consisting of businesses that apply business intel-ligence to making strategic, tactical or operational business decisions.

Based on the above findings, a pre-test memo was drafted explaining business intelligence. In the con-text of research, business intelligence is seen as the concept of the conscious, organized, continuous, legal and legitimate collection, analysis and use of data and business information. It is implemented using information technology but also in other ways. It provides insights about customers, suppli-ers, competitors, industry, technology, institutional regulation and other factors that directly or indi-rectly affect the business of the enterprise, in order to support the management in decision making.

Four findings were made and respondents were in-vited to participate in the survey if they could give at least one affirmative answer to the following state-ments:

1) Apply business intelligence at the system level or at the strategic level of certain busi-ness units (e.g. marketing, development, finance and accounting, manufacturing, commercial, procurement, etc.);

2) Apply business intelligence only to specific business processes or projects;

3) Use one of the storage technologies and platforms in your business (Data Ware-house), Data Mining, OLAP tools;

4) Use advanced analytical techniques, and simulation and visualization programs.

�is form has been verified by several professors at the Faculties of Economics in Split and Zagreb, Fac-ulty of Humanities and Social Sciences in Zagreb and practitioners of business intelligence (Šerić, Luetić, 2016).

For the purposes of this research, measurement of respondents perceptions was conducted (Akintoye


138 God. XXXIII, BR. 1/2020. str. 133-149

et al., 2000; Wixom, Watson, 2001; Skjoett-Larsen et al., 2003; Vickery et al., 2003; Benton, Maloni, 2005; Wieder et al., 2006; Sanders, 2007; Elbashir et al., 2008; Sodhi, Son, 2009; Trkman et al., 2010). �is is the chosen tool for two reasons: (1) the ef-fects of using business intelligence are intangible, but rather qualitative, which is why they are not suitable for objective measurement, (2) most infor-mation in its own right is of a confidential or stra-tegic nature and are therefore not appropriate for public disclosure (Williams, Williams, 2007; Elba-shir et al., 2008).

�e survey started with three basic indicators re-garding the company: its activity, number of em-ployees and legal form.

Activity Frequency %Primary production 10 3.4Manufacturing 107 36.5Trade 91 31.1Tourism and hospitality industry

6 2.0

Construction 17 5.8Banking, insurance and financial services

26 8.9

Telecommunications 10 3.4Business services 18 6.1Other 8 2.7Total 293 100.0

Number of employeesUp to 10 2 0.711 to 50 27 9.251 to 250 98 33.4Over 251 166 56.7Total 293 100.0

Legal formJoint-stock company 122 41.6Limited liability company

159 54.3

Foreign founder 5 1.7Institution 6 2.0Other 1 0.3Total 293 100.0

�e intention was to research those businesses that use business intelligence in their operations. An-

swers of 25 companies were excluded before pro-cessing when the companies that made the most re-cent PI, claimed in the questionnaire that business intelligence has not yet been systematically organ-ized. In addition to these companies, another three were excluded, which did not answer the above question. Finally, there were 293 usable responses, that is, a response of 29.3%.

3. The preliminary research

3.1 Participation of Croatian businesses in the Euro-pean supply chain

�e evaluation of the importance of Croatian lo-gistics performance could be seen through its participation in the European supply chains. �e direction of cooperation in supply chains and lo-cation of the countries who are critical partners for Croatia support the ongoing effort to improve its logistics potential. �e report presented by the Croatian National Bank mentioned the most important partners (Figure 3). Germany repre-sents the most balanced partnership in terms of equilibrium between forward and backward par-ticipation. Italy is similar in this position but on a smaller scale. �ese two countries, thanks to the equal backward and forward participation, create the movement of cargo in both directions, increas-ing the importance of transport corridors between them and Croatia and logistics infrastructure along the way. Austria and Slovenia are slightly away from previous balanced positions but are also important for Croatia because of their scale of participation. �e location of these countries covers the directions designated for Germany and Italy, which is helpful in assessing the importance of those transport corridors. For example, Russia, USA and China represent a weak forward partici-pation. It translates to much bigger imports (up to several times) of intermediaries from these coun-tries. �e Location of these countries entails the necessity of developing marine ports and addi-tional logistics infrastructure in case the reported imbalance would change for greater participation of export from Croatia. �e scale of trade in this case proves the international role Croatia plays in the global supply chains and is promising for the development of other trade exchange partner-ships.

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After Slovenia, there are other countries noticeable as partners in global value chains from the CEE part of the Europe (Hungary, Belarus, Poland and the Czech Republic). �e developing partnerships in supply chains among those countries support the concept of CEE boomerang located between Gda-nsk, Poznan, Prague, Brno, Bratislava, Vienna and Budapest. Central European Boomerang (CEB) de-scribed in 2012 was divided into a more attractive and developed southern part near Budapest and Prague and less developed infrastructural part of the northern part starting in Gdansk and including Poznan and Wroclaw (Gorzelak, 2012: 127). Gor-zelak pointed out the directions of transport from the industrial part of the CEB zone. It should con-nect the area between Bratislava and Budapest to-wards Zagreb and the ports of Rijeka and Trieste on the Adriatic Sea (Bentyn, 2016). �e development of this area of logistic and manufacturing coopera-tion would create an axis starting from the port of Gdansk, passing corridor VI along important distri-bution hubs: Poznan, Lodz, Wroclaw, Tychy, Brno, Bratislava, Budapest and Zagreb. At the other end, the axis would finish in the Croatian port of Rijeka and promote the development of the international logistics hub located there. Croatia offers a greater share of domestic value added in the production of food, beverages, tobacco industry, pharmaceuti-

cal products, and computers and electronics. Being a part of global supply chains nowadays means to cope with requirements of modern markets and at the same time optimizing costs of logistics ser-vices. �ese demands become more important in the FMCG (Fast-Moving Consumer Goods) mar-kets which reveal the tendency to search for time-based competitiveness (Nicita et al., 2013; Šerić et al., 2014; European Bank, 2019; Ju et al., 2019). �erefore, goods may be distributed by e-commerce channels and, thanks to the above-mentioned link-age between partner countries, they can bring great benefits to the Croatian economy. For this reason, conservative logistics strategy needs to be changed6.

3.2 Current logistics performance index (LPI) 2018 and future perspective

In the global ranking of Logistics Performance In-dex based on research carried out by the World Bank, Croatia rose from No. 51 in 2016 to No. 49 in 2018. Although the overall LPI score decreased from 3.16 to 3.10, the comparative position in the ranking is dependent also on the outcome of oth-er countries. Since 2010, when most neighboring countries were EU members, Croatia noted a bigger improvement in logistics performance. Joining the European supply chain on the terms of EU member

Figure 3 Main GVC partner countries for Croatia in 2014 in %

Source: Vidaković-Peruško I., Kovač K., Jošić, M. (2018), “Croatia in Global Value Chains”, Surveys S-32, Croatian Na-tional Bank, available at: https://www.hnb.hr/documents/20182/2348886/s-032.pdf/3edf751b-07a1-45ab-997e-ff7de-8ce76cf (Accessed on: February 6, 2019)5


140 God. XXXIII, BR. 1/2020. str. 133-149

became possible from 1 July 2013. Creating greater cohesion among the CEE countries with access to the developed western part of Europe was an im-

portant stimulus to increase foreign investment and adequately manufacturing and logistics opera-tions (Yildiz, 2014; Ju et al., 2019).

Figure 4 Croatia overall LPI 2010 - 2018

Source: Own, based on �e World Bank (2018), “Logistics Performance Index”, available at: lpi.worldbank.org (Accessed on: January 8, 2019)7

What is critical for the logistics performance of a country is the development of logistics infrastruc-ture (European Bank, 2019). Moreover, modern distribution requires a quick reaction and reliable time of performed logistic operations, which is an additional argument for further infrastructural de-velopment (Murray, 2018). Figure 5 represents con-

secutive research in infrastructural subfactor of LPI and shows that 2012 was significant for the logistics infrastructure. Another three measurements after that year indicate a steadily growing trend. �ose translate into a more balanced increase rather than a radical change visible in the years around the ac-cession to the EU.

Figure 5 Infrastructure developments in Croatia 2010-2018


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�e undertaken infrastructural projects such as Ri-jeka Gateway Project, Zagreb Pier Deep Sea Con-tainer Terminal (ZCT), Waterdrome Network and Air Carrier, Port of Ploče, as well as the construction and upgrading of infrastructure at the inland port of Slavonski Brod, may make a difference in next peri-ods under research. Some specific objectives written in the Transport Development Strategy of the Re-public of Croatia (2017 – 2030) include the develop-ment of the following main logistics centers:

• Rijeka maritime port, • Ploče maritime port, • Split maritime port,

• Vukovar inland port, • Osijek inland port, • Zagreb hub.

Another objective is even more promising for the development of an international logistics hub. A strategic goal is the strengthening of Croatia as a logistics hub for the wider region, with focus on Zagreb. �is statement leads to the logical impli-cation of aiming to harmonize transport opera-tions with neighboring countries: Bosnia and Her-zegovina, Slovenia, Serbia, Italy, Montenegro and Hungary9.

Figure 6 Timeliness subfactor of LPI in Croatia 2010-2018


�e important factor from the perspective of e-commerce is timeliness. �is subfactor has im-proved significantly in two recent measurements (Figure 6). �e reliability of cargo flow is in fact the result from all subfactors of logistics performance combined. �e time-based competitiveness is a condition forcing cooperating enterprises to create synchronized supply chains. Customers compare and choose the better offer, also in terms of delivery and standard of logistics services (Yildiz, 2014). �e effort in this area is visible in Croatia and may be an important factor for the future development of modern distribution centers ready for serving the most valuable branches of Croatian industry.

4. The primary research

4.1 Findings of the first stage

�e primary research was a part of another re-search by one of the authors (Šerić et al., 2014), but this part was conducted on the sample of export Croatian companies. Claims related to logistics po-tential are divided into five groups. Internal consist-ency was examined using Cronbach’s alpha. �e first group includes claims related to the sources and reliability of data and information. Initially, there is a total of eight variables. Cronbach’s alpha was calculated to examine internal consistency and it was concluded that one variable should be dropped.


142 God. XXXIII, BR. 1/2020. str. 133-149

�ereafter, a satisfactory size Cronbach’s alpha (0.715) was obtained. �e second group includes claims related to access to data and information. �ere were four claims. Cronbach’s alpha was 0.77. �e third group of variables is made up of claims relating to advanced analytics. �ere were also four claims. Cronbach’s alpha was 0.778. �e fourth group includes claims related to intuition and time and consists of five claims. Cronbach’s alpha was 0.765. �e fifth group consists of claims related to the organization of business intelligence and consists of five claims of which one was dropped because of internal inconsistencies. Cronbach’s alpha was 0.64. Having tested the internal consistency, factor anal-ysis was performed in order to create five latent variables to facilitate handling in the later stage of analysis. All the results were satisfactory in accord-ance with the requirements of factor analysis. �e main indicators considered about the validity of factor analysis were Kaiser-Meyer-Olkin measure of sampling adequacy, Bartlett’s test of sphericity, Kaiser’s criterion on the size of eigenvalues and the percentage of variance explained. Factor loadings were all greater than 0.5, which is very satisfactory. Claims relating to the management of the sup-ply chain were grouped into five dimensions. �e first dimension was related to agility and had four claims. Cronbach’s alpha was 0.894. �e second dimension was related to the adaptability and had three claims. Cronbach’s alpha was 0.817. �e third dimension was related to the alignment and had three claims. Cronbach’s alpha was 0.732. �e fourth dimension was related to the proactivity and consisted of four variables. Cronbach’s alpha was 0.900. �e fifth dimension was related to the per-formance and consisted of six statements. Cron-bach’s alpha was 0.896. After testing the internal consistency, the factor analysis was performed in order to create five latent variables in order to fa-cilitate handling in the later stage of analysis. All the results were satisfactory in accordance with the requirements of factor analysis.

4.2 Conclusions of the second stage

Creating a logistics strategy represents a crucial phase in management. �e research has shown that different strategies are used in Croatian business practice (Šerić, Luetić, 2016). According to the find-ings of the first stage, the most complex phase in creating a competitive logistics strategy is linked to possibilities of its implementation. Different criteria can be considered as prerequisites for an effective logistics strategy, such as – accuracy, measurability,

and applicability of information. Another impor-tant aspect is the suitability of information which is used in existing marketing information system of a company. Companies that satisfy those criteria make prompt decisions to eliminate business risks and ful-fill the goals of the Supply Chain Management de-fined as follows: “�e task of coordinating material flow and information across the supply chain to meet end-customer needs” (Harrison, Hoek, 2011).Business intelligence and supply chain management contribute to the competitiveness of the logistics strategy. Such competitiveness assumes constant collection of information on competitors’ supply. Devising a successful logistics strategy based on the application of business intelligence in the manage-ment of supply chain is more efficient and responsi-ble. All logistic tools need to be adapted in accord-ance with the strategy. �e research has shown that creating a competitive logistics strategy based on business intelligence is generally conducted through four phases. �e first phase is the analysis of the company’s environment. �e second phase includes defining the frames of the final marketing decision. In the third phase, correction decisions are made according to the feedback. In the fourth phase, consequences of the final marketing decision are estimated. �e logistics strategy should perform the func-tion of maximizing the perception of the value of the company. �e efficiency of data collection and analysis of competition in this sense are imperative. Positive experiences of several companies in the re-search sample indicate the convenience of business intelligence analysis for creating the logistics strat-egy through five levels: early warning intelligence, intelligence as support for creating a logistics strat-egy, intelligence as support in tactical logistics op-erations on the market, evaluation of competitors, and intelligence as support in planning and creating the logistics strategy.Although Herring (1999) was the first one who, ac-cording to the results of the conducted research, had formed important intelligence application ar-eas for logistics decisions, in this approach access stratification through multiple platforms is evident. �e research conducted for the purpose of this study confirmed that relevant information about consumers, competitors, potential partners, sup-pliers and other influential groups is the first and the last line in defending the market position. As a result, here is a suggested protocol for creating the logistics strategy (Table 1).

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Table 1 Recommended protocol for creating the logistics strategy

1. Estimation of tactical and strategic competitor’s logistic activities.

2. Estimation of competitor’s SCM praxis.

3. Guidelines for improving own SCM praxis.

4. Decisions related to the business development.

5. Guidelines for improving company image on the market.

6. Guidelines for shaping competitive logistics strategy.

7. Simulations and evaluation of the implementation for logistic decisions.

Source: Original, based on the conducted research

After reducing the number of variables in the busi-ness intelligence and supply chain management, the association between latent variables related to busi-

ness intelligence and supply chain management was investigated. �e following matrix of Pearson’s corre-lation coefficients was obtained as shown in Table 2.

Table 2 Correlation between business intelligence and supply chain management for creating the logi-stics strategy

SCM Agility

SCM Adaptability

SCM Alignment

SCM Proactivity

SCM Performance

BI Reliability of data and information

Pearson Correlation 0.400** 0.465** 0.321** 0.287** 0.429**

Sig. (1-tailed) 0.000 0.000 0.000 0.000 0.000

N 270 275 270 273 270

BI Access to data and information


Sig. (1-tailed) 0.000 0.000 0.000 0.000 0.000

N 283 289 283 285 280

BI Advanced analytics


Sig. (1-tailed) 0.000 0.000 0.004 0.000 0.000

N 274 280 274 278 273

BI Intuition and time


Sig. (1-tailed) 0.000 0.000 0.000 0.000 0.000

N 282 288 282 285 280

Organization of BI


Sig. (1-tailed) 0.000 0.000 0.000 0.000 0.000

N 276 282 275 280 275

** Correlation is significant at the 0.01 level (1-tailed). Source: Original, based on the conducted research


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As can be discerned from Table 2 above, in all cases there is a statistically significant correlation between variables that are related to business intelligence and variables related to supply chain management (p < 0.001). It may also be noted that correlation co-efficients are not very large. �e difference has been investigated in the arithmetic means of business in-telligence through one-way analysis of variance in relation to the company’s activity, number of em-ployees, and legal form. Statistically significant dif-ferences in the mean of business intelligence were obtained only in the analysis of the activity of the company shown in Table 3.

Table 3 Analysis of variance of business intelli-gence with respect to the activity of the company for creating the logistics strategy

Variable Significance

Source and reliability of data and information 0.013

Access to data and information 0.080

Advanced analytics 0.061

Intuition and time 0.927

Organization of business intelligence 0.967


�e differences among companies that have signifi-cantly more developed business intelligence were found in the first three groups of questions related to business intelligence and were statistically sig-nificant. As regards the number of employees and legal form of companies, there was no statistically significant difference regarding the application of the concept of business intelligence, and thus these results are not displayed.

In Table 4, all variables showed a statistically sig-nificant difference except proactivity. As with business intelligence, better results were achieved in services companies. As with business intelli-gence, there was no statistically significant differ-ence considering the number of employees and legal form of enterprise, therefore these results are not displayed.

Table 4 Analysis of variance of supply chain ma-nagement regarding the activity of the company for creating the logistics strategy

Variable Significance

Agility 0.007

Adaptability 0.062

Alignment 0.001

Proactivity 0.394

Performance 0.002


5. Conclusion

Traditional supply chains are increasingly turning into supply networks, which is best characterized by their complexity. �e added complexity of the relationship is noted when analyzing the levels of established relationships within the enterprise and between the company and its partners in the chain itself. �e research presented here is based on the experience of Croatian companies. �e chosen variables are assessed to be useful toward creating a competitive logistics strategy for the EU market. �e results show that there is a statistically sig-nificant correlation between variables that are re-lated to business intelligence and variables related to supply chain management. Facilitating strate-gies of enterprises toward these values may fulfill the constructed protocol for a logistics strategy of Croatian enterprises. It was found that there are not enough experiences in creating a logistics strategy on the platform of the main variables (such as busi-ness intelligence etc.) in Croatian business practice. In many approaches analyzed in the research, the most complex phase is where business decisions are made for logistics strategy implementation.

To time-prove planned changes in the strategies of enterprises, it would be advisable to employ values critical for the development of e-business as a ris-ing sector in the European economy. �erefore, it is necessary to ensure accuracy, measurability, and applicability of information on the basis of which logistics decisions are made. Companies included in the sample, which fulfill these criteria, take prompt measures to eliminate different market risks. �e research has shown that business decisions in lo-

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gistics based on business intelligence implementa-tion in supply chain management is efficient and responsible. Creating a logistics strategy for the EU market has to be in the function of maximizing the perception of the company’s value supply.

Aggregate correlation coefficients show a statisti-cally significant correlation between the two actual sets of variables. Correlation dimensions that con-stitute the observed variables also indicate some interesting elements:

•• •Quality of sources and reliability of data and information is effectively connected with better agility, adaptability and better perfor-mance of the company;

•• •Use of intuition and time improvements based on the use of business intelligence is effective-ly connected with better agility, adaptability and better performance of the company;

•• •Widespread use of advanced analytics is ac-tually associated with better adaptability and greater supply chain proactivity of the com-pany.

With the exception of the correlation between ad-vanced analytics and compliance, which is defined as low, all other mutual correlations are strong and statistically significant. It can be concluded that there is a positive correlation between the use of business intelligence and efficient supply chain management. Croatian companies do not have enough time to adapt and their efforts need to go in several directions: towards the development of integration (vertical and horizontal), to achieve greater visibility between the involved process participants, to achieve greater flexibility, better matching and adaptability to the conditions in which they operate. Such an effort may lead to an improvement in logistics performance of a coun-try and create synergy for economic development. Further analysis may verify an occurrence of the described relation.

�e relationship between business intelligence and supply chain management should be strengthened in order to maximize the correlation coefficients in the practice of creating a competitive logistics strat-egy of Croatian companies for the EU market.


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Zbigniew Bentyn

Ante Luetić

Neven Šerić

R E R H

S

Republika Hrvatska, kao relativno nova članica Europske unije, spoznaje i nove mogućnosti koje članstvo pruža razvoju nacionalne ekonomije. Rast udjela hrvatskih gospodarskih subjekata u europskim opskrbnim lancima je jedan od načina poticanja nacionalnoga ekonomskog rasta. Analiza logističkih performansi Re-publike Hrvatske temeljena je na recentnim podatcima Svjetske banke te ukazuje na pozitivne promjene, kako u užem, tako i u širem poslovnom okruženju. Unaprjeđenje logističke infrastrukture i njezinih temelj-nih sastavnica obuhvaćenih ovom analizom u radu, podrška razvoju gospodarstva i jačanje kompetencija u logističkoj sferi predstavljali su okvire za primarno istraživanje autora čiji su nalazi također predstavljeni u radu. Postojeće logističke prednosti Republike Hrvatske i kontinuitet unaprjeđenja logističke infrastrukture preduvjet su uspostavi novih poslovnih kontakata i poslovne suradnje hrvatskih tvrtki s europskim partne-rima. Implementacija koncepta logističke platforme nacionalnoga gospodarstva prilagodljivog poslovnim standardima tržišta ekonomske integracije preduvjet je iskorištenju novih poslovnih mogućnosti. Ovo se posebno odnosi na područje e–trgovine. Sloboda razmjene informacija putem svemrežja, kao i sloboda izravnog pristupa kupcima na tržištu Europske unije sukladno definiranim regulativama pružaju svakom gospodarskom subjektu nove mogućnosti za razvoj i rast poslovanja, te pozicioniranje u konkurentnoj tr-

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žišnoj niši. Ovome doprinose i nove regulative Europske unije koje zabranjuju ograničavanje e-trgovine na nacionalnim tržištima svojih članica. Perspektivi gospodarskog rasta Republike Hrvatske doprinosi njezina geografska pozicija i izgrađenost cestovne mreže, ali se pri tome ne smije zanemarivati unaprjeđivanje lo-gističkih performansi gospodarskih subjekata, kako bi se optimalno prilagodili standardima nacionalnih tržišta članica Unije. O ovome posebno treba voditi računa u segmentu e-trgovine koja pokazuje visoki trend rasta. Implementacija naprednih analitičkih tehnika i simulacija u logističkim aplikacijama prerasta u preduvjet održavanja i rasta ostvarenog udjela u području e-trgovine na tržištu Europske unije. Predmet istraživanja ovoga rada je fokusiran na procjenu koliko hrvatsko gospodarstvo može iskoristiti mogućno-sti koje danas pruža tržište Europske unije. Na koji način menadžer poslovnog subjekta treba prilagoditi poslovnu strategiju logističkim standardima u cilju održavanja i rasta tržišnog udjela na razini Europske unije? Koliko je značajan utjecaj business intelligencea i kako korelira s postojećim modelima opskrbnih lanaca? Svrha i cilja rada su bila oblikovati preporučljiv protokol za kreiranje generalne logističke strategije za hrvatska poduzeća koja teže rastu tržišnog udjela u postojećim europskim opskrbnim lancima. Preli-minarna istraživanja su obuhvatila analizu indeksa logističkih performansi (LPI), recentna istraživanja ove problematike, te deskriptivnu analizu prikupljenih sekundarnih podataka. Konstrukti istraženi u primar-nom istraživanju provedenom na relevantnom uzorku hrvatskih poduzeća koja posluju na tržištu Unije su kategorizirani kao business intelligence, upravljanje opskrbnim lancem, te vidljivost i integracija logističke funkcije poslovnog subjekta. Za povezivanje ovih varijabli korištena je faktorska analiza, autori su testirali i korelaciju među navedenim varijablama. Nalazi istraživanja su dokazali značajnu statističku korelaciju među varijablama business intelligencea, upravljanja opskrbnim lancem, vidljivosti i integracije logističke funkcije kao temeljenim sastavnicama u kreiranju konkurentne logističke strategije gospodarskog subjekta koji teži rastu udjela na tržištu Europske unije. Nalazima je potvrđena kompetentnost predloženog modela kreiranja logističke strategije za hrvatska poduzeća.

Ključne riječi: logistika, strategija, međunarodna trgovina, tržište

151God. XXXIII, BR. 1/2020. str. 151-164

THE DIGITAL TRANSFORMATION OF CROATIAN ECONOMY COMPARED WITH EU MEMBER COUNTRIES

Marinko JurčevićUniversity of Zagreb Faculty of Transport and Traffic Sciences Vukelićeva 4, 10000 Zagreb, Croatia [email protected] Phone: +38512380230

Lukša LulićZagreb School of BusinessUlica grada Vukovara 68,10000 Zagreb, [email protected]: +38516310844

Vinko MostaracCroatian Chamber of EconomyRoosveltov trg 2,10000 Zagreb, [email protected]: +38514561562

A

�e modern world is witnessing change on an unprecedented scale, driven by rapid technological advance-ment and increasingly unpredictable economic and social landscape. Against this background of increasing complexity and volatility of change, there is a need to embrace it and take advantage of the opportunities it brings. Changes brought about by the emergence of digital technologies have prompted the need for digital transformation, not only of the economy, but also of society as a whole. �e aim of this paper is to analyse the state of digitalisation in the economy of the Republic of Croatia and compare its digital competitiveness to the economies of other European Union Member States. An analysis of the digital competitiveness of Croatia was conducted using the Croatian Digital Index (Hrvatski Digitalni Indeks), the Digital Economy and Society Index (DESI), and the IMD World Digital Competitiveness Ranking. �e results indicate that the Croatian economy has not yet reached the expected level of competitiveness compared to other EU economies.

Keywords: Economy, digital competitiveness, Croatia, European Union



CC BY-ND












5 od 6 26. 06. 2017. 12:24

1. Introduction

�e simplest way to define the European Union (EU) would be to call it an association or communi-ty of a number of European countries which, strive to achieve common and individual goals through mutual synergies. However, the EU is much more, or at least it should be.

�e history of the European Union dates back to the period after the World War II when economic co-operation was encouraged because it was believed that countries as trading partners would become economically interdependent and therefore more

likely to avoid conflicts. �is assumption led to the establishment of the European Economic Com-munity (EEC) in 1958, which initially included six countries: Belgium, Germany, France, Italy, Luxem-bourg, and the Netherlands. What began as a purely economic union has developed over the years into an organisation spanning numerous policy areas, ranging from climate issues, environmental protec-tion, and health to external affairs, security, justice, and migration. In 1993, the EEC changed its name to the European Union (European Union, European Commission1).



Received: September 25, 2019Accepted for publishing: November 11, 2019


152 God. XXXIII, BR. 1/2020. str. 151-164

As of 2019, the European Union is a unique eco-nomic and political union of 28 countries which together cover a large part of the continent. �e Member States of the European Union are (in al-phabetical order):

- Austria- Belgium- Bulgaria- Croatia- Cyprus- Czechia- Denmark- Estonia- Finland- France- Germany- Greece- Hungary- Ireland- Italy- Latvia- Lithuania- Luxembourg- Malta- Netherlands- Poland- Portugal- Romania- Slovakia- Slovenia- Spain- Sweden- United Kingdom.

�e main goals of the EU are to promote peace, its values and the well-being of its citizens, guarantee freedom, security and justice without internal bor-ders, work for sustainable development, a highly competitive market economy and environmental protection, combat social exclusion and discrimi-nation, promote scientific and technological pro-gress, strengthen economic, social and territorial cohesion and solidarity among EU countries, re-spect its rich cultural and linguistic diversity, and establish an economic and monetary union whose currency is the euro. �e fundamental values of the

EU are human dignity, freedom, democracy, equal-ity, the rule of law, and human rights (European Un-ion, European Commission).

�e Republic of Croatia joined the European Un-ion on 1 July 2013, becoming the 28th full Member State.

Both before and since its accession to the EU, Croa-tia has used certain EU countries as a benchmark, i.e. a point of reference to compare to. �e aim of this paper is, therefore, to analyse the state of digi-talisation in the Croatian economy. To this end, an analysis is carried out of the secondary data col-lected during previously conducted survey among Croatian companies. Finally, the digital competi-tiveness of Croatia is compared to the digital per-formance of other EU Member State economies based on the results of internationally-recognised rankings and indices.

2. Definition of the term “digital transformation”

Before examining the digital transformation of the Croatian economy and the economies of other EU Member States, it is necessary to define and dis-cern the meaning of certain terms related to digital transformation, which are used in everyday dis-course.

�e term “digital” is an adjective that describes the intensity of information and comprehensive inter-penetration and interactivity of various physical devices and resources. Physical resources, such as buildings, plants, automobiles, items, processes, people or teams, become digital with the use of technologies that display the information about their situation and forward it to other devices in their surroundings. �e intensive adoption of digi-tal technology has brought about numerous chang-es, in particular to business models and their adap-tation to the digital age. One of the most important features of digitalisation is the ability to transform and change the ways of doing business and to create completely new digital business models that revolu-tionize the way business processes are implement-ed. Digital business models encompass all business activities that take place electronically using digital technologies, through intensive electronic connec-tivity with the environment with the aim of creating new value and taking advantage of digital opportu-nities. In other words, digital business models refer to the adaptation of existing business models to the

153God. XXXIII, BR. 1/2020. str. 151-164


requirements of the digital economy with the aim of finding sustainable sources of income and added value of the new business model that heavily relies on digital technology (Spremić, 2017).

Digital transformation is characterised by a fusion of advanced technologies and the integration of physical and digital systems, the predominance of innovative business models and new processes, and the creation of smart products and services (Digital Transformation, European Commission2). It refers to a broad concept that encompasses the changes facilitated by the increased availability and use of digital technologies in almost every domain of hu-man activity. For businesses, this implies that digital technologies contribute to the change of their busi-ness models, products and services, production methods and delivery, as well as to the required skills with the aim of maintaining competitiveness in a fast-changing environment (Digital Transfor-mation Scoreboard 2018, Interreg Europe3).

Digital transformation of business is the intensive application of digital technologies and digital re-sources with the aim of creating new sources of income, new business models and, generally, new ways of conducting business. It is created when an organisation, simultaneously and in a very short period, carries out fundamental changes in its most important business activities, such as strat-egy, structure, business processes, business model, and organisational culture. Organisations that have managed to transform their business to digital have been successful in adapting their business model and operation to the requirements of the digital economy, which often results in taking a leading position and increased competitiveness in the mar-ket (Spremić, 2017).

Digital transformation involves changes in opera-tion, roles, and business offers, as well as challenges related to digital technologies in an organisation or its business environment on several levels: the pro-cess level (adopting new digital tools and stream-lining processes by reducing manual steps), the organisational level (providing new services and doing away with outdated practices and provid-ing existing services in a new way), the business domain level (changing roles and value chains in ecosystems), and the social level (changing social structures) (Parviainen et al., 2017).

�e digital economy is an umbrella term used to refer to new models of business, processes, ser-

vices, markets and fast-growing economic sectors, particularly the ones that use digital technologies as their underlying business infrastructure. Digi-tal economy is often identified with terms such as industrial revolution 4.0, new economy, internet economy. It refers to the economy of knowledge, the economy of innovations, the economy of infor-mation, which means an economy in which people work using their intellectual rather than physical power and effort (Spremić, 2017).

Digitalisation is a phenomenon similar to globali-sation –in that it must be managed and governed. Institutions and enterprises must, therefore, be able to rise up to the challenges arising from digitalisa-tion (Digitalization is like globalization: it needs to be managed and governed, European Commis-sion4).

�ese definitions of the term “digital” confirm that the concepts of digital economy and digital trans-formation of business adhere to the following key principles:

- integration and simultaneous application of independently developed technologies and opportunities they provide;

- integration of progressive business concepts;- use of digital business platforms;- successful and robust digital business models;- management based on entrepreneurial

organisation culture, innovation, and cre-ation of added value (digital management) (Spremić, 2017).

3. A comparative analysis of the digital competitiveness of the Croatian economy and the economies of EU Member States

In order to present the state of digitalisation and digital transformation of the Croatian economy, the following chapter analyses in detail the results of the Croatian Digital Index (HDI). In addition, the Digital Economy and Society Index (DESI) and the IMD World Digital Competitiveness Ranking will be used in determining the position of the Croatian economy in terms of digitalisation compared to the economies of other members of the EU.

3.1 Croatian Digital Index (HDI)

�e Croatian Digital Index is based on a survey carried out among 300 medium and large Croa-


154 God. XXXIII, BR. 1/2020. str. 151-164

tian companies between October 2018 and March 2019. �e aim of the survey and publication of the index was to provide an assessment of the state of digital transformation in the Croatian economy, i.e. to analyse and assess the digital readiness of Croatian companies from various economy sec-tors, and draw up a proposal of recommendations and guidelines for improving their digital capaci-ties and thus of the economy in general. �ere are four key areas of digital transformation that the re-search has covered: the state of digitalisation and digital transformation in Croatia, digital readiness, digital strategy and internal processes, and the im-pact of digital transformation on business (Digital Transformation in Croatia 2019, Apsolon5).

�e results of the study Digital Transformation in Croatia 2019 (sorted according to the basic areas) point to the following key indicators (Digital Trans-formation in Croatia 2019, Apsolon):

A. �e state of digitalisation and digital trans-formation

a. 84% of the respondents believe that digital transformation refers to the digitalisation of existing business models and/or analogue processes;

b. �e state of the digitalisation in Croatian economy was rated with a 2 (weak).

c. �e key elements (social/political) for the improvement of digitalisation in Croatia are:

i. the digitalisation of administration and promotion/active participation in the development of key digital technologies;

ii. expanding e-services for citizens and le-gal entities;

iii. broadband internet connectivity and digital education for schools.

B. �e digital readiness of companiesa. 47% of the respondents reported that digital

transformation is among their top 10 priori-ties;

b. 35% assessed their company’s preparedness for digital transformation as good;

c. 53% perceive digital transformation as a sig-nificant opportunity for the improvement of the company’s business, while only 1% perceive it as a minor threat.

d. �e most common obstacles encountered in the process of digital transformation are:

i. focus predominantly on the existing business priorities;

ii. financial reasons (costs);

iii. lack of time for digital transformation.

C. Digital strategy and processesa. 15% of the respondents have developed a

strategy for digital transformation, whereas 65% do not but plan on developing it.

b. �e most significant measures and activities companies use to carry out digital transfor-mation are:

i. increased training of employees on digi-tal topics;

ii. use of external consulting;

iii. integration of methods that focus on the user;

iv. integration of methods for agile product development;

c. the majority of the respondents reported that costs relating to the development of employees’ digital skills account for 25% of the total investment costs;

d. 94% of the respondents believe that the lack of digital transformation will have an im-pact on their company’s business.

D. �e impact of digital transformation on business

a. 20% of the respondents believe that the pro-cess of digital transformation will lead to the creation of new employment opportu-nities, while 59% think the process will not affect the number of jobs.

b. �e percentage of respondents who believe that digital transformation will not change the company’s revenue in the next two years and those who believe that it will increase it is roughly the same, 38% and 39% respectively.

c. �e most significant outcomes achieved by implementing digital transformation in-clude:

i. digitalisation of business processes;

ii. adoption of new technologies/market trends;

155God. XXXIII, BR. 1/2020. str. 151-164


iii. efficiency/lower costs as a result of streamlining business processes;

iv. optimisation of user experience.

�e results of analysis of the digital transforma-tion in the Croatian economy and the Croatian Digital Index show that companies in Croatia are not familiar enough with digital transformation. Consequently, for most companies, digital trans-formation is not among their top priorities and only a few respondents believe their company has developed a strategy for digital transformation. More than half of the respondents believe that the digital transformation process will not impact the overall number of job positions in companies, and the number of those who believe that digital transformation will affect the company’s revenue is almost equal to the number of those who believe that it will not.

3.2 Digital Economy and Society Index (DESI)

Since 2014, the European Commission has been monitoring EU Member States’ digital competitive-ness with the annual Digital Economy and Society Index (DESI). �e DESI summarises the relevant indicators and monitors the performance of EU Member State economies in the domain of digi-talisation and digital competitiveness. �e overall DESI is calculated on the basis of the weighted av-erage across 5 main dimensions of the index: Con-nectivity, Human Capital, Use of Internet Services, Integration of Digital Technology, and Digital Public Services.* �e main dimensions include over 34 in-dicators (European Commission, Digital Economy and Society Index6).

* �e Connectivity dimension measures the deploy-ment of broadband infrastructure and its quality. �e Human Capital dimension measures the skills needed to take advantage of the possibilities offered by a digital society. �e Use of Internet Services di-mension accounts for a variety of online activities. �e Integration of Digital Technology dimension measures the digitisation of businesses and e-com-merce. Digital Public Services dimension measures the digitisation of public services, focusing on eGov-ernment and eHealth.

Below are the rankings of EU Member State econo-mies based on the Digital Economy and Society In-dex for the period from 2014 to 2018 (Table 1).

Table 1 �e rankings of EU Member State econo-mies based on the Digital Economy and Society Index for the period 2014 – 2018

Member State 2014 2015 2016 2017 2018

Austria 11 11 10 11 11

Belgium 7 7 7 6 8

Bulgaria 27 26 26 26 26

Croatia 23 24 23 23 22

Cyprus 24 22 20 21 21

Czechia 19 16 19 17 17

Denmark 1 1 1 1 1

Estonia 8 8 8 8 9

Finland 3 2 2 2 3

France 16 17 17 18 18

Germany 10 12 13 14 14

Greece 26 27 27 27 27

Hungary 21 21 21 22 23

Ireland 12 10 9 9 6

Italy 25 25 25 25 25

Latvia 18 19 18 19 19

Lithuania 13 14 12 13 13

Luxembourg 5 5 6 5 5

Malta 9 9 11 10 12

Netherlands 4 4 4 4 4

Poland 22 23 24 24 24

Portugal 15 15 15 15 16

Romania 28 28 28 28 28

Slovakia 20 20 22 20 20

Slovenia 17 18 16 16 15

Spain 14 13 14 12 10

Sweden 2 3 3 3 2

United Kingdom* 6 6 5 7 7

*�e United Kingdom is hereinafter abbreviated as the UK.Source: Authors, based on the Digital Economy and Soci-ety Index (DESI) 2014 – 2018

It is clear from Table 1 that Denmark ranked first each year, followed closely by Finland and Sweden. Croatia ranked below the EU average and remained at the bottom of the ranking throughout the pe-riod. Economies that have consistently ranked be-


156 God. XXXIII, BR. 1/2020. str. 151-164

low Croatia in the last five years are Italy, Bulgaria, Greece, and Romania. In the 2018 report, Croatia placed 22nd, which is a step up compared to the previous year. In 2018, Croatia ranked higher than Hungary, Poland, Italy, Bulgaria, Greece, and Ro-mania.

For a more detailed analysis of the individual scores and rankings of the EU member economies, we need to look at their rankings in the main dimen-sions. �erefore, the following charts illustrate the 2018 rankings in DESI and its main dimensions (Figure 1, 2, 3, 4, and 5).

Figure 1 DESI dimension– Connectivity

Source: Authors, based on the Digital Economy and Society Index (DESI) for 2018

In Connectivity dimension, the highest-ranked was the Netherlands, followed by Luxembourg

and Denmark. Croatia is in the 27th place (of 28). The only country that ranked lower than

Croatia in this dimension is Greece.

Figure 2 DESI dimension – Human Capital


The highest ranking EU countries in Human Capital dimension for 2018 are Finland, the

Netherlands and Sweden. Croatia is in the 18th place (of 28), ranking higher than Lithuania,

Poland, Hungary, Portugal, Latvia, etc.

Figure 3 DESI dimension – Use of Internet Services

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In Connectivity dimension, the highest-ranked was the Netherlands, followed by Luxembourg and Denmark. Croatia is in the 27th place (of 28). �e

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In Connectivity dimension, the highest-ranked was the Netherlands, followed by Luxembourg

and Denmark. Croatia is in the 27th place (of 28). The only country that ranked lower than

Croatia in this dimension is Greece.



The highest ranking EU countries in Human Capital dimension for 2018 are Finland, the

Netherlands and Sweden. Croatia is in the 18th place (of 28), ranking higher than Lithuania,

Poland, Hungary, Portugal, Latvia, etc.


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�e highest ranking EU countries in Human Capi-tal dimension for 2018 are Finland, the Nether-lands and Sweden. Croatia is in the 18th place (of

28), ranking higher than Lithuania, Poland, Hun-gary, Portugal, Latvia, etc.



The DESI rankings in the dimension Use of Internet Services for 2018 show that Denmark,

Sweden and the Netherlands ranked highest in this dimension. Croatia is in a very good 11th

place (of 28), ranking higher than its neighbouring EU Member States.

Figure 4 DESI dimension – Integration of Digital Technology


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�e DESI rankings in the dimension Use of Inter-net Services for 2018 show that Denmark, Sweden and the Netherlands ranked highest in this dimen-

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The DESI rankings in the dimension Use of Internet Services for 2018 show that Denmark,

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Figure 5 DESI dimension– Digital Public Services

According to the 2018 DESI rankings, in the Integration of Digital Technology dimension,

the highest-ranked Member States are Denmark, Finland and Ireland. Croatia is in the 21st

place (of 28), ranking higher than Luxembourg, Latvia, Greece, Hungary, Bulgaria, Poland

and Romania.

Figure 5 DESI dimension– Digital Public Services


The highest-ranked EU countries in the DESI dimension Digital Public Services for 2018 are

Finland, Estonia and Denmark. Croatia is in the 25th place (of 28), an unfavourable position

given that only Romania, Hungary and Greece ranked lower than Croatia in this category.

The analysis of the results of the Digital Economy and Society Index for 2018 and its main

dimensions indicates that Scandinavian countries – Denmark, Finland and Sweden ranked the

highest. Croatia achieved its highest score in the dimensions Use of the Internet Services and

Human Capital. On the other hand, in the dimensions Connectivity and Digital Public

Services, Croatia is close to the bottom of the ranking.

3.3 The IMD World Digital Competitiveness Ranking

The Institute of Management Development (IMD) carries out research to analyse and rank

countries all over the world based on their ability to adopt digital technologies leading to

transformation in public services, business models, and society as a whole. The ranking is

based on three key factors, nine sub-factors, and a total of fifty criteria. The key factors are

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�e highest-ranked EU countries in the DESI di-mension Digital Public Services for 2018 are Fin-land, Estonia and Denmark. Croatia is in the 25th place (of 28), an unfavourable position given that only Romania, Hungary and Greece ranked lower than Croatia in this category.

�e analysis of the results of the Digital Economy and Society Index for 2018 and its main dimensions indicates that Scandinavian countries – Denmark, Finland and Sweden ranked the highest. Croatia achieved its highest score in the dimensions Use of the Internet Services and Human Capital. On the other hand, in the dimensions Connectivity and Digital Public Services, Croatia is close to the bot-tom of the ranking.

3.3 The IMD World Digital Competitiveness Ranking

�e Institute of Management Development (IMD) carries out research to analyse and rank countries all over the world based on their ability to adopt digital technologies leading to transformation in

public services, business models, and society as a whole. �e ranking is based on three key factors, nine sub-factors, and a total of fifty criteria. �e key factors are ‘Knowledge’, ‘Technology’, and ‘Fu-ture readinesses. �e Knowledge factor refers to the know-how needed to discover, understand and cre-ate new technologies; it comprises three sub-fac-tors: Talent, Training & Education, and Scientific concentration. �e Technology factor is the all-en-compassing context that enables the development of digital technologies, with sub-factors Regulatory framework, Capital, and Technological framework. �e Future readiness factor is the preparedness of a country to exploit digital transformation; its sub-factors are Adaptive attitudes, Business agility, and IT integration (IMD World Competitiveness Center, IMD World Digital Competitiveness Rank-ing 20187).

Below are the rankings of EU Member States based on the IMD World Digital Competitiveness Rank-ing for the period 2014 - 2018 (Table 2).

According to the 2018 DESI rankings, in the Inte-gration of Digital Technology dimension, the high-est-ranked Member States are Denmark, Finland

and Ireland. Croatia is in the 21st place (of 28), rank-ing higher than Luxembourg, Latvia, Greece, Hun-gary, Bulgaria, Poland and Romania.

159God. XXXIII, BR. 1/2020. str. 151-164


Table 2 �e rankings of EU Member States ba-sed on the IMD World Digital Competitiveness Ranking for the period 2014 - 2018

Member State 2014 2015 2016 2017 2018

Austria 24 26 19 16 15Belgium 25 19 18 22 23Bulgaria 53 54 47 45 43Cyprus - - - 53 54Croatia 45 46 44 48 44Czechia 31 31 32 32 33Denmark 7 8 8 5 4Estonia 23 27 27 26 25Finland 4 3 6 4 7France 22 20 22 25 26Germany 14 17 15 17 18Greece 48 40 45 50 53Hungary 36 44 42 44 46Ireland 17 25 20 21 20Italy 41 36 34 39 41Latvia 33 34 33 35 35Lithuania 32 28 29 29 29Luxembourg 19 16 21 20 24Malta - - - - -Netherlands 6 6 4 6 9Poland 39 38 38 37 36Portugal 30 29 31 33 32

Member State 2014 2015 2016 2017 2018

Romania 54 51 49 54 47Slovakia 40 43 41 43 50Slovenia 37 39 36 34 34Spain 29 30 30 30 31Sweden 3 5 3 2 3United Kingdom 12 12 12 11 10

Source: Authors, based on the 2018 IMD World Digital Competitiveness Ranking

Over the last five years, Sweden has been among the top three highest-ranked EU Member States, with the exception of 2015 when Finland ranked third. In the same period, Croatia mostly occupied the bot-tom part of the ranking. In the 2018 report, Croatia ranked 44th (a four-place improvement compared to the previous year). Only Hungary, Romania, Slova-kia, Greece, and Cyprus ranked lower. As evident from Table 2, Malta is the only EU Member State which is not included the IMD research.

For a more detailed analysis, the paper looks at the rankings of EU Member States in the main factors. �e following figure illustrates the position of EU countries in the 2018 IMD report that includes over 63 countries across the world (Figures 6, 7 and 8).*

* At the top of the IMD World Digital Competitive-ness Ranking 2018 are: the USA, Singapore, Sweden, Denmark, and Switzerland.

Figure 6 EU Member States’ rankings in the Knowledge factor


In the IMD factor Knowledge for 2018, the highest-ranking countries were the Scandinavian

countries (ordered by ranking, from the highest- to the lowest-ranking): Sweden, Denmark,

and Finland. Croatia was in the 43rd place, above Romania, Hungary, Slovakia, Greece, and

Cyprus.

Figure 7 EU Member States’ rankings in the Technology factor

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160 God. XXXIII, BR. 1/2020. str. 151-164

In the IMD factor Knowledge for 2018, the highest-ranking countries were the Scandinavian countries (ordered by ranking, from the highest- to the low-

est-ranking): Sweden, Denmark, and Finland. Croa-tia was in the 43rd place, above Romania, Hungary, Slovakia, Greece, and Cyprus.



In the IMD factor Knowledge for 2018, the highest-ranking countries were the Scandinavian

countries (ordered by ranking, from the highest- to the lowest-ranking): Sweden, Denmark,

and Finland. Croatia was in the 43rd place, above Romania, Hungary, Slovakia, Greece, and

Cyprus.


0

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�e highest-ranked EU countries in the Technology factor for 2018 were Finland, Sweden and the Neth-erlands. Croatia ranked 49th. �e only EU econo-

mies that showed lower performance in this factor are Greece and Cyprus.

Figure 8 EU Member States’ rankings in the Future readiness factor


The highest-ranked EU countries in the Technology factor for 2018 were Finland, Sweden and

the Netherlands. Croatia ranked 49th. The only EU economies that showed lower performance

in this factor are Greece and Cyprus.

Figure 8 EU Member States’ rankings in the Future readiness factor


In the IMD factor Future readiness for 2018, the highest-ranked EU countries were Denmark,

the UK and the Netherlands. Croatia ranked 54th, with only Bulgaria, Romania and Hungary

showing lower performance, among the EU countries. Considering IMD World Digital

Competitiveness Ranking for 2018 and its main factors, Croatia was at the very bottom of the

ranking in the factors Knowledge, Technology and Future readiness compared to other EU

countries. The only notable area in which Croatia gained a competitive advantage is

Knowledge, in particular in Education & Training and Scientific concentration.

4. Conclusion

Digital transformation refers to a broad concept that encompasses the changes facilitated by

the increased availability and use of digital technologies in almost every domain of human

activity. This implies the change to business models, products and services, production

methods and supply, as well as to the skills needed to remain competitive in a fast-changing

environment. Given that many countries seek to adapt their economies to the new conditions

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161God. XXXIII, BR. 1/2020. str. 151-164


In the IMD factor Future readiness for 2018, the highest-ranked EU countries were Denmark, the UK and the Netherlands. Croatia ranked 54th, with only Bulgaria, Romania and Hungary showing low-er performance, among the EU countries. Consid-ering IMD World Digital Competitiveness Ranking for 2018 and its main factors, Croatia was at the very bottom of the ranking in the factors Knowl-edge, Technology and Future readiness compared to other EU countries. �e only notable area in which Croatia gained a competitive advantage is Knowl-edge, in particular in Education & Training and Sci-entific concentration.

4. Conclusion

Digital transformation refers to a broad concept that encompasses the changes facilitated by the in-creased availability and use of digital technologies in almost every domain of human activity. �is im-plies the change to business models, products and services, production methods and supply, as well as to the skills needed to remain competitive in a fast-changing environment. Given that many countries seek to adapt their economies to the new conditions and exploit new opportunities as soon as possible, research is conducted to evaluate their progress in terms of digitalisation – both on national and global levels.

�e Croatian Digital Index, which represents the results of the analysis of digital transformation of the Croatian economy, indicates that companies in Croatia are not familiar enough with the term digi-tal transformation. Moreover, for most companies, it is not even among their top priorities. In fact, very few companies report that they have developed a strategy for digital transformation. More than half of the respondents believe that the digital transfor-mation process will not impact the overall number of jobs in companies. �e number of respondents who consider that digital transformation will have an impact on the revenue and those who consider that it will not are almost equal.

According to the Digital Economy and Society Index (DESI) for 2018, Croatia occupies the 22nd position (one position higher compared to the pre-vious year) among the EU countries. �e only EU members that ranked lower than Croatia are Hun-gary, Poland, Italy, Bulgaria, Greece and Romania. Croatia obtained its highest score and achieved its highest ranking in the Use of Internet Services and

Human Capital dimensions. In contrast, Croatia ranked at the very bottom in the Connectivity and Digital Public Services dimensions.

�e analysis of the IMD World Digital Competi-tiveness Ranking for 2018 reveals that Croatia is in the 44th place (advancing by four places compared to the previous year). �e only EU countries that ranked lower than Croatia are Hungary, Romania, Slovakia, Greece and Cyprus. Compared to other EU countries, Croatia is at the bottom of the rank-ing in the Technology and Future Readiness factors. An area in which Croatia still remains competitive, compared to other EU countries, is the Knowledge factor in particular in the Training & Education and Scientific Concentration sub-factors.

�e overall performance and digital competitive-ness of the Croatian economy, compared to other EU members, show that Croatia is not in an unfa-vourable position. Although individual results are not favourable for Croatia, there is some advance-ment compared to the results from the previous year.

According to the recently published study on digiti-sation in Croatia by a consulting firm McKinsey & Company, Croatia has a long-term automation po-tential to generate as many as 800,000 new jobs by the year 2030. �e potential is based on three avail-able factors: a great number of students with a de-gree in ICT in Croatia, a competitive advantage on the macroeconomic level and competitive labour costs in the ICT sector, and success stories from the private and public sector recognised on the interna-tional level. Additional efforts are necessary to sup-port digital growth that should focus on four areas: the education system, ICT infrastructure, digital skills, and entrepreneurial environment. In addi-tion, recommendations are given for actions aimed at accelerating digitisation of the public and private sectors, and of the individual. Some of these recom-mendations are: build skill set for the future, sup-port technology adoption in the public and private sectors, invest in human capital, use the advantages of adopting digital tools in everyday life, strengthen regional digital cooperation, and others (McKinsey & Company 20188).

For the last few years, the Government of the Re-public of Croatia has been promoting digitalisa-tion through the project entitled Digital Croatia. �e Central State Office for the Development of the Digital Society is the state administration body


162 God. XXXIII, BR. 1/2020. str. 151-164

responsible for monitoring and promoting the de-velopment of digital society and the harmonisation of national rules and regulations with the guidelines and regulations of the European Union in the do-main of digital society and economy. Among other activities in this context, it is necessary to point out that the Ministry of Public Administration has de-veloped e-Croatia 2020 Strategy and Action Plan for its implementation, and that several financing agreements for the digitalisation project have al-

ready been signed (�e Central State Office for the Development of the Digital Society9, Ministry of Public Administration of the Republic of Croatia10).

Carrying out the planned projects and activities requires the synergy of all stakeholders from the public, real, and social sectors, and the results are expected to improve Croatia’s digital competitive-ness ranking in the coming period.

163God. XXXIII, BR. 1/2020. str. 151-164


R

1. Parviainen, P., Tihinen, M., Kääriäinen, J., Teppola, S. (2017), “Tackling the digitalization challenge: how to benefit from digitalization in practice”, International Journal of Information Systems and Proj-ect Management, Vol. 5, No. 1, pp. 63-77.

2. Spremić, M. (2017). Digitalna transformacija poslovanja. Zagreb: Faculty of Economics and Business.

E

1 European Commission, “The European Union”, available at: https://europa.eu/european-union/about-eu_hr (Accessed on: May 24, 2019)

2 European Commission, “Digital transformation”, available at: https://ec.europa.eu/growth/industry/policy/digital-transformati-on_en (Accessed on: May 24, 2019)

3 Interreg Europe (2018), “Digital Transformation Scoreboard 2018: Are EU companies adopting digital technologies?”, available at: https://www.interregeurope.eu/policylearning/news/3917/digital-transformation-scoreboard-2018-are-eu-companies-adopting-digi-tal-technologies/ (Accessed on: May 24, 2019)

4 European Commission (2017), “Digitalization is like globalization: it needs to be managed and governed”, available at: https://ec.europa.eu/digital-single-market/en/blog/digitalization-globalization-it-needs-be-managed-and-governed, (Accessed on: May 24, 2019)

5 Apsolon (2019), “Digital Transformation in Croatia 2019: Croatian Digital Index”.

6 European Commission (2019), “The Digital Economy and Society Index (DESI)”, available at: https://ec.europa.eu/digital-single-market/en/desi, (Accessed on: May 28, 2019)

7 IMD World Competitiveness Center (2018), “IMD World Digital Competitiveness Ranking 2018”, Institute for Management Deve-lopment, Lausanne.

8 McKinsey & Company (2018), “Croatia – Emerging Digital Challenger: Digitization as the new growth engine for Croatia”, available at: https://digitalchallengers.mckinsey.com/files/Digital-Challengers-Perspective-on-Croatia.pdf (Accessed on: May 30, 2019)

9 The Central State Office for the Development of the Digital Society, available at: https://rdd.gov.hr/ (Accessed on: May 30, 2019)

10 The Ministry of Public Administration, the Republic of Croatia, available at: https://uprava.gov.hr/ (Accessed on: May 30, 2019)


164 God. XXXIII, BR. 1/2020. str. 151-164

Marinko Jurčević

Lukša Lulić

Vinko Mostarac

D R H E

S

U sadašnjem vremenu svjedoci smo promjena koje se, kao nikada do sada, neprestano, nepredvidivo i ve-likom brzinom odvijaju oko nas. To nas dovodi do razmišljanja o tome kakva je budućnost, koja je nedvoj-beno kao nikada prije, podložna velikoj nesigurnosti i neizvjesnosti. U kontekstu toga, globalna pojava di-gitalnih tehnologija zahtijeva promptnu prilagodbu novom digitalnom dobu te digitalnu transformaciju, ne samo gospodarstva već i društva u cjelini. Cilj ovog rada je utvrditi i analizirati poziciju gospodarstva Repu-blike Hrvatske u području digitalizacije, odnosno digitalne transformacije te tzv. digitalnu konkurentnost u odnosu na ostale zemlje članice Europske unije. Kao osnova za analizu stanja i digitalne konkurentnosti hrvatskog gospodarstva korišteni su: Hrvatski Digitalni Indeks (HDI), Indeks digitalnog gospodarstva i društva (DESI) te IMD svjetska ljestvica digitalne konkurentnosti. Rezultati i zaključci analize ukazuju da hrvatsko gospodarstvo po pitanju digitalne spremnosti i transformacije još uvijek nije dosegnulo očekivanu razinu konkurentnosti u odnosu na ostale države članice Europske unije.

Ključne riječi: gospodarstvo, digitalna konkurentnost, Hrvatska, Europska unija

165God. XXXIII, BR. 1/2020. str. 165-174

A

An important antecedent for building a green supply chain are customer requirements. For the time being, however, it is unclear how the demands for providing reverse logistics services contribute to green sup-ply chain building. �e aim of the research was therefore to specify the degree of importance of reverse logistics services compared to typical services provided by the supplier during order fulfilment. Based on the survey of purchasing managers’ attitudes in 100 food companies, reverse logistics services were found to have a significant role in the portfolio of services evaluated. Return of defective goods was evaluated as the most important reverse logistics service. At the same time, it was found that the perception of the im-portance of the services provided is affected by the item purchased. Reverse logistics services are more im-portant when purchasing chemicals than when purchasing the main raw material. �us, primary research has shown that the greatest opportunity to build a green supply chain will arise when purchasing items that inherently show environmental hazards.

Keywords: Reverse logistics, green supply chain, logistics service, food industry, chemicals



CC BY-ND












5 od 6 26. 06. 2017. 12:24

1. Introduction

Currently, green supply chain management (GSCM) is gaining ground both in theory and managerial practice, combining environmental management and supply chain management (SCM) (Srivastava, 2007; Zhu et al., 2008; Yang et al., 2013). GSCM rep-

resents the integration of environmental thinking into SCM activities (Ahi, Searcy, 2013). Building a green supply chain (GSC) requires the application of an array of green practices. �ese are environmen-tally friendly activities that reduce environmental impacts and capture added value from these activi-


IMPORTANCE OF REVERSE LOGISTICS SERVICES AS AN ANTECEDENT FOR BUILDING A GREEN SUPPLY CHAIN

Michal PatakUniversity of PardubiceDepartment of Economy and Management of Chemical and Food IndustryStudentska 95,53210 Pardubice, Czech [email protected]: +420466036299

Lenka BranskaUniversity of PardubiceDepartment of Economy and Management of Chemical and Food IndustryStudentska 95,53210 Pardubice, Czech [email protected]: +420466036178

Zuzana PecinovaUniversity of PardubiceDepartment of Economy and Management of Chemical and Food IndustryStudentska 95,53210 Pardubice, Czech [email protected]: +420466036298


Received: October 3, 2019Accepted for publishing: February 5, 2020


166 God. XXXIII, BR. 1/2020. str. 165-174

ties (Ryoo, Koo, 2013). At the same time, they con-tribute to lean manufacturing (Dües et al., 2013) and according to Ryoo and Koo (2013), they enable a firm to sustain competitive advantages. Many of these practices are applicable at the level of a single enterprise, others require the cooperation of several partners in the chain (Hofmann et al., 2012). Envi-ronmentally proactive manufacturers directly and positively affect environmental behaviour of their business partners (Green Jr. et al., 2012) and imple-ment internal green practice with an extension to external supply chain partners (Zhu et al., 2013), thereby increasing the chances of their successful implementation (Yen, 2018). Greater or lesser in-volvement of business partners in joint efforts in-volves setting, coordinating, and achieving environ-mental goals that will lead to reduced environmental impacts (Green Jr. et al., 2012; Zhu et al., 2013; Yen, 2018; Vachon, Klassen, 2006). Developing external green collaboration improves the firm’s green per-formance considerably (Ahmed et al., 2018).

One of the green practices that require a greater or lesser degree of cooperation between business partners in the chain is reverse logistics. According to the literature (Cox, 1999), reverse logistics cycle manages packaging as well as returns of defective or discarded products. Reverse logistics is a tool for developing the level of recovery and return of the used products (Shi et al., 2015), serving to re-duce pollution and product waste through activi-ties like refurbishing, repairing, remanufacturing, recycling, disposal and parts recovery (Zarbakhsh-nia et al., 2019). Rogers and Tibben-Lembke (1999) define reverse logistics as designing, scheduling, and controlling the productive and beneficial flow of products that are at the end of life, inventory and information of the used products from consumer to producer so as to recover, recycle or dispose of the used products. However, reverse logistics should be considered for the entire life cycle of the product, including as part of the product design. �e basic life cycle of a product encompasses the following stages: concept, design, manufacture, use, return, recycle and/or disposal in landfills (Guarnieri et al., 2016). �e implementation of a reverse logistics network is a strategic decision. �is decision seeks to achieve a single objective or multiple objectives of cost minimization, profit maximization, custom-er satisfaction, or environmental benefit (Shi et al., 2017; Abdulrahman et al., 2015; Bazan et al., 2015; Li et al., 2017).

As far as reverse logistics research is concerned, it has been conducted essentially since 1992 when Stock (1992) acknowledged reverse logistics as a topic of societal interest. �e interest of research-ers is mainly focused on the strategic management of the reverse logistics, especially the application of management methods and approaches to reverse logistics, the implementation of the reverse logis-tics system and the development of cooperation between business partners in the supply chain, es-pecially with third-party logistics partners (Li et al., 2018; Liao, 2018; Agrawal et al., 2015; Ghadimi et al., 2019).

In research focusing on cooperation of supply chain partners in the implementation of green practices (including reverse logistics), it was found that en-vironmental cooperation and monitoring between customers and their suppliers improves environ-mental and business performance (Green Jr. et al., 2012). Moreover, Gimenez and Sierra (2013) found that the effect on environmental performance is positive and synergistic and can also be enhanced by environmental assessment of suppliers. �e pos-itive relationship between green practices, green supply chain and environmental (and economic) performance has also been revealed in food retail research (Petljak et al., 2018).

Dangelico and Pontrandolfo (2015) found that business performance is significantly influenced by the ability to develop environmental coopera-tion and to carry out environmental activities, not only with commercial, but also non-commercial entities. Moreover, it has already been revealed that the success of implementing green practices is sig-nificantly stimulated by integrations in the supply chain (Vachon, Klassen, 2006), application of envi-ronmental management in the companies involved in the chain (Wong et al., 2012), coordination of internal business processes of individual partners and implementation of an information system to support green activities (Ryoo, Koo, 2013). Also, differences in the expansion of green supply chain management in the B2B (business-to-business) and B2C (business-to-consumer) sectors have been ex-amined as well as the conditions in which firms in the B2B sector implement environmental processes into their individual buyer-supplier relationships (Hoejmose et al., 2012).

Yen (2018) addresses internal and external ante-cedents to the application of green practices, spe-cifically which of them affect the supplier-customer

167God. XXXIII, BR. 1/2020. str. 165-174


collaboration and how. He develops the results of previous research (Caniëls et al., 2013) that sug-gested that the main drivers to engage suppliers in green activities are supplier readiness and customer requirements. �e role of customers in the applica-tion of green activities has also been confirmed in research by Chavez et al. (2016). �ey discovered that customer pressure has a significant impact on the implementation of green initiatives, which in turn leads to a multiple increase in operational per-formance. However, so far no one has investigated to what extent customer requirements for provid-ing reverse logistics services contribute to building a green supply chain. �erefore, primary research was carried out. It was based on the basic idea that if the requirements for reverse logistics services were found to be important, suppliers would be motivated to provide them. �is will create an op-portunity for building reverse logistics systems. As-suming at the same time that reverse logistics is a key activity in building a green supply chain (Liao, 2018), the importance of reverse logistics services will be directly linked to building a green supply chain (the high importance of reverse logistics ser-vices will increase the chances of building a green supply chain).

�e aim of the research was to compare the impor-tance of reverse logistics services with other servic-es provided by the supplier during order fulfilment. �e more important they are compared to other services typically provided during order fulfilment, the greater the opportunity for building a green supply chain. Customer attitudes to the importance of services, however, can vary significantly depend-ing on the customer’s position in the supply chain and on the type of industry. �at is why the research focused on measuring attitudes only for B2B cus-tomers in an industry we had chosen, specifically on measuring the importance of services provided with the deliveries of raw materials to food compa-nies. Food companies had been deliberately chosen because improving backflows in the food supply chain not only brings environmental and economic effects, but also social effects resulting from saving food resources.

2. Methodology

�e starting point for the specification of the ser-vices included in the research was the literature (Christopher, 2016; Rabetino et al., 2015) and the

results of our research focused on the purchasing processes and the process of forecasting demand in food companies (Branska et al., 2017; Pecinova et al., 2017; Patak, Vlckova, 2012).

�e following reverse logistics services are consid-ered to have the greatest potential to reduce envi-ronmental impacts (i.e. the volume of waste of raw materials and packaging, but also the use of addi-tional energy and raw material resources):

− Return of defective goods,

− Return of unused goods (by reason of incor-rect forecast),

− Return of expired goods,

− Return of packaging.

In order to compare the perceived importance of reverse logistics services with the perceived im-portance of other services, usually provided during order fulfilment, the following services were exam-ined:

− Consultation on delivery innovations,

− Fixed quantity ordering,

− Fixed period ordering,

− Automatic replenishment,

− Inventory availability information,

− Order status information,

− Flexible order sizes,

− Flexible delivery times,

− Short delivery times,

− On-time deliveries,

− In-full deliveries,

− Error-free deliveries.

Subsequently, it was determined in which purchas-ing operations the importance of the services would be examined. Since the biggest opportunity to build a green supply chain is generally with key suppli-ers, the first chosen situation was the purchase of the main raw material. It was a logical choice also because these are the most important items to buy in manufacturing companies. �e other item for research was chemical products (chemicals). It is also of utmost importance for food companies –


168 God. XXXIII, BR. 1/2020. str. 165-174

these are usually cleaning and hygiene products that can significantly affect the quality and safety of food produced. �e second important reason for the inclusion of chemicals in the research was the environmental aspect thereof – unused chemicals require a specific disposal method and so does the packaging in which they are delivered to compa-nies.

�e research was organized as a quantitative one using a statistical survey. A simple random selec-tion technique was used to select respondents. �e selection was based on the public database of Czech tax entities ARES, from which all the companies registered with the main business area “Production of food products” (corresponding to the CZ-NACE classification) were selected. �e database of Czech food companies thus created was randomly sorted and, based on the order of the companies in the database, suitable respond-ents (purchase managers) were gradually ap-proached and involved in the research (ensuring random sampling). First, the companies were ap-proached by telephone with a request to partici-pate in the research. If a company refused, it was replaced by the next one until data of 100 compa-nies were collected. �e required sample size was determined as a compromise between methodo-logical requirements (sample error size, form of the statistical analysis) and available sources for data collection.

Data collection was carried out in written form us-ing an e-questionnaire. In the first part of the ques-tionnaire, the respondents were asked to evaluate the importance of 16 pre-specified services (see above), first in the context of purchasing the main raw material and then in the context of purchasing chemicals. Given the broad portfolio of services be-ing evaluated, the respondents used a seven-point scale (where 1 = absolutely unimportant, 7 = ex-tremely important) to evaluate importance. �e survey also included questions related to the size of the company, the respondent’s competence in selecting the supplier and the respondent’s experi-ence (length of practice as a purchasing manager or at a similar job position).

�e research sample included 46% of small enter-prises (with up to 49 employees), 40% of medium-sized enterprises (with up to 249 employees) and 14% of large enterprises (with 250 employees or more). �e majority of the respondents declared having a direct influence on the choice of suppli-

ers of the main raw material and chemicals to the enterprise (92%), half of the respondents declared having worked as purchasing managers for over 10 years (52%). �erefore, the sample of respondents is considered to be sufficiently representative for generalizing the results (see the structure of the re-search sample in Table 1).

Table 1 �e structure of the research sample

Characteristics Category Frequency

Enterprise size

Small 46

Medium-sized 40

Large 14

Influence on the choice of suppliers

Direct 92

Participation 8

Years of experience in the current position

Up to 5 years 29

5 – 10 years 19

More than 10 years 52

Source: Authors’ calculations

Data analysis was based on descriptive and infer-ential statistics using the IBM SPSS Statistics soft-ware. �e average importance scores calculated from all individual responses were used to evaluate the importance of services. To compare the impor-tance of reverse logistics services in the portfolio of all the services surveyed, a box-plot of average im-portance scores was chosen. Statistical significance of differences in the average importance scores of deliveries of the main raw material and chemicals was verified using a paired-samples t-test at the 0.05 level of significance.

3. Results

�e research results can be divided into two parts. �e first part of the results describes the position of reverse logistics services in the portfolio of all the services surveyed related to the deliveries of the main raw material and chemicals to food compa-nies. To compare the importance level, box-plots of average importance scores were chosen, in which the position of reverse logistics services is indicated by dashed lines (see Figure 1).

169God. XXXIII, BR. 1/2020. str. 165-174


Figure 1 �e position of reverse logistics services in box-plots of average importance scores for main raw material and chemicals


Both box-plots show the high importance of the re-turn of defective goods service, which significantly exceeds the importance of other reverse logistics ser-vices. However, when comparing box-plots, we can also notice a change in the position of reverse logistics services in the portfolio of all the services surveyed (reverse logistics services have a more prominent po-sition in the portfolio of all services in the case of deliv-eries of chemicals). �e biggest change was observed with the return of expired goods service (in the case of the main raw material it is in the fourth quartile of ser-vices, while in the case of chemicals it is in the second quartile of services). In contrast with the case of the main raw material, return of defective goods ranked among the four most important services in the case of chemicals (along with in-full deliveries, error-free deliveries, and short delivery times).

�e second part of the results focuses on identifying differences in the importance of services depending

on the type of item purchased. Already in Figure 1, there was a noticeable drop in the position of box-plots in the case of deliveries of chemicals. In addition, a comparison of the average importance scores for individual services in Table 2 shows that chemicals saw a significant decline in average im-portance for 15 of the 16 services surveyed. In ten cases it was a significant decrease in importance, in five cases this decrease was at the limit of signifi-cance (P-value close to 0.05). With the exception of reverse packaging, services related to the deliver-ies of chemicals are perceived to be less important than those provided with the delivery of the main raw material. For both types of purchased inputs, a group of services with a high perceived importance can be identified, namely in-full deliveries, on-time deliveries, error-free deliveries, flexible delivery times, short delivery times, flexible order sizes, and return of defective goods.


170 God. XXXIII, BR. 1/2020. str. 165-174

Table 2 Differences in average importance scores for services provided with the main raw material and chemicals

Element of collaborationAverage Importance Score Paired t-test

Main raw material Chemicals Difference t-value P-value

Reverse logistics services:

Return of defective goods 5.93 5.57 -0.36 -1.96 0.05

Return of unused goods 4.92 4.35 -0.57 -2.89 <0.05

Return of expired goods 4.82 4.43 -0.38 -1.89 0.06

Return of packaging 4.26 4.25 -0.01 -0.06 0.95

Other services:

Consultation on delivery innovations 4.59 3.92 -0.67 -3.11 <0.05

Fixed quantity ordering 4.88 3.92 -0.96 -3.54 <0.05

Fixed period ordering 5.05 4.11 -0.94 -4.55 <0.05

Automatic replenishment 3.96 3.46 -0.50 -1.82 0.07

Inventory availability information 5.17 4.14 -1.03 -4.89 <0.05

Order status information 4.89 4.05 -0.84 -4.28 <0.05

Flexible order sizes 6.06 5.41 -0.65 -2.94 <0.05

Flexible delivery times 6.23 5.51 -0.71 -3.48 <0.05

Short delivery times 6.22 5.65 -0.56 -2.83 <0.05

On-time deliveries 6.35 5.38 -0.98 -5.07 <0.05

In-full deliveries 6.49 6.16 -0.33 -1.76 0.08

Error-free deliveries 6.33 5.93 -0.40 -1.97 0.05


4. Discussion of results

�e research results confirmed some of the find-ings of the previous research and also yielded new findings. Regardless of the purchased item, typical transaction services, i.e. services providing on-time, in-full, error-free and flexible deliveries with short delivery times (Christopher, 2016) were logically re-garded as the most important. Such services are the basis that customers would normally expect as they have a major impact on reliable deliveries and con-sequently the ability to meet similar requirements with other customers in the supply chain. Surpris-ingly, return of defective goods also ended up in the group of the most important services. �is is probably related to customers’ demand for perfect order, which has an immediate impact not only on the environmental, but especially on the economic success of the customer. �e assessment of the im-portance of this service thus probably reflected the

respondents’ interest in their own environmental as well as economic success. Other reverse logistics services have ranked among the less important ser-vices, but they occupy an important position in this group. �erefore, the demands for reverse logistics services will naturally motivate suppliers to provide them. �us, the conclusions of previous research can be elaborated to the effect that customer re-quirements for reverse logistics services contribute to building a green supply chain.

�e research results showed that the type of item purchased affects the level of perceived importance of each service. �e services provided with the de-liveries of the main raw material are perceived as more important than those provided with the de-liveries of chemicals used mainly for the cleaning and hygiene needs of the food companies. �is is probably because the purchase of the main raw ma-terial affects customers’ commercial interests much

171God. XXXIII, BR. 1/2020. str. 165-174


more. For customers who are in the position of a manufacturer, it is much more important to have an error-free supply system for the main raw ma-terial as this ensures that the plan for production and deliveries to their own customers is met. While possible problems with deliveries of chemicals may increase the complexity of operations management, they usually do not require operations to stop and do not jeopardize the fulfilment of terms of con-tracts. �e service is equally important with the purchase of chemicals only if the packaging ma-terial is returned. Based on the knowledge of the purchasing process in food companies, it is esti-mated that the main reason for this finding may be the level of hazard of the item purchased. As the process of eco-friendly disposal of packaging waste with chemicals can be not only more demanding but also more expensive, the customer will appreci-ate the possibility to return the packaging material to the supplier. It can therefore be estimated that the importance of an environment-friendly service is assessed from both an environmental and an eco-nomic point of view.

Finally, it is also clear that reverse logistics services have a different position in the portfolio of all ser-vices, depending on the item concerned. In the portfolio of all the services surveyed, reverse logis-tics services are more important in the purchasing of chemicals. It can therefore be expected that there is a greater opportunity for building green supply chain between food enterprises and manufacturers of consumer chemical products as their suppliers. However, it can be estimated that the environmen-tal impact of implementing or improving reverse logistics for chemicals will not be as significant as in the case of improving the return flow of the main raw material that is purchased in incomparably larger volumes. However, experience with reverse flow management of chemicals will create a knowl-edge base to manage the return flows of other items, especially that of the main raw material. Making use of this experience will then be a prerequisite for further reducing the environmental burden.

5. Conclusion

�e primary research was designed to specify to what extent customer requirements for providing reverse logistics services contribute to building a green supply chain. To achieve this goal, the impor-tance of services provided in connection with the purchase of the main raw material and chemicals in the food industry was examined.

In the portfolio of reverse logistics services, it is re-turn of defective goods that is of utmost importance for customers. If the supplier seeks to strengthen relationships with its customer through reverse lo-gistics services, it is necessary to focus primarily on complaint management. From the point of view of the purchased item, this conclusion is even more important when purchasing consumer chemical products than the main raw materials. Other re-verse logistics services are also important for cus-tomers. �ey have ranked among the less important services, but they occupy an important position in this group. �erefore, it can be concluded that there is an opportunity to implement or improve reverse logistics systems for supplies to food companies, which is essential to building a green supply chain. However, it cannot generally be assumed that this opportunity is greater for supplies of the main raw material. Rather, it can be estimated that it is great-er when purchasing an item that, by its very nature, poses environmental hazards.

�ere are some opportunities for further research. Given that the importance of services provided in connection with the purchase was examined in a selected segment of industrial customers, it would be beneficial to carry out the research in another (preferably significantly different) industry. �is would make it possible to assess whether there are any sector-specific differences. It would also be ap-propriate to conduct research with other members in the supply chain. �is would make it possible to discover in what part of the chain there are the greatest opportunities for building a GSC through reverse logistics practices.


172 God. XXXIII, BR. 1/2020. str. 165-174

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Michal Patak

Lenka Branska

Zuzana Pecinova

V

S

Važan čimbenik u izgradnji zelenog lanca opskrbe su zahtjevi kupaca. Zasad, međutim, nije sasvim jasno kako zahtjevi za povratnim logističkim uslugama doprinose izgradnji zelenog lanca opskrbe. Stoga je cilj istraživanja bio utvrditi stupanj važnosti povratnih logističkih usluga u usporedbi s uobičajenim uslugama koje dobavljač pruža pri ispunjavanju narudžbe. Provedena je anketa kako bi se ispitali stavovi direktora na-bave u 100 prehrambenih poduzeća, a rezultati pokazuju da povratne logističke usluge imaju važnu ulogu u portfelju ocijenjenih usluga. Prema stavovima ispitanika, vraćanje neispravne robe najvažnija je usluga po-vratne logistike. Nadalje, utvrđeno je da na percepciju važnosti pruženih usluga utječe vrsta kupljene robe. Povratne logističke usluge važnije su pri nabavi kemikalija nego pri nabavi sirovina. Prema tome, primarno istraživanje pokazuje da se najbolja prilika za izgradnju zelenog lanca opskrbe pruža kad se nabavlja roba koja sama po sebi predstavlja rizik za okoliš.

Ključne riječi: povratna logistika, zeleni lanac opskrbe, logističke usluge, prehrambena industrija, kemi-kalije

175God. XXXIII, BR. 1/2020. str. 175-190

ADJUSTMENT AND EARLY RETIREMENT INTENTIONS OF THE OLDER WORKERS IN THE CROATIAN PUBLIC SECTOR

Ana ŠtambukUniversity of RijekaFaculty of Economics and BusinessIvana Filipovića 4,51000 Rijeka, [email protected]: +38551355132

Ivan UrodaUniversity of RijekaFaculty of Economics and BusinessIvana Filipovića 4,51000 Rijeka, [email protected]: +38551355151

Nikolina AnđelićMannheimer Strasse 100,68723 Schwetzingen, [email protected]: +491760516920

A

Croatian population and, consequently, Croatian labour force is rapidly ageing. With ageing comes the change in abilities e.g. decreasing productivity and declining cognitive ability. In the modern world, new applications of technologies transform requirements of jobs, thus workers have to adjust to those novelties. �e problem is that older workers are ‘digital immigrants’ who started using a Personal Computer (PC) later in their lives, often during employment, so they had to change their approach to work i.e., they had to adjust to different requirements of today’s jobs. Required adjustments accompanied by decreasing abilities may lead to early retirement. �e authors have investigated the influence of 1) the need to adjust to the requirements of today’s jobs (approximated by requirements to use a PC) and 2) the ability to adjust to the requirements of today’s jobs (approximated by ratings of PC skills) on early retirement intentions of population aged 50+ employed in the Croatian public sector. A logistic regression model in the context of complex samples was created by the authors, whereby both analysed variables were found to be related to the early retirement intentions. Finally, those who were required to use a PC and thus to adjust to changes were more likely to want to retire early than employees who did not have the same obligation. �ose with low PC skills, i.e. employees whose ability to adjust was low, were also more likely to retire early than those who have adjusted better.

Keywords: Population ageing, older workers, early retirement, Personal Computer (PC) related require-ments and skills, public sector, early retirement intentions and decisions



CC BY-ND












5 od 6 26. 06. 2017. 12:24

1. Introduction

According to the United Nations estimates (United Nations, 2019)1, out of 201 regions, subregions, countries and areas in the world, in 2020, the Re-public of Croatia will have the tenth oldest popula-tion in the world, i.e. 21.25% of its population will be aged 65+ (for comparison, Japan will have the highest ratio of 28.4%, the United Arab Emirates the lowest 1.26%, and the world average will be 9.33%).

Actually, those values are the reflection of long-last-ing demographic trends in Croatia. Consequently, the Croatian labour force is also ag-ing. �us, the percentage of workers aged 50+ in Croatia was 29% on March 31, 2017 as calculated with the data by the Croatian Bureau of Statistics (2018)2. Such ageing labour force, inevitably, experi-ences changes in their abilities, such as decreasing productivity and declining cognitive ability.



Received: November 15, 2019 Accepted for publishing: February 10, 2020


176 God. XXXIII, BR. 1/2020. str. 175-190

Figure 1 Total Population, Population aged 65+ and % of Population aged 65+ in Croatia in the period 1990-2020

1990 1995 2000 2005 2010 2015 2020Total population (L) 4,776,370 4,616,763 4,428,075 4,378,066 4,328,163 4,232,874 4,105,268Population aged 65+ (L) 552,899 631,820 689,264 755,105 760,038 814,657 872,462% Population aged 65+ (R) 11.58% 13.69% 15.57% 17.25% 17.56% 19.25% 21.25%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

Source: Created by the authors, based on the United Nations, 20191

In the meantime, new applications of technology are rapidly evolving and expanding, and thus being increasingly introduced in various jobs. In those terms, the introduction of PCs (Personal Comput-ers), linked to computerization, remains one of the major changes for older workers. It is mainly because those older workers have entered the la-bour force prior to or at one of the early stages of PC development and utilisation. Hence, for older workers, who have started using PCs later in life, all changes related to PC are much more challenging than for younger workers who have started using PCs at an earlier age.

To put it briefly, the problem is that older workers have to adjust to the new job-related requirements, while, at the same time, their abilities to do that are decreasing. For that reason, older workers who find it more difficult to adjust to those requirements may want to retire earlier.

�ese requirements-related issues have motivated the authors to investigate the influence of: 1) the need to adjust to the requirements of today’s jobs (approximated by the job requirement to use a PC) and 2) the ability to adjust to the requirements of today’s jobs (approximated by ratings of PC skills) on early retirement intentions.

Because of the large number of employees in the Croatian public sector, the research in this paper was focused on population aged 50+ employed within the public sector in Croatia. For that pur-pose, the authors used designated data sets origi-nating from the Survey of Health, Ageing and

Retirement in Europe (SHARE) Wave 6, data set (Börsch-Supan, 20183; Börsch-Supan et al., 2013; Malter, Börsch-Supan, 20174; Orso et al., 20175).

�e aim was to investigate how early retirement in-tentions are impacted by obligations to adjust to the requirements of today’s jobs that were approximated by the job requirement to use a PC and the ability to adjust to the requirements of today’s jobs that were approximated by ratings of PC skills. To perform the research, the authors have created logistic regression model in the context of complex samples.

2. Conceptual framework

With the purpose of establishing the compre-hensive conceptual framework, the authors have considered and elaborated the following: 1) main trends of population ageing in Croatia, 2) age-relat-ed decrease of productivity potential and decline of performance measures, 3) PC requirements and PC skills for population aged 50+, as their adjustments to today’s jobs, and 4) key statistical figures on old age pensions and early retirement pensions.

2.1 Main trends of population ageing in Croatia

Population ageing in Croatia in the last 30 years is shown in Figure 1. All of the data were based on the same source, United Nations (2019)1, with the nu-merical scale for population-related trends shown on the left vertical axis (L) and the percentage scale for %-population-related trend shown on the right vertical axis (R).

177God. XXXIII, BR. 1/2020. str. 175-190


Based on the numerical data from Figure 1, three demographic trends in Croatia over the last 30 years were identified as:

1) continuous decrease of total population

2) continuous increase of population aged 65+

3) continuous increase of percentage of popu-lation aged 65+.

In those terms, both continuous decrease of total population and continuous increase of population aged 65+, consequently contribute to continuous increase of the percentage of population aged 65+. Such population ageing figures for Croatia within

this 30-year period were primarily results of fertility decline, emigration and increased longevity (Biljan-August, Štambuk, 2005; Hinek, et al., 2019); howev-er, these were irrelevant in the context of this paper.

2.2 Age-related decrease of productivity potential and decline of performance

Population ageing inevitably leads to the ageing of the labour force. An ageing labour force is prone to changes in productivity and changes in cognitive abilities that happen with ageing.

In that regard, changes in productivity can be ob-served from the index of productivity potential by age groups, as shown in Figure 2.

Figure 2 Productivity potential index by age, based on US data on job abilities, 1960 and 1998

Source: Skirbekk, 2008

According to Figure 2, the pivotal age group were the 25-34 year olds, with the value of productivity potential index at the pivotal 0.0. Expectedly, the lowest value of this index was for the age group 16-19 at -0.43. Consequently, from this age group onwards, individuals start to learn and develop job-related skills as well as to gain work experi-ence, therefore the value of this index is continually increasing until it peaks in the age group 35-44 at 0.07. However, from the next age group onwards, i.e. from the age group 45-54, the value of this index is continually decreasing to the extremely low val-ue, namely the one for the age group 55-65 at -0.34. Even though a certain decrease of productivity po-tential was expected and inevitable with age, based solely on research findings by Skirbekk (2008), such significant decrease of productivity potential was not explicable per se.

�is decrease of productivity potential could be the result of age-related changes in cognitive abilities in the broadest sense, which can affect individuals from the older age groups i.e. 45-54 and 55-65. �is is in line with the research by Park et al. (2002). �at extensive research considered various types of cog-nitive measures i.e. memory-related, processing-related and verbal-related, across the lifespan of an individual, measured in ten-year age groups from the twenties to the eighties and scored with z score ranging from -1.5 to 1.5. However, in the specific context of this paper, the most relevant z scores were the composite ones, i.e. scores of the average of all sub-measures that form five measures (Work-ing Memory, Short-Term Memory, Long-Term Memory, Speed of Processing and Verbal Knowl-edge), as shown in Figure 3.


178 God. XXXIII, BR. 1/2020. str. 175-190

Figure 3 Composite view of life span performance measures

Source: Park et al., 2002

�e five performance measures included in Figure 3 were associated with cognitive ageing i.e. age-related cognitive decline. �is especially goes for four of these measures (Working Memory, Short-Term Memory, Long-Term Memory and Speed of Processing). �e fifth (Verbal Knowledge) is an exception, since it, ac-cording to Park et al. (2002), actually mostly increases during the lifetime i.e. into people’s seventies.Age-related cognitive decline of these four out of five performance measures can also be related to the productivity potential index mentioned above, since they both decrease with age. In that regard, such (quite inevitably) decreasing values for productivity potential index and performance measures i.e. their combination, can have multifaceted consequences in both private and working life of an individual.

2.3 PC requirements and PC skills for population aged 50+ as adjustment to today’s jobs

Modern working life, i.e. today’s jobs, either im-plicitly or more explicitly require cognitive skills related to PCs i.e. PC skills. Still, in the context of this paper, the authors have taken into account PC skills of Croatian population aged 50+, since they are actually digital immigrants “who were not born into the digital world but have, at some later point in our [authors’ remark: their] lives, become fasci-nated by and adopted many or most aspects of the new technology” (Prensky, 2001). Since they were born before the technological era, i.e. before 1980, they “had to learn to adjust to technology” accord-ing to Zenios & Ioannou (2018). �erefore, for the purposes of the approximation of: 1) the obligation to adjust to requirements of today’s jobs and 2) the

ability to adjust to requirements of today’s jobs, for Croatian population aged 50+ whose productivity, theoretically grounded, was expected to decrease, according to the index of its potential for related age groups, the authors have selected these two var-iables: 1) job requirement to use a PC (personally answered by individuals aged 50+) was considered as the approximation of the obligation to adjust to the today’s jobs, and 2) PC skills (personally rated by individuals aged 50+) were considered as the ap-proximation of the ability to adjust to today’s jobs.�us, four out of five performance measures listed (Working Memory, Short-Term Memory, Long-Term Memory and Speed of Processing) are those performance measures that can also be associated with the individual’s usage of PCs. In that specific regard, the remaining performance measure (Ver-bal Knowledge) is less important for PC usage, since the majority of modern operating systems and various applications associated with them have an intuitive Graphical User Interface (GUI) and/or comprehensible text options and menus, which makes them user-friendly regardless of the level of Verbal Knowledge of the user.Moreover, PCs are needed to do numerous jobs worldwide. In that regard, certain jobs require low(er) level of PC skills such as the most basic usage of simple applications, whilst some specific jobs re-quire high(er) level of PC skills such as programming of complex applications. As previously elaborated, individuals aged 50+ have specific issues regarding PCs and PC skills, since they had to adjust to them in the course of their personal and/or working lives.To investigate PC requirements placed on em-ployees aged 50+ and their PC skills, the authors have utilised the available designated data, taken from the relevant data set SHARE Wave 6 (Börsch-Supan, 20183; Börsch-Supan et al., 2013; Malter, Börsch-Supan, 20174; Orso et al., 20175).In order to get representative distribution of all answers to the survey questions, the authors have performed probability weighting using calibrated cross-sectional individual weights, for each of the selected countries, as shown in Table 1, Table 2, Ta-ble 4 and Table 5. In those terms, the selected coun-tries were those for which it was possible to obtain the resulting values. �e selected countries are the same as the 13 countries presented in all the tables containing countries: Austria, Belgium, Croatia, Czechia, France, Greece, Israel, Italy, Poland, Por-tugal, Slovenia, Spain and Sweden.Besides, all the percentages in Table 1, Table 2, Table 4 and Table 5 were calculated based on assessments by

179God. XXXIII, BR. 1/2020. str. 175-190


population aged 50+, from the data by Börsch-Supan (2018) 3. Table 1 and Table 4 contain percentages of two possible answers related to whether PCs were required in certain jobs. Similarly, Table 2 and Table 5 contain percentages of six possible ratings related to PC skills.�e authors have grouped ratings of PC skills as follows: Excellent, Very Good and Good have been grouped as High PC skills, while ratings Fair, Poor and (I) Never Used (a computer) have been grouped as Low PC skills. �ese two groups were used to enhance the appearance and to provide a more detailed summary of Table 2 and Table 5, as well as in the model that was created by the authors (in chapters 4. Data and methodology and 5. Re-sults and discussion).Accordingly, Table 1 contains the relative distribu-tion of the requirement to use a PC in jobs of em-ployed population aged 50+, shown jointly for the private sector and the public sector.

Table 1 PC required in jobs of employed popula-tion aged 50+, selected countries, weighted data

PC required Yes NoCountryAustria 66.79% 33.21%Belgium 76.61% 23.39%Croatia 59.33% 40.67%Czechia 63.40% 36.60%

PC required Yes NoCountryFrance 70.10% 29.90%Greece 45.52% 54.48%Israel 70.74% 29.26%Italy 60.31% 39.69%Poland 45.78% 54.22%Portugal 40.45% 59.55%Slovenia 67.27% 32.73%Spain 44.68% 55.32%Sweden 98.35% 1.65%

Note: Weighted by calibrated cross-sectional individual weights Source: Created by the authors, based on Börsch-Supan, 20183

Based on the data from Table 1, it can be observed that regarding whether PC was required in jobs of population aged 50+ employed in both the pri-vate and public sectors, Sweden had the maximum 98.35%, Portugal had the minimum 40.45%, while Croatia with 59.33% was 39.02pp worse than Swe-den and 18.88pp better than Portugal, thus ranking as the 9th among 13 selected countries.

Additionally, Table 2 shows relative distribution of ratings of PC skills of employed population aged 50+, jointly for the private sector and the public sector.

Table 2 PC skills of employed population aged 50+, selected countries, weighted data

CountryPC Skills

TOTALGrouped PC skills

Excellent Very Good Good Fair Poor Never Used High LowAustria 6.87% 22.74% 28.38% 23.16% 10.99% 7.86% 100.00% 57.99% 42.01%Belgium 9.34% 18.67% 33.94% 24.92% 10.23% 2.90% 100.00% 61.95% 38.05%Croatia 13.98% 18.99% 20.97% 18.83% 11.31% 15.92% 100.00% 53.94% 46.06%Czechia 5.12% 18.60% 29.09% 24.09% 14.60% 8.50% 100.00% 52.81% 47.19%France 6.88% 10.73% 30.29% 30.26% 16.61% 5.23% 100.00% 47.90% 52.10%Greece 8.07% 19.12% 23.13% 18.27% 14.55% 16.86% 100.00% 50.32% 49.68%Israel 14.63% 22.00% 34.14% 17.32% 5.46% 6.45% 100.00% 70.77% 29.23%Italy 7.85% 16.43% 32.36% 19.59% 10.34% 13.43% 100.00% 56.64% 43.36%Poland 2.67% 13.12% 26.64% 14.69% 20.71% 22.17% 100.00% 42.43% 57.57%Portugal 0.79% 6.73% 19.20% 25.28% 22.43% 25.57% 100.00% 26.72% 73.28%Slovenia 10.15% 12.40% 41.23% 16.23% 9.66% 10.33% 100.00% 63.78% 36.22%Spain 5.04% 7.50% 25.03% 33.00% 19.96% 9.47% 100.00% 37.57% 62.43%Sweden 20.32% 32.71% 31.19% 11.79% 2.34% 1.65% 100.00% 84.22% 15.78%

Notes: Weighted by calibrated cross-sectional individual weights, High = Excellent, Very Good, Good, Low = Fair, Poor, (I) Never Used (a computer) Source: Created by the authors, based on Börsch-Supan, 20183


180 God. XXXIII, BR. 1/2020. str. 175-190

According to Table 2, when it comes to the sub-jective assessment of own PC skills as excellent among population aged 50+ employed in both, the private and public sectors, Sweden had the maxi-mum 20.32%, Portugal had the minimum 0.79%, while Croatia with 13.98% was 6.34pp worse than Sweden and 13.19pp better than Portugal, thus ranking as the 3rd among 13 selected countries. Yet, when High PC skills are taken into considera-tion, once again, Sweden had the maximum 84.22%, Portugal had the minimum 26.72%, while Croatia

with 53.94% was 30.28pp worse than Sweden and 27.22pp better than Portugal, thus ranking as the 7th among 13 selected countries.

However, at this specific point, the authors have de-cided to focus the research of these matters exclu-sively on the population aged 50+ employed in the public sector in all selected countries, especially Croatia. �e rationale behind that decision was the fact that Croatia has a large number of employees in public sector as can be seen in Table 3.

Table 3 Number (absolute and relative) of employees in Croatian public sector on December 31, 2018

Groups of employees in Croatian public sector Number of employees

Government bodies 35,343

Ministry of the interior / internal affairs 24,852

Ministry of defence 16,881

Public services 169,487

Simultaneously employee in two or more of the above 2,175

Units of local and regional self-government 14,058

Total number of employees in Croatian public sector (1) 262,796

Croatian Bureau of Statistics Number of employed

Total number of employed in Croatia as per Croatian Bureau of Statistics (2) 1,405,973

=(1)/(2)=higher estimated % of employed in Croatian public sector 18.69%

Croatian pension insurance system Number of insurees

Total number of insurees in Croatia as per Croatian Pension Insurance Institute (3) 1,506,912

=(1)/(3))=lower estimated % of employed in Croatian public sector 17.44%

Source: Created by the authors, based on data from the Ministry of Public Administration 2019a6; Ministry of Public Administration 2019b7; Government of the Republic of Croatia (2019)8; Croatian Bureau of Statistics, 20199; Croatian Pension Insurance Institute, 2019a10

According to the data from Table 3, on December 31, 2018 the Croatian public sector accounted for at least 262,796 employees i.e. minimally approxi-mately between 17% and 19% of the total employed population were employed in it. However, accord-ing to the project by the Croatian Institute of Pub-lic Finance (2010)11, and the related research by Bejaković et al. (2011) with further analysis, this number of employees in the Croatian public sector could only be larger. �e main reason can be found in those two researches i.e. in the methodology that they have used and in the analysis that they have performed. In brief, for the year 2008, they have cal-

culated a total of 388,222 of employees in the Croa-tian public sector, with a steady increase over three consecutive years, from 2006 to 2008. Since the calculation of new(er) comparable Croatian public sector-related data would require a new research project, by taking everything previously mentioned into account, the authors of this paper have decided to put the Croatian public sector in the focus of their research, as discussed below.

In accordance with this, Table 4 contains the rela-tive distribution of the requirement to use PC in jobs of employed population aged 50+, shown only for the public sector.

181God. XXXIII, BR. 1/2020. str. 175-190


Table 4 PC required in jobs of population employed in public sector aged 50+, selected countries, weighted data

PC required Yes No

Country

Austria 87.92% 12.08%

Belgium 80.97% 19.03%

Croatia 66.66% 33.34%

Czechia 72.81% 27.19%

France 83.43% 16.57%

Greece 68.80% 31.20%

Israel 83.87% 16.13%

Italy 70.00% 30.00%

Poland 66.50% 33.50%

Portugal 70.63% 29.37%

Slovenia 72.21% 27.79%

PC required Yes No

Country

Spain 71.09% 28.91%

Sweden 97.36% 2.64%

Note: Weighted by calibrated cross-sectional individual weightsSource: Created by the authors, based on Börsch-Supan, 20183

Based on the data from Table 4, it can be seen that concerning whether PC is required in jobs of population aged 50+ employed in the public sector, Sweden had the maximum 97.36%, Poland had the minimum 66.50%, while Croatia with 66.66% was 30.70pp worse than Sweden and only 0.16pp bet-ter than Poland, thus ranking as the 12th among 13 selected countries.

Finally, Table 5 contains relative distribution of rat-ings of the PC skills of employed population aged 50+, only for the public sector.

Table 5 PC skills of population employed in public sector aged 50+, selected countries, weighted data

Country

PC Skills

TOTAL

Grouped PC skills

Excellent Very Good Good Fair Poor Never Used High Low

Austria 11.31% 26.26% 37.08% 13.54% 8.63% 3.18% 100.00% 74.65% 25.35%

Belgium 9.07% 17.80% 40.20% 23.05% 9.12% 0.76% 100.00% 67.07% 32.93%

Croatia 13.47% 23.82% 21.46% 19.84% 9.62% 11.79% 100.00% 58.75% 41.25%

Czechia 8.98% 17.37% 23.66% 33.97% 9.62% 6.40% 100.00% 50.01% 49.99%

France 4.09% 17.06% 35.64% 31.10% 11.61% 0.50% 100.00% 56.79% 43.21%

Greece 14.53% 28.38% 32.60% 9.23% 8.68% 6.58% 100.00% 75.51% 24.49%

Israel 3.11% 21.47% 59.97% 12.02% 2.37% 1.06% 100.00% 84.55% 15.45%

Italy 9.76% 16.89% 36.95% 21.86% 7.58% 6.96% 100.00% 63.60% 36.40%

Poland 4.23% 13.02% 33.34% 14.94% 22.55% 11.92% 100.00% 50.59% 49.41%

Portugal 1.05% 20.94% 23.43% 43.66% 9.07% 1.85% 100.00% 45.42% 54.58%

Slovenia 12.41% 17.79% 46.15% 9.27% 6.32% 8.06% 100.00% 76.35% 23.65%

Spain 2.10% 13.88% 35.24% 27.69% 18.82% 2.27% 100.00% 51.22% 48.78%

Sweden 14.59% 25.25% 38.63% 18.89% 0.00% 2.64% 100.00% 78.47% 21.53%

Notes: Weighted by calibrated cross-sectional individual weights High = Excellent, Very Good, Good Low = Fair, Poor, (I) Never Used (a computer) Source: Created by the authors, based on Börsch-Supan, 20183


182 God. XXXIII, BR. 1/2020. str. 175-190

According to Table 5, when it comes to the subjec-tive assessment of own PC skills as excellent among population aged 50+ employed in the public sector, Sweden had the maximum 14.59%, Portugal had the minimum 1.05%, while Croatia with 13.47% was only 1.12pp worse than Sweden and 12.42pp better than Portugal, thus ranking as the 3rd among 13 se-lected countries. However, when High PC skills are taken in account, Israel had the maximum 84.55% and Portugal again the minimum 45.42%, while Croatia with 58.75% was 25.80pp worse than Israel and 13.33pp better than Portugal, thus ranking as the 8th among 13 selected countries.Altogether, based on the data from Table 1, Table 2, Table 4 and Table 5 it is possible to see that Croatia was nowhere near the best ones among 13 selected countries. Still, in 12 selected countries (except Swe-den), as it can be observed from Table 1 and Table 4, PC was more required in jobs of population aged 50+ employed in, singly, the public sector, than in, jointly, the private sector and the public sector. In 11 selected countries (except Czechia and Sweden), as it can be seen from Table 2 and Table 5, High PC skills were more prevalent in jobs of population aged 50+ employed in, singly, the public sector, than in, jointly, the private sector and the public sector.With changing job requirements, employees are obligated to adjust to them. Yet, with ageing, there is a decrease in employees’ abilities such as pro-ductivity potential and a decline of some cognitive measures. �erefore, it is more difficult for them to adjust to those changing job requirements. Due to difficulties related to adjustment to changes in job requirements, some employees may want to leave the labour force. Since the previously elaborated decreasing productivity and declining abilities and the related difficulties arise near the age of early retirement, employees may want to retire early to leave the labour force and to have a permanent, yet smaller, source of income.

2.4 Key statistical figures on old-age pensions and early retirement pensions

Due to the population ageing, the ratio between the number of employed and the number of retired people in Croatia, as of March 31, 2019 (at the end of the first quarter of 2019), was as low as 1:1.23 (Croatian Pension Insurance Institute, 2019b)12. A clear majority of pensions, more than two-thirds of them (70.32%) were old-age pensions, while approximately one-fourth of old-age pensions (24.41%) were early retirement pensions.In addition, in 2012, Eurostat conducted a labour force survey (LFS), including the special ad hoc mod-

ule (AHM) called Transition from work to retirement (Eurostat, 2016)13. Since then, neither Eurostat nor the European Commission has repeated the same or similar research regarding retirement. �e data from the module above, specifically the ones on early retire-ment (Eurostat, 2019a)14 and old-age pensions (Euro-stat, 2019b)15, which include exclusively individuals aged 50 to 69 originating from 28 European Union countries, are jointly presented in Table 6.

Table 6 Individuals aged 50 to 69 who receive old-age pension, Early retirement among indivi-duals who receive old-age pension

CountryIndividuals who receive

old-age pension

Early retirement among individuals who receive old-

age pension

Austria 33.8% 58.5%Belgium 25.8% 45.7%Bulgaria 39.8% 5.2%Croatia 28.2% 55.8%Cyprus 27.2% 21.1%Czechia 42.0% 53.0%Denmark 32.4% 12.1%Estonia 37.9% 10.9%Finland 32.1% 26.4%France 36.0% 43.7%Germany 22.4% 11.8%Greece 40.2% 52.2%Hungary 32.3% 42.4%Ireland 21.8% 68.4%Italy 36.4% 73.5%Latvia 39.1% 35.1%Lithuania 32.1% 19.1%Luxembourg 31.9% 43.6%Malta 39.6% 33.6%Netherlands 19.9% 55.9%Poland 38.6% 44.2%Portugal 27.6% 57.3%Romania 41.7% 21.5%Slovakia 33.3% 28.0%Slovenia 41.3% 39.6%Spain 19.9% 59.3%Sweden 35.7% 46.0%United Kingdom 41.8% 23.1%European Union - 28 countries 32.4% 41.2%

Source: Created by the authors, based on Eurostat, 2019a14, Eurostat, 2019b15

183God. XXXIII, BR. 1/2020. str. 175-190


From data in Table 6, the following can be conclud-ed and calculated:

1) As for individuals aged 50-69 who receive old-age pension, Czechia had the maximum 42.0%, Spain had the minimum 19.9%, while Croatia with 28.2% was 4.2pp better than the average of EU-28, which was 32.4%. Yet, these data are not completely comparable, due to the differences among countries in statutory retirement age regarding old-age pension.

2) Concerning early retirement among the in-dividuals aged 50-69 who receive old-age pension, Italy had the maximum 73.5%, Greece had the minimum 11.8%, while Croatia with (rather high) 55.8% was 6.8pp worse than the average of EU-28, which was 49.0%. Since, herein, pensioners aged 50 to 69 were taken into account, there were, once again, some issues with the data com-parison within individual countries. On the one hand, all individuals who retire between the age of 50 and the statutory retirement age (maximum 65) are, automatically classi-fied as taking early retirement. On the other hand, in the age group 50 to 69 there is a small percentage of individuals who receive old-age pension, since most individuals who receive it are aged over 69.

Still, the previously mentioned statistical data on Croatian pensions from 2019 officially confirm the ongoing existence of early retirement in Croatia.

3. Review of previous research (theoretical framework)

In addition to previous research used to establish the conceptual framework above, the authors have used supplementary previous research to establish the equally comprehensive theoretical framework.

Although the literature on retirement decisions is extensive, there are not many papers dealing with the impact of technological skills, particu-larly PC skills on retirement intentions as well as choices. Researchers who were investigating early retirement in Croatia such as Fellmann and Möllers (2009), Baloković (2011), Pološki Vokić and Grgurić (2011), Bađun and Smolić (2018), Galić et al. (2019)

had not explored the relationship between comput-er skills and retirement.

Bartel and Sicherman (1993) researched the influ-ence of technological change on retirement. �eir first important finding was that people who work in industries with fast technological change retire later if provided with on-the job training. Further-more, they found that unexpected change in the progression of technological change, which leads to the depreciation of human capital, consequently contributes to early retirement.

Research of Ahituv and Zeira (2010) was in line with previous research. �ey found that technical change leads to the erosion of human capital i.e. the erosion effect and consequently to early retirement. �e opposite effect was the so-called wage effect, which can be explained as follows: since aggregate technical change leads to better wages, sector-relat-ed technical change tends to decrease early retire-ment.

Friedberg (2003) explored the connection between retirement and computer usage. Consequently, this author found that older workers kept pace with younger workers regarding computer use, except for those jobs that were computerized recently and quickly, so, this author’s research shows that the impending retirement affects computer use. On the other hand, changes in needed skills influence the retirement decision. It was found in this study that employees who use computers were more likely to continue working than those who do not use com-puters.

Schleife (2006) focuses on male employees in Ger-many and investigates the determinants of com-puter use and the influence of computer use on the employment status i.e. retirement decision. �is author found that it was less likely for older workers between 55 and 64 to use computers in comparison to younger workers. �e author did not find evidence to uphold the hypothesis that older workers who use computers were more likely to work until statutory retirement age (that is, not to take early retirement), compared to younger workers.

Biagi et al. (2013) separated computer use into two variables: using PC at work and PC literacy. Re-search focused on male workers in Italy aged be-


184 God. XXXIII, BR. 1/2020. str. 175-190

tween 47 and 60. �ese authors investigated the re-lationship of computer variables and employment transitions to retirement or to unemployment. �ey found that the merged effect of using comput-ers and being computer literate decreases the prob-ability of transit from employment.

Cavapozzi et al. (2015) complemented the previous research and studied the effect of using PC at work and PC literacy on job satisfaction and retirement intentions. Workers aged between 50 and 60 from several European countries have been observed and analysis was made separately for male and females and for white-collar and blue–collar employees. �ese authors concluded that PC literacy and us-ing computers at work was negatively related to job satisfaction and intention to retire early, especially for white-collar employees.

4. Data and methodology

For this research, the authors have mainly used mi-cro data from the previously mentioned source i.e. �e Survey of Health, Ageing and Retirement in Europe (SHARE). SHARE was developed by con-sidering the context of population ageing. It is a multidisciplinary, nationally representative survey designed to provide cross-sectional and longitudi-nal data on primarily the health, employment and social conditions of population aged 50 years and over, from numerous European countries and Israel (Börsch-Supan, 20183; Orso et al., 20175).

On the whole, SHARE was largely based on the US Health and Retirement Study (HRS) and the English Longitudinal Study of Ageing (ELSA). �erefore, the main principles behind including particular questions in the SHARE survey were their multidisciplinary as well as cross-national and longitudinal nature (Börsch-Supan, 20183; Malter, Börsch-Supan, 20174).

�e authors have used data from SHARE Wave 6, because that was when Croatia joined the SHARE survey, therefore no previous data on the country was available for analysis. All the data in the survey were collected by using Computer-Assisted Person-al Interviewing (CAPI). To collect data, interview-ers conducted personal interviews using a laptop computer with CAPI software installed. �e survey

was conducted in 2015, yet the results are still being released gradually.

For Croatia, a single-stage SHARE survey design with cluster sampling across six strata was used. A subpopulation consisting of population employed in public sector aged 50+ in Croatia was used. Clus-ters were sampled without replacement.

�e authors have created a logistic regression mod-el, in the context of complex samples. Calibrated cross-sectional individual weights were used as the sampling weights, while singleton strata were treat-ed as missing values. Taylor linearization was used for estimating standard errors.

Wanting early retirement, with values Yes and No, was the dependent variable in this model. �e au-thors have used these variables: requirement to use a computer (Yes and No) and PC skills (their rat-ings grouped as High PC skills and Low PC skills, as explained) as independent variables, used as ap-proximations for the obligation to adjust to the re-quirements of today’s jobs and the ability to adjust to those requirements.

Additional control variables were as follows: gen-der, collar (white collar, blue collar; acquired from the International Standard Classification of Occu-pations i.e. ISCO code), age (age in the year of the interview), age squared, years of education, hav-ing children (yes, no; calculated from the variable ‘number of children’), numeracy (test of math-ematical and numerical skills - 5 levels, grouped in three levels: poor, medium and good), fluency (test of verbal fluency), self-assessed health (comprised in two categories: ‘bad’ - includes fair and poor, and the other category ‘good’ includes good, very good and excellent) and sector (primary, second-ary, tertiary; taken from Statistical Classification of Economic Activities, NACE rev. 1.1). �is choice of control variables was influenced by Cavapozzi et al. (2015), but the authors have adjusted it to the specific context of this research.

Characteristics of all the variables weighted by cali-brated cross-sectional individual weights for the population aged 50+ employed in the public sector in Croatia are shown in Table 7.

185God. XXXIII, BR. 1/2020. str. 175-190


Table 7 Characteristics of the variables for the population aged 50+ employed in the public sector in Croatia, weighted data

Variable Values %

Wanting early retirementNo 70.88%

Yes 29.12%

Current job requires using a computer

No 33.34%

Yes 66.66%

PC SkillsHigh 58.74%

Low 41.26%

GenderFemale 47.78%

Male 52.22%

CollarWhite collar 74.46%

Blue collar 25.54%

Having childrenNo 14.21%

Yes 85.79%

Numeracy

Poor 6.12%

Medium 40.65%

Good 53.23%

HealthGood 74.52%

Bad 25.48%

Sector

Primary 8.20%

Secondary 16.33%

Tertiary 75.47%

Variable Mean (Std. error)

Age (years) 56.51 (0.289)

Education (years) 12.84 (0.232)

Fluency score 21.78 (0.556)

Notes: Taylor linearized standard error is in parenthesis. Weighted by calibrated cross-sectional individual weights.Source: Created by the authors, based on Börsch-Supan, 20183; Orso et al., 20175

5. Results and discussion

A logistic regression model, in the context of complex samples, for the researched variable ‘wanting early re-tirement’ was created by the authors of this paper for the population aged 50+ employed in the public sec-tor in Croatia, and results are shown in Table 8.

Table 8 Results of the logistic regression model for wanting to retire early of the Croatian popu-lation aged 50+ employed in the public sector

Variables Values Coef.(Std. error)

Current job requires using a computer Yes

1.839**

-0.741

PC skills Low1.202**-0.573

Gender Male-0.287-0.477

Collar Blue2.067***-0.778

Age Years-3.373-2.131

Age squared Years squared0.0294-0.0186

Education Years0.0694-0.0862

Having children Yes1.832-1.308

NumeracyMedium

0.232-1.446

Good-0.467-1.444

Fluency Fluency score0.00156-0.0388

Health Bad1.105**-0.462

SectorSecondary

-0.951-0.859

Tertiary-1.622**-0.818

Constant

91.97-60.96

F 1.995p [0.0174]

Notes: Taylor linearized standard errors are in parenthesis. �e p-values of the F-test is in brackets. *p<0.1; **p<0.05; ***p<0.01 Dependent variable: Wanting early retirement PC skills: reference category - high Collar: reference category - white collar Health: reference category - good Numeracy: reference category - poor Sector: reference category - primary sectorSource: Created by the authors, based on Börsch-Supan, 20183; Orso et al., 20175


186 God. XXXIII, BR. 1/2020. str. 175-190

�e requirement to use a computer has an influ-ence on wanting early retirement; those who have to use a computer are more likely to want to retire early than those who do not have to use a computer. �is shows that an obligation to adjust to today’s jobs positively influences the desire to retire early.

PC skills, or rather lack of them, have a significant impact on the desire for early retirement. �ose with Low PC skills are more likely to want to leave labour force than those with High PC skills. It can be seen that a lower ability to adjust to require-ments of modern jobs encourages employees to seek earlier retirement.

Certain control variables (collar, sector and health) were also found to be significant, but they were out-side of the scope of this research. It was expected that blue collars would want to retire before white collars, therefore it was also expected that blue col-lars were more inclined to early retirement than white collars. �is is primarily because of the na-ture of their jobs, which are more physically de-manding. �us, the results that show that blue col-lars are more likely to want to stop working are in line with the expectations. �e same holds for sec-tors grouping, where it can be seen that those who were employed in the tertiary sector were less likely to have early retirement intentions than those who were employed in the primary sector. �at could also be attributed to the nature of their jobs, where jobs in the tertiary sector are in general less physi-cally demanding.

Bad health is known to be a factor with great influ-ence on early retirement (for instance, Karpansalo et al., 2004; de Wind et al., 2013), so the results in the model showing that employees with bad health were more likely to seek early retirement were as expected.

�e remaining control variables: gender, age, age squared, education, having children, numeracy, and fluency, were not significant in the model.

6. Conclusion

Technological advancements have altered the re-quirements for today’s jobs. To keep pace with the new, modern working life, workers have to adjust to the changes. �us, the authors have investigated how the changes and ability to adjust affect retire-ment intentions. Since older workers are digital im-migrants who started using computers during their

working life and had to, at some point, change the way of work, i.e. they had to adjust to the altered conditions of today’s jobs, the authors have used the requirement to use a PC in job as an approximation for the obligation to adjust to the requirements of today’s jobs and PC skills as the ability to the adjust to those requirements. Moreover, the authors have focused on employees in the public sector in Croa-tia aged 50+. In order to investigate the influence of the discussed variables on early retirement inten-tions, the authors have created the logistic regres-sion model within the context of complex samples.

It was found that both of those variables of interest were related to the retirement intentions. �e re-quirement to use a computer was positively related to the intention of early retirement i.e. those who had to use a PC at work were more likely to seek early retirement, which shows that changed condi-tions motivate employees to leave labour force and retire earlier. �e level of PC skills was also con-nected to retirement intentions. For workers with Low PC skills the probability of the intention to re-tire early was greater than for those with High PC skills, which shows that the (in)ability to adjust to the today’s jobs is important for wanting to leave labour force.

Obviously, technological changes are inevitable and necessary; thus, stopping computerisation would lead to deterioration and decrease of competitive-ness. �e way to act in order to reduce early retire-ment is to actively work on ICT upskilling, i.e. on organizing adequate training regarding PC skills.

�is is also a message to the policy makers, since workers, especially older workers need to be pro-vided with training in order to adjust to the new job requirements and to be able to use new technology and meet those job requirements. Trained work-ers, who can adjust to the requirements, would be less inclined toward early retirement, which would eventually: lower the proportion of the early re-tired among those who receive pensions, shorten the duration of being retired as well as of receiving the pension, and increase payments into the pen-sion system that would reduce the pressure on pen-sion funds and the country’s budget. Policy makers should promote active policies toward the labour market aimed at providing adequate training to older workers whose cognitive abilities are gener-ally decreasing with age.

187God. XXXIII, BR. 1/2020. str. 175-190


�is study has researched the influence of the ob-ligation and the ability to adjust to today’s jobs on retirement intentions of older workers in the pub-lic sector. When the time comes to make a retire-ment decision, it does not have to be the same as the earlier retirement intention. For this reason, for further research the authors suggest to explore the influence of the factors listed above on retirement decisions.

�is research has its limitations. Retirement in-tentions and decisions are not always a deliberate choice of employees; rather, they can also be influ-enced by external circumstances. In that regard, changes or even an announcement of changes in conditions for retirement and early retirement, pe-nalisation for early retirement and additional ben-efits for remaining employed longer than necessary (where it is allowed) are examples of such external circumstances that have not been included in this research.

Project Acknowledgements

�is paper has been financially supported by the University of Rijeka, for the project ZP UNIRI 8/17.

SHARE Acknowledgements

�is paper uses data from SHARE Wave 6 (10.6103/SHARE.w6.611), see Börsch-Supan et al. (2013) for methodological details.

�e SHARE data collection has been fund-ed by the European Commission through FP5 (QLK6-CT-2001-00360), FP6 (SHARE-I3: RII-CT-2006-062193, COMPARE: CIT5-CT-2005-028857, SHARELIFE: CIT4-CT-2006-028812), FP7 (SHARE-PREP: GA N°211909, SHARE-LEAP: GA N°227822, SHARE M4: GA N°261982) and Horizon 2020 (SHARE-DEV3: GA N°676536, SERISS: GA N°654221) and by DG Employment, Social Affairs & Inclusion. Ad-ditional funding from the German Ministry of Edu-cation and Research, the Max Planck Society for the Advancement of Science, the U.S. National Institute on Aging (U01_AG09740-13S2, P01_AG005842, P01_AG08291, P30_AG12815, R21_AG025169, Y1-AG-4553-01, IAG_BSR06-11, OGHA_04-064, HHSN271201300071C) and from various nation-al funding sources is gratefully acknowledged (see www.share-project.org).

�is paper uses data from the generated Job Episodes Panel (DOI: 10.6103/SHARE.jep.600), see Brugiavi-ni et al. (2013) and Antonova et al. (2014) for method-ological details. �e Job Episodes Panel release 6.0.0 is based on SHARE Waves 1, 2 and 3 (SHARELIFE) (DOIs: 10.6103/SHARE.w1.600, 10.6103/SHARE.w2.600, 10.6103/SHARE.w3.600).


188 God. XXXIII, BR. 1/2020. str. 175-190

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1 United Nations (2019), “World Population Prospects 2019”, available at: https://population.un.org/wpp/Download/Standard/Popu-lation/ (Accessed on: June 23, 2019)

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3 Börsch-Supan, A. (2018). Survey of Health, Ageing and Retirement in Europe (SHARE) Wave 6. Release version: 6.1.1. SHARE-ERIC. Data set.

4 Malter, F., A. Börsch-Supan (Eds.) (2017). SHARE Wave 6: Panel innovations and collecting Dried Blood Spots. Munich: Munich Center for the Economics of Aging (MEA).

5 Orso, C.E., A. Brugiavini, D. Cavapozzi, G. Pasini (2017): SHARE Job Episodes Panel. Release version: 6.0.0 SHARE-ERIC. Dataset.

6 Ministry of Public Administration (of the Republic of Croatia) (2019a), “Statistički prikaz Ministarstva uprave 13”, available at: https://uprava.gov.hr/UserDocsImages/Statistički prikaz/Statistički prikaz Ministarstva uprave - broj 13.pdf (Accessed on: February 28, 2019)

7 Ministry of Public Administration (of the Republic of Croatia) (2019b), “Statistički prikaz Ministarstva uprave 14”, available at: https://uprava.gov.hr/UserDocsImages/Statistički prikaz/Statistički prikaz broj 14. _ finalni.pdf (Accessed on: May 24, 2019)

8 Government of the Republic of Croatia (2019), “Godišnje izvješće o obrani za 2018. godinu”, available at: https://vlada.gov.hr/User-DocsImages/2016/Sjednice/2019/Svibanj/158 sjednica VRH/158 - 3.pdf (Accessed on: May 28, 2019)

9 Croatian Bureau of Statistics (2019), “Persons in paid employment, by activities, January 2019”, available at: https://www.dzs.hr/Hrv_Eng/publication/2019/09-02-01_01_2019.htm (Accessed on: February 24, 2019)

10 Croatian Pension Insurance Institute (2019a), “Key information on the current state of the Croatian pension insurance system - December 2018 (payment in January 2019)”, available at: http://www.mirovinsko.hr/UserDocsImages/en/pension_insurance/2019/osnovnipodaci201901EN.pdf (Accessed on: April 07, 2019)

11 Institute of Public Finance (2010), “Istraživački projekt: Analiza sustava zaposlenih u hrvatskom javnom sektoru”, available at: http://www.nsz.hr/datoteke/09-10/Analiza sustava zaposlenih.pdf (Accessed on: December 12, 2018)

12 Croatian Pension Insurance Institute (2019b), “Key information on the current state of the Croatian pension insurance system - Mar-ch 2019 (payment in April 2019)”, available at: http://www.mirovinsko.hr/UserDocsImages/en/pension_insurance/2019/osnovnipo-daci201904EN.pdf (Accessed on: May 06, 2019)

13 Eurostat (2016), “Transition from work to retirement: Evaluation of the 2012 module”, available at: https://ec.europa.eu/eurostat/documents/1978984/6037334/Evaluation-Report-AHM-2012.pdf (Accessed on: March 08, 2019)

14 Eurostat (2019a), “Early retirement among persons who receive an old-age pension (%)”, available at: http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=lfso_12earlyret (Accessed on: February 17, 2019)

15 Eurostat (2019b), “Persons who receive a pension, by type of pension (%)”, available at: http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=lfso_12penstyp (Accessed on: February 17, 2019)


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Ana Štambuk

Ivan Uroda

Nikolina Anđelić

P

S

Hrvatsko stanovništvo te, posljedično, hrvatska radna snaga ubrzano stari. Sa staranjem dolazi do promjene u sposobnostima npr. smanjenja produktivnosti i opadanja kognitivnih sposobnosti. U modernom svijetu, nove primjene tehnologija preobražavaju zahtjeve poslova, stoga se radnici moraju prilagoditi na te novine. Problem je što su stariji radnici digitalni imigranti i počeli su koristi osobna računala kasnije tijekom života, često tijekom zaposlenja, stoga su oni morali promijeniti svoj pristup poslu tj. morali su se prilagoditi razli-čitim zahtjevima današnjih poslova. Tražene prilagodbe zajedno uz, istovremeno, smanjene sposobnosti, mogle bi dovesti do prijevremenog umirovljenja. Autori su istražili utjecaj 1) obvezu prilagodbe zahtjevima današnjih poslova (aproksimiranu zahtjevom za korištenje osobnih računala) i 2) sposobnosti prilagodbe na današnje poslove (aproksimirane procjenama vještina vezanim uz osobna računala), na namjere povezane s prijevremenim umirovljenjem zaposlenih starijih 50 i više godina u hrvatskom javnog sektoru. Logistički regresijski model u kontekstu složenih uzoraka je kreiran od strane autora ovog rada, pri čemu je za obje analizirane varijable pronađeno da su vezane s namjerama povezanim s prijevremenim umirovljenjem. Zaključno, oni od kojih se zahtijevalo da koriste osobna računala te su zbog toga bili u obvezi prilagoditi se promjenama, imali su veću vjerojatnost želje za prijevremenim umirovljenjem, u odnosu na one koji nisu imali tu istu obvezu. Oni s nižom procjenom vještina vezanih uz osobna računala, odnosno za one čija je sposobnost prilagodbe bila niska, su također imali veću vjerojatnost da će se prijevremeno umiroviti u od-nosu na one koji su se prilagodili bolje.

Ključne riječi: starenje stanovništva, stariji radnici, prijevremeno umirovljenje, zahtjevi i vještine vezane uz osobna računala, javni sektor, namjere i odluke povezane s prijevremenim umirovljenjem

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OMNICHANNEL OF PRIVATE LABEL GROCERY PRODUCTS IN TESCO AND CARREFOUR RETAIL CHAINS ON THE POLISH MARKET

Roman DomańskiPoznan University of TechnologyFaculty of Engineering Management2 Jacek Rychlewski Street,60-965 Poznań, [email protected]: +48616653385

Michalina ŁabendaWSAudiologySivantos Sp. z o.o.6 Bałtycka Street,61-013 Poznań, [email protected] Phone: +48616536886

A

Background: Customers who are operating today in many sales channels pose new challenges to suppliers’ distribution systems. �e aim of the article is to identify the state of implementation of omnichanneling of grocery private labels in Tesco and Carrefour retail chains on the Polish market along with critical remarks regarding the development of rational logistic product and price policy.

Methods: �e subject of the study is one of the methods of modern distribution – private label. �e object of the study covers two comparable retail chains – Tesco and Carrefour. �e study focuses only on private label grocery products (7 categories, in each of them 3 product representatives) and is limited solely to the Polish market – 21 different product features are studied. �e analysis tool is an on-site survey of Tesco and Carrefour chain stores – brick-and-mortar and online (virtual) – 84 analyses.

Results: From the perspective of the omnichannel strategy, product range availability and the level of price differentiation should be the same in every distribution channel – in fact, they are varied: Tesco 0.90 vs Carrefour 0.71 and Tesco 0.47 vs Carrefour 0.60. �e results point to the need to revise the theoretical and practical assumptions of the omnichannel concept.

Conclusions: �e subject of customer service is still a topical issue in the area of logistics. Irrespective of customers’ choice of the form (channel) of contact with the product distributor – the omnichannel vari-ant, they should always be served at the same service level. �e open question is: always, for each product?

Keywords: Omnichannel, private label, grocery products, Polish market, customer service level, om-nichannel indicators



CC BY-ND












5 od 6 26. 06. 2017. 12:24

1. Introduction

Logistics, like any other field, is susceptible to trends and fashion. Currently, in the area of distribution lo-gistics and supply chain management, an extensive debate is being held on the new form of multi-chan-

nel sales – omnichannel. Omnichannel involves full integration of communication channels and sales channels, while in a multi-channel or cross-channel such integration does not occur or is only fragmentary. As usual with novelties, at the initial stage of development, many views and opinions are

Roman Domanski, Michalina Labenda: Omnichannel of private label grocery products in Tesco and Carrefour retail chains on the Polish market


Received: March 11, 2020Accepted for publishing: April 23, 2020


192 God. XXXIII, BR. 1/2020. str. 191-202

not yet stable and well established. On the wave of prevailing overoptimism, barriers and restrictions related to the use of the omnichannel strategy are held in the background. It should be remembered, however, that there are no ideal, universal concepts. �erefore, one should consider for which product category omnichannel could be rationally used.

Private label brands are nowadays perceived as one of the forms of distribution (in the broad sense of the term). Currently, private labels brands have become a strong tool in competing for customers. Nowadays, a dynamic increase in the share of goods sold under the retailer’s own brand can be observed on the European and global markets. �e increase in sales of these products in relation to other brands allows us to draw a conclusion about clients’ per-ception and acceptance of alternative offers among other market proposals.

In addition to the first purchasing criterion – prod-uct availability, the second criterion for customers, equally or maybe even more important, is the price. �ese two criteria will constitute the basis for the omnichanneling assessment.

�e aim of the article is to identify the advancement of the implementation of the omnichannel concept in trade and distribution of private label grocery products in Tesco and Carrefour retail chains on the Polish market based on the assessment of indi-cators, which is the authors’ original idea.

�e article consists of the following parts: a review of the literature related to private label omnichan-neling, presentation of private labels of Tesco and Carrefour retailers available on the Polish market, description of the authors’ original research meth-odology, presentation of research results (individual and group) in terms of: product type and shop type (brick-and-mortar vs online) and product type and chain type (Tesco vs Carrefour), discussion of results (omnichannel indicators) and final conclusions.

2. Review of research and facts about omnichanneling and private label brands – theoretical framework

2.1 Omnichanneling of private label brands – based on Scopus database

Literature research conducted in the Scopus data-base of scientific articles (searched by title, abstract, keywords) shows that the highest number of publi-cations are devoted to various aspects of the Polish

market (3,551 articles), followed by private label is-sues (2,613 articles), and the lowest number devot-ed to the omnichannel concept (112 articles). �is structure should not come as a surprise, because on the one hand, it reflects how capacious a given is-sue is (from general to more specific concepts), and on the other hand, it reflects history – how long a concept has existed in the world (from the oldest to the newest).

However, what is the most interesting is the inter-relationship of these concepts. �e conjunction of the Polish market and private labels can be found in only three publications. �e first one shows how chains of modern international retailers can achieve a competitive advantage by introducing private la-bels in the organic category and can, in turn, stimu-late the consumption of food produced according to sustainability principles (Górska-Warsewicz et al., 2019). �e second one notes that on the con-sumer wipes market private label wipes are the frontrunners (Caridad, 2005). �e third one em-phasizes expansion beyond production roots into brand (private label) development and stresses out-sourcing as a key to successful expansion (Abend, 2000). As for other conjunctions, the Polish market and omnichannel as well as private label and om-nichannel do not appear in any publication in the Scopus database.

It was, therefore, decided to focus the attention on the research entity – Tesco and Carrefour chains. In the Scopus database, there were 866 articles dedicated to Tesco and 727 articles dedicated to Carrefour (individual treatment) and 33 articles in which both chains appear in one publication (joint treatment). Out of the 33 articles, only two publications concern the Polish market. �e first one of these shows how the approach grounded on non-extensive statistical physics can be applied to describe and distinguish different stages of market development through asymmetric behaviour of fat tailed distributions of positive and negative returns (Bil et al., 2017). �e second one concerns active adaptation in the case of some chains as a factor that has allowed them to attain leadership positions on the Polish market (Gwosdz and Sobala-Gwosdz, 2008). Among the 33 articles, only one publication concerns private labels – description of PLMA’s 2004 “World of Private Label” trade show held in Amsterdam (NRI, 2004)1. Among the 33 articles, only one publication concerns omnichannel – B2C e-commerce has become a mainstream sale chan-

193God. XXXIII, BR. 1/2020. str. 191-202


nel, often merged with traditional stores in an om-nichannel perspective; in this context, “Click and Collect” (C&C) is gaining importance, especially in the area of groceries, where big retailers have intro-duced it (Giuffrida et al., 2017).

Given the above, it was finally decided to analyse the situation of private labels and omnichannel in the Scopus database publications (the concepts were treated individually) separately for Tesco and separately for Carrefour. In the case of Tesco, six ar-ticles were identified as those that regarded private labels (the list features NRI, 2004) and one concern-ing omnichannel (Giuffrida et al., 2017 is repeated). Of the five new publications, the first one shows factors that influence store brand avoidance to-wards store brands owned by supermarkets and hy-permarkets (Saad, Ahmad Fauzi, 2017). �e second one traces the evolution of private labels, from their origin to the present, placing emphasis on the strat-egies that retail distributors use to obtain and main-tain competitive positions (Martínez-Ruiz et al., 2016). �e third one emphasizes that food retailers may need to further consider aspects of culture and consumer behaviour to determine whether to adapt their strategies, rather than copy and paste formats from abroad (Shannon, 2014). �e fourth one notes that private labels often focus on one narrow aspect of a product’s life cycle (such as transport), which may present an incorrect view of that product’s overall implications for climate change (Appleton, 2009). �e fifth one concerns sustainable packag-ing movement – centre on packaging reduction and the specification of more sustainable packaging ma-terials (Boettcher, 2007). In the case of Carrefour, eight articles concerning private labels were iden-tified (the list features NRI, 2004) and one article concerning omnichannel (Giuffrida et al., 2017 is repeated). Of the seven new publications, the first one shows the introduction of the concept of cus-tomer’s value to the retailer (CVR – has two com-ponents: loyalty intentions to the retailer and inten-tions to try new products or brands that the retailer offers) from a marketing perspective (Rubio et al., 2019). �e second one investigates factors affecting consumers’ willingness to buy private label brands (Mostafa, Elseidi, 2018). �e third one notes that Carrefour increased its market share through incor-porating a high percentage of private label products (Di Nucci, 2015). �e fourth one points out that at times private labels may lead to mixed effects and could reduce consumer welfare in the long run (Ez-

rachi, Ahuja, 2015). �e fifth one underlines that in relation to the fear expressed by consumers, some mass retail companies offer private label products declared free of Genetically Modified Organisms (the anti-GMO attitude) (Russo, 2015). �e sixth one presents a marketing research technique as netnography applied to determine the positioning of food distribution companies (Clemente-Ricolfe, Escribá-Pérez, 2014). �e seventh one emphasizes an increase in volume of shelf-ready packaging (SRP) of private label products as an important as-pect in retailing and the best solution to fill in the different demands of merchandise, the supply chain and the operations (IPBI, 2007).

Summarizing the theoretical part, it can be stated that as far as the research subject of this article is concerned, the available literature is not extensive. Considering individual article titles, it can be stated that the research problem undertaken in this article is original and unique.

2.2 Characteristics of private label grocery products in Tesco and Carrefour retailers present on the Polish market

�e Tesco brand was launched in 1924. It is one of the oldest brands on the market. Tesco is a retailer originating in Great Britain. Already at the end of the 1990s, Tesco was the leader in the food market, as demonstrated by a survey carried out by “Finan-cial Times” in which the retailer was viewed as the best among the British people. In Poland, Tesco has been operating since 1995 (Pringle, Gordon, 2006).

Tesco ranks second in terms of market share. In 2015, Tesco had 433 stores in the super- and hyper-market sector. Constant efforts to follow and meet customers’ expectations resulted in the opening of the Tesco Ezakupy online shop in 2012, which two years later led the retailer to obtain the title of leader in the online grocery market2.

At present, Tesco can boast a well-developed range of private label products. In Poland, one-third of the goods offered by this retailer are labelled with the Tesco brand. Table 1 presents Tesco private label food brands that are currently available on the Polish market along with their brief character-istics.


194 God. XXXIII, BR. 1/2020. str. 191-202

Carrefour is a retailer originating in France. �e first Carrefour store was opened in 1960 in Annecy. In 1976, the first products with the retailer’s own brand appeared. �e first Carrefour store in Poland was opened in 1997. Currently, the retail chain has over 900 stores in Poland. �e year 2003 saw the introduction of the retailer’s private label brand in Polish outlets. �e beginning of 2016 was the time of the development of an online shop, which began to offer food products4.

In 2017, Carrefour expanded its product range to include seven new product categories – these were not just food items. Currently, there are about 3,500 private label products5. �e French chain’s offer for the Polish market includes thirteen Carrefour pri-vate label food brands6 – their categories with a brief description are presented in Table 2.

Table 1 Tesco private label food brands

Tesco brand Brand description

Value

A brand that offers basic food products. It was created for customers who appreciate the simplicity of goods and focus primarily on functionality. Packaging usually has a white background and contains necessary information about the product. Products are covered by the customer satisfaction guarantee.

FinestA brand that offers premium food products. Created for customers who not only value the price of the product, but also pay great attention to quality. �is brand has a wide range of products, diversified in terms of taste and origin.

OrganicA brand that offers organic food products, vegetables and fruit. �e packaging features appropriate certificates (product number) and the GDA (Guideline Daily Amounts). �e goods also feature the “Organic Farming Product” label.

Free FORMA brand that offers approximately 150 gluten-free, wheat-free and dairy-free products. It was created mainly for allergy sufferers, who need to be careful about their diet. �e brand’s products also contain a reduced amount of sugar.

Healthy livingA brand that offers 500 products, with much lower levels of fat, sugar and soda than standard products. �ese are mainly ready meals, yoghurts and healthy snacks. �e line is addressed to buyers who value a healthier product variant.

Carb ControlA brand that offers low-carb products. �e youngest among Tesco private label brands. Aimed at buyers who are interested in low-carb foods.

Fairtrade International

A brand that offers products that have been awarded the Fairtrade certificate (among other things, it means that all employees working on the production of a given product have received adequate pay and have been ensured decent working conditions).

Source: Own work (Lincoln, �omassen, 2012; Tesco Polska, 20193).

195God. XXXIII, BR. 1/2020. str. 191-202


Table 2 Carrefour private label food brands

Carrefour brand Brand description

Carrefour

A brand that offers basic food products. It was created for customers who care about the price of the product being adequate to quality. As the chain assures, the brand has goods that are about 1/5 cheaper than leading goods on the market. It includes over 3,000 different goods, including non-food products. �e brand also tries to meet customers’ expectations by reducing sugar or colourings.

Nasza Wędzarnia Carrefour (Carrefour Smokery)

A brand that offers cold cuts and smoked meats. �e production uses the method of hot smoking with hardwood. Carrefour distinguishes five production steps from the receipt of raw material to the emergence of a finished product.

Jakość z natury Carrefour (Quality from nature Carrefour)

A brand that offers products made from the highest quality ingredients. �ey are produced by trusted, not only Polish, but also foreign producers who are long-term suppliers. In the case of vegetables and fruit, focus is placed on sustainable cultivation in accordance with the natural cycle. In the case of animal husbandry, their proper development is ensured. Removal of chemicals and artificial mixtures of fertilizers and fodder is important.

Millo di PastaA brand that offers a wide range of pasta. Standard products in blue packaging contain pasta for various types of meals. �e brand also offers whole grains and 100% spelt products.

Mleczny przystanek (Milk stop)

A brand that offers dairy products with a wide range of choice. �ere are products made from cow’s milk without GMOs.

Nasze rarytasy (Our delicacies)

A brand that offers cold cuts. Products are packaged in such a way that portions are tailored to customers’ needs. Products are adapted to the storage method.

Reflets de FranceA brand that offers French cuisine products. It is characterized by luxury and elegance. Products are made on the basis of original recipes or according to regional recipes. �e brand offers over 200 products from France.

Terre d’ItaliaA brand that offers Italian cuisine products created in cooperation with local producers. Aromatic spices and seasonings originating in Italy allow customers to get to know new flavours. �e brand offers about 50 products.

Cookie PlaceA brand that offers sweet snacks such as wafers, cakes, cookies and biscuits. It meets the IFS or BRC requirements. Products undergo stringent quality controls imposed by compliance with the HACCP system.

Chocolate Place

A brand that offers chocolate products. �e gradual introduction of ingredients of increased quality, in the case of palm oil, requires the possession of the RSPO certificate. Products feature labels with nutritional value so that customers can make conscious purchases.

Snack BarA brand that offers salty snacks. A wide range of products commissioned by and made for Carrefour. �ey are basically crisps, nuts, popcorn or salty sticks. �ey are mainly bought by people who organize social events.

CrumbiesA brand that offers products such as breakfast cereals and muesli. A wide range of products was created for buyers who want to diversify their breakfast for both children and adults. �e offer includes various flavours.

Northlantica

A brand that offers fish and fish products. For both health-conscious buyers and those who care for the environment and choose products with the MSC sustainable fishing certificate. It includes canned, smoked, marinated and frozen fish intended for demanding buyers.

Source: Own work (Carrefour Polska, 20197).


196 God. XXXIII, BR. 1/2020. str. 191-202

Retail chains (including Tesco and Carrefour) focus primarily on everyday products, which are most often mass-produced. However, more and more often, private label brands are taking over more de-manding markets, e.g. luxury or organic products. �is is the future direction of the evolution of pri-vate labels in retail chains.


Step 1. Selection of the research entity.Two comparable retail chains (hypermarket level) were examined. Based on industry rankings, Tesco and Carrefour hypermarkets have been leaders in this category for several years. �e study involved the analysis of two entities’ individual results and the possibility to perform a comparative analysis.

Step 2. Selection of the research subject.

Private label products of the retail chains were ex-amined. Based on industry rankings, food prod-ucts are the dominant product category. Within this category, also based on industry rankings, seven most common subcategories were selected for analysis that can be found in each chain: dairy products, frozen products, meat, breakfast prod-ucts, beverages, sweet products and salty snacks. In each subcategory, three most popular products were analysed.

Step 3. Selection of evaluation criteria.As part of the analysis, 21 product features were ex-amined. A detailed list of all criteria in the form of a list of questions is included in Table 3.

Table 3 Criteria for awarding points

Category Description of features (what was to be checked)

Composition Does the product have information about its composition?

Volume / weight Does the product have information about its content in the volume / weight unit?

Way of storage Does the product have information about how to store it?

Use-by date Does the product have information about its use-by date?

Producer information Does the product have information about the producer or place of production?

Recyclable packaging Can the product packaging be recycled?

High-quality ingredients Does the product have information about high quality ingredients?

Certificates held Does the product have quality certificates?

BIO / Gluten-free / Without preservatives / GMO-free

Does the product belong to at least one of the following categories: BIO, gluten-free, without preservatives, GMO-free?

Packaging material Does the packaging have information about the material it was made of?

Ergonomic use Is the product packaging convenient for the user?

Bulk packaging Is the product stored in the collective packaging?

Protection against damage Is the product additionally protected against damage?

Safe transport Does the packaging enable safe transport?

Product name visibility Is the product name visible to the buyer?

Brand logo visibility Is the brand logo visible on the packaging?

Retail chain logo visibility Is the retail chain logo visible on the packaging?

Font legibility Is the font on the packaging legible to the buyer?

Colours used Is the colour used on the packaging eye-friendly?

Unit price What is the price of the product? �e first is the unit price, i.e. the one the customer sees in the store. �e second is the price calculated in relation to the unit of weight / volume in which the product is sold (kilogram or litre). When the item was distributed in the same unit, the calculation was not added.Price per kg/l

Source: Own work.

197God. XXXIII, BR. 1/2020. str. 191-202


�e first five features relate to product informa-tion, the next four features relate to additional in-formation, the following five features relate to the packaging function, the next five features relate to the product appearance, and the final two features relate to the price level. Step 4. Establishing a rating scale (points).For all categories except the price, the product can be rated 1 (it has a given feature) or 0 (it does not have it). �e price category reflects the price level – cheaper products receive more points (3 or 4), whereas more expensive products receive fewer points (1 or 2).Step 5. Conducting research�e research was conducted in Poznań County in July 2019. �e principal offer adopted was the range of products in brick-and-mortar stores, with the online stores checked if they offer them as well. Two actual Carrefour and Tesco hypermarkets located

close to each other (conditions of product and price competitiveness) participated in the field study (the assumption resulting from the business strategy of a retail chain which states that the store’s offer is constant regardless of its location was adopted). �e virtual study was carried out in July 2019 in Carrefour8 and Tesco9 online stores. Step 6. Analysis and interpretation of partial and collective results (presented in the next section of the article).

4. Examination of the offer of private label food products in Tesco and Carrefour hypermarkets in Poland – results of research and discussion

Table 4 presents the result of the evaluation of an exemplary product – natural yoghurt – from the dairy products category (S – stationary store, I – online store).

Table 4 Results of the assessment of private label natural yoghurts in Tesco and Carrefour

Name of the retailer Tesco S Tesco I Carrefour S Carrefour I

Info

rmat

ion

ab

out t

he

prod

uct

Composition 1 1 1 1

Volume / weight 1 1 1 1

Way of storage 1 1 1 1

Use-by date 1 0 1 0

Producer information 1 1 1 1

Add

itio

nal

info

rmat

ion Recyclable packaging 1 1 1 0

High-quality ingredients 1 0 1 1

Certificates held 0 0 0 0BIO / Gluten-free / Without preserva-tives / Without GMOs 1 0 1 1

Pack

agin

g

func

tion

s

Packaging material 1 0 1 0Ergonomic use 1 1 1 1Bulk packaging 1 0 1 0Protection against damage 1 1 1 1

Safe transport 1 0 1 0

Prod

uct

appe

aran

ce

Product name visibility 1 1 1 1Brand logo visibility 1 1 1 1Retail chain logo visibility 1 1 1 1Font legibility 1 1 1 1Colours used 1 1 1 1

Pric

e Unit price 4 4 2 4

Price per kg/l 4 4 2 4

Total sum of points 26 20 22 21

Source: Own work.


198 God. XXXIII, BR. 1/2020. str. 191-202

�e other two products in this category were sub-jected to the same procedure. �e partial results of the analysis for the dairy products category are pre-

sented in Figure 1 (lack of all results for Carrefour I mean that some products are not included in the online store offer of this chain).

Figure 1 Results of private label assessment in the dairy products category in Tesco and Carrefour

Retail chain logo visibility 1 1 1 1

Font legibility 1 1 1 1

Colours used 1 1 1 1

Pric

e Unit price 4 4 2 4

Price per kg/l 4 4 2 4

Total sum of points 26 20 22 21

Source: Own work.

The other two products in this category were subjected to the same procedure. The partial

results of the analysis for the dairy products category are presented in Figure 1 (lack of all

results for Carrefour I mean that some products are not included in the online store offer of

this chain).

Figure 1 Results of private label assessment in the dairy products category in Tesco and

Carrefour

Source: Own work.

The remaining 18 products from six other categories were analysed according to the same

scheme. Taking into account four branches (stores), a total of 84 partial analyses were carried

out. The final collective results of the study are presented in Table 5 (overview of individual

products) and Table 6 (overview of product categories).

Table 5 Final results of the evaluation of private label food products in Tesco and Carrefour

by individual products

0

5

10

15

20

25

30

Tesco S Tesco I Carrefour S Carrefour I

Natural yoghurt

Milk 3,2%

Kefir

Source: Own work.

�e remaining 18 products from six other categories were analysed according to the same scheme. Taking into account four branches (stores), a total of 84 partial

analyses were carried out. �e final collective results of the study are presented in Table 5 (overview of individual products) and Table 6 (overview of product categories).

Table 5 Final results of the evaluation of private label food products in Tesco and Carrefour by individual products

Tesco S Tesco I Carrefour S Carrefour I TotalNatural yoghurt 26 20 22 21 89Milk 3.2% 22 18 20 0 60Kefir 23 20 21 0 64Frozen chips 17 17 17 0 51Frozen pizza 17 13 25 22 77Mix of frozen vegetables 20 18 20 0 58Still water 22 19 18 15 74100% orange juice 21 16 23 19 79Cola flavoured sparkling drink 23 18 17 14 72Milk chocolate 22 13 22 18 75Wafers 17 15 22 20 74Biscuits 16 0 18 20 54Potato crisps 17 14 25 20 76Salty sticks 20 17 17 18 72Salted peanuts 18 17 17 16 68Chicken breast ham 20 17 20 21 78Pork shoulder minced meat 18 14 20 0 52

Chicken tenderloins 19 0 15 0 34Muesli 14 13 20 19 66Corn flakes 18 17 11 14 60“Chocolate balls” 16 13 20 20 69Total 406 309 410 277

Source: Own work.

199God. XXXIII, BR. 1/2020. str. 191-202


�e results of the study can be analysed vertically (individual stores) as well as horizontally (product categories).

For both chains (de facto the same level of evalu-ation – 410 Carrefour vs 406 Tesco), products in their brick-and-mortar stores have higher values compared to the offer of online stores (there is a no-ticeable advantage of Tesco – 309 points over Car-refour – 277 points). In the case of stationary retail, Carrefour has an advantage in 4 out of 7 categories, in the case of e-commerce the situation is exactly the opposite with Tesco faring better.

Drinks are the highest rated product category (225 points), while meat products are the lowest rated (164 points). Within individual seven product cat-egories, products within a given chain, apart from one singularity (breakfast cereals in Carrefour S – 51 points vs Carrefour I – 53 points), have higher values in the case of stationary retail (traditional store) than online retail (virtual store). In the range of individual product groups, a much larger dispro-portion in the offer of brick-and-mortar and online stores (results of the point assessment) is observed in Carrefour than in Tesco.

5. Conclusions

To summarize the research part, in accordance with the first postulate, i.e. product range avail-ability, neither of the hypermarkets fully meets the conditions for implementing the omnichan-nel strategy. In the case of Tesco, the online offer, compared to the stationary offer, lacks one product from each category of sweets and meat and cold

cuts. In the case of Carrefour, the situation is much worse – there are two products missing in each of the three categories in the online offer: dairy prod-ucts, frozen products, meat and cold cuts. At this point, one may be tempted to determine the index of the product range omnichannel, understood as the ratio of the Internet offer to the stationary of-fer (the closer the result is to 1, the better, 1 being the perfect state). �e product range omnichannel of Tesco is 0.90 and of Carrefour 0.71 (noticeable disproportion of the product offer). Meat and cold cuts are a common problematic category for both retail chains. One should consider whether each single product range may be subject to omnichan-neling, or whether certain products should be ex-cluded from the offer.

In accordance with the second postulate – price comparability – neither of the hypermarkets fully meets the conditions for implementing the om-nichannel strategy (only those cases in which prod-ucts are available in the stationary and online stores have been compared). In the case of 19 products from Tesco, price differences were observed in 10 cases, with an increase in price in seven of them and a decrease in three (online shopping being more expensive than stationary shopping). In the case of 15 products from Carrefour, price differences were observed in six cases, with a decrease in price recorded for five and an increase for one product (online shopping being cheaper than stationary shopping). At this point, one may be tempted to de-termine the price omnichannel index, understood as the ratio of the price level of the internet offer to the stationary offer (the closer the result is to 1, the

Table 6 Final results of the evaluation of private label food products in Tesco and Carrefour by indivi-dual product categories

Tesco S Tesco I Carrefour S Carrefour I Total

Dairy products 71 58 63 21 213

Frozen products 54 48 62 22 186

Beverages 66 53 58 48 225

Sweets 55 28 62 58 203

Salty snacks 55 48 59 54 216

Meat products 57 31 55 21 164

Breakfast cereals 48 43 51 53 195

Total 406 309 410 277

Source: Own work.


200 God. XXXIII, BR. 1/2020. str. 191-202

better, 1 being the perfect state) – the direction of price change (increase or decrease) was not taken into account. �e price omnichannel of Tesco is 0.47 and of Carrefour 0.60 (noticeable dispropor-tion of the price offer). Due to the lack of a full set of data (the aforementioned product exclusions, a full set of data only for three product categories), a horizontal interpretation of the price level would be biased; hence it was not carried out. One should consider how distributors should determine the price of a product. �e price includes distribution costs, which depend on the type of sales channel, and therefore they are different, while the customer expects a fixed purchase price.

To summarize the theoretical and practical parts, the omnichannel strategy as a new sales (distribu-tion) strategy keeps evolving by trial and error. At the current stage of its development, there are still more research questions than answers, both on the side of science and practice. �e view on shaping the customer logistics system in the conditions of implementing the omnichannel strategy from the perspective of its four main components: time,

reliability, communication and convenience was presented by the authors in (Domański and Hadaś, 2017).

�e geographical scope of the authors’ research was limited only to the Polish market (research limita-tion). However, the size of the market is not a fac-tor that differentiates research results. �ey are de facto differentiated by the product category or type of distributors. Hence, the obtained research results should be treated as preliminary and pilot outcomes. As part of future research, the authors intend to re-examine the same problem, but without market restrictions. Another research intention will be to conduct a study on a different entity (store format - discount shop level instead of hypermarket level) on the example of Biedronka and Lidl retailers.

Acknowledgements

�is research was funded by the Ministry of Science and Higher Education – project No. 11 / 140 / SBAD / 4171.

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Roman Domanski

Michalina Labenda

O T C

S

Kontekst: Današnji kupci kupuju putem različitih prodajnih kanala, što je dodatni izazov za distribucijske sustave dobavljača. Cilj je rada utvrditi koliko se omnikanalna prodaja primjenjuje u maloprodajnim lanci-ma Tesco i Carrefour u Poljskoj s posebnim osvrtom na proizvode s trgovačkom markom. Nadalje, kritički će se obraditi razvoj racionalne logistike te politike proizvoda i cijena.

Metode: Predmet je istraživanja jedna od metoda suvremene distribucije, odnosno trgovačka marka, a provest će se na dva usporediva maloprodajna lanca, Tesco i Carrefour. Istraživanje je usmjereno samo na prehrambene proizvode s trgovačkom markom (sedam kategorija, u svakoj po tri proizvoda) te ograničeno na poljsko tržište, a ispitana je 21 značajka proizvoda. Koristili smo anketu u fizičkim trgovinama Tesco i Carrefour, te u odnosu na njihove internetske, odnosno virtualne trgovine. Ukupno je provedeno 84 analiza.

Rezultati: Iz perspektive omnikanalne strategije cijene i asortimana proizvoda trebali bi biti jednaki u svim distribucijskim kanalima, no ipak se razlikuju: Tesco 0,90 u odnosu na Carrefour 0,71 te Tesco 0,47 o od-nosu na Carrefour 0,60. Ti rezultati pokazuju da je potrebno revidirati teorijske i praktične pretpostavke omnikanalnog koncepta.

Zaključci: Pitanje usluge kupcima i dalje je aktualno u području logistike. Neovisno o tome koji oblik kupovine tj. kanal kupac odabere za kontakt s distributerom proizvoda, razina usluga trebala bi uvijek biti jednaka, pa tako i u omnikanalnoj varijanti. Ostaje otvoreno pitanje vrijedi li to uvijek i za svaki proizvod.

Ključne riječi: omnikanalna prodaja, trgovačka marka, prehrambeni proizvodi, poljsko tržište, razina us-luge, pokazatelji omnikanalne prodaje

R P

Nejla Manov, Alisa Mujkić, Melika Husić-Mehmedović:Universities’ enrollment challenge:

�e role of corporate image in higher education

Vlatka Bilas:Smart specialisation concept as a tool for improving innovation

performance of the European Union member countries

Tina Šugar, Kristina Brščić:Consumers’ perceptions of organic food products in Croatia

Mira Lulić, Ivana Rešetar Čulo:Poverty: A challenge to the protection of human rights

of older persons in the Republic of Croatia

Katarina Marošević:Lagging regions: �e case of Eastern Croatia

Ana Zrnić, Dubravka Pekanov Starčević, Boris Crnković:Recent trends in sustainability reporting:

Literature review and implications for future research

205God. XXXIII, BR. 1/2020. str. 205-216

UNIVERSITIES’ ENROLLMENT CHALLENGE: THE ROLE OF CORPORATE IMAGE IN HIGHER EDUCATION

Review article

Received: July 9, 2019Accepted for publishing: September 10, 2019

Nejla ManovLužansko polje 7,71000 Sarajevo, Bosnia and [email protected]: +38733756000

Alisa MujkićSchool of Economics and Business SarajevoTrg Oslobođenja – Alija Izetbegović,71000 Sarajevo, Bosnia and [email protected]: +38733275996

Melika Husić-MehmedovićSchool of Economics and Business SarajevoTrg Oslobođenja – Alija Izetbegović,71000 Sarajevo, Bosnia and [email protected]: +38733253774

A

�is paper focuses on gathering information regarding the importance of the university image for students and its influence on student satisfaction, loyalty and enrollment intentions. Consequently, the main aim of the paper is to evaluate whether the corporate image of a particular higher education institution affects students’ satisfaction, loyalty and enrollment intentions. �e results of the MANOVA analysis show a sig-nificant correlation between corporate image and satisfaction, explaining that corporate image influences satisfaction among students. Without any doubt, as confirmed in this paper, the corporate image construct has a strong and remarkable influence on satisfaction, loyalty and enrollment intentions of students. Hav-ing in mind the importance of the corporate image construct, it is proven to be a strong antecedent for all three determinants, satisfaction, loyalty and enrollment intentions, whose positive effect is crucial for the survival of the universities worldwide, which presents the main practical contribution of the paper.

Keywords: Corporate image, satisfaction, loyalty, enrollment intentions, higher education

Nejla Manov, Alisa Mujkić, Melika Husić-Mehmedović: Universities’ enrollment challenge: �e role of corporate image in higher education



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5 od 6 26. 06. 2017. 12:24

1. Introduction

Higher education institutions, as an important pil-lar for human resources development, play a crucial role in the economic growth and overall develop-ment of countries worldwide. �e upcoming period brings even more intense scenarios of competition among educational institutions, where higher edu-cation institutions need to explore new ways in order to compete and survive. Landrum et al. (1998) state that the university’s image may represent a valuable intangible asset in the competitive area because by

gaining a positive image from the environment, ed-ucational institutions are able to occupy a distinctive place in the target market. Universities and educa-tional institutions around the world have spent large amounts of money on communication campaigns to attract prospective students. Despite this, they usu-ally fail to create a recognizable and distinctive cor-porate image, mostly because of the difficulty to dif-ferentiate an intangible product, which is education in the case of universities and schools (O’Loughlin, Szmigin, 2005; Bravo et al., 2010).


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Moreover, the corporate image sometimes can be more important than its quality, because it is an image that actually influences choices made by stu-dents at a particular institution (Kotler, Fox, 1995). �e image of the educational institution may influ-ence who applies for studies (Landrum et al., 1998; Fielder et al., 1993; James et al., 1999), student sat-isfaction (Clow et al., 1997; Eskildsen et al., 1999) as well as student loyalty (Eskildsen et al., 1999). Researchers also claim that image is one of the main factors influencing students’ willingness to apply for enrollment (Yavas, Shemwell, 1996; Landrum et al., 1998; Parameswaran, Glowacka, 1995). However, literature on the university image as per-ceived by its students and how this image affects their behavior remains scarce. In this sense, the main aim of the paper is to evaluate whether the corporate image of a particular higher education institution affects students’ satisfaction, loyalty and enrollment intentions. �e paper consists of several subsections, beginning with the introduction fol-lowed by the theoretical conceptualization on cor-porate image in higher education, satisfaction and loyalty among students and enrollment intentions. �e hypothesis development and methodology fol-low, along with the analysis and discussion. At the end, the authors clarify the limitations of this re-search and the practical implications.


2.1 The corporate image in the context of higher education

Due to the fact that universities are becoming more aware of how important it is to attract valuable stu-dents and build a strong perceived image, the whole concept of corporate image is receiving greater at-tention (Bok, 1992; Parameswaran, Glowacka, 1995; �eus, 1993). �roughout the literature, there are many different definitions of what the corporate im-age concept represents in the higher education sys-tem (Liou, Chuang, 2010; Da Costa, Pelissari, 2017; Amendola, 2004). �ere has been a broader consen-sus, since the beginning of the 20th century, when the corporate image was defined as a set of all important invisible components of the school (Howcroft, 1991), to the present, when the corporate image is defined as a concept that comprises of both, the physical and non-physical attributes of the school interpreted by its stakeholders (Nguyen, LeBlanc, 2001). In educational services management, the corporate image concept is mostly used as a positioning in-

strument that influences the students’ final decision where to study (Milo et al., 1989; Nguyen, LeBlanc, 2001; Weissman, 1990). A study on the university’s corporate image published by Kazoleas et al. (2001) found that the corporate image may vary among different stakeholders of the university, and as such sends contradictory signals toward the environ-ment and community. Many authors agree that the corporate image has a direct impact on the success of universities (Golgeli, 2014; Dowling, 1986). Simi-larly, Fombrun and Shanley (1990) state that gener-ated advantages of a positive image could be a high student retention rate and attractive area for better-qualified applicants to enroll. Moreover, Treadwell and Harrison (1994) add that maintaining a positive corporate image as a strategic managerial issue af-fects the institution’s ability to recruit desired fac-ulty members and to retain and attract motivated students. �e research findings from different areas, including marketing, advertising, management and PR have shown that companies with a good corpo-rate image usually enjoy a greater record of sales and market share (Shapiro, 1982), loyal customers (Andreassen, Lindestad, 1998), positive quality per-ceptions (De Ruyter, Wetzels, 2000), and increased customer engagement (Bhattacharya, Sen, 2003).

2.2 Students’ satisfaction

Nowadays, satisfaction is explained as a state of mind in which the customers’ needs, wants, and expectations are aligned with his or her expecta-tions, contributing to future repurchase and loyalty. In general, the satisfaction concept is the result of mutual interaction between the consumer’s pre-purchase expectations and post-purchase evalua-tion (Gilbert et al., 1982). Hence, these statements confirm Oliver’s (1980) thinking that satisfaction is a post choice evaluation judgment concerning a specific purchase decision. Assessing the students’ satisfaction level helps higher education institutions identify those aspects that set them apart from others and, on the other hand, discover the areas that cause dissatisfaction, so they can provide improvements that can answer to the students’ needs and expectations. �rough measurement of student satisfaction, institutions are able to get data of how effective they actually are in terms of providing certain educational services to the market. �ere is a chance that one will be loyal to a certain institution if the student’s satisfaction exceeds the student’s expectations; any repeated enrollment intention, positive word-of-mouth and further use of provided services explains customer

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satisfaction (Anderson, Sullivan, 1993). Yeboah and Atakora (2013) have concluded that institutions, which have the ability to satisfy students’ needs through integrated communication, are able to suc-ceed in the competition market. Napoli and Wort-man (1998) explain the different factors that are crucial for students’ increased level of satisfaction, such as, self-esteem, life events during university years, social competence, psychological well-being, social support, and the university academic, social and administrative systems.

2.3 Students’ loyalty

During the last few years, the financial system for higher education institutions has been changed across many countries, whereas institutions’ per-formances have become increasingly important when taking into consideration where funds and money will be allocated (Arnaboldi, Azzone, 2005; DeShields et al., 2005). Within those performances, student loyalty has become a very important concept for higher education institutions (Marzo-Navarro et al., 2005). Hence, the concept of student loyalty and drivers for loyalty are a high priority when determin-ing the most appropriate management strategy of an institution. Just as the loyalty construct is crucial for businesses where products are the focus of attention, the construct is also of high importance for services (Dick, Basu, 1994). Oliver (1997: 392) defines this as a “deeply held commitment to rebuy a preferred product or service consistently in the future, despite situational influences and marketing efforts having the potential to cause switching behavior”. �us, the loyalty concept implies a certain level of continuity in how a student relates to a specific institution. �is all influenced loyalty to become one of the key concepts in higher education institutional management (Hel-gesen, Nesset, 2007b). Also, Jones and Sasser (1995) view loyalty as a construct through which students have a sense of belonging and affection towards a specific institution.

Moreover, the loyalty concept is really present when a student resists all the pressures to switch to an-other institution (Newman, Werbel, 1973). Hence, loyalty in the service industry is measured as stu-dents’ faithfulness to a particular higher educational institution. �erefore, students’ purchasing behav-ior (i.e. enrollment intentions) is also determined by the level of their loyalty. Afterwards, true loyalty was found to be a construct developed when strong

positive relative attitudes are associated with a high degree of repeated enrollment decisions.

2.4 University enrollment intentions

�e decision-making process made by students in order to choose the proper institution to study at is broadly seen as a problem, due to the huge number of institutions offering the same or similar programs and opportunities. �erefore, it is up to the higher education institution to build a strategic model, incorporated with a positive corporate image to at-tract students and decrease the number of students who switch to another university. Decision making models are usually called the purchase behavior of consumers, where the same model can be used in a process of enrollment intentions of students related to deciding at which university to enroll. Accord-ing to Kotler and Fox (1995) purchase behavior is generally a complex process comprised of several stages, including need arousal, information search and evaluation of alternatives, purchase decision and the post purchase feeling.

Chapman (1984) was among the first to apply this process of buying behavior to education represent-ing it as enrollment intentions. Servier (1986) re-vealed that most of the research studies have shown that the college or university location is one of the most important factors for the potential student’s decision to apply and enroll. Absher and Crawford (1996) and Servier (1994) add that students could be looking for a university close to their home or work-place. In addition, a low-cost, nearby university is usually an important stimulator of a student’s deci-sion for future education decisions. Academic pro-gram offerings, its content range and duration were noted to have a significant impact on a student’s university selection (Ford et al., 1999). Moreover, Ford et al. (1999) list important factors students think about while deciding where to study, includ-ing the range of study programs, flexibility of degree program and range of degree options. Most of the research studies found that the strongest predictor of university choice is the institutional image (Lay, Maguire, 1981; Murphy, 1981; Keling, 2006).

3. Hypotheses development

Many authors assessed the corporate image as an im-portant construct for higher educational institutions and confirmed its crucial and strong influence on


208 God. XXXIII, BR. 1/2020. str. 205-216

students’ satisfaction (Andreassen, Lindestad, 1998). Alves and Raposo (2010) add that the corporate im-age is the construct that mostly influences student satisfaction, but it is also relevant to student loyalty. Nguyen and LeBlanc (1998) found that satisfaction through the perceived service value directly effects the corporate image. �is issue was explained by the assertion of Barich and Kotler (1991) stating that if students of an institution believe they receive good value through education, that particular institution has a strong positive image. Hence, all these contra-dictions brought up the claim that a clear relationship between satisfaction and image is obviously missing (Azoury et al., 2013), while Amendola (2004) found a strong relationship between the corporate image and satisfaction. Palacio et al. (2002) explain that the im-age has a significant effect on students’ satisfaction and loyalty. Similarly, Alves and Raposo (2010), iden-tify the corporate image as one of the most impor-tant determinants of students’ satisfaction and loy-alty. Besides, the corporate image construct in higher education institutions is proven to be the most in-fluential on student satisfaction (Dib, Alnazer, 2013). �us, along the same lines, we propose that:

H1: �e university’s corporate image influences students’ satisfaction.

Ostrowski et al., (1993) found a significant relation-ship between the image of an organization and the loyalty of its customers. Schlesinger et al. (2015) confirmed a positive impact of the university image on the concept of satisfaction and loyalty. �erefore, results showed that satisfaction and university im-age are proven to be strong predictions of loyalty, while behavioral loyalty by students is determined

not only by satisfaction, but also by their perceived image of the institution, the level of identification and the quality of the professor-student relation-ship. Furthermore, corporate image is seen as a leading motivation factor to a higher level of stu-dent loyalty, which in turn confirms that the corpo-rate image is a leading indicator not only satisfying and retaining existing students, but also attracting new ones (Ali et al., 2012).

H2: �e university’s corporate image influences the students’ loyalty

Numerous resources have already recognized the crucial role that the corporate image concept has on the process of student’s enrollment intention (Barich, Kotler, 1991; Zeithaml, 2000). �e corpo-rate image concept is particularly important in de-veloping and maintaining loyal students, which in the end will bring higher retention rates and higher enrollment rates for the university (Dick, Basu, 1994; Raj, 1985). Similarly, Scot (1999) confirms that many universities depend on their capacity to retain current students and attract new ones, allocation of resources, achievement of students, and providing attractive programs to the external environment. Hence, it is considered that marketing strategies and the corporate image are the most remarkable factors for survival. Other studies also support the idea that the corporate image is significantly corre-lated with enrollment intentions (Gatewood et al., 1993; Mehboob et al., 2012), so we are testing this hypothesis in our study as well, while Figure 1 pre-sents the conceptual model of this research.

H3: �e university’s corporate image influences the students’ enrollment intentions.

Figure 1 Conceptual model

Source: Authors

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4. Methodology

�e questionnaire that was used within the re-search process is divided into five separate sections and is aimed to measure the following constructs: corporate image (Bravo et al., 2010), satisfaction (Bitner, Hubbert, 1994), loyalty (Gremler, Brown,

1996) and enrollment intentions (Ajzen, Fishbein, 1980), as well as demographics. All of the questions used a 7-point Likert scale, as suggested by the au-thors. Furthermore, we checked the scales reliabil-ity, which is presented in Table 1 indicating accept-able values of alpha and scale reliability.

Table 1 Reliability statistics for all four constructs in the research model

Construct N of items Alpha

Corporate Image (CI) 17 0.940

Satisfaction (S) 2* 0.800

Loyalty (L) 12 0.933

Enrollment Intentions (EI) 3 0.886

* Variable S2 was excluded from reliability statistics because it represents confirmation of S1 variable in the negation form. Source: Authors

Data was collected using a sample of students at-tending some of the study programs at a school within the public university in Bosnia and Herze-govina. A total of 200 students were interviewed face-to-face (Szolnoki, Hoffmann, 2013) during the lecture sessions of undergraduate and postgraduate classes. Descriptive statistics of the sample by age, show that the mean age of respondents is 23.01. In addition, descriptive statistics of the sample dem-onstrate that the majority of respondents were fe-males (58.5%).

5. Analysis

In order to test the previously presented hypoth-eses, the MANOVA analysis was performed. It is the multivariate analysis, which is used to test a hypoth-esis where one independent variable (or more) have a statistically significant effect on a set of two or more dependent variables. In the case of this research, the independent variable is a construct related to the Cor-porate Image (CI), while the set of dependent vari-ables include three constructs related to the students’ Satisfaction (S), Loyalty (L) and Enrollment Intentions (EI). Multivariate Tests are presented in Table 2.

Table 2 Multivariate Testsa

Effect Value F Hypothesis df Error df Sig.

Partial Eta

squared

Noncent. parameter

Observed powerd

Inte

rcep

t

Pillai’s Trace 0.989 3882.757b 3.000 134.000 0.000 0.989 11648.270 1.000

Wilks’ Lambda 0.011 3882.757b 3.000 134.000 0.000 0.989 11648.270 1.000

Hotelling’s Trace 86.927 3882.757b 3.000 134.000 0.000 0.989 11648.270 1.000

Roy’s Larg Root 86.927 3882.757b 3.000 134.000 0.000 0.989 11648.270 1.000

CIT

Pillai’s Trace 1.499 2.154 189.000 408.000 0.000 0.500 407.191 1.000

Wilks’ Lambda 0.105 2.386 189.000 402.722 0.000 0.528 450.599 1.000

Hotelling’s Trace 3.805 2.671 189.000 398.000 0.000 0.559 504.799 1.000

Roy’s Larg Root 2.502 5.401c 63.000 136.000 0.000 0.714 340.253 1.000

Note: * a. Design: Intercept + CIT, b. Exact statistic, c. The statistic is an upper bound on F that yields a lower bound on the significance level, d. Computed using alpha = 0.05Source: Authors


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As shown in Table 2, it is tested whether the Corpo-rate Image (CI) as perceived by students at an ob-served university has a significant impact on three dependent variables related to their Satisfaction (S), Loyalty (L) and Enrollment Intentions (EI). �e hy-pothesis of the research is that there will be a signif-icant multivariate main effect for all four research constructs. �e hypothesis is tested through the General Linear Model or Multivariate procedure in software SPSS. Using the matrix algebra, computa-tions are done with the aim to find the ratio of the variability of the Between-Groups sums of squares and cross-products matrix to that of the Within-Groups SSCP matrix. In the interpretation process of the MANOVA analysis, first it is important to look at the overall F test for all three unique dependent variables Satis-faction Total (coded ST), Loyalty Total (coded LTx) and Enrollment Intentions Total (coded PIT). What is most important to look at is the statistical value called Wilks’ Lambda (λ) and the F value connected with it. Lambda is actually an amount of the vari-ance percentage in the dependent variables that is not explained by differences in the level of the inde-pendent variable and it can vary between one and zero. It is desirable that Lambda be near zero, which means that there is almost no variance that cannot be explained by the Corporate Image (CI). In the case of the collected sample, the Wilks’ Lambda is 0.105 and has an associated F of 2.386, which is sta-tistically significant at p<0.001 level. In the next step of examination of given output, it is important to observe the Partial Eta Squared value associated with the main effect of the Corpo-

rate Image (CI), which has a value of 0.528, and the Observed Power to detect the main effect, which in case of the collected data is 1.000. Both of the above-mentioned computed parameters are at the statistically satisfactory level. Hence, it shows that the one-way MANOVA, which was done on the sample of students revealed a significant multivari-ate main effect for independent variable Corporate Image (CI) in which Wilks’ λ = 0.105, associated F (189, 402.722) = 2.386, p value <0.001, Partial Eta Squared = 0.528. �e Observed Power to detect the effect was 1.000, so consequently, this demonstrates that the Corpo-rate Image (CI) as perceived by students at an ob-served university has a significant impact on three dependent variables related to their Satisfaction (S), Loyalty (L) and Enrollment Intentions (EI). If the overall value of the F test is significant as in the case of our collected sample, then it is a common practice to go further and look at the individual de-pendent variables with a separate ANOVA test. However, the experiment-wise alpha protection provided by the overall or omnibus F test does not cover the univariate tests, so division of confidence levels by a number of tests is necessary. Conse-quently, since it is important to look at the value of F tests for the three dependent variables, includ-ing the students’ Satisfaction (S), Loyalty (L) and Enrollment Intentions (EI), it is required that p is less than 0.017 (0.05/3). �is particular statistical procedure ignores the fact that variables might be inter-correlated, so these separate ANOVAs do not take variables’ inter-correlations into account. �e output of analysis is shown in Table 3.

Table 3 Tests of between-subjects effect

Source Dependent variable

Type III Sum of squares df Mean

square F Sig. Partial Eta squared

Noncent. parameter

Observed powerd

Cor

rect

ed

mod

el

ST 53.511a 63 0.849 3.265 0.000 0.602 205.706 1.000

LTx 147.105b 63 2.335 4.685 0.000 0.685 295.149 1.000

PIT 186.618c 63 2.962 3.160 0.000 0.594 199.072 1.000

Inte

rcep

t ST 2244.888 1 2244.888 8629.780 0.000 0.984 8629.780 1.000

LTx 3507.125 1 3507.125 7036.630 0.000 0.981 7036.630 1.000

PIT 3266.436 1 3266.436 3484.415 0.000 0.962 3484.415 1.000

CIT

ST 53.511 63 0.849 3.265 0.000 0.602 205.706 1.000

LTx 147.105 63 2.335 4.685 0.000 0.685 295.149 1.000

PIT 186.618 63 2.962 3.160 0.000 0.594 199.072 1.000

Note: * a. R Squared = 0.602 (Adjusted R Squared = 0.418), b. R Squared = 0.685 (Adjusted R Squared = 0.538), c. R Squared = 0.594 (Adjusted R Squared = 0.406), d. Computed using alpha = 0.05Source: Authors

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Table 3 presents a segment of the output table, which represents a report of the ANOVA test on the three dependent variables students’ Satisfaction (S), Loyalty (L) and Enrollment Intentions (EI). As the table shows, the F values for all three dependent variables are statistically significant at our criterion of 0.017. Hence, this confirms that, given the sig-nificance of the overall test univariate main effects for the Corporate Image (CI), the following results were obtained for students’ Satisfaction (S): F (63, 136) = 3.265, p value < 0.001, Partial Eta Square = 0.602, Observed Power = 1.000, then for Loyalty (L), F (63, 136) = 4.685, p value < 0.001, Partial Eta Square = 0.685, Observed Power = 1.000 and for Enrollment Intentions (EI), F (63, 136) = 3.160, p value < 0.001, Partial Eta Square = 0.594, Observed Power = 1.000.

�us, according to the results of the analysis all three hypotheses are confirmed. �e university’s corporate image influences the students’ satisfac-tion (H1), loyalty (H2) and enrollment intentions (H3).

6. Discussion

Basically, the results of the MANOVA analysis show the significant correlation between the cor-porate image and satisfaction, explaining that the corporate image of the school influences satisfac-tion among its students. As the literature review shows, most of the empirical works which inves-tigated the mutuality between the concept of the corporate image and satisfaction found a positive influence. More precisely, the corporate image is an antecedent of the satisfaction construct. Azoury et al. (2013) research confirms the first hypothesis by claiming that both existing components of the cor-porate image, cognitive and affective, have crucial effects on the formation of satisfaction in students’ minds. Also, conclusions made by Azoury et al. (2013) confirm the positive influence of the service offering quality and recognition in the overall stu-dent satisfaction.

Strong effects of the corporate image on the satis-faction concept were demonstrated also by Palacio et al. (2002). �ese conclusions imply once more the positive influence and strong relationship between the corporate image and the satisfaction concept in the university environment. As a matter of fact, Alves and Raposo (2010) argue that the corporate image is one of the most important determinants

of satisfaction and loyalty, both contributing to in-creased and repeated enrollment intentions. With-out any doubt, as confirmed in this paper, the cor-porate image construct has a strong and remarkable influence on satisfaction, loyalty and enrollment in-tentions of students.

Similar findings, which were elaborated using the MANOVA method, are also confirmed by many authors in the literature. For example, Dib and Al-nazer (2013) found a strong relationship in higher education institutions between the corporate im-age and student satisfaction, loyalty and enrollment intentions. Observing the correlation among the corporate image and dependent variables, results from the paper imply a statistically significant in-fluence between the independent construct of the corporate image and each dependent construct, i.e. students’ satisfaction, loyalty and future enroll-ment intentions. It is important to bear in mind the importance of satisfied, loyal students and their repeated enrollment intentions at the same educa-tional institution. In addition to these conclusions, Alves and Raposo (2010) and Helgesen and Nesset (2007a) identified in a similar way the relationship between the corporate image and all three depend-ent variables, i.e. satisfaction, loyalty and enroll-ment intentions.

Schlesinger et al. (2015) confirm these positive re-lationships among the university image and satis-faction, loyalty and enrollment intentions, stating that the corporate image as an important construct will have an influence if students are satisfied and loyal to a particular university. �is is accomplished through keeping promises and translating them into practice. Students will then have a better un-derstanding due to the validity of the service qual-ity and the opportunities offered after graduation at the particular university.

�e corporate image, as the only independent vari-able in this research, has a positive influence on all three dependent variables, i.e. satisfaction, loyalty and enrollment intentions of students. Having in mind the importance of the corporate image con-struct, it is proven to be a strong antecedent for all three determinants whose positive effect is crucial for the survival of universities worldwide.

�ere are certain limitations of this research which could have to some extent a significant impact on the conclusion itself and its absolute acceptance by other researchers as well as practitioners in the


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field. One of the largest constraints of the collected data set is the sample size considering the number of students who answered the questionnaire. Al-though statistically significant for this paper, the total sample size (N=200) is enough to make con-clusions only for that specific university where the research was conducted. Further studies on the subject matter should increase the sample size in order to make more reliable conclusions and have at least two different universities as a control vari-able.

Another limitation is related to the type of data analysis used in this paper. Based on the sample and structure, the MANOVA method was used. �is particular statistical method was useful to pro-vide conclusions and confirm all three hypotheses defined at the beginning of the research. However, the SEM (Structural Equation Modeling) method could be added in future research because it would provide additional confirmation of the hypothesis, including more details about the intensity and di-rection of the relationship between the university’s corporate image and its students’ satisfaction, loy-alty and enrollment intentions.

�e third limitation concerns antecedents of the corporate image. �is paper did not take into con-

sideration all the possible effects that could lead to a positive corporate image. In this sense, further research should explore a wider range of potential antecedents. �at also includes not only applying quantitative techniques, but also the qualitative ap-proach as an appropriate basis for further quantita-tive research.

Nevertheless, there are several practical recom-mendations derived from this study that should be addressed by the universities’ management. Edu-cational institutions need to become well aware of how important image management is, as a process that needs to be aligned with the strategy and vi-sion of the institution. As a part of the management function, PR must be incorporated into the organi-zational structure of educational institutions, since it is one of the main tools for creating a positive corporate image. Although, the number of market-ing departments whose main task it is to commu-nicate and exchange information with stakeholders has increased, the PR function is more complex and needs to be strategically positioned and incorpo-rated in all decision-making processes of a higher educational institution.

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Nejla Manov

Alisa Mujkić

Melika Husić-Mehmedović

I :

S

Ovaj je rad fokusiran na prikupljanje informacija koje se odnose na važnost sveučilšnog imidža te njegovog utjecaja na zadovoljstvo, lojalnost i namjere upisa studenata. Posljedično, glavni je cilj ovoga rada istražiti utječe li korporativni imidž određene visokoškolske institucije na zadovoljstvo, lojalnost i namjere upisa kod studentske populacije. Rezultati MANOVA analize pokazuju korelaciju između korporativnog imidža i zadovoljstva studenata, upućujući na to da korporativni imidž ima utjecaj na studentsko zadovoljstvo. Bez ikakve sumnje, a što se potvrđuje i ovim istraživanjem, korporativni imidž ima jak i snažan utjecaj, ne samo na zadovoljstvo, već i na lojalnost i namjere upisa. Imajući u vidu značaj korporativnog imidža, dokazano je da je kao takav, zapravo snažan prediktor za sva tri zavisna konstrukta ovoga istraživanja, a to su: zadovolj-stvo, lojalnost i namjeru upisa te predstavlja temeljni elemenat za preživljavanje sveučilišta širom svijeta, što predstavlja glavni praktični doprinos ovoga rada.

Ključne riječi: korporativni imidž, zadovoljstvo, lojalnost, namjera upisa, visoko obrazovanje

217God. XXXIII, BR. 1/2020. str. 217-226

SMART SPECIALISATION CONCEPT AS A TOOL FOR IMPROVING INNOVATION PERFORMANCE OF THE EUROPEAN UNION MEMBER STATES

Review article

Received: September 12, 2019Accepted for publishing: November 14, 2019

Vlatka BilasUniversity of ZagrebFaculty of Economics and BusinessTrg J. F. Kennedya 6,10000 Zagreb, [email protected]: +38512383114

A

Globalisation brings significant challenges to economies worldwide. Smart specialisation is one of the tools that helps countries improve their innovation potential, thus improving their economic performance and competitiveness. Smart specialisation involves identifying a country’s competitive advantages in order to develop targeted strategies aimed at enhancing its competitiveness. �e main objective of the paper is to identify innovation and smart specialisation challenges the European Union economies are facing. �e pa-per aims to provide an overview of current innovation performance of the European Union Member States, as well as their smart specialisation strategies, focusing on their chosen thematic priority areas. In doing so, the contribution of the paper is twofold. First, it gives an overview of the main features of smart specialisa-tion concept. Second, it provides an overview of innovation performance of the European Union Member States and their smart specialisation strategies.

Keywords: Smart specialisation, strategy, innovation, European Union

Vlatka Bilas: Smart specialisation concept as a tool for improving innovation performance of the European Union member countries



CC BY-ND












5 od 6 26. 06. 2017. 12:24

1. Introduction

Innovations are considered to be a source of com-parative and competitive advantages of both coun-tries and companies (Bilas et al., 2016). Many regional governments invest in certain areas of science, technology and innovation without taking into consideration the particular features of their region (Arranguren, Wilson, 2013). Smart speciali-sation involves fostering innovative and entrepre-neurial initiatives which are well tailored to the lo-cal context (McCann et al., 2017).

Smart specialisation strategy is defined by the EU Regulation (2013)1 as “national or regional innova-

tion strategies which set priorities in order to build competitive advantage by developing and matching research and innovation own strengths to business needs in order to address emerging opportunities and market developments in a coherent manner, while avoiding duplication and fragmentation of ef-forts”. �e idea or concept of smart specialisation is based on classical economic theories of growth and trade specialisation. It was proposed in 2008, and quickly became a very important policy factor, espe-cially in the place of its origin, the European Union. It is important to stress that the smart specialisa-tion process, as one of the main features, includes entrepreneurial discovery process that identifies


218 God. XXXIII, BR. 1/2020. str. 217-226

priority areas or what a country or region does best in terms of research, development and innovation (Foray et al., 2011). �e smart specialisation approach was developed as an answer to the deepening research and develop-ment (R&D) gap between the European Union and its trading partners (Camagni and Capello, 2013). �e main issues identified in the European Union countries were smaller share of high-tech R&D-intensive sectors and spatial dispersion of the R&D activities. Camagni and Capello (2013) stressed that this spatial dispersion resulted in insufficient critical mass, investment duplications, inefficient resource allocation, weak learning processes, etc. Smart specialisation has a strong regional dimen-sion because regions are increasingly important as sources of innovation activities, especially when the impacts of agglomerations are taken into account (Foray and Goenaga, 2013). Hence, regions can-not do everything; they need to focus on develop-ing distinctive and original areas of specialisation (Foray, 2012)2. Smart specialisation is a process of identifying and selecting desirable areas for inter-vention where a cluster of activities should be de-veloped. �is implies that opportunities and areas of specialisations should be discovered by entrepre-neurs (Foray, 2012). Smart specialisation must not be associated with a strategy of the simple indus-trial specialisation of a particular region, but rather with R&D and innovation. It focuses on all regions, no matter their strength and performance (Foray et al., 2011).Recently, the effectiveness of smart specialisation has been globally recognised, which is evident from the fact that many other countries around the world have followed the example of the European Union

in terms of implementing smart specialisation (Bi-las et al., 2018). �e main objective of the paper is to identify inno-vation and smart specialisation challenges the EU economies are facing. �e paper aims to provide an overview of current innovation performance of the European Union Member States, as well as their smart specialisation strategies, focusing on their chosen thematic priority areas.�e paper has been divided into five parts. It begins with the introduction, which is followed by the re-view of literature on smart specialisation concepts and strategies. �e third section is concerned with the methodology used for this study, while the fourth gives an overview of the innovation perfor-mance and smart specialisation strategies of EU countries. Finally, the fifth section is the conclusion.

2. Smart specialisation concept - literature review

Given that smart specialisation is a rather new con-cept, the literature on the specific features of this approach is fairly scarce. �e evaluation of the con-cept, i.e. of ongoing smart specialisation strategies is still not possible. According to Foray et al. (2018)3 “innovation-relat-ed policies seek to enhance knowledge generation, absorption and diffusion in the economy (and soci-ety) so as to support an innovation-driven economy and to solve major societal problems”. Radosevic and Stancova (2018) characterise smart specialisa-tion as the largest innovation policy experiment. According to Gianelle et al. (2019)4, smart speciali-sation is a place-based and experimentalist policy. �e rationale of smart specialisation is shown in Table 1.

Table 1 �e rationale of smart specialisation

What? Concentrating knowledge resources for economic specialisation and linking them to a limited number of priority economic activities - competitiveness in the global economy

Why? Regional innovation policies have often demonstrated a lack of efficiency in identifying priorities and forms of practical cooperation

Who? Entrepreneurs discover what a country or region does best in terms of research, development and innovation

How? Regional change through modernisation, diversification and/or transition from an existing sector to a correlated field

Where? Smart specialisation concept can be used in all regions, even though some are more advanced in terms of knowledge production

Source: Foray et al. (2012), pp. 11-165

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Smart specialisation requires setting vertical priori-ties and is distinctively selective. �e main feature of smart specialisation is the definition of the limited set of priority areas for public investment which can best provide opportunities for growth and respond to social and economic challenges (Gianelle et al., 2019). According to Haegeman et al. (2019)6, a key feature of smart specialisation is a clear thematic fo-cus on research and innovation, through the selec-tion of a limited number of priorities.

At a minimum, smart specialisation strategies should transform less advanced regions into good followers (Foray, 2012). Foray and Goenaga (2013) defined the main principles of smart specialisation as follows: granularity, entrepreneurial discovery, continuous possibility of change of thematic priori-ties, inclusiveness and experimental nature of the policy, and the need for evaluation. �e principle of granularity means that the level on which thematic priorities are identified should not be too high, be-cause otherwise smart specialisation would become a process of sectoral prioritisation. As for the sec-ond principle, i.e. the principle of entrepreneurial discovery, priorities are identified where and when opportunities are discovered by entrepreneurs. �ese choices are not so difficult since activities not currently selected still retain a chance of being sup-ported in the future, which is covered by the third principle. Inclusiveness means that every sector is considered and it implies that policy is implement-ed at different speeds in different sectors. Finally, because of its nature, this policy is experimental and not all investments in new activities will pay off. �erefore, Foray and Goenaga (2013) claim that evaluation is a central policy task.

Cooperation for smart specialisation involves a wide variety of stakeholders. �e involvement of the so-called quadruple helix of the academic world, public authorities, the business community, but also a range of innovation users and civil society is very important for the successful implementation of smart specialisation.

�e engagement of universities in smart specialisa-tion strategy (S3) is of high importance (Arregui-Pabollet et al., 2018)7. �is is especially the case in countries or regions with underdeveloped innova-tion systems. �e role of universities, which encom-passes education, research and innovation, makes these institutions one of the key stakeholders in any innovation system. �eir role and commitment to S3 directly influence the functioning of the innova-

tion system as well as the successful achievement of S3 objectives. Reforms of the higher education system in the EU countries seek to strengthen the collaboration between the business and academic sectors. Arregui-Pabollet et al. (2018) analysed 74 university governance systems across the European Union. �e main reason for performing this study was an assumption that effective governance of these institutions would facilitate their involvement in the S3 process implementation. One of their main conclusions is that embedding S3 coordination as-pects into HEI governance system could contribute to the successful implementation of S3 and facilitate access to EU funding.

Smart specialisation aims to boost regional and national innovation, contributing to growth and prosperity and enabling territories to focus on their competitive advantages (Gómez Prieto et al., 20198; Tolias, 20199). �e identification of thematic prior-ity areas and vertical measures are characteristics which represent the main difference between the smart specialisation concept and prior innovation strategies (Foray and Goenaga, 2013).

�e concept of smart specialisation was conceived in the European Union as part of the European cohesion policy (Gómez Prieto et al., 2019). �is “made in Europe” concept is slowly spreading be-yond EU borders to the rest of the world. Gómez Prieto et al. (2019) see no obstacles to the successful implementation of S3 around the world. �eir main argument is that this concept proved to be effective in the territorial diversity of the EU and different socio-economic contexts. Smart specialisation can contribute to building regional innovation ecosys-tems around the world.

Smart specialisation is an innovative policy ap-proach. It combines industry and innovation policy. �e key characteristics of this approach are (Gómez Prieto et al., 2019): territorial dimension, bottom-up approach fostered via quadruple helix, entrepre-neurial discovery process and flexibility which al-lows modifications and improvements throughout the intervention process. Smart specialisation aims to develop competitive advantages by the conjuga-tion of the economic, innovative and scientific po-tential of a territory, and to address societal chal-lenges (Gómez Prieto et al., 2019).

Smart specialisation methodology consists of six steps (Sörvik, 201210; Gómez Prieto et al., 2019): (1) the analysis of the potential for innovation through


220 God. XXXIII, BR. 1/2020. str. 217-226

an entrepreneurial discovery process, (2) the estab-lishment of the governance system, (3) the design of a strategic territorial vision, (4) the identification of selected priorities, (5) the definition of a policy mix and implementation mechanisms, and (6) the es-tablishment of monitoring and evaluation system.

�ere are strong theoretical arguments that the quality of institutions has a key role in explaining the innovative performance at the regional level (Marinelli et al., 2019)11. Marinelli et al. (2019) maintain that regions and Member States should identify competent institutions for the governance of the smart specialisation strategy.

Tolias (2019) points out the big differences between smart specialisation strategy evaluations in the pro-gramming periods 2014-2020 and 2021-2027. In the first programming period there was no need for regulatory compliance and S3 evaluation (and monitoring), while these represent one of the ex-plicit criteria for the 2021-2027 period. No regula-tory compliance resulted in different reactions from territories. Some of them complemented S3 moni-toring and evaluation, some of them did nothing. However, for the new programming period, there is a regulatory need for S3 evaluation, but territories can decide by themselves how to plan, execute and use S3 evaluation results, especially in relation to the Operational Programmes.

Larrea et al. (2019)12 identified four pillars for the construction of multilevel governance of S3: (1) complexity, (2) emergence, (3) context specificity and (4) reciprocity. Complexity is not related only to the number of actors. Multilevel governance is complex because different government levels have different perspectives on S3 issues. Emergence re-lates to the fact that it is impossible for policy mak-ers to know what the expected outcome of their S3 would be, as a result of the learning and negotia-tion processes. �e third pillar, context specificity, means that S3 strategies as well as their multilevel governance arrangements have to be tailored to the specific context of each territory. �e fourth pillar stresses that mutual recognition among different governments, according to attributed roles, is a sig-nificant factor in the successful S3 processes.

Gianelle et al. (2019) analysed to what extent the principles of smart specialisation are actually trans-lated into policy implementation. �e main con-clusion of this study is that regions and countries use the selective approach of smart specialisation

and that only partial transition occurred from prior industrial policy to the smart specialisation ap-proach. Main divergences are broadly defined pri-ority areas, loose alignment of policy instruments with priorities, and scarce customisation of policy measures to the specific innovation needs. Ganielle et al. (2019) believe that one of the possible reasons is that incentive structure at the European Union level does not fully support the intervention logic of smart specialisation, and advise that this structure should be revised for the next programming period. Other possible reasons are lobbying activities, high-er political return from widespread public support measures, etc.

It is considered that smart specialisation partner-ships will foster a strategic approach to innovation and encourage cooperation between authorities, companies and industry at the regional level (Euro-pean Commission, 2019).

3. Methodology

Many tenets of smart specialisation have not yet been confirmed by empirical work and there is a gap between policy practice and theory. �e paper gives an overview of existing data and literature in the field of smart specialisation. Although it is a rather new concept, it has already been implement-ed in the current European Union programming period (2014-2020). Due to data scarcity and imple-mentation time period, it is still not possible to con-duct quantitative analysis or ex post evaluations. �e paper aims to contribute to existing knowledge through descriptive research and systematic collec-tion, interpretation and evaluation of existing data, studies, processes, trends and developments.

4. Overview and discussion

�e Global Innovation Index13 ranks the innovation performance of nearly 130 economies around the world (Cornell University et al., 2019)14. According to the rankings for 2019, the top five global innova-tion leaders were: (1) Switzerland, (2) Sweden, (3) the United States of America, (4) the Netherlands and (5) the United Kingdom. �is means that four European countries, of which three were members of the European Union, positioned among the five best-ranked innovation economies. �ree more EU countries ranked among the top ten (Finland, Den-mark and Germany), and another three (France,

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Ireland and Luxembourg) ranked between the 10th and 20th place. Seven more EU countries (Austria, Belgium, Cyprus, Czech Republic, Estonia, Malta and Spain) positioned between the 20th and the 30th place. Between the 30th and 40th place, there were eight EU members (Hungary, Italy, Latvia, Lithua-nia, Poland, Portugal, Slovakia and Slovenia), while three more (Bulgaria, Croatia and Greece) posi-tioned between the 40th and 50th place. Romania was

the lowest-ranking EU country, occupying the 50th place. In conclusion, the European Union countries were rather heterogeneous in terms of their innova-tion performance. �e average ranking of the Euro-pean Union as a whole did not change from 2013 to 2019, positioning around the 25th place. Table 2 shows the Global Innovation Index rankings of the EU countries for the period 2013-2019.

Table 2 Global Innovation Index rankings of the European Union countries 2013-2019

Country 2013 2014 2015 2016 2017 2018 2019

Austria 23 20 18 20 20 21 21

Belgium 21 23 25 23 27 25 23

Bulgaria 41 44 39 38 36 37 40

Croatia 37 42 40 47 41 41 44

Cyprus 27 30 34 31 30 29 28

Czech Republic 28 26 24 27 24 27 26

Denmark 9 8 10 8 6 8 7

Estonia 25 24 23 24 25 28 24

Finland 6 4 6 5 8 7 6

France 20 22 21 18 15 16 16

Germany 15 13 12 10 9 9 9

Greece 55 50 45 40 44 42 41

Hungary 31 35 35 33 39 33 33

Ireland 10 11 8 7 10 10 12

Italy 29 31 31 29 29 31 30

Latvia 33 34 33 34 33 34 34

Lithuania 40 39 38 36 40 40 38

Luxembourg 12 9 9 12 12 15 18

Malta 24 25 26 26 26 26 27

Netherlands 4 5 4 9 3 2 4

Poland 49 45 46 39 38 39 39

Portugal 34 32 30 30 31 32 32

Romania 48 55 54 48 42 49 50

Slovakia 36 37 36 37 34 36 37

Slovenia 30 28 28 32 32 30 31

Spain 26 27 27 28 28 28 29

Sweden 2 3 3 2 2 3 2

United Kingdom 3 2 2 3 5 4 5

Source: Global Innovation Index (2019); author’s compilation


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It is of note that in the group of upper-middle in-come countries, the top five global innovation lead-ers were: (1) China, (2) Malaysia, (3) Bulgaria, (4) �ailand, and (5) Montenegro (Cornell University et al., 2019). Of the two European countries in this group, one is a member of the European Union (Bulgaria), and the other is a candidate for future membership (Montenegro). China improved its ranking in the Global Innova-tion Index considerably, moving up from the 35th place it occupied in 2013 to the 14th place in 2019.According to the European Innovation Scoreboard for 2019, in terms of innovation performance, the European Union continues to lag behind South Ko-rea, Canada, Australia and Japan, but it has over-taken the United States. �e EU countries are di-vided into four groups based on their performance. Innovation leaders’ performance is well above the European Union average, while the performance of strong innovators is above or close to the EU aver-age. Moderate innovators’ performance is below the EU average, and modest innovators’ performance is well below the EU average (Table 3).

Table 3 Performance of the European Union Member States’ innovation systems according to the European Innovation Scoreboard 2019

Performance group Country

Innovation leaders

Denmark, Finland, the Netherlands, Sweden

Strong innovators

Austria, Belgium, Estonia, France, Germany, Ireland, Luxembourg, the United Kingdom

Moderate innovators

Croatia, Cyprus, the Czech Republic, Greece, Hungary, Italy, Latvia, Lithuania, Malta, Poland, Portugal, Slovakia, Slovenia, Spain

Modest innovators Bulgaria and Romania

Source: European Commission (2019)15

Compared to 2018, Estonia is the only country that improved its performance and moved from the group of moderate innovators to the group of strong innovators. A few countries dropped in their rankings. Specifically, Luxembourg and the United Kingdom dropped from the group of innovation leaders to the group of strong innovators, while Slo-venia dropped from the group of strong innovators to the group of moderate innovators. According to the Global Competitiveness Index 4.0, Germany is the best-positioned European Un-

ion country, ranking third in the world (Bilas et al., 2018). �ere are obvious disparities among the European Union Member States, and the gap has not been narrowing (European Commission, 2018d)16. It is likely that today’s increasing inequality is the result of insufficient uptake of technological innovations and their wide diffusion (European Commission, 2018d).�ere are 19 European Union countries and 180 regions registered on the Smart Specialisation Platform (Smart Specialisation Platform, 2019)17. According to the available data from the Platform, there are around 120 smart specialisation strate-gies developed in the European Union by Member States and regions (Gómez Prieto et al., 2019). Since many regions already have experience with innova-tion strategies, it was a good basis for the develop-ment of smart specialisation strategies (Foray et al., 2012). According to the level of adoption of these strategies, the EU countries can be divided into three groups: (1) countries which have adopted only national smart specialisation strategies, (2) countries which have adopted only regional smart specialisation strategies and (3) countries which have adopted both national and regional smart spe-cialisation strategies (Polverari, 2016).�e most frequent S3 priority areas identified in the European Union countries are agri-food, key ena-bling technologies (KETs), health, energy and digi-tal growth (Table 4).

Table 4 S3 priority areas in the European Union countries included in the Smart Specialisation Platform on national and regional levels

Priority area Total %

Agri-food related 272 22

KETs related 267 21

Health related 192 15

Energy related 178 14

Digital agenda related 144 11

Environment related 59 5

Creative /cultural related 48 4

Transport and logistics 38 3

Social innovation, organisational models, others 25 2

Source: Gnamus (2017: 15)18

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223God. XXXIII, BR. 1/2020. str. 217-226

Gnamus (2017) identified the overlaps in S3 related priority areas. �e most common ones were found in KETs and energy; KETs and agri-food; agri-food and health; digital agenda and energy, and digital agenda and health. In total, in the five most fre-quent thematic priority areas, Gnamus (2017) iden-tified 128 overlaps.

Haegeman et al. (2019) analysed collaboration be-tween joint undertakings and national and regional European Structural and Investment Funds manag-ing authorities. �ey define joint undertakings (JU) as a form of public-private partnership set up in strategic European Union research and innovation areas. It is of note that in their report the authors stressed the possibility of synergies between Struc-tural and Investment Funds and other EU funding programmes. �e synergies are clearly encouraged in the proposal of the European Commission for the next Multi-annual Financial Framework 2021-2027, which is yet to be approved by the European Parliament and the Council. For instance, should they choose to do so, EU Member States would be able to transfer 5% of ESI funds to any other EU in-strument to fund a project. �is opens the possibil-ity for some countries and regions to benefit from closer collaboration with JU, as well as for other types of partnerships, and for the integration of in-dustry in the S3 process (Haegeman et al., 2019).

Recent industrial policies assume active govern-ment role in facilitating innovations (Benner, 2019). For the past three decades, the EU has experiment-ed with some new approaches to industrial policy, of which Horizon 2020 and smart specialisation represent two major policy frameworks (Benner, 2019).

It can be stated that research and innovation strate-gies for smart specialisation have been a useful tool in developing innovation ecosystems in the Europe-an Union countries (European University Associa-tion, 2018). According to the European University Association (2018)19, key success factors of these strategies are: investing in human talent and skills, enhancing the strategic involvement of universi-ties, promoting the engagement of all EU regions, strengthening collaboration, and reinforcing multi-level governance.

�ere is a consensus about the main reasons why innovators find it hard to start up and scale up their businesses in the European Union. Most of these reasons include: universities that lack expertise,

adverse attitudes to entrepreneurship, underdevel-oped venture capital markets, the incomplete single market, access to adequate human capital, and reg-ulatory barriers (European Commission, 2018a)20.

�e promotion of innovation should play a key role in delivering on all the European Union policy pri-orities. �e European Union countries and regions focus on their strengths in research and innovation by establishing a strategy for smart specialisation, which is a condition to receive Structural Funds support via the European Regional Development Fund (European Commission, 2017)21.

�e EU countries should invest smartly and sus-tainably in R&D and innovation at national level, focusing investments on building human capital and infrastructures for R&D and innovation and prioritising those areas where they are strongest (European Commission, 2017).

European Commission (2018b)22 announced that the next long-term European Union budget 2021-2027 will be focused on key investment priorities: innovation, support to small businesses, digital technologies and industrial modernisation, low-carbon, circular economy, and the fight against cli-mate change. For this period, the European Com-mission is proposing a budget of €100 billion for research and innovation (European Commission, 2018c)23.

5. Conclusion

Smart specialisation concept, although rather new, has become an integral part of research & develop-ment and innovation policies in all countries of the European Union, where it originated. However, this concept is becoming increasingly important out-side the borders of the EU. Innovations are recog-nised in this regional economic integration as one of the main sources of economic growth and de-velopment, i.e., a source of competitive advantage which European Union seeks to maintain in an in-creasingly competitive world.

Innovation performance strongly varies between European Union Member States as does the speed of implementation of the concept of smart spe-cialisation into relevant policies. Consequently, the speed of implementation of smart specialisation strategies varies too. Due to data scarcity, it is still not possible to compare the results of policy actions taken thus far or still ongoing in the EU countries.


224 God. XXXIII, BR. 1/2020. str. 217-226

However, so far, it can be concluded that most of the regions/countries of the European Union have identified similar S3 priority areas to focus on (ag-ri-food, key enabling technologies, health, energy, digital agenda, etc.). One of the key factors which will contribute largely to the achievement of the desired results of the implementation of smart spe-cialisation strategies is the ability of key stakehold-ers (quadruple helix) to collaborate in all phases of smart specialisation, from identifying the priority areas to implementing policy actions.

�e limitations of this paper lie in the fact that it does not present concrete data and analysis, as it is too early to conduct any evaluation of ongoing policy actions. In terms of future research, it would be interesting to gather data and compare policy ac-tions and performance of the EU Member States in order to identify best practices and thus contribute to smart development policies.

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225God. XXXIII, BR. 1/2020. str. 217-226

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1. Arranguren, M. J., Wilson, J. R. (2013), “What can experience with clusters teach us about fostering regional smart specialisation?”, Ekonomiaz, Vol. 83, No. 2, pp. 126-145.

2. Benner, M. (2019), “Industrial Policy in the EU and Its Neighbourhood: Learning from Policy Experi-mentation”, Economies, Vol. 7, No. 2, pp. 1-22.

3. Bilas, V., Bošnjak, M., Novak, I. (2018), “Konkurentnost zemalja članica Europske unije”, Tranzicija/Transition Časopis za ekonomiju i politiku tranzicije / Journal of economics and politics of Transition, Vol. 20, No. 42, pp. 1-12.

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5. Bilas, V., Radoš, T., Franc, S. (2016). Europska unija: ujedinjena u raznolikosti? Zagreb: Notitia d.o.o. 6. Camagni, R., Capello, R. (2013), “Regional Innovation Patterns and the EU Regional Policy Reform:

Toward Smart Innovation Policies”, Growth and Change, Vol. 44, No. 2, pp. 355-389.7. Foray, D., David, P. A., Hall, B. H. (2011), “Smart specialisation: From academic idea to political instru-

ment, the surprising career of a concept and the difficulties involved in its implementation”, MTEI Working Paper, Management of Technology & Entrepreneurship Institute, Lausanne, November 2011.

8. Foray, D., Goenaga, X. (2013), “�e Goals of Smart Specialisation”, S3 Policy Brief Series No. 01/2013, European Commission, Joint Research Centre.

9. McCann, P., van Oort, F., Goddard, J. (Eds.) (2017). �e Empirical and Institutional Dimensions of Smart Specialisation. New York, Oxon: Routledge.

10. Polverari, L. (2016), “�e implementation of Smart Specialisation Strategies in 2014-20 ESIF pro-grammes: turning intelligence into performance”, IQ-Net �ematic Paper 39(2), European Policies Research Centre, Glasgow, December 2016.

11. Radosevic, S., Stancova, K. C. (2018), “Internationalising Smart Specialisation: Assessment and Issues in the Case of EU New Member States”, Journal of the Knowledge Economy, Vol. 9, No. a, pp. 263-293.

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1 Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32013R1303&from=hr (Accessed on: August 16, 2019)

2 Foray, D. (2012), “Smart Specialisation: the Concept”, available at: http://opcompetitiveness.bg/images/module6/files/26/99_Fo-ray_Sofia.pdf (Accessed on: August 13, 2019)

3 Foray, D., Morgan, K., Radosevic, S. (2018), “The Role of Smart Specialisation in the EU Research & Innovation Policy Landscape”, European Commission.

4 Gianelle, C., Guzzo, F., Mieszkowski, K. (2019), “Smart specialisation from concept to practice: A preliminary assessment. Smart Specialisation”, JRC Policy Insights, European Commission.

5 Foray, D., Goddard, J., Goenaga Beldarrain, X., Landabaso, M., McCann, P., Morgan, K., Nauwelaers, C., Ortega-Argilés, R. (2012), “Guide to Research and Innovation Strategies for Smart Specialisation (RIS 3)”, Publications Office of the European Union, Luxem-bourg.

6 Haegeman, K., Arregui, E., Harrap, N., Horbaczewska, K., Torrecillas, C., Valero, S. (2019), “Joint Undertakings: analysis of collabora-tion mechanisms with ESI Funds in an S3 context”, Technical report by the Joint Research Centre, Publications Office of the European Union, Luxembourg.

7 Arregui-Pabollet, E., Doussineau, M., Dettenhofer, M. (2018), “An analytical framework to assess the governance of universities and their involvement in Smart Specialisation Strategies”, Technical report by the Joint Research Centre, Publications Office of the European Union, Luxembourg.

8 Gómez Prieto, J., Demblans, A., Palazuelos Martinez, M. (2019), “Smart Specialisation in the world, an EU policy approach helping to discover innovation globally”, Policy report by the Joint Research Centre, Publications Office of the European Union, Luxembourg.

9 Tolias, Y. (2019), “Position Paper on S3 Evaluation”, Report by the Joint Research Centre, Publications Office of the European Union, Luxembourg.


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10 Sörvik, J. (2012), “RIS3 Guide: How to develop Smart Specialisation strategies in 6 steps”, available at: https://s3platform.jrc.ec.europa.eu/documents/20182/120657/RIS3_Strasbourg+_+JensS%C3%B6rvik.pdf/416bdc79-eec3-41f7-b84a-52319fd8d749 (Acce-ssed on: August 15, 2019)

11 Marinelli, E., Bertamino, F., Fernandez, A. (2019), “Layers, levels and coordination challenges: comparing S3 governance in Puglia and Extremadura”, Technical report by the Joint Research Centre, Publications Office of the European Union, Luxembourg.

12 Larrea, M., Estensoro, M., Pertoldi, M. (2019), “Multilevel governance for Smart Specialisation: basic pillars for its construction”, Technical report by the Joint Research Centre, Publications Office of the European Union, Luxembourg.

13 Global Innovation Index (2019), available at: https://www.globalinnovationindex.org/analysis-economy (Accessed on: August 11, 2019)

14 Cornell University, INSEAD, WIPO (2019), “The Global Innovation Index 2019: Creating Healthy Lives - The Future of Medical Innova-tion”, Ithaca, Fontainebleau and Geneva.

15 European Commission (2019), “European Innovation Scoreboard 2019”, European Union.

16 European Commission (2018d), “Re-finding Industry, Defining Innovation”, Report of the independent High-Level Group on industri-al technologies, European Union, Brussels.

17 European Commission (2019b), “Smart Specialisation Platform”, available at: https://s3platform.jrc.ec.europa.eu/home (Accessed on: August 13, 2019)

18 Gnamus, A. (2017), “Smart Specialisation: Thematic S3 Platforms (TSSP) and MacroRegional Strategies”, Joint Research Centre, available at: https://s3platform.jrc.ec.europa.eu/documents/20182/206164/S3P_A.Gnamus-Piran-3.17.pdf/97ca255d-5e7d-4930-99c5-bd51409ff6d4 (Accessed on: August 13, 2019)

19 European University Association (2018), “Coherent policies for Europe beyond 2020, Maximising the effectiveness of smart speciali-sation strategies for regional development”, European University Association.

20 European Commission (2018a), “Funding - Awareness - Scale - Talent (FAST), Europe is back: accelerating breakthrough innovation”, Full set of recommendations from the Independent High-Level Group of Innovators on establishing a European Innovation Council, European Union, Brussels.

21 European Commission (2017), “LAB – FAB – APP Investing in the European future we want”, Report of the independent High-Level Group on maximising the impact of EU Research & Innovation Programmes, European Union, Brussels.

22 European Commission (2018b), “EU budget: Regional Development and Cohesion Policy beyond 2020”, Strasbourg.

23 European Commission (2018c), “EU budget: Commission proposes most ambitious Research and Innovation programme yet”, Brussels.

Vlatka Bilas

K E

S

Globalizacija predstavlja znatne izazove za sve zemlje, a pametna specijalizacija jedan od alata za unapre-đenje inovacijskog potencijala zemalja što vodi poboljšanju ekonomske izvedbe i konkurentnosti. Pametna specijalizacija obuhvaća identificiranje i ciljano jačanje konkurentskih prednosti zemlje s ciljem poduzima-nja ciljanih strateških napora u svrhu poboljšanja konkurentnosti. Cilj rada je utvrditi izazove inoviranja i pametne specijalizacije s kojima se suočavaju zemlje članice Europske unije. Rad pruža pregled trenutne inovacijske izvedbe zemalja članica Europske unije, kao i njihovih strategija pametne specijalizacije, s po-sebnim naglaskom na odabrana tematska prioritetna područja. Slijedom navedenoga, doprinos rada ogleda se u dva ključna pravca. Prvo, u radu se daje pregled glavnih značajki koncepta pametne specijalizacije. Drugo, pruža se pregled inovacijske izvedbe zemalja članica Europske unije i njihovih strategija pametne specijalizacije.

Ključne riječi: pametna specijalizacija, strategija, inovacije, Europska unija

227God. XXXIII, BR. 1/2020. str. 227-241

CONSUMERS’ PERCEPTIONS OF ORGANIC FOOD PRODUCTS IN CROATIA

Review article

Received: April 24, 2019Accepted for publishing: December 11, 2019

Tina ŠugarInstitute of Agriculture and Tourism Department of Tourism Karla Huguesa 8,52440 Poreč, [email protected]: +385981855054

Kristina BrščićInstitute of Agriculture and Tourism Department of Tourism Karla Huguesa 8,52440 Poreč, [email protected]: +385994121813

A

In recent years, there has been an increasing interest in the development of organic farming, as people have started to rethink their eating habits. Consumers perceive organic products as conducive to good health and associate them with a healthy lifestyle. �e paper aims to study consumers’ perceptions of organic food products in Croatia. For the purpose of this research, a survey was conducted among visitors to the organic food fair in Pula and members of Solidarity Ecological Groups (SEGs) in Croatia (Pula, Rovinj, and Osijek). A total of 232 questionnaires were completed and returned. �e collected data were analysed with SPSS (22) software, and the results were presented using descriptive statistics, t-test, One-way ANOVA and Principal Component Analysis (PCA). �e results indicate that the typical organic food buyers are university-educated women aged 25 to 44 years. �e most frequently bought products include fresh fruit and vegetables, honey, cereal and cereal products, milk and dairy products and olive oil. Consumers have confidence in the certification of organic production and eco-labels. Moreover, the PCA results show that the most important factors that influence organic consumer purchase behaviour are confidence and quality. �e results of this study add to the understanding of consumers’ preferences with regard to organic food products and could be a useful aid in devising marketing strategies for such products.

Keywords: Consumers’ perceptions, organic food products, Croatia, Solidarity Ecological Groups (SEGs)

Tina Šugar, Kristina Brščić: Consumers’ perceptions of organic food products in Croatia



CC BY-ND












5 od 6 26. 06. 2017. 12:24

1. Introduction

In the last few years, the European Union countries have seen a significant increase in the organic land area (ha) and the number of organic producers. �e latest EU policies focus on the development of organ-ic farming as an activity that contributes to sustain-able development and considers natural resources, the environment, animal welfare, i.e. the entire eco-system. �e number of organic consumers and con-sumer demand for organically produced goods show growth because of the increased awareness of the health and environmental benefits of such products.

Organic production is defined as “a holistic pro-duction management system which promotes and

enhances agro-ecosystem health, including biodi-versity, biological cycles, and soil biological activ-ity. It emphasises the use of management practices in preference to the use of off-farm inputs, taking into account that regional conditions require lo-cally adapted systems. �is is accomplished by using, where possible, agronomic, biological, and mechanical methods, as opposed to using synthetic materials, to fulfil any specific function within the system.” (FAO/WHO Codex Alimentarius Com-mission, 19991).

In 2016, there were 57.8 million hectares of or-ganic agricultural land worldwide, which accounts for 1.2% of the total agricultural land, and 2.7 mil-


228 God. XXXIII, BR. 1/2020. str. 227-241

lion organic producers. �e value of the global organic market reached 89.7 billion US dollars (FiBL&IFOAM-Organics International, 20182). �e top three countries with the largest share of organic agricultural land were Australia, Argentina and Chi-na (FiBL&IFOAM-Organics International, 2018). In 2016, the EU-28 had a total area of 11.9 million hectares under organic agricultural production and 295,618 organic producers (Eurostat, 20163).

According to the data on the official website of the Ministry of Agriculture of the Republic of Croa-tia4, in 2007, 7,577 ha were under organic agricul-tural production, which accounts for 0.63% of the total agricultural area. Croatia has seen significant growth in organic farming over the years. Accord-ing to the latest available data (2016) 93,814 ha of land were under organic production, i.e. 6.07% of the total agricultural area. A total of 3,546 produc-ers were registered. In 2016, Croatia was among the top 10 countries with the highest relative growth of organic agricultural land which increased by 23.3% from the previous year and by 846.2% compared to 2007. �e retail sales of organic products in Croatia reached €99 million, according to the latest avail-able data for 2014 (FiBL&IFOAM-Organics Inter-national, 2018). Gugić et al. (2017) analysed the data on organic farming in Croatia over an eleven-year period (2005-2015) and found that the area under organic farming and the number of farms had in-creased. Given the growing importance of organic farming and environmental protection and an in-crease in the production and demand for organic products, the paper looks at the consumers’ percep-tions of organic food products in Croatia. A field study was conducted to explore consumer needs for such products. �e paper seeks to examine con-sumers’ habits of purchasing organic food prod-ucts, i.e. how often, where and which organic food products they purchase the most. In that context, the paper also explores whether consumers trust or-ganic producers, eco-labels and the organic control system in Croatia and attempts to determine their opinions about the quality of organic food in com-parison to conventional food. �e main purpose of the research was to gain a better understanding of consumer perceptions of organic food products. �e findings may help in developing new marketing strategies that would allow the producers to meet the demand and increase consumer satisfaction with their products.


The market for organic products

In recent years, consumers have become more aware of the benefits of organic production and organic products, and of the need to protect the environment for future generations. �erefore, the demand for organic products in the EU countries has increased. Nucifora (2001) concluded that the demand for organic fruit and vegetables is likely to remain relatively small unless the prices are re-duced, and an effort is made to increase consumers’ understanding of organic products and their cer-tification. Srinieng and �apa (2018), pointed out that the distribution of organic products should be improved in order to increase their availability to a larger number of consumers. Suppliers need to sat-isfy consumers’ wishes for product availability and faster delivery (Mozas-Moral et al., 2016).

In Croatia, Gugić et al. (2017) wrote about the state and perspectives for the development of organic farming in Croatia, concluding that the domestic market is not well organised and that it is necessary to increase investments in the market infrastructure and organic control. To produce their products and promote their placement on the market, organic farmers need to be aware of the consumers’ prefer-ences with regard to such products. Petljak (2010) emphasises that organic products represent a grow-ing product category in the offer of leading food re-tailers in Croatia; however, the majority of organic products is imported. Furthermore, consumers in Croatia face the reduced availability and insufficient supply of locally produced and sourced organic products. Petljak (2010) suggests that in order to enhance the development of the organic product market in Croatia, it is necessary to educate con-sumers, promote cooperation with domestic pro-ducers, expand the fresh fruit and vegetable offer, increase production volumes and lower the prices. Renko and Bošnjak (2009) pointed out that on the Croatian market, it is necessary to establish an um-brella organisation of organic producers to facilitate the placement of organic products on the market.

Consumer perceptions and attitudes towards organic food products

Several authors have explored consumer satisfac-tion with the supply of organic food products, and the motives and factors that influence the purchase

Review article

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of organic products (Brčić-Stipčević et al., 2010; Brčić-Stipčević, Petljak, 2011; Chiciudean et al., 2012; Kopić et al., 2008; Sharma et al., 2014; Zanoli, Naspetti, 2002). Paul and Rana (2012) investigated consumer satisfaction with the taste, quality, fresh-ness, availability, packaging, size, variety, informa-tion provided and delivery of organic products. �ey concluded that consumers were satisfied with or-ganic food for a variety of reasons. ‘Healthy content’, followed by ‘environmental safety’ were reported as the main reasons for purchase. Consumers tend to prefer organic food for intrinsic characteristics such as taste and quality (Chiciudean et al., 2012).

Several authors have used the �eory of Planned Behaviour to examine consumers’ attitudes, behav-iour, and intentions to purchase organic food (Ar-vola et al., 2008; Yadav, Pathak, 2016; Yazdanpanah, Forouzani, 2015; Zagata, 2012). Arvola et al. (2008) indicated that “many consumers experience organic food choice as the morally right thing to do” and confirmed the usefulness of moral norms in under-standing consumer intentions to buy organic food. Yadav and Pathak (2016) concluded that moral at-titude and health consciousness positively influence the consumer’s intention to purchase organic food. Koivisto Hursti and Magnusson (2003) found that organic foods were positively described by consum-ers and associated with “no concern, little reluctance and no risks, and they were seen as ‘healthy’, as ‘not used for profit only’, ‘serving a good purpose’, ‘nec-essary’, and most of the respondents felt that they are well aware of the consequences”. Based on pre-vious studies by various authors, and considering the trend in the literature that portrays sustainable consumption and purchase of organic food as a way for consumers to engage in socially desirable behav-iour, Ham et al. (2018) used the �eory of Planned Behaviour to examine and explain the discrepancy between the intention to purchase organic food and actual purchase behaviour in Croatia. �ey con-cluded that consumers are aware that the purchase of organic products is socially desirable but realise that this behaviour is not yet mainstream.

Consumer perceptions and attitudes towards or-ganic food products have been extensively studied over the last decade (Buder et al., 2014; Bryła, 2018; Hashem et al., 2018; Koivisto Hursti, Magnusson, 2003; Mehra, Ratna, 2014; Midmorea et al., 2011; Mukul et al., 2013; Paul, Rana, 2012; Peštek et al., 2018; Roitner-Schobesberger et al., 2008; Sangkum-chaliang, Huang, 2012; Shafie, Rennie, 2012; Xie et

al., 2015). Shafie and Rennie (2012) emphasized that “consumer perceptions of organic food are highly subjective”. Based on his empirical study conducted in Taiwan, Chen (2009) concluded that health and environmental concerns are the main determinants of a positive consumer attitude towards organic foods. ‘Health consciousness’ was also found to be a major contributor to the positive attitude to-wards organic foods. According to Ueasangkomsate and Santiteerakul (2016), consumers’ attitudes to-wards organic food are influenced by the follow-ing factors, ranked in order of importance: health concerns, local sourcing, environmental concerns, food safety and animal welfare. Lockie et al. (2002) found that the main motivating factors for purchas-ing organic food include, first and foremost health concerns, followed by natural content, price, and animal welfare. Mehra and Ratna (2014) identified the following as significant factors affecting con-sumer attitude towards organic food: perceptions towards organic food, health consciousness, prod-uct information, value for money, accessibility and trust A similar conclusion was made by Croatian authors Brčić-Stipčević et al. (2010) who found that the main motives for choosing organic products are health, environmental protection, animal welfare and support for local farmers. �e results of the study conducted by Sangkumchaliang and Huang (2012) also indicate that the main motives for pur-chasing organic food are health and environmen-tal benefits and support for local producers. �ese findings are consistent with the results of a number of other studies which indicated that health is the primary motivation for purchasing organic prod-ucts and that there is a need to regulate prices as a major factor in the purchase decision (Annunziata, Vecchio, 2016; Callieris et al., 2016; Ham, 2019; Paul, Rana, 2012; Srinieng, �apa, 2018; Xie et al., 2015; Yiridoe et al., 2005).

Several studies that analysed the differences in the demographic profile of consumers found that “or-ganic buyers tend to have a higher education level and disposable incomes, be families with children and be older than those who have not bought them” (Xie et al., 2015). Similarly, Roitner-Schobesberger et al. (2008) reported that “the respondents who have bought organic vegetables tend to be older, have a higher education level and a higher fam-ily income than those who have not bought them”. In terms of gender, women show preference and have a more favourable attitude towards the pur-


230 God. XXXIII, BR. 1/2020. str. 227-241

chase and consumption of organic food compared to men (Sivathanu, 2015; Ureña et al., 2008). Fur-thermore, the results of the study by Koivisto Hursti and Magnusson (2003) show that women are significantly more positive about organic food than men and perceive organic food as a healthier option (Mehra, Ratna, 2014). Mostafa (2007) con-cluded that the majority of green consumers are well-educated young adult women, who have more money to spend. Chiciudean et al. (2012) concluded that women are influenced by the fact that organic food is trendy, while men pay more attention to the brand. �e study by Ureña et al., (2008) found that men are inclined to pay a higher price for organic food compared to women. Fillion and Arazi (2002) concluded that the level of awareness of the benefits of organic food is high, especially among consumers living in urban areas.

A number of studies have examined consumer will-ingness to pay higher prices for organic products on different markets (Batte et al., 2007; Charatsari, Tzi-mitra-Kalagianni, 2007; Gil et al., 2000; Krystallis et al., 2006; Pellegrini, Farinello, 2009; Rödiger et al., 2016). �e results of several of these studies show that consumers with a higher level of education buy organic food more frequently (Brčić-Stipčević, Petljak, 2011; Lockie et al., 2002; Sivathanu, 2015) and are willing to pay a higher price for such prod-ucts (Charatsari, Tzimitra-Kalagianni 2007; Mehra, Ratna, 2014). Charatsari and Tzimitra-Kalagianni (2007) concluded that women are willing to pay more for organic vegetables, while Srinieng and �apa (2018) highlighted that women exhibit a higher level of awareness of the benefits associated with organic vegetables than men. �e results of re-search conducted in Romania indicated that most of the respondents are willing to pay 20% more for organic products than for conventional products; however, the price of organic products was reported to be the main limiting factor in the purchase deci-sion (Bozga, 2015). Charatsari and Tzimitra-Kalagi-anni (2007) concluded that consumers in Greece are willing to pay, on average, 27.53% more for organic vegetables than for conventional vegetables. Laheri and Arya (2015) reported that the primary barriers to organic product purchase are high prices and low availability. In the study by Lockie et al. (2002) the focus group suggested that the limiting factors for consumption of organic food are cost, availability, and convenience. Zagata (2012) found that consum-ers who had bought organic food in the past con-

sider high prices and the availability of organic food as only moderate obstacles to purchase.

Brčić-Stipčević and Petljak (2011) identified two main reasons why consumers do not buy organic food in Croatia: high prices and lack of information. �e results of this research show that consumers are not quite sure about the definition of organic food (Brčić-Stipčević, Petljak, 2011). Roitner-Schobes-berger et al. (2008) confirmed that the lack of in-formation on organic farming is a major limiting factor for purchasing organic products. �erefore it is essential to inform and raise awareness among consumers about organic production and certifica-tion. Furthermore, many researchers pointed to the need to continually raise understanding and aware-ness among consumers about the health benefits of organic products and advantages of organic farm-ing (Brčić-Stipčević, Petljak, 2011; Fotopoulos et al., 1999; Gil et al., 2000; Laheri, Arya, 2015; Srinieng, �apa, 2018).

3. Methodology

Field research

�e paper aims to investigate consumers’ percep-tions of organic food products in Croatia. Second-ary data were collected from the websites of the Ministry of Agriculture of the Republic of Croatia, Eurostat and IFOAM organisation. A survey was undertaken for the purpose of this empirical study. �e survey questionnaire focused on the following aspects of organic consumer behaviour: frequency of purchase, place of purchase, most frequently purchased products, willingness to pay for organic products and level of agreement with a number of statements about organic products. �e survey was carried out at an event called “Watch what you eat” which took place in Pula on 7 and 8 November 2015. �e respondents were visitors to the organic food fair. In total, 83 questionnaires were returned. To increase the sample size an online questionnaire created on Google forms was administered. �e link to the survey was sent to the members of Solidar-ity Ecological Groups (SEGs) in Istria County (Pula and Rovinj) and Osijek-Baranja County. �e survey was active from November 2015 until April 2016. �e respondents were asked to fill in the question-naire if they are active members of SEGs, i.e. if they buy organic food products. �is was done because some of the members joined SEGs just to show their support. In total, 149 online questionnaires

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were returned. �e respondents were instructed not to take the online survey if they have already filled in the questionnaire at the food fair. A total of 232 questionnaires were returned and analysed. A 5-point Likert scale (where 5 means strongly agrees and 1 means strongly disagrees) was used to assess the respondents’ level of agreement with specific statements on organic products. A 5-point Likert-type scale was used to rate the importance of several organic food attributes in their decision to purchase the product. �e data were analysed with SPSS (22) software and the results were presented using descriptive statistics, t-test, One-way ANO-VA and Principal Component Analysis (PCA).

Solidarity Ecological Groups

In the second phase, the survey examines the atti-tudes of Solidarity Ecological Group (SEG) mem-bers. �e following section of the paper explains what SEGs are. �e Community-supported agricul-ture (CSA) model was first introduced in Croatia only a few years ago. �us, few studies have investi-gated this topic in Croatia. Sarjanović (2014) wrote about the role of Community Supported Agricul-ture in the development of organic agriculture and concluded that the introduction of CSA in Croatia could have a positive impact on the economic de-velopment of rural areas and sustainable develop-ment of agriculture.

Solidarity Ecological Groups in Croatia have been modelled after similar groups in the world, such as GAS (Gruppi di Acquisto Solidale-) in Italy and AMAP (Association pour le Maintien de l’Agriculture Paysanne) in France, which support the development of small certified organic farms. Fonte (2013) wrote about GAS as an alternative system of food provision which enables consumers to purchase healthy products directly from the pro-ducer at affordable prices, respecting the environ-ment and the principle of solidarity. GAS members collectively plan the purchase and distribution of goods. �ey also discuss the production planning with producers and how to solve possible problems during all stages of production. GAS members in-sist on the just price, i.e. the price that is fair both for the consumer and the producer. �e goal is to make organic food sustainable, so it is essential that or-ganic products are accessible to everyone at afford-able prices (Fonte, 2013). As stated by Sarjanović (2014), the AMAP system is based on selling weekly

baskets of fruit and vegetables to consumers, and, commonly, consumers are involved in agricultural work. Furthermore, he emphasised that the most positive change brought by these groups is the im-provement of the relationship between producers and consumers.SEG in Croatia is an informal citizen’s initiative developed on the principle of solidarity and sus-tainability, which encourages the development of organic farming to generate enough organic food for all group members. �e goal of SEGs is to pro-mote a healthy lifestyle and raise awareness of the benefits of organic products for both health and the environment. �e principles of SEG work are soli-darity, mutual trust, cooperation, tolerance, trans-parency and protection of producers and consum-ers. �e first SEG was founded in Pula in 2013. It was followed by SEGs founded in Rovinj and Osijek in 2014 and SEGs in Novigrad and Vukovar, which were founded in 2016. Initially, they were called Solidarity Exchange Groups but in 2015 their name was changed to Solidarity Ecological Groups due to changes in their work practices. In 2018, they had about 300 registered members in Istria (Pula, Rovinj and Novigrad), about 250 members in Osi-jek and about 20 members in Vukovar. It is impor-tant to note that the frequency of purchasing organ-ic products differs among SEG members. �e main advantages for consumers are affordable prices of organic food, direct contact with producers and an informal agreement with producers about pro-duction planning, depending on which products consumers intend to buy. Members participate in the work and decision-making on a voluntary ba-sis. Consumers also have the option of ordering a weekly small or large basket of seasonal vegetables payable by monthly subscription. SEGs communi-cate through Google Groups where product orders and arrangements regarding the group’s actions are being made. �us, Solidarity Ecological Mar-kets have been established, which take place once a week in the cities where SEGs operate (Pula, Rovinj, Novigrad and Osijek). Products are sold exclusively by certified organic producers and include fresh fruit and vegetables, olive oil, cereals, honey, dairy products, lavender products and others. Siljan and Cerjak (2017) examined the satisfaction of produc-ers and consumers with the organic farmer’s mar-ket (SET) in Pula. �ey found that the main motive for visiting an eco-market was to purchase organic products directly from the producers, and that the consumers were very satisfied with the service pro-vided and the quality of organic products.


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4. Results

Socio-demographic characteristics of the respondents

�e socio-demographic characteristics of the re-spondents are presented in Table 1. Women ac-counted for a larger share of the sample (81.9%) than men (18.1%). Most of the respondents were aged 25 to 34 (42.7%), followed by respondents aged 35 to 44 (28%), making a total of 70.7% in the age group 25 -

44. In terms of their education, most of the respond-ents had a university degree (54.8%). �e majority (70.5%) had an average monthly household income of €669 to €2,004. �e average number of household members was 3 (N=228, mode=3, median=3). Ac-cording to the 2011 Census in Croatia, the average household had 2.8 members, and according to the Croatian Bureau of Statistics5, the average monthly salary in 2016 was €760 (5,685 HRK).

Table 1 Socio-demographic characteristics of the respondents

Variables N Share (%)

Gender (n = 232)

Female 190 81.9

Male 42 18.1

Age group (n = 232)

18 - 24 11 4.7

25 - 34 99 42.7

35 - 44 65 28.0

45 - 54 30 12.9

55 - 64 21 9.1

> 65 6 2.6

Level of education(n = 232)

Primary school 1 0.4

Secondary school 64 27.6

College degree 20 8.6

University degree 127 54.8

Master’s degree or PhD 20 8.6

Average monthly household income* (n = 227)

≤ €668 (≤ 5,000 HRK) 29 12.8

€669 - €1,336 (5,001 – 10,000 HRK) 96 42.3

€1,337 - €2,004 (10,001 - 15,000 HRK) 64 28.2

€2,005 - €2,672 (15,001 - 20,000 HRK) 26 11.5

€2,673 - €3,340 (20,001 - 25,000 HRK) 9 3.9

> €3,341 (> 25,000 HRK) 3 1.3

*InforEuro6, exchange rate 1 EUR = 7.48 HRK for July 2016 (rounded values), available at: http://ec.europa.eu/budget/contracts_grants/info_contracts/inforeuro/index_en.cfm (Accessed on: 10 May 2018) Source: Authors’ research

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�e results in Table 2 show the respondents’ organic food purchase behaviour. Most of the respondents purchase organic products once a week (40.1%) fol-lowed by those who buy them three times a week (21.1%) and once a month (16.8%). �ese results are not surprising as most respondents are SEG mem-bers and purchase organic products often. To an-swer the question which organic food products they purchase most frequently, the respondents could choose more than one answer. �e results show that consumers mostly purchase fresh fruit and vegetables (85.3%), honey (50%), cereals and cereal products (47%), milk and dairy products (37.5%) and olive oil (35.8%). Another question to which

the respondents could select more than one answer inquired about the place of purchase. �e majority (50.9%) reported purchasing organic products di-rectly from producers, followed by those who pur-chase them at the markets (44%) and in specialised stores (42.7%). It is important to emphasise that for this question an option ‘through Solidarity Ecologi-cal Groups’ was added in the online questionnaire because it targeted SEG members. Of a total of 149 online survey respondents 100 (67.1%) chose this answer. It is of note that not all SEG members fol-low SEG policy and opt for the default when order-ing organic fruit and vegetables online. Some buy them directly from the producer or at the markets.

Table 2 Organic food purchase behaviour

Variables N Share (%)

Purchase frequency (n=232)Every day 21 9.1Up to three times a week 49 21.1Once a week 93 40.1Up to three times a month 17 7.3Once a month 39 16.8Twice a year 9 3.9Once a year 4 1.7

Most frequently purchased organic food products * (n=232)Fresh fruit and vegetables 198 85.3Processed fruit and vegetable products 63 27.2Milk and dairy products 87 37.5Medicinal and aromatic herbs 44 19.0Honey 116 50.0Olive oil 83 35.8Cereals and cereal products 109 47.0Meat and meat products 22 9.5

Other (chicken eggs, nuts and seeds) 5 2.2

Places where the consumers most frequently purchase organic food products* (n=232)In specialised stores 99 42.7At the market 102 44.0Directly from the organic producers 118 50.9In supermarkets 28 12.1At organic fairs 85 36.6Online 21 9.1�rough Solidarity Ecological Groups** 100 67.1

* the possibility to choose several answers ** data collected from 149 members of SEG via an online questionnaire Source: Authors’ research


234 God. XXXIII, BR. 1/2020. str. 227-241

83.1% of the respondents consider that it is justi-fied for organic products to be more expensive than conventional products (n=231), and as many as 95.7% of them are willing to pay more for such products (n=232). When asked how much more they would be willing to pay for organic products, 211 respondents answered they are would be will-ing to pay 24% more. Using an independent t-test it was found there is no significant difference between male and female respondents in terms of the frequency of purchase (t (230) = - 0.320, p = 0.749) and willingness to pay more for organic products (t (230) = - 0.997, p = 0.320). �ese results were anticipated given that the respondents were surveyed at the organic food fair, and most of them were also active members of SEGs. One-way ANOVA showed no significant dif-ferences among the respondents in terms of their answers to questions as to the frequency of pur-chasing organic products, whether it is justifiable

for organic products to be more expensive, willing-ness to pay more for organic than for conventional products and other socio-demographic characteris-tics (age, education and income). To learn more about their perceptions of organic products, the respondents were asked to indicate their level of agreement with several statements on a scale of 1-5, 1 being strongly disagree and 5 being strongly agree. �e results show (Table 3) that the respondents neither agree nor disagree with the statements “Organic products are too expensive” and “Generally, the supply of organic products is poor”. �ey tend to disagree with the statements “I do not trust organic producers”, “I do not trust eco-labels” and “I do not have con-fidence in the organic farming control system”. Given that the majority of respondents were SEG members, it is not surprising that they reported trusting organic producers, eco-labels and the or-ganic farming control system.

Table 3 Consumers’ perceptions of organic food products

Statements (n=229) Average SD

Organic products are too expensive. 3.04 1.24

Generally, the supply of organic products is poor. 2.57 1.27

I do not have confidence in the organic farming control system. 2.46 1.22

I do not trust eco-labels. 2.14 1.13

I do not trust organic producers. 2.12 1.11

Source: Authors’ research

Table 4 shows consumers’ perceptions of the im-portance of specific attributes of organic food products. �e respondents were asked to rate the importance of several statements on a 5-point Likert-type scale (1 - not important, 5 - very im-portant) in their purchase decision. �e respond-ents find that high quality of products is impor-

tant no matter what their price is (average=4.02). Furthermore, they are of the opinion that organic products must have an eco-label (average=3.89) and should be locally produced and sourced (aver-age=3.86). It is not particularly important to them for the product to have attractive packaging (aver-age=1.95).

Table 4 Consumers’ perceptions of the importance of specific attributes of organic food products

Statements (n=228) Average SD

It is important that organic products are of high quality no matter what their price is. 4.02 0.98

Organic products must have an eco-label. 3.89 1.19

It is important that organic products are locally produced and sourced. 3.86 1.10

Organic products must have attractive packaging. 1.95 1.15


To determine their perceptions of quality attrib-utes of organic food products, the respondents were asked to indicate their level of agreement

with several statements on a 5-point Likert scale (1 - strongly disagree, 5 - strongly agree). �e re-sults in Table 5 show that the respondents consider

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organic products to be of higher quality compared to conventional products. Specifically, respondents strongly agree that organic products are healthier

(average=4.67) and of higher quality (average=4.63). �ey also believe that they have greater nutritional value (average=4.58) than conventional products.

Table 5 Consumers’ perceptions of quality attributes of organic food products

Statements (n=230) average SD

Organic products are healthier than conventional ones. 4.67 0.66

Organic products are of higher quality than conventional ones. 4.63 0.73

Organic products have greater nutritional value than conventional ones. 4.58 0.87

Organic products taste better than conventional ones. 4.42 0.88

Organic products are fresher than conventional ones. 4.07 1.11


To gain a deeper insight into the consumers’ percep-tions of organic food products, a Principal Compo-nent Analysis was conducted on a set of 14 variables. �e following variables were not used in the PCA: “Organic products are too expensive”; “Generally, the supply of organic products is poor”; “It is im-portant that organic products are locally sourced”; and “It is important that organic products are of high quality no matter what their price is”. �us, ten variables were included in the analysis and three principal components were obtained. However, the Cronbach alpha for the second component was too low (0.469) which led to the conclusion that the vari-

ables do not explain this component very well and the statements “Organic products must have an eco-label” and “Organic products must have attractive packaging” were removed from the final analysis. �us, eight variables were analysed in the final anal-ysis and two principal components were obtained. Two components had eigenvalues greater than 1, ex-plaining 67.68% of the total variance (KMO = 0.773, Bartlett’s Test χ2 sig. 0.000). �e PCA was conduct-ed to identify the main factors that influence con-sumer perceptions of organic food products. �e data obtained may be used in future research as the basis for developing a predictive model.

Table 6 Principal Component Analysis (PCA) results, Consumers’ perceptions of organic food products

StatementPattern Matrix Component

1 2I do not trust organic producers. .863I do not trust eco-labels. .903I do not have confidence in the organic farming control system. .890Organic products are healthier than conventional ones. .840Organic products taste better than conventional ones. .780Organic products are of better quality than conventional ones. .804Organic products have greater nutritional value than conventional ones. .799Organic products are fresher than conventional ones. .664Factor statistics

Eigenvalue 3.204 2.210

Variance, % 40.053 27.628

Cumulative variance, % 40.053 67.681Cronbach alpha 0.819 0.863Mean 4.47 2.24

Extraction Method: Principal Component Analysis. Rotation Method: Promax with Kaiser Normalisation.a a. Rotation converged in 3 iterations. Source: Authors’ research


236 God. XXXIII, BR. 1/2020. str. 227-241

Two principal components were identified. �e first is the “quality” of organic products compared to conventional products, which is associated with the following statements: “Organic products are healthier than conventional ones”; “Organic prod-ucts taste better than conventional ones”; “Organic products are of better quality than conventional ones”; “Organic products have greater nutritional value than conventional ones” and “Organic prod-ucts are fresher than conventional products”. �e respondents rated the quality of organic products the highest. �e second principal component can be described as “confidence” in organic products. As can be seen in Table 6, this component includes the following statements: “I do not trust organic producers”, “I do not trust eco-labels” and “I do not have confidence in the organic farming control sys-tem”.

5. Discussion

�e paper examines consumers’ perceptions of or-ganic food products in Croatia. �e results of the survey indicate that the typical organic food buy-ers are university-educated women aged 25 to 44. In terms of gender, several studies have shown that women show preference for organic food (Char-atsari, Tzimitra-Kalagianni, 2007; Mostafa, 2007; Sivathanu, 2015; Ureña et al., 2008). �e results of this study are consistent with the results of several other studies (Xie et al., 2015; Roitner-Schobesberg-er et al., 2008; Brčić-Stipčević, Petljak, 2011; Lockie et al., 2002; Sivathanu, 2015) which showed that consumers with a higher level of education pur-chase organic products more often. Respondents reported buying fresh fruit and vegetables, honey, cereal and cereal products, milk and dairy products, and olive oil once a week directly from producers (50.9%) or at the market (44%). In comparison, only 15.5% of the respondents in the survey among Aus-tralian consumers buy organic food directly from farmers (Lockie et al., 2002). �e results of this study may be used to determine why consumers in Croatia tend to buy organic food products directly from producers, and to explore the availability of organic food products in supermarkets in Croatia. Future research is suggested to explore the gap be-tween demand and supply of organic food products and identify which products are in short supply. �e results could be used by organic producers in plan-ning, i.e. expanding their production. �e results of the study show that the respondents trust organic

producers and have confidence in the certification of organic production and eco-labels. �ese results are not surprising because the surveyed respond-ents were mostly members of SEGs, which operate on the principle of trust between consumers and producers. Moreover, organic farmers must justify and maintain consumer confidence by maintain-ing product quality. �e study also found that the respondents believe that organic food products are healthier, of higher quality and have greater nu-tritional value than conventional products. �ese findings are consistent with those of Brčić-Stipčević and Petljak (2011), who found that most consumers in Croatia believe that organic food is healthier than conventional food. According to Bozga (2015), Ro-manian consumers also consider organic products to be healthier, better tasting and safer than conven-tional products. �e present study found that most of the respondents consider that it is justified for organic products to be more expensive than con-ventional products, and most of them are willing to pay, on average, 24% more for such products. �ese findings are also consistent with those of other stud-ies (Annunziata, Vecchio, 2016; Aryal et al., 2009; Ureña et al., 2008; Rödiger et al., 2016; Štefanić et al., 2001; Radman, 2005) that suggest that consum-ers are willing to pay a higher price for organically produced food.

6. Conclusion

�e main finding of the research is that consumers value confidence and quality of organic food prod-ucts the most. To facilitate the placement of organic products on the market, it is recommended to con-tinue developing Solidarity Ecological Markets and Solidarity Ecological Groups. �e development of new SEGs should be encouraged by local authori-ties as an example of good and sustainable practice in Croatia. Also, it is necessary to improve the sup-ply and availability of organic products in Croatia as well as market control. �e results of the research could be a useful aid for producers of organic food in developing marketing strategies.

�e results of this research may serve as a base for future empirical studies that would focus on SEG members and organic consumers, in general. It is suggested that future research looks at a larger sam-ple of SEG members across Croatia to monitor the development of SEGs and justify their existence. It would be interesting to identify the main motives

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for being a member of SEG and the benefits pro-vided by an organisation like SEG to consumers. Furthermore, it may be useful to determine the dif-ferences between organic consumers who are SEG members and those who are not. Further research might explore the young consumers’ attitudes to-wards organic food. Gil et al. (2000) concluded that young people are an attractive target group for organic food products because they are seek-ing to improve their eating habits. It might also be interesting to investigate whether local origin influ-ences the perceived quality of organic products, i.e. whether consumers consider that locally produced and sourced products are of higher quality.

7. Research limitations

�e limitation of the study is sampling bias. �e data were collected from SEG members and visi-tors to the organic food fair, i.e. people who have al-ready shown interest in organic products. �us, the

results of the study may not be generalised to the entire population of Croatia. �e questionnaires were sent via e-mail to members of three SEGs, in Pula, Rovinj and Osijek. Hence, the sample is not representative either of Istria County or of Croa-tia. Moreover, the results should be validated by a larger sample size to include consumers of organic food who are not SEG members and who purchase organic food through other distribution channels (via the Internet, in supermarkets, in special organ-ic food stores, etc.).

8. Acknowledgements

We want to thank all the participants of the survey and members of SEGs for providing us with valu-able information about SEGs.

We would also like to thank the reviewers for their valuable suggestions and efforts towards improving this manuscript.


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37. Radman, M. (2005), “Consumer consumption and perception of organic products in Croatia”, British Food Journal, Vol. 107, No. 4, pp. 263-273.

38. Renko, S., Bošnjak, K. (2009), “Aktualno stanje i perspektive budućeg razvoja tržišta ekološke hrane u Hrvatskoj”, Ekonomski pregled, Vol. 60, No. 7-8, pp. 369-395.

39. Roitner-Schobesberger, B., Darnhofer, I., Somsook, S., Vogl, C. R. (2008), “Consumer perceptions of organic foods in Bangkok, �ailand”, Food Policy, Vol. 33, No. 2, pp. 112-121.


240 God. XXXIII, BR. 1/2020. str. 227-241

40. Rödiger, M., Plaßmann, S., Hamm, U. (2016), “Organic consumers’ price knowledge, willingness-to-pay and purchase decision”, British Food Journal, Vol. 118, No. 11, pp. 2732-2743.

41. Sangkumchaliang, P., Huang, W. C. (2012), “Consumers’ perceptions and attitudes of organic food products in Northern �ailand”, International Food and Agribusiness Management Review, Vol. 15, pp. 87-102.

42. Sarjanović, I. (2014), “�e role of community supported agriculture in the development of organic agriculture in Croatia”, Geoadria, Vol. 19, No. 1, pp. 1-25.

43. Shafie, F. A., Rennie, D., (2012), “Consumer perceptions towards organic food”, Procedia-Social and Behavioral Sciences, Vol. 49, pp. 360-367.

44. Sharma, G., Dewan, R. and Bali, S. (2014), “Factors Influencing Consumer Buying Behavior & Aware-ness towards Organic Food: A Study of Chandigarh & Panchkula Consumers”, International Journal of Science and Research, Vol. 5, No. 2, pp. 689-696.

45. Siljan, D., Cerjak, M. (2017), “Prva eko tržnica u Hrvatskoj–zadovoljstvo proizvođača i kupaca”, Agro-economia Croatica, Vol. 7, No. 1, pp. 88-108.

46. Sivathanu, B. (2015), “Factors affecting consumer preference towards the organic food purchases”, In-dian Journal of Science and Technology, Vol. 8, No. 33, p. 1-6.

47. Srinieng, S., �apa, G. B. (2018), “Consumers’ Perception of Environmental and Health Benefits, and Consumption of Organic Vegetables in Bangkok”, Agricultural and Food Economics, Vol. 6, No. 5, pp. 1-17.

48. Štefanić, I., Štefanić, E., Haas, R. (2001), “What the customers really want: organic food market in Croatia?”, Die Bodenkultur, Vol. 52, No. 4, pp. 243-248.

49. Ueasangkomsate, P., Santiteerakul, S. (2016), “A study of consumers’ attitudes and intention to buy organic foods for sustainability”, Procedia Environmental Sciences, Vol. 34, pp. 423-430.

50. Ureña, F., Bernabéu, R., Olmeda, M. (2008), “Women, men and organic food: differences in their at-titudes and willingness to pay. A Spanish case study”, International Journal of Consumer Studies, Vol. 32, No. 1, pp. 18-26.

51. Xie, B., Wang, L., Yang, H., Wang, Y., Zhang, M. (2015), “Consumer perceptions and attitudes of or-ganic food products in Eastern China”, British Food Journal, Vol. 117, No. 3, pp. 1105-1121.

52. Yadav, R., Pathak, G. S. (2016), “Intention to purchase organic food among young consumers: Evi-dences from a developing nation”, Appetite, Vol. 96, pp. 122-128.

53. Yazdanpanah, M., Forouzani, M. (2015), “Application of the �eory of Planned Behaviour to predict Iranian students’ intention to purchase organic food”, Journal of Cleaner Production, Vol. 107, pp. 342-352.

54. Yiridoe, E. K., Bonti-Ankomah, S., Martin, R. C. (2005), “Comparison of consumer perceptions and preference toward organic versus conventionally produced foods: A review and update of the litera-ture”, Renewable Agriculture and Food Systems, Vol. 20, No. 4, pp. 193-205.

55. Zagata, L. (2012), “Consumers’ beliefs and behavioural intentions towards organic food. Evidence from the Czech Republic”, Appetite, Vol. 59, No. 1, pp. 81-89.

56. Zanoli, R., Naspetti, S. (2002), “Consumer motivations in the purchase of organic food: A means-end approach”, British Food Journal, Vol. 104, No. 8, pp. 643-653.

Review article

241God. XXXIII, BR. 1/2020. str. 227-241

Tina Šugar

Kristina Brščić

P H

S

Razvoj ekološke poljoprivrede tema je o kojoj se sve više raspravlja. Posljednjih godina ljudi sve više obra-ćaju pozornost na hranu koju konzumiraju. Potrošači percipiraju ekološke proizvode kao prihvatljive za zdrav način života. Cilj rada je istražiti percepciju potrošača o ekološkim prehrambenim proizvodima u Hrvatskoj. Za istraživačke svrhe provedeno je istraživanje i prikupljena su 232 ispunjena upitnika, i to na sajmu ekološke hrane u Puli i putem internetskih mreža solidarnih ekoloških grupa (SEG) u Hrvatskoj (Pula, Rovinj i Osijek). Prikupljeni podatci analizirani su pomoću SPSS (22) softvera, a za prikaz rezultata korištena je deskriptivna statistika, t-test, One-way ANOVA i Principal Component Analysis (PCA). Prema dobivenim rezultatima, tipični kupci ekološke hrane su žene u dobi od 25 do 44 godine s visokom stručnom spremom. Ispitanici najčešće kupuju svježe voće i povrće, med, žitarice i proizvode od žitarica, mlijeko i mliječne proizvode te maslinovo ulje. Potrošači imaju povjerenja u certificiranje ekološke proizvodnje i eko-loške oznake, a prema PCA analizi najvažnije teme vezane uz potrošače ekoloških prehrambenih proizvoda mogu se svrstati u skupine: povjerenje i kvaliteta. Rezultati istraživanja mogu biti korišteni za bolje razu-mijevanje preferencija potrošača prema ekološkim prehrambenim proizvodima pri kreiranju marketinške strategije za ekološke proizvode.

Ključne riječi: percepcija potrošača, ekološki prehrambeni proizvodi, Hrvatska, Solidarne Ekološke Grupe (SEG)

E

1 FAO/WHO Codex Alimentarius Commission (1999), available at: http://www.fao.org/organicag/oa-faq/oa-faq1/en/ (Accessed on: May 23, 2018)

2 Research Institute of Organic Agriculture FiBL & IFOAM – Organics International (2018), “The World of Organic Agriculture Stati-stics and Emerging Trends”, available at: https://shop.fibl.org/CHde/mwdownloads/download/link/id/1093/?ref=1 (Accessed on: June 01, 2018)

3 EUROSTAT (2016), available at: http://ec.europa.eu/eurostat/web/agriculture/data/database (Accessed on: May 22, 2018)

4 Ministry of Agriculture of the Republic of Croatia, “Statistika, Ekološka poljoprivreda”, available at: https://poljoprivreda.gov.hr/ (Accessed on: April 17, 2019)

5 Croatian Bureau of Statistics (2011), “Census 2011”, available at: www.dzs.hr (Accessed on: May 22, 2018)

6 InforEuro, “Monthly accounting rate of the euro”, available at: http://ec.europa.eu/budget/contracts_grants/info_contracts/inforeu-ro/index_en.cfm (Accessed on: May 22, 2018)

243God. XXXIII, BR. 1/2020. str. 243-254

POVERTY: A CHALLENGE TO THE PROTECTION OF HUMAN RIGHTS OF OLDER PERSONS IN THE REPUBLIC OF CROATIA

Review article

Received: November 4, 2019Accepted for publishing: December 16, 2019

Mira LulićJosip Juraj Strossmayer University of OsijekFaculty of Law OsijekStjepana Radića 13,31000 Osijek, [email protected]: +38531224500

Ivana Rešetar ČuloJosip Juraj Strossmayer University of OsijekFaculty of Law OsijekStjepana Radića 13,31000 Osijek, [email protected]: +385919433389

A

Poverty is traditionally studied from an economic point of view. However, along with the development of international human rights law poverty is increasingly becoming the focus of legal science; it is studied from the aspect of the protection of human rights and viewed as a result of structural and institutionalised inequalities and discrimination. Poverty is one of the leading problems older persons encounter worldwide, including in the Republic of Croatia. �erefore, the aim of this paper is to point to the problem of poverty of older persons as a form of human rights violation, but also to the lack of research on this issue, as well as to make recommendations for future research. �us, the paper gives an overview of global and national demographic trends, analyses exposure of older persons in the Republic of Croatia to poverty and outlines the existing legal framework for the protection of the rights of the elderly at both national and global levels. �e paper also draws attention to ageism and negative stereotypes and prejudices towards older persons that persist in society and affect the position of the elderly and highlights the need for a paradigm shift in relation to their role in society.

Keywords: Poverty, older persons, human rights, discrimination, international law

Mira Lulić, Ivana Rešetar Čulo: Poverty: A challenge to the protection of human rights of older persons in the Republic of Croatia



CC BY-ND












5 od 6 26. 06. 2017. 12:24

1. Introduction

�e demographic trend of population aging brings many challenges. �e United Nations warns that countries with a pronounced trend of population aging are likely to face fiscal and political pressures regarding public systems of health care, pension and social protection for a growing older population.1 Countries also face problems of ensuring political participation of older persons, social inclusion of

the elderly, old age poverty, protection against vio-lence and discrimination, or generally speaking, the protection of the rights of older persons. However, one of the biggest challenges is changing the way we look at the elderly population and finding effec-tive ways to tap into their potential. One of the in-dicators of older persons’ position in society is their exposure to increased risk of poverty both globally and in the Republic of Croatia. Although poverty is traditionally studied from an economic aspect,


244 God. XXXIII, BR. 1/2020. str. 243-254

along with the development of international human rights law poverty is increasingly becoming the fo-cus of legal science; it is studied from the aspect of the protection of human rights and viewed as a re-sult of structural and institutionalised inequalities and discrimination. Indeed, rapid population ag-ing significantly changes social, political, legal and economic relations in society. �is change is even more complicated in our country due to some spe-cific factors. Namely, damage caused during the war in the 1990s impoverished the country significantly, and the transition to democracy and the abandon-ment of self-managed socialism caused further deg-radation of social, economic and political relations. A combination of these factors and the deep-rooted negative stereotypes and prejudice about the older population place the elderly in an unenviable posi-tion where their fundamental human rights are be-ing undermined, neglected and denied.

Hence, the aim of this paper is to point to the prob-lem of poverty of older persons as a form of human rights violation and to a lack of research on this is-sue, as well as to make recommendations for future research. �e paper gives an overview of global and national demographic trends, analyses exposure of older persons in Croatia to poverty and outlines an overview of the existing legal framework for the protection of the rights of the elderly at both nation-al and global levels. Finally, it proposes guidelines for further development of policies and promotion of older person’s rights. How to reduce the costs of caring for the elderly and increase their inclusion, health, and contribution to society?

2. The dynamics and the phenomenon of an increase in the number of older persons in the 21st century

Although aging is a biological process and con-cept, old age is a socially constructed phenomenon, whose definition depends on numerous factors. When defining the notion of an older person, based on the World Health Organisation (WHO) data, it can be seen that different standards are used to define old age.2 Bearing in mind the difficulty of setting objective criteria when defining this notion by using functional and social determinants of old age or by using a multi-dimensional definition that would include all of these elements, a chronological definition of an older person is the most commonly used one.3

�ere is no consensus on the age after which a person becomes an “older person”. In its statisti-cal reports, the United Nations (UN) defines older persons as those aged 60 years or over.4 In most de-veloped countries, the age limit of 65 years is laid down as a determinant defining old age, which is closely related to the statutory retirement age, a situation applicable to the Republic of Croatia as well (cf. the Social Welfare Act). In the absence of a universally accepted definition (or at least the age limit) of old age, the study of the position of older persons is hampered by the fact that older persons are an extremely heterogeneous group that differs by gender, ethnicity, economic status, health status, accepted social values, level of education, residence in countries at different levels of development and even the age itself. �e paradox of aging consists in the fact that the world’s population is getting older and maintains vitality in psychological and biologi-cal terms and remains mentally and physically fit for longer compared to previous generations (Hel-ebrant, 2005: 5). Chronological age is only loosely associated with levels of functioning. �e WHO states that, unlike the youth population, the elderly population is characterised by the sheer diversity of health of its members, in terms of both physical and mental capacities.5

However, population aging has unquestionably been one of the leading demographic trends over the past decades. According to the most recent data, older persons are increasing in number and today account for a growing share of the popula-tion in virtually every country. �is has had im-plications for nearly all sectors of society, includ-ing labour and financial markets, the demand for goods and services such as housing, transportation and social protection, as well as family structures and intergenerational ties.6 �ere is no doubt that the share of the elderly in the total population will continue to grow. According to the UN data, there were 901 million people aged 60 years or over in 2015 worldwide, an increase of 48% compared to 607 million in 2000. In 2017, there were an esti-mated 962 million people aged 60 or over in the world, comprising 13% of the global population.7 �e population aged 60 or above is growing at a rate of about 3% per year. By 2050, the number of older persons in the world is projected to double compared to 2015, amounting to about 2.1 billion.8 According to Eurostat estimates, about 511 million

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people lived in Europe in 2017, over 19% of whom were aged 60 or over.9

�e population aging process has two features char-acteristic of old age poverty, i.e. aging and femini-sation of the elderly population. According to the UN data, women live longer than men and make up most of the elderly population, especially in the old-est age group. In 2015, women accounted for 54% of the world’s population aged 60 and over and 61% of those aged 80 and over.10 �e number of persons aged 80 and over is projected to triple by 2050, and by 2100 to increase to nearly seven times its value in 2017.11 Globally, the number of persons aged 80 and over is projected to increase from 137 million in 2017 to 425 million in 2050, and further to 909 million in 2100.12

�e Croatian population is also old. �e causes of an aging population occurring in other developed countries are also present in Croatia, i.e., lower birth rates and increased life expectancy. As the core of the migration contingent consists of persons between the ages of 20 and 40, population aging in Croatia was also influenced by specific factors such as several major migration waves in the 20th century, as well as casualties and emigration that occurred during and after the Croatian War of Independence (Živić, 2003: 309). It is estimated that 1,233,000 (i.e. 31%) and 1,309,000 (i.e. 36.8%) persons aged 60 and over will live in the Republic of Croatia in 2030 and in 2050, respectively.13

According to the estimates of the Central Bureau of Statistics of the Republic of Croatia (CBS), there were about 825,400 persons aged 65 and over in 2017, compared to 758,633 persons belonging to the same group in the 2011 Census.14 According to the 2011 Census, the share of persons aged 65 or over in the total population was 17.7%15, while that share for 2017 is estimated at 20.1%16. Consist-ent with global demographic trends, the number of very old persons is increasing in Croatia. �us, according to estimates for 2017, in the total num-ber of persons aged 65 or over, there were 256,900 persons between the ages of 65 and 69, 183,700 persons between the ages of 70 and 74, and 384,800 persons older than 75.17 �ese estimates also show the feminisation of aging. According to this source, out of the total number of persons aged 65 and old-er, 492,400 (i.e., 59.66%) are women, while 333,000 (i.e., 40.34%) are men. CBS projections show that by 2051 the share of persons aged 65 or older in the total population will increase to 27.6%.18

3. On the number of older persons living in poverty in the Republic of Croatia: society growing older and poorer

�ere has been no comprehensive empirical re-search on poverty in the Republic of Croatia; hence, there has been no systematic research on old age poverty. Instead, papers that highlight this issue or analyse available statistical data19 are sporadically published (see: Šućur, 2008: 435-454). Most data in Croatia are obtained from the Croatian Bureau of Statistics (CBS). According to the CBS Indicators of poverty and social exclusion for 2017, the at-risk-of-poverty rate in Croatia was 20%.20 �is indicator was the highest in 2017 for persons aged 65 years and over (28.6%). �e difference by gender was the highest in this age group and it amounted to 31.7% for women and 24.1% for men.

As the elderly reach retirement, their income de-creases. �ere is a rather small number of older people who are financially self-sufficient and oth-erwise independent. In 2017, the at-risk-of-poverty rate of retirees was 24.5% (i.e., 26.7% for women and 21.9% for men).21 According to the Croatian Pension Insurance Institute, in April 2019, 457,365 retirees received a pension of less than HRK 2,000. �e average pension income in April 2019 was HRK 2,435.20.22 Rarely do retirees partially return to the labour market, so their financial situation can hardly change for the better. According to the Croa-tian Pension Insurance Institute data for April 2019, 9,425 old-age and early retirement pension benefi-ciaries work up to half of what typically constitutes the standard for full-time employment, while 10,863 persons over the age of 65 are employed full time.23

Older persons living alone in a household are par-ticularly exposed to the risk of poverty. According to available data, 24.23% of the population aged 65 and over living in Croatia live in single-person households, 77.5% of whom are women.24 By age group, the oldest-old (aged 85 years and over) ac-count for the largest share of single-person house-holds (i.e., 30.9%), and this group is followed by the middle old age group (75-84 years, 28.57%) and the young old age group (65-74 years, 20.28%).25 �e at-risk-of-poverty rate for 2017 shows that single-person households are most vulnerable, especially those with persons aged 65 or over (47.8%).26 It is also reported that female single-person households are the most vulnerable (47.6% compared to 39.5%


246 God. XXXIII, BR. 1/2020. str. 243-254

referring to men at risk of poverty).27 �e authors of the Report on Social Development of the Republic of Croatia state that a typical member of the elderly population is 74 years old, has a monthly income of up to HRK 2,000 and lives alone or with a spouse (Bayley, Gorančić-Lazetić, 2006: 100). According to the statistics of the Ministry of Demography, Family, Youth and Social Policy of the Republic of Croatia, as at 31 December 2015, 9,287 persons aged 65 and over received a guaranteed minimum income (the so-called social benefit), which accounts for 9.07% of all beneficiaries of the minimum guaranteed in-come or 1.16% of all persons aged 65 and over.28

Declining health associated with increased (health) care needs puts older people in a position of pow-erlessness and dependency. �ere are also many persons with disabilities in the elderly population. According to the statistics of the Ministry of De-mography, Family, Youth and Social Policy of the Republic of Croatia, as of 31 December 2015, 3,226 persons aged 65 and over received personal disabili-ty allowance, which makes up 13.58% of all personal disability allowance beneficiaries, while 33,859 per-sons aged 65 and over received assistance and care allowance, which makes up 50.68% of all assistance and care allowance beneficiaries.29 A large number of older persons, especially those living in rural areas, live far away from health care institutions, which are mostly located in larger cities. �e elderly are also affected by changes in the healthcare system, espe-cially by rising costs of medications and treatments. Older people experiencing financial hardship and poor psychological and physical health are often placed in nursing homes. In terms of institutional elderly care in Croatia, 2.86% of the population aged 65 and over are placed in institutional households, whereas 2.38% are placed in institutions for the el-derly, of whom are 75.55% of women.30 Most worri-some is the fact that a number of older persons are forced to seek refuge in homeless shelters because they frequently live in accommodation with no ac-cess to basic sanitation services and other facilities. According to survey data on homelessness in Croa-tia, 5.7% of the total number of homeless people are aged 65-69, and 3.4% are over the age of 70.31 Life in such extreme circumstances, the abnormal and unnatural state of poverty, might lead to mental ill-nesses or disorders and deterioration in their health condition in general. Out of 635 people who com-

mitted suicide in 2017, 300 persons were aged 60+ (i.e. 130 persons aged 60 to 69, 78 persons aged 70 to 79, and 92 persons aged 80+).32 Of the total num-ber of people over 60 who committed suicide, 74.3% were men (i.e. 223 persons).33

Research has shown that due to transition, high unemployment rates, low pensions, gender and age discrimination, reforms of health care, pension and social welfare systems, older persons in Croa-tia are poor and socially vulnerable, which implies increased risk of both domestic violence and vio-lence against older people in institutional settings (Ajduković et al., 2008: 5-6). Since the perpetrators are often family members and since such offences take place at home or in institutions, they are rarely recognised and penalised. An additional problem is that elderly people are most often dependent on perpetrators of criminal offences and do not report their abusive behaviour out of either fear or igno-rance. A huge problem today is economic (financial or material) abuse, or abuse of an older person’s money, property or assets (e.g. taking an older per-son’s pension, abuse of power of attorney, change to the last will, etc.) (Dessin, 2002: 269). Older persons are easy targets for financial abuse, which can be committed by unknown persons, but is very often perpetrated by a person who is well known to them or a person they depend on (Moore, Schaefer, 2004: 508).

Poverty is traditionally studied through objective one-dimensional indicators such as income, con-sumption and assets (Wang et al., 2011: 716). How-ever, over the past decades, the idea of poverty has been recognised as a multidimensional and com-plex phenomenon. �eories of poverty, marginali-sation and underclass are being developed in Amer-ica and the Anglo-Saxon world, while the concept of social exclusion is being developed in Europe, which, in addition to the lack of material resources, also implies deprivation in social, cultural, politi-cal and other dimensions of life (Stark, 2009: 381-430). As Lipman states, poverty is hunger, harmful to the mind, body and soul; poverty is situational, generational, urban and rural, expensive, persistent, pervasive and criminalised (Lipman, 2017: 394-396). Although the very notion of social exclusion is rather new, Sen feels that there is a connection between that concept and old ideas of poverty, as lack of opportunity characterises both (Sen, 2000: 3-4). �e Multidimensional Poverty Index (MPI)

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that was conceptualised in 2010 for the purpose of measuring multidimensional poverty is based on Sen’s notion of poverty as a lack of opportunity. �e World Bank set the criterion for estimating the number of people living in extreme poverty at $1.90 a day or less (Pogge, 2017: 516; Lipman, 2017: 398; Novak, 1995: 59). When measuring the incidence of poverty, the Multidimensional Poverty Index (MPI) looks beyond income to understand how people experience poverty in multiple and simultaneous ways and includes three dimensions: health, educa-tion and standard of living, which are assessed and evaluated by means of ten indicators.34 People who experience deprivation in at least one third of these indicators fall into the category of multidimension-ally poor.35

Methodological problems related to the measure-ment of old-age poverty lead to problems with assessing the total number of the elderly living in poverty or extreme poverty. While the literature on poverty is extensive, the specific focus on old-age poverty is limited (Kwan, Walsh, 2018: 1-21). Research dealing with poverty from a multidimen-sional aspect or other aspects of deprivation other than income is even scarcer. Relying solely on eco-nomic indicators relating to expenditure on the el-derly without taking into account the contributions of older people both at an old age and throughout their lifetime gives a wrong picture of the elderly and their role in society. �e research conducted by Cook in the United Kingdom shows that the contri-butions of older persons through taxation, consum-er spending and other economically valuable activi-ties such as social care provision and volunteering were estimated to be worth nearly GBP 40 billion in 2010, which is more than expenditure on them through pensions, welfare and health care com-bined, and this number is set to rise to GBP 77 bil-lion by 2030 (Cook, 2011: 141-146). Furthermore, as part of the economy, the silver economy recog-nises aging population as a new source of economic and business opportunities (Barković Bojanić et al., 2018: 915). Despite these developments, and given the current demographic revolution, the position that is prevalent today is that without an adequate strategy and policy response, economic growth will be seriously hampered (Barković Bojanić, 2019: 1781).

4. Legal protection and the status of older persons

4.1 Poverty in the context of violation of the older persons’ rights

Poverty is one of the biggest problems older persons encounter. Not all elderly people are poor; however, they are at higher risk of poverty than any other age group. In many societies, older persons comprise a disproportionate number of the poor, the persistent poor and the poorest among the poor.36 Poverty can exacerbate the denial of basic human rights as well as limit choices and opportunities for a tolerable life for older persons.37 As early as 1975, Butler stated that the tragedy of old age is not the fact that each of us must grow old and die but that the process of doing so has been made unnecessarily and at times excruciatingly painful, humiliating, debilitating and isolating through insensitivity, ignorance and pov-erty (Butler, 1975, as cited in van den Heuvel, van Santvoort, 2011: 297). Why is that the case and what is the relationship between poverty and the rights of older persons?

Human rights, inter alia, rely on the recognition of the inherent dignity and equality of all human beings and on the non-discrimination principle (Lister, 2013: 109; 113). A human rights approach to poverty thus raises fundamental ethical ques-tions about how people in poverty are regarded and treated and about the responsibilities of others to-wards them (ibidem). However, mainstream society pushes to the margins of society all those who are in some way different. Poverty thus becomes one of the indicators of social exclusion (Šućur, 2004: 49-51). �e process of excluding poor people from so-ciety is aggravated when poverty interacts with so-cial divisions such as gender, ethnicity and disability (Lister, 2013: 112). �is category certainly includes old age. Bejaković states that inequality causes dis-ruption (albeit small) to social capital and lower participation of citizens in political life and society, which reduces the possibilities of influencing the decision-making process of the poor (Bejaković, 2004: 84). We must also take into account “shame as a non-material and social dimension of pover-ty”, which has devastating impacts on the poor (Jo, 2013: 514; Lister, 2013: 112).

Negative stereotypes and prejudices against older persons are deeply rooted in society. Not much has changed since the term ageism was coined in the late 1960s by Butler who described it as “prejudice


248 God. XXXIII, BR. 1/2020. str. 243-254

by one age group toward other age groups” (as cited in Mikolajczyk, 2015: 86). Although it is an old term and a recognised type of discrimination, “ageism” has not survived in international documents as a term, despite the ban on age discrimination that has become “more and more popular in the inter-national fora” (ibidem: 106). Ageism is still socially acceptable and often unrecognisable even when it occurs at the level of design and implementation of policies and measures directly affecting older per-sons. In extreme situations, discrimination in old age can reach such a level that we speak of struc-tural violence at the level of society and it refers to discriminatory social, health and other policies and practices towards the elderly population, and to inadequate and disturbing treatment of public ser-vices (Rusac, 2006: 332-334). Whitton also believes that ageism is still developing and that gerontopho-bia has emerged recently as the fear of growing old or aging, the fear of sharing scarce intergenerational resources and a tendency to perceive older people as a social problem (Whitton, 1997: 469).

Unfortunately, older persons are a group that does not have enough information and knowledge about their (human) rights and how to exercise them, and as such, they easily become victims. �us, it is ex-tremely important for every modern state to com-bat discrimination against older persons as success-fully as possible, and to develop successful national poverty reduction strategies. In this respect, it is important to take into account not only economic growth and development, but also social sensibility of the state towards the elderly poor. By combat-ing poverty in old age, ensuring access to adequate health care, enabling older persons to participate in the labour market and in social, cultural and political life in general, older persons are given the opportunity to enjoy a healthy life of good quality for many years, their contribution to society is ac-knowledged and they have the possibility of reach-ing their full potential.

4.2 Legal protection and the status of older persons at international level and in the Republic of Croatia

Unlike the rights of recognisably vulnerable groups such as children, women, minorities, people with disabilities, members of the LGBT community, mi-grant workers, racial groups, victims of torture, etc., older persons have no special protection under in-ternational law but rather within the generic frame-

work for the protection of human rights. However, there are very few provisions in international law that directly address elderly rights and they are the only vulnerable population that does not have a comprehensive and/or binding international in-strument addressing their rights specifically (Rodri-guez-Pinzon, 2003: 1008). In 2008, Tang published an important paper inviting the international com-munity to adopt as soon as possible an international convention that would establish a system aimed at monitoring the protection of the rights of older persons (Tang, 2008: 99, see also Sanchez Rivera, 2010: 281-282). To that end, Resolution 65/182 of 21 December 2010 was adopted by the United Na-tions General Assembly, establishing an open-end-ed working group that will work on a convention on the rights of older persons. A future convention on the rights of older persons could be modelled after the Convention on the Rights of the Child, which focuses on another particularly vulnerable group that is defined on the basis of age (Rodriguez-Pin-zon, 2003: 1008).

Due to the lack of such legal instrument, older peo-ple have to seek protection of their rights within the generic human rights framework. �e relevant international agreements in this context are as fol-lows: the 1945 Charter of the United Nations, the 1951 Convention Relating to the Status of Refugees, the 1966 International Covenant on Economic, So-cial and Cultural Rights, the 1952 ILO C102 – So-cial Security (Minimum Standards) Convention (Part V), the 1958 C111 – Discrimination (Employ-ment and Occupation) Convention, the 1967 ILO C128 – Invalidity, Old-Age and Survivors’ Benefits Convention and the 1988 ILO C168 Employment Promotion and Protection against Unemployment Convention. Age-based discrimination is explic-itly mentioned in Article 7 of the UN International Convention on the Protection of the Rights of All Migrant Workers and Members of �eir Families. Another international treaty that explicitly refers to older persons is the Convention on the Rights of Persons with Disabilities and its Optional Protocol (2006) (Articles 25(b) and 28(b)). �e latter is ex-tremely important because it represents a “dramat-ic paradigm shift” from the medical-social welfare model of disability to the human rights model that focuses on capability and inclusion (Kanter, 2009: 572).

At European level, fundamental rights and free-doms are governed by two key Council of Europe

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conventions: the European Convention for the Pro-tection of Human Rights and Fundamental Free-doms (1950) and the European Social Charter with protocols (1961). Article 4 of the Additional Proto-col to the European Social Charter of 1988 provides for the right of older people to social protection. �e rights of older people are clearly stated and reg-ulated in Article 25 of the Charter of Fundamental Rights of the European Union (Title III, Equality), which is binding on all EU Member States.

Neither international nor EU law provide a compre-hensive and systematic framework for the protec-tion of older people’s human rights, and Croatia’s legal system is no exception in this regard. Rather, the protection of the elderly is fragmented and scat-tered across a wide range of laws, by-laws and stra-tegic documents. First of all, the Constitution of the Republic of Croatia calls for the protection against discrimination and social exclusion as a fundamen-tal human right, whereas older persons are explic-itly mentioned in Article 64, paragraph 3, in the context of family and children’s obligation to look after their elderly and helpless parents. �e Consti-tution also guarantees health and medical care (Ar-ticle 59), as well as respect for and legal protection of personal and family life, dignity, reputation and honour (Article 35). Pursuant to Article 58 of the Constitution, there is also the obligation of the state to assist the weak and the helpless to meet their ba-sic needs. �e provision of Article 65, paragraph 1, of the Constitution states that everyone shall have the duty to protect children and helpless persons. In addition to the Constitution of the Republic of Croatia, the provisions of the Family Act, the Pro-tection against Family Violence Act, the Anti-Dis-crimination Act and the Free Legal Aid Act are of special importance for the protection of the rights of older persons. �e Social Welfare Act, which regulates the rights in the social welfare system, of which financial assistance (guaranteed minimum income and care allowance) and social services (ac-commodation and in-home support services) are particularly important, the Pension Insurance Act and the Compulsory Health Insurance Act are sig-nificant in the field of social rights and the protec-tion of older persons against poverty.

5. Concluding remarks: How to stay peaceful, happy and healthy as you age?

�e WHO notes that social changes that will occur by 2050 are largely predictable, so we can safely say

that the demographic transition to older popula-tions will occur and that is exactly why we need to make a plan and implement policies that will enable the protection of older people and improve their status.38 In this modern age, the biggest challenge associated with the phenomenon of population ag-ing in our society will be the ability to remain com-mitted to the idea of dignity at any age, the idea that every human being, regardless of their age, possesses inherent and equal fundamental dignity and basic rights (McLachlin, 2015: 112). As has al-ready been said, old age poverty is closely related to a grave violation of the rights of older persons, the misunderstanding of the issue of aging in general and its impact on society, as well as negative stereo-types and prejudice leading to ageism.

National governments are faced with serious dilem-mas as to which economic policies, changes to laws and regulations, as well as social welfare and other system reforms to implement to improve the sta-tus of older persons. An equally serious problem is an increase in the number of older persons and a decline in the working-age population; hence gov-ernments face problems with pension payments, as well as maintenance of expensive health care and other services for the elderly (Nash, 2004: 246). �e fact that this population group is constantly and rapidly growing only exacerbates the prob-lem. �erefore, we believe that at the level of the Republic of Croatia we should focus on systematic and comprehensive regulation of the rights and sta-tus of this extremely vulnerable and growing group of people, which is now dispersed across different legal instruments. �e Republic of Croatia must take a more proactive approach to adopting special social policies and legislation that would specifi-cally regulate the status and rights of older persons, which is consistent with contemporary tendencies in the international community. It is necessary to develop policies and measures to strengthen and stabilise the health care and pension systems, to improve social welfare services for the elderly as well as measures to assist older people and their families facing the challenges of aging (e.g. regu-lating the status of a carer for an elderly person, etc.). Further desirable actions would be to intro-duce a state pension or other instruments to pre-vent old age poverty, to sensitise the public to and increase the “visibility” of older people in society, as well as to address negative stereotypes of aging and the elderly. It is particularly important to iden-tify, prosecute and punish criminal offences against


250 God. XXXIII, BR. 1/2020. str. 243-254

older persons. However, it is also necessary to find ways in which the elderly can feel useful by lever-aging their potentials for the benefit of society as a whole (through their employment or volunteering, participation in social and cultural life, by making use of their experience in the education of younger generations, etc.).

However, it is difficult to achieve these goals without sufficient data and analysis of the overall problem of old age poverty and the position of the elderly in our society in general. Statistical data and analysis are key in this context. �ere is inadequate practical re-search into the problems and status of older persons in the Republic of Croatia, and new appropriate pol-icies and legal solutions can be initiated only on the basis of accurate research combined with existing statistical data. �erefore, a systematic quantitative survey on older people’s exposure to poverty, so-cial exclusion and age discrimination (especially by means of questionnaires and interviews) should be carried out in the coming period by a multidiscipli-nary team of scientists. Particular attention should be paid to research into the specific problems of the

elderly in rural areas, together with the analysis of the needs and problems of the elderly in urban ar-eas. In these studies, attention should be paid not only to risk factors but also to protective factors that influence the risk of poverty in old age. Quantitative research should be accompanied by qualitative re-search into the quality of life and well-being of older people in our society, and aim to find ways to help strengthen their quality of life. On the other hand, we also need to study the contribution of older people to the Croatian economy through taxation, consumer spending and other economically rel-evant activities. Scientists and experts in various branches of humanities and social sciences, but also in biomedicine and health care (e.g. lawyers, econo-mists, sociologists, social workers, psychologists, culturologists, demographers and others) should be fully involved in dealing with this problem. All of them should participate in the design of the reforms needed to ensure both sustainable development of our country and respect for human rights, dignity and the quality of life of all persons, including the elderly.

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R

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17. Nash, S. K. (2004), “Shades of Gray: �e Impact of World-Wide Aging on Elder Abuse and Neglect in the United States and France”, European Journal of Law Reform, Vol. 6, pp. 244-270.

18. Novak, T. (1995), “Rethinking Poverty”, Critical Social Policy, Vol. 15, No. 44-45, pp. 58-74.19. Pogge, T. (2017), “Fighting Global Poverty”, International Journal of Law in Context, Vol. 13, No. 4, pp.

512-526. 20. Rodriguez-Pinzon, D., Martin C. (2003), “�e International Human Rights Status of Elderly Persons”,

American University International Law Review, Vol. 18, No. 4 pp. 915-1008.21. Rusac, S. (2006), “Nasilje nad starijim osobama”, Ljetopis socijalnog rada, Vol. 13, No. 2, pp. 331-346.22. Sanchez Rivera, S. J. (2010), “Worldwide Ageing: Findings, Norms, and Aspirations”, Revista jurídica

Universidad de Puerto Rico, Vol. 79, No. 1, pp. 237-286.


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23. Sen, A. (2000), “Social Exclusion: Concept, Application, and Scrutiny”, Social Development Papers No. 1, Asian Development Bank, Manilla, June 2000.

24. Stark, B. (2009), “�eories of Poverty/�e Poverty of �eory”, Brigham Young University Law Review, Vol. 2009, No. 2, pp. 381-430.

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27. Tang, K. (2008), “Taking Older People’s Rights Seriously: �e Role of International Law”, Journal of Aging & Social Policy, Vol. 20, No. 1, pp. 99-117.

28. van den Heuvel, W. J. A., van Santvoort, M. M. (2011), “Experienced discrimination amongst European old citizens”, European Journal of Ageing, Vol. 8, No. 4, pp. 291-299.

29. Wang, X., Shang, X., Xu, L. (2011), “Subjective well-being poverty of the elderly population in China”, Social Policy and Administration, Vol. 45, No. 6, pp. 714-731.

30. Whitton, L. S. (1997), “Ageism: Paternalism and Prejudice”, DePaul Law Review, Vol. 46, No. 2, pp. 453-482.

31. Živić, D. (2003), “Demografske odrednice i posljedice starenja stanovništva Hrvatske”, Revija za soci-jalnu politiku, Vol. 10, No. 3-4, pp. 307-319.

E

1 United Nations (2018), “Global Issues – Ageing, available at: https://www.un.org/en/sections/issues-depth/ageing/ (Accessed on: August 9, 2019)”

2 World Health Organization (2002), “Proposed Working Definition of an older person in Africa for the MDS Project“, available at: http://www.who.int/healthinfo/survey/ageingdefnolder/en/ (Accessed on: August 9, 2019)

3 Zelenev, S. (Ed.) (2008), “Guide to the National Implementation of the Madrid International Plan of Action on Ageing”, United Nations Department of Economic and Social Affairs, New York, p. 11

4 United Nations Department of Economic and Social Affairs (2013), “World Population Ageing 2013”, New York, p. 17


6 United Nations Department of Economic and Social Affairs (2017a), “World population ageing 2017 – highlights”, New York, p. 2

7 United Nations Department of Economic and Social Affairs (2017b), “World population prospects – The 2017 Revision”, New York, p. 11


9 Eurostat (2019), “Population structure and ageing”, available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Population_structure_and_ageing#The_share_of_elderly_people%20_continues_to_increase (Accessed on August 9,2019)





14 Croatian Bureau of Statistics (2018), “Statistical Yearbook of the Republic of Croatia”, Zagreb, p. 115

15 Ostroški, Lj. (ed.) (2013), “Popis stanovništva, kućanstava i stanova 2011, Stanovništvo prema spolu i starosti“, Croatian Bureau of Statistics, Zagreb, p. 10


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18 Mihel, S., Rodin, U. (2010), “Pobol i uzroci smrtnosti osoba starije životne dobi u Hrvatskoj u 2009. godini”, Croatian National Institute of Public Health, Zagreb, p. 5

19 Nestić, D., Radić, A., Škreblin Kirbiš, I., Švaljek, S., Tomić, I. (2010), “Starenje stanovništva i održavanje primjerenog životnog stan-darda u trećoj životnoj dobi“, Institute of Economics, Zagreb

20 Croatian Bureau of Statistics (2018), “Indicators of poverty and social exclusion, 2017” available at: https://www.dzs.hr/Hrv_Eng/publication/2018/14-01-01_01_2018.htm (Accessed on: August 9, 2019)


22 Krstičević, G. (Ed.) (2019), “Statističke informacije Hrvatskog zavoda za mirovinsko osiguranje”, Year XVII, No. 4/2019, Zagreb, p. 38

23 Krstičević, G. (Ed.) (2019), “Statističke informacije Hrvatskog zavoda za mirovinsko osiguranje”, Year XVII, No. 4/2019, Zagreb, p. 19 and 7

24 Ministry of Demography, Family, Youth and Social Policy of the Republic of Croatia (2017), “Social Care Strategy for Older People in the Republic of Croatia 2017-2020” available at: https://mdomsp.gov.hr/vijesti-8/strategija-socijalne-skrbi-za-starije-osobe-u-republi-ci-hrvatskoj-za-razdoblje-od-2017-2020/6702 (Accessed on: August 9, 2019)


26 Croatian Bureau of Statistics (2018), “Indicators of poverty and social exclusion, 2017” available at: https://www.dzs.hr/Hrv_Eng/publication/2018/14-01-01_01_2018.htm (Accessed on: June 9, 2019)





31 Družić Ljubotina, O. Kletečki Radović, M., Ogresta, J. (2016), “Slika podrške beskućnicima u Hrvatskoj”, Gradski ured za socijalnu zaštitu i osobe s invaliditetom, Zagreb, p. 32



34 “United Nations Development Programme (2018), “The 2018 Global Multidimensional Poverty Index (MPI)”, available at: http://hdr.undp.org/en/2018-MPI (Accessed on: August 9, 2019)

35 United Nations Development Programme (2018), “The 2018 Global Multidimensional Poverty Index (MPI)”, available at: http://hdr.undp.org/en/2018-MPI (Accessed on: August 9, 2019)

36 United Nations (2018), “Report of the Independent Expert on the enjoyment of all human rights by older persons, A/HRC/38/50”, available at: https://documents-dds-ny.un.org/doc/UNDOC/GEN/G18/210/00/PDF/G1821000.pdf?OpenElement (Accessed on: August 9, 2019), p. 6

37 United Nations (2018), “Report of the Independent Expert on the enjoyment of all human rights by older persons, A/HRC/38/50”, available at: https://documents-dds-ny.un.org/doc/UNDOC/GEN/G18/210/00/PDF/G1821000.pdf?OpenElement (Accessed on: August 9, 2019), p. 6

38 World Health Organization (2015), “World Report on Ageing and Health”, Luxembourg, p. 3


254 God. XXXIII, BR. 1/2020. str. 243-254

Mira Lulić

Ivana Rešetar Čulo

S: R H

S

Siromaštvo se tradicionalno proučava s ekonomskog gledišta. Međutim, razvojem međunarodnog prava o ljudskim pravima siromaštvo sve više dolazi u fokus pravnih znanosti i proučava se s gledišta zaštite ljudskih prava i na njega se gleda kao na posljedicu strukturalnih i institucionaliziranih nejednakosti i dis-kriminacije. Upravo je siromaštvo jedan od vodećih problema s kojima se starije osobe susreću kako u svijetu, tako i u Republici Hrvatskoj. Stoga je cilj ovoga rada ukazati na problem siromaštva starijih osoba kao oblika kršenja ljudskih prava starijih i na nedostatak istraživanja o ovoj problematici te dati preporuke za buduća istraživanja. Stoga će se u radu dati pregled demografskih tendencija, kako u svijetu tako i u Hrvatskoj, analizirat će se izloženost siromaštvu starijih osoba u RH i dati pregled postojeće pravne mreže zaštite prava starijih osoba na međunarodnom i nacionalnom nivou. Također će se upozoriti na ageism i negativne stereotipe i predrasude prema starijim osobama koji perzistiraju u društvu i utječu na položaj starije populacije te potrebu promjene paradigme u odnosu na ulogu starijih osoba u društvu.

Ključne riječi: siromaštvo, starije osobe, ljudska prava, ageism, diskriminacija, međunarodno pravo

255God. XXXIII, BR. 1/2020. str. 255-270

LAGGING REGIONS: THE CASE OF EASTERN CROATIA

Review article

Received: January 27, 2020Accepted for publishing: February 25, 2020

Katarina MaroševićJosip Juraj Strossmayer University of OsijekFaculty of Law OsijekStjepana Radića 13,31000 Osijek, [email protected]: +385912245559

A

Uneven level of regional development is something that has characterized Croatia for a long time, with Eastern Croatia lagging behind significantly. �ere are many indicators that substantiate such a condition as well as the expected trends (e.g. GDP per capita in counties that belong to Eastern Croatia, huge population drain in the region, development index calculated by the Ministry of regional development and many oth-ers). As the development level of counties in Eastern Croatia is far from comparable to the most developed ones (especially the City of Zagreb), it is necessary to identify areas for possible improvements in those lagging regions. In the context of the European Union, the development level of counties in Eastern Croatia is particularly low. Other EU members have also failed to achieve convergence towards total homogeneity, but this paper focuses on chosen examples of countries and their regional policies that aimed to decrease existing regional differences. Decentralization level is one of the important prerequisites to decrease exist-ing regional differences and adequately apply regional policies.

�is paper will theoretically examine the research on experiences of selected EU lagging regions and note the importance of the relationship between regional and national economy. As all five counties in Eastern Croatia can be characterized as lagging counties, one of the goals of this paper is, in accordance with theo-retical insights into European experiences, to compare the situation and trends in the lagging regions and counties in Eastern Croatia, going beyond economic considerations to include a much broader context.

Keywords: Regional development, lagging regions, Republic of Croatia, regional development inequalities, counties

Katarina Marošević: Lagging regions: �e case of Eastern Croatia



CC BY-ND












5 od 6 26. 06. 2017. 12:24

1. Introduction

In the mid-20th century, regional development be-came a central theme of academic and political life, so those times mark the beginning of the regional perspective. Regional equality in national economic development has therefore become an important part of the political agenda of many countries (Hig-gins, Savoie, 2018). At the same time, each mem-ber state of the European Economic Community turned to different incentive programs in order to stimulate development in less developed regions (Higgins, Savoie, 2018).

Regional economic policy, according to Vanhove (2018: 57), includes all forms of public intervention aimed at improving the geographical distribution of economic activities. Furthermore, in reality, re-gional policy is aimed at correcting certain spatial consequences of a free market economy, in order to achieve two interconnected goals, economic growth and improvement of social distribution. Vanhove (2018: 57) lists five stages that need to be distinguished: a) definition of regional problems and their origins; b) definition of objectives, if possi-ble in a quantitative way; c) definition of the strategy


256 God. XXXIII, BR. 1/2020. str. 255-270

to be followed; d) indication of the instruments to be used; and e) evaluation of the policy.

Hansen et al. (1990: 2) emphasize that a policy-oriented regional economy recognizes the impor-tance of efficient markets, but also seeks to diagnose sources of significant spatial inequalities and to use regional analysis as a tool to identify the failures that may occur in the economy as a whole. Regional poli-cy represents all conscious and deliberate actions by the authorities to change the spatial distribution of economic and social phenomena, including popu-lation, income, state income, production of various goods and services, transport facilities, other social infrastructure and even political power. Capello & Nijkamp (2019) emphasize that the conceptualiza-tion and coherent explanations of regional growth, as well as the differences that arise, are a mystery to the research community in many countries. �ere is no single panacea to increase or accelerate the de-velopment of a region in the national economy or in supra-national context. �erefore, regional policy is still in many cases “a black box”, and the outcomes of intensified regional growth strategies are often extremely unpredictable.

Structurally, the paper has four chapters. Following the introductory remarks, the second chapter fo-cuses on the theoretical background of the lagging regions, their experiences and the factors of poten-tial progress, with the distinction of two different types of lagging regions. Furthermore, the same chapter examines the opportunities to stimulate development in lagging regions, with a focus on se-lected European experiences. In the same chapter, the emphasis is placed on theoretically pervasive research on the state of regional development in Eastern Croatia, i.e. five counties of Eastern Croa-tia. �e focus of the third chapter is on the position of the Republic of Croatia and its lagging regions in the context of the NUTS 2 classification1. In addi-tion, this chapter elaborates on the macro image of the national economy through the prism of NUTS 2 regions, but also an overview of the county per-spective, which provides an insight into the situa-tion within the national economy of the Republic of Croatia. Chapter 4 summarizes the lagging re-gions theory, as well as the situation and trends in the form of concluding remarks for the Republic of Croatia.

2. Theoretical framework of regions lagging behind: European experience

�ere is an indisputable relationship between the national economy and the regions of national econ-omy, with the national economy as the sum of its regional components (Römisch et al., 2017). How-ever, these authors state that macroeconomic con-ditions and policies that influence them do not have the same level of impact in all regions, and therefore macroeconomic development that positively affects one region may even be detrimental to another re-gion. It is therefore necessary to emphasize that the problems faced by lagging regions are sometimes related to national issues, but directly manifest in the regions themselves.

Furthermore, certain regions are lagging not only in comparison with the EU average, but also in com-parison with national measures and other regions of the same national economy. In lagging regions there are usually structural problems and issues. It is important to emphasize that those regions of the European Union whose level of development is significantly lower than the EU average are called “catching up regions” (European Commission, 2015)2. �ere are two types of “catching up” regions: i) low-growth regions are regions that experience a persistent lack of growth and are less developed or transition regions (regions with GDP/capita up to 90% of the EU average), which did not converge with the EU average between 2000 and 2013; and ii) low-income regions, those that remain well below the EU average GDP per capita and apply to all regions with GDP per capita below 50% of the EU average in 2013. According to the report “Competitiveness in low-income and low-growth regions“ (2017: 1)3, both types of regions perform well below the EU aver-age in terms of employment, research and develop-ment rates as a GDP share, quality and accessibility of government. Farole et al. (2018)4 point out that the diversity of regions also requires different ap-proaches, and in this case, the use of different cohe-sion policies. Furthermore, they state that it is the recognition of the basic differences between the two types of regions, the low-income and low-growth regions, which is the decisive factor in creating a cohesion policy. Low-income regions are poor, but converge rapidly and many, though not all, are well positioned. On the other hand, low-growth regions are really lagging behind and are facing fundamen-tal structural barriers to achieve convergence.

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257God. XXXIII, BR. 1/2020. str. 255-270

Considering regional development in the context of the European Union, Bachtler & Begg (2018) emphasize the importance of innovation, human capital and efficient institutions as key areas of fu-ture policies. Human capital and institutions are also mentioned by Farole et al. in the Report of the World Bank about the European Union as the most important determinants of economic performance (2018: 48): “...some of the most significant determi-nants of economic performance are social endow-ments – human capital and institutions.“

Although human capital is very often cited as a key component of future development, most EU member states are in fact recording negative de-mographic trends, and thus a problematic issue of future human capital potential. For example, Farole et al. (2018) state that demographics and technol-

ogy will be highlighted as drivers of divergence (e.g. concentration of educated and skilled work-ers around metropolitan areas and declining young population, evident in most southern and eastern European regions, which are losing more than 1% of the population a year as a result of low fertility and migration rates). In general, therefore, it can be said that lagging regions report below average fertil-ity and net migration5. For example, only two out of the 45 lagging regions have fertility rates above the EU average. Hence, there is increasing divergence in relation to leading regions.

As the need for a specific regional policy in line with the requirements of a particular region, or at least several types of tailored regional policies, has already been emphasized, the specific approaches to policy in lagging regions are highlighted in Figure 1 below.

Figure 1 Templates of policy approaches in lagging regions

Source: Farole, T., Goga, S., Ionescu-Heroiu, M., (2018), “Rethinking Lagging Regions: Using Cohesion Policy to deliver on the potential of Europe’s regions”, International Bank for Reconstruction and Development/�e World Bank, Washington, DC, available at: http://pubdocs.worldbank.org/en/739811525697535701/RLR-FULL-online-2018-05-01.pdf (Accessed on: October 9, 2019)

�e four quadrants shown (Figure 1) can be inter-preted as follows (Farole et al., 2018): i) Densely populated, centrally located region (upper right quadrant): �ese regions are generally not those belonging to lagging regions, with the stage of the integration process as a possible reason. However, if it does belong to lagging regions, usually it is a

serious failure of the government and/or major institutional weaknesses or conflicts; ii) Densely populated, peripherally located region (lower right quadrant): these regions, which are as lagging re-gions numerous in the European Union, especially among “low-growth” lagging regions, represent the types of regions where typical place-based sectoral


258 God. XXXIII, BR. 1/2020. str. 255-270

or spatial investments - for example, the implemen-tation of Smart Specialization Strategies — were ef-fective in overcoming coordination errors to unlock agglomeration; iii) Sparsely populated, peripherally located regions (bottom left quadrant): �ese re-gions generally lack the key ingredients required for sustainable transformation to develop high-added-value activities as they lack agglomeration potential and face severe market access constraints. A focus is needed on creating equality of opportunity for individuals in the region - to develop institutions to support the quality of social services with a focus on human capital accumulation. In rare peripheral regions where advanced quality institutions ex-ist and human capital has already reached a high level, a targeted opportunity for regional economic development should emerge through existing insti-tutions; iv) Sparsely populated, centrally located re-gions (upper left quadrant): �ese regions are often located near larger agglomerations, so the priority is to improve connectivity to the agglomeration. Tar-geted sectoral investments may also be relevant in this type of region. �e challenge is the limited po-tential of agglomerations, meaning that specializa-tion is extremely important, which raises the typical risk of regional industrial policy that aims to “pick winners“.

If we discuss specific examples of regional policy implementation, we can consider the research of Brown et al. (2017)6, who studied eight selected lag-ging regions in EU countries (Spain, Italy, Portugal, Romania, Greece, Bulgaria, Hungary, Poland) and reported remarkable heterogeneity in the approach to those lagging regions. Among the eight studied, Spanish regions have a bridge federal structure with regions enjoying a high degree of autonomy while adapting their policies to investment needs, even despite the imposed central budget constraints. It should be noted that the competences of the Span-ish regions, the so-called autonomous communities include, but are not limited to, territorial develop-ment, the economy and economic development, agriculture, social policy, the environment, health, education and others, either shared with the state or kept within autonomous communities.

�e degree of autonomy of regions and national policies regarding regional development are strong-ly related, as pointed out by Brown et al. (2017). Among the eight countries studied, Italy tradition-ally has the most developed national strategy for regional development, with a strong focus on its

lagging southern regions. �is is reflected in the Italian organizational approach, and thus the na-tional regional policy is highly institutionalized, in terms of both the amount of funding and their own resources, in order to boost growth in developing regions. Spain is right behind Italy (relative to the countries studied), with a national regional policy in place. Contrary to Italy, in Spain’s regional policy, given the high degree of autonomy of its regions, national policies do not interfere with regions in the form of setting investment priorities. Instead, Spanish policy is implemented through the redis-tribution of funds from more to less developed regions, thus helping economically weaker regions in a financial sense. Among other countries in the analysis, Greece with its own national regional policy, mainly operates through the centrally estab-lished “Public Investment Program”. Compared to Italy and Spain, the size of Greece’s national policy in financial terms is small, which makes Greece sig-nificantly more dependent on EU cohesion policy than the other two countries. For the remaining five countries, including Portugal and four Eastern Eu-ropean countries whose regions are lagging behind, it is necessary to emphasize that there are no major national regional policies.

Farago & Mezei (2018) state that the international academic literature pays insufficient attention to the fact that unified European regional/cohesion policy and regulations, as well as changes that occur with-in it, produce different effects in developed (center) and transition countries (periphery). �e countries of Central and Eastern Europe are lagging behind in terms of progress and future in the European Un-ion. In addition, academic debates about European regional policy and planning are also dominated by Western and Northern European leaders. �ere-fore, authors emphasize that in a “unified Europe” periphery should also be entitled to its share in the reconstruction of Europe.

�e following chapter is a comprehensive theoreti-cal account of previous research into regional devel-opment of Eastern Croatia.

2.1 Review of previous regional development research of Eastern Croatia

�ere are five counties in Eastern Croatia and all of them have an extremely low level of development, most of them lagging behind. �ere are many rea-sons for this, but we can single out consequences of

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the war as the main one. Accordingly, it should be noted that the academic literature contains analy-sis that indicates the possibility of exploiting war-affected areas for economic gain, for example for tourism purposes. For example, Šulihoj (2017) ex-plored the mentioned topic for the territory of the Republic of Croatia, pointing out that war-damaged areas can become tourist destinations. Neverthe-less, as stated by Klarin (2018), it is necessary to introduce the concept of sustainable development, which would reduce the negative impact of tour-ism. �e implementation itself depends on a num-ber of factors. Highlights are, for example, creating a stimulating institutional environment, proactive local governments, engaging the local population and educating the stakeholders about governance and sustainable development principles. Search-ing for the means of sustainable development, Bar-toluci et al. (2015) analyze the state of rural tourism in Croatia and emphasize the need to use ecologi-cally preserved space according to the principle of sustainable development. Denona Bogović et al. (2016), analyze the developmental characteristics of Eastern Croatia and the increase in developmen-tal divergence, i.e. regional inequality, with respect to comparative advantages. �ey propose the im-plementation of the “green economy“, which reit-erates the importance of sustainable development principles. So, the prerequisites for implementa-tion and transformation of the current economic structure of this region should be oriented towards a strategic commitment and implementation of de-velopment policy according to the principles of a green economy.

If we take into account the demographic factor, recorded trends are very discouraging.7 In terms of unfavorable trends, Matišić & Pejnović (2015: 101) claim that “Eastern Croatia is the largest problem area of Croatia in recent times.” Lončar & Marinković (2015) also analyze the socio-demo-graphic processes in Eastern Croatia. At the heart of their research, which relies on several selected demographic and economic indicators, is the struc-ture of certain economic activities as well as the population, which they emphasize should be the basis of regional development.

Continuing on the earlier point of the impact of hu-man capital on changes in regional development, Borozan (2015) highlights significant regional economic disparities, explores internal migration flows, tests for economic convergence and assesses

the effects of internal migration (net and gross) on convergence and growth. �e results point to the following: i) contrary to expectations based on neo-classical theory, Croatian counties face complete and conditional economic divergence; ii) in- and out-migration works symmetrically; iii) net migra-tion mainly appears to be a force that accelerates divergence, just opposite to gross in- and out-migra-tion; iv) although estimated parameters of net and gross migration have expected signs, their effect size lies in the range of statistically significant but mi-nor to insignificant; v) migrant characteristics and behavior matters when the effect size is considered. In addition to its focus on migration flows, the aca-demic literature on regional development also ex-amines other important economic issues. Talking about public sector employment and the share of self-employment, Botrić (2012) shows that at the regional level, public sector employment is nega-tively correlated with the share of self-employment and that the educational level of the self-employed is an important category for clarifying differences in Croatian counties.

Current research also includes an analysis of the sectoral structure of the economy for the five coun-ties of Eastern Croatia, covering the period from 2009 to 2017. �e results of the analysis show that some counties have relatively smaller local com-petitiveness than the national average, while some have a positive value of the local component, which indicates an increase in local competitiveness (Trinajstić et al., 2019). Regions’ strength tests are also conducted at the regional level and through some empirical analyses. Čučković et al. (2013), for example, examine the regional competitiveness of Croatian regions, grouping them based on major competitive strengths and weaknesses. �e analysis confirms that Central and Eastern Croatia, on aver-age, are the least competitive regions and require long-term efforts to catch up with the rest of the country. Furthermore, decision makers should cer-tainly take into account that significant investments are needed to support entrepreneurial and inno-vation activity along with investments in business infrastructure. It is important to emphasize that the potential on which the competitiveness of the region will be built in the future is positively cor-related with the level of education of its inhabitants.

Elaborating on the suggestions about the necessity of education as a part of human capital that can be improved, the author of this paper had an insight


260 God. XXXIII, BR. 1/2020. str. 255-270

Table 1 Comparison of the rankings of the counties of Eastern Croatia and the City of Zagreb by GDP per capita by PPS, 2015 (EU28 = 100) and for 2008, including the development index

County Ranking 2015

Ranking 2008 Index 2015 Index 2008 Development index

20189

City of Zagreb 362. 336. 107 109 117.758

Osijek-Baranja 1236. 1174. 46 53 96.009

Vukovar-Srijem 1309. 1257. 34 40 91.992

Požega-Slavonia 1313. 1256. 33 40 93.947

Virovitica-Podravina 1317. 1242. 32 42 90.666

Brod-Posavina 1318. 1279. 32 37 93.449

Source: Author’s editing, according to sources from Croatian Chamber of Economy (2019), “Razvijenost statističkih regija NUTS3 razine u Europskoj uniji”, available at: https://www.hgk.hr/documents/gospodarska-razvijenost-nuts-3-regi-ja5c49bd13e22f8.pdf (Accessed on: October 13, 2019); Development index 2018 values were taken from calculations done by the Ministry of Regional Development and EU Funds, available at: https://razvoj.gov.hr/o-ministarstvu/djelo-krug-1939/regionalni-razvoj/indeks-razvijenosti/vrijednosti-indeksa-razvijenosti-i-pokazatelja-za-izracun-indeksa-ra-zvijenosti-2018/3740 (Accessed on: November 17, 2019)

into the Statistical Reports of the Central Bureau of Statistics8 on higher education in 2013-2016 by place of residence. �ese reports show that the share of students who have graduated from uni-versity or professional studies by county and city/municipality of residence, decreased in all coun-ties of Eastern Croatia, and in the City of Zagreb in 2016 compared to the initial observation in 2013, suggesting the already well-known demographic problems and “loss” of population. It is clear that long-term education processes should be taken into account, and the alarming results of the reduced enrollment quota may not be visible for three, four or more years, but should not be neglected.

�e economic development of individual counties is presented in a European context by the analysis

of the Croatian Chamber of Economy (2019). It is evident that in 2015 Croatian counties were in a more unfavorable situation than in 2008 compared to each other, but also to the context of the Euro-pean Union NUTS 3 regions (Table 1).

It should be emphasized that such a change may lie in the fact that other NUTS 3 regions of the Euro-pean Union have advanced significantly compared to the 2008 data, but also potentially in the poorer performance of the areas for which such indica-tors were recorded. Furthermore, the same table also shows the development index in 2018, again showing all five counties of Eastern Croatia lagging behind significantly, with slightly better recorded results of Osijek-Baranja County compared to the remaining counties of Eastern Croatia.

�e positive impact of entrepreneurial activity on economic growth is significant, as confirmed by the research conducted by Korent et al. (2015), em-phasizing the importance of entrepreneurship for regional development at the level of Croatian coun-ties. Advisable recommendations for the underde-veloped regions of Croatia can be found in good practices of foreign countries. For example, Bojar et al. (2016) cite a positive example of clustering in Polish agriculture and food production industry. In addition, there are indications of increased impor-tance of such trends for regional development and growth, making local and regional business estab-lishments and farms more competitive and profit-able. Many EU member states have also implement-

ed cluster-based strategies, and Anić et al. (2019) emphasize different aspects of clustering, with some members interested in lobbying activities, while others are focused on networking and inno-vation for the most important clustering goals. �e Ministry of Economy, Entrepreneurship and Trade (2019)10 source points out that the Smart Speciali-zation Strategy of the Republic of Croatia for the period 2016-2020 is focused on the need to connect and involve all participants in the innovation sys-tem, i.e. business and scientific communities with local and regional government and state adminis-tration. Obadić & Tijanić (2014) emphasize the im-portant role of clusters in accelerating regional and national economic development. Based on mul-

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tivariate analysis results these authors found that those who felt clusters were unnecessary were also members of a cluster with a small number of em-ployees who were dissatisfied with various jointly organized marketing activities, lobbying, research, development and education. �erefore, results also indicate that more effort should be put into trying to use clustering capabilities and opportunities, as well as defining the purpose, objectives and benefits of clustering in a simpler way.

�erefore, in the continuation of this paper, an at-tempt is made to investigate at what level it is possi-ble to stimulate the development of lagging regions, taking into account various barriers that may be en-countered when creating certain solutions.

2.2 Encouraging the development of lagging regions: cohesion policy

Given that regional economic development, as well as the needs of different regions, is a process related to the category of dynamism, adjustments are needed in the ways of implementing regional policy as well as in setting its goals. According to the UNESCO website (2017)11, EU regional policy, i.e. cohesion policy, aims at improving the econom-ic well-being of regions in the European Union and avoiding regional differences, with regional policy directed at all regions and cities in the European Union to ensure job creation, business competitive-ness, economic growth, sustainable development, but also to improve the quality of life of the region’s inhabitants. Furthermore, as stated by Tulumello (2016), European cohesion policy was established in response to the risk of market integration that could possibly exacerbate national and regional socio-economic imbalances.

Vanthillo & Verhetsel (2012: 1) point out: “Due to the changing role of the “region” in economic devel-opment, it appears that policies targeting regions underwent significant changes in goals, geographi-cal scope, governance and policy instruments.” Bachtler, Mendez & Polverari (2016) provide a comprehensive overview of proposals for possible changes to the expected cohesion policy for the coming period taking into account, among other things, a potential way of improving the existing administrative capacity of the regions. Gänzle et al. (2018) cite that the European Union is imple-menting macro-regional strategies as a new EU governance tool, combining territorial community

cooperation and a repertoire of cohesion policies with intergovernmental regional cooperation in-cluding EU Member States and partner countries (e.g. Baltic Sea, Danube, Adriatic-Ionian i Alpine macroregion strategies). In order to better monitor and harmonize inter-regional and intra-regional needs, certain analysis are also carried out, e.g. Chmieliński (2017)12, on the topic of policy recom-mendations on how to integrate cohesion policy with urban and rural policies.

Regarding regional policy and regional develop-ment, Rodriguez-Pose & Ketterer (2019) state some interesting facts on econometric research for the period 1999-2013: i) the quality of government is of utmost importance in regional growth; ii) relative improvements in government quality are a strong driver of development; iii) one-size-fits-all policies in the case of lagging regions are not the solution; iv) improving the quality of government is crucial for low-growth regions; v) in low-income regions, the ability to reduce contributions is still a major barrier to development. �us, the low-growth re-gions of Southern Europe benefit the most from the improvements provided by the government, while the low-income regions of Central and Eastern Europe consider investing in traditional drivers of growth to be the main tool for successful economic development.

Given the evident complexity of creating adequate regional policies to minimize disparities and achieve convergence of economic outcomes, as stated by Farole et al. (2018: 62), remains an unrealistic ex-pectation. �erefore, it is crucial to form so-called fundamental theories of place-based policy, thereby removing market barriers to production factors as a mechanism to stimulate hidden economic resourc-es rather than redistribution or equal convergence. For the post-2020 period, it is recommended to implement a region-centered cohesion policy that focuses solely on maximizing regional potential. Two goals are set: i) to maximize regional poten-tials, measured not only by output per capita but also by the capacity to create quality (productive) jobs (EPI - Economic Potential Index); ii) to ensure equality, that is, an opportunity for individuals to reach their potential. So, when creating place-based goals, there is a clear focus on potentials. Further-more, while the goal of convergence remains, it is not defined in terms of spatial economy outcomes but in terms of social outcomes and individual op-portunities.


262 God. XXXIII, BR. 1/2020. str. 255-270

According to the New Cohesion Policy (2018)13 for the period 2021–2027, as the European Union’s main investment policy and one of its most concrete expressions of solidarity, the European Commission has proposed a modernized version of Cohesion Pol-icy, which for example in the context of regional de-velopment includes: i) regional development invest-ments targeted by Objectives 1 and 2; 65 to 85% of ERDF and Cohesion Fund resources will be directed towards these priorities, depending on the relative economic strength of the member state; ii) cohesion policy continues investment in all regions, respect-ing the categories of less developed, transitional and more developed; iii) new types of interregional and cross-border programs (“Interreg”) will help mem-ber states to overcome cross-border obstacles and develop common services, and the Commission also proposes a new instrument for border regions and member states seeking to harmonize their le-gal frameworks, called �e European Cross-Border Mechanism; iv) a development template based on a successful pilot programs 2014-2020, with the Com-mission proposing the creation of an Interregional Innovative Investments system, where regions with similar areas of smart specialization will be sup-ported in creating Pan-European clusters in priority sectors such as big data, circular economy, advanced manufacturing or cyber security.

Farole et al. (2018: 48) present interesting data on future radical restructuring of the economic hierar-chy in European regions in the coming two cycles of cohesion policy, in case the current trends in low-in-come and low-growth regions continue. As early as the next cohesion policy cycle, in 2021, low-income regions will on average reach 50% threshold of the European Union average by its definition of low-in-come regions. Consequently, by the end of the next cycle of the cohesion policy program, low-income and low-growth regions will switch positions, with the average of low-growth regions falling to the 50% threshold and the average of low-income region ris-ing significantly above it. By 2035, low-income re-gions will have achieved a transition stage. �e same authors (2018: 52) point out that the report suggests increasing attention to existing low-growth regions as a critical challenge of cohesion policy in the fu-ture programming period in order to ensure that current low-income regions do not become future low-growth regions. Furthermore, significant het-erogeneity in low-income regions is indeed present, suggesting that there is a high possibility that certain regions will be able to converge while others may be

lagging behind (delaying progress). �ese authors (2018: 53) also cite the important fact that social outcomes do not always follow economic outcomes. It is obvious, therefore, that relatively high levels of income are a necessary but insufficient condition for securing high social outcomes (2018: 54): “… you can have a rich region and still have great social outcomes, but you cannot be a poor region and have good social outcomes.“ Cohesion orientation on the interpersonal level, not just on the territorial level, a more sophisticated focus on human capital and, more broadly, social outcomes, even in high-income regions will be very important. �erefore, the local and regional levels of government play an important role. For example, the same authors state that eco-nomic progress at the regional level can be evident in economic and social outcomes for the household and the individual. If regional policy focuses on gen-erating sustainable and quality job opportunities for all its working age residents, especially women and young people, it has multiple effects on the regional labor market. Furthermore, labor market outcomes are important not only because work and earnings are channels through which economic progress at the regional level is translated into household and individual economic and social outcomes, but also because work has significant positive economic and social externalities as future workers become more effective in the presence of others workers, and tend to invest more in building next-generation human capital.

After an extensive insight into European practice and the situation in selected countries regarding the possibilities of progress of individual regions and their development, followed by a theoretical background and the empirical study of the area of Eastern Croatia, the analysis of the economic situ-ation and trends regarding regional development in Eastern Croatia as a lagging region is presented below.

3. Discussion of regions lagging behind in the context of Eastern Croatia

�e regions14 of the Republic of Croatia, compared to most regions of other EU member states, have a much lower level of development expressed in GDP per capita with respect to purchasing power parity (Figure 2). It is evident from Figure 2 that the level of realized GDP per capita (PPS) in the Republic of Croatia for both regions is at a lower level in relation to other regions of EU member states.

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Figure 2 Distribution of GDP per capita (PPS) across regions within EU countries, 2015

Source: Farole, T., Goga, S., Ionescu-Heroiu, M., (2018), “Rethinking Lagging Regions: Using Cohesion Policy to deliver on the potential of Europe’s regions”, International Bank for Reconstruction and Development/�e World Bank, Washington, DC, available at: http://pubdocs.worldbank.org/en/739811525697535701/RLR-FULL-online-2018-05-01.pdf (Accessed on: October 9, 2019)

�e observation of Eastern Croatia in the context of other counties of the Republic of Croatia points to the existence of exceptional differences and in-equalities within the country. Economic indicators confirm the stated differences, as well as their in-crease15. Dragičević & Letunić (2008) state that re-gional differences that create even bigger gaps are inherited from the earlier system; they have been obvious since Croatia became independent, but have only increased as a result of the war and the lack of government strategies and policies to ad-dress this problem. Regional development, sim-ply expressed, was not a central policy issue. Fur-thermore, certain authors, for example, Bićanić & Pribičević (2013), consider regional inequalities for an extremely long period, taking into account the forty-year period between 1968 and 2008.

�e regional development of the Republic of Croatia is determined by the Law on Regional Development (NN 147/14, 123/17, 118/18; hereinafter referred to as “the Law”)16, and the current version has been in force since January 1, 2019. �e very purpose of implementing regional development policy, as an instrument for change at the regional level of the Republic of Croatia, is defined as the need to cre-ate the appropriate conditions, as stated in Article 2 of the Law: “�e aim of the regional development policy is to contribute to social and economic de-velopment of the Republic of Croatia, in accord-ance with principles of sustainable development, by creating conditions that will enable all parts of the

country to strengthen their competitiveness and re-alize their own development potential.“17 �e body responsible for the implementation of policies ad-dressing the inequalities within the country and aimed at the balanced regional development is the Ministry of Regional Development and EU Funds. �e Ministry measures the degree of development of each area by the development index. �e analysis of this index as an indicator of the Croatian regional policy is given by Perišić & Wagner (2015). In the current NUTS 2 classification, which is particularly important because of its statistical recording capa-bility, the Republic of Croatia is divided into two18 NUTS 2 regions. However, this classification has been met with numerous negative comments and consequences. �e introduction of a new classifica-tion is already presented and a study has been made for this purpose by the Institute for Development and International Relations (hereinafter referred to as “the Study”) (Puljiz, Biondić, 2018)19. �e Study notes that changes in the number of NUTS 2 re-gions have already been addressed in certain coun-tries. Generally, the common denominator refers to the extrication of an area that deviates significantly, in positive or negative terms, from GDP per capita from other areas, and most commonly by separat-ing the capital city from the rest of the NUTS 2 re-gion. Puljiz & Biondić (2018:16) cite some impor-tant changes suggested in the study: “�e possibility of isolating the City of Zagreb for the first time as a separate NUTS 2 region is an important novelty,


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which can finally determine the division at NUTS 2 level which will provide the greatest degree of advan-tage in using EU funds as well as in securing regional subsidies“. In addition, there are three objectives of the new division of NUTS 2 regionalization that are to be achieved (Puljiz, Biondić, 2018: 27): „i) to pro-vide the greatest possible degree of advantage for as many residents of the Republic of Croatia as possible with regard to the rules for granting regional aid; ii) to ensure the best possible conditions for the use of Cohesion Policy funds for the largest area of the Republic of Croatia; iii) to form as homogeneous re-gions as possible in terms of development and other important features“. Puljiz et al. (2019) elaborate on the results achieved in the implementation of cohe-sion policy in the Republic of Croatia so far, as well as clarify how it will be approached in further devel-opment of the cohesion policy.

�e Croatian Chamber of Economy (2019)20 in its Sector for Financial Institutions and Economic Analysis, Department for Macroeconomic Analysis, produced a ranking of Croatia’s NUTS 2 and NUTS 3 regions relative to the rest of the European Union. In 2008, most of the counties in Croatia, which be-long to the NUTS 3 level, were ranked lower than one thousand. It is extremely important to empha-size that the three worst ranking counties were those in the region of Slavonia (Table 2). At the same time, large differences in the development of Croatian re-gions are noticeable, with the City of Zagreb taking the place of the most developed Croatian county with 2.9 times higher GDP per capita, expressed in PPS, while the worst ranked for the stated period was the Brod-Posavina County. �e data for 2015 shows that Croatian counties are in a less favorable position than in 2008 in the context of the European Union NUTS 3 level. �e data for 2015, from the same source, indicate widening differences between Croatian counties, as the differences between the most developed and underdeveloped counties in-creased by 3.3 times. �e City of Zagreb maintained the leading position in terms of development, while the least developed counties were Brod-Posavina and Virovitica-Podravina counties. Furthermore, in 2015, as many as four Slavonian counties were also the worst positioned in the context of the Republic of Croatia (Table 2).

Puljiz & Biondić (2018) point out that, according to the range of differences at NUTS 3 level, Croa-tia does not deviate significantly from most other member states in Central and Eastern Europe, but

when we consider the differences between NUTS 2 regions, differences are significantly larger in Con-tinental Croatia than in Adriatic Croatia. �e same authors further state that in Continental Croatia the ratio between NUTS 3 regions, i.e. between Croa-tian counties, with the highest and lowest GDP per capita is 3.17, while in Adriatic Croatia it is 1.62, i.e. Continental Croatia is a more heterogeneous region when considering the level of development of the associated NUTS 3 regions compared to other NUTS 2 regions in the 11 Eastern European countries. It is necessary to emphasize that the cur-rent classification of counties into the appropriate NUTS 2 regional level has led to a paradoxical ra-tio of regional aid, where currently counties with a lower level of development can achieve a lesser degree of regional aid than counties with a higher level of development. It is worth mentioning that in terms of the highest amount of aid awarded, out of a total of five as many as three relate to the Slavonian counties, namely Osijek-Baranja, Vukovar-Srijem and Brod-Posavina. �us, although the least devel-oped counties have attracted the funds needed for investment, given the dynamics of GDP per capita and certain demographics, it is evident that the grants awarded were not sufficient to significantly improve socio-economic opportunities in eastern Continental Croatia. At the request of the Ministry of Regional Development and EU Funds21, and ac-cording to research by Apsolon22, several Croatian towns were selected to receive physical, economic and social support, including Beli Manastir, Benko-vac, Petrinja and Vukovar. �e main challenge for the central governance mechanism is to create an investment model that would propel the economy and reduce emigration from those most deprived areas.

Gazilj et al. (2016) emphasized the importance of the legal basis needed to implement the institutional framework at the regional level and its effectiveness. �e basic problem of Eastern Croatia is related to reduced economic and social development. One of the main reasons for the developmental decline of the region of Eastern Croatia is the lack of self-gov-ernment status, since Eastern Croatia is made up of the already mentioned five counties. �erefore, with the necessary implementation of regionalization within the Croatian territory, as well as possible so-lutions due to development problems, the authors propose the efficient use of EU funds and greater accountability and efficiency of state institutions.

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�e Croatian Chamber of Economy (2019) further states that drawing on EU funds is positive in its im-pact on regional development; the amount of funds drawn is inversely proportional to the development level and thus underdeveloped regions should and must use the full range of options at their disposal. Furthermore, since the City of Zagreb is currently in the Continental Croatia classification and thus does not give a realistic picture of the development level, and the Central Bureau of Statistics estimates

that in 2017 the City of Zagreb exceeded the popu-lation needed to become a NUTS 2 unit, the newly created region of Continental Croatia could benefit significantly from EU funds. �erefore, the Min-istry of Regional Development and EU Funds has already initiated the modification of the existing NUTS 2 regions.

�e economic indicators of the selected counties are given below (Table 2).

Table 2 Basic economic indicators of selected counties for 2015 and 2016

CountyGDP per

capita (EUR)

GDP per capita in PPS (EU-28=100)

Gross added value (base prices)

GDP per capita (EUR)

Indexes(HR=100)

Gross added value (base prices)

2016 2015

Brod-Posavina 6 292 34.3 2.0 5 962 56.3 2.0

Osijek-Baranja 8 834 48.2 5.5 8 413 79.5 5.6

Požega-Slavonia 6 346 34.6 1.0 6 061 57.3 1.0

Virovitica-Podravina 6 190 33.8 1.0 5 852 55.3 1.1

Vukovar-Srijem 6 563 35.8 2.3 6 235 58.9 2.4

City of Zagreb 19 546 106.6 33.6 18 579 175.5 33.4

Source: Croatian Bureau of Statistics, First Release Number 12.1.3., Zagreb, February 12, 2019, from Table 2. GDP for Republic of Croatia at NUTS 2013 – 2nd level and by counties, 2016; Table 4. Share in gross value added of the Republic of Croatia, at NUTS 2013 – 2nd level and by counties, 2016; First Release Number 12.1.3., Zagreb, February 15, 2018, GDP of the Republic of Croatia at NUTS 2013 – 2nd level and by counties, 2015, available at: https://www.dzs.hr (Acce-ssed on: November 2, 2019)

�e necessity of self-government status, as stated by Gazilj et al. (2016), with the need for decentrali-zation, is interpreted by Jurlina Alibegovic (2013), who analyzes reforms within decentralization framework and their effects on regional and local development process in Croatia. In doing so, the author points out that there is a link between the degree of decentralization and the degree of region-al development. Reforms are therefore necessary to redefine the role of the public sector and improve performance, because a high degree of decentrali-zation of administrative power and responsibility is expected to result in increased efficiency of the public sector, improvement of local and regional government, and promotion of local and regional economic development. Đulabić & Koprić (2017) emphasize the importance of decentralization re-form in the Republic of Croatia for the period 2001 to 2015, focusing on the impacts, effects and out-comes of decentralization for specific areas, includ-ing education, health, social care and firefighting.

4. Conclusion

Regional development is probably one of the few economic topics that has, in less than a century of intense research, become almost a key part of the development of national economies. In order to correct the differences that have arisen due to the pursuit of a free market economy, it is necessary, given the dynamics of national economies and their regions, to constantly update the tools and instru-ments of regional or cohesion policy. A single re-gional policy is also not a solution, since every region and its economic reality is unique within a national economy.

Furthermore, the national economy can be viewed as the sum of regional units, but the macroeconom-ic effects are not manifested equally in all regions. �us, it can be concluded that in specific situations, national issues and problems are more pronounced in certain regions that are lagging behind. If a re-gion’s level of development is significantly lower


266 God. XXXIII, BR. 1/2020. str. 255-270

than the EU average, it is categorized as a “catch-ing up region”. Such regions are divided into two different types. �e first are low-growth regions experiencing a permanent lack of growth, i.e. less developed or transition regions that did not con-verge with the EU average between 2000 and 2013. �e second are low-income regions, which include those that remain well below the EU average by GDP per capita, i.e., all regions below 50% of the EU average in 2013. Low-growth regions, such as those in Southern Europe benefit most from improve-ments by the government, while low-income re-gions, such as those in Central and Eastern Europe, benefit most from the economic developments they make from investing in traditional growth drivers.

It is necessary to introduce different approaches adapted to the conditions of the region to which the policies apply. Key areas of investment, as cited by several authors, should include human capital and institutions. One of the templates for policy approach in lagging regions outlines four possible options (Figure 1). Based on that classification, the conclusion could be that all five counties of East-ern Croatia can be viewed in the context of sparsely populated areas. Four of them are peripherally lo-cated regions, and one can be viewed as a sparsely populated, centrally located region. �e former lack agglomeration potential, so it is necessary to strengthen the creation of opportunities for indi-viduals in the region and to develop institutions to support the quality of social services with a strong interest and focus on human capital accumula-tion. Vukovar-Srijem, Požega-Slavonia, Virovitica-Podravina and Brod-Posavina could be included in this category of counties. Osijek-Baranja County could fall into the category of sparsely populated, centrally located regions. Being close to major ag-glomerations, such regions should be linked to them, and investments should be targeted by sector, aiming to compensate for the limited potential of agglomerations through specialization. It is crucial to continually stimulate development at both indi-vidual and institutional levels.

Given the recorded situation and expected trends, a key question is how to devise adequate policies that target not only human capital development but also create an incentive for people to stay in these parts of the Republic of Croatia, which are experiencing big population outflows.

�e new EU’s programming period also brings about certain changes in the ways in which regional

policy is implemented, recommending the imple-mentation of region-centered cohesion policy in order to maximize regional potential. It is impor-tant to note that while the goal of convergence re-mains, it is defined in terms of social outcomes and individual opportunities.

In addition to the inadequacy of the same policy for different regions, several authors also cite the im-portance of government quality, especially in low-growth regions, while in low-income regions re-ducing fiscal contributions is still a major barrier to development. �e current non-administrative divi-sion in the Republic of Croatia encompasses two NUTS 2 regions, although the government has al-ready, by a proposal pending a final decision, raised the important issue of change to the four NUTS 2 regions, thus ensuring a more balanced future de-velopment. However, the question remains how to construct a specific and targeted regional policy that will drive change in Eastern Croatia, harness its potential, and not necessarily focus solely on harmonizing regional achievements.

Future research should certainly include positive examples of tackling similar problems within na-tional economies with the extreme underdevelop-ment of certain regions, as well as recommendations on how to improve the functioning of institutions, which are ultimately one of the main obstacles to (regional) development. In general, the countries of the European Union faced with the issue of lagging regions rarely have adequately designed national regional policies.

�e observed situation in Eastern Croatia and the five counties belonging to that area is characterized by low levels of development in both economic and social terms.

�e paper is theoretically well supported with de-tails on previous European and Eastern Croatian experiences in the field of regional development and in line with the aim to become a basis for in-terpreting the potential of Eastern Croatia and its associated counties. Nevertheless, the limitation is the lack of empirical analysis focused on explor-ing the current institutional framework in order to come up with new recommendations and possible solutions. Besides, future research should include analysis of ways and means of achieving a greater degree of decentralization.

Review article

267God. XXXIII, BR. 1/2020. str. 255-270

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22. Korent, D., Vuković, K., Brčić, R. (2015), “Entrepreneurial activity and regional development”, Eco-nomic Research-Ekonomska Istraživanja, Vol. 28, No. 1, pp. 939-958.

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25. Matišić, M., Pejnović, D. (2015), “Uzroci i posljedice zaostajanja Istočne Hrvatske u regionalnom raz-voju Hrvatske”, Hrvatski geografski glasnik, Vol. 77, No. 2, pp. 101-140.

26. Obadić, A., Tijanić, (2014), “Multivariate analysis of the Croatian clusters”, Economic Research-Eko-nomska Istraživanja, Vol. 27, No. 1, pp. 120-133.

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28. Puljiz, J., Maleković, S., Keser, I. (2018), “Cohesion Policy in Croatia: What Have We Accomplished So Far?”, in Petak, Z., Kotarski, K. (Eds.), Policy-Making at the European Periphery: �e Case of Croatia, Palgrave Macmillan, London, pp. 285-302.

29. Rodriguez-Pose, A., Ketterer, T. (2019), “Institutional change and the development of lagging regions in Europe”, GEN Working Paper No. A2018-8, Governance and Economics research Network, Ou-rense, February 2018.

30. Römisch, R., Brown, A., Gardiner, B, Stenning, J. (2017), “Economic Challenges of Lagging Regions I: Fiscal and Macroeconomic Environment”, wiiw Research Report No. 421, �e Vienna Institute for International Economic Studies, Vienna, December 2017.

31. Šuligoj, M. (2017), “Warfare tourism: an opportunity for Croatia?”, Economic Research-Ekonomska istraživanja, Vol. 30, No. 1, pp. 439-452.

32. Trinajstić, M., Krstinić Nižić, M., Rudan, E. (2019), “Analysis of Eastern Croatia regional Growth: Shift-share Analysis”, in Leko Šimić, M., Crnković, B. (Eds.), Economy of Eastern Croatia – Vision and Growth, Josip Juraj Strossmayer University of Osijek, Faculty of Economics in Osijek, Osijek, pp. 250-258.

33. Tulumello, S. (2016), “Multi-level Territorial Governance and Cohesion Policy. Structural Funds and the Timing of Development in Palermo and the Italian Mezzogiorno”, European Journal of Spatial De-velopment, No. 62, pp. 1-23.

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Lessons from Flanders (Belgium)”, Belgeo - Belgian Journal of Geography, No. 1-2. 36. Živić, D. (2017), “Demografsko pražnjenje Istočne Hrvatske”, Političke analize, Vol. 8, No. 31, pp. 24-

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E

1 European Commission Glossary, available at: https://ec.europa.eu/regional_policy/hr/policy/what/glossary/n/nuts (Accessed on: November 14, 2019)

2 European Commission (2015), “Catching up regions”, https://ec.europa.eu/regional_policy/en/policy/how/improving-investment/lagging_regions (Accessed on: October 7, 2019)

3 European Commission (2017), “Competitiveness in low-income and low-growth regions: The lagging regions report”, Brussels, available at: https://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/lagging_regions%20report_en.pdf (Accessed on: November 17, 2019)

4 Farole, T., Goga, S., Ionescu-Heroiu, M., (2018), “Rethinking Lagging Regions: Using Cohesion Policy to deliver on the potential of Europe’s regions”, International Bank for Reconstruction and Development/The World Bank, Washington, DC, available at: http://pubdocs.worldbank.org/en/739811525697535701/RLR-FULL-online-2018-05-01.pdf (Accessed on: October 9, 2019)

5 Net migration rate presents in-migration less out-migration as a share of the population.

6 Brown, A. et al. (2017), “Final Report, Economic Challenges of Lagging Regions”, European Commission, Publications Office of the European Union, Luxembourg, available at: https://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/challenges_lagging/econ_challenges_lagging_en.pdf (Accessed on: November 2, 2019)

7 See more: Živić, D. (2016). “Suvremena migracija kao odrednica depopulacije Istočne Hrvatske (2001.-2014.)”, In: Šundalić, A., Zmaić, K., Sudarić, T., Pavić, Ž. (eds). Sociokulturno nasljeđe i gospodarski razvoj, Zbornik radova sa znanstvenog skupa Globaliza-cija i regionalni identitet, Sveučilište Josipa Jurja Strossmayera u Osijeku, Osijek, pp. 52-76. Available at: https://bib.irb.hr/datote-ka/857963.Zbornik_Globalizacija_i_regionalni_identitetGospodarske_koristi_od_kulturnih_aktivnosti.pdf#page=52, (2.10.2019.); Živić, D. (2017). “Demografsko pražnjenje Istočne Hrvatske”, Političke analize Vol. 8, No. 31., pp. 24-32. Available at: https://hrcak.srce.hr/index.php?show=clanak&id_clanak_jezik=283893, 2.10.2019.; Akrap, A. (2019), “Stanovništvo u Hrvatskoj: čimbenici silaznih trendova”, Obnovljeni život, Vol. 74, No. 3, pp. 335-350.

8 Croatian Bureau of Statistics, Statistical Reports, Higher Education in 2013, 2014, 2015, 2016, available at: www.dzs.hr (Accessed on: November 17, 2019)

9 In this case, the Development Index of the Ministry of Regional Development and EU Funds in Table 1 shows the values of the deve-lopment index and Indicators for the calculation of the development index in 2018, which implies the value of the development index and the indicators for the calculation of the development index according to the new county level calculation model which includes the timeframe 2014 – 2016.

10 Ministry of Economy, Entrepreneurship and Crafts (2016), “Vlada usvojila Strategiju pametne specijalizacije RH za razdoblje 2016. – 2020.”, available at: https://www.mingo.hr/page/vlada-usvojila-strategiju-pametne-specijalizacije-rh-za-razdoblje-2016-2020 (Accessed on: November 1, 2019)

11 UNESCO (2017), “EU cohesion policy (regional policy)“, available at: https://en.unesco.org/creativity/policy-monitoring-platform/eu-cohesion-policy-regional, (Accessed on: November 9, 2019)

12 Chmieliński, P. (2017), “Report on the policy recommendations on how to integrate cohesion policy with urban and rural policies”, Institute of Agricultural and Food Economics – National Research Institute IAFE-NRI, Poland, available at: https://www.perceivepro-ject.eu/wp-content/uploads/2017/09/PERCEIVE-Project-Deliverable-4.4_Report-on-the-policy-recommendations-on-how-to-integra-te-cohesion-policy-with-urban-and-rural-policies.pdf (Accessed on: November 9, 2019)

13 European Commission (2018), “New Cohesion Policy”, https://ec.europa.eu/regional_policy/en/2021_2027 (Accessed on: Novem-ber 9, 2019)

14 Referring to the regions of the Republic of Croatia, the official statistical breakdown of the European Statistical Office (Eurostat) is ta-ken into account according to the European Commission glossary (https://ec.europa.eu/regional_policy/en/policy/what/glossary/n/nuts) in order to apply a common statistical standard across the European Union. However, it should be emphasized that in the Republic of Croatia, as well as in many other EU member states, such a division has been used mainly for statistical purposes. No-menclature of territorial units for statistics (NUTS) was created by the European Bureau of Statistics (Eurostat) to apply a common statistical standard across the European Union.

15 See more in: Croatian Chamber of Economy (2019). Razvijenost statističkih regija NUTS3 razine u Europskoj uniji, Zagreb. Available on: https://www.hgk.hr/documents/gospodarska-razvijenost-nuts-3-regija5c49bd13e22f8.pdf, 13/10/2019.

16 Official Gazette of the Republic of Croatia (2018), “Regional Development Act” (NN 147/14, 123/17, 118/18).

17 Art. 2. of the Regional Development Act (NN 147/14, 123/17, 118/18)

18 According to the Ministry of Regional Development and EU Funds, the announcements of 01/23/2019 (https://vlada.gov.hr/vijesti/nove-c four-statisticke-regije-omogucit-ce-vise-potpore-gospodarstvu-i- more evenly-development-their- parts-croatia/25170, 17/11/2019). At the proposal of the Ministry of Regional Development and EU Funds, the government has decided on four non-administrative units - Pannonian Croatia, Northern Croatia, Adriatic Croatia and the City of Zagreb, as a division of Level 2 statistical regions, while spatial units for Statistics 1 and 3 levels will not change. This will make better use of Cohesion Policy funds for as large an area as possible and form a more homogeneous region in terms of development level but also other important features. The decision shall take effect on January 1, 2023.

19 Puljiz, J., Biondić, I. (2018), “Izrada prijedloga nove NUTS 2 klasifikacije u Republici Hrvatskoj“, Institute for Development and Inter-national Relations, Zagreb, available at: https://razvoj.gov.hr/UserDocsImages/Vijesti%20-%20dokumenti/Izrada%20prijedloga%20nove%20NUTS%20klasifikacije%20u%20RH%20012019.pdf (Accessed on: October 28, 2019)


270 God. XXXIII, BR. 1/2020. str. 255-270

20 Croatian Chamber of Economy (2019), “Razvijenost statističkih regija NUTS3 razine u Europskoj uniji”, available at: https://www.hgk.hr/documents/gospodarska-razvijenost-nuts-3-regija5c49bd13e22f8.pdf (Accessed on: October 13, 2019)

21 Ministry of Regional Development and EU Funds (2019), “Regionalni razvoj”, available at: https://razvoj.gov.hr/o-ministarstvu/djelo-krug-1939/regionalni-razvoj/110 (Accessed on: October 2, 2019)

22 Apsolon (2019), “How we contributed to Croatia’s regional development”, available at: https://apsolon.com/en/success-stories/how-we-contribute-to-croatia-regional-development/ (Accessed on: October 14, 2019)

Katarina Marošević

R : H

S

Nejednak stupanj regionalnog razvoj karakterizira Republiku Hrvatsku već dugi niz godina, uz iznimno zaostajanje područja istočne Hrvatske. Brojni su pokazatelji kojima se takvo stanje, a i očekivani trendovi mogu i potkrijepiti (npr. ostvareni BDP po stanovniku županija koje pripadaju području istočne Hrvatske, veliki odljev stanovnika pstočne Hrvatske, indeks razvijenosti Ministarstva regionalnog razvoja i fondova Europske unije i brojni drugi). Kako je stupanj ostvarenog razvoja županija istočne Hrvatske na zaista ne-usporedivoj razini u odnosu na nekoliko vodećih županija, a posebice Grad Zagreb, nužno je razmotriti prostor za moguća poboljšanja navedenog područja koja zaostaju u razvoju. U kontekstu Europske unije, razina razvijenosti pojedinih županija istočne Hrvatske na poražavajućoj je razini.

Ni druge zemlje članice Europske unije nisu ostvarile konvergenciju k potpunoj homogenosti, no u radu se izdvajaju primjeri kreiranih regionalnih politika kojima se pokušava smanjiti stupanj divergencije. Stupanj decentraliziranosti jedan je od važnih preduvjeta smanjenja postojećih regionalnih razlika kao i odgovara-juće primjene regionalnih politika.

Stoga je cilj ovoga rada teorijski obraditi dosadašnja istraživanja izabranih europskih iskustava regija koje zaostaju u razvoju, a koje su sve dijelom Europske unije, te evidentirati važnost međusobnog odnosa re-gija - nacionalno gospodarstvo. Kako se svih pet županija koje su u sastavu istočne Hrvatske zaista mogu okarakterizirati kao područja koja zapostaju u razvoju, cilj je shodno teorijskim saznanjima europskih isku-stava usporediti situaciju i trendove regija i županija istočne Hrvatske, uzimajući pri tomu u obzir, ne samo ekonomski, nego i znatno širi koncept županija koje zaostaju u razvoju.

Ključne riječi: regionalni razvoj, regije koje zaostaju, Republika Hrvatska, nejednakosti u regionalnom razvoju, županije

271God. XXXIII, BR. 1/2020. str. 271-283

RECENT TRENDS IN SUSTAINABILITY REPORTING: LITERATURE REVIEW AND IMPLICATIONS FOR FUTURE RESEARCH

JEL: M14, M41, Q56Review article

Received: April 10, 2020Accepted for publishing: April 29, 2020

Ana Zrnić Josip Juraj Strossmayer University of Osijek Faculty of Economics in Osijek Trg Ljudevita Gaja 7, 31000 Osijek, Croatia [email protected] Phone: +38531224400

Dubravka Pekanov StarčevićJosip Juraj Strossmayer University of Osijek Faculty of Economics in Osijek Trg Ljudevita Gaja 7, 31000 Osijek, Croatia [email protected] Phone: +38531224400

Boris CrnkovićJosip Juraj Strossmayer University of Osijek Faculty of Economics in Osijek Trg Ljudevita Gaja 7, 31000 Osijek, Croatia [email protected] Phone: +38531224400

A

Sustainability reporting has become a topical issue in recent years as it is no longer enough to make claims about the sustainability level of companies, but it is also necessary to demonstrate their sustainability ef-forts. For this purpose, sustainability reporting has grown from a voluntary basis into a legal obligation for some organizations, which speaks in favor of the importance of sustainable business globally. �is paper aims to provide a wider perspective and theoretical support for research on sustainability reporting. A literature review of 52 papers from the Web of Science database indicates the following eight aspects as a trend in the literature reviews of sustainability reporting: Assurance, Boards, Communication, Framework, Impact, Indicators, Materiality and Practices. �e paper highlights problems and provides challenges re-lated to sustainability reporting and research opportunities for exploring sustainability reporting in future studies.

Keywords: Sustainability reporting, sustainable development, corporate social responsibility

Ana Zrnić, Dubravka Pekanov Starčević, Boris Crnković: Recent trends in sustainability reporting: Literature review and implications for future research



CC BY-ND












5 od 6 26. 06. 2017. 12:24

1. Introduction

Modern technology as well as globalization have brought significant changes in numerous areas of human life. On the other hand, there are increas-ing global problems in the form of more frequent natural disasters, degradation of natural resources, climate change, energy crises, and other problems that have led not only to risks to the planet, but also to a threat to development. To prevent further con-

sequences, it is important to pursue a development policy aimed at achieving continuous economic and social progress, as well as protecting nature and the environment. �is is accomplished by focusing on sustainability and sustainable development.

In 2015, as part of the 2030 Agenda for Sustain-able Development1, the United Nations adopted 17 main Sustainable Development Goals (SDG) and 169 target goals that they plan to achieve by 2030.


272 God. XXXIII, BR. 1/2020. str. 271-283

Although the goals are not legally binding, the UN Member States are expected to integrate the SDGs into their national policies and establish a system for monitoring the implementation through the agreed indicators. SDGs balance the economic, so-cial and environmental dimensions of sustainable development. Each participant should contribute to the achievement of these dimensions, with particu-lar emphasis on the role of the business sector.

According to Pojasek (2007), business sustainability must take into account the needs of the company as well as its stakeholders but at the same time it must protect, sustain, and enhance the environmental, social, and economic resources that are crucial for the future. Sustainable business creates added value for the company, which reflects on the value of the company through its economic viability and financial utility. �e results of activities related to sustainable business are presented to the public in the form of sustainability reports, which are needed “to substantiate information about the actual status of and progress towards corporate sustainability; otherwise the information tends to be considered rather superficial” (Schaltegger et al., 2006: 15).

�ere are several internationally recognized sus-tainability frameworks and standards that are avail-able for organizations when preparing their sustain-ability reports: the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines G4, ISO 26000 Guidance on Social Responsibility, the UN Guid-ing Principles Reporting Framework, the IIRC In-ternational Framework, and the OECD Guidelines for Multinational Enterprises. In the European Un-ion, sustainability reporting is regulated by Direc-tive 2014/95/EU of the European Parliament and of the Council2. It is also called the Non-Financial Reporting Directive (NFRD) and is legally binding on large public-interest companies with more than 500 employees, listed companies, banks, insurance companies, and other companies designated by na-tional authorities as public-interest entities.

However, there is still no universal regulation for sustainability reporting at a global level, but it is im-posed by each country depending on its laws and accounting regulations; hence sustainability report-ing varies across countries. �ereby, the purpose of this paper is to summarize and critically assess liter-ature on sustainability reporting and explore trends related thereto in the period 2017-2020. �is is im-portant because as of 2017 sustainability reporting became a legal obligation for many organizations,

which should consequently lead to an increase and changes in sustainability reporting. In addition, the aim is to identify opportunities for future research in the field of sustainability reporting.

�is research paper is organized as follows. �e introductory part and the literature review of sus-tainability reporting is succeeded by a section with methodology explained. �e next section brings results on recent trends in sustainability reporting, while the last section is devoted to discussion and the main conclusions of the paper.

2. Literature review of sustainability reporting

Since sustainability reporting is an ever-evolving concept, there is still no single definition. Siew (2015) notes that sustainability reporting is known under various synonyms - corporate social respon-sibility (CSR) reporting, sustainable development (SD) reporting, triple bottom line (TBL) reporting, non-financial reporting, and environmental, social and governance (ESG) reporting. Calabrese et al. (2017a: 439) define sustainability reporting as “the practice of measuring, disclosing, and being ac-countable to internal and external stakeholders for the company’s ability to achieve sustainable devel-opment goals and manage impacts on society”. Dis-sanayake et al. (2016) state that the most structured definition of sustainability reporting is obtained from the sole concept of sustainable development, i.e. from the economic, social and environmental pillars.

�e absence of a standardized form of sustainability reporting makes it harder to compare reports. �e implementation may be similar in associations of countries such as the EU, but the harmonization of reporting in the EU is still in the process that is hard to achieve (Jose, 2017; Kinderman, 2019). Compa-nies choose independently how to compose their sustainability reports, as well as the manner of their presentation. Free will in terms of the layout of sus-tainability reports by companies allows researchers to do numerous research studies in this area.

Hahn and Kühnen (2013) provided a review of 178 articles from business, management, and account-ing journals in the period 1999-2011 and gave an overview of the results on the determinants of sus-tainability reporting (internal and external). Mo-rioka and de Carvalho (2016) conducted a literature review of 261 papers and integrated the literature on sustainability performance in a conceptual frame-

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work. Gulenko (2018) provided an overview of po-tential consequences of CSR reporting regulation, derived potential future developments in Germany based on the EU Directive and contributed to the literature by suggesting that mandatory CSR report-ing leads to a shift in the reporting behavior of com-panies. Dienes et al. (2016) reviewed existing stud-ies, analyzed the drivers of sustainability reporting by using a qualitative approach, and contributed to the literature by defining the most important driv-ers of the sustainability reports disclosure. While the reviewed papers refer to a specific segment of sustainability reporting, Dumay et al. (2016) studied integrated reporting to discover how research has developed and contributed to the literature by of-fering an intuitive critique of accounting practice.

3. Methodology

To examine current trends in the literature related to sustainability reporting and to find the potential for future research, a literature review by analyz-ing the extant literature was used. �e guidelines proposed by Vázquez-Carrasco and López-Pérez (2013) were used for a review of the literature with modifications adapted to the purpose of this re-search:

1. Define the research question(s) to be ad-dressed;

2. Search for (i) a set of bibliographic da-tabases, and/or (ii) in a well-defined and justified journal sample using one or more predefined keywords;

3. Include the keywords in the search fields (title);

4. Analyze each article to identify the theoreti-cal framework, a methodological approach and interesting potential lines of research.

�e sample consists of papers related to sustain-ability reporting. �e authors selected the Web of Science as a bibliographic database. It includes scientific papers from a wide range of scientific disciplines, i.e. over 20,000 peer-reviewed schol-arly journals published worldwide across 252 disci-plines3. According to Orsagie et al. (2016: 236), such a “broad range of scientific disciplines ensures that the search is sufficiently comprehensive”. Within the database, the Web of Science Core Collection database and basic search were used. �e literature search was based on the following criteria:

• Timespan: 2017 (1 January) to 2020 (until 23 March),

• All Citation Indexes,

• Document Types: Article,

• Key words: “sustainability reporting”, “sus-tainability report”, “sustainability reports” found in the title,

• Open access.

�e search engine generated a total of 63 papers (i.e. 34, 5 and 24 papers containing “sustainability reporting”, “sustainability report” and “sustainability reports”, respectively) (Figure 1).

Figure 1 Number of papers related to sustainability reporting (1 January 2017 – 20 March 2020)

Figure 1 Number of papers related to sustainability reporting (1 January 2017 – 20 March

2020)

Source: Research results.

Out of the total number of papers, 2 papers (1 with “sustainability reporting” and 1 with

“sustainability reports”) could not be downloaded despite the open access criterion, while 9

papers (i.e. 1 with “sustainability reporting”, 3 with “sustainability reports”, and 5 with

“sustainability report”) are not entirely in English and in order to avoid any misunderstanding,

they were excluded from further analysis. Hence a total of 52 papers (i.e. 32 papers with

“sustainability reporting”, 2 with “sustainability report”, and 18 with “sustainability reports”)

out of 63 generated papers were analyzed.

All papers were thoroughly reviewed by the authors who examined the key determinants in

this literature, identified the main gaps, and pointed to areas where future work in this area

could usefully be undertaken.

4. Recent trends in sustainability reporting

Based on the review and according to the content and results of the papers, the authors found

the following eight aspects of sustainability reporting: Assurance, Boards, Communication,

Framework, Impact, Indicators, Materiality and Practices (Figure 2).

22

26

13

2

0

5

10

15

20

25

30

2017 2018 2019 2020



274 God. XXXIII, BR. 1/2020. str. 271-283

Out of the total number of papers, 2 papers (1 with “sustainability reporting” and 1 with “sustainability reports”) could not be downloaded despite the open access criterion, while 9 papers (i.e. 1 with “sustain-ability reporting”, 3 with “sustainability reports”, and 5 with “sustainability report”) are not entirely in English and in order to avoid any misunderstanding, they were excluded from further analysis. Hence a total of 52 papers (i.e. 32 papers with “sustainability reporting”, 2 with “sustainability report”, and 18 with “sustainability reports”) out of 63 generated papers were analyzed.

All papers were thoroughly reviewed by the authors who examined the key determinants in this litera-ture, identified the main gaps, and pointed to areas where future work in this area could usefully be un-dertaken.

4. Recent trends in sustainability reporting

Based on the review and according to the content and results of the papers, the authors found the following eight aspects of sustainability reporting: Assurance, Boards, Communication, Framework, Impact, Indi-cators, Materiality and Practices (Figure 2).

Figure 2 Aspects of sustainability reporting


A trend has been observed in the literature in terms of researching the impact of sustainability reporting. Impact is the most prevalent aspect of sustainability reporting (25%). �e framework and practices are equally explored (19%). �is is be-cause these two areas are closely linked since the framework acts on the application of sustainability reporting in practice. Other aspects (communica-tion (7%), boards (6%), materiality (8%), assurance (8%) and indicators (8%)) are less investigated and they represent a basis for exploring future trends in sustainability reporting.

4.1 Assurance

Boiral et al. (2020: 1) conducted a qualitative con-tent analysis of 337 assured sustainability reports in the mining and energy sectors and found that “as-surance statements do not demonstrate a material, substantial, and credible verification process”. By using a sample of Spanish accounting and consult-ing firms, Vaz Ogando et al. (2018) analyzed if the use of international standards and the profile of the provider performing the service influences the as-surance process and quality. Results showed that

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the profile of the provider performing the service does not have any effect on the assurance process and assurance quality. Al-Shaer and Zaman (2019) used a sample of UK FTSE 350 companies for the period 2011–2015. �ey found a significant positive connection between board-level sustainability com-mittees and sustainability reporting assurance, and inclusion of sustainability terms in compensation contracts. Braam and Peeters (2017) investigated the relationship between corporate sustainability performance and choices related to sustainability assurance by using a panel data set of 4,686 listed companies (from 21 European and North American countries) in the period 2009–2014. �ey revealed that companies with superior corporate sustain-ability performance are more likely to employ third parties to assure their sustainability reports than companies with inferior sustainability performance.

4.2 Boards

Anazonwu et al. (2018) used a sample of quoted manufacturing firms in Nigeria to investigate the influence of corporate board diversity on sustain-ability reporting, while Onyali and Okafor (2019) explored the influence of foreign directors on inte-grated sustainability reporting of 21 listed consum-er goods firms in Nigeria in the period 2011–2017. �ese two studies recommend a heterogeneous board structure. Furlotti et al. (2019) used the data of 182 companies listed on the Milan Stock Ex-change and examined whether there is an associa-tion between the presence of women with different responsibilities and gender policies disclosed in CSR or sustainability reports. �e results showed that it is important for firms that care about gender equality to have women as board members.

4.3 Communication

Calitz and Zietsman (2018) analyzed the existing sustainability reporting frameworks for higher edu-cation institutions and identified a lack of the use of mobile technologies in the reporting process. In their study, Rahim and Omar (2017) investigated the attitudes of managers of various backgrounds from Malaysian public listed companies on using online communication to report sustainability ef-forts. �e results showed that from the perspec-tive of a manager sustainability reporting through online communication was considered positive. Hsueh (2017) examined the success of corporate

communication in voluntary sustainability report-ing on a sample of family businesses. �e author revealed that although companies have a possibil-ity and are motivated for communicating, external stakeholders might be skeptical about voluntary sustainability reports of companies. Hossain et al. (2019) used a sample of top 24 companies of the Fortune 500 Global to explore the nature of rhetoric and rhetorical strategies that are implicit in stan-dalone sustainability reporting. �ey concluded that companies from the sample communicate fan-tasy type and rhetorical vision in their corporate sustainability reporting.

4.4 Framework

�e authors pinpointed the shortcomings and problems of sustainability reporting frameworks. Cardoni et al. (2017) evaluated the intra-industry comparability of sustainability reports, with an em-phasis on GRI. Andreassen (2017) explored how sustainability reporting guidelines represent oil operation safety issues and concluded that frame-works do not indicate how well the product safety issues are presented. Diouf and Boiral (2017) ana-lyzed the perceptions of stakeholders of the quality of sustainability reports using the GRI framework and observed that socially responsible investment stakeholders are aware of the limitations of sustain-ability reports.

Other authors described new frameworks to help solve sustainability challenges. Garcia-Torres et al. (2017) proposed an action-oriented disclosure tool in order to help solve sustainability challenges of complex fast-fashion supply chains. Hamalainen and Inkinen (2017) utilized Big Data and exam-ined how to develop cost and sustainable report-ing. Onkila et al. (2018) developed frameworks for understanding the role of sustainability reporting in organizational identity change by analyzing 52 in-terviews conducted with employees in two Finnish companies. Niemann and Hoppe (2018) used an ex-ploratory evaluation in Amsterdam, Basel, Dublin, Freiburg, Nuremberg and Zurich, and presented a framework suitable for assessing real-life practices and outcomes. �ey suggested that sustainability reporting can positively influence organizational change, management and communication, but could also lead to “fatigue” and discontinuation. Maj (2018) involved companies indexed on the Warsaw Stock Exchange and investigated diversity


276 God. XXXIII, BR. 1/2020. str. 271-283

reporting, diversity data and the determinants of diversity reporting. �e author asserted the pos-sibility of embedding diversity into sustainability reporting by including it in auditing guidelines and standards. Romero et al. (2019) made an effort to improve the existing framework of the integrated report and provided a new reporting tool in order to achieve the objectives of the International Inte-grated Reporting Council.

4.5 Impact

Most studies investigated the relationship between sustainability reporting and some of firm charac-teristics. Wang (2017) examined the relationship between firm characteristics and the disclosure of sustainability reporting for 50 Index-listed compa-nies from Taiwan. �e results showed that seven corporate governance and business characteristics, namely the size of the board of directors, the ratio of independent directors, the audit committee, the ratio of export income, the percentage of foreign shareholders’ holdings, fixed asset staleness, and firm growth, are positively related to the sustain-ability reporting disclosure. On the other hand, the percentage of director holdings and the stock price per share are negatively related to the sustainabil-ity reporting disclosure. Gavana et al. (2017) used a sample of 230 non-financial Italian listed firms for the period 2004–2013 to analyze the differences in sustainability reporting within family businesses and highlighted “that the way family ownership af-fects sustainability reporting depends on how the family exerts its influence on the business”. Loh et al. (2017) investigated the relationship between sus-tainability reporting and firm value based on listed companies in Singapore and found that there is a positive relationship between sustainability report-ing and market value. By using an example of Ko-rea, Lee et al. (2019) investigated whether chaebol firms are more likely to issue CSR reports than non-chaebol firms, and they proved that they are. Re-sults also indicated that there is a smaller increase in firm value when a firm discloses its sustainability report voluntarily because investors doubt a firm’s intentions in relation to sustainability disclosure and therefore discount its value. Carp et al. (2019) used a sample of Bucharest Stock Exchange listed companies from 2012 to 2017 to analyze the impact of sustainability reporting on firm growth and no-ticed low influence.

Cunha and Moneva (2018) identified the main in-fluencing drivers on the elaboration and publication of sustainability reports of chemical and oil compa-nies in Brazil and Spain. �ey found transparency and legitimacy as the main reasons affecting the publication of sustainability reports of companies. Smeuninx et al. (2020) applied readability formu-lae and Natural Language Processing to a manu-ally assembled 2.75-million-word corpus in order to analyze the language of corporate sustainability reporting along region, industry, genre and content lines. �e result indicated that there is no industry impact on readability, but the region proves to be an important variable. Sutopo et al. (2018) examined if the information on the winners of the Sustainabil-ity Reporting Award contributes to the usefulness of the information in the financial statements and found a positive impact on finance.

Other studies investigated the quality of sustain-ability reporting and various variables. Ching et al. (2017) concluded that although quality disclosure is improving throughout the years under study, the scores are still low. Mion and Adaui (2019) noted that the implementation of the Non-Financial Re-porting Directive (NFRD) increased the quality of sustainability reporting. On the other hand, the quality of sustainability reporting has a positive im-pact on risk (Truant et al., 2017) and on access to finance (Garcia-Sanchez et al., 2019).

4.6 Indicators

Few authors examined sustainability disclosure in-formation in a particular country at selected com-panies. Gnanaweera and Kunori (2018) evaluated the determinants of corporate sustainability disclo-sure practices on a sample of 85 Japanese companies listed on Tokyo Stock Exchange (TSE) from 2008 to 2014 and found that social values, ensuring the guidelines and the accuracy of the disclosure infor-mation, are important for corporate sustainability reporting. Arthur et al. (2017) examined GRI per-formance indicators disclosed in sustainability re-ports of 10 large mining companies in Ghana in the period 2008–2012. �e result showed an increasing trend in the disclosure of performance indicators in sustainability reports for companies by GRI guide-lines. Tarquinio et al. (2018) explored performance indicators disclosed in GRI-based sustainability re-ports produced by the companies in Italy, Spain and Greece. �ey revealed that social indicators related

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to labor are more frequently reported in sustain-ability reports of the three countries under study.

Calabrese et al. (2017b) used sustainability reports of a sample of 50 Italian companies and analyzed the possible presence of greenwashing practices. �eir results showed that reporting a higher num-ber of environmental indicators pursues a green-washing strategy aimed at obfuscating their scarce commitment in sustainability and managing stake-holders’ perceptions of their benefit.

4.7 Materiality

Calabrese et al. (2019) provided suggestions for the development of a new and more effective method of materiality analyses for making materiality work in practice. Guix et al. (2017) investigated sustain-ability reporting by focusing on stakeholder-related practices disclosed by the 50 largest hotel groups worldwide. �e authors pointed out that dialogue mechanisms that are used to empower stakehold-ers, as their participatory role in decision-making and the reporting process, shape the materiality and responsiveness disclosure. �e same authors (2018) explored the understanding and use of mate-riality on a sample of eight sustainability managers of the world’s 50 largest hotel groups. �e results showed that sustainability managers are disempow-ered, have limited resources, time, knowledge, and skills to apply to materiality assessment.

4.8 Practices

Szekely and Brocke (2017) applied topic modeling to 9,514 sustainability reports published in the pe-riod 1999-2015 to identify the most common prac-tices described in these reports. �ey found that the most frequently mentioned topics in sustainability reports of organizations related to the environmen-tal dimension are emissions and consumption, the ones related to the social dimension are employ-ees and the one related to economic sustainability is financial data. Kim and Kim (2017) based their research on news articles and sustainability reports to explore sustainable supply chain management (SSCM) trends, and a firm’s strategic position-ing and execution concerning sustainability in the textile and apparel industry. �e results indicated that listed firms show relatively low realism and high commonality. Landrum and Ohsowski (2017) studied worldviews of corporate sustainability, or the corporate message conveyed as to what sustain-

ability or CSR is and how to enact it on a sample of dominant North American firms. �e results showed that the most dominant worldview is fo-cused on the business case for sustainability with a weak representation of sustainability in corporate sustainability reports. Stewart and Niero (2018) performed a review of 46 corporate sustainability reports in the fast-moving consumer goods sector with an aim to explore how companies from the sample incorporate the circular economy into their sustainability efforts. �e results showed that a cir-cular economy has started to be integrated into the corporate sustainability agenda. Cho et al. (2017) used a sample of seven large U.S. oil and gas firms to illustrate how Goffman’s frontstage and back-stage analogy can be useful for providing insights into sustainability disclosure. An et al. (2017) exam-ined the sustainability reporting by a New Zealand public university from a longitudinal perspective and found that the university does not follow any reporting guidelines. Rashidfarokhi et al. (2018) investigated the content of sustainability report-ing issued by the real estate sector and found that fulfilling the legislative requirement and avoiding financial or legal risks are the main reasons why companies report on sustainability. Giacomini et al. (2018) used Italian local government organizations (LGOs) to investigate if LGOs use reporting tools to promote sustainable development. �ey revealed that major obstacles to sustainability reporting in most Italian municipalities are cost reduction, voluntariness and low efficiency of sustainability reporting. Kurniawan (2018) described the imple-mentation model of sustainability reporting in the village-owned enterprise and small and medium enterprises (SMEs), especially in Indonesia and found that SMEs and village-owned enterprises can contribute more to the sustainability context than other related businesses.


Successful companies engage assurance providers to assure their sustainability reports. Since sus-tainability reporting assurance is a relatively new process, “factors that affect the reliability and cred-ibility of assurance statements need to be studied further” (Boiral, Heras-Saizarbitoria, 2020: 13). Further research on assurance providers, as well as sustainability reporting users is necessary. Explor-ing stakeholder expectations and their engagement in the process of assurance is worth studying. Board


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member or CEO characteristics influence corpo-rate board diversity and sustainability reporting, so future research can analyze the impact of charac-teristics of the board, such as the education level, personality, age, etc. What can also be analyzed is the board members’ focus on particular aspects of sustainability reporting. In addition, there is a per-ception gap between the reporting company and its stakeholders that can influence the success of corporate communication regarding sustainabil-ity behavior of a company. Based on the presented framework problems, Cardoni et al. (2019) point out that researchers should be more concentrated on the quality characteristics of sustainability dis-closure rather than on performance, as long as the level of data comparability in sustainability report-ing is low. It is also necessary to discuss whether sustainability reporting frameworks are useful for providing information on companies according to various industries.

Sustainability reporting practices indicate that or-ganizations are faced with different issues and bar-riers in sustainability reporting. �e main reason for sustainability reporting is to fulfill the legislative requirement. On the other hand, the legal require-ment has a role to play in how the size of firms will affect sustainability reporting, without neglecting SMEs that can contribute to sustainability. All of the above indicates that there are weak represen-tations of sustainability in corporate reports. �at is because sustainability is a process that has yet to find its way into sustainability reports. Although the quality of sustainability reporting is still relatively low, the legislation is affecting its increase. All seg-ments of future impact research are welcome as the impact is a measure that is inexhaustible in the area of sustainability reporting due to a large number of variables that can be observed.

In sustainability reports, managers prepare materi-ality criteria using their judgment because material-ity in the context of sustainability reporting implies those issues that are most relevant to stakeholders and companies. �erefore, it is important to de-velop an effective method for making materiality work. Stakeholders play a significant role in shaping the disclosure of materiality. Further research may study the judgment process of materiality deter-mination from the perspective of stakeholders and managers.

�is research makes three major contributions in the field of sustainability reporting. First, it con-tributes to the research gap by providing eight as-pects that represent a trend in literature reviews of sustainability reporting. Second, the review offers insights into the topic and outlines problems and some of the challenges related thereto. Finally, it provides research opportunities for exploring sus-tainability reporting in future studies. Despite the contribution of this study to the literature, several limitations are worth mentioning. �e analysis was conducted on a single database with three keywords, considering all papers that were conceptually solely related to sustainability reporting. One drawback of the Web of Science database in this research is that despite the set criteria, it was not possible to download all the selected papers from the database. �ese limitations imply recommendations for fu-ture research of this type. Future research should focus on a specific aspect of sustainability reporting and conduct an analysis of papers from other data-bases with multiple keywords included, i.e. all the synonyms. �e search may include the years since sustainability reporting is required or multiple years may be included to gain an insight into the develop-ment of sustainability reporting.

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33. Hsueh, J. W. J. (2018), “Governance structure and the credibility gap: experimental evidence on family businesses’ sustainability reporting”, Journal of Business Ethics, Vol. 153, No. 2, pp. 547-568.

34. Jose, T. (2017), “Need for Harmonisation of Sustainability Reporting Standards”, Journal of Finance and Economics, Vol. 5, No. 6, pp. 253-258.

35. Kinderman, D. (2019), “�e challenges of upward regulatory harmonization: �e case of sustainability reporting in the European Union”, Regulation & Governance, Vol. 13, No. 2, pp. 240-259.

36. Kim, D., Kim, S. (2017), “Sustainable supply chain based on news articles and sustainability reports: Text mining with Leximancer and DICTION”, Sustainability, Vol. 9, No. 6, pp. 1-44.

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E

1 UN General Assembly (2015), “Transforming Our World: The 2030 Agenda for Sustainable Development”, available at: https://sustainabledevelopment.un.org/content/documents/21252030%20Agenda%20for%20Sustainable%20Development%20web.pdf (Accessed on: March 5, 2020)

2 European Parliament (2014), Directive 2014/95/EU of the European Parliament and of the Council, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32014L0095&from=EN (Accessed on: March 9, 2020)

3 Thomson Reuters (2019), “Web of science: summary of coverage”, available at: https://clarivate.libguides.com/webofscienceplat-form/coverage (Accessed on: March 19, 2019)

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Ana Zrnić

Dubravka Pekanov Starčević

Boris Crnković

N :

S

Izvještavanje o održivosti u posljednjim je godinama postalo aktualno pitanje obzirom da više nije dovoljno iznositi tvrdnje o održivosti kompanija, nego demonstrirati njihove napore vezane uz održivost. Stoga je izvještavanje o održivosti preraslo s dobrovoljne osnove na zakonsku obvezu za neke organizacije, što go-vori u prilog važnosti održivog poslovanja na globalnoj razini. Ovaj rad ima za cilj pružiti širu perspektivu i teorijsku podršku za istraživanje izvještavanja o održivosti. Pregled literature koji uključuje 52 rada iz baze podataka Web of Science ukazuje na sljedećih osam aspekata koji su postavljeni kao trend u pregledima li-terature vezanim uz izvještavanje o održivosti: osiguranje, odbori, komunikacija, okvir, utjecaj, pokazatelji, materijalnost i prakse. U radu se ističu problemi i postavljaju izazovi povezani s izvještavanjem o održivosti i mogućnostima za istraživanje izvještavanja o održivosti u budućim radovima.

Keywords: izvještavanje o održivosti, održivi razvoj, društvena odgovornost

P S

Marijana Ćurak, Dujam Kovač:Upravljanje rizicima društava za neživotno osiguranje

i reosiguranje primjenom tehnike sekuritizacije

287God. XXXIII, BR. 1/2020. str. 287-303

UPRAVLJANJE RIZICIMA DRUŠTAVA ZA NEŽIVOTNO OSIGURANJE I REOSIGURANJE PRIMJENOM TEHNIKE SEKURITIZACIJE

Stručni rad

Zaprimljeno: 21. listopada 2019. Prihvaćeno za objavu: 18. prosinca 2019.

Marijana ĆurakSveučilište u SplituEkonomski fakultetCvite Fiskovića 5,21000 Split, [email protected]: +38521430723

Dujam KovačSveučilište u SplituEkonomski fakultetCvite Fiskovića 5,21000 Split, [email protected]: +38521430696

S

U radu se analiziraju karakteristike instrumenata sekuritizacije i njihovo značenje u upravljaju aktuarskim rizicima društava za neživotna osiguranja i reosiguranja. Iako se sekuritizacijom na tržište kapitala mogu transferirati različiti rizici, najznačajniji među sekuritiziranim rizicima jesu rizici povezani s katastrofalnim događajima za koje osiguratelji/reosiguratelji ne mogu ostvariti diversifikaciju unutar vlastitog portfelja osiguranja/reosiguranja. Mogućnost proširenja kapaciteta za transfer rizika, smanjivanje izloženosti kredit-nom riziku, fiksiranje uvjeta prijenosa rizika na duže razdoblje, kojim se ostvaruje zaštita od fluktuiranja cijene transfera rizika, unaprjeđenje upravljanja kapitalom i unaprjeđenje performansi, glavne su koristi koje osiguratelji/reosiguratelji mogu ostvariti ovom metodom upravljanja rizicima. Ovim prednostima, u odlučivanju o primjeni ove tehnike u upravljanju rizicima, suprotstavljaju se nedostatci, koji u ovisnosti od primijenjenog uvjeta transakcije, obuhvaćaju rizik baze i likvidnosti te obvezu objavljivanja informacija o portfelju osiguranja, a što u konačnici određuje cijenu transfera. U odnosu na reosiguranje i retrocesiju, sekuritizacija ima malo značenje u upravljanju rizicima. Ipak, uvažavajući sve veće razmjere katastrofalnih šteta, te mogućnosti primjene ove tehnike na ostale rizike, mogao bi se očekivati porast značenja ove me-tode u upravljanju rizicima društava za osiguranje/reosiguranje, ali u svojstvu komplementa reosiguranju, odnosno retrocesiji, ne njihove alternative.

Ključne riječi: sekuritizacija, obveznice, katastrofalni rizici, upravljanje rizicima društava za neživotno osi-guranje/reosiguranje

Marijana Ćurak, Dujam Kovač: Upravljanje rizicima društava za neživotno osiguranje i reosiguranje primjenom tehnike sekuritizacije



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5 od 6 26. 06. 2017. 12:24

1. Uvod

Iako su društva za osiguranje izložena raznovrsnim rizicima, koji se prema suvremenom konceptu upravljanja rizicima, integriranom upravljanju ri-zicima (eng. Enterprise risk management, ERM),

kategoriziraju u aktuarske rizike, financijske rizike, operativne i strateške rizike, s obzirom na glavnu djelatnost osiguratelja/reosiguratelja, aktuarski ri-zici predstavljaju najznačajnije rizike društava za osiguranje/reosiguranje. U svom osnovnom obliku


288 God. XXXIII, BR. 1/2020. str. 287-303

aktuarski rizici jesu odstupanja stvarnih od očeki-vanih šteta. Najznačajnija metoda upravljanja ovim rizicima je reosiguranje/retrocesija kojim osigu-ratelj/reosiguratelj transferira rizike na društvo za reosiguranje/retrocesionara uz plaćanje premije. Međutim, uz reosiguranje i retrocesiju, koncept integriranog upravljanja rizicima društava za osigu-ranje/reosiguranje, između ostalog, uključuje i pri-mjenu alata, tradicionalno korištenih u upravljanju financijskim rizicima, u smanjivanju rizika iz poslo-va osiguranja, a koji pripadaju kategoriji tzv. alter-nativnog transfera rizika. Riječ je o širokom skupu metoda upravljanja rizicima koji se prema Banks (2004: 49) definira kao „proizvod, kanal ili rješenje kojim se transferira izloženost riziku između trži-šta osiguranja i tržišta kapitala kako bi se ostvari-li postavljeni ciljevi upravljanja rizicima.“ Prema Cummins i Weiss (2009: 506) metode alternativnog transfera rizika mogu se kategorizirati u tri skupine: udruženja (poolovi) za rizik i osiguratelji (netradici-onalni), hibridni proizvodi i financijski instrumenti. Prvoj skupini pripadaju plan samoosiguranja, vlasti-ta društva za osiguranje i grupe za pridržaj rizika. Hibridni proizvodi obuhvaćaju ograničeno ili finan-cijsko (re)osiguranje, proizvode za višegodišnju za-štitu, proizvode za višestruke opasnosti, proizvode s višestrukim triggerom, warranties šteta industrije i sidecars. Financijski instrumenti su uvjetno finan-ciranje, opcije, poslovi zamjene i obveznice vezane za katastrofalne rizike. Dok su se neke od navede-nih metoda počele značajnije koristiti od 1960-ih i 1970-ih godina (plan samoosiguranja i vlastita društva za osiguranje), metode koje su povezane s tržištem kapitala na važnosti dobivaju od 1990-ih godina (Banks, 2004: 51). Među njima, najznačajnija je tehnika sekuritizacije u osiguranju/reosiguranju koja integrira tržište kapitala u upravljanje aktuar-skim rizicima. Tehnikom sekuritizacije, rizici koji-ma je izložen osiguratelj/reosiguratelj, transferiraju se na investitore na tržište kapitala. Ova tehnika uključuje kreiranje „Special purpose vehicle“ (SPV) i emisiju vrijednosnica čiji kuponi i povrat glavnice ovise o ostvarenju osiguranog događaja, razini in-deksa šteta ili iznosu određenog fizičkog parametra vezanog za štetni događaj.

Uz volatilnost na godišnjoj razini, broj katastro-falnih šteta od druge polovice 1980-ih godina ima uzlazni trend, uz određeno smanjenje u zadnjim go-dinama (Swiss Re Institute, 2019)1. Uzrok kojim se najčešće objašnjava ovakvo kretanje broja katastro-falnih događaja jesu klimatske promjene koje iza-

zivaju ekstremne vremenske uvjete. Dodatno, kao posljedica koncentracije stanovništva u područjima koja su izloženija nastupu katastrofalnih događaja, posebno u obalnim područjima, štete koje proizla-ze iz katastrofalnih događaja velikih su razmjera. Ukupne ekonomske štete kao posljedice prirodnih katastrofa (posebno uragana i oluja) i onih koji su pod izravnim utjecajem čovjeka (kao što su požari, teroristički napadi, pomorske i zrakoplovne nesre-će) u 2017. godini iznosile su 350 milijardi USD, što je značajno više od desetogodišnjeg prosjeka koji iznosi 220 milijardi USD (Swiss Re, 2019: 3)2. S po-rastom katastrofalnih šteta, a s obzirom na rast vri-jednosti osigurane imovine, veličina šteta za društva za osiguranje, također je rasla (Swiss Re Institute, 2019)1. U 2017. godini ukupna vrijednost osiguranih šteta iznosila je 150 milijarde USD (Swiss Re, 2019: 4)2, što je najveći iznos šteta u pojedinačnoj godini ikada zabilježen (Swiss Re, 2018: 4)3. Broj katastro-falnih događaja u 2018. godini bio za dva manji u odnosu na 2017. godini (304, prema metodologiji Swiss Re, 2019: 2; 27; Swiss Re Institute, 2019)2,1 i veličina ekonomskih i osiguranih šteta bile su ma-nje u odnosu na prethodnu godinu (165 milijarde USD odnosno 85 milijardi USD). Međutim, ove vri-jednosti su četvrte najveće od 1970. godine (Swiss Re, 2019: 4)2. Konačno, ove činjenice više odraža-vaju volatilnost na godišnjoj razini. Naime, prema izvješću o globalnim rizicima (Marsh, 2019: 6; 8)4, rizici povezani s ekstremnim vremenskim uvjetima, klimatskim promjenama i prirodnim katastrofama, prema frekvenciji čine tri od pet najvećih rizika, dok isti rizici, uz rizik krize s vodom, predstavljaju če-tiri od pet najvećih rizika prema intenzitetu šteta. Prirodne katastrofe su treći po važnosti rizik koji-ma su izložene poslovne tvrtke u 2019. godini pre-ma Allianz Risk Barometer (2019)5. Također, prema AXA (2017)6 među pet najznačajnijih rizika kojima će svijet biti izložen do 2025. godine, vodeće mjesto zauzimaju klimatske promjene, a za očekivati je da će s njima rasti i broj katastrofalnih događaja i nji-hove posljedice.

Dok je nedostatak kapaciteta bio važnim inicijal-nim čimbenikom emisija obveznica baziranih na katastrofalnim rizicima7, kasnije sudjelovanje osig-uratelja i reosiguratelja u ovim transakcijama trans-feriralo se iz pasivne u aktivnu ulogu, odnosno bez obzira na raspoloživost kapaciteta na tržištu reosig-uranja/retrocesije, prenose rizike na tržište kapitala (Spry, 2009: 16) optimizirajući na taj način, upravl-janje rizicima. S druge strane, veliki kapacitet tržišta

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kapitala, njegov intenzivan rast i inovacije činili su važnu pretpostavku na strani potražnje za vrijed-nosnicama temeljenim na rizicima iz osiguranja.

Uz rast katastrofalnih šteta i cikličnost tržišta reo-siguranja, važnost za razvoj sekuritizacije imala su i unaprjeđenja u računalnoj i telekomunikacijskoj tehnologiji koja su omogućila prikupljanje i obradu podataka o katastrofalnim događajima i mode-liranje šteta, te dala doprinos razvoju koncepta in-tegriranog upravljanja rizicima (Cummins i Weiss, 2009: 494).

Cilj je rada analizirati primjenu sekuritizacije u up-ravljanju rizicima društva za neživotna osiguranja i reosiguranja, kao nastavak istraživanja Ćurak (2009) u smislu proširenja analize sekuritiziranih instrumenata i novijih razvoja u korištenju sekuriti-zacije u upravljanju rizicima povezanih s katastro-falnim događajima. U prvom dijelu rada opisat će se tehnika sekuritizacije i dati pregled različitih instrumenata koji su produkt sekuritizacije vezane za katastrofalne rizike. U sljedećem dijelovima rada analizirat će se koristi, rizici i troškovi te stupanj korištenja ove metode upravljanja rizicima društava za osiguranje i reosiguranje, kao i perspektive sekuritizacije. Zadnji dio rada obuhvaća zaključna razmatranja.

2. Tehnika sekuritizacije i vrste sekuritizaranih instrumenata

Prema Gorvett (1999: 137)8 sekuritizacija u osi-guranju obuhvaća transformaciju novčanih tokova vezanih za preuzimanje rizika u osiguranje u vri-jednosnice (oblik „financijskog inženjeringa“) i transfer aktuarskog rizika na tržište kapitala kroz prodaju vrijednosnih papira investitorima. Naime, osigurateljima, odnosno reosigurateljima nije omogućen izravan pristup tržištu kapitala za trans-fer aktuarskih rizika. Također, investitori na tržištu kapitala nisu ovlašteni za preuzimanje rizika te je njihova osnovna uloga vezana za investiranje u fi-nancijske instrumente. Način na koji su investitori u mogućnosti preuzimati aktuarski rizik jest kroz sudjelovanje u vlasništvu društva za osiguranje. Međutim, s takvom investicijom moraju biti sprem-ni na preuzimanje i ostalih rizika kojima su izložena društava za osiguranje (Lale, 2013: 3)9. Drugi način je kroz sudjelovanje u transakciji sekuritizacije. Naime, sekuritizacijom se omogućava povezivanje ovih subjekata, odnosno ostvarenje zaštite od rizika za osiguratelje i ulaganje investitora u vrijednosnice

čiji prinosi nisu korelirani s prinosima od ulaganja u druge financijske instrumente, nego štetama po osnovi osiguranih događaja. Ovo se povezivanje os-tvaruje posredovanjem posebnog pravnog entiteta – Special purpose vehicle (u nastavku: SPV) (IAIS, 2003: 14)10.

Među rizicima društava za osiguranje/reosiguranje koji su predmetom sekuritizacije, najznačajniji su katastrofalni rizici (posebno oni vezani za prirodne katastrofe, kakvi su potresi, oluje, uragani i sl.), transferom kojih na tržište kapitala nastaju tzv. vri-jednosnice temeljene na katastrofalnom riziku (eng. cat bonds). Stoga se u nastavku opisuje postupak sekuritizacije ovih rizika, čija je struktura grafički prikazana na Slici 1.

Osiguratelj, odnosno reosiguratelj transferira rizike na tržište kapitala sklapanjem ugovora sa SPV-om. Ako se zaključuje, uz tzv. odštetni kriterij, ugovor predstavlja ugovor o reosiguranju. Ukoliko je pak kriterij za sekuritizaciju indeks šteta industrije ili parametarski kriterij, ugovor će biti financijskog karaktera (IAIS, 2003: 15). Temeljem ugovora, uz obvezu plaćanja premije, osiguratelj/reosiguratelj stječe pravo na odštetu u slučaju nastupa štetnog događaja. Kao i u slučaju tradicionalnog reosiguran-ja, osiguratelj ostaje obvezan prema ugovarateljima osiguranja, a kroz sekuritizaciju osigurava izvor fi-nanciranja ovih obveza. Premija koju sponzor plaća SPV-u za pokriće rizika (kvartalno, polugodišnje) koristi se za plaćanje kupona investitorima koji su uložili sredstava u obveznice.

SPV je posrednik između sponzora i investitora. Riječ je o nezavisnom društvu koje na temelju ugo-vora sa sponzorom, posreduje u pokriću rizika, emitira vrijednosnice i upravlja sredstvima koja se ostvaruju u okviru transakcije sekuritizacije (usm-jerava sredstva na povjerenički račun za daljnje investicije i ugovara swap transakciju). Uobičajeno se osniva u područjima koja su karakteristična po povoljnijem regulatornom okviru, posebno u smis-lu nižih kapitalnih zahtjeva i povoljnijeg poreznog tretmana (npr. Kajmanski otoci, Bermuda). Najčešće se u ulozi SPV-a pojavljuje offshore reosiguratelj. Za SPV koji sudjeluje u transakciji sekuritizacije s odštetnim kriterijem, potrebno je ostvariti licencu za pružanje poslova reosiguranja, dok to nije nužno u slučaju transakcija sekuritizacije s drugim kriteri-jima (IAIS, 2003: 15). Sponzor ne može izravno sud-jelovati u vlasništvu SPV-a. Stoga je SPV uobičajeno sponzoriran od strane određene dobrotvorne zak-lade (Banks, 2004: 120).


290 God. XXXIII, BR. 1/2020. str. 287-303

Aktivnosti vezane za emisiju i plasman vrijednos-nica obavljaju investicijske banke. Iznos emisije odgovara maksimalnom iznosu obveze koje SPV preuzima prema sponzoru (limit reosiguranja). Sredstva koja ostvari od investitora, SPV plasira na kolateralizirani povjerenički račun. U cilju sman-jivanja kreditnog rizika postavljaju se ograničenja na investicije, kao i mogućnosti povlačenja sred-stava. Investicije se strukturiraju od nisko-rizičnih vrijednosnica (najčešće vrijednosnica novčanog tržišta). Upravo se prinosi od ovih ulaganja, zajedno s premijom koju SPV ostvaruje od sponzora, koriste

za plaćanje kupona investitorima u obveznice. SPV ima obvezu isplatiti sredstva sponzoru u slučaju na-stupa osiguranog događaja, odnosno glavnicu i ka-mate investitorima ako se događaj ne ostvari.

Uobičajeno transakcija sekuritizacije uključuje ugovor o zamjeni (eng. swap). Ugovor se odnosi na zamjenu fiksnih prinosa od ulaganja u financijske instrumente za fluktuirajuće kamate (uobičajeno LIBOR uvećan za određenu premiju za rizik). Ovim se ugovorom ostvaruje dodatna zaštita investicija. Međutim, zaštita od rizika nije potpuna. Naime, ugovor o zamjeni uključuje rizik suprotne strane.

Slika 1. Struktura sekuritizacije

6

(najčešće vrijednosnica novčanog tržišta). Upravo se prinosi od ovih ulaganja, zajedno s

premijom koju SPV ostvaruje od sponzora, koriste za plaćanje kupona investitorima u

obveznice. SPV ima obvezu isplatiti sredstva sponzoru u slučaju nastupa osiguranog događaja,

odnosno glavnicu i kamate investitorima ako se događaj ne ostvari.

Uobičajeno transakcija sekuritizacije uključuje ugovor o zamjeni (eng. swap). Ugovor se odnosi

na zamjenu fiksnih prinosa od ulaganja u financijske instrumente za fluktuirajuće kamate

(uobičajeno LIBOR uvećan za određenu premiju za rizik). Ovim se ugovorom ostvaruje

dodatna zaštita investicija. Međutim, zaštita od rizika nije potpuna. Naime, ugovor o zamjeni

uključuje rizik suprotne strane.

Slika 1. Struktura sekuritizacije

Izvor: Prilagođeno prema: Ćurak (2009: 47).

Primjer gubitka povezanog s ovim rizikom je propast investicijske banke Lehman Brothers koja

je bila suprotna strana u ugovoru o zamjeni za transakcije sekuritizacije za vrijeme financijske

krize 2007./2008. Zbog ovoga događaja, ukupno su četiri transakcije sekturitizacije rezultirale

u gubitku (Edesess, 2014: 9). Ovo je pokazalo da se u kratkom roku može dogoditi povezanost

Glavnica i premija

Sredstva za obveznice

Preostala glavnica

Isplate kupona

Investicijski prinos

Naknada štete

Premija

Fiksni investicijski prinos

LIBOR +/- swap spread

Suprotna strana ugovora o

zamjeni (swap)

SPV Sponzor

(osiguratelj ili reosiguratelj)

Povjerenički račun

Investitori

Izvor: Prilagođeno prema Ćurak (2009: 47).

Primjer gubitka povezanog s ovim rizikom je propast investicijske banke Lehman Brothers koja je bila suprotna strana u ugovoru o zamjeni za tran-sakcije sekuritizacije za vrijeme financijske krize 2007./2008. Zbog ovoga događaja, ukupno su četiri transakcije sekturitizacije rezultirale u gubitku (Edesess, 2014: 9). Ovo je pokazalo da se u kratkom roku može dogoditi povezanost između kretanja prinosa na ostale instrumente na tržištu kapitala i prinosa na vrijednosnice temeljene na riziku iz

osiguranja/reosiguranja. Upravo su to potvrdili re-zultati istraživanja Carayannopoulos i Perez (2015). Naime, za vrijeme financijske krize, zbog propasti Lehman Brothers, prinosi na obveznice temeljene na katastrofalnim rizicima bili su korelirani s prino-sima na ostalu imovinu. Ipak, u dugom roku postoji potencijal za ostvarenje diversifikacijskog učinka za investitore (Spry, 2009: 18).

Investitori, koji su indirektni pružatelji zaštite za rizike društava za osiguranje odnosno reosigu-

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291God. XXXIII, BR. 1/2020. str. 287-303

ranje, kupuju vrijednosnice čiji će povrat ovisiti o nastupu događaja koji je predmetom sekuritizacije. Vrijednosnice koje nastaju postupkom sekuriti-zacije mogu se ponuditi širokoj javnosti ili se nji-hova prodaja realizira preko privatnog plasmana. Investitori obuhvaćaju mirovinske fondove, inves-ticijske fondove, hedge fondove, banke te društva za osiguranje i reosiguranje. Motiv njihova ulaganja u vrijednosnice temeljene na katastrofalnim rizicima je diversifikacijski učinak (s obzirom da vrijednost instrumenta ovisi o katastrofalnom događaju, ne o prinosima na ostale financijske instrumente) i/ili veći prinos u odnosu na ulaganja u korporacijske obveznice. Iako je diversifikacijski učinak važan motiv uključenja obveznica temeljenih na katastro-falnim rizicima u investicijski portfelj, ovaj učinak može i izostati budući da katastrofalni događaji mogu proizvesti negativne posljedice i na tržište kapitala.

Iz prinosa od ulaganja sredstava koja su ostvarena prodajom vrijednosnica i premije koju je platio sponzor, plaćaju se varijabilni kuponi investitorima. Uobičajeno je da se kamatna stopa veže za LIBOR i uvećava za određenu premiju za rizik. Kamate će se razlikovati s obzirom na rejting obveznica kojeg utvrđuju agencije za rejting (npr. Standard & Poors, Moody’s) na temelju frekvencije i inten-ziteta katastrofalnog događaja koji je predmetom transakcije sekuritizacije, uvjeta sekuritizacije i rizika. Utvrđivanje frekvencije i intenziteta te-melji se na modeliranju katastrofalnog događaja od strane poduzeća za modeliranje šteta. U skladu s utvrđenom razinom rizika, vrijednosnice mogu imati investicijski ili ispod-investicijski rejting. Najčešće imaju rejting u rasponu od B do BBB pre-ma Standard & Poors (OECD, 2009: 36)11.

Sve dok se ne ostvari definirani uvjet (eng. trigger) na kojem su temeljene obveznice, investitori će pri-mati kupone te glavnicu na dan dospijeća vrijednos-nice (uobičajeno dospijeće je od tri do pet godina). Ukoliko se pak određeni događaj realizira, pravo na sredstva ostvaruje sponzor, a investitori gube dio ili cjelokupnu glavnicu. Naime, kod dijela obveznica glavnica je zaštićena u cijelosti ili djelomično, dok je kod drugih glavnica u potpunosti pod rizikom. Pored kreditnog rizika, investitori se izlažu i riziku likvidnosti. Naime, iako se vrijednosnicama koje nastaju u postupku sekuritizacije trguje na sekund-arnom tržištu kapitala, likvidnost ovoga tržišta je ograničena.

Nekoliko je kriterija za podjelu obveznica vezanih za katastrofalne rizike (prema Araya, 2004: 3, Slika 2.). S obzirom na broj rizika koji su pod pokrićem ra-zlikuju se obveznice koje pokrivaju jedan događaj (eng. single-peril) i one koje obuhvaćaju više događaja (eng. multi-peril), npr. zemljotres i ura-gan. Obveznice koje su temeljene na više događaja omogućavaju sponzoru uštedu u smislu izbjegavan-ja troškova transfera svakog pojedinačnog rizika.

Prema razdoblju pokrića rizika, postoje obveznice koje pružaju pokriće za jednu godinu (eng. single-year) i obveznice s višegodišnjim pokrićem (eng. multi-year). S obzirom na vrstu štete, obveznice se dijele na one za određeni događaj (eng. per event) i obveznice koje pokrivaju agregirane štete (eng. aggregate).

Uvažavajući kriterij, odnosno uvjet prema kojima se određuje pravo osiguratelja/reosiguratelja na naknadu i posljedično pravo investitora na povrat uloženih sredstava i ostvarenje kamata, razlikuju se obveznice temeljene na odštetnom kriteriju (eng. indemnity trigger), indeksu šteta industrije (eng. loss index), ponderiranom indeksu šteta (eng. weighted loss index), čistom parametarskom kriteriju (eng. pure parametric), parametarskom indeksu (eng. parametric index) te kriteriju mod-eliranih šteta (eng. modeled-losses trigger).

Odštetni kriterij je stvarna šteta društva za osi-guranje, odnosno reosiguranje. Kao i u slučaju ne-proporcionalnog reosiguranja/retrocesije, kada pri ostvarenju osiguranog događaja svota štete prijeđe unaprijed definirani iznos, sponzor ostvaruje pravo na naknadu štete. S obzirom da je naknada vezana za iznos štete osiguratelja/reosiguratelja, sponzor nije izložen riziku baze (odstupanje osigurateljevih/reosigurateljevih šteta u odnosu na štete/parametar koji predstavljaju kriterij za ostvarenje naknade štete na kojima su obveznice bazirane), zbog čega je ugovaranje sekuritizacije uz odštetni uvjet za spon-zora prihvatljivije u odnosu na ugovaranje tran-sakcije uz druge kriterije. Međutim, ovu prednost osiguratelji/reosiguratelji plaćaju višim premijama za rizik koju investitori zahtijevaju na vrijednosnice s odštetnim kriterijem s obzirom na viši stupanj izloženosti riziku, a koji proizlazi iz višeg stupnja informacijske asimetrije koja za posljedicu može imati nepovoljnu selekciju i moralni hazard. U pr-vom slučaju osiguratelj/reosiguratelj nekvalitetno izvršava proces preuzimanja rizika i transferira „loše“ rizike na tržište kapitala, dok u drugom ne


292 God. XXXIII, BR. 1/2020. str. 287-303

potiče na aktivnosti za smanjivanje šteta i/ili s nemarom izvršava aktivnosti vezane za likvidaciju šteta. Investitori bi trebali razumjeti poslovni pro-ces klijenta, politiku preuzimanja rizika i prakse likvidacije štete (Hagedorn i sur., 2009: 40), što nije jednostavno za investitore u obveznice koji ne pripadaju industriji osiguranja/reosiguranja. U cilju smanjenja nepovoljnih učinaka informacijske asi-metrije, odnosno usklađivanja interesa sponzora i investitora, investitori mogu zahtijevati sudjelovan-je osiguratelja/reosiguratelja u naknadi dijela štete (IAIS, 2003: 21). Također, sponzor je obvezan udo-voljiti zahtjevu za pružanjem informacija o svom portfelju. Nedostatak primjene odštetnog kriterija je i u trajanju procesa u kojem osiguratelj/reosiguratelj ostvaruje novčane tokove za pokriće šteta. Ono je duže u odnosu na razdoblja koja se vežu uz ostale kriterije iz razloga što štete trebaju biti potvrđene (Hagedorn i sur., 2009: 46), što osiguratelja izlaže riziku likvidnosti. Dodatno, neke se štete mogu pri-javiti i znatno nakon njihova nastanka, zbog čega je pri ugovaranju sekuritizacije s odštetnim kriterijem, sponzor izložen i riziku zaostalih šteta.

Smanjenje informacijske asimetrije ostvaruje se transakcijom sekuritizacije uz ugovaranje kriterija indeksa šteta industrije. Prema ovom uvjetu, osi-guratelj/reosiguratelj ostvaruje pravo na naknadu štete ako indeks šteta dosegne razinu iznad one koja je unaprijed definirana. Ovaj se kriterij koristi u situacijama kada portfelj osiguranja/reosiguranja ne sadrži dovoljno podataka, ali njegova izloženost slična je izloženosti ukupne industrije osiguranja/reosiguranja (Araya, 2004: 4). Indekse, na temelju kretanja šteta industrije neživotnog osiguranja u po-jedinim geografskim područjima (dijelovima država ili državama), određuju nezavisne agencije (koje nisu izravno uključene u transakciju sekuritizacije) (npr. PCS (Property Claims Service) za Sjedinjene Američke Države, PERILS (Pan-European Risk In-surance Linked Services) za Europu). Primjenom ovoga kriterija osiguratelj/reosiguratelj zaštićuje in-formacije odnosno ostvaruje privatnost svog port-felja (Banks, 2004: 123; OECD, 2009: 26; Swiss Re, 2011: 12)11,12, smanjuje se problem informacijske asimetrije za investitore (indeks je razumljiviji za investitore u odnosu na karakteristike portfelja osi-guranja/reosiguranja), doprinosi se standardizaciji ugovora i višem stupnju likvidnosti tržišta obvezni-ca (IAIS, 2003: 21). Međutim, sponzor je izložen riziku baze u smislu odstupanja njegovih šteta od indeksa šteta. Korelacija u kretanju šteta osigu-

ratelja/reosiguratelja i šteta industrije zavisit će od tržišnog udjela osiguratelja/reosiguratelja (Hage-dorn i sur., 2009: 44). Prema tome, sekuritizacijom temeljenom na ovom kriteriju, zaštita sponzora od rizika može biti nepotpuna. Također, za ostvari-vanje odštete potrebno je ostvariti informacije o štetama industrije nakon što se ostvari katastrofalni događaj, što može potrajati, zbog čega i ovaj kriterij s gledišta likvidnosti osiguratelja/reosiguratelja ima nedostatak. U slučajevima događaja koji izazivaju velike štete razdoblje od nastanka događaja i ob-jave podataka o procjeni šteta na razini industrije može se produžiti i do dvije godine (Brookes, 2009: 87). Dodatno, za osiguratelja je prisutan i rizik za-ostalih šteta. Iz perspektive investitora, zbog veće transparentnosti te zbog nepostojanja potrebe za procjenom portfelja osiguranja sponzora, ovaj kri-terij je poželjniji.

Način na koji se može smanjiti rizik baze za spon-zora jest uvođenje kriterija ponderiranog indeksa šteta, kojim se uvažava geografska distribucija portfelja osiguranja/reosiguranja sponzora. Naime, uvođenjem pondera, koji uvažavaju geografsku izloženost riziku sponzora, ostvaruje se viši stupanj koreliranosti u kretanju šteta osiguratelja/reosigu-ratelja i kretanja indeksa šteta.

Čisti parametarski ili fizički kriterij u transakciji sekuritizacije određuje pravo sponzora na naknadu štete na osnovi fizičkih mjera, kao što su magnitu-da potresa, brzina vjetra, veličina padalina i druge fizičke karakteristike događaja koji uzrokuje štetu, u određenom geografskom području. Sponzor utvrđuje veličinu kriterija i geografsko područje koje je obuhvaćeno zaštitom. Odštetu ostvaruje ukoliko definirani događaj, npr. vjetar dosegne određenu minimalnu razinu u određenom području. Osi-guratelj/reosiguratelj ne mora otkrivati podatke o svom portfelju osiguranja/reosiguranja. Budući da se parametri o katastrofalnom događaju mogu os-tvariti u relativno kratkom roku, vrijeme u kojem sponzor ostvaruje naknadu je kraće u odnosu na vri-jeme povezano s prethodnim kriterijima. Međutim, zbog mogućeg nepodudaranja šteta iz događaja na čijim se veličinama bazira parametarski kriterij i šteta osiguratelja/reosiguratelja te zbog moguće različite geografske distribucije osigurateljnog/reosigurateljenog portfelja (Swiss Re, 2011: 13)12, sponzor je izložen riziku baze. Rizik baze je veći u odnosu na onaj koji se može pojaviti pri primjeni indeksa šteta jer kriterij nije iznos šteta industrije kojoj pripada osiguratelj/reosiguratelj, nego veličina

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parametra vezana za određeni događaj. S druge strane, manja je informacijska asimetrija za inves-titore jer parametri koji se odnose na katastrofalni događaj i određuju pravo na odštetu, nisu pod utje-cajem osiguratelja/reosiguratelja i razumljiviji su u odnosu na one koji se vežu uz odštetni kriterij. Sto-ga su vrijednosnice temeljene na parametarskom kriteriju pogodne i za investitore koji ne pripadaju industriji osiguranja. Zbog manje informacijske asimetrije, investitori zahtijevaju manje premije za rizik, što rezultira u nižem trošku za društvo za osi-guranje/reosiguranje.

Uz čisti parametarski kriterij, koristi se i param-etarski indeks. Pri izračunu ovoga indeksa uvažava

se više lokacija za koje se primjenjuju različiti pon-deri koji odražavaju izloženost sponzora katastro-falnim događajima u određenom području (Swiss Re, 2011: 13)12. Primjer pondera su svote osigu-ranja ili maksimalna moguća šteta u određenom području (Hagedorn i sur., 2009: 42). U slučaju na-stupa određenog događaja, množe se fizički para-metar koji se odnosi na događaj i ponderi. Ukoliko zbroj ovih umnožaka dosegne unaprijed određenu razinu, sponzor ostvaruje pravo na odštetu (Hage-dorn i sur., 2009: 41). Na ovaj se način smanjuje izloženost osiguratelja riziku baze u odnosu na onu koja se javlja kod primjene čistog parametar-skog kriterija.

Slika 2. Podjela obveznica temeljenih na katastrofalnim rizicima

12

Slika 2. Podjela obveznica temeljenih na katastrofalnim rizicima

Izvor: Izrada autora prema Araya (2004)

Obveznice vezane za katastrofalne rizike

Obveznice prema uvjetu kojim se određuje pravo na naknadu Obveznice prema broju uvjeta Obveznice prema tranšama

Odštetni kriterij

Indeks šteta industrije

Ponderirani indeks šteta

Čisti parametarski

Parametarski indeks

Jedan uvjet Jedan instrument

Različite tranše Hibridne obveznice

Modelirane štete

Obveznice s obzirom na broj rizika pod pokrićem

Obveznice prema razdoblju pokrića rizika

Jedan rizik

Više rizika

Godišnje pokriće

Višegodišnje pokriće

Određeni događaj

Obveznice prema vrsti štete

Agregirane štete

Izvor: Izrada autora prema Araya (2004).

Kriterij modeliranih šteta uzima u obzir sintetički portfelj, koji se u cilju smanjenja rizika baze, usklađuje s portfeljem osiguratelja/reosiguratelja, te odgovarajuće modeliranje (Hagedorn i sur., 2009: 45). Naknada se ne utvrđuje na temelju stvarnih šteta, nego šteta koje proizlaze iz modela. Naime, nakon nastupa određenog događaja koji je pred-metom sekuritizacije, uvažavaju se fizički parametri događaja (magnituda potresa, brzina vjetra i dr.) koji se unose u unaprijed određeni model temeljem kojeg se određuje šteta. Ukoliko modelirane štete dosegnu razinu iznad unaprijed definiranog praga, osiguratelj ostvaruje pravo na naknadu (Hagedorn i sur., 2009: 45). Transakciju temeljenu na kriteri-

ju modeliranih šteta karakterizira srednji stupanj rizika baze za osiguratelje, odnosno reosiguratelje, kao i srednji stupanj informacijske asimetrije za investitore. Sponzor zaštićuje informacije o svom portfelju osiguranja/reosiguranja. U smislu likvid-nosti sponzora, kao i slučaju parametarskog krit-erija, vrijeme u kojem se ostvaruje odšteta je kraće u odnosu na vrijeme u slučaju odštetnog kriterija i kriterija indeksa šteta industrije. S kriterijem mod-eliranih šteta javlja se izloženost riziku modela u smislu da se štete iz određenog događaja mogu pod-cijeniti ili precijeniti. Međutim, s unaprjeđenjem modela od strane agencija za modeliranje šteta, ovaj se rizik smanjuje (Cummins, 2008: 28).


294 God. XXXIII, BR. 1/2020. str. 287-303

Uz primjenu pojedinačnih kriterija, transakcija sekuritizacije se može strukturirati i kombiniran-jem dvaju ili više kriterija. Na ovaj način nastaju tzv. hibridne strukture sekuritizacije. Uvjetovanjem isplata ispunjavanjem više kriterija, moguće je is-todobno udovoljiti interesima i sponzora i investi-tora. Međutim, hibridne strukture su kompleksnije za razumijevanje i s njima su povezani viši troškovi u odnosu na jednostavne strukture sekuritizacije.

Svaki od kriterija se razlikuje s obzirom na stupanj rizika baze, zahtjeva za pružanjem informacija o portfelju osiguranja s gledišta osiguratelja, odnosno informacijskoj asimetriji iz perspektive investitora, što u konačnici određuje i premiju za rizik koju zahtijevaju investitori. Odnos između stupnja rizika baze i razine transparentnosti prikazan je na Slici 3.

Pored gore navedenih podjela vrijednosnica pov-ezanih s katastrofalnim rizicima, obveznice se mogu razlikovati i prema tranšama. Postoje obveznice koje imaju samo jedan oblik instrumenta, te one koje se emitiraju u različitim tranšama koje karakterizira-ju različiti odnosi rizika i prinosa, odnosno razine kamatnih stopa i/ili povrata glavnice, odgađanja is-plate glavnice ili glavnice u potpunosti pod rizikom i kreditni rejting (Spry, 2009: 13). Odgađanje vraćanja glavnice nakon isteka planiranog dospijeća ob-veznice događa se kod dužeg vremena razvoja šteta. Osiguratelji preferiraju duže razdoblje razvoja šteta, dok investitori imaju interes za kraćim vremenom

razvoja šteta (Banks, 2004: 124). Dodatno, tranše se mogu razlikovati i prema opasnostima na kojima su temeljene kao i teritoriju (Spry, 2009: 13).

3. Koristi, rizici i troškovi sekuritizacije za osiguratelje/reosiguratelje

U razmatranju sekuritizacije društvo za osiguranje/reosiguranje analizira potencijalne koristi i rizike, odnosno troškove povezane s ovom metodom up-ravljanja rizicima. Oni će se razlikovati između različitih instrumenata koji rezultiraju iz tehnike sekuritizacije u ovisnosti od primijenjenog uvjeta kojim se definira pravo osiguratelja na naknadu šteta odnosno investitora na kupone i glavnicu te od ciklusa tržišta osiguranja/reosiguranja. Us-poredba sekuritizacije temeljene na odštetnom i neodštetnim kriterijima prikazana je u Tablici 1.

Primjenom sekuritizacije u upravljanju rizicima osiguratelj/reosiguratelj može ostvariti dodatni ka-pacitet za preuzimanje rizika. Upravo je težnja za dodatnim kapacitetom za preuzimanje rizika bila glavni pokretač razvoja ove metode upravljanja ri-zicima društava za osiguranje/reosiguranje (Ćurak, 2009). U kontekstu kapaciteta, posebna je važnost sekuritizacije za društva za osiguranja/reosiguranja u upravljanju rizicima za koje se ne može ostvariti diversifikacija u okviru njihova vlastitog portfelja, kakvi su katastrofalni rizici. Zbog velikog intenzite-ta, nastup katastrofalnih događaja smanjuje kapac-

Slika 3. Odnos rizika baze za osiguratelje i transparentnosti za investitore za različite kriterije na kojima su bazirane obveznice

13

Kriterij modeliranih šteta uzima u obzir sintetički portfelj, koji se u cilju smanjenja rizika baze,

usklađuje s portfeljem osiguratelja/reosiguratelja, te odgovarajuće modeliranje (Hagedorn i

sur., 2009: 45). Naknada se ne utvrđuje na temelju stvarnih šteta, nego šteta koje proizlaze iz

modela. Naime, nakon nastupa određenog događaja koji je predmetom sekuritizacije, uvažavaju

se fizički parametri događaja (magnituda potresa, brzina vjetra i dr.) koji se unose u unaprijed

određeni model temeljem kojeg se određuje šteta. Ukoliko modelirane štete dosegnu razinu

iznad unaprijed definiranog praga, osiguratelj ostvaruje pravo na naknadu (Hagedorn i sur.,

2009: 45). Transakciju temeljenu na kriteriju modeliranih šteta karakterizira srednji stupanj

rizika baze za osiguratelje, odnosno reosiguratelje, kao i srednji stupanj informacijske

asimetrije za investitore. Sponzor zaštićuje informacije o svom portfelju

osiguranja/reosiguranja. U smislu likvidnosti sponzora, kao i slučaju parametarskog kriterija,

vrijeme u kojem se ostvaruje odšteta je kraće u odnosu na vrijeme u slučaju odštetnog kriterija

i kriterija indeksa šteta industrije. S kriterijem modeliranih šteta javlja se izloženost riziku

modela u smislu da se štete iz određenog događaja mogu podcijeniti ili precijeniti. Međutim, s

unaprjeđenjem modela od strane agencija za modeliranje šteta, ovaj se rizik smanjuje

(Cummins, 2008: 28).

Slika 3. Odnos rizika baze za osiguratelje i transparentnosti za investitore za različite kriterije

na kojima su bazirane obveznice

Izvor: Swiss Re (2011: 10).12

Rizik baze za sponzora

Zaht

jev

za p

ruža

njem

info

rmac

ija

Odštetni uvjet

Čisti parametarski

uvjet Parametarski

indeks

Uvjet modeliranih šteta Indeks šteta

industrije

Ponderirani indeks šteta industrije

Izvor: Swiss Re (2011: 10).12

Review article

295God. XXXIII, BR. 1/2020. str. 287-303

itet na tržištu reosiguranja/retrocesije i povećava cijenu transfera rizika ili može dovesti tržište do situacije u kojoj uopće nije u mogućnosti preuzeti određene rizike. S obzirom na veličinu tržišta kapi-tala te brojne i raznovrsne investitore, ovaj segment financijskog tržišta ima veću apsorpcijsku sposob-nost u odnosu na tržište reosiguranja/retrocesije, te društva za osiguranje/reosiguranje postaju manje ovisna o reosiguranju/retrocesiji u upravljanju ak-tuarskim rizikom, posebno u situaciji kada je zbog velikih šteta kao posljedice katastrofalnih događaja, tradicionalni transfer rizika vrlo skup.

Osim što se sekuritizacijom može nadoknaditi ne-dostatak kapaciteta tržišta reosiguranja, sekuriti-zacija može pozitivno djelovati na učinkovitost tržišta reosiguranja. Naime, alternativan transfer rizika može potaknuti reosiguratelje na konkurent-nije djelovanje i u smislu cijene i pokrića rizika (Somers, 2017: 189)13.

Višegodišnje ugovaranje pokrića rizika omogućava sponzoru zaštitu od porasta cijene transfera rizika u usporedbi s tradicionalnim reosiguranjem, odnosno retrocesijom, koje se u pravilu obnavlja na godišnjoj razini. Ova prednost sekuritizacije je posebno izražena u situaciji tzv. „tvrdog“ tržišta re-osiguranja/retrocesije, kada zbog rasta šteta reosig-uratelji/retrocesionari povećavaju premiju reosigu-ranja/retrocesije. Ugovaranje zaštite na razdoblje od nekoliko godina također smanjuje administra-tivne troškove u odnosu na ugovaranje reosiguranja na godišnjoj osnovi. Smanjivanje troškova odražava se u unaprijeđenim performansama društava za osiguranje/reosiguranje.

Sekuritizacijom se stabiliziraju rezultati iz poslova preuzimanja rizika u osiguranje/reosiguranje spon-zora, što pozitivno utječe na vrijednost bogatstva dioničara osiguratelja, odnosno reosiguratelja (Nje-gomir, Maksimović, 2009: 72). Uz istu razinu kapi-tala, osiguratelju/reosiguratelju je omogućeno preu-zimanje više rizika. Oslobađanje kapitala i njegova uposlenost u druge svrhe, može pozitivno djelovati na performanse osiguratelja/reosiguratelja.

Sekuritizacijom osiguratelji ostvaruju zaštitu od rizika koja je, za razliku od tradicionalnog reosigu-ranja, kolateralizirana. Drugim riječima, sredstava za pokriće šteta ostvarena su unaprijed i plasirana u instrumente s kojima, za razliku od transfera rizika na društvo za reosiguranje/retrocesionara, osi-guratelji/reosiguratelji nisu u tolikoj mjeri izloženi kreditnom riziku. Zapravo, kreditni rizik će ovisiti o kvaliteti imovine koju formira SPV (IAIS, 2009: 10)10 i o suprotnoj strani u ugovoru o zamjeni. Pri-nosi na ovu imovinu nisu ovisni o katastrofalnim štetama. S druge strane, u slučaju tradicionalnog transfera rizika, štete mogu značajno djelovati na financijski položaj reosiguratelja/retrocesionara i time na njegovu sposobnost da nadoknadi štete osiguratelju/reosiguratelju. Također, zbog jasno definiranih uvjeta plaćanja, posebno kod transakci-ja temeljenih na neodštetnim kriterijima, naknada štete se ostvaruje brže u odnosu na naknadu po os-novi reosiguranja, kod kojega su češća osporavanja osigurateljeva prava na naknadu i iznos naknade (Swiss Re, 2011: 19)12. Stoga, iako se sekuritizacijom društava za osiguranje/reosiguranje mogu izložiti riziku likvidnosti, u usporedbi s reosiguranjem/ret-rocesijom, ovaj rizik je manji.

Tablica 1. Usporedba karakteristika obveznica temeljenih na katastrofalnim rizicima i reosiguranja/retrocesije s gledišta osiguratelja/reosiguratelja

Oblik transfera Rizik baze Kreditni rizik

Rizik likvidnosti za

sponzora

Rizik zaostalih

šteta

Pružanje informacija o portfelju osiguranja

Višegodišnje pokriće

Obuhvat više rizika

Obveznice s odštetnim uvjetom

NeMinimalan (ovisi o investicijskim ograničenjima, suprotnoj strani u swap transakciji)

Umjeren Da Da DaVarira među instru-

mentima

Obveznice s neodštetnim uvjetom

DaMinimalan (ovisi o investicijskim ograničenjima, suprotnoj strani u swap transakciji)

Umjeren Da Ne DaVarira među instru-

mentima

Reosiguranje/ retrocesija Ne Da Da Da Da Rijetko Rijetko

Izvor: Prilagođeno prema Cummins i Weiss (2009: 531).


296 God. XXXIII, BR. 1/2020. str. 287-303

Rizici s kojima se suočavaju sponzori obuhvaćaju rizik baze, rizik zaostalih šteta i rizik modela. Rizik baze pojavljuje se u slučajevima transakcija baziranih na ne-odštetnim uvjetima i predstav-lja odstupanja stvarnih šteta osiguratelja od šteta na kojima je temeljen kriterij za utvrđivanje prava osiguratelja na odštetu. Rezultira iz slabe korelacije između šteta osiguratelja/reosiguratelja i šteta in-dustrije. Rizik zaostalih šteta odnosi se na pojavu naknadnog zahtjeva za odštetom, nakon razdoblja razvoja šteta, te u iznosu većem od onoga kojeg je sponzor ostvario od SPV-a. Investitori uobičajeno ograničavaju razdoblje razvoja šteta do 18 mjeseci (IAIS, 2003: 19). Rizik modela obuhvaća rizik vezan za utjecaj pretpostavki složenih modela katastro-falnih šteta, varijabli, osjetljivosti varijabli na određene čimbenike, korelacije između varijabli, na usklađivanje modeliranih šteta s razvojem katastro-falnih šteta za sponzora (IAIS, 2003: 20). Količina i kvaliteta podataka razlikuje se među različitim događajima (Spry, 2009: 10). Međutim, općenito vrijedi da su događaji koji su predmetom sekuriti-zacije uglavnom oni, koji unatoč njihovoj rastućoj učestalosti u zadnjim desetljećima, u odnosu na os-tale rizike, ipak imaju manju frekvenciju, ali kada se materijaliziraju imaju veliki intenzitet, te su po-datci za parametre potrebni za modeliranje šteta ograničeno dostupni (Smith, 2017: 2)14. Uz rizike kojima osiguratelj može biti izložen u različitim stupnjevima u ovisnosti od primijenje-nog uvjeta, visoki troškovi realizacije transakcije sekuritizacije predstavljaju važno ograničenje za primjenu ove metode upravljanja rizicima osi-guratelja, odnosno reosiguratelja. Međutim, ovo ograničenje ovisi o uvjetima na tržištu reosiguran-ja/retrocesije. Naime, nakon većih šteta, posebno nakon prirodnih katastrofa, kada se smanji kapac-itet tržišta reosiguranja/retrocesije za preuzimanje rizika, raste cijena transfera rizika. U takvoj sit-uaciji, osiguratelji i reosiguratelji traže alternativne načine upravljanja rizicima. Stoga, u uvjetima „tvr-dog“ tržišta reosiguranja/retrocesije, sekuritizacija ima prednost u odnosu na reosiguranje, odnosno retrocesiju i obrnuto u situaciji „mekog“ tržišta (Swiss Re, 2011: 16)12.Troškovi kamata na obveznice u početku, kada su uključivali i premiju za „novitet“, bili su iznimno visoki. Naime, ova je premija na obveznice koje su emitirane u početnim godinama razvoja sekuriti-zacije bila za oko 50 do 100 postotnih bodova iznad premije na korporacijske obveznice sličnog rejtinga (Banks, 2004: 119). Međutim, s gubljenjem karakter-istike „nove vrijednosnice“ ova se premija smanjuje. Dodatno, smanjivanju kamata doprinijela je i ponuda

sredstava na tržištu za koja su investitori tražili alter-nativna ulaganja u situaciji niskih kamatnih stopa na financijskim tržištima (Munich Re, 2014; Ammar i sur., 2015: 21)15. Ostali troškovi obuhvaćaju troškove osnivanja SPV-a, troškove agencija za rejting, troškove aktivnosti vezanih za utvrđivanje cijene vri-jednosnica i troškove drugih aktivnosti investicijskih banaka u okviru emisije i plasmana vrijednosnica, pravne troškove vezane za emisiju vrijednosnica.Dok je fiksiranje uvjeta na dulje razdoblje, prednost sekuritizacije u odnosu na reosiguranje u smislu zaštite od porasta premije reosiguranja/retrocesi-je, osiguratelji/reosiguratelji nisu u mogućnosti iskoristiti povoljnije uvjete do kojih može doći na tržištu reosiguranja/retrocesije. Naime, kraća raz-doblja na koja se ugovora reosiguranje/retrocesija omogućavaju fleksibilnost, odnosno ostvarenje jef-tinijeg transfera rizika u situaciji „mekog“ tržišta.Prema Subramanian i Dicke (2018: 55) troškovi nepo-voljne selekcije su manji kod reosiguranja u odnosu na sekuritizaciju jer reosiguratelji raspolažu značajno većim resursima za preuzimanje rizika u odnosu na investitore na tržištu kapitala. Na ovaj način u većoj su sposobnosti procijeniti karakteristike rizika i smanjiti vjerojatnost pojave nepovoljne selekcije.Odluka osiguratelja/reosiguratelja o korištenju obveznica vezanih za katastrofalne rizike, prema tome, bit će temeljena na analizi troškova i koristi i njihovim usporedbama s ostalim metodama up-ravljanja rizicima. Pri tome, uz uvažavanje izravnih koristi i troškova, važno je u obzir uzeti i one neiz-ravne, kakvi su veličina ukupnog rizika koji se želi zadržati i transferirati, kreditni rizik i dr. (Banks, 2004: 118). Stoga bi se, uz uvažavanje karakteristika reosiguranja/retrocesije i sekuritizacije, prednosti ovih metoda transfera rizika trebale iskoristi u nji-hovoj optimalnoj kombinaciji (Ćurak, 2009: 47).

4. Značenje sekuritizacije u upravljanju rizicima osiguratelja/reosiguratelja

Vrijednost novih emisija i ukupna vrijednost ob-veznica temeljena na katastrofalnim rizicima i os-talih vrijednosnica povezanih s osiguranjem u raz-doblju od 1997. do 2018. godine, prikazana je na Grafikonu 1. U razdoblju od 1997. do 2007. godine ukupan volumen vrijednosnica (novoemitiranih i nedospjelih) je rastao, dok je 2008. godine sman-jen, posebno je smanjen volumen novih emisija. Uz smanjivanje prinosa, kao posljedica krize, na pad emisija obveznica temeljenih na katastrofalnim ri-zicima, utjecala je i neizvjesnost vezana za ugovore o zamjeni (zbog propasti investicijske banke Lehman

Review article

297God. XXXIII, BR. 1/2020. str. 287-303

Brothers) te povoljniji uvjeti na tržištu reosiguranja (OECD, 2009: 25)11. Od 2012. godine, uz određene godišnje oscilacije, vrijednost vrijednosnica te-meljenih na rizicima iz osiguranja ima rastući trend.Rast značenja obveznica temeljenih na katastrofal-nim rizicima očituje se i iz Grafikona 2. na kojem su

prikazani podatci o kretanju tradicionalnog i alter-nativnog kapitala društava za reosiguranje, a kojem pripadaju i obveznice vezane za katastrofalne rizike. Iako je značenje alternativnog kapitala u ukupnom kapitalu reosiguratelja značajno manje u odnosu na tradicionalno, prisutan je trend rasta.

Grafikon 1. Vrijednost novih emisija i ukupna vrijednost obveznica temeljenih na katastrofalnim rizicima i ostalih vrijednosnica vezanih za rizik iz osiguranja u razdoblju od 1997. do 2018. godine

19

Grafikon 1. Vrijednost novih emisija i ukupna vrijednost obveznica temeljenih na

katastrofalnim rizicima i ostalih vrijednosnica vezanih za rizik iz osiguranja u razdoblju od

1997. do 2018. godine

Izvor: Artemis (2019)16

Međutim, unatoč trendu rasta novih emisija i ukupne vrijednosti obveznica temeljenih na

katastrofalnim rizicima i ostalih vrijednosnica povezanih s osiguranjem, u usporedi s

reosiguranjem ovi instrumenti imaju relativnom malo značenje u upravljanju rizicima društava

za osiguranje. Naime, prema podatcima iz Grafikona 3., nove emisije obveznica vezanih za

katastrofalne rizike i ostalih vrijednosnica povezanih s osiguranjem činile su 7,9% ukupno

naplaćenih premija neživotnog reosiguranja u 2018. godini. Odnos ukupne vrijednosti

postojećih obveznica temeljenih na katastrofalnim rizicima i ostalih vrijednosnica povezanih s

osiguranjem i premija neživotnog reosiguranja iznosio je 21,14% u 2018. godini.

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Međutim, unatoč trendu rasta novih emisija i ukupne vrijednosti obveznica temeljenih na katastrofalnim rizicima i ostalih vrijednosnica povezanih s osigu-ranjem, u usporedi s reosiguranjem ovi instrumenti imaju relativnom malo značenje u upravljanju rizici-ma društava za osiguranje. Naime, prema podatcima iz Grafikona 3., nove emisije obveznica vezanih za

katastrofalne rizike i ostalih vrijednosnica povezanih s osiguranjem činile su 7,9% ukupno naplaćenih prem-ija neživotnog reosiguranja u 2018. godini. Odnos ukupne vrijednosti postojećih obveznica temeljenih na katastrofalnim rizicima i ostalih vrijednosnica povezanih s osiguranjem i premija neživotnog reo-siguranja iznosio je 21,14% u 2018. godini.

Grafikon 2. Vrijednost tradicionalnog i alternativnog kapitala društava za reosiguranje

20


Izvor: Aon Benfield (2018) p. 5.17

Grafikon 3. Premije neživotnog reosiguranja, ukupna vrijednost i vrijednost novih emisija

obveznica temeljenih na katastrofalnim rizicima i ostalih vrijednosnica vezanih za rizik iz

osiguranja u 2018. godini

Izvor: Prikaz autora na temelju podataka Reinsurance News (2019)18, https://www.reinsurancene.ws/top-50-reinsurance-groups/ Pristupljeno [29. 08. 2019.] & Artemis (2019)16

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368388

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461 490 511 493 514 516

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Vrijednost naplaćene brutopremije za tržište neživotnog

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Ukupna vrijednost CATobveznica

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Izvor: Aon Benfield (2018: 5).17


298 God. XXXIII, BR. 1/2020. str. 287-303

Grafikon 4. Struktura obveznica baziranih na katastrofalnim rizicima i ostalih vrijednosnica poveza-nih s osiguranjem prema uvjetima u razdoblju od 1997. do prva dva kvartala 2018. godine

21

U početku razvoja sekuritizacije, vrijednosnice su primarno bile temeljene na odštetnom

kriteriju. Jedan od razloga je bio taj što su glavni investitori u vrijednosnice bili društva za

osiguranje i reosiguranje koja nisu značajnije bila izložena problemu informacijske asimetrije i

bila su spremna prihvatiti odštetni kriterij. Međutim, kada su sponzori počeli tragati za

investitorima koji bi pružili dodatni kapacitet za preuzimanje rizika, odnosno onima koji ne

pripadaju industriji osiguranja, zbog visoke premije za rizik koju su zahtijevali ovi investitori

za odštetne uvjete (zbog asimetrije informiranja), morali su prihvaćati neodštetne kriterije.

Kasnije, s dodatnim razvojem sekuritizacije, kada su investitori postali više upoznati s

osigurateljnim/reosigurateljnim rizicima, odštetni kriteriji ponovno dobivaju na važnosti

(Hagedorn et al., 2009: 38).

Grafikon 4. Struktura obveznica baziranih na katastrofalnim rizicima i ostalih vrijednosnica

povezanih s osiguranjem prema uvjetima u razdoblju od 1997. do prva dva kvartala 2018.

godine


Kao što je prikazano na Grafikonu 4., vrijednosnice s odštetnim kriterijem u 2018. godini imale

su udio od 68% u ukupnom volumenu izdanih vrijednosnica, što je na razini udjela u početne

dvije godine analiziranog razdoblja, dok su primjerice, 2006. godine imale udio od samo 6%.

0%

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40%

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bziro

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a uv

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Odštetni uvjet Indeks šeta industrije Parametarski uvjet

Uvjet modeliranih šteta Kombinirani uvjet Nepoznato


U početku razvoja sekuritizacije, vrijednosnice su primarno bile temeljene na odštetnom kri-teriju. Jedan od razloga je bio taj što su glavni investitori u vrijednosnice bili društva za osi-guranje i reosiguranje koja nisu značajnije bila izložena problemu informacijske asimetrije i bila su spremna prihvatiti odštetni kriterij. Međutim, kada su sponzori počeli tragati za investitorima koji bi pružili dodatni kapacitet za preuzimanje

rizika, odnosno onima koji ne pripadaju industri-ji osiguranja, zbog visoke premije za rizik koju su zahtijevali ovi investitori za odštetne uvjete (zbog asimetrije informiranja), morali su prihvaćati neodštetne kriterije. Kasnije, s dodatnim raz-vojem sekuritizacije, kada su investitori postali više upoznati s osigurateljnim/reosigurateljnim rizicima, odštetni kriteriji ponovno dobivaju na važnosti (Hagedorn et al., 2009: 38).

Grafikon 3. Premije neživotnog reosiguranja, ukupna vrijednost i vrijednost novih emisija obveznica temeljenih na katastrofalnim rizicima i ostalih vrijednosnica vezanih za rizik iz osiguranja u 2018. godini

20


Izvor: Aon Benfield (2018) p. 5.17

Grafikon 3. Premije neživotnog reosiguranja, ukupna vrijednost i vrijednost novih emisija

obveznica temeljenih na katastrofalnim rizicima i ostalih vrijednosnica vezanih za rizik iz

osiguranja u 2018. godini

Izvor: Prikaz autora na temelju podataka Reinsurance News (2019)18, https://www.reinsurancene.ws/top-50-reinsurance-groups/ Pristupljeno [29. 08. 2019.] & Artemis (2019)16

17 22 19 22 24 28 44 50 64 72 81 89

368388

321378 447 428

461 490 511 493 514 516

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2006. 2007. 2008. 2009. 2010. 2011. 2012. 2013. 2014. 2015. 2016. 2017.

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Alternativni kapital Tradicionalni kapital

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38 14 -

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Vrijednost naplaćene brutopremije za tržište neživotnog

reosiguranja

Ukupna vrijednost CATobveznica

Vrijednost novih emisija

Mili

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a U

SD

Izvor: Prikaz autora na temelju podataka Reinsurance News (2019)18, https://www.reinsurancene.ws/top-50-reinsuran-ce-groups/ Pristupljeno [29. 08. 2019.] & Artemis (2019)16.

Review article

299God. XXXIII, BR. 1/2020. str. 287-303

Kao što je prikazano na Grafikonu 4., vrijednosnice s odštetnim kriterijem u 2018. godini imale su udio od 68% u ukupnom volumenu izdanih vrijednos-nica, što je na razini udjela u početne dvije godine analiziranog razdoblja, dok su primjerice, 2006. godine imale udio od samo 6%. Slijede vrijednos-nice temeljene na parametarskom uvjetu (14% u

2018. godini) i indeksu šteta industrije (12% u 2018. godini), dok su sredinom analiziranog razdoblja imale udio od 36%, odnosno 35%. Vrijednosnice temeljene na kombiniranom uvjetu i uvjetu mod-eliranih šteta u zadnjim godinama nemaju značenje u ukupnoj vrijednosti vrijednosnica povezanih s rizikom iz osiguranja.

Grafikon 5. Struktura obveznica temeljenih na katastrofalnim rizicima i ostalih vrijednosnica pove-zanih s osiguranjem prema vrstama opasnosti u razdoblju od 1997. do prva dva kvartala 2018. godine

22

Slijede vrijednosnice temeljene na parametarskom uvjetu (14% u 2018. godini) i indeksu šteta

industrije (12% u 2018. godini), dok su sredinom analiziranog razdoblja imale udio od 36%,

odnosno 35%. Vrijednosnice temeljene na kombiniranom uvjetu i uvjetu modeliranih šteta u

zadnjim godinama nemaju značenje u ukupnoj vrijednosti vrijednosnica povezanih s rizikom iz

osiguranja.

Grafikon 5. Struktura obveznica temeljenih na katastrofalnim rizicima i ostalih vrijednosnica

povezanih s osiguranjem prema vrstama opasnosti u razdoblju od 1997. do prva dva kvartala

2018. godine


S obzirom na vrstu opasnosti koju pokrivaju obveznice vezane za katastrofalne rizike i ostale

vrijednosnice povezane s osiguranjem (Grafikon 5.), najznačajnije su vrijednosnice za pokriće

rizika potresa, čije su emisije u razdoblju od 1997. godine do prva dva kvartala 2018. godine

sudjelovale u ukupnoj vrijednosti instrumenata s 41%. Slijede ih vrijednosnice za pokriće rizika

uragana (19%), kombiniranih rizika (17%) i oluja (12%).

41%

19%

12%

7%

2%

1% 1%

17%

Potres

Uragan

Oluja

Vjetar

Tajfun

Poplava


S obzirom na vrstu opasnosti koju pokrivaju ob-veznice vezane za katastrofalne rizike i ostale vri-jednosnice povezane s osiguranjem (Grafikon 5.), najznačajnije su vrijednosnice za pokriće rizika potresa, čije su emisije u razdoblju od 1997. go-dine do prva dva kvartala 2018. godine sudjelovale u ukupnoj vrijednosti instrumenata s 41%. Slijede ih vrijednosnice za pokriće rizika uragana (19%), kombiniranih rizika (17%) i oluja (12%).

5. Perspektive sekuritizacije u upravljanju rizicima osiguratelja i reosiguratelja

Prema podatcima prikazanim u prethodnom dijelu rada, značenje sekuritizacije u upravljanju rizicima društava za osiguranje u usporedbi s reosiguranjem je relativno malo. Međutim, prisutan je trend rasta primjene ove metode alternativnog transfera rizika. Uvažavajući čimbenike koji su doveli do razvoja sekuritizacije katastrofalnih rizika, čije se značenje, posebno kada su u pitanju klimatske promjene i s njima povezani katastrofalni događaji, povećava, za očekivati je da će osiguratelji/reosiguratelji imati

potrebu za dodatnim kapacitetom izvan okvira tradicionalnih preuzimatelja rizika. Naime, već ra-nije spomenute projekcije najznačajnijih rizika ko-jima će svijet biti izložen do 2025. godine svrstavaju klimatske promjene među pet glavnih rizika (AXA, 2017)6. Za očekivati je da će u takvim uvjetima rasti vjerojatnost i intenzitet katastrofalnih događaja, što za posljedicu može imati ograničenja u upravljanju rizicima društava za osiguranje/reosiguranje tradi-cionalnim metodama i rast značenja sekuritizacije i drugih alternativnih tehnika upravljanja aktuarskim rizicima.

Težnja osiguratelja/reosiguratelja prema optimi-zaciji upravljanja rizicima u smislu troškova i koris-ti koji su povezani s metodama upravljanja i daljnji razvoj koncepta integriranog upravljanja rizicima, također može pozitivno djelovati na potražnju za sekuritizacijom. Daljnja unaprjeđenja računalne tehnologije dodatno će doprinijeti mogućnostima obrade podataka i modeliranja šteta, važnim za sekuritizaciju. U ovom smislu posebnu važnost imaju indeksi šteta. Prema Swiss Re (2011: 33)12,


300 God. XXXIII, BR. 1/2020. str. 287-303

upravo je razvoj kriterija šteta industrije PERILS doprinio širenju tržišta vrijednosnica baziranih na osiguranju s obuhvatom katastrofalnih rizika i iz-van SAD-a.

Pored sekuritizacije katastrofalnih rizika i drugi rizici koje preuzimaju društva za neživotno osigu-ranje, mogu biti predmetom alternativnog transfera rizika. Oni posebice obuhvaćaju rizike iz područja osiguranja motornih vozila, osiguranja kućanstava, rizik ozljede na radu, političke rizike, rizike odgo-vornosti članova uprave i direktora (IAIS, 2003: 11) te kibernetičke rizike (Amar i sur., 2015: 16). Prema Spry (2009: 12) dok je sekuritizacija terorističkih rizika bila ograničena modelima, s njihovim razvo-jem, sekuritizacija ovih rizika također ima perspek-tivu.

Rezultati istraživanja Ammar i sur. (2015: 13) poka-zuju da su glavne prepreke u razvoju alternativnog transfera rizika s vrijednosnicama temeljenim na osiguranju, visoki troškovi za realizaciju transakci-ja, nedovoljno poznavanje i nedovoljno iskustvo s ovim instrumentima te neizvjesnost vezana za regulaciju.

Uvažajući koristi koje proizlaze iz sekuritizacije za sponzore i investitore, za očekivati je da bi se trend rasta značenja sekuritizacije u upravljanju rizicima društava za osiguranje/reosiguranje mogao nastav-iti. Smanjivanje prethodno navedenih ograničenja, odnosno usklađivanje interesa sponzora i inves-titora, posebno u smislu smanjivanja rizika baze i povećanja informiranosti, povećalo bi broj sudi-onika na tržištu i vrijednost transakcija. Širenjem tržišta smanjila bi se cijena transfera za sponzore i unaprijedila likvidnost za investitore (Swiss Re, 2011: 33)12. Međutim, s obzirom na specifičnosti poslovanja osiguratelja/reosiguratelja u smislu rizika koje pokrivaju i transferiraju, očekuje se da će se reosiguranje/retrocesija zadržati primarnom metodom upravljanja aktuarskim rizicima. Stoga, perspektiva sekuritizacije je u njezinoj komplemen-tarnosti reosiguranju/retrocesiji.

6. Zaključak

Obveznice vezane za katastrofalne rizike zaštićuju osiguratelje i reosiguratelje od velikih šteta koje proizlaze nastupom katastrofalnih događaja. S obzirom na ograničeni kapacitet tržišta reosigu-ranja/retrocesije za preuzimanje rizika, volatilnost cijena reosiguranja/retrocesije i kreditni rizik pov-ezan s reosigurateljima/retrocesionarima, te s dru-

ge strane, sposobnost tržišta kapitala da apsorbira velike rizike i pruži kolateralizirane instrumente za višegodišnje pokriće rizika, stabilizirajući time kreditni rizik i cijenu transfera rizika, sekuritizacija predstavlja komplement reosiguranju.

Ključna odluka u kontekstu upravljanja rizicima društava za osiguranje/reosiguranje primjenom tehnike sekuritizacije je izbor odgovarajućeg uvje-ta, budući da se na temelju njega utvrđuje pravo sponzora na odštetu i cijena transfera rizika. Dok s odštetnim kriterijem osiguratelj/reosiguratelj iz-bjegava izloženost riziku baze, suočava se s višom cijenom transfera rizika u odnosu na onu koja je povezana uz primjenu drugih kriterija i obrnuto za neodštetne kriterije.

Iako se volumen sekuritiziranih instrumenata povećava, značenje tehnike sekuritizacije u uprav-ljanju rizicima društava za neživotno osiguranje je malo u usporedbi s reosiguranjem. Za razvoj sekuritizacije važno je smanjivanje troškova i njezi-no dodatno razumijevanje od strane sudionika i tržišta osiguranja i tržišta kapitala. Uz smanjivanje ovih prepreka, perspektive sekuritizacije ovisit će o usklađivanju interesa osiguratelja i investitora odnosno o mogućnostima smanjivanja rizika baze za sponzore i informacijske asimetrije za investitore te o uvjetima na tržištu reosiguranja/retrocesije. Očekuje se da će ova metoda upravljanja rizicima osiguratelja/reosiguratelja ostati na razini dopune, a ne alternative reosiguranju/retrocesiji.

Zahvala

Izradi rada doprinio je gospodin Steve Evans, vlas-nik publikacija Artemis.bm & Reinsurancene.ws., kojemu se ovom prilikom autori posebno zahvalju-ju. Ukazano povjerenje i omogućen pristup bazi podataka koja nije javno dostupna, doprinijeli su obogaćivanju sadržaja rada u dijelu podataka koji su uporište prezentiranim tvrdnjama.

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301God. XXXIII, BR. 1/2020. str. 287-303

E

1 Swiss Re Institute (2019), „Sigma Data“, dostupno na: http://institute.swissre.com/research/overview/sigma_data/ (pristupljeno 29. kolovoza 2019.)

2 Swiss Re (2019), „Natural catastrophes and man-made disasters in 2018: ‘secondary’ perils on the frontline”, Sigma, No. 2/2019, Swiss Reinsurance Company Ltd, Zurich.

3 Swiss Re (2018), „Natural catastrophes and man-made disasters in 2017: a year of record-breaking losses”, Sigma, No. 1/2018.

4 Marsh (2019), „The Global Risks Report 2019”, dostupno na: http://www3.weforum.org/docs/WEF_Global_Risks_Report_2019.pdf, (pristupljeno 29. kolovoza 2019.)

5 Allianz (2019), „Allianz Risk Barometer, Top Business Risk 2019”, dostupno na: https://www.agcs.allianz.com/assets/PDFs/Reports/Allianz_Risk_Barometer_2019.pdf, (pristupljeno 29. kolovoza 2019.)

6 AXA (2017), „Emerging Risks: what are the main risks for 2025? AXA Emerging Risk Survey 2017”, dostupno na: https://www.axa.com/en/about-us/emerging-risks-survey, (pristupljeno 28. kolovoza 2019.)

7 Za čimbenike koje su potaknuli razvoj sekuritizacije vidjeti: Ćurak (2009).

8 Gorvett, R. W. (1999), „Insurance Securitization: The Development a New Asset Class, Casualty Actuarial Society: Securitization of Risk”, dostupno na: https://www.casact.org/pubs/dpp/dpp99/99dpp133.pdf (pristupljeno 28. kolovoza, 2019.)

9 Lale, O. (2013), „Alternative risk transfer: Advantages and risks of transferring insurance risks to the capital markets”, dostupno na:

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8. Edesess, M. (2014), „Catastrophe Bonds: An Important New Financial Instrument”, Working Paper, EDHEC-Risk Institute, EDHEC Business School, London, July 2014.

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https://www.bafin.de/dok/7874384 (pristupljeno 11. lipnja 2019.)

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11 OECD (2009), „Catastrophe-linked securities and capital markets”, 2nd Conference organized under the auspices of the OECD International Network on Financial Management on Large-Scale Catastrophes, Bangkok, Thailand, Organisation for Economic Co-operation and Development, Paris, 24-25 September 2009.

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14 Smith, C. (2017), „Insurance-linked Securities, Financial Market Authority Liechtenstein”, dostupno na: https://www.fma-li.li/files/fma/fma-factsheet-ils-en.pdf, (pristupljeno 29. kolovoza 2019.)

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Marijana Ćurak

Dujam Kovač

R -

A

�is paper analyses characteristics of securitization instruments and their importance in managing the actuarial risks of non-life insurance and reinsurance companies. Although various risks could be tran-sferred to the capital market by securitization, the most significant among the securitized risks are ri-sks associated with catastrophic events for which insurers/reinsurers cannot diversify within their own insurance/reinsurance portfolio. �e possibility of expanding risk transfer capacity, reducing credit risk exposure, hedge against the fluctuation of the risk transfer price, improving capital management and im-proving performance, are the main benefits that insurers/reinsurers can achieve with this risk management technique. However, when making decision on the application of this technique in risk management, these advantages should be compared to the disadvantages. Depending on the applied trigger of the transacti-on, disadvantages include base risk, liquidity risk and obligation to disclose information about insurance portfolio, which ultimately determines the price of the transfer. Compared to reinsurance and retrocession, securitization is of little importance for risk management. However, considering the increasing extent of catastrophic damage, and the possibility of applying this technique to other risks, increase in importance of this technique in the risk management of insurance/reinsurance companies could be expected, but only as a complement to reinsurance and retrocession, not as their alternatives.

Keywords: Securitization, bonds, catastrophic risks, risk management of non-life insurance/reinsurance

B P

Tihana Škrinjarić:Financial Econometrics, Mathematics and Statistics: �eory, Method and Application

Predrag Bejaković:Innovation Culture in Crony Capitalism: Does Hofstede’s Model Matter?

305God. XXXIII, BR. 1/2020. str. 305-307

Tihana ŠkrinjarićSveučilište u ZagrebuEkonomski fakultet – ZagrebTrg J. F. Kennedyja 6,10000 Zagreb, [email protected]

Tihana Škrinjarić: Prikaz knjige “Financial Econometrics, Mathematics and Statistics: �eory, Method and Application”

Autori: Lee, Cheng-Few, Chen, Hong-Yi, Lee, John

Izdavač: Springer Science+Business Media

Godina izdavanja: 2019

Broj stranica: 655

Kvantitativne financije danas predstavljaju neizos-tavan dio cjelokupnoga menadžmenta portfelja. Pritom je potrebno imati znanja iz područja finan-cija, matematike, ekonometrije i statistike. Knjiga Financial Econometrics, Mathematics and Statistics predstavlja kombinaciju godina predavačkog iskust-va, kao i onoga u istraživanjima troje autora. Odmah na početku knjige autori upozoravaju da je za lakše praćenje knjige potrebno položiti dva semestra kolegija ekonometrija, dva semestra matematičke statistike, kao i jedan semestar multivarijatne statis-tike. Dodatno, autori dijele knjigu na četiri osnovne cjeline: Regresija i financijska ekonometrija, Analiza vremenskih serija i primjene, Statističke distribucije, modeli vrednovanja opcija i menadžment rizika te Statistika, Itôv račun i modeli vrednovanja opcija. S obzirom na teme koje se obrađuju u knjizi, potreb-no je, osim navedenih kvantitativnih znanja, imati i

određena teorijska znanja iz financija. Kroz knjigu se provlači mnoštvo primjera, čiji su ispisi dani iz MINITAB-a, Excela, MySQL-a, SAS-a itd., uz bro-jne interpretacije rezultata. Ono što se uočava da su svi primjeri utemeljeni na financijskoj teoriji i već prethodno objavljenim empirijskim radovima koji testiraju tu teoriju. Stoga čitatelji mogu odmah dobiti jasnu ideju gdje i kako primijeniti određene koncepte koji se obrađuju u pojedinom poglavlju. Kako bi se matematički zapisi mogli lakše pratiti, potrebna je srednja razina znanja iz matematike. Dodatno su prikazani izvodi pojedinih važnijih nalaza u svakome poglavlju u odgovarajućim do-dacima. Na kraju svakog poglavlja dan je (vrlo često opsežan) popis literature koja je obrađivana unutar tog poglavlja.

Prvo poglavlje nije ubrojeno u prvu cjelinu jer se ovdje radi o navođenju najvažnijih pojmova koji će se obrađivati kroz knjigu, zajedno s referencama na koje se zainteresirani čitatelji mogu uputiti za de-talje te novije doprinose u pojedinome području. Primjetno je da knjiga nije namijenjena početnicima koji se tek susreću sa spomenutim kvantitativnim pristupima jer se već u prvome odjeljku navodi, primjerice, GMM metoda (engl. generalized method

PRIKAZ KNJIGEFINANCIAL ECONOMETRICS, MATHEMATICS AND STATISTICS:THEORY, METHOD AND APPLICATION

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of moments). Tako u drugome poglavlju započinje obrada materije koja pripada prvoj cjelini knjige. Odmah se uočava kako se veoma brzo prolaze os-novne stvari vezane uz regresijske modele, kvalitetu modela (engl. goodnes of fit), osnovni testovi (t-test i slično), te se već ovdje nalaze brojni empirijski primjeri. Autori kombiniraju nekoliko primjera iz objavljenih radova, kao i vlastitih. Treće poglav-lje se nadovezuje na drugo, s obzirom da se ovdje obrađuju testiranja pretpostavki regresijskog mod-ela, obrađuju se binarne varijable, kao i logistička regresija. Iako se radi o osnovnim pojmovima s koji-ma se ciljano čitateljstvo trebalo već susresti, autori obrađuju i dodatne pojmove koji se ne mogu uvijek pronaći u standardnoj vezanoj literaturi. Primjerice, često se kod analize autokorelacije reziduala modela obrađuje Durbin Watsonov test, no kako se u mod-ele uključuje i zavisna varijabla s pomakom, tada taj test više nije primjenjiv. Stoga autori obrađuju Durbin H test koji je primjenjiv u tome slučaju. Četvrto poglavlje je kratko jer obrađuje modele simultanih jednadžbi, dok se primjene obrađuju u sljedećem poglavlju. Ideja petog poglavlja je prika-zati kako se istovremeno moraju obrađivati i pra-titi financijska analiza, planiranje i prognoziranje, te općenito donošenje odluka. Stoga se detaljno obrađuju tipične primjene, ne samo strukturne, već i SUR (engl. seemingly unrelated regression) modele. Kroz cijelu knjigu se uočava kako autori posjeduju velika znanja iz područja financija jer se određene primjene kvantitativnih modela i metoda prikazuju detaljno u okviru pojedinog financijskog modela za koji su najbolje „krojeni“. Kako se i u području fi-nancija koriste panel podatci, poglavlje 6 obrađuje odabrane teme vezane uz panel modele. Tako se uspoređuju i rezultati temeljem nekoliko mogućih specifikacija istoga modela da bi čitatelj lakše razu-mio razliku između, primjerice, nekoliko različitih metoda procjene, kao i različitih učinaka u modelu. Ono što je prisutno ovdje, ali i u drugim poglavljima, jest kako se u dodatku posebno još obrađuje neka tema iz financija koja je usko vezana uz metodologi-ju koja se obrađivala prethodno. U šestom poglavlju se analizira optimalan omjer isplate dividendi uz prisustvo neizvjesnosti (engl. optimal payout ratio under uncertainty) uz empirijsku primjenu. Dakle, u tim dodatcima radi se o kratkom prikazu na koji način istraživači pristupaju pisanju empirijskih ra-dova. Autori prikažu kratko teoriju koja se razma-tra, razvijaju hipoteze koje se testiraju i temeljem stvarnih podataka primjenjuju metodologiju koja je

prethodno u poglavlju obrađivana. Ovakav pristup daje dodatnu vrijednost ovoj knjizi.

Sedmo poglavlje analizira alternativne metode procjene modela s obzirom na probleme u mjeren-jima varijabli (engl. errors-in-variables problems): ograničena klasična metoda (constrained classi-cal method), IV metoda (instrumental variables), LISREL i MIMIC metode (linear structural rela-tions; multiple indicators multiple causes). Odmah se na početku poglavlja pokazuje motivacija kroz nalaze i zaključke radova ekonomista u području financija vezane uz konkretne primjene i prob-leme na koje su nailazili. Ovakav pristup izuzetno je koristan za čitatelje kako bi vidjeli motivaciju za nastanak alternativnih modela i pristupa za analizu određenih ekonomskih i financijskih fenomena. Na ovo poglavlje nastavlja se osmo, koje obrađuje tri pristupa procjene i testiranja modela procjen-jivanja kapitalne imovine (CAPM, Capital As-set Pricing Model): metodu grupiranja (grouping method), IV te ML (maximum likelihood) metodu. Radi se o opširnom empirijskom poglavlju koje de-taljno analizira posljedice svih obrađivanih metoda i ekonomske implikacije. Poglavlje je puno tabličnih ispisa rezultata i detaljne analize posljedica prim-jene pogrješne ili ispravne metode s obzirom na narav problema. Autori prikazuju i zaključke ra-dova tijekom desetljeća s preporukama što učiniti u pojedinom slučaju. Tako se primjećuje da se osim tipičnih popularnih radova koji se učestalo citiraju i u radovima i udžbenicima, nalaze i najnoviji ra-dovi (citiraju se nalazi radova iz iste godine u kojoj je izišla knjiga!). Takav pristup je veoma pohvalan da zainteresirani čitatelji mogu dobiti uvide i u najnovije nalaze vezane uz određene, njima zanim-ljive, teme. Posljednje poglavlje u prvoj cjelini knjige odnosi se na pojam lažne regresije (engl. spurious regression) u uvjetnim modelima procjenjivanja kapitalne imovine. Ovo poglavlje sadrži mnoštvo tablica u kojima su rezultati simulacija uvjetnih modela procjenjivanja kapitalne imovine, s obzirom na veličinu uzorka, broj instrumenata u modelima, kako bi se mogle određene pravilnosti uočiti lakše i zaključivati. Sličan pristup simuliranja može se naći u još nekoliko poglavlja. To je još jedna posebnost ove knjige koja doprinosi njenoj jedinstvenosti.

Druga cjelina knjige (Analiza vremenskih serija i primjene) sastoji se od dva veća poglavlja. De-seto poglavlje obrađuje univarijatne modele koji se najčešće primjenjuju u području financija (ARI-MA, autoregressive integrated moving average;

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GARCH, generalized autoregressive conditional heteroskedasticity). Poglavlje započinje motivaci-jom o sezonalnosti u vremenskim serijama, te se prikazuju načini njihova izglađivanja. Jedanaesto poglavlje moglo bi biti osobito zanimljivo onima koji si usmjereni na omjere zaštite (engl. hedge ratio), pri čemu se obrađuju i statički i dinamički pristupi procjenjivanja tog omjera, zajedno s pred-nostima i nedostatcima svakoga. Obrađuje se više od deset različitih pristupa se s popisom literature za one koje zanimaju detalji i pretpostavke po-jedinoga pristupa, a na kraju poglavlja empirijski primjer uključuje nekoliko popularnijih pristupa, zajedno s usporedbama, kao i detaljan prikaz rado-va (na sedam stranica!) koji su analizirali pojedine pristupe, s opisom njihove metodologije, financi-jske imovine za koju se provodila analiza, te glavni zaključci rada.

Treća cjelina knjige posvećena je distribucijama i vrednovanju opcija. Čini ju ukupno pet poglavlja. Dvanaesto poglavlje obrađuje binomnu i multi-nomijalne distribucije s obzirom da se one koriste u izvođenju modela vrednovanja opcija; dok se trinaesto bavi alternativnim modelima vredno-vanja opcija i uspoređuju se prednosti u odnosu na modele iz prethodnog poglavlja. Za potpuno razumijevanje ovih dvaju poglavlja potrebno je imati dobru matematičku podlogu (diferencijalnog računa, limesa, itd.), kao i statističku (vjerojatnos-ti). Dodatno, za one čitatelje koji žele dobro bara-tati pojmovima vezanima uz Black-Scholes model vrednovanja opcija, savjetuje se da se posvete up-ravo ovim poglavljima. Iduće poglavlje obrađuje normalnu i log-normalnu distribuciju, s obzirom na njihove primjene za europske i američke opcije. Detaljno se obrađuju njihova svojstva, a dodatno se na kraju poglavlja nalazi cijeli popis naredbi u ok-viru Excela i VBA (visual basic) programiranja za izračun potrebnih vrijednosti u okviru specifičnih modela vrednovanja. Dodatno se u trećoj cjelini obrađuju dva poglavlja koja se odnose na mod-eliranje kreditnog rizika i analizu financijskog re-

jtinga, kopule (engl. copulas) i multivarijatnu ana-lizu. Ono što se uočava i u ovim poglavljima, jest da autori u uvodu objašnjavaju motivaciju s financijske perspektive, što daje dodatan značaj knjizi. To znači da knjiga nije isključivo kvantitativna, gdje se iska-zuju isključivo modeli, metode, formule, teoremi, izvodi i dokazi, već svi oni služe u svrhu opisivanja financijskih fenomena. No, svejedno se uočava da je potrebno imati dobru kvantitativnu osnovu za pot-puno razumijevanje svih tema.

Četvrta cjelina je posvećena modelima vrednovanja opcija, ali pomoću stohastičkih modela. Tako se obrađuju Itôva lema, proces i vezani pojmovi i teo-remi, implicirana volatilnost, Edgeworthov binomi-alni model i slično. U ovoj se cjelini uočava najviše primjena matematičkih zapisa, te je vjerojatno ujedno i najteža cjelina, s obzirom i na potrebno prethodno znanje iz financija i kvantitativnih dis-ciplina, ali i (vjerojatno) novih pojmova nekim čitateljima. Pokrivene su brojne varijacije opcija, odnosno njihova vrednovanja. Primjeri su kao i u ostatku knjige mnogobrojni i doprinose boljem ra-zumijevanju teorije. U nekim poglavljima, pa tako u posljednjem, autori daju doprinos razvoja novih modela ili metoda u ovisnosti o pojmu koji se ana-lizira. Tako u posljednjem poglavlju autori razvijaju novi pristup neparametrijskog procjenjivanja donje granice za cijene opcija.

Jedan nedostatak koji se može uočiti, a odnosi se najviše na osobnu preferenciju načina predočavanja teksta jest što je cijela knjiga pisana na način da je tekst oblikovan u dva stupca. Knjiga se preporuča studentima viših godina ekonomskih fakulteta, kao i matematičkih fakulteta koji su usmjereni na finan-cijskoj matematici. Na taj način će prva skupina studenata moći lakše povezati financijsku teoriju s primjenama nad stvarnim podatcima, dok će druga skupina steći ideje na koji način stečena kvantita-tivna znanja mogu primijeniti u području financija. Nadalje, knjiga se preporuča onima koji se bave kvantitativnim financijama, analizama financijskih tržišta te menadžmentom portfelja.

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Predrag BejakovićInstitute of Public FinanceSmičiklasova 21,10000 Zagreb, [email protected]: +38514886455

Predrag Bejaković: Book review “Innovation Culture in Crony Capitalism: Does Hofstede’s Model Matter?”

Authors: Jadranka Švarc, Jasminka Lažnjak

Publisher: Institute of Social Sciences Ivo Pilar, Zagreb

Year: 2017

Number of pages: 236

Optimal innovation culture enables a strong entre-preneurial economy with a high innovative poten-tial and improved competitiveness on international markets. What is it that determines innovation cul-ture? It is almost impossible to give an unambiguous answer because there are many factors that influ-ence its development. However, without these fac-tors, the conditions necessary for creating a culture that fosters innovation and enables technological progress would not be optimal and could hamper economic development. While creating an optimal innovation culture is quite difficult as it takes a lot of time and effort to align and balance all its ele-ments, it is relatively easy to put at risk all that has been achieved. A recent publication by two Croa-tian authors contributes to the scholarly discourse on the role and development of innovation culture, particularly having in mind the impact of crony cap-italism. It is a book entitled Innovation Culture in Crony Capitalism – Does Hofstede’s Model Matter? by Jadranka Švarc and Jasminka Lažnjak, published by the Institute of Social Sciences Ivo Pilar, Zagreb.

In addition to a short Foreword and Introduction, the book comprises three sections, which are di-vided into eight chapters. In the Introduction, the authors explain that their interest in the subject was sparked by Croatia’s long-term economic recession and divergence in GDP growth compared to other “new” EU members. Such conditions impede not only the economic development but also the welfare and wellbeing of Croatian society. Furthermore, significant disparity between Croatia’s regions in terms of economic development is another reason why they decided to explore regional differences in innovation culture using the well-known Hofstede’s cultural model. �is model is probably the most popular model for analysing cultural impacts on economic and social development. �e main goal of the book is to enhance the understanding of the role and importance of cultural factors that determine regional innovation capacities and development. By applying Hofstede’s cultural model, the authors wanted to discern whether an inclination to indi-vidualism or collectivism, masculinity or femininity, authoritarianism or liberalism, orientation to future or immediate satisfaction of desires, etc. is related to innovativeness and the development of Croatia’s regions and the country as a whole.

In the first part titled �eoretical background, based on their review of numerous research studies, the authors explain the importance of innovation and how it is linked with the innovation culture. In the

BOOK REVIEW INNOVATION CULTURE IN CRONY CAPITALISM:DOES HOFSTEDE’S MODEL MATTER?

Predrag Bejaković: Book review Innovation culture In crony capitalism does hofstede’s model matter?

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1990s, innovation experienced a remarkable boom thanks to the emergence of the knowledge econo-my, and became a buzzword, a grand concept which drives technical and technological development as well as economic growth, and helps countries to overcome major socio-economic problems. �ere are numerous interrelationships between innova-tion and creativity, and although in the cultural economy every product can be deemed an innova-tion, this relationship is an assurance for the success in the market or with the audience. Creativity in-cludes new knowledge, whereas innovation may not be creative and can be gradual. �e main charac-teristic of innovation is the application of new ideas or creativity to achieve commercial results. Creativ-ity is not sufficient but it is a necessary condition for innovation. In modern society, innovation is no longer rooted in scientific and technological knowl-edge but aligned with creative activities. �ey are encouraged by the growth of the creative economy, which brings together creativity, knowledge, and in-novation.

�e widespread distribution of innovation, the emergence and ubiquitous use of ICT and the growth of innovative undertakings enable the crea-tion of the entrepreneurial economy. While in the previously dominant concept of innovation system, innovation preceded entrepreneurial activity, in the entrepreneurial economy the order is reversed: innovation comes after entrepreneurial activity because it cannot be generated and commercial-ised without them. Over the last twenty years or so, public and academic interest has moved from the innovation culture to entrepreneurial culture. Consequently, there is an increasing trend towards applying the concepts of national culture to the analysis of national entrepreneurial culture, using the internationally recognised Hofstede’s perfor-mance evaluation and scoring. Although national innovation culture is a frequently applied concept, a universal definition has not been developed yet. Švarc and Lažnjak believe that this can be explained by two factors: first, national innovation culture is usually replaced by the concept of organisational or corporate culture, and second, national innovation culture is deemed as a derivative of national culture. In such circumstances, some selected elements of national culture suggest a higher national propen-sity to innovate while others are innovation adverse (page 61).

�ere are numerous definitions of innovation cul-ture, but they essentially include norms, values and attitudes towards innovation, technology, entrepre-neurial activities, business uncertainty and other factors that affect innovation behaviour. �e inter-pretation of pro-innovation cultural dimensions is quite demanding because in the relevant literature there is no consensus on what the dimensions of pro-innovative cultures are. Although in different cultures the same dimensions can enhance or con-strain innovations, there is a number of social val-ues and behaviours that innovation cultures should have. �ese characteristics are individualism, social equality, tolerance to risk and failure, high level of social trust, zero tolerance for corruption, diversity of views, and others. It is obvious that national in-novation culture depends on the socio-economic and political environment and the traits of the na-tional culture in general. Several authors have de-fined various dimensions of national culture, but the most popular and widely known is Hofstede’s model. �us, the authors in this study analyse in-novation culture only in relation to the dimensions of the national culture, according to the Hofstede’s systematisation. �e literature on organisational innovation culture is more abundant than the lit-erature on national innovation culture, both on the theoretical and empirical levels. �is is probably due to the more direct relationship between organi-sational culture and company’s innovation and eco-nomic results than between national cultural char-acteristics and national innovative capacity.

Various required innovation behaviours and strata of culture assessed through dimensions of organisa-tional culture have been discussed in the literature, such as success, openness and flexibility, internal communication, competence and professionalism, inter-functional cooperation, employee responsibil-ity, appreciation of employees, and willingness to take risks. �e values supporting innovation alone are not sufficient to increase innovation output so the norms for innovation, artefacts of innovation, and innovative behaviours should be added. Other characteristics that stimulate creativity and ini-tiative are types of flexible management style, bal-ance between technology and market orientation, performance appraisal, constructive competition, informal communication, democratic workplace environment, high level of freedom, low level of bureaucracy, and supportive collectivism. Further-more, there is a strong influence of national culture


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on organisational culture and management styles. �us, the way management boards run companies is without doubt influenced by the prevailing na-tional culture.

Geert Hofstede, a psychologist and professor of or-ganisational anthropology and international man-agement, well-known for his cultural dimensions theory developed on the basis of survey data on national values and comparative quantified differ-ences between national cultures using constructed cultural dimensions. �is theory proved to be a defining moment in comparative intercultural re-search. His book Culture’s Consequences published in 1980 represented a new paradigm in social sci-ence research with six dimensions of innovation culture. �ey include power distance, which is re-lated to the degree of inequality in a society and its acceptance; uncertainty avoidance, which is linked to the level of stress tolerated in a society faced with an unknown future; individualism versus collectiv-ism, which is connected to the integration of people into primary groups; masculinity versus femininity, which is related to the division of emotional roles between women and men; long-term versus short-term orientation refers to the attention that society members give to the future or the present events; and finally, indulgence versus restraint, which is linked to the gratification versus control of basic human desires related to enjoying life.

�ere are numerous critiques of the Hofstede’s mod-el (inappropriate instrumentalisation of culture; the model has a simplistic concept of national culture and fails to capture the flexibility and changes of culture over time; it ignores within-country cul-tural heterogeneity; questionable relevance of the data in a contemporary environment, etc.). Howev-er, there are also many advocates of this approach, who have implemented it in various surveys and on different levels. Although there are significant dif-ferences in various survey results, they all suggest a strong correlation between lower power distance (social hierarchy) and higher individualism with the national innovativeness measured by the in-vention patents granted. Furthermore, researchers have found a strong positive impact of uncertainty acceptance and individualism on the achievement of high rates of innovation. Firms located in high power distance countries show a higher innovation index than firms based in low power distance coun-tries. Similarly, firms based in collectivistic coun-tries invest significantly more in innovation inputs,

achieve better results in innovation processes and display a higher innovation index than those from individualist countries, although in some circum-stances collectivism could prevent an innovation breakthrough. �is part of the book ends with the note on the regions and regional cultural differ-ences in Croatia.

�e second part of the book titled Empirical re-search explains the details, purpose and aim of the research on the innovative culture in Croatia. Al-though Croatian government has made an effort to develop the Croatian innovation system and in-novation policy, it was not really a priority on the government policy agendas. Often, the focus was mainly on other political and social issues, which is why innovation policy has had little impact on innovation and economic growth. �e aim of the research was threefold: to analyse the differences among the Croatian regions in terms of Hofstede’s cultural dimensions (HCD); to describe the pro-innovation and innovation-adverse cultural dimen-sions of the regions; and to assess the relationship between HCD and innovation and entrepreneurial capacities of the regions. �e authors remind us that the explanation of Hofstede’s cultural dimen-sions depends on prevailing circumstances and that results are often contradictory, meaning that there is no consistent relationship between cultural dimensions and economic prosperity or innovation/entrepreneurial intensity (page 144). Furthermore, some dimensions can be deemed more important in terms of facilitating innovations in comparison to others. While many studies found contradictory influence of cultural dimensions on innovation, en-trepreneurship and self-employment, most of them concluded that the social values and norms that encourage risk-taking, creativity, collaboration and openness are critical for innovation success.

The authors performed a survey on the influ-ence of cultural dimensions on innovation in six Croatian regions: North Croatia, Zagreb and its surroundings, Dalmatia, Slavonia and Baranya, Istria and Lika, and Banovina. When it comes to regions, the findings of the study by Švarc and Lažnjak are in some cases quite surprising. For example, Slavonia, which is considered a tra-ditional agrarian society that maintains strong ties with extended family, has a high degree of individualism, second only to the Zagreb region. According to the common interpretation of high uncertainty avoidance, people in such circum-


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stances feel a continuous threat that must be fought, higher level of stress, expression of emo-tions, and neuroticism. They also score lower on subjective health and well-being. Surprisingly, uncertainty avoidance is significantly higher in Istria than in other regions of Croatia, which means that people living there are more scared of the future and try to control it by numerous rules and regulations. Indulgent societies are “happier” societies where human desires related to enjoying life and having fun are more likely to be gratified. According to the obtained results, the regions of Zagreb, Slavonia and Dalmatia are happier than the rest of Croatia, inferring that people living there are more optimistic and inclined to leisure, and are in control of their life. While these results are understandable for relatively developed and rich Zagreb and Dalmatia, the result for Slavo-nia is rather unexpected. Zagreb and Istria, as the two most developed regions, are the most short-term oriented societies. North Croatia gener-ally does not have the cultural traits that would stimulate innovation. The prevailing short-term orientation in the Zagreb region reveals respect for tradition, the need to protect one’s image and inclination for personal steadiness and stability. Istria, the most developed region in Croatia after the City of Zagreb, is the least propulsive of all Croatian regions and has only two pro-innova-tion cultural dimensions (low power distance and high individualism), while the remaining four di-mensions usually do not support innovation. The results confirm a well-known proposition that unfortunately the statistics presented in research studies often do not tell the entire story and need to be followed by multifaceted interpretation of survey results.

Considering the ambiguities in the results, the au-thors in the last shorter part of the book titled An alternative approach to studying innovation cul-ture move beyond Hofstede’s model and present the ideas proposed by Croatian researchers on the links between culture and innovation. �e plenti-ful research into the reasons for Croatia’s economic performance lagging behind and weak innovation and entrepreneurship development in comparison to other new EU members could be grouped into two main types: the path dependence processes or social values inherited from socialism, while the other approach focuses on the characteristics of clientelist capitalism heavily burdened with cor-ruption. According to the first group, the deficits in innovation culture and technological progress in the communist societies are the result of a totalitar-ian bureaucratic dictatorship, which had eradicated competition. �e other explanation is related to the widespread corruption and crony capitalism in which entrepreneurial activities are more prone to political connections and rent seeking than to en-trepreneurial efforts and risk taking.

�e authors of the book, Jadranka Švarc and Jas-minka Lažnjak, give an interesting and notable ac-count of the influence of cultural determinants on innovation development. Building on the key find-ings from the study, future research should propose a set of recommendations for the improvement of the situation in Croatia. Undoubtedly, this book provides sufficient information and analysis to stimulate more academic and practitioner research as well as public policy activities with regard to the important topic of innovation development. One ought to congratulate the authors for their extraor-dinary achievement in analysing the innovation culture in the circumstances of crony capitalism.

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Opis časopisa

Ekonomski vjesnik / Econviews - Review of Contemporary Business, Entrepreneurship and Economic Issues usmjeren je znanstvenicima i praktičarima. Objavljuje radove koji doprinose te-orijskim, metodološkim i empirijskim spoznajama u kompleksnom području ekonomije. Radovi se mogu temeljiti na kvantitativnim i na kvalitativnim analizama, mogu predstavljati sinteze dosadašnjih istraživanja i ukazivati na otvorena pitanja u poseb-nim područjima društveno-ekonomske prakse. Prihvaćaju se radovi usmjereni na različite razine istraživanja (od pojedinačnih slučajeva do manjih ili velikih uzoraka) i različite kontekstualne okvire (mala, srednja i velika poduzeća, industrijski sek-tori, lokalna, regionalna i nacionalna gospodarst-va, međunarodna ekonomija, gospodarske grane, zdravstvo i obrazovanje, rad i demografija, prirodni potencijali i drugi društveno-ekonomski okviri).

Časopis je usmjeren na znanstvena područja ekonomije, poslovne ekonomije i poduzetništva, a zbog njihove neodvojive povezanosti s drugim dis-ciplinama - informacijskim i tehničkim znanostima, pravom, sociologijom, psihologijom i drugima, ob-javljuju se i radovi s multidisciplinarnim sadržajima.

Vrste radova

Časopis objavljuje recenzirane radove (znanstvene članke), izvješća o istraživanju, znanstvene rasprave i prikaze. Povremeno se izdaju i tematski brojevi. Radovi podliježu postupku dvostruke slijepe recen-zije (eng. double blind review) koju provode domaći i međunarodni recenzenti. U okviru postupka stručnog recenziranja, radovi objavljeni u časopisu svrstavaju se u jednu od sljedećih kategorija: izvorni znanstveni radovi, prethodna priopćenja, pregledni radovi i stručni radovi. Radovi moraju biti na en-gleskom jeziku. Stručni radovi, prikazi i slični prilo-zi mogu se objavljivati na hrvatskom jeziku.

Podnošenje radova

Podneseni radovi ne bi smjeli biti ranije objavljeni niti predani na razmatranje za objavljivanje negdje drugdje. Radovi se dostavljaju u elektroničkom ob-liku na elektroničku adresu: [email protected]. Detaljne upute za autore mogu se pronaći na http://www.efos.unios.hr/ekonomski-vjesnik/upute-autorima/. Uz rad u odvojenoj datoteci potrebno je dostaviti naslovnu stranicu i kratku bio-grafiju (ne više od 100 riječi) za svakog (su)autora.

Autorska prava (Copyright)

Autori čiji se rad objavljuje u časopisu Ekonomski vjesnik / Econviews - Review of Contemporary Business, Entrepreneurship and Economic Issues automatski prenose svoja autorska prava na časopis, koji pridržava ta prava za sve radove koji su u njemu objavljeni. Rukopisi se ne vraćaju.

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Etička načela

Etička načela za časopis Ekonomski Vjesnik / Econ-views - Review of Contemporary Business, Entre-preneurship and Economic Issues temelje se na sm-jernicama za najbolju praksu za urednike časopisa Udruge za etiku objavljivanja (COPE - Committee on Publication Ethics).

Opće smjernice za autore

Ne postoje strogi uvjeti, ali svi radovi moraju sadržavati bitne elemente kao što su: sažetak, ključne riječi, uvod, pregled dosadašnjih istraživanja (teorijski okvir), metodologija, rezultati, rasprava, zaključak. Takva se struktura preporučuje za znan-stvene članke u kategoriji izvornih članaka, preth-odnih priopćenja i preglednih radova.

Radove je potrebno formatirati za ispis na papiru veličine 210 x 297 mm. Treba koristiti fontove Times New Roman ili Arial veličine 12 (osim ako ovdje nije drugačije navedeno), a prored treba biti 1.5. Margine stranica (lijevu, desnu, gornju i donju) treba postaviti na 25 mm. Tekst mora biti poravnat s lijevom i desnom marginom (obostrano poravnato). Rad bi trebao imati između 4500 i 6500 riječi.

Detaljne Upute za autore mogu se pronaći na http://www.efos.unios.hr/ekonomski-vjesnik/upute-autorima/. Radovi koji nisu napisani u skladu s uputama neće se uzeti u obzir za objavljivanje.

Uredništvo

Upute autorima

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Description of the journal

Ekonomski Vjesnik / Econviews – Review of Con-temporary Entrepreneurship, Business, and Eco-nomic Issues is intended for researchers and prac-titioners, and devoted to the publication of papers that contribute to the theoretical, methodological and empirical insights in the complex field of eco-nomics. Articles can be based on quantitative as well as qualitative analyses; they can be a synthe-sis of previous research and discuss open issues in specific areas of social and economic practice. �e journal welcomes papers focused on different levels of analysis (from individual cases to small or large samples) and contexts (SMEs and large compa-nies, industrial sectors, local, regional and national economies, international economics, branches of economy, healthcare and education, labour and demographics, natural resources and other socio-economic frameworks).

�e journal is focused on research in economics, business economics and entrepreneurship, how-ever, as these are closely intertwined with other dis-ciplines – information and technical sciences, law, sociology, psychology and other fields – multidisci-plinary submissions are also welcome.

Types of papers

�e journal publishes reviewed papers (scholarly articles), research reports, scholarly debates and re-views. Individual issues can be dedicated to more specific topics. Submissions will undergo a double blind review. Within the peer review process, pa-pers published in the journal are categorized in one of the following categories: original scientific pa-pers, preliminary communications, review papers and professional papers. Papers must be in English.Professional papers, presentations and other contri-butions can be published in Croatian.

Submission

Submissions should not be published earlier or be under consideration for publication elsewhere. �e papers should be submitted electronically to the e-mail address: [email protected] addition to the main manuscript, a separate file should be sent containing the title page with a brief biographical note for each author (details below).

Copyright

Contributing authors automatically waive their copyright in favour of the journal. �e journal re-serves copyright of all papers published in it.

Ethical policy

�e ethics statements for Ekonomski Vjesnik / Econviews - Review of Contemporary Entrepre-neurship, Business and Economic Issues are based on the Committee on Publication Ethics (COPE) Best Practice Guidelines for Journal Editors.

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General guidelines for authors

�ere are no strict requirements but all manu-scripts must contain the essential elements, for ex-ample: Title; Abstract; Keywords; Main part of the paper: Introduction, Review of previous research (�eoretical framework), Methodology, Results, Discussion, Conclusion, References. Such article structure is recommended for scholarly articles in the category of original scientific papers, prelimi-nary communications and review papers. Papers must be formatted so as to allow printing on paper size 210 X 297 mm. Times New Roman or Arial font, size 12 (unless otherwise stated herein) should be used, and line spacing should be 1.5.

�e margins (left, right, top and bottom) should be 25mm wide. �e text should be aligned with both the right and left margins (justified). �e paper should have between 4500 and 6500 words.

Detailed guidelines for authors can be found at http://www.efos.unios.hr/ekonomski-vjesnik/en/guidelines-for-authors/. Papers that do not adhere to these guidelines will not be considered for pub-lication.

Editorial Board

Guidelines for authors

ekonomski vjesnik / econviews - unios

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